To the end of August, 2014, Vietnam has established 295 IPs which create more than 2.25 million jobs. Among those workers, 75% of them (1.65 million) are workers from neighboring provinces which has the demand for housing within the IP’s location. However, the centralized residential complexes (financed by the state budget or IP developers) could afford only 7 to 10% of the demands. The others (90%) has to find shelters themselves, which are more likely to rent houses, dormitories or hostels in the residential areas nearby. Those places with inadequate living conditions could not afford amenities for worker; nevertheless, the over-condense of workers in a certain area leads to uncontrollable security to the local governance. Migrant workers prefer to rent dormitories in the local house, of which 3-4 workers live together in a 10-15 m2 room with the annual rental fee of 300-500 thousand VND (20-25 USD) per capita, not including the other utility fees (water, electricity, etc.)
Development in worker housing for IPs
Recently, in the process of IP planning and construction, the local authorities have taken into account the area for employee’s housing by constructing employee’s housing near the IP or planning to establish the IP in proximity to the urban residential complexes. To the end of August, 2014, there has been only 63 social housing constructed for IP workers with the capacity of 17,430 apartments, fulfilling the shelter needs for 139,400 workers (8.6% of the total accommodation demands).
Some good example for constructing housing and other facilities for workers could be cited as Samsung Corp. (in Yen Phong 1 IP, Bac Ninh province and Yen Binh IP, Thai Nguyen province); Texhong Ngan Long Corp. (in Hai Yen IP, Quang Ninh province) and Hung Nghiep Formosa Ltd. Co. (in Vung Ang EZ, Ha Tinh province).
To date, Vietnam has 39 housing projects for IP workers with the capacity of 27,000 apartments, which is expected to afford between 165.000 and 170.000 workers, meeting 10% of the actual needs.
As cumulated, the on-going and constructed housing for workers could afford only 18-19% of the actual demands, remain as the most difficulty in IP development faced by provincial authorities. Specially when the existing IPs are occupied and the constructing IPs start operating, housing for workers will become a hotter issue.
The three main reasons leading to this situation comprise of:
(1) Land area: Most of the operating IP were designed in the past, without taking into consideration the land for employee’s housing. The planning, development scheme and management mechanism of housing for workers remain unsolved and the managing model and responsibilities of related stakeholders have not been clearly defined.
(2) Financial resources: As the worker housing project will not bring about considerable profit as well as its return takes time, companies are reluctant to invest in the project, so do the financial institutions. Besides, the current preferential policies are not attractive enough for companies, organizations and individuals to invest in this field. Therefore, worker housing is less attractive than other commercial buildings.
(3) Legal framework: Before the effectiveness of Decree No.188/2013/ND-CP on management and development of social housing, the management and investment decentralization as well as responsibilities of related authorities in managing the construction and investment of worker housing projects are not regulated in details. Meanwhile, the preferential policies for worker housing stipulated in Decision No. 66/2009/QD-TTg promulgating a number of mechanisms and policies to build renting houses for workers of industrial parks and Decree No. 96/2009/QD-TTg amending a number of articles of Decree No.66/2009/QD-TTg and No.69/2009/QD-TTg do not match with the practical situation, therefore are less legally effective in reality. Moreover, the encouraging policies are more inclined to reduce which makes companies more resistant to invest in social housing.
Current regulations on worker housing
To solve the problem of land shortage and the fact that house planning should be accompanied with IP planning, the Government issued Decree No.164/2013/ND-CP on November 12, 2014 amending and supplementing some articles on Decree No.29/2008/ND-CP dated March 14, 2008 of the Government regulating on IPs, EPZs and EZs, in which a new article is added: “the planning of housing for IP workers should be made in line with the IP planning within the location; IP developers shall propose solutions to construct housing for workers in the process to apply for the Investment Certificate. Based on the approval of Ministry of Construction and Ministry of Planning and Investment, the Provincial People Committee could modify the IP’s detailed planning to retain a part of cleared land for accommodations for workers; the Provincial People Committee is responsible for creating the most favorable conditions for workers to utilize the medical, recreational and other social services within the location.
To encourage and create favorable conditions for other economic entities to invest in the planning and construction of worker housing, on November 20, 2014, the Government promulgated Decree No.188/2013/ND-CP on developing and managing the social housing. According to the Decree, besides the compulsory responsibilities of provincial authorities in setting up the schedule to develop housing for workers, planning and retaining land to establish labor housing, etc., labor housing projects enjoys encouragement policies, such as: exempting from the land use and rental fees; exempting and reducing on value added tax and corporate income tax; accessibility to soft loan from financial institutions, commercial banks, provincial budget and bonds; being reimbursed all the expenses for constructing out-of-the-fence infrastructure; being applied the streamlined administration procedure,...
According to Decree 218/2013/ND-CP dated December 26, 2013 guiding and promulgating in details the Law on Corporate Income Tax, the corporate income resulted from social housing projects which meet the requirements and criteria on social housing shall enjoy the CIT rate of 10%. Moreover, housing and life enrichment for workers have also been incorporated in the Action Plan of the Vietnam - Japan Initiatives, which was started from Phase 3, 2011 and renewed in Phase 5, 2013).
Measures to develop worker housing
To encourage different entities taking part in worker housing development, specially the private sector and the companies themselves, besides land retaining and planning, authorities shall provide cleared sites and comprehensive surrounding infrastructure for house building. Therefore, it is suggested that more preferential polices, especially financial treatment, should be applied as follows:
- Streamline the administrative procedures in appraising and approving worker housing projects;
- Expand encouragement policies to local people whose shelters leased by workers in order to improve the accommodation conditions as well as reduce the leasing expenses;
- Establish Fund for worker housing which provides companies with soft loans or with imbursement of interest from commercial banks when they invest in worker housing and supports workers with parts of the renting fees.
- Legalize worker housing as one of the responsibilities of companies and employers (for instance, investors in labor intensive industries shall commit for worker housing in applying for Investment Certificate).
- Compile standards of IP worker housing, modelize shelters based on the demand and affordability of IP workers.
- Housing for IP workers belongs to social security, therefore, it should be supported by the state budget, especially for provinces which could not balance the accounts. Similarly, it is necessary to amend and supplement the content of Decree No.43/2009/QD-TTg dated March 19, 2009 towards the fact that worker housing receives supports from the state budget.
by Vu Quoc Huy, M.Sc., Deputy General Director, Department of Economic Zone Management, Ministry of Planning and Investment.