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Phu Quoc lures resort developers

Update: August, 06/2014 - 08:28
Vingroup has begun work on the 304ha Vinpearl Phu Quoc, which will have luxury hotels and villas and a golf course, at a cost of VND17 trillion ($800 million).— Photo vinpearlphuquoc.com
HCM CITY (VNS) — Phu Quoc Island has become a magnet for investors, with a slew of large projects under way now.

The CEO Group has started building Sonasea Villa & Resort on an area of 80 hectares at a cost of VND4.5 trillion (US$200 million). It will see the 406-room Novotel Phu Quoc Resort, to be managed by France's Accor Group, finished first at the end of next year.

Vingroup has begun work on the 304ha Vinpearl Phu Quoc, which will have luxury hotels and villas and a golf course, at a cost of VND17 trillion ($800 million).

Nam Cuong Group is working on a VND3.2 trillion ($150 million) project.

"Authorities have identified tourism and investment as keys to boosting the economy," Huynh Quang Hung, deputy chairman of the Phu Quoc People's Committee, was quoted as saying in Thoi bao Kinh te Viet Nam (Viet Nam Economic Times).

According to the island's Development Investment Management Board, in July it asked the Kien Giang Province People's Committee to approve licences for five projects on an area of over 43 hectares, issued licences for six projects costing VND6.65 trillion ($315 million), amended the terms of four licences, and cancelled seven licences and took back 104ha of land.

Licences have been issued for 190 projects on around 8,700ha, of which 18 on an area of 990 hectares and costing VND6.9 trillion ($330 million) have begun operations. Another 14 are under construction at a cost of around VND24 trillion ($1.15 billion).

Most investment in Phu Quoc is focused on hotels and resorts. But even with the 952 luxury rooms that are planned, Phu Quoc will have only 20 per cent of that of Da Nang and Phan Thiet and 30 per cent of that of Nha Trang despite the fact all their beaches are nearly of the same length.

Not surprisingly, with just two luxury hotels, rents here are higher than even in Ha Noi or HCM City.

Infrastructure challenges

Investment in Phu Quoc is not very easy due to its remote location and distance from the mainland. The construction cost of a low-rise five-star hotel on the mainland is around $1,000 – 1,500 per square metre, but in Phu Quoc it increases by 20 -30 per cent since the materials have to be transported from the mainland.

It is also more expensive to operate a business on the island due to the high electricity and water tariffs.

Until last year a four-star resort was supplied electricity by the Phu Quoc Power Plant at VND9,300 per kWh but only for 10 hours a day. The rest of the time they had to use generators, which increased the cost to VND12,500 per kWh.

On average here electricity accounts for 12-15 per cent of turnover compared to 6 -8 per cent elsewhere.

The shortage of power used to be a big hurdle to the island's development, but the situation has changed after Phu Quoc was recently connected with national power grid through an undersea cable linked from Ha Tien town. Electricity now costs just VND1,500.

Lack of quality human resources, especially people with fluent English, is another challenge for Phu Quoc. Competition among luxury hotels for skilled staff has pushed salaries through the roof.

Nguyen Truong Son, head of the board's Investment Division, said: "We request all projects to comply with all regulations related to the environment, construction density, and waste treatment system.

"Every resort must have roads for local residents and visitors to use the beaches.

"Besides, Phu Quoc plans to designate many public beaches."

Investor incentives

- Incentives related to land rental: Rents for land and water will be waived for three years. Subsequently, investors might get a further waiver for 11 years, 15 years, or permanently depending on the category.

- Incentives related to income tax: The tax will be 10 per cent for 30 years for infrastructure projects like water and electricity plants, water supply and sewage system, bridges, roads, river and sea ports, and airports, and 15 years for certain other categories. But the rate will apply permanently for investments in public facilities like schools and hospitals. There are also income tax breaks and exemptions for four years from the time a project breaks even and a 50 per cent reduction for the next nine years.

- 50 per cent waiver of personal income tax for both Vietnamese and foreign nationals working in Phu Quoc.

- Foreigners and overseas Vietnamese can visit Phu Quoc without a visa for a period not exceeding 30 days. — VNS

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