“Unveiling the Unexpected: Chairman of the Song Thao Group on the 30% Land Rent Reduction Policy for SMEs”

The National Assembly has recently passed Resolution No. 198/2025/QH15, introducing a supportive policy that offers a minimum 30% reduction in land rental fees for high-tech enterprises, small and medium-sized enterprises (SMEs), and innovative startups operating in industrial parks, industrial clusters, and incubators. According to experts, this policy will alleviate initial financial burdens and facilitate these businesses’ expansion, investment in equipment, and productivity enhancement.

Sharing his perspective on the new policy, Mr. Hoang Cong Doan, Vice President of the Vietnam Young Entrepreneurs Association and Chairman of Song Thao Investment Joint Stock Company, noted that as of the first quarter of 2024, Vietnam had nearly 450 industrial parks spanning approximately 93,000 hectares. Land rental prices have been on the rise, with an average of 133 USD/sqm/lease term in the North and 189 USD/sqm/lease term in the South, reflecting an increase of 5-7% compared to the previous year, and are expected to continue climbing in 2024.

In this context, land rental costs have become a significant burden for SMEs, which typically have limited financial capabilities and face challenges in accessing credit. According to the Chairman of Song Thao Group, land rental expenses can account for over 10% of the initial investment for a manufacturing SME, directly impacting their expansion, innovation, and capital attraction plans.

The draft resolution on special mechanisms proposes a minimum 30% reduction in land rental fees for five years for SMEs in the high-tech, innovative, or industrial park sectors. The government will compensate the difference to infrastructure investors, maintaining the attractiveness of industrial park investment.

Mr. Doan elaborates: “For an SME with a monthly revenue of 10 billion VND and a 10% profit margin, reducing land rental costs increases free cash flow by 78 million VND per month, equivalent to an improvement of over 10.5%. This is not just a saving but also a lever to expand credit, reinvest, and enhance competitiveness.”

Moreover, if this saving were converted into a 2% preferential loan, the SME could access up to 5.3 billion VND in capital—a substantial resource for investing in machinery, expanding production lines, or scaling up operations.

Controlling land rental costs not only increases capital accumulation for businesses but also improves the equity ratio, a crucial factor for venture capital (VC) and private equity (PE) investors. As fixed costs are reduced, improving profit margins, the SME’s ability to raise capital is significantly enhanced.

Additionally, when coupled with tax exemption and reduction policies for startups, the overall financial benefits could channel tens of millions of USD into the industrial production sector.

However, Mr. Doan points out that the policy of reducing land rental fees by 30% still faces several challenges.

Firstly, the policy currently targets only high-tech and innovative SMEs, excluding the majority of traditional manufacturing SMEs from its scope of support.

Secondly, the allocation of 5% of land (up to 20 hectares per park) exclusively for SMEs is subject to “rent-seeking” mechanisms, lacking clear criteria, which leads to the risk of corruption and unfairness.

Thirdly, many small businesses lack the financial expertise to establish investment plans, forecast cash flow, or maximize the benefits of these incentives.

Fourthly, the processes of land leasing, permitting, and completing the necessary paperwork still involve multiple agencies, resulting in prolonged processing times of up to six months, which significantly impacts investment decisions.

To ensure the effectiveness of this policy, Mr. Doan suggests adopting the international “One-Stop Shop” model to streamline the approval process to less than 15 days and reduce administrative costs by 30%. Vietnam also needs to develop a centralized digital platform to manage the entire process of land leasing and permitting.

Additionally, providing in-depth financial training for SMEs and establishing clear performance indicators, such as the number of SMEs benefiting from the policy, revenue growth, improved cash flow, and expansion in investment, are crucial for closely monitoring the policy’s implementation.

Mr. Doan also emphasizes the importance of private sector involvement in industrial park infrastructure investment through PPP models, reducing budget burdens and enhancing service quality. Furthermore, amending the Land Law and promptly issuing guiding decrees will help ensure that the policy is implemented accurately, targeting the right beneficiaries and achieving its intended objectives and timelines.