At the Vietnam Logistics Forum last week, held in the southern province of Ba Ria-Vung Tau, Minister of Industry and Trade Nguyen Hong Dien highlighted the critical role of free trade zones (FTZs) in strengthening economic competitiveness.

“FTZs are an essential tool for countries to maximise the benefits of integration,” said Minister Dien. “Successful examples like Singapore, China, South Korea, and the UAE demonstrate how FTZs reduce costs, boost product competitiveness, optimise goods flows, improve logistics capacity, and attract foreign funding.”

With its strategic geographical position, deep-water seaports, international airports, and extensive road and rail networks, Vietnam is well-positioned to develop modern, large-scale FTZs - a specific area where goods can be stored, processed, manufactured, or re-exported without customs duties.

Despite their benefits, Vietnam has yet to establish any FTZ, though the model has been piloted in Danang.

In mid-October, Deputy Prime Minister Nguyen Hoa Binh approved tasks related to the development of Danang. Danang People’s Committee is responsible for completing the proposal and establishment dossier for the Danang FTZ by December. The dossier will then be submitted to the Ministry of Planning and Investment for appraisal and subsequent submission to the prime minister for approval, the decision noted.

Danang People’s Committee will prepare a draft decision to add the management functions of Danang FTZ to the management board of high-tech zones and industrial parks (HTZIPs) in the city. This decision will be submitted to the Ministry of Home Affairs for appraisal, which must be completed by the end of 2024.

At present, Danang is in the process of drafting a special mechanism for the FTZ.

In the initial pilot phase, the preferential policy applied to the Danang FTZ is focused on creating the best conditions for investment and business procedures, focusing on a one-door mechanism for administration procedures,” said Tran Van Ty, deputy head of the HTZIP’s management board, at a forum themed Connecting Business in the city in October.

Besides that, the FTZ will implement several trial policies during its first five years of operation. Foreign investors in the zone will benefit from a range of incentives, including exemptions from corporate income tax, land rent, and import duty tariffs, Ty added. Nguyen Anh Son, director of the Agency of Foreign Trade under the Ministry of Industry and Trade (MoIT), noted the absence of a unified legal framework for FTZs.

“Vietnam lacks regulations on investment policies, management models, and operating mechanisms for FTZs. This hinders their development on a national scale,” Son said.

He stressed that the zones provide a transparent mechanism, offering businesses tax exemptions and simplified administrative processes – key advantages for a country heavily reliant on exports.

Tran Chi Dung, general secretary of the Vietnam Logistics Services

Association (VLSA), emphasised FTZs as a magnet for foreign investment, citing their preferential policies, modern infrastructure, and favourable business environment.

“Vietnam’s free trade agreements open doors for FTZ development by expanding export markets, reducing tariffs, and creating investment opportunities,” Dung said.

Thai Van Chuyen, general director of Thanh Thanh Cong-Bien Hoa JSC, highlighted the cost-saving potential of FTZs. “Logistics costs currently account for 7 per cent of our product costs. FTZs could reduce these expenses through tax incentives, streamlined customs processes, and improved infrastructure,” Chuyen said.

Meanwhile, Dang Thanh Son, deputy marketing director of Saigon Newport Corporation, emphasised the benefits FTZs could bring to logistics providers, manufacturers, and the state.

“FTZs should simplify state management procedures while ensuring compliance. Technology will be key to achieving this,” Son said.

Localities like Haiphong and Ba Ria-Vung Tau have proposed FTZ projects, recognising their potential to boost regional logistics. Pham Quang Nhat, director of the Department of Industry and Trade of Ba Ria-Vung Tau, outlined the province’s advantages, including its strategic location, container port infrastructure, and connectivity to the southeast region.

“The planned FTZ in the Cai Mep Ha area will integrate with Long Thanh International Airport and the Cai Mep-Thi Vai deepwater port, creating a competitive advantage for the country,” Nhat said.

For the zones to succeed in Vietnam, specific steps must be taken. According to Dung of the VLSA, this begins with establishing a robust legal framework. “Vietnam should study successful FTZ models worldwide and implement pilot projects in potential localities before expanding nationwide,” he said.

Investments in modern infrastructure, advanced technology, and administrative efficiency will also be critical. Smart management systems and automated processes could enhance transparency and productivity, benefiting both businesses and state agencies.

Source: Vietnam Investmnet Review