Vietnam should rethink locations of proposed special economic zones

By Huynh The Du   May 6, 2018 | 12:18 pm GMT+7
Vietnam should rethink locations of proposed special economic zones
Fishers on Phu Quoc Island, which has been planned for one of three new special economic zones in Vietnam. Photo by VnExpress/Duong Thanh

It’s hard to see any logic behind Vietnam’s choice for special economic zones, all of which are far from the biggest cities. 

Vietnam is proposing the establishment of three special economic zones (SEZ),Van Don in Quang Ninh, Bac Van Phong in Khanh Hoa and Phu Quoc in Kien Giang. But I just can’t see any clear goal or vision behind these choices.

When we talk about competitive economies, we think of metropolises racing to attract foreign investment and multinational organizations. Just take a look at Beijing, Shanghai, Tokyo or Seoul. The backbone of development lies in urbanization going hand in hand with industrialization. It’s the big cities that make a country competitive.

Not for Vietnam, apparently. The government seems to think that our cities are overpopulated and need to be “toned down,” and that investment should be poured into rural development. Such approach goes against development trends.

In my eyes, Van Don currently stands the best chance as a SEZ. Phu Quoc might work as a SEZ to boost tourism. As for Bac Van Phong, however, I have yet to see any potential coming from this place.

With incoming investments, these three areas might bring something to the table. However, it would be difficult for them to deliver breakthrough results that would boost Vietnam’s economy.

The same principle applies to all countries. There need to be clear goals and vision when it comes to establishing SEZs. Those goals might be to boost growth by attracting foreign investment, developing infrastructure; to support an overarching economic strategy; it could be the place to test new frameworks and policies and a means to ease pressure on population growth and unemployment.

More specifically, a SEZ needs to be placed close to large markets. For example, Shenzhen in China’s Guangdong Province is a good place to establish a SEZ, as the city’s location makes it the gateway between Hong Kong and the huge market of mainland China. Or the Iskandar SEZ in Johor, Malaysia is particularly well-developed thanks its proximity to Singapore and international maritime trade routes.

As for Vietnam, if we want to attract multinational corporations to SEZs, my personal top choices would be the Hoa Lac Hi-tech Park in Hanoi and the Thu Thiem New Urban Area in HCMC. These two places entail all necessary factors to attract investors, such as proximity to a large pool of high skilled workers, international markets and developing infrastructure.

For instance, if someone invested in Van Don, they’d need thousands of engineers, and other high skilled workers. Will this area be able to meet that demand fast enough? It’d be very difficult. But it’d be easy if it was located near Hanoi, where there are plenty of talented workers. It’d be best to let Hanoi and HCMC act as the driving forces of Vietnam’s economy. 

A good SEZ, in my opinion, should provide investors with maximum freedom to experiment with different frameworks, not just simply offering tax, land and financial incentives. For example, the SEZ in Pudong District, Shanghai is a huge success due to lax regulations. Instead of requiring businesses to register, they can just announce their opening; instead of listing legal business activities, only the illegal ones are specified.

As such, Vietnam’s SEZs should be part of a comprehensive development strategy, something I couldn’t find in the government’s draft law. At the same time, the top leader of each SEZ should be given more autonomy in decision making so that we don’t lose big investor due to prolonged waiting for approval from higher level authorities. 

Regarding the cost of building the three SEZs, $44 billion, the state budget will only partially cover it, with the rest coming from other sources. During the initial phase, I believe the state budget will need to pay for infrastructure development but such a huge investment needs to be subject to careful cost-benefit analysis. If we pour millions of dollars in there without calculating return on investment, corruption will be inevitable. 

*Dr. Huynh The Du is a lecturer at Fulbright University Vietnam, HCMC.

 
 
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