According to the Vietnam Logistics Report 2024 from the Ministry of Industry and Trade (MoIT), while free trade zones (FTZs) are a familiar model around the world they are still a relatively new concept in Vietnam. The country has, however, been steadily laying the groundwork for their development, by establishing small-scale zones like export processing zones, non-tariff areas within economic zones, bonded warehouses, and duty-free shops. With four export processing zones as of the end of 2023, Vietnam is gradually shaping its own path towards a more dynamic FTZ landscape.

Opportunities from local strengths

Vietnam’s strategic location and economic advantages position it as a prime candidate for developing FTZs. With a coastline stretching 3,260 km and proximity to major international shipping routes, Vietnam serves as a vital trade gateway connecting global markets. This geographic advantage allows for efficient import, processing, and export activities within FTZs, enhancing Vietnam’s role as a key player in global supply chains.

Situated at the heart of Southeast Asia, Vietnam enjoys close economic ties with major economies, including China, Japan, South Korea, and ASEAN nations. This connectivity facilitates seamless trade flows and strengthens Vietnam’s potential as a regional logistics and transshipment hub.

The country’s deep-water seaports, such as Hai Phong in the north, Da Nang in the central region, and Cai Mep - Thi Vai in southern Ba Ria-Vung Tau province, are fully-equipped to accommodate large container vessels, making them ideal locations for FTZ developments. Recent upgrades to road, rail, and air transport infrastructure further enhance the efficiency of Vietnam’s logistics network, ensuring smooth connectivity between industrial parks, ports, and export processing zones.

Recognizing these advantages, the Vietnamese Government has introduced a range of incentives to attract investment in FTZs. These include corporate income tax reductions, import duty exemptions for goods entering FTZs for production and trade, and VAT exemptions for goods and services consumed within these zones. Additional policies, such as land use incentives and preferential loan programs, further enhance Vietnam’s appeal among both domestic and foreign investors.

Its robust economic growth, coupled with its extensive participation in international trade agreements, provides a strong foundation for FTZ expansion. Vietnam is actively engaged in various free trade agreements (FTAs) with key global partners, including the EU, Japan, South Korea, and ASEAN, further integrating the country into the global economy and boosting its competitiveness.

Ba Ria-Vung Tau’s Cai Mep - Thi Vai port complex, one of Vietnam’s largest deep-water ports, has an annual capacity exceeding 18 million TEUs. The province is also home to major industrial parks and export processing facilities, reinforcing its role as a critical logistics and manufacturing hub.

Hai Phong, a leading northern economic center, similarly benefits from extensive industrial and export processing zones. Its strategic location and well-developed port infrastructure make it an attractive destination for international businesses looking to leverage Vietnam’s trade advantages.

Beyond these key locations, the MoIT has also identified northern Lang Son and southern Dong Nai and Binh Duong provinces as potential sites for the development of FTZs. Known for their strong economic performance and strategic locations, these provinces offer additional opportunities for expanding Vietnam’s FTZ network.

As the country continues to refine its economic policies and infrastructure, the development of FTZs presents a significant opportunity to enhance its trade efficiency, attract foreign investment, and solidify its position as a global trade hub.

Source: VnEconomy