The Importance of Free Trade Zones for Vietnam's Economic Growth
The Lach Huyen Logistics-Industrial and Free Trade Zone in Hai Phong serves as a model for free trade zones in Vietnam. However, some businessmen feel that the government needs to provide policies to support the establishment of free trade zones instead of leaving them to their own devices.
Government Resolution 45 in 2019 aims to develop Hai Phong until 2045 by researching successful domestic and international policy designs and implementations for free trade zones. While this is a significant step, implementation remains weak. Free trade zones eliminate or minimize taxation and trade management hindrances, which can slow down international trade. They are different from free trade areas, which are established through multilateral international treaties.
Free trade zones are unilateral decisions made by one country, where goods from other countries can be brought in for processing, packaging, and assembly before being exported. Seaports are ideal locations for free trade zones due to their significant role in international trade. For example, Singapore has nine free trade zones, while China has 21, including the largest in the world in Hainan province.
If established in Hai Phong, a free trade zone could be located in the Dinh Vu Cat Hai economic zone, which has many seaports and few residents. This could create a vast bonded warehouse with a complete logistics and manufacturing ecosystem. Vietnam has participated in 15 international free trade agreements, but still lacks a free trade zone, hindering the country’s growth potential. Establishing free trade zones could open the country to a significant influx of capital, goods, and trade, boosting the economy in the future.