Vietnam is actively studying and implementing FTZ models in the central city of Danang and the southern province of Ba Ria-Vung Tau, with the expectation of improving logistics competitiveness and attracting foreign investment. However, to be successful, it is necessary to have a methodical development strategy and overcome existing challenges.

Firstly, FTZs simplify customs procedures, reduce trade barriers, and enable logistics businesses to operate more efficiently. When goods can move freely without immediate import duties, logistics companies can optimise their warehousing, distribution, and transshipment operations with flexibility. Due to these advantages, FTZs have become commercial hubs that facilitate the large-scale flow of goods in and out, serving as key trade and logistics centres.

As Vietnam wants to become a regional trade and logistics hub, it is to develop FTZs. Moreover, they also help businesses easily access raw materials and components from various sources around the world, helping to optimise the supply chain and improve production capacity.

Secondly, FTZs contribute to cost reductions in transportation, warehousing, and storage through preferential policies on taxes and customs procedures. When logistics costs are reduced, product prices are also reduced, thus enabling businesses to improve their competitiveness in the international market.

The development of FTZs entails great demands for modern logistics infrastructure, including warehouses, seaports, airports, road transport systems and distribution centres. Governments and private enterprises often invest heavily in transport infrastructure and logistics technology in related areas, thereby creating a solid foundation for the sustainable development of the logistics industry.

Another significant factor is the adoption of digital technology in modern FTZs. Modern FTZs are increasingly adopting digital technology, from smart warehouse management systems and real-time goods tracking software to blockchain to make trade transactions transparent. They not only help attract logistics businesses but also create an attractive business environment for manufacturers, international trading companies and foreign investors. This helps encourage local economic growth, create jobs and improve the professional qualifications of workers in the logistics industry.

Recognising their importance, Vietnam has been making strategic moves. In June 2024, the National Assembly allowed Danang to pilot the establishment of an FTZ associated with the Lien Chieu seaport. It will include production areas, logistics centres, and commercial and service areas. The city has proposed an area of about 1,500 hectares to deploy this.

Elsewhere, partnerships have been formed to support development. In February, Ba Ria-Vung Tau agreed with DP World from the UAE to develop an FTZ at Cai Mep Ha port. The aim is to leverage its strategic location to promote logistics, seaports, and international trade.

However, developing such a complex is challenging in Vietnam because of a number of barriers. Specifically, the country’s legal and policy framework is incomplete as it does not have a separate law on FTZs, which can cause difficulties in management and attracting investment.

Also, logistics infrastructure has not yet been synchronised. Transportation systems, seaports, and warehouses still have many limitations. Vietnam needs to make large investments to meet the needs of FTZs.

Moreover, Vietnam is facing a shortage of high-quality personnel. Currently, Vietnam’s logistics human resources have not yet met the requirements for operating FTZs according to international standards.

Vietnam also faces growing competition from regional nations. Singapore, China, and Thailand have been effectively operating FTZs.

In this context, Vietnam needs sufficient conditions. These include completing the legal system and building a separate law on FTZs, improving logistics infrastructure, applying digital technology in management, and upgrading seaports, airports, and highways.

There is also a need for flexible tax incentives to attract investment, cooperating with international partners with experience in FTZ development, and training and developing high-quality logistics workers. While waiting for this development, Vietnam needs solutions for logistics. It should make the most of existing economic zones and improve the operational efficiency of export processing and coastal zones.

Improving logistics infrastructure should also be prioritised by investing in highways, seaports, and airports. Moreover, Vietnam should continue its administrative procedure reform to simplify customs procedures and apply electronic declarations.

Source: Vietnam Investment Review