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Coastal economic zones: better late than never   2010-05-12 - Doanh nhan

Experts say Vietnam’s a latecomer in the race to build seports integrated with free trade zones.  However, there’s plenty of potential, according to a report in Doanh Nhan (Businessman).




Though it has a smaller area and higher population, HCM City’s budget receipts ae always twice Hanoi’s.  More than a half of the city’s income comes from an import-export tax on the goods that go through its ports and from other sources of income related to maritime trade.


The comparison between Hanoi’s and HCM City’s budgets provides convincing evidence of the riches that an economy built on sea-borne trade can bring. However, it seems that Vietnam has trailed its Asian neighbors.


Open, more open


According to Dr Vo Dai Luoc, former director of Hanoi’s Institute for World Economy, China has followed a policy of opening coastal free trade areas with success after success since 1978.  Even so, it trails other East Asian countries that opened their own coastal areas in the 1960s.


As for Vietnam, it’s way behind.  Though the country aims to build 15  coastal economic zones, including one which will open at the end of 2010, and more than 200 industrial zones and border economic zones, Vietnam does not yet have any free trade zone that can take full advantages of a seaside location. That’s surprising for, as Luoc points out, Vietnam has more than 3000 kilometres of coast, 50 river mouths and some excellent sites for deep water seaports.  It’s in the centre of a dynamically developing region.


Arguing with the viewpoint that having become a member of AFTA and WTO, Vietnam has opened its market to the world, and that Vietnam does not need to build free trade zones any more, Luoc says free trade zones are all the more important as Vietnam joins into the world.  As opportunities multiply, Vietnam ought to open more doors Vietnam to attract outside strength. Indeed, the free trade zones in East Asia have developed even more strongly once the countries that host them took steps to open their overall economies to external competition.


In July 2006, the South Korean Government even granted ‘special self-governing’ status to the Incheon free economic zone, aiming to turn Incheon into a powerhouse rivalling Hong Kong and Singapore. Meanwhile, Singapore, perhaps the freest economy in the world, has nonetheless set up a free trade zone in its port of Jurong.


“Vietnam ought to set up free trade zones in every international seaport,” Luoc says.


Where goods can go, finance will follow


Agreeing that the nation ought to speed up the development of coastal free economic zones, Professor Phan Chanh Duong of the Fulbright Economics Teaching Program in HCM City stresses that there are two key principles: “where goods can go, finance will follow”, and “the city develops the port, and the port helps develop the city.”


The first thing that needs to be done to develop a successful economic zone is to connect it with coastal cities and other economic centers by a highway system. Besides the visible roads, Duong said, it is also necessary to improve ‘intangible expressways,’ by which he means easy administrative procedures and related  customs, credit and finance.


Duong, who is also the Chairman of the Tan Thuan Export Processing Zone in HCM City, emphasizes that seaports must be strongly developed.  If port facilities are bad, the city will not develop, and vice versa.  If ports do not handle a high volume of goods, they will die. Bien Hoa and My Tho Cities developed port areas before HCM City, but they do not have good port facilities, it is HCM City, not Bien Hoa nor My Tho, that has become the most developed industrial and trade city in the south.


Sharing Duong’s view, Nguyen Xuan Thuy, Head of the Dung Quat Economic Zone (Quang Ngai) says that building modern seaports is an essential precondition to attract investment projects into an economic zone.


The experts emphasize that it is very necessary to connect economic zones. Chu Lai Economic Zone, just across the province border in Quang Nam, can focus on developing tourism, entertainment complexes and high grade recreational facilities to serve foreigners who work at Dung Quat.  While Dung Quat focuses on attracting heavyweights like Doosan Heavy Industries, Chu Lai aims to attract small and medium enterprises, mostly Vietnamese-owned.


Chu Lai, the first coastal economic zone in Vietnam, was established in 2003 at the site of a one-time American base camp.  Since then, 14 economic zones have been set up, including two in the Red River Delta, 10 on the central coast, and two in the south.

According to official planners, by 2020, Vietnam will have 15 coastal economic zones.  By the end of 2009, such economic zones had attracted 550 investment projects capitalized at nearly $25 billion.  Coastal economic zones contribute five percent of GDP while creating 300,000-500,000 jobs.

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