The National Assembly in recent months approved the pilot of a free trade zone (FTZ) model in Danang, which is a basic legal framework for the city to build the nation’s first such zone.

According to the resolution, the Danang FTZ will be established in association with the Lien Chieu seaport and, according to the People’s Committee of Danang, the exact location as well as any adjustments or expansions of the FTZ will be determined at a later date.

Danang stakes claim with first free trade zone plans

The city is now making efforts to complete documents to establish the FTZ to submit to the government in early 2025. Le Thi Kim Phuong, director of the city’s Department of Industry and Trade, at a press conference in early August said the city is specifically determining the location, boundaries, and specific functions of each functional area in the FTZ.

“To prepare for the implementation of the FTZ, Danang will conduct promotional activities to call for investors. Those interested in FTZs will enjoy policy mechanisms such as policies in economic zones and non-tariff zones. The selection of investors for the FTZ will only be implemented after the decision to establish it,” Phuong said.

The fact that Danang was approved to pilot the establishment of Vietnam’s first FTZ has contributed to increasing the reputation of the city, making investors pay attention and spend time researching and learning, Phuong added.

“There are a number of parties interested in seeking information about the policies and proposed locations for establishing an FTZ here,” she said.

According to Phuong, in an effort to form a strong trade ecosystem, the city will deploy the construction of a comprehensive and synchronous chain of solutions, including improving the business environment and quality of infrastructure, as well as promoting attractive preferential policies for investors.

“Danang will strengthen promotion activities, and promote the image and potential of the FTZ to international partners, thereby creating a strong attraction in the context of a constantly changing global market,” she said.

Ready for establishment

Previously in June, the Department of Industry and Trade of Danang sent an official dispatch requesting relevant departments and Lien Chieu district’s People’s Committee to consider and give opinions about four proposed locations for FTZs surveyed by the municipal People’s Committee.

It is expected that location 1 will form a logistics and production area of about 536 hectares located west of the southern bypass of Hai Van tunnel to the end of Truong Dinh village in Hoa Vang district.

The second location forms a production area of about 540ha in the expanded high-tech zone area in Hoa Vang district.

Location 3 forms a commercial and service area of about 130ha in an area oriented as a non-tariff zone in Hoa Vang district. The fourth location is a proposed sea reclamation, expected to be as much as 1,000ha in Danang bay, which is not yet oriented in the construction planning.

Regardless of final location, functional areas in the Danang FTZ will be separated from the outside area by hard fences, ensuring supervision and control of customs and state management activities in respective fields of relevant agencies.

The FTZ will apply a series of preferential policies. In particular, the operating term of projects on construction and infrastructure business of functional areas in the FTZ, and projects of investors subleasing land is applied as a 50-year venture in an economic zone according to the provisions of law.

Foreign investors establishing economic organisations in the FTZ do not have to have a project and do not have to carry out procedures for granting or adjusting an investment registration certificate before establishing an economic organisation.

Incentive levels, exemption periods, reductions in land rent, corporate income tax, and taxes on goods and services will be applied as incentives for ventures in economic zones according to the provisions of law.

In addition, businesses with initiatives in functional areas of Danang FTZ will be entitled to priority regimes if they meet conditions for applying the priority regime according to the provisions of customs, tax, finance and relevant laws, except for conditions on export and import turnover.

New opportunities

Ho Ky Minh, Vice Chairman of Danang People’s Committee, said, “Compared to other FTZs in the world, the Danang FTZ is proposed to be piloted with outstanding preferential policies. It will include a commercial production area, logistics port, and commercial and service area. The first phase will be completed in an open direction, softening boundaries based on research and application of an integrated business urban model.”

According to the proposal, the Danang High-Tech Park and Industrial Park Management Board will perform state management functions for the FTZ, it has management authority according to the one-stop, on-site mechanism in all fields, facilitating the settlement of investment procedures for businesses.

Architect Vu Quang Hung, head of the Management Board, said that the FTZ will be an area adjacent to the port. In particular, goods can be stored for a long time without being subject to customs or other taxes, and are guaranteed to pay taxes on inventory. It will not impose limits on the time of storage, dismantling, repackaging, assembly, distribution, or other factors.

According to Hung, there is both a deep-water seaport and an international airport, both with strong connections, so the city can establish an FTZ. There, foreign businesses and investors can bring goods and organise production, preliminary processing, packaging, and labelling before exporting to other countries, or then bringing them into Vietnam’s domestic market.

“This area is associated with the Lien Chieu seaport, which is the top favourable factor for an FTZ. Moreover, this area currently has mainly industrial zones and clusters, high-tech zones, and low population density, so planning into an FTZ is relatively easy,” Hung said.

“At that time, the entire northwest area of the city will become a giant bonded warehouse. Goods brought to warehouses and yards here will not have to pay taxes, and can continue to be processed, assembled, and separated,” he added.