Special economic zones have to compete in transaction costs
The Ministry of Planning and Investment (MPI) has announced the draft Law on Special Administrative-Economic Zones with many superior mechanisms. Thereby, three special administrative-economic zones namely Van Don in Quang Ninh province, Bac Van Phong in Khanh Hoa province and Phu Quoc in Kien Giang province are expected to have the attractive and competitive environment to attract investment and develop the economy, widely spreading effects to other localities.
Tran Duy Dong, Director General of the Economic Zones Management Department of the MPI, said that the draft Law on Special Administrative-Economic Zones was formulated on the design basis of the socio-economic policies for preferential areas, which are more favorable to superior mechanisms than existing specific institutional models in Vietnam.
The draft Law is aimed at creating favorable conditions for domestic and foreign investors to get access to lands, foreign individuals and organizations owning residential property. Preferential investment policies on taxes, exemption from land and water surface rent are proposed in excess of current regulations and can compete with special economic zones in the world to attract strategic investors in prioritized industries.
Vu Trong Binh, head of the local affairs department at the Economic Commission of the Party Central Committee said that a very basic principle to compete in the context of economic integration is the transaction costs which are critical to an economy. For instance, as the United States has the lowest economic transaction cost as a share of GDP in the world, it has been such a powerful country.
He also expressed that the State must ensure the lowest transaction costs when establishing a special economic zone which must be the pioneer in implementing the market economy to be able to compete with foreign investors.
"Slow" construction of special economic zones due to inappropriate thinking model
The draft Law on Special Administrative-Economic Zones is attracting the attention of many experts and enterprises with different views.
Some people said that the incentives of special economic zones of Vietnam are only new within the country, but in fact, it is not attractive enough to compete with other countries’ and create a breakthrough in attracting investment.
Luu Bich Ho, former Director of Development Strategy Institute, Ministry of Planning and Investment said that Vietnam's preferential policies for Van Don, Van Van and Phu Quoc special administrative-economic zones do not really have economic attractiveness.
In order to attract investment in the special economic zones, Vietnam should adopt the preferential policies to the highest level of economic liberalization and go further than current regulations.
He also expressed the question concerning how to overcome obstacles when the desire for a special economic zone has not been reached for 30 years.
"To develop a special economic zone, do not be impatient as life is not as simple as we imagine," said former Deputy Prime Minister Vu Khoan at the 2017 Extended Economics Conference.
He pointed out the reason of this situation is that because the thinking model in Vietnam is still inappropriate as the normal model must be a pyramid with the topmost thinking accounting for the smallest part.
“Vietnam’s current thinking model is an inverted pyramid. The topmost thinking takes up too much time while fewer policies and actions are implemented. Therefore, we must change as the longer we think, the further we will lag behind,” said Deputy PM Vu Khoan.
