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Enhancing border economy and promoting border trade: challenges and solutions

In 1996, the Government initiated a pilot project for the construction of the Mong Cai border gate economic zone in Quang Ninh province. This effort involved the approval of several preferential mechanisms related to investment activities, import and export, temporary import for re-export, transportation of goods in transit, bonded warehouses, and duty-free shops.

Two years later, the Government expanded its efforts on a larger scale compared to the approved scale with the approval and adoption of preferential policies for Moc Bai Economic Zone in Tay Ninh and the Lao Bao Commercial Zone in Quang Tri. Subsequently, numerous localities across the country embarked on the accelerated development of economic zones.

According to Decision No. 52/2008/QD-TTg, dated April 25, 2008, which approved the "Planning scheme for the development of Vietnam's border gate economic zones up to 2020," these economic zones in border regions were slated for transformation into dynamic economic hubs for each border province bordering China, Laos, and Cambodia. The plan envisioned the construction of 30 economic zones by 2020. Nine of these zones, namely Mong Cai, Lao Cai, Lang Son, Lao Bao Special Economic Zone, Cau Treo, Bo Y, Moc Bai, An Giang, and Dong Thap, were to be developed synchronously in terms of infrastructure and organizational management, mechanisms, and policies. The goal was to achieve a total import and export turnover of goods and services valued at $42-43 billion USD across Vietnam's borders with neighboring countries by 2020.

To date, after nearly 30 years of implementation, the entire country boasts 26 economic zones that play a crucial role in promoting import and export, facilitating cultural exchanges, and contributing to the development of friendly and cooperative relations with other nations. Nevertheless, compared to the objectives outlined in the Master Plan for the Development of Vietnam's Border Gate Economic Zones by 2020, most of the goals have not been met as anticipated.

In order to avoid hasty investments and ensure efficient development, on August 30, 2013, the Prime Minister issued Decision No. 1531/QD-TTg, approving the project "Review and Adjustment of Development Planning for Vietnam's border-gate economic zones up to 2020, with a vision to 2030." This decision replaced Decision No. 52/2008/QD-TTg from April 25, 2008. Based on a review of the current status, the Prime Minister selected nine key economic zones to receive focused development investment from the state budget during the 2016-2020 period. These nine zones include Mong Cai in Quang Ninh province, Dong Dang - Lang Son in Lang Son province, Lao Cai SEZ in Lao Cai province, SEZ of Cao Bang province, Cau Treo Economic Zone in Ha Tinh province, Cha Lo Economic Zone in Quang Binh Province, Lao Bao Special Economic and Commercial Zone in Quang Tri Province, Moc Bai Economic Zone in Tay Ninh province, and the Economic Zone of An Giang province.

The Prime Minister emphasized that the allocation of investment capital for these nine key border-gate economic zones should be no less than 70% of the total investment support capital from the central budget in the annual and five-year plans for 2016-2020, prioritizing investments in critical areas to promote efficiency and development.

Practice and Challenges

Evaluation of activities in the border economic zones of the northern border provinces (Mong Cai, Dong Dang - Lang Son, Lao Cai, Cao Bang), the Lao Bao - Quang Tri special economic and trade zone, Cau Treo economic zone - Ha Tinh, Le Thanh - Gia Lai, Bo Y - Ngoc Hoi - Kon Tum, Moc Bai, and Xa Mat - Tay Ninh economic zones reveals the following:

Among the 26 economic zones in the country, the northern economic zones, bordering Yunnan and Guangxi provinces in China, exhibit more vibrant economic activities. However, they are heavily reliant on Chinese regulatory frameworks.

The allocation of the state's initial capital, intended to stimulate and attract further investments, bolster traffic connectivity, develop infrastructure, and concurrently establish mechanisms to engage investors in business via public-private partnerships, is a pivotal precondition. Nevertheless, the current infrastructure in economic zones generally appears inadequately synchronized. Facilities like warehouses, loading and unloading equipment, and cold storage have yet to meet the needs of businesses. Many investors encounter numerous challenges, notably related to land clearance. Furthermore, essential human resources and services associated with the economic zones, including logistics, customs services, testing, quarantine facilities, and legal counsel, are insufficient in terms of expediting import and export activities for businesses operating within the zones. Despite certain positive developments, these initiatives have not met expectations. Additionally, budgetary allocations to support infrastructure investments have been limited, which has discouraged private investors from active participation due to unappealing mechanisms and policies. Even after the pilot phase, there have been no substantial breakthroughs in these mechanisms and policies, resulting in inefficient operations within the Special Economic Zones (SEZs).

Solutions for the Future

To effectively implement policies and fully leverage advantages while addressing current challenges within the SEZs, it is imperative to:

Significantly enhance the investment environment, fostering more favorable conditions for trade and service activities by prioritizing transparency and simplicity in business procedures, in alignment with international business trends and global integration.

Invest in the enhancement of both physical and soft infrastructure, particularly technical infrastructure and services that facilitate trade and investment, such as the construction of warehouses and logistics facilities. Developing complex urban areas is essential, ensuring streamlined entry and exit processes for goods and vehicles at border gate areas.

Implement modern digital technologies and electronic advancements to swiftly establish and operate an industry 4.0 compliant investment and business environment. There should be an emphasis on promoting commitments related to e-commerce within the region and ASEAN, with a focus on implementing the "one-stop-shop" mechanism to facilitate customs clearance, thereby reducing time and costs associated with trade and logistics activities.

Accelerate the formation of value chains that connect production, trade, and services. Particularly, the establishment of regional and cross-border linkage chains can capitalize on potential advantages and foster stronger ties between Vietnam and its neighboring countries.

Elevate the quality of local human resources, with a particular emphasis on high-quality talent, catering to the development requirements in investment and trade, especially within the tourism sector. Simultaneously, apply modern science and technology in the management, administration, and business activities within the province's SEZs.

Remove institutional and policy hurdles, harmonizing regulations, policies, and procedures between Vietnam and its neighboring countries to maximize production, trade, and value chains. Specific guidelines and proposals should be introduced to attract infrastructure investments that promote the establishment of cross-border economic cooperation zones in the future.

Developing Logistics Services for Import and Export Through Border Gates

In line with the strategic direction of constructing economic zones aligned with the logistics model of Industry 4.0, it is imperative to concentrate on the development of key logistics services, encompassing:

1. Transportation Services

Primary Services: Optimization of the transport system, regional, national, and cross-border distribution networks, consolidation and separation procedures, containerization, inspection, quarantine, customs, and warehousing, including bonded and other warehousing facilities.

Auxiliary Support Services: The promotion of services for vehicles such as trucking, gas stations, and car wash stations; amenities for enterprises, including office spaces; and general services, such as ensuring the availability of clean water and green spaces, to bolster businesses engaged in import-export activities within the province.

2. Freight Forwarding Services

To enhance freight forwarding services, it is essential to accomplish the development of road transport forwarding infrastructure. Additionally, a strategic focus should be placed on expanding and upgrading the warehouse system.

3. 3PL (Third-Party Logistics) and 4PL (Fourth-Party Logistics) Services

These services are pivotal for optimizing supply chain integration. They facilitate the efficient movement of goods within the supply chain while effectively managing inventory and processing information.

To foster the growth of 3PL and 4PL services, the establishment of an intelligent asset system is imperative. Logistics service providers in the region should initiate this process by establishing a network of distribution centers and warehouses. This system must emphasize modularization within the distribution center framework, ensuring scalability and adherence to modern standards, while also remaining adaptable and customizable to meet customer-specific requirements.

Vu Huy Hung

Department of Information and Trade Promotion - VIOIT