What is a special economic zone? Vietnam’s 3 proposed special economic zones

In the context of increasingly fierce global investment competition, special economic zones (SEZs) are considered a breakthrough development model, designed to create an open business environment with exceptional incentives that strongly attract investment capital. Many countries such as China and South Korea have successfully implemented this model – Shenzhen (China) and Jeju (Korea) are prime examples of SEZs that transformed regional economies and became global innovation hubs. In Vietnam, three regions Van Don (Quang Ninh), Bac Van Phong (Khanh Hoa), and Phu Quoc (Kien Giang) have been oriented to become pilot special economic zones. These SEZs are expected to create new growth engines and bring about breakthrough opportunities for national economic development.

1. What is a special economic zone (SEZ)?

A special economic zone (SEZ) is a designated geographical area under government management, established with the goal of creating an open and flexible business environment that is less constrained by overlapping administrative regulations, while offering preferential policies to promote business cooperation, attract investment, create jobs, and enhance economic efficiency.

The incentive policies within SEZs vary by country but generally provide greater advantages compared to other regions, such as: the ability to apply foreign legal systems (through mutual agreements) in dispute resolution, significantly lower tax rates often half the standard rate elsewhere; retention of all local budget revenue for reinvestment and developmen. The SEZ governor is typically granted broad authority to make key economic and administrative decisions within the zone.

One of the most successful SEZs in the world is Shenzhen (China), established in 1980. Once a small fishing village of about 30,000 people, Shenzhen has achieved an economic miracle, transforming into one of the world’s leading technology and financial hubs. In 2024, Shenzhen’s GDP reached 3.68 trillion yuan (approximately 500 billion USD), driven by booming high-tech industries such as internet services, biotechnology, and telecommunications. Foxconn, Apple’s major supplier, opened its first factory in Shenzhen in 1988 to produce computer components. Today, Shenzhen is home to global giants like Huawei, Tencent, BYD, and DJI, and has become the cradle of many fast-growing startups and technology billionaires in China.

In South Korea, SEZs such as the Incheon Free Economic Zone and the Jeju Free International City have also become highly successful models, recognized as iconic destinations that drive the nation’s economy and innovation.

2. Three special economic zone in Vietnam

In 2018, the National Assembly of Vietnam received a draft proposal outlining preferential policies for the establishment of three major Special Economic Zones (SEZs): Van Don (Quang Ninh) linked to the northern key economic region, Bac Van Phong (Khanh Hoa) part of the central region, and Phu Quoc (Kien Giang) representing the southern growth area. These three areas were strategically chosen to form a national SEZ network connecting the north, central, and south economic hubs. However, the draft SEZ Law faced significant public debate and controversy, leading to its indefinite postponement on June 11, 2018. As a result, Vietnam has not yet officially established any special economic zone. By 2025, in response to growing economic and strategic needs, the proposal to revive the three SEZ projects was reintroduced at the 9th National Assembly session on February 15, 2025. These include the following:

2.1. Van Don special economic zone, Quang Ninh province

With its strategic location for international trade, Van Don has long served as a gateway of maritime prosperity for Vietnam, facilitating sea-borne commerce with nations such as Japan, China, India, Thailand, and Indonesia.
In terms of air connectivity, Van Don International Airport allows travelers to reach major economic, financial, and tourism hubs across China and Southeast Asia within 1–2 hours of flight time, and destinations such as Beijing (China), Seoul (South Korea), Tokyo (Japan), or Dubai (UAE) within 3–4 hours.
This strategic position gives Van Don a distinct competitive advantage to evolve into a dynamic and globally connected special economic zone, positioning it as one of Vietnam’s most promising gateways for regional integration and high-value development.

2.2. Bac Van Phong special economic zone,Khanh Hoa province

Blessed with a strategic geographical location, Van Phong Bay features an average depth of 20–27 meters, calm waters, and no sedimentation, lying close to international maritime routes — making it an ideal location for developing a regional deep-water seaport and logistics hub. According to the national development plan, Bac Van Phong is envisioned to become an international-class coastal tourism city, a modern marine economic center, and a deep-water port complex integrated with a free trade zone. If the special economic zone (SEZ) proposal is approved, Bac Van Phong will be among Vietnam’s first three SEZs, serving as a key driver of the country’s marine economy and a strategic gateway for global trade and investment.

2.3. Phu Quoc special economic zone, Kien Giang province

Phu Quoc holds a strategic role across multiple sectors serving as a marine economic hub, a leading tourism center, a magnet for foreign investment, and an international gateway for the Mekong Delta region.
With its well-developed infrastructure, including an international airport, seaport, and inter-regional transportation network, Phu Quoc acts as a key connection point linking Vietnam with ASEAN countries and major global economic centers.

Many experts note that Phu Quoc shares striking similarities with globally successful special economic zones such as Shenzhen (China) and Jeju (South Korea) both of which started as undeveloped coastal regions before transforming into thriving economic powerhouses. This geographical advantage provides Phu Quoc with ideal conditions for trade, logistics, import – export activities, and foreign investment attraction and it is expected to follow a similar path of growth.
Notably, in preparation for the APEC 2027 summit, a series of major infrastructure projects are being implemented with a total investment exceeding 300 trillion VND. Experts predict that these developments will significantly upgrade the island’s infrastructure, creating a strong momentum for sustainable economic growth in the near future.

3. The Significance of Special Economic Zones (SEZs)

A highly competitive and attractive business environment within special economic zones (SEZs) is a key factor in strongly attracting investment capital from multinational corporations and foreign investors. This serves as a critical foundation for Vietnam to gain access to advanced technologies, modern production techniques, and sophisticated management experience, thereby driving breakthrough economic growth.
In addition, SEZs can be regarded as “institutional laboratories”, where the effectiveness and feasibility of new economic and administrative policies can be tested before being applied nationwide.
Currently, Vietnam has developed six types of economic and industrial zones, including: (1) export processing zones, (2) industrial parks, (3) high-tech zones, (4) border-gate economic zones, (5) open economic zones, (6) coastal economic zones. These models have made significant contributions to Vietnam’s industrialization and modernization process, yet they also expose certain limitations, such as low flexibility, incentive policies that lack international competitiveness, and investment attraction that remains below potential.
For Vietnam, as economic competitiveness remains modest, domestic and natural resources are approaching their limits, and global investment competition grows increasingly fierce, the establishment of special economic zones is considered a strategic solution and is being closely directed and prioritized by the Party and the Government.
However, international experience also indicates that granting excessive autonomy without robust oversight mechanisms may lead to the emergence of a “state within a state”, posing risks such as money laundering, real estate speculation, and capital diversion away from productive sectors.

Above RSL Group has provided readers with information about the special economic zone in Vietnam. If you have any questions, please contact our hotline immediately for answers. See more articles here.

Source: Redsunland

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