Law on special administrative-economic units to boost growth

The Government has decided to initially develop three special administrative-economic units -- Van Don in northern Quang Ninh Province, Bac Van Phong in central Khanh Hoa and Phu Quoc in southern Kien Giang.– Photo baophapluat.vn

Speaking at a meeting of the Ministry of Planning and Investment on Thursday to discuss the draft law before it came up for comments at the fourth plenary meeting of the 14th National Assembly, former deputy head of the National Assembly Economic Committee Nguyen Van Phuc said the law must answer a number of questions.

“How will the law create legal frameworks and policies strong enough to be launching pads for three special economic zones to develop vigorously? What are the special mechanisms that need to be put in place? How should difficulties and constraints be tackled? What administrative management models should be applied here?” Phuc said these were some of the issues that needed to be addressed.

The Government has decided to initially develop three special administrative-economic units -- Van Don in northern Quang Ninh Province, Bac Van Phong in central Khanh Hoa and Phu Quoc in southern Kien Giang.

The Ministry of Planning and Investment, which is in charge of drafting the law, expected that with preferential incentives, the three special zones would attract investment worth dozens of billions of dollars, which would generate huge sums in terms of added value and boost average income to US$12,000-13,000 per capita.

The ministry estimated that the special zones would contribute billions of dollars in taxes and fees to the State budget

Until now, Viet Nam has not had any genuine special economic zones offering the most open and favourable policies for investment.

The country has 17 coastal economic zones, 26 border economic zones and 328 industrial zones, which altogether have attracted some $153 billion investment, accounting for 52 per cent of registered foreign direct investment in Viet Nam, created three million jobs and contributing 42 per cent to industrial production and 52 per cent of exports.

Globally, there are some 4,500 special economic zones in 140 countries, and most countries have laws regulating these zones, according to the ministry.

Experts said it was important for Viet Nam to implement appropriate models for special administrative-economic units to facilitate investment and create spillover for the whole economy.

Tax incentives and more

Tax and fee incentives will be an important factor in turning special zones into a magnet for investment.

However, experts said tax and fee incentives were just initial attractions, and what is most important is still an open institutional environment to retain investors for a long duration.

According to Nguyen Dinh Cung, director of the Central Institute for Economic Management, initial attractions are tax, fee and land incentives, however, for the long term, it is critical to create efficient circulation of human resources, goods and capital.

Cung said to achieve this, there must be minimum barriers, lowest costs and highest safety.

“Because they are special zones, they must be different from the other parts of the country, creating zones with outstanding international competitiveness,” Cung was quoted by Thanh Nien (Young People) online newspaper as saying.

According to Luu Bich Ho, former director of the Development Strategy Institute, in special administrative-economic zones, administrative institutions should be self-controlled and self-determined and administrative procedures should be very simplified.

Ho said there were thousands of special zones worldwide, of which many had failed, but many had also succeeded, for Viet Nam to learn from. “In developing special administrative-economic zones, we cannot do anything halfway.”

Economic expert Tran Du Lich said a notable point was the proposal about the administrative management models for special zones, in which there would be no people’s councils and people’s committees. Instead, there would be a head of the zone with a compact administrative management system.

This administrative management model would be appropriate for special zones to enable them to make breakthroughs, according to Nguyen Van Thanh, deputy chairman of the People’s Committee of Quang Ninh Province, who was leading the compilation of the project on establishing the Van Don Administrative-Economic Unit.

The law is expected to be passed at the upcoming meeting of the National Assembly in May 2018.