Policy recommendations for the formation and growth of CBEZs in Vietnam

These are the contents of the research titled "Scientific Basis for the Formation and Development of Cross-Border Economic Zones in Vietnam" (KX.01.09/16-20), which is chaired by Assoc. Dr. Nguyen Anh Thu (VNU University of Economics and Business). The research presents theoretical foundations and international practices of establishing and developing CBEZs; evaluates the policy and status of border economic cooperation and development of border gate economic zones in Vietnam; and assesses the conditions for establishing and developing CBEZs in Vietnam.

Agreed perspectives on CBEZ

In this research, CBEZ is defined as an economic cooperation zone aimed at facilitating trade and investment, with an emphasis on cooperation and policy alignment between two sides. CBEZ is not always a shared zone between two countries, with an executive agency and a single policy, but might be two distinct zones that are planned with mutual benefits, collaboration, and policy harmonization between both parties in mind. This perspective is significantly broader than the Chinese-proposed model of cooperation, which is based on "two countries and one zone, free commerce, closed operation." The convergence of views on a broader and more flexible definition of CBEZ will make this model more practical, particularly in terms of sustainable development and safeguarding socioeconomic and national security concerns. With this perspective, the CBEZ concept will be one of "two zones, two countries," and in Vietnamese it should be named as "cross-border economic zone."

The construction of a CBEZ is therefore necessary and beneficial in order to increase cross-border trade in commodities, services, investment, and labor, consequently boosting the economies of border provinces and improving the lives of border residents. CBEZ, if it truly results from mutually beneficial collaboration between two nations, will boost the border provinces' strengths, contribute to regional, inter-regional development and product value chains, as well as strengthen the country's and region's links.

CBEZ model

The research provides a model of a cross-border economic zone connecting two economic zones on the opposite sides of a border gate. This model is similar to the symmetric model,  the composition of the two sides' economic zones may alter depending on their relative strengths. A full CBEZ would comprise both hard infrastructure, such as transportation systems, warehousing, commercial, and manufacturing zones, and soft infrastructure, such as financial services and information.

The research synthesized previous research as well as practical surveys and proposed a fundamental CBEZ model with eight distinct component groups based on Lord and Tangtrongjita's (2014), Lalkaka et a l(2011), Wallack et al(2011),  and some other studies developed in the research work by Nguyen Anh Thu and Nguyen Thi Thanh Mai (2017). The model is comprised of eight components: (1) an advanced checkpoint; (2) modern infrastructure connectivity; (3) a commercial zone; (4) an enterprise zone; (5) a logistics service zone; (6) preferential policies; (7) a joint management mechanism for bilateral cooperation; and (8) enterprises participating in value chains and regional linkage networks.

In terms of the mode of cooperation, the following specific themes have been proposed:

  • According to the model of two distinct zones in two countries, each country self-manages on the basis of ensuring and respecting its own independence, sovereignty, and territorial integrity, as well as compatibility and connectivity between the two sides in a variety of fields, including infrastructure planning, mechanisms and policies, organization and management, and procedures and facilitation at the border gate.
  • The two sides collaborate in planning and creating the functional subdivisions of the two zones in a way that leverages and complements each side's strengths.
  • The two sides cooperate in order to facilitate economic cooperation through harmonizing policies, particularly trade, investment promotion, and labor mobility policies.
  • A Joint Committee should be established which comprises of members of the two sides' managerial functions and representatives from the business community to meet on a monthly basis to resolve issues and obstacles encountered during cooperation.
  • A method should be established for the two parties to communicate information on an ongoing basis.
  • Each party is exclusively responsible for the development, management, and exploitation of CBEZ under its jurisdiction.
  • The adoption of CBEZ in provinces requires a roadmap, emphasizing the topics that are most pertinent to their needs and practical development. Each province's construction model should be unique, taking into account the benefits and peculiarities of each location.

Regarding the surveyed provinces, the northern border provinces have a tremendous amount of potentials for cross-border commerce development. However, enterprise development is constrained in the northern border provinces such as Lao Cai, Lang Son, and Cao Bang. Quang Ninh, in particular, has stronger general and specific characteristics for CBEZ development than other provinces, and thus qualifies as a province with the best conditions for CBEZ formation. The cross-border economic cooperation between the provinces bordering Laos and Cambodia demonstrates that the provinces can focus more on production cooperation between their respective enterprises while also promoting their strengths as a transit bridge to the country's seaport areas, particularly the Lao Bao - Densavanh area.

Recommendations to the Government:

The CBEZ is the next logical stage in the development of cross-border economic cooperation. However, because there is no universal model for all border gate areas, the approach is for the Government to develop a policy in conjunction with relevant ministries and agencies and with the approval of the Government.

The government needs to: (i) Clearly define CEBZ as a model of two zones in two countries, not as a single zone with a unified policy. At the moment, the researched provinces do not meet all of the conditions necessary for the formation and development of CBEZ, and thus it will take time for these provinces to do so; (ii) Implement policy coordination with bordering countries through the establishment of a regular exchange mechanism for macroeconomic policies, policies between border provinces, and particularly policies on trade and tourism, tax, customs, and socioeconomic development planning; Assist local governments in harmonizing policies creating a transparent legal corridor to facilitate business development; Establish a regular information exchange mechanism and keep itself updated of the border trade policies of its neighboring countries; (iii) Carry out assessment and review of border trade agreements between Vietnam and adjacent countries; (iv) Take measures to re-organize small-scale border trade with neighboring countries, promote exports through official channels, and payments according to international standards; (v) Prioritize investment resources for border provinces' economic infrastructure development; and (vi) Coordinate research on common policies to promote bilateral cooperation.

Recommendations to local governments:

Local governments must urgently examine their border provinces' master plans for socioeconomic growth, identifying important axes of convergence between trade exchange activities and local production, economic, and urban development. Local governments must identify their own advantages in economic cooperation with adjacent countries in order to attract significant investment and large domestic firms to capitalize on those advantages.

Local governments must continue to strengthen their strengths in the immediate future by promoting trade activities, facilitating commerce, and supporting investment in logistics services, supermarkets, trade centers, and bars. With a major move toward formal commerce, it is vital to alter manufacturing and processing processes, increase the quality of commodities, and boost Vietnamese exports' competitiveness in the global value chain. Along with policies that facilitate cross-border trade by constructing infrastructure and streamlining procedures, it is vital to have policies that promote production and market development in order to enhance product exports focusing on China, leveraging geographical proximity and trade preferences, and increasing the overall efficiency of Vietnamese investment in connecting infrastructure.Ministries and sectors must collaborate with Vietnam's border provinces to pilot the development of cross-border tourism cooperation zones in locations with pairs of border gates conducive to tourism development. It is reasonable to identify and classify interesting sites, particularly for Chinese tourists, in order to ensure quantity, service quality, and long-term profitability.

It is vital to continue deepening the system of cooperation between local governments in the management and usage of cross-border laborers, with the goal of enhancing cooperation in training and upgrading worker qualifications, firstly it is crucial to carry out trainings on Chinese language, Vietnamese language, and skill, qualification upgrading for unskilled employees; prioritize labor cooperation as a significant area of bilateral economic cooperation in the coming years. Concerning the issue of illegal border-crossing workers seeking work in China, local governments must coordinate with cross-sectoral forces such as police, border guards, and unions to strengthen management and containment in a variety of areas; effectively manage temporary residence and absence, organize to grasp situations, and detect and handle cases of deliberate violations. Local departments of labor, invalids and social affairs should open more vocational training classes, conduct employment counseling, and hold job fairs; they should also assist individuals who have been returned in accessing to preferential loans so as to develop economic models, overcome poverty, and stabilize life... Local authorities must aggressively prosecute swindlers and brokers who unlawfully immigrate into China to work as hired workers; they must also reform administrative procedures in order to create the most favorable conditions for the issuing of travel permits and passports in order to restrict illegal entry and exit.

Local governments must also engage in active exchanges and negotiations with adjacent nations in order to harmonize regulations and procedures, particularly those relating to trade, tourism, transportation, and cross-border labor movement. It is vital to coordinate actively in order to construct and enforce transparent technical barriers in order to improve the quality of exported goods; to boost oversight and assessment of economic and trade operations between Vietnam and China. Simultaneously, it is required to build a proactive agency to collect information on adjacent countries' policies and to deliver it to domestic businesses; and to establish a regular information exchange system with the localities of bordering countries.

It is crucial for localities to foster enterprise growth through improved business environments, enterprise training, and capacity building. Simultaneously, it is required to improve management and encourage Vietnamese firms to strengthen collaboration with each other and avoid unfair competition between them.

 

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Minh Tuan (Tran.)

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