Special mechanisms proposed for $13.5 bln sea encroachment urban area project in central Vietnam

The Ministry of Finance has proposed a set of special mechanisms for a planned sea-reclaimed urban area in Danang, a megaproject expected to cost about $13.5 billion.

The Ministry of Justice has published appraisal dossiers for a draft decree outlining specific policies for the project, which is being drafted by the finance ministry.

The proposed development would cover about 1,428 hectares in Danang Bay, offshore opposite Nguyen Tat Thanh street. It would comprise five multi-functional artificial island clusters, integrated with a system of dykes and hydrological regulation islands to create a connected urban landscape.

The project is designed as a multi-purpose hub combining residential areas, international tourism, free trade, innovation, an international financial center, and high-end entertainment and service complexes. Total investment is estimated at around VND355 trillion ($13.5 billion), with implementation scheduled over 15 years from 2026 to 2040.

Strategic investors will be selected by Danang under its own criteria and will be responsible for arranging financing and technology. The project would not use public investment funds and not carry government guarantees.

The finance ministry said the project is not driven by land shortages but aims to create a new development space in terms of institutions and symbolism, in line with Vietnam’s shift in growth model amid deeper global integration.

“Onshore land resources are not yet exhausted but are reaching their limits in generating new growth drivers,” the ministry said, adding that existing urban and industrial zones are no longer suitable for piloting international financial, trade and investment mechanisms or for developing high-end service hubs.

The reclaimed urban area is envisioned as a “national institutional testing ground,” where clearly defined artificial islands with relatively independent operations would allow pilot schemes such as free trade zones, an international financial centers, open visa policies, electronic customs, and flexible tax incentives.

The model draws reference from China’s Hainan Free Trade Port, which serves as a testing ground for institutional reforms before broader rollout. However, Danang’s approach is designed to be more flexible and suited to Vietnam’s governance conditions and level of integration.

Beyond economic significance, the project is also expected to become a national maritime symbol, similar to Dubai’s Palm Jumeirah, showcasing the country’s ability to create new urban space.

Authorities say the development could help position Vietnam as a nation proactively expanding toward the sea and integrating more deeply into global value chains, while also attracting global investors, corporations, and high-net-worth individuals seeking a distinctive, secure and internationally connected environment.

Special policy framework proposed

Under the draft decree, special mechanisms would apply to sea-reclaimed urban projects in Danang with total investment of at least VND100 trillion ($3.8 billion), covering planning, investment, finance, taxation, land, resources, environment, trade and administrative procedures.

The project’s operating term would not exceed 70 years. Strategic investors must demonstrate capital mobilization capacity and meet equity requirements of at least 15% for projects valued between VND100 trillion and VND150 trillion ($5.71 billion), and at least 10% for projects above VND150 trillion.

The ministry said this represents an adjustment from the parliament's Resolution 259/2025/QH15, which sets a flat 15% requirement for all projects above VND100 trillion ($3.8 billion).

In practice, the 15% ratio may be suitable for projects of around VND100 trillion but becomes a barrier for mega-projects. For example, a VND360 trillion project would require about VND54 trillion ($2.05 billion) in equity under the 15% rule, exceeding the short-term capacity of most investors.

Given that sea enchroachment projects involve years of filling and construction, requiring large upfront capital contributions could lead to idle funds, reducing efficiency and increasing financial costs, the ministry said.

Reducing the requirement to 10% for projects above VND150 trillion is seen as maintaining investor financial capacity while improving feasibility in attracting and implementing large-scale developments.

In terms of land and environmental policies, investors would not be required to allocate land for social housing within or outside the project. Instead, they would pay an amount equivalent to the value of serviced land designated for such purposes.

The draft also allows investors to transfer part of the project after completing infrastructure in line with detailed planning, lease land with one-off payments for the entire term, and sublease land-use rights for completed areas.

Notably, foreign ownership rules would be relaxed. Foreign individuals and organizations could own up to 50% of units in a condominium building. For landed housing in areas with a population of 10,000, ownership would be capped at 250 units, excluding areas related to national defence and security.

Investors would also be allowed to transfer up to 50% of certain property types — including condotel units, resort villas, officetel units and floor space — to foreign buyers.

At a recent meeting with Prime Minister Pham Minh Chinh, Danang authorities urged the government to issue the decree detailing these special mechanisms. The prime minister has tasked the finance ministry with finalizing the draft for government approval in March 2026.