Vietnam's south-central province Khanh Hoa joins the 'race' to establish free trade zones

Khanh Hoa has become the latest locality to join the "race" to establish a free trade zone (FTZ), with proposals for three areas - Van Phong, Ca Na, and Cam Ranh.

In recent times, multiple provinces have proposed establishing FTZs, reflecting high expectations for this new growth driver. Most recently, Khanh Hoa completed a feasibility plan for an FTZ, which has been submitted to the Prime Minister.

Khanh Hoa is proposing three initial locations: the Van Phong Economic Zone tied to Van Phong Port; the Southern Coastal Economic Zone linked to Ca Na Port; and a development area connected to the Cam Ranh International Airport.

The province is currently reviewing its master planning after administrative restructuring while continuing to study the most suitable sites for implementation. Meanwhile, the Ministry of Finance is seeking feedback on its draft FTZ proposal.

Pending central government approval to participate in the 2025-2030 pilot program, Khanh Hoa plans to refine its planning; develop transport, seaport, airport, and digital infrastructure; streamline administrative procedures to make it transparent; and foster an equitable business environment.

Dr. Ha Huy Ngoc, director of the center for policy, strategy, and local and territorial economics research under the Vietnam Institute of Economics and World, stated that the FTZ model is a global trend. "For Khanh Hoa, building an FTZ linked to the Van Phong Economic Zone is considered a core solution to create a breakthrough growth engine and realize its goal of becoming a centrally governed city."

Vietnam currently has six centrally governed cities, namely Hanoi, Hai Phong, Danang, Hue, Ho Chi Minh City, and Can Tho.

From another perspective, Associate Professor Dr. Bui Quang Binh of the University of Economics under University of Danang, emphasized Khanh Hoa’s strategic geopolitical position and deep-water port advantage at Van Phong.

He suggested the province should develop its FTZ toward logistics and international transshipment, combined with supporting industries, clean energy, and maritime services.

Additionally, the FTZ could integrate with financial services, international trade, and high-end sea-island tourism to maximize existing potential.

“This orientation will help Khanh Hoa become a gateway for international trade, complementing Danang to form a central FTZ corridor, thereby creating momentum for breakthroughs in both the marine economy and global integration,” Dr. Binh noted.

Learning from Danang’s pilot

Khanh Hoa is not alone. In central Vietnam, Ha Tinh province also plans to develop an FTZ in Vung Ang, while Hue and Gia Lai are considered to have great potential for this model.

Nationwide, several other localities are also pursuing FTZ ambitions. For instance, Hai Phong city has proposed an FTZ covering about 6,292 hectares; Dong Nai has submitted a plan for an 8,100-hectare FTZ near Long Thanh International Airport; and Ho Chi Minh City has proposed four FTZs tied to ports and logistics.

According to Dr. Binh, developing multiple FTZs could create widespread growth spillovers, leverage local advantages, attract foreign direct investment (FDI), and accelerate institutional reforms.

However, he warned that large-scale, simultaneous implementation risks spreading resources thin, duplicating functions, and fueling competition among localities. Moreover, the current legal framework for FTZs remains inconsistent, complicating management and oversight.

“There must be a comprehensive plan clearly defining the functions of each FTZ to ensure effectiveness and prevent this from becoming a mere movement,” he emphasized.

So far, only Danang’s FTZ has been officially approved by the Prime Minister under Decision No. 1142/QD-TTg, covering 1,881 hectares across non-contiguous sites. Sun Group has begun investing in infrastructure development for Zone 5 of the project.

According to Dr. Binh, Danang’s role as the pioneer is especially significant. The city has strong infrastructure, logistics capacity, a seaport, and an international airport. It is also the economic hub of the central key economic region, making it suitable for piloting a special mechanism.

By going first, Danang gains opportunities to attract FDI while serving as an “institutional laboratory” for the central government to assess effectiveness and adjust the FTZ legal framework.

“If successful, Danang could become a model, providing lessons on planning, management, incentive policies, and regional linkages for other localities. Conversely, if unprepared, the city will face heavy pressure and policy risks, since the outcome of this pilot will directly influence the decision to expand FTZs nationwide,” Dr. Binh cautioned.