Vietnam Proposes Coastal Special Economic Zones

Vietnam's Ministry of Justice has put forward a proposal to formally establish special economic zones (SEZs) at strategic coastal locations, introducing the concept into law for the first time. The draft Urban Development Law — previously titled the Special Urban Law — sets minimum thresholds of 50,000 residents and 500 km² for qualifying zones, which must also hold a Class I seaport or international airport.

A Legal Gap Finally Addressed

Vietnam currently operates 46 economic zones, including 20 coastal zones covering roughly 900,000 hectares. Yet neither the 2025 Investment Law nor any existing statute defines a "special" economic zone with differentiated governance or policy powers. The Ministry of Justice argues this gap has left potentially high-value coastal sites — Nghi Son, Dung Quat, Van Phong, Vung Ang — underperforming relative to their geographic and infrastructure advantages.

What the Draft Proposes

The draft law offers two approaches for recognising an SEZ. The first sets hard criteria: the site must be a coastal economic zone already established by the Prime Minister, possess a Class I or special-class seaport or an international airport, cover at least 500 km², and be designated as a strategic growth pole. The second approach delegates the criteria entirely to the government by decree, giving future administrations more flexibility but less predictability for investors.

Under either option, the Government would formally establish each zone after consultation with the National Assembly Standing Committee. The zone would remain an administrative unit subordinate to its host province or city, rather than a fully autonomous jurisdiction — a design choice that sidesteps the political controversy that derailed Vietnam's earlier special administrative-economic unit legislation in 2018.

Superior Governance Mechanisms

The proposal grants SEZ administrations expanded powers over personnel management, allowing the zone's People's Committee Chairman to control the hiring and deployment of civil servants and workers within the boundary. The draft also permits a higher-than-standard number of Vice-Chairpersons on zone committees, reflecting the anticipated complexity of managing large, multi-functional areas. Customs oversight would be consolidated under a single dedicated unit, with the General Department of Customs able to spin off a new sub-unit if operational demands require it.

The Ministry of Justice frames these zones explicitly as "policy laboratories" — a term borrowed from the global SEZ literature — where Vietnam can trial institutional innovations before rolling them out more broadly. Globally, around 7,000 SEZs operate across more than 140 countries, and the best performers tend to combine world-class hard infrastructure with streamlined regulatory environments.

Where Existing Zones Have Fallen Short

The Ministry's own assessment is candid about past underperformance. Occupancy rates across many existing coastal zones remain low, infrastructure is uneven, and leasable land supply is constrained. Large zones such as Van Don, Van Phong, Nghi Son, and Dong Nam Nghe An have expanded in area without achieving commensurate economic density. By contrast, zones with stronger connectivity — Phu Quoc, Van Don (airport), Cat Hai — have attracted more sustained investment interest.

The ministry concludes that infrastructure quality, institutional clarity, and regional linkages are the decisive variables, not zone designation alone. This diagnosis implicitly sets a high bar: an SEZ label without genuine policy differentiation and hard infrastructure investment is unlikely to shift outcomes.

Strategic and Security Dimensions

The proposal explicitly ties coastal SEZ development to national defence and maritime security objectives, reflecting a dual-use logic common to Vietnam's coastal planning. Sites such as Vung Ang and Nghi Son sit along the country's strategically sensitive central coast, and any governance framework will need to balance openness to foreign capital against military and sovereignty concerns — a tension Vietnam has managed carefully since the collapse of the 2018 special zone bill.

Investor Takeaway

For investors tracking Vietnam's FDI environment, this proposal signals a deliberate attempt to move beyond the current patchwork of industrial parks and coastal economic zones toward a more differentiated, higher-incentive tier of investment destination. The two-option drafting approach suggests the final law may leave considerable discretion to the executive, meaning the quality of implementation — site selection, tax incentives, land-use rules — will matter more than the statute itself. Developers and manufacturers with long-horizon commitments to coastal manufacturing or logistics assets should monitor which specific sites the Government designates once the law is enacted, as early-mover positioning in a formally recognised SEZ could carry meaningful policy advantages.