VietNamNet Bridge – Developing successful special economic zones will benefit Vietnam’s economy, but the challenge is huge, requiring the nation to learn carefully from the experiences of other countries to avoid failure. Andrew Grant, director of management consulting McKinsey & Company Singapore, discusses with VIR.

What do you think about the establishment of special economic zones (EZs) in Vietnam?

Special EZs have been successful in various places throughout the world. From a global experience, we know they can be very effective. The Vietnamese economy is moving in the right direction, but it needs a more advanced economic model. So we think it could be a prudent step to encourage the development of special EZs in the country at this time.

Actually, thousands of EZs have been established worldwide, but many of them failed and many are facing failure. Vietnam lacks experience in special EZ development, so what should Vietnam try to avoid?

We know many special EZs are successful, but it is also hard to get it right. The question is that what Vietnam can learn from other experiences. There are some vital things to ensure the success of a special EZ. Firstly, connectivity is incredibly important. I give an example of Shenzhen in China. The economic development in Shenzhen is incredibly close to port capacity. The port ensures Shenzhen’s connectivity to the rest of the world, and is key to ensuring growth. So the first thing I say is any special EZ must have global connectivity, making sure that it has good infrastructure connecting with the international market. That is absolutely vital.

Secondly, we talk about the policy in terms of competitiveness. There are three important points. Number one is the ease of doing business, number two is talent attraction and number three is a government’s friendliness.

Investors need to know who they deal with while doing business in a special EZ. They need to know they can deal with one person who is speaking on behalf of the government and they don’t get different answers from different people.

Thirdly, I think Vietnam also needs to get out more to tell its story, to tell people why they should be in Vietnam. In the region two or three years ago, everyone knew about Vietnam, Vietnam was an investment love story and everyone was interested. Today in Southeast Asia, we have Myanmar, we have the Philippines, and we have Indonesia.

This is a crowded marketplace. I think there is credible opportunity and potential in Vietnam, but I don’t think your story has been told.

The Vietnamese government has selected Van Don, Van Phong and Phu Quoc to develop special EZs, do you think these are good locations?

I think all of them are accessible locations. But I also think we should look at the lessons of history, India tried to establish hundreds of EZs, and they haven’t been successful. So we know if we try to establish hundreds, it is too many. If you look at China, special EZs have been really successful.

We are going to have three or four or even five in Vietnam, I think this is feasible. In Van Don in Quang Ninh, in particular, it benefits from a good location, good environment and effective transport links. But the challenge for Quang Ninh is that it really has to compete with Malaysia, Singapore or Indonesia in terms of quality.

All of these proposed special EZs in Vietnam are focusing on tourism, so in your opinion, will they compete with each other instead of with other zones outside Vietnam?

Just remember one thing in emerging markets, particularly in Asia. Today we have 1.5 billion people that consume tourism products. In the next 15 years, we are going to see another two billion added to that number, and most of them come from Asia, China and India in particular. So I think given what you have in the tourism industry in Vietnam, you have huge demand. I have not mentioned domestic tourists coming to Quang Ninh, Phu Quoc or Van Phong. I think tourism offers a very powerful first step.

Source: VIR