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How the Border Economic Zone in Vietnam
was developed?
The case of Tay Ninh City in the border with Cambodia
An Quang Trong Ngoc, 285288
University of Eastern Finland
Department of Geographical and Historical Studies
Master's thesis
22.08.2019
RESEARCH STATEMENT UNIVERSITY OF EASTERN FINLAND
The Vietnamese-Cambodian relations had been established in the beginning of the second
millennium. After having been through up and down in their relationship especially the Vietnam
War and the Vietnam-Cambodian border war, nowadays, Cambodian and Vietnamese are
witnessing the gradual and stable increase in their neighbor relationship.
Today, Vietnam shares a 1,270 km long border with Cambodia in the southwest (Nhu Tam, 2015).
They also share a huge common networks of roads, rivers, border checkpoints. After integrating
into ASEAN, Vietnam and Cambodia increased their cooperation not only within the ASEAN but
also bilateral relation, especially economy through their common border. In 1985, a Treaty on
Delimitation of National Boundaries was signed between the two states (was supplemented in
2005) led to an establishment of nine official border gates which increased cross border trade in
the border regions.
In this thesis research, my interest is the impact of the border economic zone on local people from
the Vietnamese perspective. Hence, my research question is “How Vietnam-Cambodia cross
border co-operations affect social economy of the border region?”. To evaluate these impacts and
answer the question, i would rely on two empirical data. The raise of people’s per capita income
in 10 years and a survey on how they really feel about the changes in their socio-economic life
after the establishment of the border economic zone.
Author: An Quang Trong Ngoc
Student number: 285288
Title of research: How the Border Economic Zone in Vietnam was developed? The case of Tay
Ninh City in the border with Cambodia
Faculty: Social Sciences and Business Studies
Subject: Border Crossings Master’s Degree Programme – Human Geography
Number of pages: 65
Work: Master’s thesis
Time: September 2019
Key words: Border Economic Zone, Socio-Economic Development, Vietnamese-Cambodian
relation
ACKNOWLEDGEMENTS
First of all, I want to express my great gratefulness toward the University Of Eastern Finland and
the Finnish Education respectively. They gave me a big opportunity to come and to study in the
best education system of the world, studying social sciences abroad was always my biggest dream
and studying in Finland was the dream come true to me. During my stay in Finland, I received
many supports and advices from many good friends, teachers which never made me feel like I was
living in an “other” country. Simply speaking, Finland and Joensuu are my second home, my
second identity.
My special thanks to Dr. Paul Fryer who supervised me through out the years in the Faculty of
Social Sciences and Business Studies, his patience, encouragement and advices helped me in
conducting the thesis were magnificent. I also want to thank particularly to Project Researcher
Dmitry Zimin who gave me plenty of economic advices, guidance which helped me on the
economic research field as I was just an amateur in economy. Another big thank to my best class
mates in Finland, Elli Katajala and Lisa Gohlke as they helped and encouraged me not only when
I was in Finland but also when I was working with my thesis in Vietnam. They have never doubted
the possibility of me to finish the thesis.
I also want to send a special thank my Director Mr. Kolbjorn Ursin and General Manager Ms.
Karen Chanh for their patience, sympathy and expectation in letting me continue writing my thesis,
never closed the door to me. Their understanding was a part of the achievement of my thesis today.
Finally, I thank very much my family, close friends as they never doubted my abilities a single
minute when I told them I would finish my thesis and my degree this year.
Ho Chi Minh City, August 2019
An Quang
TABLE OF CONTENTS
1. Introduction. .......................................................................................................................... 1
1.1 Historical Background. ............................................................................................................... 1
1.2 Border Cooperation .................................................................................................................... 2
1.3 Tay Ninh City .............................................................................................................................. 3
1.4 Research Question ...................................................................................................................... 4
1.5 Limitation of The Research ........................................................................................................ 5
1.6 Earlier research ........................................................................................................................... 5
2. Theoretical Frameworks ....................................................................................................... 8
2.1 The Border Studies Background ............................................................................................... 8
2.2. The Concept of Cross-Border .................................................................................................... 9
2.3. The Cross-Border Cooperation Paradigm................................................................................ 9
2.4. Cross Border Cooperation in the structure of international economy in the 21th Century.
10
2.5. Cross Border integration Based Economic Cooperation ...................................................... 11
3. Methodology ......................................................................................................................... 12
3.1. How the research was conducted ............................................................................................. 12
3.2. Literature Review ..................................................................................................................... 14
3.3. Secondary Data Research ......................................................................................................... 16
3.4. Ethical consideration in using secondary data ....................................................................... 17
3.5. Evaluation of the research ........................................................................................................ 19
4. Empirical results ................................................................... Error! Bookmark not defined.
4.1. From 2001 to 2010. .................................................................................................................... 22
4.1.1. Knowledge Economy and Human Capital ...................................................................... 22
4.1.2. Social Capital and Technology Transfer......................................................................... 28
4.1.2.1. Government Investment ........................................................................................... 28
4.1.2.2. Investment environment ........................................................................................... 30
4.1.2.3. Economic Policies and Technology Transfer. ......................................................... 33
4.1.2.3.1. Economic Policies ................................................................................................... 33
4.1.2.3.2. Technology transfers .............................................................................................. 35
4.2. From 2011 to 2018. .................................................................................................................... 37
4.2.1. Knowledge Economy and Human Capital ...................................................................... 37
4.2.2. Social Capital and Technology Transfer......................................................................... 41
4.2.2.1. Government Investment ........................................................................................... 41
4.2.2.2. Foreign Direct Investment ........................................................................................ 44
4.2.3. Economic Policies. ............................................................................................................. 46
4.2.3.1. Economic Policies ...................................................................................................... 46
5. Analysis and explanation .................................................................................................... 50
5.1. Governance factor ..................................................................................................................... 50
5.1.1. Project Planning ................................................................................................................ 50
5.1.2. Infrastructure Investment ................................................................................................ 51
5.1.3. Economic Policies .............................................................................................................. 52
5.2. Local People factor ................................................................................................................... 53
5.3. Investor factor ........................................................................................................................... 54
6. Conclusion ............................................................................................................................ 57
LIST OF FIGURES
FIGURE 1: Tay Ninh in the southeast of Vietnam and in the border with Cambodia. .................. 3
FIGURE 2 : Administrative map of Tay Ninh and the location of Moc Bai BEZ ......................... 4
FIGURE 3: Stages of Border integration ...................................................................................... 11
FIGURE 4: Southern Economic Corridor in the Greater Mekong Subregion .............................. 52
LIST OF CHARTS
CHART 1: GDP Growth Rate of Tay Ninh from 2001-2010 ..................................................................... 22
CHART 2: Comparison of GDP Growth Rate (%) of cities in the southeast of Vietnam in 2006-2010. ... 23
CHART 3: GDP Growth Per Capita of Tay Ninh from 2001-2010 ........................................................... 25
CHART 4: The changing in structure of the economy of Tay Ninh from 2005-2010 ................................ 27
CHART 5: Comparison of GNI per capita of Tay Ninh and Vietnam ....................................................... 28
CHART 6: Structure Government Spending of Tay Ninh from 2007 to 2010 ........................................... 29
CHART 7: FDI investment and Projects of Tay Ninh from 2001 to 2010 ................................................. 32
CHART 8: GDP Growth rate of Tay Ninh in comparison with Vietnam’s ................................................ 37
CHART 9: GDP Growth rate of economies in Southeast of Vietnam from 2015 to 2018 ......................... 39
CHART 10: GDP Growth Per Capita of Tay Ninh from 2011 to 2018 ...................................................... 39
CHART 11: Structure of the economy of Tay Ninh in 2015 ...................................................................... 40
CHART 12: GNI per capita of Tay Ninh in comparison with Vietnam’s from 2015 to 2018.................... 41
CHART 13: Percentage of Development in Local Government Investment over the years ...................... 42
CHART 14: Total budget of government investment and investment on development ............................. 42
CHART 15:Total budget of government investment and investment on economy and education ............. 43
CHART 16: Investment on economy and education by percentage .......................................................... 44
CHART 17: FDI and number of projects of Tay Ninh from 2011 to 2018 ................................................ 45
CHART 18: Sale Income of the Free Trade Zone from 2011 to 2017........................................................ 49
CHART 19: Number Of Visitors to the BEZ over the years ...................................................................... 49
LIST OF TABLES
Table 1: GDP Growth Per Capita of Tay Ninh from 2001-2010 ................................................................ 24
Table 2: GDP per capita rate from 2001 to 2010 ........................................................................................ 25
Table 3: Comparison total GDP from 2006 to 2010 ................................................................................... 26
Table 4: Population growth rate of southeast cities in Vietnam from 2006 to 2010 ................................... 26
Table 5: Government Spending of Tay Ninh from 2007 to 2010 ............................................................... 29
Table 6: PCI ranking of Tay Ninh from 2007 to 2011 ................................................................................ 31
Table 7: PCI ranking of Tay Ninh with every individual factor from 2007 to 2011 .................................. 31
Table 8: Comparison of FDI attraction from the cities in Southeast Vietnam until 2010 .......................... 33
Table 9: The evaluation of T and I index .................................................................................................... 36
Table 10: The total FDI of SouthEast region of Vietnam ........................................................................... 46
Table 11: Number of companies working in the free duty zone of the BEZ over the years ....................... 48
Table 12: Current status of projects in the BEZ .......................................................................................... 55
1
1. Introduction.
1.1 Historical Background.
The Vietnamese-Cambodian relations had been established in the beginning of the second
millennium. In the 19th century, feudal dynasties in both Cambodia and Vietnam weakened, fall
into crisis and finally were colonized by French. In 1887, the French colonial empire established
the Indochinese Union (Union indochinoise) which included Vietnam, Cambodia and later Laos
(1893). This led to the institution of “Indochine française”.
During the first Indochina War (1945-1954), Vietnamese, Laotians and Cambodian communists
created a common front to fight against the French for independence which marked the first
collaboration between Vietnam and Cambodia in modern era. After the Geneva conference was
signed in 1954, the three Indochina states were liberated from French, however, Vietnam was
divided by the 17th parallel into two separated nations, the Democratic Republic of Vietnam in the
North and the Republic of Vietnam in the South. Meanwhile, King Nodorom Sihanouk became
the leader of independent Cambodia (Kingdom of Cambodia) and kept the relations with both
Vietnamese states. However, the Vietnamese Communists as known as Viet Cong and the North
Vietnam troops manipulated Cambodian territory for a lot of military campaigns in the Vietnam
War. These actions led to bombing and airstrikes of the US Army within the Cambodian territory
to fight against the Viet Cong’s influence. Sihanouk was accused for letting Vietnamese forces
created military bases in Cambodian territory and finally was overthrown by an anti-Vietnamese
forces (most were military generals supported by the US government) in the military coup in 1970.
Non Lol, the new Cambodian president declared fighting against both the Vietnamese Communist
and anti-Vietnamese Communist forces. Non Lol’s philosophy was taking back the south of
Vietnam to Cambodian and the destruction of all Vietnamese in Cambodia to revive the Khmer
race. Although Lol Non was overthrown by Khmer Rouge in 1975, a bit earlier than the fall of
Saigon or end of the Vietnam War, his anti-Vietnamese policies were continued by the Khmer
Rouge.
The Khmer Rouge attacked and killed Vietnamese people who were living along the border of the
two countries in 1978. This actions led directly to the Vietnamese-Cambodian war in 1979. After
occupying Phnom Penh in only two weeks and defeating the Khmer Rouge, Vietnamese troops
2
stayed in Cambodia for pursuing the remain Khmer Rouge which now fought as guerillas. The war
finally ended in 1990 when Hanoi withdrew all of their troops out of Cambodia territory and
normalized their relations with Phnom Penh.
1.2 Border Cooperation
Nowadays, Vietnam shares a 1,270 km long border with Cambodia in the southwest (Nhu Tam,
2015). They also share a huge common networks of roads, rivers, border checkpoints. After
integrating into ASEAN, Vietnam and Cambodia increased their cooperation not only within the
ASEAN but also bilateral relation, especially economy through their common border. In 1985, a
Treaty on Delimitation of National Boundaries was signed between the two states (was
supplemented in 2005) led to an establishment of nine official border gates which increased cross
border trade in the border regions.
According to Dr. Tran Xuan Tung (2006) in his article “Vietnamese-Cambodian relation in the
southwest border”, the Cambodia with its 13.5 million population is a potential exported market
for the economy of Vietnam. In turn, Vietnam also need to import raw materials for its industry
from Cambodia. Therefore, the bilateral trade turnover between the two countries improves
gradually. However, the exports of Vietnam to Cambodia is higher than the exports of Cambodia
to Vietnam. Particularly, 70% of exports through the border with Cambodia from Vietnam was
done in the border regions of the three provinces Tay Ninh, An Giang and Kien Giang. (Tran X.
T., 2006, pp. 39-41)
Realizing the huge potential of border regions on border trade, economic improvement Vietnam
government decided to release a border economic zone policy in 2001 which invested on
infrastructure, tourism, decreased taxes and rents in these border economic zones. (Nguyen M. H.,
2005, pp.11)
3
1.3 Tay Ninh City
Tay Ninh is a border city with Cambodia in the west and locates in the southeast of Vietnam, the
most developing economic area of the country. The area is the highest economic growth,
population, export, import and FDI attracting of Vietnam.
The shared border of Tay Ninh with Cambodia is about
240km. The city has two international Border Economic
Zones (BEZ) are Moc Bai and Xa Mac. However, in this
research, I only focus on Moc Bai BEZ due to its longer
history (established in 2001), larger scale and impact on
the socio-economic development of Tay Ninh.
As shown in the Figure 1 and 2, Tay Ninh was located in
between Cambodia and other cities in the southeast of
Vietnam. This location could be seen as the main door to
connect the most developing region of Vietnam (including
Ho Chi Minh City, Binh Duong, Dong Nai etc) with
trading routes from Thailand and Cambodia. As a result,
the potential of the Moc Bai BEZ was huge.
FIGURE 1: Tay Ninh in the southeast of Vietnam and in
the border with Cambodia. (Wikipedia)
4
FIGURE 2 : Administrative map of Tay Ninh and the location of Moc Bai BEZ (Vu and Do,
2012)
1.4 Research Question
In the case of Tay Ninh city, a border economic zone (BEZ) was officially established within the
location of Moc Bai town in 2000 and became one of the most important and developing border
regions between Vietnam and Cambodia in border trade, tourism, securitization etc.
5
Therefore, the impacts of this border economic zone on local people are inevitable, especially
socio-economic features. My interest to this topic is how the border co-operation affects local
people (living conditions, Socio-economy) after 20 years? Is it good? Is it bad? Can it become a
paradigm for other border regions between Vietnam and Cambodia?
In the scope of the research, I also take a deep look into the insight of the BEZ, figure out how it
works over its 20 years history. The outcome of this question would be the knowledge on the
successful factors of the BEZ or the reason of its failure.
1.5 Limitation of The Research
As mentioned above, Tay Ninh city has two BEZs (Moc Bai and Xa Mac), however, I chose
working only on the Moc Bai BEZ due to its superior size and larger impact on the socio-economic
development of Tay Ninh. The contribution of Xa Mac BEZ to the socio-economic development
of Tay Ninh was trivial (Tay Ninh Government, 2019). Moreover, due to its tiny size and my
limitation abilities, it was impossible for me to conduct another research on this BEZ due to its
limited secondary data.
Due to the limitation of the topic, I did not mention the collaboration of Tay Ninh with other
regions, cities on developing the BEZ as well as from Cambodian side. Frankly, the thesis only
focuses on the Vietnamese side. On the other side of the BEZ was Bavet BEZ of Cambodia which
is also interesting. However, my limitation sources, Cambodian language and limited time budget
prevented me to do so.
1.6 Earlier research
The Vietnamese-Cambodian relations can be seen as one of the most important and common topic
for Vietnamese researchers. Especially the improvement of the Vietnamese-Cambodian
cooperation in recent years is a motivation for many researchers or institutes produce a huge
variety of researches, thesis, articles, reports in various dimensions about this topic. In the
comprehensive picture of the Vietnamese-Cambodian co-operation, there are not so many
researches about the effectiveness of cross border co-operations between the two states in English
6
or Vietnamese. Indeed, most of these researches are about the whole Vietnamese-Cambodian co-
operation or the economic growth of the whole southwest border regions.
• Tran, Xuan Hiep (2013). The Vietnamese-Cambodian relations from 1993 to 2010.
Doctoral thesis on History. Hue University (Vietnamese): This research illustrates a
comprehensive picture about the Vietnamese-Cambodian relations from 1993 to 2010
which include political, diplomatic, economic, security, scientific-technical, cross-border
co-operations between the two countries. However, due to the large scale of its topic, the
research only mentions cross-border co-operations as a factor of economic co-operation,
territorial border making or in the trio co-operation with Laos within the ASEAN context.
Therefore, cross-border co-operation in the southwest of Vietnam is not reflected clearly
in this research.
• Tran, Van Tung (2006). The Vietnamese-Cambodian co-operation in the Vietnamese
southwest border. African-Middle East Research Magazine. 03-2006 (Vietnamese): This
article analysis and examines the important of increasing the cross-border co-operation
between Vietnam and Cambodia in the Southwest of Vietnam, especially economic co-
operation. Besides, Dr. Tran also provides a total overview with empirical data about
economic growth in the border regions until 2006 and predicts the improvement of its
economic co-operation in the near future. However, this paper lack of focusing on the
border economic zone of the Chau Doc town due to one simple reason, it had not been
established at the time this article was written.
• Nguyen, Minh Hieu (2005). Evaluating the border economic zone in the southern
provinces within the geographic and socio-economic context: The case of An Giang
province. Master thesis in geography and socio-economy. Chi Minh City University of
Education (Vietnamese): This thesis conceptualizes the term border economic zone under
the definition of Vietnamese government, analysis and evaluates totally the current
situation (in 2005) of cross-border trade particularly in the case of An Giang province.
7
Moreover, the author also suggests solutions which orientate to improve operational
efficiency of the cross-border economic co-operation in the socio-economic context.
• Nguyen, Duy Dung (2015). Socio-economic problems in Vietnamese-Laotian-Cambodian
cross-border co-operation. East-Asia Research Magazine 9/2015 (Vietnamese): In this
paper, the author points out four crucial obstacles which prevent the cross border co-
operation from meeting its initial expectations. According to Nguyen (2015), there are (1)
inconsistency in domestic laws of the three countries about cross border co-operation (2)
low investments and ineffective policies in attracting investors to border markets (3) Poor
infrastructure, incommensurate investments in comparison with border region economic
potential (4) Lack of co-operation in securitization among the three countries. However,
the report does not focus specifically in the border region between Vietnam and Cambodia.
• Sau, Sisovanna (2012). “A study on cross-border Trade Facilitation and Regional
Development along Economic Corridor in Cambodia” in Emerging Economic Corridors in
Mekong Region. BBC Research Report No.8, Bangkok Research Center (English):
Since An Giang province is one part of the Southern Economic Corridor which includes
Thailand, Cambodia and Vietnam, this study provides a good survey about logistics routes,
industries, population and land area of the provinces and the surrounding provinces in the
border regions between Vietnam and Cambodia or Cambodia and Thailand, especially
from the Cambodian perspective. The author focuses on the important of necessary
infrastructures, efficient customs and transit system to fully utilize the corridor. Also,
building policies to support business opportunities along the corridor which includes the
Vietnamese-Cambodian border regions is one of the most necessities.
After reviewing these previous researches I realize while analysing the government policies,
legislation, socio-economic framework and conceptualization of the BEZ are the common trends
in the research topic, my approach would focus on figuring out how these BEZ policies affects
local people.
8
2. Theoretical Frameworks
2.1 The Border Studies Background
In the past 20 years, border studies have been witnessed a significant expansion (Houtum, 2000).
It contents of various scholars, researchers from a large number of social sciences studies such as,
“geography, anthropology, sociology, ethnography, economic disciplines, political science,
international relations, etc” (Berzi, 2017, pp.10). A wide spectrum of topics regarding borders
had emerged in socio-economic development, culture studies and political sciences. According to
Perkmann (2003) Cross-border cooperation governances with various types of forms, institutes,
topics and scales specifically show their attraction with Geographers and political scientists.
The emergence of globalization economy is making nation-states had to rescale themselves (Berzi,
2017). Indeed, nowadays, the power of nation-states has been re-organized and re-distributed into
other low political national entities (regional and local authorities). Simultaneously, supra-national
organizations also play a more important role in the general picture (the EU, ASEAN etc).
Additionally, “The new regionalist dynamic introduces new forms of territorial governance at both
a macro scale (the EU, ASEAN) and micro scale (the establishment of the ‘Euroregions’or cross-
border cooperation in ASEAN countries) that is mainly rely on the multi-level approach.” Shaw
and Söderbaum, 2003; Amin, 2004, as cited in Berzi 2017, pp.10-11)
Furthermore, As pointed out by Paasi (2003, as cited by Berzi, pp.11), the European integration in
both local and regional cooperations is currently experiencing an emergence of their important role
in the political and institutional agendas. The spread of globalization flows made these practices
happening not only in Europe but also in other parts of the world.
Finally, “the growing academic and institutional interest in cross-border spatial planning is
boosting rethinking processes of new territorial strategies” (Berzi, 2017, pp.11). Hence, these
practices prove that today borders has become a central place in the academic debate, particularly
their meaning, functions (O‘Dowd, 2001) and perception from multiple actors (Paasi 1996, 2003)
9
2.2. The Concept of Cross-Border
The borderlands, under the perspective of territorialist approach is a territory which have been
directly affected by overlapping national borders. The borders provoke a splitting of pre-existing
ethnic, socioeconomic, cultural pattern due to the involvement of geopolitical and political factors.
(Anderson and O’Dowd, 1999).
The existence of the borders led to the introduction of new normative and social code, also, a new
deterritorializing process has emerged as a new threat for the development of local identities and
internal socio-economy of the borderlands. (Berzi, 2017). Since the late of 19th century, this
process had risen in Europe following nation state ideology emergence and reinforcement of the
sense of belonging to the state (Sahlins, 1989, as cited by Berzi, 2017, pp 11-12).
However, the benefits of the presence of borders on local people were undeniable such as illegal
trade, smuggling, the reaffirmations of some “pre-border” historical rights for breeders, fishermen,
or enduring family ties (O’Dowd 2001, as cited by Berzi, 2017, pp.12).
Furthermore, Berzi (2017, pp.12, as cited by Berzi, 2017, pp. 12) explained “local communities
reinterpret the border according to three main senses: an administrative and political barrier that
limits neighbouring interactions, a resource for the economic exchanges, and a symbol of local
identity”
2.3. The Cross-Border Cooperation Paradigm
Popescu (2012) in his book “Bordering and Ordering in the 21st Century” insists that those cross-
border practices first appeared in Europe in 1960s. Nowadays, they are not only become an integral
part of EU integration processes but also in other parts of the world such as North America, South
America, Africa and South East Asia thanks to the emergence of the Globalization flows.
According to Popescu, the limitation of borders among countries was the main factor for the
creation of cross border or transborder cooperation due to the high demands of global mobility.
The cross border cooperation consists of a series of practices which aim to strengthen the
permeability of national borders. “Accordingly, neighboring local, regional and national actors
10
engage in multifaceted cooperation across borders in order to find mutually beneficial solutions in
common problems that cannot be effectively addressed in a national framework. The primary goal
is to transcend the barrier function of border to allow the functional integration of neighboring
borderlands” (Popescu, 2012, pp-121) which could be seen in the impact of Vietnamese-Cambodia
border cooperation in the case of Moc Bai City and neighboring regions.
Additionally, the emergence of neo-liberalism and the fall of the Berlin wall at the end of 20th
century inspired and provided an essential opportunity structures for the raise of cross border
cooperation and “open” borders.
2.4. Cross Border Cooperation in the structure of international economy in the 21th
Century.
The globalization in the twentieth century has changed the exclusive building of sovereignty,
territory, Identity, and border claimed by nation states. Indeed, the territorial visions of economic,
political, social and cultural processes did not overlap the border state anymore. Nowadays, the
demands for cooperation among states to share common goals, such as participation in
international organizations, regional alliance and large scale infrastructure projects require the
border permeability to be maintained as the mechanism for interstate exchange flows. (Popescu,
2012)
The changing process of capitalism in the 21th century was also a vital factor that shaped the
perception of borders in the globalization era. According to Popescu (2012), Capitalism is
processing a multifaceted re-shaping of its relationship with nation-states. In the globalization era,
capitalism has proved itself as a dominant economic and ideological system and decreased the vital
role of border state as a mechanism for the protection of domestic market against other country
competitors.
Indeed, the neoliberal ideas of free-trade which was considered as one of the most important
doctrine of capitalism has enforced world-wide competition as a new strategy of wealth
accumulation at global scale and denounced national protectionisms as an outdated development
11
strategy. Hence, the “open border” now become the major factor that creates a new global border
regime (Popescu 2012)
2.5. Cross Border integration Based Economic Cooperation
Bilchak (2014) interprets integration as the combination of economic, political and legal elements
which was developed gradually from bottom-up. This combination requires successful stages in
the establishment of the free trade area, customs union, common market, economic union and full
economic integration. (Figure 3)
FIGURE 3: Stages of Border integration (Bilchak, 2014, pp.73)
12
B. Balassa (1962) had ordered these stages. At the very first is the involvement of product market
into the integration, the capital and labour market take part in later and the social sphere will
eventually join. In combination with those elements, the needed institutional reforms will also take
part in the process. The introduction of preferential rates will lead to the open of free trade area.
The work of Bilchak (2014, pp.73) following Kramer (1969) posted the non-institutional form of
integration will happen at the first place including
- “various inter-company agreements, joint ventures, company mergers representing
various countries, the establishment of international business alliances as well as
international non-governmental organisations” Bilchak (2014, pp.73)
The integration of institutions requires three successive stages
• Integration through unilateral state activities: The foreign policy of a state will determine
the rates of their own economic policies (increase or decrease)
• Cooperative integration: Take part in bilateral or multilateral international agreements with
neighbor countries to establish the cross-border co-operations.
• Institutional integration: The creation of a supranational institutions with the authority to
make decision regarding economic policy of the whole region.
In the institutional term, Bilchak (2014, pp.74) believess that:
“every economic integration needs its own bodies, which in the new combined economy operate
those functions, which prior to that were performed by the national institutions in relation to their
national economies”
3. Methodology
3.1. How the research was conducted
The research would be conducted and researched by analyzing data from previous reports,
researches, papers, articles (Government, researchers etc) to figure out the the changes in socio-
economic development of the local people, especially those who are working in the Border
13
Economic Zone (BEZ). To evaluate these changes, there are some data that would be taken into
account:
• The Growth of GDP per capita of the province throughout the years
• People Standard of Living with Income
• Total investment of the government, investors with jobs created by them
• The changes in infrastructure of the region
Therefore, my research would be broken down into three separate phases.
First of all, the change in GDP total income per capita since the BEZ was established will show
how much the people standard of living of local people was improved. Of course, to prove it was
an improvement, I would like to compare with the GDP growth of the whole country.
There were various kinds of Data about the economic improvement of the region which could be
found on the internet. However, most of them were journalist articles and the information was too
general and could only provide limited idea of the whole picture. Hence, to collect the full and
precise data, I had to contact local government to have their annual reports on socio-economic
development. These reports were conducted by the government and researchers who were assigned
and censored by the Government so the legitimacy was guaranteed.
Based on the collected data, I made a comparison of Total income, GDP growth, number of
investors and capital throughout the years to see the differences in the development of the region
years by years. After comparing and assessing the data from 2000 to 2018. I believe that the
progress of implementation of the BEZ should be divided into two separated phases of
improvement. Due to the up and down and changes in investment policies, these two phases would
be considered contrast to each other.
• From 2000 to 2010: This period of time could be seen as the golden age of the BEZ
with various kind of policies that benefited the local employees, customers, investors.
It also experienced the highest number of investors, capital from outside to the region.
• From 2010 to 2018: The improvement of the region was slowed down due to the rapid
decline of investment. The government also limited the supporting policies for
investors (duty free goods, tariff barriers etc) and tightened the trading policies. The
14
previous policies also showed their weak points and were manipulated by local people
to illegal activities, mostly smuggling.
To understand the situation and why it happened to the BEZ, I came to the last phase of the
research, figure out the impact of the BEZ on the socio-economic life of local people and vice
versa. Of course, this process will be also conducted with the 2 period of times which i mentioned
above. To interpret and prove these impacts I mostly used the theoretical framework of cross
border integration – based economic cooperation (Bilchak, 2014)
Additionally, the changes in economic policies with the region could also be considered as one of
the main factors which contributed to the up and down of the BEZ from 2010 to 2018 period of
time. My hypothesis is the loose economic policies of the government from 2000 to 2010 were
manipulated by local people which led to the loss of income tax for the government. The policies
and decisions of the government could be found in the internet or provided by local government
themselves.
The current situation of the BEZ would be observed via narrative research. I stayed at the region
for 4 days, it’s not too long but could probably help me to visionize the normal life, investment in
infrastructure, activities of the common markets, activities of local people, especially business men
with cross-border trade activities (both legal and illegal). The goal of this narrative research is to
offer an explanation for the story of the BEZ, could it prove my hypothesis?
3.2. Literature Review
In this research, I made a literature review before starting to outline the thesis. As mentioned in
the “Earlier Research” part. There were very few previous researches which could be found on the
internet about the region, especially related to the BEZ. Most of them were too general and focused
on the Vietnam-Cambodia economic relation. Moreover, all these researches were conducted in
Vietnamese only.
15
I also took a look on other resources from outside Vietnam and found some projects that were
conducted in English and focus on the cross border regions of ASEAN only, the Moc Bai BEZ
was mentioned in these researches but not specifically, only in an overview pictures. Some of them
could be listed out below:
• Kudo, T. (2009), ‘Border Area Development in the Greater Mekong Subregion (GMS):
Turning the Periphery into the Center of Growth’, in Kuchiki, A. and S. Uchikawa
(eds.), Research on Development Strategies for CLMV Countries. ERIA Research
Project Report 2008-5, pp.53-72. Jakarta: ERIA: The research from Mr Kudo explained
the advantages of the border regions in term of economic cross-border cooperation and
integration particularly focus on the relation between less developed regions (Vietnam,
Cambodia, Laos, Myanmar) and developed regions (Thailand and China) and how
these processes could benefit from these location advantages of the border areas..
Additionally, He provided an overview approach on the GMS project from 1998 until
now, discussed why it is not growing as expected and raised some explanation which I
found interesting when applied these hypotheses into Moc Bai city case. More
importantly, Kudo had prompted the importance of Special Economic Zones (SEZs)
including export processing zones (EPZs) (which have common factors with the Moc
Bai BEZ), explained their advantages in applying them into the Border Areas. The
explanation of Kudo on the connection between the service link costs and the growth
of border industry was also benefited for my theoretical framework.
• ASSESSMENT OF GREATER MEKONG SUBREGION ECONOMIC
CORRIDORS (2018). 10th Economic Corridors Forum. Southeast Asia Department,
Asian Development Bank. This report from Asian Development Bank provided an
overview of the economic corridors in the ASEAN which also included the Southern
Economic Corridor from Thailand to Cambodia and finish in Vietnam. The Moc Bai
city was located in that route. Via the report, I can barely have an overview on main
elements which contributed to the development of the cross border area in Moc bai city.
For example, the situation of Border crossing facilities, Road Transport Infrastructure,
Special Economic Zones, investment environment and the policies of the state toward
the region in international researcher’s point of views.
16
In the first research, both qualitative and quantitative research are implemented. The Author
collected secondary data via government reports and other researchers, while he also conducted
some surveys which helped to discover the investment factors in the regions.
The second article was a report from Asian Development Bank which was mainly conducted by
quantitative methods and primary data with statistical analysis.
3.3. Secondary Data Research
As aforementioned, my thesis would be conducted by analyzing data from previous reports which
means secondary data was necessary. However, due to the specificality of the issue, there was
nothing has been done regarding to the BEZ in Tay Ninh, especially in English. I have made a
research in both Vietnamese and English resources and found out some general secondary data
that could be make sense. For example, Vu and Do (2012) provided an information on the GDP
Growth of the whole region in the period of time from 2000-2010 was above 14%, the growing
speed of industrialization was 26%. The downfall of Agriculture was also remarkable (from 47.7%
to 26.8%.
However, the data which I found on the internet was only general information which can help me
to have an overview approach on the issue. As discussed in the part “How the research was
conducted”, I would like to divide my research into 2 separate periods of time due to differences
in the socio-economic development and the up and down of the BEZ. Hence, regional specific
annual economic data reports were what I was looking for (GDP years by years, annual individual
and total income reports, annual investment reports etc). They were secondary data which was
hardly to be found on the internet. Also, they were gathered and conducted by bye Government
and related organizations. Politically, in Vietnam, most of these information was difficult to be
reached if I am just a normal person. Therefore, to get the necessary data, it’s crucial for me to
find a person that could help me to approach the resource.
17
As Adam Johnson (2007) mentioned in his book: “Research Methods for Graduate Business and
Social Science Students”, secondary data is much useful in case the researcher doesn’t have
enough time or money to conduct a proper research on primary data which also fit my situation.
(1) The collecting of secondary data would also help me to me to discover a large representative
sample which significantly exceed my ability, in this case, the socio-economic development of the
Moc Bai city in 20 years.
(2) As the research looks over the 20 years development of the region, secondary data from the
government, organizations would provide a longitudinal data that shows the trends fluctuated
through the years.
(3) Due to my modest time fund, it’s suitable for me to choose secondary data researching as my
main method. It does not require too many time and money to collect. I can save my time mainly
to analyze and interpret the data which I collected.
The disadvantages of the method were revealed by Adam Johnson (2007) and they were also
problems that I had to deal.
3.4. Ethical consideration in using secondary data
Smith (2008) argues that secondary data does not require researchers to collect new data from
many tricky steps as using primary data research which may require ethical approval. Nevertheless,
it also does not mean that researches which have secondary data related do not need to consider
ethical issues especially how the result would be used in one’s research, is it different with the
initial purpose when they are first collected while the respondent did not necessarily agree. In the
surveys and interviews, the participants could be anonymized but they require the interviewers to
approach participants by coming directly to their home, places and it built a rapport of trust
between them then maybe some sensitive questions could appear. However, in my research, I
mostly used secondary data from economic reports to conduct my research. There were a few
18
sensitive questions on political situation but they were conducted by the government organizations
so they were for sure filtered.
When using the secondary data from other authors and organizations, i needs to follow the citation
rules strictly. According to TENK (2012) - The Finnish Advisory Board on Research Integrity
guideline on the responsible conduct of research, my responsibility is to respect other researchers
and the original sources, referencing the publications with a proper citation system.
Johnson (2007) pointed out that documentation is one of the most crucial steps of using secondary
data. It also should be considered as an ethical framework for researchers who is collecting
secondary data. According to Johnson, there are some must-do activities in collecting secondary
data.
• Recording correctly the information (name and address of library, web address, book and
page numbers etc)
• It is very important to too to cite when the data was recorded (date, month, year), the
authority of the sources is also needed to be referenced.
• Making sure of the names of author behind the data, who did the research and their names
must appear in the research as main author (in case they agree to show their names)
Besides, as a researcher I must have a responsibility in avoiding these violations against the
responsible conduct of research (TENK, 2012).
• Falsifcation: Activities that modify and represent the observations or collected data
for intended purpose. Hence, the results were conducted wrongly. The falsication also
includes selection of research results and skipping necessary information or results of
the research
• Fabrication: Using a fabricated observation, collection which have not been
mentioned in the methodologies.
• Plagiarism: Using or borrowing other’s research results as my own research data
without appropriate references (either direct copying and adopted copying). It also
includes research plans, manuscripts, articles, other texts or parts of them, visual
materials, or translations
19
• Misappropriation: Presenting other’s research results, data, as one’s own research.
Additionally, gross negligence and carelessness when conducting the research would also be
considered as disregarding the responsible of the research. This type of violations includes.
1. Neglecting to mention other author names when using their ideas, opinions, research
results or referring to previous research results in inadequate or inappropriate ways.
2. Carelessness in reporting other’s research results which leads to misleading claims.
3. Inadequate record-keeping and storage of results and research data.
4. Misleading the research community in other ways. (TENK, 2012)
3.5. Evaluation of the research
The evaluation of the socio-economic development was usually evaluated mainly rely on its
broader purpose. There are some most common recognized purposes for evaluation such as:
(EVALSED, 2013):
- Planning/efficiency: To evaluate and finding whether a policy is deployed efficiently.
Justify the development of a specific region/ group of people.
- Accountability: Demonstrate the policy/ program whether it has achieved its goal or not,
has it used its resources effectively? Or what is the implication of the policy.
- Implementation: To boost the performance or the effectiveness of a policy which is
deployed before.
- Knowledge production: To understand the process. Answer the questions such as what
has been done or why (in what context)
- Institutional strengthening: To increase the capacity of the policy and their networks of
institutions.
In my research, the purposes have been mentioned in the previous part which are evaluate the
development of the Border region of Tay Ninh province (Planning/ efficiency). Furthermore, to
20
produce the understanding on how and why the development of the region has been fluctuated
through the years (Knowledge Production).
Therefore, EVALSED (2013) has listed some useful assumptions which are used to explain and
interpret the socio-economic development, direct at supply or capacity. These could be considered
in various forms such as:
“mobilizing underused resources, increasing the capacity and value of existing resources and
transferring new resources into a region or sector.” (EVALSED, 2013)
In application to my research, I would like to choose some of below assumptions and they can be
translated into:
1. Knowledge Economy: The structure and dissemination of production in the economy will
reveal the general information and knowledge in the production of products and services.
2. Human Capital: Analyzing the development of the human resources of the region. This will
include GDP per capita, Income per capita, general health and life expectancy.
3. Technology transfer: This could be evaluated by analyzing the technologies transfer. In this
case, the development of the infrastructure of the region which helped less developed area to
catch up with other regions will be taken into account.
4. Social Capital: This qualification is also related to human well-being but in the social rather
than individual level. This could be evaluated via institutional and social networks which
include social trust, government investment, Foreign investment, legal system, economic
policies etc.
Although there are still a lot of assumptions/ qualifications to evaluate the socio-economic
development, I decided to pick only three points above the interpret my research due to my
limitation on time, budget, possibility of the Data in a master thesis.
4. Empirical Results
In this Chapter, I took a look into the issue by analyzing secondary data which I collected from my
trip to the region. The Secondary Data related to economy in Vietnam was commonly collected
21
and calculated by the GENERAL STATISTICS OFFICE of VIET NAM (2018). However, the
data on the website was generally about the whole country which is not specifically focus on Tay
Ninh City where my research is focusing on. The GENERAL STATISTICS OFFICE of Tay Ninh
did not publish the data online, especially annually so I had to use my network and contact in the
researcher community at my previous University to find the right person to help collecting the
data.
Soon, the data on total GDP and GDP per capita were collected with the help of my friends.
However, they were all nominal GDP which was always higher than real GDP due to the abandon
of the price changes and inflation. As a result, the nominal GDP could not reflect correctly the
growth in economy and the local people living standard, especially using it to compare the
differences in annual GDP growth .
To get the perfect reflection, I had to calculate the Real GDP by using the formula:
GDPr = GDPn/GDPdeflator
In this case, the GDP deflator variable was the GDP deflator of the whole country which was
calculated annually by the World Bank (2018). More important, the GDP Reflator of World Bank
was all based on the price of 2010. Theoretically, all the GDP data from other years will use the
GDP in 2010 as the standard number to compare.
As mentioned above, the process will rely on the theoretical framework of EVALSED (2013) to
evaluate the development of Tay Ninh city from 2001 to 2018, the time when the Vietnam
Government decided to invest into the BEZ between Vietnam and Cambodia.
The process will go through 3 main stages of the evaluation of (1) Economy (2) Human Capital,
(3) Technologies Transfer, (4) Social Capital.
As the development of Tay Ninh City was not stable but fluctuated through the year. Generally,
the economic growth tendencies were different in 2 periods of years (2001-2010) and (2010-2018).
Indeed, in the first period when the BEZ was initial established by the Government, the region
economy rocketed with a high annual growth percentage in GDP (both total and individual).
However, after 2010, the growing speed was slow down and started to fluctuated through the years
22
and relatively stood at the same position from 2015 to 2018. In this part, I will analyze these two
periods of time to prove the changes.
4.1. From 2001 to 2010.
4.1.1. Knowledge Economy and Human Capital
The Chart 1 shows Tay Ninh’s economy in 2001-2010 witnessed a rapid growth in annual GDP
growth rate (always higher than 10% each year). Especially in 2002 when it reached the peak at
19%, the highest GDP Growth in the city history. In the first five years, the average GDP growth
rate in the period was also significant with approximately 14.6%, in the meantime, the average
number of Vietnam was only 7.5 % (World Bank, 2018).
The last five years of the period (2006-2010), the region witnessed a tiny decrease in GDP Growth
rate with the average 14.1%. However, it was the highest GDP growth rate in the Southeast of
Vietnam in the meantime, in similar with Binh Duong (14.1%)
11% 11%
19%
14%
18%16%
18%
13%12% 11%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
GDP Growth rate from 2001-2010
Total
CHART 1: GDP Growth Rate of Tay Ninh from 2001-2010 (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh)
23
However, when comparing with other cities in the south of Vietnam (Chart 2), Tay Ninh came at
the second position with only 0.8% lower than Binh Duong (15.3%) (Le, 2012) and higher than
Ho Chi Minh City (13%). Please note that Ho Chi Minh City was the biggest City of Vietnam with
11 million population, the economic center of Vietnam and its annual GDP constituted for nearly
25% GDP of Vietnam (GENERAL STATISTICS OFFICE of VIET NAM, 2018). Meanwhile,
Binh Duong was an industrialized city and the industrial center of the southern Vietnam. Tay Ninh,
on the other hand was mostly known with agricultural production in the time before 2000. In
comparison with its own growth from 1996-2000 (13%) (Le, 2012), Tay Ninh was also better.
CHART 2: Comparison of GDP Growth Rate (%) of cities in the southeast of Vietnam in 2006-
2010.(Le, 2012)
The annual GDP per capita of Tay Ninh also improved significantly from 2001 to 2010 (Table 1
and 2). From 11.3 million VND in 2001 to 27.1 million VND in 2010 (with the 2010 price) and
from 4.5 million VND to 27.1 million VND nominal GDP (Chart 3). The average GDP per capita
rate in 10 years was impressive, 22.3% and 10% respectively.
1514.4 14.4
12.2
16.4
-1
15 14.715.2
12.6
17.9
-6.4
14.913.9
15.5
10.7
13
2
10.810.2
9.48.6
11.54
1.2
14.5
12.913.5
11.811.21
7.3
-10
-5
0
5
10
15
20
Binh Duong Binh Phuoc Dong Nai ho Chi Minh Tay Ninh Vung Tau
Sum of 2006
Sum of 2007
Sum of 2008
Sum of 2009
Sum of 2010
24
Table 1: GDP Growth Per Capita of Tay Ninh from 2001-2010 (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh)
25
Table 2: GDP per capita rate from 2001 to 2010 (Collected by The GENERAL STATISTICS
OFFICE of Tay Ninh)
CHART 3: GDP Growth Per Capita of Tay Ninh from 2001-2010 (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh)
However, regardless of the highlighting points in GDP growth through the year, the Table 3 reveals
the fact that the total GDP and GDP per capita of Tay Ninh were still lower than most of other
cities in the southeast region of Vietnam. This could be explained by its remarkable low rate of
population growth. It’s only 0.7%, lower than any other cities of the same region (Binh Duong
was 7.7 and Vung Tau was 1.4) as has been shown in the Table 4
4.5 5.26.1
7.7
9.9
11.9
15.4
20.5
22.9
27.1
11.312.47
13.66
15.917.21
19.05
22.49
24.425.67
27.1
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Sum of GDP Per Capita(Million VND)
Sum of GDP Per Capita/Compare 2010 (MillionVND)
26
Table 3: Comparison total GDP from 2006 to 2010 (Le,2012)
Table 4: Population growth rate of southeast cities in Vietnam from 2006 to 2010 (Le,2012)
In general, the size of the economy of Tay Ninh was quite modest in comparison with other
economies in Southeast Vietnam. However, it was growing rapidly with a remarkable speed, the
period 2001-2010 experienced an unusual development than before. Coincidently, it was also the
time of the establishment and growth of the Border Economic Zone with Cambodia. Were these
phenomena connected?
Take a look into the changing structure of Tay Ninh economy from 2001-2010 in the Chart 4. In
this part, I will consider and analyze the development and changes of three main sections in the
economy: Service, Industry and Agriculture. According to Le (2012) and The GENERAL
STATISTICS OFFICE of Tay Ninh (2018), the period 2005-2010 witnessed a remarkable change
in the structure of the economy. Specifically, the percentage of agriculture decreased from 38% to
27% while industry experienced a gradual increase from 25% to 29%, the most significant
improvement was service with from 37% to 44% in 2010 and became the largest economic section
of the city.
27
CHART 4: The changing in structure of the economy of Tay Ninh from 2005-2010 (Collected by
The GENERAL STATISTICS OFFICE of Tay Ninh) and Le (2012)
The substantial improvement of Service section was much higher than the prediction of the Tay
Ninh government. The reason for this situation could be explained the impact of the establishment
of the border region with Cambodia which opened a huge number of business opportunities
especially in trading, hospitality, express, storage and commerce. Indeed, the proportion of the
service section reveals some interesting information. According to Le (2012), Service section has
the highest growth rate in the period. Particularly, 17% in 2001-2005 and 18% in 2006-2010, very
impressive. Trading and express were the majority and fastest growth within the section (28.6%
in 2001, 41.6% in 2005 and 47.4% in 2010)
After all these analyzing, we can see that there was a substantial movement among sections within
the Tay Ninh’s economy from 2001 to 2010. Specifically, most of the labor force moved from
agriculture and industry to service section which contributed to the significant growth rate of its
GDP and personal income. According to the GENERAL STATISTICS OFFICE of Tay Ninh
report (Chart 5), the personal income per capita had rocketed from 4.1 million VND in 2001 to 9.6
in 2005 and finally reached 30 million VND in 2010. In comparison with the GNI (General
National Income) of the whole country, we can consider it’s a huge leap for Tay Ninh, from one
of the poorest region with the lower GNI per capita than the average of the country to the higher
than the average in 10 years. (World Bank, 2018)
38%
25%
37%
Structure of Economy in 2005
Agriculture
Industry
Service
27%
29%
44%
Structure Of Economy in 2010
Agriculture
Industry
Service
28
CHART 5: Comparison of GNI per capita of Tay Ninh and Vietnam (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh) and Le (2012)
4.1.2. Social Capital and Technology Transfer
4.1.2.1. Government Investment
Report from The GENERAL STATISTICS OFFICE of Tay Ninh reveals a gradual increase in
government investment to the region through the years (Table 5). However, the proportion of
budget for economic development was quite low in comparison with other neighbor regions with
the same size of economy, area and population. Specifically, the proportion of budget for
development from 2005-2010 was only 11% while other regular budget was 40%. On the other
hand, Binh Duong, a neighbor region spent about 38% of its budget for development every year at
the same time.
4.1
9.6
30.1
6.7
10.7
23.6
0
5
10
15
20
25
30
35
2001 2005 2010
GNI Per Capita (Million VND)
Sum of Tay Ninh
Sum of Viet Nam
29
Table 5: Government Spending of Tay Ninh from 2007 to 2010 (Le,2012) by (Billion VND)
CHART 6: Structure Government Spending of Tay Ninh from 2007 to 2010 (Le,2012) by (Billion
VND)
Therefore, the limited budget for development of the region also affected the investment of the
government to the BEZ. In the report of Vu and Do (2012), they evaluated the needed capital for
development of the BEZ was 1460 billion VND in 10 years, in fact, that number was only reached
30
200 billion VND, constituted for only 13% of the demand. Due to the low investment of the
government, the BEZ was only provided basic and necessary infrastructure such as management
buildings, main roads, electricity, water etc. The rest of the needed investment was fulfilled by
private sector and foreign investors particularly in compensation for local people when they built
infrastructure for their business. However, the local government tried to compensate the modest
investment by publishing good policies for attracting investors and businessmen which will be
mentioned in the next part.
4.1.2.2. Investment environment
In 2005, “the provincial competitiveness index (PCI) was established and designed by the
collaboration between the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S.
Agency for International Development(USAID)-funded Vietnam Competitiveness Initiative
(VNCI), managed by DAI, with a substantial contribution by VNCI partner The Asia Foundation
(TAF)”. (Website of PCI Vietnam, 2017)
In general, the PCI was designed to evaluate the Vietnam’s business environment by conducting
annual business researches, providing assessment and ranking of the economic governance quality
of provincial authorities in creating a favorable business environment for development of the
private sector. (PCI Vietnam, 2017)
According to Table 6, Tay Ninh PCI’s score witnessed a gradual increase from 2006-2011 and the
rank was also getting better through the years.
Year Score Rank Assessment
2007 53.92 54 Below Average
2008 45.1 56 Below Average
2009 59.03 28 Above Average
2010 57.93 33 Above Average
2011 60.43 25 High
31
Table 6: PCI ranking of Tay Ninh from 2007 to 2011 (PCI Vietnam, 2017)
When it comes to every individual factor (As has been shown in Table 7), Tay Ninh showed a
good potential for entrepreneurs to invest into the region by high ranking in Entry costs (rank 7/63
in 2010), informal charges (2/63). Besides, some factors experienced a significant improvement
particularly Transparency, Law and Order, Proactive Leadership.
Table 7: PCI ranking of Tay Ninh with every individual factor from 2007 to 2011 (PCI Vietnam,
2017)
Regardless of such promising improvement, the PCI of Tay Ninh in the region was still low in
comparison with other neighbor cities. The main reason was Tay Ninh is located in the fastest
economic growth area of Vietnam which include Ho Chi Minh City (the largest population,
economic center of Vietnam), Binh Duong and Dong Nai (industrialized cities), Vung Tau (oil
exploitation)
32
Until the end of 2010, Tay Ninh had 199 FDI projects with investment capital was about 917
million USD. The number of projects and investment gradually increase over the years (Chart 7).
Particularly, from 2005-2008, there were 25 new projects had been signed up each year. The
investment capital was also high in this period of time with the amount of 100 million USD/ year
(2005-2010). The proportion of FDI capital was unbalanced, specifically 82% was invested on
industry. However, there was an interesting information that we need to focus, 219 million USD
in the total 917 million USD was invested on the BEZ which constituted for 25% the total amount
of FDI of the whole city. (Vu and Do, 2012). More specifically, 219 million USD was divided for
only 4 projects in express, golf and industry sector, average over 50 million USD/ project, this is
a surprisingly high rate if we know that the average capital for one FDI project of Tay Ninh was
only 4 million USD/project while the average of the country was 15.6 million USD/project. These
FDI projects helped creating over 10.000 new jobs and 60% of them were local people. (Vu and
Do, 2012), FDI capital was also constituted for 50% of the capital from private sector of the BEZ.
These achievements simply contributed for the increase in personal income and helped reduce of
unemployment rate of the city.
CHART 7: FDI investment and Projects of Tay Ninh from 2001 to 2010 (Le,2012)
31.8
4348.7
74
107.5
59
97.5104
9890
10 815 18
2720
27 27
15 17
0
20
40
60
80
100
120
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
FDI investment and Projects (2001-2010)
Sum of FDI (Million USD)
Sum of Projects
33
However, regardless of the improvement from 2005-2010, FDI of Tay Ninh still had a big gap
behind other developed neighbor regions. (Table 8)
Table 8: Comparison of FDI attraction from the cities in Southeast Vietnam until 2010 (The
GENERAL STATISTICS OFFICE of Vietnam, 2018)
As mentioned above, Tay Ninh was not famous for industrial development even though the local
government tried to industrialize the city over the years, the speed of moving from Agriculture to
Industry in its GDP structure was not too fast. Furthermore, most of the FDI investment focused
on industry sector (over 80%) and this tendency was not only happen in Tay Ninh but also in other
neighbor cities and when it came to industrialization, Tay Ninh could not compete with other
industrialized cities. Therefore, the BEZ was the most FDI attracting factor of Tay Ninh.
4.1.2.3. Economic Policies and Technology Transfer.
4.1.2.3.1. Economic Policies
As discussed above, the socio-economic development of Tay Ninh mostly relied on the
development of the economy of the BEZ which helped (1) increasing PCI ranking (2) attracting
FDI (3) Creating more new jobs (4) boosting the industrialization process and changing the GDP
structure. To explain the development of the BEZ from 2001 to 2010, it’s crucial to investigate the
34
economic policies of the local government. Therefore, I will focus on describing and analyzing the
BEZ economic policies only.
To improve the competitive advantages of the BEZ, the local government had published many
good policies to attract investors in both private sector and FDI, also with customers who visited
the BEZ to boost the trade.
Specifically, according to the decision of the Vietnam Government on the BEZ economic policies
(2004, 2007, 2009):
1. To Products and Services:
- Products, services from Cambodia will not be charged import tax when they are imported
to the BEZ and Vice versa.
- Excise products, services will not have to pay excise tax when being imported to the BEZ
or exported from the BEZ to Cambodia. (Liquor, tobacco etc)
- Assembling products which used 100% Vietnam materials will not have to pay export tax.
- All the products, services in the BEZ will be free of VAT (Value-Added-Tax)
- Imported materials, products which are used for production inside the BEZ will be free of
import tax in 5 years.
2. To investors
- All investment projects on the BEZ will get the maximum privileges of Vietnam
government according to the investment law and order.
- Free of income tax in 4 years for all projects starting when they have income which have
to pay income tax. Decrease 50% income tax for the next 9 years and they can choose to
pay only 10% on the total income with the income tax in the next more 15 years
- Projects which provide new production chains, upgrade technology, sustainable
production, improve the environment will not have to pay tax on their profit in 5 years.
Decrease 50% in the next 9 years.
- Investors, individuals who invest on the BEZ will not have to pay land tax in 11 years and
will have to pay only 30% from the 12th year.
35
- The Tay Ninh government will have the authority to approve any investment projects that
is below 40 million USD.
- People (Foreigners and Vietnamese) who are working in the BEZ will have to pay only
50% of their income tax
3. To Individual customers
- Starting from 2004, there were a lot of free duty stores open in the BEZ and customers
were allowed to buy 500.000 VND/person/day. In 2008, the limitation was change to
500.000 VND a week until 2012.
As a result, until 2011, the BEZ had attracted 34 investors with 47 projects, 6.417 billion VND
and 219.1 Million USD for FDI, directly created 25000 new jobs with 60% for local citizens. (Vu
and Do, 2012). The improvement in the PCI ranking of Tay Ninh (as mentioned above) was
directly inherited from the economic policies of the BEZ.
However, regardless of promising results in the first 6 years since these policies were published in
2004, they showed a lot of disadvantages which were manipulated by local people and the BEZ
will witnessed a downgrade by this situation in the next 8 years from 2010 to 2018.
4.1.2.3.2. Technology transfers
To evaluate the technology transfers of the region, I relied on the report of (Le, 2012) in which she
used the calculation system to consider the current technology index of companies in the region
via Technoware (T), Humanware (H), Infoware (I) and Orgaware (O) and contribution index.
These indexes rely on information from companies, assessment from economic experts,
experiences of local government, and assessment tendency. Due to the limitation of this part on
only technology transfers, I will hereby analysis Technoware (T) and Infoware (I)
Specifically:
- Technoware (T): Including these factors, technology transfers, the matching of devices
with the demanded technology, the synchronization of production chain, current usage of
these technology, duration of technology.
36
- Infoware (I): levels of implementation of information technology into production and
works, the importance of used information. Levels of updating, storing and transferring
information.
Accordingly, the research of Le (2012) calculated and assessed on these technology transfer factors
based on information from The Department of Science and Technology of Tay Ninh. However,
the result was not promising. Let’s take a look at Table 9.
The T (Technoware) Index of Tay Ninh could not impress the author as it was too low (2.4). it
means that the transferring and implementation if new technology into production chains of
factories, companies of Tay Ninh were remarkable low. The FDI section came the highest T index
with 2.74 but it was still low in comparison with other indexes even though this is the section
which has foreign participants.
The I (Infoware) Index was slightly better when it reached 4.43 at the medium level and could not
make it as the expectation.
No Section T Index I Index
1 FDI 2.74 5.21
2 State Enterprises 2.30 4.63
3 Private Sector 2.27 4.11
Table 9: The evaluation of T and I index from The Department of Science and Technology of Tay
Ninh (2011)
Economically, the first ten years after the establishment of the BEZ witnessed a remarkable growth
in the socio-economic development of Tay Ninh, especially with the achievement in the economy
by becoming the fastest growing economy in the region. The BEZ played a very important role in
these achievements and development by boosting to the movement between GDP economic
sections (from industry and agriculture to service). As a result, the general GDP, GDP per capita
and GNI per capita of Tay Ninh experienced the highest growth rate ever which changed Tay Ninh
from one of the poorest cities of the region to an over standard of living city of the country.
The economic policies and investment environment of Tay Ninh were highly evaluated with efforts
from local government. However, regardless of these highlighted points in the economy, human
37
capital and social capital, the technology transfer could not grow as expected. Moreover, the
economic policies of the BEZ which helped boosting the investment environment left some
unanswered questions about their sustainability.
4.2. From 2011 to 2018.
4.2.1. Knowledge Economy and Human Capital
As we all know, the world economic crisis (2008-2012) happened as one of the worst depression
in economic history and Vietnam was not the exception. The GDP growth rate of the country from
2008 to 2012 experienced a slight decrease from about 7% to 5.2% (as the lowest point in 2012)
then started to gradually recover to 7% in 2018. In general, the Vietnam economy has recovered
to its stable growth ra from 2012 until now and not too much fluctuation.
However, Chart 8 shows the fact that Tay Ninh’s economy was not as good as the country. When
the whole country recovered and kept moving forward with a rising tendency in its GDP growth
rate years by years, Tay Ninh witnessed a worried downgrade in GDP growth rate especially in
the period of time 2013-2016 when it plumed the bottom at 7.6% (2016).
13.50%
12.50% 12.50%
11.00%
9.40%
7.60%8.00%
8.50%
6.20%
5.24% 5.42%5.98%
6.67%6.21%
6.81% 7.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2011 2012 2013 2014 2015 2016 2017 2018
Tay Ninh GDPGrowth Rate
Vietnam GDPGrowth Rate
38
CHART 8: GDP Growth rate of Tay Ninh in comparison with Vietnam’s, collected by author from
The GENERAL STATISTICS OFFICE of Tay Ninh (2018) and The World Bank (2018))
In comparison with the GDP growth rate of Vietnam, from 2001 to 2010, the GDP growth rate of
Tay Ninh was always doubled with Vietnam’s but when it came to the next decade, the gap
between these two numbers had gradually smaller.
When comparing with itself in the previous 10 years, Tay Ninh economy was an absolute
downgrade. The average GDP growth rate from 2001 to 2010 was over 15% but the same number
for the next 8 years was only 13%. The most worry thing was the general tendency was continually
decreased.
Moreover, when most of the cities in the Southeast region of Vietnam kept recovering in the same
period of time, Tay Ninh stepped back (Chart 9). Specifically, it became the third growing
economy of the region (came first in the previous 5 years).
6.4
5.8
7.09 7.2
6.62
11.3
8.5
9.15 9
9.49
6.386.6 6.64
6.96.636.5
8.28
6.8
7.38
9.85
8.057.76
8.3 8.49
9.4
7.68
8.5 8.38
0
2
4
6
8
10
12
2015 2016 2017 2018 2015-2018
Sum of Vung Tau
Sum of Binh Duong
Sum of Binh Phuoc
Sum of Dong Nai
Sum of Ho Chi Minh
Sum of Tay Ninh
39
CHART 9: GDP Growth rate of economies in Southeast of Vietnam from 2015 to 2018 (by
Percentage). The GENERAL STATISTICS OFFICE of Vietnam (2018)
As a result, the GDP per capita of Tay Ninh could not make any breakthrough, regardless of the
improvement in current price (from 39 million VND in 2011 to 55.8 million VND in 2018) it only
slightly increased from 32.16 million VND to 35.22 million VND by the price 2010 due to the
high inflation rate of the country in that period of time. (Chart 10)
CHART 10: GDP Growth Per Capita of Tay Ninh from 2011 to 2018 (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh)
The movement in the structure of the economy was stable and did not have any thing special. In
comparison with 2010, after 5 years, the percentage of service section had decreased from 41% to
39
42.7 42.8 4344.2
49.7
53.555.8
32.16 31.7430.37 30.4 30.32
33.7134.87 35.22
2011 2012 2013 2014 2015 2016 2017 2018
Sum of GDP Per Capita (MillionVND)
Sum of GDP Per Capita/ Compare2010 (Million VND)
40
34% in 2015, the industry section was the most active one by increasing 7% from 29% ín 2010 to
36% in 2015 to be the largest percentage GDP in the structure of the city. (Chart 11)
CHART 11: Structure of the economy of Tay Ninh in 2015 (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh, 2018)
The downfall of service in the GDP structure of Tay Ninh could be explained by the decrease of
trading activities of the BEZ from 2011 to 2015 (Vu and Do, 2012)
To sum up, the whole period of time witnessed a slowdown tendency in the economic development
of Tay Ninh. The city could not maintain the surprising growth rate as the last 10 years. The
situation partly affected the socio-economic development of the local people especially
economically. Indeed, the GNI (General Nation Income) per capita of Tay Ninh could not keep its
remarkable growth rate and the gap with the GNI per capita of Vietnam was substantially shortened
as has been shown in Chart 12.
0.3
0.36
0.34
Structure of Economy of Tay Ninh in 2015
Agriculture
Industry
Service
41
CHART 12: GNI per capita of Tay Ninh in comparison with Vietnam’s from 2015 to 2018
(Collected by The GENERAL STATISTICS OFFICE of Tay Ninh, 2018 and the World Bank)
What was the reason? Was this situation related to the development of the BEZ and what happened
to the BEZ? In the next part, we will look into the matter to analyze the root of the problem.
4.2.2. Social Capital and Technology Transfer
4.2.2.1. Government Investment
According to Chart 13, the government investment in this time was quite higher than the last
decade, this could be the result of the economic achievement in the last 10 years by the fast growing
economy. One of the most interesting things was the total capital and percentage of investment for
development has been increased considerably years by years. Specifically, the percentage of
budget for development increased significantly from 12% in 2011 to 35% in 2018. (Chart 14)
42.946
50.3
54.7
47.449.7
52.8
55.2
0
10
20
30
40
50
60
2015 2016 2017 2018
Comparison of GNI per capita of Tay Ninh and Vietnam(Million VND)
Sum of Vietnam
Sum of Tay Ninh
42
CHART 13: Percentage of Development in Local Government Investment over the years
(Collected by The GENERAL STATISTICS OFFICE of Tay Ninh, 2018)
CHART 14: Total budget of government investment and investment on development (Collected by
The GENERAL STATISTICS OFFICE of Tay Ninh, 2018)
12%13%
17%
13%14%
24%
34%35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2011 2012 2013 2014 2015 2016 2017 2018
Percentage of Development in Local Government Investment
Total
6947
8134
6870 68137231
8269
7658
8222
830.61068.2 1174
909 1040
2016
25762872
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2011 2012 2013 2014 2015 2016 2017 2018
Sum of Investment (Billion VND)
Sum of Development
43
Accordingly, the average of percentage for development in this phase has been doubled in
comparison with the last decade (23% with 11%). However, it’s still nothing when compare with
the percentage for development of other developed cities of the region, for example Binh Duong
(always over 40%) (e GENERAL STATISTICS OFFICE of Binh Duong, 2018). Besides, the
budget for economy and education was still stable at 8% and 23% respectively, this is the same
amount with the percentage of spending for those two sections of Vietnam at the same time. (Chart
15)
CHART 15:Total budget of government investment and investment on economy and education
(Collected by The GENERAL STATISTICS OFFICE of Tay Ninh, 2018)
44
CHART 16: Investment on economy and education by percentage (Collected by The GENERAL
STATISTICS OFFICE of Tay Ninh, 2018)
Regardless of these investment for development, the BEZ was not invested enough as expected.
According to the calculation of Tay Ninh government on the development project of the BEZ
(2019), the BEZ needed about 1000 billion VND in 8 years (from 2011 to 2018) the develop its
basic infrastructure for socio-economic development. However, the report also reveals that the
budget of local government was only 218 billion VND (151 billion from Vietnam government and
67 billion VND from Tay Ninh government).
Fortunately, in 2013, Asian Development Bank (ADB) has sponsored for the Greater Mekong
Subregion (GMS) urban development project which includes Tay Ninh as a main border region
town. According to the report of ADB (2018), the bank has reportedly provided 40 million USD
to help the BEZ built basic facility projects such as, Water supply plants, wasted water treatment
plants, waste sorting etc. And they are expected to be finished in 2021.
4.2.2.2. Foreign Direct Investment
6% 6% 6%8%
10% 9%
23%
25%
21%
24% 25% 25%
0%
5%
10%
15%
20%
25%
30%
2013 2014 2015 2016 2017 2018
Sum of EconomicDevelopment (%)
Sum of Education (%)
45
In the period from 2011 to 2018, the FDI flows to Tay Ninh has been highlighted by a great
improvement especially in the years from 2015-2018. This number reached its record peak in 2017
with 742 million USD. (Chart 17)
CHART 17: FDI and number of projects of Tay Ninh from 2011 to 2018 (Collected by The
GENERAL STATISTICS OFFICE of Tay Ninh, 2018)
While in the previous decade, most of FDI projects were small and medium size with only about
4 million USD/ project, in 2011-2018, the average of FDI/ project has substantially increased to
17.5 million USD/ project. This was a remarkable leap for the FDI attracting capability of Tay
Ninh. However, the total FDI capital of Tay Ninh still could not be compared with other neighbor
cities of the region as they also moved too fast on FDI attracting. (Table 10)
145 152.2176
223
515
273
742
427
9 9 18 19 17 24 25 30
0
100
200
300
400
500
600
700
800
2011 2012 2013 2014 2015 2016 2017 2018
Sum of FDI (Million USD)
Sum of Projects
46
Cities FDI until 2018
(Billion USD)
Number of Projects Capital/ Project
(million USD)
Vung Tau 27.3 343 790
Tay Ninh 2.6 151 17.2
Binh Duong 30.1 3299 9.1
Dong Nai 27.5 1300 21.1
Ho Chi Minh City 47 8110 5.7
Table 10: The total FDI of SouthEast region of Vietnam (Collected by The GENERAL
STATISTICS OFFICE of Vietnam, 2018)
Surprisingly, in comparison with the previous decade, the FDI invested into the BEZ has slightly
increased (from 199 million USD to 221.95 USD), this could be considered as a drawback while
the whole city was invested 2.6 billion USD in total 8 years, constituted for only 10% of the FDI
of Tay Ninh. All of them were investment in industry section. The absence of service section in
FDI of the BEZ was mainly affected by the changing in economic policies of Tay Ninh on the
BEZ which decreased the service business of the BEZ considerably. The changing of the economic
policies will be discussed in the next part.
Additionally, the private sector contributed 11.3 billion VND (around 550 million USD) on 46
projects in the BEZ. However, the tendency of capital on the BEZ was decreasing in both FDI
and domestic private sector. The FDI and domestic private investment helped creating over 15.000
jobs and 60% of them were local people. Therefore, after looking at these numbers, we can see
that the BEZ of Tay Ninh could not make any difference in comparison with the last decade. All
the economic numbers, created jobs, investment capital stayed the same. More significantly, the
number of service business has decreased 50% in comparison with the last 10 years. (Tay Ninh
Government, 2019)
4.2.3.Economic Policies.
4.2.3.1. Economic Policies
47
As mentioned in the last part, in 2004 Vietnam government had published economic policies which
attract investors and companies to invest on the BEZ including free or decreasing tax and a lot of
other privileges. When the first policy on freeing tax for customers buying goods in the BEZ was
published (2006), the limitation for customer was to buy 500.000 VND/day. However, after 2
years, the limitation has been decreased to 500.000 VND/ week due to signs of illegally cheating
the tax laws from entrepreneurs and local people.
Indeed, at that time, there were reports, articles from journalists and management board of the BEZ
about the violations of tax law from both companies and local people. Accordingly, the BEZ
management board has detected some illegal activities from companies such as publishing blank
invoices to reclaim tax, selling goods more than the limitation for one customer to boos the sales,
exporting goods to Cambodia from the BEZ then imported goods again (they were free charge of
tax) to re-sell outside the BEZ to reduce the tax etc. On the costumer side, a great deal of
sophisticated tricks had been recorded, using fake IDs, borrowing other’s IDs to buy more than
the limit number for a customer, using ID of dead people, hiring Cambodian to buy a large amount
of goods then reselling with very higher prices (Cambodian do not have limitation when
purchasing goods in the BEZ). As a result, the government budget income has lost a large amount
of money from tax.
To prevent these violations, the Vietnam government has increased the limitation of buying goods
in the free duty zone as mentioned above which also led to the completely removing all the free
duty policies for products and other special policies for investment in 2018. Accordingly, the report
from Tay Ninh Government on the number of companies working in free trade zone of the BEZ
has decreased gradually.
48
Year Number of Companies Total Employees
2005-2007 60 1800
2009-2013 48 750
2014 19 NA
2015 20 NA
2016 15 NA
2017 12 NA
2018 12 100
Table 11: Number of companies working in the free duty zone of the BEZ over the years
(Collected by the Tay Ninh government, 2019)
Table 11 shows a huge decrease of trading activities in the free trade zone of the BEZ over the
years in both the number of the companies and the total number of employees. In 2005 to 2007,
when the economic policies have just been released, the number has reached its peak when there
were 60 companies working as trading entities (free duty stores, supermarkets with low tax.
However, when the government tightened the policies and increase the limitation of free duty
goods, there were less companies than before. Consequently, the sale income from trading
companies decreased over the years. (Chart 18)
1237 1250
993 996
386 434 476
0
200
400
600
800
1000
1200
1400
2011 2012 2013 2014 2015 2016 2017
Sale Income of the Free Trade Zone from 2011 to 2017
49
CHART 18: Sale Income of the Free Trade Zone from 2011 to 2017 (Tay Ninh government, 2019)
Simultaneously, the number of visitors to the BEZ and the duty free zone could not stay outside
the tendency. (Chart 19)
CHART 19: Number Of Visitors to the BEZ over the years (Tay Ninh government, 2019)
In general, the socio-economic development of Tay Ninh from 2011 to 2018 was as not as
impressive as the last decade. The consequences were clearly reflected by the slowdown in
economic development which caused lower GDP and GNI per capita of the city. As my analysis
when I compared the economic efficiency of the BEZ between the two periods of time (which was
proved that affected the general socio-economic development of the whole city). Indeed, the BEZ
of Tay Ninh with Cambodia experienced a substantial downgrade in comparison with itself from
2001-2010. The trading service sections have decreased over 70% until 2018 (Chart 18 and Table
10) The investment from both Government and private sector to the BEZ was also a drawback ,
illustrated by the low percentage of the investment capital of the whole city (only 10%). In the
1.28
2.3
2
1.3
0.51 0.5 0.47
0
0.5
1
1.5
2
2.5
2006 2010 2013 2014 2015 2016 2017
Number of Visitors (Millions)
50
next part, I will analyze the causes and reason in the changing economic policies of the government
which partly affected the development of the BEZ.
5. Analysis and explanation
The analysis of Tay Ninh over the years have divided its socio-economic development into two
separate periods of time based on the economic efficiency. Why there was a huge difference
between these 2 phases? In this section, I would like to make an assessment on the situation by
analyzing three main factors that mainly impact the socio-economic development of Tay Ninh
city. (1) Governance (2) Local people and (3) Investors. These three factors affect each other and
vice versa.
5.1. Governance factor
Among these three main factors I have mentioned, I would like to consider Governance factor as
it has the strongest impact on the two remain factors. Within Governance factor, there are three
sectors that need to be interpreted: Project planning, infrastructure investment and economic
policies.
5.1.1. Project Planning
The project planning of the BEZ was quite clear as it targeted only on the trading, service and
commercial activities which specifically focused on free duty trading especially the free duty zone
with a great number of free duty stores, neglecting other advantages from human resource,
economic and geographical characteristics. The service and commercial sections are good enough
and worth the investment but focusing only on them are just wasting other advantages. According
to the assessment of the Tay Ninh government in 2019. This policy could only attract investors
with short term visions, they mostly wanted to take advantage from the incentive policies.
However, the incentive policies could not attract long term, visionary and stable investors.
51
The planning from Tay Ninh government also only focused on the Cambodia market but did not
pay attention on the connection to other developed domestic markets in the region such as Ho Chi
Minh city, Binh Duong, Dong Nai. They can export and import a large amount of goods from
Cambodia but the route network to connect to other cities was in poor condition. Until 2018, the
government approved to build a highway from Ho Chi Minh City directly to Moc Bai BEZ. This
could be an advantage in the future for the BEZ to become a transportation hub for the region in
the connection with Cambodia market which possibly lead to the development of logistic, express
and storage services (these services were not interested enough over the years).
5.1.2. Infrastructure Investment
As mentioned in the last part, the investment from both Vietnam Government and Tay Ninh
Government was modest and could not compensate the calculated demand for developing
infrastructure, facilities of the BEZ. The report of Tay Ninh government has revealed the fact that
from the establishment of the BEZ until 2018, the investment from Vietnam Government and local
government reached 219 billion VND while the calculated number needed was nearly 1500 billion
VND. Therefore, we can see the fact that regardless of the promising potential of the BEZ in socio-
economic development, its role was not considered important enough.
While the investment from the government was limited, the basic infrastructure and facilities of
the BEZ were not good enough especially transport routes which could not handle a high density
of vehicles. This was also an invisible barrier for attracting investment capability of the city.
Moreover, regardless of its strategic position (in between Cambodia and other developed cities of
southeast Vietnam) the poor condition of route network prevented Tay Ninh from becoming a
connected hub of this region to the Cambodia market which also led to the low development of
express, storage, logistic industry. (Tay Ninh Government, 2019)
At the moment, the only hope for the development of the BEZ is the investment package from the
GMS (Greater Mekong Subregion) project to develop the Economic Corridor in Southeast Asia
from the Asian Development Bank (ADB). The economic investment package includes 40 million
USD in total to build basic facilities for the BEZ to boost the development of the South Economic
Corridor, connect the Cambodia with the developed region in the Southeast Vietnam.
52
FIGURE 4: Southern Economic Corridor in the Greater Mekong Subregion (Asian Development
Bank, 2018)
Figure 4 from ADB shows the strategic location of Moc Bai in the middle of the route which
connect a huge network of routes in Thailand and Cambodia to the developed region of Southeast
Vietnam including Ho Chi Minh City, Vung Tay and Binh Duong. Hence, the investment of the
ADB in Moc Bai BEZ to develop the capability of infrastructure and the project of the Vietnam
government to build a long highway to connect directly Ho Chi Minh to Moc Bai BEZ are
promising in the future.
5.1.3. Economic Policies
According to the report of the Tay Ninh Government (2019). There were a lot of problems in the
policies to the BEZ especially in land law and incentive policies with trading activities which
caused unexpected troubles.
53
Regarding to the land law, there was an inconsistency in the published laws over the years from
the government. For example, there were some projects which was established in the time of 2000s
which was under the availability of the 1993 land law. However, the process of building these
projects was lengthened to 2015 while the Vietnam Government updated the new land law in 2013
which neglected of the incentive policies on land law for projects in the BEZ. This situation caused
many troubles for the investors which made long term, visionary investors hesitated to invest into
the BEZ.
Anther example was the updating of Vietnam Government on the land law of the BEZ in 2009.
Accordingly, the new update required the investors not only compensate for the local people who
was relived for building the infrastructure with 1.5 land price (set by the government) but also
support them to learn and find other jobs. As a result, many investors could not handle the
compensation so they had to stop or withdraw the projects which wasted a great deal of money
and time.
On the economic field, the incentive policies which was applied for the BEZ had been changing
and tightening from time to time due to the manipulation of local people on the free duty products
as well as low taxation for investors. In 2018 all the incentive policies including free duty products
have been aborted by the Vietnam government in the process of looking for a new plan to develop
the important BEZ. After all, this result could be considered as the weakness, disqualification of
both Vietnam government and Tay Ninh government in keeping the BEZ moving forward
regardless of the high development in the previous phase.
5.2. Local People factor
Due to the attracting policies on selling free duty products of the BEZ, local people and travelers
were the most benefit. As mentioned above, from 2006, the government had published a policy
that limited 500.000 VND/person/day for buyers in the free duty zone. Basically, you could buy
too much with that amount of money. Hence, a single person was allowed to buy 3.5 million
54
VND/week or 14-15 million VND/month of free duty products and it created a potential market
for smugglers to manipulate the free duty policies.
According to the statistics of the management board of the BEZ, until 2011, alcohol products
(liquors and beers) are the highest rate of selling with around 40% total of sold products in the free
duty zone (GENERAL STATISTICS OFFICE of TAY NINH, 2018) especially before the lunar
new year, it could reach 70%. This was also the most smuggled products via the Vietnam-
Cambodian border. The explanation for this situation was this kind of products would be normally
charged for many kinds of taxes (import tax, excise tax and value added tax) but in the free duty
zone of the BEZ, they were charged nothing. Therefore, the difference between the price inside
the BEZ and outside was super large. The profit for smuggling this kind of product was
considerably high.
Moreover, the managing activities of the BEZ was weak and loose also partly contributed for the
problem. For instance, the checking ID and publishing invoices were assigned for the stores or
companies who were selling the products which created an opportunity for the collaboration of
these companies with smugglers. The companies could sell a large amount of goods with zero tax
while the smugglers could buy a lot of free tax products with a considerably low price in
comparison with the normal price.
To deal with smuggling, the BEZ management team published some short term solutions. In 2014,
they lower the limitation for customers to buy from 500.000 VND/day to 500.000/week, one bottle
of liquor a week or one package of beer a week. The result was not impressive as smugglers found
other ways to cheat the laws. For example, hiring ID from local people or visitors to the BEZ,
creating fake IDs, hiring Cambodian to buy products as Cambodian were not applied to the law.
Consequently, the new limitation could not stop the troubles but coincidently lower the sales of
free duty zone as normal customers could not buy as much as they could before.
5.3. Investor factor
Until 2018, there were total 54 projects from investors in the BEZ. (Tay Ninh Government, 2019).
The current status of these projects has been listed by the Tay Ninh government in the table below.
55
Number of
Registered Projects
Current Status Capital
(billion VND)
Capital
(million USD)
21 Currently Working 785.93 168.41
2 Stopped Working 130 0
6 In progress 3333 30
3 Waiting for license 0 23.5
22 Progress extended 7062 0
Table 12: Current status of projects in the BEZ (The Tay Ninh government, 2019)
The table shows a worried number of projects which were late in progress and need to be extended
(22), these projects constituted for the largest proportion of the total registered projects with 40%
while the currently working projects were accounted for only 38% of the number. In general, the
progress of implementation of invested projects was slower than expected which was reflected by
the number of extended and In progress projects. Clarifying the problems, Tay Ninh government
has made a report on the invested projects and found out some reasons.
- Due to the world economic crisis from 2008 to 2012, investors could not approach
acceptable loans from banks to keep investing to projects in the BEZ which led to delayed
projects.
- As mentioned in the previous parts, the land laws were inconsistent which made investors
confused and hesitate to keep investing in their projects.
- The local government was allowed to approve projects which investment below 40 million
USD. However, they only focused on how to attract as much investors as they could but
neglecting checking delayed projects, capacity of the investors or their abilities to invest in
the long term, easy to approve weak capacity investment. Violation on land laws or
investment laws was not handled precisely and properly.
56
To sum up, my opinion was still the same as the weak governance of both Vietnam and Tay Ninh
government contributed for the downfall of the Moc Bai BEZ regardless of the impressive
achievement in the first 10 years (2001-2010). It was mainly because of the inconsistency and
short visionary of the policy making progress. This weakness created large opportunities for
smuggling and cheating companies manipulating the market which led to lost of taxation, low
income to the government so they didn’t have enough capital to re-invest to the BEZ. Basically,
the weak policies should be considered as the main factor or roots of the problem.
Additionally, the mechanically adopting incentive policies to the BEZ while neglecting other
advantages of the region which focused only on free duty trading and low taxation for investors
should not be prioritized as they were just short-term solutions. These policies could only boost
the BEZ in short term (in the time of 2001-2010) but failed in the next decade. The government
should be up to dated and fix the policies to revise the BEZ.
Finally, to answer the question was this BEZ paradigm good? Should it be applied to other regions?
I would like to rely on the methodology of Bilchak (2014) interprets integration as the combination
of economic, political and legal elements which was developed gradually from bottom-up. This
combination requires successful stages in the establishment of the “free trade area, customs union,
common market, economic union and full economic integration” (Bilchak, 2017, pp.73). When
we apply Bilchak model to the case of Moc Bai BEZ, it’s easy to see that the BEZ here stopped at
the second level (Custom Unions) when the freedom of movement and goods was guaranteed.
However, there was still limitation of the quantity of goods according to the policies of Vietnam
government. Furthermore, the common market was unable to reach while the free trade area was
a big flop. Therefore, the whole BEZ model should not be considered as the main paradigm to
apply to other region except the incentive policies (but only in short term application to boost the
economic development).
57
6. Conclusion
To conclude the research, I would like to review my hypothesis which was risen in the third part.
“The loose economic policies of the government from 2000 to 2010 were manipulated by local
people which led to the loss of income tax for the government”. As discussed in the previous
section, local people factor was one of three main reason which led to the failure of the Moc Bai
BEZ model in Tay Ninh. However, after analyzing these three factors in the fourth part, I’ve
realized that the manipulation of the policies from local people was just a consequence of a cause-
effect relationship. Within the cause-effect inner circle of Governance, local people and investor,
the governance factor played the most important role when it dominated and affected on other two
factors.
My question from the beginning of the research was “How Vietnam-Cambodia cross border co-
operations affect social economy of the border region?”. The answer was presented clearly in the
first part of the Empirical Results. The establishment of the BEZ in Tay Ninh city increased the
Socio-Economic development of local people by lifting the GDP per capita, general GDP of the
region, GDP growth rate and GNI per capita as well. All the results showed a very promising
development and highest growth rate in its history until 2010. These all results was connected
directly to the development of the BEZ from 2001 to 2010. Unfortunately, the BEZ could not keep
its significant performance in the next 8 years and this leads to other sub-question which prompted
from the beginning, “should this model be applied to other border regions?” and my answer was
both yes and no simultaneously as described. It’s “Yes” by using the incentive policies on boosting
the economy and attract investment which could help growing the basement of the BEZ as well as
the socio-economic development in a certain phase of time. However, it’s “No” when we keep
relying on these policies and do nothing with the changing of the economy. Each region has its
own characteristics and the model was not “one fit for all”, inflexible application while neglecting
other advantages of the region could lead to failure which actually happened in Tay Ninh.
The purpose of the research is only to answer my concerns on how a promising border economic
zone with interesting economic policies which contributed for the socio-economic development of
local people at the beginning became a failure later in policy making of the Vietnam government.
58
Additionally, due to the limitation of a master thesis, the research could only describe the raise and
fall of the BEZ over the years, analysis, figure out and explain the problems but searching for the
solutions.
Finally, the Vietnam government has eventually conducted a research on revising the development
of the BEZ at the beginning of 2019. This is not only a good news for local people in the Moc Bai
BEZ of Tay Ninh but also other border regions of Vietnam when this kind of BEZ model is
showing its out of dated and witnessing a standstill in most of other places.
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