Unlocking Danang’s Tourism and Real Estate Potential: The Special Mechanism and Free Trade Zone Advantage

A Boost from the Free Trade Zone

The resolution to pilot mechanisms and special policies for the development of Danang City was passed in late June 2024, with two important policy groups. One is about the model of urban government organization, and the other is about special policies for the city’s development. These two policy groups will focus on resolving bottlenecks and removing obstacles in institutions and policies, creating favorable conditions for investment attraction, and ensuring that the city completes the tasks assigned by the Politburo in Resolution No. 43-NQ/TW.

According to assessments, while the model of urban government organization has been piloted for three years, the establishment of a free trade zone promises to unlock Danang’s economic potential. Danang is the first place in Vietnam to pilot the establishment of a Free Trade Zone (FTZ) – a model that is common worldwide but considered a breakthrough development in Vietnam.

The Danang Free Trade Zone, associated with Lien Chieu Port, is designated as a functional area with a defined geographical boundary. It is established to pilot mechanisms and policies aimed at attracting investment, finance, trade, tourism, and high-quality services. The Danang Free Trade Zone will include production areas, logistics centers, commercial and service areas, and other types of functional areas.

According to an evaluation report by the Ministry of Planning and Investment, the business sectors in the Free Trade Zone also include tourism services, amusement parks, art performances, cinema, art, and entertainment activities, trade fairs, and real estate business serving the above-mentioned sectors.

It is also proposed to form commercial and service subdivisions in the Danang Free Trade Zone, supporting the existing and developing tourism areas in Danang and the Central region, such as the Ba Na – Suoi Mo Tourism Urban Area, the Dong Xanh – Dong Nghe Lake Area, and the Khe Ram Tourism Area. This will create a dynamic area with potential to attract international corporations to build high-quality shopping centers and diverse commercial and service activities, in line with Danang’s role as a central city as per Resolution No. 43-NQ TW.

Moreover, the spillover effects of the free trade zone are significant. In addition to traditional commercial, warehousing, and import-export functions, free trade zones also form a chain of high-quality services associated with tourism. Notable examples include the Incheon Free Economic Zone in South Korea, which established the Yeongjong area specializing in distribution and tourism services, and the Hainan Free Trade Zone in China, which focuses on tourism activities and large-scale duty-free shopping.

Free trade zones are a common model present in over 150 countries, and in Vietnam’s neighboring countries such as Singapore, China, Indonesia, and Malaysia. Singapore, with an area less than two-thirds of Danang, has developed nine free trade zones.

The special policies and the pilot establishment of the free trade zone are expected to boost Danang’s economy, closely following the goals set out in Resolution 43/2019. These include developing Danang into an eco-city, a modern and smart city with international stature and unique characteristics, and promoting rapid and sustainable economic growth. Among the key sectors identified is high-quality tourism and services associated with resort real estate, which is expected to have a significant impact on Danang’s economy.

According to experts, the idea of building a New Generation Free Trade Zone is being vigorously proposed and prepared for implementation in Danang. As a development model, the New Generation Free Trade Zone – associated with Lien Chieu Port and Danang International Airport, and structured around two main axes: high-tech industry and international-standard tourism and services – will be the new driving force for the city’s development in the new phase.

Danang’s Real Estate Sector Anticipates Growth

Minister of Planning and Investment Nguyen Chi Dung once assessed that “Danang will bounce back like a spring.” The new mechanisms will contribute to restoring Danang’s growth momentum after a period of stagnation from 2015 to 2019, when the city’s average GRDP growth rate was 7.7%. In the past three years, the growth rate has only reached 5.65%. The socio-economic development plan of Danang aims for a growth rate of 9.5-10% by 2030.

Overall, the urban government organization and the special mechanisms will create a favorable legal corridor for attracting domestic and foreign investment, especially in high-tech industries. This will attract high-quality labor, experts, and merchants to Danang – a talented workforce that any major city in the world would desire. This workforce will inevitably generate demand for housing, living conditions, entertainment, and other services, creating a spillover effect on the commercial, service, and tourism sectors, especially the high-end real estate market. The development of tourism will also directly impact the real estate market.

Closely monitoring policy changes, real estate development, and distribution companies in Danang are confident in the market’s ability to recover and break through following the city’s economic resurgence. “A modern and high-class free trade zone will contribute to the development of the tourism industry through the development of accompanying service infrastructure and the attraction of luxury duty-free shopping. If well-executed, many foreigners will come to live, work, and entertain here. The diversity of services will stimulate experts and tourists to spend, shop, and experience,” shared the director of a real estate company in Danang.

Experts also believe that Danang’s tourism has the “momentum” and “advantage” to seize new opportunities brought about by the establishment of the free trade zone. In addition to leveraging its natural landscape advantages, Danang is now a city that never sleeps, with a thriving night-time economy, a city of festivals and events, and an international tourism hub.

According to Associate Professor Dr. Tran Dinh Thien, Danang needs to define the idea of a “New Generation Free Trade Zone” accurately and clearly. This should be followed by a rigorous and relentless program of action at the national level. “The free trade zone, along with the enabling conditions created by the Government and the National Assembly, will help Danang rise as a developmental model,” said Dr. Tran Dinh Thien.