How the border economic zone in Vietnam was developed: The case of Tay Ninh city in the border with Cambodia

(1)

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

(2)

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

(3)

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

(4)

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

(7)

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

(8)

1 1. Introduction.

1.1 Historical Background.

The Vietnamese-Cambodian relations had been established in the beginning of the second millennium. In the 19^th 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 17^th 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

(9)

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)

(10)

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)

(11)

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.

(12)

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

(13)

6

or Vietnamese. Indeed, most of these researches are about the whole Vietnamese-Cambodian cooperation 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 cooperation. 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.

(14)

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 cooperation 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.

(15)

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)

(16)

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 19^th 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 21^st 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

(17)

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

(18)

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)

(19)

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

(20)

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

(21)

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.

(22)

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). 10^th 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.

(23)

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.

(24)

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

(25)

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

(26)

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

(27)

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

(28)

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:

GDP

r

= GDP

n

/GDP

deflator

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

(29)

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)

(30)

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.

15 14.4 14.4

12.2

16.4

-1

15 14.7 15.2

12.6

17.9

-6.4 14.9

13.9

15.5

10.7

13

2

10.8 10.2

9.4 8.6

11.54

1.2 14.5

12.9 13.5

11.8 11.21

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

(31)

24

Table 1: GDP Growth Per Capita of Tay Ninh from 2001-2010 (Collected by The GENERAL STATISTICS OFFICE of Tay Ninh)

(32)

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 5.2 6.1 7.7

9.9 11.9

15.4 20.5

22.9 27.1

11.3 12.4713.66

15.9 17.21 19.05

22.49

24.4 25.67 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 (Million VND)

(33)

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.

(34)

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

(35)

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

(36)

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

(37)

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

(38)

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)

(39)

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

43 48.7 74

107.5

59

97.5 104 98

90

10 8 15 18

27 20 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

(40)

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

(41)

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 12^th year.

How the border economic zone in Vietnam was developed: The case of Tay Ninh city in the border with Cambodia