Hai Phong’s Free Trade Zone: Proposed Incentives To Boost Localization

As Vietnam accelerates its shift toward higher-quality foreign direct investment (FDI), policymakers and industry leaders are increasingly focused not only on attracting capital, but on ensuring technology transfer, domestic supplier development, and long-term value creation.

The new proposals are emerging to grant special incentives to enterprises that commit to localization — particularly those operating in the Hai Phong Free Trade Zone (FTZ), one of Northern Vietnam’s most strategically positioned economic hubs. The initiative aims to transform the FTZ from a logistics and assembly center into a high-value industrial ecosystem deeply integrated with domestic supply chains.

Why Localization Is Critical to the Success of Hai Phong’s Free Trade Zone

Officially launched in October 2025, the Hai Phong Free Trade Zone spans more than 6,290 hectares, covering multiple coastal economic zones closely linked to deep-sea ports, expressways, and key industrial corridors in Northern Vietnam.

1. Trade and Economic Integration

Trade lies at the core of the Vietnam–EU relationship. The EVFTA has significantly contributed to bilateral trade growth, with EU–Vietnam trade volume increasing by about 40% over the past five years. As both sides face global economic uncertainties, enhancing trade liberalization, reducing non-tariff barriers, and deepening market access remain priorities under the new strategic partnership.

However, despite strong infrastructure advantages, experts warn that Vietnam’s supporting industries remain underdeveloped, with many manufacturers still heavily dependent on imported components, raw materials, and intermediate products. Without targeted localization policies, FTZ projects risk remaining low-value assembly operations, limiting spillover benefits for domestic enterprises.

At a recent investment conference themed “Hai Phong Free Trade Zone – Destination of a New Era,” business leaders emphasized that the future success of the FTZ depends on whether it can anchor production networks inside Vietnam, rather than functioning as a transshipment or processing zone.

Proposed Incentives to Encourage Localization Commitments

To address this challenge, policymakers and industry representatives proposed a comprehensive incentive framework designed specifically for enterprises that commit to building domestic supply chains.

1. Preferential Tax and Land Policies

Authorities are considering targeted tax incentives and preferential land-use terms for projects that present clear localization roadmaps. These benefits may include reduced corporate income tax, preferential land rental rates, and extended incentive periods — tied directly to localization performance indicators such as domestic sourcing ratios, supplier development programs, and technology transfer outcomes.

2. Establishment of an Industrial Support Fund

One of the most significant proposals is the creation of a dedicated Industrial Support Fund. The fund would focus on:

• Financing domestic supporting-industry enterprises
• Providing technical consulting and production upgrading support
• Sponsoring international certifications and compliance systems

The objective is to help Vietnamese suppliers meet the stringent standards of multinational manufacturers, enabling them to formally enter global production chains operating inside the Hai Phong Free Trade Zone.

3. Digital Platform Connecting FDI Buyers and Local Suppliers

Another key recommendation is the development of a digital supply-demand matching platform. This centralized system would publish verified information on Vietnamese manufacturers’ capabilities, production standards, and product portfolios, allowing foreign-invested enterprises to efficiently identify qualified local partners.

Such a platform would significantly reduce search costs, improve transparency, and support the formation of localized industrial clusters, a defining feature of successful free trade zones worldwide.

4. Annual Localization Demand Disclosure

To further institutionalize localization, city authorities propose annually publishing the component and materials demand lists of major FDI investors. Based on this data, Hai Phong would select and intensively support 50–100 Vietnamese enterprises per year, positioning them as priority suppliers for key industrial projects.

Improving the Operating Environment: A Prerequisite for Localization

Beyond financial incentives, investors emphasize the importance of administrative consistency and operational clarity. Free trade zones, by definition, require streamlined procedures, coordinated governance, and fast response mechanisms.

Industrial developers in Hai Phong have urged authorities to strengthen coordination between customs agencies, municipal departments, and industrial zone operators. In response, the city has begun establishing dedicated investor task forces, centralized guidance channels, and policy hotlines to ensure that FTZ enterprises can implement projects efficiently.

Localization commitments, experts argue, will only materialize if investors perceive the FTZ not only as cost-competitive, but also as institutionally reliable.

Strategic Significance: From Assembly Hub to Industrial Ecosystem

Economists view the Hai Phong Free Trade Zone as a critical testing ground for Vietnam’s next phase of industrial development. Instead of competing solely on labor and land costs, the FTZ is expected to pioneer:

• High-tech manufacturing
• Smart logistics and bonded production zones
• Green and circular industrial models
• Deep domestic enterprise integration

Localization incentives play a central role in this transition. By anchoring production inside Vietnam, they support technology diffusion, workforce upgrading, and national industrial resilience.

Over time, this approach could reshape Hai Phong’s position from a port-based industrial city into a regional manufacturing and supply-chain hub serving Northeast Asia, ASEAN, and Europe.

For investors seeking to capture opportunities, Core5 Vietnam provides more than facilities , we are your strategic partner in long-term success.

Discover more About Us

Interested in expanding your business in Vietnam? Contact Core5 Vietnam today.