Lao Bao Special Economic - Commercial Area

Overview of Lao Bao Special Economic – Commercial Area:

Lao Bao Special Economic – Commercial Area is one of the most important border gate economic area in Vietnam. On November 12, 1998, the Prime Minister issued Decision No. 219/1998/QD-TTg to promulgate the regulations on the encouragement of economic and commercial development in Lao Bao, Quang Tri province. To adapt to the new situation, on January 12, 2005, the Prime Minister further issued Decision No. 11/2005/QD-TTg to promulgate the regulations on the Lao Bao Special Economic-Commercial Area.

Lao Bao Special Economic – Commercial Area is planned with concentrated production and business zones, including:

• Lao Bao Commercial and Service Industrial Zone.
• Commercial and Service Cluster.
• Industrial Cluster.
• Lao Bao Border Gate Cluster.

Geographical location:

Lao Bao Special Economic – Commercial Area covers a total area of 15,804 hectares and consists of 6 communes: Dan Hoa, Trong Hoa, Hoa Thanh, Hoa Phuc, Hong Hoa, Hoa Tien in Huong Hoa district, Quang Tri province.

Boundaries and scope:

• The northern border is adjacent to Huong Tan commune, Huong Hoa district.
• The southern border is adjacent to Thuan commune, Huong Hoa district.
• The eastern border is adjacent to Dakrong commune, Dakrong district.
• The western and southwestern borders are adjacent to Savannakhet province, Lao People’s Democratic Republic.

The Special Economic-Commercial Area is located on the East-West Economic Corridor (EWEC) with the shortest and most convenient route, ensuring continuous transportation from inland Vietnam to Savannakhet, Mukdahan, facilitating the expansion of trade, import-export activities, tourism, and services with other countries in the region. Across the international border is the Den Savanh border gate in Laos, facing the Lao Bao international border gate.

This is a comprehensive economic model that combines features of an industrial zone, export processing zone, border gate economic zone, and “special duty-free zone.” It applies pilot mechanisms and policies with the highest incentives according to the current laws of Vietnam and international agreements that Vietnam has signed or participated in. Lao Bao Border Gate is currently the busiest trading hub in Quang Tri province.

Infrastructure of Lao Bao Special Economic – Commercial Area:

Lao Bao Special Economic – Commercial Area has established a relatively well-coordinated infrastructure system in the area.

Foreign transportation:

• The foreign road transportation network of the economic area includes National Highway 12A, National Highway 12C, and Ho Chi Minh Road.
• The border patrol route along the Vietnam-Laos border passes through Trong Hoa and Dan Hoa communes, with a total length of approximately 49 km.

Internal transportation:

• The vertical axes consist of National Highway 1A, National Highway 12C, and a section of Ho Chi Minh Road that runs through the economic zone.
• The horizontal axis connects residential areas with each other through local road networks.

Power system:

• Power source: Obtained from the Gianh River 110/35/6 KV Substation – 2×25 MVA. From 2016 to 2020, the new Minh Hoa 110 KV Substation – 110/22 KV – 25 MVA was constructed.
• The capacity of the intermediate Quy Dat Substation was upgraded from 35/22 KV – 3200 KVA to 35/22 KV – 2×3200 KVA.

Water system:

• Water usage standards: 120L/person per day for urban areas, non-customs zones, and 80L/person per day for areas outside urban areas and industrial zones, which amounts to 20 m3/ha.

Firefighting water:

• A low-pressure firefighting system is used, with fire hydrants (D100-D125mm) placed along the clean water supply pipelines at distances of 150m-300m, with one hydrant per location.

Investment Situation in Lao Bao Special Economic – Commercial Area :

Attractive investment sectors:

• Energy drink production
• Processing agricultural exports
• Construction materials industry
• Assembly, mechanics, bicycle and motorcycle tire production
• Textile and garment industry
• Leather footwear
• Small hydropower and wind power

Investment attraction:

As of 2022, Lao Bao Special Economic – Commercial Area has attracted 63 registered investment projects with a total registered capital of 3,720 billion VND and a leased land area of 1,756 hectares. Among them:

• A total of 50 projects have put into operation, with a combined investment capital of 3,384 billion VND and a leased land area of nearly 1,742 hectares.
• 10 projects are under construction with an investment capital of 336 billion VND and a leased land area of 14 hectares.
• Out of the 63 projects, 5 FDI projects with a total registered capital of 22.6 million USD (2 projects from Thailand, 1 project from China, and 2 projects from Australia) exist.

Trade and service activities:

The total import-export turnover through Lao Bao border gate in:

• 2014: 398 million USD.
• 2015: 181 million USD.
• 2016: 137 million USD.
• 2017: 180 million USD.
• 2018 (estimated): 280 million USD.

Incentive policies of Lao Bao Special Economic – Commercial Area:

Corporate income tax:

• Exempted for the first 4 years from the taxable income generation; 50% tax reduction for the following 9 years; applied tax rate of 10% during the taxable period.
• Losses can be carried forward to the following year and deducted from the taxable income.
• The loss carry-forward period is not more than 5 years, starting from the year following the loss.

Personal income tax:

• Individuals working in Special Economic – Commercial Area, who are subject to high-income tax according to the law, will receive a 50% reduction in the tax amount payable.

Land rental fee:

• Investment projects are exempt from land rental fees for the first 11 years and enjoy a rental price equal to 30% of the land rental price applied to mountainous districts in Quang Tri province from the 12th year onwards.

Human resources:

• The total population of the Special Economic and Commercial Area was 29,000 when it was established. Now, the population has reached approximately 45,000 people. The majority of the population consists of ethnic Kinh people. The zone also includes Pako and Van Kieu ethnic minorities. These groups live together and benefit from the government’s preferential policies for the region.
• The number of workers employed in businesses and investment projects in the area has varied over the years. In 1998, there were around 300 people. By 2005, the number had increased to 1,000 people. In 2013, approximately 3,500 people were employed, and in 2018, the figure was approximately 2,540 people.
• Low labor costs and abundant workforce.