Ho Chi Minh City needs new driving force

(ĐTTCO)-Ho Chi Minh City is the most vibrant economic hub of Vietnam, attracting huge investments from both domestic and foreign investors, and playing a very important role in the development of the country. However, over the last few years, the City has faced many obstacles in its growth and has also been impacted by changes in the competitive environment. Some economic drivers in the City are being hit hard such as big land banks, cheaper labor costs and the service sector.
HCMC from aerial view. Photo: HOANG HUNG
HCMC from aerial view. Photo: HOANG HUNG
Hence, finding new driving forces for the City’s economic growth needs urgent and immediate tackling by Ho Chi Minh City authorities and residents.
Decelerating service sector
According to Nguyen Thanh Phong, Chairman of People’s Committee of Ho Chi Minh City, the City’s GRDP (Gross Regional Domestic Product) reached VND 324,497bn in the first quarter of 2019, an increase of 7.64% YoY. 
 The service sector contributed 63.1% GRDP, grew 7.7% YoY in Q1/2019, lower than 7.98% growth in Q1/2018. 
 The Industrial and construction sector contributed 21.5% GRDP, grew 7.41% YoY in Q1/2019 vs 7.25% growth in Q1/2018.
 The agriculture sector brought in 0.6% GRDP, rose 5.2% YoY in Q1/2019, compared to 5.83% growth in Q1/2018. 
The core service businesses in Ho Chi Minh City include commerce, finance-banking-insurance, tourism, telecommunications, transportation-port-logistics, science-technology, real estate, education, and healthcare. Although the contribution of these services to the City’s growth is increasing, the growth in each of these services is also decelerating.
At the last meeting with Ho Chi Minh authorities, Vice Prime Minister Truong Hoa Binh said, “service is the key sector for Ho Chi Minh, but it is noticeably decelerating. Currently, FDI attraction is also lower than targeted expectations. The City leaders should seriously analyze the causes and find solutions at the earliest to retain and expand the key economic driving forces in the City for the growth of the country”.

Downgraded and overburdened transport system
 Nguyen Thien Nhan, Secretary of Ho Chi Minh City Party Committee said, “service is the main growth driver in Ho Chi Minh. However, to push up growth in the service sector, the City needs more land. For example, to develop healthcare services, it must have land to build hospitals. To make Ho Chi Minh City appeal to visitors, it also needs land to construct entertainment parks. To encourage the development of science and technology, the City also needs more land for construction of industrial zones”.
Some experts suggest Ho Chi Minh City should create more land banks for attracting investments in the transportation system, especially transport facilities at the City’s gates which are adjacent to other provinces. This will help push up the City’s economic growth.
Nguyen Thien Nhan, Secretary of Ho Chi Minh City Party Committee, said “the current industrial zones are fully utilized and there is no more space to offer and attract new investors. In 2019, Ho Chi Minh City has to invest immediately in a new industrial zone area of at least 400ha. Further, looking at its current constraints in the transportation system, is it likely that Ho Chi Minh will lure clients and investors from other areas? For example, if we build a big park in Cu Chi, it takes about 4 hours to go and come, hence will it seem appealing to service providers?”
Other experts pointed out that most Ho Chi Minh gates are overloaded and congested. The new highway running from Ho Chi Minh-Dau Giay-Long Thanh, which has been in operation for several years, is also overburdened both on normal days as well as on holidays.
According to the Transportation Ministry, the downgraded transportation system is a serious bottleneck for Ho Chi Minh City’s growth. The City’s population is currently around 10 million people and the main vehicle for commuting is the motorbike. As a result, traffic jams occur everywhere. If authorities cannot resolve this problem at the earliest, the overall quality of the City’s growth will be highly impacted.
Currently, the national highways that connect Ho Chi Minh City with other provinces like highway 22, 1, 50, 13, 1K, are overburdened, degraded and heavily congested. Ho Chi Minh City should work on solutions to fix these problems at the earliest to boost economic growth.
Hold up in capital
Ho Chi Minh City is expected to soon kick-off some very important infrastructure projects which have been in the pipeline. However, the Ring Road 3 project is awaiting government approval for its first budget advance of VND 3,000bn to complete the land clearance phase. The City also plans to construct an additional 11km to Ring Road 2. 
Ho Chi Minh City has 6 highway projects planned. However, only 2 projects of Ho Chi Minh-Long Thanh-Dau Giay and Ho Chi Minh-Trung Luong have gone into operation. Notwithstanding the fact that both these two projects are already overburdened. The project of Ben Luc-Long Thanh is expected to complete by 2020-2021. The remaining three projects of Ho Chi Minh-Tay Ninh, Ho Chi Minh-Chon Thanh and Ho Chi Minh-Bien Hoa-Vung Tau are being studied by the Ministry of Transportation and local authorities. The delay and hold up lies in availability of capital. 

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