HCM City: Investment Shifts from Industry to Services

Since becoming an official WTO member, Vietnam has become an attractive destination to foreign investors in various sectors ranging from construction to real estate, industry and services. Foreign investment projects in Ho Chi Minh City have shifted from industry to services. Since the beginning of this year, as many as 257 foreign investment projects have been licensed, up 89 projects on-year, with total capital of US$830.7 million.

 

Asset trading and consultancy services sectors have drawn the highest investment capital with 118 projects (including 46 projects in information technology and 14 in property trading), followed by the transport sector with 11 projects. Leading in the list of foreign investment is investors from Asian countries and territories. There are now 2,416 operating projects with total registered investment capital of US$15.481 billion, an increase of 358 projects against the same period last year. This is an optimistic signal, greatly contributing to the city’s economic structure transformation in the future.

 

Vietnam’s financial market is considered a potential and fertile land for foreign investors. So far this year, many international financial groups from Singapore, Taiwan, the United Kingdom, France, Hong Kong and the U.S. have sought to buy shares in Vietnamese joint stock banks. However, American investors still take the lead among foreign investors. Vietnam commercial banks, after the trip of President Nguyen Minh Triet to the U.S., said that many American investors are very interested in Vietnam’s financial market. According to Mr Tran Phuong Binh, general director of the Eastern Asia Commercial Joint Stock Bank (EAB), five partners who EAB has met with have been seeking cooperation with the bank in particular and Vietnamese banks in general. Especially, American investors are really keen on those joint stock banks whose shares have not been bought by foreign investors. Binh also added that Vietnam’s financial market is attractive to American investors because the country has a young population with increasingly improving living standards, while the number of consumers using financial and banking services is still limited, accounting for only around 10 per cent of the total population.

 

In addition, many American investors have talked with local joint stock banks, even senior banks in Vietnam’s financial market, and quickly occupied the domestic market share in financial sector, especially retail banking services. For example, Standard Chartered Bank has recently launched the first retail bank in Ho Chi Minh City and expects to open an office in Hanoi by early next year. Other world giant banks such as the Australia-New Zealand Banking Group (ANZ) and Hong Kong and Shanghai Banking Corporation (HSBC) have also promoted their consumption credit services such as loans for purchase of houses or automobiles, and at the same time pouring capital into Vietnamese medium and small enterprises.

 

In fact, indirect investment capital sources from the U.S. into the Vietnam stock market are often mediated by well-known investment funds. Particularly, major world financial institutions including Merrill Lynch, JP Morgan and Citigroup have been granted trading code to take part in the local stock market. This will allow small investors to access the country’s stock market via investment funds.

 

In the seminar “Business and Investment opportunities in Vietnam,” Ms Nguyen Vuong Nga, director of Trade Promotion Department under the Ho Chi Minh City Investment and Planning Department, said the city now has more than 82,000 private enterprises and 100 new ones each day. This is an advantage for FDI enterprises to seek partners for joint ventures. In which, investment projects in infrastructure have been given top priority. The city has decided to allow investors in the infrastructure sector to take another FDI project in the real estate sector and develop this project into a new urban area to seek profit, with a view to attracting other projects related to this sector. Four projects are calling for investment, including Binh Khanh - Can Gio Bridge, Thu Thiem New Urban Area, Binh Quoi - Thanh Da Peninsula and some other Metro routes scheduled to be operational by 2020. In which, the Ben Thanh - Suoi Tien - Thu Duc Route will be started in 2008, with total capital of over US$1 billion, including 85 per cent from Japan’s ODA.

 

However, in the face of the growing investment demand in the centre of Ho Chi Minh City, the city’s Department of Planning and Architecture are quickly carrying out design ideas for 20 streets in the centre of Ho Chi Minh City, to call for investment capital into these projects including offices for rent, trade centres, retail shops, and trade and finance centres, in order to tap the opportunity to change the appearance of the city centre.