HCM City Sees a Successful Year of FDI Attraction

 

Looking back at the period from 2000 to present, Ho Chi Minh City no longer held the leading position in FDI attraction. The new leading locations in this field are Ha Noi, Binh Duong, Dong Nai and Vung Tau. The reason for the decrease in this investment source is that Ho Chi Minh lost its comparative advantages in infrastructure conditions in addition to its high labour cost, high land rent rate and complicated investment procedures. Recently, it has provided positive actions for improving its investment environment right from the airport – the first gateway in welcoming foreign investor’s – with friendly smiles from customs officials and simple entry formalities. Furthermore, the city started the application of a “one door” mechanism in business registration, land use, investment license and construction. It has also speeded up the progress of infrastructure development at industrial parks – export processing zones and hi-tech parks.

 

The city organises regular meetings between municipal leaders and enterprises to listen to their wishes and remove obstacles to their business. It has provided support in site clearance and decreased part of the land use fee to reduce the difficulty in production sites. The city has also helped enterprises in raising the productivity, quality as well as international integration. The electronic business registration has been applied to foreign businesses. Investment promotion is being accelerated through organising activities such as the Week of Hi-Tech Parks, Investment Fairs as well as taking part in foreign trade fairs held in Singapore and Malaysia.

Mr. Luong Van Ly, Vice Director of Ho Chi Minh City’s Department of Planning and Investment revealed that, the investment attraction direction has been changed, mainly focusing on hi-tech fields, clean industries, biological technologies and the service sector to match the municipal development trend. Projects of high investment being licensed in this year include Da Phuoc solid waste treatment combination (capitalised at US$90 millions), the Exhibition and Fair Centre (US$25 millions) and Saigon Hi-Tech Park. In 2005, the city attracted three large projects worth of about US$25 million each. According to forecasts, the FDI attraction of the city in 2006 will be at high level because many large projects are waiting for investment licenses. Apart from that, the accelerated implementation progress of technical infrastructure, and new planned urban areas in Thu Thiem, the project of public transportation and a new urban area in the northwest of the city will serve as a driving force for new project attraction.

Beside the optimistic situation of new FDI projects, the implementation rate of FDI projects in Ho Chi Minh City is rather high reaching 48 per cent over the registered capital, the highest figure in the country. There has been a huge increase in the number of 100 per cent foreign invested projects, making up 81.06 per cent with 184 projects in 2005. Presently in the city location, there are nearly 1,900 operating FDI projects with total investment of over US$12 billion. The operation of FDI enterprises is developing rapidly reaching high business efficiency and accounting for nearly 20 per cent of the city’s GDP. The industrial production value of FDI enterprises in the first 11 months of 2005 reached VND79,000 billion (at present prices), up by 23.6 per cent against the same period last year. Many production branches obtained high growth rates like electronics, shoes and leather, garments, chemicals, rubbers and plastics, and power generation. In trade and services, though holding a modest ratio in total sales (nearly 2.5 per cent), FDI enterprises have reached VND2,407 billion with a growth rate of more than 26 per cent. Exports also reached US$ 2,149 million, an increase of 15.8 per cent compared to the implementation in the same period last year.

The current worry is that FDI projects in the field of services made up 70.74 per cent, while industrial and consumer production projects accounted for only 10.49 per cent, and hi-tech projects made up 9.4 per cent, mainly concentrating on restaurants and hotels. There are few high-class services that the city aims at such as developing banking and financial services, storage and transportation and telecommunication. Mr. Luong Van Ly said that, the number of foreign investors wishing to invest in high-class services is high. However, the problem is “how to create a suitable legal mechanism” for drawing their investment. Therefore, the solution put forward to the work term of 2005 - 2010 is “actively improving the investment and business environment of high competitiveness to attract foreign and domestic investors in developing the city’s advantageous services”. The city will go ahead and cooperate with relevant ministries and branches to draft a financial market development programme. It will also facilitate and encourage investors to raise investment funds and financial companies as well as diversify its stock market.

The city is recommending that the Government enlarge the participation of foreign investors in some areas such as real estate, post and telecommunication and high quality health care services. The attraction of investment in these service sectors will contribute their part to restructuring the municipal economy in the direction of developing services to match its development trend.