Economy of HCMCity in Six Months: Growing but Unstable

The gross domestic product of Ho Chi Minh City in the first six months of 2006 was estimated to reach VND81,242 billion (US$5 billion), up 10.5 per cent, equalling the last year’s growth. This is a good signal because the GDP growth rate of the city was only 9.6 per cent in the first quarter of this year, lower than last year’s growth as well as the preset plan.

However, thanks to efforts of enterprises and supports from relevant organs in the second quarter to create a healthy investment and business environment, the economy grew faster. Typically, the foreign investment into the city increased sharply, especially projects with high investment value. The fast-growing and stable service and commercial development has significantly contributed to the GDP expansion of the city.

 

The GDP growth was attributed to the on-year increases of trade and service by 10.5 per cent (against 9.9 per cent in last year’s January-June) and of industry and construction 10.8 per cent (lower than last year’s six-month growth) and the reduction in agricultural, forestry and fishery growth by 0.3 per cent. This was the first time in the recent six years the trade and service sector obtained the two-digit growth. Notably, the commercial sector increased 11.9 per cent, transport and post 10 per cent and other services 10 per cent. The export turnover was estimated to jump 17 per cent to US$6.67 billion but the growth was still lower than the level of the same period last year. The core reason came from the difficulties in exporting leather, footwear, crude oil and milk.

 

In spite of recognising the positive figures in the second quarter, Mr. Thai Van re, Director of the city’s Department of Planning and Investment still expressed his worry about potentially unwanted problems that may cause negative impacts on the economic development of the city in the last months of this year. He said the urban management had a lot of shortcomings while the investment situation didn’t come up with expectations. The city was able to mobilise some VND27,000 billion (US$1.7 billion) in the six months while the needed capital was VND62,000 billion (US$3.9 billion). 

Worrisomely, enterprises in the city have the low capacity and small size (weak technology, little capital and low-levelled employees) while the Vietnam’ admission to the WTO is near. At the same time, enterprises will face up with stringent technical barriers imposed by developed nations as well as antidumping or quality cases from other countries. Meanwhile, the domestic market will be overflowed by cheap imported goods, especially from China.