Ho Chi Minh City Constantly Improving Growth Quality and Economic Competitiveness

9:23:25 AM | 8/6/2018

To raise people’s life quality and wellbeing, in the past years, Ho Chi Minh City has always given top priority to restructuring the economy, changing its growth model, and improving economic growth quality and competitiveness to meet international economic integration requirements, said Mr Nguyen Thanh Phong, Chairman of the Ho Chi Minh City People’s Committee, in an interview granted to Vietnam Business Forum. My Chau and Bich Thuy report.

How do you assess the economic growth quality of Ho Chi Minh City, a multi-faceted municipality of the country?

Like other big cities in the world, Ho Chi Minh City has paid special attention to economic growth quality and considered it a core element of development. Looking back at the city’s economic growth paradigm over the past time, we can see that its economy has grown steadily in both the short term and the long term. The economy grew by an average increment of 0.3 per cent in 2015 (7.72 per cent in 2015, 8.05 per cent in 2016 and 8.25 per cent in 2017). This was a high growth rate as major economies in the world climbed only 3 - 5 per cent a year.

In the past years, Ho Chi Minh City has developed its service- and innovation-based economy (services accounted for 58.3 per cent and innovative industries made up for 34.4 per cent). Capital-driven factor tends to decline. Instead, the growth of the total factor productivity (TFP) and social labour productivity replaced it and this is seen as a positive trend. The city initially intensively invests in science in place of capital. The internal sector continues to change sharply, with the service sector being the main factor and creating a direct driving force for growth. Improving the economic growth quality and ensuring socio-economic security, social order and safety, environmental protection and enhancing people's life quality has been underlined.

The capital factor plays a crucial role in boosting the quality of economic growth. So, what does the city have to do to create capital sources for development?

As I said above, Ho Chi Minh City has started science- and technology-intensive process in place of capital-intensive one. However, its economy continues to grow in depth where capital is still a vital element for development. According to statistics, to achieve high economic growth of 8 - 8.5 per cent in the 2016 - 2020 period, the city needs to mobilise total social investment capital of VND1,800 trillion (US$80 billion), of which VND850 trillion (US$37 billion) will be spent on basic infrastructure construction, sourced from the State Budget. However, the State Budget can afford VND170 trillion (US$7.5 billion) or 20 per cent of the demand.

To deal with this, Ho Chi Minh City will promote socialisation solutions based on market principles. The city only provides non-revenue services and projects that the private sector cannot take part in and expand the boundary of socioeconomic infrastructure projects to attract more investors. It will also focus on improving the business and investment climate; eliminate friendship status for fair competition; use bidding and auction methods to allocate resources in the city, especially public land and public property.

Ho Chi Minh City is determined to create breakthroughs in investment attraction. It has set up an inter-agency working group on land to support investors to access business location and settle two of their most pressing concerns: Land clearance expense and the time of site clearance. In addition, the city will study and form the Financial Centre in Thu Thiem New Urban Area, the main financial hub of the city aimed to mobilise medium and long-term investment capital for infrastructure development.

What experience in leadership has Ho Chi Minh City drawn from its achievements in economic development and growth quality improvement?

First of all, the city has brought into full play combined strengths of the political system, and the revolutionary tradition of resilience, dynamism, creativity and unity of the Party, the government and the people of the city; unite, unify and create social consensus in carrying out the Party and State policies; and clearly understand the role and position of convergence and divergence for the whole country and with the whole country.

Secondly, the city bases on its internal resources for economic development, where services and innovations are underlying. The city actively strives to cope with economic dilemmas, form big business corporations and strong resources to lead the local business community towards under the “flying cranes” pattern.

Thirdly, the city necessarily improves its forecast capabilities and data simulation, and assesses impacts and responses to integration challenges in a comprehensive and accurate manner. The city must improve statistical data collection, and heads for using technologies for forecasting in place of traditional methods by setting up the Centre for Data Forecasting and Simulation under the Ho Chi Minh City Development Research Institute.

Finally, Ho Chi Minh City must strengthen regional connectivity, stimulate economic potential and effectively mobilise unemployed funds from the people. At the same time, the city pays attention to coordinating and inspecting the progress of projects.

So, in the coming time, in order to maintain the quality of sustainable economic growth, what will the city focus on?

To obtain sustainable economic development, Ho Chi Minh City will focus on developing its internal economy and economic activity will base on knowledge and technology. The city’s main economic activity is service and innovation, with the nucleus being the centre of innovative knowledge economy. In addition, the city will selectively attract FDI capital, not exchange environment for economic activity; develop innovative and creative capabilities; build synchronised infrastructure and promote growth poles; and ensure equality and social inclusion, appropriate supports for vulnerable people in society so that no one is left behind.

In addition, instead of relying on low-cost labour, Ho Chi Minh City will concentrate on improving labour productivity and increasing the workforce competitiveness. The municipality will further improve the business and investment environment, provide the space for all economic sectors, especially the private sector. It will help expand the scale of small and medium-sized businesses which now make up 99 per cent of the city's business community.

Thank you very much!