Hanoi: Changing from “Management of” to "Service to” Businesses

 

First of all, it is undeniable that 2010 is a banner year for Vietnam's development. For its part, Hanoi had an eventful year as it hosted many important events like the Party Congress at local levels - a preparation for the 15th Municipal Party Congress in 2011, and the Grand Anniversary of 1,000 years of Thang Long - Hanoi. Besides, before complex economic developments, applying guidance from the Central Government, the City Party Committee and the City People's Council, the City People’s Committee - the governing body - issued Programmes 20 and 50 on measures to implement socioeconomic development plans, estimated State budget spending and revenue, curbed inflation and maintained stable growth.

 

Specifically, the city’s gross domestic product (GDP) in 2010 was estimated to rise 11 percent from 2009, higher than the target set by the People’s Council. The revenue of the State Budget was projected to reach VND100 trillion, 17 percent greater than the amount assigned by the Central Government, 12.7 percent more than the amount assigned by the People’s Council, and 34.6 percent more than in 2009. Total social investment capital was forecast at VND175 trillion, up 18.5 percent from 2009 and equal to 70 percent of the city’s GDP. Deposit and lending growths soared 28 percent and 26 percent from December 2009, respectively. Foreign direct investment (FDI) capital reached US$800 million in 2011, up 53 percent from 2009. Specially, the socialisation of investment was accelerated, particularly in the field of environmental remediation and other cultural works for celebration of 1,000 years of Thang Long-Hanoi. The city also licensed 79 non-State invested projects worth VND70.5 trillion.

 

In the past five years, Hanoi has overcome challenges and taken advantage of strengths to achieve important results. The city’s GDP was over VND205 trillion (based on current prices) in 2009, accounting for more than 12 percent of the country's GDP. In 2010, the GDP growth rose 11 percent from 2009. In the five-year period from 2006 to 2010, the social investment capital in the city totalled over VND600 trillion (US$34 billion), of which the State Budget contributed only some 12.4 percent and the rest came from different sources like private and foreign capital.

 

Hanoi planning and investment joined hands with competent agencies to complete many works of important economic and social significance like Thang Long Avenue, ring roads, Thanh Tri and Vinh Tuy bridges, Hanoi Museum, Peace Park, West Lake-encircling infrastructure, and large urban areas. In the past time, thousands of investment projects have been licensed in the city, of which only infrastructure projects invested by the State Budget accounted for 800 projects, including 16 Grade-A projects and 320 Grade-Be projects.

 

The difficulty posed for the planning and investment sector is to mobilise investment capital for development. The city’s investment capital is estimated to expand 12 -13 percent a year during the 2011 - 2015 period, totalling VND1,500 - 1,600 trillion (about US$80 billion).

 

The inherited matter of the planning and investment sector is how to mobilise investment capital. The city will need US$80 billion for socioeconomic development in the next five years but the State Budget and some other sources can ensure VND185 -200 trillion (about US$10 billion), not enough to fund social, economic and technical infrastructure investment. This will force Hanoi to mobilise from other sources such as foreign direct investment (about VND200 - 220 trillion) and domestic companies and residents (about VND1,115 - 1,118 trillion), accounting for 75 percent of the total estimated investment capital. These figures show that these economic sectors have asserted their important roles in the economy.

 

Currently, Hanoi is one of five localities with largest value of foreign investment capital in Vietnam, with a total of 1,600 projects worth US$16 billion. Foreign investors disbursed an average of US$600 million a year. Most attractive fields to foreign investors are real estate, service (hotel), and electronics industry. South Korea is the largest foreign investor in the city, followed by Singapore, Taiwan and Hong Kong.

 

Based on the socioeconomic development strategy as well as medium- and long-term development plans, the demand for basic construction investment in Hanoi is some VND600 trillion (approximately US$30 billion). Particularly, the city will need VND200 trillion to build eight urban rail routes (three will be basically opened to traffic in the period) and express bus routes. The investment capital for agricultural and rural development infrastructure will be VND30 trillion, and social infrastructures (schools and hospitals) will require about VND10 trillion.

 

Currently, the Hanoi Department of Planning and Investment, as an advisory body for the Municipal People’s Committee, will allocate the investment capital in accordance with strategic development orientations, with special priorities given to urban transport, electricity, water and environment. Besides, the department will also take care of other essential fields like health and education. Specifically, the city will attract investment capital to build new advanced specialised hospitals like Saint Paul Hospital (second branch), Hanoi Paediatrics Hospital, Hanoi Ophthalmology Hospital, and Hanoi Heart Hospital. It will also coordinate with the Ministry of Health to relocate and improve medical facilities in the city. It will encourage private investors to build 1 - 3 hospitals. In addition, Hanoi will selectively develop clean technology, biotechnology, electronics, telecommunications, high technology, service technology, etc.

 

Immediate tasks are to outline good plans and implementing them when they are approved by the government. The legal framework should be expanded to attract more investment capital, facilitate investment activities and widely apply effective investment forms like BOT, BT and PPP. Notably, the administrative apparatus must change their working principle for “managing enterprises” to "serving enterprises." The central government should also consider allowing Hanoi to apply some specific policies to attract capital-intensive projects. It should also decentralise authority to the Hanoi City People's Committee in approving investment policies on conditional projects which are now still under the authority of the Prime Minister, reduce conditional business fields to attract more foreign investors, etc.