Ho Chi Minh City: Breakthrough year

5:16:02 PM | 27/1/2008

With GDP growth of 12.6 per cent in 2007, Ho Chi Minh City obtained the highest economic growth over the past decade. Global integration has made the city’s economic development more exciting, particularly in attracting foreign direct investment, stock market, property and services sectors.
Trade and services sector taking the lead 
Ho Chi Minh City’s GDP growth is well over the national average of 8.48 per cent. With the growth, the city brought in VND 228.79 trillion (USD 14.3 billion) in GDP value in the year, contributing 21.7 per cent of the country’s total GDP. This indicated that after a year in the WTO, Ho Chi Minh City’s economy has made a breakthrough, especially in investment and services. Over the past time, Ho Chi Minh City’s trade and services activities have strongly developed with the participation of many economic sectors. The services sector not only maintains the top position in the city’s GDP structure, making up 52.5 per cent, but also posted the highest increase of 14.3 per cent.
Total retail sales and services reached VND167.03 billion, up 26.6 per cent on-year. The domestic market became more competitive with various goods. The retail sector saw remarkable change, preparing for Vietnam to open its service market in 2009. Many retail traders in the city have invested in infrastructure development, service quality and retail network expansion. The private sector’s retail sales and services market accounted for 36 per cent, to the previous years’ level of 21-22 per cent, demonstrating the expansion of the sector. Many enterprises have built specialised business networks bearing their own trademarks. This is also the year for businesses in the city like Saigon Coop, MaxiMark and Satra, among others, to boost their retail systems and join hands with other domestic businesses to expand their market share. The direct production and distribution model via shops has received support from many consumers for its good quality and competitive prices, such as food shops like Vissan, APT and Kinh Do; clothes of Vinatex, Viet Tien, Phuong Dong and Viet Thy; footwear of Vina Giay, Bitis’ and Hong Anh. However, the individual economic sector still has special advantages including flexible services, therefore it keeps the largest share of the total, 40.4 per cent.
The services sector has also expanded and obtained strong growth, particularly in import and export, transport, financial and banking, insurance, real estate and stock market. This indicates that Ho Chi Minh City’s economy is integrating into the global market. Despite facing anti-dumping risks and fierce competition in the market, many Vietnamese enterprises have maintained exports and even expanded their markets. Export turnover is estimated to hit USD 18.3 million, up 17.2 per cent on-year.
The city’s tourism has made many remarkable changes in attracting both domestic and foreign visitors. Tours have been improved from package tours to personal ones for both domestic and international visitors with reasonable prices. Besides popular tours, more luxury tours for business tourists have been organised.
The financial and stock markets saw outstanding performance with more and more new shares listed on bourse along with the greater participation of foreign investors. Capital mobilised by banks reached nearly USD 30 billion, up 69.6 per cent on-year. Total outstanding loans were estimated to hit USD 25 billion. In the year, the State Bank of Vietnam maintained the operating interest rate: basic rate of 8.25 per cent per year and discount rate 4.5 per cent per year. The US Federal Reserve (FED) reduced the basis interest rate to 4.25 per cent per year, which directly impacted the city’s monetary market. The impacts of WTO integration helped import and export turnover growth, stimulating the development of import and export payment activities, money transfer and lending of local commercial banks. Stock market development has attracted investment from both inside and outside the country, making enterprises’ capital raising easier. This has also created favourable conditions for banking activities under two directions: mobilising capital thanks to increased deposits, and a fall in pressure on mid and long-term capital for fixed assets of enterprises. Banking activities, particularly payment services have improved services and diversified products, attracting customers’ attention.
The stock market in December welcomed five additional companies with shares listed on bourse, raising the total number of listed shares to 130 and two fund certificates. Total listed value in the market reached VND101.5 trillion, of which, shares accounted VND35.5 trillion, bonds (VND64.49 trillion) and fund certificates (VND1.5 trillion).
Making added value for industrial and agriculture products
Total agricultural production value reached VND341.5 trillion, up 13.6 per cent. The foreign direct investment (FDI) sector saw the highest growth of 19.3 per cent, followed by the state-owned with 13 per cent. The industry sector’s value increased 10.4 per cent. Several industrial production sectors saw a sharp rise in value thanks to appropriate development strategies. For example, the mechanical engineering industry saw an increase of 21.4 per cent, followed by the chemical industry with 16.4 per cent, rubber and plastic products up 15.2 per cent and foodstuff and beverage up 9.4 per cent. Sectors witnessing slow growth included garment and textile, and footwear.
The agriculture sector’s development has been built on product diversification. Rice area has fallen, while growing area for flowers, vegetables and short-term industrial crops, along with high-value domestic animals, has risen. Agricultural production faced many climatic disadvantages such as hot weather, tidal flooding and heavy rain, diseases on poultry and plants; however, the agriculture sector predicted this and dealt with the situation to minimize losses. The city initially gained positive results in hi-tech agricultural production thanks to the application of several new technologies, such as producing cross-bred seeds with bio-molecular technology, Israeli irrigation system, orchid production models, and ornamental fish and crocodile breeding. 
Attracting FDI: great success
The city’s total investment capital reached VND84.5 trillion (USD 5.3 billion), up 24.2 per cent on-year. Of the sum, the state-owned sector accounted for 32.2 per cent, the private sector 51 per cent and the FDI sector 16.8 per cent. Several industries posted high growth, including property business up 46.2 per cent due to a sharp increase in office demand from foreign investors after the country’s WTO entry. Many local and foreign investors turned to building offices and apartments such as Quoc Cuong Building, Alpha Tower in District 3, Him Lam Building, Empire Tower in District 1. The finance and credit sector saw a rise of 24.2 per cent and the individual and public services sector was up 32.2 per cent (mostly housing services). Besides the increase of separate apartments, local and foreign-invested businesses have tended to invest in more apartment blocks like Manor 2, Green View Building and hi-end Nam Sai Gon Building.
In 2007, the city attracted USD 2.87 billion in FDI, up 27.5 per cent against 2006. This is a very impressive figure. The city licensed 469 new projects worth USD 2.44 billion and allowed 198 existing projects to raise their capital by USD 428.14 million. The city is now home 2,620 valid projects valued at USD 16.77 billion. It licensed 18,417 domestic enterprises in the year with total capital investment of VND160.65 trillion (USD 10 billion), three times higher than 2006.
Several Ho Chi Minh City’s key economic goals in 2008  
Economic goals
GDP up 12.7 – 13 per cent; per capita income USD 2,500
Total export turnover up 15 per cent
Total investment capital at VND 97.5 trillion, (35 per cent of GDP)
State Budget VND 98 trillion, up 6.5 per cent
Spending for investment and development: VND 7.5 trillion, making up 40.5 per cent of the city’s budget
Consumer price index growth lower than economic growth