Regional Spotlight: Vietnam’s Southeast (Ho Chi Minh City)

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HCMC300x230Jul. 18 – Home to Ho Chi Minh City (HCMC), Vietnam’s largest city, the Southeast region has long been a focus of the country’s foreign investment inflows thanks to its impressive growth fueled by a massive energy sector and a thriving manufacturing sector.

HCMC is also Vietnam’s commercial center, and accounts for a large share of the national economy – contributing over 20 percent to the country’s overall GDP, and over 25 percent of total industrial production.

HCMC’s economy consists of a wide spectrum of industries, ranging from mining and construction to seafood processing and tourism. Other large industries include agriculture and high-tech/electronic products and services.

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During the first four months of 2013, HCMC recorded a 15 percent export growth rate, totaling over US$9 billion. On the other hand, imports grew nearly 20 percent year-on-year, totaling US$10.72 billion. Imports primarily comprised of raw materials, equipment and facilities; exports were primarily clothes, shoes, electronics and rice.

In addition, a great deal of oil drilling occurs throughout the Southeastern continental shelf of the region, as oil fields with great commercial value have been discovered, such as Bach Ho (Vietnam’s largest), Dragon, Dai Hung and Rang Dong.

The city also has nearly 20 industrial parks and export-processing zones such as the HCMC Hi-Tech Park and the Quang Trung Software Park. During the first quarter of 2013, newly committed capital to one of the zones, the HCMC Export Processing and Industrial Zones Authority, amounted to US$48.2 million – of which, just over half came from foreign direct investment (FDI).

By the end of February 2013, total investment capital (committed and supplemental) in HCMC amounted to over US$90 million –14.5 percent of Vietnam’s total investment capital.

Furthermore, Binh Duong province attracted the second largest portion of FDI to Vietnam over the first two months of 2013, attracting a total of about US$135 million – good for 20 percent of the country’s total investment capital. On the other hand, Dong Nai had the largest share attracting over US$214 million – over 34 percent of total investment capital.

Geography

The Southeast region, which borders Cambodia in the north and in the west, has a fairly flat terrain with a few low hills scattered throughout. It also has many large rivers flowing through it, the most important of which being the Dong Nai and Saigon Rivers – which join Southwest of the Bien Hoa River.

The Saigon River is the main water supply of HCMC, and also the location of the Saigon Port.

Industries

Heavy industry production in the region is primarily focused on rubber products, polyethylene production, clinker and steel. Major steel production plants operating in the region include Vinakyoei, Southern Steel, Bluescopes, Vietnam Steel, SMC Plant and POSCO.

The region also has a wide variety of minerals with large deposits, including sand glass, granite, bentonite clay, various mineral ores used to produce titanium and zircon, and plentiful stocks of granite, construction stone, clay, kaolin, puzzolan, sand and gravel.

The oil and gas sectors are relatively new to the regional economy, particularly to the Binh Thuan province where large oil reserves were discovered off the coast in recent years. Gas and oil reserves have also been discovered in the Cuu Long basin, amounting to about 30 percent of the country’s total hydrocarbon resources.

Power Production

The largest portion of electric power in the region is produced by natural gas fired thermal power plants thanks to the reserves of natural gas available in the regions many offshore fields. However, the government has been pushing wind power as of late.

Binh Thuan’s provincial government recently approved 12 new wind power plant projects with a total combined capacity of 1,551 MW. Currently, one of the wind power plants located in the Tuy Phong District of the Binh Thuan Province is already in operation, paving the way for further expansion of renewable energy in the country.

Infrastructure

In HCMC, new infrastructure projects are emerging such as the Thu Thiem New Urban Area – which developers are marketing as Vietnam’s future financial and cultural hub. The project is still in its infancy and is scheduled to be completed by 2025.

The current focus for the project is on infrastructure construction to connect the Thu Thiem New Urban Area to HCMC, which should be completed by 2016 and is estimated to cost upwards of US$480 million.

In June 2013, the HCMC Infrastructure Investment Joint-Stock Company (CII) announced that it would issue US$47 million worth of bonds to be used as funds for infrastructure projects throughout the city – specifically for the upcoming Saigon 2 Bridge project.

In addition to Saigon 2, CII has been entrusted by the HCMC government to upgrade the Thu Duc Intersection, the BOT Binh Trieu 2 Bridge and Road Project and another yet-to-be-named road project to connect the East-West Highway and the HCMC-Trung Luong Expressway.

A new traffic control center is also currently in development in HCMC, valued at over US$180 million.

Not only is HCMC working to develop its road transportation network, but also its commercial transport waterways with plans to upgrade the Dong Nai River waterway in the near future.

HCMC is also looking to further develop its Saigon Port, an important port used primarily for the import of fertilizer, clinker iron and steel, wheat, and machinery equipment.

Furthermore, HCMC-based Tan Son Nhat International Airport – Vietnam’s largest international airport – is expected to be enlarged by 2015, and a new airport to be located about 40km northeast of HCMC, the Long Thanh International Airport, is currently under construction and expected to be operational by 2020.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email vietnam@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Vietnam by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

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