HCMC – 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.
With a population of over nine million, HCMC (previously known as Saigon) is the largest city in Vietnam and one of the fastest growing. The city’s population is predicted to rise to around 13.9 million by the year 2025.
HCMC is 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. In March 2014, the municipal department of planning and investment declared the goal of attracting US$2.5 billion, a 20 percent increase over the past year. This project will be concentrated in the southern hub of the city.
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.
HCMC is located in the Southeast region of Vietnam, it is 1,090 miles (1,760 km) from the capital, Hanoi. The city stretches over an area of 809 square miles (2,095 sq. km).
The city has a tropical climate which is punctuated by two distinct seasons: the rainy season (May to November) and the dry season (December to April).
The Southeast region borders Cambodia in the north and in the west. The region has a fairly flat terrain with a few low hills scattered throughout the area. It is home to many large rivers, the most important of which being the Dong Nai and Saigon Rivers – which join Southwest of the Bien Hoa River.
The Saigon River is also the main water supply of HCMC, and is the location of the Saigon Port.
Currently, HCMC is seeing strong growth in its agricultural sector – production grew by 6.3 percent Y/Y. Vietnam’s agriculture sector is an area where there has been significant countrywide growth.
Over the past few years, there has been a marked increase of FDI into Vietnam’s agricultural sector. Previously, this area had been relatively unattractive to foreign investors; however, with the fast approaching conclusion of the Trans-Pacific Partnership (TPP) negotiations, Vietnam’s agriculture industry is becoming increasingly enticing. This Free Trade Agreement (FTA) removes tariffs and other trade barriers between signatory countries, which include the United States, Vietnam, Australia, Malaysia, Singapore, and other countries in the Asia.
The city’s tourism industry is also seeing strong positive growth for 2014. In February alone, HCMC saw the arrival of an estimated 396,000 tourists. This was a 10 percent increase over the same period last year. Over the January-February period, HCMC has seen an 11 percent increase Y/Y.
Vietnam saw over 7.57 million international visitors in 2013, convincingly beating its target of 7.2 million for the year. The figures released by the Vietnam National Administration of Tourism (VNAT) represented a rise of 10.6 percent from the year 2012 (6.85 million). Revenues generated from tourism in 2013 came to US$9.4 billion.
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 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, pozzolan, 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.
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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 lately.
Binh Thuan’s provincial government 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.
Vietnam enjoys cheap wind power energy prices, currently US$0.078 (7.8 cents) per kwh, nonetheless, the provincial Windpower Association has proposed to raise the price to US$0.10 per kwh in 2015 and to US$0.12 per kwh by 2017. It is estimated that Vietnam need to have 1,000 MW wind power by 2020 and 6,200 MW by 2030.
The Vietnamese government has recently announced its intention to invest heavily in new power grids for HCMC and Hanoi. The total investment for the new project amounts to US$ 366.98 million. Of this money, US$272.71 million comes from the Asia Development Bank and the ASEAN Infrastructure Fund (AIF); the remaining US$ 94.27 million is provided by the Hanoi Power Corporation and the Ho Chi Minh City Power Corporation.
Motorbikes remain the most common way to travel around HCMC. Taxis and motorbike-taxis are also common. For long-distance trips, a coach bus can be arranged at Mien Dong Coach Station in HCMC’s Binh Thanh District.
A light rail rapid transit network is currently under development and is scheduled to be complete by 2017. The rail system will carry 160,000 passengers each day, connecting several main districts within the city.
A proposal to introduce two boat taxi routes in the city is currently being considered by the government. The fare for boat taxis would be higher than buses because of the high initial cost of investment. When operating at full capacity, the boat taxis would transport about 10,000 passengers a day.
National Highway 1A runs north-south through the whole of Vietnam, from Ca Mau (close to the Mekong Delta Region) to Lang Son (close to the Chinese border), HCMC, Da Nang and Hanoi.
Several highways link HCMC to surrounding areas, including National Route 22, which carries trade from HCMC to the Cambodian border. National Route 51 is another important highway, connecting HCMC with the Ba Rja-Vung Tau province.
HCMC is a major hub for train travel in Vietnam and services many routes within the country. The Reunification Express, Vietnam’s primary rail service, runs north from HCMC to Hanoi on 1,726km of track. Trains depart from Saigon Railway Station in HCMC’s District 3, the largest train station in Vietnam.
HCMC is served by Tan Son Nhat International Airport, located in Tan Binh District. It is the most active airport in Vietnam and handles over half of the country’s air traffic.
The new Long Thanh International Airport, located 40km northeast of HCMC, is under development and will have a capacity of four times the size of Tan Son Nhat International Airport. Long Thanh is scheduled to begin operation in 2025, at which time Tan Son Nhat will only service domestic flights.
Ports and waterways:
HCMC’s location on the Saigon River makes it an ideal hub for commercial and passenger traffic. Saigon Port is the largest port in HCMC, one of the busiest ports in the world, and has the highest container traffic of any port in the country. According to the Saigon Port Authority, approximately 12 million tons of goods pass through Saigon Port each year. The major commodities imported to Vietnam through Port Saigon include fertilizer, steel, iron, wheat, machinery and chemicals. Rice is the port’s major export.
Passenger boats also operate along the waterways in HCMC, connecting the city with several neighboring provinces. Traffic on these waterways has increased greatly over the last decade and several projects have been instituted to deepen and widen the canals that cross through HCMC.
Infrastructure Investment Projects:
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. This bridge opened to traffic three months ahead of its deadline, on October, 14th, 2013. It is expected to last for 100 years and will relieve the overload from the existing Saigon bridge.
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.
The new airport is to receive 100 million passengers and five million tons of goods every year at its maximum capacity. Tan Son Nhat, on the other end, which reached its designed capacity of 20 million passengers per year at the end of 2013, will gradually become a domestic airport.The new site would need more than VND20.77 trillion (US$975.56 million) for clearance.
Over the months of January and February of 2014, HCMC saw its sales and services revenue amount to slightly over US$4.9 billion (VND 103 trillion). This was an 11.8 percent increase over the same period last year. Alongside this trend, the city saw a year-on-year (Y/Y) increase of 14.7 percent in its level of exports, earning around US$1.8 billion during the month of February.Imports were 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.
In 2013, FDI inflow into HCMC saw a dramatic increase of 52 percent for a total of US$2.08 billion. Almost half of it, US$1.05 billion was invested in 477 newly-licensed projects – this was an increase of 77 percent in terms of capital and 9.5 percent in the actual number of projects.
The most desired areas of investment in 2013 were in the northern province of Thai Nguyen with US$3.4 billion investment, a 15.2 percent share of the country's total FDI. The second and third places were won by the central province of Thanh Hoa and the northern port city of Hai Phong, with US$2.93 billion and US$2.61 billion, respectively.
Ho Chi Minh City (HCMC) has been seeing a large increase in foreign direct investment (FDI) in 2014. In the first two months of this year, the city has seen a dramatic increase of 226.1 percent in the FDI that has flowed into the economic center of the country.
Over the first two months of 2014, HCMC has seen its sales and services revenue amount to slightly over US$4.9 billion (VND 103 trillion). This is an 11.8 percent increase over the same period last year.
Alongside this trend, the city has seen a year-on-year (Y/Y) increase of 14.7 percent in its level of exports, earning around US$1.8 billion during the month of February.
HCMC has been working hard to attract FDI and is in the process of implementing a number of reforms intended to smooth the investment process, such as making it much easier for a foreign company to be granted an Investment License.
Along with the other positive economic news in 2014, HCMC granted business licenses to over 2,700 enterprises with a total registered capital of over VND 14.36 trillion. It is estimated that these newly created businesses have generated 25,000 new jobs.
As the city seeks to keep the positive economic numbers rolling, the Municipal People’s Committee has put forward a list of goals for HCMC to strive for, these include:
HCMC has over 20 industrial parks (IP) and export-processing zones (EPZ) such as the HCMC Hi-Tech Park and the Quang Trung Software Park.
The Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA) expects that it will attract an estimated US$550 million in FDI during 2014; this represents an increase of 10 percent year-on-year.
In order to increase the flow of FDI into HCMC, HEPZA has announced that it has allocated an additional 408 hectares of land for new Export Processing Zones (EPZ) and Industrial Parks (IPs) as well as 67,400 square meters of workshop space in IPs such as Dong Nam, Tan Phu Trung, Hiep Phuc, An Ha and the Tan Thuan EPZ.