1

Cities as Engines of National Economic

Development: The Case of Ho Chi Minh City
Nguyen Xuan Thanh
Ho Chi Minh City
June 5-6, 2014
Asia Public Policy Forum (APPF) 2014
0%
2%
4%
6%
8%
10%
12%
14%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Vit Nam
TP.HCM
Economic Growth, HCMC and Vietnam
Source: GSO and HCMC Statistical Office Yearbooks.
Very close correlation of growth between HCMC and the whole country.
HCMC economic growth was on average 1.6 times the national rate
during 2001-13.
HCMC accounted for 21.3% of the national economy.
2
0%
5%
10%
15%
20%
25%
30%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
A
v
e
r
a
g
e

A
n
n
u
a
l

G
r
o
w
t
h

R
a
t
e
,

2
0
0
5
-
2
0
1
2
National Share, 2012
Finance
Agriculture
Mining
Real estate
Hotels & Restaurants
Electricity & Water
GDP HCMC/VN
2012 (20.3%)
Average growth rate
2005-2012 (10.8%)
Manufacturing
Culture &
Entertainments
Ecucation
Construction
Transport & Communication
Healthcare
Professional services,
science & technology
Public Administration
Trade
Other services
Source: Authors calculation based on VN and HCMC statistics yearbooks.
Value-added by Industry: HCMC and Vietnam
Note: Area = VND21 trillion/USD1 billion.
Growth is coming
more from
services.
Declining Economic Growth and Competitiveness
Average Annual Economic Growth (%/year) - HCMC
Period GDP Industry Services
1991 - 1995 12.59 16.84 10.31
1996 - 2000 10.11 13.18 8.34
2001 - 2005 10.99 12.37 10.03
2006 - 2010 11.17 10.54 11.92
2011 - 2013 9.56 7.56 11.11

Year Rank
2007 10/63
2010 23/63
2012 13/63
2013 10/63
Vietnam Provincial
Competitiveness Index
International City Ranking
Ranking
EIU 2012 109/120
EIU 2011 60/70
ECA Internationals Asian cities 21/49
Mercers 2009 150/215
3
HCMC as a commercial and services center
In recent years, services industries have been growing
significantly faster than manufacturing in HCMC. While there
is still potential for growth coming from higher value-added
manufacturing, the trend is clearly for HCMC to become a
commercial and business center.
This understanding is reflected in both the central
governments economic strategy and HCMCs local
development plan. International trade, logistics, finance and
tourism are the services clusters to be given priority.
Urban development policy should continue to reinforce the
growth of specialized industry clusters, such as tourism and
financial services in the city center for some time to come. At
the same time, provision should be made to decentralize
trading, specialized training, research and development, and
health and community services to newly established areas of
the city.
Supporting urban infrastructure for services clusters
Trade and logistics will crucially depend on the relocation of
existing ports in the inner city and development of new
container terminals. The current fragmented plan of
developing both the Th Vi Ci Mp port in B Ra Vng
Tu and Hip Phc port in the south of HCMC are very
counter-productive for international trade and logistics.
A competitive airport hub is very important for the citys
economy. This is not being supported by the slow progress in
the development of Long Thnh airport and the unclear future
of existing Tn Sn Nht.
The plan to develop a new financial district in Th Thim is
very ambitious, but needs support from the citys own
financial industry. To finance both hard and soft infrastructure
investments in the new financial district, partnerships need to
be developed among the government, real estate developers,
and the financial community.
4
Challenges to Economic Development
Transport congestion within and into/out of the city
Housing supply and affordability
Flooding and impact of global climate change
Sustainable urban finance
Urban Transport
Percentage of Trips in HCMC
by Mode
Mode % with
walking
% without
walking
Walking 17.1 --
Bicycle 14.4 17.4
Bus 1.4 1.7
Motorcycle 61.8 74.5
Car 1.2 1.4
Conventional taxi and
other
3.4 4.1
Motorcycle taxi 0.7 0.8
Market Share of
Public Bus Operators
Operator Market Share
Saigon Bus Company 22%
HCMC City Bus Ltd 4%
Saigon Star (Joint
Venture)
4%
Cooperatives (14) 70%
Source: The Study of Transportation Modes and
Feasibility Study in HCM Metropolitan Area June 2004,
Almec Corporation
Source: MOCPT
5
Urban Transport
Profile of built-up densities in HCMC The planned transit system of HCMC
Housing
Identification of a housing typology
correlated with HCMC households' income distribution
6
Housing of migrants and residents
Indicator Short-term, non-
registered
Short-term,
registered
Long-term, non-
registered
Long-term,
registered
Total living area in m2 27 76 32 85
Type of Household Dwelling
Detached unit with one household 15% 62% 32% 78%
Detached unit with one household 15% 62% 32% 78%
Detached unit with several households 14% 12% 12% 11%
Separate apartment 1% 2% 2% 5%
Apartment shared with several HHs 0% 0% 0% 1%
Room in a larger unit 4% 2% 4% 1%
Shared room or dormitory 58% 21% 48% 4%
Improvised/Leu Lan 9% 0% 1% 0%
Source: Urban Poverty Study 2009
Flooding Risks
Currently, HCMC is implementing a Program for Flood
Mitigation 2011 2015, with orientation to 2025.
Efforts by HCMC to mitigate impacts from flooding are
implemented under the Master Plan for Sewerage and
Drainage for HCMC for the period 2020.
Projects are still under implementation and therefore, flood
prevention efficiency has not yet been seen.
Moreover, these projects have been developed without
consideration of sea level rising and integrated impacts of
natural and human activities in upstream, downstream, as
well as in the city territory.
Number of debates is still going on short- and long-term
flooding mitigation measures in HCMC.
Long term planning should take place where impact
assessment and benefit-cost analysis of different scenarios
are well developed. Implementation of intermediate measures
should be further continued.
7
HCMC Revenue and Expenditure in Selected
Years (VND trillion)
2004A 2009A 2010A 2012B
Revenues 17.7 52.0 58.8 42.8
Local assigned revenue
- Land-based revenue
} 5.8 } 10.7
10.2 7.8
- Other local assigned revenue 3.2 2.4
Shared tax revenue 5.9 13.5 18.6 24.7
Grants and transfers 0.3 6.9 4.1 1.4
Borrowings 2.6 2.0 2.0
Revenue balances 3.1 19.0 20.7 6.5
Expenditures 17.4 45.1 50.1 42.8
Recurrent expenditure 4.9 13.3 16.1 23.8
Investment expenditure 6.5 18.1 21.3 10.1
Other expenditure 2.0 4.3 1.4 0.9
Debt service charges 0.7 2.3 1.6 1.2
Expenditure balances 3.3 7.1 9.6 6.8
Source: MOF. *A = actual, B = budgeted
77% of tax revenue collected in HCMC goes to the central government (2011-15).
Cost Estimates of High-Priority
Infrastructure Projects, 2011-2025
Sector
VND trillion
% Total
2011-2015 2016-2020 2021-2025 TOTAL
Transportation 188 242 107 537 61
Power 21 32 50 103 12
Water supply 31 25 12 68 8
Wastewater 80 40 56 176 20
TOTAL 319 339 225 883 100
Total, US$ billion 15.2 16.1 10.7 42.0
Source: Master Plan 2011-2025.
8
Substantial but largely unknown financing gap
HCMC needs to invest at least US$4 billion per year in
public infrastructure to meet the targets outlined in the
citys current master plan, which covers the period 2011-
2025.
At present, annual investments in public infrastructure
do not exceed US$500 million, partly because of delays
in project implementation, but mainly because the city
has been unable to mobilize the required financial
resources.
The actual financing gap is likely to be larger, because
the master plan does not contain estimates of subsidies
that will be required for public infrastructure whose costs
cannot be fully recovered from user charges (notably
urban rail and wastewater).