Nguyen Xuan Thanh Engine of Growth-HCMC-E

8/12/2019 Nguyen Xuan Thanh Engine of Growth-HCMC-E

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Cities as Engines of National Economic

Development: The Case of Ho Chi Minh City

Nguyen Xuan Thanh

Ho Chi Minh CityJune 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.


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0%

5%

10%

15%

20%

25%

30%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

AverageAnnualGrowthRate,

2005-2012

National Share, 2012

Finance

Agriculture

Mining

Real estate

Hotels & RestaurantsElectricity & Water

GDP HCMC/VN

2012 (20.3%)

Average growth rate

2005-2012 (10.8%)

Manufacturing

Culture &Entertainments

Ecucation

ConstructionTransport & 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 f rom

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 IndexInternational City Ranking

Ranking

EIU 2012 109/120

EIU 2011 60/70

ECA Internationals Asian cities 21/49

Mercers 2009 150/215


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HCMC as a commercial and services center

In recent years, services industries have been growingsignificantly faster than manufacturing in HCMC. While thereis still potential for growth coming from higher value-addedmanufacturing, the trend is clearly for HCMC to become acommercial and business center.

This understanding is reflected in both the centralgovernments economic strategy and HCMCs localdevelopment plan. International trade, logistics, finance andtourism are the services clusters to be given priority.

Urban development policy should continue to reinforce thegrowth of specialized industry clusters, such as tourism and

financial services in the city center for some time to come. Atthe same time, provision should be made to decentralizetrading, specialized training, research and development, andhealth and community services to newly established areas ofthe city.

Supporting urban infrastructure for services clusters

Trade and logistics will crucially depend on the relocation ofexisting ports in the inner city and development of newcontainer terminals. The current fragmented plan ofdeveloping both the Th Vi Ci Mp port in B Ra VngTu 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 inthe development of Long Thnh airport and the unclear futureof existing Tn Sn Nht.

The plan to develop a new financial district in Th Thim isvery ambitious, but needs support from the citys ownfinancial industry. To finance both hard and soft infrastructureinvestments in the new financial district, partnerships need tobe developed among the government, real estate developers,and the financial community.


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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


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Urban Transport

Profile of built-up densities in HCMC The planned transit system of HCMC

HousingIdentification of a housing typology

correlated with HCMC households' income distribution


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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 andDrainage for HCMC for the period 2020.

Projects are still under implementation and therefore, floodprevention efficiency has not yet been seen.

Moreover, these projects have been developed withoutconsideration of sea level rising and integrated impacts ofnatural and human activities in upstream, downstream, aswell as in the city territory.

Number of debates is still going on short- and long-termflooding mitigation measures in HCMC.

Long term planning should take place where impactassessment and benefit-cost analysis of different scenariosare well developed. Implementation of intermediate measuresshould be further continued.


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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 6.8Source: MOF. *A = actual, B = budgeted

77% of tax revenue collected in HCMC goes to the central government (2011-15).

Cost Estimates of High-PriorityInfrastructure Projects, 2011-2025

SectorVND trillion

% Total2011-2015 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.


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Substantial but largely unknown financing gap

HCMC needs to invest at least US$4 billion per year inpublic infrastructure to meet the targets outlined in thecitys current master plan, which covers the period 2011-2025.

At present, annual investments in public infrastructuredo not exceed US$500 million, partly because of delaysin project implementation, but mainly because the cityhas been unable to mobilize the required financialresources.

The actual financing gap is likely to be larger, becausethe master plan does not contain estimates of subsidiesthat will be required for public infrastructure whose costscannot be fully recovered from user charges (notablyurban rail and wastewater).

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Nguyen Xuan Thanh Engine of Growth-HCMC-E