Singapore is top foreign investor in HCM City

Home to 5,000 plus FDI projects, HCM City has comfortably remained Viet Nam’s growth engine, and it plans to make full use of its position to rise to international standards in many areas, Xuan Huong reports.

Despite all the international and regional competition, Viet Nam has remained an attractive destination for foreign investors, and HCM City has taken the lead in attracting foreign investment to the country since the passage of the Law on Foreign Investment in 1987.

By the end of last year the city had 5,310 FDI projects with a combined capital US$36.28 billion(S$47.9 billion), accounting for 14.4 per cent of the country’s total, Thai Van Re, director of the city’s Department of Planning and Investment, said.

The real estate sector accounted for 35.4 per cent, followed by manufacturing and processing with 32.7 per cent, education with 10.3 per cent and wholesale and retail, motorbike and automobile repair with 7.15 per cent.

Singapore is the biggest foreign investor with nearly 700 projects worth nearly $9.08 billion, or almost a fourth of all foreign investment, followed by Malaysia, South Korea, Britain, and Japan, according to the Foreign Investment Agency.

Re said that HCM City had assumed a central role in the southern region and even nation, scoring some remarkable achievements in economic and infrastructure development and international integration.

FDI sector’s achievements

With a 23.8 per cent share of the city’s economy, the FDI sector had been an important reason for such achievements, he said.

Le Thanh Hai, secretary of the city’s Party Committee, said, “Foreign-invested companies have contributed greatly to the city’s economic development [and make] an increasing contribution to the State budget, generating thousands of jobs and helping raise competitiveness and the city’s economic restructure.

“Many buildings, hotels, offices, malls, apartment buildings, and urban areas have been built with foreign capital, giving the city a new look.”

Foreign investors had also brought advanced new technologies, a very important factor in helping the city restructure its economy and economic development model, he said.

Pham Thi Minh Ly, dean of the business management faculty at Ton Duc Thang University, said the presence of foreign-invested companies also pushed domestic enterprises into renovating their technology and management methods to bolster their competitiveness and enable the Vietnamese manufacturing sector to actively participate in the global production chain.

The foreign sector was also a great contributor to the city’s export revenues, accounting for 19.4 per cent of the city’s exports in 2001 and 38.4 per cent last year, she said.

Besides, “FDI firms are pioneers in training and improving the city’s human resources, enabling the latter to meet the former’s demand and gradually approach international standards in HR.”

Concerns

However, there remained many concerns with regard to attracting and managing foreign investments, Re said.

A lack of co-ordination between official agencies in attracting foreign investment and shortage of information about the city’s investment environment had made the work less efficient, he said.

“Besides, some foreign investors take advantage of loopholes in the Government’s policies and indulge in practices like abuse of transfer pricing,” he said.

Co-operation and technology transfer between foreign and domestic firms remained very modest, and the latter’s low technological level resulted in their limited participation in the supply chains of multinational firms, he said.

“The investment environment and procedures have improved, but foreign investors still face difficulties caused by lengthy and tortuous procedures and immigration, taxation and customs issues.”

These were expected to be addressed from July when the amended Investment Law and Corporate Law takes effect with many reforms to reduce the time to get a business licence to three days and an investment licence to 15 days, among others, he said.

Speaking at a meeting in HCM City recently, Yasuzumi Hirotaka, deputy chairman of the Japanese Business Association of HCMC (JBAH), said a survey by JETRO had found an “underdeveloped” legislation and opaque legal system to be the biggest investment risks in Viet Nam followed by complexity of administrative procedures, the tax system, and tax procedures.

“Therefore, continuous efforts to improve transparency in the operational aspects of the legal system are required.”

In addition, the use of locally made content by Japanese firms in Viet Nam was only 14 per cent, compared with 21 – 23 per cent in Thailand and Indonesia, he said.

The association hoped the city would help firms develop support industries, he added.

Ly said the increasing industrialisation and growing population of the city had shrunk the area of land available for industries, causing higher production costs than in neighbouring provinces and cities.

Plans

Hai said the city would continue to introduce measures to make itself more attractive to foreign investors. They included speeding administrative reform and IT application to reduce the time needed for completing investment procedures, making tax declaration and payment, and getting customs clearance, he said.

“The city would work to create an equal and transparent business environment and hold regular meetings with foreign investors to listen to and resolve their difficulties in a timely manner,” he said.

Re said the city would also strengthen and diversify promotion activities to attract foreign investment.

It would continue to seek investment in nine services — finance, credit and insurance; trade; transport, logistics and forwarding; post, telecom and information and communication; real estate; consulting, science and technology; tourism; health; education and training — and in the industries of mechanical engineering; electronics – IT; pharmaceutical chemicals and rubber; and food and foodstuff processing.

It would offer special incentives to encourage investment in sectors that contribute to training quality human resources, projects with latest technologies and companies that have research and development centres, Re said.

Ly said policies to attract investment from countries with advanced technologies like the US, EU and Japan were required because this would enable technology transfer and create a breakthrough for the domestic manufacturing industry.

Re said, “The city will tweak zoning of industrial parks, export processing zones and industrial clusters for green development, and promote technological innovations and develop cutting-edge industries to improve competitiveness.”

Besides, it would strive to complete infrastructure at specialised industrial parks and clusters and the Agricultural Hi-tech Park, he said.

Speeding up infrastructure work and attracting investment in new urban areas like Thu Thiem and Hiep Phuoc Port and those in the south and north-west were also planned, he said.

The chief of the HCM City Export Processing and Industrial Zones Authority (Hepza), Vu Van Hoa said his agency had encouraged labour-intensive and unclean businesses to move to more suitable locations to make way for others using advanced technologies.

Hepza also urged and supported businesses to adopt newer technologies and move from sub-contracting for others to processing and manufacturing to increase value and competitiveness, Hoa said.

Le Hoang Quan, chairman of the city People’s Committee, said the city would continue to offer favourable conditions and incentives to draw more investment.

FDI last year was worth $3.25 billion and is expected to increase to $3.5 billion this year, he said.