By Quoc Hung – Translated by Kim Khanh
Port city project
These are two out of six metro trains HCM City is importing from Yamaguchi Prefecture-based Kasado Works for its metro line 1 development scheme, according to the municipal Management Authority for Urban Railways (MAUR).
The remaining four trains are set to be shipped to Vietnam in June and July, said the MAUR, adding that following customs clearance, the trains will be taken to Long Binh depot of Thu Duc city.
Japan’s contractor Hitachi will be responsible for the safety, quality as well as transportation costs of the trains.
Previously, the first among 17 trains of metro line No.1 arrived at Khanh Hoi port in HCM City’s District 4 in October 2020.
In the first phase, the MAUR will receive and operate a three-car train capable of carrying 930 passengers and running at a maximum speed of 110 km/h overground and 80 km/h underground.
The first train is expected to be given a trial run on Long Binh depot track by the end of this year at the earliest. After evaluation, the metro train will continue to be tested on the main line.
The six-car train will be tested from Binh Thai station to Van Thanh station for the second phase and from Van Thanh station to Ben Thanh station for the final phase.
The metro line No1 construction project is underway in HCM City, linking Ben Thanh market in District 1 and Suoi Tien Amusement Park in District 9.
The US$2.05 billion line is the first of at least six to be built in the city, aiming to ease traffic congestion in its north-east gateway.
In its April analysis, global analysts FocusEconomics forecast that the Vietnamese economy will grow 7.4% this year, topping Southeast Asia – where the rate will be 5.3% for the whole region, 3.2% for Brunei, 5.6% for Cambodia, 4.7% for Indonesia, 5.4% for Laos, 5.9% for Malaysia, 4.3% for Myanmar, 7.3% for the Philippines, and 5.7% for Singapore.
According to FocusEconomics, one of the key driver for Vietnam’s industrial growth and economic growth in general is foreign direct investment (FDI) which is hunting new potential markets including Vietnam.
The Ministry of Planning and Investment (MPI) has reported that from the start of January to April 20, 2021, the total newly-registered capital, added capital and capital contributions, as well as share purchases, reached US$12.25 billion, equivalent to 99.3% of that in the same period last year.
Of these, 451 projects – down 54.2% year-on-year – were granted new investment certificates, registering close to US$8.5 billion, up 24.7% year-on-year. As many as 263 projects, which were down 21.5% year-on-year, increased their investment capital by more than US$2.7 billion, down 10.6% compared to that in the same period last year.
Also during January – April 20, 2021, foreign-invested projects disbursed US$5.5 billion, up 6.8% year-on-year.
According to the MPI, though causing grave consequences in Vietnam, the region, and the wider world, COVID-19 seems not to be able to prevent FDI inflows to Vietnam in the long term, and a rising manufacturing industry here. These are big drivers of Vietnam’s economic growth this year and beyond. Many major foreign invested enterprises are eyeing the Vietnamese market, which has now basically succeeded in reining in the health crisis. Thus, strengthening their confidence in the market. COVID-19 is only slowing down the FDI inflow into Vietnam. Many projects are temporarily halted, and will be vehemently carried out when the pandemic is subdued.
Recently, general director of Samsung Vietnam Choi Joo Ho worked with authorities of Quang Ninh Province, saying that in addition to helping Vietnam attract more satellite foreign-invested projects, Samsung is focusing investment into the provinces of Bac Ninh, Thai Nguyen, and Ho Chi Minh City, with total capital of over US$17.5 billion, besides a US$230 million research and development (R&D) centre currently under construction in Hanoi.
A few weeks ago, South Korea’s GS Engineering & Construction also worked with the Quang Ninh authorities, saying that it is planning to expand investment to the northern region, in addition to some large-scale projects currently implemented in the south.
In early February, LG declared that it will add about US$750 million to its LG Display Vietnam facility in the northern port city of Haiphong, raising its total investment capital to US$3.25 billion.
A big contributor
The government’s drive towards an open economy also included domestic reforms. In 1986 the country launched its hallmark Doi Moi, or national renovation. Then in late 1987, Vietnam created its first Law on Foreign Investment, enabling foreign companies to enter Vietnam. Since then, the law has been revised a number of times, largely to adopt a more pro-investor approach while aiming to pare down administrative bureaucracy and better facilitate FDI into Vietnam.
In fact, over the more than three decades of national construction and development, FDI attraction has become a bright colour in the Vietnamese economic picture as it has provided an important and stable impetus for the economy.
According to the MPI, as of April 20, Vietnam had 33,463 valid foreign-invested projects registered at US$394.9 billion. Some 19 out of 21 economic sectors have been home to FDI, with processing and manufacturing achieving US$231.16 billion registered FDI (58.5% of the economy’s total), property business at US$61 billion (15.4%), and electricity production and distribution at US$33.56 billion (8.5%).
As many as 139 nations and territories have been investing in Vietnam, including South Korea with $71.58 billion in registered capital (18.1%), Japan $62.9 billion (15.9%), followed by Singapore, Taiwan, and Hong Kong. In 2018 and 2019, Vietnam was among the world’s list of top 20 largest FDI attractors.
All 63 provinces and cities have also attracted FDI, including Ho Chi Minh City with registered US$48.94 billion (12.3%), Hanoi with US$36.36 billion (9.2%), and Binh Duong Province with US$35.87 billion (9.1%).
Foreign-invested enterprises (FIEs) have been providing jobs for 4.5 million direct local labourers and millions of indirect labourers. They occupied 25% of Vietnam’s total development investment, 55% of industrial output, 18% of the state budget revenue, and 20% of GDP.
According to the General Statistics Office, in the first quarter of 2021, FIEs’ total export turnover, including crude oil exports, hit $59 billion, up 28.5% year-on-year and holding 76% of Vietnam’s total export revenue. This is manifested by a climb in exports largely created by FDI, such as mobile phones and spare parts (more than 99%), equipment (over 93%), and footwear (nearly 82%), and textile and garment (close to 63%).
In addition, FIEs have also helped Vietnam participate deeper in in international supply chains for the past more than 30 years, contributing to assisting the country to get out of international embargo, and resume its relationship with many countries and international organisations. Furthermore, FIEs have also helped Vietnam promote its regional and international stature and prestige.
A new path for FDI
Under the resolution of the recent 13th National Party Congress, the Party determined some strategic breakthroughs for Vietnam to become a developing country with modernity-oriented industrial development by 2025; a developing nation by 2030 with modern industrial development and upper-middle income; and a developed economy with high income by 2045.
For this ambitious goals to become true, the Party has specified that FDI will continue acting as an important component of the domestic economy, and it has a big role in mobilising investment capital, technology, modern governance, and enlarging Vietnam’s export markets.
“A shift is to be made from attracting FDI in quantity to quality. Priority is to be given to projects with high technology and high added values, and with modern governance models, high spillover effects, connecting with domestic enterprises,” read a report adopted at the 13th National Party Congress.
Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, said that foreign investors, including those from the US are optimistic about business prospects in Vietnam.
“We support efforts to create a modern economy that will attract future investment and high-paying jobs for Vietnamese people. We will continue to work on lowering trade barriers, to help the Vietnamese government make it easier to do business, and to create a high-standard, transparent, and stable business environment to ensure that all investors have fair access to that opportunity,” Adam said.
Marko Walde, chief representative, Delegation of German Industry and Commerce in Vietnam, said that the Vietnamese government creates the most favourable conditions for foreign investors and businesses, and this commitment will boost the economic growth of this country and attract further investors to Vietnam.
“Vietnam has been implementing a number of activities and effective methods in order to achieve the dual objectives of promoting socioeconomic development and effectively preventing the pandemic from taking hold,” Walde said. “German companies expect that the EU-Vietnam Free Trade Agreement and Investment Protection Agreement will improve economic policy in Vietnam in the long run. Firms could enjoy the protection of investments with trade facilitations and increase investment in Vietnam.”
According to Walde, for the mid-term, there will be many investment flows for high-valued projects into Vietnam. German investors would bring their well-known technology in management and training to this country, allowing more value-added production and less waste of material and resources.
There are currently a lot of expansion plans for German enterprises from China to Vietnam. They are complementary to their existing Chinese operations with new activities in Vietnam regarding sourcing and investments. This trend had started before the US-China trade conflict as German investors in China were already looking to diversify their operations by adding another location in Asia.
Not only attracting domestic customers, residential areas on natural islands also attract overseas Vietnamese and foreign investors thanks to convenient, classy and private ecological living spaces.
The fresh, modern and private life on natural island
Island residential estate has become a priority of investment of the rich. Among the world-famous ecological islands that are favored by the wealthy, business people, celebrities are Palm Jumeirah Island in Dubai and Deep Water Bay in Hong Kong. Each villa on Palm Jumeirah Island costs about $3.5 million. Well-known celebrities like former football star David Beckham, former supermodel Naomi Campbell, and actor Denzel Washington own estate on this island.
In Vietnam, residential projects on natural islands adjacent to the city center have also lured the wealthy’s interest. Experts said that the ‘absorption’ rate of this type of real estate is very high. For example, the rate is more than 90% for Phoenix island – Aqua City project in the east of Ho Chi Minh City. These limited products are particularly appealing to overseas Vietnamese and foreign customers.
|Phoenix island – Aqua City has a great attraction to overseas Vietnamese and foreign investors|
Ms. Lucy Nguyen – a customer – said: “I am really impressed by the ecological greenery, the river and the fresh living environment on Phoenix island. I did not think that there is such a large-scale residential area right next to Ho Chi Minh City, which is both well-planned and fully equipped with all necessary infrastructure facilities from schools, health care centers to high-class entertainment facilities and full of ‘natural breath’ like that”.
During their visit to Aqua City , movie director Victor Vu and his wife chose a house of the Aqua City project. He said that he and his wife felt comfortable once entering here. Its fresh environment, where everything is very tidy, immediately gave him and his wife a special feeling. Aqua City is the perfect choice for overseas Vietnamese when they return to Vietnam.
|Director Victor Vu highly appreciates the environment and living conditions in Aqua City|
Sharing about the attraction of the project, a representative of Novaland Group, the developer of Aqua City project, said: “With the rare position of a natural island in the heart of the Aqua city, Phoenix Island possesses beautiful natural beauty as it is surrounded by rivers and ecological environment. This isolated living space that is close to nature, is only about 20 minutes of travelling from the center of Ho Chi Minh City or from the Dong Nai Province-based Long Thanh international by road (when the infrastructure is complete). Especially, in addition to the road system, residents of Aqua City can travel by yacht, canoe or water taxi to Ho Chi Minh City by the beautiful Saigon – Dong Nai river route”.
|Aqua City Phoenix with a prime location|
Experts say that the eastern area of Ho Chi Minh City possesses the advantages of rivers and natural islands suitable for the development of high-end eco real estate projects. Currently, the strong investment in infrastructure in this area, especially a series of key projects such as Metro No. 1 Ben Thanh – Suoi Tien route, ring roads, Ho Chi Minh City – Long Thanh – Dau Giay highways, and deep-water ports, helps increase regional connectivity.
For the first time, Vietnam was named among the top 10 best countries for foreigners to live and work by HSBC Expat 2020. Since then, investors have increasingly paid attention to the Vietnamese market. Meanwhile, the ideal and classy living spaces like eco-island urban areas have also been “aimed” at by foreign investors and overseas Vietnamese.
Considered one of the dynamically developing regions of Vietnam in recent years, the east of Ho Chi Minh City is home to large industrial zones and a strongly invested transport infrastructure system. For example, in the first 10 days of 2021, Dong Nai province attracted more than $226 million of investment capital, mainly from South Korea and Japan.
At the same time, the construction of the Long Thanh International Airport started earlier this year, promising to attract a large number of foreign experts. This force, combined with the number of experts working in the industrial zones in the area, creates a great demand for housing, especially eco-urban spaces, fully-equipped island cities.
In addition, the attractiveness of the real estate market here also comes from the reason: the land fund in the center and the east of Ho Chi Minh City becomes increasingly scarce, so the rich and foreign investors all desire to own real estate products of this type early.
Ms. Kelly Lin – a Taiwanese customer – said: “I am especially impressed with Aqua City because this project is located in a prime location. All products in this area like townhouses, villas, shop-houses appeal to me because they meet all the things I expect for both residential and investment purposes”.
|Phoenix island – Aqua city is highly valued by investors for its potential profit.|
According to investors, the need to own this type of island ecological residential real estate in the east of Ho Chi Minh City is inevitable and will develop strongly in the future. The rich often want to live in private, classy, high-class areas, while connectivity, civilization, and convenience is still ensured. Investment returns and liquidity of this product line is often higher than other types of housing, thus, it attracts the interest of investors.
Mr. Su Ngoc Khuong – Senior Director, Savills Vietnam’s Investment Division – emphasized: “Macao and Hong Kong are good lessons to develop island villas for the super-rich. These people are willing to spend $50-70 million to own such products and willing to take personal planes to work every day. According to a report by Savills, the price of riverside and island estate in major cities in the world such as London, Paris, Shanghai, Sydney, Hong Kong… is usually 10-50% higher than estate products in other places”.
Find more information, see https://aquacity.com.vn or call hotline 0943797979
To reduce traffic congestion at Cat Lai port area, the department continues to review and install additional camera systems, strengthen penalties on traffic violations recorded via camera, regularly patrol and issue fines on owners of vehicles stopping or parking in prohibited places, handle pavement encroachment for trading on Nguyen Thi Dinh, Vo Chi Cong Street, etc.
By Ha Diu- Translated by Huyen Huong
Despite strong efforts, major cities like Hanoi and Ho Chi Minh City are still lagging behind in the 2020 Provincial Competitiveness Index, triggering concerns over the efficacy of their reforms.
|While some provinces have become shining examples in Vietnam’s PCI, its metropolises are lagging behind. Photo: Le Toan|
According to the Korea Chamber of Business in Vietnam (KorCham), Hanoi is planning to organise a dialogue with South Korean businesses in May to help them deal with various problems, including administrative procedures.
KorCham vice chairman Hong Sun told VIR, “South Korean businesses are still encountering some problems related to investment procedures, especially real estate and trade centre investments and others. We are expecting that all will be solved at the upcoming meeting.”
South Korea is among the targeted foreign investors Hanoi plans to attract more of. To increase its attraction, the city has taken a number of measures to reform administrative procedures. According to Hanoi People’s Committee, the capital had been determined to deploy the government’s administrative reform plan for the 2016-2020 period, and the city’s administrative reform programmes in which many targets were fulfilled before the schedule set in Resolution No.30c/NQ-CP on the master programme on administrative reform in the 2011-2020 period.
Nonetheless, Hanoi’s stronger efforts have not brought about a fruitful result. Most recently, in the 2020 Provincial Competitiveness Index (PCI), the city ranked ninth, with no increase from the previous year.
As shown in the 2020 PCI, the results of the 10 sub-indices making up the city’s overall PCI index remain lower than cities and provinces in the “excellent” category and, in terms of entry costs and land access, Hanoi is named among the lowest.
Specifically, entry costs score 6.74 out of 10; land access and tenure scores 6.07; policy bias and proactivity both 6.06; and transparency even 5.81. In comparison, the three best performers of Long An, Dong Thap, and Quang Ninh have scored over seven points in most of their 10 sub-indices.
In the same situation, as shown in the 2019 and 2020 PCI indexes, Ho Chi Minh City dropped from eighth in 2016 to 14th now. In the Vietnam Provincial Governance and Public Administration Performance Index (PAPI), the biggest city of Vietnam also saw a downgrade from 31st in 2019 to 46th in 2020, ranking among the worst performers.
The northern province of Bac Ninh also saw a slip from fourth in the 2019 PCI to 10th in 2020. Vuong Quoc Tuan, Deputy Chairman of Bac Ninh People’s Committee, blamed this for a decrease of score in the areas of transparency, policy bias, law and order, proactivity, land access, and tenure. “We will take bolder and more comprehensive measures to improve them in the months to come,” he insisted.
A few days after the announcement of the 2020 PCI, Nguyen Thanh Phong, Chairman of Ho Chi Minh City People’s Committee, worked with the city’s Institute for Development Studies on the implementation of the 2021 tasks. “Recently, local authorities reported that they all made better achievements. Why this has happened is unclear,” he admitted. “They have to reassess themselves. If we do not assess ourselves exactly, we are likely to get into the way of subjective thinking.”
Hanoi and Ho Chi Minh City have other connected issues on their collective plates because, according to statistics from the Ministry of Planning and Investment (MPI), the two cities also dropped in ranking in foreign direct investment (FDI) attraction in the first quarter of 2021. Ho Chi Minh City dropped from top of the pile in 2020 to fourth so far this year, while Hanoi fell to 14th from third in 2020.
Chairman Phong emphasised that the focus of Ho Chi Minh City this year is to improve the business climate and to build urban governance, urging stronger effort from local authorities to improve the situation.
Similarly, Chairman of Hanoi People’s Committee Chu Ngoc Anh, at a recent meeting to review the first-quarter performance and set tasks for the upcoming months, requested more administrative reforms to further facilitate business activities in the capital.
The major cities are being urged to learn from Quang Ninh, Long An, Dong Thap, and Binh Duong on how to make improvements to increase future efficiency in order to meet business expectations. Sun of KorCham noted, “The transition of the Hanoi leadership might bring about positive results, and South Korean investors are pinning high hopes on this.”
Outside Ho Chi Minh City and the capital, Long An and Binh Duong were among the most impressive localities in terms of the PCI results last year. The Mekong Delta province of Long An surpassed many others to be listed among the best performers, ranking third and rising from eighth in the 2019 index. Binh Duong meanwhile jumped to fourth from 13th the previous year.
Long An is emerging as an attractive destination for foreign investment. In the first quarter, the province led 63 cities and provinces in FDI inflows with nearly $3.2 billion, making up about 32 per cent of the country’s total. Meanwhile, Binh Duong remains in the top-six of FDI attractors.
Elsewhere, last week Long An signed MoUs with powerful domestic and international groups – Saigontel, Roland Berger, Viettel IDC, VNPay, Microsoft, Siemens, SAP, SMBL, and DVL Venture – on digital transformation and investment at its investment promotional workshop.
Nguyen Van Duoc, Secretary of Long An Party Committee, said, “We continue to make administrative reforms with a focus on the 10 sub-indices, thus further improving the business climate. We envision developing high-tech economic zones in parallel with the development of South Korean-modelled smart cities.”
John Rockhold – Vice chairman, American Chamber of Commerce Hanoi
Vietnam was successful in its dual efforts to contain the pandemic and maintain economic growth, emerging as one of the few countries in the world to record a reasonably high rate of positive economic growth in 2020.
The Provincial Competitiveness Index’ (PCI) infrastructure index ranks the quality of infrastructure and connectivity in each province. This index is not included in the calculation of the PCI scores. However, it serves as a useful reference for businesses as well as policymakers.
The PCI research team has determined it is unfair to include infrastructure in the overall ranking for three reasons: initial endowments were dramatically different across provinces, making it very difficult for some rural provinces to catch up; provinces are not solely responsible for infrastructure within their borders, as many investments are funded through central government initiatives; and the team strongly believes the improvement of infrastructure is best achieved through regional cooperation and does not want to encourage duplicative and damaging competition in construction, particularly for large projects such as ports and airports.
Infrastructure in Vietnam has generally improved since 2014. However, in 2020, the median score of the infrastructure index dropped slightly to 67.41 points from the all-time high of 68.45 points, achieved in 2019.
The findings show the correlation between the quality of governance and infrastructure in 2020. There remains a close correlation across all provinces. Consistent with previous surveys, the PCI 2020 finds that provinces performing well in governance indicators tend to have higher quality infrastructure. Provinces that outperform the median province in terms of infrastructure but do not perform as well in governance appear to be caught in a structural advantage trap.
They have not vigorously pursued good governance because they were confident that investment would come regardless of their efforts. Finally, provinces that perform better than the median province in terms of their governance but face the obstacle of limited infrastructure have to “conquer hardships” through dedicated reforms to overcome their limited endowments.
The 2020 report also dedicates another special chapter to explore factors that drive businesses to invest in green technologies and discover what motivates them to become more eco-friendly. The Vietnamese government has declared environmental protection as a key element in its foreign investment attraction and economic development policies.
In emerging markets like Vietnam, where much of the world’s future demand for energy and infrastructure will be located, there is a clear recognition of the central role that businesses can play in promoting green growth and climate action. However, there is less clarity about how to motivate private players to invest in green technologies and environmentally friendly operations.
In Chapter 4 of the 2020 PCI report, we use a survey experiment embedded in two nationally representative surveys in Vietnam to test which type of stakeholder pressure (governmental or societal) has the strongest impact on whether and how much domestic and foreign business leaders are willing to invest in green operations.
Our main findings include: Foreign investors are more susceptible to intensive regulatory pressure; and around 74 per cent of foreign businesses that received the regulatory treatment expressed a willingness to expend greater resources on environmental upgrading, compared to 67 per cent of businesses that received the social pressure treatment.
By contrast, we find no difference for domestic investors; 68 per cent expressed a willingness to invest in new environmental equipment and processes, regardless of treatment. We also do not find evidence for change with respect to the intensive margin (the increase in the share of operating costs that foreign and domestic businesses were willing to incur to increase the environmental cleanliness of their operations).
The most effective policy varies by actor. Digging deeper, we disaggregated our analysis by whether businesses’ primary customers are citizens and businesses in Vietnam or customers outside the country, who are reached through export. Fascinatingly, the effects on the extensive margin (the business’ willingness to pay for environmental upgrading) are most pronounced for foreign investors seeking to access the domestic market, and domestic businesses pursuing exports.
However, the type of stakeholder pressure that matters most varies between the two groups. Domestic-oriented foreign businesses, particularly because of their visibility and size, are more likely to respond to the regulatory pressure treatment.
By contrast, export-oriented domestic players, as they are concerned about selling to consumers with Western values, are more likely to be influenced by the social pressure treatment. Businesses’ assessment of climate risk does not influence the effect of regulatory or social pressure on their decisions to upgrade. Businesses’ subjective and objective vulnerability to climate risk does not influence the effects of regulatory or social pressure. The higher the climate risk to a company’s particular business, the more likely they are to upgrade, but this effect is not enhanced by additional social or governmental pressure.
As businesses’ role in climate action becomes increasingly important, the question is whether more government regulation is needed to bring about change in businesses’ behaviour or whether there is room for self-regulation, when they respond most strongly to pressures from non-government actors, including non-governmental organisations and citizens’ demands.
The bottom line is that there is no one-size-fits-all approach to encouraging environmental upgrading. Enhanced regulation of domestic businesses will not pay the same dividends as it does for foreign ones and comes with more costs to inspect the numerous, diffuse, and small domestic companies. At the same time, ambitious domestic businesses hoping to reach international markets will find that social pressure is an extremely effective force in motivating green behavioural change.