Ho Chi Minh City rushes to improve investment environment

The index of industrial production (IIP) of Ho Chi Minh City in the first six months of this year was 7 percent. According to many economic experts, the index has showed signs of slowdown in comparison with last year.
Food processing industry sees the highest number of enterprises shifting investment. (Photo: SGGP)
Food processing industry sees the highest number of enterprises shifting investment. (Photo: SGGP)
Downward tendency is expected to continue to strengthen in the future as bottlenecks in investment environment have not been improved so firms tend to shift investment to neighboring provinces. Therefore, it is essential for the city to quickly make investment environment better. 

Analyzing the current situation of industrial production in the city, the Department of Industry and Trade said that, up to now, the city still manages to maintain positive signs. Industrial processing industry was estimated to grow 7 percent. Metal fabrication rose 59.4 percent. Furniture manufacturing climbed 41.7 percent. Besides, the power generation and distribution index surged 8.7 percent, the highest level since the beginning of this year.

This reflects the production efficiency and added value of the city’s industrial products. However, along with positive signals, uncertainties in the city’s investment environment were also revealed clearly. The most obvious signal is that several enterprises have actively set up plans to move their factories to neighboring provinces.

At the present, food processing industry sees the highest number of enterprises shifting investment. Particularly, Uniben JSC, Viet Tien Food Technology One Member Limited Company, Cau Tre Export Goods Processing JSC and Vietnam Dairy Products JSC – Thong Nhat Dairy Factory have partly or entirely moved their operations to Binh Duong Province.

Similarly, in automobile manufacturing sector, Hosihino Vietnam Company also transferred some of its production lines of safety airbags to Binh Duong Province and merged with another company in Ho Chi Minh City. Earlier, several supporting products manufacturers also shifted investments to export processing zones and industrial parks in Binh Duong and Dong Nai provinces but their administrative border lines are contiguous to the city.

Investment switching of manufacturing enterprises also led to a slump in the local industrial production growth index in some industries. For instance, food processing industry slid 2.6 percent. Manufacturing for spare parts and accessories for engine-driven vehicles fell 17.76 percent.

Explaining this issue, PhD Huynh Thanh Dien of Nguyen Tat Thanh University in HCMC, said that neighboring provinces have advantages in land rental and other preferential policies. Meanwhile, in the city, manufacturing supporting services have not been completed. Technical infrastructure system, especially transport and water supply, has been overloaded whereas the budget and resources for infrastructure development are inadequate.

Moreover, the land fund for industrial development of the city has gradually become scarcer. Industrial parks lack of intensive reinvestment and large land fund for enterprises to make new investment or expand investment. Meanwhile, the land rental rates at new industrial parks are too high, affecting production costs and competitiveness of enterprises.

In addition, according to city-based associations, including the Food and Foodstuff Association of Ho Chi Minh City, Rubber and Plastic Manufacturers Association – HCMC, Ho Chi Minh City Association of Mechanical and Electrical Enterprises, Ho Chi Minh City Textile and Garment - Embroidery Association and  Shoes and Leather Association of HCMC, sudden increase of 8.36 percent in power prices has caused production costs to sharply increase. Meanwhile, the cost prices were unable to raise as consumption contracts had already been signed earlier. Therefore, profits of enterprises were directly affected.

In fact, hikes in power prices have reduce an average of 5-10 percent in profits of several mechanical, plastic and food processing enterprises. This is also the reason that made firms not only actively move production lines but also take into account transferring production so as to lower cost and improve competitiveness in the market.

Mr. Pham Thanh Kien, director of the Department of Industry and Trade of HCMC, said that the department and relevant departments have been carrying out synchronously solutions to help to improve investment, production and business environment for enterprises. First, they review and clarify information about investment land fund at export processing zones and industrial parks then cooperate with investors to set reasonable land rental rates. The management boards of export processing zones and industrial parks simplify investment procedures for firms who want to invest or expand production. At the present, these units have cut about 30 percent of total time for processing applications for 22 out of 65 administrative procedures under their jurisdiction. 

As for bottlenecks relating to administrative procedures, the department has met firms to solve the problem in accordance with specific pleas. The HCMC Tax Department also focused on guiding and giving support in tax laws to create the most favorable conditions for firms to fulfill their tax obligations. According to Mr. Kien, in the future, the department will speed up organization of activities to develop brands and promote advertising and introducing enterprises, especially enterprises who produce key products, in order to create a foundation for enterprises to connect with domestic market as well as export.

The city has around 428 hectares of land left for industrial investment, including Tan Thuan Export Processing Zone with 10 hectares, Hiep Phuoc Industrial Park with 84 hectares, Ho Chi Minh City's Automotive- Mechanical Industrial Park with 10 hectares, Le Minh Xuan 3 Industrial Park with 70 hectares and 5,000 square meters of ready-built factory in Dong Nam Industrial Park.

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