Untying entanglement in investment attraction

Since the beginning of this year, investment attraction of Ho Chi Minh City has been thriving; however, economic experts said that, this economic growth rate lacks of sustainability and the city’s investment attraction is on the verge of saturation and even in decline.
Factories in Hiep Phuoc Industrial Park. (Photo: SGGP)
Factories in Hiep Phuoc Industrial Park. (Photo: SGGP)
The Department of Investment and Planning of HCMC said that since the beginning of this year the city has attracted US$2.77 billion, an increase of 49 percent over the same period last year. However, in terms of investment field, most investments concentrated on real estate with 46.7 percent of total investments. Science and technology accounted for 23.4 percent. Wholesale, retail and repair of automobiles, motorbikes and other engine-driven vehicles made up 16.8 percent. Industrial processing and manufacturing comprised of 5.3 percent. Information and communications held 4.3 percent.

The Department of Industry and Trade of HCMC said that processing and manufacturing saw the sharpest decline in investment attraction since the beginning of this year. The industry drew 1,250 enterprises, down 0.64 percent over the same period last year. Registered capital merely reached $271 million, down 11.01 percent over the same period last year.

Japanese investors who have been the top investor in investment in processing and manufacturing field in the city for years also have a tendency to shift investment to Binh Duong Province. Currently, Japan is the second largest investor in Binh Duong Province with nearly 300 projects and total investment capital of around $5.2 billion, of which most of them are processing and manufacturing firms.

Economic experts said that the fact foreign investment continued to pump heavily into the city but mainly in real estate field and dropped in processing and manufacturing has showed the risk of unstableness in investment attraction of the city. They also pointed out that the land fund for real estate investment of the city has been running low and even nearly hit the limit. Moreover, investments in real estate can solve the budget revenue in short-term instead of long-term. On the contrary, investments in processing and manufacturing field can bring sustainable, steady and long-term revenue.

Actually, investment environment of HCMC has been developing several shortcomings. Accordingly, infrastructure has not synchronized with economic growth. The issues, including traffic congestion, environment pollution, cumbersome administrative procedures and unofficial production cost, have not been improved effectively.

Infrastructure of export processing zones and industrial parks was downgraded seriously. Waste treatment system has not met environmental safety requirements. The city has 16 export processing zones and industrial parks with occupancy rate slightly above 60 percent but occupancy is in dispersed pattern. This leads to a consequence that investing enterprises will not be able to expand production scale while new enterprises do not have large enough land to invest.

The HCMC Export Processing and Industrial Zone Authority said that there are still many firms in export processing and industrial zones having not received land use rights certificates although they have already paid land rentals for landlords. This also causes concerns for new enterprises who want to invest in the city. Meanwhile, the rise of neighboring provinces with better completed infrastructure, more synchronous investment and lower rents has increased competitiveness against the city in investment attraction.

On the other hand, Mr. Do Phuoc Tong, chairman of the HCMC Association of Mechanical - Electrical Enterprises, said that although the city has issued several policies to support investment and capital for enterprises but few enterprises are able to access investment packages. For instance, one of its members, Duy Khanh Mechanical Company, had registered for investment package according to the decision No.50/2015 of the People’s Committee of HCMC but after pursuing the procedure for nearly two years, the company still has not received the result. Or Lap Phuc Company has asked for permission to build new factory for three years but still has not been granted.

Mr. Pham Thanh Kien, director of the Department of Industry and Trade of HCMC, said that the city established export processing and industrial zones a long time ago. Therefore, in order to be suitable with current development, the city should convert them into specialized industrial ones that connect with each supply chain.

In order to improve investment environment, the city should review investment status of enterprises at export processing and industrial zones. Hereby, the city will reorganize, construct, attract and arrange enterprises into specialized export processing and industrial zones so as to meet new investment trend.

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