Doing Business

Which opportunities for foreign investors in investing in Ho Chi Minh City?

Trường Lăng

October 14, 2022

Doing Business

Which opportunities for foreign investors in investing in Ho Chi Minh City?

Trường Lăng

October 14, 2022

City Momentum Index 2020 of Jones Lang Lasalle (JLL) identifies the world’s most dynamic cities from a real estate perspective. According to the index, Ho Chi Minh City (HCMC) ranked third among top dynamic cities in the world. The dynamism of HCMC shows a promising picture for investment opportunities. Such potential is illustrated by the robust development of infrastructure and notable future projects.

The current situation of infrastructure development 

Transportation infrastructure

The rapid urbanization in Vietnam is placing great pressure on the existing infrastructure. Both Vietnam’s two big cities – HCMC and Hanoi – are investing vigorously in urban transport infrastructure, inter-regional traffic, and satellite city systems to alleviate this stress, which offers numerous opportunities for foreign investors. 

In particular, HCMC is currently a central traffic hub of Vietnam and Southeast Asia with a developed system of roads, railways, waterways and air routes. Regarding international trade, HCMC is located on the aviation and maritime traffic axis of the Pacific region, and can be considered the center of air traffic in the Asia-Pacific region. The relatively developed transport infrastructure and the geographic advantages in the transportation of HCMC present its attractive strengths to foreign investors. 

In the near future, HCMC focuses on developing and upgrading economic and technical infrastructure, social infrastructure, and digital infrastructure. In particular, the city will develop 3 main pillars, which are transportation infrastructure, housing, medical and education infrastructure, and e-government, digital economy and digital society. Thus, HCMC expressed the will to establish long-term and strategic collaboration with international investors. 

Industrial park infrastructure

Current situation in land occupation

Since 2016, industrial land fund has been increasingly limited, reducing the investment attraction of HCMC compared to its neighboring provinces. 

According to the development plan of HCMC up to 2020, the whole city would have 23 industrial parks and export processing zones in operation. Yet so far, only 19 industrial parks and export processing zones have been deployed, accounting for 76.78% of the total planning land area. Meanwhile, the occupation rate of leased ​​industrial land in 19 established industrial parks and export processing zones has reached over 66%. 

In recent years, several foreign investors wanted to rent about tens of hectares in the city’s industrial parks, but the current unoccupied land rent area can not meet their demand. 

Ms. Le Thi Bich Loan – Deputy Head of the Management Board in HCMC Hi-Tech Park – assessed that in the post-Covid period, many global enterprises shifted investment towards HCMC high-tech parks. But in reality, the land fund is already full, especially commercial land available for production. 

She further added: “Korean businesses or those in Intel’s global supply chain wanted to invest in the city, but there is no available land. Samsung also officially asked us that they needed 100 hectares, yet with the current situation, we cannot provide sufficient lend rent area”. 

New solutions open up new potentials

In 2017, HCMC sent an official letter to the Prime Minister, requesting for a policy to supplement Pham Van Hai Industrial Park, Binh Chanh District (668 ha). The proposal aims to meet the demand for large-area industrial land lease of foreign enterprises.

The city government oriented Pham Van Hai Industrial Park to attract mechanical engineering, industrial robots, electronics-information technology, telecommunications, pharmaceutical chemistry, cosmetics, food processing, among others. At the same time, 100 hectares of land adjacent to industrial parks are planned to be residential urban areas. 

Following new trends, major urbans will not “expand” in industry as before, but will instead pay more attention to the development of supporting services, urban services, digital economy and knowledge economy. Therefore, the orientation of HCMC’s industrial development in the coming time is based on the city’s own characteristics and advantages, associated with hi-tech and digital economy.

Trade and service infrastructure

The legal document supporting for the development of trade and service infrastructure in Ho Chi Minh City

The development planning of the trade industry in Ho Chi Minh City to 2025, with a vision to 2030 is a powerful lever to orient the industry development and create a strong foundation for businesses to plan their strategies. According to the HCMC Department of Industry and Trade, the development planning focuses on 3 core fields, which are logistics, supermarkets and trade centers, and the wholesale-retail sector.

These areas have been identified as key competitive advantages for sustainable development of the city. The fields will contribute to the general socio-economic development in HCMC, turning the city into one of essential commercial centers in the Southeast Asia region.

In particular, in 2020, the average growth rate of total retail sales of consumer goods and services in HCMC reached from 8.55% to 11.53% annually. Meanwhile, the period 2021-2025 will experience the average growth rate from 10.89% to 14.02% per year. 

The planning specifies the proportion of retail sales in modern distribution channels will reach at least 50% by 2025 and 60% by 2030. Thus, it aims to construct and implement the development plan of markets, supermarkets and trade centers in HCMC, based on harmoniously balancing development needs and project feasibility. 

At the same time, HCMC will implement 8 sub projects and programs to launch the master planning in a synchronous manner, achieving the highest efficiency. Notably, the sub projects are the Project on  the logistics industry development in the city until 2025 with orientation to 2030, the Trade Cooperation Program between Ho Chi Minh City and the East-Southwest provinces, and the Market Stabilization Program.

Opportunities for foreign investors

Economic experts forecasted Vietnam’s retail market to have great potential of becoming an attractive penetration destination for international retail groups. The shift in Vietnam’s retail structure from traditional to modern has been profound. Simultaneously, M&A activities between domestic and foreign retailers will change the structure and landscape of the retail industry.

According to Mr. Nguyen Thanh Phong – Chairman of HCMC People’s Committee, in the coming time, the world situation will place great impacts on trade and service activities of Ho Chi Minh City. Therefore, HCMC’s retail market is quite active and spares various rooms for development.

Future projects 

Planning of Thu Duc city – economic zone in east of Saigon

Chairman of Ho Chi Minh City People’s Committee has emphasized the important planning of Thu Duc city: 

“From June, we will basically complete the general planning of Thu Duc city, and complete the planning at the end of the third quarter and the beginning of the fourth quarter. In this way, we can invite investment from both domestic and international enterprises.  We also expect that Thu Duc will be one of HCMC heart, promoting the development of the whole city”

Mr. Nguyen Thanh Phong – Chairman of Ho Chi Minh City People’s Committee

Thu Duc is located in a strategic geographic position, connecting with Long Thanh airport, Dong Nai and Binh Duong provinces. Granted with geographical advantages, Thu Duc itself has a lot of potential. Notably, the export turnover of this area currently accounts for about 40% of the total export turnover of HCMC. 

In addition, Thu Duc has attracted diverse foreign investment capital, namely Intel, Samsung, among others. This area is home to the top universities of Vietnam, namely Vietnam National University Ho Chi Minh City, Fulbright University, University of Agriculture and Forestry, University of Technical Education, among others.

Therefore, Thu Duc will become the research hub as well as an abundant high-skilled human resources supply in the near future. This will help the development of HCMC as a favorable investment destination in Southeast Asia 

Furthermore, the new urban area – Thu Thiem will be the global and regional financial center. This will be one of the four projects recently supported by the Prime Minister. In this way, Thu Thiem will be the strategic area with its 3 core pillars in high technology, human resources and financial center, backing for socio-economic development of HCMC as well as Vietnam. Besides, the area will become a comprehensive ecosystem for investment and innovative start-ups. 

Planning to develop HCMC as a regional financial center

HCMC plans to attract more investment and develop the city as the top financial center of Vietnam and the world. 

The scale of the HCMC financial activities was 111 trillion VND, accounting for 35,2% of the national financial activities. Meanwhile, the total capitalized value in HCMC Stock Exchange made up 95% of the whole market and nearly 65% of GDP in 2020. The total value of corporate bond transactions in HCMC is over 33 trillion VND. 

8 Neighborhoods to Explore in Ho Chi Minh City
Ho Chi Minh City

By 2025 HCMC will implement action plans along with specific policies to strengthen the city’s position as a national financial center. In detail, the city authority will make great attempts to upgrade from a secondary to an international financial center in the ranking of Global Financial Centers Index (GFCI) before 2025. In this way, it will raise the competitiveness and development level in Southeast Asia. 

At this period, HCMC initially constructed the complex financial – commercial center in Thu Thiem.

In the period from 2026 to 2030, the city aims to be an international financial center ranked notably in Asia. In particular, the complex financial-commercial center in Thu Thiem will be a financial cluster of Fintech industries associated with the banking system, and investment and asset management services. 

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