HCMC Aims for Economic Restructuring as Motive Force

Nguyen Van Linh Avenue in HCMC (VEN) - What has Ho Chi Minh City gained after three years Vietnam has joined the World Trade Organization (WTO)? How should the economy be restructured to turn the city into a leading growth engine? These issues were put on the agenda at the workshop 'Reviewing the implications of Vietnam's three-year admission into WTO and HCMC economic restructuring' jointly hosted by the Institute for Research and Development and HCMC Center of Integration WTO Technical Assistance in late August 2010.   It is undeniable that WTO admission has brought Vietnam myriad opportunities. Yet Ho Chi Minh City does not have any inclusive assessments about the affect of Vietnam's WTO membership on the city's economy. In the past three years, the city's GDP rose 1.5 times over the country's average and HCMC contributed 20 percent of the country's GDP in 2009. Joining the WTO has quickened the pace of economic restructuring in Ho Chi Minh City. A study by Nguyen Xuan Thanh from the Fulbright Economics Teaching Program showed that the 1990s was a decade of industrial development while 2007 was marked with booming development of the construction and service sectors. Despite economic recession from 2008-2009, trade services kept growing at an amazingly high level and made up 54.5 percent of the city's GDP in 2010. "The change was the outcome of a natural development process but not driven by policies," Thanh said. For his part, Dr. Tran Du Lich, deputy head of HCMC National Assembly Delegation said the city's economic development was closely attached to urban planning. Poor infrastructure in the city's suburbs has hindered economic development. The city authorities wanted to remove ports to peripheral areas, however, it was an arduous work due to poor infrastructure in these locations. After three years of joining WTO, Vietnam's economy still relies mainly on foreign investment capital. Around two decades ago, these capital sources merely contributed around eight percent to Vietnam's economic development, now they contributed over 60 percent. However, poor absorption of foreign credit was the key reason behind inflation, unfocused investments, and slow capital disbursement at investment projects in Vietnam. Regrettably, despite priority being given to the development of high added valued industries such as mechanical engineering, electronics, telecommunications, chemicals and pharmaceuticals, and food processing), local companies mainly engage in fulfilling foreign orders. Of the same mind about HCMC development, the director of Vietnam Institute of Economics, Dr. Tran Dinh Thien said the city's urbanization was a situational solution prompted from hot economic growth. Urban planning was mainly to relieve transport congestion, flooding or provide basic living facilities rather than pursue quality-oriented targets. These all reflect an obsolete thinking towards urban development, legging behind development requirement in the new era. The mechanical industry chiefly relies on assembling and outside aid, therefore failing to act as a locomotive to pull the whole economy. "HCMC might be left behind other localities in development unless it succeeded in reconfirming its position through restructuring the economy in a timely manner and taking breakthrough steps," Dr. Thien asserted. Many economists assumed that HCMC could hardly develop unless it created a specific management mechanism for itself that was not the same as in other locations countrywide. Reality shows that HCMC had followed its own development directions in the past couple of years, however, the practical results were modest. Some key works saw delays in construction. The growth of major economic sectors was slowing down. A lot of workshop participants suggested HCMC restructure its economy while establishing quality growth as top priority. The city needed to become a center for science and technology research and application of the whole country, alongside building and developing urban infrastructure. Dr. Tran Du Lich said it was imperative to introduce a new way of thinking in which the functions of the State and businesses were clearly defined. In the words of Nguyen Xuan Thanh, monitoring economic sectors using policy vehicles was no longer feasible as the national and HCMC economy has become increasingly complex. Free trade agreements with the international community also deterred the State from providing direct support to sectoral developments. Reality shows that HCMC must exert market rules in most economic activities. Apart from upholding this fresh perception, many participants said to avoid falling into the mid-income trap from 2011-2020, Vietnam needed to change the way economic growth was considered. Due heed must be given to the development of the private sector, administrative reform acceleration, and the augmentation of the land market and support industries. Dr. Tran Du Lich recommended it was imperative for Vietnam to establish a conducive business environment for assorted economic sectors, remove incentives given to state-owned enterprises, and minimize extracting natural resources to ensure sustainable economic development./.