Pandemic still unrelenting
Exactly a year ago, at the beginning of April 2020, more than 97 million Vietnamese people implemented Directive 16 of the Prime Minister. Specifically, social distancing was conducted for fifteen days to fight and contain the Covid-19 pandemic. A week earlier, on 27 March, as per Directive 15, the Government expressed an extremely important anti-pandemic viewpoint which stated that we must be prepared to face economic losses to prevent the pandemic from spreading, as protecting lives was a far more important prerogative of the Government.
At that time, the choice between protecting the health of people or saving the economy was a difficult choice for most countries in the world, when the outbreak of the Covid-19 pandemic caught the whole world by shock and surprise. Many developed countries such as the US and the EU have made serious mistakes since, and are paying a very heavy price by choosing to maintain economic activities as normal and cope with this serious pandemic with the hope of a herd immunity setting in.
This policy decision has had severe and drastic consequences, with an unstoppable rise of infections, a skyrocketing death toll, and a nearly paralyzed economy. More importantly, these countries have missed out on golden opportunities to effectively localize and control infections and quell the rate of people succumbing to the disease. Until now, more than a year after the outbreak, with vaccinations underway in many communities, the pandemic is still recurring and fear is quite palpable across regions.
The year 2020 ended with the world economic growth map in red and a lurking recession, and only a few rare blue spots showed over countries that still maintained a positive growth rate, of which Vietnam was one. Vietnam’s economic growth rate in 2020 was 2.94%, and although it was the lowest growth rate in the past few decades, it was what most powerful governments in the world even failed to achieve.
FDI maximum in Ho Chi Minh City
In the context of a raging pandemic, the economic growth of Ho Chi Minh City reached 1.39%. Although this is the lowest growth rate in the economic history of the City, in the uncertainty of economic activities in 2020, this is an extremely impressive result. After the first wave of the pandemic broke out and the country had to implement lockdowns of infected areas as per Directive 16, Ho Chi Minh City has had to see more than 5,500 businesses shut down, and the painful loss of jobs for hundreds of thousands of workers.
As the country’s main economic hub, Ho Chi Minh City has always made great efforts and taken great strides. Many practical and effective solutions were drastically implemented to ensure economic success. Chairman Nguyen Thanh Phong admitted that 2020 was the most difficult year, when the economy of Ho Chi Minh City grew by 1.39% for the first time and more than 32,000 businesses were dissolved or temporarily shut down. Nonetheless, Ho Chi Minh City promptly supported those in difficulty, ensuring 100% implementation of their support plan with a VND 600 bn package; extending tax period for businesses with around VND 8,800 bn; and extending about VND 200 bn of value-added tax, personal income tax, and land rent of small business households.
The result brought many positive signs in the economy in Ho Chi Minh City, even though 2020 was an extremely traumatic and excruciating year. Exports are still at around US$ 44 bn, and around US$ 4 bn has come in foreign investments, with the City leading in the maximum number of FDI. Many businesses have dissolved or gone bankrupt or put on hold, but on the other hand there are about 40,000 newly registered businesses now, with around 8,000 businesses currently making efforts to resume operations.
Improving investment environment
In the first three months of 2021, the economy of Ho Chi Minh City marked many positive changes, even though it was severely affected by Covid-19 infectious cases at Tan Son Nhat airport during this time. By following effective and drastic application of Directive 16, the negative impacts on the City’s economy were minimized, except for a number of service sectors that are still heavily affected.
Ho Chi Minh City budget revenue in the first two months of 2021 reached around VND 74,000 bn, accounting for 20% of the total budget revenue for the whole of 2021, and equivalent to VND 2,900 bn per day. Other socio-economic development indicators also showed positive growth over the same period. Total retail sale of goods and services increased by 4.7%, commodity retail trade by 11%, export turnover reached US$ 8 bn, up 25%, and three times higher than in the same period last year.
On the morning of 31 December 2020, Ho Chi Minh City announced Resolution 1111 of the 14th Standing Committee of the National Assembly on the establishment of Thu Duc City directly under the governance of Ho Chi Minh City. Thu Duc City will be a knowledge based economic city, a highly creative and interactive urban area, which will be a driving force for economic breakthrough for Ho Chi Minh City.
To undertake this mission, in addition to the existing infrastructure such as High-Tech Park, University Village, Thu Thiem New Urban Area, Financial Center of Vietnam, in coming time, Thu Duc City will continue to invest in important social and technological infrastructure to become the largest creative startup center in Vietnam with Quang Trung Software Park. It will be the most modern high-performance computing center with supercomputers in ASEAN, with also an International Fair Exhibition Center and the Rach Chiec Sports Complex.
Therefore, the demand for investment capital will be very large and is considered a key task by Ho Chi Minh City in 2021. The achievements from socio-economic stability through successful anti-pandemic efforts, production and business activities, and by adapting to uncertainties caused by the pandemic, Ho Chi Minh City will work to strongly improve the quality of the investment environment. A safe and effective investment environment will help in attracting capital flow. In this effort, Thu Duc City will act as the center for capital inflow for urban infrastructure, creative space, science and technology development, and eventually become a vital AI center of Vietnam.
Asso. Prof. Dr. Nguyen Khac Quoc Bao, University of Economics, Ho Chi Minh City