Fundamental Factors Affecting Growth and Transformation

The total export turnover of the City in the past 10 years accounted for about 40.0% of the country. However, this proportion has continuously decreased in the past 10 years; from 56.4% in 2000, to 47.0% in 2005 and only 29.4%.

in 2010.

The results of this process show that the City's import-export scale performance curve, although increasing rapidly, is increasingly widening the gap compared to the whole country. Over 10 years, the country's export turnover increased 4.9 times, while the City's increased only 2.6 times.

Thus, the export and import growth of Ho Chi Minh City compared to the whole country has always been relatively high, in the period of 1993-1998 the average export growth reached 25.3%, in the period of 1999-2003 it was 19.8%, in the period of 2004-2009 the average export growth reached 19.2%, import increased by 12.9%. In particular, Ho Chi Minh City has a fairly good trade surplus, the reason is that Ho Chi Minh City port has the advantage of exporting to the provinces of the South Central and Central Highlands, however, the distribution agents of Ho Chi Minh City are not strong enough to act as import agents and distribute goods for the region. Ho Chi Minh City also has the conditions to increase export turnover if it further promotes the advantage of Saigon seaport as the export hub of the provinces of the Southeast and Central Highlands.

Regarding export structure, in 2007 (one year after Vietnam joined the WTO), it was estimated to reach 10,380 million USD, an increase of 15.3% over the same period. Of which, the items with export turnover of over 1 billion USD include: textiles and garments estimated at 2,903 million USD (an increase of 15%), footwear estimated at 1,277 million USD (an increase of 3.7%).

In general, in 2007, the city's export structure has shifted in a positive direction, high-tech products such as computers, electronics, precision mechanical products, nanotechnology products... have high growth rates but export turnover is still limited (reaching 357 million USD, up 58.7% compared to 2006). In particular, the two products of textiles and footwear, although being labor-intensive industries, currently still hold the position of the city's main export in terms of export turnover contribution. This will be an important factor affecting the trend of shifting the city's export structure.

Up to now, the export structure has continued to shift positively towards increasing the proportion of processed and manufactured goods, goods with high technology and intelligence content, and gradually reducing the export of raw goods. Many goods continue to expand production scale, increasing export value such as rice, coffee, rubber, seafood... In 2012, export turnover is estimated at 30.25 billion USD, up 7.36% compared to 2011; if excluding crude oil and gold, the turnover is estimated at 21.55 billion USD, up 13.2%. Of which, the domestic economic sector accounts for 70.9% with turnover reaching 21.45 billion USD, up 4.56%; the FDI sector with turnover of 8.8 billion USD, up 14.87%. In 2012,

Ho Chi Minh City has 5 products with export turnover of over 1 billion USD, including textiles, electrical and electronic products, rice, footwear and rubber.

3.2.2. Basic factors affecting growth and transformation

economic structure

3.2.2.1.Mobilizing investment capital

Ho Chi Minh City's social development investment has increased in both scale and growth rate, creating resources for production development. In general, investment capital plays a major and increasing role in the economy and the socio-economic development because in the long term, investment is the main factor creating the growth process, thereby shifting the economic structure.

For many years, Ho Chi Minh City has always been the country's leader in attracting domestic and foreign investment capital. This is one of the city's strengths and has made an important contribution to the process of economic restructuring and the development of the city's strong areas. The relationship between investment and growth of the city is shown in the table below.

Table 3.10. Summary of investment capital sources of Ho Chi Minh City in the period (1993-2012)

Unit: billion VND

Target

1993	1995	2000	2005	2010	2012
Total:	7,278	12,713	25,852	46,645	170,098	217,074
1. State budget capital	771	934	2,979	8,501	21,939	20,645
water, in which:
- Central State budget capital	32	934	368	960	3,189	3,685
- Local government capital	739	709	2,611	7,540	18,750	16,960
2. Direct investment capital foreign	----			7,365	84,763	128,919
3. Other capital	6.506			30,780	63,396	67,509

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Source: Ho Chi Minh City Statistical Yearbook (1993-2012)

140000

120000

100000

State budget capital

Foreign investment Other capital

80000

60000

40000

20000

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Chart 3.3. Summary chart of investment capital in Ho Chi Minh City during the period (1993-2012)

Looking at the graph (Chart 3.3), we see that Ho Chi Minh City's investment capital is always increasing, in which other capital sources account for the highest proportion, the structure of foreign direct investment capital

Foreign direct investment has always played an important role. If in 1994, foreign investment capital began to be invested at 2,868 billion VND, by 1998, foreign direct investment capital in the city was 8,217 billion VND, especially in 1997 it was 8,749 billion VND. Since 1999, this capital source has begun to change. From 2000 to 2005, the investment level stagnated at 6,319 billion VND to 7,365 billion VND. During the period from 2006 to 2012, foreign direct investment capital in the city increased very rapidly. If in 2006 it was 8,929 billion VND, in 2008 it was 18,976 billion VND, in 2010 it was 84,763 billion VND and especially in 2012 it was 128,919 billion VND. This shows that along with investment capital from the budget, foreign direct investment capital in Ho Chi Minh City also plays a very important role in the economic development process of the city and the national economic restructuring process.

Table 3.11. Investment capital and investment ratio compared to GDP in the period 1993-2012

Year

Invest (billion VND - actual price)	GDP (billion VND - actual price)	Investment/GDP (%)
1993	7,278	23,722	31
1994	9,556	28,271	34
1995	12,713	36,975	34
1996	18,643	45,545	41
1997	22,959	52,765	44
1998	23,984	61,226	39
1999	18,897	69,001	27
2000	25,853	75,862	34
2001	28,535	84,852	34
2002	32,413	96,402	34
2003	36,628	113,325	33
2004	46,996	137,086	34
2005	46,645	165,296	28
2006	54,751	160,561	34
2007	77,670	229,197	34
2008	99,407	287,513	35
2009	117,897	334,190	35
2010	170,098	463,295	36
2011	202,937	576,225	35
2012	217074	658,676	32

Source: Ho Chi Minh City Statistical Yearbook (1993-2012)

Figure 3.4. Graph of the relationship between investment and GDP of Ho Chi Minh City in the period (1993-2012)

From the above data we see that the city's investment capital is always valued and always

occupy billion

high proportion of the city's GDP in 1999 due to

terrible impact

Due to the financial crisis in Southeast Asia, the city's economy was also affected. Investment capital in 1999 accounted for the lowest proportion in the entire period (1993-2012), accounting for 27% of GDP. In other years, it was over 33%, especially in 1997, it accounted for 44% of GDP. Since 2008, the city's economy as well as the whole country has been affected by the global recession, so investment has also been affected. In 2008 and 2009, the city's investment capital accounted for 35% of the city's GDP. In 2012, the city's investment capital accounted for 32% of GDP.

The investment situation in the city by area is listed in the following table:

Table 3.12. Investment capital structure in Ho Chi Minh City divided by region in the period 1993-2012

Unit (%)

Target

1993 (%)	1995 (%)	2000 (%)	2005 (%)	2010 (%)	2012 (%)
Domestic area	100	57.8	63.1	83.4	50.2	40.6
Investment area foreign	0	42.2	36.9	16.6	49.8	59.4
Total	100	100	100	100	100	100

Source: Ho Chi Minh City Statistical Yearbook (1993-2012)

120

Domestic sector Total investment

Foreign invested area

100

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

Chart 3.5. Domestic and foreign investment period (1993-2012).

From the above data, we can see that the proportion of foreign investment capital in Ho Chi Minh City plays an important role. During the period (1994-2000), this proportion always remained above 30% of total investment capital. During the period (2001-2004), the proportion of investment capital in the foreign-invested sector gradually decreased from 29.4% in 2001 to 17.3% in 2004. During the period (2005-2012), the proportion of investment capital in the foreign-invested sector always increased at a high level. In 2005, the increase was 16.5%, in 2008, 2009 it was 18.5%, in 2010 it was 49.8%, in 2011 it was 49.8%.

2011 was 59.9% and 2012 was 59.4%.

In 10 years of developing industrial parks and export processing zones, 13 industrial parks and export processing zones have been established and attracted 326 foreign investment projects, 317 domestic projects with a total investment capital of more than 1.29 billion USD and nearly 6,500 billion VND. More than 500 factories have been put into operation, contributing 3.36 billion USD in export turnover and creating jobs for more than 100,000 workers. These moves have contributed to promoting industrial development and promoting urbanization in Ho Chi Minh City. In general, industrial parks and export processing zones have been operating stably, especially those with relatively complete infrastructure. Up to now, the occupancy rate in industrial parks and export processing zones has reached 70% in phase 1; the occupancy rate in industrial parks and export processing zones in Ho Chi Minh City has reached 50% or more. In 2005, the total foreign and domestic investment capital in foreign currency was 310 million USD, reaching 91% of the set target but still ranked in the top 3 positions among the total 67 industrial parks - export processing zones of the country and the results of attracting investment capital in the year, at the same time, there were 109 more factories put into production; most of the enterprises operated normally, the country's export turnover, the fourth year of trade surplus was 160 million USD. In 2007, industrial parks and export processing zones attracted 16,000 more workers, bringing the total number of workers, the highest in recent years, bringing the total number of workers in industrial parks and export processing zones to over 100,000 people.

Number of Investment Licenses in the city and registered investment capital of industrial parks and

Although the EPZ has declined in recent times, compared to the general situation of the country, Ho Chi Minh City still achieved positive results. The average investment capital of a foreign investment license is 4.35 million USD, and that of a domestic investment license is 16.75 billion VND. In 2007 alone, the average investment capital of a foreign investment license was 1.68 million USD, lower than the average of previous years; the average capital of a domestic investment license was 24.4 billion VND, higher than the average of previous years.

There have been 18 foreign countries and territories investing in industrial parks and export processing zones (Asia: 9, Europe and America: 6, Canada, Australia). Of which, the 5 countries and territories with the largest investment capital are: Japan (408.80 million USD) with 55 investment licenses), Taiwan (275.77 million USD with 106 investment licenses), Hong Kong (130.28 million USD with 18 investment licenses), (Netherlands 98.40 million USD with 4 investment licenses), South Korea (69.92 million USD with 31 investment licenses). (For details, see Appendix No. 06/LA-TS)

Ask for a favor

incentive and support mechanisms and policies

support

invest

into industrial parks and export processing zones

open and has many incentives from the city government, thus attracting

many projects

investment project

into industrial parks and export processing zones. According to the Management Board of Industrial Parks and Export Processing Zones

Ho Chi Minh City, in 2007, the total import-export turnover of the two export processing zones Tan Thuan and Linh Trung in Ho Chi Minh City reached 5,385.79 million USD. Of which, exports were 2,741.41 million USD, an increase of 33.8% compared to 1999; imports were 644.38 million USD, an increase of 43.3%. Goods from the export processing zones were exported to over 50 countries and regions in the world, earning 2,728.44 million USD, equal to 98.2% of export turnover. Japan was the country with the highest proportion of 44.0%, followed by the EU (25.4%), Taiwan (9.3%), ASEAN countries (4.4%), the US (2.0%),... Goods exported to the domestic market only reached 82.97 million USD, accounting for 1.8% of export turnover. Products and services with investment capital accounting for a large proportion of total investment capital in industrial parks and export processing zones are presented in Table 3.13 below.

Table 3.13. Products and services with investment capital in industrial parks and export processing zones

Tan Thuan Export Processing Zone

Linh Trung Export Processing Zone		Other Industrial Parks
Foreign capital		Domestic capital		Foreign capital		Domestic capital
Electricity, electronics	30%	Shoe	34%	Chemicals, pharmaceuticals	23%	Rubber, plastic	25%
Textile, sewing	18%	Electricity, electricity death	17%	Food	14%	Textile	20%
Mechanical	14%	Textile, sewing	15%	Wood, packaging	11%	Wood, packaging	12%
Plastic	11%	Wood processing	8%	Mechanical	7%	Food	9%

Source: Management Board of Export Processing Zones and Industrial Parks of Ho Chi Minh City

3.2.2.2. Labor force

The annual increase in the city's labor force is shown in the following table: In 1993, the city's labor force was 1.668 million workers, in 1997 it was 1.834 million workers, an increase of 9.9%, in 1998 it was 1.883 million workers, in 2002 it was 2.405 million workers, an increase of 27%, and in 2003 it was 2.503 workers, and in 2009 it was 3.118 million workers, an increase of 25.5%. If we consider the entire period, we see that over 17 years, the city's labor force increased by 1.450 million workers, equivalent to 53%, on average the city's labor force increased by 3.1%/year.

3.2.2.3.Policies and measures

city law

has been deployed to transfer

economic restructuring, improving growth quality

In recent times, specifically from 2006 to present, the City Party Committee and Government have paid special attention to the task of promoting economic restructuring and transforming the economic growth model with the aim of promoting rapid, effective and sustainable growth. Among many drastic measures, it is necessary to mention the economic restructuring support programs approved at the City Party Congresses for two terms in 2006.

-2010 and 2011 -2015.

- The economic restructuring support program was identified by the 8th City Party Congress (2006-2010 period) as one of the city's five lever programs. After 5 years of implementation, the program has contributed to promoting the city's economic restructuring in a positive and right direction. The city's economic structure has changed in the direction of gradually increasing the proportion of service sectors; gradually reducing the proportion of industry and agriculture to gradually turn the city into a service - trade and high-tech industrial center of the country. In addition, internal economic sectors have also changed in a positive direction; increasing the proportion of high value-added goods and services, high science and technology content; forming high-quality service types; reducing labor-intensive industries that cause environmental pollution.

The average growth rate of gross domestic product (GDP) in the city during the period of 2006 - 2010 was 11%/year, equivalent to the average GDP growth rate during the period of 2001 - 2005 (reaching 11%). In which, the period of 2006 - 2007 had high growth, in 2006 it increased by 12.2%, in 2007 it reached 12.6%; in the period of 2008 - 2010, due to the impact of the financial crisis and the world economic recession, the socio-economic situation of the city was negatively affected; leading to a slower economic growth rate compared to previous years, in 2008 it increased by 10.7%, in 2009 it increased by 8.5% and in 2010 it increased by over 11.8%. Of which, the service sector has the highest average annual growth rate, reaching 12.0%/year, 1.2 times higher than the average growth rate of the period.

period 2001 - 2005 (10%/year); industrial and construction sector achieved an average growth rate of 10%/year, lower than the average growth rate of the period 2001-2005 (reaching 12.37%); agricultural sector's average growth rate was equal to the period 2001-2005 at 5%/year.

The contribution of sectors to GDP also has positive changes; the service sector still accounts for the largest proportion, from 51.3% in 2006 to 54.5% in 2010, the industrial - construction sector tends to decrease, from 47.4% in 2006 to 44.3% in 2010; the agricultural sector tends to contribute to the city's GDP relatively stable, in 2010 it was 1.2%.

The structure of economic sectors in GDP has also shifted strongly towards the strong development and increasing contribution of the non-state economic sector and the foreign-invested economic sector. Specifically, the proportion of the non-state economic sector in GDP increased from 46.8% in 2006 to 49.3% in 2009; the foreign-invested economic sector increased from 20.7% in 2006 to 23.3% in 2009; while the proportion of the state economic sector in GDP decreased sharply from 32.5% in 2006 to 27.4% in 2009. This is consistent with the city's policy and orientation in recent times, which is to focus on promoting the development of economic sectors in order to promote the potential and mobilize capital from the whole society, domestic and foreign, to invest in the city's economic development.

In general, the City's CDCCKT Support Program has achieved positive results but is still slow; policies and solutions to support CDCCKT issued are not strong enough and have not created a breakthrough; internal restructuring of economic sectors is also slow; the proportion of service and industrial sectors with added value and high technology content is still low.

- The 9th City Party Congress continued to identify the Program to support the economic restructuring and transformation of the city's economic growth model in the period of 2011 - 2015 as one of the six breakthrough programs. On that basis, the City People's Committee issued Decision 24/2011/QD-UBND on the Plan to implement the Resolution of the 9th City Party Congress on the Economic restructuring program and transformation of the city's economic growth model in the period of 2011 - 2015. The Economic restructuring program aims at the general goal of: Concentrating resources to promote the economic restructuring, rapidly developing industries, industrial products and services with high scientific and technological content, high added value, high efficiency and competitiveness; developing high-tech agriculture; leading the country in transforming the economic growth model from extensive development to

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