Ho Chi Minh City's economy recovered after the Covid-19 shock

HCM City has recovered strongly after social distancing. Photo: HCM City Department of Information and Communication

Bright picture after the pandemic

During the 4th wave of Covid-19, HCM City was one of the most affected localities.

In 2021, HCM City’s GRDP grew -6.78%, the deepest decline in history. After a deep decline in the third and fourth quarters of 2021 of -24.97% and -11.64%, respectively, in the first quarter of 2022, HCMC's GRDP was estimated to increase by 1.88% over the same period. After the pandemic, HCM City has recovered and gradually prospered, showing that the space, potential, and vitality of HCM City's enterprises are good.

Dr. Tran Dinh Thien, member of the Prime Minister's Economic Advisory Group:

For HCM City to recover its economy effectively, radical change is needed instead of being hasty and following the old ways.

The biggest challenge and also the key issue now is human resources. Currently, there is a serious shortage of labor in all industries, requiring effective policies to attract workers. Additionally, HCM City needs to recognize and change the economic structure in a more fundamental way. The current weakness of HCM City is the economic structure based on low-quality labor. This trait cannot be relied on for development. Moreover, the city's industrial zones are located in the inner city leading to traffic jams and many other serious problems. Thus, the city needs to limit  the development of labor-intensive industries and switch to high technology. In particular, it is necessary to open and develop regional links to reduce congestion at seaports, river ports, and airports.

Dr. Ho Quoc Tuan, Lecturer at the University of Bristol (UK):

Public investment is considered one of the solutions to remove obstacles in HCM City's economic growth, which has slowed down in recent years. But without both resources and mechanisms, it is difficult. Accordingly, there should be an institution on a special technology-financial zone for HCM City with a specific mechanism, so that the city can use some budget revenues; appoint and use talents; actively disburse public investment capital; and plan the development direction. Only then, the public investment really works.

Phan Van Mai, Chairman of the People's Committee of HCM City, said that this was not a high growth rate, but the positive growth of GRDP in HCM City was encouraging, showing that the economy was recovering strongly. Contributing to more than 20% of the country's GDP, the economic recovery of HCM City will make an important contribution to boosting the country's economic growth to a higher level than in the same period last year.

Additionally, the number of new enterprises and enterprises returning to production and business activities in the first quarter of 2022 reached the highest level compared to the same period in the last three years. In general, the total registered and additional capital was estimated at VND282,975 billion, up 2.78% over the same period last year. In which, 9,150 enterprises were licensed for new establishment; 17,335 enterprises registered to change business registration contents, and additional adjusted capital increased by VND137,044 billion, up 16.26% over the same period.

More than 98% of production facilities in the city have opened factories, production workshops, restoring smooth and unbroken goods circulation. Authorities at all levels focus on dialogue with businesses to remove obstacles to speed up their recovery process. Production and business activities are gradually recovering in a fundamental way, industrial production continues to grow, albeit at a slower and uneven rate across industries.

Although the city's export activities have been affected by the Covid-19 pandemic, and geopolitical fluctuations have occurred in some markets, the import and export turnover in the first quarter continued to maintain a recovery momentum with a growth of 3.5% over the same period last year.

Need a breakthrough

Besides the achieved results, the economy of HCM City is facing many difficulties and challenges when the revenue of consumer services decreases; the increase in raw material prices not only affects the consumer price index but also affects the production and business activities of enterprises. These problems require urgent solutions and breakthrough mechanisms to recover and grow.

According to Nguyen Ngoc Hoa, Chairman of the Board of Directors of HCM City Financial Investment Company, the National Assembly has approved stimulus packages for economic recovery. HCM City needs to proactively use these packages and create conditions for businesses to effectively access them. Simultaneously, to be able to make a breakthrough in the "post-Covid-19" period, public investment must go first.

Therefore, it is necessary to activate a series of projects that act as a trigger to create jobs and promote business activities. When activating public investment, it is necessary to focus on two major issues: infrastructure and technology; innovation, and digital transformation. In the first issue, the city is restarting the construction of ring roads. In the second issue, a wide range of information technology applications and digital solutions will be launched. Additionally, it is necessary to concretize and remove policy mechanisms. For example, we already have a stimulus package for the social housing program, but we still need a specific approval scheme on housing and land strategy along with a series of administrative procedures, mechanisms and policies.

HCM City also needs to remove obstacles to sustainable export growth. Nguyen Ngoc Hung, Vice Chairman of HCM City Business Association, said that there should be coordination among ministries, removing market barriers in meetings of intergovernmental committees. In particular, it is necessary to proactively raise the issue of technical barriers as well as solutions to remove market barriers at meetings of intergovernmental committees at trade and international forums in which Vietnam participates.

In addition, the participation and implementation of procedures for promoting trade facilitation must be promoted, such as strengthening the signing of agreements on cooperation or mutual recognition of standards, inspection processes between the competent authorities of Vietnam and the FTA partner countries, and reducing customs procedures.