Ho Chi Minh City Seeks to Make Up for 20 Wasted Years

Vietnam’s most dynamic city struggles to shake fetters of corruption, misdevelopment

By: David Brown

Purges, anti-Chinese pogroms, a new name and miscarried attempts to 'socialize' the southern economy failed to stifle the capitalist soul of Saigon. As soon as postwar circumstances permitted, entrepreneurs and officials in what was now called Ho Chi Minh City took the lead in breaking down the 'fences' that stifled Vietnam's economy. Then followed the reforms of Prime Minister Vo Van Kiet, the architect of doi moi, the 'market socialist' experiment that enabled Vietnam's dynamic growth over the course of a quarter-century.

A scheme for a “high tech city” – a fanciful version of which appears above --  near HCM City's downtown center must have had special appeal for Kiet, who had headed Saigon's underground Communist administration during the civil war. Doubtless, he'd seen Pudong, the high-tech satellite city then rising on mudflats across the Huangpu River from Shanghai. In 1996, Kiet issued a directive that launched the Thu Thiem New City project.

A Plausible Dream

Thu Thiem is a seven sq km tract in a loop of the Saigon River. It was programmed for development as a glittering complement to the city's historic center, a park and canal-filled Vietnamese clone of Manhattan or Pudong. To create an empty canvas, 14,600 households – farmers, shopkeepers, day laborers – were relocated, not without grassroots complaint. Tenders for construction of infrastructure were issued but initially found few bidders. The project languished.

While Thu Thiem struggled under public management to achieve liftoff, HCM City grew in other directions. Taiwanese entrepreneur Laurence Ting completed the brilliantly successful Phu My Hung garden city project on the southern edge of the metropolis. Other real estate developers steadily expanded upper-middle-class enclaves to the northeast of city center.

Notwithstanding stasis in Thu Thiem, for much of the time during the last quarter-century, the dream of remaking HCM City into a financial powerhouse has seemed plausible. The city's dynamism, accommodating regulatory environment and a seemingly inexhaustible supply of young, motivated factory workers up from the Mekong Delta have been magnets for foreign investors.

Since 1995, Ho Chi Minh City has added roughly one million inhabitants every five years. Officially it now counts nine million souls, but off the books, so to speak, are several million internal migrants that haven't been able to obtain the residence certificate that would make them eligible for public services.

Empty Pockets

The swelling tide of foreign direct investment, thousands of factories producing for export in surrounding provinces and a booming real estate market have obscured HCM City's recent, relative loss of momentum, but a closer look reveals slippage. The southern megacity struggles to extend and upgrade its urban infrastructure and provide social services.

A city official told me that when HCM City couldn't find the cash recently to complete its part of a new four-lane highway linking it to Binh Duong province to the north, home of dozens of booming industrial zones, officials there were sufficiently perplexed to offer to complete construction. It seems that such shortfalls are now legion; local newspapers report that HCM City is hard-pressed to assure flood control or provide the public utilities, highways, ports, and public amenities and services that are critical supports to private development.

The real estate sector is newly problematic, a consequence of a sustained central government crackdown on self-dealing by officials who facilitate the conversion of state-owned land into privately-held development parcels. According to local sources when I visited the city in February, fully two dozen big projects in HCMC were on hold awaiting approvals that officials now feared to grant.

There's no single explanation for HCM City's relative malaise, but an important reason is the city's agreement, back in 2016 to contribute fully 82 percent of its local revenues to the central budget for redistribution to needier provinces.  Revenue sharing, the richer provinces helping out the poorer, is conventional in Vietnam but per HCM City's current leaders, under their predecessors, it got out of hand. Without more help from the state, they insist, they are hard-pressed to fund ordinary needs, let alone reinvent HCM City as a 5G-powered regional financial powerhouse.

“Unless we can retain our per capita share of the national budget,”  said Nguyen Thien Nhan, the Politburo member who's headed the HCM City party branch since 2017, "we are unable to afford public investment for infrastructure." That seems true to the casual observer, and the figure Nhan quoted, 9.5 percent, up from 5.9 percent, seems reasonable. Under present circumstances, it's said that big-ticket items like a ring road and a municipal subway and light rail system take twice as long as expected to reach completion, and they cost twice the original bid.

It Comes Down to Politics, of course

Nhan and Nguyen Thanh Phong, who heads the city's administration, have lobbied the powers that be in Hanoi for greater flexibility in spending public funds and for greater leverage over national ministries' local activities.

As for HCM City's becoming a financial powerhouse, says Nhan, that dream can't be realized unless the central authorities make it a national goal and fund it accordingly.

"Making up for 20 wasted years" has been an oft-heard phrase in recent city-sponsored economic fora and meetings with leaders from the center.  That's an oblique reference to the two decades that Le Thanh Hai and his proteges controlled HCM City and enriched themselves in particular by facilitating the shady conversion of public land to private commercial uses. Truth be known, it's perfectly plausible that "Boss Hai" agreed to increase HCMC's contribution to the central coffers in a tacit exchange for a free hand to manage affairs in the southern megalopolis.

Hai's long rise, shady dealings and abrupt fall will are the subject of a companion Asia Sentinel story. Suffice it to say here that since Boss Hai was retired in 2016, central government inspectors have found evidence of wrongdoing sufficient to put most of Hai's lieutenants into prison. Hai himself was stripped of his Party status (though not yet his party membership) in March, and indictments may well follow.

Prime Minister Phuc has seemed sympathetic to the current HCM City leadership's plea for financial and policy help. After consultations in February, Phuc instructed four of his economic advisors to report to him promptly on ways to overcome obstacles to the growth of the HCM City economy.

"Promptly" is another word freighted with special meaning. Until the end of this year, the Communist party stalwarts of Vietnam's cities and provinces will be caucusing in advance of Vietnam's 13th Party Congress. In the oblique way that party members campaign for higher office, Phuc is bidding to become the Party's next General Secretary, the nation's top job.

Phuc's competitor is Tran Quoc Vuong, a veteran of many years in the Party secretariat and most recently the indispensable aide in General Secretary Nguyen Phu Trong's anti-corruption campaign. Vuong has brought a long list of miscreants to trial since 2016, and still could bring Le Thanh Hai to trial some time before the 13th Congress convenes. Who knows what dirt might then be spilled on political and business relationships in the southern megalopolis? And yet, there have been no signals that a show trial impends.

Vuong presumably has a lock on the votes of delegates who believe ideological rigor begets good policy. Phuc, by contrast, seems good at making and executing sound policy while respecting ideology, a set of qualities that may draw him most of the delegates’ votes from HCM City and its neighboring provinces, entities that collectively contribute 60 percent of the Vietnamese state's revenues. Though Phuc's talents as an executive are impressive, what seems to matter even more to them is whether he can credibly promise to direct consistent support -- both policy and resources -- back to Vietnam's south.

David Brown is a retired former US diplomat with deep experience in Vietnam. He is a regular contributor to Asia Sentinel