Thanks to maintaining a relative high and consecutive economic growth rate over a long period, the city’s economic position has been increasingly secured.

In 1985, HCM City accounted for 13 percent of GDP, 12 percent of industrial production value and 20 percent of value added services for the whole country.

The above-mentioned figures in turn were 16.2 percent, 28.6 percent, 21.2 percent in 1995 and 19.1 percent, 28.8 percent and 24.2 percent in 2004.

Located in the southern key economic region (SKER), HCM City plays a pivotal role in providing services and processing technology to help surrounding localities boost their industrialisation process. The city makes up nearly 80 percent of revenue from the SKER’s service sector and is considered a major market for the processing industry in the region.

In recent times, localities in the SKER have played to their comparative advantages by achieving high industrial growth rates in such provinces as Binh Duong, Dong Nai and Ba Ria-Vung Tau. Meanwhile, despite obtaining lower growth rates, HCM City occupies a logistic role in providing services for localities in the industrialisation process.

In spite of some limitations in playing a key role in the SKER economy, the city’s high economic growth rate has made positive impacts on the economic development of localities in the east-southern region, the Mekong River Delta region, and the Central Highlands.

Regarding the impressive economic growth, Chairman of the HCM City People’s Committee Le Thanh Hai said the high growth rates recorded during the past 20 years can be attributed to the Party and State’s correct guidelines and policies, which encouraged the dynamism and creativity of the city’s people. The two factors added fresh impetus to the high growth of the local economy.

Notably, during the past few years, the municipal Party Committee has exerted every effort to conduct pilot projects to effectively apply new management mechanisms. Many models, like expanding concentrated export processing zones, industrial parks and socialising the mobilisation of capital inflows for investment and development, have been strongly developed in line with market mechanisms. By diversifying forms of investment and encouraging all economic sectors to develop, the city has attracted big volumes of investment capital for the whole country. Its investment capital from the State budget only makes up 12-15 percent of the total investment capital level of the country.

Since the early 1990s, city leaders planned to allocate capital inflows sourced from the State budget for developing technical and social infrastructure facilities to serve economic development and improve local living standards.

Although technical and social infrastructure facilities have not yet met requirements for the city’s economic and population scales, they created favorable conditions for the local economy to further develop.

In terms of economic restructuring, during the past 10 years, the service sectors have made drastic changes, providing catalysts for long-term sustainable development. High value added services like finance-banking, insurance, science-technology, tourism and telecommunications have growth rates higher than that of the national economy.

The industrial sectors serving consumption demands and replacing imports have also showed high growth rates. Fully aware of the competitive conditions in the market economy, industrial businesses have intensified investment in developing trademarks inside and outside the country.

Concerning the challenges facing the city in the integration process, Mr Hai said despite maintaining relatively high economic growth rates in the past years, to achieve success in competition and integration, the city is coping with three major challenges.

First, economic restructuring has been more competitive but remains slow. Low value added commodities still make up a major overall proportion. Many industrial sectors such as food processing, garments and textiles are losing their competitive advantages. Therefore, it is imperative to renew technology and shift to service and production areas.

Second, social and technical infrastructure facilities have failed to meet the requirements for the city’s ever-increasing population and expanding economy.

Every seven years, the city’s economic scale doubles and its population rises by one million people. Overloaded social and technical infrastructures are currently impeding economic development and improvements to local living conditions.

Third, State management has not yet kept up with practical demands, which require an administration to serve economic development and promote social progress.

These challenges are imposing a heavy task on the city as it must concretise action programmes to iron out certain snags in its plan for socio-economic development over the next five years.

Facing such challenges, HCM City has devised some key solutions to fulfill all the targets for socio-economic development in the 2006-2010.

It will aim to reach an average economic growth rate of 12 percent a year, higher than that of the past five years and increase the efficiency of the local economy by sharpening the competitiveness of products and services and ensuring sustainability by protecting and improving the business environment and social equality.

In terms of socio-economic development targets, the city will focus on the area of economics, culture, social affairs and the environment. In addition, priority will be given to urban service criteria such as water supplies, waste treatment, traffic density and housing areas to meet the estimated population of 7.2 million by 2010 and 10 million by 2020.

The city has worked out four major solutions to socio-economic development in the 2006-2010 period, with a focus on boosting economic restructuring and integration, renewing urban management and development and increasing the efficiency of State management. These solutions will be concretised for each year to fulfil the set targets.

The city has asked the Government to issue a number of policies relating to high-class services and investment socialisation of culture and social affairs to stimulate the rapid growth of highly competitive products, utilise internal resources and offer incentives for businesses to achieve success in competition and regional and international integration.