Hanoi continues to be attractive investment destination: Expert

Hanoi’s strong efforts to improve the business environment and support local enterprises would continue to help the capital city remain an attractive investment destination for both local and foreign investors, according to senior economist Nguyen Minh Phong.

Prime Minister Nguyen Xuan Phuc and delegates at a conference discussing measures to support enterprises last December. Photo: Minh Vuong.

After years of steadily improving its ranking in the USAID-backed Provincial Competitiveness Index (CPI), Hanoi has made its way into Vietnam’s top business-friendly localities for the past few years.

During the 2016 – 2020 period, total social investment capital in Hanoi was estimated at VND1,740 trillion (US$75.14 billion), 1.65-fold the figure recorded in the 2011 – 2015 period and equivalent to 43.9% of the city's gross regional domestic product (GRDP).

Meanwhile, the city has been able to mobilize VND1,100 trillion (US$47.5 billion) from private investors into over 2,200 projects.

Mr. Phong observed that Hanoi is taking a number of financial and trade measures to support the business community in seizing new opportunities for growth, including a proposal on the development of supporting industries in the 2017 – 2020 period, with vision to 2025, and a similar proposal for the 2020 – 2025 period, and holding investment promotion conferences, among others.

According to Mr. Phong, there have been significant results in Hanoi’s administrative reforms during the 2011 – 2020 period, as the city’s leaders have expressed determination to remove existing bottlenecks to development.

The economist pointed to the city’s push for the establishment of e-government and the ongoing digital transformation process, aiming to cut cost, time and enhance corporate governance capabilities for enterprises.

As Hanoi gives high priority to the development of hi-tech sectors, the city is currently home to 11,000 IT companies with a combined annual revenue of US$10 billion with exports accounting for 20% of the total of Hanoi.

Recently, the Hanoi People’s Committee issued plan No. No.167/KH-UBND detailing measures to support SMEs in 2021 with an estimated amount of VND402 billion (US$17.3 million). 

Under the plan, Hanoi would give priority to supporting innovative and digital enterprises, which are expected to lay a foundation for the capital city’s socio-economic development.

To further expand the business community, Hanoi eyes a 10% annual growth rate of business creation, or 30,000 new enterprises per year, while providing support for SMEs to narrow their gap with their peers in leading economies in the Southeast Asian region in terms of technology, human resources and competitiveness.

Hanoi expects SMEs operating in the city would contribute 45% of its gross regional domestic product (GRDP) by 2025, up from the current 40% rate.

Additionally, the SMEs, accounting for 97% of total enterprises in Hanoi, are expected to make up over 25% of the city’s exports and create 150,000 new jobs, stated the municipal People’s Committee in a plan detailing measures to support SMEs in 2021.

Among key measures, Hanoi would offer financial support for SMEs to participate in international exhibitions, conferences and workshop to look for new markets and partners; provide free training courses for startups and up to 70% of expenses for courses related to business administration and corporate governance.

Leading efforts to improve business environment

To ensure its place among the most favored investment destinations in Vietnam, Hanoi has identified key tasks for the next five years, including restructuring the economy for greater productivity, efficiency and competitiveness.

Moreover, Hanoi set a strong focus on improving the existing infrastructure system and bolster connectivity between industrial parks in Hanoi and those in other provinces and cities, in turn forming efficient supply chains.

At four investment cooperation conferences held from 2016 – 2020, Hanoi issued investment licenses for 264 projects worth VND854 trillion (US$36.88 billion), as well as dozens of memoranda of understandings (MoU) with business organizations, domestic and foreign investors.

In 2019, Hanoi topped the country in terms of FDI attraction for two consecutive years with US$8.67 billion, accumulating a total of US$35 billion in 2016 – 2020, a 4-fold increase against the previous five years.

With 286,096 operational enterprises as of April 2020, Hanoi made up one third of the total number of 758,610 nationwide as of late 2019.