Although the Thu Thiem New Urban Area – a major development project in Vietnam – has attracted more than $1.3bn in investments from public and private sources, foreign investors have become concerned about the slow progress of the project, as well as the complex’s high land prices.
There are worries that fragmented infrastructure and delays in construction approval could prevent the project from attracting more FDI from large international investors. Trang Bao Son, the deputy chief of the Thu Thiem New Urban Area’s management board, was quoted in local media reports saying that despite being located close to Ho Chi Minh City, which is Vietnam’s largest city, the lack of well-connected road and rail infrastructure means the urban area could remain an unattractive investment prospect for foreign investors. Although planning for the Thu Thiem New Urban Area started as early as 1996, it took municipal authorities more than 10 years to relocate residents in order to make space for the project, and in an interview with TuoiTreNews, a local newspaper, Mr Son said: “After 17 years, work has fallen short of expectations.”
Developed with a view to include mixed-use residential and business facilities, as well as hotel and exhibition centres and the city’s tallest observation skyline, doubts have been raised on whether the urban area will attract a sufficient amount of international investors upon its completion in 2025.
Despite aiming to become Vietnam’s largest urban complex, officials close to the project admit that aside from the Thu Thiem Bridge and an existing tunnel, there are still no other infrastructure facilities which connect the New Urban Area to the centre of Ho Chi Minh City. “The infrastructure that connects the Thu Thiem Area with the city is very important, but we still do not have anything but the Thu Thiem Bridge and tunnel,” Vo Sy Danh, a representative of Vietnam-based real estate developer Tien Phuoc, said in an interview with TuoiTreNews.
After establishing itself as one of Asia’s fastest growing countries in the past decade, Vietnam’s GDP growth has slowed in the past two years from 5.9% in 2011 to 5% in 2012, according to the Asian Development Bank. In addition, FDI into greenfield projects in the country has declined from a peak of 358 projects worth $60bn in 2008, to a low of 161 projects worth $6bn in 2012, according to greenfield investment monitor fDi Markets. Although the Thu Thiem New Urban Area was created to offset this decline in FDI, greenfield investment into Vietnam in 2013 is its lowest point yet in a decade, as the country attracted only 93 projects worth $5bn.
Although 99% of the Thu Thiem New Urban Area site has been cleared for construction, according to online Vietnam-based news provider VietnamNet, and the government has earmarked $550m to develop infrastructure on the left bank of the Saigon River, which runs along the site, Le Hoang Chau, the chairman of the Ho Chi Minh City Real Estate Association, said municipal authorities must work to further alleviate the legal barriers that investors face. “The city should have a more flexible land price policy in order to attract investors,” Mr Chau told TuoiTreNews. “For instance, we [should] accept low leasing fees, and focus on collecting other service fees.”