2021 21 January

Vietnam: The New Thu Duc City – What Does it Mean to Investors?

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BACKGROUND

The proposal to establish Thu Duc City was developed several years ago by the municipal government of Ho Chi Minh City.

The proposed combination of several districts in Ho Chi Minh City to form a separate city within Ho Chi Minh City was considered necessary and advisable because each of the relevant districts has existing critical resources such as finance, human resources and technology which, if combined and put under a unified administrative unit, should help the eastern section of Ho Chi Minh City become a creative and highly interactive urban center.

On October 2020, the People’s Committee of Ho Chi Minh City gathered public opinions from residents of the affected geographical districts in Ho Chi Minh City, specifically, Districts 2 and 9 and Thu Duc District, as well as relevant agencies and organizations. After receiving mostly positive responses, this proposal was finally approved when the Standing Committee of Vietnam’s National Assembly issued Resolution 1111/NQ-UBTVQH14 (“Resolution 1111”) on 9 December 2020.

The establishment of the new city marks a milestone in the development of Ho Chi Minh City. Thu Duc City, which is under the administration of Ho Chi Minh City, is expected to be a substantial part of Vietnam’s economy, contributing one-third of the gross regional domestic product of Ho Chi Minh City and thus accounting for 7% of  Vietnam’s total GDP. 

MAIN CHANGES

This is the first time in Vietnam that a city has been established within a city. According to Resolution 1111, Thu Duc City is formed out of the merger of 3 former districts in the eastern section of Ho Chi Minh City, namely Districts 2, 9 and Thu Duc. Thu Duc City covers an area of more than 211 square kilometers and boasts a population of more than one million residents. The new city borders Ho Chi Minh City Districts 1, 4, 7, 12, Binh Thanh, as well as Binh Duong province and Dong Nai province, which are two of the fastest-growing industrial provinces in the southern part of Vietnam.

The merger also leads to a restructuring of the current government authorities of the relevant districts, including the court and procuracy systems of the 3 districts will be dissolved in accordance with Resolution 1111 and the new unified court and procuracy system of Thu Duc City will be implemented.

Resolution 1111 took effect as from 1 January 2021.

POTENTIAL IMPACTS

A. Short Term
  • The transitional period may cause delays to administrative procedures

According to Mr. Huynh Thanh Nhan, the Director of the Department of Home Affairs of Ho Chi Minh City, the new government authorities of Thu Duc City must be formed not later than 7 February 2021. The transitional period may cause delay for some administrative procedures. For example, in early January 2021, the business registration office of the Department of Planning and Investment of Ho Chi Minh City announced temporarily suspending the processing of enterprise registration applications relative to Thu Duc City until it receives further guidance.

  • Documents may need to be amended  

As a result of the new establishment of Thu Duc City, permits and licenses for businesses such as the enterprise registration certificate, the investment registration certificate and relevant business operation licenses may need to be amended to reflect the change in address of affected individuals and entities.

B. Longer Term
  • The growth of the real estate market

As Thu Duc City is expected to become an economic and technology hub of Ho Chi Minh City, it may attract more residents and businesses. This may result in an increased demand for housing, as well as an increase in demand for manufacturing and office space. In the near future, it is believed that Thu Duc City will become a dynamic real estate market within Ho Chi Minh City.

With the expected increased demand for real estate and the ongoing development of infrastructure in Thu Duc City, it is anticipated that land and housing prices in Thu Duc City will increase in the near future.

  • Expected improvement of public services

During the past few years, the Vietnam government has taken steps to simplify most administrative procedures as well as accelerate e-government development. Investors may have noticed changes in the quality of public service delivery, for example the statutory time frame for most administrative procedures has been reduced and more channels have been implemented for investors to carry out administrative procedures. Although, many issues remain to be addressed, there is an expectation that with the formation of Thu Duc City, the government will take further steps to solve the remaining issues of public service delivery to facilitate and promote investment activities in the new city.

  • Expected improvement of infrastructure

To attract investment and facilitate business in Thu Duc City, the government intends to improve the infrastructure of the city, especially the transportation system. It is targeted that by the end of 2021, the Metro Line 1 project must be put into operation. Other major road and bridge construction projects in the area are also be completed expeditiously.

At the direction of the Deputy Prime Minister, Truong Hoa Binh, when preparing the development plan for Thu Duc City, the government must take into account infrastructure investment needs and demands to better assist foreign investors.

  • More investment opportunities

The formation of Thu Duc City will generate a robust demand for infrastructure (including buildings, roads and power supply) which means investors may see various investment opportunities to cooperate with the Government in public private partnership projects.

Additionally, the government is also planning to develop another high-tech park of more than 166 hectares which, if approved, will be located very close to the existing high-tech park in the former District 9. The new high-tech park is expected to become a center of research, experimentation and technology development and will have close ties with the existing high-tech park. Together, the further development of these high-tech parks will transform Thu Duc City into a high-tech city creating a favorable investment environment.

 

The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

 

Contact

Kevin Hawkins
Kevin Hawkins
Partner, Vietnam
kevin.hawkins@dfdl.com

 

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