Hanoi, HCMC among top 15 fastest-growing major cities: Savills

Hanoi and Ho Chi Minh City have been ranked among the 15 fastest-growing major cities by 2033, based on their economy, population, and wealth, according to property service company Savills.

HCMC and Hanoi rank second and sixth in the Growth Hubs Index, which builds on the Resilient Cities Index by forecasting the economic aspects of 230 cities through to 2033 to identify the fastest-growing cities.

HCMC’s strong forecast is driven by the largest increase in the number of high-income households, while Hanoi’s prospects are based on growing personal wealth and an expanding middle class, Savills said in report released Friday.

Vietnam continues to lay the groundwork to reap the benefits of strong inflows of foreign direct investment in the coming decade through step-changes in infrastructure, regulation and planning.

The country earmarks about 6% of GDP for infrastructure – the highest level in the region. This is for projects including Long Thanh International Airport, east of HCMC, as well as thousands of kilometers of new roads and deep-sea ports.

The government also has a $134.7 billion plan, Power Development Plan VIII, to reduce reliance on coal and has passed new laws at pace to advance the country’s competitiveness, governance and social justice.

The result is a growing tech manufacturing base supported by inward investment from South Korea, Singapore and China, as well as European companies securing their supply chains out of Asia.

“Vietnam has changed from traditional dirt-floor manufacturing, with companies just seeking a lower cost of labor, to a country that is high-tech, more intensive, with tertiary manufacturing,” said Troy Griffiths, deputy managing director at Savills Vietnam. “These are activities which have a really long tail and spread to the broader economy.”

This means the production of solar panels, electric vehicles, chips, laptop batteries, phones, monitors and all the relevant downstream components. However, Vietnam relies on a couple of key relationships: Samsung represents a remarkable 10-30% of the country’s GDP, while LG Corp also has a strong presence.

In April last year, Prime Minister Pham Minh Chinh chaired a ceremony to launch a national master plan which emphasizes high-tech growth and improved planning. Its implementation will introduce land-use zones and generate much-needed transport development.

HCMC has always been the gateway for foreign investment. At 92% occupancy, it has a strong office market with a shortage of Grade A stock. Retail is thriving too, with robust domestic demand driving modernization of the city’s traditional shophouses.

Hanoi has also won a large share of high tech manufacturing opportunities recently, but its downfall is its air quality. Situated in a delta bordered by two mountain ranges, any pollution becomes trapped; the city recently topped a list of the most polluted cities in the world. However, improving infrastructure has facilitated the development of localities with clean and natural environments within an hour’s travel, offsetting the city’s pollution issues.

Overall, investment in infrastructure is expected to shift the country’s industrial landscape. Around these new projects, land will also be earmarked for residential developments, plus supporting services and amenities, states Savills.