Breaking ground: Resolution 98 empowers HCM City's development and national impact

August 01, 2023 - 09:05

The resolution introduces a range of mechanisms and policies aimed at stimulating the HCM City's growth, addressing challenges, and fostering innovation and sustainability.

Võ Trí Thành


*Võ Trí Thành

Today, Resolution 98/2023/QH15 which grants special mechanisms and policies for the development of HCM City officially takes effect. The new policy replaces Resolution 54/2017/QH14 on the pilot implementation of particular policies for HCM City’s development issued on November 24, 2017.

With an impressive consensus of over 97.37 per cent from National Assembly deputies on June 24, this resolution stands as the largest specific policy ever passed by the National Assembly. The strong support for HCM City reflects the nation's desire to awaken its dynamism, creativity and innovation, while also reinforcing its role as the economic powerhouse of the country.

HCM City has played a leading role in the nation's economic landscape, contributing significantly to the country's GDP, particularly in the industrial sector, and bolstering the State budget. The City's dynamic and pioneering spirit has driven reforms and widespread development. However, in recent years, its leading position has faltered.

Between 2012 and 2015, HCM City faced challenges as it transitioned from relying on labour and natural resources to emphasising increased productivity and innovation. Despite efforts, the city struggled to create new foundations and set the stage for further development. Productivity growth remained sluggish, and in 2022, it even trailed behind the national average.

The decline in HCM City's leading role can be attributed, in part, to the overall slow pace of national development reform. The City's pioneering nature also faced constraints, with some cadres and civil servants lacking dynamism and the spirit of daring to take responsibility.

Resolution 54 had set high expectations, aiming to create specific mechanisms that would empower HCM City to develop more robustly. While it introduced some favourable measures, it only mildly alleviated existing constraints. The resolution allowed HCM City to accelerate the implementation of Group A projects without central appraisal and increased the capital mobilisation limit through the proactive issuance of local government bonds, domestic loans and foreign loans. It also raised the environmental protection fee for industrial wastewater and allocated additional income to motivate cadres and civil servants, fostering creativity and enhancing the state apparatus's quality.

Despite these efforts, Resolution 54 was seen as a “tight shirt”, failing to provide sufficient impetus for HCM City to achieve a breakthrough in its economy or address the problems hindering officials and civil servants from striving for more. Challenges also arose from the change in the City's government structure when Thủ Đức City was created. Decentralisation and autonomy of HCM City remained limited, hindering the City's ability to embrace new trends focused on increased productivity, innovation, circular economy and sustainable development.

The new specific mechanism outlined in Resolution 98 addresses these concerns and adapts to the current context. The resolution encompasses 44 mechanisms and policies, with 7 groups of specific mechanisms, some inherited from NQ54, others already issued for other localities, and 27 exclusive to HCM City. The resolution covers various areas, including investment management, finance, budget, urban management, natural resources and environment, priority industries to attract strategic investors, science-technology management, innovation and organisational structures of HCM City and Thủ Đức City.

Among the novel mechanisms, the resolution introduces a transport-oriented urban development model that allows HCM City to use the local budget for compensation, support and resettlement for investment projects near railway stations and traffic junctions along Ring Road 3. It also enables land acquisition and on-site resettlement to create land funds for auctioning to select investors in urban development projects.

Resolution 98 also grants HCM City People's Committee the authority to decide and adjust rates and fees not included in the Law on Fees and Charges, with 100 per cent of the increase from these revenues contributing to the City's budget. The city's district People's Committees are allocated an unassigned portion of their budgets, ranging from 2 per cent to 4 per cent, to address natural disasters, epidemics and other essential tasks.

In terms of finance, the resolution allows the HCM City Finance and Investment State-Onwed Company (HFIC) to increase its charter capital using revenue from the equitisation of 100-per-cent state-owned enterprises in the City, as well as from the company's retained profits. HCM City can allocate public investment capital to support interest rates for HFIC's investment projects in priority areas of socio-economic development.

Additionally, HCM City is granted the authority to collect funds to maintain and regenerate infrastructure in industrial parks and export processing zones from businesses within these areas, subject to regulations ensuring transparency. The resolution also permits piloting a financial mechanism to reduce greenhouse gas emissions through mechanisms of exchanging, clearing and trading carbon credits with domestic and international investors, with 100 per cent of the revenue from these transactions contributing to the City's budget. Moreover, the City is allowed to install solar power systems on administrative office and public service unit roofs to provide electricity for their operations.

Resolution 98 further delineates a list of priority industries and occupations to attract strategic investors to HCM City. This includes investing in building innovation centres and research and development (R&D) centres, supporting high technology transfer in various fields, such as information technology, biotechnology, automation technology, and new material technology, as well as investing in projects related to the semiconductor integrated circuit industry, design technology, component manufacturing, integrated electronic circuits, flexible electronics, chips, new technology batteries and clean energy.

The resolution's issuance comes at a time when HCM City faces numerous difficulties, including a decline in GDP (which increased by a meagre 0.7 per cent in the first quarter). However, the new mechanisms are not only tailored to address long-term needs but also aim to resolve immediate problems like investment congestion.

HCM City is already taking proactive measures to prepare for the implementation of these mechanisms. As a result, the City's GDP in the second quarter increased significantly by 5.87 per cent, making a substantial contribution to the national recovery process and heading near to its ambitious GDP of more than 6.5 per cent this year.

Beyond immediate benefits, Resolution 98 is expected to create breakthroughs in infrastructure and resource attraction, aligning with the development of linkages in the Southeast region and attracting quality investors to the City. This will reinforce HCM City's role as an economic locomotive not just for the country but also for the entire Southeast and South region. More importantly, the success of the new mechanisms may inspire other provinces and cities to seek their own specific mechanisms, fostering institutional reform nationwide.

While the new resolution provides the framework for development, the effective implementation of the mechanisms will require specific legal documents. However, it is equally crucial for HCM City to display its strong initiative and determination spirit. The Prime Minister has already assigned related agencies to develop a decree guiding the implementation of the specific mechanisms for HCM City, with a completion deadline set for August 15. The implementation of these mechanisms will benefit the whole country, making it a collective task where the nation comes together to support HCM City, and in turn, the City contributes to the nation's progress.

The sandbox implementation of the city-specific mechanism also raises concerns about institutional reform. Many other provinces and cities are considering specific mechanisms due to shortcomings in the existing system. Although the sandbox approach is a step forward, gaining experience and summarising the outcomes will take time. Furthermore, aside from specific mechanisms, it is essential to adopt a comprehensive perspective to reform the business investment environment, as this remains crucial to overall progress. 

HCM City's success will not only benefit the city but also have far-reaching implications for the nation, contributing to economic growth, regional development and institutional reform. As the city moves forward, the implementation of these mechanisms, along with strong initiative and commitment, will pave the way for a brighter future, not just for HCM City but for all of Việt Nam.

*Võ Trí Thành is a senior economist at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. A doctorate in economics from the Australian National University, Thành mainly undertakes research and provides consultation on issues related to macroeconomic policies, trade liberalisation and international economic integration. Other areas of interest include institutional reforms and financial systems. He authors Việt Nam News column Analyst’s Pick.