Sài Gòn beats Hà Nội four decades after Việt Nam War

Almost four decades after the Việt Nam ended, Sài Gòn has turned the tables on Hà Nội, outstripping its conqueror in investment and growth.

The former southern capital, renamed Hồ Chí Minh City but still widely known by its prewar name, contributes almost a quarter of the country’s gross domestic product and the market capitalization of its stock index is seven times Hà Nội’s.

Now, Sài Gòn is upping the ante with plans to build a new airport that would increase capacity as much as fivefold.

“By all measures, Hồ Chí Minh City has moved into a more advanced place than Hà Nội in terms of the sophistication of its economy and local companies.”

Said Edmund Malesky, an associate professor of political economy at Duke University in Durham, North Carolina, and the lead researcher for the Việt Nam Provincial Competitiveness Index, compiled by the Việt Nam Chamber of Commerce and Industry with U.S. aid.

It’s a long way from the chaotic day of April 30, 1975, when North Vietnamese tanks crashed through the gates of the presidential palace.

Replicas are now parked outside as a tourist attraction, while the renamed Reunification Palace is a favored venue for shareholder meetings.

Sài Gòn’s population has more than doubled to 7.8 million, while its economy grew 9.3 percent last year, pushing the city’s per-capita GDP to $4,513, more than twice the national average.

In Hà Nội, which has about 6.9 million residents, the economy grew 8.3 percent to increase its per-capita to $2,985.

General Views Of Ho Chi Minh CityA street vendor walks past a Chanel SA store inside the Rex Hotel in downtown Hồ Chí Minh City, Việt Nam

Economic hub

That makes the southern city key to Vietnam’s efforts to revive a national economy heading for its seventh straight year of sub-7 percent growth after averaging 7.3 percent in the previous seven years.

Hồ Chí Minh City’s relative wealth makes it the entry point for many Western brands.

McDonald’s Corp. Chief Executive Officer Donald Thompson attended the opening of the company’s first branch in the country in February.

A second opened in May near Bến Thành market, a landmark where tourists slurp bowls of spicy beef noodles and shop for lacquer boxes and raw silk.

Hà Nội got its first Starbucks Corp. store in July — more than a year behind Hồ Chí Minh City, which now has eight.

“Sài Gòn is the dynamo, the city with more energy.”

Said Ray Burghardt, the Hà Nội-based U.S. ambassador to Việt Nam from 2001 to 2004, who lived in South Việt Nam from 1970 to 1973.

Looking South

Part of that dynamism is rooted in the city’s past.

Southern Việt Nam’s trading roots date back centuries, according to Martin Stuart-Fox, an emeritus history professor at Australia’s University of Queensland in Brisbane.

While Hà Nội’s history is tied to the presence of neighboring China, about 100 miles away, Sài Gòn, next to the rich alluvial plain of the Mekong Delta, is 700 miles to the south and closer to Thailand, Malaysia and Singapore than it is to the Chinese border.

“Southern Việt Nam was always a frontier area, and because it didn’t have that close contact with China and didn’t look north as Hà Nội always had, people in the south looked outward instead and welcomed trade.”

Said Stuart-Fox.

“Then, when the French moved in, they built drainage canals to increase rice production in the Mekong Delta and boost trade with France, and in general focused on exploiting the south economically.”

Việt Nam’s post-1975 attempts to stifle enterprise misfired “abysmally” in Hồ Chí Minh City, with many entrepreneurs sent to labor camps for “capitalist activities,” until a crumbling economy caused Marxist tenets to be diluted or scrapped, Stanley Karnow wrote in his book “Việt Nam: a History.”

After the so-called Đổi Mới economic reforms in 1986, Sài Gòn resumed its role as a commercial hub, with newly freed entrepreneurs quickly resuming their businesses.

Western influence

Growth was boosted in 2000 with the signing of a bilateral trade agreement with the U.S.

“The south has always had more U.S. influence on its business culture.”

Said Thân Trọng Phúc, managing director of technology-focused investment fund DFJ VinaCapital LP in Hồ Chí Minh City.

“Doing business here is more straightforward, whereas doing business in the north involves more government and a complex maze of relations.”

Sài Gòn’s economy even may have benefited from being on the losing side of the war because it removed much of the government presence that existed when it was the southern capital, said Sesto Vecchi, managing partner of the Hồ Chí Minh City office of U.S. law firm Russin & Vecchi.

He arrived in South Việt Nam in 1965 with the U.S. Navy and was in Sài Gòn in the days before it fell.

Less government

“Now there’s even less government impact on people’s decision making here.”

Said Vecchi, who returned to live in the city in 1993.

“A lot of the government influence in those days was directed toward the war, but even with that, Sài Gòn always had a strong commercial environment.”

Hà Nội’s position as the nation’s capital is a double-edged sword.

While it makes the city vital for businesses that must deal with the ministries, especially banks, it also creates a more restrictive regulatory environment.

“We need to see more progress in terms of the economic-reform policies coming out of Hà Nội.”

Burghardt said.

“Hồ Chí Minh City is a hostage to the speed of those reforms.”

Hồ Chí Minh City ranked 10th last year and Hà Nội 33rd among 63 Vietnamese provinces and cities in the country’s competitiveness gauge, which weighs measures such as entry cost, transparency and access to land.

Downtown airport

Hồ Chí Minh City’s advance is most evident at the airport, which saw some of the fiercest fighting during the battle for the city in 1975.

A 20-minute drive from Reunification Palace, Tân Sơn Nhất is now in the heart of Sài Gòn’s expanding sprawl of houses, shops and factories.

Still coded SGN for Sài Gòn, it’s almost at bursting point, with almost twice the number of passengers that fly in and out of Hà Nội.

The planned new airport in neighboring Đồng Nai province eventually is expected to handle 100 million passengers a year, compared with about 20 million at Tân Sơn Nhất.

The project needs approval from the National Assembly and its first stage, costing about $7.8 billion, wouldn’t be operational until at least 2020.

Meantime, the number of travelers coming to Việt Nam keeps rising, climbing 11 percent last year to 7.6 million.

Tourists heading to Hà Nội are drawn to the scenic limestone islands of Hạ Long Bay; in the south, it’s the beach resorts of Mũi Né and Phú Quốc island or the former emperor Bảo Đại’s summer palace in the hills in Đà Lạt.

The latest offering is a resort and casino at Hồ Tràm beach, with courtesy buses shuttling gamesters for the 2 1/2-hour drive to and from Sài Gòn.

“The beaches in the north can only be used for half the year; the southern beaches are beautiful, and they are usable year-round.”

Said Paul Stoll, who helped set up the Việt Nam Tourism Association and is chief executive of Celadon International Hotel Management Joint-Stock Co.

“Hồ Chí Minh City is Việt Nam’s superhub.”


Source: Bloomberg


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