Ho Chi Minh City eyes public gold stashes to develop infrastructure

By Duy Tran   July 8, 2016 | 02:04 pm GMT+7

Will hoarders be tempted to swap their yellow metal for government bonds?

Vietnam’s southern business hub Ho Chi Minh City will need some VND500 trillion ($22 billion) in the next five years to boost infrastructure, experts said on Thursday at a workshop on innovative funding measures to develop the city’s infrastructure.

Ho Chi Minh City is forecast to need an additional $45 billion from 2020 to 2030 for infrastructure projects, said Tran Du Lich, a member of parliament's economic committee.

Lich added that the city is strategically connected to seaports, giving it an advantage to rapidly grow into a commercial hub. However, municipal authorities have been unable to keep pace with the quickly expanding demand for inland transport linking these port sites. As a result, congestion near ports is costing businesses time and money.

The legislator suggested the central government grant Ho Chi Minh City a “special mechanism” which translates into more control over its own fiscal budget, retaining more of its budget revenue for development projects.

With Ho Chi Minh City aiming for growth of 8 percent to increase the average per-person income to $8,500 by 2020, it must improve its infrastructure.

The city plans to move towards more innovative funding measures, including partnerships with the private sector and selling stakes in state-owned enterprises to the public, Lich pointed out.

“We [should] exchange public land for infrastructure assets,” said Tran Du Lich, referring to the fact that under current conditions, it makes sense for authorities to sell or lease publicly-owned land and use the proceeds to finance infrastructure investments.

Economist Nguyen Khac Quoc Bao from Ho Chi Minh City’s Economics University proposed that the authorities should mobilize funds from the public, engaging local citizens in building infrastructure.

He estimated that people living in Ho Chi Minh City are hoarding gold bullion worth $17-$21 billion, $9.7 billion in foreign currencies and around $2.6 billion in the Vietnamese dong.

Bao said that funding for the city from the central government has fallen, so they should investigate ways to raise more funds from the public to have enough VND500 trillion in the next five years.

“The city’s government must mobilize idle funds from the public by selling municipal bonds,” said the economist, adding that the city should be given more financial and administrative powers, including more control over budget revenue and investment projects.

Le Hoang Chau, chairman of the city’s Real Estate Association, cast doubt on the plan to issue municipal bonds.

“People will not choose [municipal] bonds as an investment channel,” Chau said, explaining that bond coupons are often fixed and lower than the interest rates on bank deposits.

Ho Chi Minh City contributes 22 percent to Vietnam’s gross domestic product, and up to 30 percent of the state budget, official figures show.

Prime Minister Nguyen Xuan Phuc has recently urged the country’s second-largest city to realize its full potential to become “the pearl of the Far East”, and promised to give the city more freedom to act on its own.

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