Sept. 4 (Bloomberg) -- Almost four decades after the Vietnam War ended, “Saigon” has turned the tables on Hanoi, outstripping its conqueror in investment and growth.
Motorists ride past a large billboard with an image of late president Ho Chi Minh (back left), founder of today's communist Vietnam, on display in downtown Hanoi on Aug 28. Vietnam celebrated the 69th anniversary of the country's Independence Day on Sept 2. Now, four decades after the Vietnam War, the former Saigon has emerged supreme over conquering Hanoi, with the city outstripping Hanoi in investment and growth. (AFP photo)
The former southern capital, renamed Ho Chi Minh City but still widely known by its pre-war name, contributes almost a quarter of the country's gross domestic product and the market capitalization of its stock index is seven times Hanoi's. Now, Saigon is upping the ante with plans to build a new airport that would increase capacity as much as fivefold.
"By all measures, Ho Chi Minh City has moved into a more advanced place than Hanoi 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 Vietnam Provincial Competitiveness Index, compiled by the Vietnam Chamber of Commerce and Industry with US 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 favoured venue for shareholder meetings.
Saigon's population has more than doubled to 7.8 million, while its economy grew 9.3% last year, pushing the city's per-capita GDP to $4,513, more than twice the national average. In Hanoi, which has about 6.9 million residents, the economy grew 8.3% to increase its per-capita to $2,985.
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% growth after averaging 7.3% in the previous seven years.
Ho Chi Minh City's relative wealth makes it the entry point for many Western brands. McDonald's Corp chief executive Donald Thompson attended the opening of the company's first branch in the country in February. A second opened in May near Ben Thanh market, a landmark where tourists slurp bowls of spicy beef noodles and shop for lacquer boxes and raw silk.
Coffee chain Starbucks opened its first store in Hanoi July 23, the first of three planned for the former capital of North Vietnam. By comparison, bustling Ho Chi Minh City, the former Saigon, has eight Starbucks. (EPA photo)
Hanoi got its first Starbucks Corp. store in July - more than a year after Ho Chi Minh City, which now has eight.
"Saigon is the dynamo, the city with more energy," said Ray Burghardt, the Hanoi-based US ambassador to Vietnam from 2001 to 2004, who lived in South Vietnam from 1970 to 1973.
Looking South
Part of that dynamism is rooted in the city's past. Southern Vietnam's trading roots date back centuries, according to Martin Stuart-Fox, an emeritus history professor at Australia's University of Queensland in Brisbane. While Hanoi's history is tied to the presence of neighbouring China, about 160 kilometres away, Saigon, next to the rich alluvial plain of the Mekong Delta, is 1,120 kilometres to the south and closer to Thailand, Malaysia and Singapore than it is to the Chinese border.
"Southern Vietnam was always a frontier area, and because it didn't have that close contact with China and didn't look north as Hanoi always had, people in the south looked outward instead and welcomed trade," said Mr 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."
Vietnam's post-1975 attempts to stifle enterprise misfired "abysmally" in Ho Chi Minh City, with many entrepreneurs sent to labour camps for "capitalist activities," until a crumbling economy caused Marxist tenets to be diluted or scrapped, Stanley Karnow wrote in his book Vietnam: a History. After the so-called Doi Moi economic reforms in 1986, Saigon resumed its role as a commercial hub, with newly freed entrepreneurs quickly resuming their businesses.
Growth was boosted in 2000 with the signing of a bilateral trade agreement with the U.S.
The Bitexco Financial Tower, centre, and other commercial and residential buildings stand illuminated at night in Ho Chi Minh City. Vietnam's economy will expand 5.7% this year, with the former Saigon accounting for almost a quarter of the country’s gross domestic product. (Bloomberg photo)
Western Influence
"The south has always had more US influence on its business culture," said Than Trong Phuc, managing director of technology-focused investment fund DFJ VinaCapital LP in Ho Chi Minh City. "Doing business here is more straightforward, whereas doing business in the north involves more government and a complex maze of relations."
Saigon'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 Ho Chi Minh City office of US law firm Russin & Vecchi. He arrived in South Vietnam in 1965 with the US Navy and was in Saigon in the days before it fell.
"Now there's even less government impact on people's decision-making here," said Mr 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, Saigon always had a strong commercial environment."
Hanoi'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 Hanoi," Mr Burghardt said. "Ho Chi Minh City is a hostage to the speed of those reforms."
Ho Chi Minh City ranked 10th last year and Hanoi 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
Ho Chi 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, Tan Son Nhat is now in the heart of Saigon's expanding sprawl of houses, shops and factories. Still coded SGN for Saigon, it's almost at bursting point, with almost twice the number of passengers that fly in and out of Hanoi.
Tourists wait in line to check in for departure at Tan Son Nhat airport in Ho Chi Minh City. Tan Son Nhat is now in the heart of Saigon’s expanding sprawl of houses, shops and factories. Still coded SGN for Saigon, it’s almost at bursting point, with almost twice the number of passengers that fly in and out of Hanoi. (Reuters photo)
The planned new airport in neighbouring Dong Nai province eventually is expected to handle 100 million passengers a year, compared with about 20 million at Tan Son Nhat. 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 travellers coming to Vietnam keeps rising, climbing 11% last year to 7.6 million. Tourists heading to Hanoi are drawn to the scenic limestone islands of Ha Long Bay; in the south, it's the beach resorts of Mui Ne and Phu Quoc island or the former emperor Bao Dai's summer palace in the hills in Dalat.
The latest offering is a resort and casino at Ho Tram beach, with courtesy buses shuttling gamesters for the 2.5-hour drive to and from Saigon.
"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 Vietnam Tourism Association and is chief executive of Celadon International Hotel Management Joint-Stock Co. "Ho Chi Minh City is Vietnam's superhub."