Topic
“National Income Analysis in Vietnam: A Case Study of Ho Chi Minh City”
1. Overview of National Income Accounting
The Gross National Income, GNI, formerly referred to as gross national product (GNP) measures the
total domestic and foreign value added claimed by residents at a given period in time, usually a year,
expressed in international dollars using purchasing power parity rates. Gross domestic product (GDP)
is the total monetary or market value of all the finished goods and services produced within a
country’s borders in a specific time period. As a broad measure of overall domestic production, it
functions as a comprehensive scorecard of a given country’s economic health. GDP has 2 types:
nominal GDP and real GDP. Net national income (NNI) is defined as gross national income minus
the depreciation of fixed capital assets(dwellings, buildings, machinery, transport equipment and
physical infrastructure) through wear and tear and obsolescence.
From 2011 to 2020, Ho Chi Minh City bolstered its role in attracting FDI and developing
technology-linked services, significantly boosting national export turnover and budget revenue. The
city's economic density compared to the APEC region and Vietnam as a whole increased from 7.18
and 38.25 times in 2010 to 7.56 and 41.49 times in 2020, respectively, reflecting a 1.94-fold rise in
economic density over the decade. If in 2020, when the COVID-19 pandemic raged across the whole
country and most countries in the world, the economy of Ho Chi Minh City only maintained a growth
rate of 1.4% (the whole country 2.91%), In 2022, the country's economy and Ho Chi Minh City
recovered rapidly, in which Ho Chi Minh City grew to 9.03% far beyond the set plan (6 - 6.5%), the
city's budget revenue reached 122% of the estimate, up 23.6% over the same period in 2021,
contributing about 26.5% of the country's total budget revenue. By the end of 2023, Ho Chi Minh
City will reach about 65.5 billion USD and Ho Chi Minh City's economy accounts for about 15.5%
of the country. Thus, each additional percentage point of GRDP growth in Ho ChiMinh City will
contribute an additional 0.15% of growth to the country's GDP. In 2023, the city's budget revenue is
estimated to reach about 469,000 billion VND, accounting for more than 20% of the total national
budget revenue, still ensuring the collection target and having a direct impact on the national budget
revenue.
2. GDP Breakdown of Ho Chi Minh City:
The Economy of Ho Chi Minh City base on various sectors that drive its growth, about
manufacturing, services, real estate and trade
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Breakdown of GDP Across sectors: Manufacturing is one of the most important industries
contributing a lot to the city’s economy, such as chemicals, rubber and electronics not only support
local production but also create motivation to boost exports, and eliminate the economic depression
of the industries. Services, including retail, health care and financial services are essential Which not
only make more people move to cities and spend more but also increase liquidity for the cities. Ho
Chi Minh city as known as idea location for landing investment cause by the rate of import from
foreign companies increasing year by year which affected on cash flow.Trade, especially retail,shows
that business are active despite global problems
Recent data illustrated the strong growth in these areas. From the year 2023 to Dec of 2023, the
industrial production Index increased 3.7% which was driven by strong performance in chemicals
and electronics. The service sectors were growing, with retails going up 15%, showing that people
are spending more confidently. Real estate continues to grow with the help of city expansion.
Ho Chi Minh City’s growth come from spreading out different sectors of business and investing in
building. Manufacturing uses new technology and lead on industrial revolution nationwide then sell
produce aboard. The increase of Cash flow was effective to the service of the city because more
people live in these cities and spending more, which affected real estate and more investment of
domestic and foreign companies. Even thought, Global trade issues can cause problem, especially in
exports.
Ho Chi Minh City's economy is strong because it has many different businesses that grow together.
Even when there are global problems, the city plans well and changes to keep growing.
3. Income Distribution and Inequality:
Income distribution and inequality in Ho Chi Minh City (HCMC) present notable disparities across
different districts and socioeconomic groups, exacerbated by rural-urban migration. In central
districts like District 1 and District 3, higher average incomes and better infrastructure attract affluent
residents and professionals. Conversely, peripheral districts such as District 8 and District 12 house
lower-income families with fewer job opportunities and less developed infrastructure. This results in
a widening income gap, where the wealthy benefit more from economic growth, while the poor
struggle to access quality education, healthcare, and housing.
Rural-urban migration significantly impacts income distribution, often increasing inequality between
urban residents and rural migrants. Many migrants move to the city seeking better job opportunities
and living conditions. However, they frequently end up in low-wage, informal sector jobs with
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limited access to essential services. This situation creates a stark contrast between long-term urban
residents, who generally have higher-paying jobs and better access to social services, and rural
migrants, who face numerous challenges integrating into the urban economy. Additionally, the influx
of migrants puts pressure on city infrastructure, exacerbating challenges related to housing,
healthcare, and public services.
Several factors contribute to this inequality, including differences in education and skill levels,
economic policies favoring urban development, and uneven investment across districts. Wealthier
areas receive more funding and resources, further widening the gap between rich and poor. Despite
government initiatives to address these issues, such as providing vocational training, investing in
poorer districts, and offering social welfare programs, the effectiveness of these measures remains
limited.
To effectively tackle urban income inequality and the impacts of rural-urban migration,
comprehensive strategies are required. These strategies should focus on equitable development and
robust social support systems. Improving access to education and healthcare, implementing better
housing policies, and ensuring balanced investment across all districts are crucial steps. By
addressing these challenges, HCMC can achieve sustainable and inclusive growth, benefiting all its
residents.
4. Government Revenue and Expenditure:
Ho Chi Minh City, an important economic center in Vietnam, plays an important role in generating
the country's tax revenue. Reports for 2022 highlight that the city's domestic tax revenue has
exceeded VND 300 trillion, with significant contributions from personal income tax and corporate
tax. Personal income tax revenue spiked, up 27% over the same period in 2021, underscoring the
increasing levels of income and economic activity in the city. Businesses, especially those in the
innovation sector, benefit from various tax incentives, promoting a favorable environment for
investment and growth. This robust tax collection not only boosts the national budget but also
enables significant public spending on critical infrastructure, health and education. Government
spending on infrastructure in Ho Chi Minh City plays a key role in supporting rapid urbanization and
economic expansion. Investments in transportation, such as metro systems and road networks,
increase connectivity and reduce logistics costs, thereby attracting more businesses and increasing
productivity. In the healthcare sector, the government's commitment to improving facilities and
services has been evident, with increased funding to ensure public health outcomes and productivity.
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move better. Similarly, significant spending on education aims to equip city residents with the skills
needed for a modern economy, thereby promoting human capital development. These expenditures
have a major impact on the economy. Improved infrastructure attracts foreign direct investment,
while better education and healthcare systems enhance quality of life, making the city an attractive
destination for healthy professionals. profession. As a result, increased economic activity and
increased productivity of the labor force contribute to increased national income. Ho Chi Minh City's
model of leveraging tax contributions for strategic public spending represents a balanced approach to
promoting sustainable economic growth and enhancing national prosperity.
5. Corporate and Household Income:
The profits and financial health of Vinamilk(Manufacturing):Vinamilk has a sustainable development
plan and is in sound financial standing, as demonstrated by the aforementioned numbers. The
business made significant contributions to the environment and society in addition to its commercial
accomplishments. Vinamilk's dominant position in the Vietnamese and global dairy industries is
reaffirmed by these figures, which provide the corporation with a good picture.The profits and
finance health of VCB(Finance):Viet Research and Investment Newspaper named Vietcombank the
Most Innovative and Effective Bank in Vietnam for two years running. This honor is determined by
evaluating research endeavors, the use of science and technology, inventiveness, and newly
developed goods and services offered to clients by the bank. (For example, creating several goods
and innovative services like VCB Digibank, VCB DigiBiz, and VCB CashUp...)--->It is a proof of the
bank's health that Vietcombank has been recognized as the Most Innovative and Effective Bank in
Vietnam for the past two years. VCB's sound financial standing and promising future growth.The
profits and finance health of Vinhomes(Real Estate):More than 5,000 locals attended the Vinhomes
Elite Club in Hai Phong inaugural party. Vinhomes Royal Island has ten key features, such as
opulent living quarters, sophisticated conveniences, and a sense of community. Announced are the
Wonder Island event series and special goodies. Currently, there are over 72,000 members of
Vinhomes Elite Club, with over 3,300 of those being in Hai Phong. The event featured a fortunate
draw with a VinFast VF 5 Plus electric car valued at 548 million VND as the special prize. In addition
to providing benefits to its members, Vinhomes Elite Club helps to create a sustainable and civilized
society. Household Income Sources: (wages, self-employment, and investments):The average
income per capita in 2023 is still rising in comparison to 2022, but the growth rate slows down
because of the state of the global economy and Vietnam's ongoing challenges following the
epidemic. There is still social disparity between regions, economic levels, and between rural and
urban areas. In 2024, the government and local authorities must successfully execute safety
measures if they hope to enhance people's lives. social welfare, the development of jobs, and
prompt assistance to those in need
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6. Challenges to Sustainable Income Growth:
Vietnam faces significant challenges in labor productivity despite rising average incomes. Its
productivity lags behind regional leaders like Singapore, Japan, and South Korea. Economic
restructuring is slow, with traditional sectors like agriculture failing to drive GDP growth due to low
productivity. The workforce lacks skilled labor and teamwork abilities, hindering productivity.
Technological advancement is also slow, with many firms using outdated technology. Although
capital and labor contribute to economic growth, weak corporate governance and management
impede efficiency and reform efforts. The ICOR index indicates low investment efficiency, reflecting
persistent institutional and administrative hurdles. Vietnam is recognized for its dynamic innovation
ecosystem but lacks robust policies and incentives for sustainable innovation, hindering startups'
access to funding and talent retention. To enhance competitiveness, Vietnam aims to develop new
industries like semiconductor chips and hydrogen, requiring substantial investments in research,
infrastructure, workforce training, and intellectual property protection. The government seeks to
reduce regulatory barriers, provide financial support for R&D, and promote collaboration among
businesses, research institutions, and universities to foster innovation and become a leading hub for
entrepreneurship and innovation in the region and globally.
In Vietnam, the informal sector, which employed 20.3 million people in 2020 and contributed about
30% to the GDP, plays a critical role. However, the Covid-19 pandemic exacerbated economic
challenges by reducing formal job opportunities and forcing more workers into informal sectors.
Despite recent legal improvements in social insurance, nearly 97.9% of informal workers lack
coverage, leaving them vulnerable to income loss and other risks. The country faces additional
socio-economic hurdles, including slower GDP growth due to global economic crises, strained social
program budgets, and the compounding effects of climate change with frequent natural disasters.
Demographic changes such as an aging population strain healthcare and socio-economic policies.
Vietnam's current social policy framework is fragmented, leading to disparities in essential services
and perpetuating inequalities. Addressing these issues necessitates comprehensive strategies to
strengthen social protections, improve formal employment access, build resilience against climate
impacts, and foster inclusive growth to achieve sustainable development goals and ensure equitable
opportunities for all citizens.
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7. Policy Implications and Recommendations: All
Vietnam has embarked on comprehensive reforms in vocational education, driven by the 2014 Law
on Vocational Education. This initiative aims to standardise training, improve management, and
foster innovation across vocational institutions. By prioritising the development of skilled human
resources through partnerships with enterprises and international collaboration, Vietnam seeks to
meet market demands and achieve sustainable socioeconomic growth. Inclusive policies targeting
skills education, such as Sacombank's Phu Dong Savings Solution, aim to instil financial literacy in
children. This program encourages savings habits through flexible savings plans and rewards,
supporting financial education from a young age. Regarding social safety nets, Vietnam is expanding
coverage to include more vulnerable groups and enhancing support systems. Policy innovations focus
on efficiency, sustainability, and financial autonomy, with efforts bolstered by international
cooperation to improve social security policies nationwide. These initiatives aim to build a robust
safety net against economic and social risks, ensuring equitable access to essential services for all
citizens.
Cultural industries in Vietnam drive economic growth through creativity, job creation, and enhanced
national competitiveness. To fully harness their potential, improving management, skills, and policy
support is crucial, alongside investing in education and research. Establishing creative clusters in key
cities like Ho Chi Minh, Hanoi, and Da Nang strengthens cultural value chains and boosts sectors
like cultural tourism and handicrafts, fostering innovation and meeting modern societal needs.
Transport development plays a pivotal role in urban growth and connectivity. By prioritising railway,
waterway, and road systems, alongside effective traffic management, cities like Hanoi and Ho Chi
Minh City aim to enhance mobility, alleviate congestion, and support socio-economic development.
Integrating green, smart urban planning strategies is essential for sustainable growth, adapting to
climate challenges, and engaging community participation in shaping resilient urban environments.
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