Vietnam needs to seize its urbanization opportunities to become a middle income country

April 5, 2011

Hanoi, April 5, 2012 – Vietnam can more successfully harness the economic and social opportunities of urbanization and mitigate the challenges it poses if the urbanization process is managed in a way that will benefit all segments of society.

This is a central theme of a World Bank “Vietnam Urbanization Review.” Prepared in support of the Government of Vietnam’s strong emphasis on developing its system of cities, the report aims to provide a better understanding the key dimensions and aspects of Vietnam’s urbanization process, and identifying trends, opportunities, challenges, and core policy priorities for Vietnam.

Vietnam is rapidly urbanizing,” said Victoria Kwakwa, Country Director for the World Bank in Vietnam. “The urbanization process will be an important part of Vietnam’s future and ensuring livable cities that can also compete regionally and globally will be a necessary part of Vietnam’s economic development strategy.”

According to the Report, Vietnam is urbanizing at a rate of 3.4% per year, most of which is in and around Ho Chi Minh City and Hanoi.

Urbanization, especially in the two large economic centers, have a central role to play in Vietnam’s economic growth and poverty reduction story. However, existing urban systems of Ho Chi Minh City and Hanoi are seriously limiting their competitive advantage, especially with regard to logistics bottlenecks, disproportionately high transport costs, growing congestion and land market distortions. The report suggests that in the largest cities, attention should be paid to improving urban transport and infrastructure systems, as well as strengthening the competitiveness of these economic regions.

The Report argues that while Vietnam has done a relatively good job in providing basic services and the lack of large scale slums suggests most people have access to housing, there are definitely signs that this is changing. Analysis in the report suggests that the typical housing provided today by formal land developers is affordable to only the top 5% of the income distribution in Hanoi and Ho Chi Minh cities. Vietnam’s two tiered land pricing system and lack of transparency in land markets needs to be addressed as does the extensive use of land sales and leases to finance local budgets – a practice which tends to induce urban sprawl.

The Report calls on planners to address the on-coming problem of urban mobility to improve the livability of cities and provide transport options for all citizens, including the urban poor, children, the elderly and disabled.

Addressing these problems also means modernizing and reforming Vietnam’s planning systems, strengthening urban management and ensuring better coordination between levels of government and between city departments.

No country has achieved high income status and strong economic growth without first urbanizing and nearly all countries become at least 50% urbanized before fully reaching middle income status. Vietnam expects to reach that point by 2025.

Well managed urbanization can serve to support Vietnam’s economic growth and support its Socio-Economic Development Strategy objectives,” said Dean A.Cira, Lead Urban Specialist for the World Bank in Vietnam, who led the team producing the report. “We hope this report will serve as an important reference for Vietnam’s policy makers and others concerned about the urbanization process in Vietnam.”

The Review was produced with the financial support of the Cities Alliance.


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