This is the viewpoint of Nguyen Tan Phuoc, deputy head of the city’s Export Processing and Industrial Zones Authority (Hepza).

Although the city has attracted a great deal of FDI in the processing and manufacturing industries, these sectors have become less competitive due to high costs of labor and rising fees for land rentals, he told the Dau Tu (Investment Review) newspaper.

As a result, city authorities plan to focus on developing the southern economic region’s competitive advantages and hire experts and skilled laborers in industries that require creative, intelligent and trained staff.

Phuoc said land rental costs were higher in HCM City’s industrial and processing zones than in other provinces because the fees for land clearance and infrastructure investment in the city were high.

Currently, only the Saigon Hi-Tech Park and Quang Trung Software City offer preferential rates on land rentals, but it can be difficult for a company to locate there due to strict technology standards.

To enter the zones, a project has to be approved by a technology council and investors must commit to contribute 1 per cent of their income and 5 per cent of its skilled employees to conduct research and development activities in the zones. Because of these regulations, many companies have decided not to locate in HCM City.

A beverage company from Japan, for example, chose to locate its plants in surrounding provinces after initially considering HCM City as a possible site.

A shortage of local laborers and staff has also challenged investors.

Most employees at the industrial parks in HCM City are from the central and Cuu Long (Mekong) Delta regions, so it is difficult for the processing zones to have a stable supply of laborers.

Investors also have to pay higher fees in HCM City and invest in accommodations as well as transportation.

This had caused companies to move from the city to Binh Phuoc and Tien Giang provinces, Phuoc said.

In addition, there are no areas left in HCM City that are considered disadvantaged, so preferential tax rates given to investors in those areas are no longer being given.

A report from the Ministry and Planning and Investment said the city had attracted about US$10.48 billion in FDI.