Ho Chi Minh City’s ambition to turn Thu Thiem, the 657 hectare land plot along the Saigon River in District 2, into a new urban area and a financial – commercial – entertainment center is facing the challenges of poorly developed infrastructure and high land prices.

Planning for the Thu Thiem New Urban Area began as early as 1996, and it took municipal authorities more than ten years to relocate 60,000 local residents from the area to make space for the mega project.

Site clearance tasks are now 98 percent complete, and the city is speeding up infrastructure construction to attract investors, according to the project management board.

However, there are still 150 cases of site clearance that remain unsolved, greatly hindering construction progress of the urban area, the board said.

Still, lack of infrastructure is the main problem behind the project’s unattractiveness to investors, said Trang Bao Son, deputy chief of the management board.

“There are many reasons for the slow progress, but the biggest is the modest capital from the state budget that has been allocated,” Son said.

The city has managed to open the Thu Thiem bridge and the tunnel of the same name, yet there is still no main road or other infrastructure facilities to connect the new urban area with the current city centre, he elaborated.

The Thu Thiem project is not merely a real-estate development, it is intended to create a complete city centre where 10 million people will live by 2020, Son said.

“But after 17 years, work has fallen short of expectations,” he admitted.

Money issue

Six projects in the Thu Thiem New Urban Area are calling for investment, while 17 other are scheduled for implementation, according to the management board.

Investors, however, are greatly concerned over the slow progress of infrastructure development in the area and the high land prices, they said at a conference held to boost investment for the project on Wednesday.

“The infrastructure that connects the Thu Thiem area with the city is very important, but we still do not have anything but the Thu Thiem bridge and tunnel,” said Vo Sy Danh, a representative of Tien Phuoc Co.

Meanwhile, Le Hoang Chau, chairman of the HCMC Real Estate Association, said the land leasing fees in the area are much higher compared to other neighboring countries, which discourages investors.

“The city should have a more flexible land price policy in order to attract investors,” Chau said.

“For instance, we can accept low leasing fees, and focus on collecting other service fees.”

Another problem, according to Vu The Hoang, who represents the Ukraine-based Cau Vong Kiev trade promotion center, is the lack of information about the Thu Thiem project.

“We wanted to introduce the [Thu Thiem] project to investors in East Europe, but do not have adequate information about its planning, as well as investment standards and requirements,” he said.

In response, Son, of the management board, said the land prices are set based on the expenses the city has earmarked for the project.

As of the end of January, the city has spent more than VND16.6 trillion (US$798.08 million) on site clearance, he said.

There are also trillions of dong earmarked for resident relocation and infrastructure construction, he added.

“The city, however, is considering proposing a new land price policy in order to better attract investors,” he said.