Ho Chi Minh (HCM) – From A Startup Hub to the Leading Service-oriented City
After two decades of the “Renewal”, the driving force behind Ho Chi Minh City’s economy has come from not only the manufacturing but also the dynamic rise of the private sector and a strong wave of entrepreneurship, shaping the city into the nation’s leading service-oriented urban center.
During a market research trip to the Philippines in 2010, Mr. Nguyễn Bá Diệp and three of his friends witnessed how people there conducted all transactions using only their mobile phones. Despite having a moderate average income per capita, nearly 70% of the population owned smartphones — enabling even low-income workers to easily access financial services.
“We could build a similar solution in Vietnam,” Mr. Diệp recalled their discussion at the time with his three friend who were all software engineers.
They nurtured the idea of a mobile application that would allow users to transfer money via phone — a concept they called “mobile money.” Upon returning to Ho Chi Minh City, Mr. Diệp and his colleagues spent six months conducting field research in industrial zones and worker dormitories to understand real user needs. At that time, workers who wanted to send money home often relied on intercity buses, post offices, or physically carrying cash — all time-consuming and risky methods. They discovered that low-income earners had a strong demand for small, frequent transactions, yet no financial solution adequately served this segment.
“In 2014, the MoMo e-wallet was born with a clear mission: to make money transfers faster, cheaper, and more convenient — all through a mobile phone,” Mr. Diệp said.
MoMo represents a new generation of successful private startups emerging in Ho Chi Minh City after 20 years of economic reform, becoming a key driver of the economy. These businesses are gradually taking over roles once dominated by state-owned enterprises — the economic backbone prior to 1986.
A vibrant market and a dynamic startup ecosystem have positioned Ho Chi Minh City as a cradle for nurturing tens of thousands of business ideas each year. To date, private enterprises in the city account for 30% of Vietnam’s total, with many emerging as key drivers of the national economy. Ho Chi Minh City is also home to the founding of three out of Vietnam’s four tech unicorns — VNG, MoMo, and Sky Mavis.
Incubator
To support and empower young entrepreneurs, in2010, the Business Startup Support Centre (BSSC) — under the Ho Chi Minh City chapter of the Vietnam Youth Union, when the term “startup” was still relatively new in Vietnam. As the first organization in the country to launch a dedicated support fund for young business founders, BSSC has since assisted over 17,000 projects and small-to-medium enterprises (SMEs).
“If starting a business is like cooking a dish, then Ho Chi Minh City has all the ingredients to create something exceptional. A successful startup requires not just ideas but a dynamic ecosystem — and Ho Chi Minh City offers exactly that,” said Nguyễn Thị Diệu Hằng, CEO of BSSC.
The “ingredients” in Ho Chi Minh City include a large and open-minded market that is more willing to embrace new products and take risks compared to other provinces. As a key part of Vietnam’s economic growth engine, Ho Chi Minh City attracts abundant financial resources — from angel investors and corporations to bank loans and venture capital funds. Its policy environment is also more progressive than many other regions, particularly in terms of business support.
As part of Vietnam’s first generation of startup founders, MoMo co-founder Nguyễn Bá Diệp firmly believed that Ho Chi Minh City was the ideal place to nurture their bold vision. At the time MoMo was launched, the city had one of the highest mobile and internet penetration rates in the country.
Ho Chi Minh City is home to the most dynamic and innovation-driven startup ecosystem in Vietnam, accounting for nearly 50% of the nation’s startups and 40% of its incubators and startup support organizations. Crucially, startups such as MoMo benefit from easy access to financial resources and international investor networks, significantly enhancing their ability to secure funding from major venture capital firms. Furthermore, the city is a pioneer in advancing the digital economy and promoting cashless payments.
From a small startup with just four employees, MoMo has since evolved into a technology conglomerate with a comprehensive digital ecosystem offering a wide range of services — from payments, finance, shopping, and investment to savings, insurance, and community support. Today, it serves over 30 million customers across Vietnam.
“MoMo’s success today is partly due to the openness of Ho Chi Minh City’s economic environment and the positive changes in startup policies,” Mr. Diệp said.
Similar to MoMo, many startups and businesses have been nurtured in Ho Chi Minh City, focusing on service sectors and adopting new business models such as e-commerce and the sharing economy.
For instance, Tiki was founded in 2010, initially as an e-commerce platform specializing in books. In 2012, Foody launched as a restaurant review and delivery service, and in 2017, Sea Group, the parent company of Shopee, acquired Foody for $64 million
Founded in 2004 with a focus on gaming, VNG later expanded into digital content and online entertainment services. In 2012, the company launched the Zalo messaging app, reaching 10 million users within just two years, surpassing many international competitors and becoming Vietnam’s first tech unicorn in 2014.
“Startups at that time benefited from the developed digital infrastructure, the vibrant nature of a leading multi-service economic hub, and a young, tech-savvy population open to new technologies,” said Nguyễn Bá Diệp, co-founder of MoMo.
The explosive growth of private enterprises from 2010 to 2020 led to a transformation that shifted Ho Chi Minh City’s growth engine after 20 years of Đổi Mới — from industrial to service-driven growth.
“Among the startups in Ho Chi Minh City, the service sector dominates, as it is a characteristic feature of this urban center,” said Nguyễn Thị Diệu Hằng, CEO of BSSC.
Transformation
“After being freed from the constraints of the subsidy period, Ho Chi Minh City’s economy was like a ‘bear awakening from hibernation,’ with growth consistently in double digits until 2011, driven by the release of pent-up demand after a long period of suppression,” commented Professor Dr. Nguyễn Khắc Quốc Bảo, Deputy Director of UEH University.
However, after that, aggregate demand naturally reached its limit. The growth driven by the industrial boom in the earlier period was no longer sustainable, and the city was forced to shift its growth engine to its core strengths in commerce and services.
This also represents a natural shift to leverage Ho Chi Minh City’s advantages. Whereas industry contributed 70% to the GRDP before the Renewals, the service sector began to “take the lead” starting in 1995. The primary reason for this was the faster growth of the service sector, while a portion of industrial production activities moved to neighboring provinces such as Bình Dương and Đồng Nai, due to limited land availability and high costs in Ho Chi Minh City.
In 2010, the Ho Chi Minh City Party Congress Resolution first called for a structural shift toward a service-industrial-agriculture model, setting the goal for services to account for 60% of the GRDP by 2020. The focus was on increasing the proportion of service sectors such as international trade, finance, banking, port services, warehousing, maritime logistics, import-export, and tourism.
Professor Bảo analyzed that, compared to neighboring provinces, Ho Chi Minh City does not have a significant advantage in agriculture or industry. However, the foundation for the city’s trade and service sectors had been established long ago, thanks to the tradition of commerce and the market-driven economy.
“The mindset of engaging in service-based economics is deeply ingrained in the people of Ho Chi Minh City” said Mr. Bảo. According to him, many startups choose Ho Chi Minh City because it serves as a vast incubator for those with business ideas.
Additionally, the city’s strategic geographic location connects a full system of road networks, seaports, and airports — creating favorable conditions for Ho Chi Minh City to develop services such as trade and logistics. These two sectors, along with tourism, were the top contributors to the city’s GRDP from 2011 to 2016.
As a long-time Japanese investor with strong ties to Ho Chi Minh City, Mr. Matsumoto Nobuyuki, Head of the Japan External Trade Organization (JETRO) Ho Chi Minh City office, has witnessed this transformation firsthand. He noted that initially, Japanese investments in the city were primarily focused on manufacturing and infrastructure development due to low labor costs. However, since 2010, Japanese capital has increasingly flowed into the service and consumer sectors.
The people of Ho Chi Minh City no longer need to travel to other Southeast Asian cities to experience Japanese brands such as Aeon supermarkets, Uniqlo clothing, Muji home goods, or Nitori furniture,” he cited as an example. JETRO’s most recent survey revealed that 100% of Japanese retailers in Vietnam plan to expand their businesses.
After commerce, real estate was the second-highest contributing service sector to Ho Chi Minh City’s GRDP during the 2011-2020 period. Although not part of the city’s strategic sectors, the growth in real estate business demonstrates the city’s natural appeal. It is estimated that between 2015 and 2018, real estate attracted up to one-third of the foreign direct investment (FDI) flowing into Ho Chi Minh City, with the largest sources being Singapore, Japan, and South Korea.
Having come to Vietnam in 2001, Neil MacGregor, Managing Director of Savills Vietnam, has witnessed the rapid transformation of Ho Chi Minh City.
“When I first arrived, multinational companies had to set up offices in villas or small buildings. But now, there are many skyscrapers being built,” he said.
According to him, the period from 2010 to 2020 is considered the most prosperous era for Ho Chi Minh City’s real estate market. The vibrancy spanned across all sectors, from residential properties, commercial office spaces, retail, to industrial real estate. The city’s urban landscape changed rapidly.
Data from the Council on Tall Buildings and Urban Habitat shows that in 2010, Ho Chi Minh City had only the Bitexco Financial Tower, which stands over 150 meters tall. By 2020, this number had increased to 21. Of the 100 tallest buildings in Vietnam, 59 are located in Ho Chi Minh City.
The surge in the services sector after 2010 has gradually transformed Ho Chi Minh City into a post-industrial economy.
Over the three decades from 1995 to 2024, the city’s total retail sales of goods and consumer service revenues grew by a factor of 35.37. By 2024, this activity accounted for nearly 19% of the national total. In recent years, services have become the primary growth engine of Ho Chi Minh City, contributing 65.5% of its GRDP and accounting for 68.8% of GRDP growth last year.
“Leading cities should not aspire to become traditional industrial hubs, but rather position themselves as service-driven economies,” noted economist Pham Chi Lan. She emphasized that Ho Chi Minh City should focus on fostering high-tech industries while progressively phasing out labor-intensive manufacturing.
Adaptation
Ho Chi Minh City’s rapid transition toward a service-based economy has also revealed certain vulnerabilities. According to Professor Dr. Nguyen Khac Quoc Bao, a large portion of the workforce in the service sector is engaged in seasonal or short-term employment, which undermines the sustainability of this shift.
“The service sector is relatively easy to enter, but just as easy to exit,” he explained. “Workers often leave the industry even after being trained, forcing businesses and individual operators to constantly search for new talent and reinvest in training from scratch.”
In addition, competition from other regional service-oriented cities such as Singapore and Bangkok has placed increasing pressure on Ho Chi Minh City. This presents a critical challenge, as the city requires substantial funding to upgrade infrastructure and expand urban space to fully realize its economic potential.
“The pressing issue for Ho Chi Minh City now is how to sustain the momentum of a leading economic engine,” said Professor Bao, referring to the city’s declining economic growth indicators. As the locality contributing the largest share to the national budget, any slowdown in Ho Chi Minh City’s growth could have significant implications for the broader Vietnamese economy.
Despite the increasingly challenging competitive landscape, Professor Bao believes that the entrepreneurial spirit—deeply embedded in the cultural fabric of Saigonese for centuries—will continue to empower businesses in Ho Chi Minh City to adapt under any circumstances. He pointed out that over the past 50 years, the city’s economy has successfully overcam at least three major shocks: the 1997 Asian financial crisis, the 2008 global financial crisis, and the Covid-19 pandemic.
Following the 2008 financial crisis, Vietnam’s stock market plummeted from nearly 1,200 points to just 315, halting investment flows into Ho Chi Minh City. Numerous real estate projects and high-rise buildings under construction faced insolvency. Vietnam endured a “dual shock” — externally, from the collapse of the global economy, and internally, from the bursting of its own real estate and stock market bubbles. As the nation’s economic engine, Ho Chi Minh City bore the brunt of these impacts. Nevertheless, the city had a swift recovery, driven by the rapid rebound of the service sector—particularly in finance, banking, trade, and logistics.
“The world is increasingly unstable with a series of economic and geopolitical fluctuations. The dynamism and resilience, or rather the adaptability of Ho Chi Minh City’s economy and its entrepreneurs, will be the city’s key strengths in the current context” he said.
Upcoming Event
“2025 Vietnam – China Trade and Investment Cooperation in Sustainable Development”. The Forum will provide your business with practical insights into the development potential of the Mekong Delta, laying a solid foundation for strategic decisions in investment and production expansion in the region.
Date – Time: 17:00 ~ 21:00, April 25, 2025
Venue: Can Tho City, Mekong Delta Region, Southern Vietnam
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