US embassy cable - 04HOCHIMINHCITY881

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000881 
 
SIPDIS 
 
USDOC for 6500 and 4431/MAC/AP/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: VM, ECON, ETRD, PGOV, SOCI, DPOL 
SUBJECT: HCMC OFFICIALS -- STILL ON TRAINING WHEELS? 
 
REF:  (A) 02 HCMC 0075, (B) 02 HCMC 0117 
 
1. Summary:  Since the Prime Minister signed "Decree 93" in 
December 2001, granting Ho Chi Minh City some level of municipal 
autonomy from the national government, the city is still 
struggling to interpret how much autonomy has actually been 
devolved from Hanoi and is treading cautiously.  Although HCMC has 
yet to see any dynamic impact or "breakthroughs" as a result of 
the Decree, according to a number of local officials, it has seen 
a modicum of change in land allocation, management of public 
servants, streamlining administrative processes, and, to a lesser 
extent, the budget.  Moreover, it appears that Decree 93 is merely 
the first step on a long road forward, and many government 
officials are awaiting further "clarifying" decrees to help guide 
them toward increased municipal autonomy from Hanoi. 
 
2. When it was announced in December 2001, Decree 93 was heralded 
as a watershed development for Ho Chi Minh City by local officials 
and the press.  It was supposed to "liberate" the city from the 
bureaucratic harness of the Hanoi central government, and give it 
more freedom in decision-making.  The intention of Decree 93 was 
to transfer more authority to HCMC in four designated areas: 1) 
planning, investment, and socio-economic development; 2) housing, 
land, and urban infrastructure; 3) budget; and 4) organization of 
city agencies and managing staff.  In a series of meetings with 
local officials that would presumably be affected by any changes 
in these areas, they referred to a general, if somewhat slow, 
trend toward more HCMC autonomy, but struggled when it came to 
specific examples of progress directly related to Decree 93. 
 
Land Acquisition Hard but Easier 
-------------------------------- 
3. The process of acquiring land probably reflects the most 
apparent changes.  The HCMC People's Committee is now authorized 
to allocate land of all sizes and grant land-use rights to 
individuals and companies, eliminating the need to send the 
proposal up to Hanoi and lobby for its approval.  Another 
improvement for HCMC is the authority to approve investment 
projects valued over USD$10 million, although the Prime Minister 
still must approve a "feasibility study" of these major projects 
before final action can be taken.  In order to ease the process of 
obtaining land-use rights, a "one-stop shop" has been established 
by the city.  First, buyers work with the Department of Planning 
and Investment to obtain a land license (which should take 20 days 
for cleared land; 40 days for uncleared land), and after the 
license is obtained, investors visit the Department of Natural 
Resources to obtain the land itself.  Land-use rights for 
individuals can be approved at the District People's Committee 
level, but a HCMC People's Committee Vice-Chairman must approve 
land-use rights for any organization, company or foreigner. 
 
4.  Even though the individual or company now faces a 
significantly reduced waiting period for acquiring land-use 
rights, there do not appear to be any fewer steps or approvals in 
the process at the city level.  Instead of the individual or 
company shuffling around papers to all the relevant offices, a 
representative of the Department of Natural Resources and 
Environment does the shuffling.  While this is clearly a win for 
land-use rights applicants, the overall approval process remains 
equally convoluted, and the idea of the "one-stop shop" was not a 
product of Decree 93.  Some HCMC officials argue, however, that 
Decree 93 made it possible for HCMC to streamline these 
procedures, and rightfully point out that these decisions no 
longer require the approval of Hanoi. 
 
Administrative Reforms 
---------------------- 
5.  HCMC officials stated that the process of streamlining 
administrative processes and government departments has been 
improving since Decree 93 was implemented, especially in 
restructuring public offices to be more simplified from the city 
to the local level.  Mr. Nguyen Trung Thong, Deputy National 
Project Director of the UNDP-funded project for Public 
Administration Reform, stated that since the year 2000, HCMC 
government agencies have been reduced in number from 46 to 10, and 
there has been an overall reduction in staff of 10-12 percent in 
the city's bureaucracy.   He claimed that the city had been 
working with some success at streamlining and increasing 
transparency of administrative processes.  Now anyone can go to a 
department and obtain the list of procedures required for a given 
service.  Another significant change for HCMC is more control over 
the hiring and firing of HCMC public officials, as well as over 
their salaries.  Hanoi previously directed uniform salaries for 
public servants throughout the country, regardless of 
specialization or location, and also approved all public 
officials.  More control over these areas allows HCMC to better 
manage the direction of its public policy, as well as attract 
better-qualified candidates into public service.  Mr. Thong noted 
that these changes have allowed HCMC to hire younger, university- 
educated individuals, and move younger people into higher-level 
positions at a faster pace. 
 
The Budget 
---------- 
6.  Whether HCMC has increased control over its budget, and has 
actually been able to retain more of its revenues, remains hidden 
under opaque regulations for negotiating revenue targets and 
percentages of revenue to be retained.  Most HCMC government 
officials who spoke to Econoff stated that HCMC is able to retain 
more of its tax revenues than before Decree 93, although exact 
amounts were never mentioned, even after repeated questioning.  It 
appears that the recent issuance of yet another decree signed by 
Prime Minister Phan Van Khai will clarify some of the previous 
uncertainty over the budget.  This Decree 124 details more 
explicitly HCMC's control over some budget items and supersedes 
any budget-related issues outlined in Decree 93.  (Post Note: The 
Standing Vice-Chairman of the HCMC People's Committee has said in 
meetings that HCMC's now retains about 32 percent of its tax 
revenues, compared to about 18 percent before.  The goal, he has 
noted, is to retain at least 40 percent.  End note.) 
 
7.  Decree 124 stipulates that HCMC will still need to negotiate 
its budget and tax collection target with Hanoi every year. 
However, once the two parties agree on a revenue target, the 
percentage of the revenue up to the target amount HCMC keeps will 
remain fixed for five years.  No one could tell ConGen the current 
percentage.  If HCMC collects more than the revenue target agreed 
upon, HCMC keeps 30% of the income collected above the target, but 
it can only be spent on pre-approved infrastructure projects. 
 
8.  Finally, Decree 93 allows HCMC to issue municipal bonds to 
raise capital, and the city did so last year for the first time. 
Decree 124 further expands HCMC's options to acquire capital by 
permitting HCMC to borrow money from foreign sources for certain 
infrastructure projects.  The ability to raise additional capital 
will be vital as HCMC tries to build an adequate infrastructure 
for its growing population. 
 
9.  Comment:  Unless city officials are just painfully shy about 
commenting on publicly available government decrees (a distinct 
possibility), even they have a great deal of uncertainty as to how 
much autonomy Decree 93 actually has given Ho Chi Minh City.  The 
city is on the right track, but it will probably limit itself to a 
few tentative steps while waiting for additional "clarifying" 
decrees to be issued.  City officials still feel the need to avoid 
moving too quickly, for fear of attracting Hanoi's attention or 
drawing the envy of other provinces.  Just the same, it is good 
news that HCMC officials seemed truly interested in, and 
understand the need for, further administrative reforms and 
increased decision-making autonomy.  While Decree 93 gave HCMC a 
yellow light to make independent decisions in certain areas, there 
is no green light from Hanoi on the crucial question of autonomy. 
 
YAMAUCHI