US embassy cable - 02HANOI133

UNCLAS SECTION 01 OF 02 HANOI 000133 
 
SIPDIS 
 
STATE FOR EAP/BCLTV 
 
USDOC FOR 1431/MAC/AP/HPPHO 
 
                       UNCLASSIFIED 
 
PAGE 02        HANOI  00133  01 OF 02  181028Z 
E.O. 12958:  N/A 
TAGS: ETRD, ECON, PHUM, PGOV, VM 
SUBJECT:  HA GIANG:  SLEEPY BORDER PROVINCE TRYING TO 
--        WAKE UP 
 
REF:  01 HANOI 3341 
 
1.  (U)  SUMMARY.  HA GIANG PROVINCIAL OFFICIALS ARE HOPEFUL 
THAT THE RECENTLY DECLARED "BORDER ECONOMIC ZONE" WILL 
STIMULATE DEVELOPMENT IN ONE OF NORTHERN VIETNAM'S POORER 
MOUNTAIN PROVINCES.  THE DISTANCE AND DIFFICULTY IN 
TRAVELING TO HANOI AND OTHER LOWLAND PROVINCES REMAIN 
HINDRANCES TO ECONOMIC DEVELOPMENT.  SEPTELS REPORT ON 
TERRORISM AND NARCOTICS-RELATED DISCUSSIONS.  END SUMMARY. 
 
------------------------------------ 
A LONG ROAD TO THE NORTHERN FRONTIER 
------------------------------------ 
 
2.  (U)  POLOFF AND POL FSN VISITED HA GIANG PROVINCE 
JANUARY 14-16.  HA GIANG IS ABOUT 300 KILOMETERS FROM HANOI 
AND SHARES A NEARLY 400 KILOMETER BORDER WITH CHINA.  THE 
MAIN PROVINCIAL CROSSING POINT TO CHINA IS ABOUT 20 
KILOMETERS FROM HA GIANG TOWN AT THANH THUY.  CITIZENS FROM 
THE DISTRICTS NEAR THE BORDER MAY CROSS OVER WITH A SPECIAL 
PERMIT, BUT ONLY FOR DAY TRIPS (UNLIKE MORE LENIENT 
PROVISIONS IN EFFECT IN QUANG NINH PROVINCE - REFTEL). 
LONGER JOURNEYS REQUIRE PASSPORTS AND VISAS. 
 
3.  (U)  ACCORDING TO VO DUC HONG, CHIEF OF THE BORDER 
AFFAIRS DIVISION OF THE PEOPLE'S COMMITTEE, ABOUT 80 PCT OF 
                       UNCLASSIFIED 
 
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HA GIANG'S POPULATION OF 610,000 PEOPLE ARE ETHNIC 
MINORITIES.  THE LARGEST GROUPS ARE THE HMONG AND TAY NHUNG. 
THE 9,000 SQUARE KILOMETER PROVINCE INCLUDES HIGH MOUNTAIN 
AREAS (4,000 SQUARE KILOMETERS), HIGHLAND AREAS (1,000 
SQUARE KILOMETERS), AND LOWLAND AREAS (4,000 SQUARE 
KILOMETERS).  ONLY ABOUT 13 PERCENT OF THE PROVINCE IS 
CONSIDERED SUITABLE FOR FARMING.  ITS MAIN AGRICULTURAL 
EXPORT IS TEA GROWN AT HIGH ELEVATIONS, POPULAR IN TAIWAN, 
HONG KONG, KOREA, AND RUSSIA, HONG CLAIMED.  FRUIT, RICE, 
AND CORN ARE OTHER MAIN CROPS. 
 
------------------------- 
STILL POOR, BUT IMPROVING 
------------------------- 
 
4.  (U)  LE VAN BANG, THE DIRECTOR OF HA GIANG'S PLANNING 
AND INVESTMENT DEPARTMENT, CLAIMED THAT WHILE THE PROVINCE 
WAS STILL "QUITE POOR," THE ECONOMIC SITUATION IS IMPROVING. 
BANG NOTED THAT THE POVERTY RATE FROM 1995 TO 2001 HAD 
DECLINED FROM 46 PERCENT OF THE TOTAL POPULATION TO ABOUT 26 
PERCENT, THOUGH PER CAPITA INCOME IS STILL ONLY ABOUT 30 
PERCENT OF THE NATIONAL AVERAGE OF USD 380 PER YEAR, HONG 
ADMITTED.  THE DECLINE IN POVERTY CAN BE ATTRIBUTED MAINLY 
TO DIVERSIFIED AGRICULTURE, SOME INDUSTRIAL DEVELOPMENT, AND 
MINERAL EXPLOITATION, INCLUDING IRON ORE, LEAD, AND ZINC, 
BANG EXPLAINED.  IN THE PAST FEW YEARS, A CEMENT FACTORY, 
THREE SMALL PAPER MILLS, AND TWO BRICK FACTORIES HAVE 
OPENED, ALTHOUGH BANG DID NOT HAVE AVAILABLE STATISTICS ON 
HOW MANY PEOPLE ARE EMPLOYED IN THOSE FACTORIES OR IN 
MINERAL EXPLOITATION.  BANG EXPRESSED INTEREST IN FINDING A 
COMPANY TO INVEST IN A FRUIT PROCESSING PLANT, SINCE IN THE 
                       UNCLASSIFIED 
 
PAGE 04        HANOI  00133  01 OF 02  181028Z 
PAST FEW YEARS FARMERS HAVE PLANTED MORE AND MORE FRUIT 
TREES (ESPECIALLY ORANGES); TRANSPORTING THE FRESH FRUIT TO 
MARKET IS PROBLEMATIC.  POLOFF PROMISED TO SHARE THIS 
OPPORTUNITY WITH THE USCS. 
 
5.  (U)  WHILE THE ENTIRE PROVINCE IS CONNECTED TO THE 
NATIONAL ELECTRICAL GRID, ONLY ABOUT 50 PERCENT OF THE 
POPULATION HAS ACCESS TO ELECTRICITY IN THEIR HOMES, BANG 
SAID.  HE NOTED THAT THE DISTANCE FROM AND DIFFICULTY IN 
TRAVELING TO HANOI AND OTHER LOWLAND PROVINCES REMAIN MAJOR 
PROBLEMS.  WHILE TRAVEL TIME TO HANOI HAS BEEN REDUCED TO 
ABOUT 7 HOURS AND NATIONAL HIGHWAY 2 IS BEING UPGRADED, 
TRANSPORTATION INFRASTRUCTURE STILL "MAY DISCOURAGE" 
POTENTIAL INVESTORS FROM COMING TO HA GIANG, HE ADMITTED. 
(NOTE:  THERE ARE SEVERAL SHORT STRETCHES WHERE THE ROAD IS 
TWO FULL LANES AND NEWLY PAVED, BUT THERE ARE LONG STRETCHES 
WHERE THE ROAD IS ONLY ABOUT ONE AND A HALF LANES AND VERY 
BUMPY.  THERE ARE ALSO SEVERAL ONE LANE BRIDGES.  THE GVN'S 
MASTER PLAN CALLS FOR COMPLETING THE UPGRADING OF HIGHWAY 2 
BY THE END OF 2005. END NOTE.)  SO FAR, THE PROVINCE HAS HAD 
NO DIRECT FOREIGN INVESTMENT. 
 
----------------------------- 
BORDER ECONOMIC ZONE MAY HELP 
----------------------------- 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ3257 
 
PAGE 01        HANOI  00133  02 OF 02  181028Z 
ACTION EAP-00 
 
INFO  LOG-00   NP-00    AID-00   ACQ-00   CEA-01   CIAE-00  CTME-00 
      DOEE-00  ITCE-00  DOTE-00  SRPP-00  DS-00    EB-00    EXME-00 
      E-00     FAAE-00  FBIE-00  UTED-00  VC-00    FRB-00   H-01 
      TEDE-00  INR-00   IO-00    ITC-01   L-00     VCE-00   AC-01 
      DCP-01   NSAE-00  NSCE-00  OES-01   OIC-02   OMB-01   OPIC-01 
      PA-00    PC-01    PM-00    PRS-00   ACE-00   P-00     SP-00 
      SSO-00   STR-00   TEST-00  TRSE-00  USIE-00  EPAE-00  PMB-00 
      DSCC-00  PRM-00   DRL-02   G-00     NFAT-00  SAS-00     /013W 
                  ------------------59B69F  181029Z /38 
R 181014Z JAN 02 
FM AMEMBASSY HANOI 
TO SECSTATE WASHDC 5276 
INFO AMCONSUL HO CHI MINH CITY 
AMEMBASSY BANGKOK 
AMEMBASSY BEIJING 
AMEMBASSY PHNOM PENH 
AMEMBASSY VIENTIANE 
USCINCPAC HONOLULU HI//FPA// 
SECDEF WASHDC//ISA/ABLAGG// 
USDOC WASHDC 
 
UNCLAS SECTION 02 OF 02 HANOI 000133 
 
SIPDIS 
 
STATE FOR EAP/BCLTV 
 
USDOC FOR 1431/MAC/AP/HPPHO 
 
                       UNCLASSIFIED 
 
PAGE 02        HANOI  00133  02 OF 02  181028Z 
 
6.  (U)  OFFICIALS EXPRESSED OPTIMISM THAT IMPLEMENTING 
PLANS FOR A NEW "BORDER ECONOMIC ZONE" WILL SPUR DEVELOPMENT 
IN THE PROVINCE.  IN DECEMBER 2001, THE GVN DECLARED THE 
AREA AROUND THE THANH THUY BORDER CROSSING A BORDER ECONOMIC 
ZONE.  SPECIAL ADVANTAGES INCLUDE A NUMBER OF PROVISIONS TO 
STIMULATE COMMERCIAL ACTIVITY, SUCH AS FAVORABLE CONDITIONS 
ON TAXES, A DUTY FREE MARKET, AND CONCESSIONS ON LAND FOR 
DEVELOPING COMMERCIAL ENTERPRISES.  BANG ADMITTED THAT, 
WHILE THE NATIONAL GOVERNMENT HAD DECLARED THE BORDER 
ECONOMIC ZONE, "IT IS UP TO PROVINCIAL OFFICIALS TO WORK OUT 
THE DETAILS."  ACCORDING TO BANG, HIS OFFICE IS WORKING ON A 
DEVELOPMENT PLAN THAT HE HOPES WILL BE READY "BY THE END OF 
2002." 
 
7.  (U)  DURING A MID-AFTERNOON VISIT TO THE BORDER AREA, 
NOT MUCH ACTIVITY WAS EVIDENT.  ABOUT 10 TRUCKS WERE WAITING 
ON THE HA GIANG SIDE TO RECEIVE GOODS COMING OVER FROM 
CHINA.  ACCORDING TO THE ARMY OFFICER WHO ESCORTED EMBOFFS, 
ONLY ABOUT "NINE OR TEN" TRUCKS A DAY RECEIVE LOADS IN 
EITHER DIRECTION.  A SLOW STREAM OF PEDESTRIANS WAS VISIBLE 
CROSSING THE BORDER DURING EMBOFFS' VISIT.  THE BORDER AREA 
ALSO INCLUDES A TAX OFFICE, CUSTOMS HOUSE, AND A MODEST IF 
SOMEWHAT RUNDOWN SHOPPING CENTER.  THE PEOPLE'S COMMITTEE'S 
HONG POINTED OUT TO EMBOFFS AN AREA ABOUT 100 METERS SOUTH 
OF THE BORDER WHERE LAND WAS BEING LEVELED IN PREPARATION 
                       UNCLASSIFIED 
 
PAGE 03        HANOI  00133  02 OF 02  181028Z 
FOR A NEW SHOPPING AREA. 
 
---------------------------- 
WE DON'T BUY FROM THE BORDER 
---------------------------- 
 
8.  (U)  CONVERSATIONS WITH SHOP OWNERS AROUND HA GIANG TOWN 
PROVIDED SOME INSIGHT AS TO WHY THE BORDER CROSSING AT THANH 
THUY IS RELATIVELY INACTIVE.  IN ONE SHOP SELLING HOUSEHOLD 
ITEMS, THE OWNER SAID THAT ALTHOUGH MOST OF HER INVENTORY 
CAME FROM CHINA, SHE DID NOT BUY IT FROM THE BORDER AREA. 
SHE INSTEAD USED A HANOI SUPPLIER WHO BOUGHT GOODS COMING 
FROM CHINA VIA THE LANG SON BORDER CROSSING TWO PROVINCES TO 
THE EAST. (NOTE:  LANG SON IS CLOSER TO HANOI AND CONNECTED 
BY A GOOD ROAD.  TRAVEL TIME TO HANOI IS ABOUT 2.5 HOURS. 
END NOTE.)  THIS SUPPLIER TOOK THE GOODS TO HANOI, AND THEN 
TRANSSHIPPED THEM TO HA GIANG.  IN RESPONSE TO A QUESTION, 
THE OWNER SAID THAT SHE DID NOT BUY FROM THE BORDER AREA 
BECAUSE "THE CHINESE SELL US INFERIOR PRODUCTS AND WE CANNOT 
RETURN THEM.  IF I HAVE A PROBLEM, MY HANOI SUPPLIER WILL 
EXCHANGE THE ITEMS THAT ARE DEFECTIVE." 
 
9.  (U) ANOTHER SHOP OWNER SELLING CHILDRENS' CLOTHES STATED 
THAT SHE BOUGHT HER INVENTORY IN A SIMILAR MANNER, NOTING 
THAT HER SUPPLIER SHIPPED GOODS TO HER VIA A "RELIABLE" BUS 
DRIVER WHO MAKES REGULAR TRIPS BETWEEN HANOI AND HA GIANG. 
BOTH SHOP OWNERS SAID THEY MADE OCCASIONAL DAY TRIPS TO 
CHINA FOR PLEASURE AND PERSONAL SHOPPING.  THEY WERE AWARE 
THAT THE GVN HAD ESTABLISHED THE BORDER ECONOMIC ZONE. 
HOWEVER, THE CLOTHING SHOP OWNER SAID THAT SUCCESS WOULD 
DEPEND "ON HOW THE GOVERNMENT IMPLEMENTS ITS PLANS."  BOTH 
                       UNCLASSIFIED 
 
PAGE 04        HANOI  00133  02 OF 02  181028Z 
INDICATED THEY WOULD LIKE TO SEE MORE DEVELOPMENT IN THE 
BORDER AREA BECAUSE IT WOULD BE "MORE CONVENIENT" TO BUY AT 
THANH THUY, ASSUMING THEY COULD RECEIVE GOOD QUALITY 
MERCHANDISE AT REASONABLE PRICES. 
 
------- 
COMMENT 
------- 
 
10.  (U)  IN RECENT YEARS, THE GVN HAS CLEARLY TAKEN STEPS 
TO ASSIST HA GIANG TO IMPROVE ITS ECONOMIC SITUATION.  IN 
THE ABSENCE OF RELIABLE INFRASTRUCTURE OR MORE AGGRESSIVE 
SELF-PROMOTION BY PROVINCIAL OFFICIALS, HOWEVER, GROWTH IS 
APT TO REMAIN SLOW AND POVERTY WILL REMAIN A DIFFICULT ISSUE 
TO RESOLVE.  THE UNUSUALLY HIGH PERCENTAGE OF MINORITY 
POPULATION -- PROBABLY THE HIGHEST IN THE NATION -- ALSO 
MEANS THAT COMPETENT LOCAL OFFICIALS FLUENT IN VIETNAMESE 
MAY BE ANOTHER MAJOR LOCAL CONSTRAINT, HOWEVER MUCH IN GOOD 
FAITH THE GVN TRIES TO ASSIST THEIR DEVELOPMENT AND 
INTEGRATION. 
BURGHARDT 
 
                       UNCLASSIFIED