US embassy cable - 04HOCHIMINHCITY1528

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001528 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR FOR E.BRYAN 
 
E.O. 12958: N/A 
TAGS: EINV, ETRD, EFIN, ECON, PREL, PGOV, VM, PHUM, KIRF, SOE, RELFREE, HUMANR 
SUBJECT: VIETNAM'S SOUTHERN ECONOMIC TRIANGLE SUCCESS 
 
1. (SBU) Summary: Consul General and ConGen team traveled to 
Dong Nai and Binh Duong provinces to examine the two 
provinces' economic performance that is double the national 
average.  Local officials credit their economic success to 
1990's policy decisions creating the southern economic 
zones.  In our view what separates these provinces is the 
leadership of local officials and their investor-friendly 
attitude.  Provincial authorities, particularly in Binh 
Duong, also appear to extend this "laissez faire" approach 
to religious freedom issues.  Despite the two provinces' 
track records and Hanoi's apparent encouragement, other 
provinces are slow to follow Binh Duong and Dong Nai's lead. 
Risk-taking is still not the norm for most provincial 
leaders.  End Summary. 
 
2. (SBU) Over the past decade, the provinces of Dong Nai and 
Binh Duong, adjacent to HCMC, have consistently grown at 
double Vietnam's national average.  Other provinces with 
comparable proximity to HCMC have not kept pace.  To better 
understand what underpins this success and to obtain 
investment information for American businesses, the CG and 
Econ, Pol, Consular and FCS officers visited Dong Nai and 
Binh Duong Provinces on November 10 and November 23, 
respectively. 
 
Dong Nai: "we should walk together with business" 
--------------------------------------------- --- 
 
3. (SBU) The Chairman of the People's Committee of Dong Nai, 
the Director of the Department of Planning and Investment 
(DPI), and the Deputy Head of the Dong Nai Industrial Zone 
Authority (IZA) emphasized their firm commitment to 
promoting a business-friendly environment in the province. 
They said that the GVN's economic reforms in the late 1980s 
and early 1990s had given them the impetus and legal 
foundation to act.  They credited their proximity to HCMC's 
markets, airport, and ports as a catalyst for the province's 
growth.  Dong Nai also has pre 1975 experience with 
industry.  Bien Hoa 1 Industrial Zone was established as 
Vietnam's first industrial zone in 1963 and was well 
positioned to restart Vietnamese industrialization when Doi 
Moi began in 1986. 
 
4. (SBU) According to the province's Chairman, Mr. Vo Van 
Mot, Dong Nai Province is able to maintain a high growth 
rate averaging 12-13 percent per year because of rapid 
growth in the industrial sector.  In 2003, the industrial 
sector -- half the local economy -- grew 19 percent. 
Services, which comprise a quarter of the Dong Nai economy, 
grew at 12 percent in 2003.  Dong Nai is home to 3,141 
domestic invested projects and 570 Foreign Direct Investment 
(FDI) projects. 
 
5. (SBU) The Dong Nai officials said that, to sustain their 
success, the Department of Planning and Investment (DPI) and 
the Industrial Zone Authority, with the assistance of the 
People's Committee, often amend regulations to make them 
more favorable to investors.  Dong Nai's DPI routinely 
interacts with investors to provide information on 
investment, facilitate operations, and to resolve problems. 
Chairman Vo told the CG that the province advocates on 
behalf of investors -- foreign and domestic -- with the 
central government when the issue is beyond their local 
control. 
 
6. (SBU) Calling FDI an "integral part of our economy," 
Chairman Vo said he was not satisfied with the province's 
current FDI stock.  While large by Vietnamese standards, in 
real terms FDI investment is modest, especially compared to 
China.  He acknowledged that private business needs better 
access to capital markets and that restructuring of SOEs 
remains a problem.  According to the Chairman, SOEs still 
hold the largest share of the province's economy, although 
private enterprise has been growing more quickly. 
 
7. (SBU) Provincial officials also briefed the CG on a new 
airport initiative.  Tan Son Nhut Airport in Ho Chi Minh 
City is expected to reach full capacity by 2012.  As a 
result, the Southern Airports Authority (SAA) has proposed 
building a new international airport at Long Thanh in Dong 
Nai Province, eventually becoming the sole international 
airport for the region.  According to the Dong Nai DPI 
Director, construction will begin in 2010.  However, the SAA 
is still looking for potential investors and has yet to 
undertake a feasibility study.  In addition to the new 
airport, Dong Nai is planning to relocate one of Ho Chi Minh 
City's major seaports to the province. 
 
Binh Duong:  Success Breeds Success 
----------------------------------- 
 
8. (SBU) As in Dong Nai, provincial leaders in Binh Duong 
province credited GVN policies for creating conditions that 
allowed them to achieve a nearly 15 percent growth rate last 
year. According to the Binh Duong People's Committee, the 
province has attracted 868 FDI projects from 34 countries, 
with a total investment value of USD 4.1 billion, about 9 
percent of Vietnam's entire FDI stock. In 2003, the province 
attracted 135 new FDI projects, while another 106 foreign 
investors increased their capital investment for a total 
capital investment of USD 458 million. There are 26 U.S.- 
linked FDI projects in Binh Duong totaling USD 200 million, 
roughly 17 percent of the total U.S. FDI outlay in Vietnam. 
These investments range from several hundred thousand 
dollars to 80 million dollars, according to People's 
Committee Chairman Nguyen Hoang Son. 
 
9. (SBU) While giving Hanoi the lion's share of the credit, 
Chairman Son said Binh Duong had been able to attract 
investors because the province has a cooperative attitude 
and is willing to learn from foreign investors.  He told the 
CG that the province's focus is to simplify procedures and 
address investor concerns.  The province recognizes that 
building an investor-friendly reputation will make it easier 
to attract greater investment.  In this regard, Binh Duong 
has organized its own overseas trade missions to attract 
FDI. 
 
10. (SBU) Provincial leaders also emphasized that while FDI 
gives the province valuable cachet and foreign know-how, 
they also have been working hard to attract domestic 
investment.  In recent years domestic investment has begun 
to outstrip FDI in the province.  Chairman Son added that 
Hanoi has begun to recognize Binh Duong's economic 
achievements and has recommended that other provinces visit 
to copy Binh Duong's best practices.  It was up to the 
leadership of a particular province to follow suit, he said. 
(Note: The former head of the Communist Party in Binh Duong, 
Nguyen Minh Triet, was promoted to the Politburo and to lead 
the HCMC Party Committee after helping guide Binh Duong's 
economic development in the early 1990s.  End note.) 
 
American Investors Satisfied 
---------------------------- 
 
11. (SBU) Managers of U.S.-affiliated companies in both 
provinces praised provincial leadership for its transparency 
and efficiency.  They noted that the inflow of domestic and 
foreign investment was creating upward pressure on salaries, 
particularly for management-level positions.  The investment 
also has exhausted the local labor market.  Today industry 
uses recruiters to hire employees from the Mekong Delta or 
central Vietnam.  However, despite the added costs, the two 
provinces remained the business representatives' first 
choice for any new investment in Vietnam. 
 
12. (SBU) In meetings, provincial authorities were open to 
new ideas and input on how to attract greater American 
investment.  The CG suggested several areas of improvement, 
including improved legal transparency and intellectual 
property rights protection.  He also encouraged the 
provinces' leaders to urge the GVN to conclude negotiations 
for WTO accession. 
 
Freedom of Religion 
------------------- 
 
13.  (SBU) Binh Duong also appeared to take a more 
progressive approach to religious affairs than do most other 
provinces.  The provincial Head of the Committee for 
Religious Affairs (CRA) and the Deputy Director of the 
Ministry of Public Security (MPS) told us that they 
recognized that religious freedom issues were very 
sensitive.  They were consulting with local religious 
leaders, including members of the nascent house church 
movement in province, about the Ordinance on Religion.  Binh 
Duong MPS and CRA officials told us that they had no plans 
to use the law to close house churches, but would work to 
encourage house churches to register their operations under 
the new legal framework.  We later met with the leader of a 
200-member house church in Binh Duong who told us that, in 
contrast to prior years, her church has faced no police 
harassment in 2004.  She added that over the past year, she 
had been able to develop a good working relationship with 
local police and the CRA and was beginning to think about 
the process of registration under the new law. 
 
14.  (SBU) The outgoing Bishop of Dong Nai, Phaolo Maria 
Nguyen Minh Nhat, told us that relations between the Church 
and the government in the province are gradually improving. 
In particular, the Bishop said that much of the mutual 
suspicion that existed between Church and State in the years 
after unification had dissipated.  He said that the next 
day, the church would celebrate the investiture of its new 
Bishop -- at least 3,000 persons were expected to attend the 
ceremony.  (Note:  With one million believers, the Dong Nai 
- Binh Duong - Vung Tau diocese is the largest in Vietnam. 
Many are refugee families from the former Communist- 
controlled North Vietnam who were resettled during partition 
in 1954.)  As in other provinces in southern Vietnam, the 
Dong Nai diocese is looking forward to testing provisions of 
the Ordinance on Religion that increase its autonomy, such 
as the right to appoint and transfer priests. 
 
15. (SBU) In contrast to his counterpart in Binh Duong, the 
CRA Chairman in Dong Nai told us that he planned to enforce 
provisions in the new legal framework on religion that ban 
the operation of religious organizations that are not 
registered with the Government.  However, to date, we have 
not received any reports of local authorities using the law 
to crack down on house churches in Dong Nai province. 
 
16. (SBU) Comment: Dong Nai and Binh Duong Provinces are 
doing well by any measure. Both provinces engineered an 
almost complete transformation of their economies from 
predominantly agrarian to overwhelmingly industrial and 
services-based in as little as 10-15 years.  The key to 
their success is leadership.  Other provinces have similar 
proximity to HCMC or other ports and airports; none have the 
same rate of growth.   Despite the two provinces' track 
records and Hanoi's apparent encouragement, other provinces 
have been slow to follow or to promote reformers to 
leadership positions. Despite the Binh Duong/Dong Nai model, 
steadiness, state control and caution are still seen as the 
route to job stability by most provincial leaders in 
Southern Vietnam. End comment. 
 
WINNICK