US embassy cable - 04HOCHIMINHCITY1582

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001582 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT PLEASE PASS USTR - ELENA BRYAN 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, ETRD, EFIN, ELAB, PGOV, EIND, ELTN, PINR, VM 
SUBJECT: HCMC ECONOMIC LEADERS REPORT 2004 PROGRESS, LISTEN TO 
FOREIGN INVESTOR COMPLAINTS 
 
1. (SBU) SUMMARY:  Ho Chi Minh City (HCMC) government leaders for 
the third straight year reported to the foreign business community 
on the city's annual progress in achieving economic and 
development goals.  The leaders then listened as their audience 
articulated difficulties foreign businesses experience operating 
in Vietnam.  Growth, trade and investment statistics illustrate 
HCMC's position as Vietnam's economic powerhouse.  Yet 
infrastructure and legal reform - two areas where HCMC leaders 
cited achievements since 2003 - remain a focus of business 
frustration.  The willingness of local leaders to openly report on 
strong and weak points, and to accept public criticism, 
demonstrates a transparency reflecting the reform viewpoint of the 
officials who led the meeting.  END SUMMARY. 
 
HCMC CONTINUES TO ACT AS VIETNAM'S ECONOMIC ENGINE 
 
2. (U) Top officials from Ho Chi Minh City's government met 
December 17 with representatives of foreign business to present 
statistics on growth, trade and investment in the region during 
2004 and to listen to foreign investor concerns.  According to Mr. 
Luong Van Ly, deputy director of HCMC's Department of Planning and 
Investment (DPI), HCMC's gross domestic product (GDP) grew by 11.5 
percent in 2004, driven mainly by industry, which grew by 15.1 
percent.  Total investment in HCMC reached $2.5 billion, Ly 
reported, and GDP per capita reached $1,800, a growth of 7.5 
percent since 2003. (NOTE:  According to the Asian Development 
Bank, GDP per capita for all of Vietnam in 2003 was $478.  END 
NOTE.)  HCMC recorded export turnover of $9.5 billion, most of it 
coming from domestic export enterprises.  HCMC registered 8,510 
new domestic enterprises in 2004, with total capital of close to 
$1 billion. 
 
3. (U) Mr. Truong Trong Nghia, vice president of HCMC's Investment 
and Trade Promotion Center (ITPC), discussed the contributions of 
HCMC and the southern economic zone (which includes HCMC and 6 
neighboring provinces) to Vietnam's economy.  While HCMC alone 
accounted for more than 18 percent of Vietnam's GDP, the southern 
economic zone accounted for 36 percent of the nation's GDP.  HCMC 
also accounts for 35.5 percent of Vietnam's exports and 26 percent 
of its foreign direct investment (FDI).  While HCMC's exports 
totaled $9.5 billion, its imports reached $5.1 billion, an 
increase of 16.8 percent from 2003.  The U.S. remained HCMC's main 
export market in 2004, accounting for 24.5 percent of exports. 
Hong Kong recorded the most FDI in HCMC in 2004 at $62.6 million. 
Singapore, Korea, Japan and the U.S. followed with FDI at $61.4, 
$50.4, $28.5, and $18.9 million respectively. 
 
AREAS FOR IMPROVEMENT 
 
4. (U) Following the recitation of 2004 statistics, the HCMC 
leaders presented the main frustrations articulated by foreign 
business in 2003 and what remedies HCMC had taken in 2004.  DPI's 
Luong Van Ly reported that business complaints in 2003 had focused 
on four areas: infrastructure, human resources, laws and 
regulations, and support to investors.  According to Ly, 
subsequent progress in these areas had included improved bus 
service, reduced telecom fees, an increase in the number of 
students receiving management training, a new decree that 
specifies both what documents an investor needs for a license and 
how HCMC departments coordinate licensing, and more information on 
government policies available online.  HCMC leaders acknowledged 
that further progress was still needed on bridges over the Saigon 
River, a subway system, zoning and transparency. 
 
5. (U) In response, expatriate business leaders seized on the 
deficiencies acknowledged by the local officials, harshly 
criticizing the lack of a coherent zoning plan for land use, for 
example, and citing this as a key deterrent to investment in the 
area.  People's Committee Vice Chairman Nguyen Huu Tin responded 
that city officials were working on a comprehensive zoning plan 
that they hoped to unveil in 2005.  Other criticisms from business 
focused on labor regulations, tax and accounting rules, opaque law- 
making and limits on cargo transport in the city. 
 
COMMENT 
 
6. (SBU) This reporting and feedback session was extremely useful, 
both for measuring Ho Chi Minh City's economic progress and for 
taking the pulse of the business community.  While the HCMC 
leadership provided initial explanations in response to business 
complaints, Vice Chairman Tin concluded the meeting by promising 
that the government would work to address investor concerns in the 
coming year.  The frank and candid discussion demonstrated the 
commitment to reform and transparency of local leaders, 
particularly Vice Chairman Tin, DPI's Mr. Ly, and ITPC's Mr. 
Nghia.  The latter two officials have extensive expertise stemming 
from their education in Europe and the United States, respectively 
- a background clearly reflected in their organization of this 
meeting. 
 
CHERN