US embassy cable - 02HOCHIMINHCITY117

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000117 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, PGOV, SOCI, ETRD, VM 
SUBJECT: HCMC OFFICIALS CAN NOW RUN THE CITY 
 
REF: HO CHI MINH CITY 75 
 
1.  SUMMARY:  IN WHAT APPEARS TO BE A TEST CASE FOR 
VIETNAM'S MAJOR CITIES, THE CENTRAL GOVERNMENT HAS 
DEVOLVED SOME SIGNIFICANT POWERS TO HO CHI MINH CITY 
WITH THE ISSUANCE OF "DECREE 93" BY THE OFFICE OF THE 
PRIME MINISTER.  THIS DECREE PERMITS HCMC FOR THE FIRST 
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TIME TO DO ITS OWN BUDGETING, APPROVE LARGE DOMESTIC 
INVESTMENT PROJECTS, HANDLE LAND ISSUES, HIRE AND FIRE 
KEY PERSONNEL, AND EVEN PRIVATIZE SOME PUBLIC SERVICES 
- ALL WITH MUCH LESS INTERFERENCE FROM HANOI.  HCMC 
AUTHORITIES SAY THEY WERE SURPRISED THAT SO MUCH 
AUTONOMY HAS BEEN GRANTED AND ARE STILL ASSESSING 
EXACTLY WHAT THIS MEANS.  THEY ASSERT, HOWEVER, IT WILL 
BRING MORE EFFICIENT, TRANSPARENT, AND RESPONSIVE 
GOVERNMENT. 
 
I NEED TO CHECK WITH HANOI 
-------------------------- 
2. HO CHI MINH CITY AUTHORITIES HAVE TRADITIONALLY 
NEEDED APPROVALS FROM HANOI TO MAKE ALMOST ANY MAJOR 
DECISION.  THIS BEGAN TO CHANGE WHEN LAST DECEMBER THE 
OFFICE OF THE PRIME MINISTER ISSUED "DECREE 93." THE 
DECREE GRANTS SIGNIFICANT AUTONOMY TO HO CHI MINH CITY 
IN SOME AREAS.  CITY OFFICIALS HAD BEEN PUSHING FOR 
MORE LOCAL CONTROL FOR SOME TIME, BUT TO THEIR 
SURPRISE, ACCORDING TO ONE LOCAL OFFICIAL, "WE GOT 
ABOUT 95% OF WHAT WE WERE ASKING FOR."  ALTHOUGH THE 
DECREE WENT INTO EFFECT ON DECEMBER 27, THE CITY IS 
STILL ASSESSING HOW IT WILL IMPLEMENT ITS NEW POWERS. 
RELEVANT DEPARTMENTS WILL BE MAKING RECOMMENDATIONS TO 
THE PEOPLE'S COMMITTEE IN FEBRUARY AND MARCH FOR NEW 
IMPLEMENTING REGULATIONS.  JUST THE SAME, LOCAL 
OFFICIALS ALREADY SEE THIS AS A MAJOR DEVELOPMENT IN 
THE AREA OF ADMINISTRATIVE REFORM. 
 
YOU'RE FIRED 
------------ 
                       UNCLASSIFIED 
 
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3.  UNDER THE DECREE, THE PEOPLE'S COMMITTEE OF HCMC 
NOW HAS THE AUTHORITY TO HIRE AND FIRE KEY PERSONNEL, 
SUCH AS CITY DEPARTMENT HEADS.  BEFORE, SUCH DECISIONS 
HAD TO BE APPROVED BY HANOI.  NOW HCMC CAN INSTALL ITS 
OWN PEOPLE IN THE LOCAL GOVERNMENT HIERARCHY -- AND 
FIRE THEM IF THEY DO NOT PERFORM.  THE CITY ALSO HAS 
NEW AUTHORITY TO PROVIDE ADDITIONAL "INCENTIVES" TO 
RECRUIT AND RETAIN SPECIALIZED OR TECHNICAL STAFF. 
FIRST VICE-CHAIRMAN NHAN HAS TOLD THE AMBASSADOR THAT 
HE WILL USE THESE INCENTIVES TO PROVIDE HIGHER SALARIES 
FOR INFORMATION TECHNOLOGY PROFESSIONALS (SEE REFTEL). 
 
4.  WHAT MAY HAVE EVEN A LARGER IMPACT, LOCAL OFFICIALS 
NOW WILL HAVE FULL AUTHORITY TO ESTABLISH, RESTRUCTURE 
OR DISSOLVE AGENCIES, NON-PROFIT ORGANIZATIONS, AND 
STATE-OWNED ENTERPRISES (SOES) UNDER THEIR CONTROL. 
THE CITY CAN ALSO EXERCISE THE OPTION OF PRIVATIZING 
SOME OF ITS PUBLIC SERVICES. 
 
IT'S TIME FOR YOU TO MANAGE YOUR OWN BANK ACCOUNT 
--------------------------------------------- ---- 
5.  PRIOR TO DECREE 93, HANOI DETERMINED HCMC'S BUDGET 
LINE ITEM BY LINE ITEM.  HCMC WAS UNABLE TO REDEPLOY 
THAT MONEY REGARDLESS OF HOW THE CITY PERCEIVED 
CHANGING LOCAL NEEDS.  NOW HCMC HAS GAINED VIRTUALLY 
FULL CONTROL OVER ITS ENTIRE BUDGET PROCESS. IN THE 
PAST, HANOI DETERMINED ANNUALLY THE CONTRIBUTION THAT 
HCMC MADE TO THE NATIONAL BUDGET, AND EVERY YEAR SAW AN 
INCREASE.  UNDER DECREE 93, THE AMOUNT GOING TO CENTRAL 
GOVERNMENT COFFERS WILL BE SET AS A PERCENTAGE OF TOTAL 
INCOME TAX REVENUES ONCE EVERY FIVE YEARS, MAKING IT 
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POSSIBLE FOR HCMC TO MORE ACCURATELY FORECAST ITS 
FUTURE REVENUES.  FOR THE NEXT FIVE YEARS HCMC WILL BE 
ABLE TO RETAIN 24% OF ALL CORPORATE AND PERSONAL INCOME 
TAXES RAISED IN THE CITY.  HCMC WILL ALSO BE ALLOWED TO 
SEEK OTHER SOURCES OF FUNDING -- SUCH AS ISSUING BONDS 
AND ASSESSING FEES FOR LOCAL SERVICES. 
 
I WANT TO BUILD SOMETHING REALLY BIG 
------------------------------------ 
6.  CITY PLANNING IS NOW, UNDER DECREE 93, ACTUALLY A 
CITY GOVERNMENT FUNCTION.  THE DECREE EXPLICITLY NOTES 
THAT LAND USE ISSUES ARE TO BE HANDLED AT THE CITY 
LEVEL.  THIS MEANS CITY AUTHORITIES CAN NOW LEASE LAND 
PLOTS OF ANY SIZE AND PAY LOCALLY-DETERMINED PRICES FOR 
LAND FOR URBAN DEVELOPMENT AND INVESTMENT PROJECTS. 
PREVIOUSLY, ALL LAND DEALS OVER ONE HECTARE REQUIRED 
APPROVAL FROM THE PRIME MINISTER.  ACCORDING TO LOCAL 
OFFICIALS, THIS CHANGE SHOULD SIGNIFICANTLY SPEED UP 
THE APPROVAL PROCESS. 
 
7.  STILL, THE DECREE STATES THAT HCMC AUTHORITIES 
SHOULD SHARE PROPOSALS WITH RELEVANT CENTRAL GOVERNMENT 
MINISTRIES ON MAJOR CITY PLANNING INITIATIVES.  IF HCMC 
DOES NOT RECEIVE A REPLY WITHIN 30 DAYS, THE INITIATIVE 
IS CONSIDERED APPROVED. THIS IS A MARKED DEPARTURE FROM 
THE TRADITIONAL "UNLESS IT IS EXPLICITLY PERMITTED, IT 
IS NOT ALLOWED" APPROACH UTILIZED BY THE GVN. 
 
I'LL TAKE YOUR 10 MILLION 
------------------------- 
8.  THE PROCESS OF APPROVING LARGE DOMESTIC INVESTMENTS 
ALSO HAS BEEN STREAMLINED, AND SHOULD ALLOW PROJECTS TO 
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MOVE MUCH MORE QUICKLY.  WITH DECREE 93, DOMESTIC 
INVESTMENT PROJECTS OVER US$10 MILLION WILL BE REVIEWED 
AT THE "FEASIBILITY STUDY" PHASE BY THE OFFICE OF THE 
PRIME MINISTER.  THIS ALLOWS FOR THE APPROVAL OF 
PROJECTS "IN PRINCIPLE" AT AN EARLY STAGE, RATHER THAN 
SUBJECTING EVERY ASPECT OF A FULLY DEVELOPED PROPOSAL 
TO CENTRAL GOVERNMENT SCRUTINY.  THE DECREE DOES NOT 
COVER FOREIGN DIRECT INVESTMENT. 
 
ANYTHING ELSE? 
-------------- 
9.  THE MOVE TO GRANT MORE AUTONOMY TO HO CHI MINH CITY 
IS A SUCCESS FOR CITY OFFICIALS WHO HAVE LONG LOBBIED 
FOR THESE CHANGES.  THEY HAVE ASSERTED THAT HCMC - 
BECAUSE OF ITS SIZE, LEVEL OF ECONOMIC DEVELOPMENT, AND 
RATE OF GROWTH - HAS ITS OWN UNIQUE CHALLENGES. 
SOMEWHAT SURPRISINGLY, HANOI AGREED TO ALMOST ALL OF HO 
CHI MINH CITY OFFICIALS' PROPOSALS.  ONLY A FEW ITEMS 
FROM THEIR INITIAL PROPOSAL WERE REJECTED: ELIMINATION 
OF ONE LAYER OF CITY GOVERNMENT; CREATION OF A SPECIAL 
HCMC TOURIST POLICE FORCE; AND THE FREEDOM TO ESTABLISH 
HCMC-SPECIFIC INVESTMENT AND FINANCE CORPORATIONS. 
(NOTE:  SEVERAL CONSULATES GENERAL IN HCMC--BRITISH, 
GERMAN, SINGAPOREAN, JAPANESE, AND U.S., AMONG OTHERS-- 
HAD URGED THE PEOPLE'S COMMITTEE TO ESTABLISH A 
SEPARATE TOURIST POLICE, GIVEN RECENT INCREASES IN 
STREET CRIME AND THE DEATH OF A BRITISH TOURIST DURING 
A PURSE-SNATCHING ATTEMPT.  ALTHOUGH DISAPPOINTED THAT 
THE CENTRAL GOVERNMENT DID NOT GRANT HCMC THE FUNDING 
FOR THIS ENDEAVOR, THIS WAS THE FIRST WE HAD HEARD THAT 
HCMC OFFICIALS HAD BEEN PRESSING HANOI TO INCLUDE A 
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PAGE 03        HO CHI  00117  02 OF 02  050818Z 
SEPARATE POLICE FORCE AS PART OF THE OVERALL REFORM 
PACKAGE.) 
 
10. LOCAL OFFICIALS STATE THAT HCMC WILL CONTINUE 
PUSHING FOR THOSE CHANGES AS A PART OF FUTURE REFORMS. 
OVERALL, HOWEVER, HO CHI MINH CITY OFFICIALS WERE 
PLEASED WITH THE LEVEL OF COOPERATION SHOWN BY HANOI. 
THEY VIEW THESE NEW MANAGEMENT POWERS AS REAL, ABSOLUTE 
AND EFFECTUAL.  HO CHI MINH CITY'S ABILITY TO SUCCEED 
USING THESE NEW MANDATES WILL BE A HARBINGER OF 
INITIATIVES TO COME THROUGHOUT THE REST OF VIETNAM. 
DEPUTY PRIME MINISTER NGUYEN CONG TAN WAS QUOTED IN THE 
LOCAL PRESS AS STATING, "IF HCMC FULFILLS THE 
DECENTRALIZED TASKS, THE MODEL WILL BE APPLIED NATION- 
WIDE WHEN ADMINISTRATIVE REFORMS ARE CONDUCTED IN THE 
FUTURE." 
 
COMMENT 
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11.  THE CENTRAL GOVERNMENT HAS TAKEN A STRONG STEP IN 
ADMINISTRATIVE REFORM BY GRANTING HO CHI MINH CITY 
POWERS THAT WOULD PROBABLY APPEAR TO MOST OF US AS 
TYPICAL CITY GOVERNMENT FUNCTIONS, BUT NOT IN VIETNAM. 
WHAT REMAINS TO BE SEEN, HOWEVER, IS HOW BOTH HANOI AND 
HCMC DEFINE, IN PRACTICE, THIS NEW RELATIONSHIP.  ONE 
CITY OFFICIAL NOTED THAT EVEN WITH ITS NEW POWERS "IN 
REALITY, WE WILL STILL ASK FOR ADVICE FROM HANOI ON 
MAJOR PROJECTS."  HCMC WILL RECEIVE A GREAT DEAL OF 
SCRUTINY IN THIS PILOT PHASE OF DEVOLUTION, BOTH FROM 
HANOI AS WELL AS FROM OTHER LARGE CITIES SUCH AS DANANG 
AND CAN THO WHICH WILL SEEK SIMILAR INDEPENDENCE.  WILL 
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THESE NEW POWERS MAKE THE CITY MORE RESPONSIVE, 
EFFICIENT, AND ACCOUNTABLE?  THE SIGNS ARE POSITIVE. 
DECREE 93 FOLLOWS A SERIES OF LOCAL ADMINISTRATIVE 
REFORMS THAT HAVE STREAMLINED INVESTMENT AND OTHER 
LICENSING PROCEDURES HERE IN HCMC -- AND ARE ONE REASON 
HCMC GENERATES SO MUCH OF VIETNAM'S INVESTMENT AND 
ECONOMIC GROWTH. 
 
YAMAUCHI 
 
                       UNCLASSIFIED