US embassy cable - 05HOCHIMINHCITY1010

UNCLAS HO CHI MINH CITY 001010 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR EAP/BCLTV 
 
E.O. 12958:  N/A 
TAGS: ECON, EINV, PGOV, ETRD, VM 
SUBJECT:  HCMC NEIGHBOR PROVINCE TRANSITIONING FROM AGRICULTURE TO 
INDUSTRY 
 
 
1. (SBU) Summary:  Neighboring HCMC to the south, Long An has 
developed as a center of Mekong Delta agriculture.  But its 
proximity to HCMC makes it a natural location for industrial 
development.  Some businesses, including Nike, have already begun 
to capitalize on this geography, and provincial officials seem 
interested in marketing Long An as an alternative to HCMC's 
prosperous neighbors, Dong Nai and Binh Duong.  It remains unclear 
whether local government understands the secret to Dong Nai's and 
Binh Duong's success: letting business do business with minimal 
government interference.  End Summary. 
 
LOCAL OFFICIALS AWARE OF PROVINCE'S INDUSTRIAL POTENTIAL 
--------------------------------------------- ----------- 
 
2. (SBU) The Consul General, accompanied by EconOff, Post 
Commercial Officer and ConOff, visited Long An Province September 
12.  The province borders HCMC to the west and south and is the 
northern end of the Mekong Delta in terms of both topography and 
economy.  Provincial Party Secretary, Mr. Le Thanh Tam, and 
People's Committee Chairman, Mr. Duong Quoc Xuan, said that 
agriculture in Long An represents approximately 70 percent of the 
land and 80 percent of the workforce.  Both stressed the need to 
develop the province's 22 industrial zones to take advantage of 
its proximity to HCMC to attract investment.  Four operating 
industrial zones have 19 foreign-owned companies, primarily from 
Taiwan, France and China.  Foreign direct investment commitments 
total USD 700 million.  At USD 700 per capita, provincial GDP is 
higher than the national per capita GDP of approximately USD 550. 
Long An's economy grew by 9.6 percent in 2004, and provincial 
authorities have set a 14 percent annual growth target for the 
next five years. 
 
3. (SBU) Provincial officials noted that Long An's infrastructure 
is not yet inadequate to support major increases in industrial 
development, particularly in the areas of electricity, 
transportation and water.  While the province provides tax 
incentives for investors, local leaders were vague about other 
strategies to promote industrial development.  They said they were 
studying the successful experiences of Dong Nai and Binh Duong 
provinces, though People's Committee Chairman Xuan observed that 
land in Long An is lower and wetter than in Dong Nai and Binh 
Duong and structures require pilings, raising costs.  Long An's 
leaders have also been studying the feasibility of dredging the 
Soai Rap River to create a port that could alleviate congestion at 
the Ho Chi Minh City port. 
 
SOME BUSINESS ALREADY AWARE OF LONG AN'S ADVANTAGES 
--------------------------------------------- ------ 
 
4. (U) Taiwanese-owned Ching Luh Shoes Co., Ltd. manufactures 
footwear for Nike, and is the largest factory in Long An Province 
with a 2005 production capacity of 1.2 million pairs of shoes. 
Nike has been Ching Luh's sole client since January 2005.  Its 
workforce has increased from 7,000 to 16,000 workers within the 
past year, and it expects to employ over 20,000 by the end of 
2005.  The average salary is USD 70 per month.  According to 
company officials, Ching Luh came to Long An in 2003 due to the 
greater availability of land and labor compared to Dong Nai and 
Binh Duong.  Ching Luh hopes to continue to draw workers from the 
Mekong Delta as it expands. 
 
5. (U) Dong Tam Ceramic Tiles Company employs more than 3,000 
workers in five factories, three of which are located in Long An 
Province.  The private firm produces 20 percent of Vietnam's high- 
quality tile with annual revenues of USD 40 million.  General 
Director Vo Quoc Thang is a member of the National Assembly (one 
of the few representatives who is not a Party member) and is 
Chairman of the HCMC Young Businesspeople's Association.  In 1986, 
Thang and four employees resurrected the Dong Tam company which 
his father had shuttered after 1975.  He has used his home 
province of Long An as a base for his operations. 
 
6. (SBU) Comment:  Long An has based its economic growth and 
development primarily on agriculture.  Closer to the coast, shrimp 
farming has added a cash crop to traditional rice cultivation. 
The province seeks to industrialize, taking advantage of its 
workforce and location.  It is too soon to gauge whether the local 
leadership, and especially the new People's Committee Chairman, is 
prepared to support an open and supportive business environment. 
A previous Long An People's Committee Chairman was reportedly not 
above being swayed by bribes in awarding rights to develop port 
projects.  End Comment. 
 
WINNICK