US embassy cable - 05HOCHIMINHCITY1043

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001043 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR EAP/MLS 
 
E.O. 12958:  N/A 
TAGS: ECON, PGOV, EINV, SOCI, ETRD, PHUM, SENV, VM, HIV/AIDS, SOE 
SUBJECT:  BINH DINH PROVINCE: GETTING IT RIGHT 
 
REF:  04 Hanoi 3246 
 
SUMMARY 
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1.  (U):  Binh Dinh Province, on Vietnam's central coast, is 
significantly out-performing its neighbors.  Despite the poor 
resources and traditional poverty of the central region, Binh Dinh 
ranked 21st out of 61 provinces in the UNDP 2003 Vietnam 
Millennium Development Goals Index, and 12th out of 42 provinces 
in the USAID-funded 2005 Provincial Competitiveness Index.  The 
province is a major center for outdoor furniture, a booming 
billion dollar plus export industry for Vietnam.  Provincial 
leadership is investing heavily in infrastructure to boost 
industrial development and tourism.  A good port, abundant 
potential workforce, and extensive beaches make this a viable 
strategy, especially given a pro-private investment, limited state- 
owned enterprise orientation.  Both foreign business and NGOs 
spoke highly of provincial leaders.  While the province is still 
in an early stage of development, we will encourage US investors 
to give it a close look.  The pristine coastal environment also 
holds great potential for aquaculture and makes Binh Dinh a 
potential area for technical assistance in integrated coastal 
management.  END SUMMARY. 
 
2. (U) Consul General visited Binh Dinh September 19-20 to examine 
the roots of the provinces strong performance relative to its 
neighbors.  Meetings with the People's Committee leadership, local 
bankers and businesses, industrial development sites 
representatives, the University, foreign investors, an NGO, and a 
drug/sex worker rehabilitation center painted a consistent picture 
of a progressive province on the cusp of rapid development. 
 
BINH DINH PEOPLE'S COMMITTEE:  BUILD IT AND THEY WILL COME 
--------------------------------------------- ------------- 
 
3. (SBU) Under the leadership of Chairman Vu Hoang Ha, the Binh 
Dinh People's Committee has emphasized building up provincial 
infrastructure and developing three major industrial/economic 
zones, the Nhon Hoi Economic Zone (NHEZ) being the most ambitious. 
Although it has utilized both GVN finances and policies to its 
advantage, Binh Dinh, according to Mr. Ha, follows its own 
direction in terms of economic development.  In a private 
conversation with the CG, one official noted that Ha and the 
current Binh Dinh Party Secretary, Nguyen Xuan Duong, do not see 
eye-to-eye on development, and Ha considers the Party Secretary to 
lack progressive vision and to be more of an obstacle than an 
asset.  (NOTE:  The Party Secretary was not available to meet with 
CG.  END NOTE.) 
 
4. (U) Binh Dinh has undertaken a variety of significant 
infrastructure projects to make the province an attractive 
investment location.  The province recently completed a new 
coastal highway between the provincial capital, Quy Nhon, and the 
adjacent province to the south, Phu Yen.  In addition, Binh Dinh 
has plans to complete roads between Phu Cat Airport and NHEZ, and 
between NHEZ and Quy Nhon.  A significant portion of this second 
road will be the 2.5 km Nhan Hoi Bridge, which, when completed in 
May 2006, will be the longest bridge in Vietnam, according to Binh 
Dinh officials.  Binh Dinh is also improving electricity and water 
capacity.  Renovation of the current electricity network is 
underway and plans for two wind power plants are also in progress. 
 
5. (U) Binh Dinh is also increasing the capacity of Quy Nhon 
seaport, which is the tenth largest port in Vietnam and busier 
than the much larger port of Danang.  According to port officials, 
its popularity derives from the port's proximity to the central 
and southern provinces of Vietnam, Cambodia, and Laos, as well as 
its port services.  Quy Nhon port handled 2.5 million tons of 
cargo in 2004 and will likely reach 3 million tons by the end of 
the 2005.  It currently has the capacity for 30,000 deadweight ton 
ships, though there are plans to build more piers with greater 
capacity.  Vessels from Quy Nhon transship through Singapore. 
 
6. (U) The Phu Tai Industrial Zone and the Long My Industrial 
Zone, located in Quy Nhon, are largely complete and already in use 
by various operations, mainly factories producing outdoor 
furniture.  According to provincial officials, outdoor furniture 
manufacturing - Binh Dinh's largest industry - accounted for 1.25 
percent of Vietnam's GDP in 2004, and Binh Dinh is second only to 
Binh Duong Province in its furniture production.  According to the 
Binh Dinh Industrial Zones Management Board Chairman, almost all 
of the enterprises located in the Phu Tai and Long My industrial 
zones are private companies.  The Department of Planning and 
Investment stated that there are 40 state-owned enterprises in 
Binh Dinh that account for 20 percent of the province's industrial 
production. 
 
7. (SBU) Nhon Hoi Economic Zone is an ambitious project being 
developed on the Phuong Mai peninsula, across Thi Nai Lagoon from 
Quy Nhon.  In addition to hosting manufacturing operations, NHEZ 
will develop tourism and residential areas.  Construction in NHEZ 
should begin in June 2006.  Of concern is the environmental impact 
NHEZ will have on Thi Nai Lagoon, a long salt-water estuary rich 
in marine life and potential major oyster farming ground.  Quy 
Nhon's current sewage system is out-dated and inefficient, but 
local officials reported that plans are being developed with 
international donors to improve the city's waste disposal. 
 
BUSINESS SUCCESS STORIES 
------------------------ 
 
8. (SBU) Pure Bay Oyster Company (PBOC) is an American/Australian- 
owned firm that relocated to Binh Dinh from Khanh Hoa Province in 
1998.  PBOC sells 500 cases of oysters per month, primarily to 
high-end hotels and restaurants in HCMC.  According to Amcit 
Deputy Director Thomas Williams, the company recently obtained a 
sea lease from Binh Dinh for a portion of De Gi Lagoon, where it 
plans to start oyster farming in approximately six months. 
Currently, PBOC buys its product from individual fishermen.  PBOC 
also plans to move beyond domestic buyers and export to Thailand, 
Hong Kong, and the United States.  PBOC continues to have no real 
difficulties with local authorities (reftel).  In a separate 
conversation, Binh Dinh officials told the CG they plan to 
cooperate fully with PBOC because they see the potential of the 
oyster industry to attract investors and become another avenue for 
economic expansion.  PBOC is optimistic about the seafood industry 
in general, and the oyster niche in particular, because Vietnam is 
one of the new global sources for oysters.  PBOC continues to 
grapple with the challenge of getting product to market because of 
the lack of direct transportation routes to Danang or HCMC. 
 
9. (SBU) The privately-owned Duc Nhan Limited Liability Company, 
located in Quy Nhon and established in 2003, represents one of the 
larger outdoor wooden furniture manufacturers in Binh Dinh.  Duc 
Nhan is based in Kon Tum Province, but company Director Nguyen 
Thanh Nhon said he had opened the Binh Dinh operation because he 
hoped to save on transportation costs and benefit from greater 
access to information and customers because of Binh Dinh's 
location.  While worker salaries in Binh Dinh are higher than at 
Duc Nhan's Kon Tum factory, wood transportation costs are much 
lower given the proximity of Quy Nhon Port.  Duc Nhan produces 130 
containers of furniture per month and imports its wood from 
various countries.  Nhon told the CG he prefers Binh Dinh to Kon 
Tum because of its open business climate.  At another furniture 
factory owned by the HCMC-based Khai Vy Corporation, company 
officials noted they planned to focus more on the U.S. market; 
currently Khai Vy's Binh Dinh operation, which uses computerized 
machinery for highly detailed work, produces 150 containers of 
high-end outdoor furniture per month, mainly for export to Europe. 
 
HUMAN DEVELOPMENT ALONG WITH ECONOMIC DEVELOPMENT 
--------------------------------------------- ---- 
 
10. (U) The evolution of Quy Nhon University (QNU) from a 
teacher's college to a comprehensive university in 2003 reflects 
the effort Binh Dinh is making to link economic development with 
social development.  According to People's Committee Chairman Ha, 
the province is striving to retain well-educated residents through 
various subsidies, incentive pay, and bonuses.  Binh Dinh 
officials also stated that the provincial government was willing 
to provide financial assistance to businesses for worker training 
programs.  Binh Dinh is opening a new teacher's college this year 
and expects a private university to open in 2006.  QNU supports 
three American volunteer English language teachers who come from 
the English Language Institute, a U.S.-based NGO.  Binh Dinh also 
provides some scholarships to QNU students who commit to returning 
to Binh Dinh to use their new skills to promote the province's 
economic development. 
 
ATTENTION TO AVIAN FLU AND HIV/AIDS 
----------------------------------- 
 
11. (U) CG paid a visit to the CARE International office in Quy 
Nhon, where the NGO is operating a disaster preparedness program 
and an Avian Influenza (AI) program.  According to Carol Sherman, 
CARE's country director, the AI program, which is funded by New 
Zealand AID, provides local communities with protective equipment 
and bio-safety information.  CARE is currently working with local 
officials and international organizations, like the World Health 
Organization and the UNDP, to provide uniform AI public service 
messages for community-based distribution.  Sherman and local CARE 
program managers said they generally receive good support from the 
province. 
 
12. (U) CG also toured an 05/06 rehabilitation center for 
intravenous drug users (IDUs) and sex workers located in Quy Nhon. 
It is a small center that currently has 41 residents. 
Approximately 40 percent of the residents suffer from HIV/AIDS, 
mostly IDUs.  According to center officials who met with the CG, 
40 percent of the women who enter the center are prostitutes, and 
of those, about 35-40 percent abandon prostitution when they leave 
the center.  Center officials said the average stay for residents 
is 18 months, but those suffering full-blown AIDS, who have no 
family to support them, stay until they die.  One resident told 
the CG that he had been at the center for 11 years.  Until 
recently, the center offered a program in peer education and 
community outreach supported by Family Health International (FHI). 
Although FHI no longer has funding to continue this program, the 
center still bases its rehabilitation on the FHI model. 
 
COMMENT 
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13. (SBU):  Although agriculture still supports 70 percent of Binh 
Dinh's population, the province is making strides toward 
developing a healthy environment for industrial growth and 
investment.  What appears to give Binh Dinh an edge over other 
similarly situated provinces in the region, such as Khanh Hoa (Nha 
Trang), is a progressive-minded People's Committee Chairman, who 
understands the importance of strong infrastructure and the logic 
of linking economic and social development.  Binh Dinh appears to 
be moving away from reliance on state-owned enterprises and long- 
standing vested interests.  Furthermore, both foreign corporations 
and NGOs have found the provincial government to be unobtrusive 
and, in some cases, supportive.  However, as progressive as the 
Chairman and the People's Committee may be, they do not appear to 
fully understand international investment models and how to 
evaluate the credibility of foreign investors, which may make 
doing business with foreign companies a challenge. 
 
14. (SBU) COMMENT (continued):  CG also discussed religious 
freedom issues with provincial officials, urging that they move to 
regularize the status of United Buddhist Church of Vietnam (UBCV) 
Patriarch Thich Huyen Quang, who is under pagoda arrest. 
 
WINNICK