US embassy cable - 05HOCHIMINHCITY1092

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001092 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR ELENA BRYAN 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, PGOV, VM, LABOR 
SUBJECT: TOURISM SUCCESS IN CENTRAL VIETNAM TOWN OF HOI AN 
 
REF:  HCMC 667 
 
1. (SBU) SUMMARY: The historic coastal town Hoi An in central 
Quang Nam province is a model of private sector development. A 
thriving trading center 300 years ago, Hoi An in recent years has 
drawn on its tradition of entrepreneurship and has leveraged the 
progressive attitudes of provincial leaders to turn itself into 
one of Vietnam's top tourist destinations.  Hoi An - and Quang Nam 
- authorities understand that a successful tourism industry is 
based on private sector leadership rather than state dominance. 
END SUMMARY. 
 
2. (U) In an October 6 meeting with the Consul General and members 
of the ConGen HCMC team, Hoi An People's Committee Chairman Mr. Le 
Van Giang and Director of Trade and Tourism Ms. Dinh Thi Thu Thuy 
said a flourishing private sector was the key to Hoi An's success 
in transforming itself into one of Vietnam's most popular tourism 
destinations.  In 2004, Hoi An hosted 500,000 visitors, a third of 
them foreign tourist, and that number is expected to climb to 
600,000 in 2005. (NOTE: According to the Vietnam National 
Administration of Tourism, 1.6 million international tourists came 
to Vietnam in 2004.  END NOTE.)  On average, tourists stay two-and- 
half days in Hoi An and spend about USD 50 per day.  Hoi An's per 
capita income is USD 700. 
 
3. (U) Giang said that prior to the early 1990s, Hoi An was a 
sleepy backwater that little resembled the bustling international 
port it had been in the 16th through 18th centuries, when Hoi An 
was a trade center for merchants from China, Japan, and Europe.  A 
spirit of entrepreneurship dating from this period allowed it to 
capitalize on Vietnam's doi moi reforms to open small shops, 
restaurants and hotels, relying heavily on the backpacker trade. 
The town and the province lobbied for and achieved Hoi An's 
designation as a World Heritage Site by UNESCO in 1999, spurring 
the opening of foreign invested hotels and resorts. 
 
4. (SBU) A progressive and flexible attitude on the part of Quang 
Nam provincial leadership also encouraged Hoi An's development, 
Giang said.  Provincial authorities allow municipalities to 
implement policy in a way that best suits municipal needs, and the 
authorities are willing to let the private sector take the lead in 
economic growth.  "The people are pioneers," Giang said.  "The 
government needs to realize this and issue policy that gives 
people the freedom to develop as they see fit." 
 
5. (U) Since the early `90s, Hoi An's tourism has thrived, almost 
entirely as a result of private, indigenous initiative.  Foreign 
investment followed the domestic private sector.  Hoi An is now 
home to 70 hotels with 2,650 rooms, which surpasses the number of 
hotel rooms in Hanoi, Giang noted.  Thirty percent of the hotels 
are four-star, and only two hotels are government-owned.  Hoi An's 
first foreign-invested hotel, the Victoria Hoi An, opened in 1998. 
Hoi An's hotel industry employs 2,500 people. 
 
6. (U) Just as private enterprise has formed the basis of Hoi An's 
hotel business, so too has it led the development of other tourism 
services, including historic sites, restaurants and shops.  The 
Hoi An officials noted that Hoi An is home to more than 1,300 
historic sites, many of them 300-year-old homes that individual 
homeowners have opened to tourists for profit.  Giang and Thuy 
reported that 60 percent of Hoi An's population of 80,000 works in 
the tourism industry, directly and indirectly.  Hoi An also 
supports 2,000 visiting workers per day; these are workers who do 
not live in Hoi An, but who have jobs in the town's tourism 
sector. 
 
7. (U) The two main challenges facing Hoi An's tourism industry 
are environmental concerns and human resources needs, especially 
job training.  Hoi An's leaders are trying to balance the rapid 
development of the tourism sector with the need to conserve the 
environment that is the source of the sector's success.  For 
example, in 2005, the town will be looking for investment in a USD 
10 million wastewater treatment plant; in addition to addressing 
Hoi An's wastewater needs, the project will also help clean the 
polluted canal that flows beneath Hoi An's star tourist 
attraction, the Japanese Bridge. 
 
8. (U) Hoi An Chairman Giang admitted that another challenge to 
Hoi An's growth is providing trained labor to the tourism 
industry.  Currently, only Hoi An's large hotels provide formal 
training to its employees.  The vast majority of town's tourism 
workers receive only on-the-job training.  Hoi An's leadership 
does not have specific plans to address this challenge, though it 
recognizes the dilemma inherent in transforming rural laborers 
into employees capable of functioning in a demanding service 
sector. 
 
9. (SBU) COMMENT:  Hoi An authorities have wisely allowed the 
market to determine the path of the town's development.  Chairman 
Giang said that Hoi An has been so progressive in its policies 
that on occasion the town's leaders have been "reined in" by the 
GVN.  Hoi An's success in the tourism sector is a marked contrast 
to the only modest success of the nearby imperial capital, Hue, 
where tourism continues to be both tightly controlled by the 
government and dominated by SOEs. (reftel) 
 
10. (SBU) COMMENT, CONTINUED:  Hoi An's success is due not only to 
local initiative, but also to support from Quang Nam's progressive 
leaders, including Provincial People's Committee Chairman Nguyen 
Xuan Phuc. (Analysis of Quang Nam's leadership is provided 
septel.) Phuc is a graduate of the HCMC-based Fulbright Economics 
Teaching Program and advocates a leading role for the private 
sector in Quang Nam's economy, including in the tourism industry. 
He is rumored to be a potential candidate for Minister of Tourism, 
should the GVN create such a ministry. 
 
WINNICK