US embassy cable - 05HANOI2831

UNCLAS SECTION 01 OF 02 HANOI 002831 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/MLS 
 
E.O. 12958: N/A 
TAGS: PREL, PHUM, ETRD, EINV, ECON, VM, SOE, TIP, CNARC, HUMANR, RELFREE, WTO 
SUBJECT: AMB/QUANH NINH CMTE: PROVINCIAL DEVELOPMENT PLANS 
 
1. (SBU) Summary: Quang Ninh, the north easternmost province 
of Vietnam and a key gateway to China, has high levels of 
economic growth, thorny economic liberalization problems, 
some of the worst trafficking, smuggling and narcotics 
problems in the country, and substantial natural resources 
as well as the country's marquee tourist attraction, Halong 
Bay.  The Ambassador met with the People's Committee on 
October 17 in Halong City to discuss Quang Ninh's economy, 
recent development, and plans for the future.  The Committee 
Vice Chair said based on the average GDP growth over the 
last five years (12.6 percent), the GVN has set Quang Ninh's 
target for the next five years at 15-16 percent.  The 
Committee needs to attract more foreign investment, 
development assistance, and joint ventures to meet this 
goal.  They plan to increase transparency and speed in 
contracting and licensing, and thus create a more favorable 
investment climate in the Province.  In addition, they are 
trying to combat corruption by making regulations simpler 
and more transparent.  Also, past bias in favor of State- 
owned enterprises (SOEs) is less of a problem now that there 
are more private businesses in Quang Ninh.  On border 
issues, the province is working with local authorities in 
China to combat cross-border drug-smuggling, trafficking-in- 
persons, transport of pirated goods, and the spread of 
disease, while speeding up transit time in preparation for 
increased trade following Vietnam's WTO accession.  Quang 
Ninh is also trying to increase tourism by building better 
infrastructure and by protecting the environment around Ha 
Long Bay.  Religious freedom, HIV/AIDS projects, disabled 
education projects, and other issues raised are reported 
septels.  End Summary. 
 
2. (SBU) At an October 17 dinner welcoming the Ambassador's 
October 17-19 visit to Quang Ninh Province, People's 
Committee Vice Chairwoman Nhu Thi Lien provided a brief 
overview of Quang Ninh's economic history, recent 
development, and plans for the future.  She noted that this 
coastal province in Vietnam's extreme Northeast has unique 
advantages in the country's developing economy because of 
its long (and busy) borders with China, its close proximity 
to the industrial heartland around Hanoi, its extensive (and 
beautiful) natural harbors, and its rich deposits of coal. 
With this strong economic combination, the average GDP 
growth for the Province over the last five years was a 
whopping 12.6 percent according to official statistics. 
Lien explained that, based on this performance, the latest 
five-year plan proposed by the People's Committee had set 
the Province's target average GDP growth at 13 percent; 
however, the GVN, deciding to make Quang Ninh a focus 
Province in its development plans, actually set the goal at 
15-16 percent average GDP growth.  Lien noted that the 
province is already ranked 7th in overall attractiveness to 
investors compared with other provinces in Vietnam, however, 
to meet this higher target, the People's Committee must 
actively seek to attract even more foreign direct investment 
and development assistance from Japan, China, France, the 
United States, South Korea and others.  The committee also 
wants to increase the number of international joint ventures 
operating in the province, beyond the 73 ventures currently 
in operation worth USD 500 million (including three projects 
underway with U.S. firms worth USD 20 million). 
 
Corruption, Development and the Encouragement of the Private 
Sector 
--------------------------------------------- ------- 
 
3. (SBU) The Vice Chairwoman explained that the People's 
Committee's main program for attracting new investments is 
to reduce the number of bureaucratic obstacles facing new 
and current investors.  Their goal is to increase 
transparency and speed in contracting and licensing, and 
thus create a more favorable investment climate in the 
Province.  The Ambassador agreed that this is an important 
goal but noted that two other reforms are needed to make 
Quang Ninh more competitive for investment dollars, namely, 
a program to deal with low-level corruption and an end to 
official bias towards SOEs.  Lien confirmed that corruption 
is a challenge, but noted that the Province is actively 
trying to combat the problem within the framework of the 
national anti-corruption campaign.  The Committee also hopes 
that their efforts to simplify and publicize regulations 
will help diminish the possibilities for corruption in the 
system.  Lien asserted that the Committee had already 
received some positive feedback from investors because of 
these efforts.  On SOEs, she noted that while the local 
government used to be biased in favor of public companies, 
the number of private investors and private businesses 
operating in Quang Ninh is now much higher than it used to 
be, thus bias against them is necessarily less of a problem 
than it is elsewhere in Vietnam.  The Ambassador encouraged 
the Committee to continue supporting private sector 
development because this will be the main engine of growth 
in Quang Ninh in the future. 
 
On the Border: Quang Ninh and Guangxi Cooperation 
--------------------------------------------- ---- 
 
4. (SBU) Turning to border issues, the Ambassador asked if 
Quang Ninh is actively seeking greater investment and 
tourism from China and whether the Provincial Committee is 
working with its counterparts on the Chinese side to combat 
cross-border drug-smuggling, trafficking-in-persons, 
transport of pirated goods, and the spread of diseases like 
avian influenza and HIV/AIDS.  The Vice Chairwoman stated 
that the Committee is working primarily with the central 
government in Hanoi and with international NGOs to address 
these problems, but are also in regular contact with 
officials in Guangxi Province and are trying to improve 
coordination on cross-border issue with them.  Lien stated 
that the Provincial Government's main effort to increase 
economic links with China is focused on trying to speed up 
transit times at the Mong Cai border site in preparation for 
an increase in trade activity across the border following 
Vietnam's WTO accession.  As for tourism, she affirmed that 
Chinese constituted at least fifty percent of the tourists 
coming to the province in recent years, and noted that Quang 
Ninh is trying to increase tourism in general by building 
better infrastructure and by taking some measures to protect 
the environment around Ha Long Bay. 
 
5. (SBU) Comment:  Quang Ninh offers a glimpse of successful 
development in Vietnam at the provincial level.  The 
People's Committee's focus on speed and ease of doing 
business directly addresses one of the largest obstacles 
that foreign investors face in Vietnam.  In addition, Quang 
Ninh enjoys special status as a border development zone that 
allows it to circumvent some national restrictions, such as 
the law against gambling.  Chinese funded and patronized 
hotel-casinos near the border contribute a steady stream of 
hard currency into the Quang Ninh economy.  At the same 
time, the Province also has one of the highest rates of 
HIV/AIDS in the country (just under 600 cases per 100,000 
people), a figure indicative of the potential costs that 
rapid growth and development can also bring, as well as the 
risks involved in developing the economy through the tourist 
and entertainment industries.  The extent to which the GVN 
and Quang Ninh officials are able to balance the benefits 
and drawbacks to rapid growth in this Province could serve 
as a model for other reform efforts at the provincial level. 
While its reforms are more complex, the national government 
could learn some lessons on how to create an attractive 
business environment from Quang Ninh. 
 
BOARDMAN