HA GIANG: SLEEPY BORDER PROVINCE TRYING TO

UNCLAS SECTION 01 OF 02 HANOI 000133

SIPDIS

STATE FOR EAP/BCLTV

USDOC FOR 1431/MAC/AP/HPPHO

UNCLASSIFIED

PAGE 02 HANOI 00133 01 OF 02 181028Z
E.O. 12958: N/A
TAGS: ETRD ECON PHUM PGOV VM
SUBJECT: HA GIANG: SLEEPY BORDER PROVINCE TRYING TO
-- WAKE UP

REF: 01 HANOI 3341


1. (U) SUMMARY. HA GIANG PROVINCIAL OFFICIALS ARE HOPEFUL
THAT THE RECENTLY DECLARED "BORDER ECONOMIC ZONE" WILL
STIMULATE DEVELOPMENT IN ONE OF NORTHERN VIETNAM'S POORER
MOUNTAIN PROVINCES. THE DISTANCE AND DIFFICULTY IN
TRAVELING TO HANOI AND OTHER LOWLAND PROVINCES REMAIN
HINDRANCES TO ECONOMIC DEVELOPMENT. SEPTELS REPORT ON
TERRORISM AND NARCOTICS-RELATED DISCUSSIONS. END SUMMARY.

--------------
A LONG ROAD TO THE NORTHERN FRONTIER
--------------


2. (U) POLOFF AND POL FSN VISITED HA GIANG PROVINCE
JANUARY 14-16. HA GIANG IS ABOUT 300 KILOMETERS FROM HANOI
AND SHARES A NEARLY 400 KILOMETER BORDER WITH CHINA. THE
MAIN PROVINCIAL CROSSING POINT TO CHINA IS ABOUT 20
KILOMETERS FROM HA GIANG TOWN AT THANH THUY. CITIZENS FROM
THE DISTRICTS NEAR THE BORDER MAY CROSS OVER WITH A SPECIAL
PERMIT, BUT ONLY FOR DAY TRIPS (UNLIKE MORE LENIENT
PROVISIONS IN EFFECT IN QUANG NINH PROVINCE - REFTEL).
LONGER JOURNEYS REQUIRE PASSPORTS AND VISAS.


3. (U) ACCORDING TO VO DUC HONG, CHIEF OF THE BORDER
AFFAIRS DIVISION OF THE PEOPLE'S COMMITTEE, ABOUT 80 PCT OF
UNCLASSIFIED

PAGE 03 HANOI 00133 01 OF 02 181028Z
HA GIANG'S POPULATION OF 610,000 PEOPLE ARE ETHNIC
MINORITIES. THE LARGEST GROUPS ARE THE HMONG AND TAY NHUNG.
THE 9,000 SQUARE KILOMETER PROVINCE INCLUDES HIGH MOUNTAIN
AREAS (4,000 SQUARE KILOMETERS),HIGHLAND AREAS (1,000
SQUARE KILOMETERS),AND LOWLAND AREAS (4,000 SQUARE
KILOMETERS). ONLY ABOUT 13 PERCENT OF THE PROVINCE IS
CONSIDERED SUITABLE FOR FARMING. ITS MAIN AGRICULTURAL
EXPORT IS TEA GROWN AT HIGH ELEVATIONS, POPULAR IN TAIWAN,
HONG KONG, KOREA, AND RUSSIA, HONG CLAIMED. FRUIT, RICE,
AND CORN ARE OTHER MAIN CROPS.

--------------
STILL POOR, BUT IMPROVING
--------------


4. (U) LE VAN BANG, THE DIRECTOR OF HA GIANG'S PLANNING
AND INVESTMENT DEPARTMENT, CLAIMED THAT WHILE THE PROVINCE
WAS STILL "QUITE POOR," THE ECONOMIC SITUATION IS IMPROVING.
BANG NOTED THAT THE POVERTY RATE FROM 1995 TO 2001 HAD
DECLINED FROM 46 PERCENT OF THE TOTAL POPULATION TO ABOUT 26
PERCENT, THOUGH PER CAPITA INCOME IS STILL ONLY ABOUT 30
PERCENT OF THE NATIONAL AVERAGE OF USD 380 PER YEAR, HONG
ADMITTED. THE DECLINE IN POVERTY CAN BE ATTRIBUTED MAINLY
TO DIVERSIFIED AGRICULTURE, SOME INDUSTRIAL DEVELOPMENT, AND
MINERAL EXPLOITATION, INCLUDING IRON ORE, LEAD, AND ZINC,
BANG EXPLAINED. IN THE PAST FEW YEARS, A CEMENT FACTORY,
THREE SMALL PAPER MILLS, AND TWO BRICK FACTORIES HAVE
OPENED, ALTHOUGH BANG DID NOT HAVE AVAILABLE STATISTICS ON
HOW MANY PEOPLE ARE EMPLOYED IN THOSE FACTORIES OR IN
MINERAL EXPLOITATION. BANG EXPRESSED INTEREST IN FINDING A
COMPANY TO INVEST IN A FRUIT PROCESSING PLANT, SINCE IN THE
UNCLASSIFIED

PAGE 04 HANOI 00133 01 OF 02 181028Z
PAST FEW YEARS FARMERS HAVE PLANTED MORE AND MORE FRUIT
TREES (ESPECIALLY ORANGES); TRANSPORTING THE FRESH FRUIT TO
MARKET IS PROBLEMATIC. POLOFF PROMISED TO SHARE THIS
OPPORTUNITY WITH THE USCS.


5. (U) WHILE THE ENTIRE PROVINCE IS CONNECTED TO THE
NATIONAL ELECTRICAL GRID, ONLY ABOUT 50 PERCENT OF THE
POPULATION HAS ACCESS TO ELECTRICITY IN THEIR HOMES, BANG
SAID. HE NOTED THAT THE DISTANCE FROM AND DIFFICULTY IN
TRAVELING TO HANOI AND OTHER LOWLAND PROVINCES REMAIN MAJOR
PROBLEMS. WHILE TRAVEL TIME TO HANOI HAS BEEN REDUCED TO
ABOUT 7 HOURS AND NATIONAL HIGHWAY 2 IS BEING UPGRADED,
TRANSPORTATION INFRASTRUCTURE STILL "MAY DISCOURAGE"
POTENTIAL INVESTORS FROM COMING TO HA GIANG, HE ADMITTED.
(NOTE: THERE ARE SEVERAL SHORT STRETCHES WHERE THE ROAD IS
TWO FULL LANES AND NEWLY PAVED, BUT THERE ARE LONG STRETCHES
WHERE THE ROAD IS ONLY ABOUT ONE AND A HALF LANES AND VERY
BUMPY. THERE ARE ALSO SEVERAL ONE LANE BRIDGES. THE GVN'S
MASTER PLAN CALLS FOR COMPLETING THE UPGRADING OF HIGHWAY 2
BY THE END OF 2005. END NOTE.) SO FAR, THE PROVINCE HAS HAD
NO DIRECT FOREIGN INVESTMENT.

--------------
BORDER ECONOMIC ZONE MAY HELP
--------------

UNCLASSIFIED

UNCLASSIFIED PTQ3257

PAGE 01 HANOI 00133 02 OF 02 181028Z
ACTION EAP-00

INFO LOG-00 NP-00 AID-00 ACQ-00 CEA-01 CIAE-00 CTME-00
DOEE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00 EXME-00
E-00 FAAE-00 FBIE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 IO-00 ITC-01 L-00 VCE-00 AC-01
DCP-01 NSAE-00 NSCE-00 OES-01 OIC-02 OMB-01 OPIC-01
PA-00 PC-01 PM-00 PRS-00 ACE-00 P-00 SP-00
SSO-00 STR-00 TEST-00 TRSE-00 USIE-00 EPAE-00 PMB-00
DSCC-00 PRM-00 DRL-02 G-00 NFAT-00 SAS-00 /013W
-------------- 59B69F 181029Z /38
R 181014Z JAN 02
FM AMEMBASSY HANOI
TO SECSTATE WASHDC 5276
INFO AMCONSUL HO CHI MINH CITY
AMEMBASSY BANGKOK
AMEMBASSY BEIJING
AMEMBASSY PHNOM PENH
AMEMBASSY VIENTIANE
USCINCPAC HONOLULU HI//FPA//
SECDEF WASHDC//ISA/ABLAGG//
USDOC WASHDC

UNCLAS SECTION 02 OF 02 HANOI 000133

SIPDIS

STATE FOR EAP/BCLTV

USDOC FOR 1431/MAC/AP/HPPHO

UNCLASSIFIED

PAGE 02 HANOI 00133 02 OF 02 181028Z


6. (U) OFFICIALS EXPRESSED OPTIMISM THAT IMPLEMENTING
PLANS FOR A NEW "BORDER ECONOMIC ZONE" WILL SPUR DEVELOPMENT
IN THE PROVINCE. IN DECEMBER 2001, THE GVN DECLARED THE
AREA AROUND THE THANH THUY BORDER CROSSING A BORDER ECONOMIC
ZONE. SPECIAL ADVANTAGES INCLUDE A NUMBER OF PROVISIONS TO
STIMULATE COMMERCIAL ACTIVITY, SUCH AS FAVORABLE CONDITIONS
ON TAXES, A DUTY FREE MARKET, AND CONCESSIONS ON LAND FOR
DEVELOPING COMMERCIAL ENTERPRISES. BANG ADMITTED THAT,
WHILE THE NATIONAL GOVERNMENT HAD DECLARED THE BORDER
ECONOMIC ZONE, "IT IS UP TO PROVINCIAL OFFICIALS TO WORK OUT
THE DETAILS." ACCORDING TO BANG, HIS OFFICE IS WORKING ON A
DEVELOPMENT PLAN THAT HE HOPES WILL BE READY "BY THE END OF
2002."


7. (U) DURING A MID-AFTERNOON VISIT TO THE BORDER AREA,
NOT MUCH ACTIVITY WAS EVIDENT. ABOUT 10 TRUCKS WERE WAITING
ON THE HA GIANG SIDE TO RECEIVE GOODS COMING OVER FROM
CHINA. ACCORDING TO THE ARMY OFFICER WHO ESCORTED EMBOFFS,
ONLY ABOUT "NINE OR TEN" TRUCKS A DAY RECEIVE LOADS IN
EITHER DIRECTION. A SLOW STREAM OF PEDESTRIANS WAS VISIBLE
CROSSING THE BORDER DURING EMBOFFS' VISIT. THE BORDER AREA
ALSO INCLUDES A TAX OFFICE, CUSTOMS HOUSE, AND A MODEST IF
SOMEWHAT RUNDOWN SHOPPING CENTER. THE PEOPLE'S COMMITTEE'S
HONG POINTED OUT TO EMBOFFS AN AREA ABOUT 100 METERS SOUTH
OF THE BORDER WHERE LAND WAS BEING LEVELED IN PREPARATION
UNCLASSIFIED

PAGE 03 HANOI 00133 02 OF 02 181028Z
FOR A NEW SHOPPING AREA.

--------------
WE DON'T BUY FROM THE BORDER
--------------


8. (U) CONVERSATIONS WITH SHOP OWNERS AROUND HA GIANG TOWN
PROVIDED SOME INSIGHT AS TO WHY THE BORDER CROSSING AT THANH
THUY IS RELATIVELY INACTIVE. IN ONE SHOP SELLING HOUSEHOLD
ITEMS, THE OWNER SAID THAT ALTHOUGH MOST OF HER INVENTORY
CAME FROM CHINA, SHE DID NOT BUY IT FROM THE BORDER AREA.
SHE INSTEAD USED A HANOI SUPPLIER WHO BOUGHT GOODS COMING
FROM CHINA VIA THE LANG SON BORDER CROSSING TWO PROVINCES TO
THE EAST. (NOTE: LANG SON IS CLOSER TO HANOI AND CONNECTED
BY A GOOD ROAD. TRAVEL TIME TO HANOI IS ABOUT 2.5 HOURS.
END NOTE.) THIS SUPPLIER TOOK THE GOODS TO HANOI, AND THEN
TRANSSHIPPED THEM TO HA GIANG. IN RESPONSE TO A QUESTION,
THE OWNER SAID THAT SHE DID NOT BUY FROM THE BORDER AREA
BECAUSE "THE CHINESE SELL US INFERIOR PRODUCTS AND WE CANNOT
RETURN THEM. IF I HAVE A PROBLEM, MY HANOI SUPPLIER WILL
EXCHANGE THE ITEMS THAT ARE DEFECTIVE."


9. (U) ANOTHER SHOP OWNER SELLING CHILDRENS' CLOTHES STATED
THAT SHE BOUGHT HER INVENTORY IN A SIMILAR MANNER, NOTING
THAT HER SUPPLIER SHIPPED GOODS TO HER VIA A "RELIABLE" BUS
DRIVER WHO MAKES REGULAR TRIPS BETWEEN HANOI AND HA GIANG.
BOTH SHOP OWNERS SAID THEY MADE OCCASIONAL DAY TRIPS TO
CHINA FOR PLEASURE AND PERSONAL SHOPPING. THEY WERE AWARE
THAT THE GVN HAD ESTABLISHED THE BORDER ECONOMIC ZONE.
HOWEVER, THE CLOTHING SHOP OWNER SAID THAT SUCCESS WOULD
DEPEND "ON HOW THE GOVERNMENT IMPLEMENTS ITS PLANS." BOTH
UNCLASSIFIED

PAGE 04 HANOI 00133 02 OF 02 181028Z
INDICATED THEY WOULD LIKE TO SEE MORE DEVELOPMENT IN THE
BORDER AREA BECAUSE IT WOULD BE "MORE CONVENIENT" TO BUY AT
THANH THUY, ASSUMING THEY COULD RECEIVE GOOD QUALITY
MERCHANDISE AT REASONABLE PRICES.

--------------
COMMENT
--------------


10. (U) IN RECENT YEARS, THE GVN HAS CLEARLY TAKEN STEPS
TO ASSIST HA GIANG TO IMPROVE ITS ECONOMIC SITUATION. IN
THE ABSENCE OF RELIABLE INFRASTRUCTURE OR MORE AGGRESSIVE
SELF-PROMOTION BY PROVINCIAL OFFICIALS, HOWEVER, GROWTH IS
APT TO REMAIN SLOW AND POVERTY WILL REMAIN A DIFFICULT ISSUE
TO RESOLVE. THE UNUSUALLY HIGH PERCENTAGE OF MINORITY
POPULATION -- PROBABLY THE HIGHEST IN THE NATION -- ALSO
MEANS THAT COMPETENT LOCAL OFFICIALS FLUENT IN VIETNAMESE
MAY BE ANOTHER MAJOR LOCAL CONSTRAINT, HOWEVER MUCH IN GOOD
FAITH THE GVN TRIES TO ASSIST THEIR DEVELOPMENT AND
INTEGRATION.
BURGHARDT

UNCLASSIFIED