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