MEKONG DELTA CAPITAL SEEKS NATIONAL ROLE

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001128

SIPDIS

SENSITIVE

DEPARTMENT FOR EAP/BCLTV, EB/TPP/BTA/ANA
COMMERCE FOR ITA

E.O. 12958: N/A
TAGS: ECON EINV PREL ETRD EFIS EAGR VM
SUBJECT: MEKONG DELTA CAPITAL SEEKS NATIONAL ROLE


1. (SBU) SUMMARY: Can Tho, the commercial center of Vietnam's
fertile Mekong Delta, wants to break out of its role as a
provincial capital and establish itself on the national and
international stage. While participating in a trade fair opening
led by Deputy Prime Minister Vu Khoan, Econoff saw both potential
and challenges. On the plus side is strong growth. On the minus
side is under-developed infrastructure. Seafood interests in Can
Tho are feeling the pinch of preliminary shrimp dumping duties
levied by the U.S. END SUMMARY.

TRADE FAIR OPENING WITH DPM VU KHOAN


2. (U) EconOff traveled to Can Tho August 18-20 to participate
with DPM Vu Khoan in the opening of a trade fair promoting non-
agricultural goods. She also met with First Vice-Chairman Pham
Phuoc Nhu of the Can Tho People's Committee, who stated that Can
Tho leaders plan to develop the city's economy around industry,
trade and services, and agriculture. Can Tho's growth rate for
the last few years has hovered around 11 percent, well above the 7
percent national growth rate.


3. (SBU) According to the Department of Planning and Investment,
Can Tho had 34 foreign-invested projects valued at $142 million,
as of the end of 2003. Five more projects were added this year
with a value of $20 million. There are three U.S.-invested
projects and three U.S. companies with offices in Can Tho. The
city's three state-owned industrial parks had initial success in
attracting investors but are now encountering difficulties. One
park is being sold to a private investor who manages industrial
parks in Ho Chi Minh City. The most active of the parks
negotiated too many cut-rate leases and is struggling to fund
basic services to its tenants.

INFRASTRUCTURE WOES


4. (SBU) First Vice-Chairman Nhu said that a new Mekong bridge, a
new airport and a new port will address Can Tho's transport
infrastructure problems. Currently, people and goods get to and
from Can Tho by a clogged, two-lane highway. The 165-km trip
between Can Tho and Ho Chi Minh City takes a minimum of four hours
including the ferry ride across the Hau branch of the Mekong.
Actual construction work on the Can Tho bridge - a USD 300 million
plus Japanese development project, has yet to begin. Further
north, the My Tho bridge crosses the Tien branch of the Mekong.
The stunning USD 70 million Australian-financed span has been open
for several years and cuts an hour or two from the trip. Can
Tho's airport has not been used commercially with any regularity
since 1975. Its port can receive 10,000-ton ships and will soon
be able to receive 20,000-ton vessels; however, the river estuary
must be dredged continuously.

SHRIMP INTERESTS PINCHED BY PRELIMINARY DUMPING DUTIES


5. (SBU) Two seafood processing companies in the Can Tho area are
already feeling the effects of preliminary dumping duties on
shrimp announced by the U.S. in July. State-owned Can Tho
Agricultural and Animal Products Co. (CATACO) said its $18 million
in annual shrimp exports have been halved. CATACO is receiving a
separate rate of 16 percent, much lower than the country-wide
rate, but company officials say they cannot compete with Thai
companies that received a duty rate of 6 percent. Vietnam Fish-
One, a privately-owned company subject to the country-wide rate of
93 percent, exported $23 million in shrimp in 2003. The company
lost all of its U.S. business since imposition of the preliminary
duties. U.S. sales account for half of Vietnam Fish-One's revenue
and the company foresees laying off 40 percent of its staff if the
duties remain at current rates.

COMMENT


6. (SBU) Can Tho is a thriving provincial center and a transit
point for Mekong Delta agriculture. City leaders seem focused on
attracting traditional industry and trendy sectors like
information technology and financial services. They might better
concentrate on their comparative advantage in agriculture and ag-
related industry.


7. (SBU) The GVN this year split Can Tho City from the newly-
created Hau Giang province and elevated the former provincial
capital to a standalone, "centrally-administered" status like
Hanoi, Ho Chi Minh City, Haiphong and Danang. Can Tho leaders
clearly hope this elevated standing will give them greater
authority and increased access to government funding. It is too
early to tell, however, whether the change in designation will
have the desired effect. END COMMENT.

WINNICK