HCMC ECONOMIC LEADERS REPORT 2004 PROGRESS, LISTEN TO

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001582

SIPDIS

SENSITIVE

DEPARTMENT PLEASE PASS USTR - ELENA BRYAN

E.O. 12958: N/A
TAGS: ECON EINV ETRD EFIN ELAB PGOV EIND ELTN PINR VM
SUBJECT: HCMC ECONOMIC LEADERS REPORT 2004 PROGRESS, LISTEN TO
FOREIGN INVESTOR COMPLAINTS


1. (SBU) SUMMARY: Ho Chi Minh City (HCMC) government leaders for
the third straight year reported to the foreign business community
on the city's annual progress in achieving economic and
development goals. The leaders then listened as their audience
articulated difficulties foreign businesses experience operating
in Vietnam. Growth, trade and investment statistics illustrate
HCMC's position as Vietnam's economic powerhouse. Yet
infrastructure and legal reform - two areas where HCMC leaders
cited achievements since 2003 - remain a focus of business
frustration. The willingness of local leaders to openly report on
strong and weak points, and to accept public criticism,
demonstrates a transparency reflecting the reform viewpoint of the
officials who led the meeting. END SUMMARY.

HCMC CONTINUES TO ACT AS VIETNAM'S ECONOMIC ENGINE


2. (U) Top officials from Ho Chi Minh City's government met
December 17 with representatives of foreign business to present
statistics on growth, trade and investment in the region during
2004 and to listen to foreign investor concerns. According to Mr.
Luong Van Ly, deputy director of HCMC's Department of Planning and
Investment (DPI),HCMC's gross domestic product (GDP) grew by 11.5
percent in 2004, driven mainly by industry, which grew by 15.1
percent. Total investment in HCMC reached $2.5 billion, Ly
reported, and GDP per capita reached $1,800, a growth of 7.5
percent since 2003. (NOTE: According to the Asian Development
Bank, GDP per capita for all of Vietnam in 2003 was $478. END
NOTE.) HCMC recorded export turnover of $9.5 billion, most of it
coming from domestic export enterprises. HCMC registered 8,510
new domestic enterprises in 2004, with total capital of close to
$1 billion.


3. (U) Mr. Truong Trong Nghia, vice president of HCMC's Investment
and Trade Promotion Center (ITPC),discussed the contributions of
HCMC and the southern economic zone (which includes HCMC and 6
neighboring provinces) to Vietnam's economy. While HCMC alone
accounted for more than 18 percent of Vietnam's GDP, the southern
economic zone accounted for 36 percent of the nation's GDP. HCMC
also accounts for 35.5 percent of Vietnam's exports and 26 percent
of its foreign direct investment (FDI). While HCMC's exports
totaled $9.5 billion, its imports reached $5.1 billion, an
increase of 16.8 percent from 2003. The U.S. remained HCMC's main
export market in 2004, accounting for 24.5 percent of exports.
Hong Kong recorded the most FDI in HCMC in 2004 at $62.6 million.
Singapore, Korea, Japan and the U.S. followed with FDI at $61.4,
$50.4, $28.5, and $18.9 million respectively.

AREAS FOR IMPROVEMENT


4. (U) Following the recitation of 2004 statistics, the HCMC
leaders presented the main frustrations articulated by foreign
business in 2003 and what remedies HCMC had taken in 2004. DPI's
Luong Van Ly reported that business complaints in 2003 had focused
on four areas: infrastructure, human resources, laws and
regulations, and support to investors. According to Ly,
subsequent progress in these areas had included improved bus
service, reduced telecom fees, an increase in the number of
students receiving management training, a new decree that
specifies both what documents an investor needs for a license and
how HCMC departments coordinate licensing, and more information on
government policies available online. HCMC leaders acknowledged
that further progress was still needed on bridges over the Saigon
River, a subway system, zoning and transparency.


5. (U) In response, expatriate business leaders seized on the
deficiencies acknowledged by the local officials, harshly
criticizing the lack of a coherent zoning plan for land use, for
example, and citing this as a key deterrent to investment in the
area. People's Committee Vice Chairman Nguyen Huu Tin responded
that city officials were working on a comprehensive zoning plan
that they hoped to unveil in 2005. Other criticisms from business
focused on labor regulations, tax and accounting rules, opaque law-
making and limits on cargo transport in the city.

COMMENT


6. (SBU) This reporting and feedback session was extremely useful,
both for measuring Ho Chi Minh City's economic progress and for
taking the pulse of the business community. While the HCMC
leadership provided initial explanations in response to business
complaints, Vice Chairman Tin concluded the meeting by promising
that the government would work to address investor concerns in the
coming year. The frank and candid discussion demonstrated the
commitment to reform and transparency of local leaders,
particularly Vice Chairman Tin, DPI's Mr. Ly, and ITPC's Mr.
Nghia. The latter two officials have extensive expertise stemming
from their education in Europe and the United States, respectively
- a background clearly reflected in their organization of this
meeting.

CHERN