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