BINH DINH PROVINCE: GETTING IT RIGHT

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001043

SIPDIS

SENSITIVE

DEPARTMENT FOR EAP/MLS

E.O. 12958: N/A
TAGS: ECON PGOV EINV SOCI ETRD PHUM SENV VM HIV AIDS SOE
SUBJECT: BINH DINH PROVINCE: GETTING IT RIGHT

REF: 04 Hanoi 3246

SUMMARY
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1. (U): Binh Dinh Province, on Vietnam's central coast, is
significantly out-performing its neighbors. Despite the poor
resources and traditional poverty of the central region, Binh Dinh
ranked 21st out of 61 provinces in the UNDP 2003 Vietnam
Millennium Development Goals Index, and 12th out of 42 provinces
in the USAID-funded 2005 Provincial Competitiveness Index. The
province is a major center for outdoor furniture, a booming
billion dollar plus export industry for Vietnam. Provincial
leadership is investing heavily in infrastructure to boost
industrial development and tourism. A good port, abundant
potential workforce, and extensive beaches make this a viable
strategy, especially given a pro-private investment, limited state-
owned enterprise orientation. Both foreign business and NGOs
spoke highly of provincial leaders. While the province is still
in an early stage of development, we will encourage US investors
to give it a close look. The pristine coastal environment also
holds great potential for aquaculture and makes Binh Dinh a
potential area for technical assistance in integrated coastal
management. END SUMMARY.


2. (U) Consul General visited Binh Dinh September 19-20 to examine
the roots of the provinces strong performance relative to its
neighbors. Meetings with the People's Committee leadership, local
bankers and businesses, industrial development sites
representatives, the University, foreign investors, an NGO, and a
drug/sex worker rehabilitation center painted a consistent picture
of a progressive province on the cusp of rapid development.

BINH DINH PEOPLE'S COMMITTEE: BUILD IT AND THEY WILL COME
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3. (SBU) Under the leadership of Chairman Vu Hoang Ha, the Binh
Dinh People's Committee has emphasized building up provincial
infrastructure and developing three major industrial/economic
zones, the Nhon Hoi Economic Zone (NHEZ) being the most ambitious.
Although it has utilized both GVN finances and policies to its
advantage, Binh Dinh, according to Mr. Ha, follows its own
direction in terms of economic development. In a private
conversation with the CG, one official noted that Ha and the
current Binh Dinh Party Secretary, Nguyen Xuan Duong, do not see
eye-to-eye on development, and Ha considers the Party Secretary to
lack progressive vision and to be more of an obstacle than an
asset. (NOTE: The Party Secretary was not available to meet with
CG. END NOTE.)


4. (U) Binh Dinh has undertaken a variety of significant
infrastructure projects to make the province an attractive
investment location. The province recently completed a new
coastal highway between the provincial capital, Quy Nhon, and the
adjacent province to the south, Phu Yen. In addition, Binh Dinh
has plans to complete roads between Phu Cat Airport and NHEZ, and
between NHEZ and Quy Nhon. A significant portion of this second
road will be the 2.5 km Nhan Hoi Bridge, which, when completed in
May 2006, will be the longest bridge in Vietnam, according to Binh
Dinh officials. Binh Dinh is also improving electricity and water
capacity. Renovation of the current electricity network is
underway and plans for two wind power plants are also in progress.


5. (U) Binh Dinh is also increasing the capacity of Quy Nhon
seaport, which is the tenth largest port in Vietnam and busier
than the much larger port of Danang. According to port officials,
its popularity derives from the port's proximity to the central
and southern provinces of Vietnam, Cambodia, and Laos, as well as
its port services. Quy Nhon port handled 2.5 million tons of
cargo in 2004 and will likely reach 3 million tons by the end of
the 2005. It currently has the capacity for 30,000 deadweight ton
ships, though there are plans to build more piers with greater
capacity. Vessels from Quy Nhon transship through Singapore.


6. (U) The Phu Tai Industrial Zone and the Long My Industrial
Zone, located in Quy Nhon, are largely complete and already in use
by various operations, mainly factories producing outdoor
furniture. According to provincial officials, outdoor furniture
manufacturing - Binh Dinh's largest industry - accounted for 1.25
percent of Vietnam's GDP in 2004, and Binh Dinh is second only to
Binh Duong Province in its furniture production. According to the
Binh Dinh Industrial Zones Management Board Chairman, almost all
of the enterprises located in the Phu Tai and Long My industrial
zones are private companies. The Department of Planning and
Investment stated that there are 40 state-owned enterprises in
Binh Dinh that account for 20 percent of the province's industrial
production.


7. (SBU) Nhon Hoi Economic Zone is an ambitious project being
developed on the Phuong Mai peninsula, across Thi Nai Lagoon from
Quy Nhon. In addition to hosting manufacturing operations, NHEZ
will develop tourism and residential areas. Construction in NHEZ
should begin in June 2006. Of concern is the environmental impact
NHEZ will have on Thi Nai Lagoon, a long salt-water estuary rich
in marine life and potential major oyster farming ground. Quy
Nhon's current sewage system is out-dated and inefficient, but
local officials reported that plans are being developed with
international donors to improve the city's waste disposal.

BUSINESS SUCCESS STORIES
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8. (SBU) Pure Bay Oyster Company (PBOC) is an American/Australian-
owned firm that relocated to Binh Dinh from Khanh Hoa Province in

1998. PBOC sells 500 cases of oysters per month, primarily to
high-end hotels and restaurants in HCMC. According to Amcit
Deputy Director Thomas Williams, the company recently obtained a
sea lease from Binh Dinh for a portion of De Gi Lagoon, where it
plans to start oyster farming in approximately six months.
Currently, PBOC buys its product from individual fishermen. PBOC
also plans to move beyond domestic buyers and export to Thailand,
Hong Kong, and the United States. PBOC continues to have no real
difficulties with local authorities (reftel). In a separate
conversation, Binh Dinh officials told the CG they plan to
cooperate fully with PBOC because they see the potential of the
oyster industry to attract investors and become another avenue for
economic expansion. PBOC is optimistic about the seafood industry
in general, and the oyster niche in particular, because Vietnam is
one of the new global sources for oysters. PBOC continues to
grapple with the challenge of getting product to market because of
the lack of direct transportation routes to Danang or HCMC.


9. (SBU) The privately-owned Duc Nhan Limited Liability Company,
located in Quy Nhon and established in 2003, represents one of the
larger outdoor wooden furniture manufacturers in Binh Dinh. Duc
Nhan is based in Kon Tum Province, but company Director Nguyen
Thanh Nhon said he had opened the Binh Dinh operation because he
hoped to save on transportation costs and benefit from greater
access to information and customers because of Binh Dinh's
location. While worker salaries in Binh Dinh are higher than at
Duc Nhan's Kon Tum factory, wood transportation costs are much
lower given the proximity of Quy Nhon Port. Duc Nhan produces 130
containers of furniture per month and imports its wood from
various countries. Nhon told the CG he prefers Binh Dinh to Kon
Tum because of its open business climate. At another furniture
factory owned by the HCMC-based Khai Vy Corporation, company
officials noted they planned to focus more on the U.S. market;
currently Khai Vy's Binh Dinh operation, which uses computerized
machinery for highly detailed work, produces 150 containers of
high-end outdoor furniture per month, mainly for export to Europe.

HUMAN DEVELOPMENT ALONG WITH ECONOMIC DEVELOPMENT
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10. (U) The evolution of Quy Nhon University (QNU) from a
teacher's college to a comprehensive university in 2003 reflects
the effort Binh Dinh is making to link economic development with
social development. According to People's Committee Chairman Ha,
the province is striving to retain well-educated residents through
various subsidies, incentive pay, and bonuses. Binh Dinh
officials also stated that the provincial government was willing
to provide financial assistance to businesses for worker training
programs. Binh Dinh is opening a new teacher's college this year
and expects a private university to open in 2006. QNU supports
three American volunteer English language teachers who come from
the English Language Institute, a U.S.-based NGO. Binh Dinh also
provides some scholarships to QNU students who commit to returning
to Binh Dinh to use their new skills to promote the province's
economic development.

ATTENTION TO AVIAN FLU AND HIV/AIDS
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11. (U) CG paid a visit to the CARE International office in Quy
Nhon, where the NGO is operating a disaster preparedness program
and an Avian Influenza (AI) program. According to Carol Sherman,
CARE's country director, the AI program, which is funded by New
Zealand AID, provides local communities with protective equipment
and bio-safety information. CARE is currently working with local
officials and international organizations, like the World Health
Organization and the UNDP, to provide uniform AI public service
messages for community-based distribution. Sherman and local CARE
program managers said they generally receive good support from the
province.


12. (U) CG also toured an 05/06 rehabilitation center for
intravenous drug users (IDUs) and sex workers located in Quy Nhon.
It is a small center that currently has 41 residents.
Approximately 40 percent of the residents suffer from HIV/AIDS,
mostly IDUs. According to center officials who met with the CG,
40 percent of the women who enter the center are prostitutes, and
of those, about 35-40 percent abandon prostitution when they leave
the center. Center officials said the average stay for residents
is 18 months, but those suffering full-blown AIDS, who have no
family to support them, stay until they die. One resident told
the CG that he had been at the center for 11 years. Until
recently, the center offered a program in peer education and
community outreach supported by Family Health International (FHI).
Although FHI no longer has funding to continue this program, the
center still bases its rehabilitation on the FHI model.

COMMENT
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13. (SBU): Although agriculture still supports 70 percent of Binh
Dinh's population, the province is making strides toward
developing a healthy environment for industrial growth and
investment. What appears to give Binh Dinh an edge over other
similarly situated provinces in the region, such as Khanh Hoa (Nha
Trang),is a progressive-minded People's Committee Chairman, who
understands the importance of strong infrastructure and the logic
of linking economic and social development. Binh Dinh appears to
be moving away from reliance on state-owned enterprises and long-
standing vested interests. Furthermore, both foreign corporations
and NGOs have found the provincial government to be unobtrusive
and, in some cases, supportive. However, as progressive as the
Chairman and the People's Committee may be, they do not appear to
fully understand international investment models and how to
evaluate the credibility of foreign investors, which may make
doing business with foreign companies a challenge.


14. (SBU) COMMENT (continued): CG also discussed religious
freedom issues with provincial officials, urging that they move to
regularize the status of United Buddhist Church of Vietnam (UBCV)
Patriarch Thich Huyen Quang, who is under pagoda arrest.

WINNICK