CENTRAL VIETNAM'S TALE OF TWO PROVINCES: POLITICS,

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001091

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV ECON EINV PREL SOCI ETRD PHUM PINR VM DPOL HUMANR RELFREE
SUBJECT: CENTRAL VIETNAM'S TALE OF TWO PROVINCES: POLITICS,
LEADERSHIP AND DEVELOPMENT IN DANANG AND QUANG NAM

REF: A) HCMC 1082; B) O4 HCMC 1528

Summary
--------------


1. (SBU): The Consul General led a team to Danang and Quang Nam
provinces October 4-7 to broaden U.S. engagement in central
Vietnam and to promote U.S. economic, human rights and religious
freedom interests. The style and substance of our interaction
with the province's two Party Secretaries and their staffs brought
into sharp relief contrasting approaches to economic development,
party politics and views on ties to the United States that
permeate Vietnam's Communist Party in southern and central
Vietnam. Ba Thanh, Danang's politically driven, calculating,
status quo Party Secretary ofQred little beyond promoting
Government-managed infrastructure development. In contrast, Quang
Nam's urbane Party Secretary Vu Ngoc Hoang sees his role as
ensuring that Quang Nam's legal and administrative framework is
transparent and attractive to foreign and domestic investors, with
the private sector spearheading the province's growth. Hoang sees
the United States as a key ally in Quang Nam's development
process; Ba Thanh was far less welcoming. Although Quang Nam is
starting from a much lower economic base than Danang, U.S business
contacts tell us that Quang Nam is well on its way to creating the
pro-growth, pro-private sector environment Hoang envisions.
Septels will report in detail on Quang Nam's tourism and
industrial development strategies. Religious freedom issues
affecting the Protestant community in Vietnam's central coast were
reported in Ref A. End Summary.

Ba Thanh: Conservative King of Danang
--------------


2. (SBU) Nothing moves in Danang without the blessing of its 52-
year old Party Secretary Ba Thanh, whom a reliable Vietnamese
contact from the area called "the Dictator." A fixture in Danang
politics for nearly two decades, Thanh was People's Committee
Chairman for seven years prior to being elevated to the Party
Secretary post in 2004. (Danang and Quang Nam were split to form

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two separate provinces in 1997.)


3. (SBU) Foreign and local contacts all say that Thanh thrives on
cultivating an image of a hardnosed, socially conservative but
populist politician; as People's Committee Chairman and Party
Secretary he routinely dispenses favors and allocates land,

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accepting and approving petitions from Danang's citizens on his
walkabouts through the city or on his Saturday morning "meet the
people" sessions.


4. (SBU) Danang's development strategy is one-dimensional and
mirrors the hardnosed style of Ba Thanh. According to contacts in
Danang, Thanh believes that a good infrastructure base -- coupled
with the opening of the East-West corridor to Laos and Northern
Thailand -- will attract foreign investors in droves. Thus, over
the past few years, he has undertaken an ambitious program of road
building and widening. In typical Ba Thanh style, he reportedly
decides where the roads and bridges go, going as far as to donate
a new bridge to Quang Nam Province to ease travel to his hometown.


5. (SBU) Although Thanh told the CG tQt all the road building was
internally financed, a well informed American businessman told us
Thanh directs financing from State-owned banks in Danang to
finance the construction. As a result, the Danang private sector
faces a credit crunch. A local furniture manufacturer told us he
could not obtain credit to expand his operations. One businessman
complained that three major building projects with which his
company has been involved have been frozen for the past year
because contractors had not been paid by state agencies or state-
owned enterprises.


6. (SBU) Thanh highlighted for the CG his leading role in
transforming Le Quy Don high school into a showcase institution
for cultivating Danang's and Quang Nam's future leaders. Danang
invested at least ten million dollars into building the high
school campus, which will boast an Olympic-size swimming pool, a
spacious dormitory, a huge IT section and top teachers who earn
three times the national average. In addition to having an
outstanding academic record and passing a rigorous entrance exam,
the school's 750 students also must demonstrate that they are of
"high moral caliber."


7. (SBU) Our contacts in Danang say that Thanh is intensely
ambitious and is lobbying Hanoi hard for a promotion in advance of
next year's tenth Party Congress. He is arguing that his
"transformation" of Danang merits his elevation into a more
prominent political position in Hanoi or in HCMC.


8. (SBU) While Thanh has a clear political agenda, neither he, nor
his colleagues in the People's Committee and Danang Trade
Promotion Center, could explain what economic development strategy
Danang would follow once the roads were built (which they largely
are). Despite the CG's prompting, Thanh would not articulate how
he would promote Danang overseas or what other policies were
needed to attract foreign investment and stimulate the private
sector. Thanh and other key Danang leaders demonstrated no
awareness of or interest in policy debates surrounding key
economic legislation such as the common investment law, despite
their impact on Danang's economic growth. In his meeting with the
CG, Thanh also reflected that Vietnamese business needs "more time
to adjust" to international competition. He pooh-poohed
agricultural reform and said that only through industrialization
could Vietnam become a wealthy state. He shrugged when the Consul
General pointed out that the United States remains the world's
largest agricultural exporter. Using standard Party terminology,
Thanh told the CG of the success of his "five NOs" campaign (no
illiteracy, beggars, drugs, hunger and murder) and of his plans to
launch the follow up "three YESes" campaign (housing, jobs and
civilized social lifestyle). Some of our contacts told that the
five NOs policy runs only on four main streets of Danang City.
However, in separate meetings with Danang Police, RSO found a well-
trained and motivated police force starkly loyal to hizzoner.


9. (SBU) Wearing a short sleeve shirt and sporting a heavy five
o'clock shadow, Ba Thanh closed his meeting with the CG with a 15-
minute monologue on how the United States should manage its
relationship with Vietnam. Thanh said he operates under the
principal of "not cooperating with those who oppose us." He
criticized displays of the flag of the Republic of Vietnam in the
United States. Referring to the attendance of prominent
dissidents at ConGen's Fourth of July reception, Ba Thanh said
that, were he in charge, he would refuse to "have a beer with us"
while "lawbreakers" were in the room. In reply, the Consul
General observed that, while we would continue to have dealings
with dissidents, all our activities would be completely
transparent. Moreover, we welcomed a sustained dialogue with the
Party and the GVN to narrow differences whenever possible.

Hoang: Reformist "CEO" of Quang Nam
--------------


10. (SBU) Although they were one province eight years ago, Quang
Nam's senior leaders could not be any further in style, substance
and approach from Ba Thanh and Danang. In meetings in the
provincial capital of Tam Ky October 6 and in HCMC October 18,
Party Secretary Vu Ngoc Hoang laid out his plan to transform Quang
Nam into the industrial and tourism hub of Central Vietnam,
centered respectively around the Chu Lai Open Economic Zone and
the UNESCO world heritage site of Hoi An.


11. (SBU) Flanked in both meetings by representatives from the
HCMC-based Fulbright Economic Teaching Program (FETP),Hoang was
professional, articulate, frank and thoughtful when discussing his
province's strengths and weaknesses with the CG. He made it clear
that he understands the importance of effective management at all
levels of government administration. He portrayed himself as CEO
of Quang Nam Inc., developing broad policy outlines and objectives
and then allowing his senior staff to flesh out and execute the
plan. Quang Nam People's Committee Chairman Nguyen Xuan Phuc,
himself a FETP graduate, acts as Hoang's highly capable Chief
Operating Officer.


12. (SBU) Hoang and this team welcome and solicit outside advice;
Quang Nam has asked FETP to act as de facto consultants as the
province moves to develop the Chu Lai OEZ, particularly its legal
and regulatory framework. In HCMC, he sought a meeting with
AmCham to intensify Quang Nam's dialogue with U.S. business.
Hoang said the province also has solicited input from potential
OEZ investors to ensure the zone's master plan meets as many of
their needs as possible. Hoang said that it was his
responsibility to take that proposal to Hanoi and sell it to the
Politburo and the GVN, just as he did with the original concept of
an OEZ, the first in Vietnam.


13. (SBU) Belying his years of study in the former Soviet Union,
Hoang was firm that only the private sector could deliver the
economic growth that the Vietnam needs. Government's role is to
create the environment -- legal and administrative -- that allows
the private sector to flourish. He said he and his team had
studied intensively the experience of Binh Duong province near
HCMC, which has transformed itself in ten years from a
predominately agrarian economy to one of Vietnam's fastest growing
industrial provinces (ref b).


14. (SBU) Hoang was comfortable and well versed on national level
issues. He acknowledged that the current draft of the common
investment law was unsatisfactory and noted there is a push
underway to modify it. Turning to the upcoming tenth Party
Congress, Hoang said there is general consensus that the Congress
will accelerate Vietnam's economic reform process. However,
differences between party factions still are being hammered out
over contentious issues such as whether Party members can also
have business interests. Vietnam's inability to accede to the WTO
before the Party Congress would not have an appreciable impact on
the push to accelerate reform. Hoang looked to the Party Congress
to boost his ability to adopt more liberal economic polices in
Quang Nam.

15. (SBU) Turning to bilateral ties, Hoang made it clear that he
saw the United States as a key partner. He wanted his staff to
learn U.S. management skills and sought Mission assistance in
establishing a sister-city/state relationship with a suitable
partner in the United States.


16. (SBU) Comment: One contact close to Ba Thanh said his
monologue on bilateral ties and dissidents was particularly
intense because Thanh, lobbying hard for a promotion, wanted to
burnish his credentials with the conservative faction of the Party
with which he associates. Even so, the numerous contrasts between
Quang Nam and Danang and between Hoang and Ba Thanh illustrate the
gap between reformists in the Party, who generally look to the
U.S. as a key partner, and conservatives, who tend to be wary of
the implications of more rapid economic reform and international
integration on their power and privilege.


17. (SBU) Comment Continued: Throughout southern and central
Vietnam, local leadership is the ingredient that explains why one
province outshines the other in Vietnam's increasingly competitive
and globally integrated economy. U.S business contacts tell us
that Quang Nam is well on its way to creating the pro-growth, pro-
private sector environment Hoang envisions. Although Quang Nam is
starting from a much lower economic base than Danang (USD 264 GDP
per capita to USD 581 in 2004),U.S. investors are placing their
investment bets that it will eclipse Danang. End Comment.

Additional BIO Notes
--------------


18. (SBU) Born in 1953, Ba Thanh served his entire political
career in Danang. He was Danang People's Committee Chairman for
seven years prior to becoming Party Secretary in 2004. Prior to
that, he was Party Chairman of Danang City from 1994-96 and
Director of the Department of Agriculture of Quang Nam-Danang
Province from 1992-94. Ba Thanh has a B.S. in Forestry and a
Ph.D. in Economics. He has not studied overseas. Known for his
quick temper and brash style, Ba Thanh is the unquestioned
strongman of Danang. Ba Thanh's father was a friend of current
Politburo member and Danang strongman Phan Dien. During the
Vietnam War, Ba Thanh was selected to study in the North at a
special Party school for promising future leaders (truong hoc sinh
Mien Nam). Ba Thanh is married and has two children, a son who
has just graduated from Danang University College of Economics,
and a daughter attending Le Quy Don High School.


19. (SBU) Born in 1952, Vu Ngoc Hoang has been Party Secretary
since 2002. From 1995 to 2002, he served as Vice-Chairman and
then Chairman of the provincial People's Committee, in charge of
planning and finance. Prior to that, he was Party Secretary of
Tam Ky District, Quang Nam-Danang province. Hoang studied
Agricultural Economics in Minsk in the former Soviet Union. He
confided to us that even in school he had a reputation as an
independent and critical thinker. Hoang has at least one
daughter, who is working towards her bachelor's degree in language
and economics at the Sorbonne. Hoang indicated that he wants her
to continue her post-graduate studies in the United States.


20. (SBU) Quang Nam People's Committee Chairman, Nguyen Xuan Phuc
was born in 1954. He holds a B.A. in industrial economics from
the National Economics University of Hanoi. Phuc was one of the
first graduates of the Fulbright Economic Teaching Program based
in HCMC. From 1978 to 2001, he held a number of positions within
the provincial government including the Director of the Department
of Planning and Investment and director of the Tourism Department.
Phuc is regarded as one of the individuals responsible for Hoi
An's emergence as a tourist center. In Central Vietnam he is
rumored to be a possible candidate for promotion to Hanoi should
the GVN decide to create a Minister for Tourism.

WINNICK