HCMC ECONOMIC LEADERS EVALUATE PERFORMANCE IN 2006

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001484 SIPDIS SENSITIVE SIPDIS DEPT FOR EAP/MLS DEPT PASS USTR (DAVID BISBEE) COMMERCE FOR 4431 (MAC/AP/OPB/VLC/HPPHO) E.O. 12958: N/A TAGS: ECON ETRD EINV ELAB EFIN PINR VM SUBJECT: HCMC ECONOMIC LEADERS EVALUATE PERFORMANCE IN 2006 REF: A) HCMC 218 B) HCMC 31 C) 04 HCMC 1582 HO CHI MIN 00001484 001.2 OF 002 ¶1. (SBU) Summary: Government and international business leaders gathered for their annual review of Ho Chi Minh City's economic performance. HCMC marked new milestones in economic development in 2006, but familiar obstacles to growth - including infrastructure and human resource development - remain. Despite these challenges, HCMC's leaders have set ambitious targets for the city's economy in the next ten to fifteen years. End summary. HCMC REGISTERS ANOTHER YEAR OF STRONG GROWTH -------------- ¶2. (U) In the fifth annual meeting of HCMC government and foreign business leaders, HCMC People's Committee Chairman Le Hoang Quan reported on the city's economic accomplishments in 2006, which show that HCMC remains an powerhouse in the Vietnamese economy. According to Quan, HCMC's economy grew 12.2 percent in 2006. Overall economic growth was led by growth in the private and foreign investment sectors, which grew 14.6 percent and 13.1 percent, respectively. The state sector grew the least, at 9.1 percent. Exports from HCMC, home of the nation's busiest port, grew by 23.7 percent. ¶3. (U) Foreign direct investment (FDI) and the impressive performance of the HCMC stock exchange were the highlights of an already bright economic picture in 2006. FDI doubled between 2005 and 2006, reaching USD 2.1 billion in 2006. Chairman Quan noted that USD 1.04 billion of that figure is the Intel investment. The next largest single investment was a $249 million container facility at Hiep Phuoc port, a port project under development to help alleviate congestion at Saigon Port. Activity on the HCMC stock exchange surpassed expectations. The number of listings more than doubled. According to Quan, there were 30 companies listed on the exchange at the beginning of the year; now there are 67. The VN Index reached 775.56 on December 15, up from 307.5 earlier this year. ¶4. (U) HCMC Party Secretary Le Thanh Hai outlined ambitious targets for the city. He noted that HCMC had experienced 11.2 percent average annual growth between 1991 and 2005. In the next five to fifteen years, HCMC should maintain an average 
annual growth rate of at least 12 percent, Hai said. The target for city for the year 2020 is a population of 10 million with per capita GDP of USD 7,000. (Note: HCMC's per capita GDP is currently approximately USD 1,800. End Note.) CHALLENGES REMAIN -------------- ¶5. (U) Government and business leaders agreed that challenges to HCMC's economic growth include weak infrastructure, labor pressures, and human resource deficiencies. All of the business representatives present cited infrastructure improvements, particularly in transportation and power, as the most important requirement for continued growth and investment. City authorities agreed and outlined plans to address infrastructure weaknesses, particularly for the city's strained seaports. ¶6. (U) Business leaders, including the chairman of the American Chamber of Commerce, noted that a constructive labor relations system is needed to avoid labor unrest like that experienced a year ago, when a wave of strikes resulted in the Government of Vietnam (GVN) authorizing a 40 percent increase in the minimum wage at foreign-invested enterprises (FIEs). (Refs A and B) The deputy director of HCMC's Department of Labor, Invalids and Social Affairs (DoLISA) responded to business concerns by outlining the various responsibilities of employers, workers, trade unions and government need to shoulder to ensure that labor disputes are solved before they lead to strikes. ¶7. (U) Broader human resource shortages are also a concern of both business and government. The head of the European Chamber of Commerce called for an overhaul of Vietnam's education system, with a particular focus on higher and professional education. HCMC Party Secretary Hai listed human resource development as one of the city's main challenges, noting that the city needs to improve the quality of workers and managers and needs to attract investment for educational institutions. COMMENT -------------- HO CHI MIN 00001484 002.2 OF 002 ¶8. (SBU) HCMC government leaders take this annual session seriously; the city's top two officials, Secretary Hai and Chairman Quan, were active participants in the entire four-hour meeting. However, many of the issues outlined this December are essentially the same problems outlined two years ago. (Ref C) Deficiencies in areas like infrastructure and education are not solved overnight, or even in two years. These challenges, plus the ambitious goal of reaching per capita GDP in HCMC of USD 7,000 by 2020, mean HCMC leaders have their work cut out for them. CHERN