VIETNAM TOURISM BOOMS, BUT "HIDDEN CHARM" UNDER THREAT

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SUBJECT: VIETNAM TOURISM BOOMS, BUT "HIDDEN CHARM" UNDER THREAT


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1. (SBU) Summary: Vietnam's tourism industry is set to boom in the
coming years, with Government of Vietnam (GVN) officials expecting
the number of foreign tourists to rise roughly 15 percent annually
from 3.6 million in 2006 to 6 million by 2010. Despite the positive
trend, tourist industry executives say they are frustrated with the
GVN lack of cooperation, initiative and transparency on the issue.
They add the GVN is failing to market the country's potential
adequately while over-development in some areas could create
long-term damage. End Summary.

Hidden Charm
--------------


2. (U) The Government of Vietnam's official tourism slogan is
"Vietnam: The Hidden Charm" -- a motto evoking the gentle streams,
peaceful rice paddies and smiling villagers so common in postcards
sold in Vietnam's tourist shops. With annual economic growth above
eight percent, and with Vietnam gaining greater publicity as a
result of Vietnam's WTO membership and last year's hosting of the
Asia Pacific Economic Cooperation forum, the country's tourism
industry is set to boom. Deputy Director of the Vietnam National
Administration of Tourism (VNAT) Huoang Tuan Anh told Econoff the
number of foreign tourists to Vietnam is expected to increase at an
annual rate of about 15 percent over the next few years, from 3.6
million in 2006 to over 6 million by 2010. Revenues, which rose 20
percent in 2006 to USD 2.3 billion, are expected to rise similarly
over the next five years, he added. The GVN sees the industry's
rise as a boon for economic development. Tourism is currently the
largest foreign currency earner for countries worldwide, according
to the Pacific Asia Travel Association, and Vietnam, with its many
beaches, famous cuisine, tropical climate and friendly, colorful
citizens has much to offer. Tourism also helps small and medium
sized enterprises, assisting the government with its goal of
equitable growth, Anh said. "The government considers tourism a
major sector of economic development. We want to make Vietnam a
major destination in Southeast Asia," Anh said.


3. (U) Recent press reports have described a raft of new tourism
projects:
--The Kanagawa-Vietnam Economic Exchange Association and Japan's
Riviera Group have submitted a proposal for a USD 500 million trade
center in Hanoi which would include a five-star hotel, an office
tower and sports complex. The hotel is one of seven five-star
properties to be approved by the Hanoi People's Committee this year.

--Saigon Tourist reportedly plans to build a USD 200 million World
Trade Center in Ho Chi Minh City, including a 400-room, five-star
hotel to lure increasing numbers of so-called MICE (Meetings,
Incentives, Conventions and Exhibitions) visitors to the city.
--The luxury hotel and resort firm Raffles plans to build a USD 65
million resort complex near Danang at the idyllic China Beach in
central Vietnam where U.S. troops were once based.
--The GVN plans to spend USD 46.8 million on tourism infrastructure
in 2007, up from USD 38.8 million in 2006. Government projects
include the building of three secondary vocational schools of
tourism in Can Tho, Dalat, and Nha Trang. Ten more such schools
will be built in the next four years. A new College of Tourism
will be also established in 2007 in Danang.

Private Sector Frustrated, However
--------------


4. (SBU) Despite the expected growth, industry executives have
expressed increasing frustration over the GVN's tourism efforts. In
interviews with Econoff, they have said that a lack of coordination
with industry, poor planning and corruption threaten to spoil
Vietnam's most picturesque locations due to over development and
environmental damage just as the industry is set to take off. Joe
Mannix, Vietnam General Manager of United Airlines and the head of
the Tourism Working Group (TWG) for the Vietnam Business Forum, said
the National Tourism Administration (NTA) refused to consult with
industry before the NTA submitted a five-year tourism master plan to
the Prime Minister. "I would hope that this is changing, but we
have struggled to get the government to the table," he said. "The
words are there but not the action." The result, he said, was that
plans were developed in a vacuum. In his opinion, Vietnam needs to
focus more on visitors from wealthier countries and develop better
services for wealthier tourists. He asserted that the GVN also
needs to demonstrate a greater commitment to marketing, perhaps with
a campaign similar to the "Malaysia Truly Asia" campaign which
helped that country boost its number of foreign visitors to 11
million foreign visitors in 2005. Thailand receives nearly 14
million on average. "The government has not reached out well enough
to understand what a comprehensive tourism operational plan is," he
said.


5. (SBU) Other industry executives criticized the quality of sites

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and services, as well as Vietnam's failure to address well known
environmental degradation of certain sites such as Halong Bay, a
UNESCO World Heritage Site. "Halong Bay has become clogged with
tour boats and strewn with garbage," said Michael Johnston, General
Manager of Handspan Adventure Travel in Hanoi. "But the big problem
is that there are too many officials on the take." He said
government corruption and poor planning are leading to a range of
problems including overbuilding, unsafe construction and
environmental degradation at sensitive resort areas. Other industry
executives blasted the lack of investment in museums in Vietnam's
main cities. "What is there to see in Hanoi?" asked Vu Viet Hung,
Senior Business Development Manager of the Sheraton Hanoi. "The
tourism sites are the same ones that existed 20 years ago. Nothing
has changed."

Tourism Board Responds
--------------


6. (SBU) The Tourism Board's Anh responded to criticism by noting
that much work is underway and stressing that resources are limited.
Vietnam does not have a budget to carry out an international
advertising campaign akin to Malaysia's, he said, defending the
government's refusal to share the tourism master plan with the
tourism industry. "I don't think they are interested," he said,
adding that government ministries need to coordinate further before
the plan is released. Regarding its marketing plans, the GVN is
focused on the issue and is working with a number of international
consultants, he asserted. Such consultants included an "expert"
from Cuba, Anh said. At the end of the meeting, Anh handed Econoff
a set of tourism materials. Included were several brochures and a
calendar, from 2005.


7. (SBU) Comment: The Vietnam tourism industry, though developing
rapidly, is plagued by the same problems affecting Vietnam's
development overall: a sluggish, non-transparent bureaucracy,
corruption, a poor infrastructure, weak human resources and limited
financing, to name a few. While the industry will no doubt grow --
and do so quickly -- it is becoming increasingly possible that
Vietnam's "hidden charm" will disappear if the GVN does not improve
its game plan for the industry's development over the next few
years. End Comment.

MARINE