Cablegate: Hcmc Officials Can Now Run the City

This record is a partial extract of the original cable. The full text of the original cable is not available.

050738Z Feb 02

2002HOCHI00117 - UNCLASSIFIED

UNCLASSIFIED PTQ8245

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------------------621BE7 050818Z /38
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC 5968
INFO AMEMBASSY HANOI

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000117

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV SOCI ETRD VM
SUBJECT: HCMC OFFICIALS CAN NOW RUN THE CITY

REF: HO CHI MINH CITY 75

1. SUMMARY: IN WHAT APPEARS TO BE A TEST CASE FOR
VIETNAM'S MAJOR CITIES, THE CENTRAL GOVERNMENT HAS
DEVOLVED SOME SIGNIFICANT POWERS TO HO CHI MINH CITY
WITH THE ISSUANCE OF "DECREE 93" BY THE OFFICE OF THE
PRIME MINISTER. THIS DECREE PERMITS HCMC FOR THE FIRST
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TIME TO DO ITS OWN BUDGETING, APPROVE LARGE DOMESTIC
INVESTMENT PROJECTS, HANDLE LAND ISSUES, HIRE AND FIRE
KEY PERSONNEL, AND EVEN PRIVATIZE SOME PUBLIC SERVICES
- ALL WITH MUCH LESS INTERFERENCE FROM HANOI. HCMC
AUTHORITIES SAY THEY WERE SURPRISED THAT SO MUCH
AUTONOMY HAS BEEN GRANTED AND ARE STILL ASSESSING
EXACTLY WHAT THIS MEANS. THEY ASSERT, HOWEVER, IT WILL
BRING MORE EFFICIENT, TRANSPARENT, AND RESPONSIVE
GOVERNMENT.

I NEED TO CHECK WITH HANOI
--------------------------
2. HO CHI MINH CITY AUTHORITIES HAVE TRADITIONALLY
NEEDED APPROVALS FROM HANOI TO MAKE ALMOST ANY MAJOR
DECISION. THIS BEGAN TO CHANGE WHEN LAST DECEMBER THE
OFFICE OF THE PRIME MINISTER ISSUED "DECREE 93." THE
DECREE GRANTS SIGNIFICANT AUTONOMY TO HO CHI MINH CITY
IN SOME AREAS. CITY OFFICIALS HAD BEEN PUSHING FOR
MORE LOCAL CONTROL FOR SOME TIME, BUT TO THEIR
SURPRISE, ACCORDING TO ONE LOCAL OFFICIAL, "WE GOT
ABOUT 95% OF WHAT WE WERE ASKING FOR." ALTHOUGH THE
DECREE WENT INTO EFFECT ON DECEMBER 27, THE CITY IS
STILL ASSESSING HOW IT WILL IMPLEMENT ITS NEW POWERS.
RELEVANT DEPARTMENTS WILL BE MAKING RECOMMENDATIONS TO
THE PEOPLE'S COMMITTEE IN FEBRUARY AND MARCH FOR NEW
IMPLEMENTING REGULATIONS. JUST THE SAME, LOCAL
OFFICIALS ALREADY SEE THIS AS A MAJOR DEVELOPMENT IN
THE AREA OF ADMINISTRATIVE REFORM.

YOU'RE FIRED
------------
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3. UNDER THE DECREE, THE PEOPLE'S COMMITTEE OF HCMC
NOW HAS THE AUTHORITY TO HIRE AND FIRE KEY PERSONNEL,
SUCH AS CITY DEPARTMENT HEADS. BEFORE, SUCH DECISIONS
HAD TO BE APPROVED BY HANOI. NOW HCMC CAN INSTALL ITS
OWN PEOPLE IN THE LOCAL GOVERNMENT HIERARCHY -- AND
FIRE THEM IF THEY DO NOT PERFORM. THE CITY ALSO HAS
NEW AUTHORITY TO PROVIDE ADDITIONAL "INCENTIVES" TO
RECRUIT AND RETAIN SPECIALIZED OR TECHNICAL STAFF.
FIRST VICE-CHAIRMAN NHAN HAS TOLD THE AMBASSADOR THAT
HE WILL USE THESE INCENTIVES TO PROVIDE HIGHER SALARIES
FOR INFORMATION TECHNOLOGY PROFESSIONALS (SEE REFTEL).

4. WHAT MAY HAVE EVEN A LARGER IMPACT, LOCAL OFFICIALS
NOW WILL HAVE FULL AUTHORITY TO ESTABLISH, RESTRUCTURE
OR DISSOLVE AGENCIES, NON-PROFIT ORGANIZATIONS, AND
STATE-OWNED ENTERPRISES (SOES) UNDER THEIR CONTROL.
THE CITY CAN ALSO EXERCISE THE OPTION OF PRIVATIZING
SOME OF ITS PUBLIC SERVICES.

IT'S TIME FOR YOU TO MANAGE YOUR OWN BANK ACCOUNT
--------------------------------------------- ----
5. PRIOR TO DECREE 93, HANOI DETERMINED HCMC'S BUDGET
LINE ITEM BY LINE ITEM. HCMC WAS UNABLE TO REDEPLOY
THAT MONEY REGARDLESS OF HOW THE CITY PERCEIVED
CHANGING LOCAL NEEDS. NOW HCMC HAS GAINED VIRTUALLY
FULL CONTROL OVER ITS ENTIRE BUDGET PROCESS. IN THE
PAST, HANOI DETERMINED ANNUALLY THE CONTRIBUTION THAT
HCMC MADE TO THE NATIONAL BUDGET, AND EVERY YEAR SAW AN
INCREASE. UNDER DECREE 93, THE AMOUNT GOING TO CENTRAL
GOVERNMENT COFFERS WILL BE SET AS A PERCENTAGE OF TOTAL
INCOME TAX REVENUES ONCE EVERY FIVE YEARS, MAKING IT
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POSSIBLE FOR HCMC TO MORE ACCURATELY FORECAST ITS
FUTURE REVENUES. FOR THE NEXT FIVE YEARS HCMC WILL BE
ABLE TO RETAIN 24% OF ALL CORPORATE AND PERSONAL INCOME
TAXES RAISED IN THE CITY. HCMC WILL ALSO BE ALLOWED TO
SEEK OTHER SOURCES OF FUNDING -- SUCH AS ISSUING BONDS
AND ASSESSING FEES FOR LOCAL SERVICES.

I WANT TO BUILD SOMETHING REALLY BIG
------------------------------------
6. CITY PLANNING IS NOW, UNDER DECREE 93, ACTUALLY A
CITY GOVERNMENT FUNCTION. THE DECREE EXPLICITLY NOTES
THAT LAND USE ISSUES ARE TO BE HANDLED AT THE CITY
LEVEL. THIS MEANS CITY AUTHORITIES CAN NOW LEASE LAND
PLOTS OF ANY SIZE AND PAY LOCALLY-DETERMINED PRICES FOR
LAND FOR URBAN DEVELOPMENT AND INVESTMENT PROJECTS.
PREVIOUSLY, ALL LAND DEALS OVER ONE HECTARE REQUIRED
APPROVAL FROM THE PRIME MINISTER. ACCORDING TO LOCAL
OFFICIALS, THIS CHANGE SHOULD SIGNIFICANTLY SPEED UP
THE APPROVAL PROCESS.

7. STILL, THE DECREE STATES THAT HCMC AUTHORITIES
SHOULD SHARE PROPOSALS WITH RELEVANT CENTRAL GOVERNMENT
MINISTRIES ON MAJOR CITY PLANNING INITIATIVES. IF HCMC
DOES NOT RECEIVE A REPLY WITHIN 30 DAYS, THE INITIATIVE
IS CONSIDERED APPROVED. THIS IS A MARKED DEPARTURE FROM
THE TRADITIONAL "UNLESS IT IS EXPLICITLY PERMITTED, IT
IS NOT ALLOWED" APPROACH UTILIZED BY THE GVN.

I'LL TAKE YOUR 10 MILLION
-------------------------
8. THE PROCESS OF APPROVING LARGE DOMESTIC INVESTMENTS
ALSO HAS BEEN STREAMLINED, AND SHOULD ALLOW PROJECTS TO
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MOVE MUCH MORE QUICKLY. WITH DECREE 93, DOMESTIC
INVESTMENT PROJECTS OVER US$10 MILLION WILL BE REVIEWED
AT THE "FEASIBILITY STUDY" PHASE BY THE OFFICE OF THE
PRIME MINISTER. THIS ALLOWS FOR THE APPROVAL OF
PROJECTS "IN PRINCIPLE" AT AN EARLY STAGE, RATHER THAN
SUBJECTING EVERY ASPECT OF A FULLY DEVELOPED PROPOSAL
TO CENTRAL GOVERNMENT SCRUTINY. THE DECREE DOES NOT
COVER FOREIGN DIRECT INVESTMENT.

ANYTHING ELSE?
--------------
9. THE MOVE TO GRANT MORE AUTONOMY TO HO CHI MINH CITY
IS A SUCCESS FOR CITY OFFICIALS WHO HAVE LONG LOBBIED
FOR THESE CHANGES. THEY HAVE ASSERTED THAT HCMC -
BECAUSE OF ITS SIZE, LEVEL OF ECONOMIC DEVELOPMENT, AND
RATE OF GROWTH - HAS ITS OWN UNIQUE CHALLENGES.
SOMEWHAT SURPRISINGLY, HANOI AGREED TO ALMOST ALL OF HO
CHI MINH CITY OFFICIALS' PROPOSALS. ONLY A FEW ITEMS
FROM THEIR INITIAL PROPOSAL WERE REJECTED: ELIMINATION
OF ONE LAYER OF CITY GOVERNMENT; CREATION OF A SPECIAL
HCMC TOURIST POLICE FORCE; AND THE FREEDOM TO ESTABLISH
HCMC-SPECIFIC INVESTMENT AND FINANCE CORPORATIONS.
(NOTE: SEVERAL CONSULATES GENERAL IN HCMC--BRITISH,
GERMAN, SINGAPOREAN, JAPANESE, AND U.S., AMONG OTHERS--
HAD URGED THE PEOPLE'S COMMITTEE TO ESTABLISH A
SEPARATE TOURIST POLICE, GIVEN RECENT INCREASES IN
STREET CRIME AND THE DEATH OF A BRITISH TOURIST DURING
A PURSE-SNATCHING ATTEMPT. ALTHOUGH DISAPPOINTED THAT
THE CENTRAL GOVERNMENT DID NOT GRANT HCMC THE FUNDING
FOR THIS ENDEAVOR, THIS WAS THE FIRST WE HAD HEARD THAT
HCMC OFFICIALS HAD BEEN PRESSING HANOI TO INCLUDE A
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SEPARATE POLICE FORCE AS PART OF THE OVERALL REFORM
PACKAGE.)

10. LOCAL OFFICIALS STATE THAT HCMC WILL CONTINUE
PUSHING FOR THOSE CHANGES AS A PART OF FUTURE REFORMS.
OVERALL, HOWEVER, HO CHI MINH CITY OFFICIALS WERE
PLEASED WITH THE LEVEL OF COOPERATION SHOWN BY HANOI.
THEY VIEW THESE NEW MANAGEMENT POWERS AS REAL, ABSOLUTE
AND EFFECTUAL. HO CHI MINH CITY'S ABILITY TO SUCCEED
USING THESE NEW MANDATES WILL BE A HARBINGER OF
INITIATIVES TO COME THROUGHOUT THE REST OF VIETNAM.
DEPUTY PRIME MINISTER NGUYEN CONG TAN WAS QUOTED IN THE
LOCAL PRESS AS STATING, "IF HCMC FULFILLS THE
DECENTRALIZED TASKS, THE MODEL WILL BE APPLIED NATION-
WIDE WHEN ADMINISTRATIVE REFORMS ARE CONDUCTED IN THE
FUTURE."

COMMENT
-------
11. THE CENTRAL GOVERNMENT HAS TAKEN A STRONG STEP IN
ADMINISTRATIVE REFORM BY GRANTING HO CHI MINH CITY
POWERS THAT WOULD PROBABLY APPEAR TO MOST OF US AS
TYPICAL CITY GOVERNMENT FUNCTIONS, BUT NOT IN VIETNAM.
WHAT REMAINS TO BE SEEN, HOWEVER, IS HOW BOTH HANOI AND
HCMC DEFINE, IN PRACTICE, THIS NEW RELATIONSHIP. ONE
CITY OFFICIAL NOTED THAT EVEN WITH ITS NEW POWERS "IN
REALITY, WE WILL STILL ASK FOR ADVICE FROM HANOI ON
MAJOR PROJECTS." HCMC WILL RECEIVE A GREAT DEAL OF
SCRUTINY IN THIS PILOT PHASE OF DEVOLUTION, BOTH FROM
HANOI AS WELL AS FROM OTHER LARGE CITIES SUCH AS DANANG
AND CAN THO WHICH WILL SEEK SIMILAR INDEPENDENCE. WILL
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THESE NEW POWERS MAKE THE CITY MORE RESPONSIVE,
EFFICIENT, AND ACCOUNTABLE? THE SIGNS ARE POSITIVE.
DECREE 93 FOLLOWS A SERIES OF LOCAL ADMINISTRATIVE
REFORMS THAT HAVE STREAMLINED INVESTMENT AND OTHER
LICENSING PROCEDURES HERE IN HCMC -- AND ARE ONE REASON
HCMC GENERATES SO MUCH OF VIETNAM'S INVESTMENT AND
ECONOMIC GROWTH.

YAMAUCHI

UNCLASSIFIED

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