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Cablegate: Grappling with Corruption -- Hcmc Sidewalks

VZCZCXRO1506
OO RUEHDT RUEHPB
DE RUEHHM #1234/01 3480350
ZNR UUUUU ZZH
O P 140350Z DEC 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3445
INFO RUCPDOC/USDOC WASHDC PRIORITY 0053
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHHI/AMEMBASSY HANOI PRIORITY 2365
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 3664

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001234

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS TO USAID FOR ANE
STATE PASS USTR FOR DBISBEE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR SCHUN

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EIND PGOV VM
SUBJECT: GRAPPLING WITH CORRUPTION -- HCMC SIDEWALKS


HO CHI MIN 00001234 001.2 OF 002


1. (SBU) SUMMARY: From mobile noodle stands surrounded by
brightly-colored plastic chairs to expansive motorbike parking
lots in front of pricey restaurants, the sidewalks in Ho Chi
Minh City (HCMC) are clogged with commerce. HCMC's skyrocketing
land prices make sidewalks a hot commodity, creating
opportunities for official rent seeking and corruption when
officials consider business permit applications. Officials and
media outlets fighting for transparency have seized on sidewalks
as a politically acceptable issue to force public debate on
sensitive issues of public goods use and corruption. They
appear to be making progress. End summary.

HCMC's Entrepreneurial Sidewalks
--------------------------------
2. (SBU) Virtually every square foot of many city sidewalks has
been rented out in one way or another, often with the approval
of district and ward-level governments in exchange for formal or
informal payments. Ward-level governments regularly license
sidewalk businesses, especially in the busy downtown districts
where HCMC's property values can exceed New York's. Nguoi Lao
Dong, the newspaper of the HCMC Labor Federation, recently
published a series on sidewalk commerce in which they documented
more than 500 motorcycle parking lots in District 1 alone that
posed a danger to pedestrians by forcing people to walk in
traffic-clogged streets.

3. (SBU) Businesses looking to use sidewalks for customer
motorbikes say they pay "just a little bit more" than required
when they settle their ward-level "security and national defense
fund" fees (part of the official ward budget). Other businesses
that "sublet" the sidewalk in front of their buildings report
making informal payments to ward-level police. The practice is
so widespread that many sidewalks are impassable.

Rent seeking, Organized Crime and Official Corruption
--------------------------------------------- --------
4. (SBU) The reasons behind this behavior are clearly monetary.
Poor enforcement of Vietnam's Traffic Laws and lack of
government accountability create opportunities for abuse. Some
ward-level government agencies responsible for monitoring
sidewalks even profit from business operations in front of their
own buildings. District and ward-level governments collect
questionable informal payments (to the national security fund)
and formal taxes (on the income generated by sidewalk
operations) from businesses using sidewalks to park motorbikes.


5. (SBU) This might be the end of the story if this were just
another administrative fee, but only a small portion of the
proceedings from sidewalk commerce appears to be reaching the
official budget. The rest goes to the pockets of businesses,
ring leaders and officials who facilitate the licenses.
According to the HCMC Taxation Department, District 1 alone has
250-300 licensed sidewalk parking lots, but almost all the
district-level governments say they collect "unknown" or
"insignificant" taxes from these businesses.

6. (SBU) Nguoi Lao Dong newspaper examined the connection
between informal payments and organized crime, writing about a
ring-leader well connected to senior district-level officials
who would alert him ahead of potentially problematic
inspections. Another boss boasted to the paper that he acquired
licenses for many sidewalk businesses by wining and dining local
officials (including People's Committees, Police Departments,
Urban Order Management Committees, and Taxation Departments) and
giving them envelopes of money every month.

Unexpected Champions for Transparency Step Up
---------------------------------------------
7. (SBU) Raising the issue during a November municipal meeting,
HCMC People's Committee Chairman Le Hoang Quan castigated
district and ward-level officials for having rented out this
public good and charged officials with cleaning up the sidewalks
to improve city traffic. One member of the HCMC People's
Council suggested that the Chairpersons of the district and
ward-level People's Committees should be held accountable for
ensuring that the sidewalks are cleared to serve pedestrians.
Others proposed that since there is a real need for parking
space in HCMC, local governments should conduct open bidding for
sidewalk space. Still others wanted to authorize HCMC's Public
Interest Service to regulate commercial activity on part of the
city's sidewalks, reserving two-thirds of the sidewalk area for
pedestrian use. While the specifics of the proposals varied,

HO CHI MIN 00001234 002.2 OF 002


one common theme was establishing transparency in the management
of this valuable public good.

8. (SBU) Since the reports and meetings began, local media
outlets have kept a watchful eye on sidewalk commerce and some
local government officials show signs of becoming more
accountable and are clearing the sidewalks in their areas.
After being stung by criticism that early crack-downs only
targeted poor street vendors while ignoring large-scale abuses
by expensive restaurants, the city changed its focus. The CG
personally witnessed an enforcement raid in which a team of city
workers and police confiscated scores of motorbikes parked in
front of expensive restaurants. The same team ignored small
street vendors in the neighborhood. As a result of press
coverage and the resulting aggressive enforcement, a large
number of downtown sidewalks have been cleared and more than 60
percent of District 1's sidewalk parking lot licenses have been
revoked.

Comment:
--------
9. (SBU) HCMC sidewalks are both a symbol of the city's booming
free market and a visible reminder of the temptation for
officials to abuse public goods in Vietnam. The good news is
that some city officials are stepping up, driven in large part
by local newspapers that seem increasingly willing to name names
when it comes to official corruption. These papers have found a
politically acceptable way to publicly point fingers at dirty
officials by focusing on public safety for pedestrians. This
story also demonstrates the extent to which technical assistance
is needed to improve municipal administration since even honest
officials are having difficulty balancing the competing needs of
the city's 3.5 million motorbikes and those of pedestrians and
shop owners. End comment.

10. (U) This cable was coordinated with Embassy Hanoi.
FAIRFAX

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