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Cablegate: Hcmc Officials -- Still On Training Wheels?

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

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000881

SIPDIS

USDOC for 6500 and 4431/MAC/AP/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: VM ECON ETRD PGOV SOCI DPOL
SUBJECT: HCMC OFFICIALS -- STILL ON TRAINING WHEELS?

REF: (A) 02 HCMC 0075, (B) 02 HCMC 0117

1. Summary: Since the Prime Minister signed "Decree 93" in
December 2001, granting Ho Chi Minh City some level of municipal
autonomy from the national government, the city is still
struggling to interpret how much autonomy has actually been
devolved from Hanoi and is treading cautiously. Although HCMC has
yet to see any dynamic impact or "breakthroughs" as a result of
the Decree, according to a number of local officials, it has seen
a modicum of change in land allocation, management of public
servants, streamlining administrative processes, and, to a lesser
extent, the budget. Moreover, it appears that Decree 93 is merely
the first step on a long road forward, and many government
officials are awaiting further "clarifying" decrees to help guide
them toward increased municipal autonomy from Hanoi.

2. When it was announced in December 2001, Decree 93 was heralded
as a watershed development for Ho Chi Minh City by local officials
and the press. It was supposed to "liberate" the city from the
bureaucratic harness of the Hanoi central government, and give it
more freedom in decision-making. The intention of Decree 93 was
to transfer more authority to HCMC in four designated areas: 1)
planning, investment, and socio-economic development; 2) housing,
land, and urban infrastructure; 3) budget; and 4) organization of
city agencies and managing staff. In a series of meetings with
local officials that would presumably be affected by any changes
in these areas, they referred to a general, if somewhat slow,
trend toward more HCMC autonomy, but struggled when it came to
specific examples of progress directly related to Decree 93.

Land Acquisition Hard but Easier
--------------------------------
3. The process of acquiring land probably reflects the most
apparent changes. The HCMC People's Committee is now authorized
to allocate land of all sizes and grant land-use rights to
individuals and companies, eliminating the need to send the
proposal up to Hanoi and lobby for its approval. Another
improvement for HCMC is the authority to approve investment
projects valued over USD$10 million, although the Prime Minister
still must approve a "feasibility study" of these major projects
before final action can be taken. In order to ease the process of
obtaining land-use rights, a "one-stop shop" has been established
by the city. First, buyers work with the Department of Planning
and Investment to obtain a land license (which should take 20 days
for cleared land; 40 days for uncleared land), and after the
license is obtained, investors visit the Department of Natural
Resources to obtain the land itself. Land-use rights for
individuals can be approved at the District People's Committee
level, but a HCMC People's Committee Vice-Chairman must approve
land-use rights for any organization, company or foreigner.

4. Even though the individual or company now faces a
significantly reduced waiting period for acquiring land-use
rights, there do not appear to be any fewer steps or approvals in
the process at the city level. Instead of the individual or
company shuffling around papers to all the relevant offices, a
representative of the Department of Natural Resources and
Environment does the shuffling. While this is clearly a win for
land-use rights applicants, the overall approval process remains
equally convoluted, and the idea of the "one-stop shop" was not a
product of Decree 93. Some HCMC officials argue, however, that
Decree 93 made it possible for HCMC to streamline these
procedures, and rightfully point out that these decisions no
longer require the approval of Hanoi.

Administrative Reforms
----------------------
5. HCMC officials stated that the process of streamlining
administrative processes and government departments has been
improving since Decree 93 was implemented, especially in
restructuring public offices to be more simplified from the city
to the local level. Mr. Nguyen Trung Thong, Deputy National
Project Director of the UNDP-funded project for Public
Administration Reform, stated that since the year 2000, HCMC
government agencies have been reduced in number from 46 to 10, and
there has been an overall reduction in staff of 10-12 percent in
the city's bureaucracy. He claimed that the city had been
working with some success at streamlining and increasing
transparency of administrative processes. Now anyone can go to a
department and obtain the list of procedures required for a given
service. Another significant change for HCMC is more control over
the hiring and firing of HCMC public officials, as well as over
their salaries. Hanoi previously directed uniform salaries for
public servants throughout the country, regardless of
specialization or location, and also approved all public
officials. More control over these areas allows HCMC to better
manage the direction of its public policy, as well as attract
better-qualified candidates into public service. Mr. Thong noted
that these changes have allowed HCMC to hire younger, university-
educated individuals, and move younger people into higher-level
positions at a faster pace.

The Budget
----------
6. Whether HCMC has increased control over its budget, and has
actually been able to retain more of its revenues, remains hidden
under opaque regulations for negotiating revenue targets and
percentages of revenue to be retained. Most HCMC government
officials who spoke to Econoff stated that HCMC is able to retain
more of its tax revenues than before Decree 93, although exact
amounts were never mentioned, even after repeated questioning. It
appears that the recent issuance of yet another decree signed by
Prime Minister Phan Van Khai will clarify some of the previous
uncertainty over the budget. This Decree 124 details more
explicitly HCMC's control over some budget items and supersedes
any budget-related issues outlined in Decree 93. (Post Note: The
Standing Vice-Chairman of the HCMC People's Committee has said in
meetings that HCMC's now retains about 32 percent of its tax
revenues, compared to about 18 percent before. The goal, he has
noted, is to retain at least 40 percent. End note.)

7. Decree 124 stipulates that HCMC will still need to negotiate
its budget and tax collection target with Hanoi every year.
However, once the two parties agree on a revenue target, the
percentage of the revenue up to the target amount HCMC keeps will
remain fixed for five years. No one could tell ConGen the current
percentage. If HCMC collects more than the revenue target agreed
upon, HCMC keeps 30% of the income collected above the target, but
it can only be spent on pre-approved infrastructure projects.

8. Finally, Decree 93 allows HCMC to issue municipal bonds to
raise capital, and the city did so last year for the first time.
Decree 124 further expands HCMC's options to acquire capital by
permitting HCMC to borrow money from foreign sources for certain
infrastructure projects. The ability to raise additional capital
will be vital as HCMC tries to build an adequate infrastructure
for its growing population.

9. Comment: Unless city officials are just painfully shy about
commenting on publicly available government decrees (a distinct
possibility), even they have a great deal of uncertainty as to how
much autonomy Decree 93 actually has given Ho Chi Minh City. The
city is on the right track, but it will probably limit itself to a
few tentative steps while waiting for additional "clarifying"
decrees to be issued. City officials still feel the need to avoid
moving too quickly, for fear of attracting Hanoi's attention or
drawing the envy of other provinces. Just the same, it is good
news that HCMC officials seemed truly interested in, and
understand the need for, further administrative reforms and
increased decision-making autonomy. While Decree 93 gave HCMC a
yellow light to make independent decisions in certain areas, there
is no green light from Hanoi on the crucial question of autonomy.

YAMAUCHI

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