Cablegate: Hcmc Neighbor Province Transitioning From Agriculture To

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

230301Z Sep 05

UNCLAS HO CHI MINH CITY 001010

SIPDIS

SENSITIVE

DEPARTMENT FOR EAP/BCLTV

E.O. 12958: N/A
TAGS: ECON EINV PGOV ETRD VM
SUBJECT: HCMC NEIGHBOR PROVINCE TRANSITIONING FROM AGRICULTURE TO
INDUSTRY

1. (SBU) Summary: Neighboring HCMC to the south, Long An has
developed as a center of Mekong Delta agriculture. But its
proximity to HCMC makes it a natural location for industrial
development. Some businesses, including Nike, have already begun
to capitalize on this geography, and provincial officials seem
interested in marketing Long An as an alternative to HCMC's
prosperous neighbors, Dong Nai and Binh Duong. It remains unclear
whether local government understands the secret to Dong Nai's and
Binh Duong's success: letting business do business with minimal
government interference. End Summary.

LOCAL OFFICIALS AWARE OF PROVINCE'S INDUSTRIAL POTENTIAL
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2. (SBU) The Consul General, accompanied by EconOff, Post
Commercial Officer and ConOff, visited Long An Province September
12. The province borders HCMC to the west and south and is the
northern end of the Mekong Delta in terms of both topography and
economy. Provincial Party Secretary, Mr. Le Thanh Tam, and
People's Committee Chairman, Mr. Duong Quoc Xuan, said that
agriculture in Long An represents approximately 70 percent of the
land and 80 percent of the workforce. Both stressed the need to
develop the province's 22 industrial zones to take advantage of
its proximity to HCMC to attract investment. Four operating
industrial zones have 19 foreign-owned companies, primarily from
Taiwan, France and China. Foreign direct investment commitments
total USD 700 million. At USD 700 per capita, provincial GDP is
higher than the national per capita GDP of approximately USD 550.
Long An's economy grew by 9.6 percent in 2004, and provincial
authorities have set a 14 percent annual growth target for the
next five years.

3. (SBU) Provincial officials noted that Long An's infrastructure
is not yet inadequate to support major increases in industrial
development, particularly in the areas of electricity,
transportation and water. While the province provides tax
incentives for investors, local leaders were vague about other
strategies to promote industrial development. They said they were
studying the successful experiences of Dong Nai and Binh Duong
provinces, though People's Committee Chairman Xuan observed that
land in Long An is lower and wetter than in Dong Nai and Binh
Duong and structures require pilings, raising costs. Long An's
leaders have also been studying the feasibility of dredging the
Soai Rap River to create a port that could alleviate congestion at
the Ho Chi Minh City port.

SOME BUSINESS ALREADY AWARE OF LONG AN'S ADVANTAGES
--------------------------------------------- ------

4. (U) Taiwanese-owned Ching Luh Shoes Co., Ltd. manufactures
footwear for Nike, and is the largest factory in Long An Province
with a 2005 production capacity of 1.2 million pairs of shoes.
Nike has been Ching Luh's sole client since January 2005. Its
workforce has increased from 7,000 to 16,000 workers within the
past year, and it expects to employ over 20,000 by the end of
2005. The average salary is USD 70 per month. According to
company officials, Ching Luh came to Long An in 2003 due to the
greater availability of land and labor compared to Dong Nai and
Binh Duong. Ching Luh hopes to continue to draw workers from the
Mekong Delta as it expands.

5. (U) Dong Tam Ceramic Tiles Company employs more than 3,000
workers in five factories, three of which are located in Long An
Province. The private firm produces 20 percent of Vietnam's high-
quality tile with annual revenues of USD 40 million. General
Director Vo Quoc Thang is a member of the National Assembly (one
of the few representatives who is not a Party member) and is
Chairman of the HCMC Young Businesspeople's Association. In 1986,
Thang and four employees resurrected the Dong Tam company which
his father had shuttered after 1975. He has used his home
province of Long An as a base for his operations.

6. (SBU) Comment: Long An has based its economic growth and
development primarily on agriculture. Closer to the coast, shrimp
farming has added a cash crop to traditional rice cultivation.
The province seeks to industrialize, taking advantage of its
workforce and location. It is too soon to gauge whether the local
leadership, and especially the new People's Committee Chairman, is
prepared to support an open and supportive business environment.
A previous Long An People's Committee Chairman was reportedly not
above being swayed by bribes in awarding rights to develop port
projects. End Comment.

WINNICK

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