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Cablegate: Hcmc Economic Leaders Evaluate Performance in 2006

VZCZCXRO2530
RR RUEHCHI RUEHDT
DE RUEHHM #1484/01 3561219
ZNR UUUUU ZZH
R 221219Z DEC 06
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 1912
INFO RUEHHI/AMEMBASSY HANOI 1403
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/USDOC WASHDC 0024
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH CITY 2071

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001484

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/MLS
DEPT PASS USTR (DAVID BISBEE)
COMMERCE FOR 4431 (MAC/AP/OPB/VLC/HPPHO)

E.O. 12958: N/A
TAGS: ECON ETRD EINV ELAB EFIN PINR VM
SUBJECT: HCMC ECONOMIC LEADERS EVALUATE PERFORMANCE IN 2006

REF: A) HCMC 218 B) HCMC 31 C) 04 HCMC 1582

HO CHI MIN 00001484 001.2 OF 002


1. (SBU) Summary: Government and international business leaders
gathered for their annual review of Ho Chi Minh City's economic
performance. HCMC marked new milestones in economic development
in 2006, but familiar obstacles to growth - including
infrastructure and human resource development - remain. Despite
these challenges, HCMC's leaders have set ambitious targets for
the city's economy in the next ten to fifteen years. End
summary.

HCMC REGISTERS ANOTHER YEAR OF STRONG GROWTH

--------------------------------------------

2. (U) In the fifth annual meeting of HCMC government and
foreign business leaders, HCMC People's Committee Chairman Le
Hoang Quan reported on the city's economic accomplishments in
2006, which show that HCMC remains an powerhouse in the
Vietnamese economy. According to Quan, HCMC's economy grew 12.2
percent in 2006. Overall economic growth was led by growth in
the private and foreign investment sectors, which grew 14.6
percent and 13.1 percent, respectively. The state sector grew
the least, at 9.1 percent. Exports from HCMC, home of the
nation's busiest port, grew by 23.7 percent.

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3. (U) Foreign direct investment (FDI) and the impressive
performance of the HCMC stock exchange were the highlights of an
already bright economic picture in 2006. FDI doubled between
2005 and 2006, reaching USD 2.1 billion in 2006. Chairman Quan
noted that USD 1.04 billion of that figure is the Intel
investment. The next largest single investment was a $249
million container facility at Hiep Phuoc port, a port project
under development to help alleviate congestion at Saigon Port.
Activity on the HCMC stock exchange surpassed expectations. The
number of listings more than doubled. According to Quan, there
were 30 companies listed on the exchange at the beginning of the
year; now there are 67. The VN Index reached 775.56 on December
15, up from 307.5 earlier this year.

4. (U) HCMC Party Secretary Le Thanh Hai outlined ambitious
targets for the city. He noted that HCMC had experienced 11.2
percent average annual growth between 1991 and 2005. In the
next five to fifteen years, HCMC should maintain an average
annual growth rate of at least 12 percent, Hai said. The target
for city for the year 2020 is a population of 10 million with
per capita GDP of USD 7,000. (Note: HCMC's per capita GDP is
currently approximately USD 1,800. End Note.)

CHALLENGES REMAIN

-----------------

5. (U) Government and business leaders agreed that challenges to
HCMC's economic growth include weak infrastructure, labor
pressures, and human resource deficiencies. All of the business
representatives present cited infrastructure improvements,
particularly in transportation and power, as the most important
requirement for continued growth and investment. City
authorities agreed and outlined plans to address infrastructure
weaknesses, particularly for the city's strained seaports.

6. (U) Business leaders, including the chairman of the American
Chamber of Commerce, noted that a constructive labor relations
system is needed to avoid labor unrest like that experienced a
year ago, when a wave of strikes resulted in the Government of
Vietnam (GVN) authorizing a 40 percent increase in the minimum
wage at foreign-invested enterprises (FIEs). (Refs A and B) The
deputy director of HCMC's Department of Labor, Invalids and
Social Affairs (DoLISA) responded to business concerns by
outlining the various responsibilities of employers, workers,
trade unions and government need to shoulder to ensure that
labor disputes are solved before they lead to strikes.

7. (U) Broader human resource shortages are also a concern of
both business and government. The head of the European Chamber
of Commerce called for an overhaul of Vietnam's education
system, with a particular focus on higher and professional
education. HCMC Party Secretary Hai listed human resource
development as one of the city's main challenges, noting that
the city needs to improve the quality of workers and managers
and needs to attract investment for educational institutions.

COMMENT

-------

HO CHI MIN 00001484 002.2 OF 002

8. (SBU) HCMC government leaders take this annual session
seriously; the city's top two officials, Secretary Hai and
Chairman Quan, were active participants in the entire four-hour
meeting. However, many of the issues outlined this December are
essentially the same problems outlined two years ago. (Ref C)
Deficiencies in areas like infrastructure and education are not
solved overnight, or even in two years. These challenges, plus
the ambitious goal of reaching per capita GDP in HCMC of USD
7,000 by 2020, mean HCMC leaders have their work cut out for
them.
CHERN

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