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Cablegate: Four Cg Tour of the Delta Highlights Economic Growth And

VZCZCXRO1930
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0050/01 0430637
ZNR UUUUU ZZH
P 120637Z FEB 10
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 6311
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 4193
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 6554

UNCLAS SECTION 01 OF 05 HO CHI MINH CITY 000050

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND DRL/IRF

E.O. 12958: N/A
TAGS: ECON ETRD KTIP KIRF PREL PGOV SOCI VM
SUBJECT: FOUR CG TOUR OF THE DELTA HIGHLIGHTS ECONOMIC GROWTH AND
DEVELOPMENT CHALLENGES

REF: HCMC 665

HO CHI MIN 00000050 001.2 OF 005


1. (SBU) SUMMARY: A joint trip undertaken by the Consuls General
of Australia, India, Kuwait and the USA to the Mekong Delta
provinces of Can Tho, Hau Giang and An Giang provided a host of
opportunities to share experiences, gain insights from
colleagues, forge new connections and reinforce key shared
messages on the need for continued reform in the economic sphere
and tolerance in the social and religious spheres. While the
trip focused on many opportunities for cooperation and
development in the Delta region, it also highlighted the many
challenges the provinces face, from a crippling lack of
transportation infrastructure to local Communist Party and
security officials who are clearly not comfortable with the
scope and pace of change underway. END SUMMARY.

CAN THO: THE FISH ARE JUMPING AND THE RIVER IS HIGH

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

2. (SBU) A call on the Mekong Delta Rice Research Institute in
Can Tho showcased history as well as agricultural science.
Founded in 1977 as a gift to Vietnam from India, the institute
began its life as an expression of support for the
anti-imperialist movement and focused on self-sufficiency and
import-substitution goals that were so important for many
non-aligned movement member states in the 1970's. Over the
years, however, the institute changed along with the situations
in both Vietnam and India. While a large percentage of staff
still owe their early academic training to GOI-sponsored
programs that continue to send 2 - 3 researchers to India per
year for advanced degrees, the USA is now number one source of
foreign support for the institute with both the Rockefeller
Foundation and the Gates Foundation supporting programs to
introduce more efficient and nutritious "golden rice" to SE
Asia. Thanks to a Gates Foundation Grant, the Mekong Delta Rice
Research Institute became the first in the world produce an
Indica (tropical) variety of the genetically modified "golden
rice" that combines DNA from rice and soybean plants. (Note:
The initial "golden rice" was produced using Japonica rice,
which is the base of most strains grown in temperate climates.
End Note.)

3 (SBU)Mission Vietnam has cooperated closely with the Mekong
Delta Rice Institute on programs and seminars to increase
understanding of GMOs in Vietnam. Institute Vice Director Duong
Van Chin was pleased to inform the CG that they have now
received permission for controlled open-field plantings of
golden rice as well as genetically modified soybeans with
increased pest protection. Until now, all plantings have been
done in tightly-controlled, double-isolated greenhouses
consisting of smaller greenhouses isolated inside of larger
ones. The Kuwaiti CG used the visit to deliver a sample of the
Basmati rice preferred by Kuwaiti consumers as he established
contacts to work on introducing the strain in Vietnam.

4. (SBU) A call on faculty of the DRAGON Climate Change Research
Institute at Can Tho University also showcased how a program
initiated by one country can attract broader support.
Established in 2008 as a product of the June US-Vietnam summit
in that year, DRAGON owes its existence to the USG -- the State
Department and the US Geological Survey. Now, however, the
Australian Consulate and AusAID have become very involved in the
project as Australia's commitment to working with ASEAN nations
on climate change has grown along with the large number of
Australian-trained environmental scientists at Can Tho
University. The Australian Consulate co-sponsored the Climate
Change Conference held there earlier this year (ref A) and
AusAID is finalizing plans that will channel roughly A$1.3
million to research projects being undertaken by Vietnamese
scientists at DRAGON.

5. (SBU) A visit to the Hiep Thanh rice and seafood group in Can
Tho was interesting on several fronts. While Hiep Thanh
continues to produce 60% of its own fish ("basa" pangasius), the
firm has expanded operations by developing a system of
independent growers. To maintain quality, however, all contract
growers are required to raise only Hiep Thanh-supplied stock
using Hiep Thanh-supplied feeds. Each contract grower is
required to keep meticulous, daily records of water quality,
feed dispensed, weather conditions, average fish size, any

HO CHI MIN 00000050 002.2 OF 005


problems noted and other factors in order to meet the strict WHO
and ISO standards to which Hiep Thanh adheres. While Hiep
Thanh's largest market remains the Scandinavian countries where
consumers are willing to pay premium prices for high-quality
fish, Hiep Thanh President Nguyen Van Than expressed concern
regarding the pending decision on catfish regulation in the USA
since it has the potential of impacting between 10 and 20
percent of his firm's sales.

6. (SBU) The most interesting revelation at Hiep Thanh concerned
the firm's rice business; a 2008 change in export controls on
rice has greatly reduced Hiep Thanh's ability to export
directly. As part of a package of measures ostensibly designed
to ensure food security and price stability, after the 2008 rice
price shock the GVN ruled that no private rice broker can sell
rice to any country with which the GVN has negotiated a
government-to-government rice deal. The change has hit Hiep
Thanh hard for two reasons. First, prior to the change Hiep
Thanh often sold additional rice to countries that used a
government-to-government agreement with the GVN in order to
ensure basic supplies. The Philippines, for example, have long
been Vietnam's largest rice buyer and have traditionally made
large government-to-government rice purchases that the GVN
routed though VinaFoods2, the giant southern rice SOE. In the
past, however, buyers in the Philippines were able to buy
additional rice directly from private dealers, a right they used
when market prices dipped below the government contract price.
Now, however, no one in Vietnam other than VinaFoods2 is allowed
to sell rice to anyone in the Philippines. Other large
government-to-government buyers, including the Governments of
Iraq and Iran, fall under the same SOE-monopolized regime.

7. (SBU) The second source of Hiep Thanh's difficulties arose in
2009, when VinaFoods2 and its northern counterpart VinaFoods1,
went on an extensive campaign of converting existing commercial
contracts with even minor buyers into official
government-to-government contracts, thus closing those markets
to all private Vietnamese rice dealers. As a result of this 1-2
punch, Hiep Thanh is now only able to sell 15% of its rice
output directly to overseas buyers (primarily in Africa). Hiep
Thanh must sell the remaining 85% to either VinaFoods1 or
VinaFoods2, which direct Hiep Thanh to ship it to their captive
foreign clients while the SOEs reap the majority of the profit.
Despite these restrictions, Hiep Thanh's rice processing
operations continue to grow. Because its operations are more
efficient than those of the big SOEs, Hiep Thanh can still eke
out a small profit serving essentially as a de facto
subcontractor to one of the two large SOEs.

HAU GIANG : MIXED PICTURE OF POVERTY AND GROWTH

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

8. (SBU) Hau Giang's People's Committee Chairman Huynh Minh
Chac, a retired Vietnamese Army General who saw combat duty in
Cambodia, was not bashful in describing the many problems his
impoverished province faces. When the "special city" of Can Tho
City and its environs were split off in 2004, Hau Giang became
the undeveloped, impoverished "leftover" province. Lacking in
roads, schools, water and electricity, Hau Giang is struggling
to develop. During a wide-ranging meeting with the four Consuls
General, PC Chair Chac reinforced CG's earlier impression as a
dedicated, no-nonsense administrator determined to get the job
done. While Hau Giang ranked 13th in the overall 2009
Provincial Competitive Index (a USAID-supported ranking of the
business environment in all 63 of Vietnam's provinces), it
ranked 3rd highest on the sub-indicator on "quality of local
administration." The province's overall ranking was pulled down
by its bottom-tier performance on "quality of workforce," a
reflection of the lack of education in the province. While
still very poor with per capita income roughly 25% below the
Vietnam average of about US$1,000 per year, the province is
growing rapidly and even recorded 12.6% GDP growth in 2009.
Chairman Chac presented each CG with a package that included
abstracts of investment proposals broken down into categories
for ODA-supported projects, commercial FDI projects and charity
projects, listing counterparts, projected budgets, target
populations and other data for each.

9. (SBU) A visit to one of Hau Giang's largest enterprises, the

HO CHI MIN 00000050 003.2 OF 005


Can Tho Sugar Company (CASUCO), served to underscore the
complexity of the province's development challenges. Founded in
1995 as the monopoly state-owned sugar company when Can Tho and
Hau Giang were still one province, the company still retains its
"Can Tho" name. Though the firm was equitized (legally
converted to a joint stock company) in 2005, the GVN continues
to hold the majority of the shares and the firm's deputy
director, with her heavy Hanoi accent and apparent lack of any
knowledge of the sugar industry, left the impression that she
was a political appointee. In response to a question from the
Australian CG about the source of sugar cane, for example, she
replied that CASUCO is the state sugar company of Hau Giang and
thus sources all of its sugar cane from Hau Giang farmers, who
must sell to the firm.

10. (SBU) After the formal meeting, however, the firm's business
manager explained that the system of monopsony buying had ended
several years ago and that today the firm sources sugar cane
from numerous provinces. Rather than being required to sell
only to CASUCO, Hau Giang's sugar growers (as well as those in
other provinces) have the option of selling to any buyer. He
added that CASUCO, like most other Vietnamese sugar companies,
still buys directly from a number of local farmers but now
sources a majority of its sugar cane from brokers who travel to
thousands of individual small farms (generally 2 to 4 acres)
spread across the Mekong Delta and Central Coast regions in
order to assemble large lots of cane for sale to refiners. In
this way, the determination of market prices for sugar cane has
largely moved from a few provincial refiners to the much more
numerous brokers who compete with one another to buy farmers'
crops. Rather than being required to grow sugar cane, farmers
now have a choice and most of the 2,000+ small sugar growers in
Hau Giang grow rice and sugar cane in a crop rotation scheme.
The stark contrast between the "old line" official response in
the meeting and the market realities described by plant
operators provided an interesting metaphor for the process of
economic reform still underway across the Delta region.

AN GIANG: PROMOTING EDUCATION, FIGHTING TIP

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

11. (SBU) One of Vietnam's poorest provinces just a few years
ago, An Giang's per capita GDP is now slightly above Vietnam's
national average. The reasons are fairly obvious. Every CG with
dealings in An Giang reported that the provincial government has
been one of the least bureaucratic and most supportive in the
Mekong Delta. The province has also made education its number
one priority, as evinced by the impressive new campus of An
Giang University the group of four CGs visited. Nearly half of
the university's 7,000 students are in the faculty of education,
thanks in part to an aggressive provincial campaign to recruit
and train teachers from every village and hamlet in the
province. Some of the bright, second-year students came from
villages that could only be reached by canoe while even more had
never seen a city before they arrived in An Giang's capital,
Long Xuyen with a population of 275,000. Star students are
recruited and provided with free tuition plus a stipend for
agreeing to return to his/her home village to teach for at least
five years following graduation. The four CGs spoke with one
group of students in the English class, where they were studying
"educational English," a combination of English language
training and studies on teaching methodology and curriculum
design.

12. (SBU) During a visit to the IOM assessment center for
returned victims of trafficking, the four CGs heard both of the
successes and challenges of combating trafficking in persons in
Vietnam. The good news is that the assessment center in An
Giang is working well, as is the NGO-supported "open house" that
provides longer-term care, training and support to victims.
Educational programs targeting high school students also appear
to be having an impact by increasing awareness and reducing the
number of victims from the province. The less cheery picture is
that these advancements are largely limited to a few provinces
like An Giang, where the provincial government actively supports
anti-TIP training, assists returned victims and helps with their
reintegration into the community. An Giang's leadership is
having a magnet effect--IOM reported that a recent decision by
the GVN to allow trafficking victims from other provinces to use
the assessment center in An Giang. The center's director as
well as a local Department of Labor, Invalids and Social Affairs

HO CHI MIN 00000050 004.2 OF 005


(DoLISA) representative added that over the past several months,
the central government in Hanoi has arranged for officials from
several other provinces to visit An Giang to see how the
province is making progress. The Kuwaiti Consul General (who is
fairly new to Vietnam but who previously oversaw Kuwait's
contributions to IOM in Geneva) astutely asked why the GVN is
not more active in tackling broader forms of trafficking,
including internal and labor trafficking. The IOM
representative explained that IOM and others are beginning to
convince the GVN to address these issues, adding that the
fundamental problem is that Vietnam still lacks comprehensive
TIP legislation that meets international standards. He
expressed hope that draft legislation will make it to the
National Assembly in 2010.

MUSLIMS IN THE DELTA

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

13. (SBU) As An Giang boasts Vietnam's largest Muslim population
-- roughly 14,000 members -- making a call on a mosque to visit
with a Muslim community was a natural choice. The group visited
the Ehsan mosque, which is moderately sized and serves about 200
families with a total of 1,200 members. Originally built in the
1930's, it was remodeled in 1997-8 with funds donated by Cham
Muslims who had emigrated to the USA and Australia. Of the four
CGs, only the Indian CG had visited the mosque before and he was
warmly welcomed back. In response to a question from the
Kuwaiti CG regarding the group's origins, the Muslim
representative of the provincial religious council started to
relate the general story of the Cham Kingdom that once ruled
Central Vietnam until the mosque's elders began to contradict
him. According to the Imam and his assistant, nearly all An
Giang's Muslims are ethnic Cham who immigrated from Cambodia
roughly 300 years ago as manual laborers hired to work on the
extensive canal system that eventually transformed the Mekong
Delta into Vietnam's rice bowl. As such, they are only
indirectly (and rather distantly) connected to the Cham
communities on Vietnam's Central Coast who can trace their roots
in Vietnam to the Cham Kingdom which ruled the central part of
Vietnam from roughly AD 400 to AD 1400. As with the province's
other poor minorities, the GVN provides the Cham Muslims
multiple special allowances, including free schooling and
community support. Nonetheless, the community remains very
insular and poor, with most members earning their living as
small scale farmers. Mosque elders explained that only six
people in the community actually spoke Arabic, although a few of
the elders stated that they could read it but could not speak
it. The six Arabic speakers were all fairly young and had
received training overseas courtesy of foreign governments,
including Malaysia, Indonesia, the United Arab Emirates and
Saudi Arabia. The Kuwaiti CG expressed a strong interest in
finding a way to provide training in Kuwait and to provide some
other form of support for the mosque.

14. (SBU) Despite all of the positive developments in An Giang,
the province remains in flux and thus full of contradictions.
An Giang was the province that sparked an incident in 2007 when
local MPS forcibly ejected a Consulate team from their hotel
room late a night. At the same time the People's Committee has
been courting international NGOs, we have also heard from some
NGOs that the provincial Communist Party has been attempting to
reign them in and may have even "denounced" some U.S. NGOs.

HEADING HOME ON THE HIGHWAY TO THE FUTURE

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

15. (SBU) Every Provincial Chairperson the group of CGs met
expressed their plans and desires for more modern and
efficienttransportation links, including airports, super
highways, bridges and high-speed trains. The situation is
indeed grim and the lack of transportation infrastructure
certainly represents one of the key barriers to development.
While Can Tho, for example, is located only a little over one
hundred miles from HCMC, the trip down took well over four
hours. Reaching Hau Giang, which is just 30 miles to the west,
takes and additional 90 minutes. The 150 mile trip from HCMC to
the charming An Giang tourist and trading center of Chau Doc
requires six to seven hours and three ferry crossings, two of
which cannot accommodate trucks. The poor state of
transportation impacts every aspect of the economy. Farmers'

HO CHI MIN 00000050 005.2 OF 005


incomes are negatively impacted by lack of quick access to the
giant HCMC market for fresh fruits and vegetables. (In HCMC,
most consumers still insist on buying only "picked today"
produce and either live or freshly slaughtered fish and meats.)
Industrial development is stymied on two fronts. First, almost
no foreign investors are willing to make the arduous trek south
and instead opt for close-in locations even though congestion
and labor shortages are growing problems. Second, even the few
investors who do travel south often decide that the relative
advantages of available land and abundant local (rather than
migrant) labor are not enough to outweigh the added logistical
burden of a Mekong Delta location. But, their world is about to
change.

16. (SBU) While the CGs were traveling, the new 62-kilometer
long HCMC-Trung Luong freeway opened. This Western-style
highway (four lanes, limited access, no pedestrians, motorbikes
or pushcarts), is part of a planned highway linking HCMC and Can
Tho. The opening of just this first section of the eventual
highway cut one hour off the return trip to HCMC. At the end of
March, the new Can Tho bridge will open to traffic, cutting an
additional 30 minutes off the trip. Construction is underway on
other segments of the highway, with a planned completion date of
2013, at which time the HCMC-Can Tho trip should take about an
hour and 40 minutes. Additional road projects are under
development to link Hau Giang into the highway. A separate
western Mekong Delta highway will link the provinces of An
Giang, Kien Giang and Dong Thap with the HCMC hub. The Can Tho
airport, which currently runs flights only to Hanoi and Phu
Quoc, is slated to become an international airport before the
end o the year. Once these new links are open, the Mekong Delta
provinces will face profound change and greatly expanded
opportunities. Provinces that are forward looking enough to
prepare through education, local administrative reforms, the
development of local infrastructure, etc., will be poised for
explosive growth.
FAIRFAX

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