VZCZCXRO6134
RR RUEHDT RUEHPB
DE RUEHHM #0688/01 3620701
ZNR UUUUU ZZH
R 280701Z DEC 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 6193
INFO RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHI/AMEMBASSY HANOI 4084
RUEHHM/AMCONSUL HO CHI MINH CITY 6436

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000688 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, INR/EAP 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV SOCI VM
SUBJECT: A TALE OF THREE CENTRAL COAST PROVINCES: THE GOOD, THE WEIRD 
AND THE LUCKY 
 
REF: HCMC 535 -- Paths to Provincial Leadership 
 
HO CHI MIN 00000688  001.2 OF 003 
 
 
¶1. (SBU) Summary:  The three south-central coastal provinces of 
Khanh Hoa, Phu Yen and Binh Dinh may occupy the same long 
stretch of coast, but strong local leadership commitment to 
economic reform enables Binh Dinh to thrive while Khanh Hoa 
meanders and Phu Yen stumbles.  The annual Vietnam Provincial 
Competitiveness Index, a nationwide survey of businesses in 
Vietnam, reflects this clearly with Binh Dinh in the top tier 
(#11) while Khanh Hoa (#36) and Phu Yen (#39) rate average.  New 
roads and industrial parks are paving the way for expanding 
industrial activity and a glittery new resort complex in Binh 
Dinh, augmenting its furniture manufacturing base and Vietnam's 
third busiest port.  On paper, Phu Yen boasts the largest 
investment projects of them all, yet none have materialized nor 
are there convincing signs that they will.  Khanh Hoa province 
has begun several huge industrial and tourism projects, 
sometimes side-by-side as in massive Van Phong Bay with its 
large ship building factory, but the economic downturn has made 
the future of these projects uncertain.  Projects in the three 
provinces have sharp contrasts in terms of strategic approach, 
management and economic viability - which ultimately will have a 
big impact on their success.  End Summary. 
 
 
 
With Good Potential: Binh Dinh 
 
------------------------------ 
 
¶2. (SBU) Quy Nhon City sits where Highway 19, the Central 
Highlands' main access to the sea (courtesy of the U.S. Army 
Corps of Engineers in the 1960s), meets National Highway 1 on 
its way from HCMC to Hanoi.  Agricultural products like 
sugarcane and tapioca flow out from the Central Highlands while 
cement, steel and other building materials flow in.  Most of 
these goods pass through Quy Nhon, making it the third busiest 
port by volume with 3.5 million DWT shipped in 2008, behind HCMC 
and Hai Phong, but ahead of Danang or Nha Trang.  Economic 
diversity has helped Quy Nhon Port weather the global economic 
downturn, and has kept shipping rates low and the port growing 
strong: 50 percent of its activity is export of agriculture, 
forestry and mineral products, 30 percent is imports of 
fertilizer, construction materials and machinery, and 20 percent 
of throughput is domestic.  The port's biggest challenge is 
raising capital, because national infrastructure development 
plans favor developing new facilities elsewhere on the coast 
rather than expanding existing facilities in response to demand. 
 
 
 
 
¶3. (SBU) According to the Binh Dinh Provincial People's 
Committee (PPC), growth of local industry has reversed the flow 
of migrant labor back to Quy Nhon in recent years.  Leaders 
boast that administrative reform is the PPC priority, citing the 
province's #11 ranking and good marks for transparency, lack of 
bias toward state-owned enterprises, and good infrastructure. 
Businesses ranging from local furniture manufacture My Tai to 
agriculture titan Cargill confirmed what the PPC said, "Binh 
Dinh is a great place to do business because local leaders 
actively encourage investment."  Provincial leaders have also 
looked beyond industry toward promoting tourism development, as 
evidenced by the $500 million Vinh Hoi resort development 
project located on a stunning bay north of Quy Nhon City.  Mr. 
Tran Duc Canh, the Vietnamese-American managing the development, 
told EconOff that the Ritz Carlton, the Marriott, and the 
Outrigger are already on board with their five-star hotels, with 
the first set to be operational in 2013.  Mr. Canh echoed other 
businesses sentiments about provincial cooperation, noting that 
Quy Nhon authorities recognize the economic potential and 
employment opportunities (around 4,000 just for the hotels) the 
resort area will bring and have been "easy to work with." 
 
 
 
The Weird: Phu Yen 
 
------------------ 
 
¶5. (SBU) There is no shortage of big dreams in Phu Yen province; 
PPC Chief of Cabinet Ho Van Tien listed dozens of promised 
investments climbing into the billions, but couldn't articulate 
steps taken to turn these plans into reality.  Instead he 
steered conversation to the advantages of Phu Yen's special 
breed of 'yellow cow' noting there are 300,000 domesticated 
animals in the province.  In a similar disconnect, provincial 
advocates pointed to a scenic 186-mile detour through the 
Central Highlands on the way to Tuy Hoa as an infrastructural 
 
HO CHI MIN 00000688  002.2 OF 003 
 
 
"advantage" for visitors over its southern neighbor which is 
merely a straight shoot up the national highway from HCMC. 
Because Phu Yen's coast is not protected by mountainous bays, 
the fresh flow of water keeps it "cleaner," advocates explained, 
and has thus been keenly sought out by investors despite being 
one of the more storm-prone areas in Vietnam.  The disconnect 
between plans and results is also reflected in Phu Yen #39 PCI 
ranking in 2008, with "informal charges", "proactivity" and 
unsurprisingly, "transparency" indicators scraping the bottom of 
the barrel. 
 
 
 
¶6. (SBU) Even our private sector contacts reflected this 
schizophrenia.  Smack in the middle of the provincial capital 
Tuy Hoa City is the Cendeluxe "five star hotel and Eco Tourism 
Complex," owned and operated by the Thuan Thao Corporation. The 
company had humble beginnings in 1975, when its chairman, Madame 
Thao, started a small consumer-goods distribution business. 
Gradually she expanded into transportation and now the company 
is stretched in a dozen business areas and has become the 
richest company in the province.  Thuan Thao's Deputy Director 
Mr. Cu noted that the company has very close relations with the 
provincial government.  Just how close this "close relationship" 
is was demonstrated last year after media reported that Thuan 
Thao was illegally digging up trees on city streets and 
replanting them inside their hotel and eco-complex; Thuan Thao 
was never penalized for stealing the trees.  The newly forested 
Cendeluxe Hotel seems out of place at best in a poor city like 
Tuy Hoa and it is not immediately obvious who the hotel might 
attract as guests.  Mr. Cu noted that the hotel, which is 
branding itself as a conference hub, has already staged a number 
of national competitions such as a beauty contest and a national 
music festival and is actively marketing to European tourists, 
despite being more than 2.5 miles from the beach. 
 
 
 
¶7. (SBU) Mr. Cu acknowledged that many large potential 
investment projects in Phu Yen province, even after receiving an 
investment license, never make it off paper.  There are 
currently only three foreign-invested companies in Phu Yen and 
he did not know whether U.S.-based Galileo Company's 
multi-million "Creative City" project "to create a Hollywood, 
Harvard and Disneyland all in one" would come through, but he 
did verify that the company is renting office space in Tuy Hoa. 
Mr. Cu also talked about a group of Dubai investors who had come 
to Phu Yen keen to invest $533 billion dollars, almost 8 times 
the total GDP of Vietnam.  Because the deal involves such 
massive sums of money, Cu said it is being handled by Deputy 
Prime Minister Nguyen Sinh Hung and the media is prohibited from 
reporting on the deal.  Despite all the province's purported 
advantages and signed licenses promising tens of billions in 
investment, the empty, locally-financed Cendelux complex stands 
alone in Phu Yen province. 
 
 
 
Blessed by Luck: Khanh Hoa 
 
-------------------------- 
 
¶8. (SBU) In contrast, parts of Khanh Hoa really do reflect 
development Phu Yen can only fantasize about.  Ms. Truc of the 
Khanh Hoa provincial tourism authority said that Nha Trang has 
been "blessed by luck" and remains a draw for both domestic and 
international tourists, with the total number this year expected 
at 1.5 million.  Although foreign tourism took a slight dip in 
2009, Ms. Truc attributes that less to the economic slowdown 
than to concerns about H1N1 outbreak, particularly among 
overseas Vietnamese; she expects foreign tourism to rebound in 
¶2010. 
 
 
 
¶9. (SBU) Khanh Hoa is also blessed by central planning.  The 
province boasts a huge 150,000 hectare project underway in Van 
Phong Bay, about 30 miles north of Nha Trang City that will be 
dedicated to a variety of industrial, residential, and tourism 
projects.  Mr. Hoang Dinh Phi of the economic-zone authority 
said all areas have been registered by investors and the zone is 
big enough to accommodate industrial and tourism projects at 
once.  There will be an oil refinery, a bonded fuel depot with 
one million ton capacity and two shipyards, one of which -- a 
Korean-Vietnamese joint-venture -- has recently begun 
constructing ships after many years of ship repair (note: 
another shipbuilding venture has been indefinitely postponed 
based on financing.)  Mr. Phi said that one of the industrial 
 
HO CHI MIN 00000688  003.2 OF 003 
 
 
parks around the bay will be geared toward hi-tech industries 
and an American solar panel company is among the foreign 
investors there.  Vietnam's national port development plan also 
envisions an international transshipping terminal in Van Phong 
bay that will one day take a place alongside regional shipping 
powers like Singapore and Hong Kong.  Besides good road, rail, 
and seaport networks, Mr. Phi noted, Nha Trang's principal 
airport would go international on December 11, hosting the first 
international flights from Singapore and the Ukraine. 
 
 
 
¶10.  (SBU) Khanh Hoa's leadership has steered the middle course 
of economic reform to 36th place in the 2008 PCI.  The province 
retains an appreciation for big, centrally-planned projects, 
resulting in a disappointing "SOE-bias" and "land access and 
tenure" scores, but ranks with Binh Dinh near the top of the 
infrastructure rating. 
 
 
 
Comment 
 
------- 
 
¶11. (SBU) Adjacent provinces that share virtually identical 
climate, geography and even similar infrastructure can produce 
radically different investment environments.  Our observations, 
backed up by those of thousands of businesses contributing to 
the Vietnam Provincial Competitiveness Index, indicate that 
commercial realities can be a reflection of provincial 
leadership and their economic policies.  Khanh Hoa, which has 
storm-shielded bays and a well-established reputation, is making 
progress toward its development goals one big project at a time. 
 Meanwhile, there appeared to be a sharp contrast in the 
relationship between officials and business in Phu Yen and Binh 
Dinh based on meetings there, with the former providing a more 
intricately woven paternal role for business, and the latter a 
looser one.  The highest party and government officials are 
native to each province though only Phu Yen's People's Committee 
Chairman boasts wartime credentials (reftel).  Local leadership 
and the resulting investment climate, not central government 
plans and assistance, are defining the path of development in 
these south central coastal provinces. 
 
 
 
¶12. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX