VZCZCXRO2228
RR RUEHHM
DE RUEHHI #0697/01 0860806
ZNR UUUUU ZZH
R 270806Z MAR 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 1239
INFO RUEHHM/AMCONSUL HO CHI MINH CITY 0783
RUEHVN/AMEMBASSY VIENTIANE 3775

UNCLAS SECTION 01 OF 07 HANOI 000697 
 
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STATE FOR EAP/MLS 
 
E.O. 12958: N/A 
TAGS: PREL PHUM KIRF ETRD EINV ECON VM
SUBJECT: AMBASSADOR DISCUSSES DEVELOPMENT IN HOA BINH AND 
SON LA PROVINCES: STARK CONTRASTS IN THE NORTHWEST 
 
 
¶1. (SBU) Summary:  On a recent visit to Hoa Binh and Son La 
provinces west of Hanoi, the Ambassador discussed economic 
and issues development local leaders.  The Hoa Binh 
officials were notably progressive in their approach to 
development, which bodes well for their province.  However, 
Son La's officials, despite facing some of the highest 
poverty in the country in a region that is more remote, 
reflected an old-school socialist approach to rural 
development that relies heavily on a major hydro-electric 
dam project to boost provincial growth.  Both regions need 
foreign investment and tourist dollars to continue to 
develop, but Hoa Binh's more market-oriented approach and 
its geographic advantages will likely mean that it will be 
more successful in this regard in the long term.  One 
glimmer of hope for Son La may be in small-scale 
agricultural enterprises that are currently growing rapidly. 
End Summary. 
 
¶2. (SBU) The Ambassador traveled March 13-15 to Hoa Binh and 
Son La provinces.  In Hoa Binh Town, he visited the local 
parish church and met with the new chairman of the 
Provincial People's Committee (PPC).  In Son La town, the 
Ambassador met with the Son La PPC chairman, as well as the 
the principal of Son La Ethnic Boarding School and the Son 
La Joint Counternarcotics Task Force Unit commander.  He 
also visited the Son La hydropower dam site one hour north 
of town and visited the Moc Chau Tea Company in Moc Chau 
District on the eastern edge of Son La Province.  Topics 
discussed in the two provinces during this trip included 
provincial economic development, ethnic minority issues 
(septel), religious freedom (septel) and provincial efforts 
to halt the cross-border drug trade (septel). 
 
HOA BINH 
-------- 
 
¶3. (SBU) On March 13, the Ambassador met with newly promoted 
Hoa Binh PPC Chairman Bui Van Tinh in an open session with 
several provincial reporters and continued the conversation 
over lunch.  Tinh was Provincial Vice Chairman from 2004 
until the February 2006 Provincial Party Congress, during 
which he was elevated to the chairmanship.  (Note: Tinh was 
strikingly professional in his approach to the Ambassador's 
visit, instructing his staff to facilitate the visit 
schedule in a timely and constructive manner.  Unlike many 
other provincial chairmen, Tinh exhibited little overt 
suspicion over the visit and, unusually, no Ministry of 
Public Security (MPS) personnel participated in any of the 
meetings.  End Note.)  Tinh began by presenting the 
Ambassador with a written summary of economic and social 
development in Hoa Binh in 2005 that also enumerated the 
PPC's development targets for 2006.  He briefly noted that 
this northwestern province of 800,000 people has seven main 
ethnic groups, the largest of which (sixty-three percent of 
the population) are the Muong.  The per capita income in the 
province in 2005 was 1.8 times the rate in 2000.  Under the 
2000 guidelines, only 7.8 percent of the population falls 
under the poverty line, as compared with 27.4 percent in 
¶2000.  However, under the new poverty guidelines (annual 
income of USD 150 in rural areas), 31.1 percent are below 
the line.  All of the villages in the province have been 
electrified and phone service covers the entire province. 
Over 95 percent of the inhabitants have access to radio and 
75 percent receive television broadcasts, Tinh said. 
 
¶4. (SBU) Tinh explained that the PPC has set a goal of 
achieving an average of 11-12 percent GDP growth over the 
next five years.  The PPC also hopes to reduce the 
percentage of people living under the poverty line to 27 
percent (under the new guidelines) by 2010.  He encouraged 
the Ambassador to promote Hoa Binh as a prime destination 
for foreign direct investment by U.S. businesses as it 
adjoins Hanoi municipal province and is in the process of 
establishing five new industrial zones to attract 
investment.  The province hopes that rapid WTO accession 
will also increase its attractiveness for foreign investors. 
Hoa Binh has been faster than other provinces in equitizing 
SOEs, and is now down to equitizing the remaining two of the 
original ten SOEs.   There are now more than 400 businesses 
based in the province.  In addition, Hoa Binh has built a 
new 54-hole golf course to attract tourism and will complete 
another 36-hole course in time for the APEC leaders' summit 
in November.  The Ambassador replied that golf courses may 
catch visitors' attention, but with the hundreds of 
thousands of new tourists to Vietnam, the province will also 
need hotels and resorts to attract them.  Tinh said that the 
province has allocated land for building a 200-room, four or 
five-star villa resort, including an attached ethnic 
 
HANOI 00000697  002 OF 007 
 
 
minority cultural village. 
 
¶5. (SBU) Turning to health issues, Tinh noted that Hoa Binh 
is one of the 47 Vietnamese provinces considered to be at 
high risk of Avian Influenza (AI) outbreaks.  However, 
provincial officials have not yet detected any human cases 
of the H5N1 virus, a success he attributed to the province's 
efforts to cull infected fowl.  Tinh estimated that the 
total economic damage from AI in the province at six billion 
VND (USD 375,000) in 2005.  The province has also imported a 
significant amount of equipment to help detect the virus. 
Tinh also briefly reiterated official GVN talking points on 
Agent Orange (AO), asking the Ambassador to encourage the 
United States to assist with the treatment of "AO victims". 
 
¶6. (SBU) The Ambassador noted that this was the 34th 
province that he has visited since arriving in Vietnam, and 
outlined his five main focuses.  The Ambassador's main 
mission is to increase mutual understanding between the 
United States and Vietnam, which requires that he educate 
himself by talking to local leaders and the press across 
Vietnam.  The four other objectives are of equal priority: 
supporting Vietnam's economic liberalization and entry into 
the world marketplace; creating conditions to help U.S. 
businesses to trade with and invest in Vietnam; assisting 
Vietnam in its efforts to fight the spread of diseases and 
to improve healthcare; and furthering our bilateral dialogue 
on human rights and religious freedom in Vietnam (septel). 
 
¶7. (SBU) Observing that the 1995 Bilateral Trade Agreement 
(BTA) has created a new framework for growth in Vietnam, the 
Ambassador noted that the Vietnamese have benefited more 
from the BTA than the United States.  Hundreds of thousands 
of Vietnamese fishermen and farmers enjoy a better standard 
of living because of the increase in shrimp, catfish, rice, 
pepper, coffee and other products' exports to the United 
States.  Other Vietnamese workers, particularly in the 
textile and shoe industries, have also benefited from access 
to the U.S. market.  We are now in the second phase of 
broadening bilateral trade relations through ongoing 
negotiations over WTO accession.  These negotiations are in 
the final stages after several years, but this is a process 
that will pay dividends for decades to come as the National 
Assembly has recrafted the legal framework for economic 
activity in Vietnam as part of the negotiations. 
 
¶8. (SBU) Looking at investment, the Ambassador emphasized 
that without the BTA and WTO accession Vietnam would not be 
attractive to U.S. investors.  However, the Prime Minister 
has said he wants to see the United States become the 
largest total investor in Vietnam (from sixth in 2005) and 
"the stage is set" because the United States was the single 
largest investor for the year 2004.  The Ambassador noted 
that he recently attended the groundbreaking ceremony for 
Intel's new chip plant in Ho Chi Minh City's industrial 
science park.  This program will mean 1,200 new jobs and 
will open the door for Vietnam to enter the IT industry. 
Many other U.S. firms are looking to invest in Vietnam soon. 
However, "success follows success" and a few more successful 
investments like Intel's will help attract much more money 
later.  The Ambassador also noted that another essential 
element for attracting investment is improvements in 
infrastructure.  Although Hoa Binh is technically quite 
close to Hanoi, it took several hours to drive from the 
capital to the center of the province over poor roads.  Hoa 
Binh needs better access to Hanoi's airport and the coastal 
ports to make business investment worthwhile.  Tinh replied 
that the Ministry of Transportation is preparing to extend 
and widen the Ha Nam highway to the coast all the way up to 
Hoa Binh Town and also plans to upgrade the road to Hanoi to 
a four-lane highway.  The dates for completing these 
improvements have not yet been set. 
 
¶9. (SBU) The Ambassador recommended that Hoa Binh study its 
economic competitiveness in relation to other provinces. 
USAID published a 2005 study of provincial competitiveness 
that compared forty-two provinces in nine different areas 
that affect their ability to attract business.  Although Hoa 
Binh was not part of the original study, the Ambassador 
promised to send Tinh a copy of the report in Vietnamese so 
the Hoa Binh provincial leaders can consider ways to compare 
their performance with other provinces.  He also noted that 
education is a major factor in making a workforce attractive 
to investors. 
 
¶10. (SBU) Speaking about public health, the Ambassador 
highlighted that President Bush named Vietnam a focus 
country under the President's Emergency Program For AIDS 
 
HANOI 00000697  003 OF 007 
 
 
Relief.  The United States will give $34 million to our 
partners in the Ministry of Health (MOH) under this 
initiative in 2006.  AI is another focus for U.S. assistance 
to Vietnam in partnership with MOH and the Ministry of 
Agriculture and Rural Development (MARD).  The Ambassador 
also responded to Chairman Tinh's reference to AO, noting 
that this remains an important bilateral issue that requires 
more discussion between the GVN and the United States.  More 
work must be done to clarify the issue and find effective 
ways of dealing with it.  While there are many disabled 
people across Vietnam, it is simply not true that all 
disabled Vietnamese are victims of AO.  We need more joint 
scientific research into the long-term effects of dioxin. 
At any rate, over the last 15 years the United States has 
provided $35 million for the disabled in Vietnam and even 
more money has come from other U.S. sources.  This funding 
stream still exists, though it is meant to address systemic 
issues and not to assist individual cases.  The Ambassador 
also highlighted U.S. efforts to educate Ministry of Defense 
(MOD) representatives about dioxin clean-up procedures in 
the United States. 
 
¶11. (SBU) Chairman Tinh asked if the Ambassador would help 
Hoa Binh Province find overseas development aid (ODA) to 
build a modern, 400-bed hospital to help with provincial 
efforts to prevent the spread of HIV/AIDS and AI.  U.S. 
HIV/AIDS and AI funding have helped Hoa Binh control the 
spread of these diseases.  The Ambassador replied that the 
United States gives almost all of its ODA in the form of 
grants as opposed to other nations like Japan, which give 
ODA in the form of loans.  U.S. ODA in Vietnam is focused 
almost entirely on projects that build GVN capacity, not 
individual projects such as the proposed hospital.  That 
said, the United States contributes up to one-third of the 
funding for the World Bank and IMF, which do assist with 
individual projects.  The Ambassador also noted that many 
U.S. NGOs do excellent work supporting projects in education 
and health in Vietnam, and Hoa Binh might do well to 
consider seeking funds from these sources.  A third 
alternative source might also be overseas Vietnamese who are 
coming back to Vietnam as the GVN reaches out to them for 
help.  Tinh noted that there already are eleven U.S. NGOs 
operating in the province. 
 
¶12. (SBU) In conclusion, the Ambassador thanked the Chairman 
for Hoa Binh's assistance to the Joint Personnel Accounting 
Command's (JPAC) continuing search in the region for U.S. 
missing in action.  Hoa Binh's efforts have helped many 
families move on with their lives.  We know that many 
thousands of Vietnamese families are also looking for their 
loved ones.  The United States will continue to help Vietnam 
to account for its missing, he said. 
 
SON LA 
------ 
 
¶13. (SBU) In stark contrast to the Hoa Binh PPC chairman's 
professional and relaxed approach, Son La PC Chairman Hoang 
Chi Thuc insisted on a more formal briefing for the 
Ambassador during a welcoming session with extensive 
representation of all of the provincial staff on March 14. 
Although the Ambassador briefly reiterated the same basic 
points he made with the Hoa Binh chairman, Thuc's style of 
presentation did not allow for any real discussion.  Most of 
the meeting, he read word-for-word for our translator from a 
laboriously detailed script that was evidently drawn from 
Son La's official development report to the Central 
Committee.  Thuc's approach reflected his very tight control 
over the visit agenda.  All changes, decisions and requests 
were referred directly to him throughout the visit despite 
the large staff tasked with facilitating the Ambassador's 
schedule.  The Ambassador was able to engage Thuc in a 
dialogue the following evening at a farewell dinner hosted 
by the chairman (see para 20).  (Note: Non-development 
related issues reported septel.  End Note.) 
 
¶14. (SBU) Thuc noted that the eleven districts of this 
14,000 square kilometer, mountainous province bordering Laos 
hold a population of 990,000.  As the GVN has restructured 
the economy to a market-oriented production model, economic 
growth has accelerated.  The average GDP growth rate between 
2001 and 2005 was 11.6 percent.  In 2005 alone, however, it 
was 15.5 percent, which was 1.7 times the rate in 2001.  The 
average per capita income is 4.2 million VND (USD 265) per 
month.  The province has shifted economic focus from 
agriculture and forestry to industrial production and 
services.  In 2000, 60.9 percent of the economy was based on 
agricultural and forestry, but in 2005 industry comprised 21 
 
HANOI 00000697  004 OF 007 
 
 
percent and services nearly 35 percent of economic activity. 
Agriculture remains focused on tea, coffee and sugarcane 
production.  All the Province's communes now are connected 
to the road network, and nine out of ten villages have 
television and mobile phone connectivity.  There has been 
less investment in water supply and electricity 
infrastructure.  The 2005 poverty level was 46 percent under 
the new poverty guidelines (11 percent under the old 
guidelines). 
 
¶15. (SBU) Turning to health care and other social issues, 
Thuc noted that Son La is focusing on building its capacity 
in primary care.  The province has prevented outbreaks of 
epidemics and the rate of malaria infection decreased to 
only 1.7 percent of total population in 2005.  Son La has 
also been able to control the spread of AI and SARS, and has 
provided extensive family planning services to the 
population.  Culturally, there are more than 1,600 artistic 
groups supported by the PPC and 85 percent of the public has 
access to television programming.  In addition, the province 
has focused on building institutional facilities for sports 
and physical training.  Thuc also asserted that Son La is 
focused on protecting the environment despite its rapid 
economic growth.  The province has an extensive 
reforestation campaign underway. 
 
¶16. (SBU) Thuc acknowledged that Son La is "still facing 
difficulties" and explained that main goals for the PPC 
during the next five years are:  1) to ensure the 
sustainability of growth; 2) to improve provincial 
competitiveness; and, 3) to resolve "pressing social 
issues."  To achieve these goals, the province hopes to use 
the Son La hydropower dam project as the focus of economic 
growth, and to continue to encourage industrialization over 
agriculture and forestry to stabilize economic conditions. 
The province also hopes to increase foreign investment.  Son 
La plans to reduce the number of people living below the 
poverty line to 25 percent by 2010. 
 
Son La Dam 
---------- 
 
¶17. (SBU) Immediately following Thuc's presentation, the 
Ambassador was given a tour of the Son La Dam project.  The 
Da River dam is currently under construction.  Primary work 
at this stage is the construction of infrastructure to 
support the work site and caissons in the river to allow 
work on the main structure to begin.  A spillway has already 
been completed.  Deputy Project Director Nguyen Hong Ha 
explained that this is the largest hydro-electric project in 
Vietnam.  SOE Electricity of Vietnam (EVN) is the primary 
investor, but funding has come from five different sources: 
EVN's own capital funds, domestic commercial bank funds, 
allocations of the State budget, funding assistance from the 
principal equipment suppliers for the project and from 
Government bonds.  Ha could not provide a percentage 
breakdown of the funding streams, but noted that the State 
budget funding goes primarily to the massive effort to 
resettle ethnic minority communities displaced by the dam's 
reservoir (septel).  To date, 100 million dollars have 
already been spent on the USD 2.4 billion project. 
 
¶18. (U) Ha explained that the Son La Dam project has two 
main goals:  1) to provide electricity to the national power 
grid and 2) to "improve and harmonize" the flow of water in 
the Da River.  (Note: The Da river is notorious for its 
monsoon season floods. End Note.)  The dam will produce 
2,400MW of power, which will be 1.2 times the production of 
the Hoa Binh hydro-electric plant (the other dam facility on 
the Da River).  Annual capacity at full operation will be 
10.2 billion KWH and the reservoir will hold 9.26 billion 
cubic meters of water.  The reservoir will also be able to 
hold a flood reserve of four billion cubic meters.  Initial 
survey work for the project was finished in December 2005 
and the initial work to "close water" in the river has been 
completed.  According to project plans, the first generator 
of the plant will be in operation by 2010.  In all, six 
generators should be in operation when the project is 
completed in 2012.  Ha noted that the project is currently 
on schedule to meet these targets. 
 
¶19. (U) While Vietnamese contractors will take the lead in 
constructing the dam and power plant and managing the 
project, the project management board is looking for joint 
partnerships with outside engineering firms.  Song Da 
Construction (SDC) has already utilized a number of outside 
consultancies, including one U.S. firm, to help with the 
design of the dam and to ensure earthquake safety.  EVN is 
 
HANOI 00000697  005 OF 007 
 
 
also preparing a request for bids to tender assistance in 
supervising construction.  Most heavy construction equipment 
will be provided by outside suppliers - U.S. (Caterpillar) 
and Japanese/South Korean excavators, French and Chinese 
cranes, mixers and grinders from G-7 countries and U.S. 
bulldozers.  SDC, a 70 percent equitized SOE which has been 
converted to a hydro-electric construction holding company, 
has 27,000 employees, but only 6,100 are currently employed 
in this project.  Some of these are locally hired, but the 
management board could not provide a percentage breakdown of 
local employees.  SDC is only one of several contractors on 
the project, and has primary responsibility for the actual 
hydro-electric facility.  Several other firms are involved 
in infrastructure development around the construction site 
and the future 220 square kilometer reservoir. 
 
Dinner with Son La Chairman 
--------------------------- 
 
¶20. (SBU) At a dinner hosted by Chairman Thuc, the 
Ambassador noted that he was pleased to see some Caterpillar 
equipment being utilized in the Son La Dam project, but that 
he would like to see more U.S. content, especially since the 
current bilateral balance of trade of six to one heavily 
favors Vietnam.  He also asked how the project will benefit 
Son La Province economically since it is the cornerstone of 
the PC's plans for provincial development.  Thuc explained 
that the National Assembly decided to invest in the Son La 
project in 2002, and planning and preparation began in 2003. 
The province will participate in the dam's construction, and 
it will bring various benefits to the area, not least of 
which will be electrical power.  It will also control Da 
River flooding which will be important for provincial 
agriculture.  The project is really three separate project: 
1) the dam itself, 2) the resettlement of displaced people, 
and 3) the upgrade of the province's road network.  This 
last effort in particular will greatly improve the economy 
of the Northwest as new service roads are built and 
displaced roads are raised above the water level. 
 
¶21. (SBU) The Ambassador observed that despite its 12-15 
percent GDP growth rate, Son La has some of the highest 
levels of poverty in the country.  The mountainous geography 
of the region is not kind and the province is a long way 
from Hanoi, its airport and coastal seaports.  Where Hoa 
Binh Province can invest in tourist infrastructure to 
attract and retain more tourists, it is more difficult to 
get people to even visit Son La because of its remoteness. 
Focusing on decreasing the gap in the province's 
competitiveness when compared to other provinces is 
important, but this cannot happen overnight and will require 
the assistance of the central government, he predicted. 
Meanwhile, other provinces in Vietnam will accelerate their 
attractiveness to foreign investors.  Without GVN money, it 
will be hard to make Son La competitively attractive to 
investors even if the province focuses on training.  The 
Ambassador promised to send Thuc a copy of the provincial 
competitiveness study to assist the provincial leadership in 
thinking about boosting their province's competitiveness. 
Thuc noted that Son La has received permission to upgrade 
its airfield to a serviceable airport.  This will allow 
daily tourist flights from Ho Chi Minh City.  The Ambassador 
replied that this will help attract some tourism, but Son La 
will still be in competition with much better known places 
like Dalat, Nha Trang and Ha Long Bay. 
 
¶22. (SBU) Thuc agreed that Son La will have to make the most 
of its tourist potential with the assistance of the central 
government, but he noted that Moc Trau District has a 
similar climate to Dalat, and the GVN has included Moc Trau 
in its development plans.  Also, once the Son La Dam is 
completed, the reservoir will allow for low-cost 
transportation and will have a potentially rich fishery. 
Although Son La does not have any big industrial zones, 
there are many locations in the province appropriate for 
medium- and small-scale hydro-electric projects.  "Lots of 
investors" have registered their intentions to build such 
plants, another potential source of increased economic 
activity. 
 
¶23. (SBU) The Ambassador noted that he visited Son La 
Province once before to inspect a JPAC effort to excavate a 
war-era crash site.  He thanked the Chairman for the 
province's support in this ongoing effort. Son La's efforts 
have helped many families move on with their lives.  We know 
that many thousands of Vietnamese families are also looking 
for their loved ones.  The United States will continue to 
help Vietnam to account for its missing, whenever possible. 
 
HANOI 00000697  006 OF 007 
 
 
The United States is also expanding work to find and remove 
unexploded ordinance from Vietnam.  The first phase of this 
effort focused on three provinces in the center of the 
country, but we are now looking to establish a second phase. 
Maybe some of this next effort will focus on the Son La 
region. 
 
¶24. (SBU) In conclusion, the Ambassador noted that the issue 
of AO remains an important bilateral matter that requires 
more discussion between the GVN and the United States.  We 
are doing things together to discuss how to clean up sites 
where AO was stored.  We need more joint scientific research 
into the long-term effects of dioxin.  It is inaccurate to 
describe every disabled person in Vietnam as a "victim of 
AO".  We need to define the problem more clearly while 
meeting the needs of the disabled.  The United States has 
provided USD 35 million for the disabled in Vietnam.  "We 
need to be careful how we talk about this issue, 
particularly with young people, so we don't exacerbate the 
problem," the Ambassador said.  Thuc asserted that AO is a 
social problem which has affected the lives and future of a 
generation.  "I agree that we should support the victims of 
AO," he said.  The Ambassdor reiterated that we should 
support all disabled people rather than argue about what 
caused their disabilities. (Note:  Non-development issues 
discussed at the dinner reported septel.  End Note.) 
 
Moc Chau Tea Company 
-------------------- 
 
¶25. (U) On the way back to Hanoi, the Ambassador made a 
brief stop at the Moc Chau tea plantation in Moc Chau 
District along the Son La/Hoa Binh border.  (Note: 
Historically, the Moc Chau State-owned Farm was one of the 
best known model farms in the communist North.  Originally a 
dairy and tea plantation, the farm was established in 1958. 
It is still one of Son La's most famous agricultural 
enterprises and is among the largest farms in the country, 
although it has recently split into two separate State-owned 
companies - a tea company and a dairy farm.  End Note.) The 
tea company director, Pham Tien Lo, explained that by 1995, 
after ten years of Doi Moi ("renovation") policy, the tea 
farm began to experience continued sustainable development. 
In 1995, 1,163 local households contributed to production, 
but in 2005 over 6,000 participate.  The company has gone 
from requiring only one factory in 1995 to seven full 
plants.  The company produces 10,000 tons of fresh tea 
annually (from 2,000 ten years ago).  To accommodate its 
growth in size, the tea company has imported equipment from 
Taiwan and Japan, which has boosted production and increased 
exports.  Fully 80 percent of the tea is exported.  Revenues 
have increased from a few hundred thousand dollars in 1995 
to over four million dollars in 2005.  Lo explained that the 
tea company receives technical support and financial 
assistance from the French government, which has also helped 
Moc Chau promote its trademark in the EU. 
 
¶26. (U) Lo explained that the company is in the process of 
equitization, and that 51 percent of the company will 
eventually be sold at auction.  The company has not yet 
determined how much money they will raise through this 
process and will rely on an initial block of shares sold on 
the stock market to estimate market value.  Once a price is 
determined, company employees will have first rights to buy 
shares.  There are 800 direct employees of the company, 
although 6,000 households in the district sell tea to the 
factory.  (Note: Ethnic minority participation in tea 
production reported septel.  End Note.)  The total land 
owned by the company is only 500 hectares, but at least 
another 1,000 hectares belonging to local people produce tea 
for the Moc Chau green tea label.  The company has 
determined through extensive studies that this is the most 
lucrative product for the local climate. 
 
¶27. (U) Lo noted that growth of the Moc Chau Tea Company has 
helped Son La Province develop and has reduced poverty in 
Moc Chau District.  The company has also been a good 
corporate citizen, building six schools in the area, as well 
as several TV stations.  The company has also assisted 
several JPAC MIA searches, as several MIA sites were located 
on company land.  Although it takes years for tea bushes to 
become productive, the farm gladly allowed JPAC to dig up 
tea fields in four or five locations.  The Ambassador 
thanked the tea company board for their effort to assist us 
in the search for MIAs.  We recognize that these activities 
can disrupt economic activity, he acknowledged, although 
JPAC tries to limit the impact. 
 
 
HANOI 00000697  007 OF 007 
 
 
¶28. (U) Looking ahead, Lo stated that Moc Chau Tea Company 
is very optimistic about future growth despite the 
relatively small revenues produced today and growing 
competition from companies in Lam Dong, Yen Bai and Phu Tho 
provinces.  Their biggest hope is that WTO accession will 
open the U.S. market to their product.  The Ambassador noted 
that while WTO accession may happen very soon, the company 
will still face a significant problem in overcoming U.S. 
drinking habits.  However, there is a ready niche market 
within the U.S. for green tea in the Viet Kieu community. 
The company might want to focus on penetrating that market, 
rather than attempt to sell to the whole United States.  He 
also recommended that the faster the company equitizes, the 
better, so that the company can focus on increasing 
production.  The company will also need to find good foreign 
partners as middlemen to penetrate niche markets. 
 
Comment 
------- 
 
¶29. (SBU) The contrast between the local government approach 
in Hoa Binh and Son La provinces could not have been 
starker.  While Hoa Binh has a number of economic advantages 
over its neighbor to the west, not least its accessibility, 
PPC Chairman Tinh was clearly more progressive in his 
approach to development (among other issues reported 
septel), compared with Son La Chairman Thuc.  In many ways, 
Son La represents the old school of socialist development 
thinking:  large-scale, capital-intensive, Government-funded 
projects that are hugely disruptive in the short- to medium- 
term without clearly identified benefits for the local 
economy in the long term.  While the Son La Dam project will 
undoubtedly bring money and electrical power to the 
province, it is unlikely that the project alone will drive 
industrial growth and employment in the region, much less 
the province.  It is more probable that the key to Son La's 
development more likely lies with smaller-scale enterprises 
like the Moc Chau Tea Company, an impressive if still 
relatively small business model.  Hoa Binh's leaders, on the 
other hand, seem to recognize that they must make their 
province more competitive to attract foreign investment, 
trade and tourist dollars through a variety of capital and 
administrative improvements.  They have already developed a 
slick and professional approach to advocating for their 
province, a style that will pay far more dividends with 
foreign investors than the "true believer" presentation of 
Chairman Thuc.  End Comment. 
 
MARINE