VZCZCXRO8170
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #1066/01 2630521
ZNR UUUUU ZZH
P 200521Z SEP 06
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 1481
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 1041
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 1551

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001066 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FROM THE CONSUL GENERAL 
PLEASE PASS REXON RYU IN OFFICE OF SENATOR HAGEL 
 
E.O. 12958: N/A 
TAGS: OVIP PHUM PGOV SOCI ECON KIRF VM
SUBJECT: HCMC SCENE SETTER FOR VISIT OF CODEL HAGEL 
 
HO CHI MIN 00001066  001.2 OF 002 
 
 
¶1. (SBU)        Senator Hagel: It is my pleasure to welcome you and 
your delegation to Ho Chi Minh City on October 5.  The city has 
changed enormously since your last visit here in 1999.  There is 
a new, modern satellite city to the south, extensive new 
construction in the center and a commercial and convention 
center complex planned for an area that was Viet Cong swampland 
when you served here in 1968.  The process of change and 
modernization is accelerating as this region spearheads 
Vietnam's integration into the global economy. 
 
¶2. (SBU)  In your official meetings with the HCMC leadership and 
your visits around town, you will see a vibrant city that 
epitomizes the development challenges and opportunities that 
Vietnam faces: the youthfulness, hustle and entrepreneurial 
spirit of its people, the growing importance of U.S. and other 
foreign investors, the threat of HIV/AIDS, and the subtle but 
real challenges to one-party rule from the Internet, nascent 
civil society, the inflow of ideas from overseas and the 
incremental expansion of personal freedoms. 
 
¶3. (SBU) Ho Chi Minh City and its neighboring provinces are the 
economic and financial heart of Vietnam.  With roughly 15 
percent of the population, this region accounts for over a third 
of GDP and national tax revenue and is home to over 40 percent 
of the country's foreign direct investment.  At least 50 percent 
of Vietnam's $3 to $7 billion in remittances flow into the HCMC 
area.  The city's importance as Vietnam's premier banking and 
financial center will continue to grow as foreign funds and 
domestic investors build up the HCMC Stock Exchange. 
 
¶4. (SBU) HCMC Communist Party Secretary Le Thanh Hai is the 
senior-most politician in the city and a recent appointee to the 
Politburo.  He is a savvy politician and a pragmatist.  Along 
with President Nguyen Minh Triet -- who earlier held Hai's 
current position -- Hai is one of the architects of HCMC's 
growth.  It is leadership helps explain why HCMC and some 
neighboring provinces are growing quickly -- up to double the 
national growth rate.  Political leaders in the region are 
determined to create a government culture more responsive to 
private business needs.  For example, in 2005, HCMC was dinged 
in a prestigious national survey (sponsored by USAID) of local 
government efficiency.  The city held roundtables with business 
and internal meetings to work on shortcomings.  The following 
year, Ho Chi Minh City jumped from 17th to seventh.  Neighboring 
Binh Duong province was ranked first and Dong Nai province -- 
another key industrial neighbor -- was ranked fifth. 
 
¶5. (SBU) These same leaders also have been relatively 
progressive in handling religious freedom and human rights 
issues.  HCMC has partnered with the Catholic Church to combat 
HIV/AIDS, the first such faith-based partnership in Vietnam.  As 
Vietnam moves to legalize the operations of its many Protestant 
groups, HCMC has been the pacesetter for the nation.  However, 
leaders of the staunchly anti-Communist United Buddhist Church 
of Vietnam remain under tight control, as does the city's 
dissident community; the authorities view them as threats to the 
regime. 
 
¶6. (SBU) In your meetings with Party Secretary Hai and Chairman 
of the HCMC People's Committee Le Hoang Quan, I recommend that 
you stress that greater individual freedoms, financial and 
capital market reform and strengthening of rule of law are 
needed to prevent HCMC's growth from sputtering, particularly in 
a WTO environment. 
 
¶7. (SBU) Following the signing of our Bilateral Trade Agreement 
with Vietnam, the United States has become Vietnam's largest 
export market.  Intel is the latest U.S. Fortune 500 corporation 
to join Nike, ConocoPhillips, Citibank and other private 
American entrepreneurs -- many from the Vietnamese-American 
community -- in HCMC.  Foreign investors see Vietnam as a 
cost-effective hedge to China, especially in lower volume but 
higher quality products such as knitwear and fine furniture. 
 
¶8. (SBU) HCMC negotiated hard for the $300 million Intel 
investment.  This investment showcases the city leadership's 
determination to push into the software and technology sectors, 
with U.S. business helping to lead the way.  U.S. business also 
is playing a key role in infrastructure development; the HCMC 
region urgently needs to upgrade its inadequate infrastructure 
-- roads, ports and airports -- lest this become a bottleneck to 
growth. 
 
¶9. (SBU) Local U.S. business leaders likely will tell you that 
they are bullish on Vietnam's potential but will express 
frustration over how the government is implementing some 
WTO-linked reforms.  They worry that regulatory uncertainty and 
lack of transparency could hamper business and trade 
 
HO CHI MIN 00001066  002.2 OF 002 
 
 
development.  They likely will press for the earliest possible 
Congressional approval of Permanent Normal Trading Relations 
(PNTR) with Vietnam, fearing that U.S. business would lose out 
to Japanese and European competitors should PNTR be delayed. 
You may also hear complaints that Vietnam's over-reliance on 
Official Development Assistance is hampering the development of 
efficient financial markets.  You will be able to focus more 
intensively on this latter issue in your visit to the young and 
frothy HCMC stock exchange; the exchange is up by 65 percent 
since the beginning of 2006. 
 
¶10. (SBU) HCMC welcomes Americans and American goods.  Its 
people are future-oriented.  Made in America has real cachet 
here.  HCMC also has the country's most progressive media.  The 
city's elite and its growing middle class look to the United 
States as the center of choice to which to send their sons and 
daughters to study. 
 
¶11. (SBU) HCMC Party leaders know that their legitimacy rests in 
part on satisfying the economic demands of the average 
Vietnamese.  They know that Vietnam needs to create close to 1.5 
million jobs a year to keep pace with new entrants into the 
workforce.  Many of these jobs will be in HCMC and other 
rapidly-urbanizing areas of southern Vietnam.  Communist Party 
officials struggle to balance this need to modernize and grow 
the economy -- which requires a freer society and a more robust 
private sector -- with their desire to protect the power and 
patronage that allows them to dominate Vietnamese society.  Some 
HCMC Party officials also have expressed some anxiety about the 
growth in influence and power of China.  The struggle between 
reform and control helps explain many of the actions and 
decisions of HCMC's leaders and is the subtext for much of the 
ongoing debate -- sometimes echoed in HCMC's increasingly robust 
press -- between modernists and hardliners in the Communist 
Party. 
WINNICK