VZCZCXRO0956
OO RUEHDT RUEHPB
DE RUEHHM #1281/01 3621038
ZNR UUUUU ZZH
O P 281038Z DEC 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3499
INFO RUCPDOC/USDOC WASHDC PRIORITY 0056
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHHI/AMEMBASSY HANOI PRIORITY 2389
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 3718

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001281 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EEB/TPP/BTA/ANA 
STATE PASS TO USTR DBISBEE 
TREASURY FOR SCHUN 
COMMERCE FOR HHPHO 
USAID/ANE 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ELNT ETRD BEXP VM
SUBJECT: HCMC BUSINESS LEADERS: EVEN INSIDERS INCREASINGLY FAVOR 
TRANSPARENCY 
 
REF: HO CHI MINH CITY 1265 
 
HO CHI MIN 00001281  001.2 OF 003 
 
 
¶1. (SBU) The political influence of Ho Chi Minh City's business 
establishment has increased as Vietnam's economy has grown.  In 
stark contrast to the days of the command economy, the 
Government of Vietnam (GVN) now celebrates the business 
community's contributions to the national development (on 
October 13 each year) and businessmen are sought after as Party 
members.  This first in a series of cables analyzing the role of 
HCMC's business community in shaping Vietnam's future focuses on 
those agents of change who are working from inside the system. 
We examine two business leaders who owe their start to their 
political connections but their current success to their 
business acumen. Rather than being content to run (typically 
money-loosing) state-owned enterprises, these two represent a 
small but growing class of business leaders who have transformed 
the companies they run into highly competitive private 
businesses.  Both due to their economic clout and their 
connections, forward-looking managers such as these are a major 
voice for economic reform in Vietnam.  End summary. 
 
¶2. (SBU) This is the first in a series of cables analyzing the 
role of HCMC's business community in shaping Vietnam's policies. 
 We will assess the politically-connected, the self-made, and 
those who were associated with the old regime but have overcome 
that stigma to make money and gain influence. 
 
Economic Reforms Create a New Political Reality 
--------------------------------------------- -- 
¶3. (SBU) Economic reforms have made Vietnam tangibly wealthier; 
confirming to virtually every Vietnamese citizen that the doi 
moi reforms (to shift to a market-oriented economy) started in 
1986 are propelling the country in the right direction. 
Vietnam's GDP has grown at an average annual rate of eight 
percent since 2001 and per capita income has risen from USD$220 
to USD$830 (2007 est).  A recent World Bank study placed the 
purchasing power parity (PPP) per capita income in Vietnam at 
over USD$2,000.  With the economic stagnation and extreme 
deprivations of the 80's still a vivid memory for most adults, 
the majority of Vietnamese clearly support the path of economic 
reform and global integration. 
 
¶4. (SBU) Former Prime Minister Phan Van Khai officially 
recognized business as a guiding force in Vietnam's economic 
development in 2004 when he decreed October 13 as "Business 
People's Day" to honor them and recognize their contributions to 
national development.  The 10th National Party Congress of 
Vietnam in April 2006 promulgated a resolution to recruit 
businessmen to the Party and allow Party members to own private 
businesses.  While it may seem academic, recognizing the 
"business class" as equal with the working class, the farmers 
and the intellectuals represented a fundamental doctrinal shift 
for the CPV. 
 
HCMC's Well-Connected Business Leaders 
-------------------------------------- 
¶5. (SBU) HCMC is the nation's economic engine and serves as a 
crucible for developing and testing new ideas in the economic, 
political and social spheres.  The city accounts for 20 percent 
of GDP and its tax contribution provides 33 percent of the state 
budget -- all with only 6.5 percent of the official population. 
In 2007, HCMC's average per capita income is estimated at 
$2,200, almost triple the national average of $830, and its GDP 
grew at 12.6 percent. 
 
¶6. (SBU) Politically-connected business people with sterling 
revolutionary credentials enjoyed almost exclusive access to 
Vietnam's leaders in the 90's when the government turned only to 
familiar voices for advice on managing the economy.  This access 
still means quicker approvals, less red tape and often inside 
information, as their track-record in developing property 
demonstrates.  For the most successful business leaders, 
however, connections alone do not tell the whole story. 
Instead, they combine their connections with business savvy, 
good financial management and a willingness to break new 
business ground in order to turn crumbling state enterprises 
into rising economic stars.  Increasingly, they are advocates 
for dismantling the system of preferences that gave them their 
start. 
 
Creating and Defending an Empire 
-------------------------------- 
¶7. (SBU) Typical of this group is Nguyen Thi Nghia.  Born in 
 
HO CHI MIN 00001281  002.2 OF 003 
 
 
Saigon in 1948, she joined the revolution at the age of 15 and 
was active in the anti-war students' movements before 1975. 
When cooperatives crumbled under the cumulative weight of poor 
management and public distrust toward the end of the 80s, Nghia 
was serving as the Chief of the HCMC's Cooperative Management 
Committee.  Seeing an opportunity, Nghia established the Saigon 
Union of Trading Cooperatives (Saigon Co.op) with just $6,000 
capital.  Leveraging her position and connections (her husband 
Pham Chanh Truc was Vice-Chairman of the HCMC People's 
Committee) to acquire prime locations, she developed retail and 
supermarkets in HCMC and later throughout Vietnam.  Saigon Co.op 
is now Vietnam's leading distribution chain operator and top 
retailer and has been consistently ranked among the top 500 
retailers in the Asia-Pacific region by Asia Retail Journal 
since 2004.  Earlier this year, a Japanese retail trade group 
named Co.op as one of the top 20 emerging retailers in Asia. 
 
¶8. (SBU) Translating commercial success into a political career, 
Nghia was elected to the National Assembly for the 2002-2007 
legislature and gained even more influence in 2005 when then PM 
Khai awarded her the Labor Hero Order, the highest honor 
recognizing achievements in labor.  In early 2007, she 
established the Retailers' Association of Vietnam in order "to 
protect and promote" local emerging retailers and distributors. 
The association now flexes considerable muscle; for example it 
successfully lobbied the GVN to promulgate Circular 9 to keep 
foreign firms out of the retail market for as long as it can 
under WTO commitments (reftel). 
 
¶9. (SBU) While there is no doubt that Nghia's political 
connections have helped her enormously, there is also no doubt 
that she is building a market-based, competitive retail and 
distribution system.  She is particularly proud that all 
managers of Co.op's new chain of "super stores" all have U.S. 
retail management experience and/or training. 
 
From Refrigeration to Empire 
---------------------------- 
¶10. (SBU) Nguyen Thi Mai Thanh is Chairwoman and General 
Director of Refrigeration Electrical Engineering Corporation 
(REE).  Born in 1952 in a southern province of Tay Ninh, Thanh 
joined the medical team of a revolutionary force led by her 
father in 1968 when she was just 16 years old.  Her father later 
went on to become the commander of Military Region 7, the region 
around HCMC.  With these sterling credentials, Thanh was chosen 
to head a state-owned refrigeration and HVAC contracting 
company.  Rather than just run the struggling company as before, 
however, Thanh transformed REE into the "poster child" for 
economic reform, becoming Vietnam's first equitized company 
(1993), the first Vietnamese company to raise capital through 
bond issuance (1996), the first company listed on the HCMC stock 
exchange (2000) and the first Vietnamese company to issue 
convertible bonds (2003).  Along the way, REE is also commonly 
held to have received another boost from Thanh's military father 
in the form of prime land for a high-technology business center 
("e-town") in HCMC.  (Comment: We cannot say for certain if her 
connections helped Thanh obtain more preferable treatment in 
this deal or if it was simply that her knowledge of the 
military's surplus land led her to propose an economically 
viable development plan.  End Comment.) 
 
¶11. (SBU) Thanh is now an informal advisor to Vietnam's 
leadership and advocates for increased transparency, especially 
for the sale of downtown HCMC's twenty "golden site" properties 
planned for development.  Thanh told us that when she asked how 
to go about bidding on one of the golden sites to develop, 
officials informed her that the selection process was closed. 
While she could not choose which site to bid on, she was told 
that she would nonetheless be assigned at least one site to 
develop.  Rather than being happy with her good fortune for 
being allocated a site, she complained to the HCMC People's 
Committee that lack of transparency damages both the city and 
the market.  Chairman Quan said he understood but that HCMC 
could do nothing since "the decision was made in Hanoi," so 
Thanh took her case to Prime Minister Dung.  HCMC recently took 
bids on the very same properties, receiving offers higher by a 
factor of ten than anticipated using the original "strategic 
partner" approach. 
 
¶12. (SBU) Like virtually every Vietnamese, Thanh put the past 
behind when doing business with Americans.  "There are more 
business opportunities that benefit both Vietnamese and American 
 
HO CHI MIN 00001281  003.2 OF 003 
 
 
companies being created," she said in a media interview as she 
accompanied President Nguyen Minh Triet in his June 2007 visit 
to the United States. 
 
Comment: 
-------- 
¶13. (SBU) Many still think of Vietnam as one vast smoke-filled 
room where decisions are made by the Communist Central 
Committee.  This is no longer the case for the majority of 
businesses in Vietnam. As these two cases illustrate, even 
politically connected businesses recognize how much they benefit 
from Vietnam's move toward becoming a market economy.  While 
many state-owned enterprises either founder to barely stay 
afloat, those that are prospering are doing so as much based on 
their business plan as their political connections.  In the 
future, we believe that the space for those who rely solely on 
connections to do business will continue to narrow.  HCMC's 
increasingly feisty newspapers serve as a constant reminder to 
those who rely too heavily on connections and special deals that 
printing stories about corruption and unfair dealing is now fair 
game.  End comment. 
 
¶14. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX