VZCZCXRO4936
OO RUEHDT RUEHPB
DE RUEHHM #0456/01 1610651
ZNR UUUUU ZZH
O P 100651Z JUN 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5844
INFO RUCPDOC/USDOC WASHDC PRIORITY 0138
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHI/AMEMBASSY HANOI PRIORITY 3818
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 6080

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000456 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
USTR FOR BISBEE 
TREASURY FOR CHUN 
 
E.O. 12958: N/A 
TAGS: ECON EIND ELAB PREL SOCI VM
SUBJECT: GLOBAL DOWNTURN SQUEEZES HCMC EXPATS, BUT MOST STAYING PUT 
FOR NOW 
 
HO CHI MIN 00000456  001.2 OF 002 
 
 
¶1. (SBU) Summary:  Contrary to anecdotal evidence of a mass 
exodus, interviews with international schools, relocation firms 
and expat chambers of commerce indicate that the actual effect 
of the economic downturn on HCMC's expat community is more 
complex:  Koreans are leaving in large numbers, the Taiwanese 
and Singaporean communities are stable, and departures of U.S., 
European, and Australian expats are up ten percent over last 
year and increasing.  Business associations say the 
consolidation of supply chains by international exporters has 
hit Korean subcontractors hard, while Taiwanese and Singaporean 
firms are weathering the downturn aided by the deep roots and 
long-term perspective that come with being the first to invest 
in Vietnam.  The drive to cut costs is accelerating the 
replacement of expat managers with Vietnamese personnel, a 
dynamic fueled by the increasing numbers of overseas Vietnamese 
returning to Vietnam to seek employment.  End Summary. 
 
PSST!  Did You Hear Who's Leaving Town? 
--------------------------------------- 
¶2. (SBU) A recurring theme of expat cocktail party chat and 
elevator banter is the growing wave of foreigners leaving HCMC. 
Everyone knows someone who saw half a dozen expat families move 
out of their building or heard that a prominent international 
firm is downsizing and sending employees home.  Newspaper 
articles report that the links are deserted and golf shops are 
hurting for business.  Interviews with international schools, 
relocation firms and expat chambers of commerce, however, reveal 
a more nuanced picture.  While HCMC's Taiwanese and Singaporean 
populations remain fairly stable, departures of U.S., European, 
and Australian expats are up about ten percent year-on-year and 
seem poised to increase further, although a portion of this 
outflow may owe as much to a natural tendency toward 
localization of the workforce as to companies downsizing. 
Meanwhile, large numbers of Koreans have already left Vietnam as 
funding for Korean construction projects dries up and small 
Korean exporters lose orders. 
 
¶3. (SBU) Chambers of commerce, international schools and 
commercial law firms all report large numbers of Koreans leaving 
the HCMC area.  Twenty percent of Korean-invested manufacturing 
or construction firms have closed in last four months and 80 
percent of the remaining firms are experiencing severe 
difficulties and cutting Korean management staff by one third to 
a half, according to Mr. Chang Keun Lee Chairman of the Korean 
Chamber of Commerce and Industry (KoCham) in Vietnam.  Officials 
at the HCMC Australian international school described the 
unprecedented mid-semester withdrawal of Korean students, and a 
Singaporean law firm told EconOff that the number of Korean 
firms seeking legal advice regarding business liquidations has 
skyrocketed. 
 
Weak Won and Streamlined Supply Chains Hurt Korean Firms 
--------------------------------------------- ------------ 
¶4. (SBU) The depreciation of the won has dried up project 
financing for HCMC construction projects, and the forty to fifty 
percent drop in garment and footwear orders from Europe, Japan 
and the United States has hit Korean small and medium-sized 
enterprise (SMEs) hard, according to KoCham's Mr. Lee.  Even 
manufacturers that are maintaining overall production levels in 
Vietnam are streamlining supply chains, often at the expense of 
Korean SMEs.  A leading U.S.-branded footwear manufacturer, for 
example, recently ended its relationship with a Korean 
subcontractor, idling six thousand workers and Korean managers 
relocating its orders to other, more efficient factories 
elsewhere in Vietnam. 
 
U.S., E.U., Aussie Expat Departures Building Steam 
--------------------------------------------- ----- 
¶5. (SBU)  A major international relocation company that services 
primarily American, European, and Australian clients told us 
that outbound traffic is up ten percent during the first quarter 
2009 versus the same period last year, while first quarter 
inbound traffic is down by roughly the same amount.  Second 
quarter data, while incomplete, show twice as many expats moving 
out of HCMC as for the comparable period last year.  On the 
other hand, the Taiwanese and Singaporean chambers of commerce 
told us that although the number of their nationals newly 
investing in southern Vietnam has dropped precipitously, the 
number of Taiwanese and Singaporeans remaining in HCMC remains 
steady. 
 
The Ties that Bind 
------------------ 
 
HO CHI MIN 00000456  002.2 OF 002 
 
 
¶6. (SBU) The directors of the Taiwanese Business Association and 
the Singaporean Business Group Ms. Duong Ngoc Phung and Mr. 
Benjamin Yap attributed their nationals' 'staying power' to the 
long term mindset of their investors.  Nationals of both 
countries were among the first to invest heavily in Vietnam in 
the early nineties, and were more likely to buy factories and 
land use rights, while Korean investors arriving later, 
generally rented factories and bought used equipment, investing 
for the short-term, according to Ms. Phung and Mr. Yap. 
 
Cutting Corners Instead of Leaving 
---------------------------------- 
¶7. (SBU) Expats of all nationalities are cutting costs to 
forestall departure, hoping the economy recovers.  Three 
different relocation firms told us that the domestic portion of 
their business -- moves within the area -- has surged in recent 
years.  After commercial and residential rents skyrocketed two 
years ago, many expats moved homes and offices to less expensive 
locales outside downtown HCMC.  Now that the downturn has 
brought rents way down, many are returning to the city center. 
Movers also report that many international clients are 
eliminating rotations between branch offices, and assigning 
'cheaper' expats -- younger, childless individuals or couples, 
in order to reduce housing and education costs.  The hard hit 
Korean community is also saving on education expenditures.  Mr. 
Tae Oun Kim principal of the HCMC Korean School said enrollment 
has increased over ten percent in each of the last two years, as 
parents transfer their children from $10,000 per year 
international schools to the Korean School where annual tuition 
is $2,000 USD. 
 
Downturn Generates Opportunities for Local Managers 
--------------------------------------------- ------ 
¶8. (SBU) The global downturn and commensurate need to cut costs 
are accelerating the trend of foreign and large domestic firms 
replacing expat employees with Vietnamese.  Ms. Loan Le, founder 
of HCMC's premier headhunting firm, told us that foreign and 
large domestic firms are increasingly filling general manager 
positions, previously staffed almost exclusively by expats, with 
local hires. 
 
Overseas Vietnamese Return Seeking Opportunities 
--------------------------------------------- --- 
¶9. (SBU) Fueling the 'Vietnamization' of HCMC's managerial class 
and bucking the trend of expat outflow, growing numbers of 
overseas Vietnamese are returning to their ancestral homeland to 
search for job opportunities that the global downturn has 
diminished in the United States, Canada, and Australia.  Several 
HCMC human resource firms told us that the number of resumes 
received from overseas Vietnamese have increased by twenty five 
to thirty percent in the last year.  Most of the successful 
career placements have been in the finance, information 
technology, public relations and business administration fields, 
with average salaries starting at $2,500 per month for 
non-executive level positions. 
 
Comment: 
-------- 
¶10. (SBU) The 'common wisdom' of a mass exodus of expatriates 
from HCMC is wrong. While the global downturn has set some of 
the expat community in motion, much of that activity is 
internal, changing residential, school or work locations 
according to new economic conditions.  This is further evidence 
that the global downturn is a transformational as opposed to 
cataclysmic event for HCMC, accelerating ongoing processes such 
as the 'Vietnamization' of the managerial class and the return 
of overseas Vietnamese.  Whether the projected additional 
increases in departures of U.S., European and Australian expats 
materialize likely depends on whether U.S., European and 
Japanese demand rebounds.  End Comment. 
 
¶11.  (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX