VZCZCXRO1930
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0050/01 0430637
ZNR UUUUU ZZH
P 120637Z FEB 10
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 6311
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 4193
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 6554

UNCLAS SECTION 01 OF 05 HO CHI MINH CITY 000050 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND DRL/IRF 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTIP KIRF PREL PGOV SOCI VM
SUBJECT: FOUR CG TOUR OF THE DELTA HIGHLIGHTS ECONOMIC GROWTH AND 
DEVELOPMENT CHALLENGES 
 
REF: HCMC 665 
 
HO CHI MIN 00000050  001.2 OF 005 
 
 
¶1. (SBU) SUMMARY: A joint trip undertaken by the Consuls General 
of Australia, India, Kuwait and the USA to the Mekong Delta 
provinces of Can Tho, Hau Giang and An Giang provided a host of 
opportunities to share experiences, gain insights from 
colleagues, forge new connections and reinforce key shared 
messages on the need for continued reform in the economic sphere 
and tolerance in the social and religious spheres.  While the 
trip focused on many opportunities for cooperation and 
development in the Delta region, it also highlighted the many 
challenges the provinces face, from a crippling lack of 
transportation infrastructure to local Communist Party and 
security officials who are clearly not comfortable with the 
scope and pace of change underway.  END SUMMARY. 
 
 
 
CAN THO: THE FISH ARE JUMPING AND THE RIVER IS HIGH 
 
--------------------------------------------- ------ 
 
¶2. (SBU) A call on the Mekong Delta Rice Research Institute in 
Can Tho showcased history as well as agricultural science. 
Founded in 1977 as a gift to Vietnam from India, the institute 
began its life as an expression of support for the 
anti-imperialist movement and focused on self-sufficiency and 
import-substitution goals that were so important for many 
non-aligned movement member states in the 1970's.  Over the 
years, however, the institute changed along with the situations 
in both Vietnam and India.  While a large percentage of staff 
still owe their early academic training to GOI-sponsored 
programs that continue to send 2 - 3 researchers to India per 
year for advanced degrees, the USA is now number one source of 
foreign support for the institute with both the Rockefeller 
Foundation and the Gates Foundation supporting programs to 
introduce more efficient and nutritious "golden rice" to SE 
Asia.  Thanks to a Gates Foundation Grant, the Mekong Delta Rice 
Research Institute became the first in the world produce an 
Indica (tropical) variety of the genetically modified "golden 
rice" that combines DNA from rice and soybean plants.  (Note: 
The initial "golden rice" was produced using Japonica rice, 
which is the base of most strains grown in temperate climates. 
End Note.) 
 
 
 
3 (SBU)Mission Vietnam has cooperated closely with the Mekong 
Delta Rice Institute on programs and seminars to increase 
understanding of GMOs in Vietnam.  Institute Vice Director Duong 
Van Chin was pleased to inform the CG that they have now 
received permission for controlled open-field plantings of 
golden rice as well as genetically modified soybeans with 
increased pest protection.  Until now, all plantings have been 
done in tightly-controlled, double-isolated greenhouses 
consisting of smaller greenhouses isolated inside of larger 
ones.  The Kuwaiti CG used the visit to deliver a sample of the 
Basmati rice preferred by Kuwaiti consumers as he established 
contacts to work on introducing the strain in Vietnam. 
 
 
 
¶4. (SBU) A call on faculty of the DRAGON Climate Change Research 
Institute at Can Tho University also showcased how a program 
initiated by one country can attract broader support. 
Established in 2008 as a product of the June US-Vietnam summit 
in that year, DRAGON owes its existence to the USG -- the State 
Department and the US Geological Survey.  Now, however, the 
Australian Consulate and AusAID have become very involved in the 
project as Australia's commitment to working with ASEAN nations 
on climate change has grown along with the large number of 
Australian-trained environmental scientists at Can Tho 
University.  The Australian Consulate co-sponsored the Climate 
Change Conference held there earlier this year (ref A) and 
AusAID is finalizing plans that will channel roughly A$1.3 
million to research projects being undertaken by Vietnamese 
scientists at DRAGON. 
 
 
 
¶5. (SBU) A visit to the Hiep Thanh rice and seafood group in Can 
Tho was interesting on several fronts.  While Hiep Thanh 
continues to produce 60% of its own fish ("basa" pangasius), the 
firm has expanded operations by developing a system of 
independent growers.  To maintain quality, however, all contract 
growers are required to raise only Hiep Thanh-supplied stock 
using Hiep Thanh-supplied feeds.  Each contract grower is 
required to keep meticulous, daily records of water quality, 
feed dispensed, weather conditions, average fish size, any 
 
HO CHI MIN 00000050  002.2 OF 005 
 
 
problems noted and other factors in order to meet the strict WHO 
and ISO standards to which Hiep Thanh adheres.  While Hiep 
Thanh's largest market remains the Scandinavian countries where 
consumers are willing to pay premium prices for high-quality 
fish, Hiep Thanh President Nguyen Van Than expressed concern 
regarding the pending decision on catfish regulation in the USA 
since it has the potential of impacting between 10 and 20 
percent of his firm's sales. 
 
 
 
¶6. (SBU) The most interesting revelation at Hiep Thanh concerned 
the firm's rice business; a 2008 change in export controls on 
rice has greatly reduced Hiep Thanh's ability to export 
directly.  As part of a package of measures ostensibly designed 
to ensure food security and price stability, after the 2008 rice 
price shock the GVN ruled that no private rice broker can sell 
rice to any country with which the GVN has negotiated a 
government-to-government rice deal.  The change has hit Hiep 
Thanh hard for two reasons.  First, prior to the change Hiep 
Thanh often sold additional rice to countries that used a 
government-to-government agreement with the GVN in order to 
ensure basic supplies.  The Philippines, for example, have long 
been Vietnam's largest rice buyer and have traditionally made 
large government-to-government rice purchases that the GVN 
routed though VinaFoods2, the giant southern rice SOE.  In the 
past, however, buyers in the Philippines were able to buy 
additional rice directly from private dealers, a right they used 
when market prices dipped below the government contract price. 
Now, however, no one in Vietnam other than VinaFoods2 is allowed 
to sell rice to anyone in the Philippines. Other large 
government-to-government buyers, including the Governments of 
Iraq and Iran, fall under the same SOE-monopolized regime. 
 
 
 
¶7. (SBU) The second source of Hiep Thanh's difficulties arose in 
2009, when VinaFoods2 and its northern counterpart VinaFoods1, 
went on an extensive campaign of converting existing commercial 
contracts with even minor buyers into official 
government-to-government contracts, thus closing those markets 
to all private Vietnamese rice dealers.  As a result of this 1-2 
punch, Hiep Thanh is now only able to sell 15% of its rice 
output directly to overseas buyers (primarily in Africa).  Hiep 
Thanh must sell the remaining 85% to either VinaFoods1 or 
VinaFoods2, which direct Hiep Thanh to ship it to their captive 
foreign clients while the SOEs reap the majority of the profit. 
Despite these restrictions, Hiep Thanh's rice processing 
operations continue to grow.  Because its operations are more 
efficient than those of the big SOEs, Hiep Thanh can still eke 
out a small profit serving essentially as a de facto 
subcontractor to one of the two large SOEs. 
 
 
 
HAU GIANG : MIXED PICTURE OF POVERTY AND GROWTH 
 
--------------------------------------------- -- 
 
¶8. (SBU) Hau Giang's People's Committee Chairman Huynh Minh 
Chac, a retired Vietnamese Army General who saw combat duty in 
Cambodia, was not bashful in describing the many problems his 
impoverished province faces.  When the "special city" of Can Tho 
City and its environs were split off in 2004, Hau Giang became 
the undeveloped, impoverished "leftover" province.  Lacking in 
roads, schools, water and electricity, Hau Giang is struggling 
to develop.  During a wide-ranging meeting with the four Consuls 
General, PC Chair Chac reinforced CG's earlier impression as a 
dedicated, no-nonsense administrator determined to get the job 
done.  While Hau Giang ranked 13th in the overall 2009 
Provincial Competitive Index (a USAID-supported ranking of the 
business environment in all 63 of Vietnam's provinces), it 
ranked 3rd highest on the sub-indicator on "quality of local 
administration."  The province's overall ranking was pulled down 
by its bottom-tier performance on "quality of workforce," a 
reflection of the lack of education in the province.  While 
still very poor with per capita income roughly 25% below the 
Vietnam average of about US$1,000 per year, the province is 
growing rapidly and even recorded 12.6% GDP growth in 2009. 
Chairman Chac presented each CG with a package that included 
abstracts of investment proposals broken down into categories 
for ODA-supported projects, commercial FDI projects and charity 
projects, listing counterparts, projected budgets, target 
populations and other data for each. 
 
 
 
¶9. (SBU) A visit to one of Hau Giang's largest enterprises, the 
 
HO CHI MIN 00000050  003.2 OF 005 
 
 
Can Tho Sugar Company (CASUCO), served to underscore the 
complexity of the province's development challenges.  Founded in 
1995 as the monopoly state-owned sugar company when Can Tho and 
Hau Giang were still one province, the company still retains its 
"Can Tho" name.  Though the firm was equitized (legally 
converted to a joint stock company) in 2005, the GVN continues 
to hold the majority of the shares and the firm's deputy 
director, with her heavy Hanoi accent and apparent lack of any 
knowledge of the sugar industry, left the impression that she 
was a political appointee.   In response to a question from the 
Australian CG about the source of sugar cane, for example, she 
replied that CASUCO is the state sugar company of Hau Giang and 
thus sources all of its sugar cane from Hau Giang farmers, who 
must sell to the firm. 
 
 
 
¶10. (SBU) After the formal meeting, however, the firm's business 
manager explained that the system of monopsony buying had ended 
several years ago and that today the firm sources sugar cane 
from numerous provinces.  Rather than being required to sell 
only to CASUCO, Hau Giang's sugar growers (as well as those in 
other provinces) have the option of selling to any buyer.  He 
added that CASUCO, like most other Vietnamese sugar companies, 
still buys directly from a number of local farmers but now 
sources a majority of its sugar cane from brokers who travel to 
thousands of individual small farms (generally 2 to 4 acres) 
spread across the Mekong Delta and Central Coast regions in 
order to assemble large lots of cane for sale to refiners.  In 
this way, the determination of market prices for sugar cane has 
largely moved from a few provincial refiners to the much more 
numerous brokers who compete with one another to buy farmers' 
crops.  Rather than being required to grow sugar cane, farmers 
now have a choice and most of the 2,000+ small sugar growers in 
Hau Giang grow rice and sugar cane in a crop rotation scheme. 
The stark contrast between the "old line" official response in 
the meeting and the market realities described by plant 
operators provided an interesting metaphor for the process of 
economic reform still underway across the Delta region. 
 
 
 
AN GIANG: PROMOTING EDUCATION, FIGHTING TIP 
 
------------------------------------------- 
 
¶11. (SBU) One of Vietnam's poorest provinces just a few years 
ago, An Giang's per capita GDP is now slightly above Vietnam's 
national average. The reasons are fairly obvious. Every CG with 
dealings in An Giang reported that the provincial government has 
been one of the least bureaucratic and most supportive in the 
Mekong Delta.  The province has also made education its number 
one priority, as evinced by the impressive new campus of An 
Giang University the group of four CGs visited.  Nearly half of 
the university's 7,000 students are in the faculty of education, 
thanks in part to an aggressive provincial campaign to recruit 
and train teachers from every village and hamlet in the 
province.  Some of the bright, second-year students came from 
villages that could only be reached by canoe while even more had 
never seen a city before they arrived in An Giang's capital, 
Long Xuyen with a population of 275,000.  Star students are 
recruited and provided with free tuition plus a stipend for 
agreeing to return to his/her home village to teach for at least 
five years following graduation.  The four CGs spoke with one 
group of students in the English class, where they were studying 
"educational English," a combination of English language 
training and studies on teaching methodology and curriculum 
design. 
 
 
 
¶12. (SBU) During a visit to the IOM assessment center for 
returned victims of trafficking, the four CGs heard both of the 
successes and challenges of combating trafficking in persons in 
Vietnam.  The good news is that the assessment center in An 
Giang is working well, as is the NGO-supported "open house" that 
provides longer-term care, training and support to victims. 
Educational programs targeting high school students also appear 
to be having an impact by increasing awareness and reducing the 
number of victims from the province.  The less cheery picture is 
that these advancements are largely limited to a few provinces 
like An Giang, where the provincial government actively supports 
anti-TIP training, assists returned victims and helps with their 
reintegration into the community.  An Giang's leadership is 
having a magnet effect--IOM reported that a recent decision by 
the GVN to allow trafficking victims from other provinces to use 
the assessment center in An Giang.  The center's director as 
well as a local Department of Labor, Invalids and Social Affairs 
 
HO CHI MIN 00000050  004.2 OF 005 
 
 
(DoLISA) representative added that over the past several months, 
the central government in Hanoi has arranged for officials from 
several other provinces to visit An Giang to see how the 
province is making progress.  The Kuwaiti Consul General (who is 
fairly new to Vietnam but who previously oversaw Kuwait's 
contributions to IOM in Geneva) astutely asked why the GVN is 
not more active in tackling broader forms of trafficking, 
including internal and labor trafficking.  The IOM 
representative explained that IOM and others are beginning to 
convince the GVN to address these issues, adding that the 
fundamental problem is that Vietnam still lacks comprehensive 
TIP legislation that meets international standards.  He 
expressed hope that draft legislation will make it to the 
National Assembly in 2010. 
 
 
 
MUSLIMS IN THE DELTA 
 
-------------------- 
 
¶13. (SBU) As An Giang boasts Vietnam's largest Muslim population 
-- roughly 14,000 members -- making a call on a mosque to visit 
with a Muslim community was a natural choice.  The group visited 
the Ehsan mosque, which is moderately sized and serves about 200 
families with a total of 1,200 members.  Originally built in the 
1930's, it was remodeled in 1997-8 with funds donated by Cham 
Muslims who had emigrated to the USA and Australia.  Of the four 
CGs, only the Indian CG had visited the mosque before and he was 
warmly welcomed back.  In response to a question from the 
Kuwaiti CG regarding the group's origins, the Muslim 
representative of the provincial religious council started to 
relate the general story of the Cham Kingdom that once ruled 
Central Vietnam until the mosque's elders began to contradict 
him.  According to the Imam and his assistant, nearly all An 
Giang's Muslims are ethnic Cham who immigrated from Cambodia 
roughly 300 years ago as manual laborers hired to work on the 
extensive canal system that eventually transformed the Mekong 
Delta into Vietnam's rice bowl.  As such, they are only 
indirectly (and rather distantly) connected to the Cham 
communities on Vietnam's Central Coast who can trace their roots 
in Vietnam to the Cham Kingdom which ruled the central part of 
Vietnam from roughly AD 400 to AD 1400.  As with the province's 
other poor minorities, the GVN provides the Cham Muslims 
multiple special allowances, including free schooling and 
community support. Nonetheless, the community remains very 
insular and poor, with most members earning their living as 
small scale farmers.  Mosque elders explained that only six 
people in the community actually spoke Arabic, although a few of 
the elders stated that they could read it but could not speak 
it. The six Arabic speakers were all fairly young and had 
received training overseas courtesy of foreign governments, 
including Malaysia, Indonesia, the United Arab Emirates and 
Saudi Arabia.  The Kuwaiti CG expressed a strong interest in 
finding a way to provide training in Kuwait and to provide some 
other form of support for the mosque. 
 
 
 
¶14. (SBU) Despite all of the positive developments in An Giang, 
the province remains in flux and thus full of contradictions. 
An Giang was the province that sparked an incident in 2007 when 
local MPS forcibly ejected a Consulate team from their hotel 
room late a night.  At the same time the People's Committee has 
been courting international NGOs, we have also heard from some 
NGOs that the provincial Communist Party has been attempting to 
reign them in and may have even "denounced" some U.S. NGOs. 
 
 
 
HEADING HOME ON THE HIGHWAY TO THE FUTURE 
 
----------------------------------------- 
 
¶15. (SBU) Every Provincial Chairperson the group of CGs met 
expressed their plans and desires for more modern and 
efficienttransportation links, including airports, super 
highways, bridges and high-speed trains.  The situation is 
indeed grim and the lack of transportation infrastructure 
certainly represents one of the key barriers to development. 
While Can Tho, for example, is located only a little over one 
hundred miles from HCMC, the trip down took well over four 
hours.  Reaching Hau Giang, which is just 30 miles to the west, 
takes and additional 90 minutes.  The 150 mile trip from HCMC to 
the charming An Giang tourist and trading center of Chau Doc 
requires six to seven hours and three ferry crossings, two of 
which cannot accommodate trucks.  The poor state of 
transportation impacts every aspect of the economy.  Farmers' 
 
HO CHI MIN 00000050  005.2 OF 005 
 
 
incomes are negatively impacted by lack of quick access to the 
giant HCMC market for fresh fruits and vegetables.  (In HCMC, 
most consumers still insist on buying only "picked today" 
produce and either live or freshly slaughtered fish and meats.) 
Industrial development is stymied on two fronts. First, almost 
no foreign investors are willing to make the arduous trek south 
and instead opt for close-in locations even though congestion 
and labor shortages are growing problems.  Second, even the few 
investors who do travel south often decide that the relative 
advantages of available land and abundant local (rather than 
migrant) labor are not enough to outweigh the added logistical 
burden of a Mekong Delta location.  But, their world is about to 
change. 
 
 
 
¶16. (SBU) While the CGs were traveling, the new 62-kilometer 
long HCMC-Trung Luong freeway opened.  This Western-style 
highway (four lanes, limited access, no pedestrians, motorbikes 
or pushcarts), is part of a planned highway linking HCMC and Can 
Tho.  The opening of just this first section of the eventual 
highway cut one hour off the return trip to HCMC.  At the end of 
March, the new Can Tho bridge will open to traffic, cutting an 
additional 30 minutes off the trip.  Construction is underway on 
other segments of the highway, with a planned completion date of 
2013, at which time the HCMC-Can Tho trip should take about an 
hour and 40 minutes.  Additional road projects are under 
development to link Hau Giang into the highway.  A separate 
western Mekong Delta highway will link the provinces of An 
Giang, Kien Giang and Dong Thap with the HCMC hub.  The Can Tho 
airport, which currently runs flights only to Hanoi and Phu 
Quoc, is slated to become an international airport before the 
end o the year.  Once these new links are open, the Mekong Delta 
provinces will face profound change and greatly expanded 
opportunities.  Provinces that are forward looking enough to 
prepare through education, local administrative reforms, the 
development of local infrastructure, etc., will be poised for 
explosive growth. 
FAIRFAX