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Viewing cable 08HOCHIMINHCITY248, OUSTING CORRUPT LEADER IS A START, BUT CAN THO NEEDS

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Reference ID Created Released Classification Origin
08HOCHIMINHCITY248 2008-03-07 11:39 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Ho Chi Minh City
VZCZCXRO8318
OO RUEHDT RUEHPB
DE RUEHHM #0248/01 0671139
ZNR UUUUU ZZH
O P 071139Z MAR 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3845
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 2561
RUCPDOC/USDOC WASHDC PRIORITY 0068
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 4067
UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000248 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, USAID/ANE DONAVAN, EEB/TPP/BTA/ANA 
STATE PASS USTR FOR BISBEE 
USDOL FOR DUS PONTICELLI, ZHAO 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR CHUN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND PGOV PINR VN
SUBJECT: OUSTING CORRUPT LEADER IS A START, BUT CAN THO NEEDS 
TRANSPARENCY AND COMPETITION 
 
 
HO CHI MIN 00000248  001.2 OF 002 
 
 
1. (SBU) Following allegations of land-deal corruption, the 
Communist Party Central Committee reprimanded and fired Can Tho 
People's Committee Chairman Vo Thanh Tong on March 3.  This is 
good news for the "capital of the Mekong" and an encouraging, 
though not unprecedented, development.  Can Tho's private sector 
maintains they are frozen out of the economy, with SOE bias and 
poor transparency creating an environment where bureaucratic 
ineptitude and corruption are endemic.  As a result, most of the 
city's 16.5 percent growth (double the national average) last 
year came through official development assistance or State-owned 
enterprises (SOEs) developing massive infrastructure projects. 
Tong's successor, Mr. Tran Thanh Man, is a well-connected Can 
Tho politician who made his name battling "social evils" but 
will have his hands full trying to open up Can Tho's economy. 
End Summary. 
 
Lax Management and Land Scandal Bring Down Municipal Leader 
--------------------------------------------- -------------- 
2. (SBU)  On March 3, the People's Council of Can Tho 
Municipality announced that Can Tho People's Committee Chairman 
Vo Thanh Tong and Vice Chairman Pham Phuoc Nhu had been removed 
from their positions for administrative improprieties.  Media 
reports focused on two charges:  Tong's approving "excessive" 
performance bonuses for some city departments and his role in 
improperly licensing land developments in Can Tho City. 
 
3. (SBU) Central Committee Party Inspectors found that Tong 
ignored investment licensing regulations when he signed a 
decision for South Korea's Chong Ho VN Company to buy "golden 
land" in downtown Can Tho for a bowling center.  The land 
quickly changed hands with the Korean firm netting a tidy profit 
that Party Officials felt the city should have been able to 
capture directly.  This bad decision looked worse when Vice 
Chairman Nhu produced a letter from Tong directing the vice 
chairman to award the Chong Ho the license, circumventing normal 
city licensing procedures.  The Party Central Committee's 
Inspection Committee officially "reprimanded" Tong and Nhu on 
December 28, 2007 for "having loosely managed and monitored land 
deals".  (Note:  In the Party ranks, the lightest form of 
penalty is reprimand, then comes 'warning', 'removal' from Party 
position and 'expel' from Party.  End note.) 
 
4. (SBU) Corruption associated with land deals grabs headlines, 
but Tong also made administrative decisions that are best 
inappropriate and possibly even corrupt.  In the Vietnamese 
system, if city department exceed their pre-set revenue targets, 
the People's Council can authorize performance bonuses.  Tong 
and Nhu approved performance bonuses some 5.3 billion VND (U.S. 
$330,000) in excess of the legal limits.  (Comment:  This is a 
far from modest sum by Vietnamese standards, given it is roughly 
400 times the per capita income in Vietnam.  End comment.)  In 
January, the Inspection Committee of the Party Central Committee 
issued a "warning" to Tong and Nhu for "serious violations in 
management" in approving these excessive and illegal bonuses. 
Shortly after the lunar New Year holiday, the two officials were 
removed from office. 
 
Lack of Competition and Transparency Breed Corruption 
--------------------------------------------- -------- 
5. (SBU)  By censuring and removing Tong and Nhan, the Communist 
Party may be responding to the symptoms without treating the 
disease affecting Can Tho -- an overwhelming bias in favor of 
State Owned Enterprises (SOE's) over private firms.  Can Tho's 
economy grew at a blistering 16.3 per cent in 2007, nearly twice 
the national average, but the economy is tough for the private 
business community.  (Comment:  Infrastructure spending drove 
the growth statistics.  The Can Tho bridge alone will cost $340 
million, and recent GVN reports describe a new Mekong Delta 
infrastructure fund of over $300 million.  End comment.) 
According to the private Vietnamese firms who make up the Can 
Tho Business Association, however, the infrastructure boom has 
not benefited private firms at all.  Not only do master 
contracts go to SOE's, even smaller sub-contracts flow 
exclusively to SOE's.  Business leaders complain that an opaque 
and corrupt bidding process for public works and an 
entrepreneur-averse government bureaucracy disadvantage the 
private sector.  Private companies also find it difficult to 
meet the minimum capital requirements to bid on major 
infrastructure projects.  Even for private projects, financing 
is difficult to come by because banks that lend freely to SOEs 
turn away collateral-poor entrepreneurs. 
 
 
HO CHI MIN 00000248  002.2 OF 002 
 
 
6. (SBU) On paper, at least, Can Tho is a business-friendly 
city.  Private business leaders state, however, that while 
higher-level provincial officials "talk the talk" of a one-stop 
shop for licensing projects and registering businesses, line 
bureaucrats that issue permits and assign contracts are 
"uneducated" and often require informal payments. 
 
Foreign Investors Wary 
---------------------- 
7. (SBU) Foreign investors also tell us Can Tho's investment 
environment keeps many away despite the city's growth rate. 
Inside the eerily empty building housing Can Tho's Department of 
Planning and Investment (DPI), officials told Econoff that while 
donors pledged $67 million in ODA last year, private foreign 
investors committed only $13 million.  DPI attributed the 
admittedly low amount of FDI to the higher construction costs 
required by the sandy local soil and an incompetent city 
bureaucracy.  Recent efforts by city officials to improve the 
quality of their workforce, including hefty signing bonuses and 
free housing for successful job applicants with Masters' or PhD 
degrees, have yet to yield fruit.  Queried about a possible link 
between recently-exposed high-level corruption and the paucity 
of FDI, officials maintained that such malfeasance was not a 
factor, noting that the leaders in question frequently traveled 
abroad to drum up foreign investment. 
 
Comment 
------- 
8. (SBU) By sacking the chairman of one of Vietnam's largest 
cities, the Party is making a very public statement about the 
battle against corruption.  Unfortunately, the sacking was not 
accompanied by changes in underlying rules and processes that 
produce an environment that is highly conducive to corruption. 
The ability of senior party and government officials to arrange 
the sale or transfer of land to themselves, their families and 
their political supporters ranks among the most pervasive and 
ingrained forms of public corruption in Vietnam.  In Can Tho, as 
in most of Vietnam, land use and planning decisions are still 
largely left up to individuals rather than regulated in a 
systematic, transparent manner.  In firing Tong, the Party also 
officially only cited his "mismanagement" and "improper 
licensing" rather than outright corruption.  Unfortunately, 
omission of corruption charges not only reflects a deference to 
a senior party official but also a widespread feeling among many 
party officials that rigged land deals are not inherently 
corrupt as long as those involved are not too greedy.  Despite 
these negative indicators, change is occurring in many 
provinces.  Successful provincial leaders tell us policy and 
analytical tools like the USAID-funded Vietnam Provincial 
Competitiveness Index have provided them with an almost ideal 
combination of objective feedback on performance and information 
on best practices for improving economic governance.  We will 
encourage Tong's replacement, Mr. Tran Thanh, to take these 
lessons to heart, especially transparency, SOE bias and land 
management. 
 
Biographical Notes 
------------------ 
9. (SBU) Can Tho's new Chairman, Mr. Tran Thanh, was born on 
August 12, 1962 in Truong Long Commune, Chau Thanh A District, 
Hau Giang Province and holds a bachelor's degree in politics and 
a master's degree in business administration.  Prior to his 
March 2, 2008 election, Mr. Man was Secretary of the Party 
Committee of Binh Thuy District, Can Tho City and Substitute 
Member of the Central Party Committee.  Before being transferred 
to Binh Thuy, Man was Vice-Chairman in charge of cultural and 
social affairs of Can Tho Province from 1999-2004, Chief of 
Staff of Can Tho Province People's Committee and Secretary of 
the Youth's Union of Can Tho Province.  Man is quite open in 
discussion with Consulate officers and is considered tough in 
combating social evils during his term as Vice-Chairman of Can 
Tho province.  In April 2007, he applied for a visa to travel to 
the U.S. to meet with some American potential investors in Can 
Tho.  Just after he was elected People's Committee Chairman, Man 
said that his top priorities would be developing human 
resources, infrastructure, schools, hospitals, housing projects 
in Can Tho.  End bio notes. 
 
10. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX