VZCZCXRO7576
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #1127/01 2760128
ZNR UUUUU ZZH
P 020128Z OCT 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8560
INFO RUEHHM/AMCONSUL HO CHI MINH 5179
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 001127 
 
(C O R R E C T E D  C O P Y - TEXT BELOW SIGNATURE LINE REMOVED) 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS MBROWN 
SINGAPORE FOR TREASURY 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EAID VM
SUBJECT:  GVN DISCUSSES ECONOMIC SITUATION, BIT AND BUSINESS 
CLIMATE 
 
REF: A) Hanoi 1095 ("IMF Says GVN Not Out of the Woods"); 
B) Hanoi 1108 ("Vietnam Economic Highlights"); 
C) "Governance in Vietnam: Program Options for USAID" 
 
HANOI 00001127  001.4 OF 002 
 
 
¶1. (U) This cable is sensitive but unclassified.  For official use 
only, not for dissemination outside USG channels or posting on the 
internet. 
 
¶2. (SBU) Summary:  In meetings with the DCM, officials at the 
Ministries of Finance, Planning and Investment, and Industry and 
Trade, and the Office of the Government discussed their plans to 
overcome Vietnam's macroeconomic challenges, their outlook on the 
Bilateral Investment Treaty (BIT) negotiations and the Trans-Pacific 
Strategic Economic Partnership Agreement (Transpac), and issues 
affecting the overall business climate.  The U.S. financial crisis 
was also a popular topic, with officials at every ministry asking 
for updates.  End Summary. 
 
COMPARING NOTES ON FINANCIAL TURMOIL 
------------------------------------ 
 
¶3.  (SBU) During her meeting with Finance Ministry (MOF) Vice 
Minister Tran Xuan Ha, the DCM reinforced the importance of 
macroeconomic stability to both local and foreign investors and 
noted the continued absence of a revised budget.  She asked Ha about 
the MOF's plans for fiscal spending during the second half of 2008, 
citing the mid-September IMF assessment that MOF planned to increase 
expenditures for the rest of the year (REF A).  Ha said that the 
Government of Vietnam (GVN) recently asked the ministries and 
provinces to cut another 10 percent of expenditures during 2008 (in 
addition to the initial 10 percent request earlier in the year), but 
said nothing about a revised budget.  The Vice Minister called the 
IMF conclusion "incorrect" because the IMF "should have looked at 
GVN cash flow" instead of second-half budget projections.  Ha stated 
that the GVN remained committed to controlling inflation. 
 
¶4.  (SBU) GVN officials were keen to know what the DCM thought about 
the financial turmoil in the United States.  Vice Minister Ha 
confided that a slowing down of the U.S. economy and of other large 
markets would almost certainly result in a contraction of Vietnam's 
exports.  The DCM explained that the solutions under consideration 
were meant to provide rapid relief so that the U.S. economy could 
move towards recovery, rather than taking many years to work out 
systemic issues as other countries had done. 
 
SCHEDULING THE FIRST ROUND OF BIT TALKS 
--------------------------------------- 
 
¶5.  (SBU) On the BIT, the DCM urged her GVN counterparts "to get the 
process going" before the end of the year.  "We don't expect the 
bilateral relationship to change, but it takes time for a new 
administration to get started," she said.  Ministry of Planning and 
Investment (MPI) Vice Minister Dung agreed, adding that he hoped to 
hold the first round of negotiations "soon."  He cautioned, however, 
that "given the importance [of negotiations], we have to have 
careful preparations, when it is signed we want to be prepared to 
implement it."  The Office of the Government's (OOG) Director of 
International Relations, Bui Huy Hung, and Ministry of Industry and 
Trade (MOIT) Vice Minister Hao were equally cautious, but both 
pledged to get to the table before the end of the year. 
 
TRANSPAC 
-------- 
 
¶6.  (SBU) The GVN officials also told the DCM that they were taking 
an even more cautious approach to Transpac.  The MPI's Dung likened 
Vietnam to a "sick man learning to go outdoors for the first time" 
and cited the need for a "comprehensive assessment" of new 
initiatives.  MOIT's Hao and the OOG's Hung said that the GVN had 
not made up its mind about participating and noted that they would 
need time to review such a complex proposal.  Hung added that the 
GVN has asked the Support for Trade Acceleration (STAR) program for 
assistance in understanding the potential benefits to Vietnam. 
[P1] 
U.S. BUSINESS CONCERNS 
---------------------- 
 
¶7.  (SBU) The DCM raised a number of business concerns with the 
MOIT, MPI and MOF, including the growing unpredictability of the 
GVN's taxation regime and the effect that this has on major U.S. 
company projects and Vietnam's overall business climate (REF B). The 
MOIT and MPI vice ministers recognized that the business climate in 
 
HANOI 00001127  002.4 OF 002 
 
 
Vietnam was less than ideal, and blamed these measures on the 
current macroeconomic challenges that the country is facing.  "I 
agree we should strive for transparency and predictability," VM Dung 
told her.  Finance Vice Minister Ha, however, defended the proposed 
mineral and oil tariff hikes, saying that Vietnam needed to 
"conserve its non-renewable resources."  The DCM urged him to 
implement such hikes gradually so that businesses could plan 
accordingly. 
 
GOVERNANCE REFORM 
----------------- 
 
¶8.  (SBU) The DCM took the opportunity to present MPI with a copy of 
the "Discussion Paper for Joint Vietnam/U.S. Consultation on 
Expanding Governance Technical Assistance," based on a lengthier 
study prepared by USAID (REF C).  Mission Vietnam had presented the 
Discussion Paper to the OOG in June, and the OOG forwarded the 
document to MPI.  As of September 25, however, our contacts at MPI 
claimed not to have received it.  MPI VM Dung acknowledged that this 
was the first time that he had seen the report but promised to 
review it and provide comments. 
 
MICHALAK