This record is a partial extract of the original cable. The full text of the original cable is not available.

210955Z Dec 05

UNCLAS SECTION 01 OF 02 HANOI 003343 
 
SIPDIS 
 
STATE FOR EAP/MLS, EB/TRA AND EB/TPP 
STATE PASS MARAD FOR BRUCE CARLSON 
STATE PASS USTR ELENA BRYAN AND GREG HICKS 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
SENSITIVE - DO NOT POST ON THE INTERNET 
 
E.O. 12958: N/A 
TAGS: EWWT ETRD VM
SUBJECT: SUCCESSFUL MARITIME NEGOTIATIONS IN VIETNAM 
 
 
¶1. (SBU) Summary:  The United States and Vietnam initialed, 
ad referendum, a draft Agreement on Maritime Transport after 
three days of intensive negotiations on December 6-8, 2005. 
The agreement provides shipping companies of each party the 
right to form 51 percent joint ventures immediately and to 
establish wholly owned subsidiaries within each other's 
territory after five years.  Up to now, state owned 
monopolies had controlled Vietnam's maritime sector. 
However, according to the annex, upon Vietnam's entry into 
the WTO, one U.S. shipping company may establish a wholly 
owned company in Vietnam before the five-year limit. While 
the recent EU agreement included a similar right, U.S. terms 
for equity joint ventures are more favorable. End Summary. 
 
¶2. (U) A U.S. team led by Bruce Carlton, Associate 
Administrator for Policy and International Trade, U.S. 
Department of Transportation and a Vietnamese team led by 
Mr. Vuong Dinh Lam, Chairman, Vietnam Maritime 
Administration, held discussions December 6-8, and agreed, 
ad referendum, on the text of an Agreement on Maritime 
Transport.  This was the third negotiating session in 2005. 
The two sides met last June hoping to reach agreement in 
time for Vietnamese Prime Minister Phan Van Khai's visit to 
the United States, but their positions were too far apart at 
that time.  After lawyers on both sides have approved the 
draft text, the two sides will seek a suitable date for 
signing, possibly on the margins of one of next year's APEC 
meetings in Vietnam. 
 
¶3.  (SBU) Liberalization of Vietnam's transportation sector 
has been the critical focus of the negotiation of this 
Maritime Agreement, although the Agreement also addresses 
fundamental maritime transportation matters, such as vessel 
documentation, immigration and customs, and assistance to 
vessels in distress.  While the United States maritime 
market is open, state-controlled monopolies control nearly 
every aspect of operation in Vietnam's maritime sector.  Any 
company wishing to do business in Vietnam must do so through 
a joint venture, with the Vietnamese partner controlling the 
majority share of the business decision-making and profits. 
 
¶4.  (SBU) The Agreement will give vessels of each party the 
right to transport cargo and passengers between each other's 
territory and the territory of third countries.  Shipping 
companies of each party will have the right to invest up to 
51 percent of the legal capital (a controlling share) in 
joint ventures in the territory of the other party.  These 
joint venture enterprises would be allowed to perform a 
comprehensive range of maritime services, including: cargo 
agency, cargo documentation, cargo management, ocean freight 
forwarding, storage and warehouse services, and container 
station and depot services.  In five years, shipping 
companies will be allowed to establish wholly owned 
companies in each other's territory.  The joint ventures 
(and later the wholly-owned companies) will have the right 
to use inland transportation in connection with ocean 
shipping.  Finally, entities of either party will have the 
right to fund port construction and to operate such ports. 
A separate annex to the agreement provides that, upon 
Vietnam's entry into the WTO, one U.S. shipping company will 
be permitted to set up a wholly owned subsidiary in Vietnam, 
notwithstanding the five year limit.  The term of the 
Agreement is five years, with an automatic renewal 
provision.  There is the customary consultation provision 
and termination clause that either Party may exercise at any 
time. 
 
¶5.  (SBU) Comment: The agreement met the U.S. negotiating 
team's goal of meeting or exceeding the rights that Vietnam 
gave other foreign shipping companies in agreements that it 
had signed with Singapore and with the EU. (A similar right 
to one wholly owned company was recently granted to the EU, 
but the U.S. obtained more favorable terms for equity joint 
ventures.)  The Agreement not only sets up the framework for 
maritime shipping between the United States and Vietnam to 
expand to meet future needs, but also should help Vietnam 
attract the foreign investment it urgently needs to improve 
its maritime transportation infrastructure.  The United 
States will also consider providing some assistance in the 
maritime transport sector, such as maritime training to 
Vietnamese seafarers, and the Maritime Administration is 
exploring the possibility of other forms of development 
assistance.  End Comment. 
 
MARINE