VZCZCXRO1271
OO RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHHI #0771/01 0940728
ZNR UUUUU ZZH
O 040728Z APR 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1362
INFO RUEHHM/AMCONSUL HO CHI MINH CITY 0861
RUEHZS/ASEAN REGIONAL FORUM COLLECTIVE
RUEHZU/APEC COLLECTIVE

UNCLAS SECTION 01 OF 04 HANOI 000771 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KCOR VM
SUBJECT: CORRUPTION IN VIETNAM: MINISTER FALLS, PARTY GETS 
SERIOUS 
 
Ref: A) HCMC 320; B) Hanoi 30; C) Hanoi 628; D) 05 Hanoi 
3043 
 
HANOI 00000771  001.2 OF 004 
 
 
¶1. (SBU) Summary: The media is gleefully reporting a 
sensational corruption scandal involving millions of dollars 
in graft that has cost the Minister of Transportation his 
job.  The case amplifies the recent wave of calls for anti- 
corruption reform that has dominated recent public 
discussion of the upcoming National Communist Party 
Congress' political platform, and exacerbated the Party's 
concerns that corruption is undermining the Party's and the 
Government's legitimacy.  Recent anti-corruption measures 
include the passage of a new law on corruption, the 
establishment of two new anti-corruption authorities and, 
most strikingly for us, the semi-public release of an 
internal CPV report on corruption that documents the fact 
that more than half of Vietnamese citizens pay bribes, and 
nearly half of all civil servants admit to taking them.  The 
Party and the leadership are under pressure to deal with 
corruption, but the problem is so big, with so many Party 
and Government officials involved, that it may defeat their 
best efforts.  We should seize this opportunity to assist 
them by approving and funding the ABA's December 2005 rule 
of law project proposal.  End Summary. 
 
PMU 18 
------ 
 
¶2. (SBU) Vietnam's press has been operating at maximum RPMs 
over the evolving corruption story involving Public 
Management Unit 18, a construction company handling large 
infrastructure projects, some with substantial ODA 
contributions.  A business contact in HCMC noted that PMU-18 
was the recipient of World Bank, Asian Development Bank and 
Japanese ODA.  Even by Vietnam's standards, the multi- 
million dollar scale of graft in the PMU-18 case is enormous 
and the case has revealed titillating details about the 
gambling and nepotism habits of the senior Government 
officials involved that have entranced Vietnamese readers. 
The press, particularly the popular Tuoi Tre (Youth) 
newspaper (Ref A), has pursued this case rabidly, a level of 
transparency that the Party leadership would not have 
tolerated previously.  The involvement of Vietnam's national 
soccer team has also captured the public's attention.  The 
case broke with the revelations that Bui Tien Dung, the head 
of PMU-18, was part of a ring placing enormous bets on 
soccer games, including games played by the national team. 
This earned Dung the nickname "million-dollar gambler" and 
led to a deeper investigation that netted even larger fish. 
 
¶3. (SBU) The Deputy Minister of Transportation, Nguyen Viet 
Tien, was implicated in the scandal by a March 28 Ministry 
of Public Security report and required to step down; on 
March 30, a spokesman for the Prime Minister declared that 
"the Transport Minister must take responsibility, and after 
that deputy ministers must follow.  Joint responsibility 
will be defined through investigation."  On April 1, the 
Party announced that a proposal to remove Transport Minister 
Dao Dinh Binh had been submitted to the Politburo. Binh 
submitted his resignation April 3.  Speaking to reporters 
afterwards, Binh said he "takes full responsibility for all 
wrongdoing."  World Bank representative Klaus Rohland told 
the Ambassador April 3 that First Vice Minister Pham The 
Minh is in charge at the Ministry of Transportation. 
 
¶4. (SBU) The activity has not been confined to the 
Government.  The Communist Party has also been drawn in, and 
is concerned to the point where senior Politburo member Phan 
Dzien (among the most powerful Party officials) gave an 
interview to the staid Party mouthpiece "Nhan Dan" (People's 
Daily) on the PMU 18 case.  In a remarkable public display 
of Party humility, Phan Dzien said the Party bears 
responsibility for corruption in its ranks and in the 
Government.  "The case proved a serious decline in the 
virtue and lifestyle of many cadres and Party members, many 
of whom hold senior positions," he said, in the widely read 
(and reprinted) article. 
 
The Larger Problem 
------------------ 
 
¶5. (SBU) The PMU 18 scandal is the dramatic and photogenic 
tip of a huge corruption iceberg in Vietnam.  The 
concentration on market reforms and economic development 
over the last 20 years with little or no attention to public 
administration reform has led to an epidemic of rent-seeking 
behavior in virtually every sector of the State.  Not only 
big construction contracts, but every single other 
transaction Vietnamese people conduct with their Government, 
 
HANOI 00000771  002.2 OF 004 
 
 
including medical treatment, land transactions, business 
licenses, school registration and, above all, traffic 
enforcement, involves paying bribes of various sizes.  The 
corruption that bedevils average citizens has been verified 
by external observers; Transparency International's 
Corruption Perceptions Index (CPI) for 2005 groups Vietnam 
with Belarus, Eritrea, Honduras, Kazakstan, Nicaragua, 
Palestine, Ukraine, Zambia and Zimbabwe in a ten-way tie for 
107th place with a score of 2.6.  "Less than 3 on the CPI," 
TI says, "indicates a severe corruption problem." 
 
¶6. (SBU) Vietnam's own internal corruption survey is more 
specific, and even bleaker.  The Communist Party's Internal 
Affairs Commission, working with the Swedish International 
Development Agency, conducted a year-long survey into 
corruption behaviors and attitudes across Vietnam.  They 
surveyed and conducted interviews with thousands of citizens 
and civil servants in more than a dozen ministries and State- 
owned enterprises, and produced a report in November 2005. 
The 100-page report reveals the pervasiveness of corruption. 
More than 40 percent of the civil servants polled admitted 
to taking bribes.  More than 60 percent of the Vietnamese 
people reported having to pay bribes.  Land and construction 
agencies are perceived as corrupt by more than 90 percent of 
people and businesses, and by more than 85 percent of civil 
servants.  Over 46 percent of businesses say they routinely 
pay bribes when they meet with difficulties; 55 percent of 
businesses give "presents" to public officials on holidays 
to avoid problems in the future.  A quarter of businesses 
surveyed pay pre-emptive bribes to avoid "difficulties." 
 
¶7. (SBU) The justice sector is no better.  In seven 
provinces, 50 percent of people interviewed said they "pay 
extra money" when going to the People's Procuracy or the 
People's Court.  Over 57 percent said they pay extra money 
in the event of a traffic violation.  Le Manh Luan, Chief of 
Staff of the Internal Affairs Commission of the CPV, told 
Poloff that as high as those numbers seem, they are probably 
even higher in reality because they only reflect what people 
were willing to admit in face-to-face interviews; if the 
survey accounted for people's reluctance to admit giving or 
taking bribes, the percentages would likely be higher. 
Nguyen Quang Ngoc, the Swedish Embassy expert who also 
worked on the report, agreed that the numbers almost 
certainly understate the scope of the problem. 
 
¶8. (SBU) The most striking aspect of the CPV's report may 
not be what it contains, but rather what they did with it: 
the normally secretive and uncommunicative Communist Party 
allowed the report to be translated into English and 
circulated among the diplomatic and NGO community.  They 
also sent copies to Vietnamese news agencies, as well as all 
public offices.  According to press contacts, the CPV 
stopped short of permitting the news agencies to publish the 
details of the report, which is still labeled "draft" and 
therefore considered an internal Party document.  But the 
relatively wide release of the report, not to mention the 
willingness of the normally reclusive Internal Affairs 
Commission (which had been dodging us for almost two years) 
to meet with us, was unprecedented. 
 
¶9. (SBU) "Our greatest concern is bribery and the connection 
between state officials and the people's money," the CPV's 
Luan told Poloff.  "Last year we were able to prosecute only 
300 cases of corruption in the whole country, and yet the 
public sector climate is such that more than one-third of 
public officials believe that a bribe-related `bonus' is 
normal and that they deserve compensation outside their 
regular salary."  The circulation of the report, he said, is 
designed to send a message to public employees that the 
Party and the Government are getting serious about 
corruption, and that it will have consequences.  The new 
anti-corruption law (passed in November 2005), together with 
major statements by the Prime Minister to the National 
Assembly that he will head the new national anti-corruption 
standing committee, are designed to send a similar message 
to the people. 
 
¶10. (SBU) That message is a very important one, because it 
goes to the heart of the Party's concerns about corruption: 
as the most pressing issue for the Vietnamese public (64 
percent of the population rates the issue as "the most 
serious matter" facing Vietnam today), the Party's apparent 
inability to solve the corruption problem is corrosive to 
its popular legitimacy.  In early March, at the end of the 
officially-sanctioned public comment period on the draft 
Political Report to be adopted during the Party's 10th 
National Congress (refs B and C), Luan told Poloff that the 
Party had received more than 20,000 comments from citizens, 
 
HANOI 00000771  003.2 OF 004 
 
 
and "many" of those had focused on corruption.  An editor 
who created a survey on the Political Report on his highly 
popular news website told Poloff that he had received "many 
thousands" of responses and that most of them had been 
primarily concerned with corruption. 
 
Turning the Ship 
---------------- 
 
¶11. (SBU) The corruption problem is enormous and well- 
recognized, and it is a challenge to the Party's and the 
Government's legitimacy, but considering the massive 
pervasiveness, what can the GVN do about it?  GVN and CPV 
experts recognize that the situation has reached a point 
where aggressive enforcement is not a solution; the 
authorities literally cannot arrest everybody.  "If we 
actually arrested all the corrupt traffic officers," Luan 
said, "there would be no one to control the streets of 
Vietnam's cities and there would be chaos."  (Comment: 
Actually, chaos is an apt description of Hanoi's traffic 
most days.  End Comment.)  This is also acknowledged in the 
CPV report, where demoralized civil servants say the 
pervasiveness of corruption, the lack of protection for 
whistleblowers and the failure to punish corrupt officials 
means that more than 80 percent of them would neither 
challenge nor report corruption in their organizations. 
 
¶12. (SBU) Facing this reality, Party and GVN officials 
tasked with combating corruption have decided to focus on 
incremental changes that strengthen the framework against 
corruption rather than try to adopt a pure enforcement 
approach.  Luan said that the initial steps to counter 
traffic police graft are to require three traffic police 
officers at any checkpoint; forbid traffic police officers 
from carrying more than VND 50,000 (about three dollars) on 
their persons at any time; and, requiring traffic police to 
sign receipts for fines collected.  For higher-level 
corruption, the plan is to develop clear rules and 
regulations against corruption (through the new anti- 
corruption law) and to adopt asset declaration rules to 
assist in identifying officials who are enriching 
themselves.  Here, however, Luan said Vietnam faces severe 
cultural obstacles.  "Many corrupt officials do not keep 
money or assets themselves, but instead pass their earnings 
on to family members, sometimes distant ones."  A corrupt 
official, therefore, may show no increase at all in his 
personal assets.  "Making it more difficult," Luan said, "is 
the fact that many Vietnamese do not use banks, and 
establishing the value of land and buildings is not well 
understood."  The GVN and the Party rely a great deal on the 
press, he said, to ferret out corruption. 
 
¶13. (SBU) Relying on the press for this function causes 
severe heartburn for Party and Government officials at 
times, a senior Embassy press contact told Poloff with a 
grin.  "We report on corruption cases a lot, even when it 
gets uncomfortable for the Ministry of Culture and 
Information.  But we tell them that if they try to tell us 
to stop, we will publish the fact that they told us to stop, 
and so far they think that would be worse than the 
embarrassment of Government officials."  Still, he 
acknowledged, it is possible to go too far.  One of his 
young reporters did a photoessay on the homes of the senior 
officials of the Hanoi People's Committee (a bastion of 
political conservatism) that he had to spike because of the 
potential consequences of publishing it, he said. 
 
¶14. (SBU) Dr. Nguyen Van Thanh, Director of the Institute 
for Inspection (an arm of the Government Inspectorate, an 
agency-level inspector-general and auditing organization) 
explained the main steps of the Prime Minister's action plan 
on anti-corruption: 
 
- In the next few months, the GVN will pass the necessary 
guidelines and regulations necessary to implement the anti- 
corruption law; 
- The GVN will launch an anti-corruption awareness-raising 
campaign, based at the National Academy for Public 
Administration.  This will include training for all 
branches, agencies and ministries of the GVN; 
- The GVN will establish two specialized anticorruption 
authorities: one in the Government Inspectorate, and one in 
the Ministry of Public Security; 
- The GVN will establish a national steering committee to 
coordinate anti-corruption activities; and, 
- Each agency will develop a code of conduct for anti- 
corruption. 
 
¶15. (SBU) Dr. Thanh said that the most important part of the 
 
HANOI 00000771  004.2 OF 004 
 
 
new law is that it prevents corruption by "closing the 
doors" and making public officials and the people aware that 
corruption is unnecessary, inefficient and illegal.  "We 
need to reduce the opportunity to engage in corruption," Dr. 
Thanh explained.  "This will involve an anti-harassment 
component of the new law.  It will give people more 
information, create more transparency and provide oversight 
in the form of the new anti-corruption authorities to whom 
the people can appeal." 
 
¶16. (SBU) Luan, asked about this interpretation of the GVN's 
efforts, added that although prevention will be the major 
part of the anti-corruption fight and "all measures will be 
made with an understanding of Vietnam's social, commercial, 
economic and political context," the strategy will include 
anti-corruption investigations and prosecutions. 
 
So Important 
------------ 
 
¶17. (SBU) Perhaps the most insightful comments on the 
importance of anti-corruption efforts came from designated 
GVN Wise Woman Pham Chi Lan, veteran member of the Prime 
Minister's Research Commission.  "How can we build our 
democracy without responding to the public's concerns?" she 
asked Poloff, rhetorically.  "We must do this for our own 
people, as well as for the purpose of creating an attractive 
climate for investors."  The future of the country is at 
stake, she said.  "Corruption causes a brain drain in 
Vietnam.  Smart and dynamic young people see corrupt 
officials and the public sector gobbling resources and 
buying up assets with graft.  It crushes their motivation to 
stay in Vietnam and get rich and build the country.  Without 
attacking corruption, we cannot build our nation." 
 
Comment 
------- 
 
¶18. (SBU) They get it.  The Party gets it, the GVN gets it 
and the National Assembly gets it.  The people understand, 
as does the media.  There is near unanimity on the issue of 
combating corruption in Vietnam, even (according to the 
CPV's internal survey) among remorseful bribe-taking civil 
servants.  However, there has been plenty of soul-searching 
when other major corruption scandals have been revealed 
before with no significant impact on the problem.  The 
challenges are daunting.  The pervasiveness of corruption, 
the informal personal and familial links between individuals 
at the top and the networks of patronage they control and 
the tiny public sector salaries that cap out for a minister 
at approximately USD 200 per month present a tremendously 
difficult hurdle for even the most dedicated anti-corruption 
crusaders.  GVN and CPV activists hold out hope that in this 
area, they will be able to follow the path of Singapore, 
Hong Kong, Taiwan and Korea to overcome corruption. 
 
¶19. (SBU) The high profile of the PMU-18 case, the 
importance to the public of the corruption issue, the CPV's 
willingness to address the issue and publicize embarrassing 
data, and the NA, CPV and GVN's joint efforts to address 
corruption through structural reforms suggest that we have 
the opportunity to make a positive contribution to the rule 
of law in Vietnam.  One excellent option to do that would be 
to approve the ABA rule of law project funding proposal 
submitted in December 2005 (Ref D); we should take advantage 
of the favorable timing to move it forward as soon as 
possible.  End Comment. 
 
MARINE