VZCZCXRO6263
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHHI #2316/01 2540351
ZNR UUUUU ZZH
O 110351Z SEP 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3338
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHHM/AMCONSUL HO CHI MINH 1776
RUEHGV/USMISSION GENEVA 1115
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 HANOI 002316 
 
SIPDIS 
 
STATE FOR EAP/MLS AND EB/TPP/BTA/ANA 
STATE PASS USTR DAVID BISBEE 
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD OVIP VM
SUBJECT: TREASURY SECRETARY PAULSON HOSTS VIETNAMESE ENTREPRENEURS 
 
 
HANOI 00002316  001.2 OF 002 
 
 
SENSITIVE - DO NOT POST ON INTERNET 
 
¶1. (SBU) Summary:  On September 7, Treasury Secretary Paulson hosted 
a diverse group of Vietnamese entrepreneurs, representing sectors 
from finance to technology.  The entrepreneurs spoke freely about 
the difficulties they faced.  Finding and retaining good personnel, 
especially in the face of competition from foreign firms, was one 
issue they stressed.  Another was dealing with a still omnipresent 
state, with its demands for excessive paperwork, monopoly power, and 
an unstable and non-transparent legal system.  Instability was also 
a concern expressed about the still underdeveloped capital markets. 
The entrepreneurs emphasized the importance of WTO accession, which 
they saw as both a benefit and a challenge.  In response to a 
question from the Ambassador, they admitted that corruption was 
Vietnam's biggest problem and asked for U.S. training to help combat 
it. End summary. 
 
¶2.  (SBU) On September 7 during his participation in the APEC 
Financial Ministerial, Secretary Paulson held a lunch with seventeen 
Vietnamese entrepreneurs, representing a wide range of sectors, 
including banking, investment, distribution, education, law and 
technology.  Most were completely private, but there was one former 
state-owned enterprise, which still had 8 percent state ownership, 
down from 30 percent when it was first equitized.  The business 
representatives were young and included men and women. 
 
¶3.  (SBU) The Secretary invited the guests to introduce themselves 
and say something about their companies and the problems they faced. 
 There were a number of common themes that came out of the 
discussion. 
 
-- Skill shortages:  The problem most often raised was the 
difficulty of finding and retaining good workers and the need for 
better education.  One businessman lamented that it was hard to 
attract good staff since his firm could only offer on-the-job 
training, not formal training opportunities as foreign firms could. 
A businesswoman noted that an important benefit of working with her 
foreign partner was that it could offer her employees training 
opportunities.  One businessman said that keeping talented workers 
was especially a challenge for small and medium sized businesses and 
state owned enterprises.  Another complained that employees are 
shortsighted and think only of money.  Other companies also noted 
the importance of better training and education for the economy 
generally.  The Secretary pointed out that finding quality personnel 
is key to businesses everywhere.  Speaking about retention, he noted 
that a shortsighted perspective is a universal problem, but that it 
is especially prevalent in transition economies, like Vietnam's, 
because people lack confidence that reforms will continue. 
 
-- Government obstacles:   Another important theme was the continued 
obstacles that the government places on business and the need for 
further reform.  Participants urged Secretary Paulson to help 
Vietnam speed up reforms and create a favorable environment for 
business.  Several businessmen complained about excessive paperwork. 
 One said it took eight official signatures to clear an article 
through customs.  Bureaucratic procedures created long delays for 
his foreign investor clients, such as Bechtel Corporation, which is 
trying to build a power plant in Vietnam, he said.  An advertising 
firm representative said that it took 60 days to get an advertising 
license that was only good for a year.  Another firm complained that 
the state monopoly in the telecom hindered his business development. 
 Several firms noted the lack of transparency and stability in laws 
and regulations.  One firm said that the problem was not so much 
with the laws as with implementation.  Another noted that private 
firms were not consulted in drafting new legislation.  The Secretary 
assured his guests that he raised the need to push forward with 
reforms and to create a good environment for business in all his 
meetings with government officials and noted that lack of 
transparency and excessive regulation fuel corruption.  He said that 
government monopolies are always opponents of market reforms. 
 
-- WTO Accession:  Several participants stressed the importance of 
WTO accession and hope that the United States will soon pass PNTR. 
An investment firm representative said that WTO accession would 
reduce business risk significantly because the government of Vietnam 
would no longer be able to reverse its market policies.  WTO rules 
would also equalize conditions between foreign and domestic, private 
and state-owned companies.  Some firms were concerned about the 
challenges they would face after WTO accession, with one participant 
 
HANOI 00002316  002.2 OF 002 
 
 
ruefully noting that if you couldn't compete now you certainly would 
not be able to compete after WTO accession. 
 
-- Capital Market Development:  The firms working in finance or 
investment stressed that financial markets were still underdeveloped 
and unstable.  The Secretary said that instability was 
characteristic of new markets like Vietnam and the solution was 
liberalization.  A strong financial system is essential, he said, 
and there is not a single example of a vibrant stock market that has 
not opened up to foreign investment. 
 
¶4. (SBU) After the entrepreneurs had spoken, the Ambassador 
expressed surprise that no one had mentioned corruption as a 
problem.  His comment provoked an immediate response.  One 
entrepreneur said that corruption was Vietnam's biggest problem; it 
hindered both foreign and domestic investment.  She asked how the 
United States, through training and education, could help.  Another 
businesswoman agreed that training and education would be useful, 
but emphasized that greater transparency would reduce corruption. 
The Secretary called corruption a "cruel and unfair tax" and said 
that decreasing regulation and increasing transparency would help 
reduce opportunities for corruption.  However, while government 
would have to begin the fight against corruption, it cannot do it 
all.  The best companies never give in to corruption, he affirmed. 
 
¶5. (U) This cable has been cleared by Treasury staff. 
 
MARINE