VZCZCXRO1643
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHHI #2820/01 3111006
ZNR UUUUU ZZH
O 071006Z NOV 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3936
INFO RUEHHM/AMCONSUL HO CHI MINH 2113
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGV/USMISSION GENEVA 1143
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 HANOI 002820 
 
SIPDIS 
 
STATE FOR EAP/MLS AND EB/TPP/BTA/ANA 
STATE PASS USTR 
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD OVIP EIND EINV VM
SUBJECT: APEC COMMERCIAL DELIVERABLES: AMBASSADOR'S MEETING WITH OOG 
VICE CHAIRMAN PHUC 
 
 
HANOI 00002820  001.2 OF 002 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  IT CONTAINS BUSINESS 
PROPRIETARY INFORMATION. DO NOT POST ON INTERNET. 
 
¶1. (SBU) Summary: The Ambassador met with Nguyen Xuan Phuc, Vice 
Chairman of the Office of Government (OOG) (the Prime Minister's 
office), on November 3 to discuss the status of pending commercial 
projects involving American firms in advance of the President's 
visit to Vietnam.  The Ambassador reviewed the status of progress on 
eight pending commercial deals and outlined desired outcomes for 
each project at the time of the President's visit.  While Vice 
Chairman Phuc responded positively to many of these projects, and 
pledged that the GVN was looking seriously at what could be 
achieved, he did not provide concrete assurances that any of the 
endeavors would be concluded by mid-November.  End Summary. 
 
Pending Commercial Projects 
--------------------------- 
 
¶2. (SBU) The Ambassador began by highlighting the proposed sale of 
ten 787 aircraft to Vietnam Airlines by the Boeing Company, noting 
that aircraft orders have a large impact on the bilateral trade 
balance.  With Vietnam's exports to the United States continuing to 
accelerate and set to exceed American exports by a factor of 
nine-to-one in 2006, the Ambassador noted that such a large trade 
imbalance has political and economic consequences.  The need to move 
trade more toward balance and to provide for growth in U.S. exports 
heightens the importance of this aircraft deal.  The Ambassador 
indicated that we seek a clear signal or announcement that Vietnam 
Airlines intends to buy Boeing aircraft. 
 
¶3. Continuing the discussion of the proposed Boeing procurement, the 
Ambassador sought to draw a distinction between the Boeing 787 
aircraft and the A350 plane that Airbus is hoping to develop as a 
competitor model.  Addressing the perceived price advantage of the 
Airbus aircraft, the Ambassador noted that fuel efficiency and 
reliability, in addition to initial price, are all important 
considerations in the selection of an aircraft.  The Ambassador also 
noted that the 787 is a known quantity while the A350 is simply a 
proposed project.  Boeing is prepared to sit down with Vietnam 
Airlines to discuss the range of factors involved in the purchase, 
including price.  For these discussions to be productive, Boeing 
must have definitive information on how many planes the Airline 
intends to procure and the desired delivery schedule; and must 
receive a refundable deposit of USD 155,000 for each plane to be 
ordered.  The Ambassador also highlighted the support provided by 
the U.S. Eximbank to guarantee financing for the original Boeing 
777s purchased by VNA in 2001 and the USD 413 million Preliminary 
Commitment that has just been approved by the Eximbank board in 
support of the Airline's initial order last year of four 787s. 
 
¶4. (SBU) Moving on, the Ambassador addressed two major power 
projects American firms are seeking to develop; the 1000mw AES 
facility proposed for Mong Duong in Quang Ninh Province; and the 770 
to 990 mw Gannon plant to be located in southern Dong Nai Province. 
Citing the $1.4 billion AES facility, the Ambassador noted that this 
project addresses needs identified by the GVN to develop more 
electricity generating capacity and to attract greater levels of 
U.S. investment.  The Ambassador noted the AES goal of completing a 
project principles agreement by the time of APEC may prove 
difficult, but urged progress in this regard.  The Ambassador also 
highlighted the pending $322,000 grant the U.S. Trade and 
Development Agency (TDA) has offered to provide technical assistance 
to the Ministry of Industry in negotiating contracts and agreements 
associated with the AES project.  The Ambassador urged that efforts 
be made to have the grant agreement covering this project signed 
during APEC, also noting the agency had selected Vietnam as its 
"Country of the Year" in 2006.  The Ambassador provided Phuc with an 
advance copy of a letter addressed to Prime Minister Nguyen Tan 
Dzung from the TDA Director, informing the PM of the country of the 
year designation.  (Note: In a subsequent meeting with the 
Ambassador on November 6, AES executives indicated that the signing 
of a project principles agreement was no longer a feasible goal for 
APEC.  The firm is now suggesting it may seek to conclude a "project 
development agreement" with its Vietnamese joint-venture partner, 
Vinacomin, during APEC. End Note). 
 
¶5. (SBU) Addressing the second proposed U.S. power project, the 
Ambassador noted that the Gannon Group's gas-fired generating 
 
HANOI 00002820  002.2 OF 002 
 
 
facility has received support from the government and party in Dong 
Nai Province, as well as from the Ministry of Planning and 
Investment.  The Ambassador urged that the proposed project be 
included in Vietnam's power master plan and that the GVN clear the 
way for negotiations to commence with state-owned PetroVietnam on 
gas supply and Electricity Vietnam regarding a power purchase 
agreement. 
 
¶6. (SBU) Switching to the financial services sector, the Ambassador 
raised the long-pending insurance operating license being sought by 
Liberty Mutual.  He referenced indications are that the Ministry of 
Finance is likely to grant a license in December, with a letter 
committing to this timetable being issued before APEC. The 
Ambassador suggested this would be a welcome development, but even 
more welcome would be the issuing of the actual license at that 
time. 
 
¶7. (SBU) The Ambassador then raised a pending sale to cell phone 
operator VinaPhone of some USD 12 million in cellular infrastructure 
equipment for which Motorola is bidding.  The Ambassador highlighted 
Motorola's long history in Vietnam and world-class technology, 
urging the firm's proposal be given serious consideration and that 
efforts be made to make a selection in time to arrange a contract 
signing during APEC. 
 
¶8. (SBU) Turning back to major pending American investments, the 
Ambassador expressed pleasure that SSA Marine had recently been 
awarded an investment license to develop a major facility at the 
southern port of Cai Mep.  He urged prompt consideration for the 
firm's second proposed port project at Cai Lan, in the north. 
 
¶9. (SBU) He also raised the substantial investment in the minerals 
sector under consideration by Alcoa.  The Ambassador outlined the 
interest of Alcoa in obtaining approval of the Prime Minister's 
office for a memorandum of understanding (MOU) with stated-owned 
Vinacomin to explore the feasibility of developing a $1.5 billion 
bauxite mine in Vietnam's central highlands.  Approval of the 
proposed MOU would be an important step toward implementing a market 
economic project in under-developed Dak Nong Province. 
 
¶10. (SBU) Drawing the discussion of pending commercial issues to a 
close, the Ambassador raised a relatively small, but significant 
project to build a cold storage facility in HCMC by the U.S. firm 
Antara.  He urged that the firm's request for an extension of the 
term for its investment license be granted.  The Ambassador 
concluded his presentation on commercial deliverables by handing 
Phuc an advance copy of a letter from Secretary of Commerce 
Gutierrez.  The letter, addressed to Prime Minister Dzung, sought 
his intervention in seeking to maximize progress on these matters in 
advance of the President's visit. 
 
Phuc Responds 
------------- 
 
¶11. (SBU) The Vice Chairman's response to the Ambassador's 
presentation was positive, but non-committal.  He noted that Airbus 
had offered very good financial terms for its proposed A350 aircraft 
and though Vietnam very much wanted to purchase the Boeing 787, 
pricing is an important factor. Phuc commented that he was aware of 
good results being achieved on the AES project and that a final 
decision was awaited from the Prime Minister, which he hoped would 
be taken in time for the MOU to be signed during APEC.  He indicated 
he would push for consideration of the Gannon proposal, as well as 
the Liberty Mutual license.  For the Cai Lan port, Phuc noted that 
many firms wished to invest in Vietnam's port facilities and made 
only cursory comments about a number of the other projects raised, 
including Motorola, and Antara.  In summation, Vice Chairman Phuc 
indicated that Vietnam authorities and involved firms were working 
hard on each of the projects identified by the Ambassador, noting 
that the Prime Minister had given instructions that negotiations on 
these projects be accelerated. 
 
MARINE