VZCZCXRO9677
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0849/01 1290831
ZNR UUUUU ZZH
P 090831Z MAY 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 5310
INFO RUEHHM/AMCONSUL HO CHI MINH 2995
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 05 HANOI 000849 
 
SIPDIS 
 
STATE FOR EAP/MLS; EB; EB/ESC/IEC 
STATE PASS TO USTR DBISBEE 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
 
 
USDOE FOR INTERNATIONAL AFFAIRS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD BTIO EINV WTRO PREL PGOV VM
SUBJECT: U.S.-ASEAN BUSINESS COUNCIL BOTH OPTIMISTIC AND CONCERNED 
ABOUT VIETNAM 
 
HANOI 00000849  001.2 OF 005 
 
 
(U) SENSITIVE BUT UNCLASSIFIED.  DO NOT POST ON THE INTERNET. 
 
¶1. (SBU) Summary: Eighteen U.S. business representatives delivered a 
message of optimism mixed with concern during a mission of the 
U.S.-ASEAN Business Council (USABC) to Hanoi on May 3 and 4.  The 
highlight of the mission's two-day series of meetings with 
Government of Vietnam (GVN) officials, mostly at the Vice Minister 
level, was a 45-minute meeting with Prime Minister Nguyen Tan Dzung, 
who emphasized the GVN's intention to continue economic reforms 
along with enthusiastic, though unspecified, encouragement for the 
development of the U.S.-Vietnam business relationship.  He did 
explicitly state that Vietnam is looking forward to the conclusion 
of a Trade and Investment Framework Agreement (TIFA).  The media 
provided extensive and positive press coverage of the mission.  End 
Summary. 
 
¶2. (U) Eighteen U.S. business representatives delivered a message of 
optimism about opportunities in Vietnam in the wake of WTO entry 
during a mission of the U.S.-ASEAN Business Council (USABC) to Hanoi 
on May 3-4.  Throughout the visit, the representatives expressed 
concern about the lack of clarity in government regulations, 
procedures and decision making and expressed frustration with 
continuing intellectual property rights violations.  They noted they 
were the first U.S. business mission to Vietnam following the 
country's accession to the World Trade Organization (WTO) and 
Vietnam's obtaining Permanent Normal Trade Relations (PNTR).  The 
businesses represented were ConocoPhillips, Exxon Mobil, Raytheon 
International Inc, Ford Motor Company, IBM, Alcoa, The Boeing 
Company, Vietnam Partners, Chevron Vietnam, Abbott International, 
Agilent, Hewlett-Packard, Time Warner, APCO Worldwide, GE, JHPIEGO, 
United Telecom Services and UPS. 
 
PRIME MINISTER EXPRESSES SUPPORT 
------------------------------ 
 
¶3. (SBU) The highlight of the mission was a 45-minute meeting with 
Prime Minister Dzung, who presented himself as a cordial and 
enthusiastic supporter of U.S. investment.  Dzung emphasized the 
GVN's intention to continue economic reform along with enthusiastic, 
though unspecified, encouragement for the development of the 
U.S.-Vietnam business relationship.  While he noted that he looks 
forward to the signing of a TIFA as a deliverable for President 
Nguyen Minh Triet's visit to the United States this year, he did not 
hint at the conclusion of any other of the large business deals, 
such as a Boeing sale of 787s to Vietnam Airlines or a Chevron gas 
supply contract.  Frances Zwenig, USABC Counselor, Jim Andrews, 
Vietnam Business Development Manager for ConocoPhillips and Mike 
Fleming, Vietnam Sales Manager for Boeing, spoke for the USABC 
group, congratulating Vietnam for its progress, but speaking of 
concerns. The Ambassador also attended. 
 
¶4. (SBU) ConocoPhillips's Andrews noted that a constant concern is 
the lack of clarity in new business decrees, regulations and 
internal procedures to support these changes.  "We would urge a 
dialogue with the investment community to ensure that there are no 
unintended consequences for new legislation," he said. 
Many investors fear that Vietnam's infrastructure development will 
not keep pace with demand.  Two types of infrastructure urgently 
need investment: 1) hard infrastructure, including railroads, ports, 
roads, air ports, air planes and electricity; and 2) soft 
infrastructure, i.e., skilled workers in the legal, business, 
technology, earth sciences and health professions, Andrew said. 
 
¶5. (SBU) Boeing's Fleming opined that this is Vietnam's time, but 
the times of opportunity never last quite as long as we would like 
them to.  "As global companies we have to weigh opportunities in one 
region or another.  In the interest of helping Vietnam achieve its 
goals, we hope to see Vietnam speed the ease of doing business," he 
said. (Note: This message is related to Boeing's desire for a 
quicker decision by the GVN on the Boeing sale.  Boeing says the GVN 
must make the purchase decision soon or lose the slots reserved for 
delivery in 2014 and 2015.  End Note.) 
 
¶6. (SBU) Dzung, smiling and attentive throughout, spoke for the next 
25 minutes, noting the development of the economic relationship 
between the United States and Vietnam in the last ten years and 
outlining Vietnam's major goals.  Recent reforms had successfully 
transformed Vietnam into a "genuine market economy," and the GVN's 
"democratic" policies and emphasis upon social equity were 
responsible for its success.  "Our policies reflect the will of the 
 
HANOI 00000849  002.2 OF 005 
 
 
people.  We believe the trust of the people is the root of 
sustainable development," he said.  The GVN will continue the 
development of its global economic integration, which required an 
institutional and legal framework.  "We are going to change our 
legal framework to make ourselves conform to the international rule 
of the WTO," he said.  "You said that you are concerned about the 
clarity of legal documents.  That is our concern too." 
 
¶7. (SBU) Dzung also addressed the concerns mentioned by the USABC 
members.  Tipping his hat to an often raised concern by Time Warner 
during the mission, Dzung said "We know IPR protection is the 
foundation for economic development."  He also agreed that Vietnam 
must urgently address both its hard and soft infrastructure needs 
and specifically asked for United States assistance in developing 
the skills of Vietnam's workforce.  "This is one of our primary 
intentions," he said.  On the TIFA, Dzung stated that he believed 
the agreement would represent "another step forward for the success 
of Vietnam."  At the end of his presentation, Dzung said that 
Vietnam is very interested in the many projects represented in the 
room.  "I have asked the ministries to take steps to realize your 
proposals," he said. 
 
¶8. (SBU) The Ambassador closed the meeting noting that Vietnam has 
many friends in the United States and the companies participating in 
this trade mission are among the most influential.  He urged the 
Prime Minister to ensure that his government helps make President 
Triet's visit to the United States later this year as productive as 
possible.  He expressed his hope that some of the deals represented 
by the firms present could be announced during the visit and also 
emphasized the potential benefit of the two governments signing a 
TIFA. (Note:  In a separate meeting, the Ambassador briefed the 
USABC group in detail about our growing concerns regarding human 
rights.  End Note.) 
 
LUNCH FOR VICE MINISTER FOR FOREIGN AFFAIRS 
------------------------------------------ 
 
¶9. (SBU) At a luncheon for Vice Minister of Foreign Affairs Le Van 
Bang, USABC Counselor Zwenig read a letter signed by U.S. Senators 
John Kerry and John McCain commending Bang for his work to normalize 
U.S.-Vietnam relations extending back to his time as Ambassador to 
the UN and chief of the liaison office to the United States in the 
early 1990s.  Zwenig, Virginia Foote--former President of the 
U.S.-Vietnam Trade Council and now President of Vietnam Partners 
LLC, an investment bank--and the Ambassador recalled warmly the 
critical role Le Van Bang played throughout his years of working on 
U.S.-Vietnam relations and wished him well in his next assignment. 
(Note: Le Van Bang is expected to become Vietnam's next Ambassador 
to China.  End Note.) 
 
ECONOMIC DEVELOPMENT STRATEGY AND PLANNING 
----------------------------------------- 
 
¶10. (SBU) In a session devoted to economic development and 
infrastructure investment, Vice Minister of Industry Do Huu Hao and 
Vice Minister of Planning and Investment Nguyen Bich Dat described 
the GVN's three development policy pillars:  economic growth, social 
equity and environmental protection.  The goal is to turn Vietnam 
into an industrialized economy by 2020, Dat said.  Vice Minister Hao 
said the rate of industrial growth in Vietnam is expected to be 
double that of economic growth and he emphasized the numerous 
opportunities for foreign investors in the energy industry, 
particularly in power stations, renewable resources and refineries. 
Vietnam aims to build a nuclear power station by 2015, he added.  Ha 
Khac Hao, Deputy Director General of the Ministry of Transportation, 
said that additional opportunities exist in the transportation 
infrastructure, particularly the north-south road axis.  He also 
noted upcoming port projects in Hai Phong and Can Tho, as well as 
airport projects such as an international air terminal in Danang. 
 
¶11. (SBU) In the question and answer period, Chevron's Andrew Latham 
asserted that Vietnam is facing "challenges related to legislation 
that is changed without investor consultation," a lack of 
transparency in government structures, decision making bottlenecks 
and a lack of skilled human resources.  He said that the GVN is 
making regulatory reform progress, "but in the energy sector, it is 
slow."  Foreign investors also face a lack of clear boundaries 
between the roles played by the state-owned energy monopoly, which 
simultaneously acts as joint-venture partner, regulator, buyer and 
seller of petroleum products, he said.  (Note: Lathan was referring 
 
HANOI 00000849  003.2 OF 005 
 
 
to state oil and gas monopoly PetroVietnam. End Note.)  He also 
urged a resolution of the dispute between China and Vietnam over the 
Spratly Islands, noting that the gas resources there needed to fuel 
Vietnam's growth cannot be developed.  Michael Fleming of Boeing 
urged a decision by Vietnam Airlines on its purchase of Boeing 
aircraft, noting that Vietnam Airlines' fleet would have to nearly 
triple to 31 airplanes by 2015 to meet its growth needs. 
 
MINISTRY OF POST AND TELEMATICS 
------------------------------- 
 
¶12. (SBU) Vice Minister Tran Duc Lai of the Ministry of Post and 
Telematics (MPT) presented at a second session on economic 
development.  The session was dominated by questions put forth by 
Hugh Stephens, Time Warner's Senior Vice President for International 
Relations and Public Policy for the Asia Pacific region.  Stephen 
urged GVN officials to fulfill Vietnam's WTO intellectual property 
rights commitments, noting that one digital satellite television 
firm, Vietnam Multimedia Corporation (VTC), owned by MPT and 
operating in "pilot" status for three years, has been pirating Time 
Warner content such as CNN and HBO for years.  Vice Minister Lai did 
not commit to a change, only saying that "we are working to make the 
experimental period as short as possible."  Subsequent to this 
meeting, the Vice Minister helped to schedule meetings between Time 
Warner and representatives from VTC to discuss their business 
operations and pirating of Time Warner-owned content. 
 
MINISTRY OF TRADE AND WTO ACCESSION 
----------------------------------- 
 
¶13. (SBU) In a session on Vietnam's trade policy after joining the 
WTO, Vice Minister of Trade Luong Van Tu and President of the 
Vietnam Chamber of Commerce and Industry (VCCI) Mr. Vu Tien Loc 
described how the GVN and Vietnamese businesses are responding to 
new responsibilities, opportunities and challenges now that Vietnam 
is a WTO member.  VM Tu summarized the legal reforms Vietnam has 
undertaken to comply with its WTO commitments, noting specifically 
its joining of the Berne Convention and ongoing work to institute a 
more robust regime to protect and enforce intellectual property 
rights.  Loc discussed the optimism among Vietnamese enterprises and 
their aspirations to partner with U.S. firms.  The GVN is working 
closely with VCCI's member companies to educate them on Vietnam's 
WTO commitments and the practical impact that its membership will 
have on their operations.  Additional vocational training and human 
resources development are needed, Loc added, suggesting this as a 
possible area for international investment and cooperation. 
 
¶14. (SBU) In the Q&A session with the panel members, U.S. businesses 
welcomed the prospect of a TIFA as an opportunity to continue 
dialogue and explore ways to expand bilateral economic cooperation. 
One firm suggested the creation of an energy sector working group 
under the TIFA, while another noted its hope that TIFA discussions 
could eventually lead to additional openings in Vietnam's key 
service sectors.  IPR protection is paramount for U.S. businesses, 
explained one delegation member, noting the desire to see enhanced 
enforcement of Vietnam's BTA and WTO obligations on IPR protection, 
particularly in the prevention of signal and broadcast piracy.  The 
delegation also expressed willingness to assist training Vietnamese 
businesses to understand international business practices and 
Vietnam's WTO commitments better. 
 
¶15. (SBU) Vice Minister Tu agreed that the signing of a TIFA, if 
realized, would be a great step forward.  Vietnamese businesses are 
also optimistic about new cooperative opportunities through a TIFA. 
Many VCCI member companies will travel to the United States this 
summer with President Triet, where Mr. Loc hopes they will be able 
to sign a number of high-value commercial deals.  Responding to the 
proposed development of an energy-sector working group, the VM 
agreed that investment in the energy field is a legitimate interest 
for both countries, and he hopes to see further U.S. investment in 
the energy sector, particularly refineries, as well as other 
projects to develop Vietnam's core infrastructure.  Finally, Tu 
agreed that a gap remains between the IPR legal regime and the 
reality in Vietnam's market, but reiterated that Vietnam is fully 
committed to implement its laws and is working to strengthen 
inspection and enforcement efforts. 
 
MINISTRY OF FINANCE 
------------------- 
 
 
HANOI 00000849  004.2 OF 005 
 
 
¶16. (SBU) Vice Minister of Finance Truong Chi Trung said the GVN 
plans to continue to develop the country's capital markets and speed 
up the equitization of State Owned Enterprises (SOEs).  About 200 
firms currently trade on the official markets in Ho Chi Minh City 
and Hanoi, and 800 on the informal over-the-counter market.  The 
equitization process is essential for the restructuring of SOEs, he 
said.  These equitizations were creating new opportunities for 
capital market development as many firms are being listed publicly. 
The GVN will focus on concluding equitization between now and 2010, 
with a focus on major SOEs.  Colin Low, President of General 
Electric (GE) for Singapore, the Philippines and Vietnam, commended 
the GVN for raising the cap on foreign holding of Vietnamese 
commercial banks and asked for the Vice Minister to clarify the 
requirements for "strategic partners" who invest in banks.  Vice 
Minister Trung said that the definition in the law is vague and that 
a new decree on equitization to replace Decree 187 would spell out 
these requirements more specifically.  Virginia Foote said that many 
laws had been passed for Vietnam to join the WTO, but many questions 
remain about issues related to corporate governance.  Vice Minister 
Trung acknowledged the problem, adding, however, that new laws on 
accounting and auditing would require companies to apply 
international standards.  A new law on taxation would also lead to 
many new business practices at Vietnamese firms, he said. 
 
NATIONAL ASSEMBLY 
----------------- 
 
¶17. (SBU) In a May 4 working lunch session on lawmaking and the 
fulfillment of WTO commitments, a panel including National Assembly 
Foreign Affairs Committee Vice Chairperson Madame Ton Nu Thi Ninh 
and National Assembly Economic and Budget Committee Members Danh Van 
Thanh and Truong Huu Chi opined that U.S.-Vietnam relations are at a 
very unique moment of opportunity.  This opportunity will not last 
forever, the legislators cautioned, adding that the National 
Assembly, the GVN and the United States must take actions to 
capitalize on the great momentum that has developed between our two 
countries.  Madame Ninh outlined the three main challenges she 
believes Vietnam is facing in the post-WTO environment:  1) the need 
for significant infrastructure development in Vietnam; 2) the need 
to reform Vietnam's education system and develop better human 
resources; and 3) the challenge of legal enforcement and 
implementation of Vietnam's new WTO commitments. 
 
¶18. (SBU) Madame Ninh envisions the National Assembly playing a 
greater role in each of these areas, and encouraged U.S. businesses 
to keep "an open channel" with NA members to ensure that Vietnam 
upholds its commitments.  Vice Chairperson Ninh also stressed the 
important role that a strong judiciary should play in strengthening 
and improving Vietnam's business environment.  Finally, she urged 
U.S. businesses to work with Vietnamese firms to organize 
delegations such as the current USABC delegation to Vietnam; as such 
trips can go far in developing stronger ties between our countries. 
 
 
MINISTRY OF HEALTH 
------------------ 
 
¶19. (SBU) The Ministry of Health's (MOH) Tong Hoai Nam described to 
USABC members the problems in Vietnam's healthcare system. 
According to Nam, Vietnam lacks funds to upgrade its healthcare 
system.  Moreover, at present, Vietnam has a serious shortage of 
preventative medical staff and many healthcare workers have not 
received sufficient training.  About 3.5 million Vietnamese contract 
diseases such as the flu, malaria and tuberculosis each year, but 
preventative medicine remains inadequate.  Nam said Vietnam's policy 
makers are working to upgrade Vietnam's healthcare system.  The GVN 
has completed a plan that aims by 2010 to increase significantly the 
number of preventative medicine specialists.  In addition, MOH is 
trying to develop a new model for the health insurance system.  Nam 
will give more details of Vietnam's "master healthcare plan" to the 
USABC after it is completed. 
 
¶20. (SBU) Ms. Leslie Mancuso of JHPIEGO, an international health 
organization affiliated with John Hopkins University, told the group 
that JHPIEGO can enhance the quality of healthcare services for 
women and families through training and health education.  However, 
JHPIEGO will not provide funds for MOH plans.  GE's Colin Low raised 
questions about equipment and products from China and India that the 
GVN does not allow to be used in Vietnam.  Nam responded that the 
GVN does not purchase this equipment because much of Vietnam's 
 
HANOI 00000849  005.2 OF 005 
 
 
healthcare budget comes via aid from the Japanese Government.  The 
GVN can only spend Japanese Government aid money on Japanese 
equipment, Nam added. 
 
PRESS COVERAGE 
-------------- 
 
¶21. (U) Press coverage of the USABC meetings was extensive and 
positive, with nearly every major news daily and internet news 
source covering the events.  Separate pieces covered the panel 
sessions, the lunch with Vice Foreign Minister Le Van Bang and the 
meeting with Prime Minister Dzung. 
 
MARINE