VZCZCXRO1137
PP RUEHHM
DE RUEHHI #0935 1411025
ZNR UUUUU ZZH
P 211025Z MAY 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 5417
INFO RUEHHM/AMCONSUL HO CHI MINH 3065
RUEHGP/AMEMBASSY SINGAPORE 2349
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS HANOI 000935 
 
SIPDIS 
 
DEPT FOR EAP/MLS AND EB/OMA 
DEPT PASS USTR FOR D BISBEE 
TREASURY FOR S CHUN AND A BAUKOL 
SINGAPORE FOR TREASURY S BAKER 
DEPT PLEASE PASS FED RESERVE SAN FRANCISCO FOR D FINEMAN 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID VM
SUBJECT: AMBASSADOR'S MEETINGS WITH STATE BANK, FINANCE ON CAPITAL 
CONTROLS 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET. 
 
REF: HANOI 932 
 
¶1.  (SBU) Summary:  When asked about GVN thinking on ways to address 
overheating in securities markets by the Ambassador during separate 
meetings on May 17 and 18, the State Bank Governor and the Finance 
Minister showed no hesitation in embracing the market approach (but 
did not explicitly rule out administrative controls) for dealing 
with the challenges of Vietnam's volatile stock market.  Both 
officials cited deficiencies in oversight and monitoring mechanisms 
and seemed receptive to assistance in these areas.  This message 
reports the content of the Ambassador's separate meetings on capital 
controls, which also covered other topics, and should be read in 
conjunction with reftel.  End Summary. 
 
¶2.  (SBU) In his opening remarks, the Ambassador referred to rumors 
earlier in the year that Vietnam was considering the imposition of 
capital controls to help deal with the overheating of the stock 
market.  He commended Vietnam for not imposing such controls.  The 
Ambassador welcomed the monetary authorities' market-friendly 
approach, emphasizing that free flow of goods and capital is 
essential to economic success.  He cautioned against future 
consideration of capital controls, citing experience in other 
countries, where the cost of controls outweigh any benefit. 
 
¶3.  (SBU) Looking ahead, the Ambassador hoped listing state-owned 
enterprises (SOE) on public exchanges would deepen capital markets 
and address robust demand for securities.  He urged early 
consideration of enhanced oversight of the banking and securities 
sectors, improved information and disclosure mechanisms for the 
benefit of investors, and public trading of shares on regulated 
exchanges.  To conclude his presentation, the Ambassador stressed 
the importance of policy-makers from both sides staying in touch on 
these issues. 
 
¶4.  (SBU) State Bank Governor Le Duc Thuy responded by condensing 
the GVN's choices for taming the overheated market to two options: 
should the GVN take administrative measures or economic measures? 
Continuing, he recalled that the GVN had received a wide range of 
recommendations.  In the end, the government opted not to impose 
capital controls and so far, the results have been good.  Governor 
Thuy said the authorities continue to monitor capital inflows and 
are working with the commercial banks and the equities markets in 
exercising risk management.  He observed that "the market boom took 
us by surprise," adding that the SBV is open to assistance in 
managing this phenomenon.  His specific plea for assistance was a 
request for help in managing venture funds and hedge funds. 
Finally, the Governor left open the possibility of further 
countermeasures. 
 
¶5.  (SBU) Finance Minister Vu Van Ninh's response to the 
Ambassador's admonition against capital controls generally tracked 
that of the State Bank Governor.  Ninh labeled capital markets a 
"big issue" and described the Ministry's interest in terms of 
protecting individual investors and promoting economic development 
and risk management.  The Minister stressed that there are no plans 
for administrative measures, repeating several times the virtues of 
a market-oriented response.  The Minister lamented that the GVN's 
monitoring function was dispersed.  He cited the stock market as 
needing improved supervision and more transparency; there should be 
greater oversight of the securities industry, banking and insurance. 
 The Minister suggested that a higher-level monitoring body was 
needed. 
 
¶6.  (SBU) Comment:  The GVN monetary authorities are pleased with 
the results to date of not imposing capital controls.  They readily 
acknowledge, however, their monitoring and oversight functions - and 
perhaps policy coordination - need to be enhanced.  This is an area 
that is ripe for further U.S. assistance.  End comment. 
 
MARINE