VZCZCXRO4042
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #2045/01 3391055
ZNR UUUUU ZZH
R 051055Z DEC 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6835
INFO RUEHHM/AMCONSUL HO CHI MINH 4024
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 HANOI 002045 
 
SIPDIS 
 
STATE PASS USTR FOR DBISBEE 
 
SIPDIS 
 
TAGS: ETRD ECON EINV PGOV KTEX PHUM VM
SUBJECT: OOG'S CHAIRMAN LAYS OUT HIS AGENDA IN THE U.S. IN MEETING 
WITH THE AMBASSADOR 
 
REF: A) Hanoi 1950; 
 
B) Hanoi 1994; 
C) Hanoi 1616; 
D) Hanoi 1212 
 
HANOI 00002045  001.2 OF 003 
 
 
¶1. (SBU) Summary:  In a December 5 meeting with the Ambassador, the 
head of the Vietnamese delegation to the TIFA talks in Washington, 
Office of the Government Chairman Nguyen Xuan Phuc, said that the 
GVN's top priority would be to overturn the apparel exports 
monitoring mechanism run by the Commerce Department.  Chairman Phuc, 
who will also lead a separate but concurrent mission to Washington 
on administrative reform, added that also high on his list would be 
to draw guidance from the United States on how to reform Vietnam's 
administrative regime to minimize red tape and improve the business 
climate.  Discussions on distribution and trading rights, the 
Generalized System of Preferences, designating Vietnam as a Market 
Economy, food safety and anti-money laundering topped off the list 
of the GVN's priorities.  The Ambassador and Chairman Phuc also 
discussed other issues likely to come up during the visit, including 
human rights, in particular the November arrests of two Amcits, the 
dispute with China in the South China Sea, Vietnam's record on IPR, 
the effectiveness of the U.S. programs to promote economic reform 
(STAR) and national competitiveness (VNCI), and fears that the GVN 
may back out of a deal to allow U.S. oil company Chevron to export 
gas. End Summary. 
 
THREE DELEGATIONS TAKE PART IN US-VIETNAM CONSULTATIONS 
--------------------------------------------- -- 
 
¶2. (U) In a meeting that extended well over its scheduled one hour, 
the Ambassador and Office of the Government (OOG) Chairman Nguyen 
Xuan Chairman Phuc discussed Vietnam's agenda during U.S. - Vietnam 
consultations in Washington, DC from December 10 - 18, under the 
Trade and Investment Framework Agreement (TIFA) and the 
USAID-sponsored Administrative Reform and Trading and Distribution 
Rights study missions.  Chairman Phuc is the head of Vietnam's TIFA 
and Administrative Reform delegations, while the Ministry of 
Industry and Trade (MOIT) leads the one on Trade and Distribution 
rights (which includes a December 5 - 7 leg in Los Angeles).  USTR 
is coordinating all the meetings in Washington, with interagency and 
Mission Vietnam support.  (Note: Phuc is the right-hand man of Prime 
Minister Nguyen Tan Dung, serving in a role that could be compared 
to chief of staff.  The fact that he is devoting the time and energy 
required to make this trip reflects both the importance of 
U.S.-Vietnam relations and Phuc's own commitment to broad-based 
reform fueled by USAID's Support for Trade Acceleration - STAR -- 
program.  End Note.) 
 
VIETNAM'S AGENDA STARTS WITH APPARELS 
------------------------------------- 
 
¶3. (SBU) Chairman Phuc told the Ambassador that seeking a repeal of 
the Import Monitoring Program (IMP) mechanism to monitor Vietnamese 
textile and apparel exports to the U.S. would be at the top of his 
agenda.  Vietnamese exporters have fought a well-publicized campaign 
against the IMP run by Commerce and, in meetings with the MOIT in 
the last week of November, demanded action from the GVN.  "We are 
facing a lot of pressure from the private sector," Phuc admitted. 
 
¶4. (SBU) The Ambassador replied that Phuc was likely to receive the 
same response that he got from Commerce Secretary Gutierrez during 
the latter's visit to Vietnam last November (Ref A), that is, that 
the IMP is here to stay until the end of the Administration. 
 
¶5. (SBU) Separately, a top MOIT official told Econoff that, failing 
abolishment of the IMP, the GVN would demand that a number of 
monitored items be removed.  He added that Vietnam fears that that 
second half of the year apparel orders, which tend to be higher, and 
the positive outcome of the first IMP report, which may have led 
manufacturers to throw caution to the wind, may result in a 
significant spike in orders, which would draw more attention. 
AmCham reports that the Vietnamese textile manufacturers 
association, VITAS, retained lobbyists in Washington last November 
to press their case. 
 
SECOND PRIORITY IS ADMINISTRATIVE REFORM 
---------------------------------------- 
 
¶6. (SBU) Chairman Phuc told the Ambassador that he had high hopes 
for the Administrative Reform tour, mentioning in particular the aim 
of streamlining regulations and easing registration procedures. 
"I'm very interested to see how the (Office of Management and 
Budget) operates," he said.  "We want to draw from your experience 
to help us create a good business climate."  Phuc and the other 
eight members of the study group plan to have similar meetings in 
South Korea, on the way to the United States. 
 
REQUEST FOR EXPANDED COMPETITIVENESS AND TRADE ASSISTANCE 
--------------------------------------------- ----- 
 
HANOI 00002045  002.2 OF 003 
 
 
 
¶7. (SBU) Chairman Phuc also mentioned that he would make the case 
for increased levels of assistance, particularly for the 
USAID-funded Support for Trade Acceleration (STAR) and Vietnam 
National Competitiveness Initiative (VNCI) programs.  "We are 
enthusiastic about STAR and VNCI, these two projects have been very 
efficient, especially in helping us develop our laws," he 
commented. 
 
TRADING AND DISTRIBUTION RIGHTS 
------------------------------- 
 
¶8. (SBU) The Chairman hopes that the Study Tour on Trading and 
Distribution Rights will also be helpful for both sides.  The issue 
has generated much debate in Vietnam, in particular since the July 
2007 issuance of Circular 9, which intended to provide guidance on 
existing laws but has instead muddled the waters on what foreign 
importers are allowed and not allowed to do until the distribution 
and retail sectors open up to foreign businesses in January 2009. 
The ten members of this Study Group are planning to meet with a USG 
interagency delegation and with private sector representatives 
during their time in Washington. 
 
VIETNAM INTENDS TO ASK FOR GSP 
------------------------------ 
 
¶9. (SBU) Chairman Phuc confirmed to Ambassador Michalak that Vietnam 
would ask to be included in the Generalized System of Preferences 
(GSP), which other GVN officials assured us would be done before 
¶2008.  The Ambassador urged Vietnam to consider carefully the 
qualifications required for participation in the program, in 
particular in the complex areas of labor and intellectual property 
rights (IPR). 
 
¶10. (SBU) The direct GSP benefits to Vietnam are not entirely clear 
(estimates run from as little as $10 million to as much as $400 
million, which would make Vietnam one of the top six beneficiaries). 
 Three high level GVN officials told us, however, that the main 
reason to apply is "symbolic," although they denied speculation that 
they sought it as a deliverable for a possible Prime Ministerial 
visit to the United States in early 2008.  MOIT officials also told 
us that they had hired professional assistance in Washington to help 
them make the case for GSP. 
 
MARKET ECONOMY DESIGNATION AND OTHER AGENDA ITEMS 
--------------------------------------------- ---- 
 
¶11. (SBU) Chairman Phuc told the Ambassador that Vietnam would also 
ask for market economy designation during the TIFA talks.  The 
United States committed during WTO accession talks to review the 
issue in 12 years, but several GVN officials told us that they are 
under the impression that we welcome moving this date forward.  Phuc 
added that at TIFA, Vietnam planned to discuss food safety import 
regulations and anti-money laundering cooperation.  Separately, 
MOIT, OOG and Ministry of Foreign Affairs (MOFA) officials, 
mentioned that they would also raise the issue of bonds on 
Vietnamese shQp exporters to the United States and opening 
Vietnamese bank branches in the United States. 
 
AMBASSADOR REMINDS PHUC OF THE HUMAN RIGHTS AGENDA 
--------------------------------------------- ----- 
 
¶12. (SBU) The Ambassador advised Chairman Phuc that he would face 
tough questions on human rights, particularly in light of the arrest 
of two Amcits and others in late November, whom the GVN accused of 
being part of a larger proscribed pro-democracy movement (REF B). 
Chairman Phuc agreed with the Ambassador that the GVN had to allow 
full consular access to the detained Amcits.  "That is your right 
and you are right to demand it," he said. After briefly describing 
the problems we encountered in our visit with one of the amcits Phuc 
told his staff to "make sure the Embassy can do its consular 
duties." 
 
 
¶13. (SBU) Phuc added that, although this was a "business trip" for 
him, he understood the high interest in Vietnam's human rights and 
religious rights situation, and promised to address them with his 
interlocutors.  "We should develop a roadmap to deal with these 
issues," he suggested.  Both as part of his Administrative Reform 
delegation, and individually as a GVN principal (the OOG Chairman is 
a ministerial position akin to the Prime Minister's Chief of Staff), 
Chairman Phuc plans to meet with congressional leaders and 
high-level officials at State. 
 
SOUTH CHINA SEA DISPUTE 
----------------------- 
 
¶14. (SBU) Ambassador Michalak also anticipated Washington interest 
in how Vietnam intends to address its dispute with China over waters 
 
HANOI 00002045  003.2 OF 003 
 
 
in the South Chine Sea.  Phuc said that bilateral discussions would 
continue "as good neighbors."  Separately, however, MFA officials 
told Econoff and visiting Deskoff that negotiations are not going 
well and that, while in Washington, Vietnam would ask the United 
States for assistance in preventing China from scaring off potential 
investors in the hydrocarbons-rich disputed waters. 
 
NEW EMBASSY COMPOUND 
-------------------- 
 
¶15. (SBU) The Ambassador also raised the protracted negotiations for 
a new embassy compound (NEC).  Phuc promised that, "by the end of 
the week," the Ambassador would have a counteroffer from the GVN. 
The Chairman, however, said he thought that the GVN would be unable 
to offer anything more than a 99-year lease on the NEC.  "A 198-year 
lease (as the United States has asked) will have no legal validity 
in Vietnam," he stated. 
 
POSSIBLE BREAKTHROUGH ON IPR? 
----------------------------- 
 
¶16. (U) The Ambassador also pointed to weak IPR enforcement and 
overdue regulations as one of the issues that would likely come up 
during Chairman Phuc's visit, in particular long-delayed criminal 
regulations on commercial scale trademark and copyright infringement 
(Refs C and D).   However, in a separate meeting on December 5, 
National Office of Intellectual Property (NOIP) officials told 
Econoff and visiting Deskoff that the Prime Minister had directed 
the Ministry of Science and Technology (MOST) to broker an 
inter-ministerial solution, and that MOST has scheduled a December 7 
meeting with relevant GVN agencies to discuss a way forward and 
issue criminal regulations (Septel). 
 
CHEVRON'S CONTRACTUAL COMPLICATIONS 
----------------------------------- 
 
¶17. (SBU) The Ambassador shared with Chairman Phuc concerns that the 
GVN may seek to prevent Chevron from exporting gas from its joint 
project with state-owned PetroVietnam in the Gulf of Thailand.  He 
urged caution lest contract obligations are breached.  "Before that 
happens, I urge you to have your lawyers look closely at the 
contract," Ambassador Michalak said.  Phuc vowed that the GVN would 
not intervene on behalf of either party and thought that the 
contract should be respected. 
 
COMMENT: PHUC IS PREPARED AND FOCUSED 
------------------------------------- 
 
¶18. (SBU) In our preparatory meetings for TIFA and the two study 
tours, it appears that the participating GVN officials have done 
their homework.  Our views on issues like GSP and the IMP may differ 
--and in the case of human rights differ drastically-- but we expect 
Phuc and his colleagues to be well prepared and willing to engage 
frankly on all the issues on the agenda.  End comment. 
 
MICHALAK 
H:\Draft Cables and Memos\120507 Cable - Amb Meeting with OOG 
Phuc.doc