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Viewing cable 08HANOI90, ECONOMIC DEVELOPMENT AND IPR ENFORCEMENT IN VIETNAM'S CHINA

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Reference ID Created Released Classification Origin
08HANOI90 2008-01-28 01:29 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Hanoi
VZCZCXRO2223
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0090/01 0280129
ZNR UUUUU ZZH
R 280129Z JAN 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7051
INFO RUEHHM/AMCONSUL HO CHI MINH 4183
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
UNCLAS SECTION 01 OF 03 HANOI 000090 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EEB/OIPE 
USTR FOR DBISBEE AND RBAE 
 
E.O. 12958: N/A 
TAGS: ECON KIPR EAID EINV ETRD OTRA EIND VM
SUBJECT: ECONOMIC DEVELOPMENT AND IPR ENFORCEMENT IN VIETNAM'S CHINA 
BORDER REGION 
 
REF: (A) 07 Hanoi 1817; (B) 07 Hanoi 1838; (C) 07 Hanoi 2064 
 
HANOI 00000090  001.2 OF 003 
 
 
1. (SBU) Summary: Vietnam's mountainous northeast border region with 
China has tied its economic development plans to Vietnam's growing 
international trade.  Provincial governments are making the most of 
their geographic advantages and reaping growth rates that exceed the 
8.5 percent national average.  Lang Son province has capitalized on 
its 250 km border with China to encourage trade-related services, 
resulting in 11.6 percent GDP growth in the province in 2007.  Lang 
Son officials are also focused on reducing the 29 percent poverty 
rate through increased education and training.  Along with its 
economic opportunities, the long border with China presents 
challenges for local officials.  Lang Son is trying to confront 
rampant counterfeit goods, most of which enter from China.  The 
capacity constraints in overcoming intellectual property rights 
violations this significant challenge were evident in visits to 
several border gates.  Provincial authorities have taken some steps 
to protect IPR, but their ultimate success rests in translating 
these efforts into concrete enforcement results.  End summary. 
 
2. (U) This is the latest in a series of reports (Reftels) on 
provincial travel by Embassy and Consulate General personnel to 
understand better the level of economic development and 
competitiveness in provinces throughout Vietnam.  On January 16, 
members of the Embassy economic section traveled to the mountainous 
northeast province of Lang Son to discuss with local government and 
national border officials the challenges and opportunities facing 
the region, including combating intellectual property rights (IPR) 
violations along the border with China. 
 
BANKING ON TRADE FOR THE FUTURE 
------------------------------- 
 
3. (U) The northeastern border province of Lang Son is an important 
connection between southern China and Vietnam's northern economic 
hubs of Hanoi and Haiphong.  The province has a 250 km long border 
with China, presenting provincial officials with both economic 
opportunities and significant challenges.  There are two large 
international border gates (open to all international commerce and 
nationals) and two national border gates (limited to only Vietnamese 
and Chinese nationals and their goods) in Lang Son.  A 
well-developed series of national highways connects the province 
with other urban centers in the north as well as the South China 
Sea.  A railway with connections to Hanoi and Beijing also runs 
through the center of the province. 
 
4. (U) Director of the Lang Son Trade and Tourism Department, Mr. Ha 
Hong, explained that the province's economy is shifting to more 
trade-related services as more imports and exports pass through this 
gateway to China and Vietnam's market continues to develop.  In 
2007, Lang Son had a "solid" 11.6 percent GDP growth rate, up more 
than 1.5 percent from 2006.  Services account for 39 percent of the 
province's GDP, matching the 39 percent contribution from 
agriculture and far exceeding the 22 percent share of GDP from 
industry.  Hong explained that Lang Son officials aim for services 
to comprise 45 percent of the province's GDP by 2010.  They intend 
to reach this goal by capitalizing on the province's location to 
expand trade and cooperation with China, Japan and Korea, and other 
ASEAN members.  Drawing additional investment in infrastructure 
(roads, railway and expanding the border gates) will be a focus of 
the province, Hong said.  Lang Son has developed a 17 square 
kilometer "economic cooperation area" on the Chinese border, where 
it hopes to attract local and foreign investment to conduct export 
processing services.  A transit warehouse to facilitate trade 
between ASEAN countries and China is already planned for this area, 
Hong noted. 
 
POVERTY REDUCTION A TOP PRIORITY 
-------------------------------- 
 
5. (U) Nearly 80 percent of the province's 746,000 inhabitants are 
ethnic minorities.  Director Hong said that the province's per 
capita annual income in 2007 was $600, compared with the national 
average of approximately $870.  Poverty rates are high and 29 
percent of Lang Son's population earns less than $200/year. 
Provincial authorities want to reduce poverty levels to 10 percent 
and eliminate the gap between the average provincial and national 
per capita income in the immediate future.  Bemoaning the "limited" 
national budget for poverty reduction, Lang Son officials have 
directly approached businesses and foreign donors for assistance. 
Hong noted that a number of NGOs from Germany and Holland are 
working in the province, and that Vietnamese-Americans have returned 
to the province to provide private assistance, which he estimated at 
several hundred million Vietnamese Dong (100 million VND = $6,250) 
in 2007. 
 
 
HANOI 00000090  002.2 OF 003 
 
 
6. (U) The province's poverty reduction strategy is focused on 
improving education and training opportunities.  Currently, nearly 
100 percent of children attend primary school, and the rate for 
those attending secondary schools is "catching up" to that level, 
provincial officials explained.  Lang Son has a teaching college and 
is expanding training in the fields of health, economics and 
practical business applications.  They are actively seeking 
additional donors and partners to improve education opportunities 
for local citizens. 
 
LOOKING TO IMPROVE ITS LOW PCI SCORE 
------------------------------------ 
 
7. (U) Attracting foreign investment is the lynchpin of Lang Son's 
future growth strategies.  The Lang Son People's Committee has 
adopted several measures to bring more money into the province, 
including printing brand new bilingual marketing materials touting 
the province's potential and opening separate foreign direct 
investment (FDI) and trade promotion centers.  Trade and Tourism 
Director Hong recognized, however, that Lang Son must work to 
improve the low score it received in the 2007 Provincial 
Competitiveness Index (it was ranked 59 out of 64 provinces). 
Several investors' recent concerns were resolved very quickly, Hong 
added, and provincial officials are under mandate to continue 
measures to improve and streamline administrative procedures. 
 
INTELLECTUAL PROPERTY RIGHTS: CONFRONTING THE CHALLENGE 
--------------------------------------------- ---------- 
 
8. (U) Lang Son officials face a significant challenge in combating 
rampant IPR violations, manifest in the form of counterfeit goods 
entering the province from China.  While the concept of IPR is 
relatively new to Vietnam, Lang Son officials understand Vietnam's 
responsibility to protect intellectual property, including under its 
WTO and BTA commitments, Director Hong said.  He described Lang 
Son's IPR action plan, which has resulted in "good coordination" 
between provincial trade, science and technology, customs and police 
authorities.  Hong said that Lang Son is the first (and to his 
knowledge, the only) province to create its own IPR task force, with 
the Vice Chairman of the People's Committee as the Chair.  The task 
force is charged with conducting inspections in the local markets 
and at businesses in the province.  The success of Lang Son's IPR 
task force in improving coordination on IPR has led other provinces 
to come to learn from Lang Son's experiences, Hong added. 
 
9. (U) Provincial authorities investigated 95 IPR infringement cases 
in 2007, resulting in the issuance of 39 administrative remedies. 
All of the infringing goods were destroyed, according to Director 
Hong.  Motorbikes and spare parts, small electronics, motorbike 
helmets, mobile phones and cosmetics were the most common 
counterfeit products seized by local and national border 
authorities.  Hong hastened to add that almost all of the infringing 
goods were imported from China, and most "did not involve U.S. 
products."  Lang Son authorities also handled more than 6,000 
anti-smuggling cases in 2007, many of which were "small scale" 
incidents of individuals smuggling illicit goods through more remote 
border areas. 
 
POLICING THE BORDER: CAPACITY CONSTRAINTS 
----------------------------------------- 
 
10. (SBU) In visits to the Huu Nghi (Friendship) and Tan Thanh 
border gates with China, Lang Son's capacity constraints in 
combating counterfeit trade were evident.  With hundreds, and 
sometimes thousands, of trucks entering Vietnam through Lang Son's 
gates every month, in addition to the more than 25,000 people per 
month crossing the border on foot and heavy rail traffic, customs 
officials we observed had insufficient time to inspect effectively 
many of the goods coming across the border.  While a Border Army 
official at the busy Huu Nghi Border Gate insisted that no 
counterfeit products were crossing at his station, a Tan Thanh 
border gate management official offered the more realistic 
assessment that fake goods, particularly electronic products, were 
getting through the border gate unimpeded.  Both of them claimed, 
however, that the majority of counterfeit products were entering 
Vietnam at more remote and unmanned border crossings.  The Tan Thanh 
official highlighted the need for more training on identifying IPR 
violations for both customs and market management board officials 
(responsible for monitoring goods for sale in the many marketplaces 
near the border). 
 
11.  (SBU) A tour of several local markets within 200 meters of the 
Tan Thanh border gate further underscored that many counterfeit 
electronics and other goods were making their way into Lang Son. 
Imitation Apple iPods (priced under $20), digital cameras, mobile 
phones (including a line of "Suny Ericssun" (sic) handhelds), 
 
HANOI 00000090  003.2 OF 003 
 
 
unlicensed DVDs and music discs (most with Chinese writing), luxury 
handbags and high end garments (including Nike and other American 
brands) were ubiquitous.  When asked about efforts to remove these 
counterfeit products from the marketplace, a border official claimed 
that they had difficulty telling legitimate products from fake ones, 
claiming also that they needed the legitimate products as a basis of 
comparison.  (Note: It was unclear whether provincial officials had 
requested legitimate samples from the rights holders.) 
 
COMMENT 
------- 
 
12. (SBU) While its long border with China is a great advantage for 
Lang Son, local officials must address the weaknesses identified by 
the province's low PCI score to realize fully its potential as a 
gateway between the region's two fastest growing economies.  Lang 
Son's development of an IPR action plan and task force to combat the 
omnipresent IPR violations in the province are steps in the right 
direction.  The real measure of success, however, will be the 
ability of provincial authorities to translate their efforts into 
concrete enforcement results.  Training and capacity building can 
help.  For example, one U.S. company has had success with its 
efforts to teach border officials how to identify bogus soaps and 
suds.  Direct engagement by more rights holders with enforcement 
authorities can be effective in clamping down on counterfeit trade. 
 
 
MICHALAK