VZCZCXRO8791
RR RUEHHM
DE RUEHHI #0369/01 0910955
ZNR UUUUU ZZH
R 310955Z MAR 08
FM AMEMBASSY HANOI
TO RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEHC/SECSTATE WASHDC 7502
INFO RUEHHM/AMCONSUL HO CHI MINH 4512
RUEHJA/AMEMBASSY JAKARTA 0693
RUEHGP/AMEMBASSY SINGAPORE 2573

UNCLAS SECTION 01 OF 05 HANOI 000369 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR SECRETARY LEAVITT FROM THE AMBASSADOR 
 
E.O. 12958: N/A 
TAGS: TBIO KPAO KFLU KHIV VM
SUBJECT: SCENESETTER, PART I OF III, FOR THE DEPARTMENT OF HEALTH 
AND HUMAN SERVICES (HHS) SECRETARY LEAVITT'S APRIL 2008 VISIT TO 
VIETNAM 
 
¶1. (U) This cable is Sensitive But Unclassified.  It is for official 
use only, not for dissemination outside USG channels or posting on 
the Internet. 
 
¶2. (U) Mission Vietnam very much looks forward to your visit to 
Vietnam in mid-April, as your personal engagement will support 
directly our effective, broad-based efforts to influence 
developments in this increasingly important country.  Your second 
visit is a good opportunity to encourage Vietnam to continue the 
process of opening to the world and reforming internally.  Vietnam's 
national leadership remains eager to learn from the United States on 
economic, governance, environmental, and health reform and will be 
attentive to what you have to say.  I predict that the media will 
extensively, and favorably, cover your visit, producing a 
"multiplier effect," which will help deepen mutual understanding. 
This cable, one of three I will be sending to help frame your 
discussions, provides information on our strategies to protect and 
defend our broad national interests in Vietnam.  Part II focuses on 
our many health issues, highlighting both the overarching challenges 
we face and opportunities presented us.  Part III will cover our 
work through the President's Emergency Plan for AIDS Relief 
(PEPFAR). 
 
VIETNAM WANTS TO BE ASIA'S NEXT TIGER 
------------------------------------- 
 
¶3. (U) After decades of isolation and failed economic policies, 
Vietnam is driven to become the next Asian tiger.  The Government of 
Vietnam (GVN) aims to enter the ranks of middle-income developing 
countries by 2010 and achieve industrialized country status by 2020. 
 In its efforts to modernize the economy, the GVN has focused on 
pushing exports and investment as principle drivers in its policy of 
fast economic growth. 
 
¶4. (SBU) When Vietnam first announced its program of economic 
reforms in 1986, the economy was in shambles and a large proportion 
of the population lived in poverty.  Change came slowly, but the 
pace of reform became significantly more rapid over the years. 
Vietnam is now on a successful economic path and has achieved 
average annual economic growth of 7.5 percent during the last 
decade.  In 2007, the economy grew at a rate of 8.5 percent. 
Poverty rates have tumbled from 58 percent in 1993 to under 15 
percent in 2007, according to the GVN's latest figures, which are 
based on international standards.  A recent World Bank study 
described this poverty reduction rate as the most significant in 
such a short period of time of any nation in history.  The middle 
class is growing and retail markets are expanding rapidly. 
 
THE UNITED STATES AS A PIVOTAL PLAYER 
------------------------------------- 
 
¶5. (U) Economic ties between the United States and Vietnam continue 
to expand.  The United States is Vietnam's third largest trade 
partner, after China and Japan, and its largest export market. 
Total two-way trade in goods with the United States in 2007 was 
$12.53 billion, up 29 percent from 2006, according to the U.S. 
Department of Commerce.  Vietnamese exports to the U.S. continue to 
surge, fuelling growth here, but the expansion of the middle class 
is also having a positive impact on U.S. exports.  In 2007, U.S. 
statistics indicate that exports to Vietnam increased by 73 percent 
to USD 1.9 billion from USD 1.1 billion in 2006.  We've seen several 
high profile commercial success stories, including Boeing's recent 
contract with Vietnam Airlines, Motorola's securing of three 
contracts to build the mobile phone network of a state-owned mobile 
phone service provider, and two U.S. energy companies negotiating 
for major energy-sector construction contracts.  The United States 
is also Vietnam's seventh largest investor, with $2.6 billion in 
registered Foreign Direct Investment since 1988 (South Korea is the 
largest with $11 billion), with a prominence in the technology 
industry. 
 
¶6. (U) Another signal of the United States' growing commercial 
influence was the success of Secretary of Commerce Carlos 
Gutierrez's high-profile business development mission to Vietnam 
last November.  Secretary Gutierrez advocated for U.S. business 
interests and introduced 22 companies to the principal Vietnamese 
Government and business decision makers.  The delegation included 
well-known as well as mid-sized medical device and environmental 
technology companies. 
 
¶7. (SBU) The influence of the United States is not restricted to 
growth in our trade and investment.  Over the past decade, the 
United States has become an important player and key partner in 
helping Vietnam implement market reforms and eschew central planning 
through innovative technical assistance programs.  The Mission has 
 
HANOI 00000369  002 OF 005 
 
 
worked hard with the GVN on a broad spectrum of trade and investment 
issues under the 2007 Trade and Investment Framework Agreement.  One 
area often highlighted is concerns over Vietnam's protection of 
intellectual property rights (IPR), including weak enforcement 
efforts and failure to meet its WTO commitment to provide for 
criminal remedies for commercial scale IPR violations. 
 
GROWING RELIANCE ON U.S. ADVICE 
------------------------------- 
 
¶8. (SBU) Despite our fractious history, Vietnam and the United 
States are forging closer ties each day.  Vietnam's motivation to 
seek stronger ties is clear.  The GVN sees the United States as a 
critical source of financial and technical assistance in many areas. 
 Further, Hanoi increasingly sees the United States as an important 
force in maintaining a stable regional environment and balancing a 
rising China.  For our part, Vietnam provides an important 
opportunity in East Asia for advancing U.S. national interests in 
securing a stable and peaceful Asia-Pacific region.  We are also 
encouraged by the steady liberalization of the government's role in 
the life of its citizens.  Problems remain, as noted below, but all 
agree that basic trends are positive with regard to personal 
freedoms, when viewed over time. 
 
¶10. (U) Over the past ten years, Washington has very effectively 
invested limited aid dollars to support Vietnam's transition to a 
market economy by strengthening trade liberalization, particularly 
the reforms needed to implement commitments under the 2001 Bilateral 
Trade Agreement (BTA) and WTO.  Two of USAID's-funded programs, the 
Support Trade Acceleration (STAR) and the Vietnam Competitiveness 
Initiative (VNCI), support Vietnam's efforts to create a modern 
market economy and the requisite legal framework.  The STAR team has 
been involved directly in the overhaul of Vietnam's civil procedure 
code, new investment laws providing for equal treatment of 
state-owned and private companies, a securities law to help develop 
Vietnam's capital market, protecting IPR, and numerous other 
projects to shore up greater transparency, rule of law and civil 
society.  As a direct result of these programs, Vietnam has expanded 
its reforms to include areas of good governance, including improving 
accountability, transparency and anti-corruption efforts. 
 
¶11. (SBU) Last September, pursuant to the U.S. National Nuclear 
Security Administration's (NNSA) Global Threat Reduction Initiative 
(GTRI), the USG brokered cooperation with the Russian Federation and 
the International Atomic Energy Agency (IAEA) to assist Vietnam in 
converting its only civilian nuclear reactor from high to low 
enriched uranium fuel and return spent high enriched uranium to 
Russia.  NNSA continues to assist Vietnam to develop the necessary 
physical and regulatory safeguards to establish a civilian nuclear 
power sector. 
 
¶12. (U) Eighty five percent of all U.S. Official Development 
Assistance to Vietnam focuses directly on health issues, and our 
cooperative efforts to prevent and treat HIV/AIDS and combat avian 
influenza are the hallmarks of our bilateral health relationship. 
This will be covered in my second cable. 
 
¶13. (U) The current indications from the planning figures in the 
FY08 and FY09 budgetary process is that USAID will be in a position 
to expand its assistance, especially in the areas of good governance 
and economic growth and reform.  Given the recognition of the 
growing development relationship between the United States and 
Vietnam, USAID in Hanoi became a full stand-alone presence mission 
on February 29. 
 
CHALLENGES: INFLATION, OUTDATED ACADEMIC SYSTEM, STATISM 
-------------------------------------- 
 
¶14. (SBU) Despite these achievements, Vietnam faces substantial 
challenges.  Prices have increased during the last several months, 
measuring 15.7 percent year-on-year in February 2008.  Indeed, high 
inflation became a national preoccupation over the past two months. 
This clearly worries the national leadership, which lacks experience 
and tested macroeconomic tools, and fighting inflation now competes 
with economic growth as the top economic priority.  The GVN has 
taken steps to rein in inflation, such as reducing import tariffs, 
raising interest rates and widening the trading band on the 
Vietnamese Dong, but it is not yet clear if these measures will be 
effective. 
 
¶15. (SBU) Another significant challenge is the large size of 
Vietnam's state sector.  It accounts for about 37 percent of GDP and 
includes state-owned enterprises (SOEs) that dominate 
telecommunications, banking, energy, airlines, health care, and 
other major sectors.  While the GVN works to attract more foreign 
 
HANOI 00000369  003 OF 005 
 
 
direct investment and promote the domestic private sector, it is 
also determined to maintain a major role for the state sector in the 
economy.  Despite some delays, the government is focusing on the 
process known as "equitization" as the way to help improve the 
competitiveness of the state sector.  By allowing private parties to 
buy minority shares of an SOE, the GVN hopes to introduce new 
business practices that will drive improvements in performance. 
Complicating the equitization process has been Vietnam's troubled 
stock market, which is currently hovering above 600, down from over 
1000 in 2007.  The GVN has recently attempted to rehabilitate the 
market by loosening foreign ownership laws and directing the State 
Capital Investment Corporation to buy shares. 
 
¶16. (SBU) Other areas of concern include a woefully outdated 
education system that is failing to keep up with the demands of a 
modern economy.  An acute shortage of skilled and semi-skilled labor 
is posing a major roadblock to development.  I am leading efforts to 
deepen U.S. engagement with Vietnam on education issues by brokering 
partnerships between Vietnam's academic institutions and the private 
sector, including U.S. businesses, and through a formal "Education 
Initiative" designed to quickly increase the number of Vietnamese 
students choosing the United States for overseas training.  Like 
human resources, infrastructure limitations also presents a major 
challenge to Vietnam's continued rapid growth.  Corruption also 
continues to be a substantial problem in Vietnam, and Transparency 
International's perception index ranks Vietnam at 123 of 179 
countries, in a trend of continuous backsliding since 2002. 
 
CHALLENGES ON HUMAN RIGHTS 
-------------------------- 
 
¶17. (SBU) While we share common views with the GVN in many areas, 
differences over human rights remain, and lingering fears that the 
United States supports the overthrow of the current regime continue 
to complicate the relationship.  The existence of groups in the 
United States and elsewhere that explicitly advocate regime change 
helps generate negative charges by Vietnamese conservatives that 
stoke a lingering paranoia:  we are indeed still "the enemy."  We 
counter by reassuring the GVN that the USG does not support 
separatist groups.  Rather, we make the case that we wish build a 
better human rights dialogue based on mutual trust. 
 
¶18. (SBU) Serious deficiencies related to human rights in Vietnam 
include lack of freedom of speech, freedom of assembly, and freedom 
of the press.  One of our principal objectives is to end the use of 
catch-all "national security" provisions such as Article 88 of the 
GVN criminal code, which prohibits "conducting propaganda against 
the State."  The Mission tracks approximately 50 individual cases of 
prisoners of conscience and activists under various forms of house 
arrest, surveillance, and harassment.  We continue to call for the 
release of all prisoners of conscience and freedom of peaceful 
expression of political views, but where we see individuals 
expressing their political opinions, many of our government 
interlocutors see "lawbreakers" trying to destabilize the regime. 
 
¶19. (SBU) In other areas, perceptible progress is being made. 
Influential Vietnamese leaders are committed to enhancing 
governance, establishing the rule of law and combating corruption -- 
all critical in building guarantees of individual freedoms. 
Vietnam's leading newspapers are increasingly more aggressive in 
what they publish and in their willingness to push back against 
censors.  Whereas only a few years ago any protest would meet swift 
and severe police action, this past year various peaceful protests 
have taken place involving issues such as land rights, opposition to 
Chinese territorial claims and demands for the return of Catholic 
Church property, with one protest stretching out for over one month 
before it finally ended peacefully.  With regard to religious 
freedom, Vietnam has made surprising progress over recent years. 
More needs to be done, but the country no longer qualifies as a 
particularly severe violator of religious freedom under our legal 
definition and we removed the nation from the list of "countries of 
particular concern" in late 2006. 
 
¶20. (SBU) While we have not yet encountered specific health-related 
issues in our efforts in trafficking-in-persons (TIP), work in this 
area is one of our important human rights goals.  Vietnam remains a 
significant source country in the region in the trafficking of women 
and children, primarily for sex, marriage and labor purposes. 
Cambodian and Chinese border provinces remain hot zones.  Less 
frequent male TIP cases usually revolve around labor trafficking, 
often in the fishing and construction industries.  Vietnam is a 
little more than half-way through a 6-year 2004-2010 National 
Program of Action on anti-trafficking, directed by the Prime 
Minister.  The GVN has initiated the drafting of a new, 
comprehensive anti-TIP law (we do not expect passage for at least 
 
HANOI 00000369  004 OF 005 
 
 
another two years) and has worked actively to enhance anti-TIP law 
enforcement cooperation with neighbors Cambodia, China, Laos and 
Thailand.  The government commitment on anti-TIP is there, but 
resources remain a significant challenge.  Most recently, we have 
seen an increase in labor trafficking cases, related to the GVN's 
new export labor drive, and unfortunate reports of trafficking in 
infants and children to China, partly due to China's demographic 
imbalances.  The level of USG cooperation with Vietnam on this issue 
is considered very good. 
 
VIETNAM'S INTERNATIONAL AND REGIONAL PROFILE 
-------------------------------------------- 
 
¶21. (SBU) Vietnam's current membership on the UNSC creates a window 
of opportunity to encourage Vietnam to speak out in a constructive 
way on global security issues, and to help Hanoi distance today's 
Vietnam from the Non-Aligned Movement (NAM) and Communist-Bloc focus 
driving its old-style foreign policy.  We have been proactive here 
and in Washington in educating GVN leaders and officials on Burma, 
North Korea and Iran, where in the past the GVN has been unwilling 
to engage constructively with us due to "traditional friendships" 
and non-interference.  Despite repeated demarches so far this year, 
Vietnam lined up against our positions in UNSC debates on Burma and 
Kosovo. 
 
¶22. (U) Regionally, Vietnam has become a more prominent player in 
ASEAN, and successfully hosted the APEC Summit in 2006.  Vietnam is 
slated to be chair of ASEAN in 2009, so this visit is an excellent 
opportunity to underscore the commitment of the United States to 
promote the U.S.-ASEAN Enhanced Partnership, which will provide 
expertise and support for ASEAN integration towards becoming the 
ASEAN Community by 2015. 
 
VIETNAMESE CONCERNS ABOUT CHINA 
------------------------------- 
 
¶23. (SBU) While Vietnam's engagement with the United States will 
continue to broaden, China necessarily constitutes Vietnam's most 
important strategic preoccupation.  This is not to say that Vietnam 
is "choosing" China over the United States; the situation is much 
more complex.  For starters, Vietnam's leadership is sophisticated 
enough to realize that relations with China and the United States do 
not represent a zero sum game; it is possible to have good relations 
with both.  Each relationship also creates challenges, however. 
While China constitutes a vital and necessary commercial partner and 
former ally, it is also perceived as a significant and frustrating 
constraint to Vietnam's freedom on action. 
 
¶24. (SBU)  Chinese bullying of foreign companies in an attempt to 
compel them to cease oil and gas exploration efforts in the South 
China Sea serves to remind Vietnamese officials that while the 
Vietnamese may not approve of all U.S. policies, the same is 
certainly true of Chinese actions.  While progress has been made in 
settling the land border, there is no commonality of views on 
sovereignty issues regarding the South China Sea, known as the "East 
Sea" to the Vietnamese.  Hanoi is also "riding the tiger" with 
regard to managing the deep negative views toward China of many 
Vietnamese.  China is widely disliked and distrusted as a former 
colonial master, and Beijing's actions in the Spratlys and Paracels 
threaten to inflame those passions.  Should Hanoi allow 
unconstrained protests against the Chinese, however, it would appear 
weak in the face of calls to action that it could not satisfy, as 
well as risking Beijing's anger. 
 
¶25. (SBU) On security matters, China looms large.  There is an 
understandable GVN caution with regard to China's potential reaction 
to enhancements in Vietnam's cooperation with the United States. 
U.S.-Vietnam cooperation in the security field is also constrained 
by an institutional conservatism born of concern over "peaceful 
evolution" as a real threat to the regime, as well as by an 
ingrained caution on the part of Vietnam's military in the face of 
relative power calculations vis-a-vis China. 
 
CONCLUSION 
---------- 
 
¶25. (U) Again, I warmly welcome your visit and please look for the 
Part II and III cables on health issues, including food safety 
matters and PEPFAR.  Your visit will prove critical in promoting 
further reforms, not just in health, but, as you can see from the 
above analysis, more broadly.  These efforts signal our desire to 
engage on technical matters, invest and expand markets, and 
encourage Vietnam to take a larger role in regional and global 
affairs. 
 
 
HANOI 00000369  005 OF 005 
 
 
 
MICHALAK