VZCZCXRO1801
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0746/01 1760938
ZNR UUUUU ZZH
P 240938Z JUN 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8061
INFO RUEHHM/AMCONSUL HO CHI MINH 4884
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000746 
 
USTR FOR DBISBEE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN EINV KCOR KPRV PGOV VM
SUBJECT: NATIONAL ASSEMBLY'S ECONOMIC AGENDA PURSUES TRANSPARENCY 
AND COMPETITIVENESS 
 
REF: A) Hanoi 530 
B) Hanoi 482; 
C) Hanoi 738 
 
HANOI 00000746  001.2 OF 002 
 
 
¶1. (U) Summary:  Vietnam's 12th National Assembly jumped right into 
the debate over how to improve the country's macroeconomic 
situation, grilling ministers and publicly grumbling about the 
country's economic management.  In the end, the Assembly fell in 
line behind the Government's macroeconomic policies.  Significant 
laws that the National Assembly passed this session include the 
so-called Law on Laws, which reorganized the enactment of legal 
documents, and new rules governing real estate, taxation, the 
hydrocarbons sector, nuclear energy and expanding the size of Hanoi. 
 The Assembly held its 12th session from May 6 to June 3, 2008 in 
Hanoi.  End Summary. 
 
JUMPING INTO THE ECONOMIC DEBATE 
-------------------------------- 
 
¶2. (U) Like much of the country, the members of the 12th Session 
spent much time discussing the current economic situation.  The 
Prime Minister opened the session by making general remarks, but did 
not leave time for questions at the end of his speech.  NA members 
then grilled the ministers of Industry and Trade, Finance, Planning 
and Investment, Transportation, Labor and the State Bank over 
inflation and macroeconomic stabilization measures (Ref A).  Many 
were uncharacteristically vocal with concerns that inflation could 
reverse gains in poverty reduction, even going to the press with 
complaints that the government had "abandoned" its hallowed growth 
and poverty reduction targets. 
 
JOINING THE FIGHT AGAINST INFLATION 
----------------------------------- 
 
¶3. (U) Despite the grumblings, the NA still agreed to the Government 
of Vietnam's (GVN) proposal to lower the GDP growth rate to 7 
percent from its earlier target of 8.5-9 percent.  Bowing to the 
realities of double-digit inflation, the NA also agreed to discard 
the old "inflation-below-growth-rate" target, adopting instead the 
general goal of "gradually" reducing price increases. 
 
NEW ECONOMIC LAWS 
----------------- 
 
¶4. (U) In addition to validating the GVN's economic targets, the 
National Assembly approved eleven laws, including laws on real 
estate, taxation, hydrocarbons, nuclear power and the enactment of 
legal documents.  All eleven laws will become effective on January 
1, 2009.  The Assembly held its 12th session from May 6 to June 3, 
2008 in Hanoi. 
 
LAW ON LAWS: MUCH-NEEDED REGULATORY TRANSPARENCY 
--------------------------------------------- - 
 
¶5. (U) One of the most anticipated laws in this session was the Law 
on Promulgating Legal Enactments (commonly known as the Law on 
Laws), which aims to simplify the way that Vietnam enacts laws and 
regulations (which now consist of more than 20 types).  The Law on 
Laws encourages transparency and public participation in the 
law-making process, requiring, for example, each drafting agency to 
publicize draft laws online for 60 days for public comment.  After 
that period, all legal enactments become effective 45 days after the 
date they are signed or enacted. 
 
¶6. (U) The Law on Laws phased out Prime Minister Directives, 
Ministerial Decisions and Directives and Inter-Ministerial 
Resolutions.  Although it retained the commonly-used 
inter-ministerial circulars, it specifically discourages their use 
since they lead to ambiguity and overlapping responsibilities among 
issuing authorities. 
According to the new Law, Vietnam's legal documents will be the 
Constitution; ordinances, laws and resolutions by the National 
Assembly; orders and decisions of the President; Government decrees; 
Prime Minister decisions; 
Supreme Court resolutions and circulars; ministerial circulars; 
State Audit decisions and laws issued by provincial authorities. 
 
TAXATION 
--------- 
¶7. (U) The NA passed a new revised Law on Corporate Income Tax 
which, among other things, reduced the tax burden on most businesses 
from to 28 to 25 percent (except for the hydrocarbons sector which 
was placed on a different tax rate of 32 to 50 percent).  Assembly 
delegates debated the appropriate rate publicly, with many of them 
making the case that Vietnam had to match or best the corporate tax 
rates of neighboring countries in order to remain competitive among 
 
HANOI 00000746  002.2 OF 002 
 
 
prospective investors.  Individuals and small family businesses will 
be subject to the new Individual Income Tax Law from January 1, 
¶2009. 
 
OIL AND GAS 
----------- 
¶8. (U) The NA amended the Oil and Gas Law to define more clearly 
state management functions over the activities in the oil and gas 
sector.  One amendment gave preferential tax treatment to 
investments in coal and gas projects and authorized the Prime 
Minister to approve project extensions beyond the current 30 year 
maximum.  Other amendments pursue clearer regulations, placing 
hydrocarbons contracts under the responsibility of the Ministry of 
Industry and Trade, and stating more clearly the rights and 
obligations of parties involved in oil and gas contracts. 
 
NUCLEAR ENERGY 
-------------- 
¶9. (U) The new Law on Nuclear Energy aims to promote the safe use of 
nuclear energy, and is believed to pave the way for the construction 
of a nuclear power plant in Vietnam to be built in 2012. 
 
FOREIGNERS GAIN REAL ESTATE FOOTHOLD 
----------------------------------- 
 
¶10. (U) The National Assembly also passed a resolution to allow 
foreigners to buy residential homes in Vietnam.  The resolution 
limits ownership to foreigners who are involved in direct investment 
projects in Vietnam, high-skilled laborers working in Vietnam and 
those married to Vietnamese citizens and residing in Vietnam, among 
others. Approximately 16,000 out of 81,000 foreigners living and 
working in Vietnam qualify under the above criteria.   Eligible 
buyers will be allowed to purchase only the structures but not the 
land.  The properties must be occupied by the owners, they cannot be 
used as investments and the rights expire after 50 years -- after 
which the foreigners must sell or donate the dwellings. 
 
BULGING HANOI 
------------- 
 
¶11. (U) The NA approved a plan to enlarge the capital city of Hanoi 
by 3.34 million square kilometers (1.29 million square miles) at the 
expense of neighboring provinces, effective August 1, 2008.  This is 
the fourth time the government has adjusted Hanoi's administrative 
borders, with previous expansions in 1961 and 1978 and a contraction 
in 1991 (Ref B). 
 
¶12. (U) The expanded border of Hanoi will encompass the current 
capital city plus more than 219,000 hectares of Ha Tay, Vinh Phuc, 
and Hoa Binh provinces.  With the added territory, Hanoi's 
population will increase from 3.5 million to over 6.2 million. 
During NA sessions televised live across Vietnam, several deputies 
took the Government to task for not doing more groundwork and 
feasibility studies on the project beforehand and for insufficient 
consultation with people who will be affected by the move.  In the 
end, however, an overwhelming majority of deputies voted in favor of 
expanding the capital.  According to Prime Minister Nguyen Tan Dung, 
the adjustment will allow Hanoi to improve urban planning and 
administration. 
 
FOR THE NEXT SESSION 
--------------------- 
 
¶13. (U) The National Assembly also discussed seven other draft laws 
to be considered during the next session, in October, including laws 
on Biodiversity (to deal with genetically modified products), 
Citizenship (to allow dual citizenship), Health Insurance, Road 
Transportation, High Technology, Execution of Civil Rulings, 
Government Civil Officials and on the Special Consumption (luxury) 
Tax (Ref C). 
 
ALOISI