VZCZCXRO7515
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0689/01 2101007
ZNR UUUUU ZZH
P 281007Z JUL 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 4703
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3166
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 4931

UNCLAS SECTION 01 OF 04 HO CHI MINH CITY 000689 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO H LMO KAREN GATZ AND EAP/MLS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAIR ELTN VM
SUBJECT: SCENESETTER FOR CODEL COSTELLO 
 
HO CHI MIN 00000689  001.2 OF 004 
 
 
SUMMARY AND INTRODUCTION 
------------------------ 
¶1. (SBU) Mission Vietnam looks forward to welcoming you to Ho 
Chi Minh City.  Prime Minister Nguyen Tan Dung's June visit to 
Washington exemplifies a U.S.-Vietnam relationship that 
continues to broaden and mature, in the process spurring 
economic, social and technological development that has eased 
the path for a limited expansion of personal freedom and 
expression for the people of Vietnam.  As such, the United 
States is viewed by the majority of Vietnamese as a key partner 
in Vietnam's current and future success.    High-level visits 
like yours create opportunities for us to influence developments 
and respond to Vietnam's interest in globalization, reform, 
combating corruption, and enhancing educational opportunities 
for its people.  Your particular interest in infrastructure and 
transportation coincides with one of the Government of Vietnam's 
greatest challenges and priorities, as maintaining Vietnam's 
burgeoning integration into global markets is straining its 
outdated system. 
 
¶2. (SBU) Vietnam's economic successes have translated into 
greater international clout.  Vietnam has just stepped down from 
chairing the U.N. Security Council in July, a major diplomatic 
achievement for the GVN.  While GVN leaders are not fully sure 
how to handle all the attention, they understand that the United 
States plays a direct role in creating the conditions for their 
nation's success.  Leaders here are thankful, in particular, for 
the key technical assistance we've given over the past seven 
years to help reform the system of economic governance. 
 
¶3. (SBU) Challenges of course remain.  GVN leaders assume the 
Communist Party's preeminent political role to be the linchpin 
of stability, and human rights remain a major sticking point in 
our relationship with the GVN.  China remains the GVN's critical 
strategic preoccupation, but many Vietnamese view improving 
relations with the United States as a key indicator of the 
tremendous progress since the dark days of the 1970's and 
1980's.  For these reasons, Vietnam's leaders are committed to 
continued progress in bilateral relations and will speak 
optimistically about the future of U.S.-Vietnam ties.  End 
summary. 
 
ECONOMIC SUCCESSES AND CHALLENGES 
--------------------------------- 
¶4. (SBU) After a decade of isolation and failed economic 
policies, Vietnam is determined to catch up with the Asian 
tigers.  Vietnam's "doi moi" (renovation) program of economic 
reform, begun in 1986, has set the country on a successful 
market economy path, with an average growth rate of 7.5 percent 
over the past decade.  A recent World Bank study described 
Vietnam's poverty reduction rate as the most significant in such 
a short period of time of any nation in history.  The GVN 
focuses on exports and foreign direct investment in its drive to 
achieve middle-income status by 2010.  Vietnam is second only to 
Thailand in rice exports, and second only to Brazil in coffee. 
Other leading exports include crude oil, apparel, footwear and 
aquatic products. Vietnam is also "moving up the value chain" by 
increasing its exports of furniture, machinery, cameras, 
computers, printers, consumer electronics, and other diverse 
products.  U.S. investors tell us the key challenges they face 
in Vietnam are underdeveloped infrastructure, a shortage of 
skilled workers and managers, and the considerable level of 
state participation in the economy.  For its part, the GVN is 
grappling with issues of corruption, improving the legal 
environment, and implementing its WTO commitments. 
 
¶5. (U) The United States is currently Vietnam's largest export 
market and third largest overall trade partner.  Total two-way 
trade in goods with the United States in 2007 was USD 12.53 
billion, up 29 percent from 2006.  One of the most positive 
stories from 2007 was the surge in U.S. exports to Vietnam from 
USD 1.1 billion to USD 1.9 billion, driven by agricultural 
exports such as cotton (up 92 percent), soybeans (up 1,480 
percent), and wheat (up 1,120 percent).  U.S. commodities 
including hardwood, hides and skins, tree nuts, fresh fruit, and 
poultry and red meats also posted record gains in 2007.  Driven 
by the technology industry, the United States is Vietnam's 
seventh largest investor, with USD 2.6 billion in registered FDI 
since 1988, and USD 2 billion more in "U.S.-related investment." 
 
¶6. (SBU) While the great majority of experts consider Vietnam's 
long-term economic prospects to be bright, short-term 
macroeconomic imbalances are worrying investors.  Vietnam's 
current turmoil is rooted in high inflation (26 percent 
year-on-year July), the current account deficit, and inefficient 
allocation of resources, which is particularly obvious in the 
disproportionate amount of state resources devoted to 
inefficient State Owned Enterprises (SOEs). 
 
 
HO CHI MIN 00000689  002.2 OF 004 
 
 
TRANSPORTATION AND INFRASTRUCTURE 
--------------------------------- 
¶7. (U) Rapid economic growth means that demand for 
transportation greatly outstrips the country's antiquated 
infrastructure and the GVN is racing to expand and modernize the 
country's network of roads, seaports, airports, and railways to 
meet increasing demand.  The task falls to Vietnam's Ministry of 
Transport, which has dozens of constituent agencies and 
organizations, including the Civil Aviation Administration 
(CAAV), the Maritime Administration (Vinamarine), the Inland 
Waterway Administration, Vietnam Railways, and the Vietnam Road 
Administration (VRA). 
 
CIVIL AVIATION: HIGHS AND LOWS 
------------------------------ 
¶8. (U) The GVN will spend USD 850 million to build a second 
terminal at Hanoi's Noi Bai International Airport, increasing 
capacity from six million to sixteen million passengers per 
year.  Vietnam will also build a second international airport in 
southern Vietnam to supplant Ho Chi Minh City's congested Ton 
Son Nhat International Airport.  The new facility, Long Thanh 
International Airport, will be located approximately 40 
kilometers northeast of Ho Chi Minh City and will serve 50-80 
million passengers per year when it opens in 2012.  The GVN will 
is also expanding Danang and Hue International Airports and is 
converting various regional airports, such as Haiphong's Cat Bi 
Airport, the Nha Trang Airport and the old military airport in 
Can Tho, into international facilities. 
 
¶9. (U) Vietnam's commercial air sector has grown rapidly over 
the last decade.  State-run Vietnam Airlines, which plans to 
equitize partly in 2009, flies international routes aboard ten 
modern Boeing 777 airplanes, has 21 Boeing 787 "Dreamliners" on 
order (with plans to order at least eight more in 2008), and has 
ambitions to become one of the preeminent air carriers in 
Southeast Asia.  In addition, Vietnam's first two privately held 
carriers, Viet Jet Air and Air Speed Up, recently signed 
agreements to procure Boeing 737 jets and expect to begin 
flights in late 2008. 
 
¶10. (U) Vietnam's civil aviation regulator, however, has failed 
to keep pace with the country's rapidly expanding commercial air 
traffic.  A recent audit by the International Civil Aviation 
Organization (ICAO) found serious shortcomings in Vietnam's 
aviation safety system.  The CAAV hopes to correct many of the 
problems through its work on a USD 1.4 million 
technical-assistance project funded principally by the U.S. 
Trade and Development Agency.  The project, currently underway 
and scheduled to conclude in 2010, will help the CAAV upgrade 
its aviation safety oversight role and may help Vietnam secure 
an FAA Category I safety rating, allowing Vietnam Airlines to 
access U.S. airports. 
 
LACK OF DEEP WATER PORTS IMPEDES GROWTH 
--------------------------------------- 
¶11. (U) Export-led growth has imposed particular strains on 
Vietnam's port system.  Although Vietnam has more than one 
hundred ports stretching along its 3,200-kilometer coastline, 
most are not deep-water container ports, cannot accommodate 
full-size container ships, and have poor infrastructure and 
logistical support services.  Vietnam's three largest seaports 
-- in Saigon (south), Haiphong (north), and Danang (central) -- 
are all smaller than terminals in Hong Kong, Singapore, Malaysia 
and Thailand.  Vietnam operates at a distinct disadvantage to 
its neighbors because it must route all of its 
transpacific-bound exports through Singapore and Hong Kong due 
to a lack of deepwater ports. 
 
¶12. (U) Saigon Port, which you will visit, has been in operation 
for 130 years and is Vietnam's highest volume port.  The 
facility's main export is rice, and major imports include 
fertilizer, steel, iron, wheat, machinery and chemicals.  The 
container port operates on a massive scale and handles roughly 
three-fourths of all containerized traffic into and out of 
Vietnam. 
 
HUMANITARIAN, EDUCATIONAL, AND TECHNICAL ASSISTANCE 
--------------------------------------------- ------- 
¶13. (U) U.S. Agency for International Development (USAID) 
programs provide aid in legal reform, governance, economic 
growth, HIV/AIDS, environmental protection, and disaster 
prevention.  For FY 2007, U.S. aid from all agencies was about 
USD 86.6 million, the bulk of which has gone towards providing 
health-related assistance, notably in the areas of HIV/AIDS and 
avian influenza.  Vietnam is one of fifteen countries receiving 
assistance from the President's Emergency Plan for AIDS Relief 
(PEPFAR), through which the United States will provide USD 88 
million in FY 2008 to expand integrated HIV/AIDS prevention, 
care and treatment programs.  The U.S. Centers for Disease 
 
HO CHI MIN 00000689  003.2 OF 004 
 
 
Control and Prevention (CDC) provides assistance in HIV/AIDS, 
avian influenza, and emergency outbreak response. 
 
¶14. (U) U.S. assistance in areas other than HIV/AIDS remains 
very modest in relation to spending in smaller neighboring 
nations, but increased substantially in FY08 from that low base 
to more than USD 10 million due to earmarks for governance 
programming and demining.  The Administration's FY09 request 
roughly equals the total for FY08.  To a large degree, the FY08 
earmarks reflect the profound impact of several U.S. programs. 
U.S. programs such as Support for Trade Acceleration (STAR) and 
the Vietnam Competitiveness Index have helped to reshape trade 
and economic regulation, with huge positive impact on governance 
throughout the country.  Regarding education, the United States 
now sponsors well over 200 students for graduate study in the 
United States through a combination of Fulbright grants and the 
Vietnam Education Foundation (VEF).  In-country, the Fulbright 
Economics Teaching Program trains mid-level Vietnamese 
professionals in economics and public policy.  Both Embassy 
Hanoi and ConGen HCMC are actively involved in promoting 
educational exchanges. 
 
ADOPTION ISSUES 
--------------- 
¶15. (SBU) The selling and buying of babies and children for 
international adoption is a serious issue in Vietnam.  Due to 
pervasive problems with fraud and children being offered for 
adoption without the consent of their birth parents, we have 
informed the GVN that we will not renew the current bilateral 
agreement which expires in September.  As of July 1, no new 
applications for adoptions are being accepted by the GVN.  The 
clear "way forward" for Vietnam is to accede to the Hague 
Convention on Inter-Country Adoption, which it says it wishes to 
do, as soon as possible. 
 
HUMAN RIGHTS CHALLENGES 
----------------------- 
¶16. (SBU) Serious deficiencies related to human rights in 
Vietnam include lack of freedom of speech, freedom of assembly 
and freedom of the press; the recent arrests and sackings of 
Vietnamese reporters and editors in the wake of a corruption 
scandal reveals the on-going battle within the GVN over the role 
of freedom of the press.  One of our key objectives is to end 
the use of catch-all "national security" provisions for the 
prosecution of peaceful dissent.  We continue to call for the 
release of all prisoners of conscience, but where we see 
individuals expressing their political opinions, many of our 
government interlocutors see "lawbreakers" trying to destabilize 
the regime.  The continued existence of groups in the United 
States that advocate regime change complicates human rights 
engagement by providing ammunition to hard-liners who want to 
stoke the fading paranoia that we are indeed still "the enemy." 
Reassuring the GVN that the USG does not support separatist 
groups can assist in building a better human rights dialogue 
based on mutual trust.  Despite these obstacles, real progress 
has been made.  Key Vietnamese leaders are committed to 
enhancing governance, establishing the rule of law, and 
combating corruption.  Vietnam's leading newspapers are more 
aggressive in terms of the types of news they publish and their 
willingness to push back against censors, peaceful protests 
involving a myriad of issues have been tolerated, and surprising 
progress on religious freedom has been made.  While the problems 
remain, we removed Vietnam from our list of countries of 
particular concern for religious freedoms in late 2006. 
 
MIA/POW - FULLEST POSSIBLE ACCOUNTING 
------------------------------------- 
¶17. (U) Obtaining the fullest possible accounting of American 
POW/MIAs remains an important goal in the bilateral relationship 
for the United States.  The Joint POW/MIA Accounting Command has 
operated in Vietnam since 1988.  JPAC has accounted for 880 
Americans previously listed as MIA; 1766 remain missing 
throughout Southeast Asia. 
 
AN ELEPHANT IN THE ROOM - WAR LEGACY ISSUES 
------------------------------------------- 
¶18. (SBU) In your meetings, you may hear references to 
"consequences of war" or "legacies of war" issues, which include 
Agent Orange(AO)/Dioxin, unexploded ordnance (UXO), land mines, 
and Vietnamese MIAs.  While debate continues over the human 
impact of AO, recent studies reveal that dioxin contamination is 
concentrated in approximately 20 "hotspots," mostly former U.S. 
bases where AO was stored.  Areas subjected to heavy aerial 
spraying do not currently have soil concentrations considered 
hazardous.  Our engagement on this issue has accomplished much, 
in both transforming the tone of the dialogue and capacity 
building.  Projects have included work at the Danang airport as 
well as a USD 3 million Congressional appropriation for "dioxin 
mitigation and health activities."  The USG is continuing to 
 
HO CHI MIN 00000689  004.2 OF 004 
 
 
work together with the GVN, UNDP, Ford Foundation and other NGOs 
to discuss the next steps in the environmental remediation of 
three priority hotspots in Danang, Hoa Binh and Phu Cat 
airfields. 
 
¶19. (SBU) Since 1989, USAID, through support from the Patrick J. 
Leahy War Victims Fund (LWVF) and other sources, has provided 
more than USD 43 million to support organizations to develop 
programs for disabled people.  The USG has invested more than 
USD 37 million in a broad spectrum of programs not only to 
remove unexploded ordnance and landmines but also to address the 
effects of UXO on Vietnamese living in affected areas.  Today, 
various NGOs conduct UXO and land mine clearance, risk 
education, and victim rehabilitation.  The USG has also donated 
equipment to the PAVN to assist in UXO and landmine clearance 
and return land to productive use.  In 2006, the State 
Department provided USD 3.5 million to support UXO action and 
demining activities in Vietnam, almost a third of which went 
directly to PAVN in the form of donated demining equipment. For 
FY08, an additional USD 2.5 million will be provided to 
underwrite mine action related activities in Vietnam.  For FY08, 
Congress stipulated that approximately USD 2.5 million be spent 
on demining programs, a substantial increase from the $800,000 
requested by the Administration. 
 
EVER-PRESENT CHINA 
------------------ 
¶20. (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 than that.  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. 
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. 
Continuing disagreements over territorial issues in the South 
China Sea threaten to reawaken Vietnam's long-standing animosity 
for their former colonial master.  China also looms large on 
security issues, as the GVN is understandably cautious with 
regard to Chinese reactions to increased cooperation with the 
United States. 
 
WHAT YOU CAN EXPECT 
------------------- 
¶21. (SBU) You can expect your interlocutors not only to be 
articulate and well informed, but also to speak in terms 
generally supportive of growth in the bilateral relationship. 
As noted above, lingering suspicions still exist among 
conservatives about the development of closer ties with the 
United States.  Nonetheless, we fully expect the overall tenor 
to be one of support and interest at a measured pace that will 
not upset the GVN's calibrated attempts to maintain balance 
among its other regional partners.  The members of the private 
Vietnamese business community whom you will meet will most 
likely strike you as determined, resourceful and completely open 
to new ideas.  There may be media interest among Vietnamese 
outlets.  You should expect reporters/photographers at some 
events such as the People's Committee meeting.  Given the 
opportunity, they will likely ask about the bilateral 
relationship and your impressions of Vietnam. There is a great 
deal of media interest in U.S. elections, so you may want to 
expect some questions dealing with that topic. 
 
¶22. (U) Again, we look forward to your visit and stand ready to 
do everything we can to make your visit to Vietnam as productive 
as possible. 
 
¶23. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX