VZCZCXRO1963
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0018/01 0080812
ZNR UUUUU ZZH
P 080812Z JAN 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8982
INFO RUEHHM/AMCONSUL HO CHI MINH 5453
RUEHGP/AMEMBASSY SINGAPORE 2729
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 000018 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS MBROWN 
SINGAPORE FOR TREASURY 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
 
E.O. 12958: N/A 
TAGS: EINV ECON VM
SUBJECT: PM ANNOUNCES PLAN TO COMBAT EFFECTS OF GLOBAL ECONOMIC 
DOWNTURN BUT DETAILS SKETCHY 
 
REF:   A) Hanoi 1316 (VN Shifts Focus to Maintaining Growth) 
  B) Hanoi 1196 (VN's SMEs Thirsty for Capital) 
C) Hanoi 1391 (VN: Further Effects of the Global Financial Crisis) 
 
HANOI 00000018  001.2 OF 002 
 
 
D) HCMC 11 (Factory Closings in the South) 
 
¶1.  (U) Summary:  In response to the global economic downturn, Prime 
Minister Dung has just released a five part plan aimed at 
maintaining economic growth in 2009.  The plan focuses on boosting 
exports, stimulating investment and consumption, ensuring social 
security, creating effective monetary and financial policies, and 
increasing competitiveness.  The plan commits USD 1 billion of a 
stimulus package currently under GVN consideration to subsidizing 
interest payments on commercial loans.  However, plan details and an 
implementation roadmap are lacking.  End summary. 
¶2.  (U) In response to the global economic downturn, Prime Minister 
(PM) Nguyen Tan Dung has just released a five part plan to maintain 
economic growth in 2009.  In his introduction to the plan, the PM 
officially announces that GVN policy will shift from fighting 
inflation to preventing a domestic economic downturn (reftel A).  He 
prioritizes the most urgent goals as "mobilizing aggregate strength 
to prevent economic recession, maintaining growth impetus and 
ensuring social security." 
¶3.  (U) According to the plan, the first step towards achieving 
these goals is to remove barriers to boost production, business, and 
exports.  He specifies that the struggling small and medium-size 
enterprise sector (reftel B) is in need of immediate support because 
"it has created many jobs and is facing terrible difficulties."  He 
also acknowledges that the decrease in exports is affecting 
laborers, and says that the GVN is already taking financial and 
monetary policy actions to assist the export market. (Note:  He is 
presumably referring here to the recent 3 percent devaluation of the 
dong and repeated interest rate reductions.)  The PM encourages 
domestic enterprises to look inward at the untapped market 
represented by Vietnam's 87 million people, but also notes that 
Vietnam will continue to make itself attractive to foreign 
investors, especially since "in early 2009 we must open distribution 
services in line with our WTO commitments." 
¶4.  (U) The second step requires the GVN to mobilize all available 
resources to stimulate investment and consumption.  Given the global 
economic downturn and tight markets, the PM calls on state-owned 
enterprises (SOEs) to lead the sector by creating "quality and 
efficiency" in investment projects but caveats that supervision over 
the SOEs will be tightened to avoid the "recurrence of inflation." 
He says that investment capital from the state budget, government 
bonds, overseas development assistance and credits should be 
channeled into transport, energy and housing infrastructure projects 
to stimulate the economy.  The PM admits that 2009 budget revenue 
will be tighter than previous years so the GVN will issue new bonds 
to finance these development plans.  In addition, the GVN will 
provide about 17 billion dong (USD 1 billion) to subsidize 
approximately 40 percent of the interest paid on commercial loans 
for enterprises, primarily SMEs, to "maintain and promote their 
production and business activities."  (Note: Later clarifications in 
the press indicated that the funds for this interest subsidy will be 
taken primarily from the stimulus package discussed in reftel C.) 
The PM also pledges the GVN as a guarantor for enterprises looking 
to import machinery and production equipment. 
¶5. (U) The third part of the plan is to "ensure social security and 
speed up poverty reduction."  Among other things, the PM commits the 
Ministry of Finance (MOF) to allocating sufficient funds in the 
budget to raise the minimum wage, provide food, recover from natural 
disasters and epidemics, and enforce the Law on Unemployment 
Insurance (septel).  He also says the GVN will offer pensions 
directly to the poor and ensure the accessibility of educational and 
health services in disadvantaged areas. 
¶6. (U) The fourth step focuses on the creation of effective monetary 
and financial policies.  The PM references the repeated interest 
rate reductions and "flexible" management of the exchange rate to 
facilitate exports.  He also promises that the GVN will restructure 
the debt of farmers and enterprises facing difficulties, including 
adjusting interest rates on outstanding loans to conform more 
closely with current (lower) rates.  He pledges government support 
for investment in post-harvest technologies, animal husbandry and 
crop production, especially in areas hit by epidemics or natural 
disasters. 
¶7. (U) The fifth portion of the plan calls for "flexible performance 
in line with reality."  The PM encourages all ministries and 
agencies to focus on forecasting, transparency and administrative 
reform in an effort to make Vietnam more competitive during 
 
HANOI 00000018  002.2 OF 002 
 
 
difficult economic times.  Quoting Ho Chi Minh, he adds that it is 
necessary to "raise the role of the Fatherland Front and other 
socio-political organizations" to support his five part plan and 
that the media has a responsibility for "publicizing accurate 
information in the interest of the country."  (Note:  The Fatherland 
Front is the Communist Party organization that controls all mass 
organizations in Vietnam, such as the Women's Union and the Vietnam 
General Confederation of Labor.) 
¶8. (SBU) Comment:  Vietnam's leadership is clearly concerned about 
the effects of the global economic downturn and wants to be seen as 
taking decisive action to ease the burden on the public (reftel D). 
As is normally the case here, the devil is in the details.  While 
the plan offers some potentially effective solutions to ameliorating 
the effects of the downturn, the overall language is very vague and 
an implementation roadmap is still lacking.  Efforts to expand 
production and increase exports, a common theme for many ministries 
and high-level leaders, may be ineffective while foreign markets are 
contracting.  The focus on domestic consumption and demand, however, 
combined with social security measures, could provide the most 
relief to Vietnam's population in the upcoming year.  Post will 
report implementation plans as they are announced.  End comment. 
¶9. (U) This cable was coordinated with Ho Chi Minh City.