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Viewing cable 09HOCHIMINHCITY333, ASSESSING IMPACT OF WTO LEADS TO CALLS FOR FURTHER REFORM IN

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Reference ID Created Released Classification Origin
09HOCHIMINHCITY333 2009-04-28 10:37 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Ho Chi Minh City
VZCZCXRO0731
OO RUEHDT RUEHPB
DE RUEHHM #0333/01 1181037
ZNR UUUUU ZZH
O P 281037Z APR 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5687
INFO RUEHHI/AMEMBASSY HANOI 3743
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 5923
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUCPDOC/USDOC WASHDC PRIORITY 0131
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000333 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
USTR FOR BISBEE 
TREASURY FOR CHUN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD SOCI PGOV VM
SUBJECT: ASSESSING IMPACT OF WTO LEADS TO CALLS FOR FURTHER REFORM IN 
HCMC 
 
HO CHI MIN 00000333  001.2 OF 002 
 
 
1. (SBU) "Vietnam must reorient its development strategy or 
forgo many of the opportunities on offer as a member of the 
WTO," stated Vietnamese trade experts reflecting on two years of 
World Trade Organization (WTO) membership.  By some measures, 
including increasing foreign direct investment (FDI), trade 
liberalization has been a success for Vietnam, said former 
Minister of Trade Truong Dinh Tuyen, but the benefits are 
overstated because they have done little to bolster Vietnam's 
productive capacity.  Tuyen, along with Vietnam Institute for 
Economics Director Tran Dinh Thien, urged Vietnam's 
policy-makers to eliminate preferences for state-owned 
enterprises (SOEs), trust market mechanisms to regulate the 
economy and foster real competition in all sectors, especially 
education.  The April 17 Conference hosted by the HCMC WTO 
Affairs Consultation Center provided a public airing -- by 
irreproachable experts -- of growing anxiety over the privileged 
role of SOEs in Vietnam's economy and a perceived slow pace of 
reform.  Still, the central message was encouraging:  Vietnam 
needs more economic reform, and faster.  End summary. 
 
Grizzled Negotiator Calls it Like He See It - Not Good Enough 
--------------------------------------------- ---------------- 
2. (SBU) As former Minister of Trade and key player in the 
U.S.-Vietnam Bilateral Trade Agreement and Vietnam WTO Accession 
negotiations, few are better placed than Truong Dinh Tuyen to 
assess the state of Vietnam's trade and investment environment. 
Tuyen pointed out that since joining the WTO, Vietnam has indeed 
become a popular destination for foreign investors -- $22 
billion in FDI was licensed in 2007 and $64 billion in 2008. 
Vietnam has also made considerable progress amending laws and 
regulations to create a more open business environment. 
 
3. (SBU) Just $8 billion and $11 billion of the licensed 
investment were actually implemented in 2007 and 2008 
respectively, Tuyen lamented.  More importantly, too much of the 
FDI has poured into real estate and hospitality instead of 
improving production capacity, human resources or value-adding 
facilities.  Rapid investment has also led to serious 
environmental damage in cases, he noted.  Tuyen jabbed "this 
cannot be called success." 
 
4. (SBU) Current inadequacies stem from the persistent and 
unreformed vestiges of Vietnam's old command economy, Tuyen 
assessed.  To overcome this, he said Vietnam must trust market 
mechanisms to regulate its economy, eliminate "every preference" 
for SOEs and create a level playing field in all sectors. 
Vietnam also urgently needs to increase the quality of human 
resources across all sectors, he said, including government 
officials, corporate managers, technical and economic experts 
and workers.  All of this is achievable, Tuyen concluded, only 
if the GVN reduces its interference in the economy, cuts 
bureaucracy and transaction costs and fosters competition -- in 
essence, let the market regulate itself. 
 
Was Vietnam Ready for Integration? 
---------------------------------- 
5. (SBU) Vietnam really did shift a long way from the command 
economy of the 1980's toward a market economy in the 20-year 
period leading up to WTO accession in 2007, according to Vietnam 
Institute for Economics Director Dr. Tran Dinh Thien.  Vietnam's 
growth model was based on exploiting natural resources and 
low-cost, low-skill human resources, he continued, a natural 
environment for growing big SOE conglomerates run by weak 
managers.  For two decades, reforms led to high growth, 
stability and a more mature economy capable of integrating into 
the world economy, he added.  But if the two years since WTO 
accession have been a test of Vietnam's readiness to integrate 
into the global economy, instability, high inflation and slowing 
growth suggest to Thien a rocky road ahead. 
 
6. (SBU) Dr. Thien laid out a roadmap to long-term success for 
Vietnam:  remove obstacles to infrastructure development, reform 
land and property markets, overhaul SOEs to enhance their 
efficiency, reduce bureaucracy, develop human resources and 
overhaul the educational system. 
 
View from the City 
------------------ 
7. (SBU) Head of the southern delegation of the National 
Assembly Dr. Tran Du Lich noted that city and provincial 
governments sometimes struggle to understand how they can use 
WTO membership to their benefit.  Dr. Lich said he, along with 
the HCMC City Council, pushed for a shift in strategy from 
 
HO CHI MIN 00000333  002.2 OF 002 
 
 
trying to attract high quantities of FDI to attracting 
high-quality FDI. 
 
Recognition of U.S. Contributions 
--------------------------------- 
8. (SBU) The Deputy Principal Officer attended this April 17, 
2009, conference organized by the HCMC's WTO Affairs 
Consultation Center to review what Vietnam achieved after more 
than two years of WTO membership.  One keynote speaker, Mme. 
Nguyen Thi Hong, Vice Chairman of the HCMC Peoples Committee, 
highlighted the positive role played by the U.S. Embassy and 
USAID, via the Support for Trade Acceleration Program (STAR), in 
helping the GVN prepare for and accede to the WTO.  (Comment: 
Mme Hong warmly greeted the DPO, who recently assisted an 
official HCMC delegation led by the former, to visit California 
on an investment-scouting trip.  Mme. Hong introduced DPO to the 
other head speakers and gushed that the visit to the USG had 
been "extremely successful".  End comment.) 
 
Comment: 
------- 
9. (SBU) For a long time, people around town have said that 
Vietnam urgently needs to gather the will to enact a new round 
of economic reform and confront tough issues like reforming the 
education system.  This conference splashed that message across 
the front pages of the city's newspapers in a big way.  The trio 
of Tuyen, Lich and Thien is outspoken, reform-minded and 
widely-respected.  While they sit outside official government 
channels, they influence policy players through their roles on 
various advisory committees; Tuyen on the National Monetary 
Policy Advisory Council, Thien as head of the Vietnam Institute 
of Economics and Lich in the National Assembly.  The message, 
the messengers and the public venue all give us reason to hope 
for progress. 
 
10. (SBU) Press commentary on the conference was equally 
telling.  HCMC-based newspapers like the Vietnam Investment 
Review and Thanh Nien Daily reported the letter and spirit of 
the keynote speakers' calls for additional reform.  National 
dailies like Vietnam News, in contrast, tended to quote current 
trade officials as saying that trade continues to develop 
according to plan.  Former Minister Tuyen hit close to this in 
his parting comment to the conference, "I have to say these 
things in Ho Chi Minh City because nobody will listen to me when 
I say them in Hanoi."  End comment. 
 
11.  (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX