VZCZCXRO3795
PP RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHHI #0567/01 1700439
ZNR UUUUU ZZH
P 190439Z JUN 09 ZDK
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 9779
INFO RUEHHM/AMCONSUL HO CHI MINH 5942
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000567 
 
SIPDIS 
 
STATE FOR EAP/MLS MBROWN 
SINGAPORE FOR TREASURY 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
USAID FOR DAA/ASIA MELLIS AND EAA DSHARMA 
 
E.O. 12958: N/A 
TAGS: ECON VM
SUBJECT:  VIETNAM ECON HIGHLIGHTS: RETAILERS OK WITH FOREIGN 
COMPETITION, FOREIGN WORKERS CRACKDOWN, U.S. TOP INVESTOR 
 
HANOI 00000567  001.6 OF 002 
 
 
DOMESTIC RETAILERS THRIVE AMID FOREIGN COMPETITION 
--------------------------------------------- -- 
 
¶1. (U) The domestic retail sector is doing just fine, despite its 
earlier fears that it would be unable to compete with foreign 
penetration when the sector opened in January 2009.  In fact, a 
majority of local businesses in Vietnam say that they welcome 
foreigners in the sector, according to a survey released in May by 
the international consulting firm Grant Thornton.  Local authorities 
credit foreign firms with spurring on local retailers to invest and 
modernize their facilities and services.   Although there has been 
interest among foreign firms in setting up in Vietnam, many large 
firms have stayed on the sidelines. Takashimaya of Japan, for 
example, recently pulled out of the market, citing the still-low 
purchasing power of the average Vietnamese consumer. 
 
CRACKDOWN ON FOREIGN LABOR COMING SOON? 
-------------------------------------- 
 
¶2. (U) Legislators and other Government of Vietnam (GVN) officials 
are demanding a crackdown on the 25,000 illegal foreign workers 
thought to be in Vietnam.  Vietnam's booming economy and shortage of 
skilled labor meant that the GVN often looked the other way and 
allowed thousands of visitors to take jobs without the necessary 
paperwork.  Now that the economy has slowed down, the GVN may be 
toughening its approach.  According to GVN estimates, approximately 
half of the 50,000 foreign workers in Vietnam work illegally.  The 
Prime Minister and the National Assembly have asked the Labor 
Ministry to toughen up regulations and enforcement.  What remains 
unclear is whether these regulations are aimed at unskilled labor, 
such as Western backpackers and laborers from neighboring countries, 
at foreign business executives, or whether they are riding on 
widespread fears of an influx of Chinese workers. 
 
VIETNAM SAYS IT IS COMMITTED TO TACKLING CORRUPTION 
--------------------------------------------- - 
 
¶3. (U) Vietnam has announced its intention to ratify the United 
Nations Convention Against Corruption, saying this signals its 
commitment to fight graft.  The GVN also announced a three-step 
process to eliminate opportunities for corruption which will include 
putting in place more transparent and efficient measures to detect 
and punish corrupt behaviors.  The three stages are to be 
implemented over 10 years and reach completion by 2020.  It remains 
to be seen whether these new steps will effectively address the 
widespread corruption problems in Vietnam. 
 
THE DRAGON REEMERGES AS VIETNAMESE EXPORTS RISE 
------------------------------------------- 
 
¶4. (U) According to press reports, Vietnamese exporters of 
dragonfruit, who had faced difficulties in marketing their fruit to 
the U.S. market after gaining approval to export in 2008, are making 
a strong comeback.  The fruit is being sold throughout the U.S. and 
has fared so well that some markets in Texas and Arkansas cannot 
keep up with demand. 
 
U.S. IS VIETNAM'S LARGEST INVESTOR IN 2009 
-------------------------------------- 
 
¶5. (U) The U.S. tops the list of foreign investors in the first five 
months of 2009.  Of the $6.7 billion of authorized investment in the 
first five months of 2009, the United States accounted for $853.3 
million, topping this year's list, and followed by South Korea, Hong 
Kong, Singapore and Taiwan.  Of that amount, $800 million was 
expansions to existing U.S. investment and $53.3 million was in 
investment in nine new projects.  The U.S. is Vietnam's 11th largest 
investor in terms of commitments, and 9th in actual (disbursed) 
investment (1988-2008).  The pace of both our committed and actual 
investment is fast: in 2008, the U.S. committed more investment 
($1.5 billion) than any other year, and accounts for 55% of the 
investment in the previous 20 years. 
 
CAR SALES DROP, BUT HIGH-END CAR SHOW GOES ON 
----------------------------------------- 
 
¶6. (U) Vietnam's car sales have dropped by 35% from January to May 
of this year compared to the same period in 2008, but automakers 
from 40 countries including BMW, Audi and Volvo will have their 
middle and high-end cars on display during the Vietnam Auto Expo 
2009 this month in Hanoi.  More than 100 domestic and foreign 
carmakers are showcasing their products in 500 booths.  The Deputy 
 
HANOI 00000567  002.2 OF 002 
 
 
Minister of Industry and Trade said that the purpose of the car show 
was to support businesses and stimulate demand, while Vietnamese 
dealers believe that the slump in car sales will continue throughout 
the remainder of this year. 
 
PETROVIETNAM CHOOSES U.S. FIRM FOR OFFSHORE DRILLING 
--------------------------------------------- - 
 
¶7. (U) Texas-based LeTorneau Technologies won a $40 million 
contract to build offshore oil rigs for state-owned oil company 
Petro Vietnam, according to a statement released by the company. 
LeTorneau beat rival Singaporean and American bids for the project. 
 
VIETNAM DEBUTS IPR HANDBOOK 
--------------------------- 
 
¶8. (U) Vietnam's Market Management Bureau (MMB), the lead agency in 
charge of administrative enforcement of intellectual property rights 
(IPR), debuted an IPR Handbook on June 12.  The booklet, sponsored 
by Mission Vietnam, is aimed at educating business owners and 
consumers alike on IPR issues and their related rights. 
Approximately 3,000 booklets will be distributed through the MMB's 
branch offices and consumer protection organizations, and will also 
soon be available on MMB's website (Septel). 
 
PERSONAL INCOME TAX HOLIDAY EXTENDED 
--------------------------- 
 
¶9. (U) The GVN is proposing delaying collection of its new Personal 
Income Tax (PIT) for an additional month to provide taxpayers with 
relief during the global economic downturn.   The GVN has already 
decided not to collect PIT for the first six months of 2009, a 
decision that the National Assembly is expected to ratify in coming 
days.  Some observers note that the stalled implementation may be 
the result of less altruistic reasons, alleging that the GVN is 
having difficulties in training personnel and developing the 
necessary systems required for tax collection. 
 
PALMER