VZCZCXRO3472
RR RUEHHM
DE RUEHHI #0615/01 1821017
ZNR UUUUU ZZH
R 011017Z JUL 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 9842
INFO RUEHHM/AMCONSUL HO CHI MINH 5985
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 02 HANOI 000615 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MLS FOR MBROWN 
SINGAPORE FOR TREASURY 
HHS/OSSI/DSI PASS TO OGHA (WSTEIGER/MVALDEZ/MABDOO) 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
USAID FOR DAA/ASIA MELLIS, EAA/ASIA DSHARMA AND CJENNINGS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EAID SENV KGHG VM
SUBJECT: Vietnam's Mid Year Consultative Group Meeting 
 
REF: A) Hanoi 569 (Red Tape Gripes Dominate Private Sector) 
 
¶1. (SBU) Summary: The 2009 Mid Year Informal Consultative Group (CG) 
meeting between donors and the GVN in the Central Highlands city of 
Ban Ma Thuot June 8-9 provided 2009 GDP growth rate estimates 
ranging from 3.5 to 5 per cent.  Donors stressed the need for 
continued SOE equitization and poverty reduction in the face of the 
global economic crisis. End Summary. 
 
MACROECONOMIC SITUATION STEADY: STAY THE COURSE 
--------------------------------------------- -- 
 
¶2. (SBU) The Ministry of Planning and Investment (MPI) delivered a 
report that highlighted efforts taken by the GVN to implement a 
stimulus package to respond to the global economic downturn.  MPI 
Minister Vo Hong Phuc emphasized the need to continue to promote 
economic growth, create a positive environment for business 
development, improve social security systems and administrative 
reform.  Phuc stated that after an encouraging first quarter growth 
rate of 3.1 per cent, the economy might be able to achieve a growth 
rate of 5 per cent for 2009.  Deputy Prime Minister and Foreign 
Minister Pham Gia Khiem committed to further reforms and to meeting 
WTO requirements and other commitments.  A report from the June 1 
Vietnam Business Forum (VBF)(Reftel A) urged the GVN to support 
business growth by improving the development and enforcement of 
laws, regulations, and implementing guidelines so businesses could 
plan accordingly.  The VBF report highlighted the need for greater 
GVN investment in "soft" infrastructure, education and human 
capacity development, and "hard" infrastructure, including roads and 
ports. 
 
¶3. (SBU) Donors agreed that the Vietnamese economy was faring better 
than expected earlier in the year and was doing especially well in 
comparison with other countries in the region.  However, they urged 
the GVN to continue with planned reforms, reminding the ministries 
that as competition for FDI increases, it is even more important to 
have good governance, transparency and strong anti-corruption 
efforts.  MPI said that it planned to continue banking law reforms 
that provide increased autonomy for the State Bank of Vietnam (SBV), 
including clarification of the roles of the SBV, the MOF, and the 
National Assembly.  The IMF recommended caution in the use of 
economic stimulus via interest rate subsidy schemes. 
 
SOCIAL IMPACTS: WHY IS IT SO HARD TO HELP? 
------------------------------------------ 
 
¶4. (SBU) The CG discussions also focused on GVN poverty reduction 
efforts on the national level and in the Central Highlands, the part 
of Vietnam with the greatest number of ethnic minorities and the 
highest poverty rates.  While GVN programs at the national level are 
effective, programs focused in the Central Highlands are more 
problematic.  The "Group of Four" (Canada, Norway, New Zealand, and 
Denmark) strongly urged the GVN to implement bilingual education and 
land allocation programs, provide greater access to legal services, 
and improve access to religious institutions for ethnic minorities. 
The donors stressed that among the poor, women remain especially 
vulnerable, whether as migrant workers affected by the economic 
downturn, victims of trafficking-in-persons, or victims of domestic 
violence.  The GVN responded that general economic growth and 
development would most improve the lives of the poor and ethnic 
minorities.  (Comment:  The donors chose Dak Lak Province as the CG 
location to call attention to the needs of the ethnic minorities. 
The GVN also used the CG's location to showcase its efforts to 
encourage economic development for ethnic minorities.  The two sides 
clearly had different views on how much assistance and support the 
Central Highland receives.  End comment.) 
 
ANTICORRUPTION: INTENTIONS GOOD BUT RESULTS LACKING 
--------------------------------------------- ------ 
 
¶5. (SBU) Representatives from the Government Inspectorate (GI) and 
MPI reported on the May 29 Anti-Corruption Dialogue (ACD) hosted by 
the Inspector General and the Embassy of Sweden.  The ACD focused on 
preventing, identifying, and punishing corruption in the high risk 
construction sector, including large scale projects funded by 
Official Development Assistance.  The GI emphasized the 
collaborative nature of the Dialogue, highlighting the announcement 
that the GVN will ratify the UN Convention on Anti-Corruption, as 
well as providing detailed information about the GVN's 2020 Anti 
Corruption Strategy.  Donors commended the GVN's efforts, but urged 
the GVN to insure transparency and good governance in overall public 
administration reform.  The donors further said that a free and 
effective media, an active and strong civil society, and legislation 
to support them, including protection for whistleblowers, are key. 
 
HANOI 00000615  002 OF 002 
 
 
The donors also identified corruption in the education and health 
sectors as particularly troubling and harmful to society.  While the 
petty corruption of teachers demanding bribes from students and 
health care workers asking patients for money involves relatively 
small sums of money, it nevertheless promotes a culture of 
corruption and strikes at the heart of the education and health 
systems.  MPI Minister Phuc agreed, and suggested focusing on those 
sectors for the next ACD and annual CG meeting. 
 
CLIMATE CHANGE: VIETNAM VULNERABLE 
---------------------------------- 
 
¶6. (SBU) The GVN and donors reviewed current activities and plans 
for climate change adaptation and mitigation.  Minister Phuc 
identified Vietnam as one of the world's most vulnerable countries 
to climate change but also a country with a low capacity to address 
the impact.  Discussion focused on the GVN's potential to show 
international leadership on this issue.  The Ministry of National 
Resources (MONRE) is developing various scenarios and multiple 
donors pledged significant technical and financial support.  Donors 
stressed the importance of involving the private sector, including 
through public-private partnerships (PPP). The only warning note 
sounded related to biodiversity, with some donors noting that 
climate change has removed biodiversity from national and 
international agendas, and that preserving biodiversity plays a key 
role in mitigating climate change. 
 
AID HARMONIZATION: FORM AND SUBSTANCE? 
-------------------------------------- 
 
¶7. (SBU) Donors urged the GVN to speed up fund disbursement and 
improve transparency.  Donors also highlighted the need for good 
data collection and clear cost norms as the GVN pursues its goals to 
become a Middle Income Country by 2010.  Although several donors 
hinted at a changed conversation between the GVN and donors once 
Vietnam attains this status (and, read the subtext, bilateral aid 
budgets were reduced), the GVN did not engage on this subject.  The 
GVN and donors agreed on the need to avoid duplication of efforts, 
to clarify roles and responsibilities and to make the One UN Vietnam 
concept work effectively.  There was less agreement, however, when 
donors called on the GVN for stronger engagement with the private 
sector, for greater press and media freedom and a greater role for 
civil society.  The UK repeatedly asserted the need for civil 
society participation in the upcoming annual CG Meeting but there 
was little support expressed even from the other donors. 
 
FIELD TRIP TO WORLD BANK PROJECT 
-------------------------------- 
 
¶8. (SBU) In conjunction with the CG, the World Bank organized field 
trips, including a visit to the Integrated Watershed and 
Biodiversity Management Program in Chu Yang Sin National Park.  This 
5-year project, funded by the Global Environment Fund (GEF) and 
commissioned by the World Bank, is in its third year of 
implementation and has a budget of 973,000 USD. The project trains 
and hires local ethnic minorities to protect the park and build 
partnerships with local and international conservation 
organizations.  The Director of BirdLife, the NGO implementing 
partner, informed the audience that the Ministry of Defense (MOD) 
had taken over land which belonged to the National Park and 
constructed a dam and five kilometers of road for no apparent 
purpose.  The dam was clearly visible to the audience from the 
briefing site, but when delegation participants expressed interest 
in visiting the dam itself, local authorities said that the road was 
not passable by the vehicles arranged for the field trip.  The NGO 
Director speculated to EconOff privately that MOD built the dam and 
road for its own income generation. 
 
 
MICHALAK