RAISING COMMERCIAL/ECONOMIC ISSUES WITH DPM DUNG

UNCLAS SECTION 01 OF 02 HANOI 001613

SIPDIS

STATE FOR EAP/BCLTV

BEIJING FOR AMBASSADOR-DESIGNATE MARINE

USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO

USDOC ALSO FOR ITA/CD/OIO/EAP/ABACHER

E.O. 12958: N/A
TAGS: PREL ETRD EINV VM WTO BTA
SUBJECT: RAISING COMMERCIAL/ECONOMIC ISSUES WITH DPM DUNG

REF: Hanoi 1604


1. (U) Summary. Deputy Prime Minister Dung on June 3
promised Ambassador to invite Lockheed Martin for
negotiations on Vinasat, "took note" of a request to look
into a decision on MWH's bid for a program management
contract for the Son La dam project, predicted licenses for
US insurance companies would be issued based on the "BTA
roadmap," and welcomed more US investment in oil and gas as
well as in high tech and software fields. He urged support
for Vietnam's entry into WTO, taking into consideration
Vietnam's low level of economic development. End Summary.


2. (U) In advance of the Ambassador's departure for the
U.S. to participate in the tour sponsored by the U.S.-ASEAN
Business Council and of the likely visit to the U.S. in July
by Communist Party of Vietnam Politburo member Phan Dien,
Ambassador met for two hours with Deputy Prime Minister and
Politburo member Nguyen Tan Dung on June 3. Pol/C and
Commercial Attache accompanied. Assistant Foreign Minister
Nguyen Duc Hung also attended. Reftel reported on human
rights issues.

VINASAT
--------------


3. (U) Ambassador reminded DPM Dung that Dung had met
before with representatives of Lockheed Martin regarding a
bid on the Vinasat project; LM now wants to return for
negotiations. He noted that earlier negotiations between
the GVN and Russian and French competitors appear not to
have been successful. Ambassador expressed his
understanding that a "complicated situation" at the Ministry
of Posts and Telematics had caused a delay in decision-
making, and encouraged forward motion on this important
project. DPM Dung promised that MPT would invite LM "next
week" to "continue negotiations."

SON LA
--------------


4. (U) Ambassador commented that DPM Dung had also already
met with representatives of Montgomery/Watson/Harza on its
bid as program manager for the Son La hydroelectric project,
at which time the DPM had appeared positive about its
involvement. Now, the Ministry of Industry is seeking to re-
open the bidding process on this major project, which was
already behind schedule. He called for a favorable decision
soon. DPM Dung expressed GVN interest in MWH, and noted
that EVN appeared favorably inclined. He "took note" of
Ambassador's request that he look into the situation with
MOI.

BOEING
--------------


5. (U) Ambassador expressed his satisfaction that the CEO
of Boeing Commercial Aircraft would visit Hanoi during the
week of June 7 and his hope that the negotiations would go
well on Vietnam's purchase of 7E7s.

INSURANCE
--------------


6. (U) Ambassador called for favorable decisions on AIG's
application for a non-life insurance license and life
insurance licenses for ACE and New York Life. He emphasized
that these companies could helpfully contribute to Vietnam's
economy and capital markets. DPM Dung acknowledged that the
Ministry of Finance had received these applications and that
the firms had good reputations, and predicted that the
licenses would be approved, "according to the roadmap laid
out by the Bilateral Trade Agreement."

CONOCOPHILlIPS
--------------


7. (U) Ambassador noted that ConocoPhillips was the
largest US investor in Vietnam (although GVN statistics
counted it as investment from Singapore),worth almost US$1
billion. He expressed concern that Vietnam had become
uncompetitive within the region on oil exploration, given
the large role for PetroVietnam at each stage of exploration
and production as well as the high level of shares of
profits -- sometimes as much as 90 percent -- PetroVietnam
insisted upon. He noted that oil companies believe the
potential in Vietnam was high and want to invest but that
they must worry about making a profit. He urged a review of
Vietnam's practices and noted the importance of oil as an
export for Vietnam. DPM Dung "welcomed" such US investors,
including UNOCAL as well as ConocoPhillips, and noted that
both sides in negotiations always sought advantage. He
pointed to Vietnam's "comprehensive and transparent" law on
oil and gas, and called for more investment in oil refining
and production as well as exploration. Ambassador promised
to return from his visit next week to Houston with more
detailed information about problems arising from Vietnam's
profit-sharing practices in this sector.

BTA
---


8. (U) DPM Dung pointed with satisfaction to the large
increase in two way trade -- US$ 6 million in 2003 -- since
the entry into force of the BTA. He promised that the GVN
would "do everything" to implement the BTA in its entirety,
and thanked the USG for "pushing" the GVN on this and for
supporting better BTA implementation. He welcomed increased
trade with and investment from the U.S. Ambassador
commented that the recent BTA implementation talks in
Washington had been generally good, although some issues
remain for further discussion and action. DPM Dung called
for more investment -- especially in high tech and software
-- and said that Vietnam would do "anything" in this area,
i.e. offering preferential terms to US investors, especially
in the central region and especially in Danang. He cited
Intel and HP as particularly welcome.

WTO
---


9. (U) DPU Dung reiterated Vietnam's goal of entering WTO
in 2005, and promised that the GVN was doing its "utmost" to
achieve this. He asked for US support with Vietnam's
negotiations, keeping in mind Vietnam's "low" level of
economic development in a transition phase. He also urged
the USG to consider trade disputes "fairly" and "according
to reality." Ambassador confirmed USG support for Vietnam's
entrance into WTO as quickly as possible, noted that the
Embassy would send a representative to the next round of
talks in Geneva, and commented that the latest Vietnamese
offered appeared to show some progress. He warned, however,
that this offer appeared not to be up even to BTA levels in
terms of services, whereas we saw the BTA commitments as a
floor -- not a ceiling -- to what the GVN should offer. He
stressed that trade liberalization was good for Vietnam.
The DPM said that he agreed, but that the GVN needed to
proceed by "cautious steps." He claimed that if Vietnam
fully opened without care, it could lead to "economic
collapse." Vietnam would continue to open its economy but
by "appropriate steps," as it continued to seek full
integration into the world trading system, DPM Dung
promised.
BURGHARDT