VIETNAM: AMBASSADOR'S FAREWELL CALL ON MPI MINISTER

UNCLAS SECTION 01 OF 02 HANOI 002487

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STATE PASS USTR FOR EBRYAN
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TAGS: ETRD VM ASEAN
SUBJECT: VIETNAM: AMBASSADOR'S FAREWELL CALL ON MPI MINISTER

SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY


1. (SBU) SUMMARY: On September 3 the Ambassador,
accompanied by Econ/C, paid a farewell call on Minister of
Planning and Investment Vo Hong Phuc. The Minister
expressed his appreciation for the Ambassador's
contributions to US-Vietnam relations. The Ambassador
raised a number of concerns. Phuc said that he hoped to
make a deal on the bilateral assistance framework soon.
Phuc said that MPI and the GVN were considering the auto
tariff issue and that he was giving instructions for a
solution on the McCullagh coffee joint venture. On the
Danao villa issue, MPI, MOF and OOG have agreed on an
appropriate solution (i.e. expenses for repair to the villas
would be added to the joint venture investment) and will
soon be working with the parties directly. On Tricore, Phuc
said he would discuss the situation with the Ministry of
Transport, but did not directly reply to the Ambassador's
letter calling for a meeting of various concerned parties.
END SUMMARY.


2. (SBU) On September 3 the Ambassador, accompanied by
Econ/C, paid a farewell call on Minister of Planning and
Investment Vo Hong Phuc. The Minister began by noting that
he regretted the Ambassador's imminent departure and
expressing appreciation for the Ambassador's help in
developing relations between MPI and the USG and the U.S.
and Vietnam.


2. (SBU) The Ambassador responded by thanking the Minister
for his close cooperation with the Embassy, and especially
during his trip to Washington and New York the previous
fall. That trip had been productive and given the two of
them a chance to get to know one another better, the
Ambassador said. He noted that the US-Vietnam commercial
relationship had made great progress in the past three years
and provided a solid base for improvements in other areas of
the relationship. Even US investment to Vietnam has risen
according to new data. Preliminary results of a joint study
by MPI and Star show that US-related investment is higher
than previously estimated. More important they show a rise
in implemented investment by US related firms in 2003 thus
demonstrating the contribution of trips like Phuc and Deputy
Prime Minister Vu Khoan to the US as well as those by the US-
ASEAN Business Council to Hanoi. The word is out that
Vietnam is creating the right conditions for quality
investment. There is more to be done, but Vietnam is on the
right track, the Ambassador said.


3. (SBU) Phuc commented that both the US and Vietnam had
been promoting the bilateral relationship over the past year
and that relations had developed significantly. US
investment had risen significantly, especially if one
included US-related firms that invested through Singapore
subsidiaries in the total. In 2004 many events gave hope
for even more US investment, in particular, the US-ASEAN
business council which recognized Vietnam's potential during
its visit in the summer. Other major business groups were
interested in investing in Vietnam, he remarked. Vietnam is
very interested in the US as a source not only of capital
but also of technology. He was glad Boeing was considering
investing in Vietnam and that US insurance firms were also
interested in investing here, he noted. He said that the
GVN appreciated the Ambassador's efforts and contributions
such as setting up the high level visit to the US by the
DPM, the Minister himself and others. Phuc noted that his
trip had been impressive and had given him a chance to
understand better US firms. Phuc went on to say that his
trip had helped increase mutual understanding between the
two countries as well as between him and the Ambassador. It
had been one of his favorite trips abroad, the Minister
observed.


4. (SBU) Commenting that he would be leaving some
unresolved issues to his successor, the Ambassador
enumerated them for Phuc. They are the auto tariff/tax
issue, the Danao investment in Dalat (where the latest news
is that MPI is going with MOF to try to resolve the issue),
Tricore (the Hanoi third ring road project which the
Ambassador had written to the Minister about the previous
month and suggested a meeting among MPI, the Ministry of
Transport, Tricore and the Office of the Government to
resolve the issue),and the McCullagh joint venture coffee
firm. The Ambassador expressed his appreciation to the
Minister for his attention and efforts to resolve these
issues and said he would leave them to his successor and the
Minister to resolve.

5. (SBU) The Ambassador went on to encourage the Minister
to reach an agreement on the bilateral assistance framework
where the sole outstanding issue is taxation of items used
by NGOs on contract to the USG. The USG has sent a proposed
compromise to the GVN and is awaiting a reply. Now would be
an opportune time to make a deal since US assistance from
USAID is likely to reach USD20 million and it will be hard
to work without an agreement which we have with most other
countries, he stressed.


6. (SBU) The Minister replied that his government
appreciated the assistance especially on HIV/AIDs programs.
He agreed that completing a bilateral agreement would
provide a solid legal basis for assistance. Noting that
taxation was the sole outstanding issue, he said he hoped to
reach an agreement soon since the GVN has such agreements
with many other countries.


7. (SBU) On autos, Phuc said that many investors had
commented that the tariff and tax would limit the sale and
production of cars and the development of the industry. MPI
and the GVN are considering the issue. On the McCullagh
coffee joint venture, Phuc said he was giving instructions
for a solution. On the Danao villa issue, MPI and the
Ministry of Finance and the Office of the Government had
agreed on an appropriate solution that would be in both
sides' interest. The GVN entities would soon be working
with the parties directly. Asked to explain the solution,
Phuc said that expenses for repair to the villas would be
added to the joint venture investment. Since the villas are
the center of the dispute where MPI is trying to focus the
solution that he expected would be fair to both parties,
Phuc said. The Ambassador said that if the investor
concerned received a fair settlement the investor would
probably invest more. Phuc called the construction of the
ring road an urgent matter. He said that he had asked MPI
to get the US firm involved in another project in lieu of
the ring road. He noted that the US firm wanted to
construct the entire project but that many areas included in
the original proposal included city streets or bridges. If
these were included in the BOT, it would be difficult to
collect tolls. The Minister did not reply to the
Ambassador's proposal to discuss the issue among the parties
concerned, but said he would talk to Ministry of Transport.
The Ambassador said that he could not speak for Tricore, but
that it sounded as though the firm stood to lose a lot of
the money they had invested in the feasibility study. There
needs to be more discussion of this proposal he added. The
Ambassador said he would brief his successor on these and
other issues such as the Vinasat satellite procurement,
Boeing and the Son La power project. The Minister said that
the Ambassador had left a good impression and good memories.
BOARDMAN