AMCHAM VOICES CONCERN OVER DRAFT LEGISLATION FOR WTO

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000879

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA
STATE PASS USTR FOR EBRYAN and GHICKS
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ETRD ECON PREL VM WTRO BTA WTO
SUBJECT: AMCHAM VOICES CONCERN OVER DRAFT LEGISLATION FOR WTO
ACCESSION

REF: HANOI 1957


1. (SBU) SUMMARY: At a meeting of the Legal Committee of the HCMC
American Chamber of Commerce, members voiced concern regarding
legislation being drafted in preparation for Vietnam's WTO
accession. While new overarching laws may meet WTO obligations,
AmCham legal experts say the devil is in the details. Fred Burke,
managing partner of Baker and Mackenzie law firm, claimed that
draft implementing decrees are laden with lists that limit rights
to certain sectors, requirements for "baby" permits and
registrations, and language that could be interpreted in a way
that disadvantages foreign business. At the same time, he said,
trading and distribution rights continue to be a worry, both in
draft legislation and as part of BTA implementation. END SUMMARY.


2. (SBU) Approximately 20-30 representatives of U.S. companies and
law firms, the legal committee of the Ho Chi Minh City branch of
the American Chamber of Commerce, gathered on August 9 to discuss
draft legislation being prepared by the GVN for Vietnam's
accession to the World Trade Organization (WTO). Fred Burke,
managing partner of Baker & McKenzie law firm in Vietnam, led the
discussion. He reported that, in his view, red-tape, corruption
and protectionism on the part of the GVN is growing, and this is
manifested primarily in decrees being drafted to supplement laws
being passed by Vietnam's National Assembly, including the
Commercial Law, the Common Investment Law and the Unified
Enterprise Law.


3. (SBU) According to Burke, provisions in draft decrees on
franchising, commercial promotions, foreign traders, multi-level
marketing, and others represent an attempt by GVN ministries,
particularly the Ministry of Trade (MOT),to retain power and
potential sources of graft by requiring what Burke termed "baby"
permits (e.g., repetitive permits for the same activity). He
alleged that while the GVN is submitting "sanitized" laws for WTO
review, ministries are formulating implementing decrees that
include lists that limit the number of categories in which foreign
traders can participate and include burdensome
registration/documentary requirements. (Note: The decrees to
which Burke referred were not yet available publicly at the time
of the meeting. They have since been posted, in Vietnamese, on
the Ministry of Trade's website. End note.)


4. (SBU) Dao Nguyen, partner at Johnson, Stokes & Master law firm
in Vietnam, echoed Burke's sentiments. GVN ministries are engaged
in territorial in-fighting through draft decrees, she asserted.
"The Prime Minister needs to put his foot down." She believes
that while piling registration requirements into the decrees, more
fundamental problems are being ignored. For example, there is
potential uncertainty between the investment and commercial laws
on the issue of distribution. According to Nguyen, the draft
investment law notes that distribution will be subject to rules
articulated by the Prime Minister's office, while the commercial
law does not include distribution at all, only mentioning sales-
purchase agreements and agents. Nguyen's GVN contacts tell her
currently no one is working on distribution rules as part of the
investment law. All of this leaves a major issue in a legal and
bureaucratic gray area. The GVN needs to do a better job at
considering new laws and regulations in relation to each other,
Nguyen said.


5. (SBU) Trading and distribution rights were a major focus of the
AmCham discussion. Legal experts and company representatives
sitting around the table expressed strong dissatisfaction both
with Vietnam's record on implementing its trading and distribution
obligations under the Bilateral Trade Agreement (BTA) and with
overall restrictions on trading and distribution. Walter Blocker,
managing director of Gannon Vietnam Limited, reported that
Vietnam's recent attempt to meet BTA trading/distribution
obligations by providing a point-of-contact in a diplomatic note
(reftel) was thus far unsuccessful, as Blocker could not reach the
individual through the contact details provided. (Note: Econoff
also called the number and got no answer. Embassy Hanoi is
following up with the Ministry of Trade to seek to correct this
problem. End Note.)


6. (SBU) Other company representatives voiced their concerns more
generally on limits on trading and distribution rights. Mark
Gillin, managing director of AIM, a logistics and marketing
company based in Vietnam, said Vietnam's current rules regarding
trading and distribution rights result in higher costs and greater
inefficiency for foreign companies seeking to get their products
into Vietnam. Burke believed that limits on trading and
distribution rights were among the major reasons many companies
decided not to enter Vietnam's market. He said that almost all
the companies that come to him to inquire about doing business in
Vietnam express disappointment upon learning that they cannot sell
directly into the Vietnamese market, but must go through a
Vietnamese intermediary. All the meeting participants agreed that
phase-ins for trading and distribution rights provided in Annex G
of the BTA were too slow.


7. (SBU) COMMENT: The meeting concluded with a decision to update
AmCham's WTO position paper, incorporating these and other
concerns. EconOff and Post Commercial Officer urged companies to
report to the USG on BTA implementation problems and WTO
priorities. U.S. business here clearly realizes that time is
growing short to speak up on these issues.


8. (SBU) On August 16, in Hanoi Fred Burke spoke at a luncheon
meeting of the Hanoi AmCham. The attendees included not only U.S.
business representatives, but also members of the press and
representatives of other embassies. Burke focused on Vietnam's
efforts to join the WTO and on implementation of the Bilateral
Trade Agreement (BTA),but he also made some of the same
complaints about restrictive regulations on trading and
distribution rights that he had made previously in Ho Chi Minh
City. He urged U.S. businesses to provide him with their views so
that he could update the AmCham's position paper on Vietnam's WTO
accession.


WINNICK