SENATOR HAGEL VISITS HO CHI MINH CITY

UNCLAS HO CHI MINH CITY 001207 SIPDIS SIPDIS E.O. 12958: N/A TAGS: OVIP PHUM PREL SOCI ECON EFIN PGOV KIRF VM SUBJECT: SENATOR HAGEL VISITS HO CHI MINH CITY ¶1. During an October 4-5 visit to HCMC, Senator Chuck Hagel was officially welcomed by HCMC Party Secretary Le Thanh Hai, who said it was good have the Senator back in Vietnam after a seven-year absence. Hai said he was pleased that bilateral relations continued to improve and that President Bush would visit Vietnam for the APEC Leaders' Summit. He noted the vital role that HCMC plays in the Vietnamese economy, contributing 40 percent of Vietnam's import and export output, 21 percent of overall GDP and 33 percent of national tax revenue. Since Vietnam embarked on its process of economic liberalization (Doi Moi) in 1986, HCMC has always had double-digit growth, with growth rates at least 50 percent higher than the national average. ¶2. Looking ahead, the Party Secretary noted that developing new infrastructure -- roads and ports in particular -- was the city's biggest challenge, lest infrastructure become a bottleneck to growth. HCMC also is looking to improve its human resource development. Although HCMC has 40 percent of all trained workers in the country, it still needs more to expand into higher-value service sectors such as banking, telecom and knowledge-based industries. To that end, HCMC wants to expand educational and training partnerships with U.S. institutions. Hai noted that one of his sons is studying business administration at Southern New Hampshire University. ¶3. Secretary Hai also noted the critical role that the private sector has played in HCMC's economic growth. Since Vietnam passed the Enterprise Law in 2000, HCMC has created 50,000 new private-sector businesses. These enterprises are the reason for HCMC's high rate of growth. However, looking toward Vietnam's entry into the WTO, the Party Secretary observed that most of HCMC's private-sector businesses are small and still lack the capital and technical skills to compete in the international market. In a separate meeting, Ambassador Ton Nu-Thi Ninh, Vice-Chair of the National Assembly Foreign Affairs Committee, told Senator Hagel that Vietnam is committed to improving its protection of Intellectual Property Rights. She noted that the GVN hoped for a quick and favorable vote in Congress on extending Vietnam Permanent Normal Trading Relations. Vietnam was looking forward to the earliest possible WTO entry but, to avoid "social instability," the GVN will not push economic growth "too fast." ¶4. The Board of Governors of the HCMC American Chamber of Commerce (AmCham) thanked the Senator for his leadership in promoting U.S-Vietnam relations. AmCham was looking forward to Vietnam's earliest possible entry into WTO. However, AmCham members representing the textile industry were concerned over the agreement of USTR and the Department of Commerce with Senators Dole and Graham to create a special monitoring regime for Vietnamese textiles entering the U.S. post-WTO entry. Such a monitoring regime, and the prospect that the U.S. could thereafter impose anti-dumping duties, could have a chilling impact on exports to the United States. The AmCham representatives also requested that Congress end taxation of foreign-earned income and benefits. ¶5. During a visit to the Fulbright Economics Teaching Program (FETP),the directors underscored that, over FETP's twelve years of operation in Vietnam, it has morphed into a leading center for policy analysis and is an informal advisor to the GVN on economic and educational sector development. In a lively follow-on discussion, FETP students asked the Senator about protectionism in the United States, the efforts of the U.S. and Vietnam to resolve war-legacy issues such as Agent Orange, and the negative image of the United States in some quarters overseas. ¶6. Tran Dac Sinh, the Chief Executive Officer of the fledgling HCMC Securities Trading Center, outlined the government's plans to transform the Center into a full-fledged Stock Exchange by early 2007. The Center currently has a market capitalization of USD 3.5 billion; it hopes to reach USD 10 to 15 billion by 2010. If GVN plans to "equitize" state-owned enterprises (SOES) proceed, all large State Banks will be listed by 2008 and other major SOEs by 2010. A technical team from the New York Stock Exchange will begin work with the Center this month to modernize and expand trading as well as to facilitate increased foreign participation in Vietnam's capital markets. The Center already has signed cooperative MOUs with the Czech, Malaysian, Singaporean and Korean stock exchanges. Excitement about Vietnam's economic prospects is high, Sinh told the Senator. Since January, the HCMC Stock Exchange index is up by 65 percent. Vietnam will have many new dollar millionaires by the end of 2006 if this trend continues, he said. ¶7. Senator Hagel's staff cleared this message. WINNICK