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