ADDITIONAL EXCHANGES ON CAPITAL CONTROLS

UNCLAS SECTION 01 OF 02 HANOI 000337 SIPDIS STATE FOR EB/OMA, EAP/MLS AND EAP/EP TREASURY FOR ANDY BAUKOL, CAROL CARNES AND SUSAN CHUN STATE PASS USTR DAVID BISBEE SINGAPORE FOR SUSAN BAKER SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EFIN ECON ETRD EINV VM SUBJECT: ADDITIONAL EXCHANGES ON CAPITAL CONTROLS HANOI 00000337 001.2 OF 002 (U) This cable contains sensitive information and is not for the Internet. REF: (A) HANOI 260 (B) HANOI 290 (C) HANOI 300 ¶1. (SBU) Summary. Following Embassy's delivery of initial letter from Treasury DAS Robert Dohner to Mr. Hung in the Prime Minister's office, there was an additional exchange between them on the issue of capital controls. Hung appreciated Treasury's comments, informed his superiors, and expected further government consideration of the issue after the Tet holiday. Treasury highlighted taking a careful approach to the challenges of strong capital inflows, keeping an eye to meeting international commitments and maintaining a market-friendly approach, and noted Treasury's technical assistance program should help Vietnam strengthen its securities market. End summary. ¶2. (SBU) Mr. Bui Huy Hung, International Relations Director in the Prime Minister's Office, provided additional comments in response to the February 13 letter from Treasury Deputy Assistant Secretary Robert Dohner we delivered on February 14 (Ref B). ¶3. (SBU) In an e-mail dated February 16, Hung confirmed that the government has not issued any new guidance to the market beyond Directive letter No 20/TB-VPCP dated 29/1/2007 (reported in REF C). He also indicated that Vietnam's National Monetary and Finance Committee did have a meeting on market control regulation that considered the issue of the currently "too hot" and "high risk" market. He thinks that the political leaders will consider the committee's proposals soon, after Tet. He also appreciated Treasury's timely comments and brought them to the attention of other responsible officials, particularly the concerns about the "one-year lock-up period." ¶4. (SBU) Hung thanked DAS Dohner for Treasury's technical support to the Ministry of Finance on Tax Administration. He also favorably noted USAID funding under the STAR project that provided the advice of U.S. Stock Exchange experts to Vietnam's national stock exchange committee for 10 days in November. ¶5. (SBU) Hung added his personal observations that, regarding capital controls, the Monetary and Finance committee meeting would have discussed options, with consideration to lessons learned from neighboring countries as well as its new requirements as a WTO member. He cited the WTO as a reason to be very careful about doing any interventions in the market, noting we cannot "do any thing we like as we did in the past." ¶6. (SBU) We also conveyed to Mr. Hung on February 22 a second letter from DAS Dohner dated February 15 with the following message: Begin text Thank you for your prompt response, which was relayed to us by our Embassy, and for communicating our concerns within your government. We hope that our observations were helpful. We are heartened that Vietnam is taking a careful approach to the challenges of strong capital inflows. The Prime Minister's Directive 20 shows that Vietnam is reviewing policy options with an eye to meeting its international commitments and maintaining a market-friendly approach. We think that Treasury's technical assistance program will be of assistance in tackling some of the issues identified in Directive 20 in strengthening your securities market. We look forward to continued policy dialogue and consultation through our Technical Assistance program. I greatly appreciate the opportunity to have this kind of exchange of views with you. I hope you will not hesitate to contact me, and that I may contact you again, as issues arise in the future. End text Comment -------------- ¶7. (SBU) These two communications between Treasury and OOG crossed in the mail because of the Tet holiday, but helped to establish a useful channel for conveying U.S. views on the sensitive issue of capital controls. HANOI 00000337 002.2 OF 002 ALOISI 2