AMBASSADOR PROMOTES COMMERCIAL DELIVERABLES, TIFA, NEC, HR,

UNCLAS SECTION 01 OF 05 HANOI 000641

SIPDIS

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SIPDIS

STATE FOR EAP/MLS AND CA
STATE ALSO PASS USTR DBISBEE
COMMERCE FOR 4430/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: PGOV PHUM PREL ECON ETRD EFIN KOCI CVIS CASC AMGT
ABLD, OECX, SCUL, EAID, EIVN, VM
SUBJECT: AMBASSADOR PROMOTES COMMERCIAL DELIVERABLES, TIFA, NEC, HR,
AML AND ADOPTIONS WITH OOG PHUC

Ref: State 26801


1. (SBU) Summary: The Ambassador met with the Office of the
Government (OOG) Vice Chairman Nguyen Xuan Phuc on April 4 to
promote positive Vietnamese government action on commercial projects
by U.S. firms and to address a number of prominent bilateral issues,
including: Trade and Investment Framework Agreement (TIFA)
negotiations and the annual Bilateral Trade Agreement (BTA) review;
human rights; anti-money laundering; the need for a published
schedule of adoptions fees; the Peace Corps program; and the New
Embassy Compound (NEC). Vice Chairman Phuc took note of the U.S.
concerns and pledged that the GVN would work hard to make progress
on these issues to ensure a successful visit by President Triet
later this year. End Summary.

TIFA and the BTA Review
--------------


2. (SBU) The Ambassador began the meeting by noting that in each of
the stops during his March 25-30 travels in the United States, U.S.
firms expressed considerable excitement over the prospects for our
two countries' commercial and economic relations. Before moving to
review specific commercial deliverables, the Ambassador underscored
the importance the United States places on successfully completing
TIFA negotiations in time for a signing ceremony at the time of
President upcoming visit. A TIFA would help to boost bilateral
trade and investment and serve as a strong indication of our
expanding economic ties. Negotiations should not wait until the
final weeks before the visit, the Ambassador stressed, and he
requested that OOG work with the other relevant stakeholders to
begin talks as soon as possible. Vice Chairman Phuc agreed that the
two sides should begin talks very soon, reporting that Vietnam is
undergoing internal procedures to set up its negotiating team.
(Comment: After the meeting, OOG International Relations Department
Director Bui Hui Hung asked that USTR send a formal letter to the
GVN asking to begin negotiations. Such a letter would help expedite
internal GVN processes, Hung said. We have transmitted this request
to USTR by email. End comment.)


3. (SBU) In addition to the TIFA negotiations, it is time for the
two sides to schedule the annual BTA review, the Ambassador noted,
stressing the ongoing importance of this agreement and its review
process to our economic ties, particularly on investment. He
emphasized that this review needs to occur before President Triet's
visit.

Commercial Deliverables
--------------


4. (SBU) The Ambassador then turned to a number of commercial
projects by U.S. firms under consideration by the Government of
Vietnam (GVN),and pushed for breakthroughs on these deals before
the Triet visit. Currently, the GVN is considering projects worth
an estimated USD 7.1 billion of business for U.S. companies, with
approximately USD 4.2 billion of that being exports to Vietnam.
Approval of these projects would go a long way toward reducing the
growing gap between Vietnamese exports to the United States and U.S.
exports to Vietnam, the Ambassador said. With hard work in the
coming months, the two sides could hold a very significant signing
ceremony in Washington, eclipsing even the magnitude of the signing
ceremony held during then-Prime Minister Phan Van Khai's 2005 visit
to the United States.


5. (SBU) Vice Chairman Phuc agreed that progress on commercial
projects will help strengthen bilateral ties, enhance President
Triet's visit and work to balance trade between our two countries.
He confirmed the GVN has been working to advance these business
deals, and expressed confidence that the environment for U.S.
businesses will be "very favorable in the coming period."


6. (SBU) The Ambassador first raised the joint investment
opportunity between Alcoa World Alumina and Chemicals Company and
Vinacomin to develop a bauxite mine and alumina refinery in Dak Nong
Province. Prime Minister Dzung's approval of the companies' joint
action plan and cooperative agreement would allow them to move
forward on their development plans. Vice Chairman Phuc advised that
Vietnam is undertaking a comprehensive survey of bauxite in central

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Vietnam in order to have a better picture of the quantity and
quality of reserves available. Vinacomin has been assigned as the
primary agency, and it will select appropriate partners to mine and
distribute bauxite. Vice Chairman Phuc also said he would meet with
former U.S. Ambassador Pete Peterson later on April 4 to discuss
this project.


7. (SBU) On the SSA Marine projects to develop Vietnam's seaport
infrastructure, the Ambassador stated that granting an investment
license for the firm to develop port facilities at Cai Mep late last
year was an important step to address Vietnam's infrastructure
needs. In addition to seeing this project move ahead smoothly, the
United States hopes the GVN will approve an investment license for
SSA Marine to undertake a second port project at Cai Lan in Quang
Ninh Province in time for President Triet's visit. Phuc concurred
that the Cai Mep project is going well, and explained that Vietnam
is working to finalize an agreement on the Cai Lan project before
the Triet visit. (Comment: While SSA has strong capabilities in
consulting and engineering services, we suspect that Ministry of
Industry (MOI) will not support a proposal for a 100 percent
foreign-owned project, as proposed by SSA.)


8. (SBU) Following meetings in Chicago between Boeing and DPM/FM
Pham Gia Khiem last month, Boeing will soon issue a letter to the
DPM outlining examples of how Boeing can help the Vietnamese
aviation industry, the Ambassador continued. Given the support of
the Ex-Im Bank and the U.S. Trade and Development Agency (TDA),an
agreement for Vietnam Airlines (VNA) to purchase additional Boeing
aircraft would greatly benefit VNA and serve as an unparalleled
symbol of the current strength of our countries' relationship. The
Ambassador expressed the hope that the two sides can overcome delays
caused by vacancies in VNA leadership, as the Boeing 787 Dreamliner
is the ideal fit for Vietnam's current and future air transportation
needs. Vice Chairman Phuc agreed that the two sides should be
prepared to sign an agreement over Boeing aircraft this summer.
Although Vietnam has received other offers, VNA would like to
purchase Boeing aircraft to serve best its long range routes to
Europe and, in the future, the United States. Phuc committed to
"work hard to conclude this agreement" by this summer.


9. (SBU) Vietnam should add the Gannon power plant project in Dong
Nai Province to the country's master energy plan, the Ambassador
continued. The key decision on whether to move forward with this
project rests with the Prime Minister. Ambassador Marine recently
wrote the PM a detailed letter outlining the advantages of this
project and the U.S. desire for a positive response in the near
future. The Gannon power plant would entail significant technology
transfer from several major U.S. firms, including General Electric
and Shaw, Stone and Webster. Phuc reported that he met with Gannon
executives in the United States last month, and is following this
deal closely. He committed to organize an inter-ministerial
meeting, including relevant stakeholders such as PetroVietnam, to
finalize a decision and report to the Prime Minister.


10. (SBU) Regarding plans for the American firm AES to build a
coal-fired plant in Vietnam, negotiations will begin the week of
April 9 over a power purchase agreement and a coal supply agreement,
two keys to starting this project. The Ambassador and Vice Chairman
Phuc agreed that the two sides should negotiate quickly to conclude
these agreements and begin work on the power plant. Ambassador
Marine noted that recent power outages in Vietnam highlight the
critical need to reach agreements and begin work on power projects
such as those being proposed by Gannon and AES.


11. (SBU) Motorola, another key partner for Vietnam, is interested
in expanding its cooperation with Vietnamese mobile telephone
companies, the Ambassador said. Meetings between Motorola and DPM
Khiem during the March visit were useful in advancing negotiations
between Motorola and Vinaphone, but a deal for Motorola to deliver
technology to expand Vinaphone's GSM networks in Hanoi and Ho Chi
Minh City could be a key deliverable for President Triet's visit.
Vice Chairman Phuc commented that he participated in the meetings
with Motorola in the United States, during which Vietnam raised the
prospect of Motorola manufacturing equipment, including mobile
phones, in Vietnam. Phuc asked the Ambassador to urge Motorola to
agree to this idea, saying that if both sides can agree, "it will
open good prospects for Motorola on cooperation with Vinaphone."

HANOI 00000641 003 OF 005




12. (SBU) Ambassador Marine then raised a new project: GTECH
Corporation's interest in providing technology and services to
Vietnam as it contemplates developing a national online lottery
system and a sports betting system. GTECH Corporation is a
worldwide leader in providing software infrastructure and payment
processing systems for the gaming industry, the Ambassador
explained, and would be an excellent partner for Vietnam. Although
this was the first he had heard of GTECH's interest in Vietnam, Vice
Chairman Phuc explained that Vietnam is currently developing plans
to develop sports betting systems and casinos, and urged GTECH to
work with its Vietnamese counterparts to ensure that its proposal is
included in this planning. He continued by saying that Vietnam is
particularly interested in the sports betting industry.


13. (SBU) Moving on, the Ambassador said that U.S. companies are
stepping up their interest as Vietnam develops its downstream oil
and gas industry. For example, Shaw, Stone and Webster is seeking
to obtain the right to complete a feasibility study and eventually
develop an oil refinery in the Long Son District of Ba Ria-Vung Tau
Province. Shaw, Stone and Webster is talking with the Ministry of
Planning and Investment (MPI) about this project, and TDA has
indicated it would consider co-funding the project, the Ambassador
explained. Vice Minister Phuc replied that he is impressed with
Shaw, Stone and Webster's experience and capabilities, and has
already expressed strong support to the relevant GVN agencies,
asking them to work with the MPI to develop an investment plan for
this project.


14. (SBU) After raising the above commercial projects, Ambassador
Marine raised a final case, which he noted was not a commercial
opportunity but rather a problem. A long-standing member of the
American business community in Vietnam recently asked the Embassy
for assistance in resolving a commercial dispute over property
involving Redsun, a company which the American businessman
represents in Vietnam. Redsun holds a legitimate contract for a
piece of property, and now claims the contract is not being honored.
The Ambassador explained that he typically advises interested U.S.
firms that corruption is still an issue in Vietnam and the rule of
law is not yet fully established, but the GVN is taking important
steps and progress is being made. Cases such as this one,
demonstrating a failure to honor the sanctity of contracts, undercut
those positive sentiments, the Ambassador said. Noting the growing
interest by U.S. firms in investing and growing business in Vietnam,
the Ambassador asked for OOG's cooperation in seeking fair
resolution to the Redsun case and ensuring that local interests not
get in the way of good business practices. Vice Chairman Phuc
responded that this was the first he heard of this case, but agreed
that the issue should be dealt with according to the law to protect
the legitimate rights of foreign investors. Phuc committed to
forward this issue to relevant authorities upon receiving "necessary
documents" and more information about this case.

Human Rights
--------------


15. (SBU) There is a growing concern in Washington and throughout
the United States about human rights, the Ambassador explained, and
it is important for the two sides to maintain frank and open
dialogue to prevent this from overshadowing the other positive
aspects of our relationship. The two sides will have an opportunity
to continue discussions at the April 24 Human Rights Dialogue in
Washington. The Ambassador expressed confidence that the two sides
could work together to manage these concerns, but the months ahead
will be difficult for our relationship unless we work together to
address the issue immediately.


16. (SBU) Phuc responded by confirming that Secretary Rice's
comments to DPM Khiem on the human rights situation were fully
reported to Prime Minister Dzung. He continued by pointing to the
"many positive developments" Vietnam has made in recent years to
expand human rights and religious freedom. Phuc cited the recent
abolition of Decree 31, which allowed GVN officials to detain
citizens without due process. He also explained that Vietnam is
trying to build transparency into its legal proceedings, including
allowing the media and foreign diplomats to witness the March 30
trial of Father Nguyen Van Ly.

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Anti-Money Laundering and Law Enforcement Cooperation
-------------- --------------


17. (SBU) Following up on meetings between members of DPM Khiem's
delegation and the U.S. Drug Enforcement Agency (DEA) and the U.S.
Department of Justice (DOJ) in Washington, the Ambassador expressed
a desire to see the two sides move forward on measures to strengthen
Vietnam's anti-money laundering (AML) system, particularly through
work on the AML Decree. The United States also encourages Vietnam
to take the necessary steps to join the Asia Pacific Group's
Financial Action Task Force (FATF),an important institution with
strong AML criteria. This would be a clear signal of the growing
maturity of Vietnam's banking system and the prudence of its
leadership as it takes a larger role in the international
marketplace. Furthermore, the United States would welcome a request
by the GVN for the DOJ to review Vietnam's AML Decree. These steps
are key elements in the process of setting the stage for Vietnamese
banks to open representative offices in the United States, and they
would provide a way for the United States and Vietnam to cooperate
better on tracking "hot" drug money transiting Vietnam. These steps
are only part of our desire to see stronger law enforcement
cooperation between our two countries. The Ambassador added that he
would soon send a formal proposal to the GVN to expand the existing
Letter of Agreement (LOA) which allows us to provide technical
assistance in this area.


18. (SBU) Vietnam is ready to work with the United States on money
laundering to increase transparency and prevent criminal activities,
Vice Chairman Phuc explained. After being briefed on the Washington
meetings with DEA and DOJ, the Prime Minister instructed the
relevant GVN agencies to increase cooperation with the United States
on AML efforts. Phuc noted that Vietnam stands ready to act on
specific information on suspected money laundering activities. He
also registered his concern that AML activities must not create
obstacles to legitimate investment or remittances to Vietnam. The
Ambassador agreed that the vast majority of remittances are
completely legal, but emphasized that it is equally important to
ensure that those conducting illegal activities not be allowed to
hide behind legal remittances. Phuc took note that Vietnam should
further refine its legal documents, including the AML Decree, to
which the Ambassador replied that we stand ready to help in this
regard, and a formal request for assistance by the GVN would be a
significant step forward.

Adoptions
--------------


19. (SBU) Moving next to adoptions, the Ambassador demarched the
Vice Chairman on the lack of a published schedule of adoptions fees,
per Reftel. He expressed appreciation for the growing cooperation
on adoptions of Vietnamese children by Americans. He reminded Phuc
that he had sent a March 15 letter to OOG Chairman Doan Manh Giao
outlining our concerns over the adoption program in Vietnam. In
short, the absence of a fee schedule creates the opportunity for
individuals and organizations at the grassroots level to make
illicit profits from adoptions. The two governments must work
together to prevent this, the Ambassador stressed. He urged the OOG
to work with the Ministry of Finance (MOF) to publish a fee schedule
soon, and thereby avoid any possible disruption of this wonderful
program which benefits citizens of both countries. OOG Vice
Chairman Phuc committed to try to meet with MOF officials at an
upcoming cabinet meeting to urge them to publish a fee schedule as
soon as possible.

Peace Corps
--------------


20. (SBU) Citing DPM Khiem's comments in Washington on his desire to
see this program established, the Ambassador commented that the
Vietnamese Ministry of Education and Training (MOET) has been
unwilling to meet or discuss a way forward. The Embassy would be
happy to meet with the OOG to discuss this further if necessary. In
a sign of the widespread support for the Peace Corps program, 15
U.S. Senators recently co-signed a letter to Prime Minister Dzung
pushing for the GVN to agree to bring the Peace Corps to Vietnam.
Phuc confirmed that the OOG received this letter, and said that the

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OOG will continue to request that the Ministry of Foreign Affairs
(MFA) and MOET work to negotiate a formal Peace Corps agreement, in
which he claimed the GVN has a strong interest.

New Embassy Compound (NEC)
--------------


21. (SBU) Finally, on the NEC, the Ambassador noted that he remains
troubled by the lack of visible progress in acquiring land for a new
U.S. Embassy in Hanoi. An agreement to open a new Embassy that
accurately reflects the importance of our growing bilateral
relationship remains one of the Ambassador's key priorities. He
encouraged the OOG to prod the MFA to respond soon to a formal offer
the United States submitted more than a month ago and help to broker
a positive resolution to this issue soon. Vice Chairman Phuc shared
the Ambassador's concerns and agreed to "work harder" to have
resolution on this issue in the near future.

MARINE