U.S.-ASEAN BUSINESS COUNCIL BOTH OPTIMISTIC AND CONCERNED

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SUBJECT: U.S.-ASEAN BUSINESS COUNCIL BOTH OPTIMISTIC AND CONCERNED
ABOUT VIETNAM

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(U) SENSITIVE BUT UNCLASSIFIED. DO NOT POST ON THE INTERNET.


1. (SBU) Summary: Eighteen U.S. business representatives delivered a
message of optimism mixed with concern during a mission of the
U.S.-ASEAN Business Council (USABC) to Hanoi on May 3 and 4. The
highlight of the mission's two-day series of meetings with
Government of Vietnam (GVN) officials, mostly at the Vice Minister
level, was a 45-minute meeting with Prime Minister Nguyen Tan Dzung,
who emphasized the GVN's intention to continue economic reforms
along with enthusiastic, though unspecified, encouragement for the
development of the U.S.-Vietnam business relationship. He did
explicitly state that Vietnam is looking forward to the conclusion
of a Trade and Investment Framework Agreement (TIFA). The media
provided extensive and positive press coverage of the mission. End
Summary.


2. (U) Eighteen U.S. business representatives delivered a message of
optimism about opportunities in Vietnam in the wake of WTO entry
during a mission of the U.S.-ASEAN Business Council (USABC) to Hanoi
on May 3-4. Throughout the visit, the representatives expressed
concern about the lack of clarity in government regulations,
procedures and decision making and expressed frustration with
continuing intellectual property rights violations. They noted they
were the first U.S. business mission to Vietnam following the
country's accession to the World Trade Organization (WTO) and
Vietnam's obtaining Permanent Normal Trade Relations (PNTR). The
businesses represented were ConocoPhillips, Exxon Mobil, Raytheon
International Inc, Ford Motor Company, IBM, Alcoa, The Boeing
Company, Vietnam Partners, Chevron Vietnam, Abbott International,
Agilent, Hewlett-Packard, Time Warner, APCO Worldwide, GE, JHPIEGO,
United Telecom Services and UPS.

PRIME MINISTER EXPRESSES SUPPORT
--------------


3. (SBU) The highlight of the mission was a 45-minute meeting with
Prime Minister Dzung, who presented himself as a cordial and
enthusiastic supporter of U.S. investment. Dzung emphasized the
GVN's intention to continue economic reform along with enthusiastic,
though unspecified, encouragement for the development of the
U.S.-Vietnam business relationship. While he noted that he looks
forward to the signing of a TIFA as a deliverable for President
Nguyen Minh Triet's visit to the United States this year, he did not
hint at the conclusion of any other of the large business deals,
such as a Boeing sale of 787s to Vietnam Airlines or a Chevron gas
supply contract. Frances Zwenig, USABC Counselor, Jim Andrews,
Vietnam Business Development Manager for ConocoPhillips and Mike
Fleming, Vietnam Sales Manager for Boeing, spoke for the USABC
group, congratulating Vietnam for its progress, but speaking of
concerns. The Ambassador also attended.


4. (SBU) ConocoPhillips's Andrews noted that a constant concern is
the lack of clarity in new business decrees, regulations and
internal procedures to support these changes. "We would urge a
dialogue with the investment community to ensure that there are no
unintended consequences for new legislation," he said.
Many investors fear that Vietnam's infrastructure development will
not keep pace with demand. Two types of infrastructure urgently
need investment: 1) hard infrastructure, including railroads, ports,
roads, air ports, air planes and electricity; and 2) soft
infrastructure, i.e., skilled workers in the legal, business,
technology, earth sciences and health professions, Andrew said.


5. (SBU) Boeing's Fleming opined that this is Vietnam's time, but
the times of opportunity never last quite as long as we would like
them to. "As global companies we have to weigh opportunities in one
region or another. In the interest of helping Vietnam achieve its
goals, we hope to see Vietnam speed the ease of doing business," he
said. (Note: This message is related to Boeing's desire for a
quicker decision by the GVN on the Boeing sale. Boeing says the GVN
must make the purchase decision soon or lose the slots reserved for
delivery in 2014 and 2015. End Note.)


6. (SBU) Dzung, smiling and attentive throughout, spoke for the next
25 minutes, noting the development of the economic relationship
between the United States and Vietnam in the last ten years and
outlining Vietnam's major goals. Recent reforms had successfully
transformed Vietnam into a "genuine market economy," and the GVN's
"democratic" policies and emphasis upon social equity were
responsible for its success. "Our policies reflect the will of the

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people. We believe the trust of the people is the root of
sustainable development," he said. The GVN will continue the
development of its global economic integration, which required an
institutional and legal framework. "We are going to change our
legal framework to make ourselves conform to the international rule
of the WTO," he said. "You said that you are concerned about the
clarity of legal documents. That is our concern too."


7. (SBU) Dzung also addressed the concerns mentioned by the USABC
members. Tipping his hat to an often raised concern by Time Warner
during the mission, Dzung said "We know IPR protection is the
foundation for economic development." He also agreed that Vietnam
must urgently address both its hard and soft infrastructure needs
and specifically asked for United States assistance in developing
the skills of Vietnam's workforce. "This is one of our primary
intentions," he said. On the TIFA, Dzung stated that he believed
the agreement would represent "another step forward for the success
of Vietnam." At the end of his presentation, Dzung said that
Vietnam is very interested in the many projects represented in the
room. "I have asked the ministries to take steps to realize your
proposals," he said.


8. (SBU) The Ambassador closed the meeting noting that Vietnam has
many friends in the United States and the companies participating in
this trade mission are among the most influential. He urged the
Prime Minister to ensure that his government helps make President
Triet's visit to the United States later this year as productive as
possible. He expressed his hope that some of the deals represented
by the firms present could be announced during the visit and also
emphasized the potential benefit of the two governments signing a
TIFA. (Note: In a separate meeting, the Ambassador briefed the
USABC group in detail about our growing concerns regarding human
rights. End Note.)

LUNCH FOR VICE MINISTER FOR FOREIGN AFFAIRS
--------------


9. (SBU) At a luncheon for Vice Minister of Foreign Affairs Le Van
Bang, USABC Counselor Zwenig read a letter signed by U.S. Senators
John Kerry and John McCain commending Bang for his work to normalize
U.S.-Vietnam relations extending back to his time as Ambassador to
the UN and chief of the liaison office to the United States in the
early 1990s. Zwenig, Virginia Foote--former President of the
U.S.-Vietnam Trade Council and now President of Vietnam Partners
LLC, an investment bank--and the Ambassador recalled warmly the
critical role Le Van Bang played throughout his years of working on
U.S.-Vietnam relations and wished him well in his next assignment.
(Note: Le Van Bang is expected to become Vietnam's next Ambassador
to China. End Note.)

ECONOMIC DEVELOPMENT STRATEGY AND PLANNING
--------------


10. (SBU) In a session devoted to economic development and
infrastructure investment, Vice Minister of Industry Do Huu Hao and
Vice Minister of Planning and Investment Nguyen Bich Dat described
the GVN's three development policy pillars: economic growth, social
equity and environmental protection. The goal is to turn Vietnam
into an industrialized economy by 2020, Dat said. Vice Minister Hao
said the rate of industrial growth in Vietnam is expected to be
double that of economic growth and he emphasized the numerous
opportunities for foreign investors in the energy industry,
particularly in power stations, renewable resources and refineries.
Vietnam aims to build a nuclear power station by 2015, he added. Ha
Khac Hao, Deputy Director General of the Ministry of Transportation,
said that additional opportunities exist in the transportation
infrastructure, particularly the north-south road axis. He also
noted upcoming port projects in Hai Phong and Can Tho, as well as
airport projects such as an international air terminal in Danang.


11. (SBU) In the question and answer period, Chevron's Andrew Latham
asserted that Vietnam is facing "challenges related to legislation
that is changed without investor consultation," a lack of
transparency in government structures, decision making bottlenecks
and a lack of skilled human resources. He said that the GVN is
making regulatory reform progress, "but in the energy sector, it is
slow." Foreign investors also face a lack of clear boundaries
between the roles played by the state-owned energy monopoly, which
simultaneously acts as joint-venture partner, regulator, buyer and
seller of petroleum products, he said. (Note: Lathan was referring

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to state oil and gas monopoly PetroVietnam. End Note.) He also
urged a resolution of the dispute between China and Vietnam over the
Spratly Islands, noting that the gas resources there needed to fuel
Vietnam's growth cannot be developed. Michael Fleming of Boeing
urged a decision by Vietnam Airlines on its purchase of Boeing
aircraft, noting that Vietnam Airlines' fleet would have to nearly
triple to 31 airplanes by 2015 to meet its growth needs.

MINISTRY OF POST AND TELEMATICS
--------------


12. (SBU) Vice Minister Tran Duc Lai of the Ministry of Post and
Telematics (MPT) presented at a second session on economic
development. The session was dominated by questions put forth by
Hugh Stephens, Time Warner's Senior Vice President for International
Relations and Public Policy for the Asia Pacific region. Stephen
urged GVN officials to fulfill Vietnam's WTO intellectual property
rights commitments, noting that one digital satellite television
firm, Vietnam Multimedia Corporation (VTC),owned by MPT and
operating in "pilot" status for three years, has been pirating Time
Warner content such as CNN and HBO for years. Vice Minister Lai did
not commit to a change, only saying that "we are working to make the
experimental period as short as possible." Subsequent to this
meeting, the Vice Minister helped to schedule meetings between Time
Warner and representatives from VTC to discuss their business
operations and pirating of Time Warner-owned content.

MINISTRY OF TRADE AND WTO ACCESSION
--------------


13. (SBU) In a session on Vietnam's trade policy after joining the
WTO, Vice Minister of Trade Luong Van Tu and President of the
Vietnam Chamber of Commerce and Industry (VCCI) Mr. Vu Tien Loc
described how the GVN and Vietnamese businesses are responding to
new responsibilities, opportunities and challenges now that Vietnam
is a WTO member. VM Tu summarized the legal reforms Vietnam has
undertaken to comply with its WTO commitments, noting specifically
its joining of the Berne Convention and ongoing work to institute a
more robust regime to protect and enforce intellectual property
rights. Loc discussed the optimism among Vietnamese enterprises and
their aspirations to partner with U.S. firms. The GVN is working
closely with VCCI's member companies to educate them on Vietnam's
WTO commitments and the practical impact that its membership will
have on their operations. Additional vocational training and human
resources development are needed, Loc added, suggesting this as a
possible area for international investment and cooperation.


14. (SBU) In the Q&A session with the panel members, U.S. businesses
welcomed the prospect of a TIFA as an opportunity to continue
dialogue and explore ways to expand bilateral economic cooperation.
One firm suggested the creation of an energy sector working group
under the TIFA, while another noted its hope that TIFA discussions
could eventually lead to additional openings in Vietnam's key
service sectors. IPR protection is paramount for U.S. businesses,
explained one delegation member, noting the desire to see enhanced
enforcement of Vietnam's BTA and WTO obligations on IPR protection,
particularly in the prevention of signal and broadcast piracy. The
delegation also expressed willingness to assist training Vietnamese
businesses to understand international business practices and
Vietnam's WTO commitments better.


15. (SBU) Vice Minister Tu agreed that the signing of a TIFA, if
realized, would be a great step forward. Vietnamese businesses are
also optimistic about new cooperative opportunities through a TIFA.
Many VCCI member companies will travel to the United States this
summer with President Triet, where Mr. Loc hopes they will be able
to sign a number of high-value commercial deals. Responding to the
proposed development of an energy-sector working group, the VM
agreed that investment in the energy field is a legitimate interest
for both countries, and he hopes to see further U.S. investment in
the energy sector, particularly refineries, as well as other
projects to develop Vietnam's core infrastructure. Finally, Tu
agreed that a gap remains between the IPR legal regime and the
reality in Vietnam's market, but reiterated that Vietnam is fully
committed to implement its laws and is working to strengthen
inspection and enforcement efforts.

MINISTRY OF FINANCE
--------------


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16. (SBU) Vice Minister of Finance Truong Chi Trung said the GVN
plans to continue to develop the country's capital markets and speed
up the equitization of State Owned Enterprises (SOEs). About 200
firms currently trade on the official markets in Ho Chi Minh City
and Hanoi, and 800 on the informal over-the-counter market. The
equitization process is essential for the restructuring of SOEs, he
said. These equitizations were creating new opportunities for
capital market development as many firms are being listed publicly.
The GVN will focus on concluding equitization between now and 2010,
with a focus on major SOEs. Colin Low, President of General
Electric (GE) for Singapore, the Philippines and Vietnam, commended
the GVN for raising the cap on foreign holding of Vietnamese
commercial banks and asked for the Vice Minister to clarify the
requirements for "strategic partners" who invest in banks. Vice
Minister Trung said that the definition in the law is vague and that
a new decree on equitization to replace Decree 187 would spell out
these requirements more specifically. Virginia Foote said that many
laws had been passed for Vietnam to join the WTO, but many questions
remain about issues related to corporate governance. Vice Minister
Trung acknowledged the problem, adding, however, that new laws on
accounting and auditing would require companies to apply
international standards. A new law on taxation would also lead to
many new business practices at Vietnamese firms, he said.

NATIONAL ASSEMBLY
--------------


17. (SBU) In a May 4 working lunch session on lawmaking and the
fulfillment of WTO commitments, a panel including National Assembly
Foreign Affairs Committee Vice Chairperson Madame Ton Nu Thi Ninh
and National Assembly Economic and Budget Committee Members Danh Van
Thanh and Truong Huu Chi opined that U.S.-Vietnam relations are at a
very unique moment of opportunity. This opportunity will not last
forever, the legislators cautioned, adding that the National
Assembly, the GVN and the United States must take actions to
capitalize on the great momentum that has developed between our two
countries. Madame Ninh outlined the three main challenges she
believes Vietnam is facing in the post-WTO environment: 1) the need
for significant infrastructure development in Vietnam; 2) the need
to reform Vietnam's education system and develop better human
resources; and 3) the challenge of legal enforcement and
implementation of Vietnam's new WTO commitments.


18. (SBU) Madame Ninh envisions the National Assembly playing a
greater role in each of these areas, and encouraged U.S. businesses
to keep "an open channel" with NA members to ensure that Vietnam
upholds its commitments. Vice Chairperson Ninh also stressed the
important role that a strong judiciary should play in strengthening
and improving Vietnam's business environment. Finally, she urged
U.S. businesses to work with Vietnamese firms to organize
delegations such as the current USABC delegation to Vietnam; as such
trips can go far in developing stronger ties between our countries.


MINISTRY OF HEALTH
--------------


19. (SBU) The Ministry of Health's (MOH) Tong Hoai Nam described to
USABC members the problems in Vietnam's healthcare system.
According to Nam, Vietnam lacks funds to upgrade its healthcare
system. Moreover, at present, Vietnam has a serious shortage of
preventative medical staff and many healthcare workers have not
received sufficient training. About 3.5 million Vietnamese contract
diseases such as the flu, malaria and tuberculosis each year, but
preventative medicine remains inadequate. Nam said Vietnam's policy
makers are working to upgrade Vietnam's healthcare system. The GVN
has completed a plan that aims by 2010 to increase significantly the
number of preventative medicine specialists. In addition, MOH is
trying to develop a new model for the health insurance system. Nam
will give more details of Vietnam's "master healthcare plan" to the
USABC after it is completed.


20. (SBU) Ms. Leslie Mancuso of JHPIEGO, an international health
organization affiliated with John Hopkins University, told the group
that JHPIEGO can enhance the quality of healthcare services for
women and families through training and health education. However,
JHPIEGO will not provide funds for MOH plans. GE's Colin Low raised
questions about equipment and products from China and India that the
GVN does not allow to be used in Vietnam. Nam responded that the
GVN does not purchase this equipment because much of Vietnam's

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healthcare budget comes via aid from the Japanese Government. The
GVN can only spend Japanese Government aid money on Japanese
equipment, Nam added.

PRESS COVERAGE
--------------


21. (U) Press coverage of the USABC meetings was extensive and
positive, with nearly every major news daily and internet news
source covering the events. Separate pieces covered the panel
sessions, the lunch with Vice Foreign Minister Le Van Bang and the
meeting with Prime Minister Dzung.

MARINE