HCMC WELCOMES SECRETARY GUTIERREZ WITH OPEN ARMS

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001131 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/MLS STATE PASS TO USTR DBISBEE COMMERCE FOR 4431/MAC/AP/OPB/HPPO EEB/TPP/BTA/ANA E.O. 12958: N/A TAGS: ECON EIND ETRD BEXP KTEX OTRA OVIP VM SUBJECT: HCMC WELCOMES SECRETARY GUTIERREZ WITH OPEN ARMS HO CHI MIN 00001131 001.2 OF 002 ¶1. (SBU) Secretary of Commerce Gutierrez led the Department of Commerce Vietnam Business Development Mission to Ho Chi Minh City (HCMC) on November 6 and 7, opening the doors of literally hundreds of Vietnamese policy makers, business community leaders and potential customers to the twenty-two U.S. companies on the mission. In addition to meetings with Minister of Industry and Trade Vu Huy Hoang and Ho Chi Minh City People's Committee Chairman Le Hoang Quan (SEPTEL),the Secretary addressed a capacity crowd at the HCMC University of Science and Technology, heard from leading HCMC entrepreneurs that Vietnam's regulatory environment is improving and visited a water treatment facility highlighting $25 million dollars in U.S. content. Companies reported they made important new contacts and had various long-standing issues clarified by government officials, but urged the U.S. government to redouble business advocacy efforts; a number of them stressed obtaining distribution rights as a top priority. End Summary. Opening Doors for the Delegation -------------- ¶2. (SBU) The November 6-7 trade mission saw HCMC throw open its doors, beginning with a meeting between the delegation's twenty-two U.S. companies and Minister of Industry and Trade Vu Huy Hoang. Companies laid out ambitions for new investment in Vietnam and expanding existing investments (especially in infrastructure, power generation and mineral extraction) and increasing U.S. exports to Vietnam (including vehicles, medical equipment and specialty chemicals) and well as increasing tourism in both directions. Minister Hoang welcomed U.S. interest in all sectors of the Vietnamese economy and wished the delegation fruitful discussions with their Vietnamese counterparts. In an additional bilateral meeting with the Minister, the Secretary raised a number of U.S. concerns, including intellectual property rights and distribution rights (SEPTEL). ¶3. (SBU) To see one example of the key role U.S. investment can play in HCMC's economy and development, the Secretary visited the Thu Duc Water Treatment plant. When it becomes operational in a few months, the plant will provide one-third of HCMC's drinking water. The project boasts $25 million in U.S. materials and equipment and employed U.S. services firms and intellectual property. The Secretary called the plant "an example of critical infrastructure projects and partnerships with Americans that will spur growth in the region." From the roof of the plant, hosts pointed out an aging water treatment facility built by the United States in the 1960s that currently supplies the majority of HCMC's drinking water. Broad Public Interest -------------- ¶4. (SBU) An estimated nine hundred students crammed the HCMC University of Science and Technology auditorium to hear the Secretary's message that Vietnam is doing well in the global SIPDIS competition to create an environment that welcomes investment. Education creates the entrepreneurs for tomorrow's economy in Vietnam and countries like Burma that stifle innovation clearly suffer economic consequences. Vietnam is growing because it has unleashed the entrepreneurial spirit of the Vietnamese people, the Secretary said, adding that the United States has an obligation as a good friend to encourage Vietnam to improve its record on human rights. Students asked about the future of the trading relationship, global opportunities for Vietnamese engineers, and how the United States can help Vietnam improve its educational system. The Secretary pointed to Ambassador Michalak's commitment to increase U.S. efforts, particularly by increasing the number of Vietnamese that study in the United States and Americans that study in Vietnam. ¶5. (SBU) HCMC entrepreneurs shared stories of their successes with the business delegation over lunch. Economic reform has unleashed the potential of the Vietnamese people, the Secretary agreed. Business leaders predicted (and welcomed) that in a few years time the United States will become the biggest foreign investor, direct and indirect, in Vietnam. Some credited Vietnam's slow pace of privatization with preventing the creation of a class of Vietnamese oligarchs. In 2000 just one million Vietnamese had access to the Internet, a computer gaming entrepreneur noted, but now 20 million have access and 40 million will have access to the Internet in just a few years -- this rapidly changing environment creates the ideal environment for entrepreneurs. The Secretary applauded their success. Members Report Distribution Rights Took Center Stage -------------- -------------- HO CHI MIN 00001131 002.2 OF 002 ¶6. (SBU) After nearly two hundred individual meetings, the twenty-two companies uniformly credited the mission with opening doors and kicking off further discussions, "we did in three days what normally takes us months" one medical equipment manufacturer noted. Companies said they met with decision-makers and found potential partners, distributors and customers that will lead to increased trade and investment. One tourism company asked the U.S. Mission consider the "China approach" that the representative described as a pilot program at U.S. Embassy Beijing in which reputable local (possibly state-owned) companies are able to provide additional information to inform the non-immigrant visa adjudication process. Several companies in the process of seeking investment licenses (power generation) said that the visit prompted Vietnamese decision-makers to make incremental steps forward in the complex licensing process, and thanked the Secretary for his advocacy on their behalf. Vietnamese companies and officials are tremendously interested in U.S. technology, companies noted, but added that successfully commercializing this interest will be a challenge. ¶7. (SBU) A number of companies advised the Secretary that their business is being impeded or even harmed by their inability to sell directly to end-users and distribute their products directly. [Note: According to Vietnam's services commitments, foreign enterprises do not get distribution rights until 2009. End note.] One vehicle manufacturer assessed that obtaining distribution rights immediately for U.S. companies would significantly impact on our $8 billion trade deficit with Vietnam. The regulations are clear, the manufacturer added, but not favorable to U.S. business and are ripe for USG advocacy. The Secretary noted that he raised distribution rights in virtually every meeting and agreed this is the top issue for follow-up. Comment: -------------- ¶8. (SBU) Secretary Gutierrez was warmly welcomed by HCMC's business and government leaders. Media coverage of the Secretary's visit to HCMC was extensive and very positive. In SIPDIS addition to in-depth reports in daily newspapers, weekly magazines, on national television (VTV, HTV),and on news web sites, the visit was covered by television stations from nearby Binh Duong and Dong Nai provinces. Reports focused on the university speech, issues raised at the press conference, U.S. support for Vietnamese exports, and on the bilateral meetings held with MOIT and the Chairman of the HCMC People's Committee. Companies have clearly identified distribution rights as an important issue needing further USG attention. The Secretary's visit also opened eyes in the U.S. business community to Vietnam's potential. One member summed his company's situation, saying "we've been consumed by China and India" and now need to work hard to get into Vietnam. End comment. ¶9. (U) This cable was cleared by the delegation and coordinated with Embassy Hanoi. FAIRFAX