VIETNAM FAVORS GLOBAL SOLUTIONS TO FINANCIAL CRISIS

UNCLAS HANOI 001250 SENSITIVE SIPDIS STATE FOR EAP/MLS MBROWN SINGAPORE FOR TREASURY TREASURY FOR SCHUN USTR FOR DBISBEE E.O. 12958: N/A TAGS: ECON PGOV EAID VM SUBJECT: VIETNAM FAVORS GLOBAL SOLUTIONS TO FINANCIAL CRISIS ¶1. (SBU) During his October 31 visit to Vietnam, S/P Director Gordon met with officials at the State Bank of Vietnam (SBV) to discuss the global financial situation and President Bush's G-20 Summit series. Quoting Alan Greenspan, he described the rapidly spreading crisis as a "global tsunami" that called for immediate, wide-spread action. Gordon then detailed President Bush's plans for a series of summits for G-20 members, starting with the first meeting on November 15. The purpose of the initial summit, he explained, would be to restore confidence in global markets and to set out the financial supervision principals that nations will follow domestically and internationally. He added that President Bush hopes to obtain recommitment on sustaining a global open economy (especially via the Doha round) without resorting to protectionist policies, as well as continued support from developed countries on development assistance and cooperation, so that developing countries would not bear the brunt of the crisis. ¶2. (SBU) The Director of the SBV's Foreign Exchange Department, Nguyen Quang Huy, thanked Gordon for the information and explained that although Vietnam is not suffering immediate impacts from the financial crisis, it would incur relatively serious medium-term impacts from a potential drop in (1) exports, (2) foreign investment, and (3) remittances. He advocated for both developed and developing countries to take swift and decisive measures to mitigate the effects of the financial crisis. Huy agreed that such issues were properly addressed at a global summit level and expressed confidence that Indonesia would continue to represent South East Asian economies in a capable fashion. He welcomed additional information and updates on the summits, as the "discussions and outcomes of those talks will impact Vietnam." ¶3. (SBU) Finally, Director Gordon asked about the effect of the strengthening dollar on Vietnam. Huy responded that a stronger dollar will affect exports, but that it would take two to three weeks to see the impact. He added that the exchange rate has already seen some pressure, but that it was likely due to capital relocating from Vietnam to other, more developed countries. Lastly, Huy said that Vietnam's reserves are often measured in dollars, so that the overall value may appear to go down depending on the exchange rate. Gordon explained that the recent strengthening of the dollar was partially in response to Treasury actions, but that stability should be restored so that emerging markets are not adversely affected. He added that the U.S. hopes to avoid large currency fluctuations but that it is difficult to anticipate medium-term developments. ¶4. (U) This cable was cleared by S/P. MICHALAK