DNSA PRICE'S VISIT TO VIETNAM

UNCLAS SECTION 01 OF 03 HANOI 000345

SIPDIS

SENSITIVE
SIPDIS

USTR FOR BISBEE AND CLAMAN
STATE FOR EEB/IFD/OIA GOETHERT
SINGAPORE FOR TREASURY
BANGKOK FOR JNESS
TREASURY FOR SCHUN
COMMERCE FOR A/S SPOONER AND SSU

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV KIPR OVIP PGOV VM
SUBJECT: DNSA PRICE'S VISIT TO VIETNAM

HANOI 00000345 001.2 OF 003



1. (SBU) Summary: Assistant to the President and Deputy National
Security Adviser for International Economic Affairs Daniel M. Price
visited Hanoi for official meetings on March 20-21. He received
assurances of Vietnam's interest on a BIT, on addressing IPR issues,
and on USG technical assistance on bond market development. The
Government of Vietnam (GVN) also queried Price on the Generalized
System of Preferences (GSP) and on designation of Vietnam as a
market economy. Press coverage was significant and very positive.
End Summary.

MPI MINISTER PHUC SAYS VIETNAM INTERESTED IN A BIT
-------------- --


2. (SBU) In a March 21 meeting, Planning and Investment (MPI)
Minister Vo Hong Phuc told Deputy National Security Adviser (DNSA)
for International Economic Affairs Daniel Price that concluding a
Bilateral Investment Treaty (BIT) would be "very significant," and
that it would help push U.S. investment and the overall U.S.-Vietnam
relationship to a higher level. Noting that Vietnam recently signed
a BIT with Japan, Phuc said he "looks forward to concluding" one
with Washington as well. Phuc thought that experts from both sides
"should meet more regularly" and step up efforts "to conclude an
agreement." Phuc told the DNSA that the GVN is "politically
committed" to negotiating a BIT and stressed that the experts going
with the Minister to the United States next month will be prepared
to discuss the agreement. (Note: We view Phuc's comments as
significant because we will need high-level commitment to force a
reluctant GVN bureaucracy to negotiate a BIT.)


3. (SBU) Minister Phuc also noted that Vietnamese business people
also need to learn more about U.S. laws and regulations, which is
partly why a host of local business leaders will accompany him on
his trip to the United States in the second week of April. DNSA
Price expressed his interest in seeing Phuc in Washington and
emphasized that the two sides must seize opportunities to push BIT
talks forward because "negotiation resources are scarce."


4. (SBU) Minister Phuc agreed that creating a transparent,
predictable and stable environment is critically important to
drawing more foreign investment to Vietnam. Vietnam needs to
attract more U.S.-based strategic investors, he added. He claimed,
however, that Vietnam deserves "preferential treatment" because of
its developing country status. In clarifying this point, Phuc
pointed to the issues of technology transfer, investment market
openness and "favorable conditions" for exporters. DNSA Price
responded that in almost all cases in the U.S., foreign investors
are treated the same as U.S. domestic companies. Moreover, Vietnam
would have a chance to raise national treatment exceptions if it
enters into BIT negotiations.

MOF WELCOMES TECHNICAL ASSISTANCE, EXPLAINS FINANCIAL SERVICES
--------------


5. (SBU) In a cordial meeting at the Ministry of Finance (MOF),
Vice-Minister Tran Xuan Ha reviewed, in comprehensive detail,
Vietnam's progress on implementing macro-economic reform and its WTO
commitments, despite the fact that it is a developing country that
comes from a "low starting point." Ha praised U.S. technical
assistance, including USAID's STAR program, and noted the MOF's
"improved relationship" with the U.S. Department of Treasury, which
is now providing the GVN with key technical assistance on tax,
insurance and SME credit guarantee. Ha was enthusiastic that the
GVN would soon be receiving more assistance from Treasury to develop
Vietnam's capital and debt markets.


6. (SBU) DNSA Price emphasized to Vice Minister Ha that capital
market liberalization is a very high U.S. priority. In particular,
he asked about Vietnam's commitment to allow access to 100 percent
foreign-owned fund management companies and securities firms. From
a U.S. investment banking perspective, Price said, activities of
underwriting, securities trading, asset management and financial
advisory are often all integrated, and he expressed concern about
treating such services separately from securities / fund management
firms and thus creating unnecessary over-regulation and division.
Ha explained that Vietnam hoped to liberalize such financial service
markets earlier than its 2012 WTO commitment. He further explained
that Vietnam's current regime had different regulations for
securities firms and asset management firms but that
Vietnamese-owned firms could currently provide such broad and
integrated services. Ha said it was the MOF's intention to allow
100 percent foreign-owned asset management companies to operate in

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Vietnam before the 2012 WTO deadline.

MOIT ON GSP AND MARKET STATUS
--------------


7. (SBU) In his meeting with Industry and Trade Minister (MOIT) Vu
Huy Hoang, DNSA Price again raised the BIT, calling it the "next
critical step" in the U.S.-Vietnam economic partnership. Price,
however, warned Hoang that Vietnam must do more to implement and
uphold intellectual property rights (IPR) under the WTO and
Bilateral Trade Agreement. While Hoang agreed there was more work to
do, he said the GVN had been striving to fulfill its commitments
under these agreements.


8. (SBU) Price next encouraged the GVN to open its markets to U.S.
beef, following a recent endorsement by the World Organization for
Animal Health (OIE) that designated U.S. beef products as safe for
global trade. Hoang replied that the Vietnam's Ministry of
Agriculture and Rural Development (MARD) would take the lead on beef
imports and would continue to work with the United States on this
issue.


9. (SBU) DNSA Price also endorsed further economic integration in
East Asia and observed that the ASEAN region is the United States'
number one trading partner and fifth largest export market. Hoang
said Vietnam highly appreciated the U.S.'s active relationship with
ASEAN and noted that President Nguyen Minh Triet had just ratified
the landmark ASEAN Charter the previous day, making Vietnam the
fifth ASEAN nation to do so (after Singapore, Burma, Laos and
Malaysia). The Charter, signed in 2007, aims to commit ASEAN
members to promote human rights and democratic principles.


10. (SBU) Min. Hoang also told DNSA Price and the Ambassador that
Vietnam intends to apply for GSP. Both Price and the Ambassador
observed that IPR and labor are two areas that remain particularly
problematic for Vietnam and could hinder its chances for GSP
consideration.


11. (SBU) Turning to Vietnam's current designation as a "non-market
economy," Hoang asked if the U.S. Department of Commerce could
evaluate individually, rather than collectively, the six criteria
used to determine market economy status. Hoang said this
methodology would allow the GVN to focus exclusively on the problem
areas while demonstrating to its regional trade partners that it had
satisfied some of the criteria. Price replied that he did not
believe that a decision on less than all six criteria would make
much of a difference but said that he would pass along the message
to Commerce.

OOG'S PHUC ON VIETNAM'S COMMITMENTS, IPR AND BEEF
-------------- -


12. (SBU) Office of Government Minister-Chairman Nguyen Xuan Phuc
warmly welcomed DNSA Price to Vietnam, on his own and on behalf of
the Prime Minister, noting that he personally appreciated Price as a
trusted interlocutor on trade issues due to his "open, honest and
straightforward approach." Chairman Phuc highlighted his country's
sincerity in fulfilling its BTA and WTO commitments. He reassured
Price of the GVN's resolve to continue to establish a market-based
economy and to open the economy in sensitive sectors, including
insurance, finance and banking.


13. (SBU) DNSA Price congratulated Phuc for Vietnam's recent
progress, and expressed his confidence that the country is now ready
to take the next step of beginning BIT discussions with the U.S. In
particular, the DNSA noted that it will be necessary to show
continued progress on IPR protection in Vietnam as well as expanding
market access for U. S. beef. Noting that his team had discussed
both issues earlier in the day during the TIFA Senior Officials
Meeting (Septel),Chairman Phuc reiterated the Prime Minister's
recent directive on setting criminal penalties for commercial-scale
IPR violations as well as Vietnam's determination to resolve market
restrictions for beef to the satisfaction of both parties.


14. (SBU) DNSA Price told the OOG Chairman that he would be holding
a press conference directly following his meeting at the OOG, where
he intended to publicly commend the GVN for moving toward greater
administrative predictability, consistency and transparency through
its Project 30 (the GVN's new administrative reform project). Phuc
thanked the DNSA for U.S. assistance programs like STAR and the
National Competitive Initiative (VNCI) in support of its

HANOI 00000345 003.2 OF 003


administrative reforms efforts and requested that the United States
give serious consideration to providing further support. Phuc
closed the session by again thanking Price for his openness and
Mission Vietnam for being a reliable partner.

VISIT GETS POSITIVE PRESS COVERAGE
--------------


15. (SBU) Price closed the day with an open press event for local
and foreign journalists. After delivering remarks on his earlier
meetings, the bilateral relationship (including the BIT) and
Vietnam's regional and global integration, Price took questions from
a number of reporters. British (BBC),U.S., Chinese, and many
domestic outlets carried extensive positive coverage of the visit in
the following days. Domestic press focused on the DNSA's forecast
that Vietnam would weather is current inflationary spell, his praise
for Project 30, and his message on strengthening bilateral trade
ties.


16. (U) This cable was cleared with DNSA Price prior to his
departure from Vietnam.

MICHALAK