SCENESETTER, PART I OF III, FOR THE DEPARTMENT OF HEALTH

UNCLAS SECTION 01 OF 05 HANOI 000369

SIPDIS

SENSITIVE
SIPDIS

FOR SECRETARY LEAVITT FROM THE AMBASSADOR

E.O. 12958: N/A
TAGS: TBIO KPAO KFLU KHIV VM
SUBJECT: SCENESETTER, PART I OF III, FOR THE DEPARTMENT OF HEALTH
AND HUMAN SERVICES (HHS) SECRETARY LEAVITT'S APRIL 2008 VISIT TO
VIETNAM


1. (U) This cable is Sensitive But Unclassified. It is for official
use only, not for dissemination outside USG channels or posting on
the Internet.


2. (U) Mission Vietnam very much looks forward to your visit to
Vietnam in mid-April, as your personal engagement will support
directly our effective, broad-based efforts to influence
developments in this increasingly important country. Your second
visit is a good opportunity to encourage Vietnam to continue the
process of opening to the world and reforming internally. Vietnam's
national leadership remains eager to learn from the United States on
economic, governance, environmental, and health reform and will be
attentive to what you have to say. I predict that the media will
extensively, and favorably, cover your visit, producing a
"multiplier effect," which will help deepen mutual understanding.
This cable, one of three I will be sending to help frame your
discussions, provides information on our strategies to protect and
defend our broad national interests in Vietnam. Part II focuses on
our many health issues, highlighting both the overarching challenges
we face and opportunities presented us. Part III will cover our
work through the President's Emergency Plan for AIDS Relief
(PEPFAR).

VIETNAM WANTS TO BE ASIA'S NEXT TIGER
--------------


3. (U) After decades of isolation and failed economic policies,
Vietnam is driven to become the next Asian tiger. The Government of
Vietnam (GVN) aims to enter the ranks of middle-income developing
countries by 2010 and achieve industrialized country status by 2020.
In its efforts to modernize the economy, the GVN has focused on
pushing exports and investment as principle drivers in its policy of
fast economic growth.


4. (SBU) When Vietnam first announced its program of economic
reforms in 1986, the economy was in shambles and a large proportion
of the population lived in poverty. Change came slowly, but the
pace of reform became significantly more rapid over the years.
Vietnam is now on a successful economic path and has achieved
average annual economic growth of 7.5 percent during the last
decade. In 2007, the economy grew at a rate of 8.5 percent.
Poverty rates have tumbled from 58 percent in 1993 to under 15
percent in 2007, according to the GVN's latest figures, which are
based on international standards. A recent World Bank study
described this poverty reduction rate as the most significant in
such a short period of time of any nation in history. The middle
class is growing and retail markets are expanding rapidly.

THE UNITED STATES AS A PIVOTAL PLAYER
--------------


5. (U) Economic ties between the United States and Vietnam continue
to expand. The United States is Vietnam's third largest trade
partner, after China and Japan, and its largest export market.
Total two-way trade in goods with the United States in 2007 was
$12.53 billion, up 29 percent from 2006, according to the U.S.
Department of Commerce. Vietnamese exports to the U.S. continue to
surge, fuelling growth here, but the expansion of the middle class
is also having a positive impact on U.S. exports. In 2007, U.S.
statistics indicate that exports to Vietnam increased by 73 percent
to USD 1.9 billion from USD 1.1 billion in 2006. We've seen several
high profile commercial success stories, including Boeing's recent
contract with Vietnam Airlines, Motorola's securing of three
contracts to build the mobile phone network of a state-owned mobile
phone service provider, and two U.S. energy companies negotiating
for major energy-sector construction contracts. The United States
is also Vietnam's seventh largest investor, with $2.6 billion in
registered Foreign Direct Investment since 1988 (South Korea is the
largest with $11 billion),with a prominence in the technology
industry.


6. (U) Another signal of the United States' growing commercial
influence was the success of Secretary of Commerce Carlos
Gutierrez's high-profile business development mission to Vietnam
last November. Secretary Gutierrez advocated for U.S. business
interests and introduced 22 companies to the principal Vietnamese
Government and business decision makers. The delegation included
well-known as well as mid-sized medical device and environmental
technology companies.


7. (SBU) The influence of the United States is not restricted to
growth in our trade and investment. Over the past decade, the
United States has become an important player and key partner in
helping Vietnam implement market reforms and eschew central planning
through innovative technical assistance programs. The Mission has

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worked hard with the GVN on a broad spectrum of trade and investment
issues under the 2007 Trade and Investment Framework Agreement. One
area often highlighted is concerns over Vietnam's protection of
intellectual property rights (IPR),including weak enforcement
efforts and failure to meet its WTO commitment to provide for
criminal remedies for commercial scale IPR violations.

GROWING RELIANCE ON U.S. ADVICE
--------------


8. (SBU) Despite our fractious history, Vietnam and the United
States are forging closer ties each day. Vietnam's motivation to
seek stronger ties is clear. The GVN sees the United States as a
critical source of financial and technical assistance in many areas.
Further, Hanoi increasingly sees the United States as an important
force in maintaining a stable regional environment and balancing a
rising China. For our part, Vietnam provides an important
opportunity in East Asia for advancing U.S. national interests in
securing a stable and peaceful Asia-Pacific region. We are also
encouraged by the steady liberalization of the government's role in
the life of its citizens. Problems remain, as noted below, but all
agree that basic trends are positive with regard to personal
freedoms, when viewed over time.


10. (U) Over the past ten years, Washington has very effectively
invested limited aid dollars to support Vietnam's transition to a
market economy by strengthening trade liberalization, particularly
the reforms needed to implement commitments under the 2001 Bilateral
Trade Agreement (BTA) and WTO. Two of USAID's-funded programs, the
Support Trade Acceleration (STAR) and the Vietnam Competitiveness
Initiative (VNCI),support Vietnam's efforts to create a modern
market economy and the requisite legal framework. The STAR team has
been involved directly in the overhaul of Vietnam's civil procedure
code, new investment laws providing for equal treatment of
state-owned and private companies, a securities law to help develop
Vietnam's capital market, protecting IPR, and numerous other
projects to shore up greater transparency, rule of law and civil
society. As a direct result of these programs, Vietnam has expanded
its reforms to include areas of good governance, including improving
accountability, transparency and anti-corruption efforts.


11. (SBU) Last September, pursuant to the U.S. National Nuclear
Security Administration's (NNSA) Global Threat Reduction Initiative
(GTRI),the USG brokered cooperation with the Russian Federation and
the International Atomic Energy Agency (IAEA) to assist Vietnam in
converting its only civilian nuclear reactor from high to low
enriched uranium fuel and return spent high enriched uranium to
Russia. NNSA continues to assist Vietnam to develop the necessary
physical and regulatory safeguards to establish a civilian nuclear
power sector.


12. (U) Eighty five percent of all U.S. Official Development
Assistance to Vietnam focuses directly on health issues, and our
cooperative efforts to prevent and treat HIV/AIDS and combat avian
influenza are the hallmarks of our bilateral health relationship.
This will be covered in my second cable.


13. (U) The current indications from the planning figures in the
FY08 and FY09 budgetary process is that USAID will be in a position
to expand its assistance, especially in the areas of good governance
and economic growth and reform. Given the recognition of the
growing development relationship between the United States and
Vietnam, USAID in Hanoi became a full stand-alone presence mission
on February 29.

CHALLENGES: INFLATION, OUTDATED ACADEMIC SYSTEM, STATISM
--------------


14. (SBU) Despite these achievements, Vietnam faces substantial
challenges. Prices have increased during the last several months,
measuring 15.7 percent year-on-year in February 2008. Indeed, high
inflation became a national preoccupation over the past two months.
This clearly worries the national leadership, which lacks experience
and tested macroeconomic tools, and fighting inflation now competes
with economic growth as the top economic priority. The GVN has
taken steps to rein in inflation, such as reducing import tariffs,
raising interest rates and widening the trading band on the
Vietnamese Dong, but it is not yet clear if these measures will be
effective.


15. (SBU) Another significant challenge is the large size of
Vietnam's state sector. It accounts for about 37 percent of GDP and
includes state-owned enterprises (SOEs) that dominate
telecommunications, banking, energy, airlines, health care, and
other major sectors. While the GVN works to attract more foreign

HANOI 00000369 003 OF 005


direct investment and promote the domestic private sector, it is
also determined to maintain a major role for the state sector in the
economy. Despite some delays, the government is focusing on the
process known as "equitization" as the way to help improve the
competitiveness of the state sector. By allowing private parties to
buy minority shares of an SOE, the GVN hopes to introduce new
business practices that will drive improvements in performance.
Complicating the equitization process has been Vietnam's troubled
stock market, which is currently hovering above 600, down from over
1000 in 2007. The GVN has recently attempted to rehabilitate the
market by loosening foreign ownership laws and directing the State
Capital Investment Corporation to buy shares.


16. (SBU) Other areas of concern include a woefully outdated
education system that is failing to keep up with the demands of a
modern economy. An acute shortage of skilled and semi-skilled labor
is posing a major roadblock to development. I am leading efforts to
deepen U.S. engagement with Vietnam on education issues by brokering
partnerships between Vietnam's academic institutions and the private
sector, including U.S. businesses, and through a formal "Education
Initiative" designed to quickly increase the number of Vietnamese
students choosing the United States for overseas training. Like
human resources, infrastructure limitations also presents a major
challenge to Vietnam's continued rapid growth. Corruption also
continues to be a substantial problem in Vietnam, and Transparency
International's perception index ranks Vietnam at 123 of 179
countries, in a trend of continuous backsliding since 2002.

CHALLENGES ON HUMAN RIGHTS
--------------


17. (SBU) While we share common views with the GVN in many areas,
differences over human rights remain, and lingering fears that the
United States supports the overthrow of the current regime continue
to complicate the relationship. The existence of groups in the
United States and elsewhere that explicitly advocate regime change
helps generate negative charges by Vietnamese conservatives that
stoke a lingering paranoia: we are indeed still "the enemy." We
counter by reassuring the GVN that the USG does not support
separatist groups. Rather, we make the case that we wish build a
better human rights dialogue based on mutual trust.


18. (SBU) Serious deficiencies related to human rights in Vietnam
include lack of freedom of speech, freedom of assembly, and freedom
of the press. One of our principal objectives is to end the use of
catch-all "national security" provisions such as Article 88 of the
GVN criminal code, which prohibits "conducting propaganda against
the State." The Mission tracks approximately 50 individual cases of
prisoners of conscience and activists under various forms of house
arrest, surveillance, and harassment. We continue to call for the
release of all prisoners of conscience and freedom of peaceful
expression of political views, but where we see individuals
expressing their political opinions, many of our government
interlocutors see "lawbreakers" trying to destabilize the regime.


19. (SBU) In other areas, perceptible progress is being made.
Influential Vietnamese leaders are committed to enhancing
governance, establishing the rule of law and combating corruption --
all critical in building guarantees of individual freedoms.
Vietnam's leading newspapers are increasingly more aggressive in
what they publish and in their willingness to push back against
censors. Whereas only a few years ago any protest would meet swift
and severe police action, this past year various peaceful protests
have taken place involving issues such as land rights, opposition to
Chinese territorial claims and demands for the return of Catholic
Church property, with one protest stretching out for over one month
before it finally ended peacefully. With regard to religious
freedom, Vietnam has made surprising progress over recent years.
More needs to be done, but the country no longer qualifies as a
particularly severe violator of religious freedom under our legal
definition and we removed the nation from the list of "countries of
particular concern" in late 2006.


20. (SBU) While we have not yet encountered specific health-related
issues in our efforts in trafficking-in-persons (TIP),work in this
area is one of our important human rights goals. Vietnam remains a
significant source country in the region in the trafficking of women
and children, primarily for sex, marriage and labor purposes.
Cambodian and Chinese border provinces remain hot zones. Less
frequent male TIP cases usually revolve around labor trafficking,
often in the fishing and construction industries. Vietnam is a
little more than half-way through a 6-year 2004-2010 National
Program of Action on anti-trafficking, directed by the Prime
Minister. The GVN has initiated the drafting of a new,
comprehensive anti-TIP law (we do not expect passage for at least

HANOI 00000369 004 OF 005


another two years) and has worked actively to enhance anti-TIP law
enforcement cooperation with neighbors Cambodia, China, Laos and
Thailand. The government commitment on anti-TIP is there, but
resources remain a significant challenge. Most recently, we have
seen an increase in labor trafficking cases, related to the GVN's
new export labor drive, and unfortunate reports of trafficking in
infants and children to China, partly due to China's demographic
imbalances. The level of USG cooperation with Vietnam on this issue
is considered very good.

VIETNAM'S INTERNATIONAL AND REGIONAL PROFILE
--------------


21. (SBU) Vietnam's current membership on the UNSC creates a window
of opportunity to encourage Vietnam to speak out in a constructive
way on global security issues, and to help Hanoi distance today's
Vietnam from the Non-Aligned Movement (NAM) and Communist-Bloc focus
driving its old-style foreign policy. We have been proactive here
and in Washington in educating GVN leaders and officials on Burma,
North Korea and Iran, where in the past the GVN has been unwilling
to engage constructively with us due to "traditional friendships"
and non-interference. Despite repeated demarches so far this year,
Vietnam lined up against our positions in UNSC debates on Burma and
Kosovo.


22. (U) Regionally, Vietnam has become a more prominent player in
ASEAN, and successfully hosted the APEC Summit in 2006. Vietnam is
slated to be chair of ASEAN in 2009, so this visit is an excellent
opportunity to underscore the commitment of the United States to
promote the U.S.-ASEAN Enhanced Partnership, which will provide
expertise and support for ASEAN integration towards becoming the
ASEAN Community by 2015.

VIETNAMESE CONCERNS ABOUT CHINA
--------------


23. (SBU) While Vietnam's engagement with the United States will
continue to broaden, China necessarily constitutes Vietnam's most
important strategic preoccupation. This is not to say that Vietnam
is "choosing" China over the United States; the situation is much
more complex. For starters, Vietnam's leadership is sophisticated
enough to realize that relations with China and the United States do
not represent a zero sum game; it is possible to have good relations
with both. Each relationship also creates challenges, however.
While China constitutes a vital and necessary commercial partner and
former ally, it is also perceived as a significant and frustrating
constraint to Vietnam's freedom on action.


24. (SBU) Chinese bullying of foreign companies in an attempt to
compel them to cease oil and gas exploration efforts in the South
China Sea serves to remind Vietnamese officials that while the
Vietnamese may not approve of all U.S. policies, the same is
certainly true of Chinese actions. While progress has been made in
settling the land border, there is no commonality of views on
sovereignty issues regarding the South China Sea, known as the "East
Sea" to the Vietnamese. Hanoi is also "riding the tiger" with
regard to managing the deep negative views toward China of many
Vietnamese. China is widely disliked and distrusted as a former
colonial master, and Beijing's actions in the Spratlys and Paracels
threaten to inflame those passions. Should Hanoi allow
unconstrained protests against the Chinese, however, it would appear
weak in the face of calls to action that it could not satisfy, as
well as risking Beijing's anger.


25. (SBU) On security matters, China looms large. There is an
understandable GVN caution with regard to China's potential reaction
to enhancements in Vietnam's cooperation with the United States.
U.S.-Vietnam cooperation in the security field is also constrained
by an institutional conservatism born of concern over "peaceful
evolution" as a real threat to the regime, as well as by an
ingrained caution on the part of Vietnam's military in the face of
relative power calculations vis-a-vis China.

CONCLUSION
--------------


25. (U) Again, I warmly welcome your visit and please look for the
Part II and III cables on health issues, including food safety
matters and PEPFAR. Your visit will prove critical in promoting
further reforms, not just in health, but, as you can see from the
above analysis, more broadly. These efforts signal our desire to
engage on technical matters, invest and expand markets, and
encourage Vietnam to take a larger role in regional and global
affairs.


HANOI 00000369 005 OF 005



MICHALAK