POLITBURO MEMBER COMMENTS ON AMBASSADOR'S PRIORITIES AND

UNCLAS SECTION 01 OF 02 HANOI 000541 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON PHUM PGOV KCOR KPAO SOCI PREL CM VM SUBJECT: POLITBURO MEMBER COMMENTS ON AMBASSADOR'S PRIORITIES AND ECONOMIC CHALLENGES FACING VIETNAM HANOI 00000541 001.2 OF 002 Summary -------------- ¶1. (SBU) On May 5, influential Politburo member and Standing Member of the Secretariat Truong Tan Sang met the Ambassador to discuss U.S.-Vietnam relations, the Ambassador's priorities for his tenure in Vietnam and economic issues. The "consensus" within Vietnam's governing circles is that Hanoi should deepen its ties to Washington; stronger relations are not only in Vietnam's interest but the region's interests as well. Party leaders realize they have much work to do before they achieve Ho Chi Minh's vision of a Vietnam that is free and prosperous. The Ambassador said the GVN needs to increase efforts to educate local officials about central-level directives, especially those on WTO commitments and religion. Sang asked that the Ambassador relay to the American people that "the Vietnamese people just want to do business" and do not have the stomach for "anti-dumping games." He acknowledged that some state-owned enterprises had borrowed extensively to engage in non-core expansion but was confident that the GVN will successfully deal with current inflationary pressures. End Summary. ¶2. (SBU) On May 5, the Ambassador discussed U.S.-Vietnam relations and his priorities for his tenure in Vietnam with Communist Party of Vietnam (CPV) Politburo member and Standing Member of the Secretariat Truong Tan Sang. After noting Vietnam's recent socioeconomic achievements and the steady growth in U.S.-Vietnam ties, the Ambassador stated his three main priorities: promotion of human rights, strengthening the economic relationship, and increasing educational bonds. Sang responded that he is "very happy" about recent trends in U.S.-Vietnam relations. We have different viewpoints on some issues, he said, but differences are natural in any relationship. The "consensus" within Vietnam's policy-making circles is that Hanoi should deepen its ties to Washington, he stated. Stronger bilateral relations are in our mutual interests and the greater region's interest, he added. Appeal for Greater Understanding on Human Rights -------------- --- ¶4. (SBU) The Government of Vietnam (GVN) and CPV are "very concerned" with human rights, Sang declared. Vietnam values its independence, but Party leaders understand they have much work to do to achieve Ho Chi Minh's vision of a land that is free and prosperous, he added. America is a "civilized and developed country" and Vietnam has "a long way to go" to catch up to America's level of overall development, he said. Vietnam made primary education universal only recently, but Japan did so 100 years ago, he added, an example of how far Vietnam is behind other developed countries. ¶5. (SBU) Vietnam has 54 ethnic minority groups but the level of economic and cultural development among these groups varies, Sang continued. Luckily for Hanoi, however, no conflicts have taken place between these groups, he said. Americans do not seem to appreciate the wide disparities in education levels that exist across Vietnam, he continued. Local officials often come up with excuses for not following central Party directives, such as those on religion, Sang continued. The Party has ways to make these officials understand the importance of following Central-level directives, such as transferring poor performing officials to lower level positions. The Ambassador agreed that the GVN needs to step up efforts to educate local officials about central-level directives, especially those on religion. Working Toward a "State Governed by Laws" -------------- ¶6. (SBU) The one thing developed western countries have in common is that they are governed by the rule of law, Sang continued. About ten years ago, Party leaders began efforts to make Vietnam a state governed by laws. In this connection, Vietnamese leaders have studied many different models, not just China's, Sang declared. Suitable models are those countries that have about the same level of development as Vietnam, he explained. ¶7. (SBU) The National Assembly (NA) has passed numerous laws and the Party has sought to improve the professionalism of its members and overall administrative efficiency, Sang continued. The GVN is determined to accelerate reforms; building a law-governed state must proceed in parallel with moves toward free market mechanisms, Sang said. The Ambassador pointed out that political and economic development usually go together, noting that GVN administrative reform efforts under "Project 30" have been impressive. Education Ties That Bind -------------- ¶8. (SBU) Education also is a major concern for the Party, Sang said, HANOI 00000541 002.2 OF 002 and the number of Vietnamese who study in the United States is bound to grow under the Ambassador's tenure. He said the Party aims for these returning students to help develop the country and serve as a "strong bridge" between our two countries, viewpoints the Ambassador told Sang he shares. Many high-ranking GVN officials have studied in the United States, Sang added. Economic Relations and Domestic Economic Issues -------------- -- ¶9. (SBU) Sang then stressed the importance of the bilateral trade and economic relationship. He asked the Ambassador to convey a message to the U.S. that "the Vietnamese people just want to do business" and do not want to "play anti-dumping games." Sang said Vietnam's labor productivity is low and GDP "the same as a medium-sized corporation's revenues." He added that the Vietnamese people are hard-working and would soon raise the overall level of development. Finally, he said Vietnam "must achieve happiness on its own" but nonetheless was thankful for all the assistance it has received. In terms of economics and trade, he said "there are no obstacles." ¶10. (SBU) In response to the Ambassador's query on the CPV's role in economic decision-making, Sang said the Party is working towards a multi-sector economy with no limitations. Sang noted that the private sector has grown to 70 percent of GDP in the last 15 years, and said that private sector complaints about GVN favoritism towards state-owned enterprises (SOEs) were "just low level" chatter. At a high level, SOEs and the private sector are equal according to the law, he explained. When pressed on the actual role of the CPV, Sang stated that "what I have just told you is a product of our policy; the Party's policies are legalized through the laws of Vietnam." He went on to say that Vietnam will follow its WTO commitments, but may implement some commitments earlier than required if it is beneficial to domestic interests. ¶11. (SBU) The Ambassador replied that early implementation of WTO commitments was always welcome, but questioned the effectiveness of the bureaucracy in carrying out some reforms. Sang assured the Ambassador that the PM would reprimand those not implementing the laws as directed, and noted that the CPV could also discipline Party members, including requiring the PM to fire people. Sang said that, in the long term, the GVN would have to build administrative courts to deal with these sorts of issues. ¶12. (SBU) Sang said it was the CPV itself that first reported that some SOEs were borrowing extensively to engage in non-core expansion. He said that the policy of the Party is to maintain a public sector, but that SOEs will not dominate as before. Sang cited the example of Vietcombank, noting that foreign investors now own part of the company. He admitted that although the new policies on reducing the number of SOEs had been in place for seven years, implementation had been "lower than our expectations" because implementation guidelines had to be made into law before being carried out by government officials. ¶13. (SBU) Sang stated confidently that the GVN would cope with current inflationary pressures. He said that the "PM has a good plan - just be patient," adding that the CPV not only supports the PM, but also requires him to take action. Sang explained that the lack of a skilled civil service remains problematic for Vietnam, often resulting in weak institutions and varying degrees of performance among the provinces. The Ambassador said this was affecting many projects awaiting approval, including GE, Sabre, Alcoa, AES, and SSA Marine. Sang smiled and said that he would give the projects his attention. Comment: The Smiling Knife -------------- ¶14. (SBU) Truong Tan Sang is a Party stalwart who has been on the Politburo since 1996 and on the Central Committee since 1991. He also currently serves as a deputy in the National Assembly. Before the 2006 10th Party Congress, Sang headed the CPV's Economic Commission (which in early 2007 was rolled into the Office of the Central Committee). In his meeting with the Ambassador, he came across as confident and decisive and often smiled after the Ambassador's words were translated as he pondered his replies. MICHALAK