VIETNAM: SFRC STAFFDEL STUDIES TRANSPARENCY IN EXTRACTIVE

UNCLAS SECTION 01 OF 02 HANOI 000667

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON SENV ENRG TRGY SOCI IBRD AID VM
SUBJECT: VIETNAM: SFRC STAFFDEL STUDIES TRANSPARENCY IN EXTRACTIVE
INDUSTRIES

REF: Hanoi 649 ("Vietnam's Oil And Mining Companies")

HANOI 00000667 001.2 OF 002



1. (SBU) Summary: Senate Foreign Relations Committee professional
staff members Jay Branegan and Marik String visited Hanoi May 25-29,
2008 to meet with GVN officials, private sector energy companies and
NGOs to discuss transparency in extractive industries. The
Extractive Industries Transparency Initiative aims to strengthen
governance by improving transparency in revenue flows between oil,
gas and mining companies and their
host governments. GVN officials were generally receptive and said
they could get behind the initiative. With the GVN focused on
inflation and other pressing economic issues, however, it could be
difficult to identify an EITI "champion" in the near future. End
Summary.


2. (SBU) Jay Branegan and Marik String, professional staff members
on the Senate Foreign Relations Committee, visited Hanoi May 24-29,
2008 to study transparency in extractive industries. Branegan and
String met with officials from the Ministry of Industry and Trade
(MOIT),Ministry of Public Investment (MPI),Ministry of Finance
(MOF),state-run PetroVietnam, the National Assembly's Committee on
Science, Technology and the Environment, and NGO and private sector
energy representatives.


3. (SBU) Branegan and String promoted the Extractive Industries
Transparency Initiative (EITI) as an entry point to increase
transparency and to help Vietnam avoid the "resource curse" that
often afflicts resource-rich developing countries. EITI is an
international initiative that aims to strengthen governance by
improving transparency and accountability in developing states where
revenues from extractive industries provide a significant portion of
the national budget. Twenty-two countries in Africa, Central Asia
and Latin America are currently involved, including Peru, Nigeria,
Azerbaijan and Kazakhstan. Membership is voluntary and can create
enhanced access to capital markets, help countries improve their
budget accountabilit, and increase a country's desirability as a
location for foreign direct investment.

MINISTRY OF INDUSTRY AND TRADE
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4. (SBU) Like many of his GVN counterparts, Dr. Nguyen Khac Tho,
Deputy Director of MOIT's Department of Heavy Industry, assured the
Staffdel that Vietnam was committed to transparency and
anti-corruption. He said the Norwegian Embassy in Hanoi was
currently helping Vietnam to revise its oil and gas law and had
already provided MOIT with a copy of EITI as part of that effort
(Tho was one of the few GVN officials who was actually familiar with
the initiative). Minister of Industry and Trade Hoang met with
Norwegian Embassy officials on May 20, he said, and President Nguyen
Minh Triet, accompanied by Minister Hoang, would soon depart for
Norway and would meet Norway's Energy Secretary during the trip.
Although PetroVietnam reports directly to MOIT, the company's
revenues do not fall under ministry purview. MOIT Vice Minister Bui
Xuan Khu is also a member of PetroVietnam's board, he added.

NATIONAL ASSEMBLY
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5. (SBU) Nghiem Vu Khai, Vice-Chair of the National Assembly's
Committee on the Environment, Science and Technology, confirmed that
the National Assembly has "specific concerns" concerning loopholes
in Vietnamese law related to the tendering process for oil and gas
contracts. He said the GVN was currently revising its national oil
and gas law and that he, Khai, was a member of the revision
committee. The oil and gas law, last revised in 2000, would contain
no new transparency provisions, he added. The GVN solicited foreign
energy firms to provide comments on the new law (a comment period he
admitted was "short"),but no companies provided comments related to
transparency.


6. (SBU) Khai was unfamiliar with EITI and he emphasized that
Vietnam strived for transparency since the country's extractive
industries were under "people's ownership." Vietnam has not
considered establishing an oil and gas stabilization fund to ensure
long-term budget stability and to avoid "Dutch disease," he said,
and PetroVietnam reinvests the majority of its after-withholding
capital into production.


7. (SBU) Officials at two local Hanoi NGOs, Mekong Economics and
CODE, noted that Prime Minister Nguyen Tan Dung has made tackling
corruption a top priority. Low government salaries, the lack of an
independent regulatory agency to root out corruption, and a free
press to publicize it, however, will make eradicating the problem
easier said than done.

COMMENT

HANOI 00000667 002.2 OF 002


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9. (SBU) Comment: GVN officials were generally forthcoming with
information and receptive about EITI, and said they could get behind
the initiative if mandated by the GVN's leadership. With the
government focused on inflation and other pressing economic issues,
however, it could be difficult to identify an EITI "champion" in the
near term. End comment.


10. (U) Staffdel did not have a chance to clear on this cable before
they departed Vietnam.

ALOISI



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