(U) DEPUTY SECRETARY NEGROPONTE'S SEPTEMBER 12-13 VISIT TO

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000821 SENSITIVE SIPDIS STATE FOR EAP/MLS E.O. 12958: N/A TAGS: OVIP NEGROPONTE PREL PGOV PHUM ECON SOCI KIRF VM SUBJECT: (U) DEPUTY SECRETARY NEGROPONTE'S SEPTEMBER 12-13 VISIT TO HO CHI MINH CITY, VIETNAM HO CHI MIN 00000821 001.2 OF 003 SENSITIVE BUT UNCLASSIFIED. FOR INTERNAL USG USE. NOT SUITABLE FOR INTERNET POSTING. ¶1. (SBU) SUMMARY: During the Deputy Secretary's visit to Ho Chi Minh City (HCMC) on September 12-13, HCMC government officials, business leaders and legal professionals outlined the many challenges and opportunities that will set the course for the future development of the city and the path Vietnam's economic transformation will take. City officials discussed HCMC's role as Vietnam's engine of economic growth, noting the city now accounts for nearly a quarter of the country's economy and a third of the tax base. Both government and business leaders agreed the most pressing problems HCMC faces today are the constraints created by the city's inadequate infrastructure and lack of skilled labor throughout all sectors of the economy. The U.S. business community urged an active role for the USG in Vietnam, not just because the United States is Vietnam's largest export market, but because we are seen by most as a leading partner in Vietnam's economic reform. HCMC's Bar Association said further legal reform was essential in order to create a more just and predictable judicial system for businesses and individuals. In support of U.S. efforts to promote religious freedom, the Deputy Secretary also met with the Secretary of the Bishop's Council and attended Mass at HCMC's historic Notre Dame Cathedral. In all his meetings, the Deputy Secretary affirmed the USG's commitment to strengthening the bilateral relationship and broadening cooperation on economic governance, legal reform and education initiatives. End Summary. -------------- -------------- HCMC Leaders Discuss Economic Achievements and Challenges -------------- -------------- ¶2. (SBU) During Deputy Secretary Negroponte's September 12 meetings with HCMC Party Secretary Le Thanh Hai and HCMC People's Committee Chairman Le Hoang Quan, both officials discussed Ho Chi Minh City's leading role in Vietnam's economy and the challenges they face maintaining momentum given the city's severe infrastructural and human capital constraints. Party Secretary Hai said Ho Chi Minh City capitalized on "doi moi" era reforms to become the country's "first city" in terms of its economic contributions, generating 24 percent of the national GDP and contributing 33 percent to the State budget. HCMC's double-digit growth rates consistently top the national average by almost 2 percent annually and its residents earn three times the national per capita income. Despite these achievements, HCMC's continued growth is hindered by a crumbling and overburdened transportation system, skyrocketing property costs and growing environmental and quality of life issues. People's Committee Chairman Quan said HCMC's 2015 urban development plan followed a "U.S. model" that would transform HCMC from the "outside in." By building modern residential communities and industrial zones on the outskirts of the city linked by an expanded mass transit system, inner-city residents could be relocated to new suburban satellites and HCMC planners could turn to restructuring the city center. In terms of human capital, both leaders emphasized the need for educational reform and expanded vocational training for HCMC's workforce in order to maintain HCMC's competitive edge and expand into high-tech and high-end service sectors. ¶3. (SBU) Both leaders highlighted the positive role U.S. investment and expertise was making in overcoming these barriers to growth and were optimistic U.S. investment dollars and development assistance would help transform HCMC into a world-class Southeast Asian capital on par with Bangkok or Singapore. The Deputy Secretary said the U.S. was ready to work with government and business leaders to help them achieve their goals, and affirmed that education cooperation was a high priority. The Deputy Secretary noted that the recently established Education Task Force would create a wealth of new opportunities for future collaboration, as would the upcoming educational conference in HCMC early next year. He was optimistic the U.S. and Vietnam would continue to deepen economic and commercial ties, expand diplomatic cooperation and engage on a broad range of issues that would further strengthen the bilateral relationship. -------------- Maintaining the Momentum of Economic Reform -------------- ¶4. (SBU) During the Deputy Secretary's meetings with members of the U.S. and Vietnamese business community, corporate leaders shared city officials' sentiments regarding HCMC's inadequate infrastructure and lack of human capital as a road block to growth, and noted the problems are further exacerbated by the poor coordination among the various government agencies responsible for implementing HCMC's urban development plans. In HO CHI MIN 00000821 002.2 OF 003 export operations, this has resulted in a situation where brand new container terminals have yet to be connected to existing land transit routes, creating additional bottlenecks for the overtaxed HCMC port that handles 80 percent of Vietnam's container traffic. Energy demands exceed supply by about 17 percent. As a result, industrial zones suffer routine losses of power due to rolling brown-outs and random black-outs that result in significant production losses for the food product and dairy industries. ¶5. (SBU) Turning to labor issues, U.S. producers and their Vietnamese partners also discussed the lack of effective labor dispute resolution mechanisms that has created a "strike as a first resort" mentality among factory workers, especially in the joint venture garment factories that represent the lion's share of foreign investment firms in the South. More than 500 strikes have taken place so far in 2008, in contrast to a total of 500 strikes in all of 2007. Vietnam's young population of 85 million still constitutes an attractive market, and businesses are succeeding. But entrepreneurs said shortages of skilled workers have compelled sectors as diverse as radio/TV broadcasting, energy, and information technology to establish private training institutes to fill the vocational skills deficit. ¶6. (SBU) The Deputy Secretary commended the private sector's pro-active response to human resource constraints and underscored the USG's support for continued improvements in governance that would establish a more transparent rule-based investment climate. On the economic policy front, the Deputy Secretary outlined plans to begin negotiations on a Bilateral Investment Treaty in coming weeks and to commence Open Skies Agreement negotiations in October. -------------- Building a Foundation for Legal Reform -------------- 7.(SBU) In a free flowing exchange of ideas, members of the HCMC Bar Association relayed to the Deputy Secretary their concerns about the lack of transparency, independence and professionalism in Vietnam's legal system. Lawyer Le Cong Dinh cited several positive developments, including the growing ranks of legal professionals practicing in Vietnam today. National Bar membership has gone from 400 to 4000 lawyers in past ten years and the HCMC Bar Association accounts for 2500 of those lawyers. Gradual improvements in the functioning of Vietnam's legal system including the growth of international and domestic commercial arbitration centers, greater client access for defense lawyers, and more open exchanges between lawyers and judges in the courtroom. ¶8. (SBU) Bar President Nguyen Dang Trung said despite these developments, more needed to be done to promulgate fundamental concepts of rule of law. He said that "many people say Vietnam has rule of law because we have a system of courts, judges and lawyers," but in reality citizens are unfamiliar with their legal rights and responsibilities and lack confidence in the judicial system's ability to resolve their claims fairly and transparently. Educating Vietnamese citizens regarding their basic legal rights would enhance the ability of civil society to engage meaningfully with the GVN on legal reform priorities. ¶9. (SBU) The Bar Association offered several specific ideas about where U.S. assistance could play a positive role in promoting transparency, including expanding educational opportunities and exchanges between Vietnamese and U.S. legal professionals. A former Fulbright fellow, Tung said increasing the number of scholarships for Vietnamese lawyers to study in the U.S. would be a welcome step forward and all lawyers agreed more exchanges would help build mutual understanding as well as the capacity needed to meet Vietnam's current and future legal challenges. ¶10. (SBU) The Deputy Secretary voiced his support for the HCMC Bar's efforts to advance judicial and legal reform, and agreed rule of law presented a promising area for more constructive collaboration. The Ambassador said the United States has committed to the process by supporting NGO work in rural areas to discuss civil rights and responsibilities, and promoting the publication and dissemination of Supreme Court decisions. The Consul General welcomed the idea of more exchanges, noting the recent successful visit by U.S. District Judge Janet Bond Arterton with city and provincial legal professionals through the Mission Speakers Program. The Deputy Secretary was optimistic about broadening these efforts, noting that as Vietnam continues to expand engagement in the international arena, its judicial system must evolve to meet the challenges HO CHI MIN 00000821 003.2 OF 003 ahead. -------------- A Glimpse of HCMC's Future -------------- ¶11. (SBU) To better understand of how the key issues of labor, infrastructure, governance and land can be both challenges and opportunities for investors, the Deputy Secretary visited Phu My Hung (PMH) company's "Saigon South" development, a dynamic mixed industrial, retail and residential development. A PMH executive explained that in the early nineties, his Taiwanese development company negotiated a relatively free-hand to develop 1,500 acres of swamp. Working with leading American planners and architects, PMH developed an award-winning master plan that has guided the development of a region characterized by livable spaces, a balance of greenery and mid-density housing and 10-lane roads, new bridges and space for planned mass transit lines that contrasts sharply with the chaotic sprawl that characterizes most of Ho Chi Minh City. Its private power plant makes "Saigon South" the only place in southern Vietnam immune to rolling brownouts. Despite the development's success and popularity as both a residential and commercial area, PMH stay true to its vision of being a mixed-cost residential profile that offers housing affordable to the managers and skilled and unskilled works that staff nearby companies and factories. The Deputy Secretary also toured the firm's Tan Thuan Export Processing zone, the first industrial development in Vietnam to offer a true "one stop shop" for investors that cut the approval process from months (or years) to an average of just seven to ten days. Tan Thuan Export zone has been a success almost from the start and generated ten percent of Vietnam's foreign exchange until 2005. ¶12. (SBU) Over lunch in Saigon South, a roundtable of ten HCMC business leaders described both the challenges and opportunities facing businesses and entrepreneurs today. One human resources company drew out the need to link education more closely with the needs of business, saying that vocational training in particular would help remove human resources bottlenecks from Vietnam's economy. One of Vietnam's leading industrial park developers outlined her company's efforts to expand its vocational training center and establish a new university based on U.S. curriculum. The private sector is stepping up to fill all sorts of training gaps, the chairperson of a Vietnamese media company explained, saying that she has started a training academy for media professionals. Power and infrastructure companies argued that despite a linger state sector bias, in the provinces and districts where the letter and spirit of Vietnam's economic reforms has taken root there are opportunities for private sector. ¶13. (SBU) The Deputy Secretary applauded the private sector's role in continuing to help open Vietnam's economy and emphasized their crucial efforts to improve Vietnam's education system. Improving vocational training and establishing partnerships with U.S. universities will both help Vietnam to training the human resources it needs. The Deputy Secretary also recognized the role of women as leaders in Vietnam's business community, noting that nearly half the leaders present at the PMH roundtable were women. Phu My Hung's "Saigon South" is setting a great example for the future of Vietnam, he concluded. -------------- Reflecting on Religious Freedom -------------- ¶14. (U) In the Deputy Secretary's meeting with Secretary of the Bishop's Council, Father Nguyen Van Kham, Father Kham expressed appreciation for the USG's support for religious freedom, noting the positive growth the Church has experienced under the new legal framework on religion. Today, there are 6 million Catholics residing in Vietnam's 26 dioceses, with 10 percent of those in HCMC. While discussing the Church's efforts to expand charitable and educational services, Father Kham highlighted the GVN's continuing refusal to countenance returning the many schools and other facilities confiscated after 1975. Touching briefly on the recent confrontations between demonstrators and authorities at Thai Ha parish in Hanoi, Father Kham said the situation is complex and resolving claims on confiscated properties would remain a key concern. The Deputy Secretary underscored U.S. support for continued dialogue between religious groups and the GVN on these issues, and received a warm round of applause from parishioners after Father Kham acknowledged his presence during Mass on September 13. FAIRFAX