VIETNAM'S LEADERS VOW TO PURSUE GROWTH AND MACROECONOMIC

UNCLAS SECTION 01 OF 03 HANOI 000469 SENSITIVE SIPDIS STATE FOR EAP/MLS MBROWN SINGAPORE FOR TREASURY TREASURY FOR SCHUN USTR FOR DBISBEE E.O. 12958: N/A TAGS: ECON EFIN POL VM SUBJECT: VIETNAM'S LEADERS VOW TO PURSUE GROWTH AND MACROECONOMIC STABILITY HANOI 00000469 001.2 OF 003 ¶1. (U) Summary: The fifth session of the twelfth National Assembly began on May 20, 2009, with remarks by the Chairman of the National Assembly, the Deputy Prime Minister and the Chairman of the Fatherland Front. The primary goals for the rest of the year, according to the speakers, are to promote economic growth, maintain macroeconomic stability and enhance social welfare. The current session will focus on approval of the state budget, including a potential increase in permitted budget deficit, education system reform and consideration of 12 pending legislation bills. End Summary. THE LEADERSHIP SETS 2009 GOALS -------------- ¶2. (U) The fifth session of the twelfth National Assembly (NA) began on May 20, 2009, with remarks by the Chairman of the National Assembly Nguyen Phu Trong, Deputy Prime Minister (DPM) Nguyen Sinh Hung and Chair of the Fatherland Front Huynh Dam. Chairman Trong began the day by stating that the world economic situation is still very serious, especially in countries with large economies, but noted that Vietnam's stimulus plans have been effective, pushing GDP growth to 3.1% in the first quarter of the year. He said that for the remainder of 2009, Vietnam will stick to its main goals of sustaining growth, maintaining macroeconomic stability and preventing inflation. ¶3. (U) Chairman Trong laid out the agenda for the upcoming session, including approval of the state budget, recommendations to restructure Vietnam's education system, and consideration of 12 pending bills. Laws to be discussed include the Law on Public Debt, the Law on Legal Entities, the Criminal Code, the Law on Diplomatic Representatives Abroad, the Law on Construction, and laws relating to IPR, housing and land, the Value Added and Corporate Income Taxes, healthcare and paramilitary forces, among others. The legislative session will run for a month, until June 23. PREVENT ECONOMIC SLOWDOWN AND MAINTAIN GROWTH -------------- ¶4. (U) DPM Hung then took the stage on behalf of the Prime Minister, who had been originally scheduled to speak. Hung echoed Trong's statement that the GVN would focus on preventing economic slowdown and maintaining growth in 2009. He touted Vietnam's "victory" over inflation in 2008, but admitted failing to reach GDP targets for 2008 (6.2% rather than the target of 7% set by the GVN). He expressed concern that unemployment had reached 667,000 last year. (Note: This is a higher number than previously reported.) GVN TO PLAY "LEADING ROLE" IN OVERCOMING CHALLENGES -------------- -------------- ¶5. (U) Looking to 2009, DPM Hung pointed to Vietnam's exports, capital markets and tourism as being the most affected by the global economic downturn. He said that government investment should play a "leading role" in ensuring economic growth, so the GVN should work to mobilize capital from all sources and remove bottlenecks in project implementation. He added that the GVN has instructed the state owned enterprises (SOEs) to invest in technology and environmentally-friendly projects. The DPM listed many of the stimulus measures implemented to date, citing industrial production growth of 3.3% for the first four months of 2009 and 21,000 new enterprises registered by April. He also commented on the success of GVN efforts to promote education, saying that the dropout rate has decreased 40% compared to last year. Based on the success of government programs, he said that "the people's trust has increased." ¶6. (U) DPM Hung then turned to some of the challenges for 2009, including exports hovering at the same value as last year and the lack of competitiveness of Vietnamese goods. He noted that budget revenues were down while expenditures were up, also commenting that "administrative reform is still slow, so budget disbursement is slow." Pollution, traffic and food safety continue to be problematic, he added. Still, he said, "we are getting out of the most difficult time." MINDING SOCIAL WELFARE -------------- ¶7. (U) He listed economic growth, macroeconomic stability and ensuring the social welfare as the top priorities for the coming HANOI 00000469 002.2 OF 003 year. He said that the GVN would also work to increase infrastructure investment and production capacity in 2009 and beyond, while also trying to ensure the effective use of resources, including bauxite and other minerals. Other goals include the simplification of investment procedures, increased training and education opportunities, progress on equitization of SOEs, tourism promotion, increased investment in oil, gas, energy, mining and agriculture, prevention of trade protectionism and a host of smaller issues. LEGISLATURE ASKED TO INCREASE BUDGET -------------- ¶8. (U) Specifically, the DPM said that the GVN would ask the NA to increase the allowable budget deficit from 4.8% to 8% of GDP this year and to ease the tax burden on businesses and individuals. (Note: He was likely referring to making the personal income tax deferral, implemented as part of the first stimulus package, into a permanent cut.) He also asked that the 2009 GDP growth target be revised down to around 5% from 6.5% He closed by saying that implementation and monitoring of GVN programs are the responsibilities of all ministries and provinces, and that therefore they should endeavor to provide accurate and timely progress reports, including via websites, so that the public can gauge their success. The DPM noted that the mass media also plays a key role in the dissemination of information and the monitoring of policies. Finally, he asked that the NA grant greater power to its standing committee to actively manage GVN policies and programs throughout the course of the year. (Comment: A greater role for the Standing Committee might make the NA more efficient and able to handle more draft legislation throughout the year. End comment.) FATHERLAND FRONT CRITICIZES "SLOW" STIMULUS -------------- ¶9. (U) The last speaker was Huynh Dam, Chairman of the Vietnam Fatherland Front (VFF),speaking on behalf of the NA members. (Note: The VFF is an umbrella group of pro-government "mass movements" in Vietnam.) Unlike the first two speeches, Dam's remarks were not subject to live interpretation nor distributed in written form. He began by criticizing the data collection capabilities of the GVN, saying that there were big discrepancies in the numbers reported by different government ministries and agencies, which made appropriate policy responses difficult. With regard to the economic stimulus package, he said it had "good intentions," but was "slow and troublesome in implementation." For example, the Vietnam Farmers Association and the Union of Collectives told VFF that they had a tremendous need for capital but getting access to subsidized loans was very difficult. Dam asked the GVN to improve the procedures and increase the timeframe and scope of eligibility for the loans. ¶10. (U) Chairman Dam also said that the GVN's policies for developing the agricultural sector had not achieved their target of reducing wealth disparities. He commented on the poor management of land issues, noting some recent cases where local government seized land for development (including for golf courses) without proper vocational training or other preparation for affected farmers, resulting in more complaints at higher levels of government. He asked for stronger supervision over policy implementation, citing the misappropriation of the individual stimulus payments made to the poor around Tet as an example. Dam asked that "severe penalties" be given to the officials who stole the money. ¶11. (U) On industry and the environment, Dam said that "there are strong concerns over serious cases of environmental pollution that haven't been dealt with thoroughly." He said that displacement of people due to infrastructure projects, e.g. Son La Hydro Power Plant, has not been done properly, and asked the GVN to task the Ministry of Industry and Trade (MOIT) to strengthen supervision over these projects. Dam also asked that the Central Highlands bauxite mining project be placed on the NA's program for annual review to ensure that implementation is in line with the Politburo's guidelines. On corruption, he said that "extravagant spending" is still popular in the public sector, including the import of "nonessential" expensive items and the abuse of state cars and property for private uses. COMMENT -------------- ¶12. (SBU) With Vietnam still enjoying positive growth and investment HANOI 00000469 003.2 OF 003 and trade holding their own in this difficult year, the continued emphasis on macroeconomic stability from the country's leaders is encouraging. It appears that the National Assembly will continue to take an active and vocal role this session, at least in economic matters. While NA members are nearly all Communist Party members, the public debates that will take place over the next month will provide some of the few instances of true and unfettered criticism of GVN policies and offer a rare glimpse into the consensus-building process. Post will follow the session and report the results septel. MICHALAK