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