VIETNAM ECON HIGHLIGHTS: RETAILERS OK WITH FOREIGN

UNCLAS SECTION 01 OF 02 HANOI 000567

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TAGS: ECON VM
SUBJECT: VIETNAM ECON HIGHLIGHTS: RETAILERS OK WITH FOREIGN
COMPETITION, FOREIGN WORKERS CRACKDOWN, U.S. TOP INVESTOR

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DOMESTIC RETAILERS THRIVE AMID FOREIGN COMPETITION
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1. (U) The domestic retail sector is doing just fine, despite its
earlier fears that it would be unable to compete with foreign
penetration when the sector opened in January 2009. In fact, a
majority of local businesses in Vietnam say that they welcome
foreigners in the sector, according to a survey released in May by
the international consulting firm Grant Thornton. Local authorities
credit foreign firms with spurring on local retailers to invest and
modernize their facilities and services. Although there has been
interest among foreign firms in setting up in Vietnam, many large
firms have stayed on the sidelines. Takashimaya of Japan, for
example, recently pulled out of the market, citing the still-low
purchasing power of the average Vietnamese consumer.

CRACKDOWN ON FOREIGN LABOR COMING SOON?
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2. (U) Legislators and other Government of Vietnam (GVN) officials
are demanding a crackdown on the 25,000 illegal foreign workers
thought to be in Vietnam. Vietnam's booming economy and shortage of
skilled labor meant that the GVN often looked the other way and
allowed thousands of visitors to take jobs without the necessary
paperwork. Now that the economy has slowed down, the GVN may be
toughening its approach. According to GVN estimates, approximately
half of the 50,000 foreign workers in Vietnam work illegally. The
Prime Minister and the National Assembly have asked the Labor
Ministry to toughen up regulations and enforcement. What remains
unclear is whether these regulations are aimed at unskilled labor,
such as Western backpackers and laborers from neighboring countries,
at foreign business executives, or whether they are riding on
widespread fears of an influx of Chinese workers.

VIETNAM SAYS IT IS COMMITTED TO TACKLING CORRUPTION
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3. (U) Vietnam has announced its intention to ratify the United
Nations Convention Against Corruption, saying this signals its
commitment to fight graft. The GVN also announced a three-step
process to eliminate opportunities for corruption which will include
putting in place more transparent and efficient measures to detect
and punish corrupt behaviors. The three stages are to be
implemented over 10 years and reach completion by 2020. It remains
to be seen whether these new steps will effectively address the
widespread corruption problems in Vietnam.

THE DRAGON REEMERGES AS VIETNAMESE EXPORTS RISE
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4. (U) According to press reports, Vietnamese exporters of
dragonfruit, who had faced difficulties in marketing their fruit to
the U.S. market after gaining approval to export in 2008, are making
a strong comeback. The fruit is being sold throughout the U.S. and
has fared so well that some markets in Texas and Arkansas cannot
keep up with demand.

U.S. IS VIETNAM'S LARGEST INVESTOR IN 2009
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5. (U) The U.S. tops the list of foreign investors in the first five
months of 2009. Of the $6.7 billion of authorized investment in the
first five months of 2009, the United States accounted for $853.3
million, topping this year's list, and followed by South Korea, Hong
Kong, Singapore and Taiwan. Of that amount, $800 million was
expansions to existing U.S. investment and $53.3 million was in
investment in nine new projects. The U.S. is Vietnam's 11th largest
investor in terms of commitments, and 9th in actual (disbursed)
investment (1988-2008). The pace of both our committed and actual
investment is fast: in 2008, the U.S. committed more investment
($1.5 billion) than any other year, and accounts for 55% of the
investment in the previous 20 years.

CAR SALES DROP, BUT HIGH-END CAR SHOW GOES ON
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6. (U) Vietnam's car sales have dropped by 35% from January to May
of this year compared to the same period in 2008, but automakers
from 40 countries including BMW, Audi and Volvo will have their
middle and high-end cars on display during the Vietnam Auto Expo
2009 this month in Hanoi. More than 100 domestic and foreign
carmakers are showcasing their products in 500 booths. The Deputy

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Minister of Industry and Trade said that the purpose of the car show
was to support businesses and stimulate demand, while Vietnamese
dealers believe that the slump in car sales will continue throughout
the remainder of this year.

PETROVIETNAM CHOOSES U.S. FIRM FOR OFFSHORE DRILLING
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7. (U) Texas-based LeTorneau Technologies won a $40 million
contract to build offshore oil rigs for state-owned oil company
Petro Vietnam, according to a statement released by the company.
LeTorneau beat rival Singaporean and American bids for the project.

VIETNAM DEBUTS IPR HANDBOOK
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8. (U) Vietnam's Market Management Bureau (MMB),the lead agency in
charge of administrative enforcement of intellectual property rights
(IPR),debuted an IPR Handbook on June 12. The booklet, sponsored
by Mission Vietnam, is aimed at educating business owners and
consumers alike on IPR issues and their related rights.
Approximately 3,000 booklets will be distributed through the MMB's
branch offices and consumer protection organizations, and will also
soon be available on MMB's website (Septel).

PERSONAL INCOME TAX HOLIDAY EXTENDED
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9. (U) The GVN is proposing delaying collection of its new Personal
Income Tax (PIT) for an additional month to provide taxpayers with
relief during the global economic downturn. The GVN has already
decided not to collect PIT for the first six months of 2009, a
decision that the National Assembly is expected to ratify in coming
days. Some observers note that the stalled implementation may be
the result of less altruistic reasons, alleging that the GVN is
having difficulties in training personnel and developing the
necessary systems required for tax collection.

PALMER