VIETNAM ECON HIGHLIGHTS: RETAILERS OK WITH FOREIGN

UNCLAS SECTION 01 OF 02 HANOI 000567 SIPDIS STATE FOR EAP/MLS MBROWN SINGAPORE FOR TREASURY TREASURY FOR SCHUN USTR FOR DBISBEE USAID FOR DAA/ASIA MELLIS AND EAA DSHARMA E.O. 12958: N/A TAGS: ECON VM SUBJECT: VIETNAM ECON HIGHLIGHTS: RETAILERS OK WITH FOREIGN COMPETITION, FOREIGN WORKERS CRACKDOWN, U.S. TOP INVESTOR HANOI 00000567 001.6 OF 002 DOMESTIC RETAILERS THRIVE AMID FOREIGN COMPETITION -------------- -- ¶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? -------------- ¶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 -------------- - ¶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 -------------- ¶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 -------------- ¶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 -------------- ¶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 HANOI 00000567 002.2 OF 002 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 -------------- - ¶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 -------------- ¶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 -------------- ¶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