US embassy cable - 03HANOI2650

UNCLAS SECTION 01 OF 03 HANOI 002650 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/K, EAP/RSP, AND EAP/BCLTV 
 
E.O. 12958: N/A 
TAGS: PREL, PARM, ETRD, ECON, VM, KN, KS, SW, DPRK, ASEAN 
SUBJECT:  POLITICS AND MONEY: VIETNAM AND THE KOREAS 
 
REF:  A.  Seoul 4505   B.  02 Hanoi 0932 
-     C.  Hanoi 2617 
 
1. (SBU) Summary:  Vietnam's relationships with both Koreas 
are growing.  ROK-Vietnam relations are likely to continue 
to expand, especially economically, while Hanoi-Pyongyang 
relations will develop more slowly.  Vietnamese 
interlocutors are discouraged by their lack of access to or 
influence on senior DPRK officials on nonproliferation or 
even economic issues, despite several official delegations 
to Vietnam recently to study the effects of Vietnam's 
economic liberalization, including one program sponsored by 
a Swedish institution.  End summary. 
 
--------------------------------------------- 
VIETNAM-ROK RELATIONS: FRIENDLY AND IMPROVING 
--------------------------------------------- 
 
2. (U) Vietnamese Prime Minister Phan Van Khai visited South 
Korea September 15-19 (ref a), and speaker of the South 
Korean parliament Park Kwan Yong reciprocated with a visit 
to Hanoi shortly thereafter.  (Deputy Prime Minister Nguyen 
Tan Dung also visited Seoul in September 2002, South Korean 
then-Prime Minister Yi Han-tong came here in April 2002 -- 
ref b -- and President Tran Duc Luong went to South Korea in 
2001.)  In typical fashion, both governments proclaimed the 
visits "successful" and highlighted the improving ties 
between the two countries. 
 
3.  (U)  Relations between the two countries are primarily 
important in economic and trade spheres, with the ROK's US$4 
billion worth of investments in over 400 commercial projects 
making it Vietnam's third or fourth largest foreign 
investor, depending on who is counting.  The ROK also 
contributes significant amounts (relative to what it gives 
to other nations) of ODA, mostly toward poverty reduction 
and infrastructure development projects.  In recent years, 
the ROK has also built dozens of schools in the central 
provinces near the war-time DMZ where Korean forces were 
concentrated, and in April 2003 the South Korean 
International Cooperation Agency signed a US$28.5 million 
loan to Vietnam for the construction of five plants to 
produce Japanese encephalitis vaccines and provide medical 
training and equipment. 
 
4. (U) Two-way trade between Vietnam and South Korea was 
just under US$3 billion in 2002, and is rising, according to 
ROK Embassy Counselor for Economic Affairs Sang Hak-lee. 
Sang noted that trade for the first six months of 2003 was 
19 percent above 2002 levels.  Investment is also growing; 
the ROK ranked 8th among foreign investors in 2002, but 
jumped to #3 in 2003 in Vietnam overall, and #1 in the Ho 
Chi Minh City area, he noted.  One major reason for this 
increase, Sang explained, was the reduction of tariffs as a 
result of the entry into force of the U.S.-Vietnam Bilateral 
Trade Agreement, which made Vietnam a more attractive place 
for Korean investments designed to produce goods for export 
to the U.S. 
 
5. (U) Dr. Ngo Xuan Binh, Director of the GVN's Center for 
Korean Studies, cautioned that problems between Vietnam and 
the ROK still exist, mostly in the form of investment 
disputes and the treatment of Vietnamese laborers in South 
Korean factories in Vietnam, as well as of the approximately 
20,000 Vietnamese guest workers in South Korea.  Resolving 
these issues through the development of conflict resolution 
mechanisms is a priority for both countries, Binh added. 
Discussing these mechanisms was a primary focus of PM Khai's 
visit to South Korea in September, he claimed, while 
declining to comment on the outcome of those discussions. 
 
6. (SBU) Contacts at the Japanese and South Korean Embassies 
in Hanoi have separately told poloff that, in addition to 
discussing investment and trade issues during PM Khai's 
visit, ROK officials had asked him to recommend to his DPRK 
counterparts that Pyongyang "open the door" to economic 
cooperation with other countries, and to more liberal 
economic development at home (a task the GVN has expressed 
growing willingness to assume in recent years --ref b). 
 
--------------------------------------------- ----------- 
VIETNAM-DPRK RELATIONS: EXASPERATING, BUT ALSO IMPROVING 
--------------------------------------------- ----------- 
 
7. (U) The Korea Center's Binh described Vietnam-DPRK 
relations as heavily one-sided; while the DPRK sent visitors 
to Vietnam (apparently most often at Vietnam's expense) and 
received occasional high-level delegations in Pyongyang 
(including President Luong in May 2002), Vietnamese working- 
level delegations were not especially welcomed in the DPRK 
and senior DPRK leaders rarely visited Vietnam.  North Korea 
remained tightly closed, even to "natural allies" such as 
Vietnam, he noted, claiming additionally that there was no 
official trade with North Korea at all.  (Vietnam has 
donated rice to North Korea, including a US$1 million 
donation announced in June 2002.)  Conditions for ordinary 
people in North Korea were "serious and difficult" he added. 
 
8.  (U)  According to Deputy Director Pham Tien Van of the 
MFA's Asia 1 Department, a ministerial-level DPRK economic 
mission visited Vietnam in August 2003, led by Chairman of 
the Standing Committee on Legislation of the DPRK National 
Assembly Huh Miong Kyu.  The Chairman and his "Parliamentary 
Delegation" came to study the "legal framework of Doi Moi" 
(Vietnam's economic renovation program since 1986) and some 
industrial complexes, Van noted.  (Note:  North Korea #2 Kim 
Yong-nam, head of the Supreme People's Assembly, also 
visited Vietnam in February 2002.) 
 
9. (SBU) Several North Korean delegations, both Baek and 
Binh agreed, have studied the impact of Vietnam's Doi Moi 
policy on the economy and society of Vietnam.  Observers 
have concluded that the DPRK is actively considering 
liberalizing its economy, and is looking for a model to 
follow.  China's economy is too large and too decentralized 
to offer a decent example, Baek said, while opining that the 
DPRK likely sees Vietnam's economic transition as a more 
practical model.  Binh noted that the North Koreans have 
requested that the Vietnamese not publicize the contact 
between the two countries; the Vietnamese media accordingly 
did not report on two important North Korean delegations in 
the last six months.  When asked about this lack of 
publicity, the MFA's Van stated that "the press did not 
cover these visits because they were only normal." 
 
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THE SWEDISH ANGLE 
----------------- 
 
10. (SBU) Dr. Ari Kokko of the Stockholm School of Asian 
Studies (also known as the European Institute of Japanese 
Studies) organized a delegation of DPRK "economic experts" 
that visited Vietnam in August 2003, funded by his School. 
(This group was unrelated to the official delegation of 
North Korean parliamentarians referred to in paragraph 8.) 
The 15-day program involved twelve academic and DPRK 
experts, mostly from the Pyongyang University of National 
Economics, which Kokko described as "the training school for 
bureaucrats and executives from State-Owned Enterprises." 
 
11.  (SBU)  Kokko further explained that the program, 
undertaken with the GVN's cooperation and using a South 
Korean interpreter, was part of an official DPRK "three-year 
experiment in market enterprises" begun in July 2002 and 
designed to provide training in market-based economics to 
DPRK experts.  North Korea, he added, was in a "pre-Doi Moi" 
situation, in which the State allowed SOEs to sell anything 
they produced above-quota in a limited number of "open 
markets" in Pyongyang and elsewhere, akin to what some DPRK 
officials saw as parallels with Vietnam's initial stages of 
economic liberalization.  Dr. Kokko added that in his 
discussions with officials in Pyongyang, he found that other 
officials had resisted the idea of sending experts to 
Vietnam because they claimed that North Korea was 
significantly more economically advanced than Vietnam, a 
"developing country." 
 
12. (U) In Kokko's estimation, the August program was a 
success.  He noted that his institute was working with the 
Swedish and DPRK governments to organize another program in 
spring 2004 to last between six weeks and two months, to be 
held either in Sweden or in Vietnam. 
 
13. (SBU) Comment:  Although the advantages to the economic 
relationship with South Korea vastly outweigh the political 
benefits of close relations with Pyongyang, Vietnam 
continues to see North Korea as an ideological partner and - 
the greatest of official GVN compliments - a "traditional 
friend."  GVN interlocutors nonetheless admit that Vietnam's 
influence over North Korea on nonproliferation issues is 
nonexistent, no matter how much the GVN would like to see a 
nuclear-free Korean peninsula.  In the medium and short 
term, Vietnam will continue to welcome South Korean 
investment and put up with (and often pay for) DPRK official 
visits out of a sense of historical duty, as well as part of 
its larger strategy since 1991 of being a friend and 
diplomatic partner of all nations. 
MINIMIZE CONSIDERED. 
BURGHARDT