US embassy cable - 04HANOI1613

UNCLAS SECTION 01 OF 02 HANOI 001613 
 
SIPDIS 
 
STATE FOR EAP/BCLTV 
 
BEIJING FOR AMBASSADOR-DESIGNATE MARINE 
 
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO 
 
USDOC ALSO FOR ITA/CD/OIO/EAP/ABACHER 
 
E.O. 12958:  N/A 
TAGS: PREL, ETRD, EINV, VM, WTO, BTA 
SUBJECT:  RAISING COMMERCIAL/ECONOMIC ISSUES WITH DPM DUNG 
 
REF:  Hanoi 1604 
 
1.  (U)  Summary.  Deputy Prime Minister Dung on June 3 
promised Ambassador to invite Lockheed Martin for 
negotiations on Vinasat, "took note" of a request to look 
into a decision on MWH's bid for a program management 
contract for the Son La dam project, predicted licenses for 
US insurance companies would be issued based on the "BTA 
roadmap," and welcomed more US investment in oil and gas as 
well as in high tech and software fields.  He urged support 
for Vietnam's entry into WTO, taking into consideration 
Vietnam's low level of economic development.  End Summary. 
 
2.  (U)  In advance of the Ambassador's departure for the 
U.S. to participate in the tour sponsored by the U.S.-ASEAN 
Business Council and of the likely visit to the U.S. in July 
by Communist Party of Vietnam Politburo member Phan Dien, 
Ambassador met for two hours with Deputy Prime Minister and 
Politburo member Nguyen Tan Dung on June 3.   Pol/C and 
Commercial Attache accompanied.  Assistant Foreign Minister 
Nguyen Duc Hung also attended.  Reftel reported on human 
rights issues. 
 
VINASAT 
------- 
 
3.  (U) Ambassador reminded DPM Dung that Dung had met 
before with representatives of Lockheed Martin regarding a 
bid on the Vinasat project; LM now wants to return for 
negotiations.  He noted that earlier negotiations between 
the GVN and Russian and French competitors appear not to 
have been successful.  Ambassador expressed his 
understanding that a "complicated situation" at the Ministry 
of Posts and Telematics had caused a delay in decision- 
making, and encouraged forward motion on this important 
project.  DPM Dung promised that MPT would invite LM "next 
week" to "continue negotiations." 
 
SON LA 
------ 
 
4.  (U)  Ambassador commented that DPM Dung had also already 
met with representatives of Montgomery/Watson/Harza on its 
bid as program manager for the Son La hydroelectric project, 
at which time the DPM had appeared positive about its 
involvement.  Now, the Ministry of Industry is seeking to re- 
open the bidding process on this major project, which was 
already behind schedule.  He called for a favorable decision 
soon.  DPM Dung expressed GVN interest in MWH, and noted 
that EVN appeared favorably inclined.  He "took note" of 
Ambassador's request that he look into the situation with 
MOI. 
 
BOEING 
------ 
 
5.  (U)  Ambassador expressed his satisfaction that the CEO 
of Boeing Commercial Aircraft would visit Hanoi during the 
week of June 7 and his hope that the negotiations would go 
well on Vietnam's purchase of 7E7s. 
 
INSURANCE 
--------- 
 
6.  (U)  Ambassador called for favorable decisions on AIG's 
application for a non-life insurance license and life 
insurance licenses for ACE and New York Life.  He emphasized 
that these companies could helpfully contribute to Vietnam's 
economy and capital markets.  DPM Dung acknowledged that the 
Ministry of Finance had received these applications and that 
the firms had good reputations, and predicted that the 
licenses would be approved, "according to the roadmap laid 
out by the Bilateral Trade Agreement." 
 
CONOCOPHILlIPS 
-------------- 
 
7.  (U)  Ambassador noted that ConocoPhillips was the 
largest US investor in Vietnam (although GVN statistics 
counted it as investment from Singapore), worth almost US$1 
billion.  He expressed concern that Vietnam had become 
uncompetitive within the region on oil exploration, given 
the large role for PetroVietnam at each stage of exploration 
and production as well as the high level of shares of 
profits -- sometimes as much as 90 percent -- PetroVietnam 
insisted upon.  He noted that oil companies believe the 
potential in Vietnam was high and want to invest but that 
they must worry about making a profit.  He urged a review of 
Vietnam's practices and noted the importance of oil as an 
export for Vietnam.  DPM Dung "welcomed" such US investors, 
including UNOCAL as well as ConocoPhillips, and noted that 
both sides in negotiations always sought advantage.  He 
pointed to Vietnam's "comprehensive and transparent" law on 
oil and gas, and called for more investment in oil refining 
and production as well as exploration.  Ambassador promised 
to return from his visit next week to Houston with more 
detailed information about problems arising from Vietnam's 
profit-sharing practices in this sector. 
 
BTA 
--- 
 
8.  (U)  DPM Dung pointed with satisfaction to the large 
increase in two way trade -- US$ 6 million in 2003 -- since 
the entry into force of the BTA.  He promised that the GVN 
would "do everything" to implement the BTA in its entirety, 
and thanked the USG for "pushing" the GVN on this and for 
supporting better BTA implementation.  He welcomed increased 
trade with and investment from the U.S.  Ambassador 
commented that the recent BTA implementation talks in 
Washington had been generally good, although some issues 
remain for further discussion and action.  DPM Dung called 
for more investment -- especially in high tech and software 
-- and said that Vietnam would do "anything" in this area, 
i.e. offering preferential terms to US investors, especially 
in the central region and especially in Danang.  He cited 
Intel and HP as particularly welcome. 
 
WTO 
--- 
 
9.  (U)  DPU Dung reiterated Vietnam's goal of entering WTO 
in 2005, and promised that the GVN was doing its "utmost" to 
achieve this.  He asked for US support with Vietnam's 
negotiations, keeping in mind Vietnam's "low" level of 
economic development in a transition phase.  He also urged 
the USG to consider trade disputes "fairly" and "according 
to reality."  Ambassador confirmed USG support for Vietnam's 
entrance into WTO as quickly as possible, noted that the 
Embassy would send a representative to the next round of 
talks in Geneva, and commented that the latest Vietnamese 
offered appeared to show some progress.  He warned, however, 
that this offer appeared not to be up even to BTA levels in 
terms of services, whereas we saw the BTA commitments as a 
floor -- not a ceiling -- to what the GVN should offer.  He 
stressed that trade liberalization was good for Vietnam. 
The DPM said that he agreed, but that the GVN needed to 
proceed by "cautious steps."  He claimed that if Vietnam 
fully opened without care, it could lead to "economic 
collapse."   Vietnam would continue to open its economy but 
by "appropriate steps," as it continued to seek full 
integration into the world trading system, DPM Dung 
promised. 
BURGHARDT