US embassy cable - 04HANOI2714

UNCLAS SECTION 01 OF 04 HANOI 002714 
 
SIPDIS 
 
STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA JBELLER 
STATE PASS USTR FOR EBRYAN, BWEISEL, DSPOONER 
TREASURY FOR IA/Asia Office 
USDA FOR FAS/ITP/SHIEKH 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
USDOC also for OTEXA 
GENEVA PASS USTR 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, VM, WTRO, BTA, IPROP, WTO 
SUBJECT: VIETNAM:  EB PDAS DONNELLY ENCOURAGES EXPANDED 
TRADE AND INVESTMENT 
 
1. Summary:  On September 28, EB PDAS Ambassador Shaun 
Donnelly, accompanied by the Ambassador, met with Minister 
of Trade Truong Dinh Tuyen and Vice Minister of Planning and 
Investment Nguyen Bich Dat.  In addition, PDAS Donnelly, 
accompanied by ECON/C, met with Dang Van Thanh, Vice 
Chairman of the National Assembly's Committee for Economic 
and Budgetary Affairs (CEBA) and Nguyen Hoa Binh, Director 
of the Economic Police Department of the Ministry of Public 
Security.  He also met with representatives of the American 
business community.  PDAS Donnelly encouraged the GVN to 
build on the success of the U.S.-Vietnam Bilateral Trade 
Agreement (BTA); conveyed strong USG support for Vietnam's 
WTO accession; urged the GVN to continue to improve 
Vietnam's trade and investment climate, highlighted the 
importance of effective enforcement of intellectual property 
rights (IPR); and pressed the GVN to support efforts to 
increase U.S. exports to and investment in Vietnam.  GVN 
officials expressed strong commitment to international 
economic integration, acknowledged the success of the BTA, 
highlighted the importance of economic development to 
Vietnam's security and stability, and expressed appreciation 
for USG assistance in implementing the BTA through the USAID- 
funded Support for Trade AcceleRation (STAR) Project.  End 
Summary. 
 
BTA: A Strong Foundation for Relationship 
---------------------------------------- 
 
2. In all of his meetings in Hanoi, PDAS Donnelly applauded 
the success of the BTA and the growth and development of the 
U.S.-Vietnam bilateral economic relationship.  He also noted 
that full implementation of the BTA is important for 
Vietnam's WTO accession as well as for improving Vietnam's 
competitiveness in expanding trade and attracting 
investment. 
 
3. National Assembly (NA) CEBA Vice Chairman Dang Van Thanh 
told Donnelly the NA has paid significant attention to 
implementation of the BTA and is pleased with the deepening 
of the bilateral trade and investment relationship with the 
United States.  He expressed appreciation for U.S. 
assistance on implementation, including through the STAR 
Project.  Minister of Trade Tuyen highlighted the importance 
of security and stability for Vietnam and linked these 
issues to the continued development of Vietnam's economy, 
including through expansion of economic ties with the United 
States.  Minister Tuyen also noted that he believes the 
overall U.S.-Vietnam bilateral relationship must be built on 
but not limited to a strong economic relationship. 
 
Vietnam's WTO Accession 
----------------------- 
 
4. PDAS Donnelly expressed strong support for Vietnam's WTO 
accession to all of his interlocutors.  He advised his 
counterparts that USG support for Vietnam's accession, 
however, does not mean the United States is willing to 
compromise on accession standards.  Vietnam needs to join 
the WTO at world standards so it can compete with other WTO 
members. 
 
5. Minister of Trade Truong Dinh Tuyen noted the GVN has a 
short timeframe in which to meet its goal of acceding to the 
WTO in 2005.  He informed PDAS Donnelly that Vietnam intends 
to finish its bilateral market access negotiations (bilats) 
with the European Union in October and has already finished 
negotiations with Chile.  He also stated that the GVN is 
"speeding up negotiations" with China and had concluded a 
successful meeting with the Chinese a few days ago.  The GVN 
believes it will finish bilats with "many others" early in 
2005.  That said, Tuyen acknowledged that bilats with the 
United States are the most important part of the accession 
process and that Vietnam needs to accelerate the pace of 
negotiations with the United States. 
 
6. Minister Tuyen stated that he believes Vietnam's 
accession to the WTO will be good for both countries.  As 
long as Vietnam is not a member, he said, "GVN policies can 
change" in reaction to both reform-oriented and conservative 
forces.   The United States should not push Vietnam to 
liberalize too much because this could make it more 
difficult for Vietnam to make the right decisions regarding 
WTO accession.  Rather, the GVN hopes the United States will 
be flexible and have "reasonable expectations."  Minister 
Tuyen concluded by saying that "if the United States cannot 
press China, it cannot press Vietnam." 
 
Trade and Investment Climate; Advocacy for U.S. Firms 
--------------------------------------------- -------- 
 
7. At both the Ministry of Trade (MOT) and the Ministry of 
Planning and Investment (MPI), PDAS Donnelly urged the GVN 
to consider the valuable contributions American companies 
can make to Vietnam's trade and investment climate. 
Companies such as Boeing, Lockheed Martin, U.S. insurance 
providers, U.S. information technology companies and others 
are interested in selling to and investing in Vietnam. 
Vietnam's exporters have benefited significantly from the 
BTA, but the United States and Vietnam do not yet have a 
balanced bilateral trade and investment relationship, he 
stressed.  Increasing U.S. exports to and investment in 
Vietnam will play an important role in strengthening the 
bilateral partnership and building support in the U.S. 
Congress for Vietnam's WTO accession and permanent normal 
trade relations status (PNTR). 
 
8. PDAS Donnelly also urged his GVN counterparts to work 
quickly to make Vietnam a more competitive trade partner and 
investment destination.  Companies can chose where they want 
to invest and the GVN needs to make Vietnam a more 
attractive place for potential investors.  To help improve 
Vietnam's competitiveness, the GVN needs to move forward on 
BTA implementation and WTO accession and to move more 
quickly to liberalize key sectors such as telecoms and 
financial services.  He encouraged his GVN interlocutors to 
take "bold" steps in this direction. 
 
9. MPI VM Nguyen Bich Dat highlighted the importance of 
foreign investment to Vietnam's growth and development.  He 
expressed disappointment in U.S. FDI levels, noting that 
although Vietnamese exports to the United States grew after 
entry-into-force of the BTA in 2001 (making the United 
States Vietnam's largest export market), U.S. investment in 
Vietnam has not increased significantly and is not yet 
commensurate with its potential.  The GVN is taking steps to 
improve the investment climate including: revising and 
drafting key pieces of legislation; implementing BTA 
commitments; speeding up the equitization of state-owned 
enterprises (SOEs) particularly in sectors such as 
machinery, telecommunications, petroleum and cement; 
removing special privileges accorded to SOEs; opening a 
stock market in Hanoi and considering allowing Vietnamese 
businesses to issue bonds in foreign markets. 
 
10. Both Trade Minister Tuyen and VM Dat responded 
positively to Donnelly's message regarding the need to 
improve the balance in the bilateral trade and investment 
relationship.  Minister Tuyen said he has urged the GVN and 
Vietnamese businesses to look for ways to import more U.S. 
goods.  He also noted that he supports U.S. companies, such 
as Boeing, that are interested in Vietnam and he knows the 
GVN "has good intentions" about Lockheed Martin.  VM Dat 
assured Donnelly the GVN would consider carefully U.S. 
companies' proposals for investment in Vietnam. 
 
IPR 
--- 
 
11. Throughout his visit in Hanoi, PDAS Donnelly emphasized 
that strong enforcement of IPR is important to the USG and 
is critical to Vietnam's efforts to attract more domestic 
and foreign investment.  Mr. Nguyen Hoa Binh, Director of 
the Economic Police (EP), assured PDAS Donnelly that he knew 
protection of IPR is an important issue for the GVN as well 
as for Vietnamese enterprises.  He asserted that the biggest 
IPR-related concern for the GVN is the growing market for 
fake products in Vietnam, rather than domestic production of 
counterfeit and pirated goods.  According to Mr. Binh, most 
of the fake goods found in Vietnam are produced in other 
countries (primarily China and other neighboring countries) 
and then imported into Vietnam.  Domestic production itself 
is actually very small; Mr. Binh estimated its value at less 
than 30 million VND (under USD 2000).  (Comment:  While it 
is true that a significant percentage of the fake 
merchandise available in Vietnam is of Chinese origin, this 
figure is ridiculously low.  End Comment.) 
 
12. Binh also told PDAS Donnelly that he believes the IPR 
situation in Vietnam is improving.  He noted that public 
awareness of the importance of protecting IPR is growing and 
that the GVN has clarified and strengthened its regulations 
on IPR as part of the economic integration process.  In 
August, for the first time, the GVN hosted a national 
conference on IPR in Vietnam.  Binh also revealed that the 
EP had recently established special IPR task forces in Hanoi 
and HCMC and plans to expand the program throughout the 
country starting on October 1. 
 
13. Binh explained that, although it is not perfect, Vietnam 
does have a legal framework for IPR protection that enables 
the EP to fight against IPR violations.  In the last ten 
years, Vietnam has investigated over 5,000 cases of IPR 
infringement.  However, he conceded, given that most of the 
fake goods are produced outside Vietnam, it is usually 
difficult for the EP to apprehend the "real violators."  The 
GVN has punished the people caught selling fake goods in 
Vietnam with administrative fines and measures (such as the 
confiscation of merchandise and equipment and revocation of 
business licenses).  Binh also acknowledged, however, that 
the fines allowed under Vietnamese law are too low to 
discourage future violations. 
 
14. Binh expressed appreciation for the technical assistance 
the STAR Project has provided the EP and urged PDAS Donnelly 
to ensure that the USG continues to make assistance on IPR 
enforcement a priority.  Specifically Binh requested that 
the USG provide additional technical assistance on IPR for 
Vietnam's courts and prosecutors and for additional training 
for police.  He also advocated in favor of information 
exchanges between the EP and their counterparts in the 
United States on IPR enforcement best practices. 
 
15. Binh characterized coordination among the GVN agencies 
responsible for intellectual property rights (a total of 
five agencies) as generally "good," particularly with 
respect to exchanging information, training, and 
investigating and prosecuting IPR violations.  However, he 
noted, cooperation sometimes breaks down and, on occasion, 
other agencies have tried to avoid taking responsibility for 
enforcement.  (Comment:  We believe there are large problems 
with interagency cooperation on IPR enforcement, linked at 
least in part to overlapping jurisdiction and lack of 
training on both policy and process at the local levels. 
End Comment.) 
 
Legislative Agenda 
------------------ 
 
16. Mr. Thanh, NA CEBA Vice Chairman, told PDAS Donnelly the 
NA is paying more attention to the legislative process now, 
with particular focus on international economic integration 
and Vietnam's efforts to establish a market-oriented 
economy.  The NA seeks public comments on its draft 
legislation and experts from the STAR project have provided 
the NA with line-by-line comments on draft laws and 
ordinances.  According to Thanh, the NA has established a 
legislative calendar through both 2010 and 2020 and hopes to 
complete Vietnam's legal framework for economic reform and 
integration within 20 years.  The NA has passed ordinances 
on countervailing duties, antidumping measures and 
safeguards and hopes to finalize a law on competition, a 
commercial law, and a comprehensive IPR law before the end 
of 2004. 
 
17. When PDAS Donnelly asked how the NA plans to pass all of 
the laws necessary for WTO accession, Thanh explained that 
the NA plans to draft individual laws.  The NA has 
considered but decided against following other donors' 
suggestions that the NA draft "omnibus" legislation that 
includes all of the changes necessary to prepare Vietnam for 
WTO accession.  Thanh explained that drafting individual 
laws makes it easier for the NA to prioritize laws that need 
to be passed urgently. 
 
Textiles: Request for additional carryforward 
--------------------------------------------- 
 
18. Trade Minister Tuyen raised the issue of textiles with 
PDAS Donnelly and complained about the difficulties the GVN 
is facing due to limited U.S. textile quota.  He said that 
large U.S. companies, including J.C. Penney, Mast, Nike and 
the Gap, frequently call him to ask for more quota for their 
Vietnamese suppliers, but that he has none to give them. 
Minister Tuyen noted that increased textile and garment 
exports are good for both Vietnam and the United States 
because the earnings help support Vietnam's purchase of big 
ticket items such as Boeing 777's.  He then asked PDAS 
Donnelly to convey a personal request to USTR and the 
Department of Commerce for an additional 1.8 percent 
carryforward in categories 338 and 339 (on top of the eight 
percent allowed in the bilateral textile agreement.) 
Minister Tuyen said the Vietnamese Embassy in Washington 
would be making a formal request to relevant USG agencies. 
According to Minister Tuyen, the request amounts to about 
300,000 dozen T-shirts and will prevent Vietnamese shipments 
from being turned away at U.S. ports. (Note:  Post received 
a fax copy of MOT's written request for additional 
carryforward on September 30.  See Hanoi 2697 for text.  End 
Note.) 
 
Outreach to American Business Community 
--------------------------------------- 
 
19. At a lunch hosted by the Ambassador, representatives of 
International Data Group (IDG), Ford, American International 
Group (AIG), Citibank, General Electric, Microsoft, New York 
Life and Ace-INA International shared their perspectives on 
doing business in Vietnam and priorities for WTO accession 
with PDAS Donnelly.  The primary concerns raised by the 
business community included:  speeding up liberalization of 
financial services (issuance of insurance licenses, raising 
the cap on foreign participation in joint stock banks to at 
least 51 percent, addressing the issue of nonperforming 
loans issued by state commercial banks, eliminating the 
limited validity of the licenses issued to foreign banks, 
reducing capital investment requirements for bank branches, 
and advancing the implementation of the BTA obligation to 
allow U.S. banks the right to issue credit cards); delaying 
the implementation of an increase in the special consumption 
tax on autos set to go into effect on January 1; 
transparency; corruption; and IPR enforcement. 
 
20. Comment:  PDAS Donnelly's visit afforded an important 
opportunity to reiterate USG support for Vietnam's WTO 
efforts, to broaden the range of GVN officials with whom we 
address important trade and investment issues and to take a 
fresh look at American business community concerns about 
impediments to investment in Vietnam and priorities for 
Vietnam's WTO accession.  We believe the Economic Police's 
agreement to meet with PDAS Donnelly and participate in a 
dialogue on IPR problems in Vietnam is a direct benefit of 
the good will generated by STAR's technical assistance to 
the EP as well as EP Director Binh's recent meetings with 
Department of Justice officials and Econoffs on the margin 
of the APEC Cybercrime Convention in Hanoi.  End Comment. 
 
20. (U) EB PDAS Donnelly cleared this cable. 
 
MARINE