US embassy cable - 01HOCHIMINHCITY1302

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001302 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, ETRD, VM, SOE, BTA 
SUBJECT: HCMC DEPT. OF TRADE LOVES BTA, BUT WHAT IS IT EXACTLY? 
 
 
SUMMARY 
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1.  THE DIRECTOR OF THE HO CHI MINH CITY (HCMC) TRADE 
DEPT. TOLD CG YAMAUCHI IN A NOVEMBER 13 COURTESY CALL 
THAT HCMC HAS HIGH HOPES FOR THE BILATERAL TRADE 
AGREEMENT (BTA), BUT IS LOOKING FOR A WAY TO BETTER 
UNDERSTAND THE TREATY AND HOW TO IMPLEMENT IT.  SHE 
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SAID SHE WANTED TO WORK WITH THE CONSULATE AND AMCHAM 
TO SHARE INFORMATION ABOUT THE BTA WITH LOCAL BUSINESS, 
SO THEY WOULD BE ABLE TO TAKE ADVANTAGE OF THE BTA. 
EVEN THOUGH HER DEPARTMENT CONTROLS A NUMBER OF STATE- 
OWNED ENTERPRISES (SOES), THE DIRECTOR CLAIMED THAT THE 
PRIVATE SECTOR WAS VITAL TO THE LOCAL ECONOMY AND WOULD 
GENERATE MUCH OF THE EXPORT GROWTH TO BE REALIZED 
THROUGH THE BTA.  EQUITIZATION OF SOES WOULD CONTINUE, 
BUT IT IS A SLOW PROCESS.  END SUMMARY. 
 
BTA A HIT IN HCMC, BUT DO WE UNDERSTAND IT? 
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2.   CG YAMAUCHI, ACCOMPANIED BY ECONOFF, PAID A 
NOVEMBER 13 COURTESY CALL ON MS. PHAM THI KIM HONG, 
DIRECTOR OF THE HO CHI MINH CITY DEPARTMENT OF TRADE. 
IN THIS MEETING MS. HONG ADDED HER VOICE TO THE CHORUS 
OF LOCAL BUSINESSPEOPLE AND GOVERNMENT OFFICIALS WHO 
SEE THE BILATERAL TRADE AGREEMENT AS A NEW STARTING 
POINT FOR VIETNAM - U.S. RELATIONS AND AN EXTRAORDINARY 
OPPORTUNITY FOR LOCAL BUSINESS. THIS WAS PARTICULARLY 
IMPORTANT, SHE SAID, TO HCMC, WHICH GENERATES ROUGHLY 
40% OF VIETNAM'S EXPORT TURNOVER.  LIKE MANY, HOWEVER, 
SHE EXPRESSED CONCERN THAT THE TREATY WAS COMPLEX AND 
ITS DETAILS LARGELY UNKNOWN TO THE GROUPS OF PEOPLE 
HERE - BOTH IN GOVERNMENT AND IN BUSINESS - WHO MUST 
IMPLEMENT AND MONITOR ITS PROVISIONS.  SHE URGED THE CG 
TO ESTABLISH STRONG LINES OF COMMUNICATION AND 
COOPERATION WITH LOCAL AUTHORITIES AND BUSINESS GROUPS 
TO SEE THAT BTA IMPLEMENTATION IS A SUCCESS. 
 
3.  THE DIRECTOR STRESSED THAT THE DEPARTMENT OF TRADE 
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WAS WORKING HARD TO PROVIDE INFORMATION AND ASSISTANCE 
TO BUSINESSES IN HCMC REGARDING BOTH DOMESTIC AND 
INTERNATIONAL TRADE.  THE BTA WAS A PARTICULAR 
CHALLENGE, BECAUSE OF THE LACK OF DIGESTIBLE, PRACTICAL 
INFORMATION, BUT IT HAS GENERATED AN ENORMOUS AMOUNT OF 
INTEREST.  THE TRADE DEPARTMENT RECENTLY HELD A SEMINAR 
ON THE BTA THAT WAS VASTLY OVERSUBSCRIBED BY 
BUSINESSPEOPLE EAGER TO UNDERSTAND ITS PROVISIONS.  NOT 
ONLY WAS THE BTA DIFFICULT TO UNDERSTAND, DIRECTOR HONG 
SAID, BUT SINCE MOST VIETNAMESE BUSINESSES DO NOT YET 
HAVE EXPERIENCE IN THE U.S. MARKET, THEY WOULD HAVE TO 
RELY ON MIDDLEMEN TO GET THEIR PRODUCT TO EXPORT. 
BUSINESSES WANTED TO FIND WAYS TO WORK MORE DIRECTLY 
WITH U.S. CUSTOMERS. 
 
4.  MS. HONG SUGGESTED THAT HER DEPARTMENT WORK CLOSELY 
WITH THE CONSULATE AND AMCHAM TO PROVIDE MORE 
INFORMATION ABOUT THE BTA AND HOW TO TRANSLATE IT INTO 
ACTION.  SHE WANTED TO DISTILL THE TREATY INTO SIMPLER 
LANGUAGE THAT LOCAL OFFICIALS AND BUSINESS PEOPLE COULD 
UNDERSTAND.  SHE POINTED TO AN UPCOMING SEAFOOD SEMINAR 
THAT AMCHAM IS HOSTING LATER THIS MONTH AS AN IDEAL 
EXAMPLE OF WHAT VIETNAMESE BUSINESSES ARE LOOKING FOR. 
(NOTE:  THE CONGEN WILL BE DELIVERING OPENING REMARKS 
AT THIS SEMINAR.) 
 
5.  CG ASKED IF A SMALL WORKING GROUP COMPOSED OF THE 
CONSULATE, THE DEPARTMENT OF TRADE, AND PERHAPS AMCHAM 
WOULD BE HELPFUL IN DISCUSSING BTA ISSUES AT THE LOCAL 
LEVEL, SHARING INFORMATION AND NEEDS.  THE DIRECTOR 
AGREED, AND SAID SHE WOULD DISCUSS THIS IDEA WITH HER 
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STAFF. 
 
THE PRIVATE SECTOR'S VITAL ROLE 
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6.  THE DIRECTOR STRESSED THAT EVEN THOUGH THERE WERE 
MANY POWERFUL STATE-OWNED ENTERPRISES IN HCMC, SOME OF 
WHICH WERE UNDER THE DIRECT CONTROL OF HER DEPARTMENT, 
THE DEPARTMENT DID NOT DISCRIMINATE IN FAVOR OF THESE 
SOES.  IN MS. HONG'S VIEW, THE PRIVATE SECTOR WOULD 
GENERATE MUCH OF THE GROWTH AS A RESULT OF BTA 
IMPLEMENTATION.  WHEN ECONOFF ASKED IF IT WERE CORRECT 
THAT THE VAST MAJORITY OF EXPORTS FROM HCMC WERE IN 
FACT FROM SOES, MS. HONG NOTED THAT ACCORDING TO 
OFFICIAL STATISTICS THAT WAS INDEED CORRECT.  HOWEVER, 
SHE DOUBTED THEIR ACCURACY.  IT WAS DIFFICULT TO 
MEASURE THE TRUE VALUE OF PRIVATE SECTOR PRODUCTION AND 
EXPORTS, SHE STATED.  SHE ALSO NOTED THAT MANY SMALL 
PRIVATE SECTOR BUSINESSES EXPORT VIA SOES WHICH MAY 
DISTORT THE STATISTICS. 
 
7.  CURRENTLY THE U.S. MARKET ONLY TAKES ABOUT 17% OF 
HCMC'S EXPORT TURNOVER.  MS. HONG ANTICIPATES THAT WITH 
THE BTA THIS SHARE WILL GROW DRAMATICALLY, MOSTLY WITH 
EXPORTS FROM THE PRIVATE SECTOR.  SHE HIGHLIGHTED 
FOOTWARE, GARMENTS, AND SEAFOOD AS PARTICULARLY 
IMPORTANT EXPORT PRODUCTS FOR THE REGION.  SHE FURTHER 
STATED THAT SINCE MANY MAJOR U.S. COMPANIES HAVE A 
PRESENCE IN HCMC, IMPORTS FROM THE U.S. SHOULD ALSO 
INCREASE DRAMATICALLY. 
 
EQUTIZING SOES TAKES TIME 
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                       UNCLASSIFIED 
 
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8.  CG INQUIRED ABOUT THE HCMC GOVERNMENT'S PLANS TO 
EQUITIZE MOST OF THE COMPANIES COMPRISING SAIGON 
TRADING CORPORATION, OR SATRA, WHICH IS AN SOE MANAGED 
BY THE HCMC DEPARTMENT OF TRADE.  SATRA CONSISTS OF 23 
AFFILIATES, 3 JOINT STOCK COMPANIES, AND 3 JOINT 
VENTURES, AND EMPLOYS ABOUT 19,000 PEOPLE.  ACCORDING 
TO RECENT PRESS REPORTS, THE CITY WILL EQUITIZE 17 
AFFILIATES OVER THE NEXT FOUR YEARS.  DIRECTOR HONG 
INDICATED, HOWEVER, THAT ALTHOUGH EQUITIZATION WAS A 
GOAL AND INCORPORATED INTO AN OVERALL PLAN, IN REALITY 
IT WOULD NOT OCCUR QUICKLY.  THIS WAS DUE TO SOME OF 
THE AFFILIATES AND PROBLEMS WITH CERTAIN INDIVIDUALS 
WORKING TO BLOCK THIS INITIATIVE.  SHE DID POINT OUT IT 
WAS A PRIORITY FOR THE DEPARTMENT, AND THAT IN THE PAST 
IT HAD MANAGED 50-60 SOES, MANY OF WHICH HAD ALREADY 
BEEN SPUN OFF.  ALTHOUGH THE CITY WOULD STILL WANT TO 
RETAIN CONTROL OF KEY SECTORS SUCH AS ELECTRICITY, IT 
WAS COMMITTED TO EQUITIZING OTHER SOES UNDER ITS 
CONTROL. 
 
9.  EVEN THOUGH THE DEPARTMENT STILL CONTROLS A NUMBER 
OF SOES, DIRECTOR HONG STRESSED THAT THE TRADE 
DEPARTMENT WAS WORKING TO ENCOURAGE THE PRIVATE SECTOR 
TO PARTICIPATE IN ITS TRADE PROMOTION ACTIVITIES.  SHE 
NOTED THAT THE MAJORITY OF PARTICIPANTS IN LAST MONTH'S 
HCMC EXPO WERE PRIVATE COMPANIES.  IN ORDER FOR THE 
CITY TO DEVELOP, THE PRIVATE SECTOR MUST PLAY A VITAL 
ROLE, SHE SAID. 
 
CONDOLENCES 
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                       UNCLASSIFIED 
 
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10.  AT THE CLOSE OF THE MEETING, THE DIRECTOR STATED 
THAT SHE WAS AWARE OF THE PLANE CRASH IN NEW YORK THAT 
HAD HAPPENED THE DAY BEFORE.  SHE EXTENDED HER 
CONDOLENCES TO THE U.S. AND TO THE FAMILIES OF THE 
VICTIMS.  CG THANKED HER AND STATED THAT EVEN IN THIS 
DIFFICULT PERIOD, THE U.S. WAS A RESILIENT NATION AND 
THAT WE STILL WANTED TO WORK HARD WITH VIETNAM ON 
BUILDING A STRONG RELATIONSHIP. 
 
COMMENT 
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11.  MS. HONG IS A DYNAMIC INTERLOCUTOR AND THERE WAS 
NO MISTAKING HER PLEAS FOR ASSISTANCE.  SHE REALIZES 
THAT THE BTA IS A REAL OPPORTUNITY FOR HCMC, BUT SHE 
ALSO KNOWS THAT UNLESS LOCAL OFFICIALS AND BUSINESS 
PEOPLE ARE ABLE TO UNDERSTAND THE TREATY'S PROVISIONS 
AND ACT UPON THEM, THIS OPPORTUNITY WILL PASS THEM BY. 
 
12.  MS. HONG IS COMPLETING HER FOURTH YEAR AS THE 
DIRECTOR OF THE HCMC DEPARTMENT OF TRADE, AND CLEARLY 
DOES NOT WANT HCMC TO BE OUTSHONE AS VIETNAM'S PRE- 
EMINENT COMMERCIAL ENGINE.  SHE WANTS THE CONGEN AS AN 
ALLY.  OF THE SEVERAL COURTESY CALLS THE CG HAS MADE ON 
LOCAL OFFICIALS, MS. HONG IS THE FIRST PERSON WHO HAS 
SO EXPLICITLY STATED HER CONCERNS ABOUT HCMC'S ABILITY 
TO MEET PEOPLE'S EXPECTATIONS OF THE BTA.  POST WILL BE 
LOOKING TO REGULARIZE COMMUNICATION WITH THE DEPARTMENT 
OF TRADE ON BTA ISSUES AND ENSURE THEY ARE INCLUDED IN 
ALL RELEVANT TRAINING PROGRAMS AND SEMINARS. 
 
YAMAUCHI 
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