US embassy cable - 05HANOI17

UNCLAS  HANOI 000017 
 
SIPDIS 
 
 
SENSITIVE 
 
STATE PLEASE PASS TO USTR EBRYAN, GHICKS 
STATE ALSO FOR E, EB AND EAP/BCLTV 
STATE PASS USAID FOR CHAPLIN/ANE 
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO 
USDA FOR FAS 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, VM 
SUBJECT: Vietnam: USAID STAR Technical Assistance for Key 
Economic Legislation 
 
 
1. (SBU) The National Assembly (NA) recently finalized its 
legislative agenda for 2005.  The agenda encompasses laws 
and ordinances that will be reviewed and/or passed in 2005, 
but not decrees and other lower level implementing 
regulations that are also in progress.  At the request of 
the GVN and the NA, the USAID-funded Support for Trade 
AcceleRation (STAR) Project will work intensively with a 
variety of GVN ministries, National Assembly Committees and 
Communist Party of Vietnam Commissions on the drafting of 
the legislation necessary for implementation of the U.S.- 
Vietnam Bilateral Trade Agreement (BTA) and Vietnam's 
accession to the WTO.  This cable details ongoing and 
upcoming STAR technical support for aspects of the GVN's 
legislative agenda related to its efforts toward greater 
international economic integration. 
 
Roadmaps/Legislative Agenda 
--------------------------- 
 
2. (SBU) STAR is supporting development of a Ministry of 
Justice (MOJ) Roadmap on BTA Implementation that will 
outline the status of implementation through the end of 
2004.  STAR is also supporting MOJ efforts to develop a 
Roadmap for WTO Accession that clearly identifies both the 
number of laws and regulations that need to be reformed to 
meet WTO accession requirements and the key elements within 
the laws that need to be revised.  The MOJ hopes to complete 
the WTO roadmap by January 2005.  STAR will support 
workshops to help the GVN focus on the substance of the 
necessary legal revisions and identify how to complete the 
reforms in time to meet the GVN's goal of accession to the 
WTO in 2005. 
 
Legislation Scheduled for Approval in May 2005 
--------------------------------------------- - 
 
3. (SBU) The following are the Laws and Ordinances scheduled 
for approval in May 2005 for which STAR is providing 
technical assistance. 
 
-- A full revision of the Civil Code.  This is the core law 
regulating all civil activity in Vietnam.  For the last two 
years, STAR has provided the MOJ-led drafting team with 
significant technical support on draft revisions to this 
law.  This assistance included technical workshops and three 
line-by-line written analyses of several drafts of the 
revised law (Note:  The law has more than 500 articles.  End 
Note.)  STAR has begun working with the Law Committee of the 
National Assembly and the Internal Affairs Commission (IAC) 
of the Communist Party of Vietnam (CPV), which have the lead 
on finalizing the Civil Code.  In mid- to late-January the 
National Assembly will post a draft of the revised Civil 
Code for public comment for two months.  STAR will help the 
Law Committee collect and examine these public comments and 
will host intensive week-long, article-by-article 
discussions with the Law Committee and IAC leaders and staff 
as they finalize the law after public review, in March or 
April.  The revisions to the Civil Code are intended to set 
the foundation for a modern, consistent and simplified legal 
framework for contract enforcement, secured transactions, 
and fundamental property rights. 
 
-- A full revision of the Commercial Law.  The revised 
Commercial Law is intended to provide a modern and 
simplified legal framework for commercial transactions. STAR 
has been working intensively with the Ministry of Trade-led 
drafting team for two years on this law.  STAR recently 
began to work with the National Assembly's Committee on 
Economics and Budgetary Affairs (CEBA), and the IAC to 
ensure that the contract elements in the Commercial Law are 
fully consistent with the revised Civil Code contract 
elements.  Core contract law will be contained in the Civil 
Code, while special rules for commercial transactions will 
be in the Commercial Law.  The National Assembly plans to 
pass both the Civil Code and the Commercial law in the same 
session.  A draft of the Commercial Law has been released 
for public comment.  (Note:  The Commercial Law will 
establish a broad legal framework for liberalizing 
distribution services in Vietnam, but key reforms will need 
to be done through issuance of follow-on government 
regulations.  End Note.) 
 
 
-- Development of a new Law on International Treaties.  STAR 
is working with the Ministry of Foreign Affairs-led drafting 
team and the National Assembly's Committee on Foreign 
Affairs on this new law, which is supposed to clearly and 
comprehensively lay out the legal status of international 
treaties relative to domestic law, identify the relative 
responsibilities for approving treaties by the state (e.g. 
the relative roles of the NA, President and Government) and 
establish transparency and reporting requirements.  Passage 
of this law is critical to implement trade agreements such 
as the BTA and the WTO.  STAR has advised the GVN drafters 
to 1) include strong wording that requires domestic law to 
be adjusted as quickly as possible to meet international 
treaty requirements and 2) allow certain treaties to be self- 
enforcing.  STAR has also suggested the idea of an omnibus 
bill type approach within this law whereby the National 
Assembly could adjust specific treaty-related elements of 
many laws at once.  The current system requires the National 
Assembly to make the revisions law by law. STAR's omnibus 
proposal is not incorporated into the current draft, but has 
been discussed seriously by the Ministry of Foreign Affairs 
and the National Assembly's Committee on Foreign Affairs. 
 
-- Amendments to the Customs Law of 2000.  Changes to the 
Customs Law are being driven by the need to conform fully 
with WTO requirements and to facilitate a planned USD 70 
million World Bank Customs Modernization Project loan.  The 
General Department of Customs (GDC) plans to use the World 
Bank loan to go beyond WTO requirements to incorporate much 
of what is in the Kyoto Customs Agreement.  The GDC believes 
this is necessary to develop a fully modern and effective 
customs system, including a major shift toward e-customs. 
Changes to the Customs Law are expected to facilitate risk 
management for the transactions value processes and the 
modernization of all customs procedures. 
STAR assisted the GDC in 2003 with the key legal reforms 
necessary for Vietnam to meet its BTA obligation to adhere 
to WTO Customs Valuation Agreement procedures.  In 2004, 
STAR helped the GDC begin developing the legal framework for 
border measures to protect IPR for copyright and industrial 
property.   In 2005, STAR will review and comment on draft 
amendments to the Customs Law but anticipates that the World 
Bank will take the lead on technical assistance in general. 
(Note:  A new circular on border measures for industrial 
property is expected to be finalized in January 2005.  STAR 
has provided comments on drafts of this circular.  End Note. 
 
Legislation to be Reviewed Spring 2005/Approved Fall 2005 
--------------------------------------------- ------------ 
 
4. (SBU) The following are Laws and Ordinances scheduled for 
review in the spring of 2005 and approval in the Fall 2005 
for which STAR is providing technical assistance. 
 
-- A new Law on Negotiable Instruments.  This law will 
contribute to the development of a modern, comprehensive and 
consistent legal framework for commercial transactions in 
Vietnam (developed in parallel with the revisions to the 
Civil Code and Commercial Law, along with elimination of an 
outdated Ordinance on Economic Contracts).  The law includes 
many highly technical issues including issuance of bills of 
exchange and promissory notes.  The NA Committee on 
Economics and Budgetary Affairs (CEBA) has asked STAR to 
help increase NA deputies and staff understanding of the 
law.  STAR will host technical workshops and produce a first- 
of-its-kind background paper on the technical issues 
underlying the law.  While STAR will be the lead technical 
advisor for CEBA, the IMF may also provide some initial 
coordinated support. 
 
-- A new Intellectual Property Rights Law.  The GVN decided 
in August to fast track the drafting of a stand-alone IPR 
Law in 2005 to form the basis for a comprehensive, modern, 
and consistent legal framework for protecting IPR. 
Currently, Part VI of the Civil Code serves as the basis for 
IPR law in Vietnam.  The new law would seek to modernize the 
legal framework for IPR to comply with BTA IPR obligations 
and the WTO Agreement on Trade Related Intellectual 
Property.  It also should facilitate Vietnam's efforts to 
accede to various international IPR conventions and enhance 
 
 
Vietnam's enforcement capabilities, both in terms of 
administrative procedures and the role of the courts. STAR 
is working with the Ministry of Science and Technology 
drafting team (including the National Office of Intellectual 
Property (NOIP), the Ministry of Culture and Information 
(for copyright issues) and the Science and Technology 
Committee in the National Assembly).  (Note:  STAR is also 
supporting GVN efforts to finalize a new Decree on Remedies 
that should increase the administrative penalties for IPR 
infringement and a new set of regulations on optical disks. 
In 2004, STAR worked intensively with the courts to develop 
a new Civil Procedure Code (CPC) that went into effect 
January 1 and is now working with the Supreme People's Court 
(SPC) to train 400 to 500 judges from the largest provinces 
in Vietnam to understand the new CPC rules. STAR is also 
working with the SPC to develop implementing guidelines for 
the CPC and to train a core set of about 20 judges to 
develop specialized IPR skills.  End Note.) 
 
-- A new Law on E-Transactions.  This law will form the 
legal basis for how digital information is used in 
commercial transactions and in government operations as well 
as address how the courts will handle the validity of 
disputes related to digital transactions and evidence.  The 
law will deal with both E-commerce and E-government, as well 
as with IPR issues related to digital property. The Science 
and Technology Committee of the NA will take the lead in 
drafting this new law, and the Law Committee will review it 
for final approval.  The Science and Technology Committee 
(with support from MOST) has asked STAR to take the lead in 
supporting development of this law.  An initial draft is 
likely to be ready in January. 
 
-- Amendments to the Law on Import and Export Duties.  The 
Tax Policy Department of the MOF has asked STAR to look at a 
draft set of amendments to this important law, which deals 
with the process of collecting tariff and other trade tax 
revenue.  Changes will need to be coordinated closely with 
the changes in customs procedures for classifying and 
inspecting traded goods. 
 
Legislation to be Reviewed November 2005/Approved May 2006 
--------------------------------------------- ------------- 
 
5. (SBU) The following are laws and ordinances scheduled for 
review in November 2005 and approval in May 2006 for which 
STAR is providing technical assistance. 
 
-- Revision of the Enterprise Law.  This Law is intended to 
unify the regulations for registration and corporate 
governance of private, state-owned and foreign-owned 
companies in Vietnam and to further streamline and modernize 
these procedures.  The Central Institute for Economic 
Management (CIEM) under the Ministry of Planning and 
Investment (MPI) is taking the lead in drafting the Uniform 
Enterprise Law, and has just finished an informal first 
draft.  STAR has been asked to comment on the draft.  A 
number of other donors, including the UNDP and the USAID- 
funded Vietnam Competitiveness Initiative (VNCI), are also 
providing the GVN with technical assistance in this area. 
However, STAR will be the only donor focusing on the 
international requirements (BTA/WTO) for this law. 
 
-- A new Common Investment Law.  This law will establish the 
legal framewor for both domestic and freign investment, 
including foreign, private and ost state-owned investment 
in a single legal docment.  Passage of this law should be a 
key advane in terms of providing national treatment for 
ivestments and creating a more level playing field or all 
types of investment.  New rules on investmnt licensing will 
be key for implementing BTA an WTO market access 
improvements in both the good and services sectors.  STAR 
and other donors hae recommended that the GVN move to a 
limited negtive list of restricted investment sectors.  The 
ew law could also eliminate performance requiremens for 
investment, institute registration (ratherthan licensing) 
procedures for many types of forign investment, develop 
international investmentdispute commitments, harmonize 
investment incenties, and enhance protections for 
international inestment.  STAR supported an MPI research 
report A Report on the 17 Years of Implementation of the 
 
 
Foreign Investment Law," as well as survys of business 
views from the south, central and orthern areas. STAR is 
working closely with the egal Department of MPI to develop 
the draft invetment law and will later work with the NA 
Commitee on Economics and Budgetary Affairs to help 
fialize the law.  A draft law should be available for 
comment in January. 
 
-- A new Law on Judgment nforcement.  This law will work to 
address a weaness in the court system's ability to enforce 
jugments.  This is key for effective implementation f BTA 
requirements on arbitration, intellectual poperty rights 
and other commercial dispute settlment. STAR is working 
closely with the Ministry f Justice to develop the basic 
reports and firstdraft of this Law, and will have a 
concentrated wo-week program on it in January 2005.  STAR 
willalso support technical workshops with the Law Commttee 
of the National Assembly and the Central Inernal Affairs 
Committee of the Party and will cotinue to support 
development of the law over thecourse of 2005. 
 
Legislation for Development late in 2005 and 2006 
--------------------------------------------- ---- 
 
6. (SBU) The following are aws and ordinances that will be 
addressed in 200 and 2006 for which STAR has been asked to 
provie technical assistance. 
 
-- A new Securities Law. This law will upgrade and 
consolidate the curret legal framework for developing and 
energizing apital markets in Vietnam, including both equity 
and bond markets.  It should also address several ey BTA 
requirements involving the access U.S. invstors have to 
Vietnamese capital markets. STAR hs been working closely 
with the State SecuritiesCommission (SSC) on the first 
stages of developmnt of this new law, and will continue to 
do so oer the course of 2005.  The SSC hopes to finalize 
the law in the November 2006 session of the Nationl 
Assembly.   (Note:  STAR is also supporting imlementing 
regulations on unlisted securities traing and over-the- 
counter trading.  End Note.) 
-- Amendments to the Ordinance on Procedures for Rsolving 
Administrative Cases.   The Supreme Peope's Court has asked 
for STAR's assistance with aendments to this ordinance, but 
drafting is closly linked to planned revisions to the Law 
on Comlaints and Denunciations (see separate para below). 
Changes to this ordinance should address severalimportant 
BTA issues including broadening the juisdiction of the 
administrative courts to more efectively deal with IPR 
issues and to strengthenoverall judicial review of 
administrative decisios. 
 
-- A new Law on Technology Transfer.  This lw is intended 
to modernize an outdated legal andpolicy framework for 
technology transfer in Vietam. Foreign businesses have 
major complaints abot the inadequacy of the current legal 
framework. he Ministry of Science and Technology (MOST) is 
ocused on developing the new Law on Intellectual Poperty 
Rights in 2005, but will begin work on a ew draft Law on 
Technology Transfer for passage by the end of 2006.  MOST 
has asked for STAR support on this Law.  (Note:  Currently a 
1998 Government Decree governs technology transfers issues 
and includes a cap on royalty payments to owners of foreign 
franchises in Vietnam.  Most foreign experts deem the 
current five percent cap too low to allow foreign franchises 
to operate.  MOST has circulated numerous draft revisions to 
this Decree, none of which have adequately addressed 
concerns of the business community.  The issue of technology 
transfer was raised at the Vietnam Business Forum meeting in 
December.  End Note.) 
 
-- A new Law on Lawyers.  This law will consolidate and 
simplify the overall legal services system in Vietnam.  The 
Ministry of Justice has asked for STAR support but does not 
anticipate starting until 2006.  STAR previously provided 
technical assistance for the Decree on Foreign Lawyers. 
 
New Laws Proposed in this session 
 
7. (SBU) During the last NA session, two new reforms related 
 
to economic governance were added to the legislative agenda. 
 
-- Anti-Corruption Law was added on a fast track to be 
commented on in May 2005 and approved in the November 2005 
session. The State Inspectorate(SI) will be in the lead on 
this law.  STAR is in close communication with the SI in 
this regard. There are a number of other donors also 
involved with this legislation.  STAR currently will only 
review key drafts. 
 
-- STAR has recommended the GVN undertake a full revision to 
the Law on Complaints and Denunciations (LCD).  This law 
currently does not provide an adequate framework for 
resolving complaints or disputes against government 
decisions.  The law needs to be revised to respond to 
requirements in the BTA for the right to appeal government 
decisions.  Reforms could include establishing a set of 
independent tribunals in the executive branch for resolving 
disputes with right to appeal to the courts for final 
resolution.  STAR will work with the State Inspectorate, the 
Law Committee of the National Assembly and the Central 
Internal Affairs Commission of the Party to advance 
understanding and support for a major revision in 2005. STAR 
has supported a research report issued by the Central 
Internal Affairs Commission of the Party on "Improving 
Commercial and Administrative Dispute Settlement in Vietnam" 
that will be released in January. 
 
Support for Implementing Regulations 
------------------------------------ 
 
8. (SBU) In addition, the GVN has asked STAR to support the 
development of implementing regulations for all of the new 
and revised legislation listed above. 
 
BOARDMAN 
 
 
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