US embassy cable - 05HANOI55

UNCLAS HANOI 000055 
 
SIPDIS 
 
 
UNCLASSIFIED 
 
SIPDIS 
 
FOR DEPUTY ASSISTANT SECRETARY HUHTULA FROM THE AMBASSADOR 
 
STATE FOR EAP/BCLTV 
 
E.O. 12958: N/A 
TAGS: EAID, PREL, VM 
SUBJECT: OFFICIAL-INFORMAL: VIETNAM ASSISTANCE LEVELS 
 
 
1.  I understand that USAID's ANE Bureau is now considering 
ways to take funds from USAID's FY 05 and FY 06 operating 
budget to put them into emergency assistance for the tsunami 
disaster.  We fully support the need to reallocate funding 
for this tragedy.  But while hard choices are inevitable, the 
proposed reallocation seems extremely hard on Vietnam, which 
already operates on a relatively low budget.  It is one thing 
to take one million USD from a country with an operating 
budget of USD 75 million, but quite another to take a 22 
percent cut from a modest program like that of Vietnam.  Such 
a sharp reduction of DA funds for Vietnam would be 
particularly harmful to the basic sustainability of the 
overall program and would adversely impact our ability to 
implement our Mission Performance Plan (MPP). 
 
2.  The proposed reallocations for Vietnam in FY 05 and FY 
06 come from the Development Assistance (DA) account with the 
funds for the President's Emergency Plan for HIV/AIDS 
remaining untouched.  Under the proposed approach, our FY 05 
operating budget DA amount baseline of USD 4.5 million will 
be cut by USD 500,000; then in future years, the baseline 
drops to USD four million.  However, after another large 
contribution for tsunami relief, the revised FY 06 level then 
falls to just over USD 3 million.  This amounts to a 22 
percent reduction in total DA over a two-year period. 
 
3. Two other factors make this cut even more difficult. 
First, as you know, last week the USD 2 million in ESF funds 
for FY 06 were zeroed out. Second, the USAID program in 
Vietnam is staffed by Personal Services Contractors and is a 
"virtual" mission.  As a result, all USAID operational costs 
in Vietnam come "off the top" out of program funds, including 
DA funds.  The result is that the amount of funds available 
for programs becomes even less significant. 
 
4.  The impact of such a large cut from such a low base is 
profound.  Any of the new planned, albeit modest, initiatives 
to promote economic growth cannot begin.  More importantly, 
it will be impossible to extend USAID's highly successful 
program of economic growth activities in Vietnam at even 
their current modest levels.  Two projects support Vietnam's 
aggressive transition to a full market economy. Both you and 
EB PDAS Donnelly recently met the senior Vietnamese 
delegation supporting the highly successful Support for Trade 
Acceleration (STAR) project in Washington.  The donor 
community and the Vietnamese Government consider this 
initiative to be the most influential and relevant donor 
project furthering Vietnam's transition to a market economy. 
STAR has been very helpful to U.S. national interests in 
developing a broad-based economic relationship and remains a 
key instrument for achieving many of our key MPP objectives. 
USAID was planning to extend that project from December 2005 
to December 2006, but with these funding reductions in FY 05 
and FY 06, we would have to cut back either the level of 
effort or length of that extension, perhaps both.  In my 
view, that would be contrary to our own interests. 
 
5.  You may already be deeply engaged in sorting through 
EAP's competing equities over how to fund the tsunami relief 
effort. If so, I apologize for complicating your difficult 
task. If not, I urge EAP to get involved in these budgetary 
discussions with USAID and press our case as vigorously as 
possible. 
 
 
MARINE 
 
 
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