US embassy cable - 05HOCHIMINHCITY528

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000528 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT PLEASE PASS USTR, ELENA BRYAN 
STATE FOR EAP/BCLTV AND EB/TPP/ABT/BTT 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, BEXP, PREL, VM, WTO, IPROP, BTA 
SUBJECT: DEPUTY SECRETARY MEETS WITH HCMC ENTREPRENEURS 
 
1. (SBU) SUMMARY.  During a roundtable discussion with HCMC 
entrepreneurs and government representatives, the Deputy Secretary 
discussed the current state of Vietnam's economy and future 
prospects, including accession to the World Trade Organization 
(WTO).  HCMC business representatives voiced concern over textile 
quotas, anti-dumping suits, and other difficulties entering the 
U.S. market.  Representatives also noted the positive impact of 
the U.S.-Vietnam Bilateral Trade Agreement (BTA) on business 
growth and were hopeful that WTO membership would continue this 
trend.  END SUMMARY. 
 
CONCERNS OVER TEXTILE QUOTAS AND ANTI-DUMPING CASES 
--------------------------------------------- ------ 
 
2. (SBU) In a wide-ranging discussion with the Deputy Secretary, 
members of Ho Chi Minh City's business elite began by voicing 
concerns with textile quotas, seafood anti-dumping cases and 
prospects for other anti-dumping cases in the future.  In the case 
of textiles, Vietnam's garment industry has undergone dramatic 
growth, currently employing over two million people, reported the 
chairman of the Vietnam Textile and Apparel Association (VITAS). 
However, the industry is hampered by quotas and must still compete 
with quota-free China.  According to VITAS, even U.S. buyers have 
advocated raising quota levels or eliminating quotas altogether 
because Vietnam can supply quality products at competitive prices. 
 
3. (SBU) The Vice Chairman of the Vietnam Association of Seafood 
Exporters and Producers (VASEP) related how U.S. importers and 
distributors had worked closely with Vietnamese producers to build 
a market for Vietnamese seafood.  However, anti-dumping lawsuits 
are hampering exports.  In addition, Vietnamese exporters must now 
pay bonds to ensure payment of anti-dumping duties.  The review 
process for anti-dumping cases can take two to three years, 
causing further losses that could virtually close the U.S. market 
to Vietnamese exporters.  VASEP is frustrated because U.S. 
importers and distributors do not believe that Vietnam dumped 
shrimp on the U.S. market.  Since the seafood industry in Vietnam 
employs more than three million people, with shrimp production 
comprising the largest segment of this industry, the stakes are 
high. 
 
4. (SBU) The growing furniture industry also brings worries of 
future anti-dumping cases from the United States, noted the 
director of Savimex, a top wood processing company.  According to 
Savimex, duties resulting from the U.S. anti-dumping case against 
Chinese wooden furniture have provided opportunities for 
Vietnamese producers.  Savimex stated it wants to continue to 
increase exports, but fears such increases could trigger an anti- 
dumping lawsuit.  The company questioned whether a specific level 
of exports would automatically trigger such a lawsuit. 
 
OPTIMISM ON INFORMATION TECHNOLOGY AND SMALL BUSINESS 
--------------------------------------------- -------- 
 
5. (SBU) Despite their concerns over trade disputes, roundtable 
participants were optimistic about the continued potential of 
Vietnam's economy.  U.S.-owned IDG Ventures Vietnam has 
experienced great success with venture capital in the information 
technology (IT) sector in China and wants to replicate that 
success in Vietnam.  IDG has found the level of skill and 
entrepreneurship in Vietnam impressive, and the company sees 
tremendous opportunities in the IT sector to attract U.S. 
investors.  IDG's investments include software, IT infrastructure, 
and early stage e-commerce.   Though IDG is bullish on Vietnam's 
IT sector future, predicting there will eventually be a Vietnamese 
Amazon and eBay, the company admits it does not have a clear exit 
strategy for its venture capital investments. 
 
6. (SBU) According to the Young Business Entrepreneurs 
Association, ninety percent of businesses in Vietnam are small to 
medium enterprises (SME).  The GVN's policy to open Vietnamese 
markets under the BTA has been good for SMEs.  Vietnamese 
publishing company Phuong Nam Corporation echoed praise for GVN 
policy changes.  Just ten years ago, the state had a monopoly on 
sales of cultural products, including books, music, and films. 
The GVN has since allowed private businesses to sell cultural 
products.  Phuong Nam has encountered difficulties with U.S. 
rights-holders in obtaining licensing for U.S. cultural products 
and feels U.S. businesses do not have enough interest in the 
Vietnamese market.  Despite this problem, Phuong Nam has entered 
into a U.S. joint-venture to establish a chain of movie theaters 
in Vietnam to screen U.S. films. 
 
7. (SBU) Acknowledging U.S. priorities with regard to intellectual 
property rights (IPR), the Vice Chairman of the HCMC People's 
Committee voiced a need for continued IPR training and made a 
request for continued assistance through the USAID-funded Support 
for Trade AcceleRation (STAR) Project.  The Vice Chairman also 
stressed the need for training in market research. 
 
INTERNATIONAL TRADE A TWO-WAY STREET 
------------------------------------ 
 
8. (SBU) The Deputy Secretary said that Vietnam has accomplished a 
great deal in a very short period of time.  He pointed out that as 
Vietnam succeeds on a global level, success will place Vietnam in 
competition with others, including the United States.  The very 
rapid growth of Vietnamese sales into the U.S. had given rise to 
dumping complaints.  These are adjudicated in a fair and 
transparent manner.  The Deputy Secretary cautioned that even when 
Vietnam becomes a WTO member, anti-dumping cases will still be 
possible.  Additionally, Vietnam's current designation as a non- 
market economy puts it at a disadvantage in any trade dispute. 
WTO membership is key to the future; as Vietnam works through the 
changes it must undertake, these will substantiate the case for 
market economy status. 
 
9. (SBU) The Deputy Secretary also noted that international trade 
needs to be a two-way street and that perception of fair trade is 
important.  While Vietnamese exports to the U.S. are growing 
significantly, U.S. exports to Vietnam are growing more 
conservatively.  In the United States, this trade imbalance 
creates the perception of fewer jobs for Americans and fewer 
opportunities for American companies.  Vietnam needs to open its 
markets for U.S. companies so they believe they have opportunities 
equal to those of Vietnamese exporters.  It is equally important 
for Vietnam to apply the standards of a market economy as soon as 
possible.  This includes reducing SOEs, encouraging more market- 
determined pricing, and diversifying both its export products and 
its export markets. 
 
COMMENT 
------- 
 
10. (SBU) The roundtable illustrated two often-recurring themes: 
the broad potential for economic growth in Vietnam and an 
occasional lack of sophistication about the realities of operating 
in global markets.  Vietnam's entrepreneurs are clearly keen to 
expand their businesses and participate more fully in the world 
economy.  They sometimes struggle, however, to fully comprehend or 
accept realities like textile quotas and anti-dumping rules and 
procedures.  Across the board, roundtable participants -- from 
small businesses to large former SOEs -- expressed eagerness to 
join the WTO, though perhaps under the mistaken impression that 
WTO membership will immunize them from market disruptions. 
 
11. (U) List of Participants: 
 
U.S. Side 
--------- 
 
The Deputy Secretary 
Consul General Winnick 
Ambassador Huhtala 
Ambassador Wilson 
Deputy Press Spokesman Ereli 
Chris Castro, D 
Christine Davies, D 
Lisa Martilotta, D 
Melinda J. Sofen, Public Affairs 
Tulinabo S. Mushingi, Executive Secretariat 
Deputy Principal Officer Kenneth Chern 
HCMC Senior EconOff Heather Variava 
HCMC EconOff Valerie Bilgri Holm (notetaker) 
HCMC EconOff Marc Porter (notetaker) 
HCMC Pol/Econ Specialist Pham Thanh Nhan 
 
Vietnamese Side 
--------------- 
 
Dr. Nguyen Thien Nhan, First Vice-Chairman, HCMC People's 
Committee 
Dr. Luong Van Ly, Deputy Director, HCMC Department of Planning and 
Investment 
Mr. Truong Tr?ng Nghia, Vice President, HCMC Investment and Trade 
Promotion Council 
Ms. Nguyen Th? Mai Thanh, General Director, REE Corporation - 
Developer of e.town 
Mr. Le Quoc An, Chairman, Vietnam Textile and Apparel Association 
and Vietnam National Textile and Garment Corporation 
Mr. Nguyen Van K?ch, Vice Chairman, Vietnam Association of Seafood 
Exporters and Producers (VASEP), and Director, Cafatex Corporation 
Ms. Le Th? Phuong Thuy, Vice President, Young Business 
Entrepreneurs Association, and Director, Toan My Company Ltd. 
Mr. Tran Mong Hung, Chairman, Asia Commercial Bank 
Ms. Phan Th? Le, Director General, Phuong Nam Cultural Corporation 
Mr. Hang Vay Chi, President, Viet Huong Joint Stock Group 
Mr. Do Huu Tr?ng, Director, Savimex Joint Stock Company 
Mr. Henry Nguyen, Managing General Partner, IDG Ventures 
Mr. Walter Blocker, Vice Chairman, American Chamber of Commerce, 
and Managing Director, Gannon Vietnam Ltd. 
 
12. (U) This cable was cleared by the office of the Deputy 
Secretary. 
 
SIPDIS 
 
 
WINNICK