US embassy cable - 05HOCHIMINHCITY561

UNCLAS HO CHI MINH CITY 000561 
 
SIPDIS 
 
 
SENSITIVE 
 
DEPARTMENT PASS EXIM BANK AND OPIC 
DEPARTMENT PASS USTR, ELENA BRYAN 
STATE FOR EAP/BCLTV AND EB/TPP/ABT/BTT 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
USDOC FOR ADVOCACY CENTER 
PARIS FOR USOECD 
 
E.O. 12958: N/A 
TAGS: ETRD, BEXP, BTIO, EAID, PREL, VM 
SUBJECT: INTERVENTION NEEDED TO SAVE JETWAYS DEAL IN VIETNAM 
 
REF: Ho Chi Minh City 000529 
 
1. (U) This is an action request for State and DOC.  Urgent 
intervention is needed with Japanese agencies in Washington to 
ensure a US supplier does not get ODA'd out of USD 4.6 million 
sale with considerable follow-on potential. 
 
2. (SBU) Summary:  Over the past days, State and Commercial 
Service officers in Vietnam and Tokyo have held a series meetings 
with Japanese and Vietnamese officials to try and prevent the loss 
of the $4.6 million contract for the supply of passenger boarding 
bridges (PBBs) manufactured by FMC Jetway Corp. (see reftel). 
Discussions focused on the requirements specifying the use of FMC 
PBBs in the contract between the Japanese contractor, KTOM, and 
the Southern Airports Authority (SAA).  Time is running short with 
SAA under pressure to accept the substitute product or take blame 
for delaying the high profile project.  We need to exert all 
available pressure now, including in Washington to get JBIC and 
KTOM to live up to the terms of the contract with SAA.  End 
Summary 
 
3. (SBU) On May 25, State and Commerce officers met with JBIC 
officals in Tokyo and Hanoi to discuss this case.  JBIC Tokyo 
declined to intervene in this matter, but did threaten that future 
cooperation with USAID HIV/AIDS programs in Vietnam could be 
jeopardized if the USG presses too hard on this issue. JBIC Hanoi 
officials took a different tack, suggesting that FMC was not 
mentioned in the prequalification tender documents.  Embassy 
officials pointed out that this was irrelevant since the final 
signed contract calls for the use of FMC equipment.  When asked 
what would JBIC's position be if KTOM was found to be in breach of 
contract on this matter the JBIC official responded that JBIC 
would have to take some action, but did not elaborate. 
 
4.  (SBU) Embassy officials in Hanoi also reminded JBIC officials 
of a March 2005 letter sent by SAA to KTOM stating that a change 
in suppliers of the kind sought by KTOM could constitute a 
violation of Vietnamese law.  According to SAA's letter, given 
that the signed contract was approved by relevant Vietnamese 
Government agencies, KTOM and SAA do not have the authority to 
revise the contract and such revisions could be considered 
illegal.  Emboffs said they would expect JBIC to be concerned if 
one of their projects involved a breach of contract and possibly 
even a violation of Vietnamese law. 
 
5.  (SBU) Consul General and PCO met with SAA officials in HCMC on 
May 26 to review the actions we have taken on behalf of FMC and 
SAA.  The SAA project management director told us that he was 
under pressure from Hanoi to keep this project on schedule, and 
that that if this dispute over the sourcing of PBBs delayed the 
project he would be held responsible.  He told us that the ball is 
in our court, and asked us to do whatever we can to convince JBIC 
and KTOM to accept the FMC PBBs. 
 
6. (SBU) We have received a copy of the key portions of the 
contract between KTOM and SAA which clearly specify in detail that 
FMC PBBs are to be supplied by KTOM.  It is now time for 
Washington to weigh in with JBIC and the Japanese Embassy.  With 
the clear evidence in the contract that FMC equipment was agreed 
upon by KTOM and that they then pulled a "bait-and-switch" by 
changing to Shinmaywa PBBs, we should urge JBIC to honor the 
original contract terms.  To the extent that there is a real issue 
with the 50% Japanese content requirement, they should pursue 
another option that does not involve breaching their commitments 
to SAA on procurement involving less that 2 percent of the total 
contract. 
 
WINNICK 
 
 
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