US embassy cable - 05HOCHIMINHCITY879

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000879 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA 
STATE PASS USTR FOR EBRYAN and GHICKS 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, PREL, VM, WTRO, BTA, WTO 
SUBJECT: AMCHAM VOICES CONCERN OVER DRAFT LEGISLATION FOR WTO 
ACCESSION 
 
REF:  HANOI 1957 
 
1. (SBU) SUMMARY:  At a meeting of the Legal Committee of the HCMC 
American Chamber of Commerce, members voiced concern regarding 
legislation being drafted in preparation for Vietnam's WTO 
accession.  While new overarching laws may meet WTO obligations, 
AmCham legal experts say the devil is in the details.  Fred Burke, 
managing partner of Baker and Mackenzie law firm, claimed that 
draft implementing decrees are laden with lists that limit rights 
to certain sectors, requirements for "baby" permits and 
registrations, and language that could be interpreted in a way 
that disadvantages foreign business.  At the same time, he said, 
trading and distribution rights continue to be a worry, both in 
draft legislation and as part of BTA implementation.  END SUMMARY. 
 
2. (SBU) Approximately 20-30 representatives of U.S. companies and 
law firms, the legal committee of the Ho Chi Minh City branch of 
the American Chamber of Commerce, gathered on August 9 to discuss 
draft legislation being prepared by the GVN for Vietnam's 
accession to the World Trade Organization (WTO).  Fred Burke, 
managing partner of Baker & McKenzie law firm in Vietnam, led the 
discussion.  He reported that, in his view, red-tape, corruption 
and protectionism on the part of the GVN is growing, and this is 
manifested primarily in decrees being drafted to supplement laws 
being passed by Vietnam's National Assembly, including the 
Commercial Law, the Common Investment Law and the Unified 
Enterprise Law. 
 
3. (SBU) According to Burke, provisions in draft decrees on 
franchising, commercial promotions, foreign traders, multi-level 
marketing, and others represent an attempt by GVN ministries, 
particularly the Ministry of Trade (MOT), to retain power and 
potential sources of graft by requiring what Burke termed "baby" 
permits (e.g., repetitive permits for the same activity).  He 
alleged that while the GVN is submitting "sanitized" laws for WTO 
review, ministries are formulating implementing decrees that 
include lists that limit the number of categories in which foreign 
traders can participate and include burdensome 
registration/documentary requirements.  (Note: The decrees to 
which Burke referred were not yet available publicly at the time 
of the meeting.  They have since been posted, in Vietnamese, on 
the Ministry of Trade's website. End note.) 
 
4. (SBU) Dao Nguyen, partner at Johnson, Stokes & Master law firm 
in Vietnam, echoed Burke's sentiments.  GVN ministries are engaged 
in territorial in-fighting through draft decrees, she asserted. 
"The Prime Minister needs to put his foot down."  She believes 
that while piling registration requirements into the decrees, more 
fundamental problems are being ignored.  For example, there is 
potential uncertainty between the investment and commercial laws 
on the issue of distribution.  According to Nguyen, the draft 
investment law notes that distribution will be subject to rules 
articulated by the Prime Minister's office, while the commercial 
law does not include distribution at all, only mentioning sales- 
purchase agreements and agents.  Nguyen's GVN contacts tell her 
currently no one is working on distribution rules as part of the 
investment law.  All of this leaves a major issue in a legal and 
bureaucratic gray area.  The GVN needs to do a better job at 
considering new laws and regulations in relation to each other, 
Nguyen said. 
 
5. (SBU) Trading and distribution rights were a major focus of the 
AmCham discussion.  Legal experts and company representatives 
sitting around the table expressed strong dissatisfaction both 
with Vietnam's record on implementing its trading and distribution 
obligations under the Bilateral Trade Agreement (BTA) and with 
overall restrictions on trading and distribution.  Walter Blocker, 
managing director of Gannon Vietnam Limited, reported that 
Vietnam's recent attempt to meet BTA trading/distribution 
obligations by providing a point-of-contact in a diplomatic note 
(reftel) was thus far unsuccessful, as Blocker could not reach the 
individual through the contact details provided.  (Note:  Econoff 
also called the number and got no answer.  Embassy Hanoi is 
following up with the Ministry of Trade to seek to correct this 
problem.  End Note.) 
 
6. (SBU) Other company representatives voiced their concerns more 
generally on limits on trading and distribution rights.  Mark 
Gillin, managing director of AIM, a logistics and marketing 
company based in Vietnam, said Vietnam's current rules regarding 
trading and distribution rights result in higher costs and greater 
inefficiency for foreign companies seeking to get their products 
into Vietnam.  Burke  believed that limits on trading and 
distribution rights were among the major reasons many companies 
decided not to enter Vietnam's market.  He said that almost all 
the companies that come to him to inquire about doing business in 
Vietnam express disappointment upon learning that they cannot sell 
directly into the Vietnamese market, but must go through a 
Vietnamese intermediary.  All the meeting participants agreed that 
phase-ins for trading and distribution rights provided in Annex G 
of the BTA were too slow. 
 
7. (SBU) COMMENT:  The meeting concluded with a decision to update 
AmCham's WTO position paper, incorporating these and other 
concerns.  EconOff and Post Commercial Officer urged companies to 
report to the USG on BTA implementation problems and WTO 
priorities.  U.S. business here clearly realizes that time is 
growing short to speak up on these issues. 
 
8. (SBU) On August 16, in Hanoi Fred Burke spoke at a luncheon 
meeting of the Hanoi AmCham.  The attendees included not only U.S. 
business representatives, but also members of the press and 
representatives of other embassies.  Burke focused on Vietnam's 
efforts to join the WTO and on implementation of the Bilateral 
Trade Agreement (BTA), but he also made some of the same 
complaints about restrictive regulations on trading and 
distribution rights that he had made previously in Ho Chi Minh 
City.  He urged U.S. businesses to provide him with their views so 
that he could update the AmCham's position paper on Vietnam's WTO 
accession. 
 
 
WINNICK