US embassy cable - 05HOCHIMINHCITY944

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000944 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PASS TO USTR - EBRYAN 
 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, ETRD, PREL, TBIO, VM, WTO 
SUBJECT: WTO ACCESSION CONCERNS STRESSED IN EB/CBA MERMOUD HCMC 
VISIT 
 
REF:  A) HCMC 879 B) HCMC 914 C) HCMC 935 
 
1. (SBU) Summary: Special Representative J. Frank Mermoud 
discussed commercial issues, WTO accession, and Vietnam's business 
climate in Ho Chi Minh City September 1.  Amcham governors 
expressed concern with GVN intransigence on WTO related issues. 
HCMC officials confirmed these fears and were unusually frank and 
pessimistic about support for economic reform.  Mermoud met with 
the Young Businesspeople's Association and spoke with local press. 
End Summary. 
 
2. (SBU) In a full day of meetings September 1, Special 
Representative for Commercial and Business Affairs, J. Frank 
Mermoud, met with business and government leaders to press for 
trade and investment liberalization and for several specific 
pending deals.  AmCham members supported Vietnam's WTO accession, 
but raised concerns that the GVN still sees negotiations as a zero- 
sum game in which it will concede as little as possible.  AmCham 
members reiterated concerns that the GVN was using WTO-related 
legislation to increase government control(reftels.) AmCham noted 
lack of communication between officials drafting legislation and 
WTO negotiators.  GVN officials have told some AmCham members that 
their marching orders are to "give away the minimum" in 
negotiations and in legislation. 
 
3. (SBU) Over lunch hosted by the Consul General, Dr. Luong Van Ly 
and Mr. Truong Trong Nghia provided a frank and somewhat 
pessimistic assessment of pending WTO-related legislation and 
economic policy trends. (NOTE: Ly, Deputy Director of the HCMC 
Department of Planning and Investment and Nghia, Vice President of 
the HCMC Investment and Trade Promotion Centre  (strictly protect 
both) are the two key senior working level officials in HCMC on 
trade, investment and economic policy issues.  Both are close to 
Deputy Prime Minister Vu Khoan and are strong economic reform 
advocates. END NOTE.) 
 
4. (SBU) Ly expressed relief that Vietnam's WTO accession would 
not happen in 2005, with mid-2006 as a more likely date.  There 
was simply no way, he said, to process the required legislation by 
year-end.  Ly and Nghia agreed that much pending legislation, 
including the draft Investment Law, was a move backwards rather 
than forwards (See reftels for US business concerns on pending 
legislation.)  Ly stressed that there was considerable opposition 
to trade liberalization by some Vietnamese business interests and 
state-owned enterprises with strong connections to the GVN.  In 
his view, the legislation needed for accession will have to be 
very general.  Once Vietnam is in the WTO, trade and investment 
will drive further reform through implementing decrees.  But, he 
confided, reformers did not have the political ability to obtain 
strong specific legislation and implementing decrees upfront.  In 
his view, the U.S. should support Vietnam's WTO accession since 
membership will be the lever for reform. 
 
5. (SBU) Ly explained that the Party and its Politburo are the 
ultimate authority on policy issues but that implementation 
depended on the government.  Disagreements within the government 
could prevent decisions from moving forward.  He explained that 
key to the power of the Prime Minister was the responsibility to 
refer issues to the Politburo.  Ly stated that he and his circle 
were backing Deputy Prime Minister Vu Khoan to succeed Phan Van 
Khai next year but he was pessimistic about Vu Khoan's prospects. 
 
6. (SBU) Special Rep. Mermoud and Commercial Officer also raised a 
number of pending advocacy issues.  Ly noted that a U.S. firm's 
complaints about the outcome of a flawed tender process needed to 
be raised at a political level in Hanoi since the competing 
bidder's Vietnamese agents were extremely well connected.  Two 
other pending U.S. deals should be moving following some 
unofficial guidance from the two Vietnamese officials. 
 
7. (U) Mermoud attended a dinner with six members of the Young 
Businesspeoples Association.  YBA members discussed how the lack 
of a developed commercial banking system and real estate 
speculation has created a credit crunch for small and medium size 
businesses.  The entrepreneurs also described a lack of 
information about the opportunities awaiting them when Vietnam 
joins the WTO.  Mermoud encouraged the YBA to address these 
concerns with the GVN and to look for strategic partners with 
similar interests, such as AmCham. 
 
8. (U) Mr. Mermoud has cleared this message. 
 
 
WINNICK