US embassy cable - 03HANOI956

UNCLAS SECTION 01 OF 03 HANOI 000956 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EAP/J 
 
E.O. 12958: N/A 
TAGS: PREL, ETRD, EAID, ECON, PGOV, JA, VM 
SUBJECT:  VIETNAM'S PRIME MINISTER VISITS JAPAN: 
--          NO SURPRISES 
 
REF:  A.  02 Hanoi 1124  B.  02 Hanoi 2493 
 
1.  (U)  SUMMARY.  Prime Minister Phan Van Khai's recent 
visit to Japan avoided potentially controversial political 
issues such as Iraq and North Korea, instead focusing on 
economic relations and aid.  There is optimism that a 
bilateral investment agreement may be signed by the "end of 
this year" but many doubt whether it will have much real 
positive impact on attracting new investment.  Vietnam 
pledged to use Japan's Official Development Assistance (ODA) 
more effectively.  Khai's trip was probably aimed at 
reassuring both domestic audiences concerned about the 
economy and foreign audiences wondering about a simultaneous 
visit to Beijing by the Vietnamese Communist Party chief. 
END SUMMARY. 
 
--------------------------- 
IN LINE WITH TRADITION. . . 
--------------------------- 
 
2.  (U)  PM Khai visited Japan April 6 - 12 in the latest of 
several high-level bilateral exchanges.  Communist Party of 
Vietnam (CPV) General Secretary Nong Duc Manh visited last 
October (ref b); Manh had been to Japan in 1995 in his 
previous role as National Assembly chairman.  Then-CPV 
General Secretary Do Muoi and then-Prime Minister Vo Van 
Kiet visited in 1995 and 1993, respectively.  Japanese Prime 
Minister Junichiro Koizumi came to Vietnam in April 2002 
(ref a).  Key officials accompanying Khai on this trip 
included: 
 
--Minister of Planning and Investment Vo Hong Phuc; 
--Minister of Trade Truong Dinh Tuyen; 
--Office of the Government Director Doan Manh Giao; 
--Minister of Industry Hoang Trung Hai; 
--Minister of Post and Telecommunications Do Trung Ta; and, 
--leaders from 12 provinces. 
In addition to the GVN officials, about 60 business people, 
from both state-owned and private enterprises, accompanied 
Khai. 
 
3.  (SBU)  While PM Khai was in Japan, CPV General Secretary 
Manh was visiting the PRC (septel).  Tran Quang Minh, 
Assistant Director of the Japan Studies Center of Vietnam's 
National Center for Social Sciences and Humanities, 
downplayed the nearly simultaneous timing of the visits, 
noting that "this was not the first time" that Vietnam's top 
leadership had been out of the country simultaneously. 
According to Japanese emboffs, PM Khai's visit was arranged 
with relatively little lead time, with the GVN suddenly 
announcing its desired dates.  (Note:  GVN high-level visits 
to the U.S. frequently unfold in a similar manner.  End 
note) 
 
4.  (U)  Khai spent most of his time in Tokyo, but did spend 
part of a day in Fukuoka, where he held meetings with local 
officials and participated in ceremonies marking the opening 
of a new air route to Ho Chi Minh City.  He then spent his 
last day in Osaka, meeting with civic and business leaders, 
before returning to Vietnam.  In addition to meeting with 
his counterpart in Tokyo, Khai held "about 20 separate 
meetings" with Japanese ministers for finance, economy, 
trade, and industry, as well as parliamentarians and 
business leaders, according to press reports.  Matsushita 
and the GVN's Ministry of Planning and Investment signed a 
memorandum of understanding for the company's plans to 
establish home appliance manufacturing facilities in 
Vietnam. 
 
------------------------- 
AVOIDING POLITICAL ISSUES 
------------------------- 
 
5.  (SBU)  According to Japanese emboffs, there were no 
genuinely substantive discussions of political issues, 
especially given that the large meeting in which the two 
prime ministers participated lasted only about fifty 
minutes, including time for interpretation.  Emboffs 
recounted that, prior to the visit, a Ministry of Foreign 
Affairs Deputy Director General responsible for the Middle 
East had sought reassurances that the Japanese side was not 
planning to raise Iraq; he was clearly concerned of the 
possibility that the two sides would openly disagree.  As a 
result, neither side discussed the situation in Iraq or the 
Middle East. 
6. (SBU)  Regarding North Korea, PM Khai reiterated 
Vietnam's policy in favor of a nuclear-free Korean 
Peninsula, while PM Koizumi expressed concern about recent 
developments and called upon all those with good relations 
with Pyongyang to weigh in with the DPRK leadership.  PM 
Khai responded that Vietnam's ability to influence the 
situation in the Korean Peninsula was "very limited," and 
suggested instead that the PRC and Russia had more influence 
with Pyongyang.  At a subsequent press conference, PM Khai 
reiterated publicly Vietnam's view that the United Nations 
should have a central role in Iraq's reconstruction.  He 
also pleaded for more international assistance to help 
Vietnam "overcome the effects of Agent Orange." 
--------- 
TRADE/ODA 
--------- 
7.  (SBU)  Vietnamese media highlighted PM Khai's discussion 
of a long-awaited bilateral investment agreement, which the 
two sides agreed in principle during the visit to complete 
by the end of 2003.  The Japan Studies Center's Minh said 
that "technical" sticking points revolve around finance, 
banking, and insurance.  According to Japanese emboffs, 
however, the GOJ had proposed such an agreement in 1999 but 
were now no longer particularly interested, nor did they 
believe it would make much difference to Japanese investors. 
At this point, Japanese investors are more concerned about 
the larger investment environment, and the need for 
increased "transparency and predictability," they noted. 
They cited in particular recent problems caused by "sudden 
and unexpected" tariff increases imposed on imported 
Japanese motorbike kits (and auto kits), an issue that also 
came up during General Secretary Manh's visit last April. 
Japanese businesses also want to see more open markets, the 
emboffs added.  Separately, Japanese Embassy Econ/C 
confirmed that Japan was seeking "BTA MFN" for Japan 
investors, i.e., service sector market access. 
 
8.  (U)  Also during the visit, the two sides agreed to 
establish a Vietnam - Japan Joint Committee to study the 
investment climate in Vietnam.  The Committee will be co- 
chaired by Vietnam's Minister of Planning and Investment, 
Vietnam's ambassador to Japan, Japan's ambassador to 
Vietnam, and the head of the Japan - Vietnam Committee. 
Japanese emboffs said that the two sides hope that this 
committee will improve the overall economic relationship and 
investment environment in Vietnam.  Separately, the Japan 
Studies Center's Minh opined that the GVN hopes to 
"reassure" the Japanese business community that Vietnam is a 
"reliable investment partner."  Japan is the third-largest 
investor (after Singapore and Taiwan); Japanese emboffs 
expressed puzzlement that PM Khai had claimed publicly 
during his visit that Japan was the leading foreign 
investor.  Japan has 364 projects capitalized at just over 
USD 4.2 billion to date, covering industry, agriculture, 
forestry, post and telecommunications, and hotel services. 
Japan is also Vietnam's largest trading partner, with two- 
way trade valued at almost USD five billion in 2002. 
 
9.  (SBU)  Japan is Vietnam's largest ODA (much or most of 
it in the form of soft loans, rather than grants, however) 
donor and had pledged USD 8.2 billion from 1999 - 2002, 
according to press reports.  For the current fiscal year, 
Japan has pledged about USD 783 million.  Japan represents 
about 40 percent of Vietnam's total ODA.  Despite Japan's 
difficult economic situation, Vietnam was one of the few ODA 
recipients not to suffer funding cuts this year, according 
to Japanese emboffs.  Japanese officials emphasized to PM 
Khai and his delegation that Vietnam needs to use Japan's 
ODA "more effectively."  PM Khai, for his part, thanked 
Japan for its assistance and pledged that Vietnam would use 
its reform process to maximize Japan's assistance. 
 
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NO SARS 
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10.  (SBU)  According to Japanese emboffs, neither side 
discussed the SARS outbreak in Vietnam or the region.  Japan 
has neither attempted to limit Vietnamese tourists or 
workers from coming to Japan, nor issued any travel warnings 
to Japanese citizens coming to Hanoi.  About 220,000 
Japanese tourists visited Vietnam in 2002. 
 
------------ 
WHAT'S NEXT? 
------------ 
 
11.  (SBU)  The next big event on the horizon is the 30th 
anniversary of bilateral relations in September 2003. 
Celebrations are planned in both countries.  However, they 
are likely to be modest, emboffs predicted, since Japan has 
a "limited budget" to fund such events.  While Vietnam is 
hoping for an imperial visit, emboffs predicted that this 
was "unlikely."  The two Prime Ministers will visit each 
other's country to participate in multilateral fora such as 
the Asia-Europe Meeting in Hanoi in 2004 and the ASEAN + 
Japan Commemorative Summit scheduled for December 2003 in 
Japan.  One of Vietnam's deputy prime ministers will likely 
visit Tokyo during the 30th anniversary celebration. 
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COMMENT 
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12.  (SBU)  For such a meaty bilateral relationship, this 
visit was surprisingly weak on substance.  PM Khai's goals 
may have been two-fold:  to demonstrate to folks back home 
the personal efforts he is making to energize one of 
Vietnam's most important economic relationships, and to 
counterbalance in the minds of Japanese and other 
international observers any perceived tilt toward Beijing 
potentially implied by the rival visit of GS Manh to the new 
PRC leadership. 
BURGHARDT