Cablegate: Vietnam: National Trade Estimates Report 2003

This record is a partial extract of the original cable. The full text of the original cable is not available.

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STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

E.O. 12958: N/A
TAGS: ECPS AORC VM FINREF BTA IPROP
SUBJECT: VIETNAM: NATIONAL TRADE ESTIMATES REPORT 2003

REF: (A) STATE 235887

1. THE FOLLOWING IS THE TEXT OF THE DRAFT 2003 NATIONAL
TRADE ESTIMATE REPORT FOR VIETNAM.

2. BEGIN TEXT OF REPORT:
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VIETNAM

TRADE SUMMARY

THE LANDMARK US-VIETNAM BILATERAL TRADE AGREEMENT THAT SEEKS
TO NORMALIZE TRADE RELATIONS BETWEEN THE TWO COUNTRIES CAME
INTO EFFECT ON DECEMBER 10, 2001, AND VIETNAM BEGAN
RECEIVING NTR TREATMENT. AS A RESULT OF THE LOWERING OF
TARIFFS FROM AN AVERAGE OF 40 PERCENT TO AN AVERAGE OF 3
PERCENT, VIETNAMESE EXPORTS TO THE U.S. HAVE INCREASED
RAPIDLY OVER THE LAST YEAR.

IN THE FIRST NINE MONTHS OF 2002, THE US TRADE DEFICIT WITH
VIETNAM WAS USD 1.2 BILLION, AN INCREASE OF USD 796 MILLION
FROM THE US TRADE DEFICIT IN THE FIRST NINE MONTHS OF 2001.
THE EXPORTS OF US GOODS TO VIETNAM WERE $343 MILLION IN THE
FIRST NINE MONTHS OF 2002, AN INCREASE OF $80 MILLION (30
PERCENT) FROM THE LEVEL OF US EXPORTS TO VIETNAM DURING THE
SAME PERIOD IN 2001. VIETNAM WAS THE UNITED STATES' 68TH
LARGEST EXPORT MARKET IN 2002. US IMPORTS FROM VIETNAM WERE
$1.57 BILLION IN THE FIRST NINE MONTHS OF 2002, AN INCREASE
OF $835 MILLION (113 PERCENT) FROM THE LEVEL OF IMPORTS IN
2001.

ACCORDING TO GOVERNMENT OF VIETNAM (GVN) FIGURES, THE STOCK
OF US FOREIGN DIRECT INVESTMENT (FDI) IN VIETNAM THROUGH MAY
2002 AMOUNTED TO APPROXIMATELY USD 500 MILLION. HOWEVER,
THAT FIGURE UNDERESTIMATES THE TRUE AMOUNT, AS SIGNIFICANT
ADDITIONAL US INVESTMENT IS COUNTED AS INVESTMENT FROM THIRD
COUNTRIES IN CASES WHERE THE INVESTMENT INVOLVES A THIRD-
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COUNTRY SUBSIDIARY OF A US COMPANY. US FDI IN VIETNAM IS
CONCENTRATED LARGELY IN THE OIL AND GAS SECTOR.

IMPORT POLICIES

TARIFFS

VIETNAM'S TARIFF SCHEDULE WAS RATIONALIZED IN 1992 AND
SIMPLIFIED IN 1999, FOLLOWING VIETNAM'S ACCESSION TO THE
ASEAN FREE TRADE AREA (AFTA). CURRENTLY, THERE ARE THREE
SETS OF TARIFF RATES: MFN RATES THAT APPLY TO ABOUT 75
PERCENT OF TOTAL IMPORTS, INCLUDING US IMPORTS; COMMON
EFFECTIVE PREFERENTIAL TARIFF (CEPT) RATES THAT APPLY TO
IMPORTS FROM ASEAN COUNTRIES; AND GENERAL TARIFF RATES (50%
HIGHER THAN MFN) THAT APPLY TO ALL OTHER COUNTRIES
(INCLUDING MEXICO, ARGENTINA AND BRAZIL). THE AVERAGE (UN-
WEIGHTED) MFN TARIFF RATE HAS INCREASED IN RECENT YEARS AS
VIETNAM MOVES TO CONVERT QUANTITATIVE RESTRICTIONS TO
TARIFFS; IN 2002 IT STOOD AT 15.7 PERCENT. HOWEVER, THE
NUMBER OF TARIFF LINES AND THE MAXIMUM TARIFF RATE HAVE
DECREASED. UNDER THE TERMS OF THE US-VIETNAM BILATERAL
TRADE AGREEMENT, VIETNAM IS OBLIGATED SIGNIFICANTLY TO
REDUCE TARIFFS BY AN AVERAGE OF ABOUT ONE-THIRD TO ONE-HALF
ON A BROAD RANGE OF US IMPORTS OVER A PERIOD OF THREE YEARS.
THE AVERAGE (UNWEIGHTED) CEPT RATE WAS 10.7% IN 2002 AND IS
EXPECTED TO DECLINE TO THREE PERCENT BY 2006.

BEYOND FORMAL TARIFFS, VIETNAM APPLIES "PRICE DIFFERENTIAL
SURCHARGES" ON SOME PRODUCTS, ALTHOUGH THERE IS NO FIXED
LIST OF GOODS SUBJECT TO THESE SURCHARGES. IN PRINCIPLE,
THESE SURCHARGES ARE APPLIED TO BOTH IMPORT AND EXPORT
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PRODUCTS WHERE THERE EXISTS A MAJOR DIFFERENTIAL BETWEEN THE
DOMESTIC AND WORLD PRICES AS A RESULT OF INTERNATIONAL
FLUCTUATIONS. IMPORT SURCHARGES RANGE FROM FOUR TO 40
PERCENT AND ARE IMPOSED MAINLY ON "SENSITIVE" PRODUCTS SUCH
AS GLASSWARE, CONSTRUCTION GLASS, PAPER, STEEL, CERAMIC
PRODUCTS AND ALCOHOLIC GOODS.

NON-TARIFF BARRIERS

NON-TARIFF BARRIERS WERE INTRODUCED IN VIETNAM WHEN THE
COUNTRY SHIFTED FROM CMEA TO MARKET TRADE IN THE LATE 1980S
AND EARLY 1990S AND QUICKLY BECAME A KEY COMPONENT OF
VIETNAM'S TRADE POLICY. IN THE PAST FEW YEARS, VIETNAM HAS
MADE SIGNIFICANT PROGRESS IN REDUCING THE USE OF NTBS AND,
UNDER THE TERMS OF THE BTA, VIETNAM AGREED TO ELIMINATE ALL
NON-TARIFF BARRIERS, INCLUDING IMPORT AND EXPORT
RESTRICTIONS, QUOTAS, LICENSING REQUIREMENTS, AND CONTROLS
FOR ALL PRODUCT AND SERVICE CATEGORIES OVER A PERIOD OF
THREE TO SEVEN YEARS, DEPENDING ON THE PRODUCT.

IMPORT PROHIBITIONS: VIETNAM CURRENTLY PROHIBITS THE
COMMERCIAL IMPORTATION OF THE FOLLOWING PRODUCTS: ARMS AND
AMMUNITION, EXPLOSIVE MATERIALS (NOT INCLUDING INDUSTRIAL

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STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

EXPLOSIVES), MILITARY TECHNICAL EQUIPMENT AND FACILITIES,
NARCOTICS, TOXIC CHEMICALS, "DEPRAVED AND REACTIONARY"
CULTURAL PRODUCTS, FIRECRACKERS, SOME CHILDREN'S TOYS,
CIGARETTES, SECOND-HAND CONSUMER GOODS, RIGHT-HAND DRIVE
MOTOR VEHICLES, USED MOTOR VEHICLES AND PARTS, USED INTERNAL
COMBUSTION ENGINES OF LESS THAN 30 HORSEPOWER, ASBESTOS
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MATERIALS UNDER THE AMPHIBOLE GROUP, VARIOUS ENCRYPTION
DEVICES, AND ENCRYPTION SOFTWARE.

QUANTITATIVE RESTRICTIONS AND NON-AUTOMATIC LICENSING:
VIETNAM HAS BEEN PHASING OUT THE USE OF QUANTITATIVE
RESTRICTIONS ON IMPORTS. BY JANUARY 2003, ALL QUANTITATIVE
RESTRICTIONS ON IMPORTS WILL BE ABOLISHED WITH THE EXCEPTION
OF SUGAR (TO BE KEPT UNTIL 2005) AND PETROLEUM PRODUCTS.
QUANTITATIVE LIMITATIONS ON EXPORTS IN MOST SECTORS HAVE
BEEN ELIMINATED AS WELL, WITH THE EXCEPTION OF TEXTILES,
GARMENTS, AND A LIST OF SENSITIVE ITEMS.

SPECIAL AUTHORITY REGULATION: PREVIOUSLY, IMPORTERS
REQUIRED APPROVAL FROM THE RELEVANT MINISTRY(IES) TO IMPORT
MANY GOODS. THIS SYSTEM WAS CHANGED IN 2001. NOW, SEVEN
MINISTRIES AND AGENCIES ARE RESPONSIBLE FOR OVERSEEING A
SYSTEM OF MINIMUM QUALITY/PERFORMANCE STANDARDS FOR ANIMAL
AND PLANT PROTECTION, HEALTH SAFETY, LOCAL NETWORK
COMPATIBILITY (IN THE CASE OF TELECOMMUNICATION), MONEY
SECURITY, AND CULTURAL SENSITIVITY. GOODS THAT MEET THE
MINIMUM STANDARDS CAN BE IMPORTED UPON DEMAND AND IN
UNLIMITED QUANTITY AND VALUE.

FOREIGN EXCHANGE SYSTEM: IN 1998, THE STATE BANK OF VIETNAM
(SBV) ISSUED A FOREIGN EXCHANGE SURRENDER REQUIREMENT FOR
ALL EXPORTERS, INCLUDING FOREIGN INVESTED ENTERPRISES
(FIES). A SERIES OF REDUCTIONS DECREASED THIS REQUIREMENT
FROM 80 PERCENT OF FOREIGN EXCHANGE BALANCES TO 30 PERCENT
AS OF MAY 2002. ACCORDING TO VIETNAM'S COMMITMENTS UNDER
ITS MARCH 2001 POVERTY REDUCTION GROWTH FACILITY (PRGF) WITH
THE IMF, THE SURRENDER REQUIREMENT WILL BE ELIMINATED
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COMPLETELY BY THE END OF 2003.

MAY 2000 AMENDMENTS TO THE LAW ON FOREIGN DIRECT INVESTMENT
ALLOWED FDI ENTERPRISES TO PURCHASE FOREIGN CURRENCY AT
AUTHORIZED BANKS TO FINANCE CURRENT AND CAPITAL TRANSACTIONS
AND OTHER PERMITTED TRANSACTIONS. VIETNAM ALSO COMMITTED
UNDER THE IMF PROGRAM TO REMOVE THE REMAINING EXCHANGE
RESTRICTIONS ON CURRENT INTERNATIONAL TRANSFERS AND PAYMENTS
BY THE END OF 2002. CONTROLS ON CURRENT ACCOUNT
TRANSACTIONS HAVE BEEN LIBERALIZED. A 1998 DECREE ALLOWED
BOTH RESIDENTS AND NON-RESIDENTS TO OPEN AND MAINTAIN
FOREIGN EXCHANGE ACCOUNTS WITH AUTHORIZED BANKS IN VIETNAM.
A 2001 CIRCULAR PERMITTED FOREIGN INVESTORS TO TRANSFER
ABROAD PROFITS AND OTHER LEGAL INCOME UPON PRESENTATION OF
RELEVANT DOCUMENTS TO THE AUTHORIZED BANKS.

CUSTOMS: VIETNAM IS PHASING OUT MINIMUM IMPORT PRICES IN
ITS CUSTOMS VALUATION SYSTEM. THE NUMBER OF COMMODITY
GROUPS SUBJECT TO A MINIMUM VALUE WAS REDUCED FROM 34 IN
1997 TO SEVEN IN 2000. THESE INCLUDE: BEVERAGES OF ALL
KINDS; TIRES, RUBBER INNER TUBES AND MUD-RESISTANT FRONTS
USED FOR CARS, MOTORCYCLES AND BICYCLES; FLOOR TILES AND
SANITARY WARES; CONSTRUCTION GLASS AND VACUUM FLASKS;
ENGINES; ELECTRIC FANS; MOTORCYCLES; AND, UNPROCESSED
TOBACCO.

UNDER THE TERMS OF THE BTA, VIETNAM AGREED THAT NO
ADMINISTRATIVE FEE OR CHARGE IMPOSED BY CUSTOMS AUTHORITIES
IN CONNECTION WITH IMPORTING OR EXPORTING ANY GOOD WILL
EXCEED THE ACTUAL COST OF THE SERVICE PROVIDED BY CUSTOMS.
VIETNAM ALSO AGREED BY DECEMBER 2003 TO ADOPT A SYSTEM OF
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CUSTOMS VALUATION OF IMPORTS THAT COMPLIES WITH THE
STANDARDS ESTABLISHED IN THE WTO AGREEMENT ON CUSTOMS
VALUATION.

TRADING RIGHTS: UNDER THE TERMS OF THE BTA, THREE YEARS
AFTER ENTRY-INTO-FORCE OF THE BTA, ENTERPRISES WITH CAPITAL
DIRECTLY INVESTED BY US NATIONALS AND COMPANIES IN
PRODUCTION AND MANUFACTURING WILL BE ABLE TO ENGAGE IN
TRADING ACTIVITIES IN MOST PRODUCTS AND WILL BE ABLE TO
ENTER INTO JOINT VENTURES WITH VIETNAMESE PARTNERS TO ENGAGE
IN TRADING ACTIVITIES IN ALL PRODUCTS, AS LONG AS THE US
PARTNER HOLDS NO MORE THAN A 49 PERCENT SHARE IN THE
VENTURE. SEVEN YEARS AFTER ENTRY-INTO-FORCE OF THE BTA, US
COMPANIES WILL BE ABLE TO ESTABLISH WHOLLY OWNED TRADING
COMPANIES IN VIETNAM. THE RIGHT TO TRADE IN CERTAIN GOODS
IS SUBJECT TO A PHASE IN PERIOD.

STANDARDS, TESTING, LABELING, AND CERTIFICATION

VIETNAMESE LAW REQUIRES ALL IMPORTS TO HAVE A LABEL WITH
CONTENTS AND INSTRUCTION FOR USE IN VIETNAMESE. THE LABELS
CAN BE PLACED ON THE GOODS AFTER THEY HAVE BEEN IMPORTED.

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STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

THE MINISTRY OF SCIENCE AND TECHNOLOGY PUBLISHES A LIST OF
IMPORTS AND EXPORTS REQUIRING STATE QUALITY CONTROL. THE
ITEMS ARE LISTED WITH THEIR HS NUMBERS AND ARE GROUPED UNDER
FUNCTIONAL AGENCIES INCLUDING MINISTRY OF PUBLIC HEALTH,
MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT, MINISTRY OF
INDUSTRY, MINISTRY OF FISHERIES, AND MINISTRY OF SCIENCE AND
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TECHNOLOGY. SOME ITEMS ARE SUBJECT TO NATIONAL STANDARDS;
SOME ARE SUBJECT TO REGULATIONS OF THE FUNCTIONING AGENCIES;
AND SOME ARE SUBJECT TO BOTH. OTHER ITEMS ARE SUBJECT TO
GOCT (STANDARD SYSTEM UNDER THE SOVIET UNION THAT APPLIES
ONLY TO EXPLOSIVES AND EXPLOSIVE ACCESSORIES). EXPORTERS
AND IMPORTERS MUST HAVE PERMITS FROM THE FUNCTIONING
AGENCIES OR A RECEIPT SHOWING AN INSPECTION IS IN PROCESS
FOR THE CONTROLLED ITEMS AT THE TIME THEY GO THROUGH
CUSTOMS.

GOVERNMENT PROCUREMENT

GOVERNMENT PROCUREMENT PRACTICES CAN BE CHARACTERIZED AS A
MULTI-LAYERED DECISION-MAKING PROCESS, WHICH OFTEN LACKS
TRANSPARENCY AND EFFICIENCY. ALTHOUGH THE MINISTRY OF
FINANCE ALLOCATES FUNDS, VARIOUS DEPARTMENTS WITHIN THE
MINISTRY OR AGENCY INVOLVED DETERMINE GOVERNMENT PROCUREMENT
NEEDS. COMPETITION FOR GOVERNMENT PROCUREMENTS MAY TAKE ANY
OF SEVERAL FORMS: SOLE SOURCE DIRECT NEGOTIATION, LIMITED
TENDER, OPEN TENDER, APPOINTED TENDER, OR SPECIAL PURCHASE.
CURRENTLY, MINISTRIES AND AGENCIES HAVE DIFFERENT RULES ON
MINIMUM VALUES FOR THE PURCHASE OF MATERIAL OR EQUIPMENT,
WHICH MUST BE SUBJECT TO COMPETITIVE BIDDING. HIGH VALUE OR
IMPORTANT CONTRACTS SUCH AS INFRASTRUCTURE, (EXCEPT WORLD
BANK, ASIAN DEVELOPMENT BANK, UNDP, OR BILATERAL OFFICIAL
DEVELOPMENT ASSISTANCE PROJECTS) REQUIRE BID EVALUATION AND
SELECTION AND ARE AWARDED BY THE PRIME MINISTER'S OFFICE OR
OTHER COMPETENT BODY. NO CONSOLIDATED OR REGULAR OFFICIAL
LISTING OF GOVERNMENT TENDERS EXISTS; HOWEVER, SOME
SOLICITATIONS ARE ANNOUNCED IN THE BOTH VIETNAMESE AND
ENGLISH LANGUAGE NEWSPAPERS.
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EXPORT SUBSIDIES

EXPORT CREDIT IS VERY LIMITED IN VIETNAM. THE EXPORT
PROMOTION FUND MANAGED BY THE MINISTRY OF FINANCE PROVIDES
SMALL LOANS TO VIETNAM'S EXPORTERS FOR INVESTMENT, BUT NOT
WORKING CAPITAL. THE FUND ALSO PROVIDES VERY SMALL
INCENTIVE AWARDS FOR EXPORTERS IN ALL SECTORS WHO MEET A
CERTAIN LEVEL OF EXPORT VALUE.

INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION

VIETNAM IS A MEMBER OF THE WORLD INTELLECTUAL PROPERTY
ORGANIZATION (WIPO) AND IS A SIGNATORY TO THE PARIS
CONVENTION FOR INDUSTRIAL PROPERTY. IT HAS ACCEDED TO THE
PATENT COOPERATION TREATY AND THE MADRID AGREEMENT. WHILE
NOT YET A PARTY TO THE BERNE CONVENTION, VIETNAM AGREED
UNDER THE 1997 US-VIETNAM BILATERAL COPYRIGHT AGREEMENT TO
PROVIDE US COPYRIGHTS PROTECTION ON A NATIONAL TREATMENT
BASIS IN ACCORDANCE WITH THE TERMS OF THAT CONVENTION.
UNDER THE TERMS OF THE BTA, VIETNAM IS OBLIGATED BY DECEMBER
2003 TO MAKE ITS SYSTEM FOR PROTECTING IPR, INCLUDING
ENFORCEMENT, CONSISTENT WITH THE WTO TRIPS AGREEMENT.
CONSIDERABLE PROGRESS HAS BEEN MADE OVER THE PAST FEW YEARS
IN ESTABLISHING THE LEGAL FRAMEWORK FOR IPR PROTECTION, WITH
NEW REGULATIONS EXPANDING LEGAL PROTECTION TO AREAS
PREVIOUSLY NOT COVERED, SUCH AS BUSINESS SECRETS AND NEW
PLANT VARIETIES. HOWEVER, THAT PROCESS IS NOT YET COMPLETE.
IN ADDITION, ENFORCEMENT OF IP PROTECTION REMAINS EXTREMELY
WEAK. THE BTA REQUIRES THE GOVERNMENT OF VIETNAM TO
PROVIDE EXPEDITIOUS REMEDIES TO PREVENT AND DETER
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INFRINGEMENT OF IP RIGHTS, INCLUDING PARTICULAR JUDICIAL AND
ADMINISTRATIVE PROCEDURES, PROMPT AND EFFECTIVE PROVISIONAL
MEASURES SECURED BY SUFFICIENT EVIDENCE, AND CRIMINAL
PROCEDURES AND PENALTIES FOR WILLFUL TRADEMARK
COUNTERFEITING OR INFRINGEMENT OF COPYRIGHTS OR NEIGHBORING
RIGHTS ON A COMMERCIAL SCALE.

PATENT AND TRADEMARKS

TRADEMARK REGISTRATION IN VIETNAM IS RELATIVELY
STRAIGHTFORWARD, ALTHOUGH INFRINGEMENT IS WIDESPREAD AND
ENFORCEMENT OF ADMINISTRATIVE ORDERS AND COURT DECISIONS
FINDING IPR INFRINGEMENT REMAINS PROBLEMATIC. VIETNAM'S
LAWS OFFER SOME PROTECTION FOR FOREIGN PATENT HOLDERS, BUT
THERE ARE INFRINGEMENTS. THE NATIONAL OFFICE OF INDUSTRIAL
PROPERTY (NOIP) UNDER THE MINISTRY OF SCIENCE AND TECHNOLOGY
(MOST) ADMINISTERS VIETNAM'S PATENT AND TRADEMARK
REGISTRATION SYSTEMS. NOIP HAS MADE SIGNIFICANT PROGRESS IN
RECENT YEARS TO BUILD ITS CAPACITY ADEQUATELY TO RECORD AND
ADJUDICATE PATENT AND TRADEMARK CLAIMS, AND IS WORKING WITH
A NUMBER OF FOREIGN PATENT AND TRADEMARK AGENCIES TO ENHANCE
ITS SYSTEMS. YET OBTAINING EXPEDITIOUS ADJUDICATION AND
ADMINISTRATIVE ENFORCEMENT OF PATENT AND TRADEMARK

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STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

VIOLATIONS REMAINS DIFFICULT.

COPYRIGHT

VIETNAM'S COPYRIGHT OFFICE IS UNDER THE CONTROL AND
SUPERVISION OF THE MINISTRY OF CULTURE AND INFORMATION.
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SIGNIFICANT PROGRESS HAS BEEN MADE IN PUTTING IN PLACE THE
LAWS TO PROTECT COPYRIGHTS, INCLUDING THOSE BELONGING TO
FOREIGNERS, BUT ENFORCEMENT IS ALMOST NON-EXISTENT,
ESPECIALLY FOR CERTAIN CATEGORIES OF PRODUCTS, SUCH AS PC
SOFTWARE, MUSIC AND VIDEO CDS, VCDS, AND DVDS. INDUSTRY
ESTIMATES OF PIRACY RATES FOR SOFTWARE, MUSIC, AND VIDEOS
RUN AS HIGH AS 99 PERCENT. LOCAL POLICE AUTHORITIES OFTEN
ARE SLOW TO ACT ON ADMINISTRATIVE ORDERS FINING INFRINGEMENT
AND COURT DECISIONS.

SERVICES BARRIERS

UNDER THE TERMS OF THE BTA, VIETNAM AGREED FOR THE FIRST
TIME TO LIBERALIZE A BROAD ARRAY OF SERVICES SECTORS,
INCLUDING TELECOMMUNICATIONS, ACCOUNTING, BANKING, AND
DISTRIBUTION SERVICES, AND TO APPLY MFN TREATMENT TO US
SERVICES SUPPLIERS IN ALL SECTORS AND FOR ALL MODES OF
SUPPLY (WITH ITEMIZED EXCEPTIONS). THE BTA ALSO
INCORPORATED THE WTO AGREEMENTS ON TRADE IN SERVICES (GATS)
(EXCEPT PARAGRAPHS 3 AND 4), ANNEX ON MOVEMENT OF NATURAL
PERSONS, ANNEX ON TELECOMMUNICATIONS (EXCEPT PARAGRAPHS 6
AND 7), AND THE TELECOMMUNICATIONS REFERENCE PAPER.
VIETNAM'S COMMITMENTS TO LIBERALIZE MARKET ACCESS ON
SERVICES ARE PHASED IN OVER SPECIFIED TIME PERIODS DEPENDING
ON THE SECTOR. THE COMMITMENTS BY SECTOR ARE AS FOLLOWS:

ACCOUNTING, AUDITING, AND BOOK-KEEPING SERVICES: FOR THE
FIRST THREE YEARS UNDER THE BTA, LICENSES WILL BE GRANTED ON
A CASE-BY-CASE BASIS. THE COMPANY MUST EMPLOY AT LEAST FIVE
PERSONS WITH VIETNAMESE CPAS WHO HAVE PRACTICED IN VIETNAM
FOR MORE THAN ONE YEAR. FOR THE FIRST TWO YEARS UNDER THE
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BTA, FIRMS WITH US EQUITY WILL ONLY BE ALLOWED TO SUPPLY
SERVICES TO FOREIGN-INVESTED ENTERPRISES AND FOREIGN FUNDED
PROJECTS IN VIETNAM. BRANCHING IS NOT PERMITTED.

TAXATION SERVICES: FOR THE FIRST FIVE YEARS UNDER THE BTA,
LICENSES WILL BE GRANTED ON A CASE-BY-CASE BASIS AND FIRMS
WITH US EQUITY WILL ONLY BE ALLOWED TO SUPPLY SERVICES TO
FOREIGN-INVESTED ENTERPRISES AND FOREIGN FUNDED PROJECTS IN
VIETNAM. BRANCHING IS NOT PERMITTED.

ARCHITECTURAL, ENGINEERING, AND COMPUTER SERVICES: FOR A
PERIOD OF TWO YEARS FROM THE DATE OF ESTABLISHMENT AND
OPERATION, US-OWNED COMPANIES MAY ONLY PROVIDE SERVICES TO
ENTERPRISES WITH FOREIGN DIRECTLY-INVESTED CAPITAL IN
VIETNAM. US COMPANIES HAVE TO BE LEGALLY REGISTERED IN THE
U.S. BRANCHING IS NOT PERMITTED.

US COMPANIES AND COMPANIES WITH US DIRECTLY-INVESTED CAPITAL
ARE NOT PERMITTED TO CARRY OUT TOPOGRAPHIC, CONSTRUCTION
GEOLOGICAL, METROLOGICAL, GEOLOGICAL, AND ENVIRONMENTAL
INVESTIGATIONS; OR TECHNICAL INVESTIGATIONS FOR DESIGNING
RURAL-URBAN CONSTRUCTION PLANS, UNLESS OTHERWISE AUTHORIZED
BY THE GVN.

LEGAL SERVICES: UNDER THE TERMS OF THE BTA, 100 PERCENT
EQUITY OWNERSHIP IN COMPANIES, JOINT VENTURES, AND BRANCHES
ARE PERMITTED. US LAWYERS MAY NOT APPEAR BEFORE VIETNAMESE
COURTS. HOWEVER, US FIRMS MAY ADVISE ON VIETNAMESE LAW IF
THEY HIRE PERSONS WITH VIETNAMESE LAW DEGREES WHO SATISFY
THE REQUIREMENTS APPLIED TO LIKE VIETNAMESE PRACTITIONERS.
BRANCHES OF LAW FIRMS MAY RECEIVE A 5-YEAR RENEWABLE
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LICENSE.

ADVERTISING SERVICES AND MARKET RESEARCH: VIETNAM HAS NOT
AGREED TO PROVIDE MARKET ACCESS FO ADVERTISING SERVICES FOR
WINES AND CIGARETTES OR FOR THE CROSS-BORDER SUPPLY OF
MARKET RESEARCH SRVICES. US COMPANIES IN THESE SECTORS MAY
ONLY STABLISH A COMMERCIAL PRESENCE THROUGH JOINT VENTUES
OR BUSINESS COOPERATION CONTRACTS WITH VIETNAESE PARTNERS.
US INVESTMENT IS LIMITED TO 49 PERCENT OF THE LEGAL CAPITAL
FOR THE FIRST FIVE YEARS UNDER THE BILATERAL TRADE
AGREEMENT, 51 PERCENT FOR YEARS SIX AND SEVEN, AND IS
UNLIMITED AFTER THAT. VIETNAM HAS NOT AGREED TO ENSURE
NATIONAL TREATMENT FOR THE CROSS-BORDER SUPPLY OF MARKET
RESEARCH SERVICES.

MANAGEMENT CONSULTING: US COMPANIES MAY ONLY ESTABLISH A
COMMERCIAL PRESENCE THROUGH JOINT VENTURES OR BUSINESS
COOPERATION CONTRACTS. AFTER THE BILATERAL TRADE AGREEMENT
HAS BEEN IN EFFECT FOR 5 YEARS, ENTERPRISES WITH 100 PERCENT
US OWNERSHIP WILL BE PERMITTED.

TELECOMMUNICATION SERVICES: INITIALLY, THE PROVISION OF
BASIC TELECOMMUNICATIONS SERVICES, VALUE-ADDED TELECOM

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UNCLAS SECTION 05 OF 08 HANOI 003098

SIPDIS

STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

SERVICES, AND VOICE TELEPHONE SERVICES ARE ONLY PERMITTED
THROUGH BUSINESS CONTRACTS WITH VIETNAMESE GATEWAY
OPERATORS. TWO YEARS AFTER ENTRY-INTO-FORCE OF THE BTA
(THREE YEARS IN THE CASE OF INTERNET SERVICES), US VALUE-
ADDED TELECOM SERVICE PROVIDERS MAY ESTABLISH JOINT VENTURES
WITH VIETNAMESE PARTNERS WITH UP TO 50 PERCENT EQUITY
UNCLASSIFIED

PAGE 02 HANOI 03098 05 OF 08 301022Z
OWNERSHIP. THESE JOINT VENTURES MAY NOT, HOWEVER, CONSTRUCT
THEIR OWN LONG-DISTANCE AND INTERNATIONAL CIRCUITS. FOUR
YEARS AFTER ENTRY-INTO-FORCE OF THE BTA, US BASIC TELECOM
SERVICE SUPPLIERS CAN ESTABLISH JOINT VENTURES WITH
VIETNAMESE PARTNERS WITH UP TO 49 PERCENT US EQUITY
OWNERSHIP. THESE JOINT VENTURES MAY NOT, HOWEVER, CONSTRUCT
THEIR OWN LONG-DISTANCE AND INTERNATIONAL CIRCUITS. SIX
YEARS AFTER ENTRY-INTO-FORCE OF THE AGREEMENT, US VOICE
TELEPHONE SERVICE PROVIDERS MAY ESTABLISH JOINT VENTURES
WITH VIETNAMESE PARTNERS WITH UP TO 49 PERCENT US EQUITY
OWNERSHIP.

AUDIO VISUAL SERVICES: VIETNAM HAS NOT AGREED TO PROVIDE
MARKET ACCESS OR NATIONAL TREATMENT FOR CROSS-BORDER SUPPLY
OR CONSUMPTION ABROAD OF AUDIO VISUAL SERVICES. US SERVICE
SUPPLIERS MAY ESTABLISH A COMMERCIAL PRESENCE ONLY THROUGH A
BUSINESS COOPERATION CONTRACT OR JOINT VENTURE WITH A
VIETNAMESE PARTNER. FOR THE FIRST FIVE YEARS AFTER ENTRY-
INTO-FORCE OF THE AGREEMENT, US OWNERSHIP MAY NOT EXCEED 49
PERCENT. AFTER FIVE YEARS, US OWNERSHIP MAY NOT EXCEED 51
PERCENT.

CONSTRUCTION AND RELATED ENGINEERING SERVICES: VIETNAM HAS
NOT AGREED TO PROVIDE MARKET ACCESS OR NATIONAL TREATMENT
FOR THE CROSS-BORDER SUPPLY OF CONSTRUCTION AND RELATED
ENGINEERING SERVICES. BRANCHES ARE NOT PERMITTED. FOR THE
FIRST THREE YEARS AFTER THEIR ESTABLISHMENT AND OPERATION,
100 PERCENT US-OWNED ENTERPRISES MAY ONLY PROVIDE SERVICES
TO ENTERPRISES WITH FOREIGN DIRECTLY-INVESTED CAPITAL IN
VIETNAM. US COMPANIES MUST BE LEGALLY REGISTERED FOR
OPERATION IN THE U.S.
UNCLASSIFIED

PAGE 03 HANOI 03098 05 OF 08 301022Z

DISTRIBUTION SERVICES: VIETNAM DOES NOT PROVIDE MARKET
ACCESS OR NATIONAL TREATMENT FOR THE CROSS-BORDER SUPPLY OF
DISTRIBUTION SERVICES. THREE YEARS AFTER ENTRY-INTO-FORCE
OF THE BILATERAL TRADE AGREEMENT, US SERVICE PROVIDERS MAY
ESTABLISH JOINT VENTURES WITH VIETNAMESE PARTNERS WITH UP TO
49 PERCENT US EQUITY. AFTER SIX YEARS, US OWNERSHIP IN
JOINT VENTURES WILL BE UNLIMITED. AFTER SEVEN YEARS,
COMPANIES WITH 100 PERCENT EQUITY WILL BE ALLOWED. ONE
RETAIL OUTLET MAY BE ESTABLISHED AS OF RIGHT, WHILE
ADDITIONAL OUTLETS WILL BE CONSIDERED ON A CASE-BY-CASE
BASIS. FOR SOME AGRICULTURAL AND INDUSTRIAL PRODUCTS,
MARKET ACCESS IN THIS SECTOR IS SUBJECT TO ADDITIONAL
LIMITATIONS, WHICH WILL BE PHASED OUT OVER A PERIOD OF THREE
TO FIVE YEARS. THERE ARE A LIMITED NUMBER OF PRODUCTS FOR
WHICH VIETNAM DID NOT COMMIT TO ALLOW DISTRIBUTION SERVICES.

EDUCATIONAL SERVICES: VIETNAM WILL NOT PROVIDE MARKET
ACCESS OR NATIONAL TREATMENT FOR THE CROSS-BORDER SUPPLY OF
EDUCATIONAL SERVICES. FOR THE FIRST SEVEN YEARS AFTER ENTRY-
INTO-FORCE OF THE BTA, US COMPANIES MAY ONLY ESTABLISH A
COMMERCIAL PRESENCE THROUGH A JOINT VENTURE. AFTER THAT,
SCHOOLS WITH 100 PERCENT US-INVESTED CAPITAL MAY BE
ESTABLISHED. FOREIGN TEACHERS EMPLOYED BY EDUCATIONAL UNITS
WITH US-INVESTED CAPITAL MUST HAVE FIVE YEARS TEACHING
EXPERIENCE AND BE RECOGNIZED BY THE MINISTRY OF EDUCATION.

INSURANCE SERVICES: VIETNAM HAS AGREED TO ALLOW MARKET
ACCESS FOR THE CROSS-BORDER SUPPLY OF INSURANCE SERVICES TO
ENTERPRISES WITH FOREIGN INVESTED CAPITAL OR FOREIGNERS
WORKING IN VIETNAM; REINVESTMENT SERVICES; INSURANCE
UNCLASSIFIED

PAGE 04 HANOI 03098 05 OF 08 301022Z
SERVICES IN INTERNATIONAL TRANSPORTATION; INSURANCE
BROKERING AND REINSURANCE BROKERING SERVICES; AND ADVISORY,
CLAIM SETTLEMENT, AND RISK ASSESSMENT SERVICES. THREE YEARS
AFTER ENTRY-INTO-FORCE OF THE BTA, US COMPANIES CAN
ESTABLISH JOINT VENTURES WITH VIETNAMESE PARTNERS WITH UP TO
50 PERCENT US EQUITY PARTICIPATION. AFTER FIVE YEARS, 100
PERCENT US-INVESTED COMPANIES MAY BE ESTABLISHED.

COMPANIES WITH US-INVESTED CAPITAL CANNOT PROVIDE MOTOR
VEHICLE THIRD PARTY LIABILITY, INSURANCE IN CONSTRUCTION AND
INSTALLATION, INSURANCE FOR OIL AND GAS PROJECTS, OR
INSURANCE FOR PROJECTS AND CONSTRUCTION OF HIGH DANGER TO
PUBLIC SECURITY AND ENVIRONMENT. THREE YEARS AFTER ENTRY-
INTO-FORCE OF THE BTA, THIS LIMITATION IS ELIMINATED FOR
JOINT VENTURES. AFTER SIX YEARS, THIS LIMITATION IS
ELIMINATED FOR COMPANIES WITH 100 PERCENT US CAPITAL.

FOR THE FIRST 5 YEARS AFTER ENTRY-INTO-FORCE OF THE BTA, ANY
COMPANY WITH US CAPITAL MUST REINSURE THROUGH THE
REINSURANCE COMPANY OF VIETNAM, WITH THE MINIMUM PROPORTION
OF 20 PERCENT.

BANKING: VIETNAM HAS NOT AGREED TO PROVIDE MARKET ACCESS OR

UNCLASSIFIED

UNCLASSIFIED PTQ3679

PAGE 01 HANOI 03098 06 OF 08 301023Z
ACTION CIP-00

INFO LOG-00 AGRE-00 AID-00 AMAD-00 CIAE-00 COME-00 SRPP-00
EAP-00 EB-00 E-00 UTED-00 FCC-01 TEDE-00 INR-00
IO-00 LAB-01 L-00 MOFM-05 MOF-01 NSAE-00 OES-00
OIC-02 SSO-00 SS-00 STR-00 TEST-00 TRSE-00 USIE-00
DRL-02 G-00 SAS-00 /012W
------------------1E011C 301023Z /38
O 300934Z DEC 02
FM AMEMBASSY HANOI
TO SECSTATE WASHDC IMMEDIATE 8494
INFO AMCONSUL HO CHI MINH CITY
ASEAN COLLECTIVE

UNCLAS SECTION 06 OF 08 HANOI 003098

SIPDIS

STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

NATIONAL TREATMENT FOR THE CROSS-BORDER PROVISION OF BANKING
SERVICES, EXCEPT FOR FINANCIAL INFORMATION SERVICES AND
ADVISORY, INTERMEDIATION, AND OTHER AUXILIARY SERVICES. US
BANKS MAY ESTABLISH BRANCHES, JOINT VENTURES WITH VIETNAMESE
BANKS, WHOLLY OWNED US FINANCIAL LEASING COMPANIES OR JOINT
VENTURE FINANCIAL LEASING COMPANIES WITH VIETNAMESE
UNCLASSIFIED

PAGE 02 HANOI 03098 06 OF 08 301023Z
PARTNERS.

FOR THE FIRST THREE YEARS AFTER ENTRY-INTO-FORCE OF THE BTA,
THE ONLY LEGAL FORM APART FROM BANKS AND LEASING COMPANIES
IN WHICH US COMPANIES MAY PROVIDE FINANCIAL SERVICES IS
THROUGH JOINT VENTURES WITH VIETNAMESE BANKS. DURING THE
FIRST NINE YEARS, US EQUITY IN JOINT VENTURE BANKS MUST BE
BETWEEN 30 AND 49 PERCENT. AFTER NINE YEARS, 100 PERCENT
EQUITY PARTICIPATION IN SUBSIDIARY BANKS WILL BE ALLOWED.

THE RIGHT OF US BANKS TO ACCEPT VIETNAMESE DONG DEPOSITS ON
THE SAME BASIS AS DOMESTIC BANKS WILL BE PHASED IN OVER
EIGHT YEARS FOR BUSINESS CLIENTELE AND TEN YEARS FOR RETAIL
DEPOSITORS. AFTER THIS, US BANK BRANCHES WILL BE ENTITLED
TO FULL NATIONAL TREATMENT. IN ADDITION, FINANCIAL
INSTITUTIONS WITH US EQUITY CANNOT ISSUE CREDIT CARDS ON A
NATIONAL TREATMENT BASIS UNTIL EIGHT YEARS AFTER ENTRY-INTO-
FORCE OF THE BTA.

VIETNAM RESERVED THE RIGHT TO LIMIT, ON A NATIONAL TREATMENT
BASIS, EQUITY INVESTMENT BY US BANKS IN PRIVATIZED
VIETNAMESE STATE-OWNED BANKS.

US BANK BRANCHES, SUBSIDIARIES, OR US-VIETNAM JOINT VENTURES
MUST OBTAIN A LICENSE TO ESTABLISH A COMMERCIAL PRESENCE IN
VIETNAM. A US PARENT BANK MUST PROVIDE MINIMUM CAPITAL OF
USD 15 MILLION TO ESTABLISH A BRANCH. ESTABLISHING A US-
VIETNAM JOINT VENTURE BANK OR A US BANK SUBSIDIARY REQUIRES
MINIMUM CAPITAL OF USD 10 MILLION.

FOR THE FIRST THREE YEARS AFTER THE ENTRY-INTO-FORCE OF THE
UNCLASSIFIED

PAGE 03 HANOI 03098 06 OF 08 301023Z
AGREEMENT, FINANCIAL INSTITUTIONS WITH 100 PERCENT US EQUITY
OWNERSHIP MAY NOT TAKE AN INITIAL MORTGAGE INTEREST IN LAND
USE RIGHTS. AFTER THREE YEARS, THESE INSTITUTIONS WILL BE
ALLOWED TO TAKE AN INITIAL MORTGAGE INTEREST IN LAND-USE
RIGHTS HELD BY FOREIGN-INVESTED ENTERPRISES, AND MAY USE
MORTGAGES OR LAND-USE RIGHTS FOR THE PURPOSE OF LIQUIDATION
IN CASE OF DEFAULT.

ESTABLISHING A WHOLLY-OWNED SUBSIDIARY OF A US FINANCIAL
LEASING COMPANY OR A JOINT VENTURE LEASING COMPANY REQUIRES
THREE CONSECUTIVE PROFITABLE YEARS, AND USD 5 MILLION IN
LEGAL CAPITAL.

FOR THE FIRST THREE YEARS UNDER THE BTA, VIETNAM IS NOT
OBLIGATED TO PROVIDE NATIONAL TREATMENT WITH RESPECT TO
ACCESS TO CENTRAL BANK REDISCOUNTING, SWAP, AND FORWARD
FACILITIES.

NON-BANKING FINANCIAL SERVICES: THE BTA ALLOWS 100 PERCENT
US EQUITY IN FINANCIAL LEASING AND IN OTHER LEASING AFTER 3
YEARS.

SECURITIES-RELATED SERVICES: VIETNAM HAS NOT AGREED TO
PROVIDE MARKET ACCESS OR NATIONAL TREATMENT FOR THE CROSS-
BORDER SUPPLY OF SECURITIES-RELATED SERVICES. NON-BANK US
SECURITIES SERVICE SUPPLIERS MAY ONLY ESTABLISH A COMMERCIAL
PRESENCE IN VIETNAM IN THE FORM OF A REPRESENTATIVE OFFICE.

HEALTH-RELATED SERVICES: US OPERATORS MAY PROVIDE SERVICE
THROUGH THE ESTABLISHMENT OF 100 PERCENT US-OWNED
OPERATIONS, JOINT VENTURES WITH VIETNAMESE PARTNERS OR
UNCLASSIFIED

PAGE 04 HANOI 03098 06 OF 08 301023Z
THROUGH BUSINESS COOPERATION CONTRACTS. THE MINIMUM
INVESTMENT CAPITAL IS USD 20 MILLION FOR A HOSPITAL, USD 2
MILLION FOR A POLYCLINIC, AND USD 1 MILLION FOR A SPECIALTY
UNIT.

TOURISM AND TRAVEL-RELATED SERVICES: US COMPANIES MAY
ESTABLISH A COMMERCIAL PRESENCE TO PROVIDE HOTEL AND
RESTAURANT SERVICES, IN CONJUNCTION WITH INVESTMENT FOR THE
CONSTRUCTION OF A HOTEL, EITHER IN THE FORM OF BUSINESS
COOPERATION CONTRACTS, JOINT VENTURES WITH VIETNAMESE
PARTNERS, OR COMPANIES WITH 100 PERCENT US EQUITY
INVESTMENT.

THER ARE LIMITATIONS WITH RESPECT TO TRAVEL AGENCIES AND
TOUR OPERATORS. US COMPANIES SUPPLYING THESE SERVICES MAY
ESTABLISH ACOMMERCIAL PRESENCE ONLY THROUGH A JOINT VENTURE
WITH VIETNAMESE PARTNERS AND CAN INITIALLY ONLY COTRIBUTE
49 PERCENT OF THE CAPITAL. THREE YEARS FTER ENTRY-INTO
FORCE O THE BTA, 51 PERCENT PARTICIPATION WILL BE ALLOWED
AND ALL LIMITATIONS WILL BE ABOLISHED AFTER FIV YEARS.
TOURIST GUIDES IN JOINT VENTURES MUST BE IETNAMESE
CITIZENS. SERVICE SUPPLYING COMPANIESWITH US-INVESTED
CAPITAL MAY ONLY SUPPLY INBOUNDSERVICE.

UNCLASSIFIED

UNCLASSIFIED PTQ3683

PAGE 01 HANOI 03098 07 OF 08 301023Z
ACTION CIP-00

INFO LOG-00 AGRE-00 AID-00 AMAD-00 CIAE-00 COME-00 SRPP-00
EAP-00 EB-00 E-00 UTED-00 FCC-01 TEDE-00 INR-00
IO-00 LAB-01 L-00 MOFM-05 MOF-01 NSAE-00 OES-00
OIC-02 SSO-00 SS-00 STR-00 TEST-00 TRSE-00 USIE-00
DRL-02 G-00 SAS-00 /012W
------------------1E012A 301023Z /38
O 300934Z DEC 02
FM AMEMBASSY HANOI
TO SECSTATE WASHDC IMMEDIATE 8495
INFO AMCONSUL HO CHI MINH CITY
ASEAN COLLECTIVE

UNCLAS SECTION 07 OF 08 HANOI 003098

SIPDIS

STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

INVESTMENT BARRIERS

AT PRESENT THE GOVERNMENT OF VIETNAM MAINTAINS AN EXTENSIVE
INVESTMENT LICENSING PROCESS, WHICH IS CHARACTERIZED BY
STRINGENT AND TIME CONSUMING REQUIREMENTS THAT ARE
UNCLASSIFIED

PAGE 02 HANOI 03098 07 OF 08 301023Z
FREQUENTLY USED TO PROTECT DOMESTIC INTERESTS, LIMIT
COMPETITION, AND ALLOCATE FOREIGN INVESTMENT RIGHTS AMONG
VARIOUS COUNTRIES. FOREIGN BUSINESSES ARE PERMITTED TO
REMIT PROFITS, SHARED REVENUES FROM JOINT VENTURES, INCOMES
FROM SERVICES AND TECHNOLOGY TRANSFERS, LEGALLY-OWNED
CAPITAL, AND PROPERTIES IN HARD CURRENCY. FOREIGNERS ARE
ALSO ALLOWED TO REMIT ABROAD ROYALTIES AND FEES PAID FOR THE
SUPPLY OF TECHNOLOGIES AND SERVICES, PRINCIPAL AND INTEREST
ON LOANS OBTAINED FOR BUSINESS OPERATIONS, AND INVESTMENT
CAPITAL AND OTHER MONEY AND ASSETS UNDER THEIR LEGITIMATE
OWNERSHIP. HOWEVER, THEIR ABILITY TO CONVERT DONG INTO HARD
CURRENCY IS SUBJECT TO AVAILABILITY, CAUSING FOREIGN-
INVESTED ENTERPRISES TO EXPERIENCE PROBLEMS IN SECURING HARD
CURRENCY.

THE US-VIETNAM BILATERAL TRADE AGREEMENT PROVIDES A BROAD
RANGE OF BENEFITS TO US INVESTORS IN VIETNAM THAT SHOULD
SIGNIFICANTLY ENHANCE THE INVESTMENT ENVIRONMENT FOR US
FIRMS. VIETNAMESE INVESTMENT OBLIGATIONS UNDER THE BTA
INCLUDE: PROVIDING NATIONAL AND MOST-FAVORED-NATION
TREATMENT, EXCEPT WHERE EXPLICIT EXCEPTIONS HAVE BEEN MADE;
GUARANTEEING ACCESS TO THIRD-PARTY INVESTOR-STATE DISPUTE
SETTLEMENT; AND ENSURING TREATMENT OF EXPROPRIATION
CONSISTENT WITH INTERNATIONAL STANDARDS. IN ADDITION,
VIETNAM IS OBLIGATED GRADUALLY TO DISCONTINUE APPLICATION OF
ANY TRIMS OR PERFORMANCE REQUIREMENTS INCONSISTENT WITH THE
WTO TRIMS AGREEMENT. VIETNAM CURRENTLY DOES IMPOSE A NUMBER
OF PERFORMANCE REQUIREMENTS WITH RESPECT TO THE
ESTABLISHMENT OF AN INVESTMENT AND/OR THE RECEIPT OF A
BENEFIT OR INCENTIVE. THE BTA OBLIGATES VIETNAM TO PHASE
OUT SEVERAL TRIMS-INCONSISTENT LOCAL CONTENT REQUIREMENTS
UNCLASSIFIED

PAGE 03 HANOI 03098 07 OF 08 301023Z
WITHIN FIVE YEARS OR LESS OF THE BTA'S ENTRY-INTO-FORCE.
VIETNAM IS ALSO OBLIGATED TO REFRAIN FROM IMPOSING
REQUIREMENTS TO TRANSFER TECHNOLOGY AS A CONDITION FOR THE
ESTABLISHMENT, EXPANSION, ACQUISITION, MANAGEMENT, CONDUCT,
OR OPERATION OF AN INVESTMENT.

ANTICOMPETITIVE PRACTICES

VIETNAM MAINTAINS A POLICY OF BIAS IN FAVOR OF DOMESTIC-
MARKET ORIENTED INDUSTRIES, PARTICULARLY THOSE DOMINATED BY
STATE-OWNED ENTERPRISES. ALTHOUGH LEGALLY ALL REGISTERED
FIRMS, REGARDLESS OF OWNERSHIP, CAN ENGAGE IN FOREIGN TRADE,
BARRIERS EXIST THAT DISCOURAGE TRADING BY NON-STATE
ENTERPRISES. FOR EXAMPLE, STRINGENT REGULATORY REQUIREMENTS
DEMANDED BY MINISTRIES PREVENT PRIVATE FIRMS FROM EXPORTING
RICE OR IMPORTING FERTILIZER. ALSO, MONOPOLIES IN
PRODUCTION RESULT IN MONOPOLIES IN TRADING, AS IN THE CASE
OF COAL. THE TARIFF STRUCTURE ALSO FAVORS DOMESTIC
INDUSTRIES, PARTICULARLY THOSE DOMINATED BY STATE-OWNED
ENTERPRISES. MOST LOWER TARIFFS ARE ON ITEMS PREDOMINANTLY
USED BY THOSE ENTERPRISES AS INPUTS.

ELECTRONIC COMMERCE

TO DATE, E-COMMERCE HAS NOT MADE MUCH PROGRESS IN VIETNAM.
OBSTACLES TO ITS DEVELOPMENT INCLUDE: THE LOW NUMBER OF
INTERNET SUBSCRIBERS IN-COUNTRY, OBTRUSIVE FIREWALLS,
LIMITED BANDWIDTH AND OTHER PROBLEMS WITH THE INTERNET
INFRASTRUCTURE, LIMITATIONS OF THE FINANCIAL SYSTEM
(INCLUDING THE LOW NUMBER OF CREDIT CARDS IN USE), AND
REGULATORY BARRIERS. HOWEVER, RECENT DEVELOPMENTS TO
UNCLASSIFIED

PAGE 04 HANOI 03098 07 OF 08 301023Z
FACILITATE THE GROWTH OF E-COMMERCE IN VIETNAM INCLUDE LEGAL
ACCEPTANCE OF E-SIGNATURES AND IMPLEMENTATION OF THE
ELECTRONIC INTER-BANK TRANSACTION SYSTEM. THE NUMBER OF
ONLINE TRANSACTIONS HAS BEEN INCREASING.

THE GOVERNMENT OF VIETNAM CONTINUES TO ATTEMPT TO KEEP CLOSE
CONTROL ON ALL WEBSITES ESTABLISHED IN VIETNAM. IN OCTOBER
2002, THE GVN PASSED A NEW REGULATION ON THE ESTABLISHMENT
AND MODIFICATION OF WEBSITES. THE REGULATION REQUIRES
DOMESTIC AND FOREIGN AGENCIES, ORGANIZATIONS, AND
ENTERPRISES TO OBTAIN A LICENSE FROM THE MINISTRY OF CULTURE
AND INFORMATION BEFORE ESTABLISHING NEW WEBSITES. THE
MINISTRY THEN HAS 30 DAYS TO MAKE A DECISION ON GRANTING THE
LICENSE. THE REGULATION ALSO REQUIRES DIPLOMATIC AND OTHER
FOREIGN ENTITIES TO OBTAIN WRITTEN APPROVAL FROM THE
MINISTRY OF FOREIGN AFFAIRS (MFA) BEFORE REQUESTING A
LICENSE FROM MOCI. THE GVN MAY ALSO REQUIRE ORGANIZATIONS
TO REQUEST PERMISSION FROM MOCI BEFORE MAKING CHANGES TO THE
CONTENT OF THEIR EXISTING WEBSITES BASED ON LICENSING
REQUIREMENTS IN THE REGULATION.

OTHER BARRIERS

UNCLASSIFIED

UNCLASSIFIED PTQ3684

PAGE 01 HANOI 03098 08 OF 08 301023Z
ACTION CIP-00

INFO LOG-00 AGRE-00 AID-00 AMAD-00 CIAE-00 COME-00 SRPP-00
EAP-00 EB-00 E-00 UTED-00 FCC-01 TEDE-00 INR-00
IO-00 LAB-01 L-00 MOFM-05 MOF-01 NSAE-00 OES-00
OIC-02 SSO-00 SS-00 STR-00 TEST-00 TRSE-00 USIE-00
DRL-02 G-00 SAS-00 /012W
------------------1E0132 301023Z /38
O 300934Z DEC 02
FM AMEMBASSY HANOI
TO SECSTATE WASHDC IMMEDIATE 8496
INFO AMCONSUL HO CHI MINH CITY
ASEAN COLLECTIVE

UNCLAS SECTION 08 OF 08 HANOI 003098

SIPDIS

STATE PASS USTR/GLORIA BLUE
STATE FOR EB/MTA/MST

CORRUPTION

US, OTHER FOREIGN, AND DOMESTIC FIRMS HAVE IDENTIFIED
CORRUPTION IN VIETNAM IN ALL PHASES OF BUSINESS OPERATIONS
AS AN OBSTACLE TO THEIR BUSINESS ACTIVITIES. VIETNAM SCORED
A 2.6 OUT OF A POSSIBLE HIGH SCORE OF 10 POINTS ON
UNCLASSIFIED

PAGE 02 HANOI 03098 08 OF 08 301023Z
TRANSPARENCY INTERNATIONAL'S CORRUPTION PERCEPTION INDEX.
IN LARGE PART DUE TO A LACK OF TRANSPARENCY, ACCOUNTABILITY,
AND MEDIA FREEDOM, WIDESPREAD OFFICIAL CORRUPTION AND
INEFFICIENT BUREAUCRACY REMAIN SERIOUS PROBLEMS THAT EVEN
THE COMMUNIST PARTY OF VIETNAM AND THE GVN ADMIT THEY MUST
ADDRES SQUARELY AND SOON. COMPETITION AMONG GOVERNMENT
AGENCIES FOR CONTROL OVER BUSINESS AND INVESTMENTS HAS
CREATED A CONFUSION OF OVERLAPPING JURISDICTIONS AND
BUREAUCRATIC PROCEDURES AND APPROVALS, WHICH IN TURN CREATE
OPPORTUNITIES FOR CORRUPTION. LOW PAY FOR GOVERNMENT
OFFICIALS AND WOEFULLY INADEQUATE SYSTEMS FOR HOLDING
OFFICIALS ACCOUNTABLE FOR THEIR ACTIONS COMPOUND THE
PROBLEMS. IMPLEMENTATION OF THE GVN'S PUBLIC ADMINISTRATION
REFORM PROGRAM, DEVELOPED IN WITH THE ASSISTANCE OF THE
WORLD BANK, AS WELL AS VIETNAM'S OBLIGATIONS UNDER THE
TRANSPARENCY PROVISIONS OF THE BTA PROMISE SOME IMPROVEMENT
IN THE SITUATION IN THE MEDIUM TO LONG TERM, BUT IT APPEARS
UNLIKELY THERE WILL BE MUCH IMPROVEMENT IN THE NEAR TERM.
BURGHARDT

UNCLASSIFIED

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