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Cablegate: Building Ties and Urging Reform in Vietnam's Ict Sector

VZCZCXRO6350
RR RUEHHM
DE RUEHHI #1749/01 2771619
ZNR UUUUU ZZH
R 041619Z OCT 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6463
INFO RUEHHM/AMCONSUL HO CHI MINH 3772
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 HANOI 001749

SIPDIS

STATE FOR EAP/MLS AND EB/CIP
STATE PASS TO USTR JONATHAN MCHALE AND DAVID BISBEE
COMMERCE FOR CORA DICKSON
COMMERCE PASS TO NTIA FOR MBAKER,AHEINEMAN

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECPS ECON ETRD KIPR VM
SUBJECT: BUILDING TIES AND URGING REFORM IN VIETNAM'S ICT SECTOR

Ref: A) HANOI 1360 B)HANOI 1561

1. (U) Summary: Ambassador David Gross, U.S. Coordinator for
International Communications and Information Policy traveled to
Vietnam to participate in the first-ever U.S.-Vietnam Information
and Communication Technologies (ICT) Commercial Dialogue on
September 17-18. The Dialogue, an interagency initiative led by the
International Trade Administration (ITA), aims to facilitate trade
and investment in Vietnam's ICT sector at a time when U.S. companies
are optimistic about Vietnam as both a manufacturing base as well as
a growing market. In the Dialogue and separate meetings with
Government of Vietnam (GVN) officials and private sector
representatives, Ambassador Gross advocated for closer cooperation
in the telecom and IT fields. The Ambassador explained President
Bush's Digital Freedom Initiate (DFI) and urged continued GVN
reforms to create a more transparent and competitive policy
environment, focusing on issues such as technology neutrality,
transforming the ownership structure of state owned firms to include
private equity, and spectrum allocation. His visit and the ICT
Dialogue helped to build trust and understanding between the two
governments and industries, and set a clear path forward for future
engagement. For its part, the GVN demonstrated an increased
willingness to engage with the United States in these key sectors.
End summary.

2. (U) Ambassador David Gross, U.S. Coordinator for International
Communications and Information Policy traveled to Vietnam to
participate in the first-ever U.S.-Vietnam Information and
Communication Technologies (ICT) Commercial Dialogue on September
17-18. He joined an interagency delegation led by ITA Deputy
Assistant Secretary (DAS) for Manufacturing Jamie Estrada that also
included DAS Meredith Atwell Baker from the National
Telecommunications and Information Administration (NTIA), Deputy
Assistant U.S. Trade Representative (DAUSTR) Jonathan McHale,
Regional Director Greg Walters from USTDA's Bangkok office, and
Economic Growth Program Manager David Brunell from USAID's Hanoi
office. In addition to the Dialogue meetings, Ambassador Gross met
with officials from the Ministry of Information and Communications
(MIC); officials from the Ministry of Planning and Investment; the
Chairman of Vietnam Posts and Telematics Group (VNPT), the
state-owned and largest telecom company in Vietnam; and
representatives from U.S. ICT firms operating in Vietnam. He also
spoke to a crowd of 250 students from the Hanoi University of
Technology.

MIC - NEW NAME, NEW APPROACH?
-----------------------------

3. (SBU) In a September 17 pre-Dialogue courtesy call, MIC Vice
Minister Vu Duc Dam, using his polished English, welcomed Ambassador
Gross and other members of the U.S. delegation from the Department
of Commerce (DOC) and Office of the U.S. Trade Representative
(USTR). The Vice Minister thanked the delegation for coming to
Vietnam and noted his personal appreciation for his relationship
with Ambassador Gross, which has developed through interactions at
international telecommunications events.

4. (SBU) DAS Estrada thanked VM Dam for his hospitality at a time
when the Ministry is undertaking internal restructuring following
the August 2 cabinet reshuffle (REFTEL A). MIC intends to complete
that process "within the next two months," he said. The Vice
Minister, who was joined by a substantial delegation of MIC
officials, explained that MIC wants to implement substantive changes
(NFI) beyond simply integrating the former Ministry of Culture and
Information's broadcast and print media departments into the
structure of the former Ministry of Posts and Telematics. Dam also
explained that MIC will no longer own any companies, which he
believes will be better for Vietnamese consumers and will enable
telecom operators to keep costs down. Note: In a meeting on
September 19, however, digital terrestrial television provider VTC
reported to Econoff that it is still 100 percent owned by the
Ministry. End note.

5. (U) Turning to the ICT Dialogue, Vice Minister Dam described the
two-day event as "very important" for the development of our
bilateral relationship. He expressed Vietnam's eagerness to work
more closely with the U.S. Government and industry to expand ICT
trade and investment opportunities. Forums like this will be
critical to build trust and mutual understanding, Dam said. To
better understand U.S. ICT policy making, he asked a series of
questions about the structure of the U.S. Government
telecommunications and information technology policy and regulatory
agencies, noting Vietnam's keen interest in learning from the United
States. DAS Estrada called upon members of the delegation to
explain their agencies' roles. He also pointed to the Secretary of
Commerce's upcoming trade mission in November as another sign of

HANOI 00001749 002 OF 004


deepening economic ties. Ambassador Gross remarked that this first
ICT Dialogue demonstrates that our countries' relationship is at a
new level following Vietnam's January 2007 accession to the World
Trade Organization (WTO) and the subsequent meeting between our
Presidents. Gross noted USG interest in supporting Vietnam's
development of open, market-oriented telecom and IT policies to best
serve its people and drive continued economic growth.

6. (U) In a later meeting, Director of the MIC's Vietnam Public
Utility Telecommunication Service Fund (VTF) Tran Manh Dzung
repeated the Vice Minister's call for closer cooperation between our
countries. The VTF is responsible for connecting Vietnam's rural
communities with modern telecommunication technologies through
competitively bidding projects using the state-managed universal
service fund. Mr. Dzung thanked the U.S. Government for ongoing
training and capacity building efforts for VTF staff, and hoped that
the two sides can deepen their work together - particularly in
developing fair and transparent regulatory policies. Ambassador
Gross agreed, explaining that a competitive environment will help
bring the best technologies to rural populations most efficiently.

REQUESTS FOR MORE U.S. ICT INVESTMENT
-------------------------------------

7. (U) Ministry of Planning and Investment (MPI) Foreign Investment
Agency General Director Dr. Phan Huu Thang called for more U.S.
investment in the ICT sector, particularly in telecommunications
infrastructure. He highlighted ongoing work with foreign companies
to improve Vietnam's investment policies and create a more
competitive environment. MPI has created favorable incentives for
foreign investors, Thang said, including long periods of tax
exemption and low rental costs for land. One U.S. delegation member
stated that further improvements in areas like human resource
development, intellectual property protection, government
procurement and network security would help to attract more U.S. and
foreign investment.

VNPT - A REFORMING TELECOM GIANT
--------------------------------

8. (U) VNPT Chairman Pham Long Tran described his organization's
reform efforts to become more competitive domestically and expand
its operations overseas. State-owned VNPT was a monopoly until
1995, and remains Vietnam's largest carrier with 80 percent market
share in fixed line and 55 percent market share in mobile services.
Tran explained that VNPT has over 90,000 employees and more than 100
subsidiaries in diverse markets such as postal and telecom services,
newspapers, tourism, construction, and health care. He said that
VNPT has submitted proposals to MIC to streamline and reform its
operations to better compete with growing domestic and foreign
competition. One of the key proposals is to separate VNPT's telecom
operations from its other lines of business.

9. (SBU) Additionally, VNPT is seeking to "equitize" (the Vietnamese
term for transforming 100 percent State-owned enterprises into joint
stock or limited liability companies) some of its subsidiaries.
Tran said that the entire VNPT Group will eventually be equitized
and listed on international stock exchanges. He seemed frustrated
when reporting delays in the equitization process for its
subsidiaries such as mobile service provider MobiFone. Despite
pressure to move faster, Tran blamed cumbersome and difficult to
understand government regulations for the holdup. Because the GVN
is currently reviewing its regulations on equitization (REFTEL B),
he was unable to give a timeframe for completion. Ambassador Gross
noted that VNPT's equitization plans will be important to improve
its competitiveness and to access capital markets that will help
VNPT expand its services at home and abroad.

10. (U) Chairman Tran expressed his desire to broaden cooperation
with U.S. partners. VNPT is currently awaiting a frequency license
from MIC to implement a WiMAX trial in Hanoi and Ho Chi Minh City in
partnership with Motorola, he said. VNPT is also waiting for MIC to
decide on its application for a 3-G license. It is important that
the Ministry be technology neutral in their licensing and other
decision making, Ambassador Gross said, which will enable VNPT, and
not the Ministry, to determine which technology will best suit its
consumers' needs.

U.S. PRIVATE SECTOR EXPERIENCES IN VIETNAM
------------------------------------------

11. (SBU) Representatives from eight private sector companies and
organizations described their experiences with public/private
partnership efforts to expand broadband connectivity to rural areas
in Vietnam through the Presidential Digital Freedom Initiative's
"Last Mile Initiative." Representatives from Microsoft and other

HANOI 00001749 003 OF 004


companies also reported on their joint work with USAID on the TOPIC
64 project, designed to increase ICT training and build human
resource capacity by opening IT training centers in all 64
provinces. One private sector representative opined that Vietnam
should develop a national-level strategy for expanding Next
Generation Networks for its citizens and companies. Another
suggested the GVN should designate an independent Senior Technology
Advisor who is not aligned with a particular technology to guide
Vietnam's ICT development strategy.

12. (SBU) The GVN should allow the private sector to lead, and allow
the market to drive innovation and determine prices, Ambassador
Gross stated. Fair and open competition between service providers,
without heavy involvement by the government, will ensure that
providers can meet their customers' needs at the lowest possible
cost. Equitization will also help attract foreign investment and
allow capital growth in Vietnam's ICT sector, Gross continued. He
encouraged the U.S. companies present to continue to cooperate with
the Vietnamese industry and governments from both countries to
increase trade and investment opportunities in Vietnam.

VIETNAM'S BRIGHT FUTURE
-----------------------

13. (U) Ambassador Gross delivered a presentation to a
standing-room-only crowd of 250 students at the Hanoi University of
Technology on the unique opportunities technology has created for
the younger generation in Vietnam to improve their lives. He
remarked that it is important for them to continually encourage the
government to give them the tools necessary to take full advantage
of technology to create a brighter future. In the follow-up
question and answer session, the students asked a range of
questions, including queries on how technology is transforming other
societies around the world.

ICT DIALOGUE - AN OPPORTUNITY TO FORGE NEW TIES
--------------------------------------------- --

14. (U) The first-ever U.S.-Vietnam ICT Commercial Dialogue brought
together industry leaders and senior government officials from both
sides to find opportunities to deepen and strengthen cooperation in
the ICT field. The Dialogue was co-chaired by DAS Estrada for the
USG and Director General Quan Duy Ngan Ha from MIC for the GVN. In
their opening remarks, MIC Vice Minister Dam and U.S. Ambassador
Michael Michalak both commented on the importance of this event in
jointly developing our ICT sectors to the benefit of citizens of
both countries. Dam noted that this first meeting will allow the
two sides to become familiar with one another's priorities and
determine areas where we can cooperate more closely.

15. (U) During the joint session between government and industry,
DAS Estrada highlighted six key challenges for Vietnam's ICT
development, and expressed a desire to work with Vietnam to address
those areas, which include: infrastructure development;
cyber-security; human resource development and training;
intellectual property rights protection; e-commerce; and, government
procurement. As one of the steps to ensure that advanced telecom
infrastructure is deployed widely, the U.S. side urged Vietnam to
establish a transparent, independent regulator. U.S. public and
private sector representatives also encouraged Vietnam to continue
the process of market liberalization, promulgate transparent
policies and to ensure competitive safeguards, particularly now that
it is a member of the WTO. Ambassador Gross noted the importance to
Vietnam's ICT sector of implementing a transparent and technology
neutral spectrum allocation regime.

16. (U) Representatives from Vietnam's ICT industry remarked on
their confusion about U.S. standards and regulations. A
representative from Vietnam's software industry association said his
member companies "pin strong hopes on the U.S. market," and asked
for training to better understand how they can work more closely
with, and sell products to the United States. Vietnamese private
sector representatives also commented on the lack of public
understanding of IPR issues here. They asked the U.S. side to
enhance ongoing joint efforts to raise public awareness of this key
issue. Vietnamese firms also requested more human resource
technical training, and encouraged the two governments to work
together to ease visa procedures to enable more Vietnamese private
sector officials to travel to the United States. (Note: U.S.
companies, for their part, offered to devote resources to help
Vietnamese firms cope with these issues. For example, it was
proposed to establish a public/private partnership on human
resources, and to sponsor a series of capacity-building seminars on
topics that may help them understand the U.S. market, such as IPR
regulations. End note.)


HANOI 00001749 004 OF 004


17. (SBU) Vice Minister Dam and other GVN officials expressed
appreciation for the comments and the frank exchange. Dam stressed
that Vietnam's legal framework is already consistent with its WTO
obligations, however, the GVN remains committed to further reforms.
Vietnam is currently drafting three new laws on Telecom, Frequency
Allocation and Posts, and would welcome engagement with the U.S.
side once the drafts are finalized. On the issues of government
procurement and technology neutrality, the Vice Minister pointed to
the Vietnam Forum for IT Promotion, a regular forum which MIC hosts
and in which U.S. industry participates, as evidence that the GVN is
open to working with foreign companies to address these areas. Dam
stated that the United States and Vietnam seem to have different
ideas about what constitutes an independent regulator. The MIC
serves as Vietnam's regulator, and has been independent from
operators since a 2002 Government Ordinance, he explained. The
Ministry is now working to create additional separation between
policy-makers and regulatory officials, but will likely not have an
entirely separate regulatory body like the United States.

18. (U) In closing, Vice Minister Dam commented that he and the
Ministry remain open and willing to meet with the U.S. Government
and industry to address issues in the ICT sector. The two sides
agreed to remain in contact to discuss concrete next steps,
including possible workshops on issues such as cyber-security, WTO
implementation, spectrum allocation, and electronic commerce. Those
discussions will help to develop the agenda for future meetings of
the U.S.-Vietnam ICT Commercial Dialogue. Ambassador Gross
commented that the inaugural meeting was an important step forward,
and provided a "clear vision for future collaboration." VM Dam
agreed, saying that the meeting resulted in a better understanding
of the two sides' views, and the MIC looks forward to future
exchanges.

19. (SBU) Comment: The initial meeting of the U.S.-Vietnam ICT
Commercial Dialogue and Ambassador Gross' visit contributed
significantly to a growing trust and familiarity between the two
governments and industries in the fields of telecommunications and
IT. The GVN demonstrated an increased willingness to engage with
the United States in this important sector. While they may not
always agree with or accept U.S. views, the door for dialogue is
more open now than ever before. The U.S.-Vietnam ICT Commercial
Dialogue provides a solid foundation and a clear path forward for
future cooperation. End Comment.

20. (U) This cable was cleared by Ambassador David Gross and
coordinated with Department of Commerce's ITA and NTIA.

MICHALAK

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