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Cablegate: Hcmc Board of Governors Outlines Amcham Priorities

VZCZCXRO7780
OO RUEHDT RUEHPB
DE RUEHHM #1265/01 3551259
ZNR UUUUU ZZH
O P 211259Z DEC 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3480
INFO RUCPDOC/USDOC WASHINGTON DC PRIORITY 0008
RUEHHI/AMEMBASSY HANOI PRIORITY 2379
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH CITY 3699

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001265

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EEB/TPP/BTA/ANA
STATE PASS TO USTR DBISBEE
TREASURY FOR SCHUN
COMMERCE FOR HHPHO
USAID/ANE

E.O. 12958: N/A
TAGS: ECON EAGR ELTN ETRD BEXP VM
SUBJECT: HCMC BOARD OF GOVERNORS OUTLINES AMCHAM PRIORITIES

REF: (A) HO CHI MIN 1144, (B) HO CHI MIN 1131, (C) HO CHI MIN 955

HO CHI MIN 00001265 001.2 OF 002


1. (SBU) During the monthly American Chamber of Commerce
(AmCham) Breakfast on December 11, American business leaders in
Ho Chi Minh City (HCMC) expressed frustration about the
Government of Vietnam's (GVN) approach to trading rights and
distribution rights, explained efforts to improve customs
clearance processes and discussed student demonstrations against
China. Looking to the Trade and Investment Framework Agreement
(TIFA) Council meeting in Washington on December 17, the AmCham
Board of Governors (BOG) hoped discussions would increase market
access for U.S. companies and reverse a trend that AmCham
perceives as the GVN interpreting WTO commitments as a ceiling
rather than a baseline. End summary.

Trading and Distribution Rights
-------------------------------
2. (SBU) During a monthly breakfast meeting with the Consul
General on December 11, the Board of Governors of AmCham in HCMC
raised trading rights and distribution rights as among the most
significant impediments to their expansion in Vietnam (reftel),
and referred to their AmCham position paper (at "http:
//www.amchamvietnam.com/1863?PHPSESSID=") as a source for the
full AmCham position. Members' complaints against GVN policies
fall into two areas: rules restricting importers to using a
single, nation-wide distributor for each type (HS Chapter
category) of good imported and a definitional problem concerning
what is "retailing" and a "retail sales outlet."

3. (SBU) Members of the AmCham BOG argued that the restrictions
on distribution networks (Circular 9, Article 3, 1, d) are
inconsistent with paragraph 147 of Vietnam's Working Party
Report and discriminate against foreign-invested enterprises
(FIEs) in favor of domestic enterprises not subject to the same
restriction. CG replied that his understanding was that the
restrictions currently in place do not violate Vietnam's WTO
commitments which are governed by the negotiated services
schedule which liberalizes distribution rights for FIEs
beginning in 2009. CG went on to add, however, that while the
USG cannot argue that the restrictions on distribution rights
represent violations of WTO commitments, he does agree that the
restrictions represent bad economic policy that the GVN should
change because it is hampering Vietnam's domestic economic
growth and development by creating artificial supply chain
bottlenecks and thus increasing prices. CG explained that he
has already made that argument to economic officials in southern
Vietnam and in press interviews.

4. (SBU) AmCham complaints concerning the definition of
"retailing" and "retail sales outlets" generally come from
members importing industrial machinery, materials, coatings,
chemicals and other items that are not normally thought of as
"retail" items. As long as such items are sold via a contract
signed with a foreign entity (such as an office in the USA or
Singapore), they can be imported and delivered directly to the
end user. In the past, however, some importers of such items
brought in stock in advance that they would then sell to end
users. The GVN has now defined such sales as "retail sales by a
foreign company" and thus prohibits them prior to retail
liberalization under the GVN's WTO agreement. Once again, at
least some members take a legalistic approach to this question,
arguing that GVN definitions of "retailing" and "retail sales
outlets" conflict with WTO Central Product Classification (CPC)
lists. AmCham members are pressing the Ministry of Industry and
Trade (MOIT) on the motivation and implementation of Circular
9's Economic Needs Test.

Customs Clearance Issues
------------------------
5. (SBU) A BOG member (representing express delivery) explained
that AmCham is also working to improve Vietnam's customs
procedures, working through ASEAN to promote pre-clearance
standardization in Vietnam for express delivery and freight.
However, this needs Ministry of Finance approval and Customs has
balked at program elements, including waivers on low-duty
consignments, more flexible business hours, de minimus values
and requirements for additional automation. During the APEC
year the "e-Manifest" pilot program worked well, but Customs
stopped the program after APEC saying there was no legal basis
for its continuation. Today, Vietnamese customs officials
manually clear about fifty percent of the cargo coming in,
creating "opportunities" for unscrupulous agents.

HO CHI MIN 00001265 002.2 OF 002

Students Rally Against Chinese Announcement
-------------------------------------------
6. (SBU) A member from the energy industry raised the December 9
student rallies in front of the Chinese Embassy and Consulate in
protest of an announcement that Beijing will create an
administrative unit covering the Hoang Sa (Spratly) and Truong
Sa (Paracel) islands also claimed by Vietnam. One participant
observed that the recent student protests are the first since
the invasion of Iraq in 2003. Another member said that the
police presence and controlled timing in Hanoi suggested an
active government role in that protest. The press covered
activities in Hanoi but not HCMC, suggesting events here might
have been more spontaneous. In a significant break from past
characterizations of the former government in Saigon, a December
6 Tuoi Tre article described the Navy of the Republic of South
Vietnam as "defending the motherland" against China in 1974.

Looking Forward to the TIFA Council
-----------------------------------
7. (SBU) The members agreed that the December 17 TIFA Council in
Washington would be a welcome opportunity to raise IPR,
information technology (IT), trading rights and increased
cooperation. BOG members reiterated their overall assessment
that the pace of reform has slowed since WTO accession. On IT
in particular, one member noted that second-hand equipment for
air service operations was confiscated by Vietnamese customs as
a "refurbished" product, a ruling that was reversed only after a
great deal of wasted time and resources. A number of AmCham
members believed that obtaining investment licenses in Vietnam
has become more difficult over the past year, and hoped that the
TIFA Council would be a vehicle for advancing the view that WTO
commitments are a starting point and not the finish line for
economic liberalization in Vietnam.

Comment:
--------
8. (SBU) Although nominally a single organization, AmCham has
separate offices in HCMC and in Hanoi with different board
members and different executive officers. A member of the Hanoi
AmCham board told Emboff in Hanoi on December 12 that AmCham's
understanding of the trading and distribution rights issue was
wrong. This member described some of the other issues cited in
the AmCham position paper as setting up a "straw man" in
dreaming up potential problems down the road that nobody in the
Vietnamese government has suggested will occur and that nobody
in AmCham has discussed with the Vietnamese government. The
member also expressed concerns about how the AmCham position
paper was released and pushed for a better process next time on
clearing position papers with the board. In any event, the U.S.
Mission will continue to work with U.S. businesses to expand
their investment and sales in Vietnam in making the most of
their trading and distribution rights. Mission Vietnam will
also continue to use diplomatic channels to encourage the GVN to
continue to implement and speed up economic reforms in all areas
-- in order to move to a true market economy. In this regard,
we note that USAID's economic growth programs, especially the
Support for Trade Acceleration (STAR) and Provincial
Competitiveness Initiatives (PCI) continue to assist Vietnam in
staying on track in implementing reforms. End comment.

9. (U) This cable was coordinated with Embassy Hanoi.
FAIRFAX

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