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Cablegate: Finance Minister On Macroeconomic Policy, Asean And

VZCZCXRO0936
PP RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0245/01 0601001
ZNR UUUUU ZZH
P 291001Z FEB 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 7293
INFO RUEHHM/AMCONSUL HO CHI MINH 4360
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000245

SIPDIS

SENSITIVE
SIPDIS

SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR BISBEE

E.O. 12958: N/A
TAGS: ECON EAID EAIR EFIN PGOV VM
SUBJECT: FINANCE MINISTER ON MACROECONOMIC POLICY, ASEAN AND
AVIATION UPGRADE

REF: A) 07 Hanoi 1729

B) 07 Hanoi 2013
C) Hanoi 116
D) Hanoi 193
E) Hanoi 210
F) Hanoi 243

HANOI 00000245 001.2 OF 002


1. (U) This cable is Sensitive But Unclassified. For official use
only, not for dissemination outside USG channels or posting on the
internet.

2. (SBU) Summary: In a February 26 meeting with the Ambassador,
Finance Minister Vu Van Ninh recognized the difficulty of
reconciling Vietnam's goals of high economic growth and low
inflation, and hoped that the currency's exchange rate would remain
steady in 2008. The Minister also promised to look into Vietnam's
corresponding contribution to the U.S.-sponsored project to upgrade
Vietnam's aviation regulatory safety posture to Category 1. The two
also discussed the ASEAN Foreign Ministers' meeting in Vietnam next
April and cooperation on improving Vietnam's capital markets. End
summary.

COMPETING GOALS MAKING LIFE HARD AT FINANCE
-------------------------------------------

3. (SBU) The Ambassador paid a courtesy call on Finance Minister Vu
Van Ninh on February 26. Ninh, who has worked at Finance for most
of his professional life, told the Ambassador that the 8.5 - 9
percent growth target for 2008 would probably be off the mark. He
expressed similar pessimism at being able to contain high inflation
effectively. (Note: This week the GVN announced February's CPI
index increased 15.7 percent year-on-year, almost twice the
Government's aim to keep inflation below the growth rate. Also, see
Reftels. End note.) "Inflation targets are hard to meet because of
high commodity and import prices," he lamented. "Too-tight monetary
policy may stifle growth and development." Over the last month, the
Government of Vietnam (GVN) has tried to rein in liquidity to try to
contain inflation, without results thus far (REF C).

4. (SBU) Ninh and the Ambassador also discussed the possibility that
a global economic slowdown in 2008 may also dent Vietnam's export
revenues, which grew by 29 percent in 2007 (Ref F). To compound the
situation, the Vietnamese dong has been appreciating against the
dollar, a trend that is expected to continue in 2008. Ninh said
that he expected to be able to forestall a considerable dong
appreciation. "We expect it to keep from appreciating or
depreciating too much against the dollar," he vowed.

HOPES THAT HIGH INVESTMENT CAN COME TO THE RESCUE
--------------------------------------------- ----

5. (SBU) The Minister took solace from the fact that the investment
picture remains positive. "Fortunately, we continue to expect high
investment numbers" in 2008. Vietnam's success in attracting
investment (Vietnam authorized $17.65 billion in new investment in
2007) has been a key component of its growth strategy, and
increasingly important in balancing its current accounts (Reftel D).
Ninh said that U.S. investment thus far had been "modest" and had
much room to grow.

AVIATION SAFETY UPGRADE GETS MINISTERIAL ATTENTION
--------------------------------------------- -----

6. (SBU) The Ambassador raised the issue of GVN funding for a Trade
and Development Agency (USTDA) initiative to upgrade Vietnam's
regulatory safety posture to Category 1 that would allow direct
flights to the United States. "I have heard your Prime Minister say
that this is a priority for him, but the Minister of Transportation
said that he was having trouble obtaining the necessary $50,000" for
the GVN contribution to the $1.4 million project, funded thus far by
USTDA and the U.S. private sector. Minister Ninh said that he was
not familiar with the issue and promised to look into it. On
February 27, the General Director of the Finance Ministry's
International Cooperation Department told us that Ninh had already
given instructions to see what was holding up the contribution and
that she hoped that the request would be approved in the immediate
future.

ASEAN FINANCE MINISTERS' AGENDA
-------------------------------

7. (SBU) To questions from the Ambassador on the upcoming ASEAN
Finance Ministers' meeting in Vietnam, Ninh said that the three

HANOI 00000245 002.2 OF 002


priority items on the agenda would be financial sector security,
capital mobilization and the Chang Mai Initiative. The Twelfth
ASEAN Finance Ministers Meeting will be held in Danang in central
Vietnam, on April 3 and 4, along with the Informal ASEAN Finance and
Central Bank Deputies Meeting Plus Three (China, Japan and South
Korea).

CAPITAL MARKET IMPROVEMENTS
---------------------------

8. (SBU) The Ambassador and Minister Ninh also talked about the
development of Vietnam's capital markets. The Finance leader
recognized that the sector needed "more attention, especially in
[establishing] the legal framework." The Ambassador mentioned that
more developed bond and municipal markets would improve Vietnam's
ability to finance much-needed infrastructure expansion.

9. (SBU) In this regard, the Ambassador noted that Treasury is
offering to provide technical assistance to help Vietnam develop its
bond market. The Minister said he welcomed this assistance.

BIOGRAPHICAL NOTES
------------------

10. (SBU) Aside from a 2003-06 stint at the Hanoi's People
Committee, the 53 year-old Ninh has spent his entire career at the
Finance Ministry. The U.K.-based magazine The Banker chose him in
2007 as its Asian Finance Minister of the Year for his support for
economic reform and willingness to engage with the global bond
markets, among other things
(http://www.thebanker.com/news/fullstory.php/ aid/
4666/Finance_Minister_of_the_Year_Asia.html).
During the meeting, he was courteous and somewhat reserved; but that
did not keep him from poking fun at the Embassy's "humble"
facilities when the Ambassador praised the imposing look of the
Finance Ministry (both of them laughed). Ninh has proved to be one
of the most elusive of the GVN's ministers to agree to a meeting as
it took nearly six months from the date of the Ambassador's initial
request for this courtesy call. (Curiously, former Finance
Minister and now Deputy Prime Minister Nguyen Sinh Hung, and Ninhs'
mentor, is equally hard to meet.) Ninh understands English, often
nodding as the Ambassador spoke, and said a few pleasantries in
English after the meeting.

MICHALAK

4

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