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Cablegate: Small Is Beautiful: A/S Hernandez Delegation Opens Doors

VZCZCXRO4475
PP RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0583/01 1790204
ZNR UUUUU ZZH
P 270204Z JUN 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 4584
INFO RUEHHM/AMCONSUL HO CHI MINH CITY 4809
RUEHHI/AMEMBASSY HANOI PRIORITY 3105
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0048
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000583

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS TO USTR DBISBEE

E.O. 12958: N/A
TAGS: ECON EIND ETRD BEXP KTEX OTRA OVIP VM
SUBJECT: SMALL IS BEAUTIFUL: A/S HERNANDEZ DELEGATION OPENS DOORS
FOR SMALL-MEDIUM U.S. FIRMS IN HCMC

HO CHI MIN 00000583 001.2 OF 002


1. (SBU) Assistant Secretary of Commerce Hernandez led a trade
delegation of 14 small- and medium-sized U.S. enterprises (SMEs)
to HCMC on June 18-20. The delegation's meetings with potential
local partners, HCMC officials, and Amcham members generated
commercial opportunities and increased understanding of local
market realities. Education was a central theme of the
mission, with A/S Hernandez speaking at an Intel scholarship
ceremony and kicking off Commercial Service (CS) Vietnam's
virtual education web fair. HCMC officials acknowledged
inflation as a pressing issue, but stressed that the region was
still poised for growth, and welcomed further U.S. investment.
The delegation noted that the local implementation of policy in
HCMC, especially commercial access to telecommunications
bandwidth and funding for higher education, lagged behind
forward-leaning policy statements they had heard from the
Ministries in Hanoi. Overall, the small companies that
comprised the mission reported that the focused USG support they
received generated the public and private sector access they
needed to successfully enter the HCMC market. End Summary.

USG Cachet Opens Doors, Teamwork Creates Opportunities
--------------------------------------------- ---------
2. (SBU) The June 18-20 trade mission of 14 small- and
medium-sized enterprises (SMEs) met with potential buyers,
distributors, and partners; HCMC officials and AmCham
colleagues. Several companies noted that USG backing pried open
doors that they, as small companies, could not open themselves.
Representatives of a small plastics-processing technology
manufacturer, for example, were thrilled about their first
meeting with a global footwear company that had ignored previous
requests for meetings. Member companies also effectively
networked with each other. One participating company, a major
recycler of empty print cartridges in Vietnam, has regularly
discarded 10 percent of the cartridges that arrived damaged. A
trade mission company introduced the recycler to a local
plastics' manufacturer, who has agreed to purchase the
cartridges for use as feedstock, generating a
mutually-beneficial relationship. Companies that were already
exporting to Vietnam but had yet to visit here also registered
gains. After meeting his Vietnamese customers for the first
time, a U.S. hardwood exporter felt comfortable enough to set up
a more liberal payment arrangement that will facilitate export
growth and help address the "credit crunch" brought on by
current macroeconomic circumstances.


Taking the Long View
--------------------
3. (SBU) Companies that did not advance specific projects
nevertheless thought that contacts made during the mission would
pay future dividends. Two energy-generation equipment companies
noted that while the Vietnamese market held enormous potential,
they plan to enter the market only upon deregulation of the
energy sector and subsequent increases in retail energy prices
to market levels. They also noted the uncooperative stance of
Vietnam's state-owned energy firm Electricity of Vietnam (EVN).
A diversified US conglomerate seeking to enter the Asian market
said the "big picture" knowledge gained and relationships
initiated during meetings with GVN officials provided an
extremely valuable launching pad which will form the basis of
their future Vietnam strategy.


"Education Brings Us Together..."
---------------------------------
4. (SBU)...said A/S Hernandez, observing that if current
projections hold, more than 9000 Vietnamese students will travel
to the United States to study this year. Fittingly, he made
these opening remarks at the Commercial Service's Vietnam's
Virtual Agent Fair, an innovative, low-cost program during which
a dozen leading U.S. universities pitched their schools to
pre-screened Vietnamese education agents over a web-based
technology. At an earlier event where 55 Vietnamese students
received engineering scholarships from Intel, the Assistant
Secretary lauded the U.S. high-tech giant both for its technical
innovation and its corporate social responsibility, as
exemplified by the scholarships and the technical support Intel
provides to its five Vietnamese partner universities. As
another demonstration of the high priority the Vietnamese place
on education, a trade-delegation member representing an east
coast university said that the ten HCMC-area universities he met
with were so receptive to his 'two plus two' undergraduate study
and research-scholar exchange programs that he plans to double
his university's outreach efforts to Vietnam.


HO CHI MIN 00000583 002.2 OF 002


Officials Acknowledge Inflation,But Want US Investment To
Continue
--------------------------------------------- --------------
-------
5. (SBU) Officials from the HCMC Departments of Planning and
Investment, Trade, Industry, Finance, Public Transportation, and
the Investment and Trade Promotion Center, as well as Vice
Chairman of the People's Committee Mr. Nguyen Huu Tin
acknowledged that high inflation is a problem (attributing it
primarily to high oil prices and the multiplier effects
thereof), but stressed that the underlying economy was still
sound and that they welcomed and appreciated investment by U.S.
firms. In response to comments from some GVN skeptics that the
trade delegation contained no 'giant' companies, AS Hernandez
stressed that SMEs employ close to 70 percent of the workers in
the United States, and are known for their innovation and
productivity. The A/S also highlighted the importance to the
bilateral relationship of IPR protection, the rule of law, and
Vietnam's adherence to the BTA and WTO trade agreements and
asked for transparent consideration of U.S. company proposals.
He likewise noted that, although the GVN was asking its citizens
to refrain from excessive consumption to combat inflation, he
hoped they would make an exception to purchase American
products, to help balance the trade deficit.

North-South Dissonances
-----------------------
6. (SBU) A U.S manufacturer of satellite-relay technology said
that while the Minister of Planning and Investment in Hanoi told
the delegation that Vietnam's recently launched communications
satellite, Vinasat, was "open for commercial use", subsequent
conversations with mobile telephone and Internet service
providers in HCMC revealed that none of the providers were even
remotely aware of how to apply for access to the satellite's
bandwidth. (Note: Only Vietnam Telecom International (VTI), a
subsidiary of state-owned Vietnam Posts and Communication
currently has access to Vinasat bandwidth; the satellite began
operation on June 1, and is still in testing mode. End note.)
Along similar lines, a representative from a U.S. university
noted that universities in HCMC with which he had discussions
were not aware of scholarship funds and other financial aid that
the Minister of Education and Training had described to him in
Hanoi. The Assistant Secretary broached this dissonance in
meetings with HCMC officials, noting that while ministerial
meetings in Hanoi gave the trade delegation a clearer picture of
Vietnam's regulatory structure, private and public sector
discussions in HCMC occasionally revealed conflicting
interpretations. The A/S offered FCS as an information conduit
to facilitate coordination between Hanoi and HCMC agencies.

Comment:
--------
7. (SBU) HCMC's business and government leaders warmly welcomed
A/S Hernandez, and trade-delegation members described the
mission as highly productive and informative. Public- and
private-sector meetings revealed HCMC's enormous potential as a
trade partner, in fields as diverse as plastics, lumber, and
heavy machinery and also provided a sobering glimpse of some of
the impediments (e.g. monopolistic tendencies of SOEs, such as
EVN and VTI, and the not infrequent information disconnects
between Hanoi and HCMC) to doing business in this dynamic
environment. However, according to the mission's members
themselves, their most dramatic take-home lessons were that
there is strength in numbers, and that with focused USG support,
even small U.S. firms can successfully do business in HCMC. End
comment.

8. (U) This cable was cleared by the delegation and Embassy
Hanoi.
FAIRFAX

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