Cablegate: (U) Deputy Secretary Negroponte's September 12-13 Visit To

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1. (SBU) SUMMARY: During the Deputy Secretary's visit to Ho Chi
Minh City (HCMC) on September 12-13, HCMC government officials,
business leaders and legal professionals outlined the many
challenges and opportunities that will set the course for the
future development of the city and the path Vietnam's economic
transformation will take. City officials discussed HCMC's role
as Vietnam's engine of economic growth, noting the city now
accounts for nearly a quarter of the country's economy and a
third of the tax base. Both government and business leaders
agreed the most pressing problems HCMC faces today are the
constraints created by the city's inadequate infrastructure and
lack of skilled labor throughout all sectors of the economy.
The U.S. business community urged an active role for the USG in
Vietnam, not just because the United States is Vietnam's largest
export market, but because we are seen by most as a leading
partner in Vietnam's economic reform. HCMC's Bar Association
said further legal reform was essential in order to create a
more just and predictable judicial system for businesses and
individuals. In support of U.S. efforts to promote religious
freedom, the Deputy Secretary also met with the Secretary of the
Bishop's Council and attended Mass at HCMC's historic Notre Dame
Cathedral. In all his meetings, the Deputy Secretary affirmed
the USG's commitment to strengthening the bilateral relationship
and broadening cooperation on economic governance, legal reform
and education initiatives. End Summary.

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HCMC Leaders Discuss Economic Achievements and Challenges
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2. (SBU) During Deputy Secretary Negroponte's September 12
meetings with HCMC Party Secretary Le Thanh Hai and HCMC
People's Committee Chairman Le Hoang Quan, both officials
discussed Ho Chi Minh City's leading role in Vietnam's economy
and the challenges they face maintaining momentum given the
city's severe infrastructural and human capital constraints.
Party Secretary Hai said Ho Chi Minh City capitalized on "doi
moi" era reforms to become the country's "first city" in terms
of its economic contributions, generating 24 percent of the
national GDP and contributing 33 percent to the State budget.
HCMC's double-digit growth rates consistently top the national
average by almost 2 percent annually and its residents earn
three times the national per capita income. Despite these
achievements, HCMC's continued growth is hindered by a crumbling
and overburdened transportation system, skyrocketing property
costs and growing environmental and quality of life issues.
People's Committee Chairman Quan said HCMC's 2015 urban
development plan followed a "U.S. model" that would transform
HCMC from the "outside in." By building modern residential
communities and industrial zones on the outskirts of the city
linked by an expanded mass transit system, inner-city residents
could be relocated to new suburban satellites and HCMC planners
could turn to restructuring the city center. In terms of human
capital, both leaders emphasized the need for educational reform
and expanded vocational training for HCMC's workforce in order
to maintain HCMC's competitive edge and expand into high-tech
and high-end service sectors.

3. (SBU) Both leaders highlighted the positive role U.S.
investment and expertise was making in overcoming these barriers
to growth and were optimistic U.S. investment dollars and
development assistance would help transform HCMC into a
world-class Southeast Asian capital on par with Bangkok or
Singapore. The Deputy Secretary said the U.S. was ready to work
with government and business leaders to help them achieve their
goals, and affirmed that education cooperation was a high
priority. The Deputy Secretary noted that the recently
established Education Task Force would create a wealth of new
opportunities for future collaboration, as would the upcoming
educational conference in HCMC early next year. He was
optimistic the U.S. and Vietnam would continue to deepen
economic and commercial ties, expand diplomatic cooperation and
engage on a broad range of issues that would further strengthen
the bilateral relationship.

Maintaining the Momentum of Economic Reform
4. (SBU) During the Deputy Secretary's meetings with members of
the U.S. and Vietnamese business community, corporate leaders
shared city officials' sentiments regarding HCMC's inadequate
infrastructure and lack of human capital as a road block to
growth, and noted the problems are further exacerbated by the
poor coordination among the various government agencies
responsible for implementing HCMC's urban development plans. In

HO CHI MIN 00000821 002.2 OF 003

export operations, this has resulted in a situation where brand
new container terminals have yet to be connected to existing
land transit routes, creating additional bottlenecks for the
overtaxed HCMC port that handles 80 percent of Vietnam's
container traffic. Energy demands exceed supply by about 17
percent. As a result, industrial zones suffer routine losses of
power due to rolling brown-outs and random black-outs that
result in significant production losses for the food product and
dairy industries.

5. (SBU) Turning to labor issues, U.S. producers and their
Vietnamese partners also discussed the lack of effective labor
dispute resolution mechanisms that has created a "strike as a
first resort" mentality among factory workers, especially in the
joint venture garment factories that represent the lion's share
of foreign investment firms in the South. More than 500 strikes
have taken place so far in 2008, in contrast to a total of 500
strikes in all of 2007. Vietnam's young population of 85
million still constitutes an attractive market, and businesses
are succeeding. But entrepreneurs said shortages of skilled
workers have compelled sectors as diverse as radio/TV
broadcasting, energy, and information technology to establish
private training institutes to fill the vocational skills

6. (SBU) The Deputy Secretary commended the private sector's
pro-active response to human resource constraints and
underscored the USG's support for continued improvements in
governance that would establish a more transparent rule-based
investment climate. On the economic policy front, the Deputy
Secretary outlined plans to begin negotiations on a Bilateral
Investment Treaty in coming weeks and to commence Open Skies
Agreement negotiations in October.

Building a Foundation for Legal Reform
7.(SBU) In a free flowing exchange of ideas, members of the HCMC
Bar Association relayed to the Deputy Secretary their concerns
about the lack of transparency, independence and professionalism
in Vietnam's legal system. Lawyer Le Cong Dinh cited several
positive developments, including the growing ranks of legal
professionals practicing in Vietnam today. National Bar
membership has gone from 400 to 4000 lawyers in past ten years
and the HCMC Bar Association accounts for 2500 of those lawyers.
Gradual improvements in the functioning of Vietnam's legal
system including the growth of international and domestic
commercial arbitration centers, greater client access for
defense lawyers, and more open exchanges between lawyers and
judges in the courtroom.

8. (SBU) Bar President Nguyen Dang Trung said despite these
developments, more needed to be done to promulgate fundamental
concepts of rule of law. He said that "many people say Vietnam
has rule of law because we have a system of courts, judges and
lawyers," but in reality citizens are unfamiliar with their
legal rights and responsibilities and lack confidence in the
judicial system's ability to resolve their claims fairly and
transparently. Educating Vietnamese citizens regarding their
basic legal rights would enhance the ability of civil society to
engage meaningfully with the GVN on legal reform priorities.

9. (SBU) The Bar Association offered several specific ideas
about where U.S. assistance could play a positive role in
promoting transparency, including expanding educational
opportunities and exchanges between Vietnamese and U.S. legal
professionals. A former Fulbright fellow, Tung said increasing
the number of scholarships for Vietnamese lawyers to study in
the U.S. would be a welcome step forward and all lawyers agreed
more exchanges would help build mutual understanding as well as
the capacity needed to meet Vietnam's current and future legal

10. (SBU) The Deputy Secretary voiced his support for the HCMC
Bar's efforts to advance judicial and legal reform, and agreed
rule of law presented a promising area for more constructive
collaboration. The Ambassador said the United States has
committed to the process by supporting NGO work in rural areas
to discuss civil rights and responsibilities, and promoting the
publication and dissemination of Supreme Court decisions. The
Consul General welcomed the idea of more exchanges, noting the
recent successful visit by U.S. District Judge Janet Bond
Arterton with city and provincial legal professionals through
the Mission Speakers Program. The Deputy Secretary was
optimistic about broadening these efforts, noting that as
Vietnam continues to expand engagement in the international
arena, its judicial system must evolve to meet the challenges

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A Glimpse of HCMC's Future
11. (SBU) To better understand of how the key issues of labor,
infrastructure, governance and land can be both challenges and
opportunities for investors, the Deputy Secretary visited Phu My
Hung (PMH) company's "Saigon South" development, a dynamic mixed
industrial, retail and residential development. A PMH executive
explained that in the early nineties, his Taiwanese development
company negotiated a relatively free-hand to develop 1,500 acres
of swamp. Working with leading American planners and
architects, PMH developed an award-winning master plan that has
guided the development of a region characterized by livable
spaces, a balance of greenery and mid-density housing and
10-lane roads, new bridges and space for planned mass transit
lines that contrasts sharply with the chaotic sprawl that
characterizes most of Ho Chi Minh City. Its private power plant
makes "Saigon South" the only place in southern Vietnam immune
to rolling brownouts. Despite the development's success and
popularity as both a residential and commercial area, PMH stay
true to its vision of being a mixed-cost residential profile
that offers housing affordable to the managers and skilled and
unskilled works that staff nearby companies and factories. The
Deputy Secretary also toured the firm's Tan Thuan Export
Processing zone, the first industrial development in Vietnam to
offer a true "one stop shop" for investors that cut the approval
process from months (or years) to an average of just seven to
ten days. Tan Thuan Export zone has been a success almost from
the start and generated ten percent of Vietnam's foreign
exchange until 2005.

12. (SBU) Over lunch in Saigon South, a roundtable of ten HCMC
business leaders described both the challenges and opportunities
facing businesses and entrepreneurs today. One human resources
company drew out the need to link education more closely with
the needs of business, saying that vocational training in
particular would help remove human resources bottlenecks from
Vietnam's economy. One of Vietnam's leading industrial park
developers outlined her company's efforts to expand its
vocational training center and establish a new university based
on U.S. curriculum. The private sector is stepping up to fill
all sorts of training gaps, the chairperson of a Vietnamese
media company explained, saying that she has started a training
academy for media professionals. Power and infrastructure
companies argued that despite a linger state sector bias, in the
provinces and districts where the letter and spirit of Vietnam's
economic reforms has taken root there are opportunities for
private sector.

13. (SBU) The Deputy Secretary applauded the private sector's
role in continuing to help open Vietnam's economy and emphasized
their crucial efforts to improve Vietnam's education system.
Improving vocational training and establishing partnerships with
U.S. universities will both help Vietnam to training the human
resources it needs. The Deputy Secretary also recognized the
role of women as leaders in Vietnam's business community, noting
that nearly half the leaders present at the PMH roundtable were
women. Phu My Hung's "Saigon South" is setting a great example
for the future of Vietnam, he concluded.

Reflecting on Religious Freedom

14. (U) In the Deputy Secretary's meeting with Secretary of the
Bishop's Council, Father Nguyen Van Kham, Father Kham expressed
appreciation for the USG's support for religious freedom, noting
the positive growth the Church has experienced under the new
legal framework on religion. Today, there are 6 million
Catholics residing in Vietnam's 26 dioceses, with 10 percent of
those in HCMC. While discussing the Church's efforts to expand
charitable and educational services, Father Kham highlighted the
GVN's continuing refusal to countenance returning the many
schools and other facilities confiscated after 1975. Touching
briefly on the recent confrontations between demonstrators and
authorities at Thai Ha parish in Hanoi, Father Kham said the
situation is complex and resolving claims on confiscated
properties would remain a key concern. The Deputy Secretary
underscored U.S. support for continued dialogue between
religious groups and the GVN on these issues, and received a
warm round of applause from parishioners after Father Kham
acknowledged his presence during Mass on September 13.

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