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Cablegate: Vietnam Econ Highlights: Pm Stresses Economic Stability,

VZCZCXRO1268
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #1201/01 2961005
ZNR UUUUU ZZH
P 221005Z OCT 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8645
INFO RUEHHM/AMCONSUL HO CHI MINH 5234
RUEHGP/AMEMBASSY SINGAPORE 2665
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 001201

SENSITIVE
SIPDIS

STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE AND RBAE

E.O. 12958: N/A
TAGS: ECON EFIN ETRD KIPR VM
SUBJECT: VIETNAM ECON HIGHLIGHTS: PM STRESSES ECONOMIC STABILITY,
PETROVIETNAM POWER GENERATION, IPR ENFORCEMENT

REF: A) Hanoi 1095 ("GVN Economy not Out of the Woods");
B) Hanoi 1108 (Econ Highlights);
C) Hanoi 1072 ("Pharma, IPR and Market Access Top TIFA")

HANOI 00001201 001.2 OF 002


PRIME MINISTER URGES CAUTIOUS ECONOMIC APPROACH IN 09
--------------------------------------

1. (U) In his state of the nation address before the National
Assembly on October 16, Prime Minister Nguyen Tan Dung vowed to take
a cautious approach to resolving the economic challenges of the
coming year. Dung began his address by acknowledging that the
country's macroeconomic stability was "threatened" by "the
unfavorable developments in the world economy, combined with
domestic difficulties and weaknesses in management." Restating that
controlling inflation remained the Government's "top priority," Dung
added that he expected inflation to fall below 15% by 2009 from the
current 21.8% (year to date CPI from December 2007). (REF A) The
Prime Minister also admitted that Vietnam's "high inflation is
mainly the result of inappropriate and ineffective monetary and
fiscal policies, and economic and investment structures." A close
second priority, he said, was to ensure that the developmental and
social gains of the last 20 years are not undone by the economic
situation. Although he expressed disappointment at not having met
the poverty reduction targets for this year, poverty rates were
still expected to continue declining, from 14.28% in 2007 to 13.1%
in 2008. (Comment: On October 20, Vietnam loosened monetary
policy, indicating that growth concerns are re-emerging (septel).
End comment.)

PETROVIETNAM TO TAKE OVER POWER PROJECTS
----------------------------------------

2. (U) Faced with increasing power cuts in the steel, coal, textile
and energy sectors, State-owned PetroVietnam recently announced that
it would take over 38 electricity development projects from the
state-run utility company Electricity of Vietnam (EVN). The 38
projects, which would generate 34,000 MW of power annually, are part
of the GVN's ambitious bid to add more than 50,000 MW of electricity
to Vietnam's grid by 2015. EVN blamed inadequate financing, low
domestic power prices, and the increasing cost of inputs as
justification why it could not execute the power projects, which
will cost more than $20 billion to carry out. PetroVietnam CEO Tran
Ngoc Canh said his company was eager to take over the projects since
the oil and gas sector has been affected by ongoing power cuts.

NATIONAL ASSEMBLY LOOKS AT IPR AND TAX REFORMS
-------------------------------------------

3. (U) In its second session of 2008, the National Assembly is
expected to legislate important changes to the luxury tax regime
(Refs B) and introduce reforms to its Criminal Code to penalize
commercial-scale violations of intellectual property rights (IPR)
(Ref C), both of which will have a significant impact on U.S.
business interests. The legislature will also consider legislation
on citizenship, biodiversity, advanced technology, public servants,
health insurance, legal civil proceedings, city planning, public
debt management, and state compensation, among others.

WAR ON PIRATED GOODS DECLARED, FAKE FERTILIZER PLANT RAIDED
----------------------------------

4. (U) IPR activists announced on October 20 the creation of a new
IPR protection organization, the Anti-Counterfeit and Trademark
Protection Association. The group was set up by the Hanoi
government's Department of Industry and Trade to raise awareness
about piracy. Declaring an "all-out war on pirates," the head of
the association explained that the group "aimed to protect both
consumers and business interests." That same week, the Hanoi Police
raided a fertilizer plant and impounded over 1,000 tons of fake
fertilizer. According to the authorities, the plant would produce
between 20-30 tons daily of a mix of coal, clay, lime powder, and a
small amount of authentic fertilizer, which was then sold throughout
northern Vietnam under the brand name of NPK.

NEW AIRPORT AT HANOI GIA LAM
----------------------------

5. (U) The Civil Aviation Administration of Vietnam (CAAV) recently
announced that it would spend $ 17 million to upgrade Hanoi's second
airport, Gia Lam, to accept domestic flights and relieve

HANOI 00001201 002.2 OF 002


overcrowding at the Noi Bai International Airport. The new airport,
located on the grounds of an old military airfield in Hanoi's Gia
Lam District, is located much closer to Hanoi than Noi Bai, which is
a one-hour drive from the city center. In addition to civil
aviation, the GVN will continue to use Gia Lam for military flights.
CAAV said the airport would have an annual capacity of 162,000
passengers per year by 2015, with the ability to accommodate ATR 72
or Fokker airplanes. The new airport's runway, at 2-kilometers in
length, will not be able to accommodate larger Boeing or Airbus
jets.

6. (U) This cable was coordinated with Congen Ho Chi Minh City.

MICHALAK

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