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Cablegate: Addressing the Economic Agenda During U.S. Visit By

VZCZCXRO5527
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #1251/01 3121033
ZNR UUUUU ZZH
P 071033Z NOV 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8708
INFO RUEHHM/AMCONSUL HO CHI MINH 5277
RUEHGP/AMEMBASSY SINGAPORE 2671
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 HANOI 001251

SENSITIVE
SIPDIS

STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
COMMERCE FOR JBENDER
USTR FOR DBISBEE

E.O. 12958: N/A
TAGS: ECON ENRG EAGR PINR VM
SUBJECT: ADDRESSING THE ECONOMIC AGENDA DURING U.S. VISIT BY
VIETNAM'S ECON "CZAR"

REF A) Hanoi 1185 and HCMC 739 (Media Crackdown);
B) Hanoi 950 (Vietnam Assistance Options);
C) State 117469 ("DOL Hosts US-Vietnam Labor Dialogue);
D) Hanoi 1108 ("Vietnam Economic Highlights");
E) Hanoi 1048 (Civil Nuclear Cooperation);
F) 07 Hanoi 1550 ("New Czars in The Making? The New DPMs")

HANOI 00001251 001.2 OF 003


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

1. (SBU) Summary: The November 8-20 visit to the United States by
Deputy Prime Minister (DPM) Hoang Trung Hai, offers a significant
opportunity to engage on some of the most important issues in our
bilateral agenda with Vietnam's top economic official. DPM Hai has
jurisdiction over key portfolios, including energy and mining, trade
and investment, and nuclear and environmental cooperation. His
aides say his main message in Washington will be that Vietnam wants
more and deeper economic engagement with the United States, and that
he will be looking for confirmation that we will pursue a similar
line during an Obama administration. The Deputy Prime Minister will
also promote Vietnam's inclusion in the Generalized System of
Preferences, and discuss nuclear cooperation and Vietnam's joining
the Trans-Pacific Partnership Agreement. Hai's visit presents us
with an opportunity to get Vietnam to focus on the structural
reforms essential to Vietnam's development, and to raise private
sector concerns about the increasing uncertainty of Vietnam's
policies, particularly as they pertain to taxation and contractual
obligations, and how this affects investors' perspectives of
Vietnam. Finally, as Vietnam's top nuclear policy maker, Hai is
well positioned to promote civil nuclear cooperation with the United
States and get Vietnam to participate more fully in international
fora on nuclear energy. END SUMMARY.

2. (U) Deputy Prime Minister Hai, one of Vietnam's five Deputy Prime
Ministers (DPM), will lead a delegation of Vietnamese officials to
Boston and Washington, DC from November 8 to 21. Hai will be coming
from petroleum sector-related visits to Venezuela and Canada. The
DPM will be in Boston to attend a United Nations Development
Program-sponsored seminar at Harvard University from November 8 to
15. The program, part of the UNDP's Vietnam Leadership Program,
will include a three-day session titled "Economic Development and
the Role of the State, Global Macroeconomic Conditions and
International Trade" and a two-day program on infrastructure and
urbanization. Hai requested a meeting with the Governor of
Massachusetts.

3. (SBU) In Washington from November 15 to 21, DPM Hai requested
meetings with the secretaries of State, Energy and Commerce, NSC
Advisor Price, and USTR Schwab. He plans to attend a private sector
lunch organized by the U.S. Chamber of Commerce and the U.S.-Asean
Business Council, and meet with former USTR Charlene Barshefsky and
Senator Jim Webb. The Department of Energy is arranging a visit to
a nearby nuclear power plant.

4. (SBU) Hai's delegation will include Foreign Affairs Vice Minister
Doan Xuan Hung, Industry and Trade Vice Minister Nguyen Cam Tu, and
Office of the Government Vice Chairman Van Trong Ly. Also
attending, but not planning to join in the Washington leg of the
trip are Agriculture and Rural Development Vice Minister Bui Ba
Bong, National Assembly Vice Chairman Nguyen Chi Dung, Finance
Minister Finance and Banking Department Director General Pham Phan
Dung, and executives from the state-owned gasoline retail monopoly,
Petrolimex and the power company, Electricity of Vietnam (EVN).

HAI'S AGENDA: KEEPING MOMENTUM BETWEEN ADMINISTRATIONS
--------------------------------------------- ------

5. (SBU) Ministry of Foreign Affairs officials told Econoff that DPM
Hai's top priority in Washington will be to convey Vietnam's desire
to continue deepening our bilateral economic relations at the
current pace during an Obama administration. Of particular concern
to Hai is the fate of items mentioned in the June 2008 U.S. Vietnam
Joint Statement, including Vietnam's application for the Generalized
System of Preferences (GSP). Senior GVN officials continue to
express hopes that Vietnam will get GSP before the end of the
current administration. Vietnam is also considering whether to join
the Trans-Pacific Partnership Agreement (TPP), and Hai will want to

HANOI 00001251 002.2 OF 003


know whether the regional free-trade agreement will be endorsed by
the new administration. Although Hai is Vietnam's preeminent
government official on energy matters, according to his team he does
not plan to raise conflicts in the South China Sea over oil
exploration.

THE MESSAGE TO HAI: STRUCTURAL REFORM
-------------------------------------

6. (SBU) Vietnam's desire to keep the strong pace of our economic
relations presents us with a good opportunity to get Vietnam's
leaders to focus on tackling long-delayed reforms on labor,
transparency and corruption, improved IPR protection, and improving
governance and accountability (REFS A, B, C). These, we should
stress, will raise Vietnam's overall competitiveness as an exporter
and investment destination. In addition, these reforms will open
new avenues of cooperation with the U.S. and contribute to deepening
relations.

7. (SBU) Moving forward on a Bilateral Investment Treaty (BIT) will
also promote progress in this regard. The BIT was launched during
the Prime Minister's visit in June, with the first round of talks
proposed for mid-December. Underscoring our continuing interest in
the BIT should help Hai push a bureaucracy that has dragged its feet
on getting to the negotiating table. Other areas where prodding Hai
may lead to progress include the Prime Minister's Project 30
administrative reforms, Vietnam's consideration of a Customs
"single-window", and expanding USAID governance cooperation into
areas like civil society-building and broader rule-of-law.

POLICY UNCERTAINTY
------------------

8. (SBU) DPM Hai, who oversees Vietnam's energy policy, is regarded
as the most influential policymaker in Vietnam's power, mining and
industrial sectors. The energy sector has been one of the most
troublesome for U.S. investors including Chevron, ConocoPhillips,
AES and Gannon. Hai has taken a personal interest in these issues
and meets with company executives regularly. The GVN has sown
uncertainty with its ever-changing tax regime and demands for
changes in existing production sharing contracts (REF D). Many of
these policy changes, whether royalty taxes on mining, luxury taxes
on automobiles or import licensing schemes, have been introduced
this year with little discussion or lead time despite their
significant impact to the private sector. U.S. investors such as
Ford, ExxonMobil, Chevron and ConocoPhillips believe these and
similar problems are adversely affecting Vietnam's investment
climate.

CIVIL NUCLEAR ENERGY
--------------------

9. (SBU) We should use Hai's focus on energy issues to promote
increased U.S.-Vietnam nuclear cooperation (REF E). This serves two
primary purposes: furthering our international nonproliferation aims
through the creation of a safe and secure Vietnamese civil nuclear
program, and the eventual development of a market for U.S. nuclear
technology and equipment. Building on existing cooperative
agreements with the Department of Energy and the Nuclear Regulatory
Commission, Hai's planned visit to a nuclear power facility and
meetings with the Secretary of Energy and the Director of USTDA
provide opportunities to advocate for a closer relationship. For
the past several months, we have urged Vietnam to sign a broad,
bilateral nuclear cooperation MOU. We hope to have GVN approval for
Hai to sign the agreement during his meeting with the Secretary of
Energy. If not, we urge this opportunity to advocate for prompt
action.

10. (SBU) Similarly, the GVN has repeatedly indicated its interest
in participating in the Global Nuclear Energy Partnership (GNEP),
but failed to send a delegation to the recent GNEP Ministerial in
Paris. Senior U.S. interlocutors should urge Vietnamese
participation and highlight the many benefits (and no cost)
associated with joining this growing organization. Finally, we urge
USTDA to build on the Nuclear Orientation Visit it recently funded
to urge Vietnam to consider U.S. technology as it develops its
nuclear sector. (Note: Embassy Hanoi understands that Hai's TDA
meetings have not been confirmed. We have urged MoFA to ensure that

HANOI 00001251 003.2 OF 003


his schedule includes TDA. End Note.) The GVN recently announced
plans to build two nuclear power plants by 2020.

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

11. (U) Hai, 49, became a Deputy Prime Minister (DPM) in August
2007, when the number of DPMs expanded from three to five. Hai is
the youngest person ever to hold the position. He was previously
the last Minister of Industry, before it was merged with the
Ministry of Trade into the current Ministry of Industry and Trade
also in August 2007. As one of two economic DPMs, Hai has oversight
of industry, trade and investment. Although he has yet to assert
full control of these issues, he has taken direct interest in
certain investment projects, such as energy and power generation.

12. (U) Hai started as an engineer at the state-owned power company
Electricity of Vietnam (EVN), rising to CEO in 1998-2000. Hai
joined the Communist Party in the early 1990s and served in the
powerful Central Committee. He was also a member of the National
Assembly. Hai has an engineering degree from the Hanoi University
of Technology Technical, and an MBA from Trinity University in
Ireland. His B.A. was in political philosophy. Hai was born on
September 27, 1959 in Thai Binh Province on the Red River Delta.
Hai speaks fluent English and has been known to conduct official
meetings in English (which is highly unusual for GVN officials).
Third-country mission colleagues advise us that Hai is a heavy
smoker, and does not like to spend too much time without a puff.

COMMENT: A GOOD OPENING FOR CONTINUUM
---------------

13. (SBU) Comment: The Vietnamese's interest in ensuring that the
dynamic nature of our bilateral relationship is maintained under a
new administration highlights the value the GVN places on the U.S.
relations - and the notion that we have a window of opportunity to
influence change and reform in Vietnam. End Comment.

MICHALAK

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