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Cablegate: Politics and Money: Vietnam and the Koreas

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 HANOI 002650

SIPDIS

SENSITIVE

STATE FOR EAP/K, EAP/RSP, AND EAP/BCLTV

E.O. 12958: N/A
TAGS: PREL PARM ETRD ECON VM KN KS SW DPRK ASEAN
SUBJECT: POLITICS AND MONEY: VIETNAM AND THE KOREAS

REF: A. Seoul 4505 B. 02 Hanoi 0932
- C. Hanoi 2617

1. (SBU) Summary: Vietnam's relationships with both Koreas
are growing. ROK-Vietnam relations are likely to continue
to expand, especially economically, while Hanoi-Pyongyang
relations will develop more slowly. Vietnamese
interlocutors are discouraged by their lack of access to or
influence on senior DPRK officials on nonproliferation or
even economic issues, despite several official delegations
to Vietnam recently to study the effects of Vietnam's
economic liberalization, including one program sponsored by
a Swedish institution. End summary.

---------------------------------------------
VIETNAM-ROK RELATIONS: FRIENDLY AND IMPROVING
---------------------------------------------

2. (U) Vietnamese Prime Minister Phan Van Khai visited South
Korea September 15-19 (ref a), and speaker of the South
Korean parliament Park Kwan Yong reciprocated with a visit
to Hanoi shortly thereafter. (Deputy Prime Minister Nguyen
Tan Dung also visited Seoul in September 2002, South Korean
then-Prime Minister Yi Han-tong came here in April 2002 --
ref b -- and President Tran Duc Luong went to South Korea in
2001.) In typical fashion, both governments proclaimed the
visits "successful" and highlighted the improving ties
between the two countries.

3. (U) Relations between the two countries are primarily
important in economic and trade spheres, with the ROK's US$4
billion worth of investments in over 400 commercial projects
making it Vietnam's third or fourth largest foreign
investor, depending on who is counting. The ROK also
contributes significant amounts (relative to what it gives
to other nations) of ODA, mostly toward poverty reduction
and infrastructure development projects. In recent years,
the ROK has also built dozens of schools in the central
provinces near the war-time DMZ where Korean forces were
concentrated, and in April 2003 the South Korean
International Cooperation Agency signed a US$28.5 million
loan to Vietnam for the construction of five plants to
produce Japanese encephalitis vaccines and provide medical
training and equipment.

4. (U) Two-way trade between Vietnam and South Korea was
just under US$3 billion in 2002, and is rising, according to
ROK Embassy Counselor for Economic Affairs Sang Hak-lee.
Sang noted that trade for the first six months of 2003 was
19 percent above 2002 levels. Investment is also growing;
the ROK ranked 8th among foreign investors in 2002, but
jumped to #3 in 2003 in Vietnam overall, and #1 in the Ho
Chi Minh City area, he noted. One major reason for this
increase, Sang explained, was the reduction of tariffs as a
result of the entry into force of the U.S.-Vietnam Bilateral
Trade Agreement, which made Vietnam a more attractive place
for Korean investments designed to produce goods for export
to the U.S.

5. (U) Dr. Ngo Xuan Binh, Director of the GVN's Center for
Korean Studies, cautioned that problems between Vietnam and
the ROK still exist, mostly in the form of investment
disputes and the treatment of Vietnamese laborers in South
Korean factories in Vietnam, as well as of the approximately
20,000 Vietnamese guest workers in South Korea. Resolving
these issues through the development of conflict resolution
mechanisms is a priority for both countries, Binh added.
Discussing these mechanisms was a primary focus of PM Khai's
visit to South Korea in September, he claimed, while
declining to comment on the outcome of those discussions.

6. (SBU) Contacts at the Japanese and South Korean Embassies
in Hanoi have separately told poloff that, in addition to
discussing investment and trade issues during PM Khai's
visit, ROK officials had asked him to recommend to his DPRK
counterparts that Pyongyang "open the door" to economic
cooperation with other countries, and to more liberal
economic development at home (a task the GVN has expressed
growing willingness to assume in recent years --ref b).

--------------------------------------------- -----------
VIETNAM-DPRK RELATIONS: EXASPERATING, BUT ALSO IMPROVING
--------------------------------------------- -----------

7. (U) The Korea Center's Binh described Vietnam-DPRK
relations as heavily one-sided; while the DPRK sent visitors
to Vietnam (apparently most often at Vietnam's expense) and
received occasional high-level delegations in Pyongyang
(including President Luong in May 2002), Vietnamese working-
level delegations were not especially welcomed in the DPRK
and senior DPRK leaders rarely visited Vietnam. North Korea
remained tightly closed, even to "natural allies" such as
Vietnam, he noted, claiming additionally that there was no
official trade with North Korea at all. (Vietnam has
donated rice to North Korea, including a US$1 million
donation announced in June 2002.) Conditions for ordinary
people in North Korea were "serious and difficult" he added.

8. (U) According to Deputy Director Pham Tien Van of the
MFA's Asia 1 Department, a ministerial-level DPRK economic
mission visited Vietnam in August 2003, led by Chairman of
the Standing Committee on Legislation of the DPRK National
Assembly Huh Miong Kyu. The Chairman and his "Parliamentary
Delegation" came to study the "legal framework of Doi Moi"
(Vietnam's economic renovation program since 1986) and some
industrial complexes, Van noted. (Note: North Korea #2 Kim
Yong-nam, head of the Supreme People's Assembly, also
visited Vietnam in February 2002.)

9. (SBU) Several North Korean delegations, both Baek and
Binh agreed, have studied the impact of Vietnam's Doi Moi
policy on the economy and society of Vietnam. Observers
have concluded that the DPRK is actively considering
liberalizing its economy, and is looking for a model to
follow. China's economy is too large and too decentralized
to offer a decent example, Baek said, while opining that the
DPRK likely sees Vietnam's economic transition as a more
practical model. Binh noted that the North Koreans have
requested that the Vietnamese not publicize the contact
between the two countries; the Vietnamese media accordingly
did not report on two important North Korean delegations in
the last six months. When asked about this lack of
publicity, the MFA's Van stated that "the press did not
cover these visits because they were only normal."

-----------------
THE SWEDISH ANGLE
-----------------

10. (SBU) Dr. Ari Kokko of the Stockholm School of Asian
Studies (also known as the European Institute of Japanese
Studies) organized a delegation of DPRK "economic experts"
that visited Vietnam in August 2003, funded by his School.
(This group was unrelated to the official delegation of
North Korean parliamentarians referred to in paragraph 8.)
The 15-day program involved twelve academic and DPRK
experts, mostly from the Pyongyang University of National
Economics, which Kokko described as "the training school for
bureaucrats and executives from State-Owned Enterprises."

11. (SBU) Kokko further explained that the program,
undertaken with the GVN's cooperation and using a South
Korean interpreter, was part of an official DPRK "three-year
experiment in market enterprises" begun in July 2002 and
designed to provide training in market-based economics to
DPRK experts. North Korea, he added, was in a "pre-Doi Moi"
situation, in which the State allowed SOEs to sell anything
they produced above-quota in a limited number of "open
markets" in Pyongyang and elsewhere, akin to what some DPRK
officials saw as parallels with Vietnam's initial stages of
economic liberalization. Dr. Kokko added that in his
discussions with officials in Pyongyang, he found that other
officials had resisted the idea of sending experts to
Vietnam because they claimed that North Korea was
significantly more economically advanced than Vietnam, a
"developing country."

12. (U) In Kokko's estimation, the August program was a
success. He noted that his institute was working with the
Swedish and DPRK governments to organize another program in
spring 2004 to last between six weeks and two months, to be
held either in Sweden or in Vietnam.

13. (SBU) Comment: Although the advantages to the economic
relationship with South Korea vastly outweigh the political
benefits of close relations with Pyongyang, Vietnam
continues to see North Korea as an ideological partner and -
the greatest of official GVN compliments - a "traditional
friend." GVN interlocutors nonetheless admit that Vietnam's
influence over North Korea on nonproliferation issues is
nonexistent, no matter how much the GVN would like to see a
nuclear-free Korean peninsula. In the medium and short
term, Vietnam will continue to welcome South Korean
investment and put up with (and often pay for) DPRK official
visits out of a sense of historical duty, as well as part of
its larger strategy since 1991 of being a friend and
diplomatic partner of all nations.
MINIMIZE CONSIDERED.
BURGHARDT

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