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Cablegate: Ict Reform: Will Reality Match Encouraging Words?

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

UNCLAS SECTION 01 OF 04 HANOI 000886

SIPDIS

E.O. 12958: N/A
TAGS: ECPS EINT EINV VM IPROP WTO
SUBJECT: ICT REFORM: WILL REALITY MATCH ENCOURAGING WORDS?


1. SUMMARY. Ambassador David Gross, Coordinator for
International Communications and Information Policy (CIP),
came to Hanoi February 27 for discussions on Vietnam's
telecom and ICT market. He met a Vice Minister of Posts and
Telematics (MPT), a Vice President of Vietnam's state-owned
telephone monopoly, the President of a local software
association as well as the IT Committee of AmCham Hanoi.
Discussion topics included reforming Vietnam's ICT sector,
developing Internet content, raising ICT literacy,
protecting IPR, the state of the local software and
outsourcing industry, WTO accession, and Internet governance
issues at upcoming international conferences. Gross also
advocated for Lockheed Martin on VINASAT. END SUMMARY.

2. On February 27, 2004 Ambassador David Gross, Coordinator
for International Communications and Information Policy
(CIP), met with Vice Minister Mai Liem Truc of the Ministry
of Posts and Telematics (MPT) and Vice President Bui Thien
Minh of Vietnam Posts and Telecommunications Corporation
(VNPT). Gross also met with about 20 members of the IT
Committee of AmCham Hanoi and the President of the Vietnam
Software Association (VINASA), Dr. Truong Gia Binh. Andrew
Hyde, CIP Director for Asian and Pacific Affairs, ECONCOUNS
and Econoff accompanied him.


MPT: The Non-Independent Regulator
----------------------------------

3. Gross met first with MPT Vice Minister Mai Liem Truc. MPT
regulates postal and telecommunications and related
information technology services. Vice Minister Truc, who
has met Gross at numerous international telecommunications
and technology events, received him warmly.

4. ICT REFORM. According to Truc, the recent restructuring
of MPT was a good start in Vietnam's effort to reform the
ICT sector, but he admitted much remained to be done. In 2-
3 months MPT will submit a strategic plan for the next 10-15
years to the Prime Minister. Truc believes Vietnam must
implement four basic changes to create an ICT sector that
will continue to grow; a) a good infrastructure with
widespread access, b) a diversified manufacturing base, c) a
critical mass of digital commerce and services, and d) human
resource development and societal adaptation of ICT. While
he sees government playing a role of creating a legal
framework and acting as a significant consumer, he views
enterprise as the primary enabler.

5. INDEPENDENT REGULATION. Gross urged Truc to consider
establishing an independent regulator and strong IPR
legislation as an integral part of ICT development. Truc
noted the difficulty that Thailand has experienced in
establishing an independent regulatory body, and he believes
Vietnam would have a similar result. Gross noted that this
was largely due to the slow pace of Thai reform process and
a swift reform would be most effective. Truc doubted that
Vietnam could reform swiftly enough to avoid similar
problems. Gross encouraged Truc to consider the possibility
of rapid transition and added that Vietnam's robust mobile
communications market gave it an advantage over Thailand.

6. U.S. INVESTMENT AND TRAINING. Truc requested USG
assistance in attracting greater U.S. investment. He is
very pleased with IDG's plans to invest 100 million USD in
Vietnam, but he noted the lack of U.S. investment in the ICT
service sector. There was, he noted, only one significant
U.S. manufacturing operation: the VNPT-Corning's fiber optic
plant near HCMC. Asked why investors preferred China to
Vietnam, Gross pointed out that there are no significant
United States service sector investments in China either.
MPT would like to promote Vietnam as a good springboard for
foreign investors who are interested in investing in Laos
and Cambodia, Truc said. He mentioned a long-term
commitment for investment between Comvik and VNPT worth 200
million USD signed during the recent Swedish Royal visit.
Besides increased U.S. investment, MPT is also very
interested in increasing its participation in training at
the U.S. Telecommunications Training Institute. They were
receptive to Gross' offer to coordinate an exchange with or
a visit by the Federal Communications Commission.

7. PROMOTION OF ELECTRONIC SERVICES. As part of the
restructuring that resulted from the 2002 Ordinance on Posts
and Telecommunications, MPT got complete responsibility for
promoting ICT applications in all sectors including
electronic governance, commerce, and education. Part of
MPT's strategic plan will include a road map for improving
and increasing the amount of online government services
available. Gross commended this effort noting that it will
increase transparency and reduce corruption. To further
support an increase in electronic commerce, the GVN has
encouraged banks to facilitate wider use of credit cards.
Econcouns suggested promoting prepaid cards for those who
were unable to qualify for credit. Gross lauded MPT for its
efforts to bring ICT to schools throughout the country, and
encouraged MPT to avoid managing ICT too intensively, rather
to create a framework that encourages adaptation and use of
new technology.

8. ONLINE CONTENT. Although lack of Internet penetration
is currently hindering the increase in Vietnamese language
content and opportunities to generate revenue, MPT noted the
success of VNExpress, an Internet news service with three
years of online operations. In 2003, VNExpress had 800,000
readers and over 30 million visits per month.

9. ICT LITERACY PROGRAM. Truc described a new volunteer
program designed to increase ICT literacy called "1,000,000
volunteers to teach 20,000,000 students." This five-year
project in partnership with the Youth League focuses on
educating rural youth. MPT has requested in-kind support
from several U.S. corporations such as Cisco Systems, Intel,
HP, and Sun Microsystems.

10. VINASAT. Gross asked Truc if he knew of recent
developments in the selection process for the VINASAT
procurement. Truc had originally been involved in
establishing the selection committee, but as a result of
some recent changes, he is now just a member of the
selection committee. He said the process was almost
complete and mentioned the difficulty that VNPT is having
regarding the orbital slot. VNPT's negotiations with the
Japanese government to secure a slot have been unsuccessful.
Truc said VNPT asked contractors to guarantee an orbital
slot, and that Lockheed Martin (LM) would not make such a
guarantee. Gross said that he is also concerned about an
apparent Japanese lock on orbital slots. He cautioned that
a private company could not make any guarantees about
orbital slots, and VNPT should be wary of any company that
would make such a claim. He said the USG is very interested
in this matter and would be very supportive of the project
should LM receive the bid (Note: LM has subsequently
reported renewed Vietnamese interest in their bid).

11. WTO ACCESSION. Truc also requested USG support for
Vietnam's bid to join the WTO in 2005. When Truc made this
request for support he said that MPT considers Vietnam's BTA
commitment to be a good point from which to join the WTO.

12. INTERNET GOVERNANCE. Gross also mentioned that he
hopes that the GVN will work more closely with the USG on a
variety of issues at the upcoming second phase of the World
Summit on the Information Society (WSIS) in Tunisia in 2005.
One issue of particular interest to the USG will be Internet
governance. Truc said he looks forward to the event as
well, but he made no comment indicating support or lack of
support for the USG position on this issue. However, during
his introductory remarks he did express his appreciation for
USG support of GVN resolutions at the recent ITU conference
in Marrakech.

VNPT: The Monopoly
------------------

13. VNPT and MPT TOO CLOSE FOR COMFORT. Gross met VNPT
Vice President Minh about thirty minutes after his meeting
with MPT. Instead of meeting at VNPT headquarters, a short
walk from the MPT offices, VNPT hosted Gross in the very
same reception room where he met with MPT Vice Minister
Truc. VNPT is the monopoly provider of telecommunications
services in Vietnam and dominates the market.

14. PRIVATIZATION. Although Minh avoided answering
questions about future plans for privatization, he said that
VNPT anticipates that its current market share will decrease
significantly over the next couple of years and stabilize
around 25%. Minh estimates that VNPT currently enjoys a 70%
market share. By 2010, VNPT also anticipates an overall
subscriber rate of 30-35%.

15. AREAS OF TRAINING INTEREST. In addition to requesting
increased U.S. investment, VNPT requested support to
increase the number of exchanges with U.S. companies and
training opportunities for human resource development. VNPT
is particularly interested in receiving exchanges related to
three areas; a) managerial experience, b) better
understanding of how to exploit the existing network, and c)
how to increase internet revenue.

16. BUSINESS INCENTIVES AND IPR. In his discussion with
VNPT, Gross mentioned that one way to help boost content
generation would be to create incentives for small and
medium businesses to enter the market. Gross also noted the
important role that Vietnam's young population would play in
boosting the growth of online content. It would be wise, he
observed, for the GVN and SOEs to facilitate this growth.
At several points in the discussion, Gross and Econcouns
also the need for good IPR policies. IPR was noted as
another critical factor in encouraging growth in the ICT
sector. Minh did not respond to these comments.

17. VINASAT. During the meeting with VNPT, Gross also
inquired about the VINASAT contract. Minh assured Gross
that VNPT was strictly abiding by the regulations governing
contractor selection. He also mentioned that bidders could
provide additional information during the selection process
to clarify any questions that might arise during the
evaluation process. Econcouns asked if there was anything
specific that needed to be clarified by LM, but Minh was not
aware of any specific questions about their bid. (COMMENT:
This was a very awkward exchange, and the US side was
somewhat confused by Minh's statement and demeanor. END
NOTE.)

VINASA: Software Association
----------------------------

18. VINASA is a trade association representing 78 members
most of whom are Vietnamese software companies. Dr. Binh,
the Chairman of VINASA also runs FPT, a joint stock company
with 10% equity owned by the GVN in the software and
internet services business. According to Dr. Binh, VINASA
views the ICT sector as a promising outlet for the pressure
to create employment for Vietnam's youthful population, but
several issues must be addressed for the sector to grow,
particularly the mismatch between educational curriculum and
skill requirements. Further complicating the ICT
development process is the lack of competition inherent in a
sector where the only six network service providers are
SOEs. Binh believes that the establishment of an
independent regulator and privatization are a possibility in
the future, but the reform process will move very slowly.
Furthermore, today, the pressure to reform is applied from
the top down only, and it is neither firm nor consistent.

19. SOFTWARE DEVELOPMENT AND OUTSOURCING. VINASA sees
great potential in the software development sector, but Binh
still believes that this sector lacks adequate quality
control measures. As proof of the potential, VINASA has
recorded an 80% increase in Vietnam's software outsourcing
sector in 2003. Of that growth, the percentage of
outsourcing by Japanese firms grew by 400%. In response to
questions about specialization by Vietnamese software firms,
VINASA considers most software development to focus on
construction, accounting, and other industry specific
applications. There is very little competition from other
countries for Vietnamese language software, and most SMEs
buy their Vietnamese language products from local producers.
VINASA also believes that many Vietnamese firms, especially
FPT-Soft, one of the subsidiaries of Binh's firm FPT, would
benefit from understanding how to tap into the small and
medium enterprise (SME) market in other countries. FPT-Soft
has opened an office in Silicon Valley, but they still only
have contracts with large companies such as IBM and HP.

20. ICT LITERACY PROGRAM. VINASA is also a partner of the
ICT literacy program described by MPT. Binh described
another component of this program involving the manufacture
of cheaper computers for sale to low-income households.
VINASA said the program plans to offer computers for as
little as USD 250.

21. IPR. VINASA strongly supports improved IPR legislation
and enforcement. However, Binh is not optimistic view about
the GVN approach to this issue. Although the interagency
committee for promoting ICT, Committee 58, has been
considering improved IPR legislation, they have yet to move
forward with any real developments, he said.

AMCHAM IT Committee Rebirth?
----------------------------

22. The luncheon in host of Ambassador Gross was the first
event held by the AMCHAM IT Committee in about a year. As a
result of his visit and the lunch, they resolved to resume
monthly meetings. AMCHAM Executive Director announced a new
initiative in partnership with Vietnam Television (VTV) to
produce and broadcast a thirty-minute program on IPR issues.
He did not provide exact dates but said that it would air in
the near future.

23. INVESTMENTS AND CONTRACTUAL RELATIONSHIPS. At the
AMCHAM IT Committee luncheon, Matthew Holden, Oracle's Sales
Director based in Singapore, said his company had shelved
its plans to invest in China because of the government's
handling of SARS. Oracle is looking at Vietnam as a
potential site for investment. Many companies raised the
issue of the difficulty of moving beyond consulting
relationships to long-term contractual relationships in
Vietnam. Specifically, UNISYS raised the issue of port and
cargo security operations. They are interested in providing
training to the GVN about the new requirements and
introducing them to their products that can assist with
implementing and managing security operations throughout the
delivery cycle, but they are concerned about engaging the
GVN if this investment of time and resources is not likely
to lead to a contract.
PORTER

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