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Cablegate: Vietnam: Eb Pdas Donnelly Encourages Expanded

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



USDOC also for OTEXA

E.O. 12958: N/A

1. Summary: On September 28, EB PDAS Ambassador Shaun
Donnelly, accompanied by the Ambassador, met with Minister
of Trade Truong Dinh Tuyen and Vice Minister of Planning and
Investment Nguyen Bich Dat. In addition, PDAS Donnelly,
accompanied by ECON/C, met with Dang Van Thanh, Vice
Chairman of the National Assembly's Committee for Economic
and Budgetary Affairs (CEBA) and Nguyen Hoa Binh, Director
of the Economic Police Department of the Ministry of Public
Security. He also met with representatives of the American
business community. PDAS Donnelly encouraged the GVN to
build on the success of the U.S.-Vietnam Bilateral Trade
Agreement (BTA); conveyed strong USG support for Vietnam's
WTO accession; urged the GVN to continue to improve
Vietnam's trade and investment climate, highlighted the
importance of effective enforcement of intellectual property
rights (IPR); and pressed the GVN to support efforts to
increase U.S. exports to and investment in Vietnam. GVN
officials expressed strong commitment to international
economic integration, acknowledged the success of the BTA,
highlighted the importance of economic development to
Vietnam's security and stability, and expressed appreciation
for USG assistance in implementing the BTA through the USAID-
funded Support for Trade AcceleRation (STAR) Project. End

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BTA: A Strong Foundation for Relationship

2. In all of his meetings in Hanoi, PDAS Donnelly applauded
the success of the BTA and the growth and development of the
U.S.-Vietnam bilateral economic relationship. He also noted
that full implementation of the BTA is important for
Vietnam's WTO accession as well as for improving Vietnam's
competitiveness in expanding trade and attracting

3. National Assembly (NA) CEBA Vice Chairman Dang Van Thanh
told Donnelly the NA has paid significant attention to
implementation of the BTA and is pleased with the deepening
of the bilateral trade and investment relationship with the
United States. He expressed appreciation for U.S.
assistance on implementation, including through the STAR
Project. Minister of Trade Tuyen highlighted the importance
of security and stability for Vietnam and linked these
issues to the continued development of Vietnam's economy,
including through expansion of economic ties with the United
States. Minister Tuyen also noted that he believes the
overall U.S.-Vietnam bilateral relationship must be built on
but not limited to a strong economic relationship.

Vietnam's WTO Accession

4. PDAS Donnelly expressed strong support for Vietnam's WTO
accession to all of his interlocutors. He advised his
counterparts that USG support for Vietnam's accession,
however, does not mean the United States is willing to
compromise on accession standards. Vietnam needs to join
the WTO at world standards so it can compete with other WTO

5. Minister of Trade Truong Dinh Tuyen noted the GVN has a
short timeframe in which to meet its goal of acceding to the
WTO in 2005. He informed PDAS Donnelly that Vietnam intends
to finish its bilateral market access negotiations (bilats)
with the European Union in October and has already finished
negotiations with Chile. He also stated that the GVN is
"speeding up negotiations" with China and had concluded a
successful meeting with the Chinese a few days ago. The GVN
believes it will finish bilats with "many others" early in
2005. That said, Tuyen acknowledged that bilats with the
United States are the most important part of the accession
process and that Vietnam needs to accelerate the pace of
negotiations with the United States.

6. Minister Tuyen stated that he believes Vietnam's
accession to the WTO will be good for both countries. As
long as Vietnam is not a member, he said, "GVN policies can
change" in reaction to both reform-oriented and conservative
forces. The United States should not push Vietnam to
liberalize too much because this could make it more
difficult for Vietnam to make the right decisions regarding
WTO accession. Rather, the GVN hopes the United States will
be flexible and have "reasonable expectations." Minister
Tuyen concluded by saying that "if the United States cannot
press China, it cannot press Vietnam."

Trade and Investment Climate; Advocacy for U.S. Firms
--------------------------------------------- --------

7. At both the Ministry of Trade (MOT) and the Ministry of
Planning and Investment (MPI), PDAS Donnelly urged the GVN
to consider the valuable contributions American companies
can make to Vietnam's trade and investment climate.
Companies such as Boeing, Lockheed Martin, U.S. insurance
providers, U.S. information technology companies and others
are interested in selling to and investing in Vietnam.
Vietnam's exporters have benefited significantly from the
BTA, but the United States and Vietnam do not yet have a
balanced bilateral trade and investment relationship, he
stressed. Increasing U.S. exports to and investment in
Vietnam will play an important role in strengthening the
bilateral partnership and building support in the U.S.
Congress for Vietnam's WTO accession and permanent normal
trade relations status (PNTR).

8. PDAS Donnelly also urged his GVN counterparts to work
quickly to make Vietnam a more competitive trade partner and
investment destination. Companies can chose where they want
to invest and the GVN needs to make Vietnam a more
attractive place for potential investors. To help improve
Vietnam's competitiveness, the GVN needs to move forward on
BTA implementation and WTO accession and to move more
quickly to liberalize key sectors such as telecoms and
financial services. He encouraged his GVN interlocutors to
take "bold" steps in this direction.

9. MPI VM Nguyen Bich Dat highlighted the importance of
foreign investment to Vietnam's growth and development. He
expressed disappointment in U.S. FDI levels, noting that
although Vietnamese exports to the United States grew after
entry-into-force of the BTA in 2001 (making the United
States Vietnam's largest export market), U.S. investment in
Vietnam has not increased significantly and is not yet
commensurate with its potential. The GVN is taking steps to
improve the investment climate including: revising and
drafting key pieces of legislation; implementing BTA
commitments; speeding up the equitization of state-owned
enterprises (SOEs) particularly in sectors such as
machinery, telecommunications, petroleum and cement;
removing special privileges accorded to SOEs; opening a
stock market in Hanoi and considering allowing Vietnamese
businesses to issue bonds in foreign markets.

10. Both Trade Minister Tuyen and VM Dat responded
positively to Donnelly's message regarding the need to
improve the balance in the bilateral trade and investment
relationship. Minister Tuyen said he has urged the GVN and
Vietnamese businesses to look for ways to import more U.S.
goods. He also noted that he supports U.S. companies, such
as Boeing, that are interested in Vietnam and he knows the
GVN "has good intentions" about Lockheed Martin. VM Dat
assured Donnelly the GVN would consider carefully U.S.
companies' proposals for investment in Vietnam.


11. Throughout his visit in Hanoi, PDAS Donnelly emphasized
that strong enforcement of IPR is important to the USG and
is critical to Vietnam's efforts to attract more domestic
and foreign investment. Mr. Nguyen Hoa Binh, Director of
the Economic Police (EP), assured PDAS Donnelly that he knew
protection of IPR is an important issue for the GVN as well
as for Vietnamese enterprises. He asserted that the biggest
IPR-related concern for the GVN is the growing market for
fake products in Vietnam, rather than domestic production of
counterfeit and pirated goods. According to Mr. Binh, most
of the fake goods found in Vietnam are produced in other
countries (primarily China and other neighboring countries)
and then imported into Vietnam. Domestic production itself
is actually very small; Mr. Binh estimated its value at less
than 30 million VND (under USD 2000). (Comment: While it
is true that a significant percentage of the fake
merchandise available in Vietnam is of Chinese origin, this
figure is ridiculously low. End Comment.)

12. Binh also told PDAS Donnelly that he believes the IPR
situation in Vietnam is improving. He noted that public
awareness of the importance of protecting IPR is growing and
that the GVN has clarified and strengthened its regulations
on IPR as part of the economic integration process. In
August, for the first time, the GVN hosted a national
conference on IPR in Vietnam. Binh also revealed that the
EP had recently established special IPR task forces in Hanoi
and HCMC and plans to expand the program throughout the
country starting on October 1.

13. Binh explained that, although it is not perfect, Vietnam
does have a legal framework for IPR protection that enables
the EP to fight against IPR violations. In the last ten
years, Vietnam has investigated over 5,000 cases of IPR
infringement. However, he conceded, given that most of the
fake goods are produced outside Vietnam, it is usually
difficult for the EP to apprehend the "real violators." The
GVN has punished the people caught selling fake goods in
Vietnam with administrative fines and measures (such as the
confiscation of merchandise and equipment and revocation of
business licenses). Binh also acknowledged, however, that
the fines allowed under Vietnamese law are too low to
discourage future violations.

14. Binh expressed appreciation for the technical assistance
the STAR Project has provided the EP and urged PDAS Donnelly
to ensure that the USG continues to make assistance on IPR
enforcement a priority. Specifically Binh requested that
the USG provide additional technical assistance on IPR for
Vietnam's courts and prosecutors and for additional training
for police. He also advocated in favor of information
exchanges between the EP and their counterparts in the
United States on IPR enforcement best practices.

15. Binh characterized coordination among the GVN agencies
responsible for intellectual property rights (a total of
five agencies) as generally "good," particularly with
respect to exchanging information, training, and
investigating and prosecuting IPR violations. However, he
noted, cooperation sometimes breaks down and, on occasion,
other agencies have tried to avoid taking responsibility for
enforcement. (Comment: We believe there are large problems
with interagency cooperation on IPR enforcement, linked at
least in part to overlapping jurisdiction and lack of
training on both policy and process at the local levels.
End Comment.)

Legislative Agenda

16. Mr. Thanh, NA CEBA Vice Chairman, told PDAS Donnelly the
NA is paying more attention to the legislative process now,
with particular focus on international economic integration
and Vietnam's efforts to establish a market-oriented
economy. The NA seeks public comments on its draft
legislation and experts from the STAR project have provided
the NA with line-by-line comments on draft laws and
ordinances. According to Thanh, the NA has established a
legislative calendar through both 2010 and 2020 and hopes to
complete Vietnam's legal framework for economic reform and
integration within 20 years. The NA has passed ordinances
on countervailing duties, antidumping measures and
safeguards and hopes to finalize a law on competition, a
commercial law, and a comprehensive IPR law before the end
of 2004.

17. When PDAS Donnelly asked how the NA plans to pass all of
the laws necessary for WTO accession, Thanh explained that
the NA plans to draft individual laws. The NA has
considered but decided against following other donors'
suggestions that the NA draft "omnibus" legislation that
includes all of the changes necessary to prepare Vietnam for
WTO accession. Thanh explained that drafting individual
laws makes it easier for the NA to prioritize laws that need
to be passed urgently.

Textiles: Request for additional carryforward

18. Trade Minister Tuyen raised the issue of textiles with
PDAS Donnelly and complained about the difficulties the GVN
is facing due to limited U.S. textile quota. He said that
large U.S. companies, including J.C. Penney, Mast, Nike and
the Gap, frequently call him to ask for more quota for their
Vietnamese suppliers, but that he has none to give them.
Minister Tuyen noted that increased textile and garment
exports are good for both Vietnam and the United States
because the earnings help support Vietnam's purchase of big
ticket items such as Boeing 777's. He then asked PDAS
Donnelly to convey a personal request to USTR and the
Department of Commerce for an additional 1.8 percent
carryforward in categories 338 and 339 (on top of the eight
percent allowed in the bilateral textile agreement.)
Minister Tuyen said the Vietnamese Embassy in Washington
would be making a formal request to relevant USG agencies.
According to Minister Tuyen, the request amounts to about
300,000 dozen T-shirts and will prevent Vietnamese shipments
from being turned away at U.S. ports. (Note: Post received
a fax copy of MOT's written request for additional
carryforward on September 30. See Hanoi 2697 for text. End

Outreach to American Business Community

19. At a lunch hosted by the Ambassador, representatives of
International Data Group (IDG), Ford, American International
Group (AIG), Citibank, General Electric, Microsoft, New York
Life and Ace-INA International shared their perspectives on
doing business in Vietnam and priorities for WTO accession
with PDAS Donnelly. The primary concerns raised by the
business community included: speeding up liberalization of
financial services (issuance of insurance licenses, raising
the cap on foreign participation in joint stock banks to at
least 51 percent, addressing the issue of nonperforming
loans issued by state commercial banks, eliminating the
limited validity of the licenses issued to foreign banks,
reducing capital investment requirements for bank branches,
and advancing the implementation of the BTA obligation to
allow U.S. banks the right to issue credit cards); delaying
the implementation of an increase in the special consumption
tax on autos set to go into effect on January 1;
transparency; corruption; and IPR enforcement.

20. Comment: PDAS Donnelly's visit afforded an important
opportunity to reiterate USG support for Vietnam's WTO
efforts, to broaden the range of GVN officials with whom we
address important trade and investment issues and to take a
fresh look at American business community concerns about
impediments to investment in Vietnam and priorities for
Vietnam's WTO accession. We believe the Economic Police's
agreement to meet with PDAS Donnelly and participate in a
dialogue on IPR problems in Vietnam is a direct benefit of
the good will generated by STAR's technical assistance to
the EP as well as EP Director Binh's recent meetings with
Department of Justice officials and Econoffs on the margin
of the APEC Cybercrime Convention in Hanoi. End Comment.

20. (U) EB PDAS Donnelly cleared this cable.


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