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Cablegate: Vu Khoan Answers Questions From Heads of Mission

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





E.O. 12958: N/A


1. (SBU) Summary: Deputy Prime Minister Vu Khoan raised the
following points while answering questions from thirty
heads of mission and donor representatives at a meeting
held December 1 in preparation for the December 6-7
Consultative Group (CG) Meeting. One of the dramatic
developments in Vietnam has been the recent growth in the
power of elected bodies. Although there is an
implementation gap on policies to improve the investment
climate, the Government of Vietnam (GVN) is working to
address the issue, including by passing the Common
Investment Law (CIL). Reforms will continue as Vietnam
works towards WTO accession. Prime Minister Phan Van Khai
heads the newly created National Committee responsible for
dealing with corruption. The committee's initial focus
will be crafting an action plan to address the issues
raised in a recently released survey conducted with the
Swedish Government. The fight against HIV/AIDS continues
to be a Government priority, as is creating favorable
conditions for women in society. End Summary.

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2. (SBU) Asked by the British Ambassador what the
Vietnamese Communist Party will look like in ten years, DPM
Vu Khoan began by stating that one of the dramatic changes
that has occurred in Vietnam is the tremendous growth in
the power of elected bodies. While in the past the
Government's actions were directed by the Party, now that
power rests with the National Assembly. The Party no
longer intervenes in the actions of the National Assembly
or the affairs of the Government. Citing personal
experience, Khoan said that there is a clear distinction
between his duties as DPM and as Secretary of the Party
Secretariat. Laws and decrees now regulate his actions as

DPM, rather than directions from the Party, as was
previously the case. The Party itself is subject to the
law, he stressed.

3. (SBU) As an example of the role of the Party, DPM Khoan
cited the fight against HIV/AIDS, which is an affair of the
State and Government. The Party Secretariat issued
instructions on this issue because of the need to mobilize
the entire country in fighting the disease, but this
measure does not undercut the role of the Government. The
same approach is needed to fight against Avian Influenza,
he said.

The Financial Sector

4. (SBU) In response to the Dutch Ambassador's call for
accelerated financial sector reform, DPM Khoan said that
financial sector reforms have not kept pace with Vietnam's
rapid economic growth. Power, infrastructure and banking
are three sectors that are not meeting demand. That said,
there have been significant fiscal reforms achieved in the
past twenty years.

5. (SBU) One fundamental change is that the National
Assembly, and not the Government, now controls the State
budget, DPM Khoan said. This change is also reflected at
the provincial level, and requires better management and
oversight by legislative bodies at all levels. There is
some overlap between the banking and financial sectors, and
Vietnam needs to strengthen its State Bank. Revenues from
taxes on the private sector provide 27 percent of the State
budget's funds. This share is expected to rise to 34
percent in the next five years. Modern financing
instruments, such as portfolio investment, are now
available. But these measures are not enough to fund
Vietnam's growth. The Government recognizes that further
changes are needed, and the next five-year plan stresses
completing the transition to a market-driven economy. The
Ministry of Finance (MOF) and the State Bank have developed
guidelines on implementing financial sector reforms, and
these will be carried out.


6. (SBU) The Canadian Ambassador pointed out that investors
sometimes face difficulties in Vietnam because new policies
are often not carried out at the working level.

7. (SBU) DPM Khoan acknowledged that there is a gap between
the will of the political leadership and implementation at
the grassroots level. This problem is not peculiar to
Vietnam, he said, and the interests of local people must be
taken into account. To address the problem, the GVN has
increased the oversight role of the central authorities,
especially on the issue of law implementation. While
previously this involved only the Government, now bodies
both at the National Assembly and People's Committee levels
have been established to deal with the issue. The GVN has
tried to decentralize responsibility for implementation,
and to make local authorities responsible. To accelerate
this change, the Government plans to make a major policy
decision on local accountability and investment
decentralization, and is waiting for the National Assembly
to pass the Common Investment Law (CIL). (Note: the
National Assembly passed the CIL on November 26. End
note). Finally, the Government is trying to harmonize the
regulatory framework at the central and local levels, a
subject discussed by the National Assembly at its last

8. (SBU) The EC representative pointed out that in the
past, investment licenses required that 80 percent of the
manufactured product be exported, meaning that the exports
were not market driven and leaving Vietnam open to fair
trade remedies. DPM Khoan responded that under the new
CIL, investment licenses will not be required, and there
will be no requirement for export quotas. All enterprises,
including those already established, will operate under the

9. (SBU) The Australian Ambassador commented that although
the new CIL reflects most of the changes desired by the
private sector, concerns remain about the registration and
evaluation systems. DPM Khoan answered that Vietnam will
continue with the consultation process to meet all
concerns. He said that although the law cannot be changed,
it is possible to address the remaining issues in the
implementing regulations.

10. (SBU) DPM Khoan said that land and property issues are
some of the most complicated in Vietnam. He conceded that
although the Land Law has been repeatedly amended, more
efforts are needed to establish a viable real estate


11. (SBU) In response to a question from the Swiss
Ambassador, DPM Khoan said that there are many reasons for
Vietnam to join the WTO, including accelerating the reform
process. While the leadership is aware that Vietnam will
not be able to accede this year, the National Assembly (NA)
continues its reform work. Although some NA members
believe that this process should not be undertaken so
quickly, the Government has convinced the NA leadership to
support it in the accession effort.


12. (SBU) Noting the recently released corruption survey,
the Swedish Ambassador asked the DPM how Vietnam plans to
move forward to address this problem. DPM Khoan thanked
Sweden for its cooperation with the survey. He noted that
the study is attracting much attention in the mass media
because corruption is a concern to all members of society,
and because this was the first time that Vietnam
collaborated with another country to study an issue of such
importance. The Prime Minister leads the National
Committee responsible for dealing with corruption. DPM
Khoan said that he anticipates the new anti-corruption law
will be implemented rigorously, and that the Government
will develop a plan of action in early 2006.

--------------------------------------------- ----------

13. (SBU) Ambassador Marine expressed concern that there is
increasing complacency on HIV/AIDS prevention, and that
prevalence rates are rising. DPM Khoan responded that
HIV/AIDS prevention is still a great concern, and that it
is essential to raise awareness regarding HIV/AIDS through
public campaigns. A second measure is to provide needles
to intravenous drug users, and condoms to migrant
populations. He said 70 percent of this population already
receives free condoms. A third measure is to integrate
people living with HIV/AIDS (PLWHA) into the community,
noting that a recent exhibit on PLWHA was well attended.
He added that a pilot detox program in Ho Chi Minh City has
yielded encouraging interim results, though a more thorough
assessment needs to be done.

14. (SBU) The UNDP representative said that two critical
issues are: a recent survey that shows Vietnamese women to
be less optimistic about the future and their prospects
than men; and the poor access to schooling for migrant
children. DPM Khoan responded that he was not familiar
with the survey, but that in his opinion, the Government
has policies to prevent discrimination and create favorable
conditions for women. As an example, he said that the
ratio of women at the central and leadership levels at the
next Party Congress is expected to reach 50 percent.
Companies, on the other hand, may hesitate to hire women
because of increased costs for social benefits, especially
for married women of childbearing age. Tradition can
influence hiring decisions, and result in fewer educational
opportunities for girls.


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