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Cablegate: Senator Hagel Meeting with Vietnam Finance Minister Vu Van

VZCZCXRO7855
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHHI #2619/01 2860132
ZNR UUUUU ZZH
R 130132Z OCT 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 3684
INFO RUEHHM/AMCONSUL HO CHI MINH 1975
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGV/USMISSION GENEVA 1135
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 HANOI 002619

SIPDIS

STATE FOR EAP/MLS AND EB/TPP/BTA/ANA
STATE PASS USTR DAVID BISBEE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ENRG OVIP EIND EINV VM
SUBJECT: SENATOR HAGEL MEETING WITH VIETNAM FINANCE MINISTER VU VAN
NINH


HANOI 00002619 001.2 OF 002


SENSITIVE - DO NOT POST ON INTERNET

1. (SBU) Summary: Senator Hagel met with Finance Minister Vu Van
Ninh on October 6 to discuss Vietnam's economy and financial system.
During the meeting Minister Ninh stressed that Vietnam aims to join
the WTO as soon as possible and that it appreciates the support from
the U.S. administration and U.S. Congress in the upcoming Permanent
Normalized Trade Relations (PNTR) vote. Ninh added that the energy
sector is very important to Vietnam's development and the Government
of Vietnam (GVN) has developed an energy strategy to better exploit
these resources. Ninh assured Senator Hagel that Vietnam also
understands the importance of reforming its banking and financial
sectors. On infrastructure, Ninh said Vietnam's infrastructure
requires "huge" amounts of capital, most of which will have to come
from foreign investment. He admitted, however, that lengthy
administrative procedures often hold up decision making and that
international investors have concerns in this area. The government
is working hard to address these and other concerns, specifically by
taking steps to stem corruption. Over the next 20 years, Ninh
predicted, high-tech, agriculture and marine exports will be areas
of especially strong growth for Vietnam. End Summary.

2. (SBU) On October 6, Senator Chuck Hagel (R-NE) engaged Vietnam
Finance Minister Vu Van Ninh in a cordial, but substantive,
discussion of the challenges facing Vietnam's economy and financial
system. The Senator was accompanied by the CDA, professional staff
Rexon Ryu, military escort Lieutenant Colonel Gregg Olson, control
officer and Embassy notetaker. Ninh's comments were in response to
the Senator's direct questions.

3. (SBU) WTO and PNTR: Ninh said Vietnam aims to join the WTO as
soon as possible and that the country appreciates the support from
the U.S. administration and U.S. Congress in the upcoming Permanent
Normalized Trade Relations (PNTR) vote. The GVN is greatly
concerned about the PNTR vote as Vietnam hopes to obtain PNTR by the
time President Bush arrives in November. "This is a very important
time to bring the U.S.-Vietnam relationship to new heights," he
said, adding that "we need financial support and investment to
expedite reforms."

4. (SBU) Addressing Vietnam's energy needs: Energy development is
important to Vietnam's development and the Government of Vietnam
(GVN) has created an energy strategy to exploit its resources, he
said. The GVN is channeling significant resources from the budget
to develop thermo- and hydro-electric plants and is working closely
with foreign investors to exploit oil and gas. The country is also
building a new refinery so that not all of Vietnam's oil will have
to be exported. Ninh said Vietnam is seeking greater amounts of
U.S. investment and urged Senator Hagel to encourage energy
investment, particularly because Vietnam needs technology transfers.
Such transfers will be important if Vietnam is to meet its goal of
graduating from the list of less developed countries by 2010, he
said.

5. (SBU) Banking reform, North Korea: Vietnam understands the
importance of reforming its financial sector as it develops the
economy, Ninh said. The GVN has begun banking reforms with the help
of the United States, and a U.S. delegation just conducted a finance
reform training program at the Ministry of Finance. (Note: Ninh was
likely referring to a U.S. Treasury Department assessment team on
banking reform that visited earlier in the week. End note.) The
development of Vietnam's capital markets and banking sectors were
"very important and a great challenge," he said. On the
restructuring of state-owned banks, he added, the GVN plans to
implement reforms that would align management, monetary, and credit
policies with market economy principles. The GVN will also allow
joint stock and private banks to operate in order to increase
competition and encourage growth. Many reforms remain in completed,
however, particularly those involving the equitization of
state-owned banks. Foreign investors will be able to participate in
the management of banks via this equitization, he added. In regard
to Vietnam's cooperation in blocking North Korean financial
transactions, Ninh expressed the GVN's full commitment to meeting
its international obligations on halting the proliferation of WMD.


6. (SBU) Infrastructure development: Vietnam has an enormous need
for infrastructure development and this infrastructure requires

HANOI 00002619 002.2 OF 002


"huge" amounts of capital, Ninh said. While Vietnam has invested
seriously in infrastructure, there is much room for improvement.
The GVN has a general strategy for infrastructure development for
2010 and 2020. To finance this development the GVN plans to
mobilize resources from foreign and domestic investment in addition
to concessionary loans from international donors. For this reason,
the GVN holds consultative meetings with donors every year to
coordinate aid. In response to Vietnam's needs and as a result of
this strong coordination, the amount of overseas development
assistance that Vietnam receives increases every year, he added.

7. (SBU) Streamlining government decision-making: Ninh admitted
that the length of and lack of transparency in administrative
procedures are a problem and a great concern to international
investors. The National Assembly (NA) is working to pass
legislation that creates a more transparent investor environment in
Vietnam and the Prime Minister has recently signed a decree
instructing government agencies to review and eliminate unnecessary
procedures and licenses with an aim toward increasing government
transparency, he said. The Prime Minister sits down annually with
foreign investors to receive their feedback directly. Further, the
GVN recently established a National Commission on administrative
reform. Efforts to improve governance also extend to
anti-corruption measures, Ninh noted. The NA has passed a law on
anti-corruption, mismanagement and theft of government assets which
holds the heads of government agencies accountable for wrongdoing
within their organizations. The Prime Minister also signed a decree
last month to this effect. Taken together, these measures will help
streamline government decision making, stem corruption and create an
enabling legal environment for business in Vietnam, Ninh said.

8. (SBU) Areas for growth and observations about foreign investment:
Ninh asserted that over the next 20 years he saw particular growth
opportunities for exports in the high-tech, agriculture and marine
product sectors. Intel's recent decision to build a manufacturing
facility in Vietnam was of great significance because it would
attract other foreign investors and provide hi-tech training.

9. (U) This cable has been cleared by Senator Hagel's staff.

ALOISI

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