Cablegate: Treasury Secretary Paulson Hosts Vietnamese Entrepreneurs

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O 110351Z SEP 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3338
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHHM/AMCONSUL HO CHI MINH 1776
RUEHGV/USMISSION GENEVA 1115
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 HANOI 002316

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STATE PASS USTR DAVID BISBEE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD OVIP VM
SUBJECT: TREASURY SECRETARY PAULSON HOSTS VIETNAMESE ENTREPRENEURS

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1. (SBU) Summary: On September 7, Treasury Secretary Paulson hosted
a diverse group of Vietnamese entrepreneurs, representing sectors
from finance to technology. The entrepreneurs spoke freely about
the difficulties they faced. Finding and retaining good personnel,
especially in the face of competition from foreign firms, was one
issue they stressed. Another was dealing with a still omnipresent
state, with its demands for excessive paperwork, monopoly power, and
an unstable and non-transparent legal system. Instability was also
a concern expressed about the still underdeveloped capital markets.
The entrepreneurs emphasized the importance of WTO accession, which
they saw as both a benefit and a challenge. In response to a
question from the Ambassador, they admitted that corruption was
Vietnam's biggest problem and asked for U.S. training to help combat
it. End summary.

2. (SBU) On September 7 during his participation in the APEC
Financial Ministerial, Secretary Paulson held a lunch with seventeen
Vietnamese entrepreneurs, representing a wide range of sectors,
including banking, investment, distribution, education, law and
technology. Most were completely private, but there was one former
state-owned enterprise, which still had 8 percent state ownership,
down from 30 percent when it was first equitized. The business
representatives were young and included men and women.

3. (SBU) The Secretary invited the guests to introduce themselves
and say something about their companies and the problems they faced.
There were a number of common themes that came out of the
discussion.

-- Skill shortages: The problem most often raised was the
difficulty of finding and retaining good workers and the need for
better education. One businessman lamented that it was hard to
attract good staff since his firm could only offer on-the-job
training, not formal training opportunities as foreign firms could.
A businesswoman noted that an important benefit of working with her
foreign partner was that it could offer her employees training
opportunities. One businessman said that keeping talented workers
was especially a challenge for small and medium sized businesses and
state owned enterprises. Another complained that employees are
shortsighted and think only of money. Other companies also noted
the importance of better training and education for the economy
generally. The Secretary pointed out that finding quality personnel
is key to businesses everywhere. Speaking about retention, he noted
that a shortsighted perspective is a universal problem, but that it
is especially prevalent in transition economies, like Vietnam's,
because people lack confidence that reforms will continue.

-- Government obstacles: Another important theme was the continued
obstacles that the government places on business and the need for
further reform. Participants urged Secretary Paulson to help
Vietnam speed up reforms and create a favorable environment for
business. Several businessmen complained about excessive paperwork.
One said it took eight official signatures to clear an article
through customs. Bureaucratic procedures created long delays for
his foreign investor clients, such as Bechtel Corporation, which is
trying to build a power plant in Vietnam, he said. An advertising
firm representative said that it took 60 days to get an advertising
license that was only good for a year. Another firm complained that
the state monopoly in the telecom hindered his business development.
Several firms noted the lack of transparency and stability in laws
and regulations. One firm said that the problem was not so much
with the laws as with implementation. Another noted that private
firms were not consulted in drafting new legislation. The Secretary
assured his guests that he raised the need to push forward with
reforms and to create a good environment for business in all his
meetings with government officials and noted that lack of
transparency and excessive regulation fuel corruption. He said that
government monopolies are always opponents of market reforms.

-- WTO Accession: Several participants stressed the importance of
WTO accession and hope that the United States will soon pass PNTR.
An investment firm representative said that WTO accession would
reduce business risk significantly because the government of Vietnam
would no longer be able to reverse its market policies. WTO rules
would also equalize conditions between foreign and domestic, private
and state-owned companies. Some firms were concerned about the
challenges they would face after WTO accession, with one participant

HANOI 00002316 002.2 OF 002

ruefully noting that if you couldn't compete now you certainly would
not be able to compete after WTO accession.

-- Capital Market Development: The firms working in finance or
investment stressed that financial markets were still underdeveloped
and unstable. The Secretary said that instability was
characteristic of new markets like Vietnam and the solution was
liberalization. A strong financial system is essential, he said,
and there is not a single example of a vibrant stock market that has
not opened up to foreign investment.

4. (SBU) After the entrepreneurs had spoken, the Ambassador
expressed surprise that no one had mentioned corruption as a
problem. His comment provoked an immediate response. One
entrepreneur said that corruption was Vietnam's biggest problem; it
hindered both foreign and domestic investment. She asked how the
United States, through training and education, could help. Another
businesswoman agreed that training and education would be useful,
but emphasized that greater transparency would reduce corruption.
The Secretary called corruption a "cruel and unfair tax" and said
that decreasing regulation and increasing transparency would help
reduce opportunities for corruption. However, while government
would have to begin the fight against corruption, it cannot do it
all. The best companies never give in to corruption, he affirmed.

5. (U) This cable has been cleared by Treasury staff.

MARINE

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