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### Viewing cable 04HANOI886, ICT REFORM: WILL REALITY MATCH ENCOURAGING WORDS?

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04HANOI886 | 2004-03-29 06:08 | 2011-08-25 00:00 | UNCLASSIFIED | Embassy Hanoi

`

    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

`