Reference ID: 08HANOI90

Created: 2008-01-28 01:29

Released: 2011-08-30 01:44

Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY

Origin: Embassy Hanoi


VZCZCXRO2223

RR RUEHCHI RUEHDT RUEHHM RUEHNH

DE RUEHHI #0090/01 0280129

ZNR UUUUU ZZH

R 280129Z JAN 08

FM AMEMBASSY HANOI

TO RUEHC/SECSTATE WASHDC 7051

INFO RUEHHM/AMCONSUL HO CHI MINH 4183

RUCNASE/ASEAN MEMBER COLLECTIVE

RUCPDOC/DEPT OF COMMERCE WASHINGTON DC


UNCLAS SECTION 01 OF 03 HANOI 000090

 

SIPDIS

 

SENSITIVE

SIPDIS

 

STATE FOR EAP/MLS AND EEB/OIPE

USTR FOR DBISBEE AND RBAE

 

E.O. 12958: N/A

TAGS: ECON KIPR EAID EINV ETRD OTRA EIND VM

SUBJECT: ECONOMIC DEVELOPMENT AND IPR ENFORCEMENT IN VIETNAM'S CHINA

BORDER REGION

 

REF: (A) 07 Hanoi 1817; (B) 07 Hanoi 1838; (C) 07 Hanoi 2064

 

HANOI 00000090  001.2 OF 003

 

 

1. (SBU) Summary: Vietnam's mountainous northeast border region with

China has tied its economic development plans to Vietnam's growing

international trade.  Provincial governments are making the most of

their geographic advantages and reaping growth rates that exceed the

8.5 percent national average.  Lang Son province has capitalized on

its 250 km border with China to encourage trade-related services,

resulting in 11.6 percent GDP growth in the province in 2007.  Lang

Son officials are also focused on reducing the 29 percent poverty

rate through increased education and training.  Along with its

economic opportunities, the long border with China presents

challenges for local officials.  Lang Son is trying to confront

rampant counterfeit goods, most of which enter from China.  The

capacity constraints in overcoming intellectual property rights

violations this significant challenge were evident in visits to

several border gates.  Provincial authorities have taken some steps

to protect IPR, but their ultimate success rests in translating

these efforts into concrete enforcement results.  End summary.

 

2. (U) This is the latest in a series of reports (Reftels) on

provincial travel by Embassy and Consulate General personnel to

understand better the level of economic development and

competitiveness in provinces throughout Vietnam.  On January 16,

members of the Embassy economic section traveled to the mountainous

northeast province of Lang Son to discuss with local government and

national border officials the challenges and opportunities facing

the region, including combating intellectual property rights (IPR)

violations along the border with China.

 

BANKING ON TRADE FOR THE FUTURE

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

 

3. (U) The northeastern border province of Lang Son is an important

connection between southern China and Vietnam's northern economic

hubs of Hanoi and Haiphong.  The province has a 250 km long border

with China, presenting provincial officials with both economic

opportunities and significant challenges.  There are two large

international border gates (open to all international commerce and

nationals) and two national border gates (limited to only Vietnamese

and Chinese nationals and their goods) in Lang Son.  A

well-developed series of national highways connects the province

with other urban centers in the north as well as the South China

Sea.  A railway with connections to Hanoi and Beijing also runs

through the center of the province.

 

4. (U) Director of the Lang Son Trade and Tourism Department, Mr. Ha

Hong, explained that the province's economy is shifting to more

trade-related services as more imports and exports pass through this

gateway to China and Vietnam's market continues to develop.  In

2007, Lang Son had a "solid" 11.6 percent GDP growth rate, up more

than 1.5 percent from 2006.  Services account for 39 percent of the

province's GDP, matching the 39 percent contribution from

agriculture and far exceeding the 22 percent share of GDP from

industry.  Hong explained that Lang Son officials aim for services

to comprise 45 percent of the province's GDP by 2010.  They intend

to reach this goal by capitalizing on the province's location to

expand trade and cooperation with China, Japan and Korea, and other

ASEAN members.  Drawing additional investment in infrastructure

(roads, railway and expanding the border gates) will be a focus of

the province, Hong said.  Lang Son has developed a 17 square

kilometer "economic cooperation area" on the Chinese border, where

it hopes to attract local and foreign investment to conduct export

processing services.  A transit warehouse to facilitate trade

between ASEAN countries and China is already planned for this area,

Hong noted.

 

POVERTY REDUCTION A TOP PRIORITY

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

 

5. (U) Nearly 80 percent of the province's 746,000 inhabitants are

ethnic minorities.  Director Hong said that the province's per

capita annual income in 2007 was $600, compared with the national

average of approximately $870.  Poverty rates are high and 29

percent of Lang Son's population earns less than $200/year.

Provincial authorities want to reduce poverty levels to 10 percent

and eliminate the gap between the average provincial and national

per capita income in the immediate future.  Bemoaning the "limited"

national budget for poverty reduction, Lang Son officials have

directly approached businesses and foreign donors for assistance.

Hong noted that a number of NGOs from Germany and Holland are

working in the province, and that Vietnamese-Americans have returned

to the province to provide private assistance, which he estimated at

several hundred million Vietnamese Dong (100 million VND = $6,250)

in 2007.

 

 

HANOI 00000090  002.2 OF 003

 

 

6. (U) The province's poverty reduction strategy is focused on

improving education and training opportunities.  Currently, nearly

100 percent of children attend primary school, and the rate for

those attending secondary schools is "catching up" to that level,

provincial officials explained.  Lang Son has a teaching college and

is expanding training in the fields of health, economics and

practical business applications.  They are actively seeking

additional donors and partners to improve education opportunities

for local citizens.

 

LOOKING TO IMPROVE ITS LOW PCI SCORE

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

 

7. (U) Attracting foreign investment is the lynchpin of Lang Son's

future growth strategies.  The Lang Son People's Committee has

adopted several measures to bring more money into the province,

including printing brand new bilingual marketing materials touting

the province's potential and opening separate foreign direct

investment (FDI) and trade promotion centers.  Trade and Tourism

Director Hong recognized, however, that Lang Son must work to

improve the low score it received in the 2007 Provincial

Competitiveness Index (it was ranked 59 out of 64 provinces).

Several investors' recent concerns were resolved very quickly, Hong

added, and provincial officials are under mandate to continue

measures to improve and streamline administrative procedures.

 

INTELLECTUAL PROPERTY RIGHTS: CONFRONTING THE CHALLENGE

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

 

8. (U) Lang Son officials face a significant challenge in combating

rampant IPR violations, manifest in the form of counterfeit goods

entering the province from China.  While the concept of IPR is

relatively new to Vietnam, Lang Son officials understand Vietnam's

responsibility to protect intellectual property, including under its

WTO and BTA commitments, Director Hong said.  He described Lang

Son's IPR action plan, which has resulted in "good coordination"

between provincial trade, science and technology, customs and police

authorities.  Hong said that Lang Son is the first (and to his

knowledge, the only) province to create its own IPR task force, with

the Vice Chairman of the People's Committee as the Chair.  The task

force is charged with conducting inspections in the local markets

and at businesses in the province.  The success of Lang Son's IPR

task force in improving coordination on IPR has led other provinces

to come to learn from Lang Son's experiences, Hong added.

 

9. (U) Provincial authorities investigated 95 IPR infringement cases

in 2007, resulting in the issuance of 39 administrative remedies.

All of the infringing goods were destroyed, according to Director

Hong.  Motorbikes and spare parts, small electronics, motorbike

helmets, mobile phones and cosmetics were the most common

counterfeit products seized by local and national border

authorities.  Hong hastened to add that almost all of the infringing

goods were imported from China, and most "did not involve U.S.

products."  Lang Son authorities also handled more than 6,000

anti-smuggling cases in 2007, many of which were "small scale"

incidents of individuals smuggling illicit goods through more remote

border areas.

 

POLICING THE BORDER: CAPACITY CONSTRAINTS

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

 

10. (SBU) In visits to the Huu Nghi (Friendship) and Tan Thanh

border gates with China, Lang Son's capacity constraints in

combating counterfeit trade were evident.  With hundreds, and

sometimes thousands, of trucks entering Vietnam through Lang Son's

gates every month, in addition to the more than 25,000 people per

month crossing the border on foot and heavy rail traffic, customs

officials we observed had insufficient time to inspect effectively

many of the goods coming across the border.  While a Border Army

official at the busy Huu Nghi Border Gate insisted that no

counterfeit products were crossing at his station, a Tan Thanh

border gate management official offered the more realistic

assessment that fake goods, particularly electronic products, were

getting through the border gate unimpeded.  Both of them claimed,

however, that the majority of counterfeit products were entering

Vietnam at more remote and unmanned border crossings.  The Tan Thanh

official highlighted the need for more training on identifying IPR

violations for both customs and market management board officials

(responsible for monitoring goods for sale in the many marketplaces

near the border).

 

11.  (SBU) A tour of several local markets within 200 meters of the

Tan Thanh border gate further underscored that many counterfeit

electronics and other goods were making their way into Lang Son.

Imitation Apple iPods (priced under $20), digital cameras, mobile

phones (including a line of "Suny Ericssun" (sic) handhelds),

 

HANOI 00000090  003.2 OF 003

 

 

unlicensed DVDs and music discs (most with Chinese writing), luxury

handbags and high end garments (including Nike and other American

brands) were ubiquitous.  When asked about efforts to remove these

counterfeit products from the marketplace, a border official claimed

that they had difficulty telling legitimate products from fake ones,

claiming also that they needed the legitimate products as a basis of

comparison.  (Note: It was unclear whether provincial officials had

requested legitimate samples from the rights holders.)

 

COMMENT

-------

 

12. (SBU) While its long border with China is a great advantage for

Lang Son, local officials must address the weaknesses identified by

the province's low PCI score to realize fully its potential as a

gateway between the region's two fastest growing economies.  Lang

Son's development of an IPR action plan and task force to combat the

omnipresent IPR violations in the province are steps in the right

direction.  The real measure of success, however, will be the

ability of provincial authorities to translate their efforts into

concrete enforcement results.  Training and capacity building can

help.  For example, one U.S. company has had success with its

efforts to teach border officials how to identify bogus soaps and

suds.  Direct engagement by more rights holders with enforcement

authorities can be effective in clamping down on counterfeit trade.

 

 

MICHALAK