Tag Archives: Vietnam diplomacy

The Opportunity in Vietnam’s Spat with China

Last week’s anti-China riots in Vietnam spooked investors, rattled the stock exchanges, threatened foreign business deals, and ignited conversation about whether that the political and economic risks in that region outweigh the potential rewards.  But where some see the unraveling of peaceful co-existence in Southeast Asia, others see a golden opportunity.

Are businesses and investors over-reacting?  Consider some of the more encouraging news coming out of Vietnam this month:

  • Samsung is going ahead with expansion of manufacturing in the northern provinces of Thai Nguyen and Bac Ninh.  As a result, about 50% of its smart phones made globally will be made in Vietnam.  Already, Samsung’s factory in Bac Ninh was one of its largest worldwide, and the company accounted for $24 billion in exports from Vietnam.  The Thai Nguyen factory opened in March will employ 16,000 workers and produce eight million units per month.
  • The Saigon port welcomed the largest ship ever docked there,  a 54,000 ton vessel able to navigate the river safely thanks to a mammoth dredging project that will allow ships of this size to save $500,000 a year in transit costs.  The port projects moving 120-150 million tons by 2025.

  • The investment ministry unveiled a proposed law that will cut red tape and streamline foreign investment by eliminating certificates for many projects, simplifying procedures, ending favorable treatment of domestic investors, and improving transparency.

  • Foreign investors have been snapping up stocks that domestic investors are rushing to sell in an over-reaction to last week’s riots.  Foreigners are taking advantage of sharp drop in the VN Index, which peaked at 610 points earlier this year and fell below 530 before climbing back to 544 today.

  • McKinsey released a study concluding that ASEAN, composed of Vietnam and nine other countries, will be the world’s 4th largest economy in 2050.

Business is getting done in Vietnam.  Opportunities abound.  The ugly events of last week are not likely to lead to war in the South China Sea.   More likely, they will turn out to have been an exchange of moves in a chess game of diplomacy that will help clarify the figurative boundaries between two of the world’s fastest growing economies.

Vietnam’s Stark Choice: East or West

For decades, Vietnam has walked a tightrope between East and West, as Communist Party factions jostled over whether to align more with China or more with the US.  China’s latest aggression in the East/South China Sea escalates the skill challenge — and may even threaten the survival of Vietnam’s ruling acrobats.

Although Vietnam has an ugly history with both countries, the pro-China faction has generally prevailed in Vietnam’s government.  Vietnam has evolved as a Chinese-style state-controlled capitalistic autocracy.  China has been allowed to exploit Vietnamese natural resources.  China dominates trade between the two countries.  And China even gets favorable treatment in Vietnam’s schools that teach about the horrors of the American War but gloss over (or don’t mention) the more recent border war of Chinese aggression.

But there’s evidence this week that the dynamic may be changing.  The Chinese embassy in Hanoi was the setting for the largest anti-China protests in recent history, and the Vietnamese government permitted it.  Vietnamese officials worldwide have been loudly protesting China’s contention that it owns the South China and all the resources within it — and Vietnam’s diplomats have been working overtime to line up supporters, including the US.

Meanwhile, China may not be the biggest problem the ruling party faces in Vietnam.  A bigger problem may be its own citizenry: nearly 100 million mostly young, restless, entrepreneurial people who are increasingly enamored of Western culture, products, and political ideas.  Many of them are highly educated, blogging, Facebook-users who are watching closely to see whether their government is capable of handling China.

 

 

A Parallel Between Vietnam and Ukraine

One of the consequences of today’s crisis in Eastern Europe is the escalation of anxieties elsewhere in the world.  The situation in Ukraine has reverberated at least two ways in faraway Vietnam: (1) disrupting economic stability, and (2) raising the spectre of armed conflict in Southeast Asia.    

Vietnam’s stock market, world’s best performing in the first part of 2014, has been in a nosedive since the Ukraine crisis.  That’s partly because of conflicting views within Vietnam’s ruling party about economic health of the country; but it also reflects concern about both fragile export markets in Europe and the reliability of Russia as a long-time economic and diplomatic ally.  

Meanwhile,  people who have been watching developments in the South China Sea are wondering if Vietnam is on a path to become China’s Ukraine.  That’s not surprising considering the centuries of Chinese aggression toward its southern neighbor.

The latest Chinese assertiveness is its construction of an oil and gas exploration rig near the Vietnamese coast in South China (or East) Sea territory claimed by both nations.  State-owned PetroVietnam asked China National Offshore Oil Corp. to remove the rig — situated 120 miles East of the Vietnamese coast and within what Vietnam considers its exclusive economic zone.  China responded by repeatedly ramming Vietnamese military boats.

Until now, conflict between China and Vietnam in the sea has been limited mostly to verbal sparring over who owns the Paracel and Spratly Islands, and  Chinese harassment of Vietnamese fishing fleets.

The latest dispute highlights the increasing potential for military aggression in Vietnam’s East Sea, as Southeast Asia worries about parallels between Eastern Europe and its own region of 600 million people.

Vietnam’s Out-of-Balance Trade Balance

Vietnam’s love-hate relationship with China has been centuries in the making, and now is embodied by fierce tempers over disputed islands and soaring trade between the two countries.

Vietnam and China announced this month they aim to achieve $100 billion in two-way trade by 2017 and $60 billion in 2015.  Voice of Vietnam reports $36 billion so far this year in China-Vietnam trade — which has increased more than 20% annually in recent years.

There are at least two problems with this phenomenal growth: (1) Vietnamese consumers tend to be skeptical of Chinese products, and (2) The trade is increasingly one-way — China-to Vietnam.  

In the first nine months of this year, 80% of the trade was China exports to Vietnam.  Moreover, Vietnam’s  imports from China increased 25% over the previous year while Vietnam exports to China rose less than 3%.  

The products traded aren’t favorable to Vietnam either.  Vietnam imported more than $1 billion each in machinery, telephones, computers, electronics, cotton, and steel — while Vietnam’s exports to China are mostly raw materials.

Even even though Vietnam is a major exporter of agricultural products (mostly to Europe and the US), China’s domination in Vietnam’s domestic market is growing in export of potatoes, ginger, lemon, grapefruit, pear, apple and garlic.  Because some retailers know their Vietnamese customers don’t trust Chinese products, they’re often disguised as grown in Vietnam, Thailand, the US and Australia.

Overall, Vietnam has achieved a reasonably healthy trade balance in recent years.   How did it accomplish that?  By trade with Europe and the Americas that is as imbalanced as China’s trade with Vietnam — in reverse.  So far this year, for example, the value of US-Vietnam trade was nearly $25 billion, 82% of which was Vietnamese exports to the US.  

The out-of-balance trade balances may not be sustainable.  If nothing else, it creates a diplomatic challenge for Vietnam, which wants the West’s help in fending off China’s most aggressive export of all: military might in the South China Sea.  

Bribing a Quiet American in Vietnam

News organizations in Southeast Asia have been reporting this week that a senior officer at the US Consulate in Ho Chi Minh City has been accused of selling non-resident visas (green cards) for up to $70,000 apiece and laundering the bribes to buy real estate in Thailand and elsewhere.

Although McClatchy News Service reported about this a week ago, the case hasn’t gotten very much attention in the American media — which tend to focus their reporting about Vietnam on events that happened more than 40 years ago, or memories about them.

That may help explain why Americans tend to have a self-righteous attitude about corruption in Vietnam:  Are Americans better than the Vietnamese at keeping such embarrassments quiet?

The Bangkok Post and several Vietnamese newspapers named the alleged offender as Michael Sestak and said he has been held without bail for more than a week facing charges of conspiracy to commit visa fraud and bribery.  The media quoted a US government affidavit that alleges he received several million dollars in bribes from Vietnamese and laundered the money through banks in China and Thailand to buy real estate.

American businesses considering investment in Vietnam often express concern about corruption there — as well they should in light of Vietnam’s perennial poor showing in global corruption rankings.  But corruption is not just a Vietnam phenomenon.  It frustrates law-abiding Vietnamese citizens just as much as it frustrates Americans.

The lesson for foreign investors:  They should express their reservations about Vietnam with the humility and understanding that comes with the awareness that graft knows no national boundaries.

Vietnam’s Growing Partnerships Worldwide

Diplomats and business executives worldwide are scrambling to strengthen strategic partnerships with an eager Vietnam.  But one country seems less active than others as the competition heats up to win over the promising frontier market and capitalize on its young, educated, and entrepreneurial workforce: the USA.

Examples this month of how other countries are cooperating with Vietnam:

  • Indonesia is hosting  the Vietnam Festival in Jakarta this weekend, underscoring a transformative year that brought the first direct flights between Saigon and Jakarta, a bilateral meeting in Hanoi to cement a strategic partnership, a $5 billion bilateral trade target for 2015 (which has nearly been achieved already), and corporate partnerships such as the sale of the majority of Vietnam’s biggest cement company to Indonesia’s counterpart and Indonesia Ciputra Group’s $2 billion new city in Hanoi.
  • Uruguay has been cleared to export beef and lamb to Vietnam from 12 processing plants after the country recognized the high demand for meat in Vietnam; last year Uruguay exported nearly $1.6 billion of meat — but just $2 million to Vietnam — and that’s going to change.
  • Europe is lifting a year-old ban on the import of Vietnamese basil, sweet pepper, celery, bitter gourd and coriander as Vietnam expands its growing role as a global food supplier.
  • Russia and Belarus hosted Vietnam’s Prime Minister Dung to promote strategic partnerships, especially trade and  scientific/technological cooperation.  Two-way trade with Russia was $2.5 billion last year and with Belarus is expected to reach $1 billion by 2015.  Russia has 93 projects in Vietnam valued at $2 billion.
  • Italy hosted a Vietnamese delegation to celebrate the opening of a trade office in Tuscany, the latest in a bilateral 40-year diplomatic and trade relationship.

Every month, Vietnam continues to expand and refine its global network.  Nations and corporations that want to position themselves for the Southeast Asia market need to get and stay connected with Vietnam.

Vietnam Maps the World’s Most Dangerous Sea

Vietnam’s legislature  is considering imposing a $2,400 fine on anybody who makes a map of the country that omits two island groups in the East Sea.  That’s because several other countries claim they own some or (in China’s case) all of them.  ASEAN countries are meeting in Brunei this week to try to cool down the dispute.

The hotly contested islands are potentially rich in resources and near key shipping lanes — and that puts them on the world map as a dangerous region that seems to be moving toward a military flash point.

China claims it owns the entire South China Sea and everything in it, including the Spratleys and the Paracels.  Vietnam maps label the islands Truong Sa and Hoang Sa, respectively, and position them in Bien Dong, which (with the proper markings) means East Sea.

Maps have power.  Centuries ago, cartographers gave China the upper hand in claiming the disputed islands when they put the name of its country on maps of Southeast Asia’s Sea; today the name South China Sea dominates globes in the Western world.

Understandably, Vietnam (not to mention the Philippines, Malaysia, Japan and other countries) wants to change perception.  But regulating map-making is a clunky way to do so — for a very practical reason:  Including the Spratleys and Parcels makes Vietnam look much smaller than it is — an S-shaped strip in the upper left corner of the page.

The proposed law change, which actually would increase the fine from $50 to $2,500, apparently was inspired by discovery in a hotel last August of 11 smuggled made-in-China maps showing what Vietnam regards as incorrect boundary lines for Vietnam and neighboring China, Laos, and Cambodia.

The map caper would seem trivial it if weren’t emblematic of one of the most serious territorial disputes in the world today.  That’s why it is high on ASEAN agenda this week in Brunei, where ASEAN nations are trying to negotiate a Code of Conduct in the world’s most populous region.

Meanwhile, China is aggressively pursuing its claims — opening the largest Paracel island to tourism; expanding its military presence; and disrupting fishing and natural resource exploration.

Meanwhile, if you want a good map of Vietnam, buy it in Singapore or Taiwan.