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.

Vietnam’s Tired Anti-American Propaganda

CBS started a controversy last weekend when it sent Amazing Race contestants to the B-52 wreckage in Hanoi that celebrates Vietnam’s triumph over US imperialism 40 years ago.  The American Legion said the episode promoted communist propaganda and disrespected Vietnam veterans, especially the men who were shot down in the aircraft decades ago.

But there’s an irony here.  Even as the wreckage memorializes the defeat of the USA, history shows the Americans achieved their central goal there: economic freedom.

CBS showcased one of Vietnam's ugliest sights
CBS showcased one of Vietnam’s ugliest sights

Vietnam is governed by a Communist Party that doesn’t tolerate much criticism, but free enterprise, more than communism, rules the economy.  And the cold-warriors that aimed to stop the spread of communism at the China border prevailed in the end.

Today, Western tourists who visit Vietnam’s many war memorials and museums subject themselves to intense propaganda.  These sites and the high school history books demonize Americans and glorify the Communist victors.  But the message is as obsolete as the wrecked aircraft that serves as its emblem.

In fact, Vietnamese people for the most part worship American culture and technology.  As a whole, they crave the fruits of free enterprize.  Diplomatic, and even military, relations between Vietnam and the US are warm and getting warmer.

I hope Vietnam’s leaders consider getting rid of — or at least toning down — the tired, hostile propaganda the permeates their otherwise spectacularly promising country.  What purpose does it serve to provide CBS with war wreckage as a backdrop when the network should be showcasing world-class art, wildlife, cuisine, temples, commerce, and beaches?

As for CBS, here are places the network could visit to showcase the Vietnam of today — Vietnam slide show — and if the network insists on the war theme, the site pictured below would be more appropriate.  It’s one of scores of cemeteries for Vietnamese war veterans, this one in the central highlands city of Buon Me Thuot.

Powershot 1360


Terrorists, Subversives and Vietnam’s Economy

Vietnam took an important step this week toward stabilizing the political climate that undermines its global economic aspirations.  The country released and deported a popular Vietnamese American activist who had been accused of conspiring to overthrow the Communist government.

Authorities said activist Nguyen Quoc Quan, accused of terrorism when he was arrested in Saigon last April, confessed to a downgraded crime of subversion and asked for leniency to be reunited with his family in California.  The US sought his release; supporters say he is a nonviolent advocate of democratic reforms in Vietnam.

Hanoi’s action represents a significant departure from past practice:  prison terms for dissidents — sentences that inspire headlines across the world highlighting Vietnam’s human rights record.  The latest was in January when 14 political activists were sentenced to prison.

Are these cases examples of political oppression or measures necessary for national security?  Regardless of your point of view, they are bad for business.  They raise anxiety among global corporations that wonder whether their investments in Vietnam are sound and  safe.

Although Vietnam is objectively one of the best investment opportunities among the world’s frontier markets, it has serious economic challenges.  The country, especially its economy, needs positive public relations on a global scale, and freeing Nguyen Quoc Quan is a step in the right direction.  It helps defuse the still-lingering hostility between Vietnamese Americans and the ruling government of Vietnam.  And it promotes healthy Vietnam-US diplomatic relations, military cooperation and trade.

Why Vietnam’s Communists Invite Western Scorn

Just when Vietnam’s fragile economy seems to be healing and once again enticing global investors, one of its courts this week sentences 14 “subversive” writers to prison.  Predictably, the scorn of human rights groups and Western media rains on the Communist Party that runs the country.

Why does an otherwise media-saavy government subject itself to international outrage over human rights?  The obvious answers are (1) The Party is unwilling to tolerate dissension, and (2) Vietnam invites global attention to send the message to would-be subversives.

The reality is more complicated, rooted in history.  To understand what’s going on with civil rights in Vietnam, it helps to remember the mood in America right after 911.

The defendants convicted in Vietnam this week were arrested in 2011 when the government linked them to a Viet Tan, a group led by Vietnamese Americans in California.  Vietnamese authorities contend the group aims to overthrow the Vietnam government.

Human Rights Watch says Viet Tan isn’t a terrorist organization but has evolved from an anti-communist resistance movement into a group committed to peaceful political reform, democracy and human rights in Vietnam.

Vietnam Prime Minister Nguyen Tan Dung says his government is “regularly challenged by conspiracies to spark sociopolitical instability and violate our national sovereignty and territorial integrity.”

That perception helps explain Vietnam’s increasing crackdown on dissidents, including the 2011 conviction of well-known poet Cu Huy Ha Vu, the 2012 sentencing of two Catholic activists for distributing “antigovernment leaflets,” and long prison terms recently given three prominent bloggers.

No doubt this is happening in part because the current regime feels threatened and wants to stay in power.

Even so, the threat that Vietnam’s rulers perceive is not paranoia.  It is real.  Of two million overseas Vietnamese, most left their homeland to get away from Vietnam’s Communists.  Most are now Vietnamese Americans.  For some, the Vietnam War has not yet ended.  That’s why the Communist Party, in a sense, governs as if it is still at war.

Countries at war, including Western democracies, are less tolerant of free speech, religion and assembly.  They are oppressive.  Like Vietnam today, the government — and so far most of Vietnam’s citizens — value stability more than liberty.  That’s because Vietnam was at war for centuries, almost always defending itself against intruders such as China, France, and — from Hanoi’s perspective — the US.  As a people, the Vietnamese are tired of war.  They want stability.

To maintain political and social stability, Vietnam has been willing to outrage Human Rights Watch and readers of the New York Times.  And doubtless Hanoi would gladly debate which countries have more political prisoners today.