EXECUTIVE SUMMARY
- In a bid to offer a counter narrative to Western media, China has cranked up its efforts to propagate its own views on various fronts abroad. Armed with ample resources and muscular capacity, Beijing has orchestrated a well-coordinated campaign to shape narratives on platforms such as Twitter, Facebook and YouTube. It also marshals different sophisticated methods such as the use of an army of fake accounts to amplify the narratives dictated at home.
- But where Vietnam is concerned, China has found it challenging to sway the local media and information landscape. Several factors account for this, including the entrenched anti-China sentiments within Vietnam, the ownership, control structure and censorship of the Vietnamese media, and characteristics of Vietnam’s social media landscape that are not conducive for China’s efforts to weaponize Twitter, which is otherwise its main platform for online messaging.
- Facebook has thus become the platform of choice for China to shape its online messaging and to conduct its public diplomacy engagement efforts in Vietnam
- In comparing Facebook posts by the Chinese embassy and consulate with the U.S. embassy and consulate over a seven-month period, several intriguing observations emerge. A key tenet of China’s public diplomacy efforts in Vietnam has been to peddle anti-America narratives. Meanwhile, the U.S. has been more inclined to highlight issues such as education and culture. Also, whenever Washington did trade verbal barbs with Beijing on social media, the former often prevailed, as Vietnamese public sentiments show.
- Findings from the comparative analysis of all those Facebook posts suggest that it would be a risky bet for China to continue dialling up its blistering anti-America indictment in Vietnamese cyberspace, even when it adopts a more engaging approach to communicate its messages. By and large, the Vietnamese public shows a tendency to appear more receptive to U.S. narratives.
* Dien Nguyen An Luong is Visiting Fellow with the Media, Technology and Society Programme at ISEAS – Yusof Ishak Institute. A journalist with significant experience as managing editor at Vietnam’s top newsrooms, his work has also appeared in the New York Times, the Washington Post, the Guardian, South China Morning Post, and other publications. The author would like to thank Ms Lee Sue-Ann and Dr Le Hong Hiep for their constructive comments and suggestions.
INTRODUCTION
As the U.S.-China rivalry for global public opinion heats up,[1] Beijing has constantly had to walk a very fine line between toughing out Western criticism and sprucing up a “credible, lovable and respectable” image.[2] That undertaking means China has to placate a nationalist domestic audience while avoiding estranging foreign supporters abroad.
In 2009, China reportedly began to pump billions of dollars into boosting its global state media presence.[3] The ultimate goal is to shape a narrative in foreign countries that benefits China. 2013 was considered a critical juncture as President Xi Jinping launched a multi-pronged campaign designed to “tell China’s story well” globally.[4] Xi has also since then stressed that China needs to “increase [its] soft power, give a good Chinese narrative, and better communicate China’s messages to the world.”[5]
But in recent years, China’s authoritarianism, its treatment of the Uyghurs, its crackdown on dissent in Hong Kong, and the Covid-19 pandemic have all combined to send global views of Beijing plummeting to unprecedented lows.[6] This is the context in which China has doubled down on its efforts to propagate its own version of the story on various fronts in a bid to offer a counter narrative to Western media. That was reiterated in a speech Xi made in early June where he stressed that China needed to build a “credible, lovable and respectable” image abroad, adding that the country was engaged in a “public opinion struggle.”[7]
As part of the state-orchestrated campaign to “tell China’s story well” to the world,[8] a bevy of Chinese diplomats, state media outlets and academics have become increasingly vocal and frequent in defending China’s policies in cyberspace. They have focused on excoriating the ills and double standards in the U.S. and its allies, and pushing back against what is perceived to be Western prejudices and stereotypes of their country. Such “Wolf Warrior” diplomacy, named after two Rambo-style Chinese box offices,[9] has drawn widespread ire for what critics call an abrasive, defiant and combative approach. The message is crystal clear, however: China is set to take up the gauntlet of standing up to the U.S.
But perhaps beset by hubris, China has blended its domestic and foreign propaganda policies even though the target audiences could not be more different. The blistering anti-America approach appears to be working well at home, but whether it sells abroad is another story. That question looms all the more large in Vietnam, where one poll after the next have shown that Washington is favoured over Beijing.[10] In that context, even though its criticism of the American agenda is not always utterly groundless, China’s messages risk being a hard sell in Vietnam.
This paper addresses these questions: How has Beijing propagated its narrative in a country where anti-China sentiments have not only permeated public discourse but are also deeply embedded in the Vietnamese psyche?[11] How receptive are social media-savvy Vietnamese netizens to China’s online messaging, compared with U.S. online messaging? What observations can we make of China and U.S. online public diplomacy strategies in winning over the hearts and minds of Vietnamese?
HOW CHINA SELLS
It is social media that has become China’s key battlefield for public opinion. Beijing’s propaganda machine has sought to make the most of Western media platforms, which are otherwise banned at home, to telegraph and amplify its official line on global affairs and current events to a broader international audience.[12] Such manipulation of online discourse has become more or less institutionalized with Twitter, Facebook and YouTube becoming China’s platforms of choice since 2017.[13] China’s global propaganda machine has functioned around this modus operandi: The party line dictated by the Ministry of Foreign Affairs and state media outlets is picked up and spread by Chinese diplomats and diplomatic missions around the world.
China has been able to deliver some results on both the mainstream media landscape and the cybersphere. Two surveys by the Brussels-based International Federation of Journalists attest to how China has significantly escalated its global media outreach. According to the first survey which was released in 2020, a total of 58 journalist unions polled from 58 different countries said the most widely reported form of Chinese outreach was journalistic exchanges and training schemes.[14] Those programmes were overwhelmingly described as “a positive experience.”
The other survey, released last May, also found journalist unions in more than half of 50 different countries confirming that coverage of China in their national media had been more positive since the start of the Covid-19 pandemic.[15] In other words, as the pandemic started to spread, China marshalled its existing media dissemination channels in developing countries to burnish its image as a reliable partner there. That mission has been accomplished apparently with a sleight of hand, however. According to the latest survey, besides propaganda, China has also sought to cultivate and shape its own narratives through the use of new tactics such as disinformation and misinformation. Many pro-China pundits have also raised hackles for allegedly resorting to conspiracy theories or disinformation to peddle Beijing-sanctioned narratives. To China and its cheerleaders, in the battle to massage public thinking, “relying on logic and facts does not always work.”[16]
Such dynamic came to the fore in cyberspace.A seven-month investigation by the Associated Press and the Oxford Internet Institute found thatan army of fake accounts have been most active in retweeting Chinese diplomats and state media to the tune of “thousands of times.”[17] In doing so, those accounts have played a crucial role in amplifying China’s propaganda to an audience that could reach the size of hundreds of millions. More importantly, they did so without necessarily divulging that the content is state-sponsored. According to the joint study, the investigation marked for the first time the large-scale inauthentic amplification that has “broadly driven engagement across official government and state media accounts.” Key issues that Beijing sought to highlight to sway public opinion included its core strategic interests such as Taiwan, Hong Kong and Xinjiang.
But against that backdrop, Beijing’s recipe for success elsewhere could risk turning out to be a debacle in Vietnam, where anti-China sentiments have percolated and been amplified in public discourse.
IS THE VIETNAM PUBLIC BUYING IT?
In fact, anti-China sentiments have thwarted Beijing’s repeated attempts to shape its narrative in Vietnam’s mainstream media, according to a 2020 study by the Washington-based Center for Naval Analysis.[18] The reasons: Anti-China sentiments, compounded by a “hostile media environment” that was fuelled chiefly by historical Sino-Vietnamese conflicts, contemporary grievances and a genuine lack of public interest in Chinese propaganda, have blunted the promotion of China’s narratives in Vietnam, according to key findings of the study. Vietnamese authorities sometimes even calibrated media coverage to exhibit a harder stance on China with regards to maritime territorial disputes, the study said.
Deep anti-China sentiments aside, another stumbling block to China’s efforts to shape the media environment in Vietnam is ironically the structural similarities between the two ideological allies. Internet censorship, strict media controls and ownership limitations have shut major avenues for Chinese companies to penetrate the Vietnamese market. Chinese-language editions have been subject to state control and censorship. Government policies and regulations have neutered China’s largesse, weaponized in many other countries to sway editorial decisions and agendas. Licensing requirements have also constrained the number of foreign journalists and media bureaus – Chinese included – in the country. In a nutshell, China’s playbook is more limited in Vietnam than elsewhere.
In the online sphere, while much of Beijing’s “Wolf Warrior” diplomacy has played out on Twitter,[19] Vietnam’s social media landscape has throttled China’s efforts to weaponize the platform to propagate its messages. Various statistics confirm that Facebook, Google’s YouTube and Zalo have been the most popular social media platforms in Vietnam.[20] (Zalo is Vietnam’s premier chatting app, launched in 2012 and currently boasting around 64 million users.[21) In that context, Facebook has become the only remaining platform available for China to shape its online messaging in Vietnam.
U.S.-CHINA RIVALRY FOR PUBLIC OPINION ONLINE
Like Chinese diplomats, the U.S. diplomatic corps has also turned to Facebook, which has between 60 to 70 million active users in Vietnam,[22] as the main venue for engaging with the Vietnamese public. This section examines the issues and key messages that the U.S. and China have telegraphed to the Vietnamese audience in the online sphere by analysing the contents of all posts on the Facebook pages of both diplomatic missions during the first seven months of this year. It also examines how receptive the Vietnamese public has been to such public diplomacy efforts by both superpowers. The topics of discussion are classified into five categories: Diplomacy & Politics, Economy & Trade, Education & Culture, Recruitment, and Vaccine Diplomacy.
An analysis of those Facebook posts and their public engagements suggests the following characteristics:
- Between January to July, the U.S. embassy and consulate had a total of 1,155 posts covering five topics, nearly double those on the Facebook pages of the Chinese embassy and consulate (601).
- China’s public diplomacy narratives in Vietnam have mostly peddled anti-America messages, focusing on reinforcing centrally directed messages from the Ministry of Foreign Affairs and state news outlets. Meanwhile, the U.S. employed a different tack, focusing less on U.S.-China tensions than on promoting a range of other issues with the Vietnamese. But when Washington did trade verbal barbs with Beijing on social media, the former often prevailed, going by Vietnamese public sentiments.
- The dominant theme the U.S. sought to highlight was Education & Culture, accounting for 68% of the total number of online posts. On the other hand, Diplomacy and Politics makes up the major chunk (64%) of the total number of China’s Facebook posts (Figure 1).
- But even though the U.S. generated the most content on Education & Culture issues, public eyeballs lay elsewhere. An analysis of the top three most-engaged posts during the seven-month period showed that Facebook posts by the U.S. that attracted the most attention belonged to the Diplomacy & Politics category. Interestingly, public engagements zeroed in on the very theme China sought to propagate its narratives on: the anti-American trope.
The focus on the Education & Culture theme crystalizes how the U.S. has sought to cash in on its soft power to win public hearts and minds in Vietnam, a move that dovetails with facts on the ground. One poll after the next has attested to the strong positive sentiments among Vietnamese toward the U.S. and its image – no matter who the U.S. president is. For instance, while – according to a 2017 Pew survey[23] – the image of the U.S. deteriorated sharply across the globe during the first year of the presidency of Donald Trump, popularity ratings only increased in Vietnam and Russia.
That positive perception has barely changed. The desire to live, study and settle down in the U.S. has remained palpable among ordinary Vietnamese. According to most recent data from the U.S. Student and Exchange Visitor Program, Vietnam had sent nearly 26,000 students to the U.S., ranked fifth among countries with the most students at American educational institutions.[24] This has enabled Vietnam to distinguish itself from Southeast Asian peers to be the top source of students in the region for the U.S.. Vietnamese, along with the Chinese and Indians,[25] have formed the biggest chunk of applicants for the EB-5 visa scheme, which offers foreign investors a fast path to a green card by investing at least $500,000 to finance a business employing at least 10 American workers. Meanwhile, Vietnamese megacities such as Hanoi or Ho Chi Minh are awash with Americano-philia: A get-together at Starbucks or an overnight queue just to get the latest iPhone version is considered emblems of chic Americanism and a tech-savvy lifestyle.
FIGURE 1. KEY THEMES PROMOTED ONLINE BY THE U.S. AND CHINA
That is the context to which U.S. online messaging hones in on how crucial a role education and culture can play in boosting bilateral ties. The “master narrative” comprises three key messages:
- The United States is a prosperous, democratic and modern country, buttressed by a developed economy and an advanced education system.
- The U.S. provides ample resources and opportunities for those who seek to hone their soft skills or further their studies in the States. America has always played an instrumental role in helping Vietnamese youth compare notes with their peers from all over the world on various fronts.
- Educational and cultural exchanges have proven to be and will always be a welcome and useful bridge between the U.S. and Vietnam.
But based on the analysis of the top three most engaged Facebook posts by the U.S. from January to July this year, it was the category of Diplomacy & Politics that attracted the most public attention. The engagements in the Education & Culture category even trailed behind Recruitment (Figure 2).
FIGURE 2. MOST ENGAGED FACEBOOK POSTS BY THE U.S.
While the contents on the Facebook pages of the U.S. embassy and consulate have been almost identical, that is not the case when it comes to how China has allocated its resources for online messaging. Since last year, the Chinese embassy has refrained from posting provocative statements that are vulnerable to popular backlash. Meanwhile, the Chinese consulate has made the most of satirical illustrations, parodies, memes and sarcastic language to practice “whataboutism” to serve a dual purpose: defend China’s official line and castigate the American agenda. Practically, “whataboutism” means “raising a supposedly analogous issue in response to a perceived hypocrisy or inconsistency.”[26] This tactic is part and parcel of a uniform bandwagon that Chinese officials have jumped on to deflect Western criticism.[27]
Several prominent issues in which Beijing looked to hammer home the party line and ramp up condemnation of the U.S. and its allies include: (i) China’s stance on the U.S. presidential election,[28] (ii) China seizing on the mob attack at the U.S. Capitol on January 6 to mock America’s support of global protest movements including those in Hong Kong in mid-2019,[29] and (iii) China bristling at U.S. criticism of its treatment of Uyghurs in Xinjiang.[30] The “master narrative” of those posts consists of three key messages:
- On the world stage, China is a more responsible and constructive player than the U.S., including in the fight against Covid-19.
- It is the U.S., not China, that has been the purveyor of most humanitarian disasters with its “aggressive wars” and military interventions over many decades.[31]
- America’s domestic and foreign policies are a travesty of what it has been trying to preach to the rest of the world about freedom, dignity and human rights.[32] The U.S. does not have the qualification to lecture China from a position of strength.[33] Neither do its allies.
The Diplomacy & Politics category also elicited the most online engagements from January to July. (Figure 3)
FIGURE 3. MOST ENGAGED FACEBOOK POSTS BY CHINA
Based on an analysis of the degree of public reactions to all Facebook posts by the U.S. and China during the January-July period, two key takeaways are distilled (Figure 4):
- The Chinese embassy incurred the most “Angry” emojis while its consulate had the most “Haha” ones, even though they both sought to propagate the same narratives. One possible explanation for this discrepancy perhaps lies in the fact that the online messaging employed by the Chinese consulate was more engaging to social media-savvy users.
- The U.S embassy and consulate attracted the most “Love” emojis, suggesting the public found their messages more appealing than those from their Chinese counterparts.
FIGURE 4. Public reactions to U.S. and China’s online messaging
When both countries seek to burnish their vaccine diplomacy campaigns on Vietnamese cyberspace, the U.S. beat China by a wide margin in terms of positive public reactions, emblematic of how the Vietnamese public prizes American vaccines over Chinese shots.[34] Such sentiments were reflected in an analysis of Facebook posts and their average engagements on vaccine diplomacy which were among the most engaged content from January to July (Figure 5).
FIGURE 5. PUBLIC SENTIMENTS ON U.S.-CHINA VACCINE DIPLOMACY
A BITTER PILL FOR CHINA
Findings from the comparative analysis of Facebook posts suggest that it would be a risky bet for China to continue dialling up its blistering anti-America indictment in Vietnamese cyberspace. Souring Sino-Vietnamese ties in recent years, fuelled chiefly by Beijing’s muscle-flexing moves in the South China Sea[35] and its damming of the Mekong River,[36] has exacerbated anti-China sentiments in Vietnam. This dynamic has whetted Vietnam’s appetite for closer defence and economic ties with the U.S..[37] Poll after poll have also corroborated that the Vietnamese public overwhelmingly favour Washington as a hedge against Beijing. In the State of Southeast Asia 2021 survey, published in February by Singapore’s ISEAS – Yusof Ishak Institute, Vietnamese – along with Filipinos – register the most palpable levels of distrust toward China in the region.[38] Those who distrust China think Beijing could wield its economic and military power to threaten their country’s interests and sovereignty. According to the same survey, Vietnamese are most leery of China’s growing strategic clout, yet most supportive of American influence in Southeast Asia.
Two waves of online backlash against China’s anti-America narrative in Vietnamese cyberspace last year are likely to have served as a bitter pill for Beijing to swallow.
In July 2020, the Facebook page of the Chinese embassy in Hanoi caused an online stir after posting a note from the Global Times editor Hu Xijin, sternly warning Vietnam not to side with the U.S. to contain China.[39] In the note, which appeared on the occasion of the 25th anniversary of U.S.-Vietnam bilateral ties, Hu minced no words in pointing to the U.S.’s “malicious intent” on pitching Hanoi against Beijing. The note also reminded the Vietnamese people of how the U.S. could pull the rug out from under Vietnam’s feet. In the wake of a public furor, the note was soon taken down.[40]
In what amounted to an ideological confrontation four months later,[41] the U.S. and China posted statements that accused each other of destabilizing the global order on the Facebook pages of their respective embassies.[42] What stood out was how the online community reacted to the diplomatic brickbat. In the comment sections of those Facebook posts, those who appeared to be Vietnamese Internet users overwhelmingly cheered on the U.S. statement while sneering at China’s response to it. This was reflected in the most-used keywords in all comments on both Facebook posts. Online reaction to the U.S. post centred on either pro-America or anti-China sentiments, such as “God bless America”, “Thank you, President Trump”, “China is the nightmare of the world” or “[China] robbed Vietnam of its islands.” Meanwhile, China-bashing comments dominated the online response to the Chinese statement, such as “No one believes in China”, “China is a hypocrite” or “China, shut up.”
A “LOVEABLE” CHINA IN VIETNAM? NOT SO FAST
China is unlikely to dial back its nationalistic rhetoric on foreign policy, for various reasons. Chief among them is that any effort to do so could be crippled by the nationalist fervour at home. In a speech that marked the centenary of the founding of the Chinese Communist Party on July 1, Xi Jinping reiterated that the country would not back down from any fight where China’s sovereignty and interests were threatened, warning against “foreign forces” that stand in the way.[43]
But as this study has shown, China might at some point wish to tone down its “chest-thumping” stance, as this seems to have been counter-productive at least where the Vietnamese audience is concerned. When it comes to the goal of making its image more “loveable” in Vietnam, it seems that Beijing still has a long way to go.
ISEAS Perspective 2021/109, 17 August 2021
ENDNOTES
[1] Teddy Ng and Laura Zhou, “US-China infowar escalates as America deploys task force in battle for power and influence”. South China Morning Post, 4 May 2021. https://www.scmp.com/news/china/military/article/3132184/us-china-infowar-escalates-america-deploys-task-force-battle
[2] “Xi Jinping calls for more ‘loveable’ image for China in bid to make friends”. BBC News, 2 June 2021. https://www.bbc.com/news/world-asia-china-57327177
[3] Danson Cheong, “The art of making China lovable”. The Straits Times, 21 June 2021. https://www.straitstimes.com/opinion/the-art-of-making-china-lovable
[4] J. Szczudlik, “‘Tell China’s Stories Well’: Implications for the Western Narrative,” Pol. Inst. Int. Aff. PISM, vol. 9, no. 169, p. 11, 2018.
[5] Wilson Center, “China’s Soft Power Campaign”, 2020. https://www.wilsoncenter.org/chinas-soft-power-campign
[6] Charissa Yong, “Global views of China remain negative, but Singapore an exception”. Straits Times, 1 July 2021. https://www.straitstimes.com/world/united-states/global-views-of-china-remain-negative-but-singapore-an-exception
[7] Xi Jinping calls for more ‘loveable’ image for China in bid to make friends”. BBC News, 2 June 2021. https://www.bbc.com/news/world-asia-china-57327177
[8] “China’s Xi urges state media to boost global influence”. Reuters, 19 February 2016. https://www.reuters.com/article/us-china-media-idUSKCN0VS1IF
[9] Katsuji Nakazawa, “China’s ‘wolf warriors’ take aim at G-7”. Nikkei Asia, 13 May 2021. https://asia.nikkei.com/Editor-s-Picks/China-up-close/Analysis-China-s-wolf-warriors-take-aim-at-G-7
[10] Mengzhen Xia and Dingding Chen, “China and the US: Who Has More Influence in Vietnam?”. The Diplomat, 21 May 2021. https://thediplomat.com/2021/05/china-and-the-us-who-has-more-influence-in-vietnam
[11] Charles Dunst, “Chinese aggression pushes Vietnam ever closer to Washington”. Nikkei Asia, 6 April 2021. https://asia.nikkei.com/Opinion/Chinese-aggression-pushes-Vietnam-ever-closer-to-Washington
[12] Z. A. Huang and R. Wang, “Building a Network to ‘Tell China Stories Well’: Chinese Diplomatic Communication Strategies on Twitter,” Int. J. Commun., vol. 13, p. 24, 2019
[13] Erika Kinetz, “Army of fake fans boosts China’s messaging on Twitter”. Associated Press, 29 May 2021. https://apnews.com/article/asia-pacific-china-europe-middle-east-government-and-politics-62b13895aa6665ae4d887dcc8d196dfc
[14] International Federation of Journalists, “Telling China’s Story: Reshaping The World’s Media”, 2020. https://www.ifj.org/fileadmin/user_upload/IFJ_ChinaReport_2020.pdf
[15] International Federation of Journalists, “The Covid-19 Story: Unmasking China’s Global Strategy”. 2021. https://www.ifj.org/fileadmin/user_upload/210512_IFJ_The_Covid_Story_Report_-_FINAL.pdf
[16] Danson Cheong, “The art of making China lovable”.
[17] Marcel Schliebs, Hannah Bailey, Jonathan Bright, Philip N. Howard. “China’s Public Diplomacy Operations: Understanding engagement and inauthentic amplification of PRC diplomats on Facebook and Twitter.” Working Paper 2021.1. Oxford, UK: Programme on Democracy and Technology, Oxford University, 2021. https://demtech.oii.ox.ac.uk/china-public-diplomacy-report.
[18] Ryan Loomis and Heidi Holz, “China’s Efforts to Shape the Information Environment in Vietnam”, Center for Naval Analysis (2020): 48. https://www.cna.org/CNA_files/PDF/IIM-2020- U-026222- Final.pdf
[19] Chun Han Wong and Chao Deng, “China’s ‘Wolf Warrior’ Diplomats Are Ready to Fight”. Wall Street Journal, 19 May 2020. https://www.wsj.com/articles/chinas-wolf-warrior-diplomats-are-ready-to-fight-11589896722
[20] Leading active social media platforms among Internet users in Vietnam as of 4th quarter of 2020. Statista, March 2021, https://www.statista.com/ statistics/941843/vietnam-leading-social-media-platforms
[21] Thảo Nguyên, “Zalo trở thành ứng dụng nhắn tin được yêu thích nhất Việt Nam” (Zalo becomes Vietnam’s Most Favorite Messaging App”. Thanh Nien, 4 June 2021. https://thanhnien.vn/cong-nghe/zalo-tro-thanh-ung-dung-nhan-tin-duoc-yeu-thich-nhat-viet-nam-1393656.html
[22] James Pearson, “How Vietnam’s ‘influencer’ army wages information warfare on Facebook”. Reuters, 9 July 2021. https://www.reuters.com/world/asia-pacific/how-vietnams-influencer-army-wages-information-warfare-facebook-2021-07-09
[23] Richard Wike, Bruce Stokes, Jacob Poushter And, Anell Fetterolf, “Trump Unpopular Worldwide, American Image Suffers”. Pew Research Center, 26 June 2017. https://www.pewresearch.org/global/2017/06/26/tarnished-american-brand
[24] Mark A Ashwill, “Will Vietnamese student numbers in the US recover post-COVID?”. University World News, 9 January 2021. https://www.universityworldnews.com/post.php?story=20210107143706792#:~:text=Over%20eight%20out%20of%2010,at%2031%2C613%20in%20March%202018.)
[25] “Investor Visa Groups Haggle Over Expiring Program’s Renewal”. Bloomberg Law, 18 June 2021. https://news.bloomberglaw.com/daily-labor-report/investor-visa-groups-haggle-over-expiring-programs-renewal
[26] Ben Yagoda, “One Cheer for Whataboutism”. New York Times, 19 July 2018. https://www.nytimes.com/2018/07/19/opinion/one-cheer-for-whataboutism.html
[27] Tsukasa Hadano, “‘Last G-7’: China revels in parody mocking US and allies”. Nikkei Asia, 16 June 201. https://asia.nikkei.com/Politics/International-relations/Last-G-7-China-revels-in-parody-mocking-US-and-allies
[28] “In China, bemusement and scorn over unresolved U.S. election”. Reuters, 4 November 2020.https://www.reuters.com/article/us-usa-election-china-reaction-idUSKBN27K1EF
[29] Amy Gunia, “China Has Reacted to the Storming of the U.S. Capitol by Comparing It to the Wrecking of Hong Kong’s Legislature”. TIME, 11 January 2021. https://time.com/5928446/china-reaction-capitol-hong-kong-legco
[30] Ken Moritsugu, “On Eid, Xinjiang imams defend China against US criticism”. Associated Press, 14 May 2021. https://apnews.com/article/china-government-and-politics-religion-3d8fa6aee61268d105610ebc92ed1b55
[31] Alex Lo, “Beijing reads Noam Chomsky”. South China Morning Post, 15 April 2021. https://www.scmp.com/comment/opinion/article/3129571/beijing-reads-noam-chomsky
[32] Bruce Shen, “Why Chinese feel free to dismiss America’s human rights concerns in Xinjiang”. South China Morning Post, 31 March 2021. https://www.scmp.com/comment/opinion/article/3127577/why-chinese-feel-free-dismiss-americas-human-rights-concerns
[33] Amber Wang, “Alaska summit: what message did public US-China spat send to observers?”. South China Morning Post, 20 March 2021. https://www.scmp.com/news/china/diplomacy/article/3126291/us-china-talks-what-message-did-their-public-spat-send
[34] Hoang Thi Ha, “Vietnam’s attitude towards Chinese vaccines is very telling”. Channel News Asia, 14 July 2021. https://www.channelnewsasia.com/news/commentary/vietnam-vaccine-pfizer-moderna-sinovac-sinopharm-us-china-covid-15210910
[35] Rahul Mishra, “China’s Self-Inflicted Wounds in the South China Sea”. The Diplomat, 21 July 2020. https://thediplomat.com/2020/07/chinas-self-inflicted-wounds-in-the-south-china-sea
[36] Catherine Wong and Maria Siow, “Mekong dam: China cuts river flow 50 per cent, is slammed for lack of warning”. South China Morning Post, 9 January 2021. https://www.scmp.com/news/china/diplomacy/article/3116989/mekong-dam-china-cuts-river-flow-50-cent-slammed-lack-warning
[37] Huynh Tam Sang, “Facing frenemy China, Vietnam shall edge closer to America”. Think China, 14 September 2020. https://www.thinkchina.sg/facing-frenemy-china-vietnam-shall-edge-closer-america
[38] Seah, S. et al., The State of Southeast Asia: 2021 (Singapore: ISEAS – Yusof Ishak Institute, 2021). /wp-content/uploads/2021/01/The-State-of-SEA-2021-v2.pdf
[39] “China threatens Vietnam of being ‘overthrown’ if sides with the US to contain Beijing”. Thoibao.de, 18 July 2020. https://thoibao.de/blog/2020/07/18/china-threatens-vietnam-of-being-overthrown-if-sides-with-the-us-to-contain-beijing
[40] https://twitter.com/ngaphambbc/status/1282920802573221888
[41] https://www.facebook.com/usembassyhanoi/posts/3997121293650036
[42] https://www.facebook.com/ChineseEmbassyinHanoi/posts/442447523818541
[43] “On Communist Party’s Centenary, Xi Jinping Warns Against Foreign Interference”. New York Times, 1 July 2021. https://www.nytimes.com/live/2021/06/30/world/china-communist-party-anniversary
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EXECUTIVE SUMMARY
- US Defense Secretary Lloyd Austin’s visit to three Southeast Asian countries in July 2021 was aimed at reaffirming America’s commitment to regional alliances and partnerships amid concerns of US neglect of the region in the first six months of the Biden administration.
- The choice of Singapore, Vietnam and the Philippines – as well as forthcoming high-level US engagements in these three countries – highlight their importance as “critical Indo-Pacific partners” in the Biden administration’s Indo-Pacific strategy.
- Austin’s trip confirmed the strategic importance of Singapore as a strong supporter of America’s security presence in the region through longstanding and multifaceted bilateral defence ties.
- In Vietnam, Austin addressed legacy issues from the Vietnam War, especially the country’s own Missing in Action issue, which could potentially pave the way for more substantive security relationship.
- During Austin’s visit to the Philippines, President Rodrigo Duterte withdrew his letter of termination for the 1999 Visiting Forces Agreement, which helped put the US-Philippine alliance back on course.
- Austin’s messages during his trip, particularly in his Fullerton Lecture in Singapore, outlined the broad contours of the Biden administration’s Southeast Asia policy that goes beyond the dynamics of US-China strategic rivalry and seeks to provide a more holistic and positive agenda of US engagement with the region.
*William Choong, Le Hong Hiep and Ian Storey are Senior Fellows and Hoang Thi Ha is Fellow and Co-coordinator of the Regional Strategic and Political Studies Programme at the ISEAS – Yusof Ishak Institute.
INTRODUCTION
US Secretary of Defense Lloyd Austin’s swing through Southeast Asia on 26-29 July, during which he visited Singapore, Vietnam and the Philippines, was significant because it was the first trip to the region by a US cabinet-ranking member since President Joseph Biden took office in January.
The first six months of the Biden administration had been largely focused on rebuilding US relationships with high-priority allies and partners in Northeast Asia (Japan and the Republic of Korea), Europe (NATO and the G7) and the Quad (especially India) as well as setting the parameters of engagement with China – America’s key strategic competitor. In contrast, President Biden has not had a single telephone call with any Southeast Asian leader. The administration’s belated outreach to Southeast Asia led to concerns that Washington was neglecting the region at a time when China’s regional influence continued to expand through extended trade and investment ties, vaccine assistance and in-person diplomacy.[1]
Against this backdrop, the significance of Austin’s trip goes beyond issues of defence cooperation. As he highlighted in his Fullerton Lecture in Singapore, the principal objective of his trip was “to reaffirm enduring American commitments” to Southeast Asia.[2] This Perspective examines the outcomes and messages from Austin’s trip, and gauges the broad contours of the Biden administration’s Southeast Asia policy within its broader Indo-Pacific strategy.
AUSTIN’S FULLERTON LECTURE: REVERTING TO FORM
Austin’s Fullerton Lecture in Singapore, organised by the London-based International Institute for Strategic Studies (IISS), can be seen as the first Southeast Asia policy speech by the Biden administration. As indicated in its title – “The Imperative of Partnership” – the lecture reaffirmed the importance of alliances and partnerships, the lodestone of America’s Asia policy, which had been undermined by the Trump administration’s transactional and unilateral approach. Austin’s statement that the US would move in “lockstep” with its allies and partners on a range of issues[3] such as the COVID-19 pandemic, climate change, coercion from rising powers, North Korea’s nuclear arsenal and the Myanmar crisis, reflects the Biden administration’s internationalist approach in addressing common global challenges – a clear departure from the Trump administration.
The Fullerton Lecture went beyond the defence-security domain and offered tangible US deliverables to the region. This message was aptly calibrated for his Southeast Asian audience, many of whom prefer to see America providing a positive agenda of regional cooperation rather than a zero-sum narrative of US-China rivalry. Austin hit the right note in saying that America’s enduring ties in Southeast Asia “are bigger than just geopolitics”.[4]
He emphasised US pandemic assistance, especially the donation of 40 million doses of COVID-19 vaccines throughout the Indo-Pacific, including Indonesia, Laos, the Philippines, Malaysia, Thailand and Vietnam. Taking an indirect swipe at China－whose vaccines are mainly sold and have relatively lower efficacy rates－Austin praised US-developed vaccines as “medical miracles” that are “incredibly effective at saving lives and preventing serious illness” and that were being donated with no conditions or strings attached.[5] Austin’s statement mirrors what Kurt Campbell, the Biden Administration’s Indo-Pacific czar, had said earlier in July. Speaking to the Asia Society, Campbell said that the US needed to “do more” in Southeast Asia and he expected “exciting” and “decisive” announcements on vaccine diplomacy and infrastructure when the Quad leaders meet in Washington in late 2021.[6]
When addressing the challenges posed by China, Austin also sought to strike the right notes with his Southeast Asian audience who are concerned that too strident a push by Washington against China would pressure regional states into making invidious choices between the two powers.[7] While criticising Chinese behaviour on a range of issues from the South China Sea dispute and tensions with Taiwan and India, to actions against Uighur Muslims in Xinjiang, Austin also gave assurances that Washington was “committed to pursuing a constructive, stable relationship with China, including stronger crisis communications” and is “not asking countries in the region to choose between the US and China”. In a post-event roundtable discussion organised by the IISS, many regional analysts thought that this message on China was “about right”.[8] This view, however, was not shared by China. In its remarks on 29 July, the Chinese Embassy in Singapore harshly criticised Austin’s lecture, saying that he had “played up the so-called China threat in an attempt to drive a wedge between China and its neighbors”.[9] Beijing has consistently used this narrative in its contest for influence with the US in the region.
Austin’s lecture reiterated US support for ASEAN’s central role in the region. It is noteworthy that Austin went so far as to “applaud ASEAN for its efforts to end the tragic violence in Myanmar” even though the group has been criticised for its delayed appointment of a special envoy to Myanmar. Arguably, this support is not based on high expectations of what ASEAN can do, and is instead a pragmatic consideration given the lack of better alternatives due to Washington’s limited leverage over, and peripheral interests in, the Myanmar situation.
Austin also stressed that the Quad sought to complement – not replace – ASEAN-led mechanisms, including the ASEAN Defence Ministers’ Meeting-Plus (ADMM-Plus). However, whether Southeast Asians have been reassured by this message remains to be seen. Washington realises the importance of reassuring the region about ASEAN centrality even as the US continues to further its investment in the Quad for the desired strategic-security outcomes which it does not expect ASEAN to be able to provide.
SINGAPORE: CONSOLIDATING STRATEGIC TIES
Austin’s visit to Singapore underscored the strategic importance that the Biden administration attaches to Singapore – a strong supporter of the US security presence in the region, including through logistical support for US military aircraft and vessels, and facilitation of the “regular rotational deployment” of US Littoral Combat Ships and P-8 Poseidon aircraft. As noted in the Joint Statement between Austin and his Singaporean counterpart Dr Ng Eng Hen, “[t]his support is anchored on the shared belief that the US’ presence in the region is vital for its peace, prosperity, and stability”.[10] On its part, the US is a longstanding supporter of Singapore’s overseas training and exercises, and will be hosting Singapore’s future F-35B fighter aircraft detachment.[11]
The longstanding and multi-faceted US-Singapore defence relationship was reaffirmed by the 2019 signing of the Protocol of Amendment which renewed the 1990 Memorandum of Understanding (MOU) regarding America’s use of facilities in Singapore and extended the MOU by 15 years, and another MOU on the establishment of a Republic of Singapore Air Force fighter training detachment in the US-territory of Guam.
During Austin’s visit, both sides highlighted new areas of bilateral defence cooperation, especially in cyber defence and strategic communications.[12] These include Singapore’s establishment of the multilateral Counter-Terrorism Information Facility in which the US is a partner country. Singapore also joined the multi-national Artificial Intelligence Partnership for Defence in May 2021. The partnership seeks to enable multilateral cooperation and exchange of best practices on “responsible AI” in the defence sector.[13]
Apart from Austin’s visit, Washington has injected fresh energy into the bilateral relationship. Before him, the outgoing commander of the US Indo-Pacific Command, Admiral Philip S. Davidson, and his successor, Admiral John Aquilino, visited the city-state in April and July, respectively. On 29 July, the Biden administration announced the nomination of entrepreneur Eric Kaplan as Washington’s new ambassador to Singapore, a post which had been left vacant since January 2017. A day later, the White House announced that US Vice-President Kamala Harris would visit Singapore and Vietnam in August to strengthen relationships and expand economic cooperation with America’s two “critical Indo-Pacific partners”.[14] Washington has good reasons to up its game in Singapore beyond defence matters to win the hearts and minds of Singaporeans, many of whom have cultural and familial bonds with China. A Pew Research Centre report in July 2021 showed that 64 per cent of Singaporeans polled had a favourable view of China – the highest among the 17 countries surveyed.[15]
VIETNAM: ADDRESSING THE PAST, LOOKING TO THE FUTURE
Austin’s visit to Vietnam was the latest in a series of US diplomatic overtures to the country in recent months. In July, Vietnam received a second ex-US Coast Guard cutter donated by the United States. Following a Vietnam-US agreement to address US concerns about Vietnam’s currency practices on 19 July 2021,[16] the Office of the US Trade Representative formally closed a Section 301 investigation into this matter, removing a major source of contention in bilateral relations.[17] By early August, the US had donated five million doses of the Moderna vaccine against COVID-19 to Vietnam through the COVAX Facility, making Vietnam one of the largest beneficiaries of Washington’s “vaccine diplomacy”. Secretary Austin’s visit was part of America’s coordinated efforts to deepen ties with Vietnam to win Hanoi’s support for its regional strategic agenda.
Austin’s meetings with President Nguyen Xuan Phuc and Prime Minister Pham Minh Chinh in Hanoi focused on bilateral cooperation to fight the COVID-19 pandemic, which is currently Vietnam’s most immediate concern. The Vietnamese hosts expressed their appreciation for America’s unconditional vaccine donations. During Austin’s meeting with Vietnamese Defence Minister Phan Van Giang, they discussed measures to further promote cooperation in line with the 2011 MOU on defence cooperation and the 2015 Joint Vision Statement on defence relations. Priority areas of cooperation include addressing legacy issues from the Vietnam War, maritime law enforcement capacity building, military medicine cooperation, training and defence industry collaboration.
A highlight of the visit was the signing of an MOU under which the US, through the participation of Harvard and Texas Tech University, will help Vietnam locate, identify and recover the remains of hundreds of thousands of Vietnamese soldiers killed during the Vietnam War but who are still listed as missing in action (MIA).[18] This move will contribute to the building of mutual trust as the MIA issue still carries great emotional significance for the Vietnamese people. Helping Vietnam solve this legacy issue will remove an obstacle of strong political symbolism to bilateral defence ties, paving the way for stronger and more substantive defence cooperation between the two former foes in the future.
Before Austin left for Southeast Asia, there were rumours that the two sides might also sign a General Security of Military Information Agreement (GSOMIA). GSOMIAs set the legal framework for parties to establish terms for the protection and handling of classified military information exchanged between them. The signing of such an agreement would signify a meaningful step towards more substantive defence cooperation between the US and Vietnam, and facilitate bilateral coordination on issues of mutual concern, including the South China Sea dispute. The two sides are said to have been in talks about the agreement for several years. However, media reports on the outcomes of Austin’s visit did not mention the signing of a GSOMIA. It is unclear if the signing of a GSOMIA has been delayed, or if the agreement has been signed but both sides decided not to publicise it.
As noted earlier, Vice President Kamala Harris is scheduled to visit Vietnam in August, the first sitting US Vice President to do so. Further meetings between the two countries’ leaders, including at the highest level, should also be expected as they seek further measures to strengthen their bilateral relations, including military ties in particular.
Faced with unprecedented security challenges caused by the rise of China and its growing assertiveness, the US and Vietnam have recently found strong incentives to work together to build a more resilient and substantive bilateral relationship. Austin’s visit will strengthen bilateral relations in that direction and facilitate their potential upgrade to the level of strategic partnership in the future.
THE PHILIPPINES: MOVING THE ALLIANCE FORWARD
The third and final leg of Austin’s Southeast Asian trip was arguably the most successful in that it helped put the US-Philippines alliance back on track after more than a year of uncertainty. That uncertainty had arisen from President Rodrigo Duterte’s threat to terminate the 1999 US-Philippines Visiting Forces Agreement (VFA) which provides the legal framework for the US military to undertake training activities in the Philippines with the Armed Forces of the Philippines (AFP). Without the VFA, the 1951 Mutual Defense Treaty (MDT) and the 2014 Enhanced Defense Cooperation Agreement (EDCA) that allows the US to preposition military equipment at various AFP bases, cannot function effectively.
In February 2020, Duterte had served notice that the Philippines would withdraw from the VFA after 180 days. The proximate cause was the US State Department’s denial of a travel visa to one of Duterte’s political associates who had helped execute his “war on drugs”. The move was also in keeping with Duterte’s pledge to “divorce” the US and pursue a more balanced foreign policy. Further, Duterte may have calculated that by threatening to abrogate the VFA, the US would hold off criticism of his administration’s human rights record. Some Philippine politicians had also long grumbled that the VFA prevented the legal prosecution of US service personnel who had committed serious crimes in the Philippines.
However, the Philippines’ national security establishment lobbied hard to keep the VFA. The US-Philippine alliance strengthens Manila’s hand in its maritime territorial and jurisdictional dispute with Beijing in the South China Sea: it provides the AFP with a security guarantee that if they are attacked, US forces would provide support as well as valuable training opportunities and millions of dollars in military assistance every year. Duterte’s threat to abrogate the VFA had made long-term planning for the alliance almost impossible, causing great frustration in both the Trump and Biden administrations.
As a result of this lobbying, Duterte suspended the abrogation of the VFA three times: in June and November 2020 and in June 2021. Between February and May 2021, US and Philippine officials had negotiated an addendum to the VFA. Although the details of that addendum have not been released, Philippine Ambassador to the US, Jose Manuel Romualdez, indicated that it had improved the terms of the VFA, presumably meaning it had addressed Philippine concerns regarding the prosecution of US service personnel.[19] In June, Duterte promised he would study the revised agreement. The third extension would have kept the VFA alive until February 2022, and many observers expected that Duterte would agree to a further postponement early next year and leave the final decision to his successor (constitutionally Philippine presidents are limited to one six-year term and Duterte will leave office in June 2022).
However, in a 75-minute meeting with Austin, Duterte agreed to withdraw the letter of termination. The decision was announced the next day at a joint press conference with Austin and his Philippine counterpart Delfin Lorenzana.[20] Lorenzana said he did not know why Duterte had changed his mind. However, increased tensions with China in the South China Sea – including the presence of hundreds of Chinese fishing boats at Whitsun Reef in the Philippines’ EEZ in March-April[21] – were almost certainly a factor in the President’s calculations. Duterte’s spokesperson, Harry Roque, said the decision was based on “upholding the Philippines’ strategic core interests … and clarity of US position on its obligations and commitments under the MDT”.[22] After Austin had departed Manila, Duterte himself said he had withdrawn his opposition to the VFA as a quid pro quo for America’s donation of more than six million doses of Johnson & Johnson and Moderna COVID-19 vaccines to the Philippines.[23]
Prior to Austin’s visit, there had been some signs of progress in US-Philippine relations. In January, the US had reiterated its commitment to come to the aid of the Philippines if it were attacked in the South China Sea.[24] In April, the annual Balikatan bilateral military exercise took place[25] (the drills in 2020 were cancelled due to the pandemic), and in June, the US State Department approved in principle the sale of F-16 fighter jets to the Philippines.[26] (Manila is nevertheless still looking at alternative options).
But since Duterte took office in 2016, the US-Philippine alliance has been treading water, and given the President’s continued animus towards America, it is still possible that he could reverse his decision on the VFA, or impede negotiations between the two sides on improving military cooperation. As such, real progress on strengthening the US-Philippines alliance – such as negotiating a GSOMIA, designing new combined exercises and implementing EDCA – will have to wait until Duterte’s successor takes office in June 2022.
CONCLUSION
Austin’s swing through Southeast Asia was positively received by the security establishments in the host countries.[27] His trip reflects Washington’s growing cognizance of the need to intensify diplomatic engagement with Southeast Asia – “the fulcrum of the Indo-Pacific region” where the US holds “enduring interests”, as affirmed in the Southeast Asia Strategy Act.[28] The Act, which was passed by the US House of Representatives in April, also requires a comprehensive strategy for engaging Southeast Asia across multiple dimensions, from trade and investment flows to diplomatic and security arrangements. The Biden administration has thus far taken only some initial steps towards this end.
Austin’s Southeast Asia tour is part of the Biden administration’s “charm offensive” towards the region after the first six months of lacklustre interactions. His message of US commitment to “deepen and expand Southeast Asian alliances, partnerships and multilateral engagements”[29] will be echoed by Secretary of State Antony Blinken when he meets ASEAN foreign ministers in early August. US Vice-President Kamala Harris will also visit Singapore and Vietnam this month. Kurt Campbell has hinted that a special ASEAN-US Summit is being considered, and another visit by US Secretary of State Anthony Blinken might be on the cards.[30]
Given the growing significance of Southeast Asia – be it as a key arena of US-China strategic competition or a growing source of US prosperity – it is in America’s interests to build upon this momentum to deepen its engagement with the region in a sustained and comprehensive manner.
ISEAS Perspective 2021/103, 5 August 2021
ENDNNOTES
[1] See Colum Lynch, Jack Detsch, and Robbie Gramer, “The Glitch That Ruined Blinken’s ASEAN Debut”, Foreign Policy, 27 May 2021, https://foreignpolicy.com/2021/05/27/blinken-asean-meeting-pivot-asia-middle-east; James Crabtree, “A Confused Biden Team Risks Losing Southeast Asia”, Foreign Policy, 27 June 2021, https://foreignpolicy.com/2021/06/27/southeast-asia-asean-china-us-biden-blinken-confusion-geopolitics; Hoang Thi Ha, “Beijing’s head start over Biden in South-east Asia”, Straits Times, 31 May 2021, https://www.straitstimes.com/opinion/beijings-head-start-over-biden-in-south-east-asia.
[2] Secretary of Defense Remarks at the 40th International Institute for Strategic Studies Fullerton Lecture (As Prepared), US Secretary of Defense Lloyd J. Austin III, 27 July 2021, https://www.defense.gov/Newsroom/Speeches/Speech/Article/2708192/secretary-of-defense-remarks-at-the-40th-international-institute-for-strategic.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ken Moriyasu, “US does not support Taiwan independence: Kurt Campbell”, Nikkei Asia, 7 July 2021, https://asia.nikkei.com/Politics/International-relations/Biden-s-Asia-policy/US-does-not-support-Taiwan-independence-Kurt-Campbell.
[7] William Choong, “The United States’ ‘Mini’ Shangri-La Dialogue: Stand and Deliver”, Fulcrum, 27 July 2021, https://fulcrum.sg/the-united-states-mini-shangri-la-dialogue-stand-and-deliver.
[8] IISS post-event discussion on Austin’s Fullerton Lecture, 27 July 2021, attended by one of the authors.
[9] Embassy of the People’s Republic of China in the Republic of Singapore, “Remarks of the Spokesperson of the Chinese Embassy in Singapore in Response to U.S. Secretary of Defense Lloyd James Austin III’s China-Related Remarks at the Fullerton Lecture”, 29 July 2021, http://www.chinaembassy.org.sg/eng/sgsd/t1895923.htm.
[10] Joint Statement by United States Secretary of Defense Lloyd J. Austin III and Singapore Minister for Defence Dr Ng Eng Hen, https://www.mindef.gov.sg/web/portal/mindef/news-and-events/latest-releases/article-detail/2021/July/27jul21_fs.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] Nirmal Ghosh, “US Vice-President Kamala Harris to visit Singapore and Vietnam”, The Straits Times, 30 July 2021, https://www.straitstimes.com/world/united-states/us-vice-president-kamala-harris-to-visit-singapore-and-vietnam.
[15] Laura Silver, “China’s international image remains broadly negative as views of the U.S. rebound”, Pew Research Center, 30 June 20211, https://www.pewresearch.org/fact-tank/2021/06/30/chinas-international-image-remains-broadly-negative-as-views-of-the-u-s-rebound.
[16] US Department of the Treasury, “Joint Statement from the U.S. Department of the Treasury and the State Bank of Vietnam”, 19 July 2021, https://home.treasury.gov/news/press-releases/jy0280.
[17] Office of the US Trade Representative, “USTR Releases Determination on Action and Ongoing Monitoring Following U.S.-Vietnam Agreement on Vietnam’s Currency Practice”, 23 July 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/july/ustr-releases-determination-action-and-ongoing-monitoring-following-us-vietnam-agreement-vietnams.
[18] For an analysis of the significance of the signing of the MOU, see Le Hong Hiep, “Secretary Austin’s Visit to Vietnam: Building Trust to Strengthen Defence Ties”, Fulcrum, 28 July 2021, https://fulcrum.sg/secretary-austins-visit-to-vietnam-building-trust-to-strengthen-defence-ties.
[19] Karen Lema, “Philippine envoy confident Duterte will back revamped U.S. defence pact”, Reuters, 3 June 2021, https://www.reuters.com/world/asia-pacific/philippine-envoy-confident-duterte-will-back-revamped-us-defence-pact-2021-06-03
[20] Frances Mangosing, “Lorenzana: ‘VFA in full force again’”, Philippine Daily Inquirer, 30 July 2021, https://globalnation.inquirer.net/198126/duterte-recalls-decision-to-junk-vfa-after-meeting-with-top-us-official
[21] Laura Zhou, “South China Sea: Chinese boats keep up steady presence at disputed Whitsun Reef, says US ship tracker”, South China Morning Post, 22 April 2021, https://www.scmp.com/news/china/diplomacy/article/3130676/china-present-whitsun-reef-and-surrounds-2019-says-us-group.
[22] Idrees Ali and Karen Lima, “Philippines’ Duterte fully restores key US troop pact”, Reuters, 30 July 2021, https://www.reuters.com/world/asia-pacific/us-aims-shore-up-philippine-ties-troop-pact-future-lingers-2021-07-29.
[23] Genalyn Kabiling, “‘Give and take’: VFA retention a ‘concession’ after US vaccine donation, Duterte admits”, Manila Bulletin, 3 August 2021, https://mb.com.ph/2021/08/03/give-and-take-vfa-retention-a-concession-after-us-vaccine-donation-duterte-admits
[24] Wendy Wu and Teddy Ng, “China-US tension: Biden administration pledges to back Japan and Philippines in maritime disputes”, South China Morning Post, 28 January 2021, https://www.scmp.com/news/china/diplomacy/article/3119578/south-china-sea-blinken-pledges-us-backing-philippines-event.
[25] “US and Philippine Forces Conclude 36th Balikatan Exercise”, US Embassy in the Philippines, 23 April 2021, https://ph.usembassy.gov/us-and-philippine-forces-conclude-36th-balikatan-exercise.
[26] “US State Dept OKs possible sale of F-16s, missiles to Philippines”, Reuters, 25 June 2021, https://www.reuters.com/business/aerospace-defense/us-state-dept-approves-possible-sale-f-16-fighters-missiles-philippines-pentagon-2021-06-24.
[27] The IISS post-event discussion on Austin’s Fullerton Lecture, 27 July 2021; Authors’ interviews with a number of Southeast Asian states’ officials; and podcast on 49th Fullerton Lecture: US Secretary of Defense Lloyd J. Austin, IISS Sounds Strategic, 29 July 2021, https://www.iiss.org/blogs/podcast/2021/07/40th-fullerton-lecture-us-secretary-of-defense-austin.
[28] H.R.1083 – Southeast Asia Strategy Act, US Congress, https://www.congress.gov/bill/117th-congress/house-bill/1083.
[29] Ibid.
[30] James Crabtree, “What does it mean to be America’s partner?”, Straits Times, 24 July 2021, https://www.straitstimes.com/opinion/what-does-it-mean-to-be-americas-partner-0.
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EXECUTIVE SUMMARY
- Security challenges presented by the South China Sea dispute led to Vietnam’s efforts to modernise its armed forces over the past two decades. However, after the fall of Prime Minister Nguyen Tan Dung in 2016, the procurement of major military assets has virtually ground to a halt.
- Apart from budget constraints, another important reason that has impeded Vietnam’s military modernisation is the deep-rooted mindset of the Vietnam People’s Army (VPA) that considers political action more important than military action, and propaganda more important than fighting.
- The high-profile anti-corruption campaign led by General Secretary Nguyen Phu Trong since 2016 has also weakened the network of military officers who engaged in rent-seeking activities, directly affecting the military procurement process.
- Vietnam aims to fully modernise its military by 2030. However, more still needs to be done in essential areas such as strategy making, organisational restructuring and defense industry upgrading. In particular, the VPA’s mindset of prioritising political action over military action needs to be changed.
* Nguyen The Phuong is Lecturer at the Faculty of International Relations, Ho Chi Minh City University of Economics and Finance (UEF). He is also Visiting Fellow at the Saigon Center for International Studies (SCIS), University of Social Sciences and Humanities – Vietnam National University-HCMC, and a member of the South China Sea Chronicle Initiative (SCSCI).
INTRODUCTION
Vietnam’s approach to building and modernising the Vietnam People’s Army (VPA) has evolved over time. In the early 2000s, when the country’s top priority was economic development, Vietnam focused on maintaining armed forces that were “strong enough with a reasonably numerical strength and high degree of training proficiency”.[1] In the 2019 Defense White Paper, however, Vietnam set the target of developing a “revolutionary, regular, highly-skilled, gradually modernized VPA with some forces advancing straight to modernity […] meeting requirements of safeguarding the Homeland and responding to hi-tech wars”.[2] This was also the first time the country had officially and publicly set the target for its military modernisation endeavours, aiming to “build the VPA into a modern military” from 2030 onward.[3]
The pace of Vietnam’s military modernisation, however, has slowed down over the past five years despite the country’s increasingly complex and unpredictable external security environment. This article examines the factors underlying this trend. Apart from budget constraints, the paper argues that the VPA’s mindset of considering political action more important than military action and propaganda more important than fighting is constraining its modernisation efforts. At the same time, Vietnam’s anti-corruption campaign since 2016 has also weakened the rent-seeking networks within the VPA which used to play an important role in promoting the VPA’s modernisation programmes as a rent-seeking measure. With these programmes facing major setbacks, the power gap between Vietnam and China, its main rival in the South China Sea, will likely continue to widen.
MILITARY MODERNISATION GRINDING TO A HALT
From a “strong enough” military to a “gradually modernised” to a fully “modern” military, this 30-year military modernisation trajectory of Vietnam converges with the increasingly complex and asymmetrical nature of the South China Sea dispute. With Vietnam’s defence budget increasing year by year, it is expected that more and more sophisticated assets will be procured and put into service. According to official sources, the country’s defence budget is set to increase from US$5 billion in 2018 to US$7 billion by 2022, of which 20 per cent will be spent to “replace older equipment and introduce new and modern capabilities” annually.[4]
However, the results have been underwhelming. While the VPA has continued to invest in the production and procurement of small and medium assets such as assault rifles, radars, anti-air missile systems, main-battle tanks or training jets, the procurement of big and significant systems for the air force and the navy has virually ground to a halt after the fall of then-Prime Minister Nguyen Tan Dung in 2016. The last big-ticket purchase for the air force was made in 2013 (12 Sukhoi Su-30MK2 costing US$600 million), and for the navy in 2011 (two Gepard-class frigates costing US$700 million).[5] China, meanwhile, launched two dozen large warships – from destroyers to huge amphibious landing docks and corvettes – in 2019 alone. Similarly, over the past five years, the Vietnamese navy has commissioned only six major naval assets (two Kilo-class submarines in 2017, two Gepard-class frigates in 2018 and two second-hand Pohang-class corvettes in 2019). As such, the pace of Vietnam’s military modernisation in the past five years has been too slow for the country to deal with the increasing complexity of its external security environment. This is a legitimate cause for concern, given the country’s stated goal of having the navy and the air force advance “straight to modernity”.
The most common reason cited by many in explaining this failure is Vietnam’s budget constraints. Former Minister of Defense Phung Quang Thanh stressed in 2014 that the country’s overall budget was limited, and that money had to be allocated to other important areas of national development such as infrastructure, education or healthcare.[6] However, budget constraints do not seem to be the only reason behind this worrying trend.
THE OLD MINDSET
The launch of the Doi Moi (renovation) policy in 1986 was aimed at pulling Vietnam out of severe poverty and international isolation following a series of socio-economic crises in the 1980s. Policy makers in the early reform period largely perceived security challenges through the question of “security by what” instead of “security for whom”. The reformist and globalist “new thinkers” of this period argued that security should be ensured mainly through economic rather than military means.[7] They have since been locked in endless debates with anti-imperialist, conservative “old thinkers” over the shaping of Vietnam’s security policies.
Memories and experiences of the economic and social crises of the 1980s fuel enduring security concerns which shape the conflicting visions of the two camps. The new thinkers, in response to the economic crisis which preceded Doi Moi, felt that market-oriented reforms and international economic integration were needed to overhaul the country’s frail economy. Witnessing the socio-economic crises in the first half of the 1980s, the old thinkers also shared the concern that the legitimacy of the CPV would be challenged if the Party could not improve the economic well-being of the country and its people. However, pointing to the demise of communist regimes in the Soviet Union and Eastern Europe in the early 1990s, the old thinkers maintained a suspicious attitude towards the liberal ideas embraced by the new thinkers. As such, Vietnam’s post-Doi Moi economic liberalisation and international integration have always been challenged by hardcore ideological conservatives who prioritise regime survival over economic liberalisation.
Despite these differences, the two camps agree on at least one thing – the need to sustain the legitimacy of the Party. Doi Moi was, to this end, a pragmatic compromise between the two camps.[8] As the international order changed, so did the formula to generate legitimacy. Legitimacy could no longer be solely based on memories of the Party’s leadership during Vietnam’s military struggle for national unification and independence, or on the collective socialist economy. This led the Party to switch to performance-based legitimacy, namely its ability to maintain continuous economic growth and to improve the social and economic well-being of the people.[9]
The new thinkers therefore argue that the country’s security approach should “no longer [give] priority to military affairs but [allow] the conduct of a new foreign policy to play a bigger role in ensuring national security and supporting the economic development of Vietnam”.[10] While the new thinkers seek to strengthen the country’s ties with the West as fast as possible in order to reap the benefits of trade and globalisation, the old thinkers, on the other hand, are suspicious of “Western values” and perceive them as a threat to the Party’s revolutionary values and its monopoly of power.
Party-military relations have also evolved alongside the aforementioned political debate. This relationship is characterised by the highly visible political role of the VPA in ensuring the legitimacy and survival of the Party, officially enshrined in its famous slogan “building and protecting the socialist motherland”.[11] Alexander Vuving recently described this relationship as “mutual embeddedness”, which he deemed “the single most important thing that withstood all changes in the external and internal environment”.[12] The military “is the guardian and saviour of the Party; it fights for the Party’s supremacy, not for its own supremacy”.[13] The Party exerts its control over the military through a number of tools, from ideological indoctrination via the political commissar networks to a “dual elite” system where all military officers are simultaneously members of the Party, ensuring their loyalty and subjecting them to the Party’s control. And when the military intervenes in politics, “it intervenes on behalf of the party”.[14]
Nevertheless, due to the symbiotic nature of the relationship between the VPA and the Party, the VPA remains one of the most influential factions within the state apparatus when it comes to defence and security matters, alongside the Ministry of Public Security and the Ministry of Foreign Affairs. The military’s influence in the country’s top echelons trended upwards between 1989 and 2001, led by the late General Le Duc Anh, who was then minister of defence (1987-1992) and state president (1992-1997). The military’s influence during this period was also facilitated by the CPV’s deepened concerns about regime security following the collapse of the Soviet Union.[15] Power competition among different factions within the Party and within the military itself has seen a decrease in the military’s influence since 2001.[16] Regardless of the faction that dominates the leadership, however, the military tends to align with the conservatives because this party-military symbiosis “gives military leaders more say and more privileges than they would have” under a more open and progressive type of regime.[17] Against this backdrop, the VPA adopted the slogan “political action is more important than military action; propaganda is more important than fighting” as its main approach to strategic tasks.[18] The VPA’s top priority as mentioned in the Strategy to Safeguard the Homeland has always been “to secure the leading role of the Party”, while “protecting the Party, State, and the people” is promoted as an essential part of the National Defense Strategy.[19]
The dominance of the old thinkers in both the Party and the military has led to a conservative and cautious approach towards military modernisation, especially regarding “professionalisation”. The conservatives tend to prefer security partners which are not critical of the CPV regime and its human rights record, as regime security is considered their top priority. Due to their anti-Western sentiments, conservatives also favour traditional partners, mostly from the post-Soviet world, in terms of military procurement. Beside practical reasons such as the more affordable prices and maintenance costs that these partners offer, they also prefer the old-fashioned way of making acquisition deals behind closed doors through state monopolies, which Western partners normally avoid. Meanwhile, in their view, professionalisation is an alien concept infested with anti-regime notions, especially the implied idea of “separating the military from the Party”. They believe that there is no such thing as “a neutral military” or “a military without politics”. This conservative mindset causes the VPA to adopt a half-hearted approach to force modernisation and professionalisation.
A RENT-SEEKING MILITARY
Another factor that has contributed to the slowing of Vietnam’s military modernisation over the past five years is the weakening of the rent-seeking networks within the VPA which used to facilitate major defence acquisition programmes under the Nguyen Tan Dung administration. It is no coincidence that Vietnam’s most well-known military modernisation projects so far were implemented under Dung and his defense minister Phung Quang Thanh, whose web of influence had been characterised as “the biggest rent-seeking networks in the country”.[20] These networks took advantage of Vietnam’s economic reforms as well as its need to deal with emerging security threats in order to gain personal benefits, including through military modernisation programmes and unauthorised land deals. Since 2016, for example, dozens of high-ranking military officers, including then-Deputy Minister of Defence Nguyen Van Hien, have been prosecuted for mismanagement, mostly related to military-owned land.[21] The power struggle between Nguyen Tan Dung and General Secretary Nguyen Phu Trong, who since 2016 has led a high-profile anti-corruption campaign that targets many of Dung’s allies and associates, characterises the rivalry between a liberal-turned-rent-seeking camp on one hand versus a conservative one seeking to “clean up the system” on the other.[22] An unintended consequence of the campaign happens to be the military modernisation process, with purchases of big-ticket military assets slowing down significantly since 2016. Despite China’s increasing assertiveness in the South China Sea, the Party seems to prioritise domestic stability and maintaining its legitimacy over a “hard balancing” approach to maritime disputes.
Over the past five years, the VPA has made no major defence acquisitions, although there have been some sporadic small-scale contracts for the ground force (e.g., the T-90 main battle tank project) and the air force (e.g., the trainers project and some anti-air missile and radar systems). The navy, the most essential service in defending the country’s maritime sovereignty, has to share its limited budget with the coast guard. The navy’s main surface force still consists of just four 1.500-ton Gepard 3.9 frigates and several second-hand and Soviet-era frigates that have been refitted several times to prolong their service. Even for constabulary missions, the combined number of vessels from both the navy and the coast guard is insufficient for covering Vietnam’s sovereign waters in the South China Sea.
The slowing military modernisation drive has given rise to public concerns about its consequences. On the one hand, without strong and capable armed forces, especially the navy, Vietnam would not be able to deploy a comprehensive hedging strategy against China in which “hard balancing” plays an essential role.[23] The capacity gap between China and Vietnam is steadily widening. If China can establish an unchallenged presence in the South China Sea, not only Vietnam’s sovereignty but also its ruling Party’s legitimacy will be at risk. At the same time, the conservative mindset of the VPA has significantly limited the potential of many defense and security partnerships between Vietnam and Western countries, especially the United States. The cautious and suspicious attitude towards the West has deprived the VPA of the opportunity to learn from these advanced partners, especially in such areas as organisation, command and control, and how to modernise Vietnam’s defense industry.
CONCLUSION
The VPA has been undergoing four phases of modernisation since 1986, with the fourth one currently being shaped. The 2019 Defense White Paper may have set ambitious objectives for the country’s military modernisation programme, but given its current slow progress, it remains to be seen whether all these objectives can be met on time, and if so, whether or not a modernised VPA will have the necessary capabilities and proper mindset to deal with a fast-changing regional security environment.
The VPA will face significant challenges in getting “fully modernised” if it does not change the old mindset, which puts political affairs above modernisation and regime sercurity above external security. At the same time, more also needs to be done to improve defence strategy, restructure the VPA’s organisation, and upgrade the country’s Soviet-style defence industry. Without such reforms, Vietnam’s military modernisation programme will risk losing momentum, putting the country and the VPA in a more precarious position, given the backdrop of an increasingly complex and unpredictable regional strategic environment.
ISEAS Perspective 2021/96, 22 July 2021
ENDNOTES
[1] Ministry of Defense, Vietnam’s National Defense in the Early Years of the 21st Century (Hanoi, 2004),pp. 59-60.
[2] Ministry of Defense, 2019 Vietnam National Defense (Hanoi, 2019) p. 95.
[3] Ibid, pp. 95-96.
[4] Official brochure of the first Vietnam International Defense & Security Exhibition (VIDSE). The exhibition was initially planned for September 2020 in Hanoi, but was postponed due to the COVID-19 pandemic.
[5] Vietnam purchased 12 Yakolev Yak-130 trainers from Russsia (worth US$350 million) in 2019 and 12 Aero L-39NG trainers from the Czech Republic in 2021. These trainers are expected to be delivered from 2021 to 2024.
[6] Việt Hoàng, “Bộ trưởng Phùng Quang Thanh: Xây dựng một số quân binh chủng tiến thẳng lên hiện đại” [Minister Phùng Quang Thanh: Building some services straight into modernity], Dân Trí, 3 December 2014, https://dantri.com.vn/chinh-tri/bo-truong-phung-quang-thanh-xay-dung-mot-so-quan-binh-chung-tien-thang-len-hien-dai-1418233 230.htm.
[7] Alexander Vuving, “Vietnamese Perspective on Transnational Security Challenges”, in Issues for Engagement: Asian Perspectives on Transnational Security Challenges, edited by David Fouse (Hawaii: Daniel K. Inouye Asia-Pacific Center for Security Studies, 2012), p. 168.
[8] Ibid.
[9] Le Hong Hiep, “Performance-based Legitimacy: The Case of the Communist Party of Vietnam and ‘Doi Moi’”, Contemporary Southeast Asia 34, No. 2 (2012), pp. 145-172.
[10] Nguyen Vu Tung, “Vietnam’s Security Challenges: Hanoi’s New Approach to National Security and Implications to Defense and Foreign Policies”, in Asia Pacific Countries’ Security Outlook and Its Implications for the Defense Sector, NIDS Joint Research Series No.5 (Tokyo: The National Institute for Defense Studies, 2010), pp. 107-120.
[11] Carlyle A. Thayer, “Military politics in contemporary Vietnam: Political engagement, corporate interests, and professionalism”, in The Political Resurgence of the Military in Southeast Asia, edited byMarcus Mietzner (New York: Routledge, 2011), p. 81.
[12] Alexander Vuving, “Mutual Embeddedness: The Architecture of Civil-military Relations in Vietnam”, SocArXiv Papers, draft as of 31 January 2021, https://osf.io/preprints/socarxiv/4a9z7/.
[13] Ibid, p. 4.
[14] Amos Perlmutter & William M. LeoGrande, “The Party in Uniform: Toward a Theory of Civil-Military Relations in Communist Political Systems,” American Political Science Review 76, no. 4 (1982), p. 788.
[15] Vuving, “Mutual Embeddedness”, pp. 8-12. For more information about the power struggle between the different CPV factions, see Alexander Vuving, “How Experience and Identity Shape Vietnam’s Relations with China and the United States,” in Asia’s Middle Powers? The Identity and Regional Policy of South Korea and Vietnam,edited by Joon-Woo Park, Gi-Wook Shin and Donald W. Keyser (Stanford: Walter H. Shorenstein Asia-Pacific Research Center Books, 2013), pp. 53-71.
[16] For an analysis of the rise and fall in the VPA’s political influence in Vietnam, see Le Hong Hiep, “The Military’s Resurging Influence in Vietnam”, ISEAS Perspective, No. 54/2021, /wp-content/uploads/2021/03/ISEAS_Perspective_2021_54.pdf.
[17] Vuving, “Mutual Embeddedness”, p. 16.
[18] Nguyen Tan Tuan, “Bài 2: Chính trị trọng hơn quân sự” [Part 2: Politics is important than military], Quân đội Nhân dân online, 10 November 2014, https://www.qdnd.vn/chinh-tri/tin-tuc-su-kien/bai-2-chinh-tri-trong-hon-quan-su-425345.
[19] Ministry of Defense, 2019 Vietnam National Defense, pp. 21-22.
[20] Alexander Vuving, “Vietnam in 2018: A Rent-Seeking State on Correction Course,” in Southeast Asian Affairs 2019, edited by Daljit Singh and Malcolm Cook (Singapore: ISEAS – Yusof Ishak Institute, 2019), pp. 375-394.
[21] There have been discussions in Vietnam about the level of corruption within the military, especially in the areas of land management, research and development (R&D), and acquisition. The public, however, has had almost no access to evidence regarding corruption in R&D or procurement due to the sensitivity of the information, and the attempt of the regime to maintain the image of a clean and invincible military. Recently, however, there have been international media reports about possible corruption related to VPA’s defense deals worth billions of dollars. See, for example, Intelligence Online, “Corruption suspicions in Hanoi freeze defense deals”, 21 October 2020, https://www.intelligenceonline.com/international-dealmaking/2020/10/21/corruption-suspicions-in-hanoi-freeze-defence-deals,109615408-art.
[22] Le Hong Hiep, “Vietnam’s Anti-corruption Campaign: How much is it about Political Infighting”, ISEAS Commentaries, 5 July 2018, /media/commentaries/vietnams-anticorruption-campaign-how-much-is-it-about-political-infighting-by-le-hong-hiep/.
[23] For an analysis of Vietnam’s “rebalancing” strategy in the South China Sea, see Tran Truong Thuy, “Rebalancing: Vietnam’s South China Sea Challenges and Responses”, Maritime Issues, 27 December 2016, http://www.maritimeissues.com/working-papers/rebalancing-vietnams-south-china-sea-challenges-and-responses.html.
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EXECUTIVE SUMMARY
- International trade agreements, especially the ASEAN Free Trade Area, are making cars more accessible to Vietnamese consumers and reshaping the country’s transportation landscape.
- The pace and sequencing of mobility transitions are a concern given limitations in Vietnam’s transportation infrastructure, planning coordination and environmental and safety management.
- Future mobility solutions and sustainability models that are being developed by automakers in conjunction with research labs in Singapore for application across Southeast Asia are insufficient to address Vietnam’s particular transportation needs.
- Given impending congestion problems, the completion of public transportation systems in Vietnam’s major cities should precede the removal of non-tariff barriers to automobile imports.
- How the Vietnamese government coordinates with stakeholders in the auto industry as well as trade and urban planning authorities will have an impact on the growth and expansion of cities. With proactive planning and foresight, Vietnam can reduce the primacy of cars while developing effective multi-modal transportation networks.
* Ivan V. Small is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute and a sociocultural anthropologist and Associate Professor at Central Connecticut State University.
INTRODUCTION
Vietnam, which attained lower-middle-income status in 2009, has grabbed global attention as an emerging hub of international supply chains. One of the metaphors for the increasing circulation of capital that has characterized Vietnam’s now highly global economy is the expansion of road traffic since the 1990s, often embodied by the seemingly ubiquitous motorcycles on its streets.[1] In recent years, however, motorbike sales have started to flatten, while automobile sales have been increasing. Vietnam is expected to reach per capita GDP of US$5,000 in 2025[2] (up from $2,700 in 2019), which market analysts consider an important threshold that will fully launch the nation into the “next stage” of widespread car consumption, or “motorization”.[3]
Over 17 auto makers have built factories or entered into joint ventures with Vietnamese companies to build cars since 1995, although the vast majority of output comes from plants that assemble cars from mostly imported components. Market leaders such as Toyota, Thaco and Thanh Cong assemble and distribute a variety of foreign brands like Toyota, Mazda, Peugeot, Kia and Hyundai, while emerging local companies such as VinFast hope to build a national car brand that will extend its presence to the global market.[4] The Vietnamese auto market has therefore been driven by not only the increasing wealth of Vietnamese consumers and the removal of tariff barriers under free trade agreements, but also by investments from foreign car companies and the Vietnamese government’s ambition to develop a native automotive industry. However, a relatively underdeveloped road infrastructure and poor urban planning are constraining the growth of Vietnam’s auto market.
This article examines how the Vietnamese auto market has been shaped by industrial development policies, and how these are shifting with the implementation of international free trade agreements, particularly the ASEAN Free Trade Area (AFTA). It then considers Vietnam’s mobility infrastructure and urban planning shortfalls, and whether multi-modal transport models and technologies, such as those developed in Singapore, can be implemented in Vietnam. The article concludes by interrogating the automotive inevitability assumed in future mobility research agendas and car companies’ market strategies.
EFFECTS OF TRADE AGREEMENTS ON VIETNAM’S AUTO MARKET
Car sales in Vietnam, which has a population of 96 million but a relatively low car ownership ratio, have soared in recent years. In 2019, for example, over 300,000 cars were sold in the country, nearly a tenfold increase from 2006. Vietnam’s participation in free trade agreements (FTAs), which has reduced trade barriers once designed to protect Vietnam’s emerging automotive sector, is a major driver behind this trend.
In 2007, Vietnam joined the World Trade Organization, which required a phased reduction of the 90% tariff previously imposed on most automobiles. Of greater significance for the Vietnamese car market, however, is the country’s membership in the ASEAN Free Trade Area (AFTA). AFTA’s ASEAN Trade in Goods Agreement (ATIGA) imposed on Vietnam a complete elimination of tariffs by 2018 on automobiles assembled in any ASEAN member state. While lower prices on imports have been offset by consumption taxes, registration and license fees as well as other non-tariff measures such as inspections to maintain elevated car prices, the inevitable erosion of added costs that made cars unaffordable in the past now contribute to the emergence of an automobility society.[5]
AFTA is causing many automotive companies to rethink their manufacturing and market strategies across the region and in Vietnam. This has been especially the case for Japanese car manufacturers that made significant investments in Thailand and until recently maintained a dominating market share in Vietnam as well as the region.[6] Many expected that the AFTA would encourage Vietnam to focus on light truck and van building, drawing on its comparative advantage in this segment, rather than passenger cars.[7] Yet anticipated manufacturing shifts away from passenger cars remain in play. Non-tariff barriers, such as the requirement issued in 2018 for completely built-up (CBU) cars to undergo tests in a Vietnamese lab to ensure that they met environmental and emissions standards, slowed the expected flood of cars manufactured in other ASEAN countries into Vietnam.[8]
While some companies scale back their production in Vietnam, Hyundai, which surpassed Toyota to become the best-selling car brand in Vietnam in 2020, has opted for an expansion strategy by increasing production capacity at its joint venture with Thanh Cong in Ninh Binh Province. With the EU-Vietnam Free Trade Agreement opening up cost-efficient supply chains for parts, and with the Regional Comprehensive Economic Partnership (RCEP) on the horizon, Vietnam is still considered by some companies as an attractive car market and production hub.[9]
What remains to be seen is how the implementation of the latest regional trade agreements, such as the RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), will further reshape Vietnam’s auto industry as regional supply chains become further integrated. The CPTPP took effect in Vietnam in 2019; and the RCEP, which Vietnam signed in November 2020, is expected to be ratified in 2021. Adaptations to trade agreements’ provisions will be gradual but will most likely further connect the supply chains and consolidate the production strategies of automotive companies. Against this backdrop, and together with the increasing income of Vietnamese consumers, it is likely that Vietnam’s auto industry and car market will continue to expand.
INFRASTRUCTURE AND URBAN PLANNING LIMITATIONS
While many Vietnamese are generally excited about the prospect of car ownership, the country’s poor transportation infrastructure – including roads and alternative public transportation options – remains a challenge to expanding automobility.[10] Urban planning in Vietnam remains weak and uncoordinated compared to more developed countries in the region such as Singapore,[11] which has become a hub for designing mobility solutions for Southeast Asia.[12] Many of the solutions developed in Singapore through grants from auto companies project technologically sophisticated multi-modal mobility models intended for not only Singapore but also densely populated mega-cities throughout the region.[13] One such future urban mobility research group’s stated goal is to “develop, in and beyond Singapore, new paradigms for the planning, design and operation of future urban mobility systems.”[14] For another, “a key focus will see how research outcomes can benefit the Asian market based on the needs of the region”.[15]
For most Vietnamese living in major cities like Ha Noi, Ho Chi Minh City and Da Nang, the motorcycle remains an essential part of life. Yet the use of motorbikes has also led to congestion, pollution, traffic fatalities and other growth dilemmas.[16] Many interlocuters that I interviewed feel that given the uncontrolled growth of cities, cars offer mobility as a valuable escape to more sustainable and safe suburban lifestyles.[17] They also map their previous experiences with motorcycles onto their future expectations of cars. Some signed up for driving lessons even before owning cars, and bought land and houses in suburban satellite districts as they prepare for an inevitable lifestyle shift.
Although the Vietnamese government has declared that the positive effects of “modernization and industrialization” brought by the auto industry’s expansion must be synchronized with “traffic infrastructure development, consumption policies, environmental protection requirements and energy saving trends”,[18] most interlocuters have little faith that local or national authorities will effectively implement sustainable urban development plans. Consequently, many residents have been anticipating and building alternative living spaces, often piecemeal. Among the growing middle class, there is a strong desire for “civilized”, safe, and pollution-free living environments, as anthropologists have discovered in recent studies of new urban districts in Ho Chi Minh City such as Saigon South.[19] In other mid-sized cities like Da Nang, residents watch as an urban landscape designed for future automobility efficiency rapidly unfolds, featuring multi-lane highways, bridges, and new suburban zones, in anticipation of increased car ownership and the metro area population doubling by 2030.[20]
Mobility futures attached to the automobile can excite or terrify, depending on one’s vantage point. Spectral to Vietnam’s automobility horizons are cautionary tales of regional cities such as Jakarta or Manila that suffer under the congested weight of poorly-planned urban expansion and motorization. Tran Bao Ngoc, a general director at Vietnam’s Ministry of Transport, identifies the following challenges to urban transportation in Vietnam: slow road and public transport infrastructure development, high growth of personal vehicles, inadequate planning and management, and no targeted control of personal vehicles to manage traffic.[21] Studies of Ho Chi Minh City’s infrastructure planning and development, including its subway system, warn of generally weak and uncoordinated responses by urban planners that if left unaddressed will have long-term congestion consequences.[22] A city and regional planner analyzing conflicting transit plans in Ho Chi Minh City identified competing and fragmented regimes of legal and regulatory frameworks, grant incentives, and planning principles that act as barriers to a more streamlined and effective development approach to the metropolitan public transport system.[23] The first subway line in Ho Chi Minh City, financed by Japan, and Ha Noi’s first metro line, financed by China, are well behind schedule. The former was supposed to open in 2018 and the latter in 2017, coinciding with the drop in auto tariffs imposed by AFTA, but by mid-2021 both remain uncompleted. Meanwhile, in Ha Noi, Da Nang, and Ho Chi Minh City, bus public transit accounts for less than 10% of commuter transportation, a small proportion compared to other major cities in the region.[24]
On the other end of the Southeast Asian city traffic spectrum, Singapore has invested heavily in car-lite city planning and its Land Transport Authority has emphasized technological innovation and transportation engineering to discourage widespread individual car use.[25] The automobile has come to co-exist with a variety of other mobility options, especially trains and buses, producing a city that remains surprisingly mobile for its size. The ease and connectivity of multiple modalities of transportation in Singapore have made it a test-bed, model and hub for developing and exporting mobility solutions for cities across the region.[26] A number of mobility labs funded by corporate and government grants at Singapore University of Technology and Design, Nanyang Technological University, National University of Singapore, and TUMCREATE[27] have been conducting research on the “future of mobility” from various urban planning, technology and engineering perspectives. These include investments in areas of environmental sustainability and first- and last-mile connectivity. Collaborative industry grants from companies such as Daimler, BMW, Volvo, Hyundai, Grab and Huawei which fund these labs are highly technology-centred, and generally revolve around key research areas such as autonomous vehicles, electromobility, traffic modeling, connectivity and vehicle sharing. According to one researcher, mobility solutions developed in these labs can be applied in Singapore and used as “models” for cities across the region.[28]
While these mobility futures under development sound promising, lingering within them are some of the very problems they purport to address. Central is the issue of sustainability. Across the board, technology is promoted by mobility service providers as a requisite solution to address problems of emissions, environmental degradation and climate change. In particular, electrification, car sharing, and multi-modal links to public transport are seen as progressive measures that can help tackle these issues. Yet, electrification often depends on energy generated by traditional power sources such as coal-fired power plants. Electric cars themselves still take up more space than is available on narrow Vietnamese city streets, requiring a continuous expansion and upgrading of infrastructure. Their batteries require many rare earth minerals, and are still not widely recycled. New car models that are technologically connected will also have shorter life spans and faster replacement rates, which produce more expenses and waste.
Future mobility projections that rely on automobile companies’ research grants are also likely to produce new dilemmas down the line. While many policy and industry efforts have been taken to make cars more energy-efficient and mega-cities more car-lite, such visions are still based on the assumption that the car must be here to stay, even if produced and used in modified and interconnected forms. While reinvented mobility services are meant to help expand automotive companies’ revenue in the global North, targeting emerging markets like Vietnam that are reaching the profitable stage of “motorization” for legacy car sales remains an important parallel strategy for many car companies.
Widespread motorization has not yet happened in Vietnam, partly because the country is still relatively low on the development ladder. Another reason is that the Vietnamese government has managed to maintain their own version of “car-lite” cities through taxation. However, this planning and revenue tool is being eroded. The 90% tax rate on automobiles sold in Vietnam just 15 years ago made car ownership a rare luxury and mostly prohibitive. But since Vietnam is now a member of the WTO and 15 free trade agreements, tariffs on automobiles are being removed and markets are being pried open. A former luxury is likely to eventually become a necessity.
Unlike Singapore where research institutions are working in greater tandem with urban planners, the government, and industry to get ahead of the problem and maintain a mobile and environmentally friendly city, the coordination between local stakeholders to improve Vietnam’s urban planning and to facilitate a car-lite future does not necessarily exist to the same extent.[29] The mandatory elimination of tariffs on cars in Vietnam and elsewhere in the region through trade agreements does not bode well for cities that are already congested and polluted and where strong planning mandates or alternative transportation infrastructures are lacking.[30]
If imported mobility solutions are limited in their applicability to the Vietnamese context, and the country’s infrastructure to support widespread automobility remains insufficient, what alternatives are there to address Vietnam’s expanding mobility needs?
CARS AS VIETNAM’S INEVITABLE FUTURE?
Vietnam’s automobile consumption has recently slowed. The closure of borders and the disruption of economic activities during the COVID-19 pandemic saw car sales in the country decline 8% in 2020. Disrupted supply chains have also constrained automobile production.[31] Special consumption taxes, vehicle certification requirements and other protective measures, although being challenged, are also temporarily decelerating the flood of imported cars into Vietnam.
Nonetheless, many potential problems associated with capitalist hyper-mobility await on the post-pandemic horizon. Now is perhaps the time to rethink what future mobilities should realistically look like over the longue durée, and how to more holistically project and extend the collective “profit” of sustainable living to future generations. Interrogating assumptions about the inevitability of Vietnam’s auto market expansion is a good starting point.
The post-automotive future has already been anticipated by the auto industry. Vietnam should avoid becoming a dumping ground for legacy car sales – the primary profit area that car companies focus on in emerging markets without having to take responsibility for associated problems. For Vietnam’s densely populated cities, it is urgent that the national and local governments coordinate to prioritize the rapid completion of essential transportation infrastructures, especially highways and city metro systems. Until then, authorities should continue to stave off widespread auto consumption with short term non-tariff barriers – as they have tried to do since 2018. Such barriers will inevitably be challenged, but even a short extension of Vietnam’s public infrastructure development timeline will help prepare the country for more seamless and appropriate mobility solutions.[32] In the interim, targeted qualitative studies that emphasize user needs, experiences and constraints in Vietnam’s rapidly changing urban and transportation ecosystems are also required to effectively inform the implementation of sustainable urban development plans. Being proactive, rather than reactive to the transportation challenges facing Vietnamese cities, is critical.
As Vietnam tweaks its national industrialization and urban planning priorities and policies, it should encourage some leapfrogging within assumed transportation development trajectories. Most studies anticipate an influx of cars in the near future, but given Vietnam’s late start in motorization, they also hold out the possibility of alleviating if not bypassing the presumed inevitability of mass automobility. If approached with creative foresight and planning, automobiles and their associated problems may not necessarily have to dominate the future of mobility in Vietnam and elsewhere.
ISEAS Perspective 2021/83, 18 June 2021
ENDNOTES
[1] Allison Truitt, “On the Back of a Motorbike”, American Ethnologist 35 No. 1. (2008): pp. 3-19.
[2] Hai Hong Nguyen, “Vietnam’s Frontrunner for Prime Minister”, Fulcrum, 29 March 2021, https://fulcrum.sg/vietnams-expected-next-prime-minister/
[3] Joyce Dargay, “Income’s Effect on Car and Vehicle Ownership” Transportation Research Part A Issue 33 No. 2. (1999): 101-138.
[4] VinFast bought General Motor’s Vietnam manufacturing and distribution operations in 2018. On VinFast, see Le Hong Hiep, “Vietnam’s Industrialization Ambitions” ISEAS Trends in Southeast Asia No. 2 (2019).
[5] On automobility and society, see Mimi Sheller and John Urry, “The City and the Car”, International Journal of Urban and Regional Research Vol. 24 Issue 4 (2000): pp. 737-757.
[6] Kaoru Natsuda and John Thorne, Automotive Industrialisation: Industrial Policy and Development in Southeast Asia,(London: Routledge, 2021).
[7] Prime Minister Decision No. 229/QD-TTG (2016) incentivizes manufacture of priority vehicles including trucks and 9-seater vans.
[8] Thailand, dubbed the “Detroit of Asia” for its efficiency of scale in auto manufacturing, is Vietnam’s primary concern within ASEAN and the target of protective trade barriers against imported CBUs. Lamonphet Apisitniran and Piyachart Maikaew, “Heat on Vietnam Car Barriers Rises”, Bangkok Post 12 June 2018. https://www.bangkokpost.com/business/1483213/heat-on-vietnam-car-barriers-rises. Non-tariff barriers have been identified “as causing the most problems to free trade”: see “ASEAN – an Emerging Global Automotive Hub in the Making”, EU-ASEAN Business Council (2015).
[9] Under the EU-VN FTA, tariffs on auto assembly components drop from 32% to zero by 2025.
[10] Urban planner Danielle Labbe points out that “transportation planning experts generally agree that a city with a moderate density of 30 persons per hectare needs about 25 percent of its surface devoted to road space to support car traffic. Hanoi not only has three times that density, but its roads represent less than 20 percent of its surface”. Labbe, Danielle. “Urban Transition in Hanoi”. ISEAS Trends in Southeast Asia Issue 2 (2021) pg 10.
[11] Labbe also points out that in Vietnam “there has long been a need to integrate the mission of the institutions responsible for land-use development with other transport and infrastructure plans”. Ibid pg. 12.
[12] Glenn Van Zutphen, “Singapore’s Race for Mobility Solutions”, (2015), https://www.mobility.siemens.com/global/en/portfolio/road/stories/singapores-race-for-mobility-solutions.html
[13] Technology and planning solutions include the development of green and AI technologies for autonomous, connected, electric and shared vehicles, and of well linked multi-modal public transport networks, traffic engineering, electronic road pricing and routing algorithms to reduce personal car traffic.
[14] Singapore-MIT Alliance for Research and Technology, Future Urban Mobility Research Cluster, https://smart.mit.edu/research/fm/about-fm
[15] “BMW Group and NTU set up first joint research lab in Southeast Asia”, 23 April 2013, https://www.bmw-sg.com/local-news/bmw-group-and-ntu-set-up-first-joint-research-lab-in-southeast-asia/2013/04/23/
[16]Arve Hansen, “Transport in Transition: Doi Moi and the Consumption of Cars and Motorbikes in Hanoi”, Journal of Consumer Culture 17 No. 2. (2017): pp 378-396.
[17] Between 2013 and 2019, the author interviewed current and potential motorcycle and automobile users as well as auto sales, manufacturing and marketing representatives in Ho Chi Minh City, Da Nang, and Ha Noi. See Ivan V. Small, “Anticipating the Automobile”, Consumer Culture Theory 19 (2018): 145-161.
[18] Prime Minister Decision No 1211/QD-TTg 2014 “On the Approval on the Master Plan on Vietnam Automobile Development to 2020 with a Vision to 2030”.
[19] Erik Harms, Luxury and Rubble, (Berkeley: Univ of California Press, 2016).
[20] Ichiro Kutani and Yasutomo Sudo, “Case Study of Da Nang City”, in Addressing Energy Efficiency in the Transport Sector Through Traffic Improvement, Economic Research Institute for ASEAN and East Asia Research Project Report FY 2015 No. 10, 2016, https://www.eria.org/research/addressing-energy-efficiency-in-the-transport-sector-through-traffic-improvement/
[21] Tran Bao Ngoc, “Challenges and Solutions for Sustainable Urban Transport in Cities of Vietnam” UNESCAP, 2016, https://www.unescap.org/sites/default/d8files/Country%20Report_Viet%20Nam_SUTI.pdf
[22] T.H. Truong, T. T. Truong and S.T. Tung, “Housing and Transportation in Vietnam’s HCMC”, Friedrich Elbert Stiftung, 2017, https://asia.fes.de/news/housing-and-transportation-in-vietnams-ho-chi-minh-city; Jessica Lockrem, “Moving Ho Chi Minh City: Planning Public Transit in the Motorbike Metropolis”, Ph.D. dissertation, Rice University, 2016, https://scholarship.rice.edu/handle/1911/96259
[23] Hun Kee Kim, “Speculating on World Class Transportation Infrastructure in Ho Chi Minh City”, Trends in Southeast Asia, no. 11, 2017, /images/pdf/TRS11_17.pdf.
[24] Pham Minh Hai, “Ho Chi Minh City Sustainable Urban Transport Index”, UNESCAP, 2018, https://www.unescap.org/sites/default/files/SUTI%20%20Mobility%20Assessment%20Report%20%20-%20Ho%20Chi%20Minh%20City.pdf
[25] Singapore Ministry of Foreign Affairs and Centre for Liveable Cities, “ASEAN Smart Cities Network”, 2019; Urban Land Institute Asia Pacific and Centre for Liveable Cities, “Urban Mobility: 10 Cities Leading the Way in Asia Pacific”, 2017.
[26] Enterprise Singapore, Urban Solutions, https://www.enterprisesg.gov.sg/industries/type/urban-solutions/industry-profile
[27] A research platform founded in 2010 to foster research collaborations between Singapore and the Technical University of Munich.
[28] In 2013 and 2021, the author interviewed mobility lab researchers and auto corporate executives in Singapore about their designs for the city and region. See Ivan V. Small, “Affecting Mobility: Consuming Driving and Driving Consumption in Southeast Asian Emerging Markets”, Journal of Consumer Culture 18 No. 3. (2018): 377-396.
[29] Danielle Labbe and Clement Musil, “Periurban Land Redevelopment in Vietnam Under Market Socialism”, Urban Studies 51 No. 6. (2014): pp. 1146-1161.
[30] In 2017, air pollution in Ho Chi Minh City was more than double the levels recommended by the World Health Organization. Hanoi was rated the seventh most polluted capital in the world by IQ AirVisual in 2019.
[31] Ben Shepherd and Anita Prakash, Global Value Chains and Investment: Changing Dynamics In Asia, Economic Research Institute for ASEAN and East Asia Research Project Report 2021 No. 01, https://www.eria.org/publications/global-value-chains-and-investment-changing-dynamics-in-asia/
[32] Do Mai Lan and Hoang Oanh, “Vietnam’s Tentative Approach to Regional Infrastructure Initiatives”, Perspective No. 71, 2021, /articles-commentaries/iseas-perspective/2021-71
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, Lee Sue-Ann, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
2021/75 “Vietnam’s Evolving Regulatory Framework for Fintech” by Dang Linh Chi and Pham Mai Nhu Thuy
EXECUTIVE SUMMARY
- The Vietnamese government is encouraging financial technology or fintech to promote a cashless society and extensive financial inclusion in the country.
- The fintech market is subject to multiple regulations issued by the State Bank of Vietnam for finance matters and the Ministry of Public Security (MPS) for data privacy and cybersecurity matters. The Steering Committee on Financial Technology is the centralized State authority for fintech management.
- Existing regulations neither provide a definition of fintech nor a single comprehensive instrument regulating fintech activities. The government is developing projects and drafting rules to regulate this largely unregulated industry.
- Government plans to promote modern technologies such as e-KYC, Open API, big data, artificial intelligence, blockchain and cloud computing, which supports local fintech development.
- To ensure that fintech promotes financial inclusion and a cashless society, the Vietnamese government needs to design a regulatory framework that is well-balanced to support innovation and ensure consumer protection and financial stability.
* Dang Linh Chi is a Special Counsel based in Baker McKenzie’s Hanoi office and Pham Mai Nhu Thuy is a Legal Assistant, also based in Baker McKenzie’s Hanoi office. [1]
INTRODUCTION
Financial technology, or fintech, has transformed financial services and introduced ample opportunities for economic development. Vietnam’s share of regional fintech investment rose from only 0.4% in 2018 to 36% in 2019, placing it second only to Singapore (51%) in the ASEAN region. Despite this achievement, the financial areas transformed by fintech in the country are quite limited, with 98% of the funding being concentrated in the payment sector and 1% in blockchain.[2] Also, Vietnam is still considered as having limited range of fintech activities, with fintech in the payment industry accounting for 31%, P2P lending for 17%, and blockchain/crypto for 13% of the market.[3] One of the main factors hindering fintech growth and development is the under-developed regulatory framework where most regulations revolve around fintech activities in the payment industry.
Generally speaking, the fintech regulatory landscape in Vietnam is still at an early stage of development. Traditionally, the government had been quite conservative in terms of currency control. However, to promote financial inclusion and a cashless society via fintech, the government has been willing to allow more relaxed regulations to create more space for innovation. At the same time, the legal framework has also been designed to ensure consumer data privacy and cybersecurity.
This paper discusses the current fintech regulatory development in the country, from fintech development policy, key fintech regulators, regulations on specific forms of fintech and fintech-enabling technologies. It also discusses personal data protection and data localisation requirement, which are important issues relevant to fintech companies and fintech-enabling technology developers. The key challenge for the local government is to design a regulatory framework that is well-balanced and that allows innovation while ensuring consumer protection as well as financial stability.
FINTECH DEVELOPMENT FOR FINANCIAL INCLUSION
Currently, Vietnam has a large proportion of individuals and small- and medium-sized enterprises which remain unbanked or underbanked. For example, only 30% of adults (15 years and above) have accounts with financial institutions in 2018.[4] Also, the rate of cash transactions is high, i.e., 80 % as at 31 December 2019.[5] Meanwhile, the population’s access to information technology and telecommunications (ITC) services is quite impressive, with mobile phone connection at 150%, internet penetration at 70%, and 3G&4G registration at 45% in 2019.[6]
In that context, to promote greater financial inclusion, the government has set the following targets by 2025:[7]
- non-cash payment transactions will increase at the annual rate of 20-25%,
- at least 80% of adults will have accounts opened at banks or other authorised organisations,
- at least 25-50% of adults will have deposit at credit institutions;
- at least 250,000 small- and medium-sized enterprises will have debt balance at credit institutions;
- at least 70% of adults will have credit history information in the credit information system of the SBV.
Fintech development is considered an important strategy to achieve the above targets. More specifically, fintech is included in the government’s plan for regulatory improvement, expansion of financial supply chain channels, diversification of basic financial services, enhancement of the financial infrastructure, and protection of financial consumers. For example, fintech companies are encouraged to actively participate in the financial service supply chain and partner with credit institutions, especially micro-finance organizations and programs.
That is to say that for fintech investors, Vietnam remains largely an untapped market offering an attractive customer base as well as policy incentives. However, such an untapped market poses great challenges for the government in its ambition to use fintech to achieve financial inclusion goals.
FINTECH REGULATORS
As fintech involves both elements of finance and technology, the industry is subject to multiple regulations issued by a number of key regulators. The country’s central bank, the State Bank of Vietnam (SBV), regulates finance-related matters, while the Ministry of Public Security (MPS) oversees data privacy and cybersecurity-related matters. Both the SBV and the MPS are specialised governmental agencies that can directly issue regulations (i.e., in the form of circulars). They can also propose draft regulations to be approved and issued either as decrees (which are of higher order of application than circulars) by the government or as laws (which are of higher order of application than decrees) by the National Assembly. For example, intermediary payment service (IPS), which is the dominant form of fintech activity in Vietnam, is subject to regulations on the establishment and operation of IPS providers, and regulations on anti-money laundering/KYC (Know-Your-Customer). Both are basically designed by the SBV. At the same time, IPS providers that participate in the collection, exploitation, analysis, and/or processing of personal information are also subject to the regulations on personal data protection and cybersecurity. These are basically designed by the MPS.
Among the regulators, the Steering Committee on Financial Technology, which was established by the SBV in March 2017, is the designated centralised state authority for implementing State management of fintech. The Department of Payment under the SBV is the standing unit responsible for implementing tasks assigned by the Committee.[8] The Committee is positioned to, among other functions, develop and complete the fintech ecosystem (including a regulatory framework), and create opportunities for fintech companies following the policy and strategy of the government. So far, the Committee has set targets to research fintech in five services: e-payment, e-KYC, P2P lending, Open API and blockchain application. Also, it has established direct dialogue channels with fintech firms to facilitate active problem solving.[9]
REGULATION ON CERTAIN FINTECHS
At present, Vietnamese laws provide neither a definition of fintech nor a single comprehensive instrument for regulating fintech activities. Current regulations mostly evolve around fintech in the payment industry. That said, the government has been developing projects and draft regulations to regulate thus far unregulated fintech forms.
Intermediary payment service providers
Fintech in the form of IPS is governed by the Decree 101 on non-cash payment[10] and Circular 39 on IPS.[11] IPS includes financial switching service, electronic clearing service, payment gateway service, support service for money collection and payment, support service for electronic money transfer, and e-wallet service.
IPS providers must be locally established enterprises that have obtained a license to provide IPS (“IPS License”) from the SBV. Basically, in order to obtain an IPS License, the applicant must satisfy conditions such as those on the charter capital (i.e., VND 50 billion, approx. USD 2,145,000), service provision plan (which includes processes such as those on technical processes, payment guarantee mechanism and internal control), personnel (e.g., the qualifications of the legal representative and key managerial positions) and technical infrastructure (e.g., those for security of information technology system). After being issued an IPS License, an IPS provider must provide services in accordance with its IPS License and relevant laws. One key operational requirement is that the IPS service provider must implement anti-money laundering measures (e.g., KYC/e-KYC and transaction reporting) in accordance with the laws on anti-money laundering.
Currently, the government is drafting a decree that will replace the Decree 101 on non-cash payment. This is expected to provide more details on IPS, allow outsourcing of certain functions to agents, and release or remove certain licensing requirements to facilitate market access to fintech investors.
Mobile money service providers
In March 2021, the Prime Minister issued Decision 316 on a pilot programme for mobile money service, allowing the use of telecommunications accounts to make payment for goods and services of small value (i.e., the total transaction value limit of VND 10 million (approx., USD 434) per month per mobile money account).[12] The pilot programme will operate for two years from the time the first enterprise is approved to pilot the mobile money service. The result of the pilot programme will be used by regulators to design specific regulations.
Enterprises eligible to apply for the pilot programme must either be (i) a qualified enterprise that has a license to provide e-wallet IPS and a license to establish a ground public telecommunication network using radio frequency bands, or (ii) a subsidiary that is allowed to use telecommunications infrastructure, network and data by its parent company which has a license to establish a ground public telecommunication network using radio frequency bands.
P2P lending service providers
For the lending industry, the SBV is currently working on a pilot programme for P2P lending as part of the Plan on Promoting Sharing Economy.[13] So far, the SBV has confirmed that P2P lending is currently unregulated by Vietnamese laws. There are some P2P lending platforms operated by companies who have registered for the business lines of financial consultancy and financial brokerage.[14] Also, the policy considers P2P lending as a civil transaction rather than a business activity.[15]
REGULATORY SANDBOX FOR UNREGULATED AND UNDER-REGULATED FINTECH
Apart from specific regulations, the government is making efforts to develop a regulatory sandbox as a catch-all instrument for all forms of fintech. This sandbox is currently included in many master plans such as the Strategy for developing information technologies in the banking sector,[16] the Scheme for promoting a sharing economy[17] and the Strategy for national financial inclusion.[18]
In early June 2020, the government issued a draft decree providing for a fintech regulatory sandbox (the “Draft Sandbox Decree”) in the banking sector. Generally, the Decree provides for the sandbox’s purpose, conditions and application procedures, test run requirements and extension/exit scheme, and the obligations of related parties.
More specifically, under the Draft Sandbox Decree, a fintech regulatory sandbox in the banking sector is defined as a legal mechanism established by the government that allows credit institutions, fintech solutions providers, and other innovative organizations to directly test fintech products and services in a closely-controlled environment supervised by relevant State bodies. Fintech areas that can be test run include payment, credit, P2P lending, KYC supports, Open API, solutions applying innovative technologies (e.g., blockchain), and other services supporting banking activities (e.g., credit scoring, savings, fundraising).
In the Draft Sandbox Decree, fintech organisations are organizations that are (i) not banks, (ii) established in Vietnam in accordance with the Law on Enterprises, and (iii) directly providing some banking-related services based on fintech solutions and/or fintech solutions supporting the activities of credit institutions. Fintech organisations must obtain a certificate of registration to participate in the sandbox by submitting a dossier to the Department of Payment of the SBV, which is the standing unit of the Fintech Steering Committee. The SBV will issue the certificate upon approval by the government.
The Draft Sandbox Decree also assigns the SBV with the responsibility to provide further detailed guidance for the implementation of the draft decree. However, it appears that the government’s current focus is on developing a regulatory sandbox for fintech in the banking sector, which will be managed by the SBV. Seeing that fintech could disrupt financial services other than banking activities (e.g., insurance with insur-tech), it is expected that there will be more regulatory development for Vietnam to welcome fintech investors from more diverse financial subsectors.
REGULATIONS ON AND SUPPORT FOR FINTECH ENABLING TECHNOLOGY
Fintech development is enabled by technologies such as e-KYC (electronic Know-Your-Customer), cloud computing, API, IoT (Internet-of-Things), big data, artificial intelligence, and blockchain. Development of such technologies is central to the SBV’s plan on banking digitalisation. SBV has set the goal of issuing a regulatory framework by 2025 for the application of key 4.0 technologies. These technologies include, among others, e-KYC, Open API, big data, artificial intelligence, blockchain, and cloud computing.[19]
The e-KYC is now further enabled by the National Database of Citizen, which was put into operation in late February 2021. It allows the collection and use of basic information on all Vietnamese citizens, which is standardised, digitalised, stored, and managed by an information technology infrastructure that supports State management and transactions of agencies, organisations and individuals.[20]
For cloud computing, banks are allowed to outsource information technology/cloud computing services to third-party service providers upon satisfaction of certain requirements. These cover obligations of the service user, criteria for selecting the service provider and the compulsory contents of the service contract.[21] The SBV expects the number of local banks using cloud computing to reach 60% by 2025 and 100% by 2030. However, currently, local cloud service providers account for only 20% of the market, and the majority are offshore entities.[22] With possible data localisation requirements being imposed on data-based service providers, partnerships with offshore cloud service providers to facilitate widespread use of cloud computing will be challenging.
Aside from the above regulatory initiatives, the Ministry of Science and Technology is also implementing Plan 844 to promote innovative start-ups that have the ability to grow rapidly via exploitation of intellectual property assets, technology, and new business models. The incentives include, among others, support for expenses regarding infrastructure, capital, training and marketing.[23]
PERSONAL DATA PROTECTION AND DATA LOCALIZATION
Fintech companies and fintech-enabling technology developers involved in data-related activities may be subject to regulations on data privacy, data protection, and data security/cybersecurity.
On the issue of data privacy, Vietnam does not have a single comprehensive law that addresses individual and organisational privacy rights. Instead, relevant provisions are contained in various legal instruments such as the Civil Code, the Law on Information Technology, the Law on Protection of Consumers’ Rights, the Penal Code, and the Law on Cyber Information Security. That said, a recent development is the Draft Decree on Personal Data Protection (the “Draft PDPD”), issued by the government in February 2021. Notable proposals under the Draft PDPD include a broad definition of personal data, restrictions on processing of sensitive personal data and cross-border transfer of personal data (which includes data localisation in certain cases). Under the Draft PDPD, the PDPD will take effect on 1 December 2021 with no grace period available.
Regarding data localisation, under the Law on Cybersecurity,[24] both local and offshore enterprises providing services on the telecom network, the Internet, and value-added services on cyberspace (herein referred to as “Cyberspace Service Providers”) which are involved in the collection, exploitation, analysis, and/or processing of personal information, data about users’ relationship and/or data generated by users in Vietnam, are required to store those data in Vietnam for a period specified by the government. Offshore entities will be required to open a branch or a representative office in Vietnam. That said, the data localisation requirement has not been implemented due to lack of details and guidance. Cyberspace Service Provider is yet to be more specifically defined, and it is uncertain whether data must be stored exclusively in Vietnam (i.e., no cross-border transfer) or whether only a copy of the data must be stored in Vietnam.
The data localisation requirement as proposed in the Law on Cybersecurity [24] and the Draft PDPD has generated heated debates in the private sector. A key concern raised is that the requirement of storing data in Vietnam will increase costs and reduce efficiency for businesses, especially for multinational companies. Another key concern is that companies located in Vietnam may become easy targets of cyberattacks, which may increase exposure to significant data loss, and with the risk of the attackers gaining access to a huge amount of information stored in Vietnam. In addition, the data localisation requirement is regarded by certain market participants to be potentially violating Vietnam’s international commitments under Article 14.11 and Article 14.13 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (or the CPTPP).[25]
CONCLUSION
Digital payment and e-commerce activities are booming in Vietnam amidst the COVID-19 pandemic. These are driven by an increased demand for low-value transactions at low costs as well as the government’s policy to promote financial inclusion and a cashless society. The fintech industry is expected to grow further in the country. Investors, especially foreign ones, should stay updated with regulatory developments in the industry, especially possible restrictions regarding data privacy and cybersecurity. For fintech to enhance financial inclusion and promote a cashless society, the Vietnamese government will need to design a regulatory framework that is well-balanced and that allows innovation while ensuring consumer protection as well as financial stability.
ISEAS Perspective 2021/75, 7 June 2021
ENDNOTES
[1] Dang Linh Chi is a special counsel based in Baker McKenzie’s Hanoi office. Linh Chi focuses her expertise heavily towards the corporate, and banking and financial services sectors. She has substantial experience in and regularly advises on a broad range of banking and finance regulatory matters, capital market transactions, insurance, securities and funds. With fintech as part of her specialised expertise, Linh Chi frequently advises fintech companies, bank card organisations, and providers of payment services and intermediary payment services on their products and operation in Vietnam. Her capabilities also extend to advising domestic and international banks and financial institutions on their investment products. Over the past years, she has been actively participating as a contributor to legal reform efforts and as legal advisor on banking and financial services issues to business and professional associations. Pham Mai Nhu Thuy is a legal assistant based in Baker McKenzie’s Hanoi office. Thuy primarily focuses on banking and financial services, finance and projects, and corporate sectors. She helps the team in preparing regulatory advice, transactional documents and due diligence works for clients in several industries, including fintech.
[2] UOB, PwC and SFA, FinTech in ASEAN – From Start-up to Scale-up, 2019, p. 7 and 9.
[3] Fintechnews Singapore, Vietnam Fintech Report 2020, 2020, https://fintechnews.sg/wp-content/uploads/2020/11/Vietnam-Fintech-Report-2020.pdf
[4] World Bank (2018). The Little Data Book on Financial Inclusion 2018. Washington DC.
[5] Tapchitaichinh.vn, ““Thanh toán không dùng tiền mặt tại Việt Nam: Thực trạng và giải pháp”“, [Noncash-payment in Vietnam: Current situation and solutions] November 2020, https://tapchitaichinh.vn/ngan-hang/thanh-toan-khong-dung-tien-mat-tai-viet-nam-thuc-trang-va-giai-phap-329639.html#:~:text=Theo%20T%E1%BA%ADp%20%C4%91o%C3%A0n%20D%E1%BB%AF%20li%E1%BB%87u,l%C3%A0%20giao%20d%E1%BB%8Bch%20r%C3%BAt%20ti%E1%BB%81n.
[6] Vnetwork, ““Các số liệu thống kê Internet Việt Nam 2019”“, [Statistics on Internet in Vietnam] November 2019, https://vnetwork.vn/news/cac-so-lieu-thong-ke-internet-viet-nam-2019.
[7] Decision No. 149/QD-TTg dated 22 January 2020 of the Prime Minister on approving the Strategy for a national financial inclusion towards 2025, with a vision towards 2030 (the “Decision 149”).
[8] Decision No. 328/QD-NHNN dated 16 March 2017 of the State Bank of Vietnam on the establishment of Fintech Steering Committee and the supporting units from the Fintech Steering Committee of the State Bank of Vietnam (the “Decision 328”).
[9] The State Bank of Vietnam, “Hợp tác Ngân hàng – Fintech – Góp phần thúc đẩy phổ cập tài chính” [Bank and fintech partnership – contributing to the promotion of financial inclusion] August 2019, https://www.sbv.gov.vn/webcenter/portal/m/links/cm255?dDocName=SBV400234.
[10] Decree No. 101/2012/ND-CP dated 22 November 2012 of the Government on non-cash payment, as amended by Decree No. 80/2016/ND-CP and Decree No. 16/2019/ND-CP (the “Decree 101”).
[11] Circular No. 39/2014/TT-NHNN dated 11 December 2014 of the State Bank of Vietnam on guiding the intermediary payment service, as amended by Circular No. 20/2016/TT-NHNN, Circular No. 30/2016/TT-NHNN, and Circular No. 23/2019/TT-NHNN (the “Circular 39”).
[12] Decision No. 316/QD-TTg dated 9 March 2021 of the Prime Minister on Approving the implementation of piloting the use of telecommunications account for payment of small value goods and services (the “Decision 316”).
[13] Decision No. 999/QD-TTg dated 12 August 2019 of the Prime Minister on approving the Plan on Sharing Economy (the “Decision 999”).
[14] Official Letter No. 5228/NHNN-CSTT dated 8 July 2019 of the State Bank of Vietnam to credit institutions and branches of foreign banks regarding peer to peer lending (the “Official Letter 5228”).
[15] The State Bank of Vietnam, “Ý kiến của NHNN về lĩnh vực cho vay ngang hàng tại thời gian gần đây”, [Opinions of the State Bank of Vietnam on peer-to-peer lending in recent period], December 2018, https://www.sbv.gov.vn/webcenter/portal/vi/menu/trangchu/ttsk/ttsk_chitiet?centerWidth=80%25&dDocName=SBV355385&leftWidth=20%25&rightWidth=0%25&showFooter=false&showHeader=false&_adf.ctrl-state=3u8h33nbo_14&_afrLoop=6460897095115211#%40%3F_afrLoop%3D6460897095115211%26centerWidth%3D80%2525%26dDocName%3DSBV355385%26leftWidth%3D20%2525%26rightWidth%3D0%2525%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.ctrl-state%3Da9bxu47t5_4.
[16] Decision No. 2655/QD-NHNN dated 26 December 2019 on approving the Strategy for developing information technologies in the banking sector by 2025, with a vision towards 2030 (the “Decision 2655”).
[17] Decision No. 999/QD-TTg dated 12 August 2019 of the Prime Minister on approving the Scheme for promoting a sharing economy (the “Decision 999”).
[18] Decision No. 149/QD-TTg dated 22 January 2020 of the Prime Minister on approving the Strategy for a national financial inclusion towards 2025, with a vision towards 2030 (the “Decision 149”).
[19] Decision No. 2655/QD-NHNN dated 26 December 2019 on the Strategy for developing information technologies in the banking sector by 2015, with a vision toward 2030 (the “Decision 2655”).
[20] VNExpress, “Khai trương hệ thống cơ sở dữ liệu quốc gia về dân cư” [Commencement of the national database on citizen], 25 February 2021, https://vnexpress.net/khai-truong-he-thong-co-so-du-lieu-quoc-gia-ve-dan-cu-4239980.html
[21] Circular No. 18/2018/TT-NHNN dated 21 August 2018 of the State Bank of Vietnam on the security of the information system in banking activities (the “Circular 18”).
[22] Opengovasia, “Vietnam launches digital transformation campaign”, June 2020, link https://www.opengovasia.com/vietnam-launches-digital-transformation-campaign/.
[23] Decision No. 844/QD-TTg dated 18 May 2016 of the Government on approving the plan of “Supportive policy for national innovative start-up ecosystem to 2025”, as amended by Decision No. 188/QD-TTg (the “Decision 844”).
[24] Law on Cybersecurity No. 24/2018/QH14 adopted on 12 June 2018 by the National Assembly (the “Law on Cybersecurity”).
[25] Under the CPTPP: Article 14.11: “each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person”; Article 14.13: “no Party shall require a covered person to use or locate computing facilities in that Party’s territory as a condition for conducting business in that territory”.
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- Vietnam’s digital subprime lending industry is rapidly growing amidst public concern for reckless lending and aggressive and unregulated debt collection practices.
- Disgruntled, harassed and vengeful digital borrowers express their discontent about predatory lending apps on social media platforms including Facebook groups.
- These Facebook groups function as: a) forums where members coalesce for guidance on navigating the expanding and labyrinthic landscape of lending apps; b) milieus of expression and comfort for over-indebted, isolated and harassed members; c) and spaces where members express their desire to challenge and take revenge against digital lenders and debt collectors that victimise them.
* Nicolas Lainez is Visiting Fellow at ISEAS – Yusof Ishak Institute and an Adjunct Faculty at NUS in Singapore; Tô Thu Phuong lives in Hanoi and holds a Bachelor in Human Rights and Political Science from Columbia University and Sciences-Po Paris; and Bui Thi Thu Doai lives in Hanoi and is studying towards a BA in Development and Economics at the London School of Economics.
INTRODUCTION
Consumer finance is rapidly growing in Vietnam, a country undergoing financial transformation.[1] Digital subprime lending is a thriving new market,[2] and dozens of lending apps are available for download on smartphones.[3] These allow borrowers to enjoy a ‘fast and easy’ credit experience and obtain subprime unsecured loans with high interest rates within minutes. This expanding lending landscape stirs ambivalent emotions. On the one hand, it generates excitement over the prospects for accelerating financial inclusion, formalising lending practices and repelling ‘black credit’—a catch-all for unlicensed moneylending, high interest rates, and strong-arm collection practices.[4] On the other hand, it raises public concern over unlawful lenders who promote reckless and predatory lending and use harsh recovery methods that create grounds for debt entrapment and social discontent.[5]
This article examines how disgruntled, harassed and vengeful borrowers express their discontent in Facebook groups that antagonize over digital subprime lending. It shows how, for mainly young and active working-age borrowers, participating in these groups constitute a politicisation from below of digital subprime lending. These borrowers’ groups do not challenge dominant narratives about credit liberalisation as vectors for progress, neither do they promote the emancipatory ideology that anti-debt movements spread in Europe[6] and North America[7] in the aftermath of the 2008 financial crisis. Instead, they reflect the need for a newly formed community of borrowers to assist each other and share practical knowledge on how to navigate lending apps, express frustration about abusive practices, and beat ‘predatory’ lenders at their own game. Their posts and micro-actions make practical knowledge accessible to large communities of borrowers and lenders who monitor discussions, thereby encouraging collective action and reaction.
But even if these micro-actions reflect public discontent and trigger regulatory changes, it is unlikely that they will reverse the growth of digital subprime lending and financial transformation all-together. Be that as it may, these social media groups provide insights into under-regulated digital subprime lending in Vietnam, and highlight the need for will, leadership and direction in facing the challenges of financial transformation and fostering political change.
Findings for this article were retrieved by surveying posts across three private Facebook groups dedicated to digital borrowers in Vietnam.[8] Due to technical constraints associated with data processing limits, five days’ worth of user posts were sorted from most to least recent, and exported for thematic analysis. Each of the groups surveyed harbours around 12,000 members, and there are hundreds more of smaller and bigger, active and inactive groups available through a keyword search on Facebook. They carry similar names, usually with the expression ‘evading debt’ (bùng app) incorporated. Members are mainly borrowers who use lending apps from banks, financial companies (such as FE Credit), p2p platforms, dubious loan companies and moneylending gangs, lenders who advertise their products, and debt collectors who seek defaulting borrowers.
NAVIGATING APPS: GROUPS AS SPACES OF GUIDANCE
The borrowers’ groups primarily function as a forum where members come together to seek advice and encouragement on how to navigate the expanding and labyrinthic landscape of lending apps. To start with, these groups provide guidance for borrowers to access ‘easy money’ from digital lenders. Newcomers will commonly seek advice on which apps are easier and safer to borrow from, what personal data to provide or give access to in order to reassure lenders while protecting borrowers’ privacy, and how to fulfil requirements to ensure approval. Generally, application requirements are more stringent for banks and p2p platforms, and minimal for financial companies and illegitimate lenders. Experienced borrowers often address practical and technical requests, such as how to check and improve one’s credit record. Notably, these groups do not deter but encourage mass digital borrowing. The reason is that by repeatedly borrowing, maximising, and repaying their credit, borrowers are able to build trust and credit history with lenders, giving them access to cheaper, larger and more flexible loans. Therefore, instead of informing about the dangers of digital subprime lending in terms of over-indebtedness, group members share tricks on how to take full advantage of the system or ‘exploit the apps’ (cày app).
A popular topic of discussion is over-indebtedness, especially debt entrapment and heavy harassment. Many members invite over-indebted borrowers to dip their feet further into the mud, borrow more, default and hope for resolution through debt restructuring. By doing so, they promote further entrenchment with digital lending schemes, encouraging juggling – borrowing here to repay there – instead of steering away from mass-borrowing. Some members advertise side-services, advice and collaboration on how to borrow more and engage deeper with lending behaviours, especially to new members who have had their loan application rejected. They offer personal document fraud and fake identities to borrow under a different name, referees-for-hire or the provision of a reference number for borrowers to put forward in their loan apps, and surrogacy services whereby members offer to borrow for borrowers in exchange for a percentage of the debt payment. Some members also publicise their desire to cooperate and ‘build a good record together’. In these arrangements, a creditworthy borrower cooperates with a non-creditworthy borrower to take a high loan to be split and then default together. One of these posts reads: “Hi everyone, I’m holding a ‘good profile for borrowing purposes, inbox me if you want to participate, we will split 5/5”.
Discussions about over-indebtedness also deal with default and debt evasion. Tips and methods for how to stifle debt collectors’ harassment and evade loans are passed along from more experienced members to newcomers. To prevent or put a stop to threatening messages and cyber-bullying tactics used by debt collectors, borrowers are advised to meticulously erase their phone and social media data, as well as tighten and reduce their online presence to a minimum to stop the flow of information supplied to their harassers. In addition, experienced members classify lenders based on how easy it would be to default them. Traditional banks are the hardest to default because of their stringent application demands. Financial companies such as FE Credit come second due to their well-developed pressuring methods and large networks of debt collectors. Ranking last in members’ implicit difficulty scale are dubious lending apps – the most cited are Doctor Đồng, Tamo, VDong, and Cash24 – that have limited resources to persecute late borrowers. These illegitimate lenders are preferred and most-recommended because, as one user writes, they “won’t go to your homes or collect your debt in real life. Apps only text and call to threaten you. All their staffs bluff and pretend to be gangsters. They only scare women and little children”. In any case, close observers note that debt collectors stop harassing late borrowers with phone calls and social media smear posts two or three months after the latter defaulted. In a last recourse, experienced members advise harassed and over-indebted borrowers to ‘evade their debt’ (trốn nợ). Extreme techniques of loan evasion involve moving away from one’s old place of residence and faking one’s own death.[9] In short, borrowers’ groups play a vital function for sharing practical and vital knowledge to navigate lending apps.
LAMENTING OVER APPS: GROUPS AS SPACES OF COMFORT
Beyond sharing advice and guidance, borrowers’ groups form much-needed milieus of expression and comfort for members who lack experience in dealing with digital lenders and debt collectors and are isolated from their usual support systems. Many members show apparently genuine concern, solidarity and compassion for over-indebted borrowers who share their ‘harassment journeys’. Members publish posts that profess struggle, pain and desperation resulting from heavy indebtedness and cyber-bullying from collectors. In one of the groups surveyed, multiple members expressed being reputationally isolated and persecuted by their families for falling into debt. These groups and the illusion of collective understanding therefore become a source of social support for lost and isolated borrowers who share their story to seek uplift and encouragement. Across the litany of posts detailing harassment journeys can be found posts such as one by a member professing to have reached an end point:
Is anyone else here also like me? I was caught in a financial bind, so I took out high-interest loans. Then I borrowed from lending apps to get rid of those debts, and I wound up with more debt. I can’t tell my family. I am blacklisted by the banks. Now neither my brothers and sisters nor my friends will lend me money. I am losing 30 million in daily interests, and there’s no way for me to escape or get a fresh start in life. I can’t sleep most nights because I feel as humiliated as a tramp. I am constantly worried about debt collection.
These cri-de-coeur are more often than not met with compassion, and at times, sincere commiseration from other members. One user commented: “nobody living a happy, peaceful life would think to turn to borrowing from mobile apps and defaulting. In these groups, aside from loan sharks and scammers, everyone has had to live through the pressure of defaulting and evading debts from lending apps”. Members are open and candid about the cyber-harassment that results from defaulting and evading debts, often sharing screenshots of threatening text messages, recordings of threatening phone calls and instances of social media defamation by collectors. They do this to ask for advice, and at times to consult the group on the severity of the threats, some of which border on being death threats:
Warning to Debtor [name], National ID [ID Number]. We have bought back your debt contract, if we don’t receive the money today, we will send our gang down to your house, don’t blame us then for being heavy-handed.
These posts are often met with an outpouring of support and demonstrations of support whereby members would collectively insult and demean the lender and debt collector. Overall, these Facebook groups generate virtual – yet generous – social support to over-indebted borrowers who have become alienated from their families and society.
CHALLENGING THE APPS: GROUPS AS SPACES OF CONTENTION
Borrowers’ groups are also spaces where members express their desire to challenge digital lenders and collectors that victimise them. One way through which members do so is by classifying, analysing and dismantling their rhetoric and methods. Comments downplaying the legitimacy of a threat, such as “real gangs do not work like this, they don’t go around sending threatening paragraphs [of text] (…) These are little boys posing as gangs” abound under members’ posts on the harassment they suffer. If these comments provide some comfort, they also highlight an antagonising mindset of ‘us versus them’ which borrowers adopt against lenders and collectors, as well as debtors’ willingness to get beneath and dismantle creditors’ practices.
Borrowers’ primary method to contend and take revenge against lenders and collectors is by instrumentalising the act of mass-borrowing. To “relieve people’s suffering” and bankrupting lenders, borrowers must continually borrow and default and/or evade debt en masse. Advocates for this approach speak of “teaching the mobile apps a lesson”, and encourage other members to default as well: “exactly, evade the loan to show them how cutthroat interests work”, as one member puts it. Some members have articulated an ‘eye-for-an-eye’ desire to even things with digital lenders:
The apps are so stupid. Why didn’t they talk properly from the beginning? They’re calling and swearing at people in my contacts, now they’re turning to soft text messages asking me to repay the principal. What’s the point? You can redeem the money, but I can’t redeem my reputation. I’m not going to pay until you die.
This tendency towards borrowing to take revenge is spurred on further by collective action. More specifically, some members organise among themselves to share or buy into a profile or a SIM card with favourable scores. Members will often trade SIM cards with three months or more of call history to apply for loans and default collectively, hoping to put the lender under financial stress.
The desire to undermine lenders’ threats is taken to the extreme when members respond to debt collectors’ threats with taunts and provocations, by daring debt collectors to come to their residences or by sending condescending words to them. Some go so far as to call collectors to meet physically, to which the latter never show. One user writes: “does anyone know the working address for VDong? I want to come over to find them, so they wouldn’t waste their efforts on finding me, I’ve been waiting for so long”. Other group members organise among themselves to report debt collectors to the police. Most of the time, however, the majority of these reporting activities happen within the Facebook groups themselves. Members adopt a fiercely hostile and insulting attitude towards lenders and collectors, and threads reporting them often garner significant engagement in the form of outraged and angered comments such as: “loan sharks need to be boycotted immediately”.
Despite launching themselves into activities that could be considered controversial if not illicit, members view their actions in a Robinhood-esque narrative of rightfully taking from predatory digital lenders, their henchmen or debt collectors, and the ‘rich’ mobile apps to “fund their own livelihoods”, as expressed by several members. Members also justify their actions based on the mistreatment and harassment suffered at the hands of exploitative lenders. In brief, groups act as spaces for resisting and challenging lenders and collectors who are perceived as evil.
CONCLUSION
To sum up, the recent explosion of digital subprime lending in Vietnam is a double-edged sword. On the one hand, it democratises credit access in a country where 70 percent of the population is un(der)banked and consumer finance was non-existent until a few years ago. On the other hand, it fuels a traditional and digital lending market inhabited by old and new, lawful and unlawful, decent and predatory lenders driven by the demand for short-term profit-seeking and dubious practices. Facebook borrowers’ groups relay growing concerns about predatory finance as well as the financial insecurity of a young generation of tech-savvy borrowers in Vietnam. These groups provide a space where digital borrowers seek advice, services and comfort, and voice their anger and desire to undermine predatory lenders. The borrowers are confronted with a new era of financial transformation that is increasingly capturing aspects of their everyday life and transforming their borrowing practices and relationship to lenders, finance and technology. As their stories, testimonies and micro-actions show, digital subprime lending can also turn against abusive lenders and trigger a politicisation from below which may draw large support and prompt regulatory changes without challenging subprime lending and financial transformation. We can only hope that the Vietnamese government will continue to regulate consumer finance, including p2p platforms that operate in legal limbo, lending practices such as personal data collection, and the debt collection industry which will continue to grow despite the recent banning of the ‘debt collection business’. In the meantime, Facebook borrowers’ groups will continue to pop up and escalate the outcry against predatory finance.
ISEAS Perspective 2021/72, 28 May 2021
ENDNOTES
[1] Hong-Kong Nguyen et al., “The New Politics of Debt in the Transition Economy of Vietnam,” Austrian Journal of South-East Asian Studies 12, no. 1 (2019): 91–110.
[2] I borrow the term ‘digital subprime’ from Joe Deville, “Digital Subprime: Tracking the Credit Trackers,” in The Sociology of Debt, ed. Mark Featherstone (Bristol: Bristol University Press, 2019), 145–74. Digital subprime refers to “subprime, payday lending markets in various different countries [that] are lending at high rates of interest to borrowers who often have either poor credit histories or, in some cases, no credit histories at all” (p. 145).
[3] Nicolas Lainez, “Navigating Vietnam’s Lending App Maze,” Fulcrum, January 6, 2021, https://fulcrum.sg/navigating-vietnams-lending-app-maze/.
[4] Angela Di Rosa, “Vietnam Fintech Report 2020” (Singapore: Switzerland Global Enterprise, Fintechnews.sg, 2021).
[5] VietnamNet, “Chinese Lending Apps Leave Vietnam Quietly,” Intellasia, August 1, 2020, https://www.intellasia.net/chinese-lending-apps-leave-vietnam-quietly-797636; Tuoi Tre News, “In Vietnam, Instant Online Personal Loans a Poisoned Chalice for Borrowers,” March 18, 2019, https://tuoitrenews.vn/news/business/20190318/in-vietnam-instant-online-personal-loans-a-poisoned-chalice-for-borrowers/49318.html.
[6] Quentin Ravelli, “Debt Struggles: How Financial Markets Gave Birth to a Working-Class Movement,” Socio-Economic Review, August 3, 2019, mwz033, https://doi.org/10.1093/ser/mwz033; Marek Mikuš, “Contesting Household Debt in Croatia: The Double Movement of Financialization and the Fetishism of Money in Eastern European Peripheries,” Dialectical Anthropology 43, no. 3 (September 2019): 295–315, https://doi.org/10.1007/s10624-019-09551-8.
[7] Noelle Stout, “Indebted: Disciplining the Moral Valence of Mortgage Debt Online,” Cultural Anthropology 31, no. 1 (October 23, 2015): 82–106, https://doi.org/10.14506/ca31.1.05; Marcos Angelovici, Pascale Dufour, and Héloïse Nez, eds., Street Politics in the Age of Austerity: From the Indignados to Occupy, Protest and Social Movements 8 (Amsterdam: Amsterdam University Press, 2016).
[8] Hội bùng app vay tiền online (‘Online Lending App Evasion’), Bóc phốt tín dụng đen online-Chia sẻ Kinh nghiệm Vay App, Bùng App (‘Revealing the Faults of Online Black Credit and Experience-sharing for Online App Lending and Evasion’), Hội vay tiền App web Bị khủng bố-Tín dụng đen-Giúp đỡ ACE đối phó (‘Harassed Lending App/Black Credit Borrowers’ Support Group’).
[9] Tuoi Tre News, “Vietnamese Woman Stages Own Funeral to Evade Debt Collectors,” Tuoi Tre News, April 1, 2021, http://tuoitrenews.vn/news/society/20210401/vietnamese-woman-stages-own-funeral-to-evade-debt-collectors/60107.html.
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Comprehensive infrastructure development has been highlighted as one of the three strategic breakthroughs for Vietnam’s 2021-2030 Socio-Economic Development Plan. In this picture, workers clean the surface of Thang Long bridge during a major renovation in Hanoi on August 27, 2020. Nhac NGUYEN, AFP.
EXECUTIVE SUMMARY
- Vietnam’s Socio-Economic Development Plan 2021-2030 highlights infrastructure development as one of the three strategic breakthroughs.
- However, financing for infrastructure development remains constrained. State resources fund approximately 90 per cent of the country’s infrastructure projects, and mobilising private capital has proven difficult.
- There are currently many foreign-financed connectivity initiatives in the region, such as China’s Belt and Road Initiative, Japan’s Expanded Partnership for Quality Infrastructure, and projects supported by America’s International Development Finance Corporation.
- While competition among these initiatives provides Vietnam and regional countries with more funding options, they also come with challenges. Vietnam therefore has approached them with some reservations.
- Moving forward, it is crucial for Vietnam to adopt stringent standards in approving new projects, improve the legal environment to attract private infrastructure investment, develop better national infrastructure master plans, diversify infrastructure investment sources, and refrain from taking sides in pursuing international infrastructure development cooperation.
*Do Mai Lan is Research Fellow at the Center for Regional Studies and Foreign Policy, Institute of Foreign Policy and Strategic Studies, Diplomatic Academy of Vietnam. Hoang Oanh is Deputy Director of the Center for Regional Studies and Foreign Policy at the same institute.
HUGE DEMAND FOR INFRASTRUCTURE INVESTMENT
Infrastructure competitiveness plays a central role in attracting investment and promoting economic growth. However, Vietnam is lagging behind some regional countries in this regard. For example, the World Economic Forum’s 2019 Global Competitiveness Report ranked Vietnam 67th out of 141 economies for national competitiveness and 77th for infrastructure quality.[1] Only 20 per cent of the country’s national roads are paved,[2] much lower than neighbouring countries such as Malaysia (80.9%),[3] India (63.24%),[4] and Indonesia (89.7%).[5] Vietnam’s Ministry of Planning and Investment estimates that the country will need approximately US$480 billion in infrastructure investment from 2017 to 2030,[6] while the 2019 Global Infrastructure Investor Survey report ranked Vietnam, together with India, China, Brazil, and Indonesia, among the top five developing countries with the largest infrastructure markets in the next five years.[7]
Comprehensive infrastructure development has been highlighted as one of the three strategic breakthroughs for Vietnam’s 2021-2030 Socio-Economic Development Plan. The need to upgrade physical infrastructure and logistics services has become even more urgent due to increasing competition among regional countries to attract investors who wish to diversify their manufacturing base away from China. Post-pandemic economic recovery has also underscored the importance of infrastructure development as one of the most effective measures to stimulate economic growth. The Vietnamese government has targeted a growth rate of at least 6 per cent for 2021, with public spending on infrastructure development identified as one of the key measures to achieve this target.
CONSTRAINED BUDGETS
However, Vietnam is facing difficulties in mobilising infrastructure investment from the private sector, causing it to rely heavily on state resources, which currently fund about 90 per cent of its infrastructure projects.[8] According to the World Bank’s Private Participation in Infrastructure (PPI) database, Vietnam has approved only 116 public-private partnership (PPP) projects totalling US$19.4 billion since 1990, accounting for less than 10 per cent of the country’s total infrastructure investment during the same period.[9] Private infrastructure investment remains limited, at less than 1 per cent of Vietnam’s GDP in the past decade.[10] By 2020, although several road-building PPP projects have been implemented, some of them were later renegotiated and eventually converted to public-invested ones due to project delays, incompetent investors, or financial irregularities. Recently, two North-South Expressway component projects have also been converted from PPP to public investment due to the lack of interest from private investors.[11]
Be that as it may, according to the Asian Development Bank (ADB), Vietnam is the biggest infrastructure spender in Southeast Asia. Between 2010 and 2014, infrastructure spending from both the public and private sectors made up 5.7 per cent of the country’s GDP, compared to the 2-3 per cent of its neighbouring countries.[12] In Asia, Vietnam ranks second only to China (6.8 per cent). The large infrastructure spending puts Vietnam under significant fiscal pressure as its tax base weakens due to the Covid-19 pandemic.
In addition, as Vietnam officially graduated from the International Development Association (IDA) in 2017, it has lost access to IDA concessional financing. IDA loans and grants previously financed a majority of Vietnam’s infrastructure projects.[13] The need to diversify financial resources for infrastructure development in Vietnam is therefore urgent, causing the country to welcome regional infrastructure initiatives.
PRUDENT APPROACH TO REGIONAL INITIATIVES
Many significant infrastructure development initiatives have been introduced in recent years. For example, China introduced the ambitious US$1 trillion Belt and Road Initiative (BRI) in 2013 to support “affordable infrastructure” in developing countries, primarily in transportation and power.[14] Japan quickly responded with its “quality infrastructure” drive and ramped up lending under its 2015 Partnership for Quality Infrastructure (PQI) campaign. Accordingly, Japan pledged to increase its investment in Asian infrastructure to roughly US$116 billion for the period 2016-2020, a 30 per cent increase compared to the previous five years. In 2016, Japan announced the Expanded Partnership for Quality Infrastructure, the High-Quality Infrastructure Export Expansion Initiative, as well as reforms to improve its loan-granting process and to provide additional guarantees against risks, to encourage private sector investment. The annual budget for Japan’s infrastructure exports has since 2017 nearly doubled from ¥110 billion to ¥200 billion (approximately US$1.8 billion).[15]
In order to operationalise the economic dimension of the Free and Open Indo-Pacific (FOIP) strategy, the US Congress passed the Better Utilization of Investment Leading to Development (BUILD) Act in October 2018. Under the Act, Washington established the US International Development Finance Corporation (DFC) and doubled its development finance capacity to US$60 billion worldwide.
Other notable initiatives include the EU Strategy for Connecting Europe and Asia (2018), Russia’s Trans-Eurasian Belt Development (2015), the India and Japan-led Asia-Africa Growth Corridor (2017), and South Korea’s New Southern Policy (2017). ASEAN, together with the ADB, also established the ASEAN Infrastructure Fund (AIF) to mobilise capital for infrastructure development in Southeast Asia.
Competition among these initiatives brings Vietnam and regional countries more funding options for infrastructure projects. But although Vietnam has expressed its support for these initiatives, it approaches these initiatives with some reservations.
First, different regional infrastructure development initiatives have been launched for some time but all revealed significant limitations. Despite its impressive promises, the BRI faces two main challenges: (i) In many BRI projects, China’s ambition to build connectivity corridors might not always align with the interests of local communities living along these corridors. For instance, in Laos, criticisms have been levelled at the relocation of villages to make way for railroads and dams which are believed to benefit Beijing more than locals.[16] (ii) The initiative has generated debt concerns. According to one study, among 68 countries that are hosting BRI-funded projects, 23 of them are at risk of high debt stress.[17] Eight of them, namely Djibouti, Tajikistan, Laos, Maldives, Mongolia, Pakistan, and Montenegro, are marked as “highly vulnerable”.[18]
The second-largest infrastructure initiative in the region is Japan’s Quality Infrastructure in Asia (PQI). The initiative promotes high-quality infrastructure partnerships and assistance in Asia through the collaboration between Japan International Cooperation Agency (JICA) and ADB to increase the supply of funding and promote relevant international standards. With the target of providing US$200 billion within the period 2015-2020, the scope of this initiative was extended from Asia “to the world,” and the range of projects went beyond infrastructure in a narrow sense to cover different projects, ranging from extracting natural resources to building hospitals.[19] Nevertheless, the PQI also has certain limitations. As PQI cannot compete with China’s BRI in terms of scale, and Japan cannot pursue low-cost projects the way China does, the country has to opt for a high-quality approach. However, the standards for high-quality infrastructure are still not clear while it is still questionable if developing countries can afford the high cost of Japanese projects.
Second,most current initiatives have often been associated with great power strategic competition, particularly between the US and China. For example, the BRI is considered a vehicle for China to expand its political, economic and security interests abroad, with many of its infrastructure projects having the potential for civil-military dual use.[20] On the other hand, US-led initiatives have been widely seen as a mechanism to offset Chinese influence.[21] There is thus a concern in Vietnam that its choices may be wrongly understood as picking sides in the current “alignments of force”.[22]
Third, Vietnam’s concerns about the BRI go beyond the common criticisms against this initiative such as debt burdens, lack of transparency or social and environmental problems.[23] In particular, given China’s maritime ambitions and its increasing aggression in the South China Sea, projects along the Maritime Silk Road have raised concerns over China’s intentions in the South China Sea. Vietnam also has some economic concerns regarding the BRI, including:
- Unattractive commercial terms and conditions, especially the high interest rates of Chinese loans. According to a report by the Ministry of Planning and Investment, China’s ODA often carries an interest rate of 3 per cent per year, if Chinese contractors are used.[24] This rate is higher than Japan’s (0.4 to 1.2 per cent, depending on the loan terms), Korea’s (0 to 2 per cent, depending on bidding conditions), and India’s (1.75 per cent). Loans provided by the China Export-Import Bank are also subject to a commitment fee of 0.5 per cent and a management fee of 0.5 per cent, while loan terms and grace periods are both shorter than those of other capital markets by five to 15 years.[25]
- Increased trade with China due to the implementation of China-funded infrastructure projects can exacerbate Vietnam’s trade deficit and economic dependency vis-à-vis China. In 2020, for example, Vietnam’s trade deficit with China amounted to US$32.5 billion. The large trade deficit with China has been increasingly seen by some Vietnamese policy makers as a security issue.
- There have been many problems associated with China-funded infrastructure projects in Vietnam, including environmental pollution, project delays, cost overruns, low construction quality, outdated technologies, and the unauthorized use of Chinese labourers.[26] The Cat Linh–Ha Dong urban railway project in Hanoi is a case in point. The project, which started in October 2011 and was initially expected to be completed in November 2013, has been delayed for more than seven years. Its cost also doubled from VND 8,770 billion (US$552.86 million) to VND 18,002 billion (US$868 million) by the end of 2020.[27]
- As Vietnam is speeding up reforms towards high-quality and sustainable growth, the non-transparent practices and relatively lax standards of the BRI[28] are seen as an impediment to such reform efforts.
Fourth, the availability of better alternatives, particularly from Japan, has dimmed the attractiveness of the BRI.
Japan is currently Asia’s biggest source of development finance, providing US$367 billion, compared to China’s US$255 billion.[29] As of June 2019, Japan’s infrastructure investments in Vietnam (including pending projects) amounted to US$209 billion, accounting for more than half of Japan’s total in the region.[30] In particular, between 2005 and 2016, Japan’s ODA to Vietnam surged by three times compared to the period 1993-2004, while its ODA to other Southeast Asian countries generally decreased. Notably, 46 per cent of Japan’s ODA to Vietnam has been channelled into transport infrastructure projects.[31] Some Vietnamese experts were of the view that the high quality of these projects, implemented by innovative companies with strong technical expertise and transparent business practices, adds to Vietnam’s overall reform efforts.[32]
These alternatives to the BRI, however, also present Vietnam with other challenges. Japanese funding comes with increased loan costs,[33] strict approval conditions, and higher spending for Japanese consultants. Projects under the Special Terms for Economic Partnership (STEP), for example, must engage a Japanese company as its general contractor, and source at least 30 per cent of its materials and equipment from Japan.[34]
Japanese ODA projects have also reported cost overruns and slow disbursement.[35] Moreover, high-quality initiatives by Japan, the US, and others mainly draw on the private sector. Vietnam, however, is struggling to create attractive conditions for private infrastructure investment. Although it has made some progress in streamlining regulations on the PPP framework to ensure investor rights, policies on risk-sharing mechanisms, exchange rates and revenue guarantees, which are top concerns among foreign investors, are still lacking.
RECOMMENDATIONS FOR VIETNAM
Vietnam’s participation in international mechanisms and initiatives is guided by its national interests. In addition to economic interests, national security, social stability, reform and innovation are also Vietnam’s priorities. With the labour- and resource-based growth model initiated in the 1980s having reached its limit, Vietnam currently aims to bring about a Doi Moi 2.0 that will lead to an innovation-based growth model. Vietnam thus prioritises sustainably planned FDI projects, especially those with high potential for hi-tech transfers and spill-over effects. It is therefore crucial for Vietnam to adopt more stringent standards in evaluating and approving new projects.
At the same time, Vietnam needs to improve its legal environment to facilitate high-quality partnerships. Vietnam’s new Law on Public-Private Partnerships, which came into effect on 1 January 2021, demonstrates the government’s commitment to attract high-quality PPP projects. However, there is still room for further improvement, such as by introducing regulations with credible penalties to deter offenders. The government should also formulate enforceable anti-corruption laws and implement prudent macroeconomic policies that promote financial prudence and discipline.
Vietnam also needs to develop medium- and long-term national infrastructure master plans that thoroughly assess its needs, priorities and projects in order to make optimal use of its limited fiscal resources. It should also diversify its infrastructure investment sources by encouraging financing from private and foreign investors, as well as by tapping personal savings. It is estimated that the Vietnamese people possess some 500 metric tons of gold as personal savings, which would provide a massive boost to the economy if brought into circulation.[36]
As far as international funding initiatives are concerned, given the intensifying great power competition, Vietnam should refrain from taking sides. Instead, it should maintain a neutral stance and uphold its principles in a consistent manner. It should support open, transparent, inclusive and non-discriminatory cooperation mechanisms and proactively work with regional countries to shape the rules for regional infrastructure initiatives.
Finally, some Vietnamese experts have pointed out several potential benefits that the BRI can bring Vietnam, such as strengthening connectivity and facilitating Vietnam’s access to the Chinese market, or helping Vietnam make the most of its long coastline by connecting Southeast Asian ports to enhance intra-ASEAN trade.[37] Joining the BRI also gives Vietnam opportunities to actively take part in the shaping of rules governing international cooperation. However, when taking part in the BRI, Vietnam should adopt proper management mechanisms to avoid potential problems, such as the transfer of outdated technology, project delays and cost overruns.
ISEAS Perspective 2021/71, 27 May 2021
ENDNOTES
[1] World Economic Forum, The Global Competitiveness Report 2019, http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf.
[2] Ministry of Industry and Trade, “Accelerating Vietnam’s infrastructure development for Sustainable Growth,” Infrastructure Vietnam, 2019, http://infrastructurevietnam.com.
[3] ASEAN, ASEAN regional road safety strategy, 2016, https://asean.org/storage/2016/10/ASEAN-Road-Safety-Strategy_full_24Oct16_rev_clean.pdf
[4] Ministry of Road Transport and Highways, Basic Road Statistics of India 2016-177, 2017, https://morth.nic.in/sites/default/files/Basic%20_Road_Statics_of_India.pdf
[5] ASEAN, ASEAN regional road safety strategy, 2016, https://asean.org/storage/2016/10/ASEAN-Road-Safety-Strategy_full_24Oct16_rev_clean.pdf
[6] Oxford Business Group, “Vietnam looks to the private sector to fund infrastructure,” Vietnam News, 9 June 2017,https://vietnamnews.vn/economy/378057/viet-nam-looks-to-private-sector-to-fund-infrastructure.html.
[7] EDHEC Institute for Infrastructure Research and the Global Infrastructure Hub, The Global Infrastructure Investor Survey 2019, https://www.gihub.org/resources/publications/global-infrastructure-hub-investor-survey-report-2019/.
[8] “90% du an co so ha tang o Viet Nam do nha nuoc dau tu: Khong du nguon von tu nhan?”, Vietnambiz, 5 June 2020, https://vietnambiz.vn/90-du-an-co-so-ha-tang-o-viet-nam-do-nha-nuoc-dau-tu-khong-du-nguon-von-tu-nhan-20200604215244655.htm
[9] Ibid.
[10] “Vietnam eyes private investment in infrastructure projects,” Vietnam Investment Review, 17 January 2019, https://www.vir.com.vn/vietnam-eyes-private-investment-in-infrastructure-projects-65317.html.
[11] “Chuyen doi 2 du an tren cao toc Bac – Nam phia Dong sang dau tu cong”, Dang Cong san Viet Nam, 11 January 2021, https://dangcongsan.vn/thoi-su/chuyen-doi-2-du-an-tren-cao-toc-bac-nam-phia-dong-sang-dau-tu-cong-572662.html.
[12] ADB, “Meeting Asia’s Infrastructure Needs”, 2017, https://www.adb.org/sites/default/files/publication/227496/special-report-infrastructure.pdf.
[13] “Financing for development in Vietnam,” Oxfam discussion papers, Oct 2019, https://oxfamilibrary.openrepository.com/bitstream/handle/10546/620879/dp-financing-development-vietnam-ida-graduation-251019-en.pdf.
[14] Jonathan Hillman, “How Big is China’s Belt and Road?”, Center for Strategic and International Studies, 8 April 2018, https://www.csis.org/analysis/ how-big-chinas-belt-and-road.
[15] Tobias Harris, “Quality infrastructure: Japan’s robust challenge to China’s Belt and Road,” War on the Rocks, 9 April 2019, https://warontherocks.com/2019/04/quality-infrastructure-japans-robust-challenge-to-chinas-belt-and-road/.
[17] John Reed and Kathrill Hille, “Laos’s Belt and Road project sparks questions over China ambitions”, Financial Times, 30 October 2019, https://www.ft.com/content/a8d0bdae-e5bc-11e9-9743-db5a370481bc
[18] John Hurley, Scott Morris, and Gailyn Portelance, “Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective.” Center For Global Development, 04 March 2018, https://www.cgdev.org/sites/default/files/examining-debt-implications-belt-and-road-initiative-policy-perspective.pdf
[19] Amar Diwakar, “China’s Debt-Trap Diplomacy Along the Belt and Road,” The Wire, 10 August 2018, https://thewire.in/world/china-debt-trap-diplomacy-bri
[20] Werner Pascha, “The quest for infrastructure development from a “market creation” perspective: China’s “Belt and Road”, Japan’s “Quality Infrastructure” and the EU’s “Connecting Europe and Asia”, International Economics and Economic Policy 17, 687–704, 5 May 2020, https://doi.org/10.1007/s10368-020-00468-0
[21] Shaun Turton, “China’s Belt and Road ports raise red flags over military plans,” Nikkei Asia, 23 July 2019, https://asia.nikkei.com/Spotlight/Asia-Insight/China-s-Belt-and-Road-ports-raise-red-flags-over-military-plans
[22] Jennifer Lyn, “US Blue Dot Network to counter China’s BRI,” Asia Times, 21 May 2020, https://asiatimes.com/2020/05/us-blue-dot-network-to-counter-chinas-bri.
[23] Le Hai Binh, Tap hop luc luong trong the ky XXI: Xu huong, tac dong va doi sach cua Vietnam (Hanoi: Chinh tri Quoc gia Publisher, 2020), p. 298.
[24] Prashanth Parameswasan, “The real trouble with China’s Belt and Road,” The Diplomat, 11 May 2017, https://thediplomat.com/2017/05/the-real-trouble-with-chinas-belt-and-road.
[25] Ministry of Planning and Investment, “The Management and Usage of ODA 2018-2020 With a Vision to 2025”, 2018, http://vanban.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?class_id=2&_page=1&mode=detail&document_id=195225
[25] Nguyen Mai, “Bay no tu cac du an co so ha tang cua Trung Quoc”, Nha dau tu, 18 June 2020, https://nhadautu.vn/bay-no-tu-cac-du-an-co-so-ha-tang-cua-trung-quoc–bai-cuoi-bai-hoc-dat-gia-voi-viet-nam-d38760.html
[26] Nguyen Thi Thuy Ha, “Tac dong tu nguon von cua Trung Quoc qua sang kien Vanh dai va Con duong den cac nuoc dang phat trien,” Ly luan chinh tri, 25 October 2019, http://lyluanchinhtri.vn/home/index.php/quoc-te/item/2957-tac-dong-tu-nguon-von-cua-trung-quoc-qua-sang-kien-%E2%80%9Cvanh-dai-va-con-duong%E2%80%9D-den-cac-nuoc-dang-phat-trien.html
[27] “Gan 10 nam Du an duong sat Cat Linh – Ha Dong: Xuan nay tau se chay?”, Voice of Vietnam, 1 January 2021, https://vov.vn/xa-hoi/gan-10-nam-du-an-duong-sat-cat-linh-ha-dong-xuan-nay-tau-se-chay-827868.vov.
[28] “China’s flexible belt and road approach leads to ambiguity,” South China Morning Post, 22 April 2019,https://www.scmp.com/news/china/diplomacy/article/3006898/chinas-flexible-belt-and-road-approach-leads-ambiguity.
[29] Eduard Fernandez, “Japan still reigns in South East Asian infra,” Infrastructure Investor, 16 July 2019, https://www.infrastructureinvestor.com/japan-infra-player-in-south-east-asia-china-belt-and-road-initiative.
[30] “China no match for Japan in Southeast Asia infrastructure race”, Bloomberg, 23 June 2019, https://www.bloomberg.com/news/articles/2019-06-23/china-no-match-for-japan-in-southeast-asia-infrastructure-race.
[31] “Nhat Ban – nha cung cap ODA hang dau ho tro phat trien giao thong Viet Nam”, Vietnam Business Forum, 12 November 2018, https://vccinews.vn/news/21064/nhat-ban-nha-cung-cap-oda-hang-dau-ho-tro-phat-trien-giao-thong-viet-nam.html.
[32] “Nhat Ban: Tang cuong dau tu cac du an co so ha tang trong khu vuc,” Banking Plus, 30 January 2019,https://thoibaonganhang.vn/nhat-ban-tang-cuong-dau-tu-cac-du-an-co-so-ha-tang-trong-khu-vuc-84628.html
[33] Japan increased its loan interest rates from 1.2 to 1.5 per cent per year for regular loans and from 0.3 to nearly 1 per cent per year for preferential loans, effective 1 October 2017.
[34] Ministry of Foreign Affairs of Japan, Japan’s Official Development Assistance White Paper 2013,
[35] “Vay ODA lam duong sat do thi, doi von ty USD, 15 nam bat dong”, Vietnamnet, 2 November 2019, https://vietnamnet.vn/vn/kinh-doanh/dau-tu/loat-du-an-duong-sat-do-thi-doi-von-may-chuc-nghin-ty-cham-tre-trien-khai-584144.html; “Vi sao Metro so 1 doi von 30.000 ty, cham tien do?”, Dai doan ket, 26 October 2017, http://daidoanket.vn/vi-sao-metro-so-1-doi-von-30000-ty-cham-tien-do-383816.html.
[36] “Vietnam’s central bank contemplates ‘mobilizing’ gold from public,” Tuoi Tre News, 7 December 2017, https://tuoitrenews.vn/news/business/20171207/vietnams-central-bank-contemplates-mobilizing-gold-from-public/43027.html.
[37] See, for example, Le Hai Binh, Tap hop luc luong trong the ky XXI, p. 299.
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EXECUTIVE SUMMARY
- Vietnam’s domestic and foreign policy structures held up well in 2020 in the face of significant challenges involving Covid-19, chairing ASEAN, and relations with China and the United States.
- At home, it managed the Covid-19 pandemic commendably and kept economic growth going at a steady clip. As ASEAN chair, it steered the grouping through a difficult year of the pandemic and great power rivalry.
- Externally, Vietnam continued to maintain a delicate balance between China and the US, while at the same time retaining a strategic option to pursue deeper defence and military relations with the US.
- Vietnam’s ability to maintain and enhance agency, in particular in its relations with Beijing, offers lessons for other Southeast Asian countries facing the same dilemma.
* William Choong is Senior Fellow at the ISEAS -Yusof Ishak Institute, and the Managing Editor of Fulcrum, the Institute’s commentary and analysis website.
INTRODUCTION
As Sino-US rivalry escalated in recent years, the mantra of “not choosing sides” between China and the United States (US) has become the favoured choice for many states in Southeast Asia. The same applies to Vietnam, a frontline state in the dispute with China over the South China Sea. In 2020, Vietnam faced a slew of challenges, ranging from the Covid-19 pandemic, managing Chinese power, disputes in the South China Sea and maintaining ASEAN cohesion as chair of the 10-member organisation.
Remarkably, Vietnam held up well. At home, it managed the Covid-19 pandemic commendably and kept economic growth going at a steady clip. As ASEAN chairman, it steered the grouping through a difficult year of the pandemic and great power rivalry. Externally, Vietnam continued to maintain a delicate balance between China and the US, while at the same time retaining a strategic option to pursue deeper defence and military relations with the US.
Vietnam also subscribes to not choosing sides between China and the US, but for Hanoi, the level of complexity is higher. The Sino-Vietnam relationship is troubled by historical baggage and the dispute over the South China Sea. The same complexity applies to Hanoi’s relationship with the US. While bilateral relations have progressed substantially in recent years, a vestigial mistrust of Washington, in particular of the latter’s rhetoric on human rights and democracy, continues. Yet, Vietnam still provides a model for how Southeast Asian countries can respond to China in a time of great geopolitical flux.
If agency in this context is defined as the ability to maximise benefits from both powers while adopting hedging strategies to keep them at arm’s length, Vietnam is a classic showcase of that art, which can be useful for other Southeast Asian nations to replicate.
FIERCE STREAK OF INDEPENDENCE
Vietnam is no strategic lightweight among ASEAN’s 10-member states. In 2020, it overtook Singapore and Malaysia to be the grouping’s fourth largest economy (after Indonesia, Thailand and the Philippines),[1] ranked fourth in defence spending in 2020 (at US$5.7 billion) and boasts the region’s largest active standing military, at 482,000 in personnel size.[2] That said, Vietnam lives in a tough neighbourhood. Historically, the natural geographical separation of its northern and southern cores exacerbated the two regions’ political and social divide, leaving the country vulnerable to invasion by foreign powers – Chinese, French or American.[3] In particular, Vietnam has always been exposed to China’s expansionary tendencies and what one analyst terms the “tyranny of geography” – an old joke puts that the country’s S-shaped bend resembles an “old woman straining under China’s weight”.[4] Yet, Vietnam has always retained a fierce streak of independence, repelling repeated Chinese invasions throughout history. Significantly, between 1954 and 1979, Vietnam defeated three big powers – the French (by the Viet Minh), the Americans and the Chinese.
The determination to safeguard Vietnam’s independence through policy flexibility and effective execution continues to this day. This implacable streak of independence is reflected in comments by Ho Chi Minh. In the 1950 and 1960s, when the Sino-Vietnam relationship was termed as close as “lips and teeth”, Ho Chi Minh described the relationship as being “one hundred favours, a thousand loyal affections and ten thousand loves”. Yet when Chinese (Nationalist) forces arrived in northern Vietnam in 1945, Ho said he would rather put up with French rule than endure another Chinese occupation. He reportedly said: “I prefer to sniff French s*** for five years than eat Chinese s*** for the rest of my life.”[5]
MANAGING EXTERNAL RELATIONS
As the Indonesian dictum goes, national resilience breeds regional resilience, and regional resilience enhances national resilience. Vietnam’s ability to keep the number of Covid-19 cases low augurs well for the country.[6] Its successful management of the pandemic has had knock-on effects on its economy. It has been reported as likely to have been Asia’s top-performing economy in 2020 – a feat achieved without a single quarter of contraction.[7] Vietnam reported 2020 GDP growth at 2.9 per cent, thanks to robust exports of electronics and other consumer products.[8] In recent decades, GDP growth averaged 7 per cent, thus doubling GDP to US$262 billion in the decade ending 2019.[9] Vietnam was already benefiting from the Sino-US trade war, as China-based foreign firms moved to the country.
Since 1986, when Vietnam embarked on its doi moi policy, four themes have shaped its diplomacy: diversification and multilateralisation of external relations; defending the national interest through cooperation and struggle; active international integration, and; the maintenance of independence, sovereignty and strategic autonomy.[10] Through the three decades from 1986 and 2016,[11] one way Hanoi did this was by sustaining “strategic” and “comprehensive” partnerships with middle powers, such as Australia, India, Japan and South Korea – a move that Beijing tends to be less sensitive to compared to Hanoi’s relations with the US.[12] Despite the growing number of such relationships, Vietnam remains non-aligned and stays clear of formal alliances, in part to avoid provoking Beijing.[13] Like other Southeast Asian states, Vietnam has sought to avoid making stark choices between China and the US – and enjoying the “blessedness of not making choices.”[14]
In recent years, Vietnam has seen significant upgrades in its relationships with other powers. In 2014, the Japan-Vietnam relationship was upgraded from a “strategic partnership” to an “extensive strategic partnership”. In 2016, the India-Vietnam relationship was upgraded from a “strategic partnership” to a “comprehensive strategic partnership”.[15] In November 2020, Australia expressed a desire for bilateral ties with Vietnam to be upgraded from a strategic partnership to a “comprehensive strategic partnership”.[16] It is worth noting that Australia, Japan and India are part of the Quadrilateral Security Grouping, or “Quad” together with the US. This is an informal grouping of democracies seeking to uphold a regional, rules-based order premised on principles such as freedom of navigation, free and open societies and the importance of international law.
The biggest challenge for Vietnam, however, remains the triangle involving itself, China and the US. Thus far, Vietnam has been able to maintain a delicate balance in the triangle. With China, the relationship is multi-faceted. Vietnam’s economy has become increasingly interlinked with China, and the two countries’ Marxist-Leninist political systems are similar. Beijing also has the rare accolade of being the only country which is a “comprehensive strategic cooperative partner” of Vietnam.[17] Still, historical animosity to Chinese domination and the lingering dispute with China over the South China Sea has constrained the China-Vietnam relationship. In the eyes of a senior Vietnamese diplomat, Vietnam’s most serious problems lie with China, given Beijing’s attempt to gain control of the South China Sea, its growing strength and its “more aggressive” behaviour.[18] As such, Vietnam’s sophisticated management of the bilateral relationship cautiously avoids provoking of Beijing.[19] Hanoi’s highest foreign policy priority is to insulate the two countries’ economic (and overall) relationship from the dispute, while at the same time building as many security ties with as many powers as possible.[20]
Similarly, the Vietnam-US relationship has also developed apace. Relations between the two erstwhile enemies have come a long way since diplomatic normalisation in 1995, such that they are reportedly considering upgrading their “comprehensive relationship” to a “strategic partnership”.[21] The relationship has been buoyed by a shared perception of the China threat, and coincides with Vietnam’s generally supportive view of US-led regional and global orders, such as the Trump administration’s “free and open Indo-Pacific” (FOIP) strategy. [22] In 2018, Vietnam participated for the first time in the US-led Rim of the Pacific (RIMPAC) exercise, the world’s biggest multilateral naval exercise; the US has also provided the Vietnamese Coast Guard with patrol boats and training facilities.[23] Two US Navy Nimitz-class carriers visited Vietnam in 2018 and 2020 – marking a historic advance in the relationship. However, the relationship is also constrained by multiple factors – Vietnam officials’ suspicions about Washington’s long-term goal of “peaceful evolution” to depose the Vietnamese Communist Party; American concerns about Hanoi’s human rights record, and more importantly, the implications of an improved bilateral relationship on China.[24]
AGENCY IN THE MIDST OF ENMITY
In the face of China’s growing assertiveness, Vietnam has demonstrated much agency by employing several avenues: contributing to regional and global security; internationalising the South China Sea issue, threatening legal action against Beijing; and participating in regional mechanisms such as the Quad to counteract Chinese assertiveness.
Contributing to Regional Peace and Security
Since the late 1980s, Vietnam has maintained the principle that it will be a “friend and reliable partner of all countries”, such that it will actively participate in “international and regional cooperation processes.”[25] In 2020, Vietnam enjoyed a successful year as a non-permanent member of the United Nations Security Council (UNSC). It also served as the president of the UNSC, which conducted an open debate on upholding the UN Charter. The debate saw a record 111 speakers from 106 states, and the adoption of the first UNSC President statement calling for compliance to the Charter.[26] Hanoi is also planning to expand its UN peacekeeping operations, which has helped promote cooperation between Vietnam and its partners, and enhanced its position in the regional and global arena. Between June 2014 and December 2020, Vietnam sent 179 officers and soldiers to peacekeeping missions in South Sudan, the Central Africa Republic and the UN Peace Operation Department at UN Headquarters.[27]
Vietnam was chosen as the venue for the second Trump-Kim summit in 2019 for various reasons, such as its relatively close relations with the three involved powers in the Korean nuclear issue (the US, North Korea and South Korea) and Vietnam’s relative proximity to North Korea. By far, however, the most important benefit for Hanoi was the chance to showcase its diplomatic skill of handling such a crucial event on a global stage.[28] The same applied to Hanoi’s successful hosting of the 2017 Asia Pacific Economic Cooperation (APEC) meeting. The meeting demonstrated its diplomatic finesse at balancing between China and the United States. During the meeting, Vietnam issued two important joint statements. The one with Washington affirmed their Comprehensive Partnership and sought to promote trade and investment and deepen security cooperation. In its joint statement with China, Vietnam welcomed and supported China’s Belt and Road Initiative. Both sides agreed to enhance cooperation on economy and trade, industrial capacity, investment and infrastructure.[29]
Internationalising the South China Sea Issue
Vietnam has displayed ingenuity and boldness in championing its interests on the South China Sea issue each time it played the role of ASEAN chair. In 2010, when Vietnam was ASEAN chair, then-US Secretary of State Hillary Clinton – reportedly with Vietnamese instigation – stressed at an ASEAN security forum in Hanoi that the US had an interest in freedom of navigation in the disputed South China Sea. This helped to internationalise the issue, and understandably riled China.[30]
In 2020, Vietnam, as ASEAN chair again, strengthened the group’s discourse on the South China Sea issue, focusing on the primacy of international law. Its chairman’s statement at the 36th ASEAN Summit in June 2020 affirmed UNCLOS as the basis for “determining maritime entitlements, sovereign rights, jurisdiction and legitimate interests over maritime zones”. The same statement had six mentions of “UNCLOS” – three times more than the 35th ASEAN Summit’s chairman’s statement. Vietnam’s chairman’s statement had five mentions of “international law” compared to three in the 2019 chairman’s statement.[31] Using its prerogative as ASEAN chair, Vietnam used similar language in chairman statements of ASEAN’s ministerial meetings with Canada, Japan, New Zealand, the US and the European Union.[32] Again, this helped to internationalise the issue, by striking resonance with countries that place an emphasis on the value of international law in the controversial dispute. Intriguingly, Vietnam’s use of strong language saw no adverse public reaction from China.
Deterring China and the Threat of Legal Action
Vietnam has become quite adroit at sending deterrent messages to Beijing not to cross redlines in its interactions with its smaller neighbour. In the 2014 oil-rig standoff between China and Vietnam in the Paracels, China withdrew the rig after about two months. Vietnam’s successful defence of its interests was due to a slew of factors,[33] including Hanoi’s threat of legal action against Beijing. While on a visit to Manila, Vietnam’s then-prime minister Nguyen Tan Dung said that Hanoi was considering “various defense options”. This would include legal actions in accordance with international law to defend its South China Sea claims.[34] At the 2014 Shangri-La Dialogue, then-defence minister Phung Quang Thanh said that Hanoi was prepared for “other solutions”, including taking China to court. The minister said that the solutions must be “peaceful” should bilateral means fail.[35] While Beijing stressed that the withdrawal had “nothing to do with any external factor”. Vietnamese leaders hailed the retreat as a victory.[36] The incident has been called the “clearest case of major coercive failure” for China.[37]
In 2019, the two countries were embroiled in another standoff near Vanguard Bank in the South China Sea. China took tougher action to disrupt Vietnam’s new oil and gas mining operations, but Vietnam showed no signs of backing down. At the 52nd ASEAN Foreign Ministers’ Meeting (AMM) in 2019, Vietnam secured, in an AMM Joint Communique, tougher language in an indirect reference to Chinese actions.[38] It also secured support from extra-regional parties such as Australia, the European Union and the US. While there was no official declaration that Hanoi would consider taking China to arbitration, there have been suggestions for Vietnam to take the dispute to an arbitral tribunal – the same approach taken by The Philippines against China in 2013.[39]
Extra-regional Dialogue Mechanisms
The ace in the deck which exemplifies Vietnam’s agency is the refining of its defence posture in its 2019 defence white paper. Traditionally, this posture has been premised on “three no’s” – that is, no military alliances, no alignment with one country against another, and no using of Vietnam’s territory to carry out military activities against another country. The 2019 paper introduced a new “no” (no use or threat of force) and a “depend” – that Vietnam will consider developing “necessary, appropriate defence and military relations with other countries” in the Indo-Pacific region.[40] The new language is indicative of Vietnam’s increasing receptiveness of the US-led FOIP strategy, in particular, the emphasis on freedom of navigation and the upholding of international law, particularly as applied to China’s nine-dashed line claim in the South China Sea.
In addition, by using the “Indo-Pacific” term, Hanoi is suggesting that it might contemplate, as a last resort, an upgrade in relations with the US and potentially other countries in the Indo-Pacific.[41] In effect, this serves as a deterrent signal to China as it affords Vietnam room to step up its ties with not only individual members of the Quad but also with the four-nation grouping as a whole. Most recently, Vietnam participated in a Quad-Plus meeting involving the four members of the Quad, New Zealand and South Korea. Although the 2020 meeting discussed joint responses to the common scourge of Covid-19, the message would not be lost on China that Hanoi might consider cooperating with the Quad on defence and military-related topics should it feel a need to do so.
Lending credibility to the desire of other like-minded partners to exercise agency, Mike Pompeo, the former US Secretary of State, welcomed the institutionalisation of the Quad and for other countries to be part of this arrangement at some future point. The Biden administration appears to have placed equal, if not more emphasis on this front with its hosting of the first Quad Summit in March 2021. Furthermore, in its interim national security strategic guidance issued in the same month, the administration said it was open to working with “Vietnam, and other Association of Southeast Asian Nations (ASEAN) member states” to advance shared objectives.[42] In toto, this gives Hanoi more leverage in its pursuit of options vis-à-vis China.
CONCLUSION
Vietnam has pursued both diplomatic and defensive options to pre-empt further pressure from Beijing. It has taken part in three major multilateral trade agreements of note – the 11-member Comprehensive and Progressive Partnership for Trans-Pacific Partnership, the 15-nation Regional Comprehensive Economic Partnership, and the European Union-Vietnam Free Trade Agreement. Such FTAs internationalise Vietnam’s economy and reduce its reliance on any particular country. In the South China Sea, Vietnam is making “modest improvements” to the features it occupies in the Spratlys, including anti-air and coastal defences on Vietnam-occupied features such as Spratly Island, Pearson Reef and Sand Cay.[43] This in itself suggests Vietnam’s development of an anti-access, area denial strategy (A2AD) that replicates China’s own A2AD strategy in the area.[44] This would serve to blunt, but not eradicate, Chinese advantages if conflict arises in the area.
Vietnam’s favoured choice of “not taking sides” between China and the US has been portrayed as a decision not to choose a certain outcome, yet retaining the freedom to manoeuvre amid complexity and multipolarity. This involves a country knowing its own interests, taking a position accordingly so as not to allow others to define its national interests.[45] As David Shambaugh argues, ASEAN states still retain agency and can mitigate the region’s tilt towards China, based on America’s strategic weight in the region, Chinese diplomatic missteps and the help of other middle powers.[46] As Vietnam has shown, they can still navigate and waltz among the duelling pachyderms if they employ some creative thinking.
ISEAS Perspective 2021/62, 4 May 2021
ENDNOTES
[1] Statista, “Gross Domestic Product (GDP) of the ASEAN Countries from 2010 to 2020”, https://www.statista.com/statistics/796245/gdp-of-the-asean-countries
[2] International Institute for Strategic Studies, The Military Balance, (Abingdon: Routledge for the IISS, 2021), pp 518 – 519
[3] Stratfor, “Vietnam’s Geographic Challenge”, 18 September 2014, https://worldview.stratfor.com/region/asia-pacific/vietnam
[4] Sebastian Strangio, In the Dragon’s Shadow: Southeast Asia in the Chinese Century (New Haven and London: Yale University Press, 2020), pp 90 – 91
[5] Strangio, In the Dragon’s Shadow, p. 97
[6] Nguyen Guy, “Vietnam Exits Top 10 in Resilience Ranking Due to New Outbreak,” VN Express, 2 March 2021, https://e.vnexpress.net/news/news/vietnam-exits-top-10-in-covid-19-resilience-ranking-due-to-new-outbreak-4241777.html
[7] Yen Nee Lee, “This is Asia’s Top-Performing Economy in the Covid Pandemic – It’s Not China,” CNBC, 27 January 2021, https://www.cnbc.com/2021/01/28/vietnam-is-asias-top-performing-economy-in-2020-amid-covid-pandemic.html
[8] Kentaro Iwamoto, “ASEAN’s 2021 GDP Forecasts Show Cautious Optimism in COVID Shadow”, Nikkei Asia, 15 February 2021, https://asia.nikkei.com/Economy/ASEAN-s-2021-GDP-forecasts-show-cautious-optimism-in-COVID-shadow
[9] Huong Le Thu, “Vietnam’s Coming Leadership Change”, The Diplomat, 1 January 2021, https://magazine.thediplomat.com/#/issues/-MP3bG9zf0K8NVsEkcVl/preview/-MP3bGyD6VDM7gKWXETv
[10]Thayer, “The Evolution of Vietnamese Diplomacy” p. 40
[11] Ibid, p. 23
[12] Le Hong Hiep, “Vietnam’s Strategic Trajectory”, ASPI Strategic Insights, June 2021, https://www.openbriefing.org/docs/vietnamtrajectory.pdf, p. 11
[13] Tim Huxley and William Choong (eds), “Vietnam’s Major Power Diplomacy”, Asia-Pacific Regional Security Assessment 2016 (London: the International Institute for Strategic Studies, 2016), p. 75
[14] William Choong, “China-US Relations: Singapore’s Elusive Sweet Spot”, ISEAS Perspective No. 80, 23 July 2020, /wp-content/uploads/2020/07/ISEAS_Perspective_2020_80.pdf, pp 5 – 6
[15] Devirupa Mitra, “India and Vietnam Upgrade to Comprehensive Strategic Partnership”, The Wire, 4 September 2016, https://thewire.in/external-affairs/india-and-vietnam-upgrade-to-comprehensive-strategic-partnership, Vo Xuan Vinh, “India-Vietnam Relations Under Modi 2.0: Prospects and Challenges”, ISEAS Perspective 2019 No. 82, /images/pdf/ISEAS_Perspective_2019_82.pdf, p.2
[16] Vietnam News Agency, “Australia Wants to Set Up Comprehensive Strategic Partnership with Vietnam: FM”, 5 November 2020, https://en.vietnamplus.vn/australia-wants-to-set-up-comprehensive-strategic-partnership-with-vietnam-fm/189882.vnp
[17] Derek Grossman, “Reviewing Vietnam’s ‘Struggle’ Options in the South China Sea”, The RAND Blog, 4 May 2020, https://www.rand.org/blog/2020/05/reviewing-vietnams-struggle-options-in-the-south-china.html
[18] David Shambaugh, Where Great Powers Meet: America & China in Southeast Asia (New York: Oxford University Press, 2021), p. 95, 210
[19] ibid
[20] Strangio, In the Dragon’s Shadow, pp 106 – 107
[21] Le Hong Hiep, “The Vietnam-US Partnership and the Rules-Based International Order in the Age of Trump”, Trends in Southeast Asia, 2020, p. 1, 20-21, /wp-content/uploads/pdfs/TRS1_20.pdf
[22] ibid, p 2, 27
[23] Maria Siow, “US-Vietnam Defence Ties Expected to Strengthen with New Governments in Place and China Looming: Analyst”, South China Morning Post, 30 January 2021, https://www.scmp.com/week-asia/politics/article/3119865/us-vietnam-defence-ties-expected-strengthen-new-governments
[24] Congressional Research Service, “US-Vietnam Relations”, 16 February 2021, https://fas.org/sgp/crs/row/IF10209.pdf
[25] Viet Phuong Nguyen, “Why Vietnam Should Host the Second Trump-Kim Summit”, The Diplomat, 16 January 2019, https://thediplomat.com/2019/01/why-vietnam-should-host-the-second-trump-kim-summit
[26] Huong Le Thu, “Vietnam Steps Up to Take Vietnam Leadership Role”, ASPI Strategist, 5 August 2020, https://vietnamnet.vn/en/politics/vietnam-gains-breakthrough-diplomatic-success-as-unsc-member-official-708187.html
[27] Nhan Dan, “Vietnam Expects to Expand Engagement in UN Peacekeeping Operations”, 7 January 2021, https://en.nhandan.org.vn/politics/item/9477902-vietnam-expects-to-expand-engagement-in-un-peacekeeping-operations.html
[28] Straits Times, “Trump-Kim Summit: Why is Vietnam Chosen?” 12 February 2019, https://www.straitstimes.com/asia/se-asia/trump-kim-summit-why-was-vietnam-chosen
[29] Nguyen, “Why Vietnam Should Host the Second Trump-Kim Summit”
[30] William Choong, “Coping with China’s Rapid Rise”, The Straits Times, 2 September 2011, p. A37
[31] See ASEAN, “Chairman’s Statement of the 36th ASEAN Summit”, 26 June 2020, https://asean.org/storage/2020/06/Chairman-Statement-of-the-36th-ASEAN-Summit-FINAL.pdf, ASEAN “Chairman’s Statement of the 35th ASEAN Summit”, 3 November 2019, https://asean.org/storage/2019/11/Chairs-Statement-of-the-35th-ASEAN-Summit-FINAL.pdf
[32] Hoang Thi Ha, “ASEAN and the South China Sea Code of Conduct: Raising the Aegis of International Law”, ISEAS Commentaries, 21 September 2020, /media/commentaries/asean-and-the-south-china-sea-code-of-conduct-raising-the-aegis-of-international-law
[33] Such as the US condemnation of the Chinese deployment; Vietnam’s deployment of dozens of ships around the Chinese oil-rig; and popular resistance among ordinary Vietnamese to China’s actions.
[34] Reuters, “Vietnam PM Says Considering Legal Action Against China Over Disputed Waters”, 22 May 2014, https://www.reuters.com/article/us-vietnam-china-idUSBREA4K1AK20140522
[35] Chua Chin Hon, “Vietnam Mulling Legal Option to Resolve Maritime Spat with China,” The Straits Times, 31 May 2014, https://www.straitstimes.com/singapore/vietnam-mulling-legal-option-to-resolve-maritime-spat-with-china
[36] Michael Green, Kathleen Hicks, Zack Cooper, John Schaus and Jake Douglas, “Counter-coercion Series: China-Vietnam Oil Rig Standoff,” Asia Maritime Transparency Initiative, 12 June 2017, https://amti.csis.org/counter-co-oil-rig-standoff
[37] ibid
[38] Lye Liang Fook and Ha Hoang Hop, “The Vanguard Bank Incident: Developments and What Next?” ISEAS Perspective, 4 September 2019, p. 4, /images/pdf/ISEAS_Perspective_2019_69.pdf
[39] ibid
[40] Ministry of Defence (Vietnam), “2019 Viet Nam National Defence”, http://www.mod.gov.vn/wps/wcm/connect/08963129-c9cf-4c86-9b5c-81a9e2b14455/2019VietnamNationalDefence.pdf, pp 23 – 24, 29
[41] Derek Grossman, “What Does Vietnam Think About America’s Indo-Pacific Strategy?” The RAND Blog, 5 August 2020, https://www.rand.org/blog/2020/08/what-does-vietnam-think-about-americas-indo-pacific.html
[42] Joseph R. Biden Jr., “Interim National Security Strategic Guidance”, March 2021, p. 10, https://www.whitehouse.gov/wp-content/uploads/2021/03/NSC-1v2.pdf
[43] Asia Maritime Transparency Initiative, “Vietnam Shores up its Spratlys Defenses”, 19 February 2021, https://amti.csis.org/vietnam-shores-up-its-spratly-defenses/
[44] S. Rajaratnam School of International Studies, “Countering Anti-Access/ Areal Denial Challenges: Strategies and Capabilities (Event Report)”, 1 December 2017 https://www.rsis.edu.sg/wp-content/uploads/2018/04/ER180424_Countering-Anti-Access.pdf, p. 10
[45] Bilahari Kausikan, “ASEAN’s Agency in the Midst of Great Power Competition”, Australian Institute of International Affairs, 30 October 2020, https://www.internationalaffairs.org.au/australianoutlook/aseans-agency-in-the-midst-of-great-power-competition/ [46] Shambaugh, Where Great Powers Meet, pp 12 – 15
[46] Shambaugh, Where Great Powers Meet, pp 12-15
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |
EXECUTIVE SUMMARY
- The Vietnam People’s Army (VPA) appears to be gaining leverage in Vietnam’s political system. Two generals, Luong Cuong and Phan Van Giang, were elected to the Communist Party of Vietnam’s (CPV) Politburo at its 13th National Congress.
- The number of military representatives in the Party’s Central Committee also increased from 20 to 23, cementing the VPA’s status as the largest voting bloc in the Committee.
- The VPA’s increasing influence reflects the CPV’s security concerns over growing tensions in the South China Sea, which enabled the VPA to gain more leverage in the Party’s top decision-making bodies. Its political position has also benefited from the growing importance of the defence industry and the commercial success of military-run businesses such as Viettel.
- The VPA’s increasing leverage may discourage reforms towards more political freedoms and lead to greater “securitisation” of certain economic policies. It may also harden Vietnam’s stance on the South China Sea, but this does not necessarily mean that Vietnam will take a more adventurous approach to the dispute.
- As the CPV continues to subject the VPA to its tight control, the military’s influence will remain within boundaries set by the Party, and may fall again in the future.
* Le Hong Hiep is Senior Fellow in the Vietnam Studies Programme of the ISEAS – Yusof Ishak Institute.
INTRODUCTION
The 13th National Congress of the Communist Party of Vietnam (CPV), which concluded in early February 2021, resulted in several surprising personnel arrangements.[1] One of them was the election of Colonel General Phan Van Giang, Chief of General Staff of the Vietnam People’s Army (VPA) and Deputy Minister of Defence, and General Luong Cuong, Head of the VPA General Political Department, into the CPV’s Politburo. This is the first time in 20 years that two VPA representatives have been elected into the Politburo. In addition, the number of military representatives in the Party’s Central Committee also increased from 20 to 23, cementing the VPA’s status as the largest voting bloc in the Committee.
What explains the military’s increased representation in the CPV’s top echelons, and hence its increasing leverage? What does this trend mean for Vietnam’s political, economic and foreign policy prospects?
This paper explores these questions. It starts with a review of the military’s traditional role in Vietnamese politics before analysing the factors that have led to the VPA’s increasing influence over the past decade. The paper concludes by assessing this trend’s implications for Vietnam.
“THE PARTY COMMANDS THE GUN”
Chinese communist leader Mao Zedong famously said in 1938 that “Every Communist must grasp the truth, ‘Political power grows out of the barrel of a gun.’ Our principle is that the Party commands the gun, and the gun must never be allowed to command the Party.”[2] The CPV follows the same principle and has always put the VPA under tight control. Party officials and ideologues frequently criticise the idea of depoliticising the VPA and turning it into a “national army” independent of the CPV, something they consider a scheme by “hostile forces” to undermine the Party’s rule.[3]
The CPV’s constitution stipulates that the VPA is subject to the Party’s “absolute, direct and comprehensive leadership”.[4] The Party exercises its control over the VPA through different mechanisms, the most important of which is the Central Military Commission (CMC) headed by the CPV general secretary himself. The CMC supervises party affairs within the VPA, and is represented at the central level by the VPA General Political Department. All units of the VPA from the top to the bottom are subject to the Party’s control, made possible by the existence of a vertical system of political units headed by political commissars.
The Party needs to maintain tight control over the VPA because the latter plays an essential role in not only national defence but also the regime’s security. Although the Party has never faced the level of threat that its Chinese counterpart did in 1989 when it mobilised soldiers and tanks to crush the pro-democracy Tiananmen Square protests, the CPV views the VPA as a critical tool for the Party to deal with imminent threats against itself. Moreover, the VPA also plays an important role in the country’s socio-economic development. Apart from running more than 20 major state-owned enterprises (SOEs), the VPA also manages 28 economic-defence zones[5] located in remote border areas. These zones, run by economic-defence corps, are part and parcel of the Party’s strategy to protect national sovereignty and promote socio-economic development in these less-developed areas.
The VPA’s importance to the country and the CPV is reflected in its strong representation in state bodies and party governance institutions. It is allocated a significant bloc of seats in the National Assembly as well as the CPV’s Central Committee and Politburo, turning it into an influential player in national politics. The VPA’s representation in these bodies was markedly strong during war time and periods of heightened national security.
For example, at the second National Congress of the Party in 1951, General Vo Nguyen Giap (Minister of National Defence) and General Nguyen Chi Thanh (Head of VPA General Political Department) were elected into the seven-man-strong Politburo.[6] They retained their seats at the third Party Congress in 1960. In addition, General Van Tien Dung (VPA Chief of General Staff) was elected as an alternate member before being promoted to full member in 1972, replacing General Thanh, who passed away in 1967. The fourth CPV Congress in 1976, held a year after the country was unified, witnessed the increased influence of the VPA with three out of 14 members of the Politburo coming from the military. They were General Vo Nguyen Giap (Minister of Defence), General Van Tien Dung (VPA Chief of General Staff), and General Chu Huy Man (Head of VPA General Political Department). The VPA continued to maintain strong influence at the fifth CPV Congress held in 1982. Specifically, General Van Tien Dung (Minister of Defence), General Chu Huy Man (Head of VPA General Political Department) and Colonel General Le Duc Anh (Deputy Minister of Defence) were elected full members of the new Politburo. In addition, Dong Sy Nguyen, who was formerly a lieutenant general and deputy minister of defence, was elected as an alternate member. The strong representation of the military can be explained by the fact that since 1979, Vietnam had been involved in prolonged armed conflicts along its border with China and in Cambodia, rendering national defence once again a top priority for the country.
After adopting economic reforms under the Doi Moi policy in 1986, withdrawing from Cambodia in 1989 and normalising relations with China in 1991, Vietnam entered into a phase of peace and development. Economic development became the top priority for the country and national defence became less of a concern. This gradually led to the declining role of the VPA in national politics, reflected in its reduced representation in the Politburo. At the CPV’s ninth National Congress in 2001, Minister of Defence Pham Van Tra was the only military figure elected into the Politburo, setting a new norm for the next twenty years.
THE LARGEST VOTING BLOC
At the 13th CPV National Congress, the norm of electing only one VPA representative into the Politburo was broken when both Colonel General Phan Van Giang and General Luong Cuong won their seats. In addition, the VPA’s representation in the Party’s Central Committee also steadily increased over the past 10 years. In 2011, 18 out of 175 full members of the Committee (10.3 per cent) came from the VPA. In 2016, when the number of the Committee’s full members expanded to 180, the number of VPA representatives also increased to 20 (11.1 per cent). At the 13th Congress, a total of 23 VPA representatives were elected into the Committee, accounting for 12.8 per cent of its membership. As a result, the VPA currently forms the largest voting bloc in the Central Committee, the Party’s paramount executive body between its national congresses. Two major factors may account for this trend.
First, rising tensions in the South China Sea tend to enhance the VPA’s bargaining power. Defending national security and sovereignty has been central to the CPV’s political legitimacy, meaning that the VPA has a bigger say whenever the country’s security and sovereignty are threatened. As discussed in the previous section, this pattern was well established in the past with the VPA gaining more influence during the Vietnam War and in the 1980s when the country faced serious security threats from China and the Khmer Rouge. China’s increasing assertiveness in the South China Sea over the past decade[7] has deepened the CPV’s security concerns, enabling the VPA to gain not only more leverage in the Party’s top decision-making bodies but also more budgetary resources. For example, between 2010 and 2018, Vietnam’s military spending on average was equal to 2.62 per cent of its GDP.[8] In 2018, Vietnam was the 35th largest military spender in the world with a defence budget of around US$5.5 billion.[9]
Second, the VPA’s political position appears to have benefited from its expanding economic role. Apart from helping to develop the local economy in remote areas, the VPA’s economic role also extends to a wide range of activities, including manufacturing, telecommunications, information technology, banking, transportation and construction. There are two main groups of military-run businesses. The first is defence companies which mostly produce weapons and defence equipment for the VPA. They are managed by the General Department of Defence Industry under the Ministry of Defence. The second includes businesses which serve both the VPA and civilian clients. Vietnam’s 2009 Defence White Paper listed ten such major businesses,[10] the most notable of which include Viettel, a telecommunications and industrial conglomerate; Military Bank; and Sai Gon New Port, the biggest container terminal operator in Vietnam. In recent years, these companies’ commercial success and their increasing contribution to national economic development have helped enhance the VPA’s reputation and influence. Viettel, for example, has been considered a national champion in developing Vietnam’s defence industry and high-tech capabilities, especially 5G technologies. In 2016, Major General Nguyen Manh Hung, then general director of Viettel and currently minister of information and communications, was elected into the CPV Central Committee, the first time for a military business leader. At the 13th CPV Congress, Lieutenant General Tran Hong Minh, Head of the General Department of Defence Industry, also won a seat in the Central Committee.
In addition, internal competition between Luong Cuong and Phan Van Giang for the Politburo membership and the defence minister position was another important factor that led to the election of both men into the Politburo. Cuong initially had more advantage over Giang because he held a more senior rank and was elected into the Party’s Secretariat in 2016, while Giang was only a Central Committee member. Moreover, Giang, born in October 1960, was overaged and originally ineligible for Politburo membership. As such, Cuong was in a better position to become the only Politburo member representing the military, which should have paved the way for him to become the new defence minister. However, there was growing consensus within the VPA leadership that the minister position should be given to a commander rather than a political general, especially given that the outgoing minister, Ngo Xuan Lich, was himself a political general. There was reportedly fierce competition between the two men in the run-up to the 13th CPV Congress. In the end, to accommodate both sides, the Party decided to extend an age limit exemption to Giang, which enabled him to become a Politburo member and later minister of defence. Cuong, meanwhile, remains as head of the VPA General Political Department.
In 2016, there was also competition between Ngo Xuan Lich, then head of the VPA General Political Department, and Do Ba Ty, then Chief of General Staff, for the Politburo membership and defence minister position. However, only Lich was eventually elected into the Politburo. This time around, the Party’s decision to grant Politburo membership to both Cuong and Giang is therefore an indication of the VPA’s growing leverage.
GREATER IMPLICATIONS
It remains to be seen if the election of two military representatives into the CPV Politburo is just a one-off development or a new norm to be repeated in subsequent party congresses. Similarly, it is unclear if the VPA will be able to maintain its current all-time strong representation in the Party’s Central Committee in the future. However, if the South China Sea dispute intensifies and military-run businesses continue to contribute substantially to Vietnam’s economic development, VPA generals will likely be able to maintain their current level of leverage.
There is little evidence that the military’s increasing influence will lead to major changes in Vietnam’s political, economic and foreign policies. However, minor or gradual shifts may be possible. Politically, despite its increasing leverage, the VPA will remain subject to the CPV’s total control. However, normally seen as more conservative and security-minded, VPA generals, with their stronger say in both the Politburo and Central Committee, will endorse prudent approaches to political issues, which may eventually slow down certain reforms, especially those towards more political freedoms.
Economically, there are indications that the “securitisation” of certain economic policies may slow down Vietnam’s economic growth. For example, the 2020 Law on Investment mentioned the word “national defence” 12 times compared to six times in the 2014 version. In particular, the 2020 law introduced new provisions[11] to subject certain investment projects and share acquisitions, especially those by foreign investors, to the approval of the Ministry of Defence. Consequently, there have been complaints from some investors about delays in the licensing process. If the Vietnamese government does not introduce timely bylaws to provide clearer guidance and simplify the approval process, such regulations will likely worsen Vietnam’s business environment and hurt its economic growth in the long run. At the same time, while military-run businesses contribute to Vietnam’s overall economic development, their growth may crowd out private investors in certain sectors and contribute to an unlevel playing field. This is because defence companies, through their strong connections with the military and government authorities, normally enjoy an unparalleled advantage in getting access to capital, land and other policy incentives.
Finally, the VPA’s influence on Vietnam’s overall foreign policy will remain strong, but its increased leverage in domestic politics is unlikely to lead to major shifts in Vietnam’s foreign relations. The VPA’s stronger say in the CPV’s top policy-making bodies may harden Vietnam’s stance on the South China Sea, but this does not necessarily mean that Vietnam will take a more adventurous approach to the dispute. Although Vietnam is determined to protect its sovereignty and territorial integrity, VPA leaders, who have gone through multiple costly wars in the past, tend to favour the peaceful resolution of disputes and avoid armed conflicts where possible. This is in line with Vietnam’s focus on domestic development, which depends on its ability to maintain peace and stability. Therefore, although Vietnam fiercely opposed China’s planting of the Haiyang Shiyou 981 oil rig in its exclusive economic zone in 2014, which Vietnam saw as a serious infringement, it has since adopted a more restrained approach to China’s other provocations in its South China Sea waters.
In sum, the VPA’s increasing leverage in the CPV’s top policy-making bodies may have some impact on Vietnam’s political, economic and foreign policy outlook. However, such impact will likely be moderate and limited. As the CPV continues to “command the gun”, the VPA’s influence, though increasing in recent years, will remain within boundaries set by the Party. In the future, the generals’ influence may fall again if the South China Sea dispute cools down, or if the Party’s top leadership sees potential problems arising from the VPA’s growing clout.
ISEAS Perspective 2021/54, 27 April 2021
ENDNOTES
[1] For an analysis of these unconventional arrangements, see Le Hong Hiep, “The CPV’s 15th Plenum: “The Art of the Possible” in Vietnamese Politics”, Fulcrum, 18 January 2021, https://fulcrum.sg/the-cpvs-15th-plenum-the-art-of-the-possible-in-vietnamese-politics/
[2] “Problems of War and Strategy”, Selected Works of Mao Tse-tung, Vol. II, pp. 224-225, available at Marxists Internet Archive (transcription by the Maoist Documentation Project): https://www.marxists.org/reference/archive/mao/selected-works/volume-2/mswv2_12.htm
[3] See, for example, “‘Phi chính trị hóa’ Quân đội – một thủ đoạn không mới, nhưng phải luôn cảnh giác”, Tạp chí Quốc phòng Toàn dân, 13 April 2018, http://tapchiqptd.vn/vi/phong-chong-dbhb-tu-dien-bien-tu-chuyen-hoa/phi-chinh-tri-hoa-quan-doi-mot-thu-doan-khong-moi-nhung-phai-luon-canh-giac/11528.html; CPV, “Nâng cao cảnh giác, đập tan âm mưu ‘phi chính trị hóa’ Quân đội, 15 March 2021, https://dangcongsan.vn/bao-ve-nen-tang-tu-tuong-cua-dang/nang-cao-canh-giac-dap-tan-am-muu-phi-chinh-tri-hoa-quan-doi-576303.html.
[4] Article 25 of the CPV constitution (in Vietnamese) available at https://tulieuvankien.dangcongsan.vn/van-kien-tu-lieu-ve-dang/dieu-le-dang/dieu-le-dang-do-dai-hoi-dai-bieu-toan-quoc-lan-thu-xi-cua-dang-thong-qua-3431
[5] For a list of these economic-defence zones, see Ministry of Defence, 2019 Vietnam National Defence (Hanoi: National Political Publishing House, 2019), pp. 125–27.
[6] Six more members were added to the Politburo in 1955-1956.
[7] Some examples of China’s growing assertiveness include its decision to plant giant oil rig Haiyang Shiyou 981 in Vietnam’s exclusive economic zone in 2014, its construction and militarisation of seven artificial islands in the Spratlys, and its threat to attack Vietnamese outposts in the Spratlys in 2017.
[8] According to Vietnam’s 2019 defence white paper, Vietnam’s defence budget as share of GDP in 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018 was 2.23, 2.82, 2.88, 2.69, 2.69, 2.72, 2.64, 2.51, and 2.36 per cent, respectively.
[9] Stockholm International Peace Research Institute, Trends In World Military Expenditure, 2018, April 2019.
[10] Ministry of Defence, Quốc Phòng Việt Nam [Vietnam’s National Defence] (Ha Noi: Ministry of Defence, 2009), p. 114.
[11] These provisions are found in articles 24, 26, 32 of the law, which is available (in Vietnamese) at http://datafile.chinhphu.vn/file-remote-v2/DownloadServlet?filePath=vbpq/2020/07/61.signed.pdf
| ISEAS Perspective is published electronically by: ISEAS – Yusof Ishak Institute 30 Heng Mui Keng Terrace Singapore 119614 Main Tel: (65) 6778 0955 Main Fax: (65) 6778 1735 Get Involved with ISEAS. Please click here: /support | ISEAS – Yusof Ishak Institute accepts no responsibility for facts presented and views expressed. Responsibility rests exclusively with the individual author or authors. No part of this publication may be reproduced in any form without permission. © Copyright is held by the author or authors of each article. | Editorial Chairman: Choi Shing Kwok Editorial Advisor: Tan Chin Tiong Managing Editor: Ooi Kee Beng Editors: William Choong, Malcolm Cook, Lee Poh Onn, and Ng Kah Meng Comments are welcome and may be sent to the author(s). |