EXECUTIVE SUMMARY
- How to control cyberspace in a country that boasts around 72 million social media users without alienating the growing cadres of Internet-savvy youths is a daunting challenge for Vietnamese authorities.
- 2013 was a watershed year that shaped how the authorities walk a very fine line between accommodating social-savvy youths and controlling online discourse.
- The challenge for many Internet users is not that their voices are censored but are drowned out in a cacophony of public grievances on social media.
- The Milk Tea Alliancehas laid bare a stark reality: What has bonded the youth across the region and galvanised them into action also epitomises the major concerns of Vietnamese authorities.
- Unlike China, Vietnam has not been able to muster enough political and technological resources to craft sophisticated campaigns to boost youth nationalism. This gap is all the more potent online.
* Dien Nguyen An Luong is Visiting Fellow with the Media, Technology and Society Programme of the 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, Washington Post, the Guardian, South China Morning Post, and other publications.
INTRODUCTION
Vietnam’s top echelons have indicated that the task of controlling cyberspace has never been more crucial.[1] But how to do so in a country that boasts 72 million social media users[2] without alienating the growing cadres of Internet-savvy youths is a daunting question.
In fact, such a dual challenge is nothing new to Vietnamese authorities. It started when the Arab Spring uprisings – fuelled by social media – broke out a decade ago, raising the spectre of a similar movement in Vietnam.[3] At that time, Vietnamese leaders had to confront what in the first place appeared to be a Hobson’s choice: Should the spirit of the Arab Spring be used as a rationale for catering to the people’s urgent needs or a pretext to tighten the screws on the Internet and social media?
It turned out that Vietnam afforded to go both ways at the same time, ushering in an era in which the authorities constantly walked a very fine line between accommodating social media-savvy youths and controlling online discourse. Nowhere was this dynamic more manifest than in the watershed year of 2013. Vietnam has ever since then been finetuning its tactics to keep up with the helter-skelter growth of social media.
A pattern emerges: Citing the standard line of the ruling Communist party, the authorities first identify what they perceive as threats that social media poses to political stability, both outside and inside Vietnam. Then they use those threats to rationalise reining in the online sphere. At the same time, the authorities also increasingly look to social media as a useful yardstick to gauge public grievances and, wherever appropriate, take remedial actions to mollify the masses.[4]
Over the past several years, the continued intent of Vietnamese leaders on winning over youths and shaping nationalism in them has taken place against the backdrop of social media-fuelled youth movements besieging Taiwan, Hong Kong or Thailand. But meanwhile, in what has been called the weaponisation of social media, many Southeast Asian governments, such as The Philippines, Indonesia, Thailand, Myanmar or Vietnam, have also sought to exploit such Western platforms as a valuable proxy for authoritarian control.[5]
It is in that context that several major questions emerge: How have Vietnam’s leaders honed their message, particularly in the online sphere, to appeal to the young? How have the authorities reconciled the task of controlling the online narrative with the need to placate a generation whose daily life is shaped by the Internet and social media?
And perhaps most importantly, Vietnam has been successful in tapping into nationalism to coalesce the public around the fight against the coronavirus.[6] But will the authorities be able to continue leveraging such nationalism in the post-pandemic era?
AN INCREASINGLY BLURRY LINE
A comic book featuring rhyming phrases of Vietnamese youth slang was reinstated after its editors took out some “violent or politically sensitive” illustrations that censors flagged as grounds for yanking it from stores a year earlier.[7] The Central Communist Youth Union commissioned a Vietnamese rapper to compose a song to convey the content of a youth resolution.[8] Vietnam’s then-Prime Minister Nguyen Tan Dung for the first time instructed the Central Youth Union to set up a homegrown social networking site that could rival Facebook and engage the young.[9]
Those back-to-back developments all took place in 2013 as the authorities stepped up efforts in an explicit gesture to attract youthful eyeballs. The context was not hard to fathom: At that time, Vietnam was experiencing the rare phenomenon of a “golden population” with two or more persons of working age for every person of dependent age (under 15 or 60 and over), meaning it was endowed with a large population of young people.[10] The challenge was also obvious: Harnessing the energy and dynamism of the young would be synonymous with bridging the yawning gap between a leadership line-up who came of age at a time of prolonged wars, and a generation that had never been through any war.
But there was a more significant underlying pull factor: Witnessing the dramatic events unfolding in Egypt and Tunisia, Vietnam’s leaders could have fretted over the ripple effect of social media that could trigger Arab-style uprisings in a country that prizes political stability above all else.[11] To aggravate their concern, a forecasting model of non-violent uprisings for 2011 had also ranked Vietnam fifth among the top 40 countries where a non-violent rebellion “would most likely occur at some point”.[12] A handful of activists tried to capitalise on this pretext to call for an Arab Spring-style uprising in Vietnam, a move that triggered heavy-handed responses from the authorities, including arrests.[13] But against that backdrop, the Middle East situation elicited lacklustre attention from Vietnamese youths.[14] Still, it would be a safe bet to assume that regimes outside the Arab world, particularly authoritarian ones like Vietnam, would consider those popular uprisings as a warning, leading the authorities to act in order to avert a similar revolution.
This is the context for which 2013 is marked as a critical juncture explaining how Vietnam justifies deployed censorship strategies to achieve the dual goal of maintaining its grip on online discourse without losing touch with the new generation.
In a blistering 2013 opinion piece in the Communist Magazine,[15] a Vietnamese military official warned about the prospect of social media becoming a conduit for “hostile forces” to coalesce young people around what was labelled as anti-government movements. The article pulled no punches: “With these activities, the hostile forces will promote anti-government ideology among netizens, rally forces and establish opposition organisations to lead protests and provoke riots and insurrection against local administrations in certain localities and then take it as a reason for armed intervention to overthrow the political regime.”
It was in 2013 that Vietnam for the first time acknowledged publicly that it had deployed groups known as “public opinion shapers” to spread views in defence of the state against detractors or “hostile forces”.[16] The crackdown on social media also hit a crescendo in 2013, during the start of the second term for Prime Minister Nguyen Tan Dung, crystalising in the implementation of Decree 72. Broadly worded and subject to various interpretations, the decree criminalises the sharing of news stories on various social networks[17] and bans “the use of Internet services and online information to oppose the Socialist Republic of Vietnam; threaten the national security, social order, and safety; sabotage the ‘national fraternity’; arouse animosity among races and religions; or contradict national traditions, among other acts.” It is hard to downplay the evergreen significance of Decree 72. It has served as the oft-cited legal groundwork for Facebook and Google’s YouTube to restrict or take down content at the behest of the Vietnamese authorities.[18] Since 2017, Facebook and Google’s YouTube, the two most popular social media platforms in Vietnam,[19] have publicly released the number of items that Vietnamese authorities have asked them to restrict access to. According to both platforms, the majority of the restricted or removed items were related to “government criticism” (Chart 1) or ones that “oppose the Communist Party and the Government of Vietnam” (Chart 2).
As part of the fear-based censorship, considered Vietnam’s “key strategy of digital governance,”[20] the authorities enacted a raft of laws and regulations designed to solidify the legal scaffolding of Internet controls. It is Decree 72 that has paved the way for other relevant regulations in the era of swelling social media (Table 1).
But the stability of authoritarian regimes is also contingent on three pillars that shed light on different approaches to social media: repression, legitimation and co-optation.[21] Responsiveness and legitimacy are all the more crucial to the resilience of Vietnam’s leadership. Given that, netizens have still had some wiggle room to continue testing the waters of where the red line within Vietnam’s online sphere lies. But on the other hand, the authorities have also been able to bend the implementation of such a mixture to their own will, many times leaving Internet users in the dark about when toleration, responsiveness or repression would be enforced. Past and recent crackdowns on social media in Vietnam have shown repression taking place mostly when Internet users appeared to broach issues such as political multilateralism, improved human rights, freedom of speech, Vietnam’s dealings with China or regime change. This grey area has since set off an ongoing cat-and-mouse game between the censors and Internet users.
AN ONLINE TUG-OF-WAR
The post-2013 period saw both the youths and the authorities scrambling to make the most of their unlikely alliance with social media – chiefly Facebook – to plow ahead with their own agendas. For Vietnam’s youth, it was about having their grievances, which centred on environmental concern and government’s mishandling of bread-and-butter issues, heard and addressed. Such grievances could be vented against a local move to build a cable car into what is billed as Vietnam’s cave kingdom, a plan to fell nearly 7,000 trees in the capital of Hanoi, or a calamitous fish kill along the country’s central coastline. In such movements, the challenge for Internet users was not that their voices were censored but it was about ensuring that they were not drowned out in a cacophony of public grievances in the online sphere.
For the authorities, it was about trying to appear as responsive to public sentiment online as they could. But not without some caveats: Collective action or social unrest, their bête noire, could arise from the fact that criticism of the government’s policies in a certain area quickly spreads to another, perpetuating a spiralling cycle of public disenchantment. Vietnam’s online movements – most of them initiated, coalesced and sustained by youths during the 2014-2016 period – have revolved around that dynamic, which remains relevant today (Table 2).
In 2015, then-Prime Minister Nguyen Tan Dung publicly admitted that it was impossible to ban social media platforms and that the government should instead embrace them to spread its own message.[28] This landmark development was instrumental to youth-led online movements. But on the other side of the spectrum, the drafting process for Vietnam’s Cyber-Security Law was mooted as early as July 2016, just right on the heels of the Formosa protests.[29] That is not to mention the official debut of Vietnam’s 10,000-strong military cyber unit a year later to counteract any “wrongful opinions” about the regime and protect it from “toxic information”.[30] These turning points were emblematic of how realistic, pragmatic and opportunistic Vietnamese politicians were in striking an increasingly delicate balance between placating the young and manipulating the online sphere.
MALAISES THAT LEAD TO UPRISINGS
The passage of the Cyber-Security Law in 2018 opened a new era that has seen Vietnam’s social media landscape coloured by several major factors: (i) a growing body of evidence that the role of social media as a force for democratisation has been somewhat misunderstood, mischaracterised, or even overhyped[31]; (ii) the authorities’ fixation on curbing anti-state content online; and (iii) Vietnam’s relative success in containing the Covid-19 pandemic, which has enabled the leadership to earn the exceptional level of public support that it had been craving.[32]
While some observers have talked up its role, social media alone could not have fanned the Arab Spring uprisings and the like.[33] As past studies have shown: There were other longstanding socio-economic reasons that fuelled the uprisings such as unemployment, poverty or growing inequalities. Those pull factors, coupled with pent-up grievances exacerbated by the Covid-19 pandemic, indeed played a crucial role in triggering ongoing protests across Southeast Asia.[34] That appears not to be the case in Vietnam, at least for now. Aside from being able to rein in the pandemic, political stability has continued to be a selling point for top leaders.[35] Vietnam’s economy has remained resilient, standing out among the few in the world notching up positive growth.[36]
But as a stern reminder to Vietnam’s leaders that it would be risky to let their guard down, the Milk Tea Alliance, a social media-fuelled youth movement spanning Taiwan, Hong Kong and Thailand, has kept evolving to spur young people across Asia to rise up.[37] The movement has laid bare a stark reality: What has bonded youths across the region and galvanised them into action also epitomises the major concerns of Vietnamese authorities. Chief among them are:
- The movement has rammed home a consistent message that it is seeking to push back against autocratic governments, such as the Chinese model after which Vietnam is believed to have modelled.[38]
- Social media has played an increasingly crucial role in enabling activists to coalesce networks online and translate them into real life actions.[39]
- Those movements attest to youths’ growing disenchantment, further driving a wedge between them and the government, and undermining the legitimacy of the latter.[40]
In a low key yet symbolic move, the People’s Police newspaper, an organ of Vietnam’s Ministry of Public Security, ran an article in February that warned about the dangers of having “depoliticised” armed forces independent of the ruling Communist party.[41] Citing the current political chaos driven by the military coup in Myanmar, the article delivered a scathing indictment of “subversive elements and hostile forces” who have sought to plot “vicious conspiracies” to neuter the state’s leadership role in the army, turning it into a force that “betrays the interests of the Party and the people.” Another article of the same newspaper in late March also castigated external forces for capitalising on the Myanmar crisis to lure young people into taking part in “subversive activities” such as “online colour revolutions” that would pave the way for “street movements”.[42]
Those articles appeared at a time when the protest movement in Myanmar had been able to garner widespread support from the Milk Tea Alliance.[43] It encapsulated the entrenched concern and official line of Vietnamese authorities that political chaos and social unrest could end up opening the floodgates of youth-led movements that challenge the legitimacy of the regime. But it was still just the first baby step in Vietnam’s playbook. As already mentioned, the next challenge is how to win over the youths while at the same time keeping close tabs on cyberspace.
Vietnam is not short of political rhetoric and exhortation on youth patriotism. Like their Chinese counterparts, Vietnamese leaders are probably well aware that in addition to the rising standards of living, nationalism remains a crucial part of the regime’s legitimacy.[44] But unlike Beijing,[45] Hanoi has not been able to muster enough political and technological muscle to craft sophisticated campaigns aimed at boosting youth nationalism. This gap is all the more potent in the online sphere. The reasons are not hard to pin down: A “national Internet” meant for blocking of Western social media platforms has given China a carte blanche to shape a narrative at its will.[46] That has also bred a generation of Chinese youths who have come of age without Facebook, Google’s YouTube, or Twitter.[47]
That may help explain why Vietnam has kept beating the drum for building domestic social media platforms that could compete with or even elbow out their foreign counterparts.[48] But here is another Catch-22 for the authorities: Social media was built into a mechanism that incentivises click-baiting, sensationalism and fake news – all designed to increase public attention and engagement. Vietnamese censors will not want to make their homegrown social media network another fertile ground for “wrongful opinions”, fake news, or “toxic information”, the very rationale for them to control the Internet. But if Vietnam seeks to curb such elements by creating a new social network, people – the young in particular – are likely to switch it off.
Still, there has been a perhaps inadvertent edge for Vietnam: The leadership has been able to gain exceptional public kudos for pushing back the coronavirus. The Covid-19 pandemic also provides an illuminating case study of how Vietnam’s public communications strategies succeeded in making the most of social media platforms to reach out to the public – young people included – and enlist their support.[49] In the State of Southeast Asia 2021 survey done by ISEAS – Yusof Ishak Institute,[50] including academics, government officials and business people – respondents from Vietnam registered their strongest approval of their government’s handling of the pandemic. That success has been key to boosting patriotism in a population of nearly 100 million. In an attempt to shed light on this dynamic, we generate relevant keywords on the topics of Covid 19-era patriotism (Appendix 1) and the pro-youth movement sentiment (Appendix 2) and analyse the discussion on them in Vietnam’s online sphere since late July 2020. That was the time when the second coronavirus wave hit Vietnam, and the youth movement was gaining traction in Thailand.[51] Online discussions on Covid-era patriotism overwhelmingly dwarfed the pro-youth movement during the corresponding period (Chart 3).
This is further exemplified by social media activity over time, where conversations on pro-youth movement sentiment averages only 6 posts at any given time, compared with 96 from the Covid-era patriotism topic (Table 3).
Such positive sentiment dovetails with other findings of pre-pandemic surveys. During a recent national online exchange, the top leader of Vietnams’ Central Youth Union cited a past survey as showing that nearly 94 per cent of Vietnamese youths said they were “patriotic” and had “national pride.”[52] According to data from the 2018 Asian Barometer Survey conducted by the Academia Sinica and National Taiwan University, around 90 per cent of Vietnamese polled said they trusted the Communist party of Vietnam and the government at least somewhat.[53]
But despite such a momentum, Vietnamese authorities are all poised to confront a vexing question: What’s next in the post-pandemic period?
THE $64,000 QUESTION
Even if and although the prospect of a social media-fuelled youth movement may remain pretty distant in Vietnam, how to best appeal to youths remains an urgent task and a thorny question for the authorities. The Next Generation survey conducted last year by the British Council[54] showed that three in four (78 per cent) Vietnamese youths polled said they had “no engagement” with the country’s politics. Around five in nine (55 per cent) expressed concern about “the lack of any opportunity to have their voice heard.” If there is a venue to do so, it is social media and close circles of friends and family, according to the same survey.
With the mainstream media haemorrhaging readership to the online sphere, the authorities engaging youths just through slogans and banners or their propaganda playbook remaining riddled with humdrum, ideology-laden language, is likely to be a turnoff. This is where the authorities may find themselves caught between a rock and a hard place: If they keep making the most of the digital space to reach out to the youths, any future move that seeks to tighten cyberspace could trigger a popular backlash.
In that context, it remains to be seen how Vietnam can afford to rationalise any further controls on social media. How they manage to do so without estranging the digital-savvy youth is another intriguing question.
ISEAS Perspective 2021/43, 14 April 2021
ENDNOTES
[1] Dien Nguyen An Luong, “Cyberspace: Vietnam’s Next Propaganda Battleground?”. Fulcrum, 25 February 2021. https://fulcrum.sg/cyberspace-vietnams-next-propaganda-battleground/
[2] Hootsuite & We Are Social (2021), “Digital 2021: Vietnam”. https://datareportal.com/reports/digital-2021-vietnam
[3] Ben Bland, “Vietnam: a question of balance”. Financial Times, 24 November 2011, https://www.ft.com/content/0ae832b0-15e1-11e1-a691-00144feabdc0
[4] James Borton, “Vietnam’s Social Media Shaping New Environmentalism”, Internews, 5 July 2017, https://internews.org/news/vietnams-social-media-shaping-new-environmentalism
[5] Ronald Deibert. “The Road to Digital Unfreedom: Three Painful Truths About Social Media”. Journal of Democracy 30, no. 1 (2019): 25–39.
[6] Minh Vu and Bich T. Tran, “The Secret to Vietnam’s COVID-19 Response Success”. The Diplomat, 18 April 2020. https://thediplomat.com/2020/04/the-secret-to-vietnams-covid-19-response-success
[7] “Vietnam’s awakening youth circumvent censorship”. Associated Press, 2 February 2012. https://ktar.com/story/221702/vietnams-awakening-youth-circumvent-censorship/
[8] “Bridging a war and peace gap”. Thanh Nien News, 3 April 2013. http://www.thanhniennews.com/society/bridging-a-war-and-peace-gap-2942.html
[9] “Vietnamese prime minister calls for young people’s social network”. Inside Asia, 14 May 2013, https://www.insideasiatours.com/southeast-asia/news/3140/vietnamese-prime-minister-calls-for-young-peoples-social-network
[10] Rafael Nam, John Ruwitch, “Consumers driving Vietnam into ‘golden age’”. Reuters, 27 May 2020. https://www.reuters.com/article/us-frontiers-vietnam-consumers-idUSTRE64Q08S20100527
[11] Ben Bland, “Vietnam: a question of balance”. Financial Times, 24 November 2011, https://www.ft.com/content/0ae832b0-15e1-11e1-a691-00144feabdc0
[12] Long S. Le, “Uprisings in the Air? Forecasting Political Instability in Vietnam”. Global Asia, June 2012 (Vol.7 No.2). https://www.globalasia.org/v7no2/feature/uprisings-in-the-air-forecasting-political-instability-in-vietnam_long-s-le
[13] “Vietnam activist Nguyen Dan Que held for uprising call”. BBC News, 28 February 2011. https://www.bbc.com/news/world-asia-pacific-12595261
[14] Yen Duong, “The Political Apathy of Vietnamese Youth”. New Naratif, 1 December 2017. https://newnaratif.com/journalism/the-political-apathy-of-vietnamese-youth [15] Nguyen Hong Quan, “‘Arab Spring’ inspires thoughts about social networks management”. Communist Review. 7 October 2013. http://english.tapchicongsan.org.vn/Home/Politics/2013/836/Arab-Spring-inspires-thoughts-about-social-networks-management.aspx
[16] Nga Pham, “Vietnam Admits Deploying Bloggers to Support Government”. BBC News, 12 January 2013. https://www.bbc.com/news/ world-asia-20982985
[17] Mong Palatino, “Decree 72: Vietnam’s Confusing Internet Law”, The Diplomat, 8 August 2013, https://thediplomat.com/2013/08/decree-72-vietnams-confusing-internet-law.
[18] “‘Let Us Breathe!’ Censorship And Criminalization Of Online Expression In Viet Nam”, Amnesty International, p.20, 1 December 2020, https://www.amnesty.org/download/Documents/ASA4132432020ENGLISH.pdf
[19] Hootsuite & We Are Social (2021), “Digital 2021: Vietnam”.
[20] Giang Nguyen-Thu, “Vietnamese Media Going Social: Connectivism, Collectivism, and Conservatism”. The Journal of Asian Studies 77, no. 4 (2018): 895–908.
[21] Johannes Gerschewski. The three pillars of stability: legitimation, repression, and co-optation in autocratic regimes. Democratization, 2013, vol. 20, no 1, p. 13-38.
[22] Dien Luong, “In Facebook, young Vietnamese see an ally”. VnExpress International, 2 February 2017. https://e.vnexpress.net/news/news/in-facebook-young-vietnamese-see-an-ally-3535044.html
[23] Chris Humphrey, “In Vietnam, cable car plans continue to threaten important cave system”. Mongabay, 24 July 2018. https://news.mongabay.com/2018/07/in-vietnam-cable-car-plans-continue-to-threaten-important-cave-system
[24] Michael Peel, “Hanoi residents mobilise to save city’s cherished trees”. Financial Times, 27 March 2015, https://www.ft.com/content/54d07f2a-d462-11e4-8be8-00144fea
b7de
[25] Helen Clark, “Hanoi Citizens Protest Tree-Felling Plan”, The Diplomat, 25 March 2015, https://thediplomat.com/2015/03/hanoi-citizens-protest-tree-felling-plan
[26] My Pham and Mai Nguyen, “Vietnam says recovery from Formosa industrial disaster could take a decade”, Reuters, 24 December 2016, https://www.reuters
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[27] Mai Nguyen, “Formosa unit offers $500 million for causing toxic disaster in Vietnam”, Reuters, 30 June 2016, https://www.reuters.com/article/us-vietnam-environment/formosa-unit-offers-500-million-for-causing-toxic-disaster-in-vietnam-idUSKCN0ZG1F5
[28] “Vietnamese leader says banning social media sites impossible”, The Associated Press, 16 January 2015, https://federalnewsnetwork.com/technology-main/2015/01/vietnamese-leader-says-banning-social-media-sites-impossible
[29] Trinh Huu Long, “Vietnam’s Cybersecurity Draft Law: Made in China?”. The Vietnamese, 8 November 2017, https://www.thevietnamese.org/2017/11/vietnams-cyber-security-draft-law-made-in-china
[30] James Hookway, “Introducing Force 47, Vietnam’s New Weapon Against Online Dissent”. The Wall Street Journal, 31 December 2017, https://www.wsj. com/articles/introducing-force-47-vietnams-new-weapon-against-online-dissent-1514721606
[31] Bryan H. Druzin and Jessica Li, “The Power of the Keystroke: Is Social Media the Radical Democratizing Force We’ve Been Led to Believe it is?”, Harvard Human Rights Journal, 1, Vol. 28 (2015): 1–6, https://harvardhrj.com/2015/02/the-power-of-the-keystroke-is-social-media-the-radical-democratizing-force-weve-been-led-to-believe-it-is
[32] Tran Le Thuy, “Vietnam is fighting Covid without pitting economic growth against public health”. The Guardian, 20 October 2020. https://www.theguardian.com/commentisfree/2020/oct/20/vietnam-covid-economic-growth-public-health-coronavirus
[33] Gayo-Avello, Daniel, Social Media and Authoritarianism (2015), https://ssrn.com/abstract=2878705 or http://dx.doi.org/10.2139/ssrn.2878705
[34] Robinson, Macan-Markar, and Turton, “Thai protests build as pandemic fuels unrest across Southeast Asia” [35] Phuong Pham, “Nguyen Phu Trong: The Best Choice to Lead Vietnam’s Communist Party”. The Diplomat, 8 February 2021. https://thediplomat.com/2021/02/nguyen-phu-trong-the-best-choice-to-lead-vietnams-communist-party/
[36] Yen Nee Lee, “This is Asia’s top-performing economy in the Covid pandemic — it’s not China”. CNBC, 28 January 2021. https://www.cnbc.com/2021/01/28/vietnam-is-asias-top-performing-economy-in-2020-amid-covid-pandemic.html
[37] Laignee Barron, “‘We Share the Ideals of Democracy.’ How the Milk Tea Alliance Is Brewing Solidarity Among Activists in Asia and Beyond”. TIME, 28 October 2020. https://time.com/5904114/milk-tea-alliance
[38] Timothy Mclaughlin, “How Milk Tea Became an Anti-China Symbol”. The Atlantic, 13 October 2020. https://www.theatlantic.com/international/archive/2020/10/milk-tea-alliance-anti-china/616658/
[39] Patpicha Tanakasempipat, “‘We’re in this together’: Milk Tea Alliance rallies against Myanmar coup across Asia”. Sydney Morning Herald, 1 March 2021. https://www.smh.com.au/world/asia/milk-tea-alliance-activists-across-asia-hold-rallies-against-myanmar-coup-20210301-p576lc.html [40] Jitsiree Thongnoi, “Milk Tea Alliance: are young Thais turning on China over Hong Kong?”. South China Morning Post, 14 June 2020. https://www.scmp.com/week-asia/politics/article/3088901/milk-tea-alliance-are-young-thais-turning-china-over-hong-kong
[41] Nguyễn Sơn, “‘Phi chính trị hóa lực lượng vũ trang’ – vấn đề nhìn từ Myanmar” (“Depoliticizing the armed forces” – a perspective on Myanmar). Công an nhân dân, 20 February 2021, http://cand.com.vn/Chong-dien-bien-hoa-binh/Phi-chinh-tri-hoa-luc-luong-vu-trang-van-de-nhin-tu-Myanmar-631398
[42] Tran Anh Tu, Pham Duy, ““Cách mạng màu online” và thủ đoạn dựng hình mẫu ngược!” (Online color revolutions and ploys to create a reverse model). Cong An Nhan Dan, 29 March 2021. http://cand.com.vn/Chong-dien-bien-hoa-binh/Cach-mang-mau-online-va-thu-doan-dung-hinh-mau-nguoc-635492/
[43] Jessie Lau, “Myanmar’s Protest Movement Finds Friends in the Milk Tea Alliance”. The Diplomat, 13 February 2021. https://thediplomat.com/2021/02/myanmars-protest-movement-finds-friends-in-the-milk-tea-alliance/
[44] Pu, X. Jessica Chen Weiss, Powerful Patriots: Nationalist Protest in China’s Foreign Relations . J OF CHIN POLIT SCI 21, 501–502 (2016). https://doi.org/10.1007/s11366-016-9440-0
[45] Liza Lin, “Xi’s China Crafts Campaign to Boost Youth Patriotism”. Wall Street Journal, 30 December 2020. https://www.wsj.com/articles/xi-china-campaign-youth-patriotism-propaganda-11609343255
[46] Dien Luong, “Vietnam Wants to Control Social Media? Too Late”. New York Times, 30 November 2017. https://www.nytimes.com/2017/11/30/opinion/vietnam-social-media-china.html
[47] Li Yuan, “A Generation Grows Up in China Without Google, Facebook or Twitter”. New York Times, 6 August 2018. https://www.nytimes.com/2018/08/06/technology/china-generation-blocked-internet.html
[48] Dien Nguyen An Luong, “Vietnam and Social Media: The Clock Is Ticking on Tiktok”. ISEAS Commentary, 27 August 2020. /media/commentaries/vietnam-and-social-media-the-clock-is-ticking-on-tiktok/
[49] Hong Kong Nguyen and Tung Manh Ho, “Vietnam’s COVID-19 Strategy: Mobilizing Public Compliance Via Accurate and Credible Communication”, ISEAS Perspective, no. 2020/69, 25 June 2020 [50] 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
[51] Helen Regan and Kocha Olarn, “Thailand protest movement puts country’s youth on collision course with military-backed establishment. CNN, 24n July 2020. https://edition.cnn.com/2020/07/23/asia/thailand-anti-government-protests-intl-hnk/index.html
[52] “Bí thư thứ nhất T.Ư Đoàn đối thoại với thanh thiếu nhi” (First Secretary of Ho Chi Minh Communist Youth Union interact with young people). Thanh Nien, 16 March 2021. https://thanhnien.vn/gioi-tre/bi-thu-thu-nhat-tu-doan-doi-thoai-voi-thanh-thieu-nhi-1354559.html
[53] Paul Schuler, “Vietnam in 2020: Controlling COVID and Dissent”. Asian Survey (2021) 61 (1): 90–98. https://doi.org/10.1525/as.2021.61.1.90
[54] “Next Generation Vietnam”. British Council, August 2020. https://www.britishcouncil.org/sites/default/files/l045_next_generation_vietnam_final_web.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). |
EXECUTIVE SUMMARY
- Vietnam’s economic growth in 2020 declined sharply due to the Covid-19 pandemic, from a high of around 7 per cent to 2.91 per cent. This is better than many other countries where growth rates were negative.
- The Covid-19 pandemic has affected the economy on both the supply and demand fronts. On the demand front, aggregate demand comprising consumption, investment and exports has declined, with the tourism and food and beverage sectors the worst affected.
- On the supply front, the pandemic and social distancing measures have disrupted supply chains inputs and labour supply. According to a General Statistics Office survey, 85.7 percent of businesses were affected by Covid-19.
- Poverty and near-poverty rates worsened across Vietnam, with migrant and ethnic minority households disproportionately affected.
- Domestically, the government has introduced measures to alleviate the pandemic’s negative impacts on the people and businesses. Beyond the pandemic, it will have to tackle persistent challenges such as poor infrastructure, lack of quality human resources, and underperforming state-owned enterprises.
- Externally, the Biden administration’s economic, trade and human rights policies towards Vietnam bear watching.
* Nguyen Chien Thang is Associate Professor and Director General of the Institute for European Studies at the Vietnam Academy of Social Sciences; while Pham Sy An is Director of the Department of Macroeconomics and Institutions, Vietnam Institute of Economics at the Vietnam Academy of Social Sciences.
IMPACT OF COVID-19 ON VIETNAM’S ECONOMY
Before the advent of Covid-19 in early 2020, Vietnam’s economic growth was generally trending upwards and remained high, averaging around 7 per cent in the last three years (2017-2019). The Covid-19 pandemic, however, has had a negative impact on the economy, which saw growth in 2020 slumping to 2.91 per cent, the lowest level in 10 years (2011-2020).
The pandemic’s impact on the Vietnamese economy can be examined on both the supply and demand fronts. On the demand front, the pandemic and the social distancing measures mandated by the Prime Minister’s Directive No.16/CT-TTg in early April 2020 caused a strong decline in domestic consumption. Major economies (such as the United States, China, EU, Japan, and South Korea) were also severely affected by the pandemic and the implementation of social distancing measures within their own borders, leading also to a decline in economic growth; this meant a decrease in import demand, including for Vietnamese goods.
According to projections by Vietnam’s General Statistics Office, the retail sales value of goods and services is set to increase by 2.6 per cent in 2020, compared to 2019. However, a decrease is expected if the price factor is excluded, with a decrease of 1.2 per cent in 2020 compared to an increase of 9.5 per cent in 2019.[1] Revenue from accommodation and catering services also decreased in the first six months of 2020, falling by 18.1 per cent compared to the same period in 2019. Tourism revenue fell by 53.2 per cent in the first six months of 2020, and was the sector most severely affected by the pandemic and the implementation of social distancing measures.
With regard to investment demand, total investment increased by 5.7 per cent in 2020 – the lowest increase in the 2011-2020 period. This comprised investments from three main sources – the state sector, which increased by 14.5 per cent; the non-state sector, which increased by 3.1 per cent; and foreign direct investment, which decreased by 1.3 per cent.[2] This is a notable fall compared to 2019, when total investment increased by 10.2 per cent compared to 2018. Thus investment demand growth came largely from the state sector, with on-year growth increasing from 2.6 per cent in 2019 to the abovementioned 14.5 per cent in 2020. This highlights the important role the state has played in limiting the decline in aggregate demand during this period of economic uncertainty.
There was also a slight decrease in export growth. In 2020, Vietnam’s total export turnover increased by 6.5 per cent compared to 2019, of which exports by the domestic sector decreased by 1.1 per cent and the foreign-invested sector (including crude oil) increased by 9.7 per cent. In contrast, in 2019, total export turnover increased by 8.1 per cent compared to 2018, of which exports by the domestic sector increased 17.7 per cent and the foreign-invested sector (including crude oil) increased 4.2 per cent. This fall in overall export growth in 2020 illustrates how the pandemic’s negative impact on investment and the global value chain also affected Vietnam’s exports.
In sum, the Covid-19 pandemic has reduced aggregate demand (consumption expenditure, investment, and exports) growth as well as slowed down production and economic growth. The government is thus currently in the midst of implementing measures aimed at stimulating aggregate demand and restoring economic production.
On the supply front, the pandemic and social distancing measures have disrupted inputs for supply chains and labour supply. For instance, automobile manufacturers such as Honda, Nissan, Toyota, Ford, and Hyundai have halted production in Vietnam due to the scarcity of input components as well as the social distancing measures. Operations are only likely to resume when social distancing restrictions are lifted and supply chains are reconnected.
Many enterprises, especially those that rely on foreign specialists and workers, have also been heavily affected by Covid-19 due to a shortage in labour supply. The cost of labour for businesses has further increased due to the need to provide masks, disinfectant liquid, and the implementation of safety measures to prevent the spread of the virus.
According to a 2020 survey by Vietnam’s General Statistics Office, 85.7 per cent of businesses have been affected by Covid-19. The construction and service sectors have been the most affected, with 86.1 per cent and 85.9 per cent of businesses being hit respectively. In the agriculture, forestry and fishery sector, the proportion of businesses affected by the pandemic was lower, at 78.7 per cent. However, there were specific industries such as aviation, accommodation services, catering services, travel services, education and training, textiles, leather production, leather products, electronic manufacturing, and car manufacturing which had over 90 per cent of businesses affected by the pandemic. These industries were heavily affected by disruption in global and regional supply chains as well as the implementation of social distancing measures.[3]
Classified by size, micro firms saw the biggest drop in revenue, followed by small, medium, and large firms. Given that the vast majority of businesses in Vietnam are micro and small-sized ones, the pandemic has therefore affected a vast number of businesses in the country.
However, there has also been a small proportion of firms which have found opportunities from the pandemic. These businesses operate in industries such as insurance, health care, postal and delivery services, e-commerce, and information technology, which benefit from the increase in online transactions. In particular, social distancing during the pandemic has encouraged consumers to stay home, search for goods on the internet, and place orders online. This consumer trend promotes e-commerce and logistics services.
From a social perspective, the loss of income brought about by the pandemic has raised the poverty rate and near-poverty rate in Vietnam. According to a 2020 survey conducted by the UNDP and UN Women in Viet Nam, the proportion of income-poor households in Vietnam increased dramatically from 11.3 per cent in December 2019 to 50.7 per cent in April 2020. The proportion of near-poor households increased from 3.8 per cent to 6.5 per cent across the same time period.[4] More importantly, the survey also highlighted that ethnic minority households, households with informal workers, and migrant families have been disproportionately affected by the pandemic. The survey estimates that ethnic minority households’ income in April and May 2020 dropped by 75 per cent and 64.3 per cent respectively compared to December 2019 income levels, while income loss for the Kinh-Hoa majority[5] was less at 69.7 per cent and 48 per cent respectively. Likewise, migrant households experienced income loss of 74.9 per cent and 56.8 per cent respectively, while non-migrant households’ incomes dropped 69.2 per cent and 47.5 per cent respectively.
Macroeconomic stability in 2020 was negatively affected by Covid-19 in 2020, although inflation remained low under 4 per cent. The budget deficit increased sharply (from 3.36 per cent of GDP in 2019[6] to 4.49 per cent of GDP in 2020[7]) due to an increase in government spending for pandemic-related financial support for citizens and businesses. Accordingly, debt indicators for 2020, namely public debt (as percentage of GDP), foreign debt (as percentage of GDP), government debt payments to total budget revenue, and foreign debt repayment (as percentage of total exports) all increased compared to the previous year (see Graph 2 below).
Covid-19 has affected all aspects of socio-economic development such as economic growth, trade activities, labour, employment, and income of workers. To mitigate this disruption, the Vietnamese government has implemented a series of timely and strong measures aimed firstly to limit the spread of the virus and then secondly to promote economic development. The measures have shown initial success at controlling the spread of the virus, with Vietnam having come close to completely halting local transmission.
Note: figures in 2020 are estimated by Government.
Source: Government’s report (2020) [8]
SOLUTIONS AND PROSPECTS FOR VIETNAM’S ECONOMY
Vietnam’s economy grew by 2.91 per cent in 2020, significantly below the target of 6.8 per cent set at the beginning of the year. However, this is nonetheless a very impressive result, given the current global economic slump. According to The Economist, Vietnam is among the 16th most successful emerging economies in the world, and has the potential to close the income gap with some developed countries during the Covid-19 pandemic.[9] This is due largely to Vietnam’s success in controlling the spread of the pandemic and mitigating its negative impacts. In addition, because of the pandemic, Vietnam is now more determined to transform its economy through innovation and digitalisation.
Given Vietnam’s strong economic fundamentals and in preparation for the all-important five-yearly 13th Party Congress that was held in early 2021, the Vietnamese government has paid particular attention to the twin goals of controlling the pandemic while promoting economic growth. On the economic front, the government has proposed various monetary, fiscal, and social security policies to help businesses and citizens tide over the most difficult period of the Covid-19 shock. Firstly, monetary measures include a credit policy package which aims to restructure debt and reduce interest rates for the total outstanding loans; secondly, a new loan package with a total committed limit of about VND 300,000 billion (US$13 billion) with a preferential interest rate of 1-2.5 per cent per year, much more favourable than the normal credit scheme of 4.5 per cent per year; thirdly, a fiscal package with a total value of VND 180,000 billion (US$7.8 billion) including deferral of tax and land rental payments for enterprises (extension of payment deadline to five months);[10] and fourthly, a social security package worth VND 62,000 billion (US$2.7 billion) for more than 20 million workers and disadvantaged citizens.
This provides financial support for a maximum of three months to workers who are unemployed or underemployed because of Covid-19; to employers who face difficulties in paying salary to workers; to individual business households which have ceased business operations; and to disadvantaged groups.[11] These measures are expected to remain in place for some time.
Although the impact of the abovementioned measures cannot be adequately assessed yet, the support package, especially the social security package, has already reached many disadvantaged groups such as poor households, near-poor households, and families recognised for their meritorious service to the country.[12]
On the healthcare front, the Vietnamese government has implemented strict and proactive measures to curb the spread of Covid-19 across the country and to quickly isolate cases when they occur.[13] Due to the government’s consistent implementation of these containment measures, the situation is now largely under control. If there are no further mass outbreaks and support packages and policies continue to stimulate the economy, the possibility of economic recovery is very high.
The shock from the Covid-19 pandemic is likely to pass, but the Vietnamese economy will still have to grapple with uncertainties and challenges that are expected to linger on. One key uncertainty is the new Biden administration’s policies towards the region in general, and its orientation towards Vietnam in particular. Will the US-China trade war escalate or cool with Biden at the helm, and what are the implications for Vietnam? What will the Biden administration’s trade and investment policy towards Vietnam be like? Will it follow up with additional trade sanctions after the US Treasury Department labelled Vietnam a currency manipulator in December 2020?[14] How will Vietnam respond if the Biden administration decides to take a tougher stance on human rights issues?
Challenges for Vietnam in the next few years will include problems that had persisted way before the pandemic but have yet to be resolved. These include the wanting quality of infrastructure, which ranks 77th amongst 141 economies; the lack of high-quality human resources, which ranks 93th,[15] and the slow pace of state-owned enterprise (SOE) reforms. Vietnam had targeted to equitize 127 SOEs between 2017-2020, but as of June 2020, however, only some 28 per cent of this target has been achieved.[16]
In general, the Covid-19 shock has had a negative impact on most enterprises across different industries. Although the government has introduced measures to support businesses, global and regional production networks and value chain supplies are still disrupted. Support packages by the government thus can only partially relieve the pain and loss of businesses and employees. Such difficulties will accumulate in the coming years as the government attempts to restore the economy and stimulate production, while coping with the unpredictable developments that will accompany the change of power in the United States. At the same time, it also has to tackle the abovementioned chronic problems to promote sustainable economic growth.
ISEAS Perspective 2021/41, 8 April 2021
ENDNOTES
[1] General Statistics Office (2021), Báo cáo tình hình kinh tế – xã hội Qúy IV và năm 2020 (Report on socio-economic situation of 4th Quarter and year 2020), 17 February, 2021, https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2020/12/baocao-tinh-hinh-kinh-te-xa-hoi-quy-iv-va-nam-2020/.
[2] General Statistics Office (2021).
[3] General Statistics Office (2020), Tọa đàm đánh giá tác động của đại dịch Covid-19 đến doanh nghiệp Việt Nam (Seminar on Assessment of Covid-19 impact on Vietnamese enterprises), 21 July 2020, https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2020/07/toa-dam-danh-gia-tac-dong-cua-dai-dich-covid-19-den-doanh-nghiep-viet-nam/.
[4] UNDP and UN Women in Viet Nam (2020), Covid-19 Socio-Economic Impact on Vulnerable Households and Enterprises in Viet Nam – A gender-sensitive assessment, p. 10.
[5] Kinh (Viet), Hoa (Chinese) are two major ethnic groups in Vietnam that tend to perform economically better than others.
[6] Anh Minh (2020), Ngân sách 2019 thâm hụt gần 8.7 tỷ USD (Budget deficit in 2019 was about US 8.7 billion), 15 May 2020, https://vnexpress.net/ngan-sach-2019-tham-hut-gan-8-7-ty-usd-4099709.html.
[7] Trinh Dung (2020), Dự ước thu, chi Ngân sách nhà nước năm 2020 đều giảm so với dự toán (Estimated revenue and expenditure of state budget for 2020 all are lower than forecast), 20 October 2020, https://nhandan.com.vn/tin-tuc-kinh-te/du-uoc-thu-chi-ngan-sach-nha-nuoc-nam-2020-deu-giam-so-voi-du-toan-621249/.
[8] Luong Bang (2020), Sức ép trả nợ công, những con số chỉ báo mới (Pressure of public debt payment and new forecasts), 20 October 2020, https://vietnamnet.vn/vn/kinh-doanh/tai-chinh/no-cong-nam-2021-chinh-phu-du-kien-vay-hon-579-nghin-ty-dong-681823.html.
[9] Thu Thu (2020), The Economist: Việt Nam lọt top 16 nền kinh tế mới nổi thành công nhất thế giới, nhiều triển vọng thu hẹp khoảng cách với các nước phát triển trong đại dịch Covid-19 (The Economist: Vietnam is in the top 16 most successful emerging economies in the world, with many prospects for narrowing the gap with developed countries during the Covid-19 pandemic), 19 August 2020, https://cafef.vn/the-economist-viet-nam-lot-top-16-nen-kinh-te-moi-noi-thanh-cong-nhat-the-gioi-nhieu-trien-vong-thu-hep-khoang-cach-voi-cac-nuoc-phat-trien-trong-dai-dich-covid-19-20200819051311544.chn.
[10] Nghị định số 41/2020/NĐ-CP của Chính phủ về Gia hạn thời hạn nộp thuế và tiền thuê đất, ban hành ngày 8/4/2020 (Decree No. 41/2020 / ND-CP of the Government on extension of deadline for tax and land rental payment, issued on 8 April 2020), https://thuvienphapluat.vn/van-ban/thue-phi-le-phi/Nghi-dinh-41-2020-ND-CP-gia-han-thoi-han-nop-thue-va-tien-thue-dat-438649.aspx.
[11] Nghị quyết số 42/NQ-CP của Chính phủ về Các biện pháp hỗ trợ người dân gặp khó khăn do đại dịch Covid-19, ban hành ngày 9/4/2020 (Resolution No. 42 / NQ-CP of the Government on measures to support people facing difficulties caused by the Covid-19 pandemic, issued on 9 April 2020), https://thuvienphapluat.vn/van-ban/Lao-dong-Tien-luong/Nghi-quyet-42-NQ-CP-2020-bien-phap-ho-tro-nguoi-dan-gap-kho-khan-do-Covid-19-439526.aspx.
[12] This refers to families who had members who fought and died or were wounded in past wars (such as the wars of resistance against the French and Americans, and the Chinese). Some of them come from families of revolutionary martyrs. So in difficult times, the government is expected to reward them by providing material support.
[13] When any Covid-19 case (so-called F0) is identified, the individual will be taken to a hospital for compulsory treatment, while all F1 (direct contact with F0) will be taken to quarantined camps for health tests, and all F2 (direct contact with F1) and F3 (direct contact with F2) are required to isolate at home for two weeks. These strict and proactive measures have been successful to curb the spread of Covid-19.
[14] Alan Rappeport, “Trump Administration Says Vietnam and Switzerland Manipulated Currency”, The New York Times, 16 December 2020, at https://www.nytimes.com/2020/12/16/us/politics/trump-vietnam-switzerland-currency-trade.html. In 2019, Trump accused Vietnam of being the single worst abuser on trade with the United States, worse than China.
[15] WEF (2019), The Global Competitiveness Report 2019, [http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf]
[16] Le Son (2020), Vì sao cổ phần hoá doanh nghiệp chậm? (Why Equitization of SOEs is Low?), Vietnam government news, 6 August 2020, at http://baochinhphu.vn/Tai-co-cau-doanh-nghiep/Vi-sao-co-phan-hoa-doanh-nghiep-cham/403328.vgp.
| 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). |
2021/34 “Upstream Dams Threaten the Economy and the Security of the Mekong Region” by Murray Hiebert
EXECUTIVE SUMMARY
- China’s 11 hydropower dams built on the upper Mekong River held back massive quantities of water over the last two years, causing crop failure and depleting fish catches, and threatening the livelihoods of the 60 million people living downstream: a) Recent storage of massive amounts of water behind these dams has starved Tonle Sap Lake of water and devastated Cambodia’s most fertile fish-spawning area; b) China’s upstream dams hold back water and silt which threaten the Mekong Delta, Vietnam’s most fertile rice-producing region with inundation by saltwater from the South China Sea.
- China has financed half of Laos’ 60 dams on Mekong tributaries and two more on the mainstream. This has helped push the landlocked country’s debt levels to about $17 billion in 2019, nearly equivalent to the country’s annual GDP. In 2020, difficulties servicing this debt caused the Lao government to turn over a giant chunk of its electricity distribution company to a Chinese state-owned power grid firm.
- Beijing has long pressed to send large cargo vessels down the Mekong deep into Lao and Thai territory. To make this work would require blowing up massive rocks in the river, which Thai environmentalists have objected to. Bangkok initially put China’s project proposal on hold, but later cancelled it out of concern that it would give Beijing too much strategic and economic influence deep into mainland Southeast Asia.
* Guest writer, Murray Hiebert, is the author of Under Beijing’s Shadow: Southeast Asia’s China Challenge, published in August 2020, from which this article is adapted. He is Senior Associate at the Center for Strategic and International Studies in Washington, DC.
INTRODUCTION
The drought that struck during the 2019 rainy season, when the Mekong River hit its lowest levels in half a century, ravaged the livelihoods of farmers and fishers living along the lower Mekong countries of Laos, Thailand, Cambodia and Vietnam. Initially, it was widely thought that the sharply reduced levels of water were primarily due to unusually low rainfall caused by an El Nino weather system.
Only in April 2020 did these nations learn the key cause of drought when a U.S. research company released satellite images that showed dams on the upper reaches of the Mekong in China holding back large quantities of water at a time when its southern neighbors were facing devastating shortages.[1] China had said that it was encountering low levels of rain itself when in fact it was blessed with higher-than-normal levels of water upstream along the 4,300-kilometre river.
China denied the findings of the Eyes on the Earth and seemingly did little, if anything, to release water from the reservoirs of its dams, resulting in a second devastating drought in the lower Mekong in 2020. This two-year drought, which resulted at times in the river’s water level being three meters lower than normal at the river gauge in Thailand nearest to China’s border, wreaked havoc on the livelihoods of the 60 million people living along or near the lower Mekong.
Beijing’s financing and constructing of dams in Laos have also had an economic impact. The debt burden of Laos’ state-owned utility Electricite du Laos (EDL) in 2020 reached about $8 billion, nearly 50 percent of Laos’ GDP.[2] The sharp decrease of government revenue in the wake of the Covid-19 pandemic made it more difficult to service the company’s debt, prompting Laos to spin off part of EDL into a new entity in which a Chinese power grid firm took a giant stake.[3] This marked the first known case in Southeast Asia in which a country fell into a “debt trap” with China and had to turn over a stake in a key company to service the country’s loans.
Since the Mekong is so vital to economic life in mainland Southeast Asia and western China, analysts have begun viewing the river as the possible next hot spot between Beijing and its southern neighbours, much like the South China Sea has become. This has prompted the United States to call out some of China’s actions and join Japan and Australia in providing various types of aid and capacity building to the lower Mekong nations.
THE ENVIRONMENTAL IMPACT
China has built 11 hydropower dams on its section of the world’s 12th longest river that have the combined capacity to store as much water as the Chesapeake Bay in the United States, or about 18 trillion gallons of water.[4] Nine others are on the drawing board. Chinese conglomerates are also in various stages of planning to finance and/or construct about half of 11 dams planned for the mainstream of the river in Laos and Cambodia. The dams in these two countries will have an even bigger impact than those in China because the Mekong in these countries provides roughly four-fifths of the water and sediment downstream.
The dams built or funded by China are creating apprehension downstream. They will not only impact the water flow, but also restrict the movement of fish and diminish the flow of sediment which farmers and fishers depend on along the lower Mekong. During the dry season, more than 40 percent of the water in the Mekong comes from melting glaciers and water runoff in China’s portion of the river which begins in the snow-covered mountains of Tibet.[5]
Water from China is vital to rice production in the downstream countries of Laos, Thailand, Cambodia and Vietnam, especially during times of limited rainfall. This is particularly true in southern Vietnam’s Mekong Delta, which grows half the country’s rice and nearly three quarters of its fruits and vegetables. Freshwater from China helps this low-lying region against invasion of saltwater from the South China Sea. Rice production in Thailand and Vietnam, two of the world’s largest exporters, fell sharply in 2019 and 2020.[6]
Sediment carried by the river, about half of which comes from China, has also long been critical for protecting the Mekong Delta against intrusion by the sea. But much of the silt is now blocked by the dams, which do not have effective sediment flushing systems. The quantity of suspended sediment dropped to 10 metric tons in 2009 from 60 metric tons in 2003 in Chiang Saen in northern Thailand[7] and is expected to block some 96 percent of all sediment if all the dams currently proposed are built.[8] The loss of sediment is also starving the banks along the river and the Mekong region of the nutrients needed for crop production, causing billions of dollars in losses.[9]
China’s dams also block fish migration between the upper and lower regions of the river, which hampers spawning and causes a sharp drop in fish stocks downstream. This decline of fish movement will cause losses to China’s southern neighbours of over $16 billion in the years until 2042.[10]
LAOS IN A “DEBT TRAP?”
Laos has built 60 hydropower dams on the Mekong’s tributaries and two on the mainstream to fire up the landlocked and mountainous nation’s economy. Vientiane is planning up to eight more on the mainstream despite complaints by Thailand and Vietnam about the environmental impact to their countries. Most of the Lao-produced electricity is exported to Thailand, where demand has dropped sharply in the wake of the pandemic.
China has financed and/or built about half the dams along the Mekong and its tributaries. The Export-Import Bank of China and China Development Bank have provided billions of dollars in loans for the dams in Laos, and companies such as Sinohydro Corporation and Power China Resources have constructed many of the barrages.
Vientiane’s plans for hydropower dams have created tensions with its neighbours downstream. Before building the $3.5 billion Xayaburi Dam, Laos’ first on the mainstream, the government in 2011 promised to consult with its neighbours under a process set up by the Mekong River Commission, an inter-government organisation designed to promote sustainable development and joint management of the river. But the next year, Laos signed a contract with a Thai firm and began construction, despite objections from Vietnam.[11]
A similar situation developed around the Don Sahong Dam near the Cambodian border. Laos had agreed with its neighbours to perform an impact study before starting construction, but two months later Vientiane announced that construction would begin. Thailand, Cambodia and Vietnam requested more time to complete the study, but Laos pushed ahead with construction.
A number of Lao plans for dams began facing strong opposition from civil society organisations and villagers in Thailand, which is purchasing much of the electricity Laos is producing. These groups protested the impact of the dams on the migration of fish and the flow of sediment downstream. The Thai government has deferred a decision to sign a power purchase agreement for the output of the planned Pak Beng Dam on realising that it had overestimated the nation’s electricity needs until 2036.[12]
Laos is determined to press ahead, even though its external debt – much of it related to loans from China for dams – is becoming unsustainable. Laos’ foreign obligations by 2019 had reached nearly $17 billion, slightly less than the country’s GDP, of which a little over $10 billion were public and publicly guaranteed debt. China accounted for nearly half of all Lao external debt.[13] The debt of EDL, which played a vital role in many of the hydropower projects, stood at roughly $8 billion, over 40 percent of GDP.[14]
In September 2020, Laos created a new company out of EDL, calling it EDL Transmission Company (EDL-T), which would be responsible for the country’s domestic electricity transmission grid. It then turned over a roughly 90 percent stake in the new company to a Chinese state-owned firm, China Southern Power Grid Co. Ltd. How much the firm paid for its stake has not been made public nor is it clear if the newly formed company will take on some of the Lao government debt. EDL officials insist that the transaction has not resulted in a loss of sovereignty because, they say, the Chinese firm is a professionally run utility company.[15]
The following month, EDL, still facing debt repayment pressures, sold roughly a quarter of its shares on the Lao Securities Exchange in EDL-Generation Public Company to a prominent Lao construction firm active in the energy sector.[16] The Lao government reportedly is considering selling a separate stake in the Nam Ngum 3 hydropower project to other investors, possibly including China Southern Power, a company from Thailand and another from Laos.[17]
FISH MIGRATION THREATENED
About half of Cambodia’s population makes its living farming on the floodplains created by the Mekong and its tributary the Tonle Sap, or fishing along the two rivers.[18] When the yearly monsoon rains begin around May massive quantities of water flow up the Tonle Sap and expand by roughly fivefold the dry-season size of Tonle Sap Lake. As the rains subside towards the end of the year, Tonle Sap River reverses course and drains the lake’s water back into the Mekong.
This annual cycle plays a critical role in the migration and spawning of fish, a process that has been severely impacted by the recent droughts and the holding back of water behind China’s upstream dams. Fishers along the Tonle Sap, the world’s largest inland source of fish which supplies around three-quarters of the country’s protein, reported that their catches in 2019 were down some 80 percent or more.[19]
China is also a major investor in and builder of dams in Cambodia. The Lower Sesan 2 Dam, in which a Chinese company holds a majority stake, is projected to have an outsized impact on the environment. A U.S. environment organisation that did a study of the dam for the Cambodian government concluded that it is “the most destructive dam in the Mekong River basin.”[20] The dam, inaugurated in 2018, is expected to block the migration of fish, on which millions depend for their livelihoods.
Nearly 80,000 people living above the Lower Sesan 2 dam are expected to lose access to migratory fish on which they rely for their livelihoods.[21] But a larger population will be hit by losses of protein and sources of income because the dam will block the movement of fish between the Sesan and Srepok tributaries of the Mekong and the Tonle Sap to spawn.[22]
A 2012 study by the U.S. National Academy of Sciences found that over a million tons of freshwater fish were caught each year in the floodplains of Cambodia and Vietnam. The authors estimated that the population of fish would drop by 9.3 percent due to the Lower Sesan 2 Dam. They found that the Mekong had some 900 species of fish, over 100 of which would be affected by the dam blocking their migration patterns.[23]
Another dam, the Sambor, which was designed by China Southern Power Grid Co., would be even more “devastating” to migratory fish, according to a 2017 study by the U.S. National Heritage Institute. The authors reported that it would create a barrier that would make it impossible for fish to move from Tonle Sap Lake to spawning grounds upstream. The dam would block 60 percent of the suspended sediments that provide the food needed to sustain fish, and as many as 80 long-range migratory fish species would be “endangered” by the dam.[24]
THAILAND LIMITS CHINA’S SECURITY INFLUENCE
Decades ago, after Thailand abandoned building hydropower dams at home under pressure from civil society, it began looking to Laos to fill the energy void. Thai companies gave the Lao credit to build dams and its construction firms helped design and build many of them. But Bangkok began withdrawing support for Lao dams after one collapsed in southern Laos. Under pressure from civil society, Thailand delayed signing an agreement to buy electricity from the planned Pak Beng Dam after realizing that officials had overestimated the country’s power needs, and because the costs of producing wind and solar power had dropped sharply.
Beijing has long pressed to send large cargo vessels carrying up to 500 tons of goods down the Mekong from southern China at least as far south as Luang Prabang in Laos. But that would require dynamiting some gigantic rocks and dredging the river near Chiang Saen, which Thai environmentalists have vigorously opposed because it would affect the ecology of the river and harm food security for people along the river. Thai officials put the project on hold in 2017 and three years later cancelled it totally.[25]
After drug dealers killed 13 sailors during an attack on two cargo vessels in the Thai section of the Mekong a decade ago, China has been sending armed Chinese police boats down the Mekong through Myanmar and Laos about once a month. These boats travel to the Thai section of the river where they are met by Thai patrol boats before returning to China.[26] Beijing has pressed Bangkok to allow the Chinese patrol boats to go further but the Thais have pushed back out of concern that this would allow China to extent its economic and strategic reach deep into mainland Southeast Asia.
DAMS IMPERIL VIETNAM’S FERTILE MEKONG DELTA
The Mekong Delta in southern Vietnam, where about 22 million people live, supports some of the world’s richest farming areas. The low-lying plain, roughly the size of Denmark was created by mountains of silt from the river, some of which came from the Himalayas. The delta produces three rice crops a year, which has turned Vietnam into a major rice exporter. But the delta is barely above sea level and is vulnerable to the incursion of saltwater.
Because of the delta’s unique features, it is in a very vulnerable situation. The dams that the Chinese, Lao and Cambodians are building upstream block water, hold back silt and obstruct the movement of fish. The downstream countries have traditionally gotten about 40 percent of their water from the Chinese section of the river during the dry season and 18 percent during the rainy season, but those percentages have been reduced sharply by the dams upstream.[27]
Beyond 2020, the sediment that reaches the Mekong Delta in Vietnam is estimated to be only about one-third of the level in 2007.[28] The dams also block fish migration and are expected to cause a drop in fisheries income in the countries south of China of up to $22.6 billion over 24 years, according to a 2018 study.[29]
CONCLUSION
The physical, ecological and economic future of the Mekong is under threat from upstream dams. For the Mekong to remain healthy and survive will require that China and its Southeast Asian neighbours find ways to share the river’s water, fish and silt. This will also ensure that the Mekong does not become a security flashpoint like the South China Sea has become.
Beijing can help ease the threat of drought downstream by providing more information about how much water it is storing behind its dams and agreeing to release more water during the rainy season. This water is needed for farming downstream, but also to save the Tonle Sap’s fishing industry, and keep the Mekong Delta from being submerged under saltwater.
The international community, including the United States and Japan, can help landlocked Laos figure out how to build its economic future without constructing more costly, environmentally damaging hydropower dams. If Laos looked to solar and wind farms, its Thai and Vietnamese neighbours would be more inclined to buy more electricity from it to help drive their economies.
ISEAS Perspective 2021/34, 22 March 2021.
ENDNOTES
[1] Kay Johnson, Chinese Dams Held Back Mekong Waters During Drought, Study Finds, Reuters, 13 April 2020, https://www.reuters.com/article/us-mekong-river/chinese-dams-held-back-mekong-waters-during-drought-study-finds-idUSKCN21V0U7.
[2] John Reed, Laos Faces Sovereign Default As Forex Reserves Dip Below $1 Billion, Financial Times, 3 September 2020, https://www.ft.com/content/dc3f5981-4fd9-4e3a-9824-5b9ddf70735e.
[3] Keith Zhao and Kay Johnson, Taking Power – Chinese Firm to Run Laos Electric Grid Amid Default Warnings, Reuters, 15 September 2020, https://www.reuters.com/article/china-laos/exclusive-taking-power-chinese-firm-to-run-laos-electric-grid-amid-default-warnings-idUSKBN25V15G.
[4] Brian Eyler, How China Turned Off the Tap on the Mekong River, Stimson Center, 13 April 2020, https://www.stimson.org/2020/new-evidence-how-china-turned-off-the-mekong-tap; Facts & Figures: Chesapeake Bay Program, https://www.chesapeake.net/discover/facts.
[5] Eyler, How China Turned Off the Tap on the Mekong River.
[6] Tomoya Onishi and Marimi Kishimoto, Rice Prices Hit 6-year High as Thailand and Vietnam Face Drought, NikkeiAsia, 31 March 2020, https://asia.nikkei.com/Business/Markets/Commodities/Rice-prices-hit-6-year-high-as-Thailand-and-Vietnam-face-drought.
[7] T. Piman and S. Manish, Case Study on Sediment in the Mekong River Basin: Current State and Future Trends, Stockholm Environment Institute, 4 November 2017, https://www.sei.org/publications/sediment-mekong-river.
[8] Mekong River Commission, The Council Study: The Study on Sustainable Management and Development of the Mekong River Including Impacts of Mainstream Hydropower Projects (Phnom Penh: Mekong River Commission, 2017), p. 7, https://mrmekong.org/assets/Publications/Council-Study/Council-study-Reports-discipline/180207-Macroeconomic-Assessment-Report-final-5-MG-2.pdf.
[9] Flood and Drought, Mekong River Commission, https://www.mrmekong.org/topics/floo-and-drought (accessed August 20, 2019).
[10] Mekong River Commission, The Council Study, p 7.
[11] MRC Vietnam Condemns Thai Company’s Contract to Build Xayaburi Dam, Thanh Nien News, 24 April 2012, http://www.thanhniennews.com/politics/mrc-vietnam-condemns-thai-companys-contract-to-build-xayaburi-dam-7641.html.
[12] Thailand Delays Decision on Power Purchase from Pak Beng Dam, Open Development Mekong, 13 March 2018, https://opendevelopmentmekong.net/news/thailand-delays-decision-on-power-purchase-from-pak-beng-dam.
[13] World Bank Group, Lao PDR Economic Monitor: Building a Resilient Health System, June 2020, http://pubdocs.worldbank.org/en/962271591369090988/Lao-Economic-Monitor-June-2020-final.pdf, p 26.
[14] Keith Barney and Kanya Souksakoun, Credit Crunch: Chinese Infrastructure Lending and Lao Sovereign Debt, Asia Pacific Policy Studies, 2021;1–20, https://onlinelibrary.wiley.com/doi/full/10.1002/app5.318.
[15] Zhao and Johnson, Taking Power – Chinese Firm to Run Laos Electric Grid Amid Default Warnings.
[16] Barney and Souksakoun, Credit Crunch: Chinese Infrastructure Lending and Lao Sovereign Debt, p 10.
[17] Barney and Souksakoun, Credit Crunch: Chinese Infrastructure Lending and Lao Sovereign Debt, p 11.
[18] Brian Eyler, Last Days of the Mighty Mekong, Zed Books, 2019, p 220.
[19] Shashank Bengali, ‘No Fish’: How Dams and Climate Change Are Choking Asia’s Great Lake, Los Angeles Times, 20 January 2020, https://www.latimes.com/world-nation/story/2020-01-20/how-climate-change-and-dams-threaten-one-of-the-worlds-great-lakes.
[20] National Heritage Institute, Cambodia (Sambor), December 2017, https://n-h-i.org/programs/restoring-natural-functions-in-developed-river-basins/mekong-river-basin/cambodia-sambor.
[21] Soth Koemseun, Lower Sesan II Dam Opens, Phnom Penh Post, 18 December 2018, https://www.phnompenhpost.com/national/lower-sesan-ii-dam-opens.
[22] Phak Seangly and Daphne Chen, Seasan Dam Goes Online, while PM Dismisses Environmental Concerns, 26 September 2017, https://www.phnompenhpost.com/national/sesan-dam-goes-online-while-pm-dismisses-environmental-concerns.
[23] Guy Ziv, Eric Baran, So Nam, Ignacio Rodriguez-Iturbe and Simon A. Levin, Trading-off Fish Biodiversity, Food Security, and Hydropower in the Mekong River Basin, Proceedings of the National Academy of Sciences of the United States of America, 10 April 2012, https://www.pnas.org/content/109/15/5609.
[24] National Heritage Institute, Cambodia (Sambor), December 2017.
[25] Andrew Stone, Chinese Firm Fails to Convince Locals Over Mekong Blasting, The Third Pole, 29 January 2019, https://www.thethirdpole.net/en/regional-cooperation/mekong-blasting.
[26] Michael Sullivan, China Reshapes The Vital Mekong River to Power Its Expansion, National Public Radio, 6 October 2018, https://www.npr.org/2018/10/06/639280566/china-reshapes-the-vital-mekong-river-to-power-its-expansion.
[27] Mekong: Climate Change Adaptation Strategy and Action Plan, Mekong River Commission, November 2017, p 19, http://mrcmekong.org/assets/Publications/MASAP-book-28-Aug 18.pdf; Peter T. Adamson, Ian D. Rutherford, Murray C. Pell and Iwona A. Conlan, The Hydrology of the Mekong River, The Mekong River, pp 53-76, 2009, https://www.researchgate.net/publication/279971517_The_Hydrology_of_the_Mekong_River.
[28] Short Technical Note: Mekong Sediment From the Mekong River Commission Study, p. 8, https://www.mrcmekong.org/assets/Publications/Mekong-sediment-from-the-MRC-Council-Study-Technical-notedocx.pdf.
[29] The Council Study: The Study on the Sustainable Management and Development of the Mekong River Basin, Including Impacts of Mainstream Hydropower Projects (Final Report), Mekong River Commission, December 2017, https://www.mrcmekong.org/assets/Publications/Council-Study/Macro-economic-assessment-report_Council-Study.pdf. see also https://www.researchgate.net/publication/279971517_The_Hydrology_of_the_Mekong_River.
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Japan’s Prime Minister Suga’s visit further accelerates Japan’s strategy of looking at Vietnam as an “attractive alternate destination for Japanese companies exiting China”, which has been in the works for some time. Here, Japan’s Prime Minister Yoshihide Suga (3rd L) and his Vietnamese counterpart Nguyen Xuan Phuc (2nd R) visit the late President Ho Chi Minh’s Stilt House in Hanoi on October 19, 2020. Photo: Minh HOANG, POOL, AFP.
EXECUTIVE SUMMARY
- Japan’s economic and security concerns are becoming increasingly intertwined with those of Southeast Asia.
- Tokyo sees Vietnam as the gateway for projecting its influence in Southeast Asia, especially after Vietnam’s reputation improved due to its promotion of ASEAN centrality during its 2020 term as ASEAN chair.
- In the Sino-Japan struggle for economic leadership in Southeast Asia, China currently has the upper hand. Japan can buttress its role in the region by strengthening economic ties with Vietnam and other ASEAN member states.
- Japan seeks to bolster its security and defence relationship with Vietnam, and does not rule out the possibility of Vietnam joining the Indo-Pacific ‘Quadrilateral’ arrangement.
- In turn, Vietnam can be expected to work more with Japan to further consolidate its omni-directional foreign policy, especially at a time when Japan is directing more of its attention to Southeast Asia.
* Guest writer, Huynh Tam Sang, is Lecturer at the Faculty of International Relations and Research Fellow of Center for International Studies, University of Social Sciences and Humanities in Ho Chi Minh City, Vietnam. He is also a member of the International Relations Studies Research Group, Ho Chi Minh City University of Foreign Languages and Information Technology.
INTRODUCTION
During his December 2013 visits to Vietnam, Thailand and Indonesia, former Japanese Prime Minister Shinzo Abe, said that strengthening Japan’s relations with the countries of ASEAN is “indispensable for the peace and prosperity of the region while also being in Japan’s national interests”.[1] Seven years later, Suga’s overseas debut in Vietnam and Indonesia in October 2020 as prime minister reiterated Japan’s ambition to strengthen ties with Southeast Asia in general and with Vietnam in particular.
Even before Covid-19 struck, Japan had been striving to lessen its economic dependence on China. The pandemic accelerated this process with Japan enhancing economic cooperation with Vietnam and diversifying its supply chains there.[2] This should bolster Japan’s economic presence in Vietnam and facilitate Tokyo’s deeper economic engagement with Southeast Asia. At the same time, Japan is also keen to strengthen defence ties with Vietnam.
On its part, Vietnam is eager to boost ties with Japan in a reaffirmation of its omni-directional foreign policy. To some extent, it is also concerned with the rising tensions between the United States and China, especially the impact on smaller countries such as Vietnam. In addition, Japan’s and Vietnam’s territorial and maritime disputes with China and their complex interactions with Beijing have contributed significantly to rising anxiety in Tokyo and Hanoi about living “in a new Sino-centric order”.[3]
JAPAN FORGING ECONOMIC TIES WITH VIETNAM
Japan has been strengthening its economic ties with Vietnam over the years. In fact, it was the first G7 country to recognise Vietnam’s market economy status in 2011. The Vietnam-Japan Economic Partnership Agreement (VJEPA) signed in December 2008 (and which came into effect in October 2009) provides a framework to promote trade and investment between the two countries.[4] The ASEAN-Japan Comprehensive Economic Partnership (AJCEP) between Japan and the five ASEAN members (Laos, Myanmar, Singapore, Thailand, and Vietnam) implemented in December 2008 and amended in August 2020 further expands the areas of cooperation between Japan and ASEAN.[5] These two frameworks created favorable conditions for forging Vietnam-Japan’s economic ties.
Apart from the above institutional arrangements, Japan and Vietnam have benefitted from the complementary and non-competitive structure of their two economies.[6] Among the 136 nations and territories investing in Vietnam, Japan is the biggest official development assistance (ODA) provider, at nearly US$24 billion in 2019; the second-biggest investor with US$1.73 billion in the first three quarters of 2020; and the fourth largest commercial partner with US$28.6 billion in two-way trade turnover between January and September 2020. As of September 2020, Japan had invested in about 4,600 FDI projects in Vietnam, with a total registered capital of about US$60 billion.[7]
Bilateral economic ties were given a boost during Suga’s visit. The two countries agreed to resume two-way commercial flights early and implement a “business track” that would allow short-term business travels of executives and workers without a mandatory 14-day quarantine.[8] Suga further expressed Japan’s support for Vietnam’s effort to develop an e-government system,[9] reaffirming Japan’s earlier offer in January 2020 to share its experience and provide information technology equipment worth 500 million yen in ODA to develop such a system.[10]
Suga’s visit further accelerates Japan’s strategy of looking at Vietnam as an “attractive alternate destination for Japanese companies exiting China”, which has been in the works for some time.[11] Amid the economic turmoil caused by Covid-19, Japan had earlier earmarked 23.5 billion yen as a stimulus package for its companies seeking to shift production to Southeast Asian countries.[12] Due to its effective containment of Covid-19,[13] cheap labour and stable politics, Vietnam has emerged as one of the biggest beneficiaries of the US-China trade war, especially as businesses look to relocate their operations.[14] In his meeting with Suga, Vietnamese Prime Minister Nguyen Xuan Phuc expressed Vietnam’s readiness to support Japanese investments, with a plan to accommodate its real estate and human resource needs.[15]
In a 2019 online survey, conducted by NNA Japan Co., Japanese firms valued Vietnam as the most preferred destination in Asia to invest in 2020 due to its potential, such as “a growing market and large supply of skilled, low-cost labor”, and its proximity to China.[16] According to another 2019 survey by Japan External Trade Organisation on Japanese companies investing in Asia and Oceania, 63.9 percent of Japanese enterprises doing business in Vietnam are committed to augmenting their businesses in the next one to two years, the highest rate in ASEAN and the third in the Asia-Oceania region.[17]
Vietnam’s GDP growth was estimated at 2.12% for the first 9-month period of 2020, “the lowest 9-month growth rate in the past ten years” due to the pandemic.[18] This growth rate is still commendable since most other ASEAN countries are grappling with negative growth. Japanese firms faring pretty well or being less hurt from Covid-19 could consider pumping more capital into Vietnam to capitalise on the country’s relatively strong economic fundamentals.[19] During Suga’s visit to Vietnam, Tokyo Gas Co., Marubeni Corp. and PetroVietnam Power Corp. signed two memoranda of understanding (MoU) to develop gas-fired power projects in Quang Ninh Province and Can Tho City.[20] The first MOU by Tokyo Gas Co., Marubeni Corp. and PetroVietnam Power Corp. involves building a US$1.9-billion-plant for imported liquefied natural gas and is scheduled for commercial operation in 2026-2027. The second MOU involves Marubeni building a US$1.3billion gas-fired power plant, which is expected to be completed in the fourth quarter of 2021 and be ready for trading operations in December 2025.[21] These two plants, when ready, would help augment Vietnam’s increasing energy needs and to some extent make up for Hanoi’s current “declining gas production and offshore exploration challenges in the South China Sea amid territorial disagreements with Beijing”.[22]
Once the biggest foreign investor in Vietnam (in 2018), Japan sank to fourth place in the first nine months of 2020, overtaken by Singapore, South Korea and China, respectively.[23] The slow decision-making process of Japanese executives accounted for the delay in the Japanese companies’ outreach to Vietnam. Japan’s fall behind more “agile rivals” such a South Korea and China has been due to the phenomenon of local Japanese representative offices having minimal authority in making big decisions, and the travel restrictions in place as a result of Covid-19 slowing down decision-making further.[24] A possible solution to expedite Japanese investment into Vietnam is for the Japanese government to provide more effective support.[25] On their part, Japanese companies must speed up its decision-making processes to seize the opportunities that Suga’s visit underscore.
On Vietnam’s part, it needs to proactively come up with favourable policies, notably in the fields of infrastructure and human resources, to attract relevant investments to help upgrade and restructure its economy.[26] Currently, Vietnam relies heavily on overseas materials, as its industry mainly deals with processing and assembly processes. Its local enterprises are eager for “advanced governance experience and technologies of foreign partners from developed nations” to raise the quality of its exports.[27] Vietnam can do more to capture Japanese FDI shifting out from China. Such inflows can provide Vietnam with modern technology and technique to elevate the level of its economic development.
AGAINST THE BACKDROP OF CHINA’S RISE
Since 2012, the Japan-Vietnam defence and security relationship has improved due to China’s increased belligerence in the East and South China Seas. A shared concern on China’s territorial ambitions has prompted Vietnam to adopt a soft balancing strategy against China, with Japan emerging as one of its “best and most powerful friends in Asia”.[28] Meanwhile, Japan has embarked on a “more self-reliant course in defense and diplomacy”[29] by promoting a more vigorous outreach to expand its strategic networks with Southeast Asian countries, with Vietnam as an anchor.
In August 2013, Vietnam and Japan held their second Defence Policy Dialogue in Tokyo,[30] which was much more significant than the first one in 2012 since it led to both sides agreeing to hold their vice-ministerial level meeting on an annual basis.[31] At the same meeting, the two countries underscored the importance of international law, specifically the United Nations Convention on the Law of the Sea (UNCLOS), in resolving “disputes and differences on sea and island sovereignty issues” and reached an agreement on mutual support regarding marine research and capacity building.[32] Shinzo Abe had identified in January 2013 that “ensuring that the seas, which are the most vital commons to us all, are governed by laws and rules, not by might” as one of the five key principles of Japan’s diplomacy.[33]
There was also closer navy-to-navy cooperation. In July 2013, for the first time, the Kojima, a training vessel from the Japanese Coast Guard (JCG), docked at Tien Sa Port of Da Nang for a five-day visit.[34] Though Vietnam and Japan’s coast guards have maintained a cooperative relationship since 2000, the JCG visit to Da Nang was crucial since it occurred after Japan’s 2012 nationalisation of the Senkaku Islands in the East China Sea (which significantly strained Sino-Japanese relations). Since then, Japan has stepped up naval ship visits to Vietnam.[35]
In 2014, Japan transferred six used patrol vessels to Vietnam worth US$5 million, nearly two weeks after the oil rig standoff between Vietnam and China in the Paracel Islands. Given Japan’s own disputes with China over the Senkaku Islands, Japan’s offer was equivalent to an “alignment” of sorts with Vietnam.[36] In September 2015, Vietnam and Japan signed a separate deal, laying a foundation for Tokyo to sell more naval vessels to Vietnam in the future.[37]
Both countries further strengthened their defence and security ties with a deal worth $350 million in June 2017 to upgrade Vietnam’s coast guard vessels and patrol capabilities. With a shared “deep concern over the complex developments” involving Beijing in the South China Sea, Abe and his Vietnamese counterpart Nguyen Xuan Phuc affirmed then that Tokyo’s maritime material and technology transfer to Hanoi was designed to strengthen “a free and open international order based on the rule of law”.[38]
In September 2018, the docking of Japan’s Maritime Self-Defense Force submarine Kuroshio at Cam Ranh International Port while carrying out its first submarine drill in the South China Sea was significant for a number of reasons.[39] First, Japan’s first submarine visit to Vietnam indicated Tokyo’s intention for firmer defence cooperation with Hanoi. Second, it portrayed a sort of informal security alignment between the two like-minded states, with Vietnam viewing Japan as a strategic partner in its “omnidirectional foreign policy”, and Japan viewing Hanoi as a “key node in its greater engagement of Southeast Asia and as part of its own Indo-Pacific strategy”.[40]
In October 2019, the Japanese Defence Minister Takeshi Iwaya and his Vietnamese counterpart, Ngo Xuan Lich, signed another “defence cooperation and exchange” memorandum that “prescribed regular vice-ministerial level talks” and facilitated more Japanese ports-of-call in Vietnam.[41] In March 2020, Japan agreed to transfer military shipbuilding technology to Vietnam, continue high-level defence contacts, and strengthen ties between the Vietnamese Army and Japan’s Ground Self-Defense Force.[42]
In July 2020, the Japan International Cooperation Agency inked a loan agreement with the Vietnamese government to provide Vietnam with six coast guard patrol boats worth $345 million.[43] The project was “the first maritime patrol ship deal” between Tokyo and Hanoi,[44] pledged by Abe in 2016,[45] and will “provide the Vietnam Coast Guard with financing to procure vessels, supporting an improvement in maritime rescue operations and maritime law enforcement”.[46]
During his October 2020 visit, Suga went further to promise in principle to transfer defence gear and technology to Vietnam, including patrol planes and radar.[47] Suga described this as a “big step in the field of security for both countries”,[48] especially in improving Vietnam’s surveillance capabilities. This also benefits Japan. Since its embargo on arms exports[49] was lifted in 2014,[50] it has been seeking to promote its indigenous military weaponry and naval assets production to overseas markets due to its small domestic market,[51] a thrust clearly stated in its 2020 Defense White Paper.[52]
Seeking to identify with Vietnam’s concerns about Chinese behaviour,[53] Suga said in his remarks at the Vietnam-Japan University[54] that “Japan is strongly opposed to any actions that escalate tensions in the South China Sea” and that Japan has been “consistently supporting the preservation of the rule of law in the seas”.[55] Suga echoed the position adopted by Abe in his 2013 Vietnam visit, who had similarly stressed that both countries “would oppose changing the status quo with force in the South China Sea and that the rule of law, including related international laws, was essential”.[56] However, Suga apparently went further by stressing Japan’s opposition to actions that “escalate tensions” in the regional waters. His criticism of against-the-law actions was regarded as a “veiled attack” against China.[57] Even though China was not specifically mentioned, it was clear that Beijing was the “elephant in the room” and that Vietnam is “crucial to achieving Japan’s vision for the Free and Open Indo-Pacific (FOIP) initiative”.[58]
VIETNAM AS A POTENTIAL QUAD-PLUS MEMBER?
Apart from Vietnam being regarded as the “cornerstone” of Japan’s efforts to realise a Free and Open Indo-Pacific,[59] there are indications that Japan is open to the idea of Vietnam being part of an expanded Quadrilateral grouping beyond the original four of Australia, India, Japan and the United States.
In response to a media query on whether the Quad should include other members, the Japanese Minister for Foreign Affairs Motegi Toshimitsu said in October 2020 that Japan’s FOIP framework allows “participation by all countries that share basic values such as freedom, democracy, the rule of law, and freedom of navigation”, while adding that the ASEAN Outlook on the Indo-Pacific (AOIP) appears to share the same values and concepts.[60] In other words, Japan seems open to the participation of countries such as Vietnam as long as they subscribe to certain basic values and shared rules.
The United States seems to share Japan’s thinking as well. Just before the second Quad ministerial-level meeting in Tokyo in October 2020 (less than two weeks before Suga’s Vietnam visit), then US Secretary of State Mike Pompeo discussed the possibility of institutionalising the Quad network. Once this was done, Pompeo suggested that other countries could become part of this network at “the appropriate time”.
Given Vietnam’s strategic importance in the American efforts to counter China, as evinced by the visits of Pompeo and US National Security Adviser Robert O’Brien to the country in October and November 2020 respectively, it is very likely that the United States will seek Vietnam’s involvement should a Quad-Plus arrangement materialise.
On Vietnam’s part, there is a new-found sense of confidence given the leadership’s commendable efforts in containing the spread of Covid-19 and maintaining economic growth despite the global slowdown.[61] Hanoi appears to welcome more engagement with the United States and Japan, amid growing concerns over China’s assertiveness in the region. In particular, Vietnam stated in its 2019 Defense White Paper that it is “ready to participate in security and defense cooperation mechanisms suitable to its capabilities and interests, including security and defense mechanisms in the Indo-Pacific region”.[62] Vietnam seems to be dangling the possibility of joining a regional security framework to increase its leverage against China.
However, Vietnam has refrained from committing to any specific grouping as it is not in Hanoi’s interests to be seen as ganging up with other countries against China. In the same 2019 Defense White Paper, Vietnam reaffirmed its policy of not entering into any military alliance, avoiding any alliances with other countries to counter another country, and barring foreign military bases in Vietnam.[63] While trying to avoid antagonising China, Vietnam is conveying an implicit message that it may be compelled to embrace a Quad-Plus framework if Chinese actions were to leave Hanoi with little maneuvering space.
CONCLUSION
Suga has largely followed in the footsteps of his predecessor Shinzo Abe to strengthen ties with Southeast Asia, with particular attention on Vietnam. This desire to forge closer and deeper ties with Vietnam is likely to be hastened by broader geostrategic trends, especially the US-China competition. The diversification of Japanese supply chains from China to Southeast Asia would also pave the way for closer economic cooperation between Japan and Vietnam.[64] This will help Japan consolidate and enhance its defence and security ties with Vietnam, although both countries have been careful not to position these moves as being directed against any third country.
ISEAS Perspective 2021/31, 16 March 2021.
ENDNOTES
[1] Prime Minister of Japan and His Cabinet, “Policy Speech by Prime Minister Shinzo Abe to the 183rd Session of the Diet,” 28 January 2013, https://japan.kantei.go.jp/96_abe/statement/201301/28syosin_e.html
[2] Hau Dinh and Mari Yamaguchi, “Japan, Vietnam agree to boost defense ties, resume flights,” AP News, 19 October 2020, https://apnews.com/article/global-trade-yoshihide-suga-south-china-sea-hanoi-asia-0eaf782e0b27aab73cad46d6cb353e37
[3] Hanh Nguyen, “Post-Abe, Vietnam-Japan Relations Have Nowhere to Go But Up,” The Diplomat, 11 September 2020, https://thediplomat.com/2020/09/post-abe-vietnam-japan-relations-have-nowhere-to-go-but-up/
[4] See “Vietnam-Japan Economic Partnership Agreement (VJEPA),” Vietnam Chamber of Commerce and Industry (VCCI), 2 December 2015, https://wtocenter.vn/chuyen-de/12772-full-text-of-vietnam-japan-economic-partnership-agreement-vjepa
[5] See Trinh Nguyen, “Protocol Amending AJCEP Comes Into Effect: What It Means for Investors in Vietnam,” Vietnam Briefing, 17 August 2020, https://www.vietnam-briefing.com/news/protocol-amending-ajcep-in-effect-what-it-means-for-investors-vietnam.html/
[6] Japan is Vietnam’s large importer of seafood, textiles and garments, leather and footwear, and processed foods, while Vietnam benefits from Japan’s machinery, equipment and materials for production. Nguyen Hoa, “Vietnam eyes Japan market potential for its exports,” Vietnam Economic News, 15 March 2018, http://ven.vn/vietnam-eyes-japan-market-potential-for-its-exports-31269.html
[7] Viet Anh, “New Japanese PM Suga to arrive in Vietnam Sunday,” VN Express, 16 October 2020, https://e.vnexpress.net/news/news/new-japanese-pm-suga-to-arrive-in-vietnam-sunday-4177847.html
[8] Việt Nam News, “VN, Japan agree on quarantine-free procedures for short-term entries,” 21 October 2020, https://vietnamnews.vn/politics-laws/803710/vn-japan-agree-on-quarantine-free-procedures-for-short-term-entries.html
[9] Ngoc Thuy, “Vietnam, Japan to boost cooperation in innovation,” Hanoi Times, 20 October 2020, http://hanoitimes.vn/vietnam-japan-to-boost-cooperation-in-innovation-314564.html
[10] Nippon, “Japan, Vietnam Agree to Boost 5G Cooperation, 9 January 2020, https://www.nippon.com/en/news/yjj2020010901250/japan-vietnam-agree-to-boost-5g-cooperation.html
[11] Jagannath Panda, “[Asia’s Next Page] Evolving Focus: Japan Sees Vietnam’s Role in a Free and Open Indo-Pacific,” Japan Forward, 26 October 2020, https://japan-forward.com/asias-next-page-evolving-focus-japan-sees-vietnams-role-in-a-free-and-open-indo-pacific/
[12] Isabel Reynolds and Emi Urabe, “Japan to Fund Firms to Shift Production Out of China,” Bloomberg, 8 April 2020, https://www.bloomberg.com/news/articles/2020-04-08/japan-to-fund-firms-to-shift-production-out-of-china
[13] Era Dabla-Norris, Anne-Marie Gulde-Wolf, and Francois Painchaud, “Vietnam’s Success in Containing COVID-19 Offers Roadmap for Other Developing Countries,” International Monetary Fund, 29 June 2020, https://www.imf.org/en/News/Articles/2020/06/29/na062920-vietnams-success-in-containing-covid19-offers-roadmap-for-other-developing-countries
[14] Charlotte Gifford, “Top 5 countries poised to become the world’s next manufacturing hub,” World Finance, 21 September 2020, https://www.worldfinance.com/home/top-5/top-5-countries-poised-to-become-the-worlds-next-manufacturing-hub
[15] Kyodo News, “Japan, Vietnam leaders affirm defense, economic cooperation,” 19 October 2020, https://english.kyodonews.net/news/2020/10/f8536e95c87d-update2-japan-vietnam-leaders-affirm-cooperation-in-s-china-sea.html
[16] NNA Business News, “Vietnam most promising Asian investment destination in 2020: survey,” 9 January 2020, https://english.nna.jp/articles/3703
[17] Japan External Trade Organization, “2019 JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania,” 21 November 2019, https://www.jetro.go.jp/ext_images/en/reports/survey/pdf/rp_firms_asia_oceania2019.pdf
[18] Ngoc Thuy, “IMF trims Vietnam GDP growth forecast to 1.6% in 2020,” Hanoi Times, 14 October 2020, http://hanoitimes.vn/imf-trims-vietnam-gdp-growth-forecast-to-16-in-2020-314508.html
[19] Tomoya Onishi, “Japan and Vietnam agree to accelerate business reopenings,” Nikkei Asia, 18 October 2020, https://asia.nikkei.com/Politics/International-relations/Japan-and-Vietnam-agree-to-accelerate-business-reopenings
[20] Michael Marray, “Japanese companies sign up for Vietnam gas-fired power projects,” The Asset, 28 October 2020, https://www.theasset.com/article/42031/japanese-companies-sign-up-for-vietnam-gas-fired-power-projects
[21] Chí Hiếu, “Nhiệt điện Ô Môn 2 sẽ có giá bán điện lên tới hơn 2.500 đồng/kWh?”, Thanh Nien, 2 November 2020, https://thanhnien.vn/tai-chinh-kinh-doanh/nhiet-dien-o-mon-2-se-co-gia-ban-dien-len-toi-hon-2500-dongkwh-1299250.html
[22] Eric Yep and Vietnam Newsdesk, “Analysis: Vietnam’s gas-fired power projects see flurry of interest from US LNG exporters,” S&P Global , 27 August 2020, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/082720-analysis-vietnams-gas-fired-power-projects-see-flurry-of-interest-from-us-lng-exporters
[23] Cục đầu tư nước ngoài, “Tình hình Đầu tư nước ngoài 9 tháng năm 2020,” 28 October 2020, https://dautunuocngoai.gov.vn/tinbai/6387/Tinh-hinh-Dau-tu-nuoc-ngoai-9-thang-nam-2020
[24] Tomoya Onishi, “Japan’s investment in Vietnam plummets while Suga seeks closer ties,” Nikkei Asia , 22 October 2020, https://asia.nikkei.com/Business/Business-trends/Japan-s-investment-in-Vietnam-plummets-while-Suga-seeks-closer-ties
[25] The Japanese government would do well to conduct regular dialogues with Japanese businesses and key stakeholders to listen to their opinions and identify the difficulties facing their current economic operations in Vietnam. Recommendations from these parties would provide a good basis for the government to devise initiatives and solutions, to improve the administrative procedures and policy-making process, so as to boost Japanese business activities in Vietnam during this hardship.
[26] Trần Văn Thọ, “Một Đông Du mới,” VN Express , 21 October 2020, https://vnexpress.net/mot-dong-du-moi-4178892.html
[27 Vietnam Plus, “Processing – major contributor to Vietnam’s economy,” 24 December 2018, https://en.vietnamplus.vn/processing-major-contributor-to-vietnams-economy/144083.vnp
[28] Nguyen Manh Hung, “Shared concerns about China bring Vietnam and Japan closer,” East Asia Forum , 2 June 2016, https://www.eastasiaforum.org/2016/06/02/shared-concerns-about-china-bring-vietnam-and-japan-closer/
[29] Urs Schoetti, “Japan’s new outreach in Asia,” Geopolitical Intelligence Services , 18 January 2019, https://www.gisreportsonline.com/japans-new-outreach-in-asia,defense,2774.html
[30] The first Defense Policy Dialogue between Japan and Vietnam at deputy ministerial level was held in 2012. Both sides agreed to a wide-ranging MOU on defense cooperation, including “defense exchanges at ministerial, chief of staff and service chief level; naval goodwill visits; annual defense policy dialogue at the deputy defense minister level; cooperation in military aviation and air defense; and personnel training including scholarships for defense personnel to study and train in Japan”. Quang Minh, “Infographics: Highlights of Viet Nam-Japan relations,” Online Newspaper of the Government of Vietnam , 21 October 2019, http://news.chinhphu.vn/Home/Infographics-Highlights-of-Viet-NamJapan-relations/201910/37786.vgp ; Carl Thayer, “Vietnam’s Extensive Strategic Partnership with Japan,” The Diplomat , 14 October 2014, https://thediplomat.com/2014/10/vietnams-extensive-strategic-partnership-with-japan/
[31] Bjørn Elias Mikalsen Grønning, “Japan’s security cooperation with the Philippines and Vietnam,” The Pacific Review , Vol. 31, No. 4, 2018, pp. 533-552.
[32] Nhân dân Online, “Vietnam, Japan hold second defence policy dialogue,” 10 August 2013, https://en.nhandan.org.vn/politics/item/1924602-vietnam-japan-hold-second-defence-policy-dialogue.html
[33] Prime Minister of Japan and His Cabinet, “The Bounty of the Open Seas: Five New Principles for Japanese Diplomacy,” 18 January 2013, http://japan.kantei.go.jp/96_abe/statement/201301/18speech_e.html
[34] Thanh Nien News, “Japanese training vessel arrives in Vietnam,” 30 July 2013, http://www.thanhniennews.com/society/japanese-training-vessel-arrives-in-vietnam-1704.html
[35] Notable examples of Japanese naval ship visits to Vietnam include: two guided-missile destroyers Ariake and Setogiri’s visit to Cam Ranh Bay in April 2016, submarine Kuroshio at Cam Ranh Port (Khanh Hoa province) in September 2018, minesweepers JS Bungo and JS Takashima at Tien Sa Port (Da Nang city) in December 2019. Prashanth Parameswaran, “Japanese Destroyers Visit Vietnam’s Cam Ranh Bay in Historic Move,” The Diplomat , 13 April 2016, https://thediplomat.com/2016/04/japanese-destroyers-visit-vietnams-cam-ranh-bay-in-historic-move/ ; Prashanth Parameswaran, “Why Japan’s first submarine visit to Vietnam matters,” The Diplomat , 19 September 2018, https://thediplomat.com/2018/09/why-japans-first-submarine-visit-to-vietnam-matters/; Vietnam Plus, “Japan Maritime Self-Defense Force’s minesweepers visit Da Nang,” 12 December 2019, https://en.vietnamplus.vn/japan-maritime-selfdefense-forces-minesweepers-visit-da-nang/165329.vnp
[36] BBC News, “Japan gives Vietnam six navy ships amid regional tension,” 1 August 2014, https://www.bbc.com/news/world-asia-28599397
[37] Tra Mi, “Japan Donates 2 More Patrol Boats to Vietnam Amid S. China Sea Tensions,” VOA News , 3 November 2015, https://www.voanews.com/east-asia/japan-donates-2-more-patrol-boats-vietnam-amid-s-china-sea-tensions
[38] Mari Yamaguchi, “Japan, Vietnam to Bolster Maritime Security Cooperation,” World Politics Review , 6 June 2017, https://www.worldpoliticsreview.com/articles/22373/japan-vietnam-to-bolster-maritime-security-cooperation
[39] “Japan carries out first submarine exercise in disputed South China Sea,” The Defense Post , 17 September 2018, https://www.thedefensepost.com/2018/09/17/japan-submarine-exercise-south-china-sea/
[40] Prasanth Parameswaran, “Why Japan’s first submarine visit to Vietnam matters,” The Japan Times , 21 September 2018, https://www.japantimes.co.jp/opinion/2018/09/21/commentary/japan-commentary/japans-first-submarine-visit-vietnam-matters/
[41] Ralph Jennings, “Japan, Vietnam Teaming up to Resist China Expansion,” VOA News , 9 May 2019, https://www.voanews.com/east-asia-pacific/japan-vietnam-teaming-resist-china-expansion
[42] Hoang Thuy, “Japan to transfer military shipbuilding technology to Vietnam,” VN Express , 3 March 2020, https://e.vnexpress.net/news/news/japan-to-transfer-military-shipbuilding-technology-to-vietnam-4063193.html
[43] According to Naval News , construction of the vessels will begin in 2021, with the delivery to the Vietnam Coast Guard (VCR) expected in October 2025. There has been no announcement regarding the class of vessels selected by the VCG, but “the Aso-class, a class of 79 meters patrol vessels in use by the Japan International Cooperation Agency” seems to be a probable model. Xavier Vavasseur, “Japan To Build Six Patrol Vessels For Vietnam’s Coast Guard,” Naval News , 8 August 2020, https://www.navalnews.com/naval-news/2020/08/japan-to-build-six-patrol-ships-for-vietnams-coast-guard/
[44] The Japan Times, “Japan and Vietnam ink first maritime patrol ship deal as South China Sea row heats up,” 11 August 2020, https://www.japantimes.co.jp/news/2020/08/11/national/japan-vietnam-patrol-ships-south-china-sea/
[45] Ankit Panda, “Japan Pledges 6 New Patrol Boats for Vietnam Coast Guard,” The Diplomat , 17 January 2017, https://thediplomat.com/2017/01/japan-pledges-6-new-patrol-boats-for-vietnam-coast-guard/
[46] Japan International Cooperation Agency, “Signing of Japanese ODA Loan Agreement with Viet Nam: Strengthening the maritime security and safety capability of the Vietnam Coast Guard,” 30 July 2020, https://www.jica.go.jp/english/news/press/2020/20200730_31_en.html
[47] Isabel Reynolds, “Vietnam lands defence deal with Japan amid China tension,” The Sydney Morning Herald , 19 October 2020, https://www.smh.com.au/world/asia/vietnam-lands-defence-deal-with-japan-amid-china-tension-20201019-p566kp.html
[48] However, the details for such a transfer remain to be worked out. Suga’s spokesman Yoshida Tomoyuki responded to reporters’ questions at a press conference in Hanoi on 19 October 2020 by saying: “Japan is ready to support Vietnam to strengthen its defense capacity,” and further clarified: “what technology to be transferred depends on Vietnam’s demand in the maritime sector, but Japan maintains the principle of ensuring that technology transfer complies with peaceful purposes and should not be shifted to a third country”. Tiền Phong, “Việt – Nhật đang đàm phán thoả thuận chuyển giao công nghệ quốc phòng,” 19 October 2020, https://www.tienphong.vn/the-gioi/viet-nhat-dang-dam-phan-thoa-thuan-chuyen-giao-cong-nghe-quoc-phong-1737600.tpo ; Người Lao động, “Người phát ngôn Thủ tướng Nhật Bản nói về hợp tác quốc phòng với Việt Nam,” 20 October 2020, https://nld.com.vn/thoi-su/nguoi-phat-ngon-thu-tuong-nhat-ban-noi-ve-hop-tac-quoc-phong-voi-viet-nam-20201020124153097.htm ; Khanh Vu, Kiyoshi Takenaka, “On Suga’s overseas debut, Japan, Vietnam agree broadly on defence transfer,” Reuters , 19 October 2020, https://uk.reuters.com/article/uk-japan-southeastasia-vietnam-defence/japan-vietnam-reach-broad-agreement-on-transfer-of-defence-gear-idUKKBN2740BZ
[49] See “Japan’s Policies on the Control of Arms Exports,” Ministry of Foreign Affairs of Japan , https://www.mofa.go.jp/policy/un/disarmament/policy/index.html
[50] Hiroyuki Sugai, “Japan’s future defense equipment policy,” Brookings , October 2016, https://www.brookings.edu/wp-content/uploads/2016/10/201610_japan_future_defense_hiroyuki_sugai.pdf
[51] See Gurjit Singh, “Japan’s Defence White Paper 2020: An enhanced role emerging?,” Observer Research Foundation , 27 July 2020, https://www.orfonline.org/expert-speak/japans-defence-white-paper-2020-an-enhanced-role-emerging/
[52] Defense Ministry, “Japanese Defense White paper 2020,” 14 July 2020, https://www.mod.go.jp/e/publ/w_paper/wp2020/DOJ2020_EN_Full.pdf
[53] China’s growing intimidating behaviour towards Vietnam in the South China Sea have heightened the “China threat” mentality, with a psychological spectrum ranging from dislike, vigilance, to aversion, among the Vietnamese population and abroad. Tran Cong Truc, “Vietnam-China Border Management, Cooperation And Struggle,” Vietnam Times , 10 August 2020, https://vietnamtimes.org.vn/vietnam-china-border-management-cooperation-and-struggle-23270.html
[54] The Vietnam-Japan University (VJU) was established in 2014 and became the 7th member university under the Vietnam National University (VNU). The total investment of VJU was US$365 million, comprising US$200 million ODA loan from the Japanese government, US$ 100 million sponsored by Japanese enterprises, and the remaining US$65 million from the Vietnamese government. In an attempt to become “a leading prestigious university in Asia by 2035,” VJU has adopted a pragmatic research university model with training programmes oriented towards providing human resources for sustainable development and adding “more values to Japanese investments in Vietnam”. VJU, while considered to be a symbol of the “comprehensive strategic partnership” between Vietnam and Japan, is also expected to “become a hub in attracting Japanese companies who wish to deploy or outsource R&D activities in Vietnam”. By visiting and speaking at VJU, Suga sought to promote more robust Japan-ASEAN ties. On Suga’s visit to VJU, VNU President Nguyen Kim Son said: “The Japanese Prime Minister’s visit to VNU VJU today shows his special attention to students, young people and intellectuals – the key factors to the Japanese miracle and also a driving force to create a breakthrough in the future strategic relationship between our two nations”. “Japanese Prime Minister Suga Yoshihide has a meeting with students of VNU Vietnam – Japan University,” Vietnam National University , 29 October 2020, http://www.vnu.edu.vn/ttsk/?C2422/N27112/Japanese-Prime-Minister-Suga-Yoshihide-has-a-meeting-with-students-of-VNU-Vietnam—Japan-University.htm ; “History of the Vietnam-Japan University,” Vietnam Japan University , http://vju.ac.vn/about-us/su-kien-quan-trong-ste5.html ; “Vietnam-Japan University,” Devex , https://www.devex.com/organizations/vietnam-japan-university-vju-143938 ; Đình Nam, “Động thổ xây dựng Đại học Việt-Nhật,” Báo điện tử Chính phủ , December 20, 2014, http://baochinhphu.vn/Tin-noi-bat/Dong-tho-xay-dung-Dai-hoc-VietNhat/216340.vgp
[55] “Building together the future of Indo-Pacific: Speech by the Prime Minister at the Vietnam-Japan University,” Cabinet Public Relations Office , 19 October 2020, https://japan.kantei.go.jp/99_suga/statement/202010/_00002.html
[56] “Prime Minister Shinzo Abe’s Visit to Viet Nam (Overview),” Cabinet Public Relations Office , 17 January 2013, https://www.mofa.go.jp/region/asia-paci/pmv_1301/vietnam.html
[57] The Jakarta Post, “Southeast Asia first,” 20 October 2020, https://www.thejakartapost.com/academia/2020/10/20/southeast-asia-first.html
[58] The Japan Times, “Suga in Vietnam: Talking about China without naming it,” 20 October 2020, https://www.japantimes.co.jp/opinion/2020/10/20/commentary/japan-commentary/yoshihide-suga-vietnam-china/
[59] The Japan Times, “Suga and Vietnamese PM meet, with focus on economic and defense cooperation,” 19 October 2020, https://www.japantimes.co.jp/news/2020/10/19/national/politics-diplomacy/vietnam-japan-yoshihide-suga/
[60] Ministry of Foreign Affairs of Japan, “Press Conference by Foreign Minister MOTEGI Toshimitsu,” 6 October 2020, https://www.mofa.go.jp/press/kaiken/kaiken4e_000852.html
[61] According to Australia-based think tank Lowy Institute, Vietnam’s comprehensive power ranked 12th out of 26 countries and territories in the Asia-Pacific region. The country’s uptick on the 2020 power index has been attributed to its diplomatic influence, with its reputation strengthened by the proper handling of Covid-19, improvement in defence networks, economic capability, cultural influence, and future resources. Vietnam was listed in the group of “biggest gains” (with Australia and Taiwan) and praised as “a middle power in Asia”. “Vietnam,” Lowy Institute Asia Power Index 2020 Edition , https://power.lowyinstitute.org/countries/vietnam/
[62] Ministry of National Defence, 2019 Viet Nam National Defence , National Publishing House, 2019, p. 29.
[63] Vietnam’s “four-nos” defence policy includes the traditional three-nos, i.e. no military alliance, no affiliation with any country to counter another, and no foreign military base in Vietnam. It added a fourth of “no force or threatening to use force in international relations.” Linh Pham, “Vietnam releases defense white paper, reaffirming no military alliance,” Hanoi Times , 26 November 2019, http://hanoitimes.vn/vietnam-releases-defense-white-paper-reaffirming-no-military-alliance-300279.html
[64] Daishi Abe, “Japan promises to diversify supply chains across ASEAN,” Nikkei Asia , 20 October 2020, https://asia.nikkei.com/Politics/International-relations/Japan-promises-to-diversify-supply-chains-across-ASEAN
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Vietnam now boasts the highest installed capacity of solar power in Southeast Asia, generating 16,500MW at the end of 2020. This photograph taken on April 23, 2019, shows solar panel installations and a wind turbine at the Phu Lac wind farm in southern Vietnam’s Binh Thuan province. Photo: Manan VATSYAYANA, AFP.
EXECUTIVE SUMMARY
- Vietnam now boasts the highest installed capacity of solar power in Southeast Asia, generating 16,500MW at the end of 2020.
- Generous feed-in tariffs are a key proximate driver towards this achievement.
- Supporting policies include income-tax and land-lease payment exemptions for utility-scale investors.
- The government’s commitment to boosting energy supply and strong public demand for improved air quality have been important underlying drivers in this direction.
- Vietnam provides relevant lessons for other ASEAN member states to realise their significant solar power potential.
* Thang Nam Do is Research Fellow at the Grand Challenge Program on Zero Carbon Energy for Asia Pacific, Australian National University, Canberra. His research interest lies in renewable energy and environmental policies in Southeast Asia. Paul J. Burke is Associate Professor at the Crawford School of Public Policy, Australian National University. His research focuses on the economics of energy, transport and the environment.
INTRODUCTION
Vietnam has recently seen a remarkable solar photovoltaic (PV) boom, the first stage of a major and rapid energy transition in the country. The country’s solar PV capacity increased from only 86 MW in 2018 to 4,750 MW in 2019 (Figure 1). With this, Vietnam passed Thailand to have the largest installed capacity for solar power generation among members of the Association of Southeast Asian Nations (ASEAN) (Do et al., 2020). By the end of 2020, its installed solar PV capacity reached about 16,500MW, around one quarter of the country’s installed power capacity (Nhan Dan, 2021). This far surpasses its 2020 target of 850 MW (Government of Vietnam, 2016). Solar PV systems generated about 10.6 TWh of electricity in 2020, accounting for about 4% of all generation. Rooftop solar contributed about 48% of Vietnam’s total solar capacity by the end of 2020.
ASEAN member states (AMS) have set an ambitious target of a 23% renewable energy share in the total primary energy supply by 2025 (ASEAN Centre for Energy, 2020). ASEAN countries have significant solar power potential to help achieve the target, but progress is mixed (Burke et al., 2019; Guild, 2019). The target may well be missed in some member countries. This paper discusses key drivers of Vietnam’s solar power boom and highlights a number of policy implications for other ASEAN countries.
DRIVERS FOR VIETNAM’S SOLAR PV BOOM
Proximate drivers
Do et al. (2020) applied an economic, social, and institutional framework to investigate underlying drivers for Vietnam’s impressive solar boom. They found that attractive solar feed-in tariffs (FIT) have been the key proximate driver. The first FIT was issued in 2017 by Prime Minister’s Decision 11/2017/QD-TTg (Government of Vietnam, 2017). Solar power projects – both utility-scale and rooftop – that started operation prior to 30 June 2019 are able to sell their electricity to the state-owned Vietnam Electricity and its subsidiaries at a FIT of US$93.5/MWh for 20 years.
In April 2020, the Prime Minister issued Decision 13/2020/QD-TTg to usher in reduced feed-in tariffs of US$83.8/MWh for new rooftop solar projects, US$70.9/MWh for new ground-mounted solar PV, and US$76.9/MWh for new floating solar projects. Projects that entered commercial operation by 31 December 2020 were eligible, with the feed-in tariffs covering electricity generated over the next 20 years. At the time of writing, no FITs or other incentive mechanisms exist for solar PV projects starting from 2021.
These FITs are generous. Lee et al. (2019) estimated that the average levelised cost of electricity (LCOE) for solar PV in Vietnam – when excluding protected areas, water bodies, forested areas, agricultural areas, urban areas, and areas with a slope greater than 5% – was around US$87.5/MWh in 2018. Using an annual reduction rate of 13% (International Renewable Energy Agency, 2019), these LCOEs would roughly be about US$76/MWh in 2019 and US$66 in 2020. Therefore, the FITs of US$93.5/MWh before June 2019 and US$70.9–83.8 per MWh thereafter have been attractive to project developers, especially given that they have focused on the best available sites in the southern part of the country.
Other government policies have also played important roles. Utility-scale solar PV developers have been given flexibility to mobilise funding from all sources, including foreign funding, and have been exempted from income tax for the first four years. The income tax will then be reduced by 50% in the following nine years, and thereafter 10% until the 15th year of operation. Imported equipment has also been exempted from import tariffs. Solar PV projects have also received land-lease payment exemptions ranging from 14 years to the entire project life, depending on the location (Do et al., 2020).
Underlying drivers
A survey of experts identified the government’s commitment to energy security as the most important motivation for the introduction of Vietnam’s FIT (Figure 2; Do et al., 2020). Delays in new coal and other power projects amid rising electricity demand have meant that securing new electricity generation sources has been a priority. Solar PV has become highly viable due to rapid technological improvements and associated cost reductions.
Public demand for environmental protection was identified as the second-most important driver (Do et al., 2020). Serious air pollution in urban areas has triggered public opposition to the development of new coal power plants, and local issues related to water and other resources have also become concerns. Some local authorities have refused to approve new coal power projects on account of their environmental implications (Vietnam Ministry of Industry and Trade, 2019).
Another important driver for the introduction of the solar FIT has been the government’s intention to develop solar power generation as a new economic sector. The National Strategy for Green Growth 2012 sets out the specific objective of restructuring the economy by greening current sectors and promoting a renewable energy sector. Following this, the Renewable Energy Development Strategy 2015 detailed targets for developing the renewables sector. The importance of this sector has been re-emphasized in the recent Political Bureau Resolution no. 55 on National Energy Development Orientations (Vietnam Political Bureau, 2020).
The government’s commitment to climate change response, along with the renewable energy advocacy of certain foreign organisations have also played catalyst roles in solar PV diffusion (Do et al., 2020). In 2020, Vietnam adjusted its nationally determined contribution as a commitment with the goal to reduce greenhouse gas emissions in 2030 relative to business as usual, by 9% or 27%, without and with international assistance, respectively (Government of Vietnam, 2020). For the energy sector, targets are for emission reductions of 5.5% (unconditional) and 11.2% (conditional) relative to business as usual.
POLICY IMPLICATIONS FOR ASEAN MEMBER STATES
Potential drivers for solar PV development in ASEAN
ASEAN has significant potential for solar power, particularly in the Mekong countries of Myanmar, Thailand, and Cambodia. The potential for solar PV at sites with an LCOE of less than US$150/MWh has been estimated to exceed 30 TW (Lee et al., 2019). This is about 130 times ASEAN’s total installed generation capacity (234 GW) as of 2017 (ASEAN Centre for Energy, 2020). Solar power could play a major role in helping AMS achieve the renewable energy target of 23% by 2025, with wind, geothermal, and other renewable technologies also able to contribute.
To tap this potential, AMS could follow Vietnam to focus on domestic drivers in motivating policy change, noting that the political economy behind new policy directions is important for policy success. These include the local health benefits associated with zero-emission electricity generation from sources such as solar PV. Similar to Vietnam, AMS are facing serious air pollution due to combustion of fossil fuels. The annual number of premature deaths associated with air pollution in ASEAN is projected to rise from 450,000 in 2018 to more than 650,000 by 2040 if the current trajectory for fossil fuel reliance continues (International Energy Agency, 2019a). Outdoor air pollution – predominantly from fossil fuel combustion, and also construction, agriculture, and other sources – is estimated to reduce average life expectancy by about 2 years in Indonesia, 1.7 years in Malaysia, and 1 year in Thailand (Energy Policy Institute at the University of Chicago, 2020). A focus on the local air quality benefits of solar power would potentially cultivate political and public support.
There are many other potential motivations to pursue solar PV in ASEAN. Developing a solar PV industry would provide a new economic benefit to the economy and help AMS pursue a greener post-pandemic recovery. Solar PV offers an opportunity to generate revenues and economic benefits from otherwise underutilised spaces such as rooftops. Countries could also reduce risks they face in terms of new investments in what may well become stranded fossil fuel assets. AMS could also use broader motivations such as global climate change and improving national positions in the international arena to motivate the adoption of solar PV policies.
Suitable policy instruments
Vietnam’s case is an example of FITs having a strong effect on uptake. Thailand and Malaysia started solar PV FITs in 2007 and 2011, respectively – much earlier than Vietnam. However, recent FITs in these countries have been less generous than Vietnam. For example, the rooftop FIT in Thailand in 2019 was only about US$57/MWh (Pugnatorius 2019). Before ending in 2016, Malaysia’s solar FITs was subject to strict conditions, including a maximum eligible installed capacity of 30 MW and annual reductions in FIT rates based on government-set quota (ASEAN Centre for Energy and China Renewable Energy Engineering Institute, 2018). Indonesia’s solar FITs have recently been capped at 85% of the regional average cost of electricity generation in many regions, which in some areas is quite low and disadvantages solar PV vis-à-vis generation from fossil fuels (Burke et al., 2019). Vietnam also does not impose local content requirements as a condition for preferential FITs as is used in Indonesia and Malaysia (Guild, 2019; SEDA, 2019). This enables a level playing field for investors and reduces technology costs.
The case of Vietnam has also demonstrated that reforming regulations is also a priority. For example, a new investment law and an amendment to the current Electricity Law have been proposed to tackle transmission capacity issues that have led to curtailment of solar power (Bao Dau Tu, 2020). In the meantime, the Prime Minister issued an ad hoc decision in 2020 to allow the private sector to invest in transmission lines to connect their plants and other projects in the same area to the main grid (Nang Luong Vietnam, 2020). Vietnam is also developing a mechanism for direct power purchase agreements to enable solar power generators to sell electricity directly to consumers.
Recycling of solar panels has received policy attention in Vietnam. According to the Law on Environmental Protection 2020, producers and importers of solar equipment will be responsible for its recycling. They will either organize the recycling or pay a premium to the Vietnam Environmental Protection Fund. This is part of a circular economy policy that is in place in Vietnam.
Room for improvement
Despite strong initial successes in solar PV uptake, Vietnam’s policy framework for solar PV diffusion has not been flawless. One notable limitation has been the use of short FIT windows, with high and extended uncertainty over the FIT regime that will apply for new projects at the expiry of any window. This has led to installation rushes to meet FIT deadlines rather than a smooth development of the industry. Uncertainty also increases financing and project costs and introduces difficulties for national electricity sector planning and grid development (Doanh Nghiep & Tiep Thi, 2020). Smoother and more foreseeable processes would be preferable.
Another issue has been transmission grid planning. A sudden solar boom in provinces such as Ninh Thuận has led to curtailment of output. Now that solar PV has entered the mainstream in Vietnam, it is important that transmission planning starts to catch up so that the cheapest electricity can be easily transmitted to major demand centres such as Hồ Chí Minh City. Time-of-day price flexibility and the use of energy storage are also becoming increasingly important as priorities for effective management of the intermittent (day-time) nature of solar PV generation. The experience of Vietnam, the frontrunner in ASEAN, is useful for other AMS in their own preparations to move toward higher solar uptake.
There are other opportunities for Vietnam. A quantity-focused mechanism in the form of a renewable portfolio standard (RPS) is an option to more smoothly guide the way towards high levels of renewable energy use, and to reduce uncertainty. A mandatory RPS could also encourage the national electricity utility to develop a more renewables-oriented transmission planning approach. Vietnam is also considering the use of reverse auctions, a mechanism through which long-term PPAs are signed based on a feed-in price decided on the basis of the lowest submitted bids. This policy instrument has become increasingly popular for new solar-sector projects around the world. While reverse auctions can help to achieve cost reductions, careful preparation is needed to make sure that auctions are a good fit in the local institutional context.
In November 2020, Vietnam’s National Assembly passed a revised Law on Environmental Protection that legalises an emission trading scheme. The law will take effect on 1 January 2022 (Do, 2020). Singapore already has a carbon tax, but there are opportunities for other AMS countries to follow Vietnam’s move. Vietnam and other AMS could also further reform fossil fuel subsidies. Removing fossil fuel subsidies in ASEAN’s electricity sector would not only enable solar PV development but also potentially free up about US$8.3 billion per annum (International Energy Agency, 2019b). This sizable resource could instead be used for the development of transmission lines or to meet other priorities. The COVID-19 recovery period is an ideal time for such reforms, given the relatively low international fossil fuel prices and the need for efficiency-enhancing public investments.
CONCLUSION
Generous FITs, together with income and land-lease payment exemptions, have been key aspects of the policy framework that has spurred Vietnam’s solar PV boom. Underlying drivers include the government’s determination to ensure sufficient local electricity supply to cope with increasing power demand, public demand for local environmental quality, and the government’s intention to develop solar power as a new economic sector. Other factors such as climate policy and advocacy from international organizations have also played contributing roles.
Vietnam’s first stage of solar success confirms that the solar PV sector is able to develop rapidly in a developing country context when suitable financial and institutional conditions are in place. Strong solar PV development has also been seen in other developing countries such as India.
The key lesson from Vietnam’s experience is the importance of price signals for solar PV and an adequate degree of government prioritisation and support. However, there is room to improve on Vietnam’s approach; a more stable and foreseeable FIT regime would allow reduced investment uncertainty and help to smoothen the industry’s expansion path. Better system planning and greater focus on system flexibility and power storage, plus enhanced private sector participation in transmission development to connect their projects, would also facilitate more efficient integration of solar PV into the electricity system.
ISEAS Perspective 2021/28, 11 March 2021.
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EXECUTIVE SUMMARY
- The operations of Vietnam’s public opinion shapers and cyber-troops reveal that the online discourse is manipulated to enforce the Communist Party’s line.
- Vietnamese authorities constantly grapple with the vexing question: How to strike a delicate balance between placating critical public sentiment online while ensuring that it does not spill over into protests against the regime.
- When it comes to methods, targets and motives, there appears to be significant crossover between public opinion shapers and the government’s cyber troops.
- The Vietnamese state cyber-troops have been encouraged to use real accounts to mass-report content. This helps explain why it is the only Southeast Asian state to publicly acknowledge having a military cyber unit.
- The lack of political and technological wherewithal presents an uphill battle for these cyber-troops in influencing Vietnam’s online information environment.
* Dien Nguyen An Luong is Visiting Fellow with the Media, Technology and Society Programme of the 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.
INTRODUCTION
Since its official inception in 2017,[1] Vietnam’s 10-000-strong military cyber unit, dubbed Force 47, has been subjected to widespread lampoon, criticism and backlash. Critics have pointed the finger at what is widely assumed as the main objective of the unit: target dissidents and activists[2] and mass-report anti-state content in order to have their accounts suspended and “anti-state” posts removed. [3] While there is some truth to this observation, zeroing in on such operations could risk glossing over the core duties laid out at the very outset for Force 47.
In the view of the authorities, Force 47 has a legitimate raison d’être: These “well qualified and loyal” cyber-warriors work “every hour, every minute, every second” to scour and collect information on social media, participate in online debates to maintain “a healthy cyberspace” and counter any “wrongful opinions” about the regime and protect it and the public from “toxic information”.[4]
But as Vietnamese authorities have handled public political criticism – both online and in real life – with a calibrated mixture of toleration, responsiveness and repression,[5] the key tenet of the operations of Force 47 should be appraised in a broader frame. In fact, a closer look at how Vietnam’s public opinion shapers and cyber-troops have operated offers a glimpse into the unit’s ultimate goal: manipulate online discourse to enforce the Communist Party’s line in a country whose leaders have been fixated on curbing anti-state content.
The authorities have publicly admitted that Vietnam’s ossified propaganda apparatus was ceding ground to social media in the race for readers’ attention.[6] But Vietnam’s lack of political and technological wherewithal and limited home-grown social media platforms[7] have throttled its efforts to create a “national Internet” meant for enforced blocking of Western social media platforms.[8] This has paved the way for Facebook to become the main venue for Vietnam’s cyber unit to safeguard the party line, shape public opinion, and spread state propaganda.[9]
Some key observations: First, the red flag that would galvanize the cyber unit into action is anti-state content, one that is deemed detrimental to the reputation and legitimacy of the regime and its leaders; second, discourse, toleration and responsiveness have been the prioritized strategy of choice; and perhaps most intriguingly, while the authorities have repeatedly warned the mainstream press against the risk of trailing behind social media, they have often tacitly sanctioned the cyber unit to be ahead of the propaganda media in shaping the online narrative on certain sensitive issues.
CURBING ANTI-STATE CONTENT: A TALL ORDER FOR THE TRADITIONAL PROPAGANDA MODEL
Vietnamese authorities have long frowned upon anti-government propaganda and freer flow of information as threats to the legitimacy of the ruling Communist Party, using this as a pretext to rationalise reining in the online sphere and cracking down on such activities. In recent years, contents being anti-government has been the most oft-cited rationale for Vietnamese censors to force Facebook and Google’s YouTube to restrict or take down posts from their platforms.[10] There have also been real-life consequences. According to Reuters, of 280 people who have been arrested for “anti-state” activities in Vietnam since 2016, 260 have been convicted. This marks a precipitous spike from the 68 arrests and 58 convictions carried out during the 2011-2016 period.[11]
On the legal front, since the Internet’s arrival in Vietnam in 1997, Vietnam has enacted a raft of laws and regulations, with a consistent focus on criminalising those who use the online sphere to “oppose the government; undermine the state and state unity, or threaten national security, public order, or social security; or incite violence or crime”.[12] An analysis of Vietnam’s laws and regulations on Internet controls during the 2001-2020 period shows how legal terms governing the criminalization of anti-state activities have formed the frontline in the country’s Internet control efforts. (Figure 1)
Figure 1. Legal terms on anti-state activities dominate Vietnam’s Internet controls
On the information control front, Vietnam’s propaganda czars have hashed out terminology as well as the tone and position of press coverage on individuals, organizations and contents flagged as “anti-state” (Table 1).
TABLE 1. List of key terms used to describe anti-state activities
| Vietnamese | English | Description |
| “thế lực thù địch” | hostile forces | any groups or organizations plotting to topple the regime.[13] |
| “diễn biến hoà bình” | peaceful evolution | the process in which anti-communist forces deploy unarmed means under the banner of “democracy”, “freedom”, and “human rights” against the Communist Party.[14] |
| “cách mạng màu” | colour revolution | popular uprisings against authoritarian regimes, such as those which took place in former Soviet countries.[15] |
| “tự diễn biến”, “tự chuyển hoá” | self-evolution, self-transformation | recently coined terms to describe those who, after being able to access a more free flow of information, lose faith in the regime and decamp from its ideology.[16] |
| “xuyên tạc”, “chia rẽ”, “chống phá” | distort, divide, sabotage | used to label the act of spearheading anti-state propaganda or plotting against the regime. |
The Central Propaganda Department – the Communist Party’s propaganda organ – and the Ministry of Information and Communications have been at the helm of controlling this discourse, dictating over all state-run print, broadcast, online, and electronic media.[17] The flip side of this approach is glaring, however: Couched in hackneyed language, the mainstream media has often been pooh-poohed for being riddled with a war mindset that is occasionally borderline “paranoid”.[18] This risks leaving the government message out of sync with a language used by forward-looking, Internet-savvy young population.[19]
Opting to embrace social media – chiefly Facebook – to spread the Party’s message,[20] the authorities have been constantly grappling with a vexing question: How to strike a delicate balance between placating public sentiment online while ensuring that it does not spill over into protests against the regime. This is the context in which Vietnam’s public opinion shapers and cyber-troops enter the fray, setting the stage to jockey for control of public narrative in the online sphere.
MEET FORCE 47 AND PUBLIC OPINION SHAPERS
Vietnam had already in 2013 acknowledged publicly that it had deployed groups known as “public opinion shapers” to spread views in defence of the state against detractors or “hostile forces”.[21] It was only in late 2017 that the country officially rolled out Force 47. When it comes to methods, targets and motives, significant crossovers occur between public opinion shapers and cyber troops.[22]
To gain insight into the personnel, structure and operations of both Force 47 and public opinion shapers, we examine hundreds of posts and comments on 10 Facebook groups whose stated missions, policies and contents are systematically aligned with the modus operandi of the cyber unit. Several of these groups publicly claim links with Force 47. We have also thoroughly reviewed dozens of publicly available documents, reports and newspaper articles that shed light on this issue.
• Who they are: Officially, Force 47 is backed by the Ministry of National Defense and comprises mostly of “professional defense officers” mostly trained in propaganda and equipped with skills to counter “wrongful opinions” or “toxic information” about the regime.[23] Who accounts for the force of “public opinion shapers” is a trickier question to answer. Due to the voluntary and pro bono nature of their work, at a certain time, anyone interested – be it war veterans, journalists, doctors, academics, businesspeople, or students – can take the government up on its offer to dabble as public opinion shapers online. Another potential segment, which is not part of the state-sanctioned cyber unit but which should not be discounted altogether, are zealous Internet users who may be voluntarily participating in defending the state. The common pull factor? These people share a nationalist, and to some extent anti-West, sentiment, and are sympathetic of Vietnam’s policies and actions.
In what is called “diversified propaganda”, these actors are often recruited by the local chapters of the propaganda apparatus or from other state-affiliated political groups such as the Ho Chi Minh’s Communist Youth Union or Women’s Association.[24]
Elsewhere in the region, Thailand has also turned to youth groups to aid in shaping public opinion on social media.[25] The public opinion shapers are not obliged to report to any agency, but if they do, it is often to the local-level propaganda departments.[26] Like the Philippines,[27] Vietnam is also said to have commissioned paid influencers to shape public opinion in certain cases. But still, there has been no definitive research to substantiate this allegation.
• How they are managed: Both Force 47 and public opinion shapers operate on a mission-based basis without any concrete organisational or physical structure. Nguyen The Phuong, a researcher from Vietnam National University-Ho Chi Minh City, summed up the structure of the cyber unit in a 2018 article for The Diplomat: “There is minimal or even no command and control in some cases because members of the task force are given the rights to operate independently and actively in the Internet. The [Vietnam People’s Army] can still maintain order and ideological discipline of this force (and of course provide general guidelines) through its unique network of political commissars.”
• What they do: Vietnam’s Force 47 and public opinion shapers have made the most of Facebook to execute their daily tasks and missions, which include “training, studying and interacting with specific audiences.”[28] According to a report by researchers at Oxford University,[29] the expanded typology of the strategies of messaging and valence (valence describes “how attractive or unattractive a message, event, or thing is”) that cyber troops use to communicate with Internet users online includes: “(1) spreading pro-government or pro-party propaganda; (2) attacking the opposition or mounting smear campaigns; (3) distracting or diverting conversations or criticism away from important issues; (4) driving division and polarization; and (5) suppressing participation through personal attacks or harassment.” Vietnam’s cyber-troops check three out of five boxes (Table 2).[30]
TABLE 2. Messaging and valence strategies of Vietnam’s cyber-troops
The Oxford report places the communication strategies of the cyber troops into five categories: “(1) the creation of disinformation or manipulated media; (2) mass-reporting of content or accounts; (3) data-driven strategies; (4) trolling, doxing or harassment; and (5) amplifying content and media online.” Vietnam ticks four out of these five categories[31] (Table 3)
TABLE 3. Communication strategies of Vietnam’s cyber troops
As Giang Nguyen-Thu (2018, p. 903) points out, Vietnam’s online censorship playbook still more or less “adheres to the old model of mass media discipline.”[32] In that context, the modus operandi of both Force 47 and public opinion shapers continue to comport with the ideological and political dos and don’ts that have long dictated the editorial line of the mass media. The methods and communication strategies of the cyber unit, however, show that it has evolved into a more sophisticated extension of Vietnam’s traditional propaganda model.
PRO-STATE CONTENT IN THE DRIVER’S SEAT
This research programme at ISEAS sets out to examine several case studies to sketch out a pattern of how Force 47 and public opinion shapers allocate resources in the online sphere. There has been no consistent implementation of the aforesaid calibrated mixture of toleration, responsiveness and repression in the online sphere. The two following two case studies seek to illustrate when, how and to whom toleration, responsiveness or repression are applied. The first case involves Thuy Tien, a popular Vietnamese singer who is also known to be a keen philanthropist. The other relates to Pham Doan Trang, a high-profile Vietnamese dissident arrested in October 2020 for “anti-state activities.”[33]
When floods ravaged central Vietnam in October, Thuy Tien used her Facebook account to call for public donations.[34] She also went to the central region to personally provide succour flood-hit victims. That should have been a feel-good story, which indeed it was, grabbing headlines and setting social media abuzz. But when the donations crossed the threshold of VND100 billion (US$4.3 million), Thuy Tien found herself caught in the whirlwind of a growing online controversy.
It first centred around the legitimacy of the funds, then it morphed into a spate of online criticisms. Critics lambasted Internet users for capitalizing on Thuy Tien’s charity and her Facebook page to unleash a floodgate of anti-state comments. According to the critics, in questioning the legitimacy and efficiency of the regime in its response to the floods, those comments besmirched the reputation of the government and dismissed the state effort and the sacrifice of many soldiers. Those comments were also accused of misleading the public into believing that the authorities were conspiring to siphon off the donations that Thuy Tien had been able to raise.
Nowhere was such criticism more manifest than on Facebook pages purportedly run by public opinion shapers and/or Force 47.
Gleaning from all relevant posts on the same Facebook pages (10 of them) analysed in the previous section, we are able to establish a pattern: In the case of Thuy Tien, online conversations on the topic were not flagged until they involved anti-state content. Her popularity and influence further merited the intervention of either cyber-troops or public opinion shapers, or both. Their activities centred around (i) arguing directly with critics, (ii) seeking to neutralize undesirable public opinion by peddling pro-state views through posts and comments on Facebook, and (iii) steering online conversations in what is perceived as the right direction. The propaganda media did not take the lead in initiating the discussion, only chiming in later to mostly encapsulate what had already been discussed on pro-state Facebook pages.
In the case of Pham Doan Trang, a different pattern emerged: The issue attracted much less attention and bandwidth in all those Facebook pages. The contents chiefly focused on amplifying the government indictment of her anti-state agenda and rebutting foreign criticism of the arrest.
We take a deeper dive into all relevant posts and comments from three such Facebook pages, codenamed A, B, and C. They were selected for analysis because:
- Their direction and contents are consistently aligned with the purpose and modus operandi of Force 47 and public opinion shapers .
- Whenever anti-state content is flagged on social media, these pages swing into action almost immediately and concurrently. The state-sanctioned terminology on anti-state activities were exhaustively used, particularly in the comments.
- They have all amassed a strong base of followers. A, which has a foreign name, has 171,000 followers. B, which claims to have a mission to counter reactionary information, has 198,000. C, which is said to be commissioned by a group of military officers, has 66,500.
The posts appeared between October and December 2020. It was in early October 2020 that Thuy Tien started raising money for flood-hit victims; and Pham Doan Trang was arrested on October 7.[35] Posts related to the case of Thuy Tien overwhelmingly outnumbered those on Pham Doan Trang. B entertained 14 posts on Thuy Tien but only 2 about Pham Doan Trang. A and C, despite their popularity, did not have any post on the latter. The number of average reactions, shares and comments on Thuy Tien in each Facebook page also exceeded those on Pham Doan Trang by a wide margin (Chart 1).
CHART 1. The number of reactions, shares and comments on Thuy Tien and Pham Doan Trang
What accounts for the different approaches and findings in these two case studies? Some important context: Social media is a concern for Vietnamese authorities, not so much for the public criticism, but more for its ability to coalesce collective action or organise protests in real life. The takeaway here is that as long as collective action is nipped in the bud, social media can serve as a release valve for public opinion.[36]
Even though the anti-state comments in the case of Thuy Tien, the singer, were disparaging, they showed little sign of translating into real-life actions. In that context, by allocating major resources to handle online criticism, the censors in fact proved their intent on tolerating the discourse. There was even some sign of responsiveness: Almost immediately in the wake of the online controversy over the legitimacy of the charity funds, Prime Minister Nguyen Xuan Phuc called for the quick clearing of any legal hurdles that could stand in the way of such philanthropic activities.[37]
In contrast, the Vietnamese police have long been accused of harassing and beating up Pham Doan Trang, the dissident, for her activism in real life.[38] Past and recent crackdowns on social media in Vietnam have shown that repression took place mostly when dissidents or activists appeared to cross the red line on political multilateralism, improved human rights, freedom of speech and regime change. In that context, for both Pham Doan Trang and the authorities, her arrest was perhaps a more or less foregone conclusion. The onus of dealing with her would thus appear to have fallen concretely to Vietnam’s security apparatus, and not the cyber unit in the online sphere.
From July 2020 to January 2021, anti-state content stemmed mostly from controversy over philanthropic activities for flood victims, Vietnam’s handling of the Covid-19 pandemic, and the arrest of several high-profile dissidents (Pham Doan Trang included). We generate relevant keywords on those topics and analyse online discussion on them in two opposing categories: anti-state and pro-state content. 54.4 percent of the content originated from social media, which more or less means Facebook; 32.5 percent were from news sites (Chart 2).
CHART 2. Online posts on pro- and anti-contents in different channels
Pro-state content overwhelmingly eclipsed anti-state content online over the July 2020-January 2021 period (Chart 3). The reasons could vary: By successfully battling the Covid-19 pandemic,[39] Vietnam’s leadership could have won hearts and minds. Force 27 and public opinion shapers may have played a role, or it could have been due to the combination of both factors, and possibly other reasons.
CHART 3. Pro- and anti-contents in the online sphere since the first half of 2020
There have been media reports in which advocacy groups, dissidents and activists accused Vietnam’s cyber-troops of online harassment and abuse.[40] Force 47 has also allegedly cashed in on loopholes in Facebook’s community policies which allow for automatic rejection of content if enough people lodge complaints about certain accounts. In other words, by mustering up a large number of cyber-troops to report to Facebook, the task force could have targeted accounts suspended and content belonging to activists removed.[41] The lack of empirical evidence has, however, made it hard to ascertain the extent to which these operations account for the daily workload of Vietnam’s cyber-troops.
Unlike their peers in Thailand, Malaysia or the Philippines, Vietnam’s cyber-troops have been encouraged to use real accounts to mass-report content.[42] This helps explain why Vietnam has been the only country in the region to acknowledge its authorities’ deployment of cyber-troops. The use of real accounts is also a testament to how increasingly adept Vietnam has become at co-opting Facebook. When the authorities invoked local laws to compel Facebook to take down posts, the platform was bound to document such “content restrictions” in its biannual transparency report, which could deal a major blow to its reputation and invite increased scrutiny. But when Facebook removes content based on mass reporting, which is subject to its own content moderation policies, the takedown does not merit any public acknowledgement. This approach amounts to a two-way street that is likely to redound to the benefit of a transactional social media giant.[43]
STILL MILES AWAY FROM THE CHINESE MODEL
At a time when Southeast Asian nations are embracing China’s state censorship approach,[44] the use of cyber-troops appears to be part and parcel along that trajectory, and Vietnam is apparently not an exception.[45] But the scale, capacity and performance of Vietnam’s cyber-troops are still dwarfed by those of their Chinese counterparts.
Contrary to widespread assumptions, empirical evidence presented in a 2017 Harvard paper shows that China’s “50-cent” party, which consists of as many as two million people tasked with faking around 448 social media comments a year, “engages in almost no argument of any kind”.[46] The force is instead charged with chiefly “cheerleading for the state, symbols of the regime, or the revolutionary history of the [China]’s Communist Party.” According to the paper authors, these activities are designed to strategically distract from “collective action, grievances, or general negativity.” Even though Vietnam has said its web-monitoring unit is now capable of scanning up to 300 million news items per day for “false information”,[47] it remains an uphill battle for Vietnam’s cyber-troops to fulfil the task of diluting the information environment in the online sphere. Against that backdrop, the daily mission of Force 47 and public opinion shapers is likely to continue revolving around (i) making specific, directed pro-regime arguments, (ii) attacking those who oppose the government from inside Vietnam and from abroad, and (iii) targeting high-profile activists and influential groups online. It is likely that the Western media will continue focusing on how Vietnam’s cyber-troops target dissidents and activists. Still, in a country where the media is tightly controlled, how much the cyber unit contributes to the official narrative is an intriguing question and merits further discussion.
ISEAS Perspective 2021/22, 3 March 2021.
ENDNOTES
[1] James Hookway, “Introducing Force 47, Vietnam’s New Weapon Against Online Dissent”. The Wall Street Journal, 31 December 2017, https://www.wsj. com/articles/introducing-force-47-vietnams-new-weapon-against-online- dissent-1514721606
[2] James Pearson, “Vietnam steps up ‘chilling’ crackdown on dissent ahead of key Communist Party congress”. Reuters, 19 January 2021. https://www.reuters.com/article/vietnam-politics-dissent/vietnam-steps-up-chilling-crackdown-on-dissent-ahead-of-key-communist-party-congress-idUSL4N2JM14L
[3] Davey Alba and Adam Satariano, “At Least 70 Countries Have Had Disinformation Campaigns, Study Finds”. The New York Times, 26 September 2019. https://www.nytimes.com/2019/09/26/technology/government- disinformation-cyber-troops.html
[4] Hookway, “Introducing Force 47”.
[5] Dien Nguyen An Luong, “How Hanoi is Leveraging Anti-China Sentiments Online”, ISEAS Perspective, no. 2020/115, 13 October 2020, p.2.
[6] Dien Luong, “Why Vietnam cannot hold back Facebook”. VnExpress International, 10 September 2017. https://e.vnexpress.net/news/news/why-vietnam-can-t-hold-back-facebook-3639186.html
[7] Dien Nguyen An Luong, “Vietnam and Social Media: The Clock Is Ticking on Tiktok”. ISEAS Commentary, 27 August 2020. /media/commentaries/vietnam-and-social-media-the-clock-is-ticking-on-tiktok/
[8] Dien Luong, “Vietnam Wants to Control Social Media? Too Late”, The New York Times, 30 November 2017, https://www.nytimes.com/2017/11/30
/opinion/vietnam-social-media-china.html
[11] “Vietnam arrests popular Facebook user for ‘anti-state’ posts”. Reuters, 19 January 2021. https://www.reuters.com/article/us-vietnam-security/vietnam-arrests-popular-facebook-user-for-anti-state-posts-idUSKBN28R1H6
[12] Zachary Abuza, Stifling the Public Sphere: Media and Civil Society in Vietnam, (Washington DC: National Endownment for Democracy 2015), p .10, https:/
/www.ned.org/wp-content/uploads/2015/10/Stifling-the-Public-Sphere-Media-Civil-Society-Vietnam-Forum-NED.pdf
[13] “Scientific Conference ‘Identifying the sabotage plots and tactics of hostile forces towards young people nowadays and proposing solutions’,”. The Electronic Portal , Ho Chi Minh National Academy of Politics, 21 September 2020. https://hcma.vn/english/news/Pages/features.aspx?ItemId%3D9293
[14] Bich T. Tran, “Evolution of the Communist Party of Vietnam’s Control Over the Military”. The Diplomat, 29 August 2020. https://thediplomat.com/2020/08/evolution-of-the-communist-party-of-vietnams-control-over-the-military
[15] “Color revolution aims to ruin HK’s future”. Global Times, 13 August 2019. https://www.globaltimes.cn/content/1161356.shtml
[16] “Solutions to prevent ‘self-evolution’ and ‘self-transformation’ among cadets at military training institutions”. National Defence Journal, 27 September 2017. http://tapchiqptd.vn/en/research-and-discussion/solutions-to-prevent-selfevolution-and-selftransformation-among-cadets-at-military-trainin/10628.html
[17] Abuza, “Stifling the Public Sphere”, p. 10.
[18] Hồ, Mạnh Tùng, How a Rational Organization Responds to an Increasingly Mediatized World (May 30, 2019), p. 4. https://ssrn.com/abstract=3461850 or http://dx.doi.org/10.2139/ssrn.3461850
[19] Jessica Meyers, “Their parents’ lives were defined by war. Now Vietnam’s youth are pushing the country toward a new identity”. Los Angeles Times, 2 February 2017. https://www.latimes.com/world/asia/la-fg-vietnam-future-2017-story.html
[20] Lien Chau, “Vietnam embraces social media as health minister launches Facebook page”. Thanh Nien News, 2 March 2015. http://www.thanhniennews.com/politics/vietnam-embraces-social-media-as-health-minister-launches-facebook-page-39262.html
[21] Nga Pham, “Vietnam Admits Deploying Bloggers to Support Government”. BBC News, 12 January 2013. https://www.bbc.com/news/%20world-asia-20982985
[22] Sam Biddle, “Facebook Lets Vietnam’s Cyberarmy Target Dissidents, Rejecting A Celebrity’s Plea”. The Intercept, 22 December 2020. https://theintercept.com/2020/12/21/facebook-vietnam-censorship
[23] Nguyen The Phuong, “The Truth About Vietnam’s New Military Cyber Unit”. The Diplomat, 10 January 2018. https://thediplomat.com/2018/01/the-truth-about-vietnams-new-military-cyber-unit
[24] Hồ, Mạnh Tùng, How a Rational Organization Responds to an Increasingly Mediatized World (May 30, 2019), p. 5. https://ssrn.com/abstract=3461850 or http://dx.doi.org/10.2139/ssrn.3461850
[25] David Nathan, “Thailand’s Youth Asked To Cyber-Spy For The State”. New Internationalist, 5 September 2014. https://newint.org/features/web-exclusive/2014/09/05/thailand-cyber-crackdown [26] Truong Son, “Công an Hà Nội đang xác minh về lực lượng ‘dư luận viên’ tự phát” (Hanoi police launch probe into self-proclaimed ‘public opinion shapers’”). Thanh Nien, 17 March 2015. https://m.thanhnien.vn/thoi-su/cong-an-ha-noi-dang-xac-minh-ve-luc-luong-du-luan-vien-tu-phat-542332.amp
[27] Ong, Jonathan Corpus and Cabañes, Jason Vincent A., “Architects of Networked Disinformation: Behind the Scenes of Troll Accounts and Fake News Production in the Philippines” (2018), p. 35. https://doi.org/10.7275/2cq4-539
[28] Nguyen The Phuong, “The Truth About Vietnam’s New Military Cyber Unit”.
[29] Davey Alba and Adam Satariano, “At Least 70 Countries Have Had Disinformation Campaigns, Study Finds”, The New York Times, 26 September 2019, https://www.nytimes.com/2019/09/26/technology/government- disinformation-cyber-troops.html [30] Samantha Bradshaw & Philip N. Howard. (2019) The Global Disinformation Disorder: 2019 Global Inventory of Organised Social Media Manipulation, p. 13. Working Paper 2019.2. Oxford, UK: Project on Computational Propaganda.
[30] Samantha Bradshaw & Philip N. Howard. (2019) The Global Disinformation Disorder: 2019 Global Inventory of Organised Social Media Manipulation, p. 13. Working Paper 2019.2. Oxford, UK: Project on Computational Propaganda.
[31] Bradshaw & Howard. (2019) The Global Disinformation Disorder, p. 15
[32] Giang Nguyen-Thu. 2018. “Vietnamese Media Going Social: Connectivism, Collectivism, and Conservatism”. The Journal of Asian Studies 77, no. 4: 895–908
[33] “Vietnam detains activist hours after human rights meeting with U.S.”. Reuters, 7 October 2020. https://www.reuters.com/article/us-vietnam-security-idUSKBN26S0RT
[34] “Help at hand for flooded provinces”. Vietnam Investment Review, 27 October 2020. https://www.vir.com.vn/help-at-hand-for-flooded-provinces-80283.html
[35] “Pham Doan Trang: Vietnam arrests leading pro-democracy blogger”. BBC, 7 October 2020. https://www.bbc.com/news/world-asia-54452851
[36] Dien Nguyen An Luong, “How Vietnam has borrowed from China’s online censorship playbook”. South China Morning Post, 14 September 2020, https://www.scmp.com/week-asia/opinion/article/3101477/how-vietnam-has-borrowed-chinas-online-censorship-playbook
[37] “Floods in Central Vietnam: Revising law to ensure effectiveness and lawfulness of charitable activities”. Vietnam Law & Legal Forum, 11 November 2020. https://vietnamlawmagazine.vn/floods-in-central-vietnam-revising-law-to-ensure-effectiveness-and-lawfulness-of-charitable-activities-27458.html
[38] Richard C. Paddock, “The Jailed Activist Left a Letter Behind. The Message: Keep Fighting”. New York Times, 14 October 2020, https://www.nytimes.com/2020/10/14/world/asia/vietnam-pham-doan-trang-arrest.html
[39] Lien Hoang, “Asia’s COVID recovery: Vietnam’s breakout moment”. Nikkei Asia, 20 January 2021. https://asia.nikkei.com/Spotlight/The-Big-Story/Asia-s-COVID-recovery-Vietnam-s-breakout-moment
[40] “‘Let Us Breathe!’ Censorship And Criminalization Of Online Expression In Viet Nam”, Amnesty International, p.50, 1 December 2020, https://www.amnesty.org/download/Documents/ASA4132432020ENGLISH.pdf
[41] Megha Rajagopalan, “Facebook Has Been Accused of Helping The Vietnamese Government Crack Down on Dissent”. BuzzFeed News, 10 April 2018. https://www.buzzfeednews.com/article/meghara/facebook-vietnam- mark-zuckerberg
[42] Bradshaw & Howard. The Global Disinformation Disorder.
[43] Biddle, “Facebook Lets Vietnam’s Cyberarmy Target Dissidents, Rejecting A Celebrity’s Plea”.
[44] “Is a splinternet emerging? ASEAN nations are turning to a Chinese model on internet censorship”, ASEAN Today, 19 April 2019. https://www.aseantoday.com/2019/04/is-a-splinternet-emerging-asean-nations-are-turning-to-a-chinese-model-on-internet-censorship
[45] Justin Sherman, “Vietnam’s Internet Controls: Following China’s Footsteps”. The Diplomat, 11 December 2019, https://thediplomat.com/2019/12/vietnams-internet-control-following-in-chinas-footsteps
[46] Gary King, Jennifer Pan, and Margaret E. Roberts. 2017. “How the Chinese Government Fabricates Social Media Posts for Strategic Distraction, not Engaged Argument.” American Political Science Review, 111, 3, Pp. 39, https://gking.harvard.edu/files/gking/files/50c.pdf [47] Linh Pham, “Vietnam vows to identify social network users”. Hanoi Times, 11 November 2020. http://hanoitimes.vn/vietnam-vows-to-identify-social-network-users-314784.html.
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EXECUTIVE SUMMARY
- About 70 percent of Vietnamese citizens are un(der)banked and have limited or no access to financial services.
- Their lack of credit histories severely limits their access to credit markets as lenders cannot assess their creditworthiness.
- Fintech startups provide digital credit scoring services to lenders in Vietnam to assess credit risk of the un(der)banked. Risk assessment is based on alternative data collected from users’ smartphones and processed through machine learning algorithms.
- Digital credit scoring provides more consistent, efficient, accurate and timely credit scores than traditional scoring based on economic data, especially credit repayment history.
- Digital credit scoring though raises concerns about unfair discrimination against the underbanked in credit access, the loss of privacy and ability to make choices and personal data protection.
- This technology is deployed in Vietnam in a legal vacuum. A legal framework is proposed that aims to balance normative trade-offs between innovation and public protection.
* Nicolas Lainez is Visiting Fellow with the Regional Economic Studies Programme at ISEAS – Yusof Ishak Institute.His research is located in the field of economic anthropology, covering credit and household debt, formal and informal finance, migration and trafficking, family and care economies. He is currently working on Financialisation and credit and consumer lending growth in Vietnam.
INTRODUCTION
Big data and artificial intelligence (AI) are transforming the credit industry worldwide. This process is clearly visible in Vietnam, an emerging lower-middle-income economy where credit markets are undergoing rapid liberalization and transformation. Lenders increasingly assess borrowers’ creditworthiness – defined as the likelihood and willingness to repay their loans – using ’digital credit scoring’. This technology combines big data and machine learning algorithms to generate scorecards about loan applicants’ risk profile. It promises efficiency, accuracy and speed in predicting credit risk. With 70 million unbanked and underbanked citizens short on credit history and access to banking services, digital credit scoring emerges as a magic tool to foster financial inclusion in Vietnam. However, it also raises public concern about opacity, unfair discrimination, and privacy threats, especially in the more developed markets.[1]
Regulation is critical to foster innovation while safeguarding public interest. The problem is that Vietnam lags in having regulations covering digital credit scoring. As a result, the lending industry deploys it at scale without a proper regulatory framework. This article addresses this issue from a legal perspective. After describing the pros and cons of digital credit scoring in Vietnam, it suggests novel ways to regulate it. The goal is to provide oversight over this technology and make the process from data collection to credit decisions transparent, accessible and fair. This study’s assumption is that adequate regulation is vital to delivering big data and machine learning’s promise in the financial services market, while ensuring fairness and privacy protection. The legal proposal aims to amend and complement credit and data privacy legislation in Vietnam.
THE PROS OF DIGITAL CREDIT SCORING
The financial industry is driven by information. In particular, lenders need accurate and up-to-date data on borrowers to determine loan pricing and terms. This is to decrease exposure to bad debt and maximize profit. However, lenders have imperfect information on their customers. Data can be difficult to obtain in countries where financial exclusion prevails and citizens are not sufficiently served by financial institutions. Financial exclusion is high in Southeast Asia. In Vietnam, 70 percent of 98 million Vietnamese are un(der)banked and therefore lack access to formal financial services.[2] Lenders and credit scoring firms assume that many of these individuals seek loans and have the ability to repay them.
To achieve financial inclusion, credit scoring startups take an ’all data is credit data’ approach. They take advantage of the recent introduction of digital technologies and services, new electronic payment systems, and smart devices to collect alternative data. They capitalise on high mobile phone and internet penetration rates in Southeast Asian. In Vietnam, the internet penetration rate reaches 52 percent and smartphone ownership reaches 72 and 53 percent in urban and rural areas, respectively, in 2016.[3] In 2017, 132 million mobile devices were in circulation.[4] Credit scoring firms glean alternative data from borrowers’ mobile devices, which they feed to machine learning algorithms for generating detailed and intimate knowledge about their behaviour and risk profile. These are derived from telco and mobile data, social network data, browser data, e-commerce, and financial transaction data.
Credit scoring startups make an argument for efficiency by comparing their scorecards with traditional scoring based on economic data and simple statistical tools. Their marketing presents the latter as a system of “archaic credit data and scoring technologies of the 70s”.[5] In Vietnam, the Credit Information Center (CIC) under the State Bank is the official public credit registry. It collects, processes and stores credit data, analyses, monitors and limits credit risk, scores and rates credit institutions and borrowers, and provides credit reports and other financial services. It gleans credit data from 670,000 companies and 30.8 million individuals with existing credit history.[6] The CIC operates alongside the Vietnam Credit Information Joint Stock Company (PCB), a smaller private credit registry created by 11 banks in 2007. The CIC and PCB provide essential services to the financial community, but use traditional credit data and scoring methods that limit their reach and scope. The CIC, for instance, takes several days to deliver individual reports and lacks a national credit database system with a unique profile for every citizen.
Credit scoring startups put forward efficiency, accuracy and speed to set themselves apart from credit registries and promote their sophisticated technology. Their predictions offer higher accuracy than traditional scoring because they leverage a much larger number of data points relevant to risk behaviour and analyse them with AI. They also increase speed to provide ’real-time credit decision’, as stated in CredoLab’s privacy policy.[7] Banks and consumer lending companies also seek to provide a ’fast and easy’ credit experience. Kalidas Ghose, CEO of FE Credit, the leading consumer lender in Vietnam and a subsidiary of VPBank, promotes the power of big data to foster financial inclusion and credit growth in Vietnam. At first, FE Credit developed an “enhanced process for instant application in 1 click” that takes less than two days: an SMS is sent to the customer, a “fair price” is calculated based on a “highly reliable score”, the customer applies for a loan on “1 click”, the sales team calls back in less than 30 min, an appointment is made in less than 24 hours to close the deal, and the loan is disbursed within 12 hours. This system leverages telco data provided by Viettel (63.6 million users), Mobifone (20.5 million) and Vinaphone (34.6 million) to assess risk.[8]
As if two days were not fast enough, FE Credit then developed $NAP, an automated lending platform that digitises the loan application process and shortens the time for approval and disbursement to 15 minutes.[9] $NAP reduces customer recruitment cost and lowers the risk of losing them due to cumbersome procedures. According to Ghose, a “strong risk management process”, based on “extensive usage of big data analytics”, has resulted in “an ability to take on higher exposure with better customers, delivering them top-up loans earlier in their lifecycle, and expansion of target base by using alternate behavioral data in partnership with telcos, e-commerce and utility companies” (ibid.). In Ghose’s opinion, new technological practices “have helped us to serve our customer faster, easier, deliver the right product to them, at the right time and right place. And as a result, we can now increase our revenues while reducing risk as well as operations cost” (ibid.). According to FE Credit, $NAP has succeeded in attracting customers – “2 million application downloads, 540,000 application registrations, and 200,000 successful disbursals.[10] $NAP will most likely set the path for a ’fast and easy credit’ experience in Vietnam. Big data and machine learning algorithms are critical to achieving this goal. They deliver accurate predictions at a glance and cut down bureaucracy and human discretion that prevail in traditional credit scoring and human decision, as the narrative goes. They make possible the next frontier of consumer lending: the automation of lending.
THE CONS OF DIGITAL CREDIT SCORING
Digital credit scoring promises to foster financial inclusion and make customised credit products available to the un(der)banked. But can machine learning algorithms and big data live up to their promise of distributional fairness and privacy protection?
There are conflicting public perceptions of big data and AI. A common assumption is that this technology is truthful, objective and neutral. This positive view gives AI authority over humans to take on heavy responsibilities and make vital decisions. Meanwhile, the general public worries that algorithmic governance may be biased and discriminate against vulnerable groups, including the poor, women and racial, ethnic, religious and sexual minorities.[11] The hidden nature of machine learning algorithms exacerbates these anxieties. Algorithms are popularly described as ’black boxes’ because they run autonomously, especially unsupervised learning. The reason is because they operate sometimes without disclosing even to their programmers how they calculate and what datasets or combinations of datasets they use to predict the most accurate outcomes. For risk assessment, borrowers fail to understand how algorithms make predictions based on data from call and SMS logs and social media networks A widespread fear is that ’opaque’ algorithms will standardise past prejudices and biases into discriminatory rules that will reinforce inequality. If these fears are founded, they ignore an important consideration, which is that the danger of discrimination lies not in algorithms but in humans who classify and rank other humans permanently, and design, programme, and train algorithms to perform certain operations and reach determined outcomes.
Another area where digital credit scoring raises anxieties is consumer autonomy and privacy. Autonomy refers to consumers’ ability to make choices and decisions free from outside influence. Consumer lending markets use credit pricing and customisation to discipline behaviour as well. Loan prices and conditions result from the sorting and slotting of people in “market categories” based on their economic performance.[12] In the US, these market categories are linked to credit scores that determine credit access, pricing and conditions. However, they also determine one’s ’life chances’ because credit scores measure creditworthiness and trustworthiness. A favourable credit score is required to purchase a home, a car, a cellphone on contract with no security deposit, seek higher education, start a new business, and secure a job with a good employer. Conversely, bad scores hamper one’s life chances. Credit scores thus make and undo fates.
In Vietnam, it is too early to observe behaviour change and nudging among consumers based on digital credit scoring, as it at an early stage of deployment. Yet, banks and lending companies increasingly use this technology to assess creditworthiness and make traditional and digital credit widely accessible to borrowers. They also take the initiative to educate people about credit scoring and to advise on how to adjust behaviour to improve scores and chances of obtaining loans.[13] The media pay some attention to digital credit scoring. For instance, there has been a news clip where Vietnamese students are advised on how they are to behave to secure loans and fund their studies and consumption in the US.[14] The journalist shares “the reasons why one should accumulate credit points and how one learns to build credit effectively and safely while living in the US”. These materials reveal the emergence of digital credit scoring and its normative power for guiding behaviour in Vietnam.
A last issue of growing concern is cybersecurity or the fraudulent use of data for profit. In Vietnam, new wealth fuels cybercrime. With rapid economic and digital growth and a growing and impressive number of internet users (66 percent out of 98 million inhabitants) and social media users (60 percent), Vietnam is an “El Dorado for cyber-offenders”.[15] Cyberattacks and data breaches are common. In 2019, the Government Information Security Commission reported 332,029 access attacks (using improper means to access a user’s account or network) and 21,141 authentication attacks (using fake credentials to gain access to resources from a user).[16] These data are just the tip of the iceberg in a country where cybercrime remains largely underreported.[17] The media regularly report data breaches. In 2019, the Maritime Commercial Joint Stock Bank (MSB) suffered a leak of personal data. A list of two million account holders’ names, ID, phone numbers, addresses, birthdates, gender, emails, and occupations was posted in a website trading stolen data. It is unclear if the data were leaked by an employee from the bank or by a hacker who attacked the bank’s database.[18] In 2018, the police dismantled a group of 12 cybercriminals who broke into the server of an unspecified bank to access the accounts of customers who had not subscribed to online banking services. After fraudulently subscribing to these services, they impersonated bank officers and called customers to ask for an OTP to disburse a loan. They use OTPs to log into the accounts of 560 customers to steal VND43 billion (US$1.8 million).[19]
REGULATING DIGITAL CREDIT SCORING
Big data and AI make big promises but pose big challenges as well. These challenges require regulation, oversight and safeguards. However, in its current state, Vietnamese law is ill-equipped to regulate big data and AI, including digital credit scoring. This technology calls for revising credit law, especially matters related to creditworthiness assessment. In Vietnam, credit law is scattered across several instruments. The 2010 Law on Credit Institutions is the general framework, but it addresses creditworthiness tangentially. Other rules appear in circular 39/2016/TT on lending transactions of credit institutions, circular 43/2016/TT on stipulating consumer lending by financial companies, and circular 02/2013/TT on conditions of debt restructuring. The regulations on creditworthiness require creditors and regulators to continually assess and categorise debtors and loans in risk categories. Since these regulations were designed before the advent of AI, they contain gaps and inadequacies.
First, lenders are required to assess borrowers’ creditworthiness using traditional, financial and (non-)credit data (“qualitative and quantitative, business and administration situation”), which they collect from borrowers and the CIC. This framework is inadequate to regulate the gleaning and processing of alternative data by credit scoring startups.
Second, credit law does not ban discrimination against vulnerable borrowers through sensitive characteristics like race, religion, national origin, sex, marital status, and so forth. Vietnam does not have any specific law about discrimination – except the articles 16 in the Constitution and 12 in the law on gender equality. If credit scoring firms collect alternative data comprising sensitive characteristics and use them to assess risk, they may (in)advertently (re)produce unfair discrimination.
Third, credit regulation requires credit institutions to provide borrowers with a reason for rejecting loan applications. However, the law does not grant borrowers the right to correct credit data, appeal human or automated decisions, and request explanations on how decisions are made, and suggestions on how to improve their credit record and scoring to avoid future improper rejections.[20]
On the whole, legal provisions on creditworthiness assessment leave lenders unaccountable for their decisions and adds an extra layer of opacity to credit scoring and decision-making, thereby putting borrowers at a disadvantage.
The goal for industry players from the fintech and finance sectors, for the regulator and for society is to negotiate normative trade-offs between efficiency and fairness, innovation and public interests that are to be represented in the amended regulation.[21]
The regulator could issue a decree that would update credit law. It could limit what data is collected, how it is used, under what circumstances it can be transferred, stored and sold, and whether and how it should be shared with the CIC.
The decree could also ensure that consumers are given the possibility to oversee the entire scoring process and have the right to explanation in case of rejection, appeal for rejection, and correction of credit data to improve their chances of approval in the future.
The decree could also detail safeguards and procedures on how to open the scoring system for inspection by a public regulatory body – for instance the State Bank of Vietnam. The decree could also address the issue of bias and discrimination against vulnerable groups by banning the use of sensitive characteristics.
The regulator could design this decree and negotiate optimal compromises between efficiency and fairness with industry players and civil society organisations.
Another area of concern raised by big data and AI is privacy. Laws on personal data protection are comprehensive but scattered in many statutes and decrees. The reference legislation is Law 86/2015/QH13 on Cyber-Information Security (CIS). Other relevant regulations can be found in Law 67/2006/QH11 on Information Technology (IT).[22] The CIS and IT require data collecting companies to obtain consent from data owners prior to gleaning personal data. For the CIS, consent requirement shall include the “scope and purpose of collection and use of such information” (art 17a). According to the IT, companies must “inform those people of the form, scope, place and purpose of collecting, processing and using their personal information” (art 21.2a). Data owners have the right to “update, alter or cancel their personal information collected or stored” by companies and to stop these companies from “providing such personal information to a third party” (CIS, art 18.1). It also requests data collectors to “delete the stored personal information when they have accomplished their use purposes or the storage time has expired” (CIS, art 18.3). Art 22 of the CIS stresses that data owners have a right to “inspect, correct or cancel such information” (see also art 22 of the IT).
All-in-all, the law provides data owners a comprehensive set of rights and protections against companies that collect personal data. It also promotes transparency and accountability. However, it does not delimit what data companies can collect to protect privacy.
This gap is problematic given the severe implications big data and AI have in people’s lives. Legal scholars call for minimising data collection, meaning banning the collection and “processing of certain types of personal data – such as relationship, health and social media data – that are considered intrinsic to a consumer’s identity and autonomy”.[23] This suggestion raises a challenging question: How does one determine what data are intrinsic and therefore non-commodifiable for preserving privacy and intrinsic identities?[24]
This thorny question requires extensive political, societal and legal debate, negotiation, and compromise. The Vietnamese government could address it by launching a consultation with industry players, international bodies, data protection organisations, and civil society associations to determine what personal data should or should not be collected and commodified for credit scoring purposes.
The goal would be to find a compromise between efficiency in risk assessment and credit decision-making while preserving the data owner’s privacy and intrinsic identities. The results of this consultation could be made enforceable by issuing a decree that amends privacy regulations including CIS and IT. Meanwhile, the authorities should ensure that credit scoring firms and local and international lenders operating in Vietnam follow the law on personal data protection to respect privacy.
CONCLUSION
It is important to follow the deployment and study the impact of digital credit scoring in Vietnam. This technology stirs mixed feelings: excitation over prospects for greater efficiency and potential for fostering inclusion, and concern about discrimination and privacy threats. It is too early for a comprehensive evaluation of the pros and cons of digital credit scoring in Vietnam, as this technology is being deployed as we speak. Nevertheless, regulation is vital to support fintech innovation and positive socioeconomic change.
Given that digital credit scoring thrives in legal limbo in Vietnam, the regulator should address new challenges posed by big data and AI and reflect on normative trade-offs without further ado. Implementing legal safeguards and human oversight to support efficiency and accuracy while preserving public interest and privacy is an imperative. The authorities will also have to make sure that domestic and foreign credit scoring firms and lenders comply with proposed changes in regulation.
ISEAS Perspective 2021/20, 26 February 2021.
ENDNOTES
[1] Nikita Aggarwal, “The Norms of Algorithmic Credit Scoring,” SSRN Electronic Journal, 2020, https://doi.org/10.2139/ssrn.3569083; Citron Danielle and Franck Pasquale, “The Scored Society: Due Process for Automated Predictions,” Washington Law Review 89, no. 1 (2014): 1–34.
[2] World Bank, The Little Data Book on Financial Inclusion 2018 (Washington DC: World Bank, 2018), 160.
[3] Hai Yen Nguyen, “Fintech in Vietnam and Its Regulatory Approach,” in Regulating FinTech in Asia, ed. Mark Fenwick, Steven Van Uytsel, and Bi Ying, Perspectives in Law, Business and Innovation (Singapore: Springer, 2020), 121.
[4] CSIRO, “Vietnam Today: First Report of the Vietnam’s Future Digital Economy Project” (Hanoi: Commonwealth Scientific and Industrial Research Organisation, 2018), 3.
[5] https://www.trustingsocial.com/about-us (accessed 20 November 2020)
[6] https://cic.org.vn (accessed 20 November 2020)
[7] https://www.credolab.com/privacy-policies/english (accessed 20 November 2020).
[8] Kalidas Ghose, “Financial Inclusion- Leveraging the Mobile Device: The FE Credit Experience” (Hanoi: FE Credit, 2018), https://www.mmaglobal.com/files/speaker_presentations/5._kalidas_ghose_-_fe_credit_.pdf (accessed 20 November 2020).
[9] Saigon Times, “FE Credit Reshapes Vietnam’s Consumer Finance Industry with Its Disruptive ’$nap’ Digital Lending Platform,” Saigon Times, January 11, 2019, https://english.thesaigontimes.vn/65498/fe-credit-reshapes-vietnam’s…nce-industry-with-its-disruptive-$nap-digital-lending-platform.html (accessed 20 November 2020).
[10] https://snap.fecredit.com.vn/en (accessed 20 November 2020)
[11] see, i.e., Safiya Umoja Noble, Algorithms of Oppression: How Search Engines Reinforce Racism (New York: New York University Press, 2018).
[12] Marion Fourcade and Kieran Healy, “Classification Situations: Life-Chances in the Neoliberal Era,” Accounting, Organizations and Society 38, no. 8 (November 2013): 561-572.
[13] FE Credit, “Điểm Tín Dụng Xấu Là Gì? Làm Gì Khi Điểm Tín Dụng Xấu? (Phần I) [What Is a Bad Credit Score? What to Do When a Bad Credit Score? (Part I)],” May 23, 2016, https://fecredit.com.vn/taichinh/diem-tin-dung-xau-la-gi-lam-gi-khi-diem-tin-dung-xau-phan (accessed 20 November 2020).
[14] Anh Duong, “Credit Score (Điểm Tín Dụng) – Yếu Tố Quan Trọng Trong Cuộc Sống Của Du Học Sinh Tại Mỹ [Credit Score: An Important Factor in the Life of International Students in the US],” San Sang Du Hoc, June 28, 2018, https://sansangduhoc.vn/tin-tuc/credit-score-diem-tin-dung-yeu-to-quan-trong-trong-cuoc-song-cua-du-hoc-sinh-tai-my.html (accessed 20 November 2020).
[15] Tech Collective, “Vietnam Suffers the Most Southeast Asia Offline Cyber Attacks Q2 2019,” KrAsia, August 9, 2019, https://kr-asia.com/vietnam-suffers-the-most-southeast-asia-offline-cyber-attacks-q2-2019 (accessed 20 November 2020).
[16] Vietnam Security Summit, “Cyber Security in the AI and Big Data Era: Event Brochure” (Vietnam Security Summit, November 10, 2020), https://securitysummit.vn/docs/2020/Brochure_Vietnam_Security_Summit.pdf (accessed 20 November 2020).
[17] Hai Thanh Luong et al., “Understanding Cybercrimes in Vietnam: From Leading-Point Provisions to Legislative System and Law Enforcement,” International Journal of Cyber Criminology 13, no. 2 (2019): 294.
[18] Lam Bao, “Two Million Account Details from Major Vietnamese Bank Leaked Online,” November 22, 2019, https://e.vnexpress.net/news/news/two-million-account-details-from-major-vietnamese-bank-leaked-online-4016176.html (accessed 20 November 2020).
[19] VNS, “Sophisticated Cyber Crime on the Rise in Việt Nam,” Viet Nam News, August 14, 2018, https://vietnamnews.vn/society/463726/sophisticated-cyber-crime-on-the-rise-in-viet-nam.html (accessed 20 November 2020).
[20] A good credit scoring will differentiate the different grades of credit risk a borrower has and inevitably there will be high risk borrowers that lenders would not want to accept given the high cost of credit that would impact lenders financial performance.
[21] A more comprehensive analysis would require exploring the legal safeguards implemented in more developed markets. See Aggarwal, “The Norms of Algorithmic Credit Scoring” for a brilliant study of the UK case, and Danielle, Citron and Franck Pasquale, “The Scored Society: Due Process for Automated Predictions.” Washington Law Review 89, no. 1 (2014): 1–34 for a study of the U.S. case.
[22] For a description of other laws, see Ha Quyen Hoang Nguyen, “Protecting Personal Data on Cyberspace: Enterprise’s Obligations under the Laws of Vietnam,” December 2, 2019, https://www.inhousecommunity.com/article/protecting-personal-data-cyberspace-enterprises-obligations-laws-vietnam/ (accessed 20 November 2020).
[23] Aggarwal, “The Norms of Algorithmic Credit Scoring,” 17.
[24] For a similar discussion, see also World Bank, CGAP, “Data Protection and Privacy for Alternative Data” (Washington, D.C: World Bank, CGAP, 2018), 13–14.
| 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
- Major power competition, especially between the US and China, has negatively affected the ADMM-Plus’ decision-making process and institutional outcomes.
- The ADMM-Plus’ confidence-building measures aimed at incident prevention and crisis management tend to focus more on instituting processes than delivering results. Their practical value remains elusive as they have never been tested in a crisis situation.
- Emerging minilateral security arrangements among the US and other major powers in the Indo-Pacific are unlikely to replace the ADMM-Plus. However, they do threaten to eclipse it in terms of speed and efficiency in responding to geostrategic shifts and crises in the region.
- The ADMM-Plus must be more strategic and less bureaucratic in the design of its agenda and activities. It needs to focus more on risk control at the policy dialogue and operational levels.
*Hoang Thi Ha is Fellow and Lead Researcher (Political-Security) at the ASEAN Studies Centre, ISEAS –Yusof Ishak Institute.
INTRODUCTION
Established in 2010, the ASEAN Defence Ministers Meeting-Plus (ADMM-Plus) occupies pride of place in the ASEAN-led regional architecture, being recognised by its 18 members as “the highest ministerial defence and security consultative and cooperation mechanism for regional security issues”[1] and “de facto multilateral security mechanism in the Asia-Pacific”.[2] Its steady development has contributed significantly to robust multilateral defence diplomacy in Southeast Asia and the broader region over the past decade.
At the policy dialogue level, the frequency of ADMM-Plus ministerial engagements increased from triennial (2010) to biennial (2014) and annual (2018). Informal ‘plus one’ meetings between ASEAN defence ministers and their American, Chinese, Japanese and most recently Australian counterparts have been introduced and gradually regularised in parallel. At the operational level, practical cooperation under the purview of respective Experts’ Working Groups (EWGs) has expanded from five to seven areas, and now cover maritime security, counter-terrorism, humanitarian assistance and disaster relief (HADR), peacekeeping operations, military medicine, humanitarian mine action and cyber security.
Alongside the steady progression and expansion of the ADMM-Plus over the past decade, the regional geostrategic landscape has changed dramatically, underlined by three major trends. First, there is the rise of China and Beijing’s activism in rewriting the rules and reasserting its role and influence in the regional and global order.[3] Second, there is the shift in US-China relations from engagement to strategic competition.[4] Third, there is the emergence of the Indo-Pacific construct[5] and minilateral security arrangements by and among the US and other major powers[6] in response to China’s rise. Shivshankar Menon describes this uncertain and fluid landscape as one that is “between orders”,[7] characterised by increasing fragmentation and polarisation from both within and without. The pursuit of cooperative security championed by ASEAN-led institutions has become more fraught in this increasingly contested region. This Perspective examines whether the ADMM-Plus in its current institutional set-up is adequately equipped to cope with these challenges, especially in the maritime domain.
THE ADMM-PLUS AND MAJOR POWER COMPETITION
ASEAN is no stranger to managing the competing interests of major powers in its mechanisms. Institutional balancing – defined by Kai He as “countering pressures or threats through initiating, utilising, and dominating multilateral institutions”[8] – is inherent within and across ASEAN-led mechanisms that include the ASEAN Regional Forum (ARF), ASEAN Plus Three (APT), East Asia Summit (EAS) and ADMM-Plus. While the outcomes are in the form of cooperative security, the process always entails the whole spectrum of “institutional struggle, confrontation, bargaining, negotiation, compromise and balance among states within institutions”.[9] Navigating between competition and cooperation is part and parcel of ASEAN processes, as it is in this in-between-ness that regional states exercise their agency and advance their interests.
Yet, the current abyss in US-China relations, and other sub-sets of major power contestation that are independent from but not unrelated to US-China rivalry, have exerted unprecedented pressure on ASEAN-led mechanisms to the point of polarising their decision-making processes and complicating their institutional outcomes.[10] The ADMM-Plus is not insulated from this fraught situation. For example, the granting of Observership to ADMM-Plus EWGs’ activities to the UK, France, Canada and the EU has been in abeyance since 2017 due to opposition from Plus members, especially Russia and China. Disagreements between the US and China over the wording on the South China Sea (SCS) resulted in the ADMM-Plus failing to issue a joint declaration (JD) for the first time in 2015.[11] ASEAN has since skipped this strenuous exercise of negotiating the JD, and decided to issue ADMM-Plus joint statements on specific topics and JDs only on special occasions. This bureaucratic tweak has helped avert a recurring impasse but has had no bearing on the deepening security dilemma in the region. Differences over the SCS issue continued to haunt the forum, and almost derail the issuance of the Joint Declaration on Strategic Security Vision of the ADMM-Plus at its 10th anniversary in 2020.[12]
As noted by Tan See Seng in 2016, “it is unlikely that the ADMM-Plus will transform the increasingly toxic state of the security environment of the region and overturn its massive trust deficit.”[13] The negotiating process leading to the ADMM-Plus Joint Declaration on Strategic Security Vision last year unveiled anything but a common strategic vision among its members. Rather, it demonstrated the widening strategic chasm between China and Russia on one side and the US and its allies and partners on the other. Even how this broader region is to be called – i.e. Asia-Pacific or Indo-Pacific – is intensely contested since these terms signify contrasting visions among the Plus countries for the future regional order.
Thus, the question facing the ADMM-Plus at this juncture is whether it can withstand, and to some extent mediate, these competitive forces through strategic dialogue and practical cooperation. The ADMM-Plus is not the prominent forum for strategic dialogue on traditional security concerns. Its focus has always been on practical cooperation which in turn places the emphasis on non-traditional security issues. This is a design feature, since one of the ADMM-Plus’ key aims is to “strengthen regional defence and security cooperation through conduct of concrete and practical cooperation”.[14] According to Nick Bisley, “defence diplomacy is popular in Asia because it is focused on concrete concerns and values the practical and the technical over the abstract and political.”[15]
Yet, as Bisley also points out, while defence diplomacy “may be technical in means, it is inherently political in its ends. It is about using defence personnel and assets to communicate, negotiate and more generally manage relations between states.”[16] As the political-technical nexus is never far from the surface, the defence ministers and ADSOM-Plus leaders at the policy dialogue level must be more upfront in expressing their concerns over major power rivalries and recognising the need to institute risk control measures that include developing norms of engagement and convening ADMM-Plus emergency meetings, among others. The objective should focus more on recognising the differences and managing them than putting up an appearance of solidarity.
MEASURING PROGRESS THROUGH PROCESS?
The ADMM-Plus has made its mark in building mutual confidence and promoting norms of engagement among the participating militaries through practical cooperation at the operational level. This has enabled security cooperation to go “beyond diplomatic dialogue and towards more practical, task-oriented frameworks, agendas, and exercises.”[17] In fact, it is the operational aspect involving military personnel and assets in joint activities and exercises that make the ADMM-Plus stand out in the ASEAN-led architecture, especially vis-à-vis the foreign affairs-led ARF. There have been 20 large-scale combined military exercises thus far that cut across the ADMM-Plus’ seven priority areas.[18]
Some of these practical CBMs were designed with the objective of crisis management and incident prevention in mind. For example, the Code for Unplanned Encounters at Sea (CUES) was practised during the ADMM-Plus maritime security field training exercise (FTX) in May 2019.[19] The ADMM-Plus in 2018 expressed in-principle support for the ADMM’s Guidelines for Air Military Encounters and the intention to “explore the application of these guidelines by the ADMM-Plus”.[20] Similarly, the ASEAN defence ministers in 2019 agreed to extend the ASEAN Direct Communications Infrastructure (ADI) to the eight Plus countries.[21]
While these guidelines, protocols and norms of engagement are regarded as important deliverables of the ADMM-Plus, their practical value in crisis situations remains untested. On closer examination, these protocols fall into the trap of instituting processes instead of delivering results. As an example, there are simply too many bureaucratic procedures and contextual requirements built into the ADI to make it an effective hotline for rapid response in times of emergency and crisis.
This procedure-bound mindset also led ASEAN to sleepwalk into the current impasse regarding the admission of observers to the EWGs’ activities. The concept paper on observership highlights the principle of ASEAN centrality, with the ADMM having “the prerogative to determine the criteria to select the non-Plus countries as observers”.[22] Yet, observership applications must be approved by the ADSOM-Plus by consensus, giving the Plus countries veto power, which is exactly what China and Russia are currently exercising. This was a lapse in strategic judgement as ASEAN was too engrossed in bureaucratic procedures in managing the ADMM-Plus portfolio.
Last but not least, practical confidence-building measures under the ADMM-Plus run the risk of lagging behind new security dynamics and developments in the region, especially the use of grey-zone tactics by maritime law enforcement agencies and maritime militias. Both China and Vietnam operate maritime militia forces and the Philippines is considering establishing one.[23] China recently upped the ante with its new Coast Guard Law that allows its coast guard to use weapons against foreign ships,[24] while Indonesia recently armed its maritime enforcement vessels with machine guns.[25] The CUES and other ADMM guidelines of maritime interaction and air encounters are not quite relevant and effective in this grey zone warfare. Besides, these guidelines’ geographic scope only applies to the high seas whereas maritime incidents in the region mainly take place in disputed exclusive economic zones (EEZs) and territorial waters as a result of overlapping sovereignty and jurisdiction claims.
BUY-IN FROM THE PLUS COUNTRIES
Non-ASEAN countries, especially the US and its allies such as Australia and Japan, maintain a longstanding ambivalence towards ASEAN as the architect and driver of the region’s institution-building. On the one hand, the ADMM-Plus and other ASEAN-led mechanisms provide useful platforms for them to exert their influence in shaping the regional security environment. On the other hand, the embedded ASEAN-centric incremental and consensual approach is considered a permanent drag on its efficacy and the delivery of concrete results. Therefore, ASEAN-led institutions are among “many policy options and alternative frameworks” for these states and “the increased capacity and initiative displayed by China on both economic and maritime fronts with the turn of the 21st century only adds to the incentives to push alternative proposals that are both more exclusive in their participation and more major power-centric in their preoccupations.”[26]
In recent years, exclusive minilateral alignments among like-minded security partners have increased in both variety and intensity. According to Sarah Teo, “minilateralism could prove more effective than multilateralism in responding to specific issues and move regional cooperation beyond the proverbial low-hanging fruits.”[27] In 2020, the ADMM-Plus was dormant in terms of its operational activities, which is technically attributed to the fact that most of these activities had been undertaken in previous years according to the timelines specified in the respective EWG 2017-2020 work plans. Even then, there is no denial of the fact that ADMM-Plus, with its broad and diverse membership, almost always moves at a slow pace. For example, before a field exercise can take place, the conceptualisation and planning stages for it may take a couple of years and involve initial, mid-term and final planning conferences and a preceding table-top exercise (TTX).
In contrast, major power-centric exercises remained very active throughout 2020, especially among the US-Japan-India-Australia Quadrilateral Strategic Dialogue (Quad) members in different configurations that include plurilateral, trilateral and bilateral (Table 1). Their narrow membership with high levels of strategic convergence and interoperability allows for swift deployments and nimble responses despite all the disruptions caused by COVID-19. The Quad’s scope of work remains under-defined and under-institutionalised – perhaps intentionally so to allow for flexibility[28] – but it clearly signals its members’ return to or re-focus on balance of power to countervail a risen China. The Quad serves an entirely different purpose from the ADMM-Plus; nor does it seek to replace or compete with the ADMM-Plus institutionally. Instead, it raises questions and concerns over the relevance of the ADMM-Plus in an increasingly contested region.
Table 1: Major power-centric naval exercises in the Indo-Pacific in 2020[29]
| January | US-Japan Iron Fist 2020 exercise |
| February | US-Japan advanced warfighting training (BAWT)US-Japan Resilient Shield 2020 exercise |
| April | US-Australia combined operations in the South China SeaUS-Japan joint operations while sailing through the Andaman Sea |
| June | India-Japan passing exercise (PASSEX) in the Malacca Strait |
| July | US-Japan Mine Warfare Exercise (MIWEX) 2JA 2020 off Japan’s coastUS-India joint military exercise in the Indian Ocean |
| August | Exercise Rim of the Pacific (US-led, China excluded)US-Japan joint exercises in the waters and airspace near Japan |
| September | Pacific Vanguard Exercise (US, Japan, Australia, ROK) |
| October | US-Japan-Australia naval exercise in the South China SeaUS-Japan Keen Sword 21 exercise |
| November | Malabar Naval Exercise (US, India, Australia, Japan) |
| December | Russia-China joint aerial patrol over the Sea of Japan and East China SeaUS-France-Japan integrated exercises in the Philippine Sea |
As and when these major powers shift their focus back to ASEAN, their respective proposals to strengthen defence cooperation under the informal ‘ADMM plus one’ configuration also presents a conundrum for ASEAN. China especially has pushed for a more exclusive form of ASEAN-China defence cooperation to reinforce the narrative and visibility of China as the first among equals among all ASEAN’s Dialogue Partners. The first ASEAN-China maritime exercise was conducted with much publicity in 2018.[30] ASEAN balanced this out with a maritime exercise with the US in 2019[31] and another with Russia[32] in the near future. The same dynamic has been observed in the separate informal engagements that have taken place between ASEAN defence ministers and their counterparts from China and the US (since 2011), Japan (since 2016) and Australia (2020).
On the one hand, these engagements may bring “expertise, perspectives and resources from extra-regional countries” that “benefit ASEAN member countries in building capacity to address shared security challenges” – a very important objective of ASEAN’s defence diplomacy.[33] On the other hand, they may put the ADMM-Plus at the risk of bifurcation and/or multifurcation along US-China rivalry faultlines. ASEAN’s innate institutional balancing has thus far managed this competitive dynamic well and turned it to cooperative outcomes. But it must watch out for the potentiality of these exclusive ‘Plus One’ engagements gradually sucking the oxygen out from the ADMM-Plus’ collective undertaking.
CONCLUSION
While “resolution of major power conflicts is beyond the capacity of ASEAN frameworks”,[34] the ADMM-Plus still holds the significance of mediating and alleviating their competitive dynamic through normative rhetoric, policy dialogue and practical cooperation. To this end, the ADMM-Plus will need to be more strategic and less bureaucratic in the design of its agenda and activities. It must take a hard look at the unfolding rivalries in the region, and place greater emphasis and urgency on risk control at both the policy dialogue and operational levels. The ADMM-Plus’ impressive track record in a short span of ten years is cause for celebration, but it should not be reason for complacency. If the ADMM-Plus contents itself with the comfort zone of confidence building and the process-bound mindset, the ARF, with a protracted history of confidence building and fading relevance in today’s region, provides a cautionary tale.
ISEAS Perspective 2021/13, 10 February 2021.
ENDNOTES
[1] Hanoi Joint Declaration on the First ASEAN Defence Ministers’ Meeting-Plus, 12 October 2010, https://www.asean.org/wp-content/uploads/images/archive/defence/JointDeclaration101012.pdf
[2] Chairman Statement of the 5th ADMM-Plus, 20 October 2018, https://asean.org/storage/2018/10/Final-5th-ADMM-Plus-Chairmans-Statement.pdf
[3] Nadège Rolland, China’s Vision for a New World Order, The National Bureau of Asian Research, NBR Special Report no. 83, 27 January 2020, https://www.nbr.org/publication/chinas-vision-for-a-new-world-order.
[4] The White House, United States Strategic Approach to the People’s Republic of China, May 2020, https://www.whitehouse.gov/wp-content/uploads/2020/05/U.S.-Strategic-Approach-to-The-Peoples-Republic-of-China-Report-5.20.20.pdf.
[5] The White House, Remarks by President Trump at APEC CEO Summit, Da Nang, Vietnam, 10 November 2017, https://www.whitehouse.gov/briefings-statements/remarks-president-trump-apecceo-summit-da-nang-vietnam; Australia’s 2017 Foreign Policy White Paper, https://www.fpwhitepaper.gov.au/foreign-policy-white-paper; Indian Prime Minister Narendra Modi’s Prime Minister’s Keynote Address at Shangri La Dialogue on 1 June 2018, https://mea.gov.in/SpeechesStatements.htm?dtl/29943/Prime_Ministers_Keynote_Address_at_Shangri_La_Dialogue_June_01 _2018; Japan’s Free and Open Indo-Pacific Strategy, https://www.asean.embjapan.go.jp/files/000352880.pdf.
[6] Tanvi Madan, “What you need to know about the “Quad”, in charts”, Brookings, 5 October 2020, https://www.brookings.edu/blog/order-from-chaos/2020/10/05/what-you-need-to-know-about-the-quad-in-charts
[7] Shivshankar Menon at the Regional Outlook Forum 2021, ISEAS – Yusof Ishak Institute, 6 January 2020.
[8] Kai He, “Institutional Balancing and International Relations Theory: Economic Interdependence and Balance of Power Strategies in Southeast Asia”, European Journal of International Relations, September 2008.
[9] Ibid.
[10] Alice Ba, “US-China Relations and Regional Institutions: Challenges and Paths Ahead”, p.167, US and China in Asia: Mitigating Tensions and Enhancing Cooperation, John Hopkins School of Advanced International Studies and Institute of International and Strategic Studies Peking University, Washington DC: Pacific Community Initiative, 2019.
[11] “No joint statement as US, China clash over wording on South China Sea”, Today, 5 November 2015, https://www.todayonline.com/world/no-signing-joint-declaration-asean-defense-forum.
[12] Joint Declaration by the ADMM-Plus Defence Ministers on Strategic Security Vision of the ADMM-Plus, 10 December 2020, https://admm.asean.org/dmdocuments/2020_Dec_7th%20ADMM-Plus_10%20Dec%202020_1.%20JD%20Final.pdf.
[13] Tan See Seng, “The ADMM-Plus: Regionalism that Works?”, National Bureau of Asian Research, Asia Policy No. 22, July 2016, pp. 70-75, https://muse.jhu.edu/article/628482.
[14] Hanoi Joint Declaration, op.cit.
[15] Nick Bisley, “The Possibilities and Limits of Defence Diplomacy in Asia”, the Centre of Gravity paper #17 ‘Defence Diplomacy: Is the game worth the candle?’, http://sdsc.bellschool.anu.edu.au/sites/default/files/publications/attachments/2016-03/cog_17_web.pdf.
[16] Ibid.
[17] Alice Ba, “ASEAN and the Changing Regional Order: The ARF, ADMM, and ADMM-Plus”, ASEAN @ 50 Volume 4: Building ASEAN Community: Political-Security and Socio-cultural Reflections, Edited by Aileen Baviera and Larry Maramis, 2017, https://www.eria.org/ASEAN_at_50_4A.8_Alice_Ba_final.pdf.
[18] News release, Dedication to Ensure Regional Peace and Stability Stronger Than Ever Amid Ongoing Security Challenges, MINDEF Singapore, 10 December 2020, https://www.mindef.gov.sg/web/portal/mindef/news-and-events/latest-releases/article-detail/2020/December/10dec20_nr.
[19] News release, Multinational Navies Work Together to Counter Maritime Security Threats in ADMM-Plus Exercise, MINDEF Singapore, 12 May 2019, https://www.mindef.gov.sg/web/portal/mindef/news-and-events/latest-releases/article-detail/2019/May/12may19_nr.
[20] Joint Statement by the ADMM-Plus Defence Ministers on Practical Confidence-Building Measures, 20 October 2018, https://asean.org/storage/2018/10/Final-ADMM-Plus-Joint-Statement-on-Practical-Confidence-Building-Measures.pdf.
[21] Linette Lai, “Asean defence ministers to extend rapid communication hotline to eight other countries”, The Straits Times, 11 July 2018, https://www.straitstimes.com/singapore/asean-defence-ministers-to-extend-rapid-communication-hotline-to-eight-other-countries
[22] Concept Paper on Observership of ADMM-Plus Experts Working Group Activities, 19 October 2018, https://admm.asean.org/dmdocuments/2018_Oct_12th%20ADMM_Singapore,%2019%20October%202018_[Final]%20Concept%20Paper%20on%20Observership%20of%20ADMM-Plus%20EWG%20Activities.pdf.
[23] Alan Robles, “Philippines’ plan for maritime militia to match China raises fears of ‘shooting war’”, South China Morning Post, 16 October 2020, https://www.scmp.com/week-asia/politics/article/3105687/philippines-plan-maritime-militia-match-china-raises-fears.
[24] “China law empowers coast guard to use force amid disputes”, Channel News Asia, 23 January 2021, https://www.channelnewsasia.com/news/asia/china-law-empowers-coast-guard-to-use-force-amid-disputes-14026398#:~:text=The%20Coast%20Guard%20Law%20passed,organisations%20or%20individuals%20at%20sea%22.
[25] Amy Chew, “Indonesia arms maritime force to deter Chinese, Vietnamese fishing vessels from entering Natuna seas”, South China Morning Post, 10 January 2021, https://www.scmp.com/week-asia/politics/article/3117018/indonesia-arms-maritime-force-amid-growing-china-encroachment.
[26] Alice Ba, “ASEAN and the Changing Regional Order: The ARF, ADMM, and ADMM-Plus”, op.cit.
[27] Sarah Teo, “Could Minilateralism Be Multilateralism’s Best Hope in the Asia Pacific?”, The Diplomat, 15 December 2018, https://thediplomat.com/2018/12/could-minilateralism-be-multilateralisms-best-hope-in-the-asia-pacific.
[28] Malcolm Cook, “Indo-Pacific ushers in a new era of post-modern regionalism”, ASEANFocus,
Issue 3/2018.
[29] Compiled by author from various sources. The list is non-exhaustive.
[30] Li Wenfang, “China, ASEAN begin joint naval drill”, China Daily, 23 October 2018, http://www.chinadaily.com.cn/a/201810/23/WS5bce80d7a310eff303283f68.html.
[31] US Mission to ASEAN, “ASEAN-US Maritime Exercise Begins in Thailand”, 1 September 2019, https://asean.usmission.gov/asean-u-s-maritime-exercise-begins-in-thailand.
[32] “ASEAN and Russia work together through the idea to conduct joint navy drill”, Navy Recognition, 14 February 2020, https://www.navyrecognition.com/index.php/news/defence-news/2020/february/8052-asean-and-russia-work-together-through-the-idea-to-conduct-joint-navy-drills.html.
[33] Concept Paper on the ASEAN Defence Ministers Meeting-Plus (ADMM-Plus), https://www.asean.org/wp-content/uploads/images/archive/21216.pdf.
[34] Alice Ba, “ASEAN and the Changing Regional Order: The ARF, ADMM, and ADMM-Plus”, op.cit.
| 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). |
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