2021/34 “Upstream Dams Threaten the Economy and the Security of the Mekong Region” by Murray Hiebert

 

This photo taken on February 8, 2020 shows fishermen laying their nets on the Mekong River near Luang Prabang close to the site of an approved Laos dam site. Environmentalists have criticised Laos for pressing ahead with plans for another “destructive dam” on the Mekong River, a waterway already strangled by hydropower schemes. Photo: Aidan JONES, AFP.

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.

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: /supportISEAS – 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).

 

2021/31 “Vietnam-Japan Relations: Growing Importance in Each Other’s Eyes” by Huynh Tam Sang

 


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

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).

 

 

“Vietnam-China Agricultural Trade: Huge Growth and Challenges” by Le Hai Binh and Lam Thanh Ha

 

 

2021/28 “Vietnam’s Solar Power Boom: Policy Implications for Other ASEAN Member States” by Thang Nam Do and Paul J. Burke

 


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.

REFERENCES

ASEAN Centre for Energy, 2020. ASEAN energy outlook 2017-2040.

ASEAN Centre for Energy, China Renewable Energy Engineering Institute, 2018. ASEAN Feed-in tariff mechanism report.

Bao Dau Tu, 2020. Private sector’s investment in transmission grids: don’t confuse border lines (in Vietnamese) [WWW Document]. URL https://baodautu.vn/tu-nhan-dau-tu-luoi-truyen-tai-dien-dung-map-mo-ranh-gioi-d121651.html.

BP, 2020. BP Statistical Review of World Energy [WWW Document]. URL http://www.bp.com/statisticalreview (accessed 6.5.20).

Burke, P.J., Widnyana, J., Anjum, Z., Aisbett, E., Resosudarmo, B., Baldwin, K.G.H., 2019. Overcoming barriers to solar and wind energy adoption in two Asian giants: India and Indonesia. Energy Policy 132, 1216–1228.

DEVI, 2020. DEVI Renewable Energies – Kênh thông tin năng lượng tái tạo [WWW Document]. URL https://devi-renewable.com/ (accessed 12.11.20).

Do, T.N., 2020. Vietnam pioneers post pandemic carbon pricing [WWW Document]. East Asia Forum. URL https://www.eastasiaforum.org/author/thang-nam-do/ (accessed 12.11.20).

Do, T.N., Burke, P., Baldwin, K.G.H., Nguyen, C.T., 2020. Underlying drivers and barriers for solar photovoltaics diffusion: The case of Vietnam. Energy Policy 111561.

Doanh Nghiep & Tiep Thi, 2020. After two years of solar rush, investors still interested in renewable energy (in Vietnamese) [WWW Document]. URL https://doanhnghieptiepthi.vn/2-nam-chay-dua-bien-nang-va-gio-thanh-tien-nha-dau-tu-van-muon-them-uu-dai-cho-nang-luong-tai-tao-161203112080230068.htm %3Ffbclid %3DIwAR1yLBqY2xpAkSeh3DHvhWE6qFDuxS7PAeBgfiXVfZRX8YPJP6vE-3LPGCc (accessed 1.1.21).

Energy Policy Institute at the University of Chicago, 2020. Air Quality Life Index [WWW Document]. URL https://aqli.epic.uchicago.edu/the-index/ (accessed 2.27.20).

Government of Vietnam, 2020. Updated Nationally Determined Contribution. Hanoi.

Government of Vietnam, 2017. Prime Minister of Vietnam’s Decision No 11/2017 On the Support mechanisms for the Development of Solar Power Projects in Vietnam.

Government of Vietnam, 2016. Prime Minister of Vietnam’s Decision No 1250/QD-TTg on Power Development Plan 7.

Guild, J., 2019. Feed-in-tariffs and the politics of renewable energy in Indonesia and the Philippines. Asia Pacific Policy Stud. 6, 417–431. https://doi.org/10.1002/app5.288

International Energy Agency, 2019a. Southeast Asia Energy Outlook 2019. Paris.

International Energy Agency, 2019b. Energy subsidies: Tracking the impact of fossil-fuel subsidies [WWW Document]. URL https://www.iea.org/topics/energy-subsidies (accessed 4.19.20).

International Renewable Energy Agency, 2019. Renewable Power Generation Costs in 2019 [WWW Document]. Int. Renew. Energy Agency. URL https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf (accessed 8.1.20).

Lee, N., Flores-Espino, F., Oliveira, R., Roberts, B., Bowen, T., Katz, J., 2019. Exploring Renewable Energy Opportunities in select Southeast Asian Countries: A Geospatial Analysis of the Levelized Cost of Energy of Utility-Scale Wind and Solar Photovoltaics.

Nang Luong Vietnam, 2020. Solutions for diversifying investment in transmission grids (in Vietnamese) [WWW Document]. URL http://nangluongvietnam.vn/news/vn/dien-luc-viet-nam/ban-giai-phap-da-dang-hoa-dau-tu-luoi-truyen-tai-dien-o-viet-nam.html (accessed 12.28.20).

Nhan Dan, 2021. Rooftop solar power boom (in Vietnamese) [WWW Document]. URL https://nhandan.com.vn/tin-tuc-kinh-te/dien-mat-troi-mai-nha-phat-trien-bung-no-tong-cong-suat-len-toi-gan-9-300mwp-630350 %3Ffbclid %3DIwAR10XAwiH3Gmd4qkcOcDRT2aofdNBd46GD_3JXcLwP32ozAiKFlO-qrQy-U (accessed 1.2.21).

SEDA, 2019. SEDA PORTAL [WWW Document]. URL http://www3.seda.gov.my/iframe/ (accessed 12.11.19).

Vietnam Ministry of Industry and Trade, 2019. Report on implementation of power projects in the revised Power Development Plan 7 (in Vietnamese). Hanoi.

Vietnam Political Bureau, 2020. Resolution 55 on Energy Development Orientations (in Vietnamese).

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: /supportISEAS – 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).

 

2021/22 “How The Vietnamese State Uses Cyber Troops to Shape Online Discourse” by Dien Nguyen An Luong

 

A Vietnamese youth checks his mobile phone on the century-old Long Bien Bridge in Hanoi on September 3, 2019. Vietnamese authorities have handled public political criticism – both online and in real life – with a calibrated mixture of toleration, responsiveness and repression. Photo: Manan VATSYAYANA, AFP.

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 Internetmeant 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 EnglishDescription
“thế lực thù địch” hostile forcesany groups or organizations plotting to topple the regime.[13]
“diễn biến hoà bình”peaceful evolutionthe 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 revolutionpopular 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, sabotageused 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.

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: /supportISEAS – 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).

 

2021/20 “Regulating Digital Credit Scoring in Vietnam” by Nicolas Lainez

 

About 70 percent of Vietnamese citizens have limited or no access to financial services. Here social distancing markers are placed at the ATM counters amidst concern of COVID-19 coronavirus inside a shopping mall in Hanoi on August 14, 2020. Photo: Manan VATSYAYANA, AFP.

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 s​et 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: /supportISEAS – 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).

 

ISEAS 2021/13 “Repositioning the ADMM-Plus in a Contested Region” by Hoang Thi Ha

 

(L-R) Malaysia’s Defence Minister Mohamad Sabu, Myanmar’s Defence Minister Sein Win, Philippines Deputy Defence Minister Cardozo Luna, Singapore’s Defence Minister Ng Eng Hen, Thailand’s Deputy Defence Minister Chaichan Changmongkol, Vietnam’s Defence Minister Ngo Xuan Lich, Brunei’s Second Defence Minister Halbi bin Mohd Yussof, Cambodia’s Deputy Prime Minister and Defence Minister Tea Banh, General Secretary of Defense of Indonesia Agus Setiadji, Laos’ Defence Minister Chansomone Chanyalath, and ASEAN Secretary-General Lim Jock Hoi pose for a group photograph during the Association of Southeast Asian Nations (ASEAN) Defence Ministers Meeting (ADMM) in Hanoi on February 19, 2020. Photo: Nhac Nguyen, AFP.

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]

JanuaryUS-Japan Iron Fist 2020 exercise
FebruaryUS-Japan advanced warfighting training (BAWT)US-Japan Resilient Shield 2020 exercise
AprilUS-Australia combined operations in the South China SeaUS-Japan joint operations while sailing through the Andaman Sea
JuneIndia-Japan passing exercise (PASSEX) in the Malacca Strait
JulyUS-Japan Mine Warfare Exercise (MIWEX) 2JA 2020 off Japan’s coastUS-India joint military exercise in the Indian Ocean
AugustExercise Rim of the Pacific (US-led, China excluded)US-Japan joint exercises in the waters and airspace near Japan
SeptemberPacific Vanguard Exercise (US, Japan, Australia, ROK)
OctoberUS-Japan-Australia naval exercise in the South China SeaUS-Japan Keen Sword 21 exercise
NovemberMalabar Naval Exercise (US, India, Australia, Japan)
DecemberRussia-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: /supportISEAS – 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).

 

“The Prospects and Dangers of Algorithmic Credit Scoring in Vietnam: Regulating a Legal Blindspot” by Nicolas Lainez

 

 

ISEAS Perspective 2021/6 “Vietnam’s Role in Regional Peace and Mediation” by Hoang Oanh

 

Vietnam’s Prime Minister Nguyen Xuan Phuc takes part in the closing ceremony of the Association of Southeast Asian Nations (ASEAN) summit being held online in Hanoi on November 15, 2020. Photo: Nhac Nguyen, AFP.

EXECUTIVE SUMMARY

  • Vietnam institutionalised in official documents a ‘reconciliation/mediation role’ for its diplomacy even before taking on the 2020 ASEAN chairmanship and the country’s non-permanent seat on the United Nations Security Council.
  • This new thrust demonstrates Vietnam’s growing confidence on the regional, if not international stage. Hanoi recognises that it is in its interest to contribute to international peace and security.
  • However, Vietnam has to overcome significant challenges to play a role in reconciliation and mediation. As a newcomer to this field, Vietnam will need significant time and resources to build up its capacities and reputation.
  • Undertaking a lower key mediation role that focuses on facilitating understanding and dialogue among disputing parties should be Vietnam’s current aim.
  • For a start, the country could seek a mediating role in regional security issues and enhance its peacekeeping contribution to demonstrate its commitment and build up its reputation in the area.

* Guest writer, Hoang Oanh, is Deputy Director, Center for Regional Studies and Foreign Policy, Institute of Foreign Policy and Strategic Studies, Diplomatic Academy of Vietnam.

INTRODUCTION

Vietnam’s rapid economic development political stability, and successful hosting of various high-profile international events have raised the country’s regional and international profile. With this new spotlight, however, has come expectations from inside and outside of Vietnam for the country to contribute more to international peace and security. [1]

Recent developments in Vietnam’s foreign policy demonstrate the country’s stronger commitment to peace and reconciliation:

  • The themes drawn up to guide its engagement in multilateral forums concentrate on peace and reconciliation – the expressed theme for Vietnam’s non-permanent seat on the UNSC is “Partnership for Sustainable Peace”, focused on conflict prevention, peace building, post-conflict reconstruction, and on strengthening the role of multilateralism and multilateral institutions in peace and security.[2]
  • A priority for its ASEAN chairmanship also emphasises a “cohesive ASEAN” gained through fostering solidarity and unity among its members.[3]
  • Vietnam started its 2020-2021 UNSC term with two initiatives that exemplify the themes: One open session on UN Charter compliance, stressing the need to enhance dialogue, multilateralism, and peaceful tools provided by the UN for conflicts and disputes; and one meeting to ‘bridge’ the UN and ASEAN, aimed at increasing understanding between the two bodies and promoting ASEAN’s contribution to UN initiatives, especially peacekeeping. For the first time, at the initiative of Vietnam, an information briefing on ASEAN took place at the UNSC.[4]
  • Vietnam has rapidly increased its contribution to UN peacekeeping operations,[5] and the recent passage of the National Assembly Resolution on Vietnam’s participation in UN PKO in November 2020 has laid a legal foundation for its further contribution. Vietnam is also eager to upgrade its UN peacekeeping training centre into a regional facility for the Asia Pacific.[6] The country has also been willing to share its experience in post-conflict reconstruction, national reconciliation, promoting integration, and sustainable development. For instance, Vietnam has actively shared its experience on tackling post-conflict issues at various multilateral forums, such as through its work with the Geneva International Centre for Humanitarian Demining (GICHD), working on topics such as the handling of bombs, mines, and unexploded ordinances.[7] It has also emphasised the role of women in post-conflict reconstruction, as a part of efforts to promote the UNSC Resolution 1889 (2009) on Women and Peace and Security.[8] Bilaterally, it has shared lessons on reunification, national reconciliation, and reforms with both of its Korean partners.[9]

These diplomatic efforts, particularly Vietnam’s hosting of the second Trump-Kim Summit in February 2019, have fuelled discussions among intellectuals and general public about a Vietnamese ‘reconciliation diplomacy’ or ‘mediation diplomacy’. These discussions mainly feature two key ideas: (i) Vietnam’s repositioning as a middle power, and the need to build a ‘niche diplomacy’ to contribute more effectively in global affairs;[10] and (ii) Vietnam possibly becoming ‘Asia’s Helsinki’ or a ‘peace bridge’.[11] One former deputy foreign minister remarked: “Although it is still too early to talk about it, but a ‘reconciliation diplomacy’ or ‘mediation diplomacy’ is not impossible for Vietnam if we take into account Vietnam’s history or its recent efforts and contributions to world peace. However, what we need is not just a slogan, but we have to initiate concrete actions to implement the objective”.[12]

This paper explores Vietnam’s possible role and options in the field of peace and conciliation. It argues that the time is ripe for Vietnam to play a limited mediation role in line with the country’s national interests. It concludes with some policy recommendations for Vietnam to play such a role.

WHY SHOULD VIETNAM CONSIDER A MEDIATION ROLE?

(i)        A new thrust in foreign policy

Vietnam has long declared a foreign policy goal of “willing to become a friend and reliable partner of all countries in the world community, striving for peace, independence and development”.[13] However, it was only recently that Vietnam placed greater emphasis on the goal of proactive contribution to international peace and security. Directive No. 25 CT/TW of the Secretariat of the Party Central Committee (issued on 8 August 2018) on enhancing the role of multilateral diplomacy stated that the country would need to shift from merely “attending” to “actively participating” and “actively contributing” to multilateral institutions, accelerating efforts to play a “leading or mediatory role in multilateral organizations and forums having strategic importance to the country”[14] in accordance with the specific capabilities and conditions of the country.[15] Vietnamese leaders have repeatedly used the phrase “hoa giai” (translated as either reconciliation or mediation in English) in their public speeches,[16] and stated that Vietnam should gradually promote the role of mediation in regional and global issues.[17]

“Hoa giai” in the Vietnamese language implies the involvement of a third party. According to the Encyclopaedic Dictionary of Vietnam, “Reconciliation/Mediation means peacefully solving disputes by arrangements and negotiation with the assistance of a third party”.[18] “Hoa giai” is a common practice in Vietnamese culture, where bringing disputes to legal authorities is not a preferred option. Officially, Vietnam uses the word “hoa giai” to indicate that the country is willing to take on the role of a third party, such as in mediating international disputes and conflicts, though preferably under a multilateral framework.

Directive 25-CT/TW was issued in preparation for Vietnam’s 2020 ASEAN chairmanship and its non-permanent seat on the UNSC. This directive, however, has long-lasting and significant implications for Vietnam’s foreign policy. It signals, as Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh puts it, “an important milestone in foreign policy thinking”.[19] It is remarkable that, for the first time, mediation diplomacy has been institutionalised. While this highlights a sense of responsibility and desire to contribute to international peace and security, it also demonstrates Vietnam’s growing confidence on the regional, if not international stage. Vietnam draws this growing confidence from what it perceives as an increased degree of trust and encouragement from the international community. Directive 25-CT/TW, thus, can be seen as an institutionalisation of Vietnam’s newfound confidence and willingness to take on a bigger role in international affairs.

(ii)       Vietnam’s capabilities and advantages

Mediation resonates with Vietnamese cultural and historical traditions: It could be argued that reconciliation diplomacy is not simply a new direction but harks back to Vietnam’s history of reconciling with former enemies after conflicts. A master strategist in the 15th century, Nguyen Trai, declared after a military victory that the country would facilitate the return of prisoners of war (Chinese troops) to “repair the bilateral friendship [and] end war forever”.[20] King Tran Nhan Tong (1258-1308) has also been seen as a symbol of Vietnam’s reconciliatory spirit.[21]According to The Complete Annals of Đại Việt,King Tran Nhan Tong stripped the reward of a prince who continued to hunt for Yuan troops after the king had ordered a ceasefire. To alleviate his mandarins’ fear of any post-war political retribution, the king also had any supposed proof of treason burnt.[22]

In the contemporary period, Vietnam has established high-level partnership frameworks with all its former foes – France, the United States, and China. Vietnam has also made significant efforts and achievements in national reconciliation, particularly with new political and legal frameworks that facilitate the return and participation of overseas Vietnamese in Vietnam’s political, economic, and social life. Notably, four out of the 15 members of the current prime minister’s Economic Advisory Group are overseas Vietnamese intellectuals.[23] The government has also actively promoted outreach efforts targeted at overseas Vietnamese communities in the United States. The return of Mr Nguyen Cao Ky, former prime minister of the South Vietnamese administration that fought against the Vietnam Communist Party in the North, in 2004, during which he expressed support for national conciliation, was a symbolic success in the process.[24]

Vietnam’s improved international prestige: Vietnam has been pursuing a proactive foreign policy through its expanding diplomatic network, which is currently ranked 38th in the world and 10th in Asia.[25] It has established 189 diplomatic relations, among which are three comprehensive strategic partnerships, 14 strategic partnerships, and 13 comprehensive partnerships. One notable feature of Vietnam’s foreign policy is the emphasis on ties with “traditional friends”,[26] many of which are currently involved in disputes and conflicts that might require international support to promote reconciliation efforts. Vietnam’s economic development model as well as its experience with reform and ‘opening-up’ could be a source of inspiration for others.[27]

Organisational capability and confidence in its diplomacy: The experience gained from its roles at important multilateral institutions and from hosting big international events has boosted Vietnam’s confidence in its diplomacy. The second Trump-Kim Summit held in February 2019 was a political and logistical success, praised by both Trump himself and DPRK officials.[28] Vietnam’s efforts in facilitating a safe long journey by train for Kim also demonstrates Vietnam’s commitment, diligence, and ability to deliver a key event at very short notice.[29]

Strong domestic support: Among the Vietnamese people, there is a strong sense of gratitude and desire to contribute to international peace, in acknowledgement of the international community’s support for Vietnam during its wars, post-war reconstruction, and modern development.[30]As stated in a news briefing, the second US-DPRK Summit held in Vietnam is particularly meaningful as Vietnam, during its past wars, had counted on the support of international third-party mediators in the Geneva and Paris negotiations in 1954 and 1973 respectively.[31] Today, Vietnam is thus willing to mediate peace between the United States and DPRK, for the region and the world.[32] Despite the significant amount of financial and human resources spent on the event, as well as the inconvenience and disruption it brought to daily life, the Vietnamese people are supportive and proud to have played such a role in the US-DPRK negotiations.

(iii)      It serves Vietnam’s interests

Vietnam’s national interests has three broad dimensions: security, economic development, and prestige. A mediation role supports Vietnam’s national interests in all three dimensions. In terms ofsecurity,maintaining a peaceful and stable external environment is one of the most important goals of Vietnam’s foreign policy.[33] Contributing to efforts to manage disputes in the region directly complements this goal. More importantly, upholding a rules-based international order is of great importance given Vietnam’s two main security challenges – territorial disputes in the South China Sea and water management issues in the Mekong. By playing a mediating role, Vietnam reinforces and promotes the norms of peaceful settlement of disputes and conflicts, while signalling its rejection of unilateral and violent acts which contravene international law. Such a role would also help Vietnam enhance its own conflict management and resolution capacities.

Playing an active role in managing international disputes also serves Vietnam’s economicinterests. According to a Moody report, if tensions on the Korean Peninsula continue to escalate and lead to conflict, other than the parties directly involved (North Korea, South Korea, and the United States), Vietnam and Japan would be the most badly hit. This is because approximately 20 per cent of Vietnam’s intermediate goods are imported from South Korea, while its exports to South Korea account for more than 5 per cent of its GDP.[34]

Last but not least, a mediating role will improve Vietnam’s image and reputation, which in turn, will translate into many concrete benefits. Vietnam would for instance become increasingly attractive as a tourist destination and business environment. Its national products would become more desirable, and the country could even experience an increase in its soft power.

EXPLORING A MEDIATION ROLE FOR VIETNAM

The current challenge for Vietnam is to translate a very general official guideline into practical policies which address geopolitical realities, while being in step with the country’s comfort level, capacities, and resources. A ‘third-party’ reconciliatory role could potentially involve anything from providing good offices to taking on mediation, inquiry, conciliation, and arbitration responsibilities[35] before, during, and after a conflict. Many of these responsibilities, such as conciliation and arbitration, require a significant level of engagement and demand more political and financial costs and greater capabilities and experience.

Mediation itself also has a wide range of approaches, from the lowest level of good offices to actively inducing a certain solution to disputes. As outlined by Touval and Zartman (1985), there are three general approaches: information strategies, formulation strategies, and manipulation strategies, depending on the level of involvement of the mediator.[36]

If Vietnam is to take on such a ‘reconciliatory role’, it will need to develop a clear conceptualisation and a feasible operational strategy. Firstly, it should start with a narrower focus – a modest mediation role or the first and second approaches listed above. There are three main reasons for this: (i) Despite having a long tradition of peace diplomacy, Vietnam is still a ‘newly reborn kid on the block’ in a professional field that requires specialised expertise, experience, practical guidance, as well as considerable political, financial, and administrative support. The challenge is greater when it has to operate in an increasingly competitive environment, where the number of third-party facilitators and mediators (at local, national, regional, and international levels) has significantly increased in the last decade;[37] (ii) The fundamental principles of Vietnamese foreign policy, including a respect for sovereignty, self-determination, and non-interference, will limit the extent of its engagement. Vietnam’s own experience with mediation also discourages the country from a manipulative approach – during the Geneva Conference negotiations, its own interests were negatively affected by the calculations of bigger powers;[38] (iii) While Vietnam’s close relationships with all parties, particularly the disputing parties, is an advantage; this also requires the country to firmly uphold its neutrality.

With a moderate mediation role, Vietnam can consider several options such as good offices, shuttle diplomacy, facilitating negotiations, capacity building, and experience sharing with relevant parties. Directive 25 advocates a mediatory role in a multilateral setting; however, as mediation is often a very long process and Vietnam will not always be able to hold high-profile posts at multilateral forums, it will have to explore both multilateral and bilateral approaches.

Secondly, Vietnam will have to overcome several significant challenges. An operational masterplan needs to be designed to build domestic consensus and political will, lay the institutional foundations, mobilise financial and human resources, and build the necessary capacities: (i) Peace making and mediation in particular require the right set of competencies – both at the level of individuals and institutions. While pooling a few eminent individual peace-makers is important, it is more vital to build institutional capacity and an organizational culture that enables a well-coordinated engagement and allows sustainability given the rotational nature of the country’s diplomatic system. (ii) Managing relationships with other actors including civil society, the academia, and foreign actors is also a challenge. (iii) Economic resources provide important leverage to peace-making when the mediator might have to fund confidence-building activities, shuttle diplomacy, or back the implementation of peace agreements. This could be a big challenge given Vietnam’s plan to streamline and downsize its public spending.[39]To overcome the above challenges, Vietnam will need to reach out to relevant partners and experienced mediators for assistance and build cooperative partnerships.

Thirdly, Vietnam should aim to boost its peace reputation and offer to undertake an appropriate role in regional issues. The second Trump-Kim Summit in Hanoi demonstrated Vietnam’s capability in hosting high-profile events. Both the parties were also pleased with Vietnam’s efforts. There have already been many players involved in mediating efforts on the Korean issue. Trump and Kim also have their own direct channels. However, Vietnam is uniquely placed to be an effective facilitator for conversation. Vietnam has a non-hostile and neutral profile, with no geopolitical motives. The DPRK is very sensitive to any perceived influence from a third party – North Korea’s chief negotiator Kim Myong Gil, for instance, once criticised Sweden for acting like a “backseat driver” when mediating nuclear negotiations.[40] Moreover, as the DPRK has a relatively high level of trust in Vietnam, its leadership is comfortable learning from Vietnam’s experience in economic development and reform, as well as Hanoi’s ability to maintain good relationships with both the United States and China.[41] In fact, Kim’s 2019 visit to Vietnam was designated as an “official friendship visit”, a term that connotes an even higher status than Kim’s previous visits to China.[42] While the Trump-Kim meeting was underway in Hanoi, a separate DPRK delegation made field trips to Vietnam’s industrial parks and factories.[43]

Presently, the United States and North Korea do not wish to appear weak and lose their bargaining power in their ongoing tug-of-war. In this regard, they can consider the alternative of approaching a credible third country to explore ways to move forward without being seen as ceding ground unnecessarily. Given its comparative advantage, Vietnam could facilitate an agreement that meets both parties’ near-term objectives (i.e. reducing tensions and diffusing crises) that can lay the basis for a longer-term solution. Vietnam should also further promote humanitarian assistance to mitigate food shortages and natural disasters,[44] and encourage the exchange of students, academics, and officials, especially on issues related to economic planning and transition.

Within the region, Vietnam should support ASEAN, the UN and relevant parties in promoting dialogue towards long-term solutions to conflicts and facilitating the safe and dignified repatriation of refugees in Myanmar’s Rakhine state.[45] More specifically, Vietnam could continue to strengthen the ASEAN consensus on a regional approach and the association’s crucial role in helping Myanmar reach a solution; facilitate dialogue between relevant parties on technical issues such as illegal migration, human trafficking, refugee repatriation; and share its experience in working with relevant partners on refugee repatriation,[46] rehabilitation, and reconciliation.

Last but not least, Vietnam should further enhance its PKO participation in both quantity and quality, particularly expanding its PKO functions to include policing and enhancing women’s representation. These measures will promote effective community outreach and confidence-building, leading to lasting and positive impact on the ground. In fact, Vietnam has performed pretty well in promoting the role of women.[47] Beyond their assigned duties, they actively take on other roles such as teaching children, sharing farming experience with the local people, and encouraging the participation of women and girls in political processes.[48] Vietnam should also share its own successful experiences on national reconciliation and sustainable post-conflict reconstruction, and possibly explore a mediation role involving its PKO missions at a proper time.

ISEAS Perspective 2021/6, 27 January 2021.


ENDNOTES

[1] Editorial Department (2020), “The gioi dat ky vong vao Viet Nam,” Nhan Dan Online, at  https://nhandan.com.vn/tin%2Dtuc%2Dthe%2Dgioi/the%2Dgioi%2Ddat%2Dky%2Dvong%2Dvao%2Dviet%2Dnam%2D446302

[2] Deputy PM, FM Pham Binh Minh’s  article on occasion of VN’s assumption of UNSC Presidency (2020) VGP News, at http://news.chinhphu.vn/Utilities/PrintView.aspx?ID%3D38471

[3] VNA (2020), “ASEAN Chairmanship: For a cohesive and responsive ASEAN,” Nhan Dan Online, at https://en.nhandan.com.vn/highlights/item/8318102%2Dasean%2Dchairmanship%2Dfor%2Da%2Dcohesive%2Dand%2Dresponsive%2Dasean.html

[4] VNS (2020), “Viet Nam successfully fulfils role as President of UNSC in January,” Viet Nam News, at https://vietnamnews.vn/politics%2Dlaws/591739/viet%2Dnam%2Dsuccessfully%2Dfulfils%2Drole%2Das%2Dpresident%2Dof%2Dunsc%2Din%2Djanuary.html

[5] Although Vietnam is relatively new to peacekeeping and has only started its deployment since 2014,  it has significantly stepped up its efforts. Up to January 2020, it had sent 43 officers and 126 military doctors and medical personnel to South Sudan. Since 2018, Vietnam has sent whole PKO unit forces with two Level-2 field hospitals to South Sudan, and is ready to deploy the third one by the end of 2020. It is also currently ready to dispatch 295 military engineers and is training police force for PKO in South Sudan. Lonicera Vu (2020), “Vietnamese peacekeepers maintain peace to the world to defend the country,” Vietnam Times, 30 May, at https://vietnamtimes.org.vn/vietnamese%2Dpeacekeepers%2Dmaintain%2Dpeace%2Dto%2Dthe%2Dworld%2Dto%2Ddefend%2Dthe%2Dcountry%2D20863.html

[6] Hoang Thuy (2020), Vietnam eyes UN peacekeeping center for Asia-Pacific, VNExpress, at https://e.vnexpress.net/news/news/vietnam%2Deyes%2Dun%2Dpeacekeeping%2Dcenter%2Dfor%2Dasia%2Dpacific%2D4128709.html

[7] Vietnam shares experience in tackling post-war bombs, mines and UXOs (2017). Voice of Vietnam, 7 September, at https://vovworld.vn/en%2DUS/news/vietnam%2Dshares%2Dexperience%2Din%2Dtackling%2Dpostwar%2Dbombs%2Dmines%2Dand%2Duxos%2D574174.vov

[8] Cross-Cutting Report No. 2: Women, Peace and Security. Security Council Report, at https://www.securitycouncilreport.org/research%2Dreports/lookup%2Dc%2Dglkwlemtisg%2Db%2D6239031.php

[9] Vietnam shares experience in national reunification (2015). Nhan Dan, 23 May, at https://en.nhandan.com.vn/politics/external%2Drelations/item/3366602%2Dbir%2Dseba%2Dproject%2D%E2%80%93%2Da%2D

Huileng Tan (2019), North Korea has been studying Vietnam’s reforms for years, CNBC, 24 February, at https://www.cnbc.com/2019/02/25/north-korea-has-studied-reforms-in-hanoi-ex-advisor-to-vietnam%20pm.html#:~:text%3DNorth%20Korea%20has%20been%20closely,government%20advisor%20said%20on%20Monday.&text%3DU.S.%20President%20Donald%20Trump%20and,Hanoi%20on%20Wednesday%20and%20Thursday

[10] Vu Le Thai Hoang (ed.) (2020), Ngoai giao chuyen biet: Huong di, uu tien moi cua ngoai giao Viet Nam den 2030 [Niche Diplomacy: New Orientation and Priority of Vietnam Diplomacy toward 2030], Hanoi: Su That Publishing House.

[11] Duc Khai (2019), “Thuong dinh My – Trieu Ha Noi: The hien ro net vai tro ‘cuong quoc hang trung’ cua Viet Nam,” The World and Vietnam Report, at https://baoquocte.vn/thuong%2Ddinh%2Dmy%2Dtrieu%2Dha%2Dnoi%2Dthe%2Dhien%2Dro%2Dnet%2Dvai%2Dtro%2Dcuong%2Dquoc%2Dhang%2Dtrung%2Dcua%2Dviet%2Dnam%2D88375.html

[12] Pham Hang (2019), “Nguyen Thu truong Ngoai giao Nguyen Phu Binh noi ve vai tro trung gian cua ngoai giao Viet Nam,” The World and Vietnam Report, at https://baoquocte.vn/nguyen%2Dthu%2Dtruong%2Dngoai%2Dgiao%2Dnguyen%2Dphu%2Dbinh%2Dnoi%2Dve%2Dvai%2Dtro%2Dtrung%2Dgian%2Dcua%2Dngoai%2Dgiao%2Dviet%2Dnam%2D88380.html

[13] Editorial Department (2006), “Vietnam’s present Foreign Policy,” Socialist Republic of Vietnam Government Portal, at http://chinhphu.vn/portal/page/portal/English/strategies/strategiesdetails%3FcategoryId%3D30&articleId%3D3036

[14] UNSC seat enables Vietnam to contribute more to global peace (2019), Nhan Dan, https://en.nhandan.org.vn/politics/external%2Drelations/item/7559702%2Dunsc%2Dseat%2Denables%2Dvietnam%2Dto%2Dcontribute%2Dmore%2Dto%2Dglobal%2Dpeace.html

[15] Nhat Phong (2020), “Năm 2020: Nâng tầm ngoại giao đa phương,” The gioi va Viet Nam, at https://baoquocte.vn/nam%2D2020%2Dnang%2Dtam%2Dngoai%2Dgiao%2Dda%2Dphuong%2D108123.html

[16] Bui, Thanh Son (2020), “Dong gop cua nganh doi ngoai trong qua trinh doi moi tu duy, phuc vu su nghiep doi moi,” Nhan Dan Online, at https://nhandan.com.vn/tin%2Dtuc%2Dthe%2Dgioi/dong%2Dgop%2Dcua%2Dnganh%2Ddoi%2Dngoai%2Dtrong%2Dqua%2Dtrinh%2Ddoi%2Dmoi%2Dtu%2Dduy%2Dphuc%2Dvu%2Dsu%2Dnghiep%2Ddoi%2Dmoi%2D608766

[17] PM Nguyen Xuan Phuc (2019), “Doi ta vi Hoa binh ben vung: Viet Nam san sang dong gop tich cuc cho no luc chung cua quoc te vi hoa binh, an ninh,” VOV5.vn, 9 June, at https://vovworld.vn/vi%2DVN/chinh%2Dtri/doi%2Dtac%2Dvi%2Dhoa%2Dbinh%2Dben%2Dvung%2Dvn%2Dsan%2Dsang%2Ddong%2Dgop%2Dtich%2Dcuc%2Dcho%2Dno%2Dluc%2Dchung%2Dcua%2Dquoc%2Dte%2Dvi%2Dhoa%2Dbinh%2Dan%2Dninh%2D756061.vov

[18] Hoi dong quoc gia chu bien chuyen nganh tu dien bach khoa Vietnam (1995), Tu dien bach khoa Viet Nam [Encyclopedic Dictionary of Vietnam], volume II, Nha xuat ban Tu dien Bach khoa (Ha Noi), p. 473. 

[19] Vice PM Pham Binh Minh (2019), “Doi ngoai nam 2018: Sang tao trong cach lam, hieu qua trong hanh dong,” VietnamNet, at https://vietnamnet.vn/vn/thoi%2Dsu/chinh%2Dtri/doi%2Dngoai%2Dnam%2D2018%2Dsang%2Dtao%2Dtrong%2Dcach%2Dlam%2Dhieu%2Dqua%2Dtrong%2Dhanh%2Ddong%2D499099.html

[20] Le Van Lan (2018), “Nguoi Viet, nuoc Viet hoa hieu,” Nguoi Lao dong, at https://nld.com.vn/thoi%2Dsu/nguoi%2Dviet%2Dnuoc%2Dviet%2Dhoa%2Dhieu%2D20180208111943998.htm

[21] There has been an initiative on a reconciliation award named after the King. See more at: “Tran Nhan Tong Reconciliation Award to be launched in the US” (2012). VietnamNet, 19 June, at https://english.vietnamnet.vn/fms/society/23461/tran%2Dnhan%2Dtong%2Dreconciliation%2Daward%2Dto%2Dbe%2Dlaunched%2Din%2Dthe%2Dus.html

[22] Ngô Sĩ Liên (1993) Đại Việt Sử Ký Toàn Thư, translated from Nội các quan bản Edition (1697). Hanoi: Social Sciences Publishing House, p. 199.

[23] Thu Ha (2010), “Hòa hợp dân tộc qua góc nhìn của ông Nguyễn Cao Kỳ,” Que huong, 27 April, at http://quehuongonline.vn/doi%2Dsong/hoa%2Dhop%2Ddan%2Dtoc%2Dqua%2Dgoc%2Dnhin%2Dcua%2Dong%2Dnguyen%2Dcao%2Dky%2D14900.htm

Dang Minh Khoi (2020), “Công tác về người Việt Nam ở nước ngoài,” Tap Chi Cong San, 26 March, at  http://www.tapchicongsan.org.vn/web/guest/50%2Dnam%2Dthuc%2Dhien%2Ddi%2Dchuc%2Dcua%2Dchu%2Dtich%2Dho%2Dchi%2Dminh/%2D/2018/816007/view_content

[24] “Former Saigon PM talks about homeland” (2010) Viet Nam News, 4 November, at /https://vietnamnews.vn/politics%2Dlaws/205369/former%2Dsaigon%2Dpm%2Dtalks%2Dabout%2Dhomeland.html

[25] Lowy Institute Global Diplomacy Index 2019, at https://globaldiplomacyindex.lowyinstitute.org/country_rank.html#

[26] Pham Binh Minh (2015) Ngoại giao góp phần xứng đáng xây dựng và bảo vệ Tổ quốc, Vietnam Government Portal News, 15 August, at http://baochinhphu.vn/70%2Dmua%2Dthu%2DCach%2Dmang/Ngoai%2Dgiao%2Dgop%2Dphan%2Dxung%2Ddang%2Dxay%2Ddung%2Dva%2Dbao%2Dve%2DTo%2Dquoc/234114.vgp

“Vietnam respected in international arena: Ambassador,” Vietnam News Agency, 28 August 2020, at https://en.vietnamplus.vn/vietnam%2Drespected%2Din%2Dinternational%2Darena%2Dambassador/182029.vnp

[27] Nguyen Viet Phuong (2019), “Thuong dinh My – Trieu Ha Noi: Noi cong dong quoc te dat niem tin hoa binh,” The gioi va Viet Nam, at https://baoquocte.vn/thuong%2Ddinh%2Dmy%2Dtrieu%2Dha%2Dnoi%2Dnoi%2Dcong%2Ddong%2Dquoc%2Dte%2Ddat%2Dniem%2Dtin%2Dhoa%2Dbinh%2D88274.html

[28] Nguyen Viet Phuong, and Vu, Khang (2019), “After the Hanoi Summit: Next steps for the US, North Korea, and Vietnam,” The Diplomat, 2 March, at https://thediplomat.com/2019/03/after%2Dthe%2Dhanoi%2Dsummit%2Dnext%2Dsteps%2Dfor%2Dthe%2Dus%2Dnorth%2Dkorea%2Dand%2Dvietnam

[29] Vietnam only had a two-week preparation period,  much shorter than the two-month advance notice given for the leaders’ meeting in Singapore in June 2018.

[30] Security Council, “Security Council urges renewed measures to improve women’s participation in peace processes,” reaffirming the key role women can play in rebuilding war-torn societies, United Nations at https://www.un.org/press/en/2009/sc9759.doc.htm

[31] These diplomatic processes are considered consequential in Vietnam’s struggle for its independence in view of the power imbalances between Vietnam and its much stronger adversaries. As a complete military victory was too costly, and even impossible, the then Vietnamese strategy was to combine “fighting and negotiation”. See Vo Van Sung (2012), “Suy ngẫm về bài học “vừa đánh vừa đàm” trong chiến tranh bảo vệ Tổ quốc,” Nhan Dan, 13 December, at https://nhandan.com.vn/tin%2Dtuc%2Dsu%2Dkien/suy%2Dngam%2Dve%2Dbai%2Dhoc%2Dvua%2Ddanh%2Dvua%2Ddam%2Dtrong%2Dchien%2Dtranh%2Dbao%2Dve%2Dto%2Dquoc%2D582129  

[32] Nguyen Hong Diep (2019), “Thuong dinh Hoa Ky – Trieu Tien: Kien tao hoa binh, nang tam vi the,” Thong tin Doi Ngoai,at http://tapchithongtindoingoai.vn/su%2Dkien%2Dva%2Dbinh%2Dluan/thuong%2Ddinh%2Dhoa%2Dky%2Dtrieu%2Dtien%2Dkien%2Dtao%2Dhoa%2Dbinh%2Dnang%2Dtam%2Dvi%2Dthe%2D21338

[33] Luu Ngoc Khai, and Dang Cong Thanh (2019), “Duong loi doi ngoai cua Dang theo tinh than Nghi quyet Dai hoi XII – Mot tam cao moi,” Bao Dien tu Dang Cong san Viet Nam, at http://dangcongsan.vn/tu%2Dlieu%2Dtham%2Dkhao%2Dcuoc%2Dthi%2Dtrac%2Dnghiem%2Dtim%2Dhieu%2D90%2Dnam%2Dlich%2Dsu%2Dve%2Dvang%2Dcua%2Ddang%2Dcong%2Dsan%2Dviet%2Dnam/tu%2Dlieu%2Dcuoc%2Dthi/duong%2Dloi%2Ddoi%2Dngoai%2Dcua%2Ddang%2Dtheo%2Dtinh%2Dthan%2Dnghi%2Dquyet%2Ddai%2Dhoi%2Dxii%2Dmot%2Dtam%2Dcao%2Dmoi%2D544967.html

[34] Yuda Masayuki and KikuchiTomomi (2017), “Vietnam and Japan would be among hardest hit by a Korean conflict,” Nikkei Asian Review, 4 October, at https://asia.nikkei.com/Economy/Vietnam%2Dand%2DJapan%2Dwould%2Dbe%2Damong%2Dhardest%2Dhit%2Dby%2Da%2DKorean%2Dconflict2

[35] J. G. Merrills, International Dispute Settlement, Cambridge University Press (Fifth Edition 2011), p. 26.

[36] Information strategies: the mediator primarily serves as a facilitator of information, laying the groundwork for further substantive progress in the conflict resolution process. Formulation strategies are those where a mediator serves as a facilitator for actual negotiations by providing a meeting place, and moderating discussions. Manipulative strategies: a mediator actively engages the parties and shapes the negotiations. See William Zartman and Saadia Touval (1985), “International Mediation: Conflict Resolution and Power Politics,” Journal of Social Issues, 41(2), 27–45.

Jacob Bercovitch (1997), “Mediation in International Conflict.” In I. William Zartman and J. Lewis Rasmussen, eds., Peacemaking in International Conflict.  Washington, DC: United States Institution of Peace Press., pp. 137-138.

[37] The European External Action Service (2016), Global Challenges and Trends in International Peace: Mediation and Diplomacy: A Background Note, p. 2, at http://eeas.europa.eu/archives/docs/cfsp/conflict_prevention/docs/20160519%2Dglobal%2Dchallenges%2Dand%2Dtrends_final_en.pdf

[38] The Geneve Accords was a legal commitment from the great powers to respect the independence and sovereignty, unity and territorial integrity of Vietnam (together with Cambodia and Laos). However, Vietnam could not ultilise the military advantages it had gained on the ground to leverage a better settlement as China and the Soviet Union made concessions on the Vietnamese demarcation line for their own interests. See Vu Khoan (2014), “Hiep dinh Gio-ne-vo, 60 nam nhin lai”, Quan doi Nhan dan Online, at https://www.qdnd.vn/thoi%2Dsu%2Dquoc%2Dte/binh%2Dluan/hiep%2Ddinh%2Dgio%2Dne%2Dvo%2D60%2Dnam%2Dnhin%2Dlai%2D447282

Fredrik Logevall (2012). Embers of War: The Fall of an Empire and the Making of America’s Vietnam. Random House, pp. 607-620.

[39] Vietnam needs to cut recurrent spending to ensure healthy budget (2018), Nhan Dan, at https://en.nhandan.com.vn/_mobile_business/_mobile_economy/item/6076102%2Dvietnam%2Dneeds%2Dto%2Dcut%2Drecurrent%2Dspending%2Dto%2Densure%2Dhealthy%2Dbudget.html.

[40] Oliver Hotham (2019), “Sweden no longer needed to mediate North Korea-U.S. talks: DPRK diplomat,” NKNews, 19 November, at https://www.nknews.org/2019/11/sweden%2Dno%2Dlonger%2Dneeded%2Dto%2Dmediate%2Dnorth%2Dkorea%2Du%2Ds%2Dtalks%2Ddprk%2Ddiplomat

[41] Le Dinh Tinh & Nguyen Duc Chinh (2019) “Why Vietnam Is More Than Just a Venue for the United States and DPRK Summit: A View From Hanoi,” Pacific Forum, 1 March.

[42] Lye Liang Fook and Ha Hoang Hop (2019), “Vietnam-North Korea Relations: Still a Special Relationship?,” ISEAS Perspective, Issue: 2019, No.18, p. 3.

/images/pdf/ISEAS_Perspective_2019_18.pdf

[43] Eric Talmadge (2019), “On summit sidelines, North Koreans study Vietnam’s economy,” APNews, at https://apnews.com/eb50d09b6fa94e2e8166098be7dedc5c

[44] Vietnam offered the DPRK 100 tonnes of rice aid in 1995 and another 13,000 tonnes in 1997. From 2000 to 2012, it supported the DPRK with 22,700 tonnes of rice, 5 tonnes of material rubber, and US$50,000 in emergency aid. It offered US$70,000 in flood relief to the North Asian nation in 2016. See “Official visit to set historic milestone in Vietnam-DPRK relations” (2019), Viet Nam News Agency, 28 February, at https://en.vietnamplus.vn/official%2Dvisit%2Dto%2Dset%2Dhistoric%2Dmilestone%2Din%2Dvietnamdprk%2Drelations/147476.vnp

[45] Political Department (2018), “Vietnam, Myanmar issue joint statement,” Nhan dan Online, at https://en.nhandan.com.vn/politics/external%2Drelations/item/8237902%2Dvietnam%2Dmyanmar%2Dissue%2Djoint%2Dstatement.html

[46] Jennifer Pagonis (2006), “Cambodia, Viet Nam and UNHCR agree on further Montagnard cooperation,” UNHCR The UN Refugee Agency, 22 August, at  https://www.unhcr.org/news/latest/2006/8/44eb03442/cambodia%2Dviet%2Dnam%2Dunhcr%2Dagree%2Dfurther%2Dmontagnard%2Dcooperation.html

[47] Up till Oct 2020, Vietnam has sent 23/166 female officers (13.8%) for UN PKO missions in South Sudan, which is higher than the UN average rate (4.8% of military contingents and 10.9% of formed police units). See more at: Women in Peacekeeping. https://peacekeeping.un.org/en/women%2Dpeacekeeping#:~:text%3DIn%202020%2C%20out%20of%20approximately,units%20in%20UN%20Peacekeeping%20missions.

[48] Women’s participation key to effective peacekeeping and peacebuilding (2020), at https://www.vn.undp.org/content/vietnam/en/home/presscenter/pressreleases/UNSCR1325.html

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: /supportISEAS – 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).

 

ISEAS Perspective 2021/2 “Sino-US Competition in Infrastructure Development: Power Plants in Vietnam” by Le Hong Hiep

 


A municipality electricity company fixes electricity cables atop a high pole in downtown Hanoi in September 2020 (Photo: Hoang Dinh Nam, AFP).

EXECUTIVE SUMMARY

  • Vietnam needs to build more power plants to deal with its looming power shortage. Instead of tapping Chinese loans under the Belt and Road Initiative (BRI), it is working with American investors to build a series of power plants using liquified natural gas (LNG) imported from the United States.
  • Vietnam’s decision is driven by its wish to use cleaner sources of energy and to reduce financial and fiscal risks for the country.
  • These projects also strengthen Vietnam-US relations and help make bilateral trade more balanced.
  • The American government is strongly endorsing these LNG-to-power projects for both economic and strategic reasons. The United States is particularly interested in presenting regional countries with an alternative to the BRI that is based on sustainable, high-standard, market-oriented private sector investments.
  • The emergence of an alternative to the BRI is welcome news for regional countries as they will have more funding options for their infrastructure projects.
  • Competition from the United States should encourage China to make BRI lending practices more transparent, sustainable, and compatible with international standards.

* Le Hong Hiep is Fellow at the ISEAS – Yusof Ishak Institute.

INTRODUCTION

As a fast-growing economy, Vietnam’s demand for new infrastructure has been increasing over the years. According to the Global Infrastructure Outlook, Vietnam’s investment needs for infrastructure projects between 2016 and 2040 amount to US$605 billion, in which power plants account for US$265 billion (44 per cent).[1] Facing delays in current power projects and difficulties in getting financing for new ones, Vietnam’s power shortage is estimated to reach 6.6 billion kWh in 2021 and 15 billion kWh in 2023, or 5 per cent of the country’s total power demand.[2] If this problem persists, it will pose serious constraints to Vietnam’s economic development.

Against this backdrop, China’s Belt and Road Initiative (BRI) should be an appealing source of funding that Vietnam can tap into. However, for various reasons, Vietnam has generally shunned BRI loans.[3] Instead, it is actively working with US investors to develop its energy infrastructure. By late 2020, at least two major power plants funded by US investors using US liquified natural gas (LNG) had been approved, and at least five more similar projects are in the pipeline.

Vietnam’s decision to tap American rather than Chinese capital for its power plants not only has important implications for Vietnam-US relations but also provides an indication of how America is responding to China’s expanding economic and geopolitical influence through the BRI. If these projects are successful, they will bring credibility to America’s approach and offer regional countries a viable alternative to the BRI.

VIETNAM’S SWITCH TO LNG-FIRED POWER PLANTS

As shown in Figure 1, as of early 2020, Vietnam’s total installed capacity of power generation was 54.88 gigawatts (GW), in which hydropower and coal-fired power plants account for 71.46 per cent. However, these traditional power sources have shown limitations.

Figure 1 – Vietnam’s power generation sources as of 2020 (per cent)

Source: EVN National Load Dispatch Center

In addition to the lack of suitable locations left to build new hydropower plants, criticisms against hydropower projects have intensified, especially following recent serious flood and landslide disasters linked to a hydropower project in Quang Nam Province. Meanwhile, air pollution concerns and the Vietnamese government’s strengthening commitment to green development have caused widespread public rejection of new coal-fired power plants. Provinces such as Bac Lieu, Binh Thuan, Long An, Nghe An and Ha Tinh have cancelled coal-fired power projects planned in their jurisdiction. International financiers have also pressured investors to withdraw from coal-fired power projects in Vietnam. For example, a group of investors recently urged Mitsubishi Corp. and seven other Japanese companies to withdraw from the Vung Ang 2 coal-fired power project in Ha Tinh Province.[4] As more international banks refuse to fund coal-fired power plants, getting financing for such projects have become increasingly difficult.[5] The most feasible source of funding for new coal-fired power plants now is from China. However, the borrower would have to use Chinese technology, which is generally seen as less advanced and more polluting.[6] The rising anti-China sentiments in Vietnam would also be a major challenge.

In order to diversify away from hydro and coal-fired power, Vietnam has created a lot of incentives for investments in the renewable energy sector. As shown in Figure 1, as of 2020, solar and wind power account for 11.05 per cent of Vietnam’s total power generation capacity. By August 2020, 23 GW of renewable energy had been added to the national power development plan, including 11.2 GW of solar power and 11.8 GW of wind power.[7] In the next few years, as these renewable energy projects are completed and put into operation, the share of renewable energy in Vietnam’s energy mix will further increase.

However, as renewable energy sources are not stable due to changing weather conditions, Vietnam still needs more stable sources of energy to serve as baseload power. In this regard, LNG-fired power plants provide the most promising option as they are seen as much cleaner than coal-fired power plants while safer and less difficult to develop than nuclear power plants. Currently, Vietnam is planning 10.4 GW of gas-fired power by 2028, most of them use imported LNG. The key challenge, however, is to get funding for these projects.

THE ROLE OF AMERICAN INVESTORS

Vietnam has developed more than 10 gas-fired power plants, but most of them (except for the Phu My 2.2 and Phu My 3 projects in Ba Ria – Vung Tau Province) are developed by domestic investors. All these plants use gas from Vietnam’s gas wells in the South China Sea. As the domestic gas supply is rather limited while new gas development projects have been delayed, Vietnam finds engaging American investors to build new power plants using LNG imported from the United States a convenient option for various reasons.

First, engaging American investors will help strengthen US-Vietnam relations. This is an important consideration, given that Vietnam is keen to maintain strong ties with the United States for both economic and strategic benefits. The United States is currently Vietnam’s biggest export market, while strategic cooperation with Washington is important for Vietnam’s efforts to balance against China in the South China Sea.

Second, importing LNG from the United States will help reduce America’s trade deficit with Vietnam, which stood at $55.8 billion in 2019.[8]  This large and swelling trade deficit has been a major source of resentment for the administration of President Donald Trump. In December 2020, the US Treasury labeled Vietnam as a currency manipulator and accused Vietnam of manipulating its currency to gain “unfair competitive advantage in international trade”.[9] Importing US LNG for its power plants will therefore enable Vietnam to achieve the dual goals of addressing America’s trade concerns and improving its energy security.

Third, working with US private investors will reduce financial and political risks for the Vietnamese government. Unlike Chinese loans under the BRI which are normally arranged through government-to-government agreements and require government guarantee, most LNG-to-power projects in Vietnam are proposed by private investors under the independent power producer (IPP) model. Under this model, the Vietnamese government only needs to commit to buy electricity from such projects at an agreed price. Financial arrangements for the construction of the projects will be made by the investors, which helps reduce the fiscal burden on the Vietnamese government.

Fourth, as Washington is providing support for the LNG industry to turn America into a major LNG producer and exporter,[10] importing US LNG can be a sustainable option for Vietnam in terms of pricing and supply capacity. Moreover, US investors, with their proven financial and technical track record, can better ensure that their projects are implemented successfully without the problems normally associated with China-backed infrastructure projects, especially cost overruns and project delays.

Table 1- Vietnam’s major LNG-to-power projects related to American investors

 Project nameCapacityInvestment value (US$)American investorStatus
1Son My 22.2 GW1.7 billionAES*Approved, commissioned in 2024
2Bac Lieu LNG3.2 GW4 billionDelta Offshore EnergyApproved, phase 1 commissioned in 2023
3Chan May LNG4 GW6 billionPacific Rim Investment and Management Inc.*Proposed, phase 1 commissioned in 2024
4Long Son LNG3.6 GW4.39 billionGeneral Electric*Proposed, phase 1 commissioned in 2025
5Hai Phong LNG4.5 GW5.09 billionExxonMobil*Proposed, phase 1 commissioned in 2026
6Long An LNG3 GW2.88 billionGeneral Electric*Proposed, phase 1 commissioned in 2025
7Mui Ke Ga3.6 GW4.2 billionEnergy Capital Vietnam, Excelerate*Proposed, phase 1  commissioned in 2028

* These projects are not wholly-owned by American investors, and there are local or third-country partners involved.

Source: Author’s own compilation

As of December 2020, more than 20 LNG-to-power projects have been proposed in Vietnam. Among these, two have been approved to be developed by American investors. As shown in Table 1, some other projects that have entered advanced stages of their application are also associated with American investors. In the next few years, more America-backed projects are expected to be announced.

AN EMERGING ALTERNATIVE TO THE BRI?

These projects have been considered favorably by not only Vietnam but also America. A primary example is the Bac Lieu LNG-fired power plant. This project is developed by Delta Offshore Energy, a special purpose vehicle established in Singapore but owned by three American shareholders. In September 2019, the US Department of Commerce (DOC) added the project to the US Commercial Advocacy Program, which enables the project to enjoy certain benefits, including lobbying efforts led by US government agencies. Shortly after that, the project was approved by the Vietnamese government and added to the national Power Development Plan 7 in December 2019. It has since been highlighted as a marquee project of US-Vietnam energy cooperation. At the Indo-Pacific Business Forum held in Hanoi in October 2020, under the witness of Vietnamese Deputy Prime Minister Pham Binh Minh and US Ambassador to Vietnam Daniel J. Kritenbrink, Delta Offshore Energy signed a master teaming agreement with three other American firms (Bechtel, General Electric and McDermott) to prepare for the execution of the project.

Commenting on the event, which also witnessed the signing of a memorandum of understanding (MOU) to develop the Hai Phong LNG power project and a joint venture agreement for the development of the Son My LNG import terminal, the US embassy in Hanoi stated that “the United States is committed to helping Vietnam meet its growing energy needs”.[11]

The US government’s support for America-led LNG-to-power projects in Vietnam is a telling example of how the US is countering China’s BRI. Since the BRI’s launch in 2013, China has been able to use the initiative to advance its economic and strategic agenda across the region at the expense of the United States and its allies. A key factor causing many regional countries to embrace the BRI was that BRI was almost the only game in town. The LNG-to-power projects that the United States is backing in Vietnam therefore provides early evidence that Washington is taking concrete actions to present regional countries with an alternative to the BRI.

Towards this end, the United States and Vietnam signed in November 2019 a Cooperation Framework to Strengthen Infrastructure Finance. The initiative was designed to achieve the two countries’ mutual goals of supporting infrastructure development through market-oriented, private sector investments. The agreement is said to support the broader US Government Indo-Pacific Strategy by complementing initiatives such as the Enhancing Development and Growth through Energy (Asia EDGE) and the Infrastructure Transaction and Assistance Network (ITAN). [12] At the regional level, Washington has also signed similar agreements with South Korea, Taiwan, Indonesia, Singapore and Thailand.

The participation of private investors like Delta Offshore Energy, ExxonMobil, AES or General Electric makes America’s approach to assisting the region’s infrastructure development markedly different from the BRI, as the implementation of the BRI has so far been dominated by Chinese state-owned enterprises. Moreover, while most BRI projects use loans arranged through government-to-government agreements or provided by Chinese state-owned banks, America-backed projects use market-based financing arrangements negotiated between investors and international creditors. In the energy sector, America’s promotion of LNG-to-power projects also contrasts with the BRI’s approach, which has mainly focused on hydro or coal-fired power plants. In Vietnam, Chinese investors and contractors have built many coal-fired power plants, and the BRI’s only energy project in the country so far is the 1.2 GW Vinh Tan 1 coal-fired power plant in Binh Thuan Province.

America is also working with Japan to support Vietnam’s energy infrastructure development under the Japan-US Strategic Energy Partnership. In a joint statement at a trilateral forum on LNG held in December 2020, the two countries pledged to provide financial assistance for Vietnam to build LNG-fired power plants and receiving terminals.[13] Japanese investors are also actively investing in such projects on their own or in collaboration with American partners. For example, during US National Security Advisor Robert O’Brien’s visit to Vietnam in November 2020, Mitsubishi, General Electric and their Vietnamese partners signed an MOU to develop the Long Son LNG power project. In the same month, Tokyo Gas, Marubeni and Vietnamese partners also signed an MOU to build the Quang Ninh LNG-fired power plant.

The collaboration between America and its allies and partners therefore highlights another major difference in the approaches of America and China to international infrastructure development. While China has funded BRI projects mostly by its own money, America has tried to pool resources from its allies and partners. In the long run, this approach together with the market-based financing mechanism will make America’s strategy more sustainable. Washington has strengthened collaboration with its allies for not only project financing but also standard setting. A primary example is the Blue Dot Network (BDN), an initiative announced in November 2019 by the United States, Japan, and Australia to provide assessment and certification of “quality infrastructure investment that is open and inclusive, transparent, economically viable, financially, environmentally and socially sustainable, and compliant with international standards, laws, and regulations”.[14] Another goal of the initiative is to mobilize private capital for infrastructure development projects across the Indo-Pacific. As Vietnam’s LNG-fired power projects appear to meet the above criteria, it is likely that they will soon be certified as BDN projects.

CONCLUSION

US-China strategic competition has expanded to different areas, including funding infrastructure development projects in developing countries. Bilateral competition in this domain has particularly intensified since 2013 when China rolled out its BRI. Until recently, China has been successful in promoting the BRI partly because the United States lacked a coherent and viable strategy to compete with the BRI. However, the case of America-backed LNG-to-power projects in Vietnam provides early evidence that Washington is taking concrete steps to counter the BRI in an effective manner. A comprehensive strategy to help regional countries build quality infrastructure in line with America’s economic and strategic visions is also taking shape. This will present a formidable challenge to the BRI at a critical juncture when the BRI itself is facing significant international and domestic setbacks, leading to Beijing’s decision to scale back the initiative and adopt a more conservative approach.[15]

The availability of an alternative to the BRI should be welcome news to regional countries as they can thus avoid dependence on any single source of funding. Competition from the United States and its allies will also force China to become more responsible and make its BRI lending practices more transparent, sustainable, and compatible with international standards. If the United States and its allies can successfully implement its infrastructure development financing model in Vietnam and replicate it in other countries, Washington can strengthen its strategic and economic position in the Indo-Pacific and counter China’s expanding influence more effectively. For Vietnam, the participation of US investors brings a critical source of funding at a time when the country desperately needs to build more power plants to deal with its looming power shortage. If these LNG-to-power projects are successful, Vietnam may also consider engaging American investors in other infrastructure projects as well. In the meantime, the priority for both Vietnam and the United States is to make sure that these LNG-to-power projects are successful. One challenge Vietnam may face along the way is how to manage the possible increase in its electricity retail price given that LNG-fired power is relatively more expensive than coal-fired or hydro power. If this challenge is addressed properly, there are good reasons to believe that Vietnam-US cooperation in the development of energy infrastructure will strengthen over the next decade.

ISEAS Perspective 2021/2, 19 January 2021.


ENDNOTES

[1] Global Infrastructure Hub, “Global Infrastructure Outlook – Infrastructure investment needs – 50 countries, 7 sectors to 2040”, July 2017, https://d2rpq8wtqka5kg.cloudfront.net/389138/open20170919030300.pdf

[2] “Từ 2021, mỗi năm Việt Nam sẽ thiếu hàng tỉ kWh điện”, Tuổi Trẻ, 9 November 2019, https://tuoitre.vn/tu-2021-moi-nam-viet-nam-se-thieu-hang-ti-kwh-dien-20191109084941987.htm

[3] For an analysis of Vietnam’s perception of the BRI, see Le Hong Hiep, “The Belt and Road Initiative in Vietnam: Challenges and Prospects”, ISEAS Perspective, 2018 (18).

[4] “Ditch Vietnam coal-fired plant, investors tell Mitsubishi and banks”, Nikkei Asia, 29 November 2020, https://asia.nikkei.com/Spotlight/Environment/Ditch-Vietnam-coal-fired-plant-investors-tell-Mitsubishi-and-banks

[5] “Banks Shunning Coal Financing Bodes Badly for New Plants in Asia”, Bloomberg, 25 February 2020, https://www.bloomberg.com/news/articles/2020-02-25/banks-shunning-coal-financing-bodes-badly-for-new-plants-in-asia

[6] Author interview with Vietnam energy expert, November 2020.

[7] “113 dự án năng lượng tái tạo đã cơ bản được giải tỏa công suất”, Vietnam Electricity, 4 September 2020, https://www.evn.com.vn/d6/news/113-du-an-nang-luong-tai-tao-da-co-ban-duoc-giai-toa-cong-suat-6-12-26358.aspx

[8] Office of the US Trade Representative, “Vietnam”, undated, https://ustr.gov/countries-regions/southeast-asia-pacific/vietnam

[9] “U.S. Treasury labels Switzerland, Vietnam as currency manipulators”, Reuters, 16 December 2020, https://www.reuters.com/article/usa-currency-manipulation-idUSKBN28Q1SF

[10] “The US is helping the natural gas industry make a profit — at the expense of the environment”, The Texas Tribune, 12 December 2018, https://www.texastribune.org/2018/12/12/us-helping-private-natural-gas-companies-make-profit/

[11] Facebook page of US Embassy in Hanoi, 29 October 2020, https://www.facebook.com/usembassyhanoi/posts/3930934623602037

[12] US Department of the Treasury, “United States and Socialist Republic of Viet Nam Sign Cooperation Framework to Strengthen Infrastructure Finance”, 7 November 2019, https://home.treasury.gov/news/press-releases/sm829

[13] “Vietnam teams with Japan and US for low-carbon electricity”, Nikkei Asia, 4 December 2020, https://asia.nikkei.com/Business/Energy/Vietnam-teams-with-Japan-and-US-for-low-carbon-electricity

[14] US Department of State, “Blue Dot Network”, undated, https://www.state.gov/blue-dot-network/

[15] For example, according to data compiled by researchers at Boston University, BRI lending by the China Development Bank and the Export-Import Bank of China decreased from a peak of US$75 billion in 2016 to just US$4 billion in 2019. See “China curtails overseas lending in face of geopolitical backlash” Financial Times, 8 December 2020, https://www.ft.com/content/1cb3e33b-e2c2-4743-ae41-d3fffffa4259

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 to 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).