Vietnam Fears Losing Foreign Investment Over Anti-China Protests

Vietnam Fears Losing Foreign Investment Over Anti-China Protests

China began evacuating its citizens from Vietnam following last week’s demonstrations that led to hundreds of factories in the country’s Binh Duong province being damaged and looted. And while production has resumed at some factories, others remain too ravaged to conduct business as usual.

According to China’s Xinhua, at least two Chinese citizens have been killed and more than 100 injured in the anti-China protests over the oil rig placed in disputed South China Sea waters.

“The violent protests by irrational rioters can not be justified under any circumstances and will in no way strengthen Hanoi’s groundless claim over Chinese territory and surrounding waters in the South China Sea. For the Vietnamese government, its failure or inaction to prevent such tragedy can only tarnish its image as a favorable destination for international investment and tourism, which could bring about severe consequences for its own economy,” Xinhua reported.

Matt Priest, president of the Footwear Distributors & Retailers of America (FDRA) said the Vietnamese government reached out to his organization saying the Prime Minister sent an urgent notice to the Ministry of Public Security and other ministries, sectors and localities that it is taking firm measures to prevent and punish those who incite others to disturb law and social order.
The Vietnamese government allowed citizens to protest last week, a rare occurrence in a country that generally suppresses public displays of displeasure.

“I think the Vietnamese government saw the value in promoting some discourse amongst their people in response to the oil rig,” Priest said, “But as it impacts foreign direct investment and as it impacts footwear companies and their ability to make shoes and export them to the U.S. and European markets, I think that the longer it goes on the more detrimental effect it will have on that production. I think they’re going to do everything they can to try to get people back to work.”

Some companies, like Formosa Chemicals & Fibre Corp, have resumed operations, somewhat quelling fears that the protests would be a major setback to global supply chains and a hindrance to the country’s economic growth. Since the factories in Binh Duong account for one third of Vietnam’s export revenue, those that remain closed could impact business.

“I think we anticipate some production delays, but I don’t think anyone knows exactly what will happen next,” Priest said.
The bigger issue, Priest explained, is that this is going to be an ongoing conflict. FDRA published a paper in March titled, “What Conflict in the South China Sea Would Mean for the Footwear Industry,” outlining the background on the tensions and potential future impacts.

“China is kind of flexing their muscle as a region to remind people that they are the economic power, that they are the ones that have the most influence on the region,” Priest explained. “Particularly as the US comes in to negotiate the Trans-Pacific Partnership (TPP) and the talks with Japan, and the talks with Vietnam and Malaysia and Singapore, and other regional countries, in a way that would solidify the free trade agreement and really drive economic growth for all those who are part of the agreement, and China, for now, is not part of the TPP.”

In an effort to reassure foreign investors, Vietnam’s Ho Chi Minh City authority said it would ensure safety and security for them and their businesses and that they would not be held liable for damages incurred, Vietnam News reported.

At a press briefing Thursday, Vietnam foreign ministry spokesman Le Hai Binh said order had been restored in the Ha Tinh and Binh Duong provinces, and that trade activities along the border with China were normal.

Vietnam Fears Losing Foreign Investment Over Anti-China Protests