Saturday, October 17, 2020

Vietnam’s manoeuvres to reap gains in the changing international environment

The Chinese aggressiveness in its periphery is leading to a paradigm shift in the international order. Several nations, perturbed over the Chinese aggressiveness, efforts to disrupt and reshape international environment and hegemonic ambitions, are resetting their ties to restrain China and ensure that the strategic balance remains unchanged.

With Xi's taking over the power, the Chinese aggressiveness significantly escalated in the South China Sea (SCS). China is routinely encroaching into the EEZs of other littoral states, harassing their fishermen and obstructing their drilling operations. It has created artificial islands and turned them into weaponised outposts. It is carrying out naval and air exercises to deter other claimants from opposing its claim, which has been nullified by the PCA Ruling. Since 2012, it has also intensified the cartographic aggression and propaganda to assert its claim in the nine-dashed-line. China has rejected the Ruling based on UNCLOS.

While China is targeting all other claimants, its aggressiveness is focused on Vietnam for being the strongest opponent of the Chinese expansionist policy in the region. Besides repeatedly encroaching into its EEZ, in April Chinese sunk a Vietnamese boat in the Paracel islands. This was repeated in June as well. Malaysia, Indonesia and the Philippines too became targets of Chinese harassment. Taiwan's AIDZ and maritime boundaries are repeatedly violated. The Chinese overall strategic objective is to control the entire SCS and later use it to dominate the Indian Ocean.

In view of the above, the International Community has become convinced of the need to undertake coordinated steps to contain China and promote peace, security, stability and prosperity in the Indo-Pacific region. This has led to the emergence of a group to have peaceful and secured Indo-Pacific region covering SCS. India along with Japan, Australia and US, called the Quad, began to take steps to formalise the group supporting the establishment of free, open and inclusive Indo-Pacific based on equality, multipolarity and international law and norms. The group based on shared interests is trying to have South Korea and ASEAN countries to turn it into Four Plus to maintain strategic balance in the region. The Foreign Ministers of the group met on 6 th October indicated this. India is working with Russia for "common approaches" for the development in the Pacific and Indian Oceans. There are commonalities between this concept and ASEAN Outlook for Indo-Pacific. France and Germany have extended their support to this concept and Canada is mulling over it.

Alongside, the demand for implementation of the PCA Ruling has considerably increased. US has announced that it was aligning its position with the PCA Ruling of 2016. Other western countries too are supporting it. India and Japan have always been supporting the implementation of 2016 Judgement. Australia too is now supporting UNCLOS and PCA Ruling. It submitted a Note Verbale to the Commission on the Limits of the Continental Shelf (CLSC) on 23 rd July that rejecting China's claims on Paracel and Spratly islands based on its 'historic rights'. ASEAN countries also desire its implementation.

The growing disenchantment with the BRI project based on predatory economics is becoming visible. The manufacturing firms from China are moving out and looking for alternative location. There is increasing demand for having an alternative to the Chinese dominated supply line.

Vietnam in the South East Asia is set to gain from the changed environment. Vietnam's consistent economic growth, deft handling of pandemic and its ability to keep the ASEAN under its chairmanship unified have significantly raised its stature in the region. Besides, its responsible behaviour as the Non-Permanent member of UNSC too has raised its image internationally.

Vietnam has emerged as an attractive alternative location for companies moving out from China due to a number of factors. First, Vietnam is seen as one of the most exciting ASEAN's economies with growing middle class, younger population, cheaper labour and potentials for business growth. Second, Vietnam has a large manufacturing hub that offers synergy to companies and the prevalent laws conducting business are less time consuming. Third, Vietnam has invested in healthcare education since Doi Moi reforms in 1986. Fourth, Vietnam's currency is stable. That is why Vietnam is called the 'New China' for manufacturing hub.

Vietnam has taken steps to take advantage of the opportunities available and this is likely to continue. It began to invite the firms moving out of China. Even prior to pandemic, firms had started moving out from China with the continuing US-China trade war. By April this year, about 50% of the 56 firms that moved out from China, were relocated in Vietnam. The pandemic has acted as a catalyst for firms to shift from China. In July, 15 Japanese companies moved to Vietnam, while firms from US and South Korea are shifting or mulling over it. They find Vietnam as an ideal alternative in the region. Japan has announced a $2.2 billion economic stimulus to help manufacturers to shift production out of China.

Vietnam is also taking steps to make it an attractive place for investment. It is showing willingness to simplify laws and procedures to make the nation more attractive for business. It is also taking steps to provide advance technical education to its youth to provide work force to firms. Western Australia signed a MoU with a key economic zone in Vietnam – Ba Ria-Vung Tau Province for boosting trade and investment. This agreement focuses on maximising investment and trade opportunities and supporting business networks and communities. In June, Vietnam ratified its FTA with the EU, which would essentially allow European producers to invest in Vietnam. The FTA, an ambitious one seeks to remove a whopping 99% of customs duties between EU and Vietnam. However, Vietnam has to make serious efforts to build additional infrastructure and align with the alternative supply chain.

There are indications that Vietnam would utilise its diplomacy more forcefully at multilateral forums to put pressure on China to bring an end to its belligerence. Realising that ASEAN unity is essential for this, it manoeuvred to get a unified Chairman's statement. This time the terms like "some leaders" and "some ministers" to express the concerns over the Chinese activities as in the past were not used. It would more forcefully reaffirm that the 1982 UNCLOS should be the basis for determining maritime entitlements, sovereign rights, jurisdiction and legitimate interests over maritime zones. It intends to promote defence cooperation abroad, according to its while paper. In view of the continued attacks on its fishermen by China, a need to develop a fishing fleet for their protection is being acutely felt. Vietnam may work in this direction.

On PCA Ruling, it has approached UN and this was followed by Malaysia and Indonesia and the Philippines' has also supported it. Vietnam is also sharing with other nations the need for its implementation. The Vietnamese Ambassador discussed the regional development with the Indian Foreign Minister. Since India would be joining as the Non-Permanent of the UNSC, a greater push can be made there for the implementation of the PCA Ruling.

Vietnam would work to align the approach of ASEAN with the global trend for the actualisation of the Indo-Pacific vison. As the ASEAN's centrality is accepted by all in this, Vietnam as the important nation would significantly gain. This would establish peace and allow all to carry on trade without any obstruction. In essence, Vietnam would continue the policy to boost its economic growth and deepen strategic alliances with countries needed for consolidation of its prime position in the South East Asia.

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