Expert accuses Chinese investors of scheming on Vietnamese resources
  • By Bich Diep | | June 12, 2014 08:56 AM
 >>  Vietnam urges China to withdraw oil drilling rig
 >>  Vietnam receives no official statement of China's contract ban
 >>  China shifts oil rig again, Vietnamese boats harassed
 >>  China intentionally conceals wrongful acts in East Sea
 >>  China bans state firms from Vietnam contract bids

Even though China ranks only 14th out of 96 countries and territories investing in Vietnam, Chinese investors have focused investment on industry and natural resources exploitation, according to one expert.

Dr. Pham Sy Thanh, Director of the China Economic Research Programme at the Vietnam Centre for Economics and Policy Research, gave an interview with DtiNews about economic relations between the two countries amid rising tensions over the East Sea.


Dr. Pham Sy Thanh, Director of the China Economic Research Programme at the Vietnam Centre for Economics and Policy Research

The economic relations between Vietnam and China is not only a relationship between two neighbouring countries. Since one of the partners in these relations happens to be the second largest economy in the world, what are the interests and pitfalls for Vietnam moving forward?

China has maintained a yearly economic growth rate of nearly 10% over the past three decades and has become the world’s second largest economy. With a population of nearly 1.4 billion people, China has brought about trade opportunities for all countries.

Since Vietnam shares a border with China, we have great opportunities for trade, both in terms of imports and exports. Trade between China and Vietnam has benefits for both sides. Our exports supplement the Chinese market and Chinese imports are affordable to Vietnamese people.

Trade between our two countries has been increasing for a long time, and trade between the two countries accounts for one-third of Vietnam’s total trade turnover, so clearly we are benefiting. However we have not taken full advantage of our economic relations with China. And, since we have yet to explore other foreign markets, Vietnam would be vulnerable to risk if trade relations with China were cut for any reason.

Another part of the reason is the dynamics of these trade relations. Vietnam mostly exports unprocessed and low-cost products to China, while importing complete, manufactured and high-priced products. This is because of Vietnam's limited technological capacity.

Most Vietnamese products are exported to China through small contracts, affecting collection of taxes and hindering quality control.

Vietnamese products have only served China’s border provinces and have yet to penetrate into the country’s main market.

Vietnam is currently dependent upon economic relations with China, in both industry and agriculture. Currently, Vietnam’s animal feed supply market is dominated by foreign enterprises from Thailand, Taiwan, France and China. Anywhere from 60% to 70% tra fish feed, and 90% of seafood and veterinary medicines are supplied by foreign enterprises.

In your view, how will the rising tensions over the East Sea affect bilateral economic relations? Will Vietnamese exporters to China be seriously affected?

The rising tension over the East Sea, related to China’s illegally-placed oil rig in Vietnamese waters has negative economic impacts for both economies.

It’s obvious that Vietnam would record a fall or stagnation in the number of cooperative projects with China in terms of trade, tourism and foreign investment as well as engineering procurement contracts. This would negatively impact on Vietnam’s economy.

If Chinese contractors halt their projects in Vietnam, many major projects would face stagnation, driving up costs. Vietnam would also face difficulties in finding new contractors, as all the equipment and technology for these projects are Chinese. Currently, it seems that Vietnam is not yet willing to unilaterally end contracts with Chinese contractors.

A decrease or stagnation in economic relations would directly affect Vietnamese producers of apparel, footwear and seafood. Other industries would be affected as well.

On the other hand, China would also see a fall in its exports, especially agricultural products and supporting industry products. China’s capital withdrawal from Vietnam would affect their chances of benefiting from Vietnam’s Trans-Pacific Partnership (TPP) Agreement.

In addition, this would negatively affect the supply chains of many trans-national companies that do business in both countries.

Vietnamese Minister of Transport Dinh La Thang has recently stated that Vietnam would make efforts to decrease dependence on Chinese contractors. In fact, Chinese contractors are holding the majority of EPC contracts in Vietnam. What do you think about this? And what is the solution?

In order to mitigate possible negative impacts caused by the fact that foreign contractors dominate EPC contracts, Vietnam should create a comprehensive legal framework on bidding. The country should also clarify the rate of EPC contracts to be awarded to Vietnamese contractors, along with strict punishments for corruption in ODA-related cases.

Vietnam has recently been paying more attention to technical standards and longevity than it has to prioritising saving on costs.

It’s possible to ban bidding for contractors from some foreign countries for key national projects such as energy and mineral exploitation projects. More attention should also be paid what happens after the bidding process. This means really looking at implementation supervision to prevent Vietnamese contractors from selling their contracts to Chinese firms or hiring Chinese sub-contractors.


Chinese investors dominate mineral exploitation projects in Vietnam

How will Chinese FDI affect Vietnam’s economic development?

Chinese investors tend to invest a lot in the acquisition of materials and not so much on technology transfer. They tend not to hire foreign workers in their overseas factories.

Statistics from the Ministry of Industry and Trade show that, as of December 15, 2013, China ranked 14th out of 96 countries and territories investing in Vietnam. They had a total of 891 projects with a combined registered capital of USD4.68 billion.

It seems that 60% of total Chinese projects, and 70% of Chinese FDI projects have been pumping capital into searching for strategic properties and appropriating the natural resources of Vietnam.

While Vietnam is speeding up TTP negotiations, several Chinese investors are building factories to produce apparel and footwear materials in Vietnam in order to take advantage of the agreement. It’s possible that Chinese investors may dominate the apparel and leather industries in Vietnam at the expense of Vietnamese enterprises.

Do you think that TTP could help Vietnam mitigate its dependence on trade relations with China?

When Chinese investors rush to build apparel plants in Vietnam, it may help reduce Vietnam’s dependence on imports of such materials. However, this would also foster the domination of Chinese enterprises in the market. On the other hand, TPP would bring Vietnam a number of new economic cooperation opportunities if we can improve the quality of our products and management systems.

Thank you very much!

Leave your comment on this story