China’s illegal placement of Haiyang Shinyou 981 oil rig on the Vietnamese continental shelf was estimated to have cost Vietnam around USD1.5 billion, or 0.7% of its GDP, according to one expert.
Dr. Nguyen Duc Thanh, from Vietnam National University – Vietnam Centre for Economic and Policy Research
Dr. Nguyen Duc Thanh, from Vietnam National University – Vietnam Centre for Economic and Policy Research (VEPR), sat down with DTiNews to explain more about the economic fallout from the incidents provoked by the illegal placement of the Chinese oil rig.
Could you please explain why economists have recently changed their methods of calculating the impact of the Chinese oil rig placed within Vietnam’s exclusive economic zone?
Before mid-June, I and many of my colleagues forecast that, if China continued to maintained their illegal oil rig our continental shelf through the end of August this year as they stated they would, it would cost Vietnam around USD2 billion or 1% of the country’s GDP. However, due to great efforts made by the government, ministries and branches, the intelligent strategies of many investors and China’s early withdrawal of the rig, we’ve reassessed the projected impacts. So the quantifiable cost to the country is slightly less than expected.
Most of this is a result of indirect economic effects in industries such as tourism, agriculture and seafood export.
Which sectors have been most affected?
As I said, the economic damage has been mostly indirect. Trade with China as well as tourism were probably the main cause of losses. The tourism industry recorded major losses in June, with many hotels reporting low occupancy rates.
Between May and June, 18 major hotels in Vietnam recorded a room cancellation of 10%. This rate increased to 30% between June and July. The standoff caused an estimated loss of USD18 million for Vietnam’s tourism industry.
China’s aggressive actions in the East Sea also affected the operations of several businesses from Hong Kong, Taiwan and Singapore that operate in Vietnam.
Will these events have any major impacts on investments coming from China in the near future?
Yes, they will definitely have an affect on Chinese investment in Vietnam. This will, in turn, affect our economy, as Vietnam is to some extent dependent on trade with China. Bilateral trade operations could be affected and there may be worries about cancellations of contracts. Litchi exports usually peak in June, but this year exports were lower than usual. However, these issues would not be long-term. Many Chinese firms have already resumed trade with Vietnam.
There have not been any real negative effects in terms of investment, as Chinese investment in Vietnam is rather modest.
What action should be taken if China continues to pursue aggressive policies in the future?
I do not see the Chinese giving up their plans for the East Sea, so there may be further incidents in the future. The Vietnamese have adapted to the situation and see the problem as a long-term one, which will likely continue to exist for future generations.
Vietnam should prepare by seeking new trade partners. I believe that China would not be able to continue to take unilateral actions, ignoring international law.
The most concerning aspect of this is the dependance of some Vietnamese industries on Chinese materials and Chinese markets for their products. China’s recent aggressive actions in the East Sea can be seen as a wake-up call for Vietnamese companies. They will have to adopt a more practical attitude about partnerships with Chinese firms, especially in fields such as engineering, electricity, transportation and apparel.
Thank you very much!