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Tensions with China Drive Investors Towards Vietnam

One of many small streets in Ho Chi Minh City, with newly-build towers in the background. Credit: Kris Janssens / IPS

One of many small streets in Ho Chi Minh City, with newly-build towers in the background. Credit: Kris Janssens / IPS

HO CHI MINH CITY, Apr 3 2024 (IPS) - In recent months, several European representatives embarked on trade missions to Vietnam. German President Steinmeier visited Hanoi in January. The Netherlands sent Prime Minister Mark Rutte, with the Dutch royal couple, King Willem-Alexander and Queen Máxima, soon to follow suit. Notably, the Netherlands stands as the most significant European investor in Vietnam.

Additionally, official delegations from the US and China have engaged in discussions with Vietnam regarding economic cooperation.

According to the Vietnamese Ministry of Planning and Investment, the country attracted nearly US$36.61 billion of Foreign Direct Investment (FDI) in 2023, marking a notable increase of over 32 percent compared to the previous year.

What factors contribute to this success? Vietnam, having emerged from a tumultuous history that included a war with the United States until the 1970s and continuing under communist leadership, has made significant strides. European entrepreneurs share their experiences in this thriving Southeast Asian nation.


Bill Clinton and the Era of Normalization

“[Vietnamese communists] have always lied to us, and they are still lying to us. I see normalization as an attempt on their part to get access to American markets. They are not to be trusted.”

This is a quote by Sam Johnson, former Texas Republican Party MP and war veteran. In 1995, he reacted furiously to Democratic President Bill Clinton’s decision to re-establish relations with Vietnam.

Opponents believed that there should first be complete clarity about missing Americans who had never returned from the Vietnam War. Clinton supporters felt “it was time to turn the page.”


European trade agreement

The rapprochement with the West already started in the 1980s when the market economic policy ‘Doi Moi’ (literally translated as ‘renovation’) was introduced. As a result, Vietnam’s poverty level dropped from 58 percent in 1993 to less than three percent in 2020.

Meanwhile, the country managed to smooth things over with the United States and succeeded in gaining Europe’s trust. Thanks to the EU-Vietnam Free Trade Agreement (EVFTA), signed in 2019, import taxes are being systematically reduced in both directions.

The impact of this agreement took some time to materialize because the pandemic grounded planes for a few years, but nowadays European entrepreneurs easily find their way to this new sales market with almost a hundred million inhabitants.


China Plus One Strategy

Vietnam has emerged as an attractive investment destination for international investors seeking alternatives to China. For years, the Chinese work ethic and low production costs provided an ideal investment climate.

But Beijing’s economy is sputtering, wages are rising and US trade sanctions are scaring lenders away. To diversify, they want at least one branch elsewhere. As a neighboring country, Vietnam seems to be the perfect alternative.

Dutch entrepreneur Stefan Kleijkamp also applied the so-called “China plus one” strategy. He is the manager of waste2wear, a company that produces clothing and carrier bags made from waste material. So far, he has mainly been operating in China, but recently he opened a new branch in Vietnam.

The key element is the reluctance of American customers to buy Made in China labeled products. “This is related to the tense geopolitical situation,” says Kleijkamp. “The fabric still comes from China, but the bags are being assembled in our factory in Ho Chi Minh City,” he explains.


Navigating Geopolitical Sensitivities: South China Sea or East Sea?

The work ethic and mentality are largely similar, but the relationship between the two countries is very sensitive. Vietnamese may benefit from the Chinese economy, but they prefer not to be associated with their northern neighbors. This aversion goes far. Just take the map of the region.

The sea around the famous Spratly Islands, which are disputed because of their strategic location, is called the South China Sea. At least according to Beijing. From a Vietnamese perspective, it is the East Sea. Geographically, both names make sense. But a map with an ‘incorrect’ designation can cause a diplomatic row.

The increasing conflict over the islands is a cause for concern. There is a real fear of a (new) Chinese invasion of Vietnam, as happened in the late 1970s.


Aversion to China Greater than Resentment of Americans

“The two countries are at a different stage of development,” says Stefan Kleijkamp. Vietnam resembles the China of twenty years ago, he thinks, purely focused on economic development. “China itself now has bigger ambitions.”

As a result of its size and its international position, China is less dependent on the rest of the world, whereas Vietnam does need help and expertise from abroad. Also from the United States.

Vietnamese people invariably answer “they have left the past behind them” when you ask a question about the US. They have morally won the war and this feeling strengthens them.


The Entrepreneurial Spirit in Vietnam

Soon after the war, when North and South Vietnam reunited, Trường Ngô fled his country. He arrived as a boat refugee in the Netherlands, where he was trained as a hydrologist. Later, when he returned to his roots in Vietnam, he used his acquired knowledge to start a water treatment company.

“When I arrived here, these were all rice fields”, he recalls, when he shows me his head office in Trà Vinh, a city about 120 kilometers southwest of Ho Chi Minh City. “The drinking water was very dirty. Now, everyone here uses tap water from us,” he says proudly. Currently, Trường and his son Vinh supply drinking water to 75,000 residents of the region, a spectacular growth. “That’s my mindset. I have a goal and I’m heading towards it. No matter what,” says Trường.

The Vietnamese seem to incarnate the American dream more than the Americans themselves.

This rampant belief in prosperity and progress is Vietnam’s greatest asset for entrepreneurs, although there is still a long way to go. “There is a positive dynamic and a rapidly growing market,” says Steve Van Aelst. He is a Belgian architect who has been working in Ho Chi Minh City since 2010.


The Only Way Is Up

Unlike the European nostalgic and somewhat pessimistic attitude, Vietnam is purely passionate about the future and is focused on prospects and opportunities. Even if this progress means that simple rural life will eventually make way for an industrial society.

Van Aelst’s company has been able to develop urban planning projects of 1,000 hectares or even 20,000 hectares. These kinds of assignments are no longer possible in Europe and are often not desirable.

A different country also brings different challenges. Last fall, Minister-President of Belgium’s Flanders region Jan Jambon went on an economic mission in Vietnam. During this visit, Van Aelst gave a lecture on sustainability. Vietnam has a vast coastline and is therefore vulnerable to the consequences of global warming. As an architect, Van Aelst can provide ecological alternatives. However, he says, the price tag of these energy-efficient measures is also important for a Vietnamese customer.


Communist Danger

During Jambon’s visit, a political delegation member asked a question about ‘the communist regime’. But European entrepreneurs here mainly experience a capitalist mentality and do not feel the population is ‘burdened under the yoke of the government’, as is often thought.

In short, communist rule is taken for granted, as long as it doesn’t affect economic growth and people can work their way up. “The Vietnamese have dollar signs in their eyes,” someone aptly summarizes, although she doesn’t want to be named in this article.

Because Vietnam is a one-party state criticizing the government is very sensitive and this even includes seemingly innocent statements. As soon as a conversation becomes too political, it is blocked.

Same goes for Trường, who shows me his native village and the tomb of his parents. At first, he is very emotional when he talks about the opportunities his parents gave him by fleeing to Europe.

The next moment, he asks me to quickly get back into the car because he doesn’t want to be seen in such a small village with a European reporter. “You never know what the authorities think,” he says.

The communists who forced this family to flee, are apparently still watching them.

Finally, as a European entrepreneur, you cannot simply copy-paste your Western attitude here. As an example, Steve Van Aelst refers to sharp points on a building. “Those do not fit within the philosophy of Feng Shui,” the architect says. “Softness and poetry and the emotional connection with a building are important here. You have to get to know those differences and sensitivities and take them into account.”

But the general balance certainly tips to the positive side for Aelst.

“The complexity of this country and the answers we can provide are satisfying. We are working on projects here that we can truly be proud of.”

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