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Vietnamese Businesses Offer Cautious Welcome to Belt and Road

Although some concerns remain over territorial disputes with China, many Vietnamese companies remain upbeat over the country's prospects as part of the Belt and Road initiative, while infrastructure work is already underway.

Photo: Transshipment: A key role for Vietnam.
Transshipment: A key role for Vietnam.
Photo: Transshipment: A key role for Vietnam.
Transshipment: A key role for Vietnam.

Vietnam is considered a key part of the maritime component of China's ambitious Belt and Road Initiative. In particular, there has been a focus on Northern Vietnam's Haiphong Port, with plans afoot to complete a major upgrade to its facilities by the end of 2017.

Overall, Haiphong is a key nexus point along two of the proposed trade corridors. The first is along a route connecting Nam Ninh, Lang Son, Hanoi and Haiphong, while a second connects Kunming, Lao Cai, Hanoi and Haiphong. These proposals would see Vietnam playing an enhanced role in the transportation of goods produced in China, while also opening up the local consumer market to more external suppliers. It is also believed that the improved links will also help develop Vietnam's own industrial base.

With Vietnam ideally placed as a transportation hub for a number of other countries along the Mekong River – including Cambodia, Laos, Thailand and Myanmar – the country would play an important logistics role with regard to serving the ASEAN  bloc. The only real barrier to such a development is seen as the lingering territorial disagreements between China and Vietnam, particularly with regard to the South China Sea.

Addressing the need to resolve such issues, Xi Jinping, the Chinese President, has gone on record saying: "We must strictly adhere to the important agreements that the leaders of the two countries have achieved. Together, we can handle and control any disagreement over the situation, and maintain peace, and stability on the East Coast."

Mutual benefit

Should any such issues be resolved or even merely set aside, many in both China and Vietnam would welcome the closer economic and logistics ties outlined as part of the Belt and Road proposal. One such advocate is Eric Fang, Director of the Shunfang Company, a Chinese fabric trading company based in Shanghai.

Photo: Haiphong: A vital marine hub.
Haiphong: A vital marine hub.
Photo: Haiphong: A vital marine hub.
Haiphong: A vital marine hub.
Photo: The new Vinh Tan thermal power plant.
The new Vinh Tan thermal power plant.
Photo: The new Vinh Tan thermal power plant.
The new Vinh Tan thermal power plant.

Outlining the possible benefits, Fang said: "Vietnam is one of our major buyers. The fact that Vietnam has agreed to be a part of the Silk Road project is great news for us. We have been working with Vietnamese companies for many years and, up until now, the process of shipping goods by sea has been lengthy, while also requiring the completion of a substantial amount of paperwork. In the future, if we could use rail transportation, there would be a considerable saving in terms of both time and costs."

While the benefits for those Chinese exporters seeking markets for their excess capacity is clear, some have been less certain about the upside for Vietnam. Despite this, the mood of the Vietnamese business community seems to be largely upbeat about the prospects of the initiative, believing it is likely to enhance its own trading prospects in the long-term.

Addressing this issue David Wong, Director of the Wintec Company, a specialist PU foam manufacturer based in Vietnam's Long An province, said: "I expect Vietnam will participate in the Belt and Road project and that, in future, relationships between the two countries will be less complicated. It can only lead to a much improved situation and not only in terms of international trade.

"I believe it will create the ideal conditions to develop and extend our business domestically. It will also benefit other Vietnamese enterprises and the Vietnamese economy in general."

Wong's optimism was echoed by Tran Lam, a Senior Sales Representative of the Au Viet Moc Trading Import Export Company, a wooden furniture manufacturing company based in Hi Chi Minh City. Emphasising the importance of overseas investment, Lam said: "In my opinion, when foreign companies invest in Vietnam, there will inevitably be more job opportunities for the people here. That means the unemployment rate will drop and the overall quality of life will improve. That has to be a good thing."

Highlighting the importance of settling any outstanding territorial matters, Nguyen Van Hoang, Deputy Director of Vietnam Textile and Garment Corporation, said: "In terms of our businesses, if the relationship between Vietnam and China improves, it can only be a good thing. Many of last year's problems relating to the South China Sea had a hugely negative impact on our business. With sales frozen for months, there was nothing for our workers to do. Despite this, we still had to pay our staff in order to retain them."

Power to the People

Overall, the Belt and Road project is seen as offering a number of clear opportunities for the Vietnamese economy. While most obviously offering Vietnam the chance to attract a higher level of investment from overseas companies, especially those based in China, the project will also support the development of the country's infrastructure, particularly in terms of utility and logistics facilities development.

Photo: Infrastructure investment: Vietnam readies itself for the Belt and Road.
Infrastructure investment: Vietnam readies itself for the Belt and Road.
Photo: Infrastructure investment: Vietnam readies itself for the Belt and Road.
Infrastructure investment: Vietnam readies itself for the Belt and Road.

A prime example of this is the work that has already been completed on the hydroelectric power generation plant in Binh Thuan on Vietnam's south central coast. Around 95% of the project's total capital cost of US$1.75 billion came from Chinese venture investors – the Southern China Power Grid Company and Chinese International Power Company, with the remaining 5% being covered by the Vietnam Coal and Mining Group (Vinacomin).

The same consortium is also behind the development of the Vinh Tan thermal power plant in Binh Thuan. With a total capacity of 1,200MW, the initial phase of the project will come on line before the end of 2018, with the second phase scheduled for completion some six months later.

Pham Tuong Vi, Special Correspondent, Ho Chi Minh City

Content provided by Picture: HKTDC Research
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