Vietnam poised to be big post-pandemic winner

Through early and efficient border closures, uncharacteristic official transparency and strategic Covid-19 diplomacy, communist-run Vietnam is fast emerging as a likely post-pandemic winner.

For a nation that has long-sought to secure it’s place as a reliable and responsible global actor, the coronavirus outbreak and its minimal impact on Vietnam has presented the nation an opportunity in crisis analysts say it is firmly grasping.

Carl Thayer, emeritus professor at the University of New South Wales in Australia and a recognized Vietnam expert, says that Hanoi was “quick off the mark” in its version of “coronavirus diplomacy”, a gambit China, Taiwan and others have likewise deployed to strategic effect.

Vietnam has recently ramped up medical equipment production and made related donations to countries in Covid-19 need, including to the United States, Russia, Spain, Italy, France, Germany, and the United Kingdom.

The latter five European nations, all grappling to cope with the pandemic, have negotiated strategic partner agreements with Vietnam in recent years, Thayer noted.

US President Donald Trump earlier this month thanked “our friends in Vietnam” in a Twitter post after America received 450,000 protective hazmat suits manufactured in Vietnamese factories owned and operated by US chemical company DuPont.

Vietnam has also donated face masks, hand sanitizers and other Covid-19 containing supplies to medical services in neighboring Cambodian and Laos, countries with which Vietnam shares special relations and where China has recently made inroads and gains.

“The coronavirus pandemic has been a great opportunity for Vietnam to enhance its soft power, as it helped to broadcast Vietnam’s generous behavior toward the international community,” said Alexander Vuving, professor at the Daniel K Inouye Asia-Pacific Center for Security Studies in Honolulu, Hawaii.

Indeed, international praise for Vietnam is soaring at a time when China faces considerable criticism for not only for covering up the initial outbreak of the virus in its Hubei province, but also for spreading disinformation and propaganda in its aftermath, including a bogus official accusation that the US planted the virus in China.

Derek Grossman, a senior defense analyst at the RAND Corporation, a Washington-based think tank, says that Vietnam’s handling of the coronavirus pandemic, as well as its diplomacy amid crisis, will “enable it to demonstrate its value-added to the world.”

That was already becoming apparent to some before the pandemic. Vietnam was one of the few beneficiaries of the US-China trade war as multinational and other companies migrated their factories from China to Vietnam to avoid punitive new US tariffs on China-made goods.

Japanese investment bank Nomura estimates that Vietnam’s economy enjoyed an 8% boost in 2019 as a beneficiary of the shift in supply chains.

Many analysts now expect Vietnam to receive the lion’s share of “second wave” factory relocations driven by the pandemic and growing anti-Chinese sentiment in the West fueled by perceptions China is chiefly responsible for the outbreak.

Politicians in Washington, Tokyo and certain European capitals now speak openly and provocatively about the need for “decoupling” from China’s economy, including to break dependence on a single foreign source for essential imports such as medical supplies.

“Vietnam is a major beneficiary of this diversification as it has proved to be friendly while still cost-effective to firms from the West,” said Vuving. “Vietnam will be, in many cases, their first choice when they look around to find a reliable alternative to the now unreliable Middle Kingdom.

The shift, if indeed on the horizon, couldn’t be better timed for Vietnam. The World Bank forecasts in a worst Covid-19 case scenario that Vietnam’s gross domestic product (GDP) will fall to 1.5% this year, down dramatically from around 7% in recent years.

While this would mark Vietnam’s lowest growth in decades, it will still be much higher than most of its Southeast Asian neighbors, including manufacturing rival Thailand, which is now officially projected to see -5.3% GDP growth in 2020.

Investors clearly see the difference as Vietnam’s bourse has emerged as the region’s best performer this year while several of the region’s other stock markets have tanked in anticipation of Covid-19’s economic damage.

Indeed, some pundits suggest that Vietnam’s economy could bounce back faster than other Southeast Asian states in 2021, especially if the likes of the US, Japan and EU states move en masse to relocate their post-pandemic supply chains out of China and into Vietnam.

The Covid-19 crisis also comes at an important diplomatic time for Vietnam. This year the nation holds the rotating chairmanship of the Association of Southeast Asian Nations (ASEAN) and a non-permanent rotating position on the United Nations’ Security Council.

This week, Vietnam hosted a virtual summit with other Southeast Asian leaders to forge a collective regional Covid-19 response at a time new cases are surging in several of the ten-member bloc’s member states, including Indonesia, Singapore and the Philippines.

“It is in these grim hours that the solidarity of the ASEAN community shines like a beacon in the dark,” Prime Minister Nguyen Xuan Phuc, who chaired the meeting, said in his opening remarks.

Speculation is now swirling in diplomatic circles that Vietnam’s tenure as ASEAN chair could be unprecedentedly extended until 2021 due to disruptions caused by the coronavirus crisis.

If so, it would allow Hanoi more time to build regional consensus on two big China-related issues it was expected to emphasize as ASEAN’s chair, namely notching a long-sought code of conduct for the contested South China Sea and an agreement on water resource management on the Mekong River.

Both prickly and escalating issues have put various ASEAN member states at loggerheads with China. Vietnam-China tensions escalated this month after a Chinese surveillance ship sank a Vietnamese fishing boat in contested sea waters; the Philippines came to Vietnam’s diplomatic defense over the incident.

Meanwhile, a report compiled by American climatologists released this week used satellite images to show for the first time that water levels in China’s dammed upper reaches of the Mekong River were running high despite months of severe droughts and parched water flows in downstream Vietnam, Cambodia, Laos and Thailand.

If Vietnam is to have any success in making its case against China and to emerge as a regional spokesperson for resolving the issues, Hanoi will need to win the support of the wider international community, including in the West.

Vietnam’s diplomacy in the recent years has been geared towards winning friends and potential allies in case of a conflict with China. In that vein, many analysts now consider Vietnam to be America’s closest ally in Southeast Asia.

Last month, the USS Theodore Roosevelt aircraft carrier became the second US naval vessel to dock in Vietnam since the end of the Vietnam War in 1975, following another major US naval visit in 2018.

The carrier has since been grounded due to a rash of Covid-19 infections among its personnel, raising speculation China may seize on the vaccuum to take a more assertive approach to the maritime area with the US at least temporarily out of the strategic picture.

Vuving argues that Vietnam is now “veering closer to the US and farther from China” faster than it would have without the Covid-19 pandemic and fast emerging related new security dynamics.