“Vietnam’s legal claim against Beijing is
very strong; or to put it another way, China’s claim of sovereignty over the
East Sea is both legally very weak and hypocritical.”
Vietnam’s
leadership is clearly challenged by China’s assertiveness in the East Sea and
the potential losses of natural resources. The conflict surrounding China’s
placement of the HYSY-981 oil rig within 150 nautical miles of Vietnam’s coast,
including the daily ramming of Vietnamese vessels, has the potential to
escalate into a much larger conflict despite
Hanoi’s restraint. Since May, the issue has dominated both the media and
politics and led to unprecedented popular demonstrations. But the crisis also provide diplomatic,
military and economic opportunities for Vietnam, which could emerge stronger.
Diplomatically,
Prime Minister Nguyen Tan Dung announced that Vietnam will file a memorial
protesting China’s claims to the East Sea with the United Nations Convention on
the Law of the Sea (UNCLOS) arbitration panel in the Hague. This garners several diplomatic
benefits. First, Vietnam maintains the
moral high ground by searching for a peaceful solution based on international
laws and norms. It also parallels the
Philippine submission. While Beijing
announced that it will not be bound by the arbiter’s ruling if it goes against
them and, to date, has refused to submit a counter-memorial, this further
isolates them and calls into question their claim of a “peaceful rise” and
their commitment to international laws and norms. Beijing can claim to be acting defensively in
the face of Vietnamese aggression, but they are losing the debate in the court
of public opinion with video evidence of provocations. China looks hypocritical when they appeal to
the UN to condemn Vietnamese aggression while ignoring the International Court
of Arbitration.
There
were hopes that Beijing would try to defuse the situation when it sent its top
diplomat Yang Jiechi to Hanoi for talks, yet no concessions were made and Yang
not only made no concessions, but was assertive: “will never trade our core
interests or swallow the bitter fruits that undermine our sovereignty, security
and development interests.” During his visit, Beijing announced the placement
of an additional rig near Vietnamese waters.
The top
leadership was hoping to resolve the issue diplomatically. But China’s intransigence has forced
Vietnam’s hand. In a very candid
assessment by Nguyen Si Hung, the Chairman of the National Assembly and a
Politburo member, said that the top leadership is terribly divided on how to
approach China: “Vietnam’s politburo is torn about their policy on Vietnam’s
relationship with China. The fear is China won’t compromise. The last chance
for sitting down and trying to resolve the dispute in the South China Sea is
this summer. Otherwise, Vietnam will bring the case to an international
tribunal.”
Beijing
has to know that their policies are making them no friends in the region and
undermining many of their long-term interests.
Dredging on Johnson Atoll and other provocative acts are a clear
violation of the Declaration of Conduct on the South China Sea. Though non-binding, it does obligate states
to not do anything that changes the status quo.
Even Singapore came out demanding that things be settled through the
rule of law as might does not make right.
Critically,
if other states also pursue legal claims against Beijing, it will start to
become the multilateral issue that Beijing has long tried to avoid. Beijing’s
strategy has been to keep negotiations on the overlapping disputes on a
bilateral basis. Chinese actions have
rekindled ASEAN discussions on a Code of Conduct that had stalled. Malaysia, Indonesia, Singapore, the
Philippines, and Vietnam have all supported a new round of negotiations. Beijing is loathe for that to happen.
Hanoi’s
close relationship with Jakarta is key to this, as Indonesia has pushed for a
peaceful solution, but also increased its own military and diplomatic attention
to the South China Sea, where Beijing’s nine-dashed line goes through
Indonesian waters and the lucrative gas fields off of Natuna Island. The Indonesian and Vietnamese navies have
stepped up joint training exercises, while Jakarta has increased military
spending, as well as deployed more forces to Natuna. Indonesia has been vocally concerned about
China’s aggression in the South China Sea and, being primus inter pares within
ASEAN, makes Jakarta’s role essential.
Cooperation between Jakarta and Hanoi is all the more important when
Thailand is inwardly focused following the 22 May coup and threatening closer
ties with China in response to EU and American sanctions.
Vietnam’s
legal claim against Beijing is very strong; or to put it another way, China’s
claim of sovereignty over the East Sea is both legally very weak and
hypocritical. For example they deny Southeast Asian claimants continental shelf
rights while that is the basis of their claim against Japan in the Senkakus.
Likewise, the Chinese build up atolls, asserting their 200 nautical mile
exclusive economic zones (EEZ), while denying Japan’s EEZ from the Senkakus
islands. Even the Chinese foreign
ministry is moving away from its defense of the nine-dashed line, because it is
completely illegal under the UNCLOS. Thus Beijing is seeking to create “facts
on the ground” which are threatening to the claimant states.
But
Vietnam can also reap other diplomatic rewards: Vietnam’s willingness to search
for legal and peaceful means to de-escalate the situation has garnered it
significant support from Washington and Tokyo that have become all too
concerned about China’s provocations. Hanoi’s
public diplomacy has never been better.
Militarily,
the threat in the East Sea will further channel resources to the military to
assist in its modernization program.
Since the mid-1990s, the Vietnam People’s Army (VPA) has developed
impressive maritime and air capabilities.
Vietnamese military expenditures climbed from $1.4 billion in 2003 to
$3.4 billion in 2012. No country in
Southeast Asia has brought more deterrent capability online in recent years
including the most advanced fighter jets, new naval vessels, kilo-class
submarines and an impressive arsenal of anti-ship missiles; nonetheless, this
modernization is incomplete. Moreover, it is dwarfed by China’s surging
military expenditures and power projection capabilities.
The
current security environment has also forced the traditionally xenophobic VPA
to be far more willing to engage in bi- and multi-lateral training exercises
with traditional partners, such as India, but also increasingly with ASEAN and
the United States. Vietnam will not become
an ally of the United States – that would be a red line for China – but the two countries are stepping up
military relations. Increased port access, more joint exercises, and
intelligence sharing are all identified in the 2011 defense agreement with the
United States. Vietnam recently joined
the US-led Proliferation Security Initiative, which will further enhance
security cooperation.
Just as
important as military modernization is investment in maritime policing. Hanoi has made significant efforts in this
regard, bringing new classes of Marine Police and Fisheries Resources
Surveillance vessels online. The
National Assembly recently earmarked VND16 trillion ($200 million) to construct
four new vessels for maritime policing.
Japan announced the transfer of a fleet of surveillance vessels to
Vietnam by early 2015. Vietnam needs new
and larger vessels that Chinese ships cannot ram with impunity. Moreover,
civilian vessels control the risk of escalation and help to maintain Hanoi’s
diplomatic strategy of seeking a legal and peaceful settlement of the dispute.
The
current conflict and senseless rioting will lower this year’s economic growth
to around 5.4 percent. That is
unavoidable. Most foreign investors will remain in the country, though the rioting
could have an impact on future investments, especially Chinese who have
invested some $2.28 billion of Vietnam’s $21.6 billion in total
investment. Hanoi’s strong response to
the riots and pledges of compensation should assuage most investors that Vietnam
remains a safe and stable business environment.
Nonetheless, there are several economic opportunities for Vietnam.
First, it should force Vietnam to lessen its trade dependence with China. China is Vietnam’s largest trading partner
accounting for nearly $50 billion in bilateral trade in 2013. Yet, Vietnam maintains a chronic trade
deficit with China – $23.7 billion in 2013 alone. Some 11 percent of Vietnam’s exports go to
China, though they are mainly natural resources. Vietnam must diversify its trading partners.
Second,
Vietnam must redouble its efforts to conclude TPP negotiations, including
making some painful decisions about the role of inefficient state-owned
enterprises (SOE) and government intervention in the marketplace. Conservatives in the Vietnamese Communist
Party Politburo who have resisted these reforms and supported the leading role
of the state sector are undermined by China’s assertiveness. This is an opportunity for Vietnam’s economic
reformers under the leadership of President Trong Tan Sang to hasten the
transition to a market-based economy.
SOEs absorb too much capital starving the innovative engines of growth
and employment: small and medium-sized enterprises. 400 SOEs are slated for “equitization,”
including ownership by foreign investors in the coming year. These reforms will
be painful at first, but they will put Vietnam onto a path to more sustainable
economic growth and further integrated into the global economy will enhance the
country’s security. It will further deepen
ties with the United States and make the bilateral relationship more holistic.
Vietnam
is in a strong position to increase foreign investment: costs are rising in
other ASEAN states, while some foreign investors are turning away from Thailand
due to its political instability. Vietnam should be a beneficiary if it
continues to implement serious economic reforms.
Further
integration into the global economy is key to Vietnamese national
security. If nothing else, military
expenditure is linked to GDP growth.
After all, a poor state is never a strong state. And with good decisions, Vietnam could emerge
from this crisis stronger across the board.
Dr.
Zachary Abuza
Dr. Zachary Abuza is a professor and analyst
of Southeast Asian politics and security.
He has lived and traveled extensively throughout the region. Dr. Abuza
consults widely and is a frequent commentator in the press. He holds an MALD
and PhD from the Fletcher School of Law and Diplomacy.
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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