The Decibel - Why major economies are trying to woo Vietnam

Episode Date: April 10, 2024

Vietnam is having a moment on the world stage. Last month, Canada sent the largest ever “Team Canada” delegation of business leaders and government officials in a push to strengthen the bond with the country. And Canada isn’t alone – the U.S., Australia and China are all looking to do the same.The Globe’s Asia correspondent, James Griffiths was recently in Vietnam and he’s on the show to explain why the southeast Asian country is so popular right now, what Canada is hoping to gain and what this all means for Vietnam’s future.Questions? Comments? Ideas? E-mail us at [e-mail]

What we reaffirm really is just this important relationship between Vietnam and Canada. You've heard me say, look, five years of CPTPP, 30 years since there's been a trade office here between Canada and Vietnam, and 50 years of a diplomatic relationship. Late last month, Trade Minister Mary Ng led the largest ever Team Canada trade delegation to Vietnam. Vietnam has been exporting quite a lot to Canada following the CPTPP. And you're seeing here just the opportunities that are here for Canadian expansion into this market. We already have a trade agreement in place as part of CPTPP, the Comprehensive and Progressive Agreement for

Trans-Pacific Partnership. But now, Canada's hoping to strengthen ties with Vietnam, and it's competing with a number of other countries looking to do the same. The Globe's Asia correspondent, James Griffiths, was there along with the Canadian delegation. He's on the show to tell us why Vietnam has become so popular, what China has to do with it, and what Canada is looking to gain. I'm Maina Karaman-Wellms, and this is The Decibel from The Globe and Mail. James, thanks for being here. It's great to have you in studio. Thanks. It's great to be here. So Vietnam is currently having a bit of a moment and we're going to talk about why.

But first, can you just start by giving us a sense of the country? Like you were just there. So what is it like? So Vietnam, for people who aren't aware, it's in Southeast Asia. It's about 100 million people. It's one of the fastest growing economies in the region, communist one party state, but one that kind of similar to China has embraced capitalism or a quote unquote socialist market economy. And that's been really successful in the last couple of decades. It's had huge economic growth. And when you go there, you can really feel that growth.

It feels like a country that is buzzing kind of with excitement. To me, as someone who lived in China in the 2000s and the 2010s, it really feels like that, that there's kind of rapid growth. People will tell you that these huge swaths of the city have popped up overnight or there's development everywhere. There's buildings being built all over the place. And, you know, you just really feel the energy. Wow. And Canada, of course, recently sent a delegation to Vietnam. What was the goal here? So Canada is pretty much just the latest Western country seeking closer ties with Vietnam. What was the goal here? So Canada is pretty much just the latest Western country seeking closer ties with Vietnam. The last year or so, the US has sent delegation.

Australia was there recently. The EU was kind of ahead of the game. They signed a trade deal in 2019. There's a lot of excitement about trying to take part in that economic growth in Vietnam and, take advantage of this huge growing manufacturing base there and also potentially sell to a growing middle class in Vietnam. So let's talk about this kind of economic growth that we are seeing in Vietnam. It seems like the economy is booming. Do we know why? Tell us a little bit about that. Yeah, so I think it is fair to kind of compare it to China.

It's a very similar type of model that you have a communist country opening up, gradually allowing more foreign investment into its economy, really focusing on manufacturing, focusing on kind of making textiles, making electronics, taking advantage of a, you know, large workforce, quite well-educated workforce. And so, you know, we've seen companies like Samsung, you know, move some manufacturing there, you know, lots of clothing brands up in there. Lululemon does most of their agent manufacturing in Vietnam. Oh, interesting. And that's been hugely successful and they're trying to double down on that.

And so there's a lot of excitement about, you know, both expanding manufacturing in Vietnam and then also as that manufacturing, as the economic growth starts to kind of trickle down to people. There's also, you know, a huge market opportunity in Vietnam of selling to Vietnamese consumers. Yeah. Can we talk a little bit about the money? So when we talk about their economy booming, what are some of the numbers like GDP and things here? So since Vietnam started opening up in 1986, their GDP has gone from about 100 billion USD to over 600 billion USD. They're one of the fastest growing economies in Asia. They are the fastest growing economy in Southeast Asia. Between 2002 and 22, their GDP per capita grew almost 3.6 times. So they're really, really massive economic growth, similar to China. We're talking 5%, 6% consistently

over the last 10 years. They're probably going to be the fastest growing economy this year. So it's really booming. Okay. And so Canada is, of course, interested in Vietnam, but it's not the only country that is looking for closer ties with Vietnam. What other countries are turning to Vietnam here, James? And I guess, what is it about Vietnam that is so enticing? The economy is booming, but let's get into this a little bit more. So one of the reasons there is excitement about Vietnam, and there would be anyway because of this economic growth, but one of the reasons there is excitement about Vietnam, and that would be anyway because of this economic growth, but one of the kind of reasons there's extra special attention being paid to on China, about having supply chains completely focused in China. And there's been a kind of push for either divestment in an extreme case or at least diversification, a kind of China plus one strategy. And so when you're looking for China plus one strategy, you want a country that can do similar things to what China has always done well, which is especially kind of high tech manufacturing and very quick manufacturing.

And trying to find somewhere else that does that is quite difficult because China has been doing that incredibly well for decades now. And other countries aren't necessarily set up so well, whereas Vietnam is kind of in a perfect position, both because they've been doing this for a while, they've had a strong manufacturing base. And then also geographically, Vietnam is so close to China that it's quite easy to move resources there. It's easy to kind of attach Vietnam to your supply chain close to China that it's quite easy to move resources there. It's easy to kind of attach Vietnam to your supply chain in a way that it's maybe not if we're talking about moving manufacturing to, say, Indonesia or to India, which aren't necessarily on the same route.

Whereas if you've got a factory in Guangdong in southern China, you open up another factory in Vietnam. You don't necessarily close your China operations, but you open up another factory in Vietnam. They start to communicate with each other, you start to shift resources to Vietnam, everyone's happy. And so what other countries do we see trying to get into this space? I mean, basically all of them. So as well as Canada, you've got Australia just signed a big trade deal with Vietnam, upgraded diplomatic relations, US has upgraded diplomatic relations, tons of American investment, tons of Korean investment. Samsung, like I said earlier, is a big major player in Vietnam.

Japan has tons of investment in Vietnam. And also China does as well, because as well as the political reasons for people wanting to divest from China, there is also a certain degree that economically, as China's grown, wages have gone up. Manufacturing isn't quite as cheap there. And so that affects not only kind of Western businesses, but Chinese businesses. So a lot of Chinese businesses are looking to offshore their manufacturing, and a lot of that is going to Vietnam. So it sounds like the reason a lot of countries are trying to move to Vietnam is to try

to move away from China a little bit. So what is China doing in response? Well, like I said, to a certain extent, China is also doing this. But when it comes to this kind of, you know, divesting from China stuff, or de-risking from China, as the Europeans call it, you know, Beijing isn't too keen about that. It pushes back quite hard against anyone calling for de-risking. And it is trying to, you know, say, hey, look, we're open for business. COVID is gone. The horrible restrictions we had for a long time that really screwed up supply chains, that's all gone. We want foreign direct investment again. But the problem is, while the kind of trade and economic side of the government is saying that, the security state in China is still cracking down very heavily. It's going after, there's this big push to go after spies. And a lot of that is

affecting foreign businesses. You've had foreign researchers arrested. You've had due diligence firms raided. You've had foreign business people being slapped with exit bans, unable to leave the country. So it's kind of the messaging is quite confused because while they say they're open for business and they don't want people running off to other parts of Asia to make their goods and to invest, they are also still not the most welcoming country in the region. What about Vietnam then? From their perspective, James, what is in it for them to work to kind of nurture these relationships with all these other countries? Economic growth, essentially. It's been working really well for them so far since

they started opening up in 86. This has been great. You know, one analyst, Vietnamese political analyst based in Singapore, you know, said to me, you know, Vietnam has managed the great power competition extremely well. I think that's the only country in the region that managed to upgrade their relationships with both China and US at the same time. They're essentially playing all sides and benefiting from all sides. So I guess all that being said, James, like we've laid out this advantageous position for Vietnam, superpowers like the US and China are really vying for closer ties. I guess, why does Vietnam care about Canada then? Like, why is it trying to actually work with us to develop this trade here?

I think to a certain extent, you know, the more the merrier. But also Vietnam and Canada have very strong relations. Last year, they celebrated 50 years of diplomatic relations. Canada, of course, did not take part in the Vietnam War. And that's remembered kind of fondly in Hanoi. Canada's Vietnam's third largest trading partner in the whole of the Americas behind the US and Brazil. So it's a strong relationship. You know, you've got some Canadian companies that have been there for a long time, especially in the financial sector. You have Manulife and Sunlife have been in Vietnam for decades, thousands of agents across the country. The tallest building in Ho Chi Minh City, Landmark 81, that was designed by Canadian architects at Kinzrealis. So there is all this kind of Canadian connections to Vietnam that

really kind of underlie this relationship. And when we talk about trade between these two countries, what are the goods that are usually traded here? So on the Canadian export side, it's kind of quite unsexy stuff. I think the largest one is wood pulp. It's going up for paper. And there are some agricultural products as well. There's a hope that as we go forward, this will start to kind of become more sophisticated. So there's potentially going to be some Canadian LNG going to Vietnam. Vietnam's trying to make its economy to be some Canadian LNG going to Vietnam. Vietnam's trying to make its economy more green and Canadian companies are trying to take part of that. Coming the other direction, it's mainly manufactured goods, so especially textiles and high-tech manufacturing. A lot of kind of last mile electronics manufacturing gets done in

Vietnam. So a Samsung phone or a TV or something like that may come through Vietnam on the way to Canada. We'll be right back. James, you brought up the Vietnam War a few minutes ago, and I want to ask you about this because, of course, the Vietnam War has played a big role in the country's history. That war ended almost 50 years ago now. I guess, is it remarkable that a country that had that kinded after the US intervention, you know, millions of people were killed, and was reunified the country and set up what is now the Socialist Republic of Vietnam. It's pretty spectacular when you look at the growth that Vietnam's had, especially, you know, kind of starting from where they did. Again, I think we can kind of compare it to China China that China had these disasters in the 1950s and

in the 1960s and then from kind of the 70s and 80s onwards had this huge astronomical economic growth but saying that of course China dwarfs Vietnam by a huge degree and has a huge population has a huge internal market which Vietnam doesn't so Vietnam's you know success is maybe even more impressive I think you kind of compare it to the Asian tigers of the 90s and the 2000s. So South Korea, Hong Kong, Singapore, places like that, or Taiwan, because Taiwan obviously is someone that came out of military dictatorship, really opened up and became this global, powerful economy. And I wonder, given the US's involvement in the war, of course, how is that relationship with Vietnam now? Is it still affecting the current relationship? I think it can be surprising for people who grew up on Vietnam War films and

documentaries to see just how good relations are between Hanoi and Washington and just kind of between Vietnam and the US in general, that there isn't really any bitterness in Vietnam, certainly not on the surface. I mean, arguably, you could say the Vietnamese won that war. So that may help some of it. But relations have been pretty good for decades now. During the Obama administration, the Vietnamese paramount leader went to Washington, met Obama, Obama's traveled to Vietnam, Biden's had close ties with them. During the President Donald Trump administration, people may remember that one of Trump's meetings with North Korean leader Kim Jong Un was in Hanoi. So this has been a relationship that's been good for a while, seems to be getting even better. Last year, they upgraded their relationship to a strategic partnership, which is kind of one of the highest

levels. And so this is really close ties, which are getting closer. Yeah. So the country really has come a long way, but it is not a completely positive picture. And when we talk about doing trade with Vietnam, James, right, there's concerns about human rights issues. There's also a fraught political situation. Can we talk a little bit about that and how those issues actually affect things here? There are myriad concerns around human rights in Vietnam, including a lack of rule of law, severe limits on free expression, crackdown on environmental activism, and then concerns about forced labor in the supply chain. And all of these have been kind of longstanding and arguably are not only not being addressed, but are potentially getting worse in some situations.

Vietnam is a one party state, one party communist state. It is quite an authoritarian country. You don't feel it so much on the ground. I think even less so than China. The internet is relatively open, especially compared to China. And so there isn't that kind of sense of going to a country that is quite authoritarian that you get when you go to some other places. But behind the scenes, things are quite severe and they've been getting worse. Basically, every prominent dissident is either in prison or in exile. They've been crackdowns on civil society groups, on environmental movement, things like that. And what's striking from a trade and economic perspective is the Vietnamese government is very clear. We have a leaked directive from last year saying this, that as they open up economically, they have no intention of opening up politically. And the government has been warned to be on the lookout for any kind of Western influence or Western

infiltration that comes with that foreign investment. You know, there was that naive view that as China opened up economically, that it would kind of liberalize politically. And China's leaders made sure that didn't happen. Vietnam has learned from that, is happy to take the money, has also has no intention of liberalizing politically. Communist Party is going to stay in control and they're going to stay in absolute control. That must be something that Canada and other nations think about then when they're looking to do trade and to work more closely with Vietnam. Do we have a sense of how this is, I guess, being discussed from a Canadian perspective?

So Western officials, not just Canadian officials, will tell you that they communicate this stuff in private. In public, they don't really say anything. So I've asked U.S. officials, I've asked Canadian officials about these things. They kind of point to the strength of the relationship and say, oh, we're able to say things in private. You know, we care about, you know, our self-stated values. Canadian Trade Minister Mary Young, when I interviewed her, she said, you know, Canadians expect her to stand up for Canadian values and that she will communicate concerns to Vietnam. But on the face of it, Vietnam has been cracking down very hard in the last couple of years. And all that's happened from a Western perspective is

it's got more trade deals. Some of these trade deals even have conditions about things like labor rights and independent labor unions that aren't being met in Vietnam. Vietnam is about to come up at the UN Human Rights Council for their kind of annual review that is likely to produce a litany of complaints about Vietnam, litany of problems in the country. It's unlikely that that is going to lead to anything in terms of negative consequences for Hanoi. It sounds like the economic growth really is overshadowing everything else here then at this point. And not just the economic growth, but also Vietnam's kind of geopolitical importance in terms of balancing China in the region. So even though Vietnam has extremely close ties

with China, especially the two communist parties have very close party to party ties. There is a sense in the West that Vietnam is a very important counterbalance to China, that if they aren't on the West side, they'll be on China's side. And so therefore, you overlook some things in terms of improving that relationship. Just lastly here, James, after everything that we've laid out here, what does this all mean for Vietnam's future on the world stage? I guess, how does it play its cards right in a way maybe so that it moves forward from all this current attention that has on it? So far, they're playing their cards incredibly well. And that's why the economy's grown so well.

You know, you definitely say that the Vietnamese government has delivered on this promise of economic growth, and it seems to be that they will deliver for years to come. There are some concerns, there are some potential slip-ups that could happen. There is an ongoing anti-corruption campaign within the party, which while some of that obviously is important, cracking down on graft and things like that, there is a degree to which there does seem to be a political purge happening at the same time. And there's also a degree to which analysts and business people in Vietnam have told me that that is really slowing down decision making. So, you know, if there's a big anti-corruption drive going on, you don't want to be the person signing off on the $10 billion deal, especially if the benefits of that deal aren't felt for 10 years, say. And that might be slowing things down. And the concern for Vietnam there is, while China, or even India, say,

are these huge countries that can kind of take their time on attracting foreign investment, because everyone's always going to want to get into those markets. Vietnam has a lot of competitors, a lot of similarly sized countries, both in Southeast Asia, so Malaysia, Indonesia, the more developed economies in the region like Korea, Singapore, but also, you know, in the rest of the world. Mexico competes with Vietnam for a lot of things like manufacturing and stuff like that. So if we do see a slowdown, Vietnam could potentially get left behind and that could kind of, you know, undo a lot of this hard work that's been gone in the last couple of decades. But so far, they seem to be on an incredibly good track. James, it's always great to talk to you.

Thank you for being here. Thank you. That's it for today. I'm Maina Karaman-Wilms. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrienne Chung is our senior producer. And Angela Pachenza is our executive editor.

Thanks so much for listening, and I'll talk to you tomorrow.