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Op-Ed: Tensions in Vietnam Yet to Subside

The proverb says that people who live in glass houses shouldn’t throw stones. Is that what just happened in Vietnam?

It was early this month, when everyone learned that the oil service division of the China (state-run) CNOOC (China National Offshore Oil Company) had moved a $1 billion dollar oil exploratory rig to a disputed area 150 miles off the Vietnam coast, near the Paracel islands. This sector of the sea is currently claimed by both Vietnam and China. The sea bed may house extensive oil reserves and that is the main issue in the dispute, other than both countries claiming sovereign territorial rights.

The Vietnamese expressed that their boundary was violated, and on May 13 and 14, the tension boiled over. Some local Vietnamese protested peacefully, and some decided to take arms against their sea of troubles. Ultimately, they attacked factories that were built on Vietnamese soil, as they thought these facilities were owned by Chinese investors, but most were not.

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When the mayhem occurred, it was a typical hot, sleepy day in Vietnam and all was quiet. Security in the Industrial Parks was minimal, and there were only a few people in the streets. Then, as if struck by lightning, all hell broke loose. Swarms of motorcycle-riding, rock-throwing Vietnamese rushed the parks with the intent to cause damage to Chinese-owned or operated facilities.

While I won’t touch the political ramifications of the frustration the Vietnamese feel with regard to China putting an oil exploration rig in their economic zone, this act of sabotage to plant property and equipment actually did more harm to Vietnam than to China.

Over 350 factories were attacked in just one province and at least 50 percent of them were owned by Taiwanese (not Chinese). Close to 30 were actually owned by Vietnamese and 20 were owned by South Koreans. Eight Hong Kong-owned factories were damaged and about 14 mainland Chinese factories were hit. These numbers were just from one province, but it gives an idea of the scope, at least to some degree, of what went on in 22 Vietnamese provinces. In Binh Duong Province alone, more than 100 factories were damaged. Twelve were burned to the ground.

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It’s difficult to get clarity on the numbers, but many were injured and some died. In one protest, a 67-year-old woman set herself on fire in Ho Chi Minh City (Saigon)–which, to many observers, was a clear echo of the self-immolations of Buddhist monks during the Vietnam War era.

People who sleep near a volcano always fear another eruption. Time heals the pain of the last event, but a slight rumbling of the ground wakes up the sleeping, and the fear reigns anew.

This outbreak against factories in Vietnam only served the cause of misplaced anger, and ultimately allowed the Vietnamese to declare war on themselves. Vietnam hurt Vietnam by pummeling the buildings, they didn’t hurt China. Disputes like this need to be settled at the negotiating table, not by throwing stones at factories, looting buildings, or burning them to the ground. It is reported that over 60,000 Vietnamese are now out of work because of these actions.

Vietnam’s Prime Minister Nguyen Tan Dung has extended his hand, and offered to compensate foreign investors who were hurt by the riots. He is doing what he can to control the damage. However, foreign retailers and manufacturing companies are now “re-evaluating” their sourcing strategies for risk aversion. Clearly, investors believed that Vietnam was safe, and clearly it is not as stable as they thought.

Trade data indicates that Vietnam will likely be the next big winner for the textile, apparel, footwear, and accessory industries in the coming years. No one thought there would be a bump in the road, but what a bump this is!

By now, most factories have resumed normal operations. However, investors will sit back a bit and watch. Trust has been lost and Vietnam will have to work twice as hard to bring it back.

While the U.S. continues to finalize the Trans-Pacific Partnership (TPP), the biggest beneficiary country in the apparel and textile area will definitely be Vietnam. However, investors need some time to re-evaluate the safety of all foreign workers, and the confidence that has been lost among all the sages who have declared Vietnam to be the next China.

If Vietnam wants to solve the oil rig issue, it should take it to the International Courts, not to the streets. That won’t solve the problem, and it frightens investors.

One would think this incident was starting to wind down, but as of Monday, the dust hadn’t settled.

A Vietnamese fishing boat was rammed by a Chinese fishing vessel not far from the Chinese oil rig. While there are several versions of what actually happened, reports said the 10 Vietnamese crew members were rescued, and confrontation of boats in the area continues. The CNOCC has moved the oil rig to a different location for more exploration, and plans to wrap up its work this summer. However, no one knows what they found under the water, but everyone knows what has happened on the surface.

On Wednesday, the Vietnamese asserted that China interfered with four fishing vessels. The conflict continues and is getting quite tense. Clearly, it will test the influence of the USA Asia Pivot toward the area, versus the Chinese influence in the South China Seas. The Chinese believe it’s their right to be there, and the Vietnamese believe that China is violating their territorial waters. Whatever the case, this needs to be settled peacefully and soon.

It’s true that people who live in glass house shouldn’t throw stones. They will ultimately destroy the house they live in.

Shakespeare’s Hamlet had it right: Do you take arms against a sea of troubles and by opposing, end them? Do you bear the ills you have, or fly to others that you know not of?

Vietnam needs to take a hard look at its strategy; there’s a lot at stake for everyone. Let’s hope for a peaceful solution to a very difficult problem. Let’s get it solved, before it gets worse.

 

RickHelfenbein

Rick Helfenbein is Chairman of the Board of the American Apparel and Footwear Association. He is a fierce advocate for a robust USA Trade Agenda and speaks frequently on the subjects of supply chain and international trade.