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Vietnam building

What Vietnam is looking for from Scott Morrison's visit

By Huong Le Thu

In March last year, Australia and Vietnam upgraded their diplomatic relations to a strategic partnership, stressing among other things the importance of a region "shaped by rules and norms" and annual meetings between their defence ministers. The agreement is a shared vision for a regional security outlook that trumps the differences in political systems. In one of his very first official trips as the re-elected prime minister of Australia, Scott Morrison arrives in Hanoi on Thursday amid tensions unfolding in the South China Sea.

There are many highlights in the relationship. Australia has been a reliable partner in providing assistance to Vietnamese UN peacekeeping forces, and it has supported infrastructure in the vulnerable Mekong region, including completion of the Cao Lanh Bridge last year – Canberra’s largest single aid project in mainland south-east Asia. Trade and economic ties are the key areas of mutual interest. Vietnam is our second fastest-growing trade partner, and the bilateral trade volume has been consistently growing by 12 per cent in the past five years. But there is more that Australian businesses can do.

Vietnam is an attractive market. It is one of seven economies, according to Standard Chartered Bank, where GDP growth will remain about 7 per cent through the 2020s provided there are no major disruptions from the tariff war. A youthful population will fuel significant consumption growth – Vietnam’s GDP per capita is expected to increase four-fold by 2030.Australian brands are among the most trusted in agriculture, medicine, and education by a Vietnamese middle-class of 33 million people, and that figure continues to grow by 1.5 million each year. Currently about 30,000 Vietnamese are studying in Australia and the potential is much higher. There is high demand for both English language and digital literacy training. The Australian and Vietnamese economies are very complementary.

But beyond flourishing opportunities, there are also mounting geostrategic challenges. Since the signing of the strategic partnership, the strategic environment has considerably deteriorated. Back then, the term “Indo-Pacific” was still in its infancy as the preferred terminology for the region. The US-China trade war had not fully begun, bringing both gains and collateral damage to regional economies: Vietnam tops the list on both counts.

Chinese coercion

As Hanoi welcomes Mr Morrison, Vietnam faces Chinese coercion as maritime militia and coastguard forces escort Chinese petroleum survey ships into Vietnam’s Exclusive Economic Zone. Outside the US, international reaction to continuing incidents at sea has been relatively muted. Australia is yet to explicitly condemn Beijing’s action. Canberra signed under the recent collective statements from AUSMIN and Trilateral US-Australia-Japan consultations which alluded to the event as “disruptive activities”, related to oil and gas projects and fisheries in the South China Sea.

The Morrison government took office at a time when Australia’s relations with China were becoming increasingly difficult to manage, on multiple fronts. As Mr Morrison sits down in talks with Vietnam's leaders in Hanoi this week, he can expect to face questions on the consistency of Australia’s South China Sea policy.  Ideally, the Vietnamese would like more diplomatic and practical support from Canberra, backed up by Australia oil and gas exploration companies commercially partnering with Vietnamese ones in the disputed waters. Just how strategic is the strategic partnership between the two if they can’t count on each other in the key security agenda?

Vietnam’s independent spirit is reflected not only in traditional issues of sovereignty, but also in how it manages the impact of future technologies. Vietnam has 5G network ambitions but shares concerns about Huawei technology. Vietnamese telecom companies have partnered with Ericsson and have successfully tested the network in Hanoi. If the second phase is completed, Vietnam would be among the very first to have a 5G network not reliant on Huawei – something of interest to Australia given its rejection of Chinese technology. Vietnam is now the second largest exporter of smartphones and the current tariff restrictions on China’s electronic components have boosted its numbers. South Korea's Samsung and LG have also shifted manufacturing of semiconductors to Vietnam. The Vietnamese government, under Prime Minister Nguyen Xuan Phuc – who signed the strategic partnership with Australia last year – has made the Fourth Industrial Revolution a signature policy for the country.

For Canberra, Vietnam’s importance is beyond just its bilateral relations with China; it is increasingly a key diplomatic and strategic actor in the region. As it gears up to the ASEAN chairmanship 2020 (along with sitting on the UN Security Council as a non-permanent member), how Hanoi embraces the “Indo-Pacific” concept will be very important for the future of the idea. Noting that Vietnam will be the first ASEAN chair following the adoption of the ASEAN Outlook on the Indo-Pacific (AOIP), this is an opportunity for Morrison to communicate Australia’s own guiding principles in the fast-changing Indo-Pacific region.

Originally published by: Australian Financial Review on 21 Aug 2019