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Southeast Asia

How bureaucracy is destroying Malaysia’s agricultural sector

Prof. Murray Hunter

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Over the last 30 years, Malaysia has miraculously grown into a middle income country, transforming itself from a primary producer of minerals and commodities, to a multi-sector economy.

The Malaysian Government has skilfully attracted foreign investment in high technology industries like electronics, multimedia, medical technology, and pharmaceuticals, service sector industries like Islamic finance, and urbanized the country with a rich retail service industry. However, agriculture has been allowed to slip well behind the rest of these sectors within the economy.  

This is normally the case when an economy transforms itself from the status of ‘developing’ to ‘developed’. However the case of Malaysian agriculture characterizes a number of mistakes. These mistakes have cost the country in terms of better food self-sufficiency, rural and community development, regional development, employment, poverty alleviation, and missed some of the great agro-based sunrise industry opportunities of this millennium.

What more, rural infrastructure and agro-based expertize is drastically lacking in Malaysia, since the Mahathir led drive to modernization back in the 1980s.  

This is particularly dangerous with a gloomy global outlook ahead, where Malaysia must become buoyant enough to internally withstand any deep international recession approaching, if it is to stave off great hardship on its citizens.

According to Malaysian statistics cited over various Malaysian Plans, the agriculture sector in 1970 represented 28.8% of national GDP. As of 2013, agriculture represented only 9.33% of GDP. However in some states like Perlis, Kelantan, and Sabah, agriculture still makes up 20-30% of the total economy.

Employment in the sector has fallen from 13% of the total workforce in 2007, to only 9.3% in 2014. However 66% of the people involved in working within the agriculture sector are over 50 years old. The estate sector is primarily staffed with foreign labourers bringing little income benefits to local communities.

The bulk of Malaysia’s agricultural land is utilized for the production of industrial crops, which has risen from 2.1% in 1960, to over 87% of land use today. Palm oil and rubber dominate, with paddy production and declining cocoa production running far behind. Timber is still a major primary product, where reforestation is lagging behind, making the industry unsustainable. Sarawak for many years has enjoyed a successfully developed a pepper industry, and there are pockets of fruit and market vegetables, around the nation.

However, less land is being utilized for agriculture today, as it is more valuable for industrial and housing developments. The composition of industrial crops, and industrial and housing development for land is steadily driving up the costs of food production in Malaysia. Paddy farming is also facing challenges due to declining productivity, increasing fragmentation of land plots, and poor response to changing consumer desires within the marketplace. Even the production of palm oil is expected to decline based upon recent industry predictions.

The push to industrial crops in the 1960s although rapidly developing the agricultural sector, rapidly decreased the diversity of agriculture within Malaysia. Even settlement schemes like FELDA and FELCA shied away from food and cash crops towards the palm oil and rubber because of the relatively large returns available with little need to market and sell their crops. As smallholder farmers have aged, with the youth reluctant to follow in their parents’ footsteps, the production of crops such as coconut, tropical fruits, vegetables, and other cash crops has been declining.

Estate production of industrial crops is now the mainstay of Malaysian agriculture, which is mainly in the hands of Malaysian Government Linked Companies (GLCs) like Sime Darby. Smallholders have been grossly neglected where little has been done by Malaysia’s agricultural research institutions and universities to modernize and develop appropriate technologies, new hybrids of cash crops, and assist in developing modern smallholder business models through the infusion of entrepreneurial thinking in rural communities. In addition, finance for smallholders is extremely difficult to obtain, and farm extension has all but died out two decades ago. The smallholders have been left to themselves, where they face acute labour shortages and little access to markets that would help make their efforts viable.

If one also factors in poor basic infrastructure such as access to irrigation and roads, the poor level of education of most smallholders, resulting in an attitude towards being production orientated rather than entrepreneurial, “conmen” taking advantage and promising big returns to smallholders if they buy seeds from them, and the condescending attitude many government bureaucrats have towards small holders, it’s not hard to understand why this sector is so much in decay.

The Malaysian agriculture situation has reached a point where the estate business model that was once so successful for the production of commodity crops is now stagnating. Malaysia is losing its dominance as the major producer of palm oil, and palm oil itself is under threat from international health concerns, and also concerns from the international community about the environmental record of Malaysia’s palm oil producers. Rubber prices are facing a slump, and paddy production is primarily insufficient to feed the total population, i.e., 35% of Malaysia’s rice needs to be imported from Myanmar, Thailand, Vietnam, India, and Pakistan.

There is little evidence to see where local communities have benefitted from the presence of Malaysian GLCs, yet state Governments have been eager to transfer state land to them for development with virtually no transparency. Picturesque pieces of virgin jungle are still being ripped up to make way for new palm plantations, to replace those developed into housing and industrial estates, where the GLCs are making mega-profits.

Malaysia’s agricultural direction was planned through a series of 5 year plans. The Malaysian political/bureaucratic elite have always presented rosy forecasts and gained publicity through staging MOU ceremonies, to announce projects which never happen, or fail through mismanagement.

Part of the problem in the Malaysian agriculture sector is that the politicians and bureaucrats have been thinking big, at the cost of thinking small. For example, the Ministry of Agriculture has developed a list of agro-based industries that should be national priorities. The Malaysian Agricultural Research and Development Institute (MARDI), and the Forest Research Institute of Malaysia (FRIM) restrict their research to these national priorities, while leaving a void in research on crops needed to spur on the growth and development of small local communities. Consequently, Malaysia’s research efforts have benefitted few communities, which still remain in relative poverty today, particularly in the agricultural dominant states like Perlis, Kelantan, Sabah, and Sarawak. There are a lot of potentially viable crops that should be researched and developed, but are being ignored.

Institutions like MARDI and FRIM have become showpieces to please the politicians.

Further, the bureaucrats involved in these plans implementation have appeared to lack the zeal and commitment to see these plans progress into reality. Managers on the ground have focused upon building hard infrastructure where favoured contractors can be employed to build these projects and facilities, rather than ploughing resources and money into education and extension. The result has been a number of ‘white elephants’ that litter the country.

Corruption, via land grants, misallocation of funds, and building irrelevant facilities, is a major issue hampering effective rural development in Malaysia today.

Malaysia, as an economy skewed towards state planning and intervention has attempted to “pick winners” and develop them through the state apparatus. In the case of herbs and biotechnology, massive funds were allocated in the pursuit of achieving success in these “sunrise” industries, where the funds were predominately channelled into developing ineffective and costly bureaucracy.

The Malaysian Herbal Corporation was formed in 2001 with much fanfare, where it was considered within the bureaucracy to be the driver and ‘flagbearer’ for the industry. The corporation undertook many initiatives, with the staff travelling widely and luxuriously around the world. Today, the Malaysian Herbal Corporation is now defunct.

With former Malaysian Prime Minister Abdullah Ahmad Badawi’s focus on biotechnology as a ‘sunrise industry’ midway last decade, the Malaysian Biotechnology Corporation (MBC), along with various state funded biotechnology companies such as Melaka Biotech, J-Biotech in Johor, K-Biocorp in Kedah, and Kelantan Biotech, were all well-funded with hundreds of millions of Ringgit in grants, but have little, if anything to show for it. Most of, if not all of the grants given out by MBC to commercial companies failed to produce any commercialized intellectual property, as university research also failed to do.

Technology Park Malaysia (TPM) built biotech labs around the country in places like Perlis, which are mostly empty. The East Coast Economic Regional Development Council set up herbal parks in Pahang and Terengganu which are basically inactive in regards to their original purpose.

FELDA opened up the FELDA Herbal Corporation which is now replaced with another attempt at developing biotechnology through Felda Wellness. Biotropics was set up by Khazanah Coropration and is basically only producing some cosmetic and herbal products. The Ministry of Health set up NINE BIO to produce Halal vaccines and herbal products.

The Malaysian-MIT partnership hailed as being an example of a smart-partnership, cost the Malaysian taxpayer USD20 Million with absolutely nothing to show.

The Malaysian Government rather than be a driver of the industry became a participant with drastic results.

Just about all these Government interventions into business have failed dismally, losing hundreds of Millions of Dollars for the Malaysian taxpayer.

What is tragic is that there has been no transparency in the way the Malaysian Government handed over responsibility to personnel within these government corporations, and no accountability.

Top down planning with no consultation with local industry, local communities, and local scientists, has led to Malaysian agriculture falling well behind its neighbours within the Asian region. Top down planning has allowed bureaucracy to overrun market considerations in Malaysia’s agricultural and agro-based industry development.

Development programs like the agropolitan schemes in Sabah are conceptualized and developed within the bureaucrats’ paradigms. GLCs are asked to take up large swabs of land, plant palm oil, and develop a small corridor for local villagers. They have been of large benefit for these GLCs, but local villagers have been short changed where GLCs partaking in these projects fail to live up to their responsibilities.

Likewise, other bureaucrat concepts such as combining fragmented land holdings into paddy estates run by anchor GLC companies, as promoted by the Performance Management Delivery Unit (PEMANDU) within the Prime Minister’s Department disempower local land owners who are expected to work as labourers on their own land. These types of projects have failed in their conceptualization, let along during the implementation stage.

As a consequence opportunities to alleviate poverty in rural communities have been missed, and opportunities to develop new crops, and create new industries have been ignored.

Many successful programs like entrepreneurship mentorship schemes run at Agricultural Institutes around the country, are starved of funds, because of the preference for the bureaucratic ‘white elephants’ that benefit policy implementers financially.

Malaysian agriculture is now in crisis and there is a need to reinvigorate the sector, particularly with the expected global economic slowdown.

Malaysia is currently importing up to 60% of its current food needs. With the level of national debt, falling foreign reserves due to a low Ringgit, and a potential slow-down in exports due to a sluggish international economy, food self-sufficiency may become more important than ever.

Food self-sufficiency would create an important buffer for rural Malaysia to withstand any deep recession. Without food self-sufficiency the population within the Malay heartlands will suffer immensely. As mentioned, Malaysia imports much of its rice needs, milk, beef and mutton, flour, and fruits.

Within this problem, lays an opportunity. Malaysia’s Neighbour Thailand has been reinventing itself as the ‘kitchen of the world’. Malaysian agriculture with modern farming methods, utilizing appropriate technology, and adopting new branding paradigms through merging GAP and Halal practices into say a “HalalGAP” protocol could enter and prosper in the rapidly growing Halal market worldwide.

Malaysian agriculture needs new farming practices, business models, and reinvented supply/value chains. The decline of the value of the Ringgit will help Malaysian farmers find a new era of competitiveness that the sector has never had.

Now is the time to take this opportunity.

Innovator and entrepreneur. Notable author, thinker and prof. Hat Yai University, Thailand Contact: murrayhunter58(at)gmail.com

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Southeast Asia

Japan’s involvement in Myanmar

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After the civilian-democratic transition in Myanmar, the western sanctions on trade and investment in the country were lifted. This led to a huge inflow of foreign direct investment in key infrastructural sectors and energy sector because of the nascent stage of economic progress in the conflict-torn country. Regional giants like China and Japan as well as ASEAN countries have been increasing their economic aid, assistance and cooperation with the country notwithstanding the humanitarian concerns raised by international community. The Chinese involvement in the region, especially its investment in big infrastructure and energy projects in Rakhine province have been a subject of international deliberation and criticism. However, Japan too has been competing with China to check its hegemonic ambitions under the One Belt One Road initiative. Consequently, it has been increasing its existing economic cooperation and financial investment in Myanmar since 2012. Japan’s overall investment pale in comparison to that of China (which over the past 30 years has invested, while it did peak to 1.48 Billion USD in 2017. As of July 2018, Japan was number 10 in terms of investment, while China was number 1.

Japanese involvement in Myanmar has various layers; investments in infrastructure projects ( a strong example being rail system in Yangon), Thilawa SEZ Project, (Japan’s Industrial Decisions firm as well as Marubeni are involved in two coal projects, as well as assistance in capacity building. Significantly, a survey last year revealed that Myanmar population prefers Japanese because investments have resulted in job creation, and assistance to small and medium enterprises. This is also because of the generous loan agreements and economic grants that Japan has made while having a balanced relationship with the erstwhile Junta and the resurgent democratic polity. Resentment against China is not restricted to Myanmar, but has been evident in Africa, South East Asia and even South Asia. The phenomena of Debt Trap Diplomacy has accentuated it as China takes back every last penny and that too at prohibitively high rates.

Japan’s involvement in Rakhine State

While Myanmar has been showcasing the Thilawa SEZ (49% is owned by JICA and three Japanese banks) as one of it’s successes. Japan has been pro-actively involved in development of the Rakhine State (while the state is rich in natural resources, a significant percentage of population is below the poverty line). Foreign Minister visited Japan twice last year and in January 2019, Ms. Toshiko Abe, State Minister for Foreign Affairs visited Republic of the Union of Myanmar and issues pertaining to the Rakhine State were discussed. During her visit to Japan in October 2018, Aung San Suu Kyi had praised Japan for being understanding towards Myanmar’s stand on the Rohingya issue. While Aung San Suu Kyi has been facing widespread criticism for her lacklustre and indifferent approach towards the grave human rights violations against rohingya population, she has been seeking support of the investors like Japan to emphasize the fact that Myanmar being a young democracy can not take decisive action against these violations and acting against military establishment would imperil the stability of democratic government. Nevertheless, Tokyo has been providing noteworthy assistance in state capacity building and economic revival of the Rakhine state. Only recently, the Japan International Cooperation Agency [JICA], and the Japan External Trade Organization [JETRO organized the Rakhine State Forum (February 21-23,2019). State Chancellor, Aung San Suu Kyi, made it a point to mention both these organisations during her address.

While China has invested in Rakhine State. A pipeline which commences from Kyaupkyu in Rakhine and extends till Yunnan Province in China, was inaugurated in April 2018 and China has  also tried to play a role in resolving Rohingya Crisis. Tokyo’s approach towards Rakhine has been far more holistic. Japanese Envoy in an interview to the media, stated that the only way out was all round development – which included economics and politics. The Envoy also said that they would try to draw more investment

In 2018, Japan had announced assistance of over 20 Million USD for the conflict torn region. The Government of Japan and eight United Nations Agencies also signed a US$ 37 million value agreement to implement humanitarian and development projects in Shan, Kachin and Rakhine States.

While Japan is playing an important role in ensuring that Myanmar looks beyond China, it will also need to play a role in convincing Suu Kyi to adopt a different role towards Human Rights Issues and avoid curbs on the press (last year two Reuter’s journalists were arrested). While Suu Kyi has been trying to obfuscate, this will not be possible in the long run. The widespread concerns about the ongoings in Myanmar have a huge negative associative value for foreign investors who otherwise view an exceptional economic advantage in this highly under-developed and naturally endowed region with cheap labour. The fact, that some European companies have begun to exit from Myanmar, as a result of the Human Rights violations and EU is has threatened to withdraw the GSP is a strong reiteration of this point. Since investment inflows have a positive network effect that goes beyond geopolitical rivalries, it is important for the existing investors like Japan to urge the Myanmar goverment to take robust action to hold human rights violators accountable. This would go a long way in ensuring the sustainability of economic leverage that Myanmar possesses and lead to a paradigm of socio-economic stability in the region. Given the fact, that Japan, a democracy, is one of the key players in promoting the idea of a ‘Free and Open India Pacific’ (to check China’s rise) it is in a good position to do so. Myanmar will need to decide which path it needs to take – that of other authoritarian states in the region – or of a robust democracy, Japan can play an important role in the same.

*Prannv Dhawan leads the India Pakistan Research Project at the Council for International Relations and International Law. He is also a BA LLB Hons student at the National Law School University, Bangalore.

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Southeast Asia

Take me to Patpong: The forgotten women of Thailand

Rattana Lao

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One of the perks of going abroad and studying in many schools is that I have friends from many nationalities, backgrounds and interests, the privilege to welcome them here in Thailand. Sometimes too many faces and hair colors walk through my house at once that I joke I should receive a recognition from the Tourism Authority of Thailand.

Not only is it a great way to understand the multiculturalism, it is also a good way to know more about your home country.

Amongst the usual to-do-list includes Grand Palace, Elephant Riding and Jim Thompson. Then came a highly educated, wealthy and a white male friend. He wanted nothing more than having a glimpse of Thailand infamous red right district, Patpong: “If I didn’t get to see Patpong, my friends would have thought I never made it to Thailand.”

Seriously?

He is not alone.

Million of men – not exaggerated – travel through Thailand each year for sex, erotic pleasure and adult entertainment. The demand for sex industry is not just high but quintessential for Thai tourism.

Of course, there is no official records of how many came for paid sex in Thailand. There is no official record of how many women sacrificed their bodies, hearts and souls to be someone sex toys so that they can make ends meet. There is no official record of how many of those women suffer and die from sexual transmitted deceases brought to them by men of different colours, backgrounds and nationalities.

There is no official record of anything.

Why?

Because according to the state perspective – these women do not exist. They are illegal workers of the underworld business.

Not only are they the destination for a lot of tourists, but they are also the contribution of underground world – where officials take unofficial numbers of brides so these parlors can run their business in the open – illegally, of course.

They have no access to official state facilities that will make them parts of the citizens.

How double standard?

Being a buddhist country, sex industry is a sin. But being a hypocrite state, the Thai state has benefited significantly from the pain, suffering and death of these prostitutes.

Welcome to the land of smile.

The election is coming up. If politicians are lacking of idea of what to do with this country, perhaps it is time they take a serious look to the lives and despair of the most excluded and underserved group of the population.

On the international woman’s day, it is the time to recognize of those “hookers” who make so many men happy. It is the time to realize that despite their plight, they are a part of our society. International woman’s day is not just about CEO on Forbes. It’s about every woman live. Because everyone matters.

Prostitutes or not, I wish every woman a happy day.

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Southeast Asia

US-Vietnam economic relations: The China factor

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While addressing a joint Press Conference at Hanoi, after his summit, with North Korean Leader Kim Jong Un, US President, Donald Trump spoke not just about the Summit, but also the current state of US-China relations.  Trump criticized his predecessors, for not doing enough to address the trade imbalance with China, while also making the point,  that he was all for China’s economic progress and growth, but not at the cost of the US.

If one were to look beyond the Summit in terms of the US-Vietnam economic relations, top US companies – Boeing and GE electric sealed some important deals.

Given the focus of Trump’s visit (which was the Summit with North Korean leader) perhaps these deals did not draw the attention they ought to have. The fact is that the US has begun to recognise Vietnam’s economic potential, as well as geo-political significance in Asia. This paper will give a backgrounder to Vietnam’s economic growth story in recent years, some of it’s key strategic relationships and then examine the nature of the China-US-Vietnam economic triangle.

Vietnam’s growth story: The key reasons

There is absolutely no denying the fact, that Vietnam has emerged as an important engine of economic growth within Association of South East Asian Nations (ASEAN) region in general, and has been able to emerge as a top performer within Cambodia, Myanmar, Laos, Vietnam (CMLV) bloc in particular Economic reforms (doimoi) began over three decades ago in 1986. In recent years, some of the key factors which have driven Vietnam’s growth story, especially its success in drawing FDI are;  a large labour force (57.5 million), lower wages for workers (there are varying estimates, but the wages of production workers are estimated at around 216 USD, monthly, and this is half of what labour would charge in China). Electricity too is way cheaper in Vietnam than other competitors in the ASEAN region. As of June 2018, Vietnam charged 7 U.S. cents per kilowatt hour, while the cost of electricity in Indonesia was 10 U.S. Cents, and Phillipines charged nearly thrice the amount — 19 U.S. Cents.

If one were to look at the growth and FDI figures, they are a clear reflection of Vietnam’s success. In 2018, Vietnam’s growth rate was estimated at a little over 7% (7.08) this was the highest in 11 years. Disbursed FDI into Vietnam was estimated at19.1 Billion for the year 2018 (disbursed FDI for three years was estimated at well over 50 Billion USD). Total FDI for the year 2018 was estimated at 35 Billion USD. Japan with over 8 Billion USD was the single largest investor in 2018. Other countries which have a strong presence in Vietnam are South Korea and Singapore. China is the 7th largest investor in Vietnam. One of the major attractions apart from the economic potential is the country’s location (it is easier to expand to other countries like Myanmar, Laos and Cambodia)

As a result of growing consumer demand and increased tourism, revenues from Retail Sales and Consumer Services and Travel and Tourism also witnessed a significant increase in 2018. Revenue from retail services was estimated at over 190 Billion USD, while from travel and tourism was nearly 2 Billion USD. The increased revenue from travel and tourism it is driven by the rise in tourism in 2018 (almost 20 percent)

Vietnam has close trade relations with both China (Vietnam is China’s largest trade partner in ASEAN) and US. Bilateral trade between both countries for the period January-November 2018 was estimated at 97 Billion USD, though this was heavily skewed in favour of Beijing (the total trade deficit was over 20 Billion USD). In the case of US-Vietnam trade, it is heavily skewed in favour of Vietnam (US runs a trade deficit of over 25 Billion USD).

Strategic Importance

Vietnam’s strategic importance is also increasing. Even before the recent Trump-Kim Jong UN Summit, Vietnam has hosted a number of important events in recent years such as the Asia Pacific Economic Cooperation meeting in 2008 (in Hanoi) and in 2017 (in Danang), the high-powered World Economic Forum in 2018, and frequent ASEAN summits.

It is strengthening defense and security ties with Japan, US and India in recent years. One of the key reasons for this pro-active strategic outreach is the China factor.

 During former Vietnam President, Truong Tan Sang’s Japan visit, both sides issued a joint statement which referred to the need for upgrading the bilateral relationship to an “Extensive Strategic Partnership for Peace and Prosperity in Asia’. The joint statement made references to closer security cooperation, the joint statement made mention of Japanese assistance for capacity building of it’s maritime enforcement agencies. Both sides also reiterated their shared opinion on the South China Sea Issue as well as denuclearization in North Korea. In July 2018, Japan and Vietnam held the 6th Defence Policy Dialogue (this was co-chaired by Deputy Defense Ministers of both countries.   In September 2018,a Japanese Maritime Self-Defense Force (JMSDF) submarine Kuroshio docked at Cam Ranh International Port in Kham Hoa on September 17. While security cooperation has been increasing in recent years, this development emphasized the increasing convergence of both sides on important geo-political issues. Japan has also been batting for greater Japan-Vietnam cooperation in the context of the Indo-Pacific. The Japanese PM, in an interview, in February 2019 reiterated the need for a stronger Japan-Vietnam partnership for pushing forward the idea of a ‘Free and Fair’ and ‘Open’ Indo-Pacific.

Vietnam has also been bolstering strategic ties with the US. In July 2017, Washington and Hanoi conducted the 8th Naval Engagement Activity. The United States is also providing support for Vietnam’s participation in UN peacekeeping operations. In 2018, more than four decades after the end of the Vietnam war, US Navy aircraft carrier USS Carl Vinson arrived in the city of Danang a key battle ground during the war. This was an important step in the context of strategic cooperation between both countries,  but to send a message to China that the latter’s militarization and aggression over the South China Sea issue will not be taken lying down.

Vietnam is also enhancing security ties with Japan and India. During his visit to Vietnam in 2016, Indian PM Narendra Modi had offered a credit line of 500 Million for defense cooperation. During Vietnamese President Tran Dai Quang both sides resolved to work jointly for a ‘free and prosperous’ Indo-Pacific.

While Vietnam has been strengthening it’s strategic ties with the above countries, it has been a tad cautious with regard to the Indo-Pacific narrative and has said that  was against any military alliance as this would have an adverse impact on security in the region.

US-Vietnam relations

If one were to look at the trajectory of US-Vietnam relations (which were influenced by the baggage of the war) have steadily increased over the past two decades. Both sides have made efforts to put behind the acrimony arising out of the Vietnam war – though this is extremely tough given the fact that was amongst the bloodiest conflicts of the 20th century.  Some important steps were taken in the 1990’s during the Presidency of Bill Clinton. In 1994, US lifted the trade embargo against Vietnam. A bilateral trade agreement between both countries came into being in 2001 after it was approved by the US Congress as well as the Vietnamese National Assembly.

 During the Obama Presidency again crucial steps were taken to strengthen the economic relationship. The Trans Pacific Partnership (TPP) signed in 2015 for which Obama pushed would have benefited Vietnam immensely as the South East Asian Country would have gained preferential access to US market.

President Trump did make the massive trade deficit with Vietnam an election issue, and US exit from TPP was a setback but a number of important developments have taken place in the context of US-Vietnam bilateral ties. In May 2017, during the Vietnam President’s, Nguyen Xuan Phuc visit to the US, deals worth 8 Billion USD (two major US companies were Caterpillar and General Electric) were signed between both sides. Trump mentioned the US’ trade deficit and hoped to balance that over a period of time.

While addressing the APEC Summit in November 2017, the US President had a word of praise for Vietnam’s economic progress:

….’ Vietnamese economy is one of the fastest-growing economies on Earth. It has already increased more than 30 times over, and the Vietnamese students rank among the best students in the world..’

China-US-Vietnam triangle

After the China-US trade wars many argued, that Vietnam could be the biggest beneficiary. So far, Vietnam has benefitted (export orders to certain sectors have witnessed a rise) but not in a dramatic way (some companies are likely to relocate from China with Vietnam being a possible choice, but current evidence suggests that this has not happened on a large scale.

Deals signed during Trump’s Vietnam visit: How China has sensed an opportunity

As mentioned earlier, during the US President’s Vietnam visit a number of significant deals were signed. Viet Jet will buy 100 Boeing 737-Max jets and 215 GE/CFM joint venture engines, Bamboo Airways (a start up owned by Hanoi-based conglomerate FLC Group) is buying 10 Boeing 787-9 jets.

U.S.-based aviation technology company Sabre also inked a deal with the flag carrier Vietnam Airlines. The deal estimated at 300 Million USD is supposed to help Vietnam Airlines in upgrading its digital abilities, and to achieve its aim of becoming a digital airline by 2020. Total deals signed during Trump’s visit were estimated at 20 Billion USD.

The China-US-Vietnam triangle is interesting not just from a historical context, but also an economic dimension. What is significant is that while there is talk of US-China trade wars and the likely benefit for Vietnam, Beijing kept a close eye not just on Trump’s statements with regard to North Korea, but also the deals signed during his Vietnam visit.

An article in Global Times makes a mention of how China can be part of the global production chain through a “completion and delivery center” in Zhoushan, East China’s Zhejiang Province. Interior work of over 700 planes can be completed in this centre.

The focus of the Trump visit was North Korea, the deals signed will give a boost not just to economic ties between Vietnam and US, and are a clear illustration of how much importance Trump gives to big ticket business deals. It is interesting to see the approach of China towards these deals, while keeping a close watch on the outcomes of the summit with Kim Jong Un, China also closely watched the economic outcomes of the visit and analysed how it could benefit from the same.

The conclusion of the article is especially interesting:

‘China has no reason to be jealous of Trump’s economic gain in Vietnam. In contrast, we hope the US can increase economic interaction with enterprises in Southeast Asian countries. Hopefully, everyone can learn that economic engagement is not a zero-sum game’.

Conclusion

The China-US-Vietnam triangle is important, not just in the strategic context especially with regard to the South China Sea Issue as well as the aim of achieving a ‘Free and Fair Indo-Pacific’. As for the economic context, both Trump and the Chinese are equally transactionalist and it is interesting to see Beijing de-hyphenate US’ strategic ties with Vietnam from the economic relationship.

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