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Vietnam’s Tyranny of Geography

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Vietnam’s Tyranny of Geography

Being economically dependent on China only adds to existing Vietnamese security fears. But does it have any choice?

Some researchers liken China to a rooster, with Korea as its beak and Vietnam its leg. The analogy, while highlighting the strategic importance of Vietnam toward China’s well-being, especially in terms of security, also implies that Vietnam has long been living with the weight of China on its shoulder. The problem is that Vietnam can’t do much about it, even if it wants to.

Just like Cuba to the United States or Georgia to Russia, Vietnam is, in Prof. Carlyle Thayer’s words, condemned to a ‘tyranny of geography,’ whereby it has no choice but to learn to share its destiny with neighbouring China through every twist and turn of its history.

In fact, a stronger China has long been the most serious threat to Vietnam’s security. Vietnam came under Chinese suzerainty for almost a thousand years until 938 A.D. Between then and the French colonization of Vietnam in the latter half of the 19th century, China invaded and occupied Vietnam a couple of times. But the most recent testimony in support of the idea that China is a major source of insecurity has been the brief yet bloody war that China waged along Vietnam’s northern border in 1979, and the naval clash initiated by China in the South China Sea in March 1988.

The threat posed by China toward Vietnam comes not only from geographical proximity, but also the asymmetry of size and power between the two countries. China is, for example, 29 times larger than Vietnam, while Vietnam’s population, despite being the 14th biggest in the world, is roughly equivalent to that of a mid-sized Chinese province.

Vietnam’s impressive economic performance since the late 1980s hasn’t allowed it to close the gap in strength. On the contrary, with China’s modernization over the last three decades, the power gap between the two countries is getting ever wider. For example, according to World Bank data, between 1985 and 2009, China’s GDP in current US dollars expanded by more than 16 times, from $307 billion to $4.985 trillion. Over the same period, however, Vietnam’s GDP increased by only 7 times, from $16 billion in 1985 to $97 billion in 2009.

Thanks to its economic development, China’s military might has also been significantly boosted, posing an even more formidable threat to Vietnam’s security. According to China’s official statements, its military budget for 2011 is $91.5 billion, while Vietnam is said to have allocated only $2.6 billion (about 2.5 percent of its GDP). What’s particularly worrying for Vietnam is that China’s expanded military expense is concentrated on its air force and navy, strengthening China’s capacity to project power into the South China Sea, where China and Vietnam have competing claims.

To make things worse, Vietnam’s transformation toward an open market economy adds another aspect to this tyranny of geography: increased economic vulnerability.

Since Vietnam resumed trade with China in the late 1980s, its domestic production has long been threatened by Chinese goods, which flood the country through both formal trade and smuggling. In the early 1990s, for example, Chinese consumer goods smuggled into Vietnam were so overwhelming and detrimental to domestic production that the Vietnamese government had to impose a ban on 17 categories of goods imported from China. In recent years, despite the enhanced competiveness of Vietnamese products and the perceived poor quality of Chinese ones, smuggling from China is still rampant. This not only exerts a negative impact on Vietnamese domestic production, but also puts Vietnamese consumers at risk, especially when many goods smuggled from China are toxic and harmful to people’s health.

Another vulnerability is Vietnam’s perennial trade deficit with China, which amounted to $5.4 billion out of the country’s total trade deficit of $7.5 billion in the first half of 2011. Moreover, China has emerged as Vietnam’s largest source of imports, accounting for almost a quarter of its import turnover in 2010. Vietnam is heavily dependent on China for input materials for some of its major export industries, such as footwear, garments, textiles or furniture. Meanwhile, Vietnam’s exports to China are just a minuscule portion of China’s total imports. As a result, should China decide to discontinue trade with Vietnam for some reason, the damage to Vietnam’s economy would be immense.

Another concern raised in Vietnam recently has been the fact that Chinese companies have won up to 90 percent of EPC (Engineering/Procurement/Construction) contracts for Vietnam’s major industrial projects, especially those of coal-fired power plants. Chinese contractors are favoured as they offer cheap technology and promise to help arrange financial funding from Chinese banks. Cheap as it seems, though, Vietnam in fact pays dearly for these contracts.

First, cheap technology brings pollution. Some reports have suggested that some technologies offered by Chinese companies have been discharged or banned by China since 2005. Second, Chinese contractors’ technical capabilities are limited, causing projects to be delayed or, even when the projects are completed on time, leaving project owners with expensive maintenance bills. Third, as Chinese contractors refuse to use locally available products and instead import everything from China, including basics such as washers, Vietnam’s trade deficit with China soars. Chinese contractors even illegally bring in Chinese labourers at the expense of Vietnamese workers, something that has prompted public outrage in Vietnam.

Another recently exposed economic vulnerability for Vietnam vis-à-vis China is related to Chinese merchants buying massive quantities of Vietnamese agricultural products, ranging from lychee and cassava to aquaculture products and pork. This has caused food prices to surge in Vietnam, and despite the government’s desperate efforts to curb inflation, it climbed to 20.8 percent in June.

These economic vulnerabilities present Vietnam with another perceived threat in addition to the more visible military one. Should China decide to wage an ‘economic war,’ Vietnam would suffer disastrously.

Yet Vietnam seems to have few options for dealing with the economic vulnerabilities it faces over China. On the one hand, any possible reaction will likely be constrained by the fact that Vietnam now has to observe international trade and investment rules, such as those set down by the World Trade Organization, to which Vietnam became a member in early 2007. But Vietnam would anyway have to be wary about massive retaliation should it move to counter China.

Of course there is a possible flipside. Vietnam hopes that growing, though asymmetrical, economic interdependence will help to reduce the possibility of China taking militarily aggressive action against Vietnam, especially in the South China Sea. And, although there are drawbacks to depending on China, Vietnamese businesses still find it much cheaper and more convenient to work with its looming neighbour than with other comparable partners.

As a result, Vietnam is still keen to do business with China, and will continue to try to reap the most it can from its northern neighbour’s booming economy. But as an old Vietnamese saying goes, honey does kill flies. It’s therefore essential that Vietnam stay fully aware of the potential threat, and work on possible strategies to at least neutralize the economic aspects of the tyranny of geography that the country is increasingly suffering from.

Le Hong Hiep is a lecturer at the Faculty of International Relations, College of Social Sciences and Humanities, Vietnam National University – Ho Chi Minh City, and is currently a Ph.D. Candidate at the University of New South Wales at the Australian Defence Force Academy.