The Real Significance of the Japan-Vietnam Strategic Partnership

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The Real Significance of the Japan-Vietnam Strategic Partnership

The relationship between Hanoi and Tokyo needs to be put in broader context.

The Real Significance of the Japan-Vietnam Strategic Partnership

Japanese Prime Minister Shinzo Abe, seen here with his Vietnamese counterpart Nguyen Tan Dung following a meeting last year.

Credit: Ministry of Foreign Affairs of Japan

This week, Vietnamese Communist Party (VCP) General Secretary Nguyen Phu Trong pays a four-day visit to Japan in a visible effort to deepen Hanoi’s relationship with the world’s third largest economy. During his first official trip to Japan, the party chief is meeting with a number of Japanese leaders and elites – including Japanese Prime Minister Shinzo Abe – to discuss multiple topics ranging from bilateral trade to security in the South China Sea.

Abe is an influential figure in the bilateral relationship. In 2006, when he took office for the first time, Japan and Vietnam forged a strategic partnership, with Tokyo being just the second nation after Russia to endorse such a relationship with Vietnam. In March 2013, when Abe returned to office, the two countries agreed to elevate their relationship to an extensive strategic partnership.

Economic Cooperation

Economic cooperation is a key aspect of the bilateral relationship. According to 2013 statistics, Japan is Vietnam’s fourth largest trade partner after China, the United States, and South Korea. Japan is currently Vietnam’s third-largest export market behind China and the United States. On top of that, Japan was the first nation to officially designate Vietnam as a market-based economy in 2011.

Beyond this, both Vietnam and Japan are in the final stage of the Trans Pacific Partnership (TPP) negotiations. The free trade agreement, which currently includes 12 countries representing 40 percent of global GDP, is expected to deepen trade and investment between the two countries at a much faster pace once finalized. As of January 2015, Japan was the second biggest investor in Vietnam, with total registered capital of around $37 billion dollars, behind only South Korea. However, Tokyo is leading in terms of investments actually realized.

With respect to preferential loans, Japan has been Vietnam’s largest donor nation in terms of official development assistance (ODA), having committed up to $2 billion in 2012. As of 2012, the cumulative ODA fund from Japan had reached $22.7 billion. Compared to Chinese ODA projects in Vietnam, Japanese projects rank much higher in terms of technology, labor safety, cost effectiveness, social transformation, and environmental friendliness.

Numerous bilateral agreements have been signed to create institutional frameworks for promoting bilateral trade and investments. In April 2003, Vietnamese Prime Minister Phan Van Khai and his Japanese counterpart Junichiro Koizumi launched the Vietnam-Japan Initiative to improve the business climate in Vietnam. In December 2008, the Japan-Vietnam Economic Partnership Agreement (JVEPA) was endorsed to speed up economic cooperation, trade liberalization of goods and services, and investments between the two nations. And in July 2013, Japan and Vietnam agreed to a “joint crediting mechanism” that enables Japanese firms to purchase carbon credits while helping Vietnam lower its own carbon emissions.

Under the umbrella of these agreements, Vietnam has been trying to attract small-and-medium enterprises (SME) from Japan in an effort to help develop its supporting industries. In 2013, the Long Duc Industrial Park located in the southern province of Dong Nai launched the Kansai Supporting Industry Complex to cater to SMEs from the Kansai region. Following suit, in December 2014, the Vietnam-Japan Techno Park built in the Ho Chi Minh City-based Hiep Phuoc Industrial Park completed its first phase and was expected to be a popular destination for Japanese companies from the supporting manufacturing sector. The Ho Chi Minh City authorities have pinned much hope on Japanese investors to boost the city’s manufacturing sector by replicating the model to other industrial parks. In the context of growing Chinese projects in Vietnam, Japanese technology, expertise, and capital are what Vietnam really needs to advance its economy and gradually lessen its dependence on Beijing.

Security and Defense Ties

With regard to security and defense cooperation, the two countries have steadily beefed up their ties against the backdrop of China’s increasingly assertive behavior. Advancing cooperation in the areas of human resource development, capacity building, and visits of military ships was an important part of the extensive strategic partnership agreement. These concrete improvements built on the comprehensive Memorandum of Understanding on Defense Cooperation that the two countries endorsed in October 2011.

In February, 2015, the first out of six patrol vessels under the Japanese deal granted to Vietnam last year was delivered to the Vietnam Marine Police. The remaining boats will be delivered to Vietnam later this year and will be valuable additions to Hanoi’s inadequate maritime security equipment.

Broader Significance

From a broader perspective, VCP General Secretary Nguyen Phu Trong’s trip to Japan is just a continuation of Vietnam’s bid for diversification in its foreign policy. In April 2015, the party chief made a second visit to Beijing in his capacity as the VCP general secretary. In July 2015, he made an historic visit to the United States and was greeted at the Oval Office by President Barack Obama. In October or November 2015, Trong is expected to receive his Chinese counterpart, Xi Jinping, in Hanoi. Obama will likely pay a visit Vietnam thereafter.

Vietnam’s foreign policy moves are a vivid example of hedging strategies with a mixture of soft balancing against China. Hanoi is deepening relationships with Japan and the United States while arguably continuing to pay deference to Beijing. This is understandable within the context of China’s attempts to change the status quo in the Asia-Pacific – especially in the South China Sea – which has caused concerns among Japan and other regional powers.

The pattern of Vietnamese-Japanese relations reflects a sweeping convergence of national interests between the two countries. Vietnam sees Japan as a reliable source of funds, technology, innovation, and security. Japan’s ODA funds and investment have played a critical role in Vietnam’s sustained economic growth.

Japan, for its part, looks at Vietnam from the lens of economic and political opportunities. Vietnam is a big market of 90 million people with a growing middle class for Japanese goods and products, as well as a friendly place for Japanese investments with relatively cheap labor costs and skilled workers. In addition, Vietnam is an important member of the Association of Southeast Asian Nations (ASEAN) and the most experienced nation in the region when it comes to standing up to China.

More importantly, the broader significance of the Vietnamese-Japanese partnership lies in how it fits into a broader network of informal alliances on China’s periphery. Since the end of World War II, the Asian regional order has often been characterized as a “hub and spoke” order – a visual image of a U.S-led system of bilateral security relations with her Asian allies. Nevertheless, since 2009, there has been a gradual development of this hegemonic order into a more “networked” system – an interconnected, quasi-multilateral network of security ties. The security network includes bilateral military ties among America’s traditional allies (Japan, South Korea, Australia, Thailand, and the Philippines) as well as between these allies and other Southeast Asian countries.

Within this system, aside from the United States, Japan, Australia and India have also been ramping up their strategic ties with Vietnam. India has become a key provider of strategic weaponry and a major investor in Vietnamese offshore hydrocarbon projects in the South China Sea, while Japan has pledged greater assistance for Vietnam’s Coast Guard development. Japan has also been reaching out to both India and the Philippines in recent years, with the Shinzo Abe administration gradually carving out a regional security role for Tokyo. All these regional players have been operating in tandem with the United States’ broader pivot to Asia strategy, which is partly aimed at constraining China’s aggressive behavior in the western Pacific.

The Philippines has been accelerating defense talks with other partners in the region, most notably South Korea and Australia. This week, South Korea’s defense minister paid a two-day visit to Manila, where he signed a new defense pact to exchange classified information, military officials, and boost cooperation against non-traditional and transnational threats. Manila is also scheduled to conduct two joint exercises with Australia by the end of this year. The Philippines and Australia already enjoy deep military ties, as evidenced by the Philippine-Australia Status of Visiting Forces Agreement that the two countries signed in 2007. Manila is set to sign another similar treaty with Japan in the coming years.

The international security environment also witnessed a newly launched “Japan-Australia-India Trilateral Dialogue” in June. This multilateral framework was initiated by Japan and strongly embraced by Australia as well as the United States. The June meeting among Indian, Australian, and Japanese diplomats demonstrated the increasing convergence of interests against Chinese aggression.

One of the concrete outcomes of this growing convergence is that Japan will join the October Malabar exercise, an annual joint naval drill between India and the United States in the Indian Ocean. Australian defense minister Kevin Andrews acknowledged earlier this month that Australia will be partaking in the drill. Japan’s naval involvement in the joint maritime exercise is indicative of a new era of coordinated military cooperation, motivated by Chinese assertive behavior not only in the South China Sea but also in the Indian Ocean.

A more informal, networked alliance structure led by the United States is important because it creates greater incentives for Asian actors – including Vietnam and Japan – to play a greater role in collective security. No ‘pivot’, no national strategy on the South China Sea – if there is to be one – can dispense with an Asian linchpin. To take just one example, rising tensions in the Asia-Pacific are making the positions of the United States and Japan more complementary than ever. Within this context, Japan’s contributions – actual and potential – are far from negligible when it comes to the South China Sea, as Tokyo is a strong supporter of universally agreed principles of international law and an important provider of specific capabilities to other states like Vietnam.

It is in this broader context that the Japan-Vietnam extensive strategic partnership must be viewed. Deeper bilateral ties are not just about the leverage Vietnam can gain over China in the South China Sea. Closer alignment with Japan will also undoubtedly engage Vietnam in a web of Japan-friendly partners as well. That will lead not only to a stronger Vietnam, but a more peaceful and prosperous Asia-Pacific which will benefit countries within the region as well as beyond it.

Nguyen Thanh Trung is a PhD candidate at the Hong Kong Baptist University Department of Government and International Studies and lecturer at the University of Social Sciences in Ho Chi Minh City. Truong-Minh Vu (PhD) is the director for the Center for International Studies (SCIS) at the University of Social Sciences and Humanities in Ho Chi Minh City. He is co-editor of the book Power Politics in Asia’s Contested Waters – Territorial Disputes in the South China Sea” (Springer, forthcoming in 2015).