Vietnam faced two sets of interrelated domestic and external challenges in 2017. The major domestic challenge was how to reduce corruption and reform the developing economy so that the country could effectively integrate into the global economy. This was a difficult challenge given the rise of protectionism around the world.

The major external challenge was how to manage its strategic partnerships with major powers without sacrificing its sovereignty and self-reliance. This was a complex challenge given the uncertainties surrounding the Trump Administration’s pursuit of an “America First” policy and China’s drive to dominate the East Sea.

How did Vietnam manage these twin challenges in 2017?

Domestic challenges

The Central Committee of the Communist Party of Vietnam held two plenary sessions during the year. The fifth plenum, held from May 5-10, focused on three major issues: perfecting the institutions of the socialist-oriented market economy, reorganizing and improving the efficiency of State-owned enterprises (SOEs), and developing the private economy. The sixth plenum, held from October 4-10, adopted an important resolution on personnel strategy and the rotation of leading and managerial personnel.

During the year the campaign against corruption went into top gear, with the mass trial of 51 officials associated with the State-run PetroVietnam, Sacombank, OceanBank, and Vietnam Construction Bank. Mr. Dinh La Thang was dismissed from his post on the Politburo and later arrested for mismanagement during his time as PetroVietnam’s CEO. Mr. Nguyen Xuan Anh was dismissed from his post as Party Secretary of Da Nang for his involvement in illegal schemes.

External challenges

Vietnam ended the year with a diplomatic flourish, successfully hosting the APEC Economic Leaders’ Meeting and official visits by the presidents of the US, China, and Chile and the Canadian Prime Minister.

APEC. Vietnam has a proven track record for successfully hosting meetings of international multilateral organizations, such as summit meetings of Francophone nations (1997), APEC (2006), and ASEAN (2010). The APEC meetings in 2017 were no different. As host, Vietnam chaired numerous preparatory meetings at the working, senior official, and ministerial levels. 

Vietnam later chaired a round of APEC meetings in Da Nang that resulted in two important statements. The first was a joint statement by APEC ministers issued on November 10. This meeting reaffirmed ministers’ commitment to four major goals and the means to achieve them: sustainable, innovative and inclusive growth, deepening regional economic integration, strengthening micro, small and medium-sized enterprises’ competitiveness and innovation in the digital age, and enhancing food security and sustainable agriculture in response to climate change. The second was a joint statement issued after the 25th APEC Economic Leaders’ Meeting on November 11 that endorsed the priorities adopted by APEC ministers.

TPP-11. At the same time, Vietnam was intimately involved in working with Japan and eight other signatories of the TPP to revive the agreement in light of US President Donald Trump’s decision to withdraw. Unfortunately, after general agreement had been reached, Canadian Prime Minster Justin Trudeau had last minute reservations and failed to attend the final meeting. This threw the process into confusion. Japan and Vietnam have nonetheless continued to advance the TPP.

Major powers. Since the early 1990s, Vietnam has pursued a policy of diversifying and multilateralizing its external relations. This has resulted in the negotiation of a number of strategic and comprehensive partnerships with major powers, including all five permanent members of the UN Security Council as well as India and Japan.

Vietnam attempts to give each major power equity in its development. All have an interest in seeing Vietnam retain its autonomy as an independent and constructive contributor to regional and global security. It is not in the interest of any major power to see Vietnam pulled into the orbit of another major power.

Vietnam responded quickly to the election of Donald Trump. Prime Minister Nguyen Xuan Phuc was the first government leader from Southeast Asia to be received by President Trump at the White House, in late May. Later, after the APEC meetings, President Trump made an official visit to Hanoi to meet with Vietnam’s top leaders. As a result, Vietnam and the US reaffirmed their commitment to enhancing the comprehensive partnership agreed to under the Obama Administration.

Vietnam deftly handled the issue of its trade imbalance with the US by agreeing to negotiate a bilateral trade agreement. Vietnam also sweetened the pot by announcing trade deals worth several billion US dollars and by promising to facilitate American businesses and investment.

Relations between Vietnam and China experienced a momentary downturn mid-year. Nevertheless, as a result of “frank and deep” discussions on the East Sea, bilateral relations were put back on course. The fourth friendly border defense exchange was held in September. China’s Foreign Minister Wang Yi visited Hanoi in early November to smooth the path for President Xi Jinping’s official visit later in the month.

Vietnam’s invitations to Presidents Trump (November 11-12) and Xi (November 12-13) illustrate its policy of providing equity to each major power to keep Vietnam from falling into the orbit of another major power. President Xi could scarcely have refused to visit Hanoi in light of President Trump’s visit. His visit merely restored the status quo before the mid-year contretemps.

Throughout the year, Vietnam kept up high-level contacts with other strategic partners. In June, Prime Minister Nguyen Xuan Phuc travelled to Tokyo to meet with his counterpart, Shinzo Abe. The two issued a lengthy 46-point joint statement on deepening their extensive strategic partnership, including cooperation in economic and political relations, trade, investment, energy, and security and defense. Japan and Vietnam shared similar views on security in the East Sea.

State President Tran Dai Quang and Russian President Vladimir Putin met on the sidelines of APEC 2017. Their discussion focused mainly on facilitating reciprocal investment in infrastructure, transport, and energy. Both noted an increase in trade under the Vietnam-Eurasia Economic Union Free Trade Agreement. Significantly, they issued a joint statement on cooperation in safeguarding international information security.

Deputy Prime Minister Truong Hoa Binh visited Seoul in November after APEC 2017 and held discussions with South Korean Prime Minister Lee Nak-yon on advancing their strategic cooperative partnership. Discussions focused on a number of economic issues (market access, aid, and Vietnamese workers), including raising two-way trade to $100 billion by 2020 under their bilateral trade agreement. Vietnam is South Korea’s fourth-largest trading partner, while South Korea is Vietnam’s third-largest trading partner. In September and December, Vietnam and the EU held negotiations resolving outstanding issues in the EU-Vietnam Free Trade Agreement (EVFTA).

What lies ahead?

In 2018, Vietnam will face at least four major foreign policy challenges that will test the political and diplomatic skills of its leaders.

The first challenge is how to manage territorial disputes in the East Sea in the face of two conflicting trends: negotiations between ASEAN and China on a Code of Conduct (CoC) and China’s further militarization of its artificial islands. Vietnam will have to press for ASEAN unity at the same time as it lobbies major powers to counter-balance China. The emergence of the Quad - the US, Japan, India and Australia - could benefit Vietnam.

The second challenge is how to avoid being caught up in rising tensions between the US on the one hand and Russia and China on the other. The Trump Administration’s National Security Strategy has clearly identified these two countries as rivals and has signaled a strong line. Accelerated major power rivalry could result in pressure being put on Vietnam to take sides and in the worst-case scenario lead to a breakdown in major power cooperation over North Korea.

The third challenge is economic. Vietnam must negotiate its way through two possibly conflicting issues: negotiating a bilateral trade agreement with the US while reaching an agreement on a revised TPP. Vietnam must also resolve outstanding economic and political issues affecting the ratification of the EVFTA.

The fourth challenge relates to the UN. Vietnam will make a major commitment to peacekeeping with the deployment of a Level II field grade hospital to Sudan with a follow-on commitment to deploying military engineers. A successful debut will strengthen Vietnam’s attempt to be re-elected as a non-permanent member of the Security Council. But in order to achieve this objective, Vietnam may find it difficult to please all the major powers.

Finally, on the domestic front, Vietnam will face major challenges in tackling large-scale corruption, reforming SOEs, and perfecting the socialist-orientated market economy and State institutions while at the same time attempting to raise GDP growth to 7 per cent or higher. Vietnam’s external and domestic challenges are interrelated.

VN Economic Times