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Vietnam eyes pragmatic gains from the Indo-Pacific economic framework

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Participation in the new U.S. initiative could advance Vietnam’s aspiration for economic gains and a firm status in the regional economic architecture, but its full-fledged engagement is unlikely.

Last month, President Joe Biden announced the long-awaited establishment of the Indo-Pacific Economic Framework (IPEF), which aims to dial up Washington’s economic engagement with its Indo-Pacific allies and partners. Towards this goal, the IPEF contains “four pillars,” which aim to promote connected, resilient, clean, and fair economic interactions with regional partners.

The participation of Vietnam in the U.S.-led economic pact came as no surprise. Guided by the precept of multilateralism, Vietnam has long sought to embed itself in vital economic institutions, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). In joining these frameworks, Vietnam has sought to pursue omnidirectional cooperation at various levels of economic integration. Vietnam, as an IPEF member, can have a critical stake in the framework’s political and economic agendas, given that this economic initiative will be guided by key dialogues between the partners involved.

In particular, ensuring the stability of key supply chains is a primary Vietnamese concern, at a time when supply chain blockages have haunted Southeast Asian economies. In December last year, the tightening of Beijing’s land border due to COVID-19 outbreaks caused turmoil for Hanoi’s agricultural producers, prompting protests from Vietnamese leaders. To make matters worse, Russia’s invasion of Ukraine has hit Vietnam’s import and export markets, in primarily its agriculture, forestry, and fishery sectors due to the Western sanctions imposed against Moscow. These two cases have exposed Vietnam’s economic vulnerability to geopolitical shocks and trade disruptions. Hence, diversifying supply chains with IPEF partners could help Vietnam enhance its economic resilience, at a time when the actions of Moscow and Beijing has continued to pose challenges to the global supply chain.

Being a member of the IPEF could help shore up Vietnam’s geoeconomic and geopolitical interests, especially amid the U.S.-China economic rivalry and countries’ seeking economic shifting or a “China-Plus-One” strategy. Vietnam hopes to receive financial and technical support from the U.S., especially in the fields of technology, energy, and environmental protection. Vietnamese Prime Minister Pham Minh Chinh’s recent visits to tech giants Intel, Apple, and Google in Silicon Valley have opened opportunities for Vietnam’s engagement with the U.S.’s tech supply chain and digital ecosystem, given these high-tech firms’ desires to diversify their own supply chains. The good news is that tech giant Apple is considering boosting its production in Vietnam, which currently “houses 31 factories producing and assembling electronic parts and equipment for Apple products.”

Clean energy and climate change have also emerged as growing concerns of the Vietnamese government. As one of six countries globally hit hardest by climate change, including by threats of heatwaves, floods, and droughts, Vietnam has brought this topic to various environmental forums. At last year’s 26th United Nations Climate Change Conference of the Parties (COP26), Chinh described climate change as one of the chief constraints on Vietnam’s economic development, and underscored the country’s commitment towards achieving net-zero emissions by 2050. Recently, Vietnam has underlined its endeavor to collaborate with the U.S. on concrete measures to address this environmental emergency while seeking practical support from Washington to become “an ASEAN leader in renewable energy.”

When meeting Chinh in Boston on May 14, U.S. Special Presidential Envoy for Climate John Kerry underlined that the Biden administration would foster ties with Vietnamese ministries and agencies and at the same time provide assistance to help Vietnam “develop renewable energy, reduce gas emissions, and consolidate its infrastructure in a sustainable way.” Additionally, as the U.S. has maintained clean energy partnerships and sought to strengthen bilateral cooperation with New Zealand, Japan, Australia, India, and South Korea, it is likely that Vietnam will continue to pursue multilateral engagement with these countries on decarbonization and its renewable energy transition, given Hanoi’s growing important role in the eyes of these Indo-Pacific powers.

Digital transformation, the crucial push towards Vietnam’s targets of becoming a high-income country and reaching net-zero emissions, is what Vietnam can learn from the U.S. and other middle powers, given their hands-on experience in the field. Last year, Vietnam released the National Digital Transformation Program by 2025 with a vision towards 2030, aiming to address the digital skills gap and pave a path towards the digital economy. Members of the economic plan can share their experiences and sustainable solutions with Vietnam, thereby boosting Vietnam’s capabilities and confidence in striving for a sustainable digital society.

Yet, it remains to be seen whether Vietnam would be willing to join the “fair economy” pillar of the IPEF, which aims at enforcing “effective tax, anti-money laundering, and anti-bribery regimes.” Vietnam’s general secretary Nguyen Phu Trong, the architect of the “burning furnace” (dot lo) anti-corruption campaign, has met Vietnam citizens’ long desire to fight against bribery and corruption. Nevertheless, his campaign may become volatile amid rumors about his health and the controversy over Trong making an early exit before 2026, the date of the next Vietnamese Communist Party (VCP) congress. With Trong stepping down, his anti-corruption furnace might be thwarted, making Vietnam’s commitment towards a “fair economy” less binding.

Moreover, Vietnam may consider some sub-themes that fall beneath the “fair economy” umbrella as overly delicate. In Hanoi, conservative leaders have maintained skeptical views over the so-called “peaceful evolution,” a term denoting outside countries’ quiet, but incremental, engagement to shift the communist nation towards liberal democracy. Engaging in dialogues and collaborations with Washington on liberal democracy or anti-corruption-related topics, is a a scenario that Vietnamese conservatives would likely seek to avert. Equally important is that anti-American sentiments still “remain entrenched in certain pockets of the population,” reflecting America’s imperialist agenda and human rights abuses during the Vietnam War.

Though Vietnam may not seek participation in all pillars of the IPEF, the U.S. would be well advised to understand what Vietnam truly wants, and to offer more tangible support to these ends, such as building closer ties between Vietnam and the Quadrilateral Security Dialogue, incentivizing American companies and investors to foster cooperation with their Vietnamese counterparts, while respecting and accepting certain differences, like ideological values and political regimes. Additionally, the Biden administration should help Vietnam carve out actionable policies to strengthen its economic resilience in the Indo-Pacific, especially amid China’s growing economic coercion and uncertainties following Russia’s invasion of Ukraine.

Given the highlighting of multilateralism and “people-centered cooperation” with like-minded powers joining the IPEF, Vietnam would likely opt for workable and flexible mechanisms instead of keeping itself locked into any fixed course of activities. To leverage its status with countries involved in Washington’s executive agreement, Hanoi should address its shortcomings, such as relatively low labor productivity, modest innovation and shadowy regulations in financial technology, and deficiency in the export of sophisticated goods to developed countries. Moreover, aligning both concerns and interests between Vietnam and its partners through equitable dialogues and frequent consultations should be facilitated to gear the IPEF towards “an inclusive, open, and flexible process,” as Chinh underlined at the virtual meeting for the launch of the economic pact.

By Huynh Tam Sang – The Diplomat – June 13, 2022

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