A coastal province, it is surrounded by the core hub of economic activity of a country with GDP growth so white-hot, even the COVID-19 pandemic has not cooled it off completely. Vietnam is one of the few Asian economies expected to maintain positive growth in 2020.
Here in WA, we’re only just starting to wake up to Vietnam’s opportunities. This is surprising given the fact that Australian companies were among the first foreign firms to invest in Vietnam when it began to reform its economy in the late 1980s.
As early as 1994, BHP had business ventures along the Thi Vai River, which courses into the South China Sea through Ba Ria-Vung Tau province.
Indeed, the history of Australian presence in the area goes all the way back to the Vietnam War, when Vung Tau served as a logistics base for Australian forces.
Today, the war is a distant memory and history in no way constrains Australia’s economic engagement with Vietnam. The scars of war and privation have been replaced by the hallmarks of rapid industrialisation and urbanisation: ports, industrial parks, highways, and high-rise apartments.
WA businesses already have a footprint in Ba Ria-Vung Tau. Interflour, a joint venture between WA’s CBH Group and Indonesia’s Salim Group, has a grain port at Cai Mep along the Thi Vai River. Across the bay WA’s Austal opened a shipyard in 2018.
Other developments around the province will make it more relevant to WA.
Vietnam’s power generation sector is driving demand for LNG, but has been constrained by a lack of infrastructure. Its fledgling LNG import industry is concentrated in Ba Ria-Vung Tau and nearby provinces.
PetroVietnam and its South Korean partner, Samsung C&T announced in 2019 the construction of one of Vietnam’s first gas terminals on the Thi Vai River. The terminal would supply electricity generators in neighbouring Dong Nai province.
However, geopolitics is shaping Vietnam’s decisions about LNG. Along with its favourable price, Vietnamese policymakers see American LNG as a tool to avoid the wrath of US President Donald Trump and close the wide trade gap with the United States.
WA’s interest in Vietnam will be shaped by similar forces. This year has seen WA products such as barley sanctioned by China, exposing the need to diversify economic partnerships in the region. Shifting the orientation of WA’s trade to focus on demand in fast-growing economies in south-east Asia is one way forward.
Vietnam is well-placed to be a major component of WA’s diversification portfolio and a framework exists to help this process.
The alphabet soup of trade deals we have seen enter the international scene belie the fact that Vietnam and Australia are in all of them: the ASEAN-focussed AANZFTA and RCEP, and the much-vaunted CPTPP, which prevailed in spite of the US departure.
These agreements have swung the doors open with tariff elimination, new investment frameworks, and strong regulatory requirements.
Trade deals alone aren’t enough. Even with the right policy settings in place, the next move is to get people on the ground, building business connections and looking for opportunities.
While this is difficult in the COVID-19 era, the good news is as border restrictions ease Vietnam looks likely to be an early candidate for an international travel “bubble” because of its success controlling its own outbreaks so far.
This will be the key to activating WA’s new MoU: regular exchanges between both sides, starting as soon as possible. WA must show the initiative.
Developing links with the Ba Ria-Vung Tau provincial government and the institutions established to guide prospective investors such as the Vietnam Chamber of Commerce and Industry (VCCI) will be important first steps.
If WA can back this MoU with resources, it will be surprised how quickly the province could become one of its most valuable economic relationships.
Kyle Springer is a senior analyst at the Perth USAsia Centre, a non-partisan, not-for-profit think tank based at the University of Western Australia.