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Vietnam Defence and Security Report Q1 2011
Business Monitor International, Jan 2011, Pages: 87
The Vietnam Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's defence and security industry.
On August 17 2010, Vietnam and the US held Defence and Security Report 2011 talks for the first time. Vietnam’s deputy Defence and Security Report 2011 minister Nguyen Chi Vinh met with US Deputy Assistant Secretary of Defence and Security Report 2011 for South and Southeast Asia Robert Scher. Scher later said that they discussed marine security, international peacekeeping, search and rescue operations, humanitarian and disaster relief operations, and language training.
Additionally, they talked about unexploded ordnance and herbicides left over from the Vietnam War, as well as servicemen listed as missing-in-action. Both sides stated that although the dispute with China regarding the South China Sea was not the main subject of the dialogue, the dispute had to be peacefully negotiated to sustain regional stability.
At the ASEAN Regional Forum (ARF) in July 2010, the US had already made it clear that it would negotiate on a multi-lateral basis to mediate in disputes in South East Asia. This is obviously an effort to counter China’s ambitions to dominate the South China Sea, over much of which it claims sovereignty. In the short-to-medium term, though, access to water from the Mekong river, which reaches the sea in southern Vietnam, will be a key foreign relations issue for Vietnam.
Vietnam faces the challenge of modernising its large armed forces, but without the resources that are available to its richer neighbours. For the time being, Russia remains the main source of equipment and materiel. However, as a part of its policies to develop relations with countries in Southeast Asia, India has also emerged as a significant supplier of parts for the ships in Vietnam’s navy. In November 2010, the government of Vietnam made it clear that foreign navies may avail themselves of the facilities at the base at Cam Ranh Bay. The base was used by the US Navy during the Vietnam War, and subsequently by the Soviet Navy. It remains to be seen whether the base can become a significant source of revenue for the Vietnamese.
Vietnam recorded an impressive real GDP growth of 6.3% y-o-y in Q210, as the economy headed towards the government's growth target of 6.5% for 2010. Economic indicators in July also reinforced the government's aggressive target, after industrial production came in at a better-than-expected 16.0% y-o-y in July. To a certain extent, the encouraging numbers helped to alleviate concerns that weakening external demand from the US and EU would be a drag on the economy. Industrial production accelerated after slowing down for three consecutive months.
However, we expect loan growth to remain weak on a historical basis in H210 due to the threat of higher inflation. Therefore, we do not see business investments continuing to contribute significantly to industrial production growth. Instead, we see private consumption and government-supported infrastructure investment as the main drivers of economic growth in H210.
Regardless of the ongoing disagreements with China, in the longer term, our core political scenario is for the Communist Party of Vietnam (CPV) to shift increasingly towards a technocratic form of government, aimed at maintaining high economic growth levels and an acceptable distribution of wealth across the population. We thus foresee a continuation of economic reforms despite criticism from more traditionally-minded party members. However, intermittent periods of harsh repression against prodemocracy activists and other government critics are a strong indication that political liberalisation is not in the offing.
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