After anti-China riots, Vietnam must work to restore investor confidence

PUBLISHED : Tuesday, 20 May, 2014, 4:48am
UPDATED : Tuesday, 20 May, 2014, 9:11am

Vietnam is now suffering the consequences of using politics to whip up anti-Chinese sentiment. The deaths of Chinese and torching of factories by rampaging Vietnamese mobs has rocked the confidence of investors and prompted tourists to cancel bookings. Foreign investment and tourism are integral to continued recovery from several years of economic difficulties. Assuring the region and world that Vietnam is a safe place to visit and do business will not be easy after so blatant a disregard for diplomacy.

China is evacuating thousands of citizens, has warned against travel to Vietnam and suspended some exchanges. Work at factories has been disrupted, affecting output and supplies and negatively impacting the stock price of listed firms. The country's reputation as an attractive foreign investment destination has unsurprisingly been hit. Factory owners are talking of relocating to safer places, potential investors are having second thoughts and tourists are changing travel plans.

Protests are rare in Vietnam; the authoritarian government is intolerant of opposition and quickly silences dissent. But the demonstrations that formed from the anti-China campaign planted in the state-run media fitted authorities' agenda and the protesters were encouraged. Officials were not prepared when the movement caught fire on social media, though, and out-of-control mobs turned on factories and buildings with signs bearing Chinese characters. In a matter of days last week, two Chinese were killed, scores injured and hundreds of mainland Chinese, Hong Kong, Taiwanese, Singaporean and Japanese factories burned, looted and vandalised before security forces and police were able to restore order.

Competition for foreign direct investment in Asia is keen. Overseas firms have chosen Vietnam for factories and production lines in part because of competitive wages, a skilled workforce and good infrastructure; most of all, though, they count on the stability that the government ensures. The violence unleashed by allowing anti-Chinese sentiment to get out of control has damaged investor confidence. It will be further eroded unless authorities set aside nationalist ways.

Thousands of rioters have been arrested and officials have apologised and embarked on fence-mending missions. Compensation, including reducing or waiving business taxes, is being discussed. But Hanoi has to do much more to reassure foreign investors, especially those from China.