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Riots dampen Vietnam's investment climate

Publication Date : 23-05-2014

 

Wen Yong, a Chinese businessman in Vietnam's southern Binh Duong province, recalled the horror on May 13 when anti-China riots broke out there.

"I could only speak in a low voice. We called the police, but it seemed they wouldn't come very soon," he said.

Wen, who owns the Yong Hao Shoe Co in Binh Duong province, was one of the many Chinese investors caught up in the riots.

Wen and other Chinese staff were hiding in the company's upstairs office, as the downstairs office was already strewn with broken glass and smashed furniture.

"Nearly 20,000 people were rioting. Police used rubber bullets and tear gas but failed to control the crowd," Wen said.

Security forces had been deployed to Ho Chi Minh City to protect the country's economic hub, leaving Binh Duong out of control, he said.

"Any Chinese here?" a mobster asked the Vietnamese employees who stayed downstairs. "No, they've already fled," came the answer from the employees, and Wen breathed a sigh of relief.

Wen, who arrived in Vietnam 10 years ago from Jiangxi province, couldn't have imagined that his business would be attacked three times on May 13.

The riots in central and southern Vietnam have tarnished the country's image as a safe investment environment.

Since opening its doors to foreign investors, Vietnam has offered preferential land and tariff policies to attract foreign investment. After entering the World Trade Organization in 2007, foreign investment in Vietnam hit a peak of $71.7 billion in 2008, but that fell after the outbreak of the global financial crisis.

In 2013, Vietnam attracted $21.6 billion in foreign direct investment, up 54.5 percent year-on-year thanks in part to China's industry upgrade.

Taking the textile industry as an example, Vietnam's 600 garment and textiles companies earned more than $20 billion from exports in 2013, up 18.5 per cent year-on-year, creating 5 million direct and 2.7 million indirect jobs, government figures show.

But during the riots, Chinese companies suffered the most.

Reporters learned that on May 13 alone, at least 19 Chinese companies were burned down - 15 of them in Binh Duong.

In addition, 10 companies from Japan, 55 from South Korea and some Singaporean companies were also damaged and forced to close.

Preliminary estimates show the direct losses of Taiwan-funded enterprises in Binh Duong and its neighboring provinces reached hundreds of millions of dollars, rising to billions if indirect losses are counted.

Formosa Plastics Group from Taiwan had planned to invest $23 billion in Vietnam's central Ha Tinh province, but riots there cost it $3 million, and losses from construction delays are far larger.

The riots have also affected the country's economic situation. The conglomerate's investment in Ha Tinh contributes nearly half the province's tax budget.

When Xinhua reporters arrived in Ha Tinh on May 18, order had been restored but the Vung Ang economic zone appeared unusually quiet.

Several sand and gravel plants along the road from Ha Tinh to Nghe An province were still shut; shops were closed; and there were few cars.

Formosa Plastics has claimed $3 million in compensation for property damage.

Other Taiwan enterprises in Binh Duong and neighboring provinces have also claimed damages of hundreds of millions of dollars, or $1 billion if indirect damages are included.

Vietnam is considering reducing land and corporation taxes and providing preferential loans among other measures to compensate enterprises affected by the riots.

"We don't want those. What we want is cash," a businessman from Taiwan said.

Wen, the shoe company owner, told Xinhua that "if there is any feeling of insecurity again, we will not be able to continue" to invest in Vietnam.

On May 14, Vietnamese authorities threatened to use live ammo to disperse the rioters. Wen and other Chinese staff then left Binh Duong for Ho Chi Minh City.

"I have to send them to Ho Chi Minh first, then come back to deliver wages for the employees, or they would think that I left without paying them," Wen said

Zang Xiaohua, a representative of Taiwan's Allover World, expressed hope the Vietnamese authorities will strengthen security for foreign investors and their employees.

Vietnamese Minister of Planning and Investment Bui Quang Vinh early on May 16 told MPI publication Vietnam Investment Review each Vietnamese had responsibility to protect foreign investors and employees, otherwise the country's investment reputation would be hurt.

The image of a safe investment environment Vietnam had built in the past 20 years was turning very ugly, he said.

 

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