Viet protests a 'wake-up call' for S'pore firms

Over 20 die as riots spread; steel plant set ablaze

By
Kelly Tay
kellytay@sph.com.sg @KellyTayBT
print |email this article

Vietnam's anti-China protests - which turned deadly on Wednesday night after spreading to
the central province of Ha Tinh - are a stark reminder of how easily geopolitical tensions can
spill over and affect businesses - PHOTO: REUTERS
BT GRAPHICS
[SINGAPORE] Vietnam's anti-China protests - which turned deadly on Wednesday night
after spreading to the central province of Ha Tinh - are a stark reminder of how easily
geopolitical tensions can spill over and affect businesses. And for Singapore companies there,
the ongoing unrest adds another layer of concern to an economy already plagued by several
challenges, despite once being deemed a bright market for local firms.
The spreading troubles saw over 20 people killed as rioters set Vietnam's biggest steel plant
ablaze overnight, according to Reuters. The mill was owned by Taiwan's Formosa Plastics
Group, and was poised to be South-east Asia's largest steel plant when completed in 2020.
The escalation of violence in Ha Tinh comes a day after angry mobs - enraged by China's
recent deployment of an oil rig in disputed waters - overran industrial zones in the southern
province of Binh Duong. Rioters in the south - purportedly 19,000 in number - were said to
have targeted Chinese companies and employees, but ended up looting and setting fire to
Korean, Taiwanese and Hong Kong properties as well. BT understands Binh Duong streets
are now quiet with military vehicles on patrol.
Analysts The Business Times spoke to say the tumult in Vietnam should act as a "wake-up
call" to Singapore companies, especially those which have not seriously considered the risks
of regional tensions bubbling beneath the surface.
Said Barclays economist Leong Wai Ho: "I think here in Singapore, we've been generally too
complacent about geopolitical tensions, which really have the potential to disrupt operations
in a big way. It's not just about Vietnam - everyone should be looking more closely at any
strategic investments in Asean. . . This anti-Chinese sentiment is only going to worsen as
China becomes more assertive." Added Mizuho economist Vishnu Varathan: "People think
that (these South China Sea disputes) are just at the diplomatic level. But once anything turns
nationalistic, it's not going to be just officials trading barbs (and we're) seeing that in Vietnam
already."
While geopolitical strains should not deter Singapore companies from investing in the region,
economists say firms need to properly assess the potential risks from cross-border tensions,
before investing on a risk-adjusted basis.
Singapore is already Vietnam's third-largest investor (after Japan and Korea), with registered
cumulative investments of US$30.2 billion in 1,258 projects.
As instances of civil unrest in Vietnam have been scant, observers say the last 48 hours have
shattered long-held perceptions of the country's stability.
Noting Vietnam's problems with high inflation, a volatile exchange rate and worrying levels
of non-performing loans, Mr Leong said: "This just shows that Vietnam's path to
industrialisation is going to be more rocky than initially thought - it's not just about managing
structural changes, but it's also about putting in place frameworks to (regulate) underlying
tensions that could pop up at any time."
The protests are hitting other foreign firms as well; hundreds of Taiwanese companies have
reportedly stopped production on safety concerns, as did Hong Kong's Li & Fung - the
world's largest supplier of clothes and toys.
CIMB economist Song Seng Wun cautioned that the protests could have spillover effects on
Vietnam's economy, which could in turn weigh on the region: "We're all going to be losers if
this becomes much more serious."
Although none of the Singapore companies contacted by BT have been directly affected by
the riots, firms such as Ezra, Mapletree, Olam, Super Group and Technics Oil & Gas said
they have stepped up security procedures at their facilities and continue to remain vigilant.
Property groups Ascendas and CapitaLand continued to affirm their confidence in Vietnam's
business prospects. Said an Ascendas spokesman: "We take a long-term view of our
investments in these locations and we are monitoring the developments in Vietnam closely.
While mindful of the short-term challenges, we believe in Vietnam's long-term growth."
The Ministry of Foreign Affairs (MFA) yesterday confirmed that protesters burned a
Singapore flag after breaking into two Vietnam Singapore Industrial Parks (VSIPs). "The
Singapore government continues to monitor the situation closely and there have not been any
reports of Singaporeans affected by the demonstrations so far," said the MFA.
According to a VSIP statement, "order has resumed" at VSIP Binh Duong, where four
factories had been torched on Tuesday night. Sembcorp, which runs the industrial parks, said
that more than 50 per cent of tenants are now up and running.
More Sharing Services SHARE Share on facebook FACEBOOK Share on
twitter TWITTER Share on linkedin LINKED IN Share on google GOOGLE+
Print | Email this article