Australia should engage with Vietnam as a regional economic power.
In March 2018, Australia and Vietnam officially signed a strategic partnership. This is an important achievement for two countries which have been levelling up relations, step by step, over the past ten years. The strategic partnership, which will focus on military and security cooperation
, makes sense given the surrounding geopolitical context. The resurgence of China casts a shadow over Vietnam, which fought a devastating border war with China in 1979 and now deals with China’s contested claims in the South China Sea. Vietnam is searching for reliable partners among its neighbours, especially now that there is a perception that American power and influence in the region is diminishing.
Equally compelling, but less often discussed, is the foundation Australia has for a reinvigorated economic partnership with Vietnam. PwC predicts Vietnam is expected to become one of the twenty largest economies by 2050
. By that time, Australia will find itself in a region home to the world’s largest economic powers, including Vietnam, Indonesia, China, Japan and India. Fortunately, Australia is now laying a solid foundation for engagement with a rising Vietnam.
This relationship first began in the final days of the Vietnam War. As Australian troops were pulling out of South Vietnam, Australian diplomats were moving in. Prior to reunification, Australia established diplomatic ties with North Vietnam while maintaining relations with the South. Early ties were not always plain sailing: shortly after reunification, Australia’s aid to aid Vietnam’s war recovery was suspended after the invasion of Cambodia in 1979.
In 1986, the year Vietnam’s Doi Moi
economic reforms were rolled out, the relationship began to grow. With diplomatic representation in Hanoi, Australia was well positioned to enter this newly opened market. By 1991, Australian firms had $300 million invested in the Vietnam, a significant amount in a developing and comparatively isolated economy. In 1993, ANZ opened its first branch
in Hanoi, and was one of the first foreign banks permitted to enter the country. Australia’s “list of firsts” in Vietnam was not limited to business interests. In 1998 the Royal Melbourne Institute of Technology University (RMIT) was invited to establish Vietnam’s first international university campus
On the international relations front, Australia stood behind Vietnam as it reintegrated itself into the global economy and regional architecture. Australia backed Vietnam’s entry
into the World Trade Organisation, and was supportive of its membership in ASEAN. This laid the foundation for formal partnerships to be developed: first a “comprehensive partnership” in 2009, which progressed to a “enhanced partnership” in 2015; and finally the “strategic partnership” signed by the Prime Ministers this week.
There is no doubt Vietnam and Australia share convergent economic interests. Australia and Vietnam are both signatories to the modified CPTPP (or TPP-11)
. Tariffs and other barriers to trade between both countries are addressed under the existing Australia-New Zealand-ASEAN Free Trade Agreement (AANZFTA). Two-way trade
sits at around $10 billion, and Australia’s foreign direct investment in Vietnam
has grown to $1.5 billion. These figures have potential for rapid growth as Vietnam’s economic transformation continues.
To further progress the economic partnership, Australia should start to recognise Vietnam’s role as a regional economic power. Early steps involve both government and business initiatives. The Australia-Vietnam Joint Trade and Economic Cooperation Committee (JTECC), which was established in 1990, could be used as a vehicle to enhance economic cooperation. The last time the JTECC met was in 2011
, and with the signing of the strategic partnership now is time to reinvigorate this process. To broaden the agenda for cooperation in Australia, foreign policy think-tanks and universities should host workshops and commission research to explore new cooperative mechanisms on a track-two basis. A high-level, bipartisan dialogue involving all three sectors: business, government, and academia would support the deepening of bilateral relations.
There are multiple opportunities for economic cooperation. Australia can help Vietnam avoid the “middle income trap
” by helping to increase worker productivity, access to education and helping Vietnamese products access the Australian marketplace. There is also a huge infrastructure gap to be bridged. For example, only 20 percent of Vietnam’s roads are paved
. Australia already has a reputation for delivering high-quality infrastructure through its aid program. The My Thuan Bridge
project is a ‘gold standard’ example. This need for infrastructure provides Australia an opportunity to work with its partners through development banks and for its private sector to fund new projects.
Australia has a strong foundation on which to build not only a strategic partnership with Vietnam, but an economic one as well. Developing an economic partnership from this strong foundation will ensure Australia-Vietnam relations are broad-based and reflect Vietnam’s strategic importance and its economic potential. Australia-Vietnam relations are poised to discover new opportunities and reach new levels of cooperation, reflecting the new realities of the emerging economic and political order in the Indo-Pacific region.
is the Programs Manager at the Perth USAsia Centre and explores these issues in more depth in ‘Vietnam as a G20 Country: Towards an Australia-Vietnam economic partnership
’, published in February in our Indo-Pacific Insights Series
. This is the Perth USAsia Centre's policy research series, which is a platform for insights and policy recommendations on contemporary developments in the Indo-Pacific.