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[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.