Why you should care

Because any journey from painful loss to reckoning to partnership is worth watching. 

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“That’s me!” exclaims Sen. John McCain. He’s standing in his office, pointing to a grainy black-and-white photo of a man floating on a debris-strewn lake, surrounded by a dozen young Vietnamese. The senator, of course, became a prisoner of North Vietnam during a war that killed millions and routed a generation, but today — no hard feelings. Vietnam’s defense minister gave him the framed photo when the official visited Washington, D.C., a few years back, McCain says.

Well, we gave peace a chance, and the times they did change, and now relations between the once-bitter enemies are close enough to exchange macabre souvenirs. The United States and Vietnam restored diplomatic ties 20 years ago, but it was only last October that the U.S. eased its ban on weapon sales to Vietnam. This month the U.S. sent five high-speed patrol boats to Vietnam’s coast guard as part of a commitment to bolster the nation’s defenses against China. And while many countries lobby hard for a visit from the American president, there is a decent chance that President Barack Obama really will make it to Hanoi before the year is out — just as Japan’s prime minister, India’s president and Russia’s foreign minister already have.

[Vietnam’s foreign] policy of three no’s: no foreign alliances, no foreign bases and no joining with one country to gang up on a third.

Carl Thayer, professor emeritus at Austrailia’s University of New South Wales

Why is the poor, authoritarian country the object of so much attention? Location, location, location is part of the answer. With a long coastline on the South China Sea, Vietnam occupies a prime spot on the thoroughfare where “over half the world’s merchant tonnage flows,” as Puneet Talwar, a State Department official, observed in a Jan. 23 speech in Hanoi. Vietnamese labor is cheaper than China’s, but companies in Vietnam can still operate within much of the larger Chinese manufacturing supply chain. And China’s rivals and uneasy partners alike are eager for Vietnam’s help as a counterweight to Beijing.

Vietnam has welcomed the overtures, to a point. For much of its history, the country was little more than a satellite of China, and not always for the better. The risks of relying on one powerful patron still resonate, and nowadays, Vietnam’s foreign policy, as laid out in defense white papers, roughly translates as the “policy of three no’s,” says Carl Thayer, professor emeritus at Australia’s University of New South Wales: “No foreign alliances, no foreign bases and no joining with one country to gang up on a third.” Economically too, Vietnam has laid out the welcome mat to all comers. Its fast-growing population of more than 90 million and its political stability (authoritarianism helps that way) have lured trade and foreign investors.

But lately, Vietnam’s careful balance has tilted westward. This past spring, a tiff with China over the disputed Paracel Islands in the South China Sea pushed it further into the arms of its Western friends. So did the United States’ move to ease its ban on weapon sales — somewhat of a surprise, given Vietnam’s tendency to throw journalists and political dissidents in jail. But Vietnam has yet to actually buy any American weapons. It seems to be more interested in symbolism at this point, and wary of ticking off China any further.

China-jousting aside, Vietnam has drawn foreigners with trade and investment opportunities that have opened up during its transition — known as “Đổi Mới” — from a centrally planned economy to a market-oriented one, which accelerated after the collapse of the Soviet Union. Foreign investment has grown rapidly in the 21st century, at a pace that trails only Indonesia and Thailand. Trade, meanwhile, has grown at a double-digit rate over the last decade; Vietnam was second only to Singapore in value of goods traded in 2013.

That has helped Vietnam prosper despite some profound problems with its domestic business climate, including inefficient state-owned companies and a rickety financial system. A World Bank report released in December urged Hanoi to make significant reforms to continue economic growth. Perhaps more worrisome, Vietnam is getting a smaller share of foreign investment in Southeast Asia than it used to, according to David Dapice, lead economist at the Vietnam Program at Harvard’s Kennedy School of Government. He points out via email that Vietnam had almost 20 percent of all Association of Southeast Asian Nations investment in 2008, but less than 10 percent in 2013.

In other words, Vietnam’s leaders can’t go forward on autopilot and expect the good times to keep rolling. The first decade of the 21st century was a big one, yes; but it gets only harder from here. No one said becoming a regional power was easy.

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