HANOI/TAIPEI May 16 Dexter Hsu spent Tuesday
night barricaded inside his workers' dormitory in Vietnam's Binh
Duong province. Tables were stacked up against the doors, but he
and his dorm-mates were terrified by the shouts and sounds of
Earlier that day, the Taiwanese product developer at a
footwear company saw a mob of some 4,000 angry protesters riding
scooters into the industrial park where he worked, smashing
windows and breaking equipment.
Now, he's in hiding in a Ho Chi Minh City hotel, waiting for
the order to resume work, although he said he was wondering
whether in the long term he should just return home. "I'm
totally helpless to control this situation and I feel like my
life could come under threat," he said in a telephone interview.
Tales like Hsu's risk undermining foreign investment in
Vietnam, the lynchpin of its economy.
Industrial parks have been a major driver of the country's
economic growth, accounting for more than 30 percent of
Vietnam's exports and attracting around $110 billion in foreign
Setting up shop in one of the 200-odd parks across the
country saves foreign companies the bureaucratic headache of
obtaining land on their own, as well as giving them easy access
to electricity, water supplies and worker accommodation. That's
helped Vietnam and its army of low-wage workers carve out a
niche in the global supply chain for textiles and electronics.
Samsung Electronics has just opened the world's
largest smartphone factory in northern Vietnam, Intel Corp
has one of its biggest chip plants there, while Nike
Inc and Adidas both buy footwear from
South Korea, Taiwan and Singapore in particular have been
some of the biggest investors in the parks. That could now
Riots in Vietnam this week, sparked by protests over China's
move to station an oil rig in waters claimed by both countries,
have centred on the industrial parks, where thousands of Chinese
employees live and work.
Taiwanese or companies owned by Taiwanese in Vietnam are
often mistakenly seen as mainland Chinese.
Hundreds of companies have been forced to halt production as
factories were looted, torched or damaged in the riots. In the
long run, the concern for Vietnam would be that they move away
"Investors cannot just pay attention to costs or quality of
labour, they should also assess the likelihood of nationalist
sentiments whipped up suddenly that could disrupt production,"
said Leong Wai Ho, an economist for Barclays in Singapore.
"The protests might be one off, but the underlying tensions
and sentiments will not go away, and will probably worsen over
time," he added.
Vietnam's industrial parks employ about 2.1 million people
and manufactured products worth $38 billion in exports last
year. They have helped provide a bright spot in the $170 billion
economy, where growth potential has been hampered by debt-ridden
state-owned enterprises and corruption.
A glut of bad debt caused by over-indulgent bank lending and
a glacial pace of reform in the state-owned corporate sector
mean Vietnam has gone from being one of Asia's rising stars to
one of the region's biggest underperformers.
NOT FIRST SIGN
This week was not the first sign of unrest at the parks; in
recent years workers have been increasingly dissatisfied over
labour conditions, although the authorities have until now kept
any protests contained.
"Local riots in response to harsh employment conditions have
been quickly put down by the government," said Suiwah Leung,
associate professor of economics at Australian National
University, and an expert on Vietnam.
Now, the risk is that anti-foreigner antagonism mixed with
unhappy workers will be harder to control and will worry foreign
companies, even if they have no connection to China and events
in the South China Sea.
"The situation that some workers are taking advantage of
their right to demonstrate by destroying factories is definitely
not good for Vietnam's investment environment," said Nguyen Mai,
chairman of the Vietnam Association of Foreign Invested
A major downturn in foreign investment would be a big
Samsung spent $3.2 billion on its smartphone factory in the
northern Thai Nguyen province.
The five Vietnam-Singapore Industrial Parks, two of which
were hit by this week's riots in Binh Duong, say they host
around 500 companies and have created more than 140,000 local
jobs. Their tenants come from 23 different countries.
The Ha Tinh industrial park in central Vietnam, where a huge
steel complex being built by Taiwan's Formosa Plastics Group was
set on fire, is estimated to cost more than $20 billion by the
time it is completed in 2020.
For now, signs are that most foreign investors are willing
to ride out the unrest.
"This is a very isolated incident," said Jason Yeo,
president of the Singapore Business Association Vietnam, who has
been in the country for 17 years. "The Vietnamese government
(officials) are very concerned on this issue and will do their
best to protect foreign investors in their country."
A spokeswoman for Singapore's Ascendas Pte Ltd,
which runs a large industrial park with Vietnam's Protrade in
Binh Duong, said that while it has bolstered security and is
monitoring events, it still believes in "Vietnam's long-term
Hsu, however, is unlikely to easily put behind him the
memories of Tuesday's riots.
"This is a terrifying situation, it's the first time I've
genuinely thought about leaving Vietnam," he said.
(Additional reporting by Andrew Toh in Singapore and Faith Hung
in Taipei; Writing by Rachel Armstrong; Editing by Raju