October 3, 2016 6:00 pm JST

Danang courts Japan as anti-China sentiment simmers

ATSUSHI TOMIYAMA, Nikkei staff writer

Vietnamese IT company FPT opened this development center in Danang in April, in part to capitalize on the growing presence of Japanese peers in the city.

HANOI -- Danang, Vietnam's fastest-growing city and a popular tourist destination, is working to attract Japanese investment amid an upsurge in resentment against China.

The central Vietnamese city is wooing information technology and other companies from Japan, envisioning itself as a new base for the industry. At the same time, authorities are considering measures to curb land purchases by Chinese buyers, which have been increasing since the central government lifted a ban on foreigners owning property in July 2015. A steep rise in the number of Chinese tourists visiting Danang is also creating friction.

FPT, a major Vietnamese IT group, opened a development base on 1.9 hectares of land in Danang in April. The plan is to bring in 10,000 resident engineers by 2020 and lead the city's emergence as an IT powerhouse. FPT decided to bet big on the city, in part, because of the growing presence of Japanese IT companies.

According to the People's Committee of Danang, there were 112 Japanese business investments totaling $397 million as of September -- most of them in the field of IT. The local community tends to welcome Japanese companies because they employ workers on a long-term basis and provide them with educational opportunities.

While 3,600 students graduate with IT-related university degrees in Danang every year, only 50-60% land jobs at IT companies. The more Japanese companies put down roots, the more graduates they will be able to hire.

For now, tourism is Danang's bread and butter. In 2015, 1.25 million foreign travelers visited the coastal resort, up 31% on the year.

For the third year in a row, Danang was chosen as a city with the strongest growth potential, according to a survey by the Vietnam Chamber of Commerce and Industry. But since it has no major industry besides tourism, local authorities see building an IT hub as a way to realize that potential.

In July 2015, the People's Committee set up a Japan desk to assist Japanese investors in their own language. Another point in the city's favor is that there are already direct flights from Tokyo and Osaka.

In contrast with the growing pro-Japan sentiment, local feeling toward China is deteriorating.

South China Sea tensions

Brisk land purchases are contributing to the animosity. Chinese investors have been snapping up property, and prices in some parts of the city have doubled or even tripled over the past year.

Tran Van Son, director of the city's Planning and Investment Department, said Chinese investors are taking advantage of legal loopholes to buy land in locations that are off limits to foreign investors, such as tracts near military facilities. The city office is studying ways to respond, in conjunction with the central government.

Some residents and business owners, meanwhile, complain about the behavior of some Chinese tourists. Around 300,000 Chinese visited Danang in 2015 -- the largest number from a single country. 

Police looked into one case where a Chinese tourist allegedly burned a Vietnamese bank note at a bar in June. In July, a local restaurant called Ngoc Quy posted a sign in Vietnamese and Chinese stating that it refuses to serve Chinese people. The owner said the boycott was due to Chinese tourists' poor manners; the ban has since been lifted. 

The vast majority of the travelers, of course, are ordinary vacationers. But looming in the background is a bigger source of tension: territorial disputes in the South China Sea.

An international tribunal in July dismissed China's claims to much of the sea. Beijing's refusal to respect the ruling has angered many in Vietnam, which has its own claims in the sea.

Yet, the Vietnamese government is reluctant to openly criticize China due to the close relationship between the two countries. China accounts for 20% of Vietnam's external trade. The Chinese Communist Party is the model for Vietnam.

The Vietnamese government's awkward position fuels public resentment. That resentment tends to run hotter in Danang, Nha Trang and other resort destinations that draw a lot of Chinese visitors. 

In a way, Danang could be considered a microcosm of Vietnam's current diplomatic orientation -- leaning more toward Japan and away from China. 

Japan is the biggest provider of official development assistance to Vietnam. Although South Korea has surpassed Japan as the No. 1 source of direct investment, the Vietnamese government is eager to lure more Japanese companies to the country.

Japan and Vietnam are also reinforcing their military ties. In April, Japanese Maritime Self-Defense Force ships made port calls in Cam Ranh Bay, Vietnam's main naval stronghold, for the first time.

Asia300

FPT Corp.

Vietnam

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