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International Relations

Vietnam's economic zones derailed by anti-China protests

Government says policies do not favor Beijing, but public's concern grows

Police dispersed a protest in Hanoi in June over the draft special economic zone law, which was viewed as favoring China.   © Reuters

HANOI -- The Vietnamese government's plan to open the country's first three special economic zones have been stalled until next year at the earliest due to large demonstrations by those wary of an influx of Chinese businesses.

In early June, protests erupted throughout the country, including in Hanoi and Ho Chi Minh City. Factories and shops were destroyed, and at least 1,000 people were arrested -- an unusual display in Vietnam, where public security forces keep a close eye on the public. The national legislature responded by postponing deliberation and voting on laws related to the special zones that month, and recently decided to leave the matter alone once more in an October session.

"Not one word of the special-zone bill draft bill mentions China," Minister of Planning and Investment Nguyen Chi Dung said in June, adding that "some people are deliberately trying to fuel the idea of a threat" from Vietnam's northern neighbor. The unusually blunt statement about China, a topic on which Vietnamese politicians tend to hedge, was aimed at quelling popular unrest.

In 2013, Vietnam named as candidate special zones Quang Ninh -- a coastal province east of Hanoi that borders China -- as well as the resort centers of Khanh Hoa Province and the island of Phu Quoc. The zones are designed to lure foreign investment with benefits like the ability to use land for up to 99 years, relaxed rules on casinos and streamlined legal procedures. Vietnam embraced the special-zone model later than other Asian countries.

Behind the public's concerns is China's growing influence in the country. Last year, Chinese companies' direct investment in Vietnam totaled $1.4 billion, about five times the 2012 figure. Visitors from the Asian economic powerhouse roughly tripled over that period to about 4 million. In resort areas like Da Nang, Nha Trang and Phu Quoc, Chinese buyers have gone on property shopping sprees, with Chinatowns emerging in some areas.

Neighboring countries like Cambodia and Laos are also growing more reliant on China in areas like infrastructure development and direct investment. But many Vietnamese are distrustful of China, with the countries having clashed in a border war and subsequent armed conflicts in the 1970s and 80s, and still facing tensions over South China Sea territorial issues.

The special economic zone plan is designed to attract investors from anywhere in the world and does not deliberately favor China. Though its 99-year land-use provisions have drawn criticism, current laws already let foreign investors lease land for up to 70 years.

But the three candidate sites have some of Vietnam's fastest-growing Chinese populations, and all are strategically important from a defense standpoint. Khanh Hoa is home to Cam Ranh Bay, a key maritime site with major military installations.

"Opinions are split even among Vietnamese leaders" on the matter, said a government source.

Still, the possibility remains that some party or parties encouraged June's protests for political reasons. The site of the fiercest demonstrations was Binh Thuan, a remote southern province east of Ho Chi Minh City where no special economic zone is planned. Some local media reports claim people behind the violence were paid off.

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