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Japan’s Chexit

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A Move to Protect its own Supply Chains.” This article was published nationally and distributed by the National Association of District Export councils. LINK NEEDED

Indonesia’s “John Adams Moment”

By All Southeast Asia, Articles, Blog, Indonesia, Indonesia

 July 30, 2014

(Originally published by the Center for Strategic and International Studies (CSIS) and can also be found also at: https://www.csis.org/analysis/pacnet-62-indonesia%E2%80%99s-john-adams-moment )

          There was a moment of time in our own history, when our new democracy peaceably and orderly passed the reins of power from George Washington, at the end of his second term, to John Adams. It had never happened before in history. The “John Adams Moment” firmly established

the precedent  in the new, American democracy, of a Presidency limited to only 2 terms. That tradition lasted up until the time Franklin Roosevelt and was resumed thereafter by Constitutional Amendment. It was a transition moment when the country broke away peacefully from a military/civilian leader, Washington, to a purely civilian leader, John Adams. Our own “John Adams Moment” set the tone and the tradition for generations that followed. Indonesia, following its recent divisive election, is at a similar, “John Adams Moment” in the strengthening of its own new democracy. President Susilo Bambang Yudhoyono  (SBY),  a military/civilian leader, will step down after his own 2nd term this coming October, and relinquish power to a new, duly- elected civilian President, Joko Widodo (Jokowi).  This is a historic, critical step in the development of Indonesia’s own, young democratic traditions.

The Indonesian democracy has developed out of the dark, bloody days of rioting and violence in the wake of the collapse of the Thai baht and the Asian Financial crisis in 1997-98. The financial implosion of Indonesia’s rupiah occurred along with the dismantling of the autocratic and highly corrupt Suharto regime. Since that time, Indonesia has re-invented herself in a little over a decade and a half, repaired her devastated economy, and has now emerged as a robust democracy in Southeast Asia, with a plethora of newspapers, talk shows, media sources, and strong voter participation.  It is impressive progress in less than two decades.

The recent Presidential election campaign was a hard-fought battle, but free of violence. And, although religion is never entirely absent from Islam’s foremost democracy, this was a contest fought overwhelmingly over secular issues.

Jokowi, represents a marked departure from Indonesia’s past. He started out as a small business owner, a humble furniture seller, and became a pragmatic, uncorrupt mayor. He is not from the usual clutch of political and business dynasties and their sleazy cronies. He represents something new for Indonesia. The 53-year-old is the first of a political generation reaching the national stage since popular protests in the late 1990s that toppled Suharto. Jokowi’s rise would have been inconceivable without the radical political decentralisation which is perhaps the outstanding success of Indonesia’s democratic journey. He began his political career as mayor of Solo, a medium-sized city in Java, the most populous island, before becoming an immensely popular Governor of Jakarta, the capital, in 2012. It is there that he forged a reputation for can-do competence and clean government that won the admiration of many and propelled him into the Presidential race.

Jokowi has a good record of dealing with the concerns of ordinary Indonesians: clogged traffic, poor sanitation and petty, bribe-taking bureaucrats. He is also more comfortable working with Christians or ethnic Chinese than most Indonesian politicians have been and are. Indeed, his opponents tried to turn his hostility to religious intolerance against him by claiming that he was in fact a Christian. Certainly, Jokowi is a new kind of Indonesian leader, but he is still a devout Muslim. In the three days before actual election in which Indonesian law forbids campaigning, Jokowi made a lightening pilgrimage to Mecca. But he also embraces religious pluralism. And, though no room exists on the Indonesian political spectrum for anything like economic liberalism, he is less of an economic nationalist than his opponent in the election, former Special Forces General, Prabowo Subianto, once Suharto’s son-in-law with a tainted human rights record, a throwback to Indonesia’s darker past.

Foreign investors are now pleased with the Jokowi victory. He understands the need to cut ruinous fuel subsidies and to boost education.

The big worry about Jokowi is that he might be out of his depth in high politics. That is partly because he lacks experience: his views on foreign policy are still barely known. His campaign was amateurish, relying mainly on the perhaps, naive assumption, that honesty and an impressive record would be good enough. It turns out that Jokowi was right; Indonesians did not buy the slick, orchestrated campaign of General Prabowo. Jokowi is a man of the streets and neighborhoods, whereas past Indonesian leaders have ruled from on high. He has no ties to the Suharto regime, unlike most of his predecessors, and that represents a clean break.

Jokowi has been underestimated before. Indonesia faces a geopolitical challenges with China over its Natuna islands in the South China Sea along with its ASEAN leadership demands and international economic challenges. Standing still will not be the easiest option. Indeed, his capacity to attract powerful technocratic advice could see Jokowi pursue a more proactive and internationalist agenda than his predecessors.

Jokowi’s endearing trait—his humility—turned into a liability during the campaign as his image as an outsider was compromised by his reliance on his party’s grande dame, Megawati Sukarnoputri, the daughter of modern Indonesia’s founder and a former President herself. She has appeared on occasion to be grudging in her support for Jokowi. This reliance is likely to fade in time as Jokowi makes his own mark.

There is a leadership trait which Jokowi possesses which is both visionary and courageous. As the world’s 4th largest country, and a Muslim-majority one at that, the ethnic Chinese have been the political scapegoats forever. During the Suharto years, a drive through Jakarta’s Chinatown, Kota, was remarkable for its lack of Chinese characters, symbols, architecture and even names in English—the ethnic Chinese were literally hidden from view. The bloody anti-Chinese riots (which General Prabowo is said to have encouraged) in Kota and elsewhere left deep cultural wounds.  Jokowi is the first Indonesian politician to actively begin the healing process. When he ran for the Governorship of Jakarta, Jokowi had the courage to have an ethnic Chinese, Basuki Tjahaja Purnama (Ahok) as his successful running mate.  That was a historic first for Indonesia and it bodes well for Jokowi’s reputation as a cultural healer, a nation-builder, and a diplomat. Interestingly, Ahok now succeeds Jokowi as the Governor of Jakarta.

In the end, Indonesians, made the right choice. Jokowi will be a disruptive figure in in that he will have to learn to work with, and begin to breakup, the old political oligarchy, upgrade the bureaucracy, work the corruption problem, develop civilian control of the military, and continue to strengthen this fledgling democracy.

This is Indonesia’s “John Adams Moment.”

(David Day is the Chairman of the Board of the Hawaii Indonesia Chamber of Commerce and an international business lawyer).

What Could Have Been

By All Southeast Asia, Articles, Blog, Ho Chi Minh, Vietnam, Vietnam, Vietnam History-related

[soliloquy id=”3889″]

In the wake of the state funeral for Vietnam’s legendary General Vo Nguyen Giap, we thought it appropriate to share with you some heartbreaker photos taken in August of 1945 in the mountains outside of Hanoi. They are heartbreakers only if you recognize what could have been, instead of the carnage that followed.

We do not ascribe blame for the failure to build on this relationship but only want to point out that it did not happen and perhaps, could have.

American OSS Deer Team with Ho Chi Minh & Vo Minh Giap August, 1945 Pac Bo, Vietnam

American OSS Deer Team with Ho Chi Minh & Vo Nguyen Giap
August, 1945
Pac Bo, Vietnam

In the  photo above, American OSS (Predecessor to the CIA) “Deer Team” members pose with (then) Viet Minh leaders Ho Chi Minh and Vo Nguyen Giap during a military training at Tan Trao, in the mountains north of Hanoi in August, 1945. Deer Team members standing, l to r, are Rene Defourneaux, (Ho Chi Minh), Allison Thomas, (Vo Nguyen Giap), Henry Prunier and Paul Hoagland, far right. Kneeling, left, are Lawrence Vogt and Aaron Squires. (Rene Defourneaux).

Ho Chi Minh, Vo Nguyen Giam, and the Deer Team 1945

Ho Chi Minh, Vo Nguyen Giap (in the white suit), and the Deer Team
1945

Toward the end of World War II, the U.S. Office of Special Operations (the OSS), the precursor to the CIA, started doing business with the communist-dominated Viet Minh, led by the ascetic and mysterious globe trotter Ho Chi Minh. The aim was to use the Viet Minh to drive the Japanese out of what had been French Indochina. But events were moving way too fast for coherent American policy to be made.

In return for the Viet Minh’s help against the Japanese, the OSS provided the Communist-dominated group with weapons, radio sets, medicines and training. The two groups quickly became very friendly and fought as comrades-in-arms in capturing the Japanese garrison at Tan Trao. They celebrated by getting drunk together. Along the way there would be such incongruous (in retrospect) actions as an OSS medic saving the life of the very sick Ho Chi Minh.

[soliloquy id=”3894″]

The Japanese, traumatized by Hiroshima and Nagasaki, surrendered much earlier than expected.  Ho’s forces declared independence the very same day that General MacArthur accepted the formal Japanese surrender on the deck of the USS Missouri, September 2, 1945.  In so doing, Ho’s Viet Minh looked to America for friendship and even included some phrasing from the American Declaration of Independence in their own, with Ho carefully checking the words of Thomas Jefferson with his OSS colleagues by radiophone from a shophouse in Hanoi’s Old Quarter as it was being drafted.

The Vietnamese Declaration of Independence that Ho Chi Minh drafted begins:

“To the compatriots of the entire country,

All men are created equal; they are endowed by their Creator with certain inalienable Rights; among these are Life, Liberty, and the pursuit of Happiness. This immortal statement was made in the Declaration of Independence of the United States of America in 1776. In a broader sense, this means: All the peoples on the earth are equal from birth, all the peoples have a right to live, to be happy and free…”

Ho Chi Minh delivering the Declaration of Independence for the Democratic Republic of Vietnam, September 2, 1945 Ba Dinh Square, Hanoi

Ho Chi Minh delivering the Declaration of Independence for the Democratic Republic of Vietnam, September 2, 1945
Ba Dinh Square, Hanoi

Ho was clearly influenced by the political writings and values of the American Founders. Up on the stage at Ba Dinh Square in Hanoi, clear for all to see, OSS Major Archimedes Patti stood behind Ho. There are photos of Patti saluting the Vietnamese flag as the band played the Vietnamese and the US national anthems. Then, coincidentally, a clearly-marked U.S. plane flew over  Ba Dinh Square during the ceremony. Was it by accident or design? It remains a mystery. Either way, it was apparent to everyone in the square that day that Ho Chi Minh (and Vo Nguyen Giap) had powerful backers and that the forces of Ho Chi Minh were clearly the political and spiritual leader of the Vietnamese revolution against the country’s French overlords.

Meanwhile, Chiang Kai-Shek’s undisciplined and rapacious troops, defeated Japanese forces, some French military people and colons and a few bemused Americans all milled around in Hanoi waiting for resolution of the dangerous and confused situation in which Indochina found itself at the end of World War II.

The U.S. adventure in Hanoi ended quickly, and it swiftly became clear that the French would fight to regain their lucrative colonies in Indochina. After all,  because the mother country was, at the time, reduced to rubble–it was critical for France that she quickly re-open her colonial cash pipeline from Vietnam in the rubber, tin and other profitable Vietnamese exports of that era.

Following the Japanese surrender on September 2, 1945, the French began to return to Hanoi and Saigon and made it clear that they had no intention of abandoning the colony.  In an effort to block the French return, Ho Chi Minh sent several telegrams to Washington seeking assistance against the French. These telegrams were written by Ho personally, and typed on his own typewriter. The telegrams were addressed to President Truman, sent via the State Department, but, oddly, never delivered to Truman. Here is one of several Ho sent in 1946:

Ho Chi Minh Telegram to President Truman February 1946

Ho Chi Minh Telegram to President Truman
February 1946

 

 At the same time, bewildered U.S. policy makers in the inexperienced Truman administration were dealing with domestic pressures to send U.S. forces home and anxiety about upsetting the French. While the precise point at which the Truman Administration turned its back on Vietnam is unclear, we do know that France was desperate to re-start its colonial cash flow and de Gaulle, always playing hard to get, was dragging his feet during the negotiations on French participation in the precursor to NATO, the Western Union, initiated formally in 1948.

President Truman did not share Roosevelt’s strong democratic principles. He was more concerned with keeping the French happy as a major business and security partner, as well as helping stand that country back upon its feet again. Plus, there was already on the horizon the “Great Imagined Fear” of the Russians, and de Gaulle knew how to play his cards just right. De Gaulle, in mid-march 1945, had already said in discussion with the (then) Roosevelt administration:

“What are you driving at? Do you want us to become, for example, one of the federated states under the Russian aegis? The Russians are advancing apace as you well know. When Germany falls they will be upon us. If the public here comes to realize that you are against us in Indochina there will be terrific disappointment and nobody knows to what that will lead. We do not want to become Communist; we do not want to fall into the Russian orbit, but I hope that you will not push us into it.”

[by, say, letting the Vietnamese have democratic control over their own country].

Truman and the U.S. State Department made no response to Ho Chi Minh’s numerous telegrams seeking assistance against the French. Washington feared that in the chaos and economic distress of immediate post-war France that the communists would take power there. So it pulled back from what had seemed to have been its support for Vietnamese nationalism under the Viet Minh and began to support the French.

The die was cast for a future conflict and, as Minister of Defense during the Vietnam War, Vo Nguyen Giap, would play a crucial role against his old comrades from the United States.

_______________


To learn a little more about this history, check out the following articles:


http://www.historynet.com/ho-chi-minh-and-the-oss.htm

http://www.nytimes.com/2013/04/18/world/asia/henry-a-prunier-army-operative-who-helped-trained-vietnamese-troops-dies-at-91.html?_r=0

China’s Trial of the Century: The Real Bo Xi Lai–A Tiger By the Tail

By Anti-corruption, Blog, China, China, Corruption in Business, International Business, Northeast Asia, Our Media, PRC/China

This show is a fascinating, in-depth conversation about the collapse of one of China’s key

Michael Sacharski, CEO Pacific Enterprise Capital

Michael Sacharski, CEO
Pacific Enterprise Capital

Princelings, Mr. Bo Xi Lai. What is different about this program is that the guest, Mr. Michael Sacharski, is a 3+decade American China Hand who has met and spent time with Mr. Bo on several occasions.

The conversation probes Bo’s extraordinary revolutionary pedigree, his rise as a charismatic, anti-corruption mayor of Dalian, moving to other key political positions before his final post as the crime-busting mayor of the huge city of Chongqing. The program includes a conversation about how Mr. Bo departed from the consensus style of the typical senior, Chinese leadership and his political differences with members of the senior leadership.  Interestingly, this discussion includes warnings  to Bo from the Party about his wife, Gu Kai Lai (who is also a Princeling). The conversation includes a discussion of how this trial came about, why the Party is conducting the trial, and the relationship of Mr. Bo’s courtroom defiance to his own father’s conduct during his persecution by the Red Guards during the Cultural Revolution. This interview with Mr. Sacharski examines the interesting quanxi relationship that exists running from Bo Xi Lai’s father, Bo Yi Bo, to Jiang Zemin (Zhang Zemin) to a number of Politboro members, including Xi Jin Ping, and back to Bo Xi Lai, the son.

[soliloquy id=”3512″]

 

Hosted by David Day, Mr. Sacharski draws upon his extraordinary meetings with the charismatic Mr. Bo and his knowledge of the history and inner workings of the Party to give the viewer a far more complete picture of this, China’s trial of the 21th century. The discussion concludes with a  look towards Mr. Bo’s future and the likelihood that his opera is not over…down, but not out.

 

North Korea: “The Cheonan Was Bait for an Internal Propaganda Frenzy “

By Articles, Blog, China, Foreign Policy/Geopolitics, Korean Peninsula, North Korea, North Korea, North Korea, North Korea, North Korea: The Cheonan Incident, Northeast Asia, Regional Security/Flashpoints, The Cheonan Sinking

The Cheonan sinking is an important internal propaganda victory that Pyongyang  created. With the loss of 46 South Korean sailors, Washington and Seoul had no choice. They took the bait.  In so doing, they have predictably teed up the opportunity now for Kim Jong Il to do a little defense of the homeland frenzy. This internal, “Defense of the DPRK” propaganda barrage that now follows the Washington Seoul “spanking” is  extremely valuable to the regime to enhance its stability at this delicate and difficult time of transition. The Dear Leader and his elite, inner circle know full well that, given Kim Jong Il’s 2008 stoke, his clock is already in overtime.

While we may never know for sure, the sinking of the Cheonan appears to be part of a deliberate teasing to coax a limited military response out of Seoul and Washington. Given the sophisticated, Kasparov-like chessmaster moves made by Pyongyang (typically outgunning U.S. negotiators concentrating on their checkers board), the Cheonan incident is just one of several moves coming up. Brinksmanship?  Hardly.  Pyongyang knows full well that at worst it faces a limited spanking response like perhaps joint military exercises (for show) or perhaps beefed up security between U.S and ROK forces on the peninsula combined with some rhetoric. Nothing more. Should Seoul engage in even the most benign cross-border military skirmish, Kim Jong Il can  then get away with his slash back and propagandize that as blocking the aggressor from the South, no matter how minimal the “deterrent” response is from Washington and Seoul.

There is another piece to this already complicated puzzle. Kim Jong Il needs a leadership-anointing opportunity to assist his youngest son, the Swiss-educated  Jong-Eun, to obtain some kind of military leadership, albeit limited, in defense of the fatherland. He also needs to cinch down the military power base for Jong-Eun. So how would this work? Whip the country and the KPA into a war frenzy, organize rallies in Pyongyang, put the KPA on alert, cut off trade and communications with the South. Perhaps even give “Brilliant Comrade ” (Jong-Eun) a military leadership role in the slash back exercise which can then be internally propagandized and then jerk him back to safety once the slash back has been undertaken. Military anointment completed and the internal film and propaganda machinery can then be unleashed. But before “Brilliant Comrade” is placed in the limited line of fire, the Dear Leader needed to test the waters and set up the U.S. an South Korean response. Hence, the Cheonan incident. The timing of this Cheonan chess move is not coincidental—the DPRK Party Congress is set to meet in a few weeks and it is likely that Kim Jong il will confirm then that the baton will pass to Jong-Eun.

A Different Focus on North Korea – Business Reunification Out Over the Horizon

By Articles, Blog, China, Foreign Policy/Geopolitics, International Business, Korean Peninsula, North Korea, North Korea, North Korea, Northeast Asia, Regional Security/Flashpoints, Russia, South Korea, South Korea, South Korea

 

A Different Focus on North Korea – Business Reunification Out Over the Horizon

May 31, 2009 by davidfday

Negotiating table for the 6 Party talks.

Negotiating table for the 6 Party talks.

 

This is what the real Six Party Talks looked like.

The recent nuclear and missile tests combined with threats bandied about by Pyongyang present an ominous, threatening view of attention-grabbing brinksmanship. It is worrisome, to be sure. Negotiations to handle North Korea, or get them back to the table at least, will be a new and different challenge for Special Envoy, Stephen Bosworth, who is no stranger to difficult negotiations—after all, as the America Ambassador in Manila in 1986, he was one of the principal players in successfully negotiating the Marcoses out of Malacanang Palace and eventually out of the country. Remember, the Philippine situation in the mid-1980’s was still a very touchy matter. There were a million people exposed in the streets sandwiched between the armed forces of Juan Ponce Enrile and General Ver. North Korea will be an entirely different ballgame for many reasons.

To be sure, there will be plenty of commentary about North Korea, its threats, and the destabilizing prospect it exhibits for Northeast Asia.

One thing is for sure. Beyond the nuclear tests, bellicose threats and serious potential for a regime implosion with its humanitarian crisis to follow, there are prospects for a stabilized and developing future for the country out over the horizon. We never hear much about this possibility. It is just that very few people focus on the opportunities that are coming as the country eventually stabilizes and begins to open up.

DHL is.

DHL Vans in service in Pyongyang

DHL Vans in Pyongyang

Given the current deteriorating health of the Dear Leader, we are now entering the transition period for the regime.

3G Mobile Phones in Pyongyang?

By Articles, Korean Peninsula, North Korea, Northeast Asia, Telecommunications

3G Mobile Phones in Pyongyang?

February 3, 2010 by davidfday

Koryolink Mobile Advertisement in North Korea

Koryolink, the North Korean subsidiary of Egypt-based Orascom, claims it now has 100,000 subscribers in its first year and looks to add several million more over the next 5 years.  The extent of this initial, pre-paid 3G subscriber feast north of the DMZ is indicative of powerful mobile access beyond the elite military leadership. Currently, Koryolink only provides domestic voice and text messaging with no international call or roaming service. There are some reports that mobile customers within metropolitan Pyongyang also have mobile internet service.

Reportedly, Pyongyang is now laying fiber-optic cables in various provinces as a key component of IT infrastructure development looking toward the government’s stated goal of a “mighty and prosperous nation” by 2012.

These IT developments in North Korea follow last month’s announcement that Americans would now be allowed into the country as tourists.

Interestingly, North Korea’s business development moves contrast with harsh statements against the South Korean government for participating in the U.S. disaster preparedness contingency plan in the event of a Regime implosion in the North. The business moves also come at a time when North Korea is facing even harsher UN sanctions as a consequence of the nuclear issue. The business moves certainly look like the Regime is beginning to face the inevitable “opening up” required to move towards a more prosperous system. That “opening up,” whether by 3G networks, fiber optic cables,  or American tourists wandering around the country, will place new and more stressful challenges on Pyongyang to maintain Regime stability and continuity. One only needs to look to the instability created within the former Soviet Union created by information about the prosperity and freedom of the outside world made more available to the population at large in the 1980?s as a result of American & Western tourists, fax and telephone.

The Real Nightmare of a North Korea Collapse & Implosion

By Articles, China, China, Disaster Prep & Humanitarian Aid, Foreign Policy/Geopolitics, International Business, Korean Peninsula, North Korea, North Korea, Northeast Asia, Regional Security/Flashpoints

The Real Nightmare of a North Korea Collapse & Implosion

June 1,  2010 by davidfday  

Some commentators suggest that this Cheonan incident may have created be the perfect storm to elbow the regime over the cliff. The consequences of such a “Diem” strategy towards the DPRK would be disastrous. Even without being elbowed, the regime is still going to implode. It is not a question of whether.  It is simply a question of when—and and serious economic sanctions run the terrible risk of shoving the DPRK right over the edge.

A DPRK implosion will cause a massive disaster crisis on a scale the likes of which the world has never seen before. On the human side, the disaster will involve hundreds of thousands of refugees seeking to breach the Chinese and Russian borders in the Northern part of the country and even greater numbers attempting to cross the heavily- mined DMZ to get to Seoul. There are multi-million numbers involved in human relief efforts that will have to be sustained for a lengthy period of time since there is no economy. Then there are the WMD weapons, expertise, nuclear materials, and rogue military issues also in the equation which will have to somehow be handled with lightening speed before being spirited away into undesirable hands. The current regime is already unstable and approaching a delicate leadership time—a collapse risks an implosion of epic proportions, making Haiti look like a garden party. Russia and China understand this and will not buy into any serious, biting economic sanctions that shove North Korea closer to the brink.

There are two critical points here. The first is that there can never be stability on the Korean peninsula until the DPRK can create a modicum of economic progress. Every day that the country can move a bit towards its 2012 economic goal of “A Mighty and Prosperous Nation” is a win and pushes the implosion nightmare back a notch or two. This will require heavier involvement of the private sector, not less. As a policy goal, Seoul and Washington must find ways to get more of the private sector underway in North Korea. The heroine for peninsula stability last year was Hyun Jung-Eun, chairwoman of South Korea’s Hyundai Group who successfully negotiated the reopening of North-South trade after the Dear Leader shut it down. Hyun Jung-Eun personifies the type of private sector leadership that can brunt or possibly block the implosion nightmare– if given enough time.

The second point is that the current disaster relief efforts in Haiti and the Gulf of Mexico do not even rise to the level of dress rehearsals for a collapse of North Korea. Seoul will have to bear the brunt of the implosion nightmare. Unless the Blue House is sufficiently satisfied watching Washington’s current response to the crises in Haiti and with the BP oil spill, and is convinced that Washington is fully capable of handling a multiple-fold Haiti with lightning speed and minimal hiccups, it would be well-advised to get a massive, DPRK disaster master plan in place yesterday. This means strategic disaster planning, the staging of huge amounts of supplies, disaster management training and development, and repeated, coordinating rehearsals. The response time will need to be in hours, not days or weeks and a blistering fast disaster response cannot be cobbled together on this massive scale when it occurs. It will be way too late.

Vietnam Looking to Elbow a Place with China and India with Foreign Investors

By All Southeast Asia, Articles, Blog, China, International Business, Vietnam, Vietnam

Vietnam Looking to Elbow a Place with China and India with Foreign Investors

By David Day. August 2010

For Vietnam, stepping onto the world stage in recent years has meant admission to the WTO, a Nonpermanent seat on the UN Security Council, launching the country’s first telecommunications satellite (Vinasat 1 built by Lockeed Martin) and hosting the APEC Summit in Hanoi.

Lockeed-Martin’s Vinasat 1

Vietnam continues to weather the global recession in reasonably well with foreign investment possibly doubling to $15 billion this year. Its largest export market is now the U.S. with over $12 billion last year. This Fall will see Intel’s new $1 billion chip assembly plant open outside Ho Chi Minh City.

Vietnam is now poised for yet another breakthrough. Political tensions in Thailand are helping Vietnam to get onto contingent plan target lists of foreign investors seeking political stability. Political stability is one factor working in Vietnam’s favor now. Another is labor costs. Vietnam is attempting to capitalize on the 30 to 40% labor differential with manufacturing plants in China. This is a huge incentive for China-based operations to begin looking to the south. The labor cost differential with China has been compounded by other problems nagging China operations: labor strikes and shortages.

Outside of the tech industry, where Vietnam has done very well in terms of attracting foreign investment, its aging colonial infrastructure has been a hindrance to all kinds of foreign investment.

There are two recent developments in Vietnam that will catapult the country forward in terms of attracting foreign investment at this critical juncture during the global recession. The first is the development of a number of major superhighway systems north of Hanoi that will link into highway systems in southern China. These new highways will allow a supply chain linkage between Chinese and Vietnamese manufacturing operations.

The second is a proposed Shinkansen-like bullet train between Ho Chi Minh City and Hanoi. The proposed bullet train, which would be completed by 2035, would travel the 1,600 km from Hanoi in the north to Ho Chi Minh City in the south in less than six hours. Vietnam’s current charming but woefully outdated trains take more than two days to make the trip. While this $56 billion project has recently been rejected by the National Assembly, Japan’s Transport Ministry continues to voice support for the project and has promised assistance should the Vietnamese government ultimately decide to proceed with the project once concerns of National Assembly members are adequately addressed (we believe that this is likely to occur despite the current clamor). Vietnam Railways Corp. was planning to use Japanese technology to build the high-speed train line. Sumitomo Corp. had teamed with Mitsubishi Heavy Industries Ltd. to bid on the project. Itochu Corp. was heading a competing group with Kawasaki Heavy Industries Ltd.

Proposed Vietnamese “Shinkansen” Linking Hanoi & HCMC

Given the importance of a high-speed rail link between Hanoi and Ho Chi Minh City, and the challenges Vietnam Airlines, and its related carriers have in meeting the staggering business traffic demands between the two cities, a Vietnamese “Shinkansen” would be an enormous contribution to the national infrastructure. No question that Vietnamese officials are eyeing the success of the Tokyo-Osaka Shinkansen as a precedent for a sorely needed rail upgrade in their own country.

Financing the north-south linkage is another matter.