Focus on Asia-Pacific tensions

Vietnam prepares its people for war with China

A new National Defense Education Act has been approved by the standing committee of Vietnam's National Assembly on Aug. 20 to provide basic military training to every civilian under 50 years old, according to Duowei News, an outlet run by overseas Chinese.

Want China Times,

23 August, 2012

To prepare for a possible military conflict with Beijing over the disputed Paracel and Spratly islands in the South China Sea, Hanoi has tried several diplomatic and military approaches. During the recent standoff between Chinese and Philippine vessels near the waters of Scarborough Shoal, Su-27 fighters from the Vietnamese air force began their first patrols over the Spratlys to put pressure on the Chinese government. To counter Beijing's influence in Southeast Asia, Hanoi has also changed its attitude towards the United States. US naval vessels were also invited by Vietnam to conduct a joint military exercise between the former enemies.

Facing its own territorial dispute with China in the East China Sea, Japan also decided to provide advanced patrol boats to the Vietnamese government through its Official Development Assistance program. To reduce China's cultural influence, a policy was also issued by the Vietnamese authorities to limit the broadcasting of Chinese TV programs in the country.

From its experience during the Vietnam War, Hanoi knows the value of mobilizing its population. Accordingly, it believes every civilian under 50 years old should be trained for battle in case a war with China should break out. Political education has also been introduced to teach the nation's children that their neighbor to the north is an aggressor.

Wealthy Vietnamese Face Backlash as Economy Worsens

WSJ,

23 August, 2012

The arrest this week of Vietnamese banking and soccer mogul Nguyen Duc Kien comes amid a growing backlash against Vietnam's wealthy tycoons, as the country struggles with an economy that is going from bad to worse.

Some of Vietnam's Communist leaders have never been entirely comfortable with their country's pro-market reforms. Waves of liberalization have often been followed by periods of inaction.

Analysts now worry that combating politicians and a hostile public might thwart the reforms needed to recapture the stellar growth rates that once made the country one of world's most sought-after emerging markets.

Plans for privatizations have stalled as bad debts have rippled through the banking system. Meanwhile, top executives at some state-owned enterprises have been arrested and charged with mismanaging state resources after the global financial crisis sent many businesses into a financial tailspin, exposing the shortcomings of Vietnam's bid to catch up with its neighbors after decades of war and Marxist economic planning.

The shakeout is spilling over into the private sector. Politically connected tycoons such as Mr. Kien, who was arrested Monday and accused of running unlicensed investment firms, are facing growing scrutiny for allegedly skirting banking regulations. Mr. Kien or his legal representatives couldn't be reached to comment.

In the latest developments Thursday, the chief executive of the bank that Mr. Kien helped found in the 1990s, Asia Commercial Bank, resigned for personal reasons. Ly Xuan Hai is now helping police with their investigation, a bank spokesman said, although authorities have stressed that ACB itself isn't part of the probe and that Mr. Kien left ACB in 2010. Mr. Kien owns about 5% of ACB shares in addition to holdings in other Vietnamese banks. Mr. Hai couldn't be reached to comment.

The share price of ACB, 15%-owned by Standard Chartered, STAN.LN -0.61% fell again in trading Thursday, down 6.7%. That decline helped to extend a series of sharp losses on the broader VN Index, which has lost 10.5% so far this week.

State-run media also reported Thursday that ACB was given access to up to 46 trillion dong, or $2.2 billion, in emergency central-bank funds to offset a brief panic among depositors.

A statement on the government's website said Prime Minister Nguyen Tan Dung met with government agencies and law-enforcement chiefs on Wednesday and urged them to act quickly to stabilize the country's banking system after bad debts doubled to about 10% of total lending in recent months.

The political infighting playing out in Hanoi could hamper reforms needed to clean up bad debts in the banking sector and get Vietnam's economy moving again after expanding a sluggish 4.7% in the second quarter from a year earlier—well below the government's 6% full-year target.

Other big names have fallen foul of the authorities in recent months. Businesswoman Dang Thi Hoang Yen became one of the first tycoons elected to the country's National Assembly last year, but was ousted in May from the Communist-run legislature for failing to disclose that she was no longer a member of the party.

In the state sector, eight executives at Vinashin received prison sentences of up to 20 years in April after the shipbuilder nearly collapsed in 2010. It had racked up around $4.4 billion in debt.

Analysts say the crackdown is increasing pressure on Prime Minister Dung, the main architect of Vietnam's rapid-growth policies. He survived a behind-the-scenes leadership challenge last year, but his power is being clipped further by the rise of rivals such as Communist President Truong Tan Sang, who is widely seen as a hard-liner, along with a national legislature that appears more willing to hold the country's top leaders to account.

At the height of the Vinashin scandal, Mr. Dung apologized in a televised session of Vietnam's National Assembly for failing to properly supervise state-run companies, and executives at other such companies have since been arrested.

"Vietnam and Mr. Dung pursued a policy of high growth at all costs, and they were willing to overlook many things in order to achieve that goal," said Carl Thayer, a veteran observer of Vietnamese politics at the Australian Defence Force Academy in Canberra.

The backlash against Vietnam's go-go years, when it averaged annual growth rates of more than 7% for nearly a decade, isn't confined to the country's inner political sanctum. Anger at currency devaluations and high inflation rates has demoralized many ordinary people in recent years.

Popular newspapers have run lurid stories about wealthy Vietnamese, accusing some of them of cutting open the skulls of live monkeys and scooping out their brains as a gourmet treat, just as the country's old emperors were reputed to do.

This week, the Vietnamese press ran a series of pictures of Mr. Kien's luxury cars, emphasizing the gulf between the new elites who grew rich during the Vietnam's boom years, and the millions who now struggle with sky-high interest rates and the threat of currency devaluations and inflation.

Mr. Kien, who faces up to two years in prison for his alleged offenses, is an especially high-profile figure. The 48-year-old is instantly recognizable by his shock of thick, white hair and is as well-known for his soccer exploits as for his role in establishing Asia Commercial Bank. Last year, he took control of Vietnam's new professional soccer league in a bid to increase attendance, and bought a premier league Hanoi Football Club after his other side was relegated.

"He's a big celebrity here," said Jonathan Pincus at Harvard University's Fulbright Economic Teaching Program in Ho Chi Minh City. Mr. Kien's arrest "will make people sit up and take notice."

China media reacts sharply to Japan-U.S. island drill

Asahi Shimbun,

23 August, 2012

A military drill simulating an island assault by Japan’s Ground Self-Defense Force and U.S. Marines has drawn a sharp reaction from Chinese media amid a ramp-up in tensions over a cluster of disputed islets.

"Villains do evil together," commented one China Central Television newscaster, and the influential nationalist Global Times newspaper urged China to prepare for possible conflict.

The exercise involves the islands of Guam and Tinian, which is adjacent to Saipan in the Commonwealth of the Northern Mariana Islands. It began Aug. 21.

The exercise simulates landing on and securing a small island, the first of its kind for Japanese ground troops and U.S. Marines. It comes amid tit-for-tat landing stunts by activists and a war of words over the Senkaku Islands, which are held by Japan but claimed by China; it calls them Diaoyu.

A Defense Ministry official said the exercise does not presuppose an invasion by China of the Senkakus, but it will test cooperation with U.S. forces.

"It will contribute to deterrence," said a senior SDF official. "We would turn to them for support in the event of an emergency."

About 2,000 Marines from Okinawa Prefecture and 40 Japanese troops are to take part. They will use a U.S. amphibious assault ship, helicopters and hovercrafts to land on an island, sources said.

Chinese media outlets, which support China's claim to the Senkakus, have played up the drill.

A program on state-run China Central Television on Aug. 22 provided extensive coverage, with a detailed rundown of what the troops will do.

Media also reacted negatively to a Japanese report that quoted a top Defense Ministry official as saying the drill simulates a response to a Chinese advance on the Senkakus; and the exercise explores how to retake the islets.

Beijing has yet to react officially, but there is a reported growing belief that the exercise is intended as a provocation by Japan after Japanese lawmakers joined activists in a landing on the islets.

Meanwhile, the Beijing Times newspaper expressed concern about U.S. intentions, saying the nation is taking advantage of the territorial standoff between China and Japan to enhance its own position in East Asia.

Pentagon plans new missile defences in Asia

The United States is planning to build a new missile defence shield in Asia to contain threats from North Korea and counter China's growing missile capabilities.

The Telegraph,

23 August, 2012

A defensive array could include a new radar system in southern Japan and possibly another in South East Asia, according to the Wall Street Journal.

The news came after an unnamed US official told Jane's Defence Weekly that China's People's Liberation Army tested an intercontinental ballistic missile on July 24 which has the range to strike any city in the United States.

The DF-41 missile can carry ten separate nuclear warheads, each of which can be programmed to strike at a different target, the magazine reported.

The Pentagon is also concerned about China's development of a new "carrier-killer" anti-ship missile that can strike at the US Pacific fleet.

These missiles, which have a range of 930 miles, are designed to prevent US ships from approaching the South China Sea, a key sphere of Chinese influence.

US Defence officials told the Wall Street Journal that the core of the new anti-missile shield would be a powerful early-warning radar, known as an X-Band, sited on a southern Japanese island. Discussions between Japan and the United States are currently underway.

The new X-Band would join an existing radar that was installed in northern Japan in 2006 and a third X-Band could be placed in South East Asia.

The resulting radar arc would cover North Korea, China and possibly even Taiwan. China currently has over 1,000 missiles pointed at Taiwan, and is likely to strenuously object to any interference from the US.

A spokesman for the Japanese Defence ministry declined to comment. A spokesman for the Pentagon told the newspaper that North Korea is the "immediate threat" that is "driving our missile defence decision making".