Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Outcomes of Prime Minister
Suga’s Visit to Vietnam
Carlyle A. Thayer
October 20, 2020

Japanese Prime Minister Yoshidihe Suga is visiting Vietnam. We request your

assessment of two significant points of this visit:
Firstly, Japan and Vietnam agreed on Monday to strengthen security and economic
ties, including an agreement in principle for Japan to export military gear and
technology to Vietnam.
Secondly, in a speech later Monday, Prime Minister Suga said Japan opposed any steps
to heighten tensions in the South China Sea.
We request your response to the following three questions:
Q1. What is your assessment of the visit of Prime Minister Suga to Vietnam? Will it
result in greater economic and security cooperation and between Vietnam and Japan?
ANSWER: All major defence and national security policy documents by the Trump
Administration have underscored U.S. priority in developing strategic ties with
Vietnam. Australia too recognizes Vietnam’s special regional role. Prime Minister
Suga’s first overseas visit to Vietnam is an independent reaffirmation of Vietnam’s
central role in Southeast Asia’s security. PM Suga declared in Hanoi, “Vietnam is crucial
to achieving our vision of ‘the Free and Open Indo-Pacific’.”
The in-principle agreement between PM Suga and PM Nguyen Xuan Phuc on the
transfer of Japanese defence technology to Vietnam is mutually beneficial. Vietnam
stands to gain by technology transfer and the acquisition of ships and aircraft that will
increase its maritime domain awareness capabilities. Japan gains an additional market
for its defence exports.
This is a very sensitive matter for Japan. Jaapn’s Foreign Minister told a press briefing
in Hanoi, “We have to make sure the equipment and technologies transferred to
Vietnam (are) used in a peaceful manner and contribute to regional peace.” In other
words, Japan has trust that “Vietnam consistently advocates (not) using force or
threatening to use force in international relations (the “fourth no” in 2019 Viet Nam
National Defence White Book)
Q2. Japan is significantly ramping up a program encouraging businesses to build
production sites in Southeast Asiato diversify supply chains that are too dependent on
China. So, do you think Suga used his trip to to promote Japanese investment in
Southeast Asia?
 2

ANSWER: Prior to his trip PM Suga initiated a program of subsidies to encourage

Japanese businesses to lessen their dependence on China by moving their supply
chains and production facilities to Southeast Asia. According to preliminary data, thirty
companies have taken advantage of the Japanese government’s 23.5 billion yen
program to diversify supply chains to Southeast Asia, fifteen of the companies chose
Vietnam.
During PM Suga’s visit to Hanoi, two memoranda of understanding were signed. The
first MOU committed the Marubeni Corporation to invest $1.3 billion in a power plant
in Can Tho province. The second MOU between Tokyo Gas Co Ltd and PetroVietnam
Power Corp to jointly develop a $1.9 billion gas-fired plant in Vietnam. In addition, the
Gunma Bank will open a representative office in Ho Chi Minh City to provide its
customers information on market conditions and administrative requirements in
Vietnam.
It is expected other Japanese investments will be announced when PM Suga visits
Indonesia.
Q3. Do you think PM Suga’s trip is likely to stimulate the advanced economies to
increase the involvement of their companies in Vietnam? For example, the European
Union has a new trade deal with Vietnam, the United Kingdom and Vietnam are
negotiating a separate trade agreement, and the United States is showing increased
interest in Vietnam as an economic partner.
ANSWER: PM Suga’s visit to Vietnam, and its outcomes (resumption of air travel,
defence equipment and technology transfer, and investment) will increase overseas
confidence in Vietnam’s economic future as it recovers from the coronavirus. This will
spur the advanced economies to invest in a stable Vietnam as more of their production
shifts from China to Vietnam.

Suggested citation: Carlyle A. Thayer, “Outcomes of Prime Minister Suga’s Visit to

Vietnam,” Thayer Consultancy Background Brief, October 20, 2020. All background
briefs are posted on Scribd.com (search for Thayer). To remove yourself from the
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.