Risks in capricious Vietnam

THE VIETNAMESE AUTHORITIES ARE GOING to great lengths to contain the economic fallout from the violent rampages in the country two weeks ago.

They have promised to compensate foreign companies for their losses, and they are now prosecuting some of the rioters.

They need such immediate and effective crisis control to repair their country's damaged image as a safe and reliable destination for foreign investments. They need to quickly reassure scared investors to stop them leaving permanently. And they need production at the factories destroyed and closed in those fatal riots to begin again as soon as possible.

In spite of the short duration of the violent "protests", they seriously hurt Vietnam's reputation as a favorable destination for foreign direct investment and cast long shadows over the country's economic prospects.

Cheap labor always appeals to the profit-minded, it always will, but safety always comes first. People will always think twice before putting money into a risky environment. The ruthless violence two weeks ago - supposedly against Chinese interests, yet actually extended to Japanese, South Korean and Singaporean enterprises - revealed the dangerous vulnerabilities of foreign firms operating in Vietnam due to its capricious political climate.

If a relatively modest dispute at sea can result in violence of that magnitude, it is beyond imagination what misfortune might befall foreign businesses on another day.

The local authorities' vow of "zero tolerance" to violence has more or less pacified some of the affected firms, including Chinese ones.

And some time from now, provided the tension in the South China Sea does not take a violent turn and security conditions improve markedly in Vietnam, Chinese tourists may reappear on Vietnamese soil.

Chances are, while continuing its standoff with China in the Xisha waters and trying to internationalize the dispute, Vietnamese authorities will try everything they can to appease overseas investors. After all, beyond the burnt down factory buildings and broken supply chains, some of other consequences of the devastating violence are just beginning to be felt. Local media are now reporting significant job losses.

The horrifying scenes of people fleeing the violent mobs will continue to haunt many who saw them for years to come. Our government is obliged to properly inform potential Chinese investors about the risks of investing in Vietnam.