Is Vietnam safe?

Besides cheap labor costs, what investors treasure most is the social stability of an investment destination. The latter is even more valuable than the former as social instability will greatly compromise the benefits that cheap labor brings about.

This is something that investors will be carefully considering when it comes to investing in Vietnam. To stay or not to stay is now the question for those who already have factories in the Southeast Asian country after their factories were looted and burned down by protestors late last week.

More than 3,000 Chinese from the mainland who have been doing business in Vietnam have left after two of their compatriots were killed and more than a dozen seriously injured and their factories ransacked and burned when Vietnamese anti-China protesters took to the streets.

The protests were inflamed by anti-Chinese sentiment after Vietnamese ships blocked Chinese vessels from placing an oil rig by ramming into them in Chinese waters around Xisha Islands, to which Vietnam lays claim.

If anything, whatever the Vietnam government does and has done, China will never give up its sovereignty over the waters in question. Despite China's request that Vietnam should respect its sovereignty and stop interfering with Chinese vessels operating in its own waters, an increasing number of Vietnamese vessels are sent to intentionally interfere with the Chinese vessels there.

It seems that the conflict will hardly come to an end in the near future. Nor will the anti-Chinese sentiment among radical Vietnamese people.

It is not the protests per se that are the major concern of investors and their governments. It is the inability of the Vietnamese central government and its local counterparts to bring the protests under control.

That several hundreds of factories from China, Korea, Malaysia and some other countries were looted and burned down during the protests sent the message that both the Vietnamese central and local governments failed to take into account the possibility that the protests might turn violent and failed to have plans in place to control them.

The severity of the violence and the heavy losses foreign firms have suffered raises the question of whether the Vietnamese government attaches enough importance to the interests of investors and the security of foreign factories.

If investors are not confident a government can guarantee a secure investment environment, they will understandably hesitate over making the decision to invest.