Australia’s Relationship Upgrade with Vietnam a Diplomatic ‘Win’

Vietnam has been busy upgrading its ties to the West, especially in the past year. What does it mean for Australia to become the latest country to join the top tier of Vietnam’s international relationships?

The conclusion of a “Comprehensive Strategic Partnership” by two states leads few observers to experience frissons of excitement.

However, the Partnership agreed yesterday between Anthony Albanese and Vietnamese Prime Minister Phan Minh Chinh is more than an ‘announceable’ wrought by officials to garner a headline or two for their principals.

For many countries, including Vietnam, formal gradations in relationships from “comprehensive” to “strategic” to the top tier of “comprehensive strategic” are a sign of where a relationship stands within their global perspective, a mark that the relationship has substantive content, and a signal to their bureaucracy that policies and activities under the carapace of the partnership are priorities.

For years, the only countries with which Vietnam had the top relationship were China and Russia – partly stemming from their historical support in the Vietnam war – and India, which, while nominally neutral, tilted towards Vietnam.

Now, within the space of about a year, the United States and three of its allies (Japan, South Korea and Australia) have moved into the top tier.

First off, the Vietnam-Australia upgrade is a win. Last year, we celebrated 50 years of diplomatic relations with Hanoi. We have come a long way from when we opened our first embassy in Hanoi – a bedraggled couple of hotel rooms with lino floors in the war-ravaged city.

We are now dealing with a significant country. its population is about 100 million. On IMF figures, its per capita GDP, on both nominal and purchasing power parity measures, is higher than that of the Philippines and not far below Indonesia’s – not bad for a country which 35 years ago was on its uppers.

The Vietnamese-born population is our sixth biggest immigrant community. About 30,000 Vietnamese students are studying in Australia. There is major potential for future trade and investment notably in clean energy, agriculture and the digital economy.

We are the only country to have a centre dedicated to research, education and dialogue between the two countries (the Vietnam Australia Centre), which is in a direct partnership with the Ho Chi Minh National Academy of Politics. This is the leading institution in Vietnam for the education of party and government officials.

A second point is that the past year’s four upgrades of Vietnam’s relationships are central to its ambitions to become a high-income country and implicitly intended to bolster its security.

Self-evidently, the most important of the upgrades was that with the United States. As well they might, the Americans take Vietnam seriously. When President Biden visited the region in September, he made a bilateral visit to Hanoi, at which the new partnership was concluded, while skipping a series of top-level meetings at the ASEAN summit in Jakarta.

Vietnam never takes major diplomatic steps without considerable thought and preparation. It is unsurprising that it is now widely regarded as the most skilful foreign policy practitioner in Southeast Asia.

Notwithstanding the importance of the upgraded Vietnam-Australia relationship, there are a few things we must watch.

First, when Vietnam takes a step towards the West – above all towards the United States – it moves to reassure China. Biden visited Hanoi in September. President Xi was there in December, with his visit reportedly receiving even more publicity in Vietnam than Biden’s. The Vietnamese are past masters in the arts of political calibration and diplomatic balance. They well know that history and geography dictate skill and caution in dealing with their northern neighbour. They can’t be taken for granted by anyone.

Second, the future of the Vietnamese economy is not plain sailing. To facilitate a new wave of foreign investment – much of which is waiting in the wings – the Vietnamese need to move hard on economic reform, particularly in the banking sector.

While Vietnamese entrepreneurial skills are legendary, their bureaucracy is sclerotic. Vietnam needs a new Doi Moi (literally “Restoration”), the famous economic reform process begun in 1986 that opened the Vietnamese economy.

Third, we should not rule out a power struggle within the leadership between now and the election of a new General Secretary in 2026. The current General Secretary, Nguyen Phu Trong, is ailing and recently dropped out of sight for a couple of weeks. There will be speculation as to whether those more linked to the party (sometimes seen as closer to China) or those more associated with government (possibly leaning more to opening to the West) will be the dominant faction.

However, taking a punt on an opaque system, Vietnam’s tradition of collective leadership is likely to prevail with no one tendency dictating the outcome. A Vietnamese Xi or Modi is unlikely to emerge from the process.

Fourth, while Australian values must influence our external policy, we should not try to premise our relationship on those values. That won’t work. In the end, we must take countries as they are – not as we might wish them to be. Values count, but it is common interests that will prove to be the solder in our dealings with Vietnam.

John McCarthy AO is a senior adviser to Asialink and Vice Chancellor’s Fellow at the University of Melbourne. He is a former ambassador to Vietnam and numerous other countries.