The unrest in Vietnam was triggered by Chinas deployment of an oil rig in disputed waters near the Paracel Islands in the South China Sea

The unrest in Vietnam was triggered by China's deployment of an oil rig in disputed waters near the Paracel Islands in the South China Sea

Recent anti-China riots in Vietnam caused serious damage to a number of foreign-owned footwear and clothing plants. But now that the unrest has subsided, industry executives suggest a pullout of future investment is unlikely.

A supervisor at an American company in Vietnam's Binh Duong Province has told just-style how she saw anti-Chinese protests escalate into demonstrations against foreign-owned clothing and textile companies.

But industry insiders in other Asian countries claim the resulting damage will not seriously deter future foreign investment.

By the time the Vietnamese Army stepped in to stop the riots on 15 May - three days after they broke out - 351 factories were damaged in the province.

The supervisor at a company located near where the protests began, who requested that her name not be released, witnessed the beginning of the unrest. She told just-style a "strike began from a small demonstration, which was joined by around 100 workers from a shoe factory [Giay] Thong Dung [a Taiwanese-invested company] at VSIP [Vietnam-Singapore Industrial Park 1].

"They went around VSIP with a banner petitioning China to get out of Vietnam. This was a demonstration in peace, so the police did not stop them till some inciters joined and [turned things violent].

"The workers sabotaged and burned factories such as the Kingmaker shoe factory [mainland China-based], Maxim [a Taiwan-based apparel labelling and packaging company] and Thong Dung."

From there, the riots spread to other industrial zones, including nearby Song Than Industrial Park 2 and Linh Trung Industrial Zone 2.

Taiwanese investment impact
There are indications that the riots might deter some future investment, although not a significant amount. A major Taiwanese clothing and textile company has, however, suggested it will build a factory in Africa rather than Vietnam because of the increased political risks of foreign investment in the southeast Asia country.

"I cannot reveal the company name, but we are talking about a major plant with a projected turnover of US$500m, with an announcement on it to come by year's end," Justin Huang, secretary general of the Taiwan Textile Federation (TTF), told just-style. 

However, all major Taiwanese textile firms with production facilities currently in Vietnam have since announced they are not considering withdrawing capital from the country.

More than 200 Taiwan-owned businesses suffered losses in Vietnam's largely anti-Chinese riots, among them major Taiwanese apparel makers Makalot Industrial Co and Eclat Textile Co, along with textile firms Far Eastern New Century Corp and the Formosa Plastics Group's (FPG) Formosa Chemical and Fibre Corp.

Taiwan textile businesses that have suffered losses in the riots will quickly restore operations in Vietnam, facilitated by prompt insurance payments, Huang noted.

A high-ranking Taiwanese government delegation led by vice minister of economic affairs, Shen Jong-chin, has also started talks in Vietnam in order to push the Vietnamese government to repay the affected insurance companies and grant tax concessions to the riot-affected Taiwanese firms.

A bilateral investment agreement was signed last year, but this alone will not sufficiently compensate Taiwan's riot-hit textile businesses in Vietnam, according to Huang. 

Hong Kong outsourcing
In Hong Kong, clothing companies still consider Vietnam as an important outsourcing destination in the aftermath of the anti-Chinese riots, according to the spokesperson of a long-established Hong Kong-based major clothing maker, who did not want to be named.

"Our plant in Ho Chi Minh City has been affected," said the spokesperson, "but recovery work has started as the situation there is calm now." She added: "In terms of investment, it is still too early to reach a conclusion whether the incident will affect our future investment. The only thing to be sure of is that Vietnam will remain an important location for the strategic development of our company."

The spokesperson told just-style: "We have invested hugely in [the] Vietnam market in the past few years anyway," she continued. The company has three manufacturing plants in Vietnam.

The comments came as Felix Chung Kwok-pan, Hong Kong Legislative Council member for the textiles and garment constituency, told Hong Kong media that some investors from the China special administrative region are considering withdrawing from Vietnam after the riots.

He said Vietnam workers had been angered about the high proportion of management positions in Hong Kong and mainland Chinese-owned factories that were occupied by ethnic Chinese managers. He added that Vietnamese workers were also upset at what they regarded as overly long working hours and poor conditions in Chinese-owned factories.

Stanley Lau Chin-ho, chairman of the Federation of Hong Kong Industries, has said there are about 100 Hong Kong-owned factories in Vietnam, many producing clothes (and also electronic goods).

South Korean concerns 
Meanwhile, the Vietnam demonstrations also hit between 70 and 80 South Korean manufacturing factories (all goods), the majority of which are privately-owned.

However a spokesman for the Korean Federation of Textile Industries (KOFOTI) told just-style that only one Korean-owned factory suffered serious physical damage.

However, this was extreme: "One company was so badly damaged that all of their products have been ruined," he said. "The other [South Korean-owned] factories have suffered some [lesser] damages, but the biggest concern for them right now are the delays in delivering their exports in the aftermath of this event."  

He added, however, that he did not think that the riots would restrict future South Korean investment in Vietnam's clothing and textile sector.

Indeed, Korean investment in Vietnam has been increasing; in 2013, South Korea invested more than US$1.46bn into the Vietnamese industries. "Overall, Korean apparel manufacturing firms are investing more and more in Vietnam these days, and expanding their projects there. And these are usually small, privately-owned firms," explained the spokesman.

Three days after the riot, the South Korean government advised South Korean factory owners to raise South Korean and Vietnamese national flags together over their plants, to prevent them from being mistaken for Chinese firms, who were the main focus of anger from demonstrators. Park Min-woo, a South Korean consul in Vietnam, said later that these preventative measures seemed to be working.

In Vietnam, Michael Laskau, managing director of the FOB division of Nha Be Garment Corporation Joint Stock Company (NBC), believes the threat posed by the riots to business-as-usual has been overstated.

"The only impact for us was that a label supplier was closed in Binh Duong for several days," he said. "From what I read it seems that there is still plenty of FDI [foreign direct investment] coming into Vietnam. "I think the government cracked down very hard and I doubt whether we will see another demonstration like this again."

With additional reporting by Harry Caine, Crystal Tai and Ivy Zhang.