Vietnam is considering a law that could open up the market to foreign arms companies

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Vietnam is considering a defense and security industry law that could pave the way for foreign companies to tap into the country’s burgeoning industry.

Until now, only military-owned domestic companies are allowed to invest in the multibillion-dollar industry that has experienced rapid growth in recent years.

The Ministry of National Defense has “instructed relevant organizations to finalize the proposal for a bill on defense and security industries and industrial mobilization”, state media said senior lieutenant general Nguyen Tan Cuong, chief of general staff and deputy minister, recently.

The bill will be passed on to the government to place on the agenda of Vietnam’s National Assembly, or parliament, for further discussion and approval, General Cuong said in an interview over the weekend.

Officials and analysts have said such a law, which provides a clearer legal framework and requirements, is urgently needed to boost the domestic defense sector.

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Major General Luong Thanh Chuong, Vice Chairman of the General Department of Defense Industry, told the Quan Doi Nhan Dan (People’s Army) reports that as Vietnam follows a strategy of promoting the “dual-use” of defense technologies and equipment for both military and civilian purposes, companies and private organizations are encouraged to invest in the defense industry.

The paper, which serves as a mouthpiece for the defense ministry, quoted unnamed Vietnamese arms manufacturers as saying that “all economic entities, including foreign-invested companies in which foreign investors do not have majority ownership, should be able to participate” in the industry .

Vietnamese military officials and a delegate speak next to a military radar model during the Vietnam 2022 International Defense Expo in Hanoi on Dec. 8, 2022. Credit: Nhac Nguyen/TBEN

According to the Stockholm International Institute for Peace Researchwhich tracks global military transfers, Vietnam’s military spending increased nearly 700% from 2003 to 2018 to $5.5 billion.

GlobalDataa London-based analysis and consultancy firm, reported that Vietnam’s defense spending is estimated at $5.8 billion by 2022 and is expected to grow at an annual rate of 8.5% to $8.5 billion by 2027, “primarily due to the country’s plan to upgrade its defense capabilities to counter Chinese aggression in the South China Sea.”

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Vietnamese defense officials are not available for media requests and usually communicate through pre-screened interviews in the ministry’s publications.

Earliest approval

The Vietnamese Ministry of Defense organized the first international defense fair in December to boost the arms sector while diversifying arms procurement.

Hanoi buys weapons and military equipment from 26 countries, but Russia, its historical and traditional ally and also one of Vietnam’s four comprehensive strategic partners, remains by far the largest supplier.

Domestic companies now make a number of products, including infantry rifles and ammunition, logistics equipment, radars, drones, and equipment for cyber defense operations.

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Part of Z111, a leading Vietnamese arms factory, was developed with technology from an Israeli firearms manufacturer, a model that more companies could follow.

With greater investment and technology transfer, Vietnam’s defense industry could “accelerate the modernization process and become both independent and self-sufficient,” said Major General Doan Hong Minh, former chief adviser to the defense minister on high tech weapons development.

“To modernize the industry, it is essential to modernize the legal environment,” said Minh Defense TV channeladding that he hoped the defense and security industry bill would get the green light from the current parliament.

The 15th National Assembly of Vietnam (2021-2026) is expected to discuss a bill at its 6e session later this year and, if satisfactory, sign into law on the 7e session in May 2024.

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