Vietnam is considering a defense and security industries law that could pave the way for foreign companies to enter the country’s burgeoning sector.
So far, only domestic military-owned companies are allowed to invest in the multi-billion dollar industry, which has seen rapid growth in recent years.
The Ministry of National Defense has “directed relevant organizations to finalize the proposal for a law on defense and security industry and industrial mobilization,” state media quoted Lt. Gen. Nguyen Tan Cuong, chief of the military staff and deputy minister, as saying recently.
The bill will be forwarded to the government for inclusion on the agenda of Vietnam’s National Assembly or Parliament for further discussion and approval, Gen Cuong said in an interview over the weekend.
Officials and analysts have said such legislation, which provides a clearer legal framework and requirements, is badly needed to boost the domestic defense sector.
Major General Luong Thanh Chuong, vice chairman of the General Ministry of Defense Industry, told Quan Doi Nhan Dan (People’s Army) newspaper that Vietnam is pursuing a strategy of promoting the “dual use” of defense technologies and equipment for both military and civilian purposes, business and private organizations are encouraged to invest in the defense industry.
The newspaper, which serves as the mouthpiece of the defense ministry, quoted unnamed Vietnamese arms manufacturers as saying that “all business entities, including foreign-invested companies, in which foreign investors do not hold a majority stake should be allowed to participate.” Industry.
Vietnamese military officials and a delegate speak next to a model of a military radar during the Vietnam 2022 International Defense Expo in Hanoi December 8, 2022. Credit: Nhac Nguyen/AFP
According to the Stockholm International Peace Research Institute, which tracks military transfers worldwide, Vietnam’s military spending increased nearly 700% to $5.5 billion between 2003 and 2018.
GlobalData, a London-based analytics and advisory firm, reported that Vietnam’s defense spending is estimated at $5.8 billion in 2022 and is expected to grow 8.5% annually to $8.5 billion through 2027 , “mainly due to the country’s plan to increase its defense capabilities to counter Chinese aggression in the South China Sea.”
Vietnamese defense officials are not available for media inquiries and mostly communicate through pre-screened interviews in ministry publications.
The Vietnamese Ministry of Defense held the first international defense fair in December to boost the defense sector while diversifying its arms procurement.
Hanoi buys arms and military equipment from 26 countries, but Russia, its historical and traditional ally and also one of Vietnam’s four broad strategic partners, remains by far the largest supplier.
Domestic companies today manufacture a range of products, including infantry rifles and ammunition, logistics equipment, radars, drones, and equipment for cyber defense operations.
Part of Z111, a leading Vietnamese arms factory, was developed using technology from an Israeli arms manufacturer, a model more companies could follow.
With more investment and technology transfer, Vietnam’s defense industry could “accelerate the modernization process and become both independent and self-reliant,” said Maj. Gen. Doan Hong Minh, former chief adviser to the senior defense minister on technical weapons development.
“To modernize the industry, it is imperative to modernize the legal environment,” Minh told Defense TV Channel, adding he hopes the Defense and Security Industry Bill will get the green light from the current parliament.
The 15th National Assembly of Vietnam (2021-2026) is expected to discuss a draft law later this year at its 6th session and, if satisfactory, enact it at the 7th session in May 2024.