Arms Industry

During peaceful periods, the Vietnam People's Army (VPA) has been actively involved in Vietnam's workforce to develop the economy of Vietnam, “in order to coordinate national defense and the economy.” The VPA has regularly sent troops to aid with natural disasters such as flooding, landslides etc. The VPA is also involved in such areas as industry, agriculture, forestry, fishery, and telecommunications. The armed forces engaged in the production of weapons and military hardware, undertakings identified in the press as "national defense enterprises" and defined by PAVN as "production establishments of the armed forces." These included vehicle assembly plants, ordnance plants, and explosives factories.

As in other societies with large standing armies, the question in Vietnam was whether it made sense economically for a military unit to engage in production: whether, for instance, it could grow rice more productively or build a bridge more efficiently than a civilian counterpart. Vietnamese officials appear to have decided in favor of military participation, for they incorporated PAVN production potential into long-range economic planning.

Military modernisation in the new situation requires speeding up the development of defence industry with a view to creating advanced, modern technical infrastructure. Therefore, the defence industry is to be built and developed in the self-reliant, resilient, dual-use, progressively modern direction with advanced scientific and technical levels of strategic significance to the cause of building the gradually modernised VPA, contributing to successfully carrying out the guideline on “combining national defence, security with economy and vice versa.” The implementation of the Resolution No. 06-NQ/TW, dated 16 July 2011, of the Politburo on “Building and developing the defence industry through 2020 and beyond” needs to be summed up in a close, effective manner, which lays the foundation for proposing sound policies and solutions to development of the defence industry in line with Viet Nam National Defence Strategy, Viet Nam Military Strategy, and requirements for building a strong all-people national defence and a modern military in the new period for the Party and State.

More effort should be made in accomplishing particular plans and mechanisms to implement programmes and projects relating to defence industry as identified. There needs to continually enhance quality of research, development of prototypes, production, repair while attachinng importance to atracting high-quality human resources; stepping up scientific research; promoting unity, creativeness, and close collaboration among levels, sectors inside and outside the military. International cooperation with advanced defence industries continues to be deepened to ensure that Viet Nam’s defence industry achieves modern, dual-use requirements; becomes a key element and combines closely with the national industry.

Vietnam pays attention to international cooperation in national defence industry in order to meet the demands for weaponry of the armed forces, to enhance capabilities of the national defence industry on the basis of the strict implementation of international commitments to arms control mechanism. Vietnam’s national defence industry prioritises international cooperation in the fields of technological research and transfer, weapon and equipment production and repair, and personnel training.

To provide the VPA with modern weapons that the domestic defence industry is not yet capable of producing to meet the requirement of safeguarding the Homeland, Vietnam continues to acquire military weapons and equipment from traditional trading partners. At the same time, Vietnam pays attention to expanding defence trade relations with other countries in order to further satisfy the needs for technical support as well as equipment and weapons of the armed forces.

During the Cold War, North Vietnam’s military production was quite insignificant and practically all weapons and ammunition must be imported. During the mid-1960s Communist China furnished most of the small arms and small arms ammunition and many of the trucks, while the USSR supplied most of the other combat material. China increased its shipments of construction materials, rails, trucks, and spare parts to replace losses suffered in air attacks against North Vietnam. In addition, China sent additional technicians and construction engineers to aid the North Vietnamese.

From the 1970s to 1991, the Soviet Union was the main supplier of military hardware to Vietnam. During the 1970s Vietnam's own defense industry remained oriented toward the production of low-technology items such as rifles, and the overhaul of more advanced equipment, generally with the assistance of Soviet technicians. After 1975 the Vietnam People’s Army (VPA) inherited equipment abandoned by the U.S. Army and Army of the Republic of Vietnam, most of which was imported from the United States. Since 1991, the Chinese have been the biggest supplier of military goods to Vietnam. The Vietnamese have also produced their own equipment and repaired existing equipment.

Because Vietnam’s military was equipped with Soviet-designed equipment, Vietnam first had to negotiate affordable commercial contracts with Russian state arms manufacturers. The break-up of the Soviet Union opened up alternate sources of Soviet-era equipment. Due to continual pricing difficulties with Russian authorities, Vietnam turned to Ukraine and established strong defense industry and arms procurement relations. Ukraine then emerged as the major competitor to the Russian Federation for arms sales to Vietnam. Additionally, Vietnam sought out opportunities among the states of the former Warsaw Pact, most notably Belarus, Bulgaria, the Czech Republic, Poland and Slovakia. Other key suppliers include China, France and UK.

In the years between 1953 and 1991, 700 warplanes, 120 helicopters, and 158 missile complexes have been supplied to Vietnam from the USSR. Even today, three-quarters of Vietnamese weaponry has been made in post-Cold-War Russia. Today the VPAF is in the midst of modernization. It still operates late model Mig-21s, Su-22s, aircraft of the cold war era. However, it has recently been modernizing its air force with models of the Su-27 air superiority fighter following closer military ties and an array of arms deals with Russia. Most of the Navy’s cruises and equipment is from Russia, some are from U.S., China. Larger transport ships of the Navy include the Truong Sa class ship which was built by the state-owned shipbuilding firm, VINASHIN.

Until November 1998 Vietnam was constrained in its arms and equipment purchases by United States national security legislation that prevented the sale of military equipment to Vietnam that incorporated U.S. technology. Until the U.S. ban was lifted, Vietnam was basically forced to look to those countries that had compatible Soviet-made equipment. That did not prevent Vietnam, however, from testing the market. Cost and compatibility have governed Vietnam’s arms and military equipment purchases.

Following the Presidential Determination of December 29, 2006, U.S. policy on arms transfers toward Vietnam now permits the sale, lease, export, or other transfer, on a case-by-case basis, of non-lethal defense articles and defense services to Vietnam. For the purposes of the policy, “non-lethal defense articles” means an article that is not a weapon, ammunition, or other equipment or material that is designed to inflict serious bodily harm or death. The export of the following defense articles and defense services will not be approved: lethal end items; components of lethal end items, unless those components are non-lethal, safety-of-use spare parts for lethal end items; non-lethal crowd control defense articles and defense services; and night vision devices to end-users with a role in ground security. This new policy applies to both government-to-government sales (Foreign Military Sales or FMS), as well as commercial sales by U.S. industry (Direct Commercial Sales or DCS).

Potentially strong demand for U.S. defense equipment exists in Vietnam, especially for spare parts to upgrade used U.S equipment left after the war, e.g. spare parts for UH1 helicopters. Potential sales also exist for search and rescue helicopters, patrol boats, telecommunications, defense equipment for training, ATC parts, and military medical care.

Competitive suppliers have traditionally been from Russia, Ukraine, China, France and U.K. Keys to success for a defense product in Vietnam’s market have typically included: financing support/options, long-term logistical support, technology transfer, patience and a strong partner with key relationships with major decision makers.

Just after Vietnam was admitted into the World Trade Organisation (WTO), the Vietnam Communist Party Central Committee held its fourth plenary session from January 15-24, 2007. This meeting took the decision to order the party, the army, police and regime-approved mass organizations to divest themselves of their commercial enterprises. Ownership will reportedly be transferred to a holding company which will make a determination about which enterprises will be equitised and sold to private investors.

The Vietnam People’s Army, for example, currently runs 140 enterprises and holds shares in another twenty companies. These enterprises are engaged in an incredibly diverse range of economic activities from coffee production, coal mining, garment manufacture, stock broking, and telecommunications to health services. In 2006, army-run enterprises earned US $2 billion in revenue or 3 percent of Vietnam’s Gross Domestic Product (GDP). Divestiture will touch on sensitive sources of funding for the military at a time when developments in the South China Sea seemingly demand an increase in defense expenditures.

In 2006, the the 10th National Party Congress adopted a resolution decreeing that Vietnam’s maritime economy should be strongly developed with a focus on sectors that have comparative advantages in order to develop a strong maritime economy, maintain national defense and security in a spirit of international cooperation. This matter was considered by the fourth plenum of VCP Central Committee that met in January 2007. Reports submitted to this meeting noted that there was no coherent plan to integrate the economic development of coastal areas with the exploitation of marine resources in Vietnam’s territorial waters. Economists estimated that by 2020, the marine economy would contribute up to 55 percent of GDP and between 55-60 percent of exports.