In foreign affairs, Vietnam employs a system of “bamboo diplomacy,” flexibly adapting its diplomatic approach to accommodate state partners across the geopolitical spectrum. Vietnam maintains its highest level of diplomatic relations, known as a comprehensive strategic partnership, with China, Russia, India, the Republic of Korea, the United States, Japan and Australia, elevating the last four nations in the previous two years. Despite the EU signing a free trade agreement with Vietnam in 2020, none of its member states have yet been upgraded to this level, nor has a comprehensive strategic partnership been established between the EU and ASEAN.
Yet, EU technology giants Ericsson of Sweden and Nokia of Finland are some of the only companies that can feasibly bid for Vietnam’s lucrative telecommunications infrastructure contracts. If they are successful in winning and then delivering these projects, it could have threefold geopolitical and economic benefits for the EU:
- They could elevate Finland and Sweden and, by extension, the EU’s diplomatic relations with Vietnam.
- They could crowd out Chinese competitors Huawei and ZTE from the most politically sensitive areas of Vietnam’s telecommunications market, exporting the Brussels Effect and the EU’s rights-based regulatory model of technology through their data localisation standards.
- Winning these contracts could potentially provide billions of euros in trade value to the EU and its member states, significantly boosting cash inflows and the EU’s broader economic standing in mainland Southeast Asia.
Vietnam’s Information and Communication (IC) Master Plan is an opportunity for the EU, its corporations and citizens to reap the financial and geopolitical benefits of a rapidly modernising Southeast Asia, as well as propel its own capacity for technological innovation, aiding in future domestic implementation of telecommunications infrastructure.
EU and China’s Tech Giants Vie for Vietnam’s 5G Market
Telecommunications equipment is a global oligopoly with just a few competitors vying for large contracts. Seven vendors have 80% of the market share, with Europe’s Nokia and Ericsson and China’s Huawei and ZTE accounting for 63% of total revenue alone.
Source: DellOro Group
Previously, Huawei was cut out of the Vietnamese telecom market as part of Hanoi’s efforts to curry favour with the US during its 2020 economic conflict with China. As noted in Anu Bradford’s Digital Empires: The Global Battle to Regulate Technology, “[Vietnam] have chosen not to take an official stand against Huawei but have de facto excluded or limited its market presence. [Vietnam] gradually phased out contracts with the company, delayed the approval of new Huawei contracts, or simply chose alternative vendors.” As a consequence, much of Vietnam’s preexisting 4G infrastructure was built by Ericsson and Nokia.
However, Huawei’s return to constructing telecommunications equipment in Vietnam was formally announced by President Vo Van Thuong in Beijing in September 2023 to bolster 5G adoption and commercialisation. In March 2024, Huawei proposed developing a 5G innovation centre in Vietnam in a meeting with the Vietnamese Minister of Information and Communications, Nguyen Manh Hung. European competitors to Huawei have made their own pledges to capitalise on this new investment opportunity. For example, in collaboration with Taiwanese precision manufacturing firm Foxconn, Nokia will construct AirScale 5G equipment in the North Vietnamese province of Bac Giang.
Nokia has also sought to promote Finnish–Vietnamese relations in the media, advancing Vietnam as one of its key supply chain hubs for foreign direct investment (FDI) growth in manufacturing telecommunications equipment in 2023, as well as “providing infrastructure solutions to network providers such as Viettel, VinaPhone and MobiFone.” Head of Ericsson Vietnam Rita Mokbel has pledged support for the Infrastructure Master Plan in local Vietnamese media: “Ericsson has been supporting Vietnamese mobile service providers with commercial 5G pilots since 2020, and is proactively working with mobile service providers to ensure Vietnam is at the forefront of 5G developments.”
Vietnam and Scandinavia: A Warm But Minor Partnership
Beyond economic collaboration and trade, Swedish–Vietnamese relations are unexpectedly warm. The nations share a historical amiability beyond economic expedience. Sweden was the first Western nation to recognise the Socialist Republic of Vietnam on 11 January 1969. It showed solidarity with the country during the Vietnam War, granting humanitarian asylum to hundreds of US draft deserters during the conflict. In contemporary times, Swedish–Vietnamese trade relations are healthy, with “a shift from aid to trade” as Vietnam has rapidly industrialised. Sweden is a top 10 EU trading partner to Vietnam, with an approximate real growth in bilateral turnover (adjusted for inflation) of between 32 and 45% between 2012 and 2022, rising from ~915m to ~1.7b USD. This fruitful relationship was bolstered by the passing of the EU–Vietnam Free Trade Agreement in 2020, which led to a surge in two-way trade between the bloc and Vietnam of 14.8% in 2021 to 63.6 billion USD.
Finnish–Vietnamese two-way trade is comparatively modest in total size and development, growing an estimated six to 16% between 2012 and 2022, with total bilateral trade rising from ~304m to ~432m USD, according to the United Nations Commodity Trade Statistics Database (UN Comtrade). Nonetheless, (now former) Chairman of the National Assembly, Vuong Dinh Hue, argues that this figure does not accurately illustrate the potential for trade between the two nations. Indeed, Vietnam and Finland “are set to upgrade their relationship in the near future.” The close cultural ties and joint business operations between Sweden and Finland foster significant financial collaboration and are a strategic advantage. This synergy is exemplified by the 2024 SEB Nordic CEO Meeting held in Vietnam, underscoring the Southeast Asian nation’s crucial strategic importance in Nordic corporate expansion efforts. Understanding and leveraging this relationship between Scandinavia and Vietnam is important for future diplomatic and trade success in both regions.
However, only mentioning the Nordic/Vietnamese statistics neglects the elephant in the room, the tremendously large volume of trade between Vietnam and China, rising from ~41.9b USD in 2012 to ~175.6b in 2022 at a tremendous 243.92% growth rate. Telecommunications technology is a major factor in this growth, with Computers, electrical products, spare parts and components thereof and Telephones, mobile phones and parts thereof both among the top five good categories exported bilaterally during 2022.
Furthermore, it is crucial to recognise the advantages the Chinese state provides to telecommunications giant Huawei. Again, as outlined by Anu Bradford in Digital Empires: “Huawei has benefited from a total of 75 billion USD in state support over the years, which allows it to regularly underbid its rivals by up to 30%.” Given these circumstances, how could EU companies like Ericsson and Nokia possibly gain an advantage in bidding for Vietnam’s largest 5G telecommunications contracts? They do so for two reasons, namely regulatory alignment and their foothold in Vietnam’s preexisting 4G infrastructure. An area where they may be potentially disadvantaged is in the geopolitical considerations of the Public Utility Telecommunications Service Fund, which manages all resources pooled from private companies and the government for delivering public utility telecommunications equipment in Vietnam. The Fund may favour Chinese firms in certain situations, even if an Ericsson or Nokia contract would better suit them, to ensure that China views Vietnam favourably as a trade partner.
How EU Standards Give Ericsson and Nokia an Edge in Vietnam
The Brussels Effect is the EU’s ability to shape global standards by leveraging its market power. It sets strict rules for its internal market, which multinational companies adapt to ensure they can access EU consumers and businesses, leading to EU regulations becoming de facto global standards. The most relevant example is the 2016 General Data Protection Regulation (GDPR), which regulates the international transfer of personal data.
In line with the EU, Vietnam has adopted data protection laws such as the 2018 Cybersecurity Law. In September 2023, they adopted Decree No. 53, requiring foreign and domestic telecommunications companies “to store the data of service users in Vietnam if it receives a formal request for data retention from the Ministry of Public Security.”
In the past, Huawei has been critiqued for allegedly aiding in corporate and state reconnaissance. As a Chinese company, it must comply with Article 7 of China’s National Intelligence Act (2017) that “all organisations and citizens shall support, assist, and cooperate with national intelligence efforts in accordance with law, and shall protect national intelligence work secrets they are aware of.” Huawei and ZTE fall under China’s state-based regulatory model and cannot reasonably hope to comply with Vietnam’s data localisation demands if they happen to be in tension with the requests of the Chinese authorities. As such, Vietnam may end up providing some of its most lucrative and strategically important contracts for telecommunications equipment to Ericsson and Nokia, which, as EU companies, already operate under the benchmark set by the GDPR and can easily comply with Vietnam’s cybersecurity laws. The EU’s rights-based regulatory model is more conducive to public/private supranational investment, giving Ericsson and Nokia a distinct competitive edge in Vietnam compared to the Chinese state-driven model and legislation that Huawei and ZTE must prioritise.
Secondly, European companies have a preexisting foothold in Vietnamese 4G infrastructure. This is because, until the recent return of Huawei, Vietnam tended to choose European contractors over Chinese ones because of the US–China trade war. Whilst Viettel Chief Executive Officer Le Dang Dung insists it was purely a technological decision, he noted that “many other countries, including the US, have found evidence that showed using Huawei is not safe for the security of the national network.” Even as Huawei returns to the fold in Vietnam, Ericsson and Nokia have created the existing 4G telecommunications infrastructure that Hanoi seeks to build off, and Ericsson has proactively expanded their 4G base stations in Vietnam to “upgrade to 5G features seamlessly and efficiently when needed.” Moreover, Nokia and Ericsson’s preexisting social relationships and partnerships with Vietnamese telecommunications executives and engineers at companies such as Viettel can be leveraged. Ericsson and Nokia have a first-mover advantage over Huawei in both these contracts’ technological and social aspects.
The State Owns the Wires: Vietnam’s Centralised Telecom Vision
The advantages described above may give European companies a better hand. However, the financial capital of the 2025 Communication Infrastructure Master Plan will be allocated to account for Vietnam’s geopolitical objectives, not just the best economic or industrial opportunities. The primary instrument for financing the Information And Communication (IC) Infrastructure Plan is the Public Telecommunication Service Fund, established in 2004 to “support the implementation of the State’s policies on the provision of public-utility telecommunication services.” This fund is run directly by the Ministry of Information and Communications. It receives 3–5% of yearly revenues from “service provision to customers” earned by local telecommunication companies, which can run into hundreds of millions of dollars of annual capital for the fund.
The largest of Vietnam’s telecommunications companies is Viettel, run by the Ministry of Defence of Vietnam. The second largest, MobiFone, is managed directly by the Ministry of Information and Communications. Essentially, all organs of the Vietnamese telecommunications apparatus are run in the interest of the Vietnamese state, which will balance its desires for technological innovation and infrastructure development with its diplomatic considerations. The competitive advantages outlined above for European companies may matter less if the Ministry of Information and Communications broadly considers that Huawei or ZTE must have a greater stake in the Vietnamese ICT market to placate Hanoi’s northern neighbour, even if they do not offer the best contract or technical conditions.
Vietnam’s 5G Market: A Gateway for European Tech and the EU Indo-Pacific Strategy
If Ericsson and Nokia were to receive the lion’s share of contracts associated with Vietnam’s telecommunications upgrade, and would be of comparable value to the reported numbers for 5G contracts in other nations, total revenues could run into hundreds of millions or even billions of dollars in trade value. In the medium term, completing these upgrades could increase opportunities for EU firms to expand into emerging markets such as Cambodia and Laos, in collaboration with Vietnamese state-owned enterprises such as Viettel. Such collaboration could lead to closer ties between the Scandinavian nations (and by extension the EU) and Vietnam, as well as Southeast Asia more broadly. Moreover, further embedding themselves into Vietnam’s most critical telecommunications infrastructure could strengthen the Brussels Effect, increasing the representation of the EU 27’s digital values in Vietnam.
Two key areas of the EU’s Indo-Pacific strategy are “Digital governance and partnerships to foster cooperation for a safe and secure digital space” and “Connectivity to promote sustainable connectivity for all and establish common standards.” Moreover, the EU’s Global Gateway Initiative is built upon the principles of equal partnerships, good governance and transparency, and catalysing private sector investment. Any and all successful 5G infrastructure projects completed by Ericsson and Nokia in Vietnam, ASEAN’s third most populous nation, would directly correlate with achieving these numerate ends. However, these companies will need to compete with Huawei. Should they be unsuccessful in their endeavour, the EU’s leverage to achieve the digital objectives of its Indo-Pacific strategy would be significantly diminished.
Ultimately, the contracts awarded as part of Vietnam’s 5G upgrade will be decided by Vietnam, balancing its diplomatic vision of “bamboo diplomacy” and economic vision of itself as a technologically advanced, prosperous and innovative nation. Nonetheless, Nokia and Ericsson should, to the best of their ability and in collaboration with Brussels, attempt to leverage their material strategic advantages to increase EU–Vietnam trade flows. This could strengthen the EU’s case to be upgraded to a comprehensive strategic partnership with Vietnam.
Author: Cain Hillier, EIAS Junior Researcher
Photo Credits: Unsplash