* EU flags security concerns as Hanoi awards contracts to

Huawei, ZTE (Shenzhen:000063)

* EU's Sikela says data security worries may discourage

investment

* Huawei, ZTE (Shenzhen:000063) have rejected concerns as baseless, call

curbs unfair

By Francesco Guarascio

HANOI, March 24 (Reuters) - The involvement of Chinese

vendors in the rollout of Vietnam's 5G network may deter foreign

companies from investing in the Southeast Asian nation, a top EU

official said on Tuesday.

European telecom firms Ericsson and Nokia

are developing Vietnam's core 5G network, but in

recent months Vietnamese state-owned operators have awarded 5G

contracts to Chinese rivals Huawei and ZTE (Shenzhen:000063).

That marks a notable shift following years of caution

towards China, and the change has sparked concerns among Western

officials.

"Be careful with dependencies in strategic areas," EU

Commissioner for International Partnerships Jozef Sikela said

when asked about the Chinese contracts.

"5G is the new battlefield," he told Reuters on the

sidelines of an EU-Vietnam investment forum in Hanoi. "Through

the network you can access a lot and you can control a lot, and

you have to be always careful who is your trusted vendor."

"If investors have doubts about the security of their data,

they might decide not to take the risk and not to invest," he

said.

Vietnam's foreign ministry and the Chinese embassy in Hanoi

did not immediately reply to emailed requests for comment.

Vietnam is a major industrial hub and hosts large

manufacturing operations of big Western multinationals,

including European firms Adidas and Lego. Its decades-long

economic boom hinges on foreign investment.

The European Union and European states on Tuesday announced

a new package of investment in Vietnam's transport and energy

sector.

Sikela said risks to future investments from unsecure

networks were at this stage theoretical, and noted that several

European countries allowed Chinese telecom vendors in the past.

Huawei and ZTE (Shenzhen:000063) are banned from the telecom networks of

several European countries and in the United States, because

they are seen as risks to national security.

The companies have criticised the restrictions as unfair,

rejecting the concerns as baseless.

Vietnamese officials have said that Chinese telecom

equipment is reliable and cheaper, while downplaying ​security

risks. Additional contracts with Chinese firms are under

discussion, Reuters reported earlier this month.