Asia Sentinel

Vietnam faces political turbulence as economic woes worsen

The party's key Central Committee last week held an emergency meeting in an attempt to bolster the fight against rampaging inflation, continued labour unrest and a widening trade deficit.

It is no secret that conflicting views about the root cause of Vietnam's precipitous economic malaise, and about how best to tackle it, have spread through the party's ranks from the topmost leaders in the Politburo down to the rank and file grassroots in the provinces. Party leaders themselves remain divided between those who continue to back Prime Minister Nguyen Tan Dung's expansionist high-growth policies and a widening group around Party General Secretary Nong Duc Manh who favour consolidation and slower, more sustainable growth rates.

Intertwined with these economic ideological differences are longstanding personal grievances over Dung's accelerated promotion of technocrats and fellow southerners to the exclusion of other senior figures, notably from the nation's central region. Compounding the splits are the lacklustre anti-corruption campaign, personally led by the PM, as well as recent crackdowns on journalists and members of the Catholic Church.

Party insiders and diplomatic sources say that there is growing speculation that if the splits become more severe, they may precipitate a leadership crisis in the near future.

Last week's plenum in Hanoi, an unprecedented third meeting this year of all 160 members of the party's central executive committee, was hurriedly called to try to stave off public bloodletting and concentrate minds on the economic crisis that has begun to threaten social stability and party control.

Traditionally, the party holds only two annual meetings of the committee, but following this year's first plenum in January, a second was hurriedly called in July to try to decide what to do about the economic collapse. Now comes a third in October.

Professor Carlyle Thayer, a Vietnam expert at the Australian Defence Force Academy, said: "A third plenum signals that something very significant is being discussed."

Officially, the talk at the three-day conclave centered almost entirely on socio-economic matters and in particular on how to prevent the already depressed economy from sinking further as a result of the financial turmoil in the United States.

Nguyen Tran Bat, chairman of the Investconsult Group, one of Vietnam's largest business advisory companies, commented: "This plenum was very important because it focused on how to deal with inflation and how to react to the downturn in the US market."

But this is nothing new, at both previous plenums this year, party leaders essentially discussed exactly the same topics, each time with rising alarm and trepidation – and with increased backbiting among themselves over who was, or was not, proposing the right course of action.

At the last meet, Central Committee members, who were losing patience with the government as inflation soared to nearly 30 per cent, gave the Politburo responsibility for oversight of the economy until the end of this year. The 14-member Politburo is the party's topmost body. And this decision to take away control of the economy from Dung's government was a highly portentous move that has effectively sidetracked the cabinet and the PM's economic team.

There was little Dung and his cohorts could do about it since they remain a minority in the Politburo, where supporters of the more cautionary, consolidationist party boss Nong Duc Manh dominate.

The July meet was not necessarily a signal of lack of faith in the relatively new PM, but it was an indication that many Central Committee members remain unconvinced that he is the right man to run the country during these troubled times. And the fact that they called yet another crisis meeting last week clearly indicates that they are still not convinced.

Indeed, just a day before the plenum convened, PM Dung reiterated his standard tocsin about how ministries and financial bodies must give priority to controlling inflation, stabilising the macro-economy, ensuring social security and maintaining suitable growth. 

His words have had little notable impact, but he continues to push for a robust growth rate of around 7 per cent this year, which many feel is unattainable.

But it is at least more realistic than his government's original goal of 9 per cent. The Asian Development Bank and other institutions are now forecasting a figure of around 5 per cent.

And at last week's plenum, the party wisely couched its own forecast in very general terms, stating that "the growth rate should be kept at an appropriate and sustainable level." Gone for the foreseeable future are those 8 per cent rates that Vietnam registered over the past decade.

Dung also instructed economic ministries and agencies, particularly the State Bank of Vietnam, to pay attention to fluctuations in global and US financial markets so that Vietnam can take remedial measures to ensure the viability of the country's banking system. According to Dung, who was briefly – and rather inauspiciously – once head of the central bank himself, the US financial crisis has not had a significant impact upon Vietnam's economy, so far.

However, while he cautioned that Vietnam must remain on guard, his words were still seen as rather too complacent. Soundings in the business community suggest that there is an overwhelming sense that the US downturn will seriously affect Vietnam's already swooning economy.

Nguyen Tran Bat said: "Obviously, the US downturn will affect the party's social and economic objectives and it may be necessary to readjust our long term targets."

The US market is vital for many of Vietnam's exports, notably textiles, seafood, footwear, furniture and many low-end goods. And it was Manh rather than Dung who stressed the need for a new and greater urgency to push exports while concurrently controlling imports to try to reduce the burgeoning trade deficit.

Furthermore, there will be fewer remittances from hard-hit overseas Vietnamese (Viet Kieu) in the US, Europe and Australia. And there is sure to be less follow-through on many promises of US investment.

Dung's cautious optimism contrasted with party boss Manh's opening remarks at the plenum the following day. Their language may have been polite and on the surface the words not too dissimilar, but underneath the contrast was stark.

Manh noted that despite export growth and investment promises, there are still major shortfalls and weaknesses, including surging inflation, a ballooning trade deficit and continued labour unrest. In other words, the masses remain uneasy and discontented – and that could lead to major problems for the party if it is not sorted out soon. He urged the Central Committee to find out the causes and take action.

The fact that the party boss should need to reiterate – a year after the crisis first hit Vietnam – that they still need to determine the causes, let alone the solutions, was ominous.

Over the past year, things have gone from bad to worse for Vietnam's export-driven economy, and now, with its biggest export market tilting towards recession, things are likely to get even bleaker, especially for low-income and middle-class citizens who face new hikes in utility prices.

The Deputy Trade and Industry Minister Bui Xuan Khu said last week that Vietnam would begin raising its government-controlled electricity prices by some 20 per cent next year in order to attract more investment into the nation's woefully inadequate and inefficient energy sector. "Recently, we have maintained low retail prices with the goal of containing inflation, but the price will rise starting in 2009."

Such moves are likely to exacerbate public discontent and labour unrest, as well as fuel divisions within the party about the merits of such actions. Already, the party has officially conceded that the earliest possible date for a return to single-digit inflation will not be until 2010.

As well as wrestling again with these thorny matters, last week's plenum also discussed the next session of the National Assembly which will soon be convened in Hanoi.

Party leaders know they must try to formulate economic policies that meet the expectations of the assemblymen and thus forestall the kind of pungent criticism they received in January when inflation, at round 14 per cent, was only just beginning to bite and the trade gap and labour unrest seemed relatively normal.

That is not the situation now, and, as in January, legislators from Vietnam's rural provinces are likely to be particularly prominent in assessing the government as they recount the financial pain caused by inflation among farmers in their constituencies.

Whether last week's "'wake-up call" plenum will galvanise party leaders into more action – and into more cohesion – remains to be seen. If not, there is liable to be yet another plenum, or perhaps even a mid-term Congress, in which the senior leaders, including Dung and Manh, may find themselves laterally shifted or even moved out.

As Manh warned in his closing address to the plenum: "It is particularly important to gain consensus among the party, the people, the army and all sectors and branches."

Not only is the party fearful of internal splits, but it is also wary of any social trouble or political opposition. Hence the recent crackdown on journalists and Catholics. Several well-known journalists have been detained over the past months, and two of the nation's crusading anti-corruption reporters are about to be put on trial for exposing malfeasance among party leaders in the notorious PMU18 scandal two years ago.

Members of the Catholic church, including the archbishop in Hanoi, have also been warned to stop protesting over the confiscation of their property in the aftermath of the Vietnam War. Calling recent protests "'absolutely unacceptable," PM Dung said: "If those activities do not come to an end, they will have an adverse impact on the good ties between the state and the church."

The Prime Minister recently met with several bishops, but the land issue was not resolved and remains a key block to the restoration of diplomatic ties between Hanoi and the Vatican.

Local party officials, particularly those aligned with veterans like Manh, party Secretariat boss Truong Tan Sang and Public Security Minister Le Hong Anh, are known to be chafing at the bit to take more robust action. They believe that the US and other Western nations are too distracted by the current global turmoil and the US elections to pay much attention to the religious and media crackdown in Vietnam.

Others, mostly within the PM's more conciliatory camp, argue that the best course of action would be for both sides to cool down.

Said Nguyen Tran Bat: "Although the local authority clearly can't return land to the Catholic Church because there is no legal framework to do so at present, I still favour adopting a moderate stance to resolve the dispute."

Professor Thayer added: "A hard line against the Catholic Church is never a good idea and in the midst of an economic crisis it is an even worse idea. Nonetheless, the conservatives will voice their concern over political stability."

Indeed, the clampdown on the media as well as the action against the Catholics were also topics discussed at last week's plenum because, like the economic downturn, they impinge on the party's obsession with political stability and the continuation of its one-party rule.

Dr Nguyen Quang A, director of Hanoi's Institute of Development Studies, said: "The communists always use the fear of instability as an excuse not to democratise and they will continue to do that."

Party leaders regard Vietnam's political stability as the cornerstone of its attraction to foreign investors, especially as instability continues to plague competitor nations in the region like Malaysia, Thailand and the Philippines.

Earlier this summer, Michael Pease, chairman of the American Chamber of Commerce and General Director of Ford Vietnam, said: "Vietnam's success in attracting foreign investment has largely been built on the expectation of economic and political stability."

A report early this year by Business Monitor International Ltd, listing Asia Pacific nations by their political risk, rated Vietnam equal second with Hong Kong, after Singapore, for short term political stability.

Naturally, party leaders, both the staid and the forward-looking, relish such reports and seek to ensure that the current economic turmoil, and religious and media issues, do not disturb that rosy assessment – which some fear it is already starting to do.

Party veteran Vu Mao, a former chairman of the National Assembly's external relations committee, said: "I have mixed feelings when I hear that Vietnam's short term political stability is rated so highly. The assessment is over-rated in my view and does not take account of Vietnam's many festering problems over land rights, rural poverty and the quality of life of low-income workers."

Added Thayer: "There is certainly growing discontent among urban residents about rising prices, pollution, traffic jams and corruption."

Indeed, when it came to the assessment of long term political risk, Vietnam did not fare well in the report and was near the bottom, only marginally ahead of countries like Laos and Myanmar.

Of course, even factoring in the current party infighting at the top, few believe that the communist regime in Vietnam is going to collapse because of the present economic meltdown and the actions of some feisty dissidents, journalists and priests.

But certainly its current leadership is under pressure and would not have held last week's crisis meeting otherwise. The final ramifications of that meeting are still unfolding.

Comments (8)

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Great article
written by Dan , October 19, 2008

This gives lie to those who think they should automatically pull up their China stakes and move their factories to Vietnam.

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The Vietnamese communists have never had legitimacy to their power
written by Wesley Nguyen , October 10, 2008

I suspect the other commentator has a vested interest with the communists continuing to dominate the political arena in Vietnam. The guy might be having a high-paid consulting job bestowed by the ill-educated communists. I understand you speak for your "stomach" just like most if not all the Vietnamese communists (VC) fought for "their own food and glory" during the Vietnam war.

For foreigners who come from democratic societies to come to the defense of one of the most repressive regimes in the history of modern Vietnam, it is despicable - to say the least. But to be fair, there are those who understand and to certain extent share the sufferings of the Vietnamese under the iron-fist rule of the vicious VCs for so long. And they do that through their fair and balanced reporting so the world could see the truly ugly face of the Hanoi regime. They certainly include Roger Mitton and Ben Stocking.

If Vietnam economy emerges from its own economic challenges stronger, who are going to reap the fruits? Of course the VCs as they have. But if the economy gets worse as the global financial crisis intensifies, the poor and middle-class Vietnamese will get hit hard. In fact, in Vietnam there is virtually no middle class.

I would suggest any heartless foreigners who want to make a few bucks in Vietnam to leave your values at the door before doing any business with the greedy and valueless VCs. But if you do business with bad guys long enough, you will become one of them.

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Today's Financial Global Crunch will surprisingly Shore up VCP's Confidence
written by Javier Delgado Rivera , October 10, 2008

First all, I'd like to reiterate the previous comentator remark on the quality of Roger's article. Viet Nam doesn't appeal to the worldwide media, so I feel compelled to acknowledge the merit of such an analysis, as sources on the country internal maneuverings are truly hard to spot.

Any single-party state structure is in itself a detestable governing code, a ruling format which only can be pluralised from within though. No foreign vested interests'll press to derail the conformable VCP's grip of power and though in the rise, public pressure lacks of the massive strength needed to effectively trigger an acceptance by the elites that political pluralism (even in the surface) is the only way to keep holding the key of power (because opening the political scene doesn't equal to lose the throne).

Once Viet Nam emerges of the ongoing global financial meltdown, and its deficit figures and trade balance stabilises (as it will certainly do), both camps of the VCP will gain an item of further argument to uphold their legitimacy over Viet Nam's fate. In short, I believe that today's financial global crunch will surprisingly shore up VCP's confidence.

For some insights on the VCP's ideology, please read --
http://www.globalaffairs.es/Noticia-385.html

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written by Nguyen , October 09, 2008

It was clear that the blood-thirsty communists won the war, yet the Vietnamese as a whole lost everything. The war set Vietnam backward economically and socially at least 50 years with millions of lives lost to a fraudulent cause, a nation bitterly divided and ruined, and an army of mad victors running around looking for preys - especially in the South. The Northerners - with the help of the communist Southerners - have ruled Vietnam much worse than the colonial French did. Never in the history of Vietnam there have been so many young Vietnamese women marrying old foreigners in droves in hope of seeking a way out of poverty and out of Vietnam. Are you proud of this? If you are, then you've got to be heartless.

Look, I was someone who has nothing to do with the war. I was just 6 years old when the war ended. I was taught to worship Uncle Ho. But how can you worship a murderous dictator who did nothing but destroyed Vietnam? As a little child growing up after the war, I saw it all. Life was worse than hell under the communists. There was no independence after the Americans left. During the war, the highest-ranking communist after HCM declared that the communists were fighting the Americans for the Chinese.

I suspect HCM was a Chinese, not a Vietnamese because he did what the Chinese wanted him to do, which was to turn Vietnam into a sea of fire for almost 30 years. The Chinese never want Vietnam and its people to do well - as history has shown. By the way, HCM had a Chinese wife and he loved Mao Zedong. In exchange for the weapons and war supplies from the Chinese so he could continue to wage war against his own people, HCM ordered his prime minister Pham Van Dong in 1958 to recognize the Chinese claim to two strategic islands off the coast of Vietnam. This is an act of treason by any standard of any nation.

Today, there are thousands of young kids across the country who could not attend schools because they are so poor, yet the filthy rich communists in Hanoi spend millions of dollars a year just to care for the stingy body of Ho Chi Minh in a massive mausoleum. There is a division-sized force assigned to defend the dead body of someone who did nothing but destroyed the country. The reason they need a huge force to defend the body of HCM is because the communists are afraid that the Vietnamese would spit at the man. I guarantee you that they would if they have an opportunity.

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written by Peace Pham , October 09, 2008

Everybody knows that Vietnam is the only winner in battle with the US. How could Vietnamese did that, bcoz they are proud of their nation , even Chinese could not make them surrender for over thousand of years of ruling. Now Vietnam is facing with high inflation but it's better than Financial crisis in the US and EU. We have to live everyday and everyday we fight for happiness and wealthiness of our people. Someone is always raedy to be a slaver so they can easily state that Ho Chi MInh does't care for Vietnamese people, that's why they are exilic now.

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written by Nguyen , October 08, 2008

For those of you who do not have an opportunity to know about the history of Vietnam, Vietnam has a long sad history, especially in the second half of the 20th century. Many of you probably heard about Ho Chi Minh who during the Vietnam War had declared that he was willing to destroy the country for however long it took to win the war. And he did it to that effect. In that civil war, some 4 millions Vietnamese on both sides were killed and many more millions were wounded. The very reason HCM was able to do that was because he was an absolute dictator who did not give a damn about the people and the country he claimed to love.

The communists running Vietnam today are those who worship the very man who destroyed Vietnam and one way or another got the blood of millions of Vietnamese on his hands. Today, virtually every member of the communist party is filthy rich in a country where the average monthly salary of a worker is less than US$100. The highest monthly salary of government officials is no more than US$250, but many high-ranking officials have hundreds of millions of dollars. Where does all of this money come from? You don't have to be smart to know they must steal it from somewhere.

The entire system is corrupt and designed for the benefits of the communists. It has been a very dark chapter in the history of Vietnam under these heartless and mindless communists. The communists have to be removed from power if Vietnam is to have a brighter future.

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written by Wesley Nguyen , October 07, 2008

As always, Roger is very knowledgeable about political and economic issues happening in Vietnam. You don't see this type of analysis pertaining to how or why national economic policies are made or who stand behind those policies in the 100% government-controlled press.

In a country where the political establishment has held monopoly power for decades, the Vietnamese people themselves are outsiders in their own land when it comes to debating and choosing a particular set of national policies. There is no political process in Vietnam; in fact, there is only political tyranny, period.

Readers do not need to look far to see how self-interested the communists have been. Look at the banner atop a landmark building that reads "Eternal Glory to the communist party". In the National Assembly in Hanoi, one will see these type of self-interested banners everywhere. The communists have been in the political business to enrich themselves and their own gang - at the expense of the dirt-poor Vietnamese. The political system has a Mafia-like power structure and it rewards gang members accordingly.

The increasingly economic difficulties facing the vast majority of Vietnamese do not seem to bother the communists much as they are so rich. I personally know a few people in Vietnam who are members of communist party. They have millions of dollars in wealth and they live like multi-millionaire in the U.S. Yet, they are just low-level party members. So you do the math and you see how rich the guys at the top and middle of the party hierarchy are.

So the only way "out and up" for the Vietnamese people is to take on the morally bankrupt communists and demand their rights be respected so they can take control of their own future. The political system in Vietnam is a rude affront to the hearts and souls of the Vietnamese. Recent indicators have shown that the Vietnamese now do not fear the communists as much as they used to. Once the pervasive fear among the population is taken down and removed, the communists will be next.

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