Change Coming in Vietnam?

Vietnam faces a highly political year in 2015. Inside and outside its Communist Party, elite attention is riveted on the likely outcomes of the party congress that will convene in January 2016.

Political decisions are monopolized by the party, by law Vietnam’s only political party and “the force leading the State and society”. Current leaders are the successors of the revolutionaries who led Vietnam to independence and, 40 years ago, to unification. That’s ancient history to three quarters of the nation’s population.

The party’s claim to rule now depends on its ability to solve 21st Century problems. Though the internet has broadened the space for political discussion (and has enabled a vocal crowd of dissidents and regime critics), Vietnam’s 90 million citizens still show no appetite for political upheaval. Relative prosperity has dimmed but not erased memories of 30 years of war and the privations then and later. The Vietnamese are inclined to accept a high degree of state control as long as the party can deliver stability and prosperity.

Stability is not in question. The regime’s instruments of political suasion are pervasive. Prosperity – that is, sustaining economic growth in the order of 7-8 percent annually and distributing that growth equitably – Is less certain. Economists agree that policies that leverage Vietnam’s advantages – in particular its young and disciplined workforce – should enable explosive growth.

However, the Hanoi regime has stumbled in recent years. A bet that it could build a few state enterprises into internationally competitive companies did not pay off. At almost the same time, a misguided effort to spend its way out of global recession failed badly, leaving thousands of stalled real estate projects and saddling banks with non-performing loans. Hammered by inflation and high interest rates, the public was unhappy. In 2012, criticism of government policies was heard in every street corner cafe and seen in hundreds of dissident blogs.

In the Vietnamese party/state, power is concentrated in the party’s Politburo. Hoping perhaps to raise the public mood, Prime Minister Nguyen Tan Dung’s Politburo colleagues set him up as the fall guy. Dung came up short -- reportedly 3 for and 11 against -- in a Politburo vote. The Prime Minister appealed to the Party’s 200-man Central Committee, called in all his IOUs and won a vote of confidence. Since then, he’s been the man to beat.

The party conducts its business in private but bits and pieces leak out steadily into the cybersphere. These suggest that intra-party factional antagonism remains at an unusually high pitch. It has been a quarter-century since there were such sharp differences in orientation within the Party leadership. It boils down to argument over three issues: managing China, managing state-owned enterprises, and managing dissent.

Simply put, a faction centered in the Party apparatus is generally conservative and a faction centered in government institutions is by contrast described as “open-minded”. For convenience, we will call these the party faction and the government faction.

Managing China: A renascent China, determined to assert hegemony over the South China Sea, if not over all of Southeast Asia, poses a grave strategic threat to Vietnam. Maintaining Vietnam’s national identity and integrity vis-a-vis foreign invaders – chiefly Chinese – is the liet-motif of the nation’s long history.

The party faction counsels restraint in the face of Chinese provocations, reasoning that Beijing commands overwhelming military and economic power and, though the interest of other powers in the region will wax and wane, China will always be uncomfortably adjacent. The government faction has pursued “strategic alliances” with like-minded Asean partners, Japan, Australia, India, South Korea and especially the United States – all in order to balance Chinese ambitions.

Managing State Enterprises: Vietnam’s state-owned enterprises command key sectors of the economy and absorb resources while creating relatively little wealth. On economic restructuring, the party faction tends to see state-owned industries as “an important tool for the implementation of policies” and less of a problem than endemic corruption.

General Secretary Nguyen Phu Trong has campaigned to sideline corrupt party cadres. Prime Minister Nguyen Tan Dung, meanwhile, has pledged to break the state’s bonds to the public enterprises that command key sectors of the economy, chiefly by forcing them to sell shares and publish transparent accounts. Neither Trong nor Dung has been conspicuously successful to date.

Managing dissent: The party faction favors tight supervision of print and broadcast media, repression of dissident bloggers, and stiff punishments for anyone who dares to advocate multiparty democracy. The government faction seeks to control the state’s narrative with a lighter hand.

Party congresses are convened every five years. There is vigorous internal competition for positions, promotions and the perks that flow from them. Typically a party congress is not a winner-take-all event, but rather one aimed, after a year of alliance-mending and horse-trading, at updating the party’s internal balance among factions and interests while retiring former leaders bloodlessly.

During 2015, local party caucuses will select the 2000 delegates to the 12th Congress. For many of these delegates, the meeting in Hanoi in January 2016 will be their first experience of politics at the national level. They will endorse lengthy statements on political and economic matters and toward the end of the 10-day meeting, they will vote on a list of 200 candidates to fill the 200 full and alternate seats on the Party’s Central Committee.

About half the list will be newcomers who will replace members who have reached retirement age (generally 65) or who, less often, have been dropped as a consequence of misbehavior or conspicuous failure in their public roles.

Immediately after the party congress adjourns, the reconstituted central committee will elect from among its ranks the members of its political committee, or politburo. To the extent that the delegates reflect the mood of the country, the new Central Committee and Politburo are likely to have a more progressive tilt.

Vietnam’s professional and managerial classes give Dung and his closest collaborators relatively high marks for putting the economy back on an even keel, attracting high quality-foreign investors and having the right attitude toward the so-far intractable SOE problem. Dung’s management of the confrontation over China’s drill rig deployment and a subsequent tightening of links to the US is also popular.

Finally, the Dung faction is perceived as markedly more inclusive in its approach to governing – i.e., inclined to seek expert knowledge outside party ranks. Rumors of corruption dog all Vietnamese leaders. Dung is no exception. The ‘black blogs’ first appeared in the summer of 2012, when Politburo colleagues tried to dump Dung as PM in favour of his longtime rival, President Truong Tan Sang.

Allegations against Dung, his family and associates are daily fare on certain blogs. Other blogs specialize in hurling allegations at his rivals. The blogs’ sponsorship is obscure and their content often deadly. In a nation where newspapers are forbidden to discuss intra-party wrangling, these blogs score a huge number of daily hits. The consensus on Dung is that “like everyone else, he’s corrupt, but he delivers on his promises.”

He is given some credit for promoting capable people into key positions. Working in his favor is a rise in the prestige of the government vis-a-vis the party. While party cadres struggle to remain relevant, it is the Western-trained managers who increasingly populate government ranks that are apt to have the answers to complex issues raised by “globalization” -- Vietnam’s integration into a technologically-driven world economy characterized by value chains, non-tariff barriers and highly mobile capital flows.

Dung reportedly aims to succeed Trong (who has reached retirement age) as Party General Secretary, to arrange the elevation of a protégé, Deputy Prime Minister Nguyen Xuan Phuc, as the next Prime Minister, and to secure a dependable majority in the new Politburo and Central Committee.

That will be hard to pull off in a party that has monopolized the perks and spoils of office and in recent years has preserved harmony by sharing these out among party factions. An “anyone but Dung” reaction may well unite the prime minister’s enemies around candidates less dismissive of ideology and tradition.

Though Dung and his protégés seem to have the inside track, it’s still a long way to the 12th Party Congress.

Sea of Troubles

Capping a warming trend in relations, China and Vietnam declared in 2008 that their relationship was “comprehensive, strategic and cooperative.” A year later, Beijing tabled its “nine-dash line” claim to a swathe of ocean extending south from Hainan Island nearly to Singapore. Since then, its pursuit of hegemony over the seas that wash Vietnam’s coasts has posed a huge dilemma for the Hanoi regime.

No matter that the evidence is largely contrived, the Chinese public fervently believes in Beijing’s “historic sovereignty” over the South China Sea. The Chinese regime has ridden the nationalist tide. It maintains that China’s claims trump Law of the Sea rules for carving up maritime areas and has steadily consolidated its de facto sway over disputed reefs and islets.

China’s decision to park a deep sea oil drilling rig in Vietnam’s EEZ in May 2012 was only the latest and most provocative iteration of a salami-slicing strategy that has been startlingly successful. Xi Jinping and his colleagues seem no longer to prize ideological solidarity with the Hanoi regime.

Short of armed conflict, it is hard to imagine what more Beijing could do to undermine its would-be friends in Vietnam. Asked if he had calculated the economic costs to Vietnam if China were to gain control of oil fields off Vietnam’s coast and confine Vietnam’s fishing fleets to coastal waters, a prominent Saigon economist called the economic impact “actually quite small; Vietnam’s future is in manufacturing. However”, he added, “the political impact could be staggering”.

In the wake of the oil rig episode, the Politburo agreed to harden Hanoi’s resistance to Chinese pressure in two very public ways: it sought (and secured) US agreement to sell Vietnam defensive weapons and it registered Vietnam’s support of Manila’s contention to the Permanent Court of Arbitration that the nine-dash line flaunts provisions of the Law of the Sea Treaty.

Membership in the US-sponsored Trans-Pacific Partnership trade pact (assuming it ever goes into effect) is a no-brainer for Vietnam. Peterson Institute calculations show that the deal would make Vietnam 14 percent wealthier than it would be otherwise by 2025.

The American Chamber of Commerce in Vietnam sees the TPP lifting US-Vietnam trade from $35 billion last year to $57 billion by 2020. China’s aggressive posture has made the TPP triply attractive to Hanoi. It is seen as a means of lessening trade dependence on Chinese inputs and markets and as a talisman of Vietnam’s ripening relationship with the United States.

Baby Steps Toward Political Broadening

Although Vietnamese have little appetite for political or social turmoil, there is considerable sentiment for a loosening of restrictions on public expression. Vietnam is a police state. The Ministry of Public Security enforces laws that severely constrain political liberties – for example, a prohibition against “abusing democratic freedoms to infringe on the interests of the State.” Small steps toward liberalisation would be highly popular – such as laws greenlighting the formation of civic organizations independent of the party, relaxing censorship of newspapers and magazines or permitting peaceful public demonstrations.

Within the regime, these remain highly contentious matters. Online social media particularly irritate the party conservatives who are frequently the butt of sarcastic posts. The State can’t afford to build a “Great Firewall” like China’s.

Other attempts to regulate the activity of Vietnam’s 30 million Facebook users have proven futile. In a pointed public rebuff to factional rivals, Dung declared early this year that the government should embrace Facebook. He instructed ministries to take care that the official version of an incident (here he referred to the oil rig crisis and to rumors about the health of a high-ranking party official) is posted promptly and in detail.

In this instance and others, Dung has staked a tacit claim to being the party leader most willing to enlarge Vietnamese political space to include non-party interests. His strategy could well fail. For many party stalwarts, it evokes the specter of the “peaceful revolution” scenario that overthrew Communist regimes in Poland, Czechoslovakia and other East European states.

Beyond the 12th Congress

Asked what the government is likely to do about such and such a problem, Vietnamese are apt to answer that “that depends on the 12th Congress.” Considerable hope for constructive change is invested in the pending party meeting. These may again be empty hopes. Crony capitalism and rent-seeking remain such a pervasive feature of the regime that it is difficult to imagine a Party consensus for doing away with the “socialist-oriented market economy”.

This is not the first time that progressives within the party have warned that by resisting change, the party risks losing its mandate to rule. This time they may be more than usually right. If Dung and his protégés secure most of the top party positions, including a reliable majority in the Politburo and Central Committee, chances seem good for bold policy initiatives.

Initiatives under discussion aim at returning Vietnam to annual growth circa 7 percent and spreading the fruits of growth more broadly among the emerging middle class. These would include increased public investment in quality higher education, in health care and in affordable housing -- the last in partnership with Vietnam’s private sector.

Assuming the 12th Congress confirms his dominant position, a measure of Dung’s success will be the degree to which he is able to turn public enterprises private. The government had hoped that foreign investors would hurry to buy minority stakes in Vietnam’s SOEs. That hasn’t happened. Stronger medicine is needed.

In the opinion of economists who seem to have the government’s ear, that means setting up a ‘hard constraint’ on handouts to state enterprises, leaving them either to privatize successfully or die. In that case, many are likely to fail and as they fail, opportunities will multiply for the nation’s private sector.

David Brown is a regular contributor to Asia Sentinel. He wrote this for Asianomics, the Hong Kong-based subscription-only financial analysis firm.