By: David Brown

The historically testy relationship between Vietnam's national authorities and those who govern the nation's southern megalopolis, Ho Chi Minh City, appears to be moving onto a more productive track after decades of squabbles over finance.

The city, has 10 percent of Vietnam's population but generates 22 percent of Vietnam's GDP. It is not just the nation's financial and entrepreneurial dynamo, it's also the still-not-entirely-reconciled former capital of anti-Communist "South Vietnam." Since liberation, the sprawling city has sent most of its tax revenues to the central government for redistribution to poorer parts of Vietnam.

Over the years, the city authorities seem to have considered it reasonable that they, not officials in Hanoi, should have the deciding voice in how to spend the fraction of locally generated revenues that it is allowed to keep.

While Nguyen Tan Dung was Vietnam's prime minister from 2006 to 2015, HCM City's administration and its Communist Party branch were notably non-compliant with unwelcome directives from the center. Yes, there was talk of real estate scandals in HCM City and other places, and grumbling that there as elsewhere, Dung's favorites engaged in unseemly self-dealing. Was it excessive by Vietnamese standards? Not until after Dung failed in his bid for election as the party's general secretary in early 2016 and was retired did it became apparent that "Boss" Le Thanh Hai and his associates were the masters and prime beneficiaries of a pervasive web of municipal corruption.

Before 2016, 77 percent of the general tax revenues collected in HCM City were transferred to the central government for redistribution to Vietnam's neediest provinces. Then came a new set of leaders in Hanoi, with an anti-corruption agenda. They increased the levy to 82 percent.

For reform, start at police HQ

By past form, the local authorities should have resisted. HCM City was effectively broke. Especially after 2016, tax revenues retained by the city haven’t provided enough cash to keep big infrastructure projects from falling well behind schedule.

The only plausible explanation for the HCM City government's agreement to raise its contribution to Vietnam's 2016-2020 five-year plan to 82 percent of local collections is that the Hai Gang hoped that they were buying renewed central government disinterest in how the sprawling city was governed.

They guessed wrong. As Asia Sentinel reported last year, Vietnam's new central leadership deployed squads of inspectors and accountants to the southern metropolis. They built dossiers on Hai, his confederates, and their schemes to profit from converting public land into privately owned office towers and posh residential neighborhoods.

And yet, rolling up the Hai Gang is no simple matter. A Politburo member sent south in 2017 to take command of the city's party organization was not up to the task. Exasperated, General Secretary Trong arranged Nguyen Thien Nhan's abrupt replacement in October 2020. Nhien's successor was Nguyen Van Nen, an obscure official who'd been Trong's chief of staff in the party's central office.

Nen seems to be made of sterner stuff. In former days he was the chief of police in Tay Ninh province, just northwest of HCMC. Earlier this year Nen made headlines by declining to stand for sure election to Vietnam's National Assembly, a side job that's normally coveted for the opportunity to hang out in Hanoi with the rest of the political elite for two months each year. Nen tantalized reporters by saying that he had more important work to do in HCM City.

That important work notably involves the municipal police, long regarded as a compliant asset of the Hai Gang. Now a new chief had been appointed, Le Hong Nam, another outsider. He's an officer known for his past successes against racketeers and smugglers — in other words, an ideal ally for Nen.

On December 16, 2020, the municipal police arrested and charged Hai's long-time associate Tat Thanh Cang, the principal deputy secretary of the city’s party committee, with "mismanagement of state assets."

Then, in March, the Politburo stripped Hai and Le Hong Quan, his long-time deputy in the Hanoi party organization, of their past party titles and awards -- a step that clears the way to try them in the criminal courts. Quan is said to have turned state's evidence. Vernacular newspapers report more vigorous activity by government investigators. Comments sourced to 'state authorities' suggest that dozens of senior and mid-level HCM City party officials are likely to be busted.

Seeking to Leverage Success

HCMC Party Secretary Nen and his colleagues are leveraging their initial successes against the Hai Gang as they campaign to retain more of the tax revenues collected in HCM City. Local officials gave Prime Minister Pham Minh Chinh an earful of reasons why when he made a working visit in May.

Like his hosts, Chinh seemed persuaded that HCM City needs a bigger budget. He told them they'd made a good case, and urged them to press it on individual ministers. He called HCM City "the nation's locomotive" – kindly words that echoed similarly sympathetic comments by Chinh's predecessor, Nguyen Xuan Phuc, who is now Vietnam's 'State President.'

Both Nen and Chinh are new in their jobs and are also newly-minted members of the politburo, the party's 18-person standing committee. Up until last October, when both worked in the Party's Central Office, Chinh, chief of personnel, was Nen's nominal subordinate.

Chinh's visit to HCMC was his first foray out of Hanoi as prime minister. Significantly and perhaps deliberately, another politburo member arrived from Hanoi only a week later: Pham Đinh Trac, Trong's new deputy on the party's anti-corruption task force. Trac brought a very blunt and public message: by the end of June, he said, HCM City authorities must complete action on the scandals that have roiled municipal politics for years. Trac assured his audience that more foot-dragging would compel the central government to take over the investigations.

First, Trac addressed the seven sq. km Thu Thiem New City project. Launched two decades ago and mired in self-dealing and misappropriation, the project is still far from completion. This is an urgent matter, Trac stressed. The dossier published by central government inspectors two years earlier is damning and Hanoi's patience is exhausted. Now the HCM City authorities "must recover and refund more than 26 trillion dong (about US$1.14 billion) advanced to the project from the State budget." HCM City must also mobilize another four trillion dong to repay loans from the State Bank.

That wasn't all. By the end of June, Trac said, the Hanoi authorities also expect to see speedy action to rectify the profitable mismanagement of a number of land development schemes by state enterprises under HCM City control. All of these schemes, a bit of research reveals, are linked to confederates of disgraced "Boss Le Thanh Hai." It's looking like Hai, along with Quan, Cang, and others still unarrested – will be behind bars before long.

Carrots and Sticks

Pham Dinh Trac didn't visit HCM City late last month in order to energize Nen. Not at all: the new deputy in Trong's war on intraparty corruption and moral backsliding was sent to shake a big stick on Nen's behalf. He came to dispel illusions that Hanoi might allow things to go on as before.

A carrot that's intended to complement Hanoi's big stick is quite likely the tax break mentioned above, monies that Nen and his new constituents must have to re-energize the build-out of urban infrastructure.

A long list of municipal projects is starved for public funds, including (of course) Thu Thiem, which was conceived as a park and canal-filled Vietnamese clone of Manhattan or Pudong. There's also the nine-line municipal light rail network that's about a decade behind schedule, and a new international airport that's still just a dream.

Necessarily, because much of HCM City is only a meter or so above mean sea level, there's an urgent need to build costly defenses against rising seas. The health and education infrastructure that make a city great and social goods like clean water and waste disposal need better funding, too.

Winning permission to keep and use another five percent of the taxes collected in HCM City won't fix all these needs, but it can make them considerably more fixable.

David Brown is a former US diplomat with wide experience in Vietnam and a regular contributor to Asia Sentinel

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