By: David Brown

Late last month, as Vietnam’s legislature prepared to enact a law establishing special enterprise zones at three locations on the nation’s long coast, a firestorm of protest erupted on Facebook.

The Facebookers weren’t much upset by the very generous incentives, including 99-year land leases, that Prime Minister Nguyen Xuan Phuc and his Ministry of Planning and Investment propose to grant foreign investors who bring advanced technologies to the new zones. That is old news and only slightly controversial.

The thrust of popular anger, repeated in thousands of posts, was that the plan mortally threatens national security. It’s argued that the great majority of the investors in these SEZs would be Chinese firms, and their privileged installation on three strategically important coastal sites would form a ready support base for invading forces from the north.

Many netizens speculated also that shady “real estate interests” would profit handsomely from such treachery.

Touching the third rail

Nothing upsets the Vietnamese public more than worry that their Communist leaders are cutting secret deals with China. To use an American metaphor, China is the third rail of the nation’s public life, a subject so controversial that simply touching it can incinerate a political career.

On June 10, two days before the legislature was to vote, crowds of demonstrators turned out to protest in Hanoi, Ho Chi Minh City and elsewhere. In one city, Phan Thiet, they seized and trashed the offices of the local Communist Party committee.

In the event, the protesters had cause to celebrate, for on the eve of the demonstrations the prime minister pulled back the SEZ bill for further study. Phuc said he had been persuaded by “listening to enthusiastic and responsible contributions of members of parliament, scientists, economists, experts, voters and the people.”

In short, Vietnam’s government has backed away from a battle it didn’t need to win. That kind of good sense has been a distinguishing mark of Prime Minister Phuc’s tenure.

Phuc has outperformed expectations since taking charge of Vietnam’s government in the spring of 2016.  As muted as his predecessor, Nguyen Tan Dung, was – by Vietnamese Communist standards – flamboyant, Prime Minister Phuc’s steady hand at the helm is, say the nation’s economists, just what Vietnam needs to leverage its current, and transient, demographic advantage.

Leading from inside

Phuc (pronounced ‘Foop’, by the way) is not Vietnam’s supreme leader. Nor, unlike Dung, does Phuc aspire to replace Nguyen Phu Trong as party leader. He seems content to manage the national government, executing policies and initiatives that align with guidance from his peers in the 18-member party politburo.

Perhaps because General Secretary Trong and his closest colleagues have been preoccupied with flushing opportunists – mostly Dung’s people – and other backsliders out of the party, Phuc has had a fair opportunity to play his own hand.

Trong et al. are likely correct in their belief that the Communist Party’s right to rule Vietnam for years to come depends importantly on their being perceived as the legitimate and incorruptible heirs of the cadre who vanquished first France and then the United States. Whether they can pull it off is another matter entirely, but it is not central to this story.

Growing wealth could threaten party

No less critical to the future of one-party dictatorship in Vietnam, however, is evidence that Vietnam is growing wealthy. Phuc’s task is to demonstrate that ordinary citizens, not just the well-connected, can prosper under communist rule. He aims to persuade foreign enterprises to set up cutting-edge manufacturing operations in Vietnam. He and his advisors, cheered on by the World Bank, have embraced analysis that investor-friendly policies can sustain annual growth at or above its current near 7 percent rate for at least a decade to come.

Vietnam’s commitment to the globalization of its economy is manifest in free-trade agreements with the European Community, Japan, Korea, the US and other advanced economies. Western businessmen acclaim the array of incentives that Hanoi offers investors. Many of these originated, to be sure, in Dung’s decade at the helm.

However, it is Phuc and his closest associates who are credited with turning words – such as promises to streamline and speed customs clearances — into action. Whereas the Dung government was notorious for institutionalized corruption, Phuc’s government seems notably cleaner and more efficient.

A senior staffer of Hanoi’s premier think tank, the Central Institute for Economic Management, told me in February that under Phuc, government policy is better coordinated and implemented. “We’ll see steady implementation of reforms to free up markets for goods and services, and further,” he said, “divestiture of state-owned enterprises is real. It’s no longer just hot air.”

Foreign investors pour in

Not surprisingly, foreign investment has been pouring into Vietnam, led by some of the biggest names in digital electronics. Foreign-owned companies in 2017 generated more than 20 percent percent of Vietnam’s GDP and 71 percent of its exports.  They are providing plenty of assembly jobs for a fast-growing blue-collar workforce.

Prime Minister Phuc and his Minister for Planning and Investment, Nguyen Chi Dung, speak often about preparing Vietnam for “the Fourth Industrial Revolution” – the notion popularized by World Economic Forum staff that the successful economies of the fairly near future will be those that anticipate and adapt to a coming “fusion of technologies that blur the lines between the physical, digital and biological spheres.”

Phuc pins his hopes on Vietnam’s private sector, which has languished for years while state funds sustained the nation’s notoriously inefficient state-owned enterprises. “We will try to put in place the most favorable policies and create the most favorable environment…We will try to maintain favorable conditions for businesses, a healthy environment for businesses and further international integration, especially support for the private sector, and nurture innovation so that we can enhance GDP growth for many years to come.”

So far, however, linkages between the foreign firms and Vietnamese manufacturers are rare. “It’s a headache,” explained my economist friend. “Because the WTO forbids local content requirements, we can’t compel foreign investors to integrate with our private sector.

Concerns over tightening security

Notably, among the demonstrators who tied up traffic in a dozen cities on June 10, some were also agitating against pending ‘internet security’ legislation that would force social media providers like YouTube and Facebook to share their data on Vietnamese users at police request.

The internet security bill now before Vietnam’s national legislature points up the limits of Phuc’s authority. What the regime calls ‘internal security’ seems to be outside his remit, even though domestic businessmen, as well as the foreign social media giants, argue that the pending legislation will be bad for the economy.

At the same time that Vietnam has become a poster child for free trade-powered growth, it has cranked up pressure on its dissident activists. Folks who campaign for heresies like multi-party democracy are being rounded up and, after the trappings of a trial, receiving unusually long prison sentences.

In the Dung decade, dissidents who pushed the boundaries of permitted speech were also harassed and sometimes jailed, to be sure. Now, however, police tactics are so brutally retrograde that a close observer could conclude that (to the extent that the sprawling Ministry of Public Security is beholden to any other authority) it is not Phuc but rather hardliners in the party apparatus who set their agenda.

Repression of dissidents probably isn’t of much concern to foreign investors.  Nor, as long as their standard of living keeps rising, is it likely to disturb the great majority of Vietnam’s citizens.

David Brown is a former US diplomat with extensive knowledge of Vietnam. He is a regular contributor to Asia Sentinel.