Vietnam – Hardliners Flexing Their Muscle

In August, President Tran Dai Quang made his first public appearance in four weeks, ending speculation that illness or upheaval within the ruling CPV might trigger a near-term reordering of the political hierarchy. Quang is the second-ranking member of the Politburo, subservient only to CPV General-Secretary Nguyen Phu Trong, and his main role is to act as a mediator between the conservative Trong and the reformist Prime Minister Nguyen Xuan Phuc.
Although Quang’s government role is mostly ceremonial, the election of the former minister of public security to the presidency in early 2016 indicated that political liberalization was not under consideration by the CPV. Indeed, since the reshuffling of the party leadership last year, the government has cracked down on government critics, a fact that has been noted by democracy advocates via social media, much to the displeasure of top officials.
During the president’s absence from the public eye, state media published an article in which Quang called for tighter regulation of the Internet, citing a cyberattack involving the WannaCry virus, which officials have blamed on hostile foreign forces seeking to undermine the Vietnamese state. Such statements could portend the adoption of a Chinese-style approach to controlling Internet content that would have negative implications for businesses that rely on open access.
The government’s simultaneous crackdown on corruption, which is undoubtedly merited as a general rule, both in terms of upholding the legitimacy of the CPV’s monopoly on political power and creating a more hospitable climate for business, nevertheless holds the potential to heighten political risks. There are clear signs that the anti-corruption campaign is being used to purge reformist allies of former Prime Minister Nguyen Tan Dung, with the aim of consolidating the control of the CPV’s conservatives ahead of the next leadership reshuffle in 2021.
In one case, Vietnamese agents effectively kidnapped the former chief executive of the construction subsidiary of state-owned PetroVietnam, who fled to Germany to escape what he claims are bogus corruption charges. The incident has touched off a diplomatic dispute with Germany that will complicate Vietnam’s relations with the broader EU, possibly affecting a trade agreement that is scheduled to come into force next year.
To date, the political maneuvering has not been accompanied by any significant retreat from the economic liberalization program currently being overseen by Prime Minister Phuc, Dung’s protégé and the third-ranking member of the Politburo. The government is planning to sell the state’s full stake in more than 100 smaller enterprises, while permitting partial private ownership in 137 strategic enterprises, including the state dairy firm, Vinamilk, and Sabeco (a brewer).
The continued support for equitization reflects the acknowledgment even among conservatives that the public-sector debt burden is increasing at an alarming rate, and the large fiscal deficit must be brought under control. The apparent consensus on economic policy prompted an upgrading of Vietnam’s debt rating earlier this year, and will reduce the near-term danger that a perceived increase in political risk might lead to weaker inflows of FDI.
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