political situation in vietnam

176

ADAM FFORDE

Vietnam in 2011

Questions of Domestic Sovereignty

ABSTRACT

Tensions in the international arena are linked here to problems in contemporary Vietnam. Eroding domestic political authority is related to the lack of political recon-struction to suit a market economy and an increasingly open society. At the close of 2011, it appears that there is as yet no clear path forward.

KEYWORDS: Vietnam, politics, international relations, economy, sovereignty

INTRODUCTION

For Vietnam, 2011 was a year of gathering and unprecedented tension as unresolved and deep-rooted political issues harried politicians, bureaucrats, foreign investors, and the long-suffering population. The lack of effective political change suited to the contemporary requirements of a dynamic, diverse, and outward-oriented society of itself posed major questions to political actors about the capacity of Vietnam’s political system to rule the country effectively.

Manifest as macroeconomic imbalances, which returned around 2007 after more than a decade’s absence, economic problems such as rising prices hit living standards, while banking problems saw the politically unconnected face credit limitations as markets became increasingly subject to big fish with mar-ket power. This appeared to have little to do with any consistent state policy, and was driven by what various informed commentators saw as a collapse of coherent government. What survives is seen by many as a hollowed-out shell, going through various motions and exploiting a hard-pressed and corrupted public service that continues to struggle to serve the population.

Under these conditions, the level of contempt in which the political system, and leading politicians, are held is probably now at crisis levels. It is

Adam Fforde is Professorial Fellow at the Center for Strategic Economic Studies, Victoria Univer-sity, in Melbourne, and is also Principal Fellow (Honorary), Asia Institute, University of Melbourne. Email: <[email protected]>.

Asian Survey, Vol. 52, Number 1, pp. 176–185. ISSN 0004-4687, electronic ISSN 1533-838X. © 2012 by the Regents of the University of California. All rights reserved. Please direct all requests for permis-sion to photocopy or reproduce article content through the University of California Press’s Rights and Permissions website, http://www.ucpressjournals.com/reprintInfo.asp. DOI: AS.2012.52.1.176.

FFORDE / VIETNAM IN 2011 • 177

certainly far higher than in earlier periods of major crisis, such as the late 1970s (when the 6th Plenum of the Vietnamese Communist Party [VCP] opened the doors to commercialization of the economy); the mid-1980s (when the Sixth Party Congress announced the “doi moi” [renewal] policies that led to de-Stalinization); and 1989–91, when the collapse of the Soviet Union saw the end of central planning, emergence of rapid growth and a market economy, and the decision to avoid constitutional change.1

The regular and constitutionally held Party Congress was held in January 2011.2 Despite presiding as premier over massive corruption at VINASHIN (Vietnam Shipbuilding Industry Group),3 a large state conglomerate that had used favored access to credits to overextend into areas such as property, Prime Minister Nguyen Tan Dung remained in his post. Many observers associated Dung with forces that preserved, despite great opposition from within and outside the establishment, Chinese investments in bauxite in the Central Highlands, a region of major security significance long given high priority in national defense. The position of state president went to his rival, Truong Tan San, also a southerner with close connections to state business. The reportedly amiable, recently widowed, two-term party secretary, Nong Duc Manh, was replaced by Nguyen Phu Trong, a northerner with a back-ground in ideological matters.4

The Politburo structure that emerged from these processes showed depar-tures from Vietnamese Communist institutional norms.5 These, until the previ-ous Congress, had matched the internal power-balancing of ruling Communist Parties seeking to avoid the risks of violence associated with Stalin’s and Mao’s reigns by ensuring that important constituencies were always represented at the peak. Indeed, while maintaining stability and preventing concentrations

1. A Vietnamese speaker, the author was in Vietnam all three times. 2. Unlike some other ruling Communist Parties, the VCP has tended to act largely “constitution-

ally” in the sense of following its own formal rules, governing, for example, the timing of congresses, how formal decisions are taken, and so on. This includes the ways in which various “front” organiza-tions, such as the Mass Organizations, are treated as ways in which the Party carries out the “direct rule” of the country laid down in the Constitution of the state, the Socialist Republic of Vietnam.

3. There is much information available on this scandal. Whatever the truths of the matter, the central political issue is that nobody in the top political leadership has suffered significantly from the losses of billions of U.S. dollars, and in the eyes of most Vietnamese, so far there has been no firm action to deal with the underlying issue of out of control state businesses.

4. It is striking that Northern regional leaders with local popular authority were not chosen, or not available. Trong, though, was Hanoi party secretary from 2000–06.

5. A senior politician often mentioned as “clean” is the new minister of Finance, Vuong Dinh Hue.

178 • ASIAN SURVEY 52:1

of power, this focus upon “structure” (co cau) meant that after the emergence of a market economy, outsider political groups had either to buy themselves in (e.g., business interests outside the state sector) or gain attention through threats or the reality of violence (such as the rural unrest of 1997).

There were three main indicators of a shift from “structural” internal representation toward patterns reflecting new power relations. First, the Party general secretary is now seen as subordinate to the prime minister, who is therefore relatively free of the institutional constraints of the formal system. Second, central Vietnam is, again, no longer represented among the top three positions. It is from the center that wartime leaders have often come. Third, the Foreign Ministry, a crucial organ in managing the gathering pressure from China, no longer has a position in the Politburo. The new minister, Pham Binh Minh, son of the late and formidable former Foreign Minister Nguyen Co Thach, is relatively young and politically weak.

SOCIAL CONDITIONS

Social conditions in 2011 were strongly influenced by three factors:

the economy. Gross domestic product (GDP) growth slowed, and for 2011 a rate of around 5% is likely (nearer 3% on a per capita basis). Jobs are still available, but tensions are increasing. Rapid inflation near 20% has rattled consumer confidence and dented the real incomes of many Vietnamese.

ongoing levels of state confusion and corruption. On a daily basis, Vietnamese families must still engage with state officials who require bribes or income supplements (their own formal incomes are too low) in areas such as health, education, business activities, and so on. Business people without good political connections (that is, usually, who are not relatives of politicians) often find that they are squeezed. Access to bank credit or even bank deposits is difficult for many, and by end-year there were reports from local Vietnamese businesses that “the banks have no money.”

continuing relative prosperity and openness. Despite their troubles, most Vietnamese continue to experience living conditions that are unprecedented, with open overseas access. This can be seen in many areas, not least the vastly improved nutritional status of the rural population.


OTHER ISSUES

There is some limited evidence that the level of violence employed by Viet-nam’s security forces is slowly increasing, perhaps leading to the emergence of groups willing to use violence on a regular basis, possibly in order to provoke a popular response. The capital, Hanoi, saw small public demonstrations outside the Chinese embassy. The background to this appears as a series of events leading to increased tensions, with Vietnamese foreign policy makers actively seeking and securing closer multilateral support from countries such as India, Japan, and the U.S. Indeed, some observers noted that the pattern of visits by Vietnamese politicians after the Congress did not take the usual pat-tern of giving priority to China. There are also counter-arguments, consistent with the continued acceptance by the Vietnamese government of Chinese investments (the lead Chinese company is CHALCO, a massive state-backed organization) in the Central Highlands Bauxite project, that this pattern is a front to hide penetration of Vietnamese politics by Chinese interests. It is hard to say, but the pattern of events, and the collapse of political authority, is often seen by Vietnamese as “strange” (la).6

VIEWS AND OPINIONS

In the run-up to the Party Congress, as is normal practice, the Party circulated draft reports and documents. In late 2010, a group of very senior establish-ment intellectuals and retired politicians met to comment on them. Criti-cisms show an extremely low level of respect for the political process and the quality of documents. The directions of the criticisms varied, but the com-mon factor was the sense that the Party’s politics did not command respect. Many argued that under current conditions Vietnam could not compete in the international economy, linking the political situation to economic dete-rioration. It was remarked that the amount of investment required to gener-ate additional output as indicated by the Incremental Capital-Output Ratio (ICOR) had increased from around 2.2 in 1991–95, just after the emergence of a market economy, to more than six in 2006–10.7 A suitable Vietnamese

6. Part of the national mood may well be that many if not most Vietnamese know their various histories, where, in order to engage in painful struggle to regain or preserve national independence, it was first necessary to put their own house in order to create an effective national leadership.

7. The ICOR gives the ratio between the level of investment and the associated increase in GDP. More of the former, for relatively less of the latter, usually implies decreasing inefficiency. For a sound


development model had not yet been created and was not evident in the Party Congress documents. These economic failures were linked to political prob-lems: “We say that the Party holds power—but how does it do this? Whose power does it hold? And who gives that power to the Party?”8

But central to these discussions was the question of capitalism, and how capitalists in Vietnam related to political power. It has indeed been argued that Vietnam’s emergent capitalism is a capitalism of factions, highly segmented. Under such conditions, traditional Vietnamese concern with the mobilization of talented people, and the inability of bad political regimes to do so, naturally comes to the fore.9

While many foreign commentators refer to the increased power of the National Assembly (NA), among them there was little confidence in the assembly’s ability to resolve problems. Linking various issues together, it was said that while national security had not been mentioned “when these matters were addressed by the NA, problems of the Central Vietnam bauxite project, of the renting-out of forest, and of foreign workers, had not been resolved.”10 In the words of another critic, “I am embarrassed when it is said that the NA is the supreme organ of power—what powers does it actually have, that it be said to be the supreme organ of power?”11

Extremely strong criticism came from Tran Phuong, one-time deputy prime minister, who argued that the entire ideological position of the Party, its claim to be socialist, and requirement that Marxism-Leninism be an oblig-atory subject in schools and universities, rested on sand: “I ask you, what is socialism? And we know that our answers are a swindle on other people (bip

technical analysis of the medium-term economic situation, see Nguyen Ke Tuan, ed., Kinh te Viet nam 2010: Nhin lai mo hinh tang truong gai doan 2001–2010 [The economy of Vietnam in 2010: A re-examination of the 2001–2010 growth model] (Hanoi: Dai hoc Kinh te Quoc dan [National Eco-nomic University Publishing], 2011). The study points to the poor quality of economic growth and therefore the need for focused political measures to ensure that issues such as public goods produc-tion, business restructuring, and efficient public investment strategies are, as they are not yet, solved.

8. I refer here to transcripts in Vietnamese of a high-level workshop held to discuss the Party Congress document in October 2010. I have left the precise source anonymous.

9. Here, in a country of high literacy, reference was made to the TV series Ly Cong Uan. Chinese-directed, its interpretation of Vietnamese history met strong attacks from Vietnamese historians in the face of proposals that it be shown on prime-time Vietnamese television. See, on the question of the employment of people of talent, Nguyen Trung, “Viet nam va van de su dung nguoi tai trong giai doan hien nay” [Vietnam and the problem of the use of people of talent in the current stage], Thoi Dai Moi [New Era], no. 22 (August 2011), Hanoi.

10. See fn. 8.11. Ibid.


nguoi khac). . . . This is not socialism—are we as good as Sweden and Norway? They are better than us . . . and what is written in the Party documents is wrong. . . . You cheat with these words (ong bip thien ha voi cai chu cua ong).”12 If such people argue that the “emperor has no clothes,” they appear to share their views with the mass of the population, though evidence is naturally, for reasons of security, hard to report.

Comments from the International Monetary Fund (IMF) at the informal mid-year consultations, if one reads through the polite surface of the text, show a similar sense that the government’s statements should not be taken seriously. The overall view was that “[i]nitial progress is encouraging but sig-nificant challenges remain.” This was largely to do with the familiar problems of inflation, excessive credit expansion, rent-creation, growth slowdown, and weak public goods production (see below)—all challenges for a country that has only just reached middle income status. Thus, the short-term priority is to “[s]trengthen the credibility of macroeconomic strategy,” the need is for the State Bank of Vietnam (SBV) to have “unambiguous political support” where a “political commitment to clear medium-term objectives” would be “an important initial step toward strengthening the credibility of the SBV’s monetary policy framework.”13

These strong statements indicate disbelief in the protestations of govern-ment spokespeople. A good indicator of this is the IMF’s call for reliable data: it is well known that there is no accurate data available on state businesses, whose accounts and asset statements are notoriously unreliable.14 As men-tioned above, the prime minister, reappointed at the recent Party Congress, is closely linked by many analysts to these large state business interests such as VINASHIN. Whether this is true or not, it points to the severe erosion of political authority.

Although establishment policy-thinkers and the IMF are deeply concerned, we can find articulation of similar views among long-term foreign investors,

12. Tran Phuong was a deputy premier in the 1980s, is said to have been a district Party leader in his late teens, and played an important role in the 1980s transition to a market economy.

13. IMF report, “Informal Mid-year Consultative Group Meeting,” Ha Tinh City, June 8–9 2011, <http://www.imf.org/external/country/VNM/rr/2011/060811.pdf>.

14. Fforde 2009 referred to the report of an NA committee tasked to investigate this area, reporting that neither the Ministry of Finance nor any other state organ would say that they had reliable information. See Adam Fforde, “Luck, Policy, or Something Else Entirely? Vietnam’s Economic Performance in 2009 and Prospects for 2010,” Journal of Current Southeast Asian Affairs 28:4 (2009), pp. 71–94.

http://www.imf.org/external/country/VNM/rr/2011/060811.pdf


some of whom have been involved since the emergence of a market economy in the very early 1990s. In 2012–13, a number of these management invest-ment funds may be wound up for Vietnam. Worries about the weak stock market and the likelihood that the profitable management fees derived from these funds would end with their termination were expressed at a workshop in August. Fund managers including Dragon Capital, VinaCapital, SGI Capital, and Saigon Asset Management all expressed concerns. If the expectation was that Vietnam was easily transitioning to middle-income status, then the issues would be how to manage increased long-term capital inflows.

Assessments in 2011 of domestic human rights issues deteriorated further, implying that the Vietnamese security apparatus continued to be used against a number of well-known targets in violation of international agreements and the Vietnamese Constitution. Details can be found on the websites of orga-nizations such as Amnesty International, Human Rights Watch, Reporters without Borders, and various Western foreign ministries.

The central issue, of course, is popular attitudes and likely actions. Here, information is naturally limited, and ready judgments are unwise. What can be said? So far, it is striking that there is little evidence that workers or peas-ants will be treated with anything other than great caution, not least at local level. Anecdotal and uncitable sources suggest that the population is not only rather well-armed (despite appearances to the contrary) but is well aware of how to find members of the security forces who might use excessive violence against the population.

THE RETURN OF A RENT-CREATING ECONOMY

The Vietnamese economy reveals a qualitative shift in political conditions over the past six years, in contrast to the 15 or so years that followed the emergence of a market economy in 1989–91. In a nutshell, from the early 1990s to around 2007, political conditions prevented too much rent creation: Vietnamese enjoyed relatively stable prices, and foreign currency and credits were largely available at single rates. For these reasons, the value of political relationships to businesses had more to do with how one acquired assets than how one then made money from them. This created a capitalist class with good political connections. At the same time, as the establishment intellectu-als above point out with considerable force, the formal political structures of neo-Stalinism were left largely intact. These structures were designed to


create balance between insider groups, partly to prevent “supreme leaders” from coming to power and killing insiders. No measures were taken to give formal political power to outsider groups, so naturally the most powerful—those with money—bought their way in.

By 2007, the resulting steady erosion of political coherence had reached the point where the political system could no longer prevent particular business interests from securing rents—resources available to them but not to others. Incoming capital was bought by the SBV on the exchange markets. But in order to protect the economy from inflation, the bank was then prevented from sterilizing the domestic currency they had created to buy it with. This would have meant that certain key businesses with important political con-nections would have had either to buy government bonds or make compul-sory deposits at the SBV. They did not want to do so, and were able to secure political support to flout the authority of the SBV.

Since then, the rules of the political game have changed profoundly. In ways very familiar to Vietnamese economists who understand the 1980s, state power is now used to create rents in various ways. Inflation erodes the value of savings and shifts value to certain asset holders; tensions in the foreign exchange market either lead to parallel markets (so that the state has cheap dollars to offer chosen businesses) or to attempts (very visible through 2011) to criminalize holdings of foreign currency by those not authorized to do so. Banks are pushed to give or extend credits to favored businesses, and non-repayment is at discretion, politically influenced. None of these interferences with free markets follow any coherent developmental logic (which is why the establishment intellectuals remark that there is no Vietnamese development model).

At the same time, public goods production remains subject to major criti-cism, as it has been for years, with no apparent shift in policy. Education, public health, transport, public hygiene, and so on are all areas of consider-able public discontent. Employers complain about high school, technical, and university graduates who do not know what they should. What was sig-nificant about 2011 was that these problems are now widely seen as indicative of a deep political malaise, contributing to the collapse of political authority.

Under these conditions, the response of the Vietnamese public is to avoid the domestic currency and focus upon investments in dollars and gold, with increasing desires to shift liquid assets overseas. Thus, the main tension in the Vietnamese monetary economy through 2011 was the shift against dong assets


internally, including an avoidance of bank deposits. Such behavior has not been seen since the 1980s and early 1990s, when the population also lacked confidence in the politics behind such institutions (at that time because of Communist desires to defend the state sector).

POLITICAL ANALYSIS AND OPTIONS

The situation seems to be one where only a political crisis can resolve the underlying issues of political authority. The options appear to be three: first is the continuing situation, where lack of political authority is seen to risk economic and political stability and make it harder to prevent increasing Chinese penetration. Second is an attempt to restore central authority by reinforcing the current tendency to combine use of the security forces with political links to business. In many ways, this would simply extend the push to reduce the Party’s constitutional checks upon the concentration of power. Third is some political development where political leaders with personal authority secure a political transition.15

CONCLUSIONS

In many ways, the situation in Vietnam may be seen as a severe erosion of domestic sovereignty (chu quyen doi noi), the prerequisite of the protection of international sovereignty (chu quyen doi ngoai), although few Vietnamese have so far articulated it thus. Here, Vietnamese is more accurate than English: the Sino-Vietnamese term chu quyen refers to a power that has a master (chu) who is subordinate to no other master—the political concept that there is, in the body politic, some authority accepted by all as superior to all.16 Under current Vietnamese conditions, the Politburo is meant to have this power (no matter what the Constitution says about the NA), and the evidence suggests to many that it in fact does not. It is striking how the current prime minister is often referred to as the senior politician in the country, yet formally he sits at the

15. Here, it is striking how the political leadership of Da Nang in Central Vietnam, one of the few cities directly under the central government, despite securing local personal authority, failed to extend this into the national political theater.

16. F. H. Hinsley, Sovereignty (Cambridge: Cambridge University Press, 1986). This refers to sovereignty as a political idea, reality being, of course, something to be studied and debated. As the Vietnamese political crisis develops, in ways that appear linked to debates about the relationships between society and government, Hinsley’s point of view appears increasingly relevant.


pleasure of the Politburo, and there the Party general secretary formally out-ranks him. These are all signs that the Vietnamese are increasingly concerned with their political system, still seen by many in the South as fundamentally illegitimate and by many in the North as by now irremediably corrupt.

If we now return to consider Vietnam’s foreign relations, including the maritime tensions with the People’s Republic of China, we can see how, for Vietnamese, issues of national sovereignty are in a fraught relationship with those of domestic sovereignty. It seems reasonable to assume that China’s rising levels of economic, military, and other forms of power, manifest across a wide range of areas, have to be treated by the Vietnamese as deeply worrying. This is especially so in the case of tensions over the disputed Paracel and Spratly Island groups in the South China Sea. The asymmetries in the relationship are hard to manage, but Vietnamese are long familiar with this, and stories of how to cope with external pressures from apparently far more powerful foreign powers saturate their histories. The conflicts with France and the U.S. fit into this overall set of narratives. But what exactly is worrying? This paper has argued that the central issue facing the Vietnamese now is not the external threat itself, but the sense that domestic politics are showing them that dealing with that threat will require major domestic political changes to restore an ability to manage that threat. And it is not clear just how this may be done.

political situation in vietnam

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