Vietnam is experiencing its highest level of international attention in nearly a decade. The country is going through a major leadership transition, starting with the Communist Party Congress that took place in January. The all-important political event saw the surprising departure of Prime Minister Nguyen Tan Dung, arguably one of Vietnam’s most powerful political figures since 1975. Nine Politburo members and 14 cabinet ministers also retired. The only exception to the retirement age requirement of 65, made specifically for this Party Congress, is General Secretary Nguyen Phu Trong, who will retain his office for another term. A new era is setting in with the inauguration of the other three most important positions, namely the president, prime minister and national assembly chair. Collective leadership is to be enforced in this term, and the new team will work to ensure stability in the country.
National Assembly First Chairwoman Nguyen Thi Kim Ngan is well regarded and expected to keep pushing economic reforms. President Tran Dai Quang’s background in security fits well in his new role as commander-in-chief of the military and chairman of the Council for Defense and Security. Prime Minister Nguyen Xuan Phuc’s leadership style is perhaps a more open question for now, but his experience in domestic affairs and anti-graft will likely keep reforms apace. With 14 out of 22 ministers being new to their posts, the government is geared for widespread changes. Some movements can already be observed at the local level, with a strong agenda for administrative reforms in Ho Chi Minh City run by the new city Party Chief Dinh La Thang, the “populist” former transportation minister. The actual outcomes, however, remain to be seen.
Striking the Critical U.S.-China Balance
Contrary to the popular oversimplification that Gen. Sec. Trong is pro-China while former Prime Minister Dung is pro-U.S., Vietnam is unlikely to court its northern neighbor any more than it has in the past decade. Vietnam strictly follows non-alignment foreign policy as part of its “Three-Nos” principle – no military alliances, no foreign military forces on Vietnamese territory, and no reliance on allies in order to maintain self-defense. As such, Vietnam will continue its current hedging strategy of maintaining relations with its two most important partners. While geography, history, and culture all constrain Hanoi to maintain harmony with Beijing, tensions in the South China Sea are undeniably pushing Vietnam closer to Washington. This hedging policy will have direct implications on Southeast Asia strategic dynamics, especially on states that are also claimants to the South China Sea.
President Barack Obama is scheduled to visit Vietnam in May, his first trip to the country as president. After Trong’s historic visit to Washington last summer, Hanoi is again hopeful and excited for a new bilateral agenda, extending from commercial deals to Agent Orange relief to defense cooperation. A complete lifting of the lethal arms sales embargo may be far away, but further commercial exchange, especially in terms of defensive capacity building, is not unimaginable.
While observers have opined that Dung’s absence from the cabinet may slow reforms, the country’s consensus-based decision making system will work to maintain a commitment to global trade and investment under the new leadership regime. In the context of the Trans-Pacific Partnership (TPP), arguably the most important deal for Vietnam economically and strategically, upholding a high standard of business conduct is a matter of government survival in the country’s new era.
Tackling Corruption: A Matter of Party Survival
One certainty under the new leadership is a renewed effort to stem endemic corruption that plagues the economy. Shortly after the conclusion of the January Party Congress, an investigation led to the arrest of two board members of the Bank for Investment and Development of Vietnam (BIDV), a large and politically important state-owned enterprise (SOE). Further rounding up of high-level executives on charges of corruption is to be expected in the months ahead.
With Vietnam further ensconced in its lower middle-income status, international aid, currently an important source of external funds, is expected to decline. Foreign investors will be increasingly selective in placing their capital; therefore, transparency and ease of doing business must be prioritized to maintain growth dynamics. Expectations should be limited, however, as cleansing the SOEs and personal interests hard-wired into the system will be a grueling task.
Unprecedented Contest for Parliamentary Seats
Domestically, Vietnam is potentially seeing additional steps towards greater democratic governance, with the upcoming National Assembly elections registering the highest number of self-nominated candidates to date. This may be a signal to the U.S. on long-standing human rights disagreements, with the state-run media being relatively open in the lead-up to the elections. While a promising sign, the degree the government is willing to open the door of the legislative body to independent candidates is still unclear, with the Party-controlled Fatherland Front vetting which candidates make the final ballot. On this front, political openness in Vietnam retains very tight limits.
