Vietnam’s New Leadership and Its Prospects for Relations with China
By Alvin Cheng-Hin Lim

Vietnam’s New Leadership and Its Prospects for Relations with China

Apr. 18, 2016  |     |  0 comments

On April 7, 2016, Vietnam’s leadership transition was completed when the National Assembly elected Nguyen Xuan Phuc as the new Prime Minister, replacing Nguyen Tan Dung, whom the National Assembly had voted the previous day to remove from office three months before the end of his term. Dung, who had come into office in 2006 during the global financial crisis, had overseen Vietnam’s recent growth under the conditions of capitalist globalization. Indeed, a Pew Research poll in 2014 found that 95 percent of the respondents in Vietnam felt that life was better under the capitalist free market, which ironically made nominally communist Vietnam the country that was the most supportive of capitalism of all the countries surveyed, and this deep public confidence in Vietnam’s capitalist path can be seen in the recent 11 percent average monthly growth in consumption that has been driven by consumer purchases of automobiles and real estate (Keck, 2014; Wilson, 2016).

However, Dung’s attempts to reform the country’s inefficient state-owned enterprises (SOEs) were expensive failures — especially in the cases of corruption-ridden SOEs like the Vietnam Shipbuilding Industry Group and Vietnam Shipping Lines — and in January 2016 he lost a challenge at the 12th National Congress of the Vietnamese Communist Party (VCP) to unseat General Secretary Nguyen Phu Trong (“Vietnam’s prime minister,” 2012; “Vietnam’s Prime Minister,” 2016). While the media has portrayed General Secretary Trong’s re-election as a victory for the conservative pro-China faction of the VCP against Dung’s pro-US reformist faction, experts note that the reality is more complicated:

“Trong’s approach to China is soft in public but firmer behind the scenes. He is cautious about relations with the United States but he also supports closer ties with Washington and joining the Trans-Pacific Partnership (TPP).”

(Vuving, 2016)

Indeed, experts expect the new leadership to maintain the thrust of former Prime Minister Dung’s reform agenda (Petty & Nguyen, 2016). The International Monetary Fund in particular has highlighted the need for Vietnam to complete its reforms of its banking sector and SOEs, especially given the vulnerability of the country’s open economy to external challenges like the global collapse in commodity prices as well as China’s economic slowdown (Boudreau, 2016). The new leadership in Vietnam will not only have to reboot the earlier failed restructuring of the SOE and banking sectors, but will also have to implement the legislative and administrative measures mandated under Vietnam’s free trade agreements (FTAs) with its trading partners, especially the TPP, including the removal of tariffs and other trade barriers, as well as the establishment of a common set of rules with its FTA partners on labor standards and other legislative benchmarks (Tan, 2016). Should the TPP successfully come into effect, the new preferential access Vietnam’s export sectors — including the seafood, textile, and apparel industries — will gain to the US and other markets will be expected to generate USD 36 billion, or an additional 11 percent of GDP growth, for Vietnam by 2030, hence the Vietnamese government’s successful passage and implementation of the necessary legislative and administrative measures for the TPP and other FTAs will be crucial for the country’s economic future (Boudreau, 2015).

While Prime Minister Phuc has considerably less experience than his predecessor, he is also less associated with the taint of corruption, a problem which had expanded in Vietnam during the recent reform era (Davies, 2015; “Vietnam’s Prime Minister,” 2016). Indeed, in his inaugural address as Prime Minister to the National Assembly, Phuc announced that the anti-corruption campaign would be one of his top priorities (“Vietnam’s newly elected,” 2016). Phuc will likely be supported in his efforts by VCP General Secretary Trong, who was deeply involved with the anti-corruption campaign during the Dung era:

“Shortly after being elected VCP General Secretary in 2011, Trong launched a major campaign aimed at uprooting corruption. The main target of this anti-graft drive was Prime Minister Dung.”

(Vuving, 2016)

Phuc will likely also receive support from the third member of the ruling triumvirate, Vietnamese President Tran Dai Quang, who was elected to office by the National Assembly on April 2, 2016. President Quang’s career path was with the Vietnamese government’s internal security apparatus, including a stint as Minister of Public Security, and the party’s selection of someone with his policing background to be Head of State suggests a desire among the party members to strengthen the Vietnamese party-state though internal housecleaning, especially after the recent excesses of capitalist expansion (Petty, 2016; “Newly-elected President,” 2016). While Vietnam’s recently emboldened voices of dissent may expect to face a clampdown under the new leadership, would the new triumvirate of President Quang, Prime Minister Phuc, and VCP General Secretary Trong also usher in a sweeping anti-corruption campaign on the scale of that introduced by President Xi Jinping in China (Chen, 2016; “Communist Vietnam,” 2016)?

With respect to China, the South China Sea promises to continue to be a source of tension in the Sino-Vietnamese relationship. Already, just a few days after Nguyen Xuan Phuc’s election as Prime Minister, the Vietnamese government had to call on their Chinese counterparts to remove the controversial Haiyang Shiyou 981 oil exploration rig from contested waters in the Gulf of Tonkin; the placement of this very same rig at the contested Paracel Islands in 2014 had then triggered violent anti-Chinese protests in Vietnam. Indeed, the Vietnamese government further called on China to “not take additional unilateral actions that further complicate the situation” in their contested maritime zones. However, the new Prime Minister’s pledge to protect Vietnamese sovereignty will likely be tested by China’s growing assertiveness on its claims in the South China Sea (“Vietnam demands,” 2016).

The new Vietnamese leadership may also find itself caught in an armed confrontation between China and the US, especially with both major powers accelerating the technological development of their naval and submarine capabilities.

China’s long-distance fishing fleet in particular is likely to trigger confrontations in the contested maritime zones, especially when they encroach on fisheries claimed by Vietnam and the other claimant states as exclusive economic zones. The increasing security and logistical support provided to these fishing vessels by oil resupply ships and the Chinese coast guard, not to mention the network of island bases China has controversially established across the South China Sea, allow these approximately 2,000 fishing vessels to conduct their activities deeper in contested waters and with greater confidence, but at the same time increasing the chances of armed confrontations occurring between Chinese coast guard and naval vessels and those of the other claimant states (Mollman, 2016).

The new Vietnamese leadership may also find itself caught in an armed confrontation between China and the US, especially with both major powers accelerating the technological development of their naval and submarine capabilities, including breakthrough technologies like the US Navy’s development of unmanned autonomous naval vessels. The application of such disruptive military technologies could dangerously intensify the impact of possible armed confrontations in the South China Sea (Tucker, 2016). The upcoming May 2016 visit to Vietnam by US President Barack Obama should help clarify the foreign policy direction of the new Vietnamese leadership, especially in the increasingly fractious context of growing Chinese and US assertiveness in the South China Sea (Xuan, 2016).

At the same time, the new Vietnamese leadership cannot afford to allow its geopolitical tensions with China to cloud their productive economic relationship. Sino-Vietnamese bilateral trade reached USD 67 billion in 2015, and Chinese firms are among those which are expected to invest in new manufacturing plants in Vietnam to take advantage of the preferential access to foreign markets that will be granted under the TPP and other FTAs. Should domestic politics in the US lead to the non-ratification of the TPP, China’s economic partnership will become even more important for Vietnam, especially with the government facing economic challenges from its USD 2 billion budget deficit, as well as the loss of revenue from the global collapse in oil prices and a drought in the rice-producing Mekong Delta (Boudreau, 2015; Boudreau & Nguyen, 2016).

Observers will also be waiting to see if the new Vietnamese leadership will be open to partnering with China on a “Belt and Road” transportation megaproject, in particular the long-planned line of the proposed Pan-Asian high-speed railway network running from China through Vietnam and Cambodia into Thailand (Lim, 2015).


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