Vietnam: New Leadership and the Pressure for Economic Reforms
By Huong Le Thu

Vietnam: New Leadership and the Pressure for Economic Reforms

Apr. 25, 2016  |     |  0 comments

In the months leading up to January 2016, the international media paid increasing attention to the 12th National Congress of the Communist Party of Vietnam (CPV). Unlike previous congresses, this one witnessed a fierce power struggle between the two main personalities in Vietnamese politics: the incumbent Party chief Nguyen Phu Trong and the then prime minister Nguyen Tan Dung.

To the outside world, Dung has been portrayed as a “reformer” who is “pro-Western,” and who can breathe some changes into the regime. The norm in Vietnamese politics is retirement at the age of 65, which both leaders have exceeded: Dung by a year and Trong by 12 years. The age as a threshold had misled many analysts who eliminated the key candidates months before the Congress due to their birth certificates. But the results of the 12th National Congress, held from January 21-28, surprised many outside observers. Despite Dung’s relative popularity, high international profile, and projected image as a forward-thinking reformer, he failed to secure sufficient Party support.

Leading up to January, the fervent political mood in Vietnam had an “anything could happen” anticipation. After a week-long meeting behind closed doors, Trong was announced to have extended another term in office as general secretary of the CPV. Such a turn of the events had confounded Vietnam watchers, who are especially surprised at the nimble and effective manoeuvres of those who had been considered old and obsolete. A general takeaway from the congress was that Hanoi was not ready for any “drastic” change. As a response to the turbulent regional environment and growing pressure for reforms, the CPV decided to go for political continuity.

In June 2014, the Central Committee’s Decision No. 244 (signed by Trong) prohibited the candidacy of those who had not been nominated by the Politburo, successfully eliminating Dung from becoming Party chief. In his publicly disseminated closing remarks at the 12th Congress, the victorious Secretary General Trong registered his surprise at once again being entrusted with the responsibility of leading the Party, and that he had no other option but to continue to serve the country. Although there have been indications that this arrangement could only be for half a term, this remains an open question.

As a response to the turbulent regional environment and growing pressure for reforms, the CPV decided to go for political continuity.

After the Party chief position was settled, the process of power transition garnered an unusual amount of attention. The premature dismissal of the three of the four pillars at the end of March instead of mid-May sparked discussion of internal “pacification” within the CPV. As the controversy settled down, the newly completed leadership positions and cabinet provide a full picture of Vietnam’s immediate policy direction. On March 31, Nguyen Thi Kim Ngan was sworn in as the chairperson of the National Assembly — constitutionally the highest organ in Vietnam. Among the four pillars: Party (Secretary General), state (President), government (Prime Minister) and National Assembly (Chairperson), it is the National Assembly that technically has the impeachment mandate. Ngan — the first woman in this position — has acted as Deputy Chairperson to the National Assembly in the previous term. A member of the Politburo, Ms. Ngan was previously a minister of MOLISA (Ministry of Labour, War Invalids, and Social Affairs). Her experience will be important for the current set of challenges, including a range of reforms to regulations such as the labor law required for accession to the Trans-Pacific Partnership (TPP). The former chief of policy, Tran Dai Quang, has been appointed as the next head of the state. Dung’s former position has been taken over by the former deputy prime minister, Nguyen Xuan Phuc. Three new deputy prime ministers have been appointed, and Pham Binh Minh maintains his positions from his previous term as deputy prime minister and foreign minister.

It is expected that the old-new leadership will not introduce any drastic change, particularly with regards to external relations. With Pham Binh Minh continuing his portfolio, no revision will be made. Vietnam will continue to seek balance in the reality of growing Sino-US rivalry but will not lean towards either. Vietnam’s current approach in its claims for disputed islands in the South China Sea will be reiterated: peaceful and law-based resolution. Hanoi will also continue to enhance its internal balancing strategy while improving its military and maritime capabilities. In terms of soft balancing, Vietnam is committed to re-building the strategic trust with China. While the main line of defense and foreign policy is not likely to be changed, but rather continued, Vietnam will need to have nimble responses to turbulent external conditions — including China’s rapid militarization of the South China Sea.

Domestically, the new leadership will be facing even more challenges. Economic policies beg for a major update from the implementation of the Doi Moi reforms in 1986. To ensure full integration into the global economy, including fulfilling expectations of the TPP, Vietnam need to do some serious adjustments. These will include: restructuring State Owned Enterprises, curbing corruption, reducing bad debts, etc. There is high expectation of the TPP’s benefits for the Vietnamese economy, such as boosting the national GDP by stimulations to industries such as garments, footwear, seafood, agriculture, food processing, etc. In order to get there, the country need to face some challenges, including labor policy regulations and rules of origin. New labor provisions respecting freedom of association will be difficult to reconcile with Vietnam’s single state-sponsored labor union. Producers in several industries worry that the TPP’s environmental provisions could raise costs. Moreover, infrastructure development is essential. Limitations of the logistics sector in Vietnam have been known for a long time: weak and non-synchronous infrastructure, differences in legal system, cargo clearance, and administrative procedures are only a few of the many challenges to meet.

In sum, while politically the communist regime is continuous and strong, the highly competitive and dynamic nature of the global market economy will require Vietnam’s fast adjustments. The bar of expectations for the new leadership to meet is high.

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