Vietnam PM Keeps Post as Economic Struggles Continue

Posted on October 18, 2012


HANOI, VIETNAM — Vietnam’s prime minister appears to have survived a leadership challenge this week over his handling of the poorly-performing economy.

Communist Party officials ended any speculation that Prime Minister Nguyen Tan Dung might lose his job when they concluded a top-level party meeting on Monday.

The 175-member party central committee met for two weeks to discuss a long list of topics, ranging from economic reform and land use to education.

Japanese Foreign Minister Koichiro Gemba (L) shakes hands with Vietnamese Prime Minister Nguyen Tan Dung during their meeting at the Government Office in Hanoi, Vietnam, July 14, 2012. (AP)

The run-up to what is usually a low-key event attracted international attention following several arrests over a banking scandal and the publication in political blogs of material highly critical of the 62-year-old prime minister, whom many blame for the country’s economic crisis.

Mistakes acknowledged

In a nationally broadcast speech at the conclusion of the meeting, party secretary Nguyen Phu Trong apologized for the mismanagement of the struggling economy.

Trong said the party had made some big mistakes, especially in not preventing corruption and deterioration among some of its members. He added, however, the one member who deserved punishment would be spared.

Many believe that person is the prime minister.

Vietnam analyst Tuong Vu, a professor at the University of Oregon, said Dung’s rivals clearly failed to oust him from power, but Trong’s speech should be interpreted as a warning to the prime minister’s supporters.

“They tried first in the politburo, they failed. They brought it to the central commission, they failed. And now they have to put a spin on it and so they will try to admit defeat and try to mobilize support for their faction, and send a warning message to the prime minister’s faction,” said Vu.

Faltering ascent 

Dung established his political support base by achieving high economic growth rates. Under his command, Vietnam was focused on becoming the world’s leading shipbuilder. That goal was derailed by the global financial crisis, followed by massive corruption scandals.

In the run-up to the meeting, some analysts predicted Dung would be ousted by his rivals, President Truong Tan Sang and Party Secretary Trong.

Regional security analyst, Professor Carl Thayer, said a dramatic change was not very likely, though, given the makeup of the country’s powerful central committee.

“About 40 per cent on the central committee are on there because of him. That’s just a ball park figure. Those people would resist having him removed because it would unravel. The problem with a system like this is nothing is independent. Everything is dependent on the party,” he said.

Economic reforms 

Thayer said the prime minister may have retained his position, but his power has been undermined.

Prime Minister Dung was given an agenda to reform state-owned enterprises and sort out the banking system. Further investigations into shipbuilding giants Vinashin and Vinalines also were singled out.

Economists say the results of the meeting are good news for investors, who could have more confidence that economic reforms finally will  be carried through.

Dung is now in his second term and will be of retiring age by the time the next party congress convenes. This also will affect his political power, said Thayer, as people are less likely to ally themselves with him.

“If you’re hanging on to Nguyen Tan Dung, he’s going to be lame duck. He’s going to be 65 by the next congress. He had his two terms in office, like an American president he has a second term. In the end power begins to wane,” said Thayer.

Others disagree, saying Dung could well remain in power, but with a different title, perhaps in the position of party secretary.

Analysts say the high-tension rivalry between the country’s top leaders is symptomatic of the shifting relationship between state and party. Associate professor Vu said the state has become so rich and powerful in recent years that party leaders like Trong are losing control.

“There has been a natural process of economic reform that brings more power to the state and causing the ideology that the party represents, system which the party controls, is losing relevance,” said Vu.

It may be years in the future, but observers say change is inevitable for Vietnam as economic reform eclipses communist ideology and the legitimacy of the party.


Vietnam to re-organize FDI management

The Ministry of Planning and Investment (MPI) has suggested proposing a state’s steering committee on foreign direct investment (FDI) management, which will have the “super power” to deal with the problems which cannot be settled by ministries and branches.

The national steering committee is a part of the plan on renovating the FDI management in the new development stage, when Vietnam would be choosier in attracting foreign investment, striving for investment quality instead of quantity.

If the idea is approved, the steering committee would be headed by a Deputy Prime Minister, while the officials from MPI would be the deputy chair of the committee and representatives from relevant ministries would serve as the members.

In 2012, Vietnam reviews the last 25-year period of implementing the Foreign Investment Law.

Thoi bao Kinh te Vietnam has quoted an MPI’s official as saying that there are two FDI management models being applied in regional countries.

With the first one, which can be seen in Thailand or Malaysia, there is only one management agency that takes care for both domestic and foreign investment, while there is no specific agency in charge of FDI.

The biggest outstanding feature of the model is the transparency and simplicity which allows the state to pursue consistent investment encouragement policies. Meanwhile, the disadvantage of the model is that it cannot cover all the possible arising in reality; therefore, it cannot make timely decisions on specific cases.

The second model is the one being applied in Vietnam, which means that there is an agency in charge of FDI promotion and management. Under the mechanism, all the FDI activities could be registered at one agency.

However, the model has some disadvantages, including the power concentration and the separation of the domestic and foreign management systems, which may lead to the investment imbalance.

MPI has admitted that the FDI management nowadays is facing big difficulties due to the disadvantages of the model.

Regarding the suggested steering committee on FDI management, analysts believe that such a committee would help heighten the FDI management efficiency.

Samsung, Nokia and Robert Bosch, the big foreign investors in Vietnam have asked for the government’s intervention when seeking investment incentives for their specific investment projects.

MPI and relevant agencies including the Ministries of Finance, Industry and Trade (MOIT), Science and Technology all have to join forces to consider the projects thoroughly before suggesting to the government the solutions which can both ensure the national benefits and the investors’ benefits.

According to Dau tu newspaper, Taiwanese E-United and Japanese JFE, have also been reportedly contacting the Dung Quat Economic Zone, Quang Ngai provincial authorities, MPI, MOIT, Ministry of Natural Resources and the Environment, and the government as well, to seek the support in the problems relating to the project’s investment capital adjustment.

The Taiwanese investor plans to increase the capital of the Guang Lian steel project in the economic zone from 3 billion dollars to 4.5 billion dollars, and “admit one more investor – JFE.

Analysts say it would take the investors years, not months, to get the final answers from the government. Meanwhile, if such a national steering committee on FDI management exists, the problems would be settled more quickly.

Advocating the suggested model,, Ngo Sy Bich, Head of the Board of Management of Industrial Zones in Bac Ninh province, said the one-stop-shop mechanism in localities and the national steering committee would help improve the FDI quality in the time to come.