A purge too far in Vietnam?

Communist Party head Nguyen Phu Trong’s anti-graft drive has unsettled the country’s usually sedate one-party politics and exposed deep rot in the opaque banking system

Originally published by Asia Times (September 21, 2017)

 

A mounting internal purge has unsettled Vietnam’s typically sedate Communist Party-dominated politics, as an unresolved factional power struggle for supremacy plays out in unusually colorful ways.

In recent weeks, business executives have been arrested for corruption, state bankers have been sent to jail, leading politicians have gone strangely absent, the Politburo has been shuffled in a rare rotation and an ex-state enterprise leader was kidnapped by agents in the German capital of Berlin.

Vietnam’s political elite is still reeling from the decisions made in January 2016 when then-Prime Minister Nguyen Tan Dung failed in his bid to become the next general secretary of the Party, the most powerful position in the country’s communist configuration.

Instead, Dung was voted out of office and the incumbent general secretary, Nguyen Phu Trong, who was expected to step down then at the age of 71, was given special permission to continue in the Party’s top spot for another five-year term.

Now, Trong is purging many of Dung’s remaining protégées to consolidate his power in preparation for the next Party Congress in 2021, at which he will almost certainly retire and hand over his and other top posts to trusted allies.

The intrigue started in May when the Party voted to remove Dinh La Thang from his post as party secretary of Ho Chi Minh City, Vietnam’s largest city, and expel him from the 19-seat Politburo, the communist government’s core of political power.

Thang stands accused of losing the country millions of dollars during his tenure as general director of PetroVietnam, a state-owned energy company. He was also seen as close to former premier Dung.

Months later, Ho Thi Kim Thoa lost her job as deputy trade minister because of alleged financial wrongdoings when she headed a state energy firm. Others believe Thoa was dismissed because she appointed Trinh Xuan Thanh as chairman of PetroVietnam’s Construction Joint Stock Corporation.

In late July, after fleeing Vietnam years earlier, Thanh was kidnapped by Vietnamese state agents on the streets of Berlin, sparking a diplomatic spat between the two nations that is still unresolved. Thanh stands accused of financial mismanagement and corruption.

In a September 2 statement, the Government Inspectorate said it had uncovered evidence of negligence in the central bank’s supervision of lenders’ compliance with regulatory requirements from 2010 to 2015 – a period when Dung was in power.

The claim comes as 51 former bankers at PetroVietnam’s Ocean Bank stand trial in Hanoi for causing US$69 million in state losses. The Inspectorate’s statement also said the central bank had been slow in reporting the properties, assets and revenues of government officials.

On September 9, a Ho Chi Minh City court sentenced the former chairman of Vietnam Construction Bank, Pham Cong Danh, and 36 former employees to a combined 213 years in jail for embezzling more than US$400 million in bank funds. Pham received a 30 year sentence.

Tuong Vu, a professor of political science at the University of Oregon, thinks the next official to fall will be Nguyen Van Binh, the former governor of the State Bank of Vietnam and now a Politburo member. Binh is also a known protégé of Dung, Vu said.

The academic also speculated that another potential casualty could be Hoang Trung Hai, a deputy prime minister under Dung who is now party secretary of Hanoi, Vietnam’s capital.

Critics claim Dung rose through the Party’s ranks via his ties to ill-gotten wealth which he allegedly leveraged into vast patronage networks linking state-owned enterprises (SoEs), local officials and members of the Party’s Central Committee. Dung has never been formally charged or convicted of corruption.

Yet many observers blame Dung for Vietnam’s now considerable public debt pile. During his tenure, SOEs were allowed to build up significant loses, sometimes because of corruption but most often due to poor management, all of which he allegedly overlooked given his ties to the executives.

Powerful patronage networks afforded Dung political protection. In 2012, the Politburo reportedly voted to oust him as prime minister, but instead of leaving quietly as is custom in the party he dug in and fought the later reversed decision, allowing him to complete his second term in office.

“He cashed in political debts and won a stunning reversal of the Politburo’s decision at a [Communist Party’s] Central Committee meeting two months later,” David Brown, a Vietnamese-speaking former American diplomat, wrote last year.

It has since been suggested that Dung promised to step down without a fight at the hotly contested 2016 Congress in return for his protégées being allowed to move up the Party’s ranks.

“Even out of power, it’s that network that continued to give him power and influence,” said Zachary Abuza, a professor at the National War College in Washington and frequent commentator on Vietnam’s politics.

If true, Thang’s ascent fits the bill. Despite his relative inexperience in government, last year he was made a Politburo member and head of the party in Ho Chi Minh City, the country’s economic hub. After Thang’s dismissal, the post was handed to Nguyen Thien Nhan, widely considered a Party “yes-man.”

Carl Thayer, a Vietnam expert at the University of South Wales in Australia who often dismisses claims of black-and-white power struggles in the Communist Party warns not to view the ongoing saga as a mere contest between Trong and Dung.

More important, Thayer says, is an unresolved battle over how the Communist Party functions. At the last Congress, divisions were evident when a group of senior Party officials coalesced against the then-prime minister. Former diplomat Brown referred to the bloc as an “anything but Dung” coalition.

Since the Congress, Thayer says, the government has tried to jettison Dung’s individualist leadership style, which consolidated an unusual amount of power within his office, and return the Party to a more traditional “consensus-based collective leadership.”

With public debt mounting at 65% of gross domestic product and rising investor concerns about opaque problems in the financial sector, tackling wasteful practices at state-owned enterprises, banks and among Party officials is smart politics.

Given that Vietnam is Southeast Asia’s third-most corrupt nation, according to a recent Transparency International report, anti-graft measures are known to be popular with the public. And the fact that many of those accused or arrested are known Dung allies is a win-win for the Party’s Trong-led faction.

Indeed, driving the Party’s re-collectivization process now appears to be Trong’s top concern. There were rumors earlier that Trong would only serve half of his five-year term, stepping down sometime in 2019 and handing power to a trusted successor. But it now seems that he will fulfill his entire term until 2021.

One prominent candidate to take the helm was Dinh The Huynh, a well-respected Party careerist who by 2016 had become its leading ideologue. Some observers, in fact, tipped him to become the Party’s general secretary at the last Congress.

In July, however, Huynh was replaced as a standing member of the Central Committee’s secretariat by another Politburo member, Tran Quoc Vuong. Huynh had been absent for some time before the reshuffle, reportedly seeking treatment for an illness that some pundits have speculated could be cancer.

Vuong, chairman of the Central Inspection Committee, an anti-graft body responsible for many of the recent arrests, is now thought to be a candidate to become the next general secretary. Academic Abuza has described him as “Trong’s attack dog.”

Another possibility is defense minister Ngo Xuan Lich, said Tuong Vu of the University of Oregon. The defense minister has been in the public spotlight in recent months, capped by a high-profile visit to Washington last month.

Whatever eventually happens in 2021, it seems likely that the three top posts – general secretary, prime minister and president – will go to Party members who back consensus politics and shun the individualism associated with Dung’s tenure and allies.

The high-level political maneuvering is taking place during a highly-sensitive time, with rising public pressure for improved human rights and even calls for democracy among social activists who have become bolder in their dissent against one-party rule.

Moreover, the economy is in a delicate situation, with crucial infrastructure projects delayed because of a lack of government funds and rising questions about the opaque banking sector’s underlying health. Some experts think Vietnam’s GDP growth rate will fall short of this year’s 7% projection.

At the same time, there is nationalistic groundswell for the government to take a tougher line vis-à-vis China. Hanoi was forced into an embarrassing retreat in July after Beijing threatened military action if Vietnam continued drilling for oil in the contested South China Sea.

The Association of Southeast Asian Nations later failed to align with Hanoi’s call for a stronger regional response to China’s ‘militarization’ of the maritime area. Trong is thus not only fighting to maintain stability within the Communist Party, but also to ensure its survival as national guardian after five decades of authoritarian rule.

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