More room to manoeuvre
Mounting economic and political pressures could help Vietnam's prime
minister push ahead with vital economic reforms.
HANOI - Eight months ago a frustrated Communist Party cadre decried the
"radical weaknesses" of Vietnam's economy. Poor productivity,
competitiveness and quality--especially at the state-owned
enterprises--bore
the brunt of his criticism. It wasn't a voice from the political
wilderness.
The dour assessment came from none other than the prime minister,
Soviet-trained economist Phan Van Khai, in a speech last year to the
national assembly, Vietnam's highest legislative body.
Khai has won some acclaim for promoting economic reforms, in particular
expanding Vietnam's private sector. But since he took office in 1997, he
has
failed to muster enough political clout to implement many of the
government's economic initiatives. Now, as the 68-year-old Khai heads
into a
new second term, there's a good chance that he will have more room to
manoeuvre.
Khai's position has been strengthened precisely because the party
leadership
is reeling from internal and external pressures that make his job
harder,
but also give him a stronger mandate. This time around, the leadership
is
grappling with a high-profile corruption scandal and struggling to
digest
the consequences of imminent trade liberalization. It's also locked into
an
ambitious reform timetable reflected in the new bilateral trade
agreement
with the United States that came into effect in December 2001.
With competition looming from the Association of Southeast Asian
Nations'
Free-Trade Area and World Trade Organization accession just around the
corner, the party is counting on Khai more than ever to correct the
economy's "radical weaknesses."
Khai certainly appears to have a better shot this time at slimming down
the
nation's 5,650 state enterprises, a prerequisite to recapitalizing the
overburdened state-owned commercial banks. In August the government will
begin to dole out more generous cash payments to workers who volunteer
to
leave their state jobs, as part of a new "social safety net" programme.
The private sector, meanwhile, is showing greater ability to absorb
surplus
workers. Thanks to a recent law that has made it easier to set up a
business, 2,000 new companies are being launched each month. But Khai
must
succeed in abolishing hundreds more licences standing in the way of
start-ups, and pump credit into the private sector.
That's crucial because Vietnam's prospects for navigating the WTO will
depend on the ability of the private sector to meet external demand with
internationally competitive quality and prices, says a new report from
Vietnam's state-run Central Institute for Economic Management. The
report
warns that if Vietnam doesn't accelerate domestic reforms while it opens
itself to external markets, most of the WTO benefits will accrue to
Vietnam's trading partners.
Positive impact
The party views Khai as the right man for the job. The central committee
did
consider at least two younger candidates to step in as Khai's successor.
But
as party leaders weighed their political maturity, experience and
economic
savvy, they were unable to reach a consensus. Ultimately Khai was seen
as
the most reliable choice to reconcile internal party divisions and
accelerate economic reforms. "A younger person's capacity to cope with
resistance is weaker," notes one Hanoi party watcher. "He wouldn't have
the
political experience in handling party factions, and defusing conflict
of
interest among various forces."
Reconsolidating the leadership is a top priority. A corruption probe
tainted
with underworld scandal has punctured the party's complacency and
spurred
public demand for strict punishment. Of course, corruption is not a new
problem in Vietnam. Every year, thousands of low-level cadres are
dismissed
or punished for alleged wrongdoing. But this time the rot has apparently
reached as high as the party's central committee. In July, two central
committee members were expelled. "How can Vietnam change and grow
stronger
after this?" questions one Vietnamese political analyst. "It's not just
a
matter of personnel changes, it's the system."
The system's vulnerability is clear. The state-run media in recent
months
has chronicled the dismissal of a high-ranking public-security official,
two
prosecutors, dozens of policemen and a media tsar from the Voice of
Vietnam,
the state-run radio. They are all suspected of shielding Truong Van Cam,
known as "Nam Cam," a Ho Chi Minh City underworld boss accused of
running
gambling and protection rackets and ordering the murder of a rival
gangster.
Nam Cam was arrested last December and the corruption probe is expected
to
conclude in August. Trial dates have yet to be announced.
Khai will also face pressure from a small but tireless group of
pro-democracy dissidents. They have protested at the sporadic pattern of
harassment and arrest by the nation's security forces. The latest
victim,
Hanoi writer Nguyen Vu Binh, was detained shortly after he e-mailed his
testimony to a United States congressional human-rights caucus. In a
July 6
letter to the Vietnamese leadership, Binh and 16 other dissidents
charged
that "this is one of the darkest periods in the history of the Communist
Party of Vietnam in the areas of culture, ideology, [and] reasoning."
Will Khai and his new team prove them wrong? While the door remains shut
to
a multi-party political system, the team's main challenge lies in
reviving
the credibility of both the government and the party. That means
scouring
the ranks and moving beyond vague promises of economic and legal
reforms.
Some party insiders believe that Khai is determined to help younger,
better-educated cadres move up in key ministries and curb the turf
battles
bogging down the government machinery.
Khai is not the only one to shoulder the burden of cleaning up
government
and pushing economic reforms. That job also falls to Communist Party
General
Secretary Nong Duc Manh and President Tran Duc Luong, both of whom also
won
another five-year term in July. But Khai and his new team of
ministers--to
be announced this month--will have the day-to-day responsibility of
arm-twisting the bureaucracy to obey high-level policy directives. "For
some
time, there have been good signs from the political leadership,"
observes
one European diplomat. "But beneath them you have a very thick layer of
middle-level decision makers who have everything to lose, and nothing to
gain, from implementing change."
One cabinet change that could make a difference is the expected
promotion of
former Trade Minister Vu Khoan to deputy prime minister. Khoan, 64,
brings
the team much-needed economic and diplomatic sophistication, grounded in
deep knowledge of issues linked to China and the U.S. As Vietnam's chief
negotiator on the U.S. trade agreement, he worked closely with affected
ministries to pinpoint priorities and danger spots.
The trade picture is worrisome. Although the World Bank estimates
relatively
healthy GDP growth of 5.2% this year, export earnings dropped nearly 6%
year
on year in the first half of the year. Foreign direct investment
approvals
plunged 55% year on year during the same period. The good news is that
lawyers and business consultants report that more foreign investors are
showing interest in Vietnam again; actual foreign investment grew a
year-on-year 11% to $1.05 billion in the January-June period.
The World Bank and the International Monetary Fund are counting on
greater
support for the private sector, as well as progress in banking and
state-enterprise reforms, as mandated by commitments hammered out in
2001-02. "There is very impressive momentum right now," says Andrew
Steer,
head of the World Bank in Vietnam. Steer notes the benefits of "having a
team that knows the programme, authored the programme and has reasons to
make sure it's implemented." With potential investors waiting in the
wings,
the clock is ticking.
By Margot Cohen - The Far Eastern Economic Review - August 1st, 2002.
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