Political Outlook for Vietnam, 2005-2006

Carlyle A. Thayer ∗
[Paper delivered to Regional Outlook Forum 2005 organized by the Institute of Southeast Asian
Studies, Shangri-La Hotel, Singapore, January 7, 2005]

Introduction
Vietnam is in an enviable position. Vietnam’s economy is on a roll with all major

indicators trending upwards in 2004: Gross Domestic Product grew by 7.6%;

foreign investment reached U.S. $4 billion, the highest foreign investment

commitments since the 1997 Asian financial crisis; and exports rose to U.S. $25.8

billion, a seven-year high. Late last year the international donor community, in

recognition of Vietnam’s efforts in lowering the incidence of poverty from 12% in

2003 to 9% in 2004, gave Vietnam a vote of confidence by pledging U.S. $3.44

billion in assistance for economic development and poverty reduction. This is a

marked rise from U.S. $2.5 billion in 2003. Vietnam’s economic performance is all

the more remarkable because Vietnam was affected by rising commodity prices

(especially oil), drought, a renewed epidemic of avian (bird) flu and legal action

by the United States that limited textile export quotas and increased tariffs on

shrimp exports.

∗
Director, UNSW Defence Studies Forum, School of Humanities and Social Sciences, The
University of New South Wales at the Australian Defence Force Academy where he is Professor
of Politics and C. V. Starr Distinguished Visiting Professor of Southeast Asian Studies, School of
Advanced International Studies, Johns Hopkins University (2005).
 2

Vietnam’s international standing is also at an all-time high. Last year it

successfully hosted the 5th Asia Europe Meeting (ASEM 5), overcoming

threatened boycotts by some European countries because of the contentious

Myanmar question. Vietnam has received backing from the European Union and

numerous other countries for accession to the World Trade Organisation (WTO).

A review of the domestic political-security situation also reveals a firm

foundation for future development. Vietnam’s socialist one-party system is stable

and is not under serious domestic challenge. Vietnam successfully contained

ethnic minority unrest in the Central Highlands that erupted during the past

year. And Vietnam has not faced the scourge of international terrorism.

Vietnam’s is successfully negotiating greater diversity in society and the rise of

the youth generation by a carefully constructed program of incremental political

reform. Vietnam’s one-party state is voluntarily relinquishing some of its

authority to local administrative units and newly emerging social associations.

Last year Vietnam successfully held local government elections at province,

district and commune levels in an effort to promote financial devolution and

“grassroots democracy.”

At the central level, Vietnam’s National Assembly is becoming an increasingly

vibrant body at the cutting edge of political reform efforts. Vietnam seeks to

retain its one-party system by creating a “law governed state” in which the

Vietnam Communist Party is subject to law. Vietnam is building up the capacity

 3

of the National Assembly and its deputies to enact legislation and to play an

oversight role over the management of government.

Last year National Assembly deputies took the initiative to shift responsibility

for the government’s General Audit Office from the executive to the legislature.

National Assembly deputies have been given the right to subject ministers to

votes of no confidence. And for the first time the prime minister was subject to a

televised question and answer period by deputies.

And finally, to round out this brief macro-perspective, Vietnam’s anti-corruption

campaign netted a number of important officials including a deputy minister.

What then are the prospects for the future? I have been asked by the Forum

organizers to address the following questions: What will happen in Vietnam in

2005-06 in the political arena? What political and domestic security challenges

will the government be facing? How well or badly will they be coping with

them? What are the developments to look out for in 2005-06? More stability or

less? Any pleasant or unpleasant surprises on the way?

1. The Political Arena

Over the course of the next two years major developments in the political arena

will include: (1) an acceleration of the current program of political reform; (2)

enhancement of the capacity of the National Assembly to legislate and conduct

oversight; (3) preparations for the convening of the tenth national party congress;
 4

and (4) grappling with political economy issues related to Vietnam’s free trade

agreement with the United States and accession to the WTO.

Accelerating Political Reform

Nong Duc Manh, the current Secretary General of the Vietnam Communist

Party, came to office in April 2001 after a period of stalled reforms and

disenchantment with the leadership style of his predecessor, Le Kha Phieu.

Manh initiated a wide-ranging program of political and administrative reforms

both within the party apparatus and state bureaucracy.

However, corruption remains a serious problem in Vietnam. Transparency

International’s Corruption Perceptions Index 2004 awarded Vietnam a rank of

102 out of 145 (lowest). Party leaders view institutionalized corruption as

perhaps the greatest threat to their political legitimacy.

In 2004 Vietnam uncovered major corruption cases in the oil and gas, fishery,

aviation and trade industry sectors. The minister of agriculture and rural

development, Le Huy Ngoc, resigned after being reprimanded by the prime

minister, while his two deputies received jail sentences. The deputy minister of

trade, Mai Van Dau, was relieved of his position and arrested for his

involvement in a quota allocation scandal in the textile industry. Conviction on

serious fraud charges is often punished by the death penalty as in the case of

embezzler La Thi Kim Oanh

 5

In 2005 Secretary General Manh can be expected to accelerate the pace of these

efforts in order to improve his scorecard as his five-year tenure as party leader

draws to a close. In particular, we will witness even greater efforts to eradicate

institutionalized corruption. Vietnam’s press will play an enhanced role in the

anti-corruption campaign. Special attention will be paid to the construction

sector and the Dung Quat oil refinery in particular.

The prime minister, Phan Van Khai, has ordered the compulsory audit of ten

ministries and central agencies, thirty provinces and cities, and eighteen state-

owned enterprises and financial institutions. The central-level ministries include:

Customs Office, Ministry of Natural Resources and Environment, State Bank of

Vietnam, Ministry of Transport and Communications, Ministry of Fisheries,

Supreme People’s Court, State Committee for Ethnic Minorities, Committee for

Population, Family and Children, Ministry of Culture and Information, and the

Ministry of Foreign Affairs.

Enhancing the Capacity of the National Assembly

Vietnam’s National Assembly has three main functions: law making, oversight,

and “deciding on important national matters.” Its role has been greatly enhanced

since 1992 when a revised state constitution was adopted. It is no longer the

rubber stamp body it once was.

But the National Assembly has a long way to go before it has the capacity to act

effectively and authoritatively in all areas of its responsibility. Up until recently,

 6

National Assembly deputies served on a part-time basis giving them little time to

research and draft legislation. Since 2002, one-quarter of the deputies now work

full-time, approximately half of them work on legislative committees while the

remainder work locally in their constituencies. Nonetheless, the Cabinet drafts

approximately 96-97% of all bills tabled in the National Assembly, while the

remaining 3-4% are drawn up by the Vietnam Fatherland Front or by National

Assembly committees.

The National Assembly holds two legislative sessions per year. The next session

(seventh session, eleventh legislature) is scheduled for April-May 2005. Its work

plan for the year includes the adoption of eleven codes and laws and

consideration of eleven other drafts for legislative consideration. Important

legislation that will be considered includes: draft law on corruption (to be drawn

up by the National Assembly and not Cabinet), converting the 1998 ordinance on

practicing thrift and combating waste into law, and a draft law on gender equity.

In 2005 we will witness greater attempts to increase the transparency of National

Assembly proceedings and efforts to broaden popular participation. For

example, plans are underway to change the set piece question and answer

sessions to include actual debate on carefully selected issues such as education.

The construction sector also will be in the spotlight because of widely reported

malpractices including fraud, diversion of funds and mismanagement. The

National Assembly is scheduled to revise the Law on Law-Making to include

 7

increased inputs from the citizenry. In addition, the National Assembly will

debate such contentious issues as compensation for victims who are unjustly

accused by state authorities, and the settlement of citizens’ complaints and

petitions.

The National Assembly will also give priority attention to looking into

allegations of mismanagement and wastage in the construction of the

controversial Dung Quat oil refinery in central Vietnam and oversight of

Program 135 designed to bring effective socio-economic development programs

to remote and mountainous areas. Cabinet members involved in these projects

can expect some tough questioning of their handling of their portfolios.

Preparations for the 10th National Party Congress

Irrespective of efforts to accelerate political reform and combat corruption and

enhance the professional role of the National Assembly, the political arena in

Vietnam during 2005 will increasingly be dominated by preparations for the

convening of the tenth national congress of the Vietnam Communist Party

during the second quarter of 2006.

Vietnam’s national political system has operated on a five-year cycle since

reunification in 1976, the last national congress, the ninth, was held in April 2001.

In July of last year, the tenth session of the VCP Central Committee considered a

report from the Political Bureau on preparations for the next national party

congress and its agenda.

 8

The normal agenda of a national party congress includes consideration and

approval of the Secretary General’s Political Report, a report on party-building,

amendments to the party Platform and revisions to the party Statutes, the

adoption of Vietnam’s socio-economic development strategy and targets for the

next five years (2006-2010), and the election of a new party Central Committee.

Following the July 2004 tenth plenum, the Central Committee began setting up a

number of sub-committee to assist the Political Bureau and Secretariat in

undertaking a wholesale policy review that is part and parcel of the five-year

political cycle. During 2005, draft policy documents to be submitted to the

national congress will slowly percolate through the party’s organization. They

will then be presented to research institutes and appropriate focus groups for

their input. When a high degree of consensus is obtained key documents will be

released to the public for comment and criticism. A special committee will collate

the responses received (generally in the tens of thousands) and senior party

officials will oversee the final stage of editing.

Sometime during the latter half of 2005 and extending into early 2006, party

congresses will be held at district and then provincial and municipal level. These

meetings will debate and vote on the draft national congress policy documents.

In addition, province/municipal-level party congresses, as well as the Vietnam

People’s Army separately, will elect about 1,200 delegates to attend the national

party congress.
 9

When the tenth national party congress is held, it should be a short set-piece

affair because nearly everything will have been decided already. All the major

policy documents and reports will be approved because they are consensus

documents that already incorporate the major views of the party’s constituents.

Delegates to the national party congress will also elect the party’s national

leadership – a Central Committee of around 150 persons. All candidates for the

Central Committee will be thoroughly vetted by the party’s Organization

Committee beforehand. In order to be elected each candidate needs to receive

fifty percent plus one of the delegates’ votes. It is not uncommon for one or two

endorsed candidates to fail or for unendorsed candidates to be nominated from

the floor.

Immediately after the national congress concludes, the new Central Committee

will meet in its first plenary session to elect its executive – a Political Bureau of

under twenty persons, a Secretariat, Control Committee, and, of course, the party

Secretary General. Based on the past record of national congresses, it is

reasonable to expect the retirement of a quarter to a third of the incumbent

Central Committee and Political Bureau.

VCP statues require that the Central Committee meet a minimum of twice a year.

The current party Secretary General began his tenure by convening three Central

Committee plenary sessions a year during his first two years in office (see

Appendix A). Increasingly in 2005-06, the Central Committee will focus its
 10

attention on preparations for the tenth congress and leadership changes. It is

common in these circumstances to convene a number of Central Committee

meetings in quick succession just prior to the national congress in order to obtain

consensus on outstanding policy and personnel matters.

2. Political Economy Issues

Vietnam has long set itself the goal of fully integrating with the world economy.

A major priority for 2005 is membership in the WTO. In order to join Vietnam

needs to successfully conduct negotiations with all 147 WTO members and

complete ten rounds of negotiations. Last year Vietnam overcame a major hurdle

when it successfully concluded negotiations with the European Union.

In order for Vietnam to gain entry into the WTO in 2005 it must overcome one

last major hurdle – securing the agreement of the United States. Vietnam already

has a Bilateral Trade Agreement with the United States that includes “WTO-

plus” provisions. But on 1 January 2005 new commitments under the BTA came

into force. U.S. negotiators are pressing Vietnam hard to improve investment

access in the services and manufacturing sectors including such sensitive areas as

telecommunications.

Under the terms of the BTA, Vietnam’s normal trade relations (NTR) status must

be renewed annually. This has provided an opportunity for members of the U.S.

Congress who are concerned with human rights and religious freedom issues in

Vietnam to move to block the extension of NTR status. This issue would be
 11

immediately overcome if Vietnam became a member of the WTO as WTO rules

prohibit the U.S. from acting in a discriminatory fashion.

But it is unlikely that the United States will agree on WTO membership for

Vietnam without first according Vietnam Permanent Normal Trade Relations

(PNTR) status. In order for this to happen Vietnam will be forced to concede on a

number of issues such as opening its goods and services sectors.

Vietnam is under some pressure to act because its rapidly growing textile

industry could be severely affected by prolonged non-WTO status. Textile

exports, especially to the United States, are one of Vietnam’s major export

earners. In January this year the WTO ended tariff restrictions on textiles among

its members. Vietnam will be at a continued disadvantage until it joins the WTO.

3. Political and Domestic Security Challenges

In January of last year, a resolution adopted by the ninth plenum of the VCP’s

Central Committee identified three major threats facing Vietnam: economic

underdevelopment, social problems arising from corruption, and peaceful

evolution by outside hostile forces. The “threat of peaceful evolution” first

emerged as a concern in the aftermath of the collapse of socialism in Eastern

Europe and the Soviet Union in 1989-91. This threat is not just a rhetorical device;

it is widely reported in internal party documents and security assessments.

Vietnamese party and security officials are concerned that “hostile external

forces” will combine with internal dissidents and exploit such issues as human
 12

rights and religious freedom to undermine Vietnam’s one-party state. Recent

unrest involving ethnic minorities in the Central Highlands is a case in point.

Ethnic minority discontent erupted into violence in February 2001 and resurfaced

again in April of last year. Vietnam’s international prestige suffered a blow when

highlanders fled into Cambodia where they were interviewed by the

international media. The causes of unrest are complex and involve a mixture of

religious persecution and economic grievance due to the encroachment of

lowland settlers on ethnic minority land. This land has been converted to coffee

production and growers have suffered the vicissitudes of the international

market. Vietnamese leaders and security officials point the finger of blame at the

U.S.-based Montagnard Foundation for instigating the unrest.

Vietnamese party and state authorities have taken determined steps to redress

minority grievances following the events of 2001. They were genuinely surprised

when violence flared up again last year. Vietnam has arrested, tried and

imprisoned those whom it considers the main instigators. Vietnam has also taken

action against local officials including reprimanding the former head of the party

committee in Gia Lai province. In 2005, as noted above, the party and the

government will step up their efforts to ameliorate ethnic minority grievances

and encourage socio-economic development in the Central Highlands.

Although Vietnamese security officials are also concerned about the actions of

political dissidents and religious groups that act independently of state

 13

authorized bodies, Vietnam does not face any serious domestic political

challenge to the security of its one-party state.

4. Developments to Look Out For

This paper has presented an overview of likely major political developments in

Vietnam in 2005-06 in three main areas: the political arena (accelerating political

reform, enhancement of the capacity of the National Assembly and preparations

for the tenth national party congress), political economy issues, and domestic

political and security challenges. These issue areas are interrelated. I would like

to highlight seven developments to look out for:

1. In 2005 Prime Minister Phan Van Khai is scheduled to visit the United States.

This visit may be crucial to the resolution of the PNTR and WTO membership

issues. It is likely that Khai’s visit will provide a catalyst for a variety of domestic

groups in the United States to press the Bush Administration to attach human

rights and religious freedom conditions to these negotiations. U.S. domestic

politics could derail Vietnam’s objectives of securing PNTR status and WTO

membership and cause strains in the bilateral relationship.

2. If Vietnam is successful in obtaining PNTR status and WTO membership, it

will face a formidable legislative challenge. The National Assembly will need to

revise and approve at least thirty laws and ordinances to meet WTO entry

requirements; this will be a strenuous test of its law-making capacity. Some

 14

observers suggest the National Assembly will have to submit omnibus

legislation.

3. Vietnam’s integration with the world economy will throw open its domestic

economy to international competition. This will affect vested interests in state-

owned enterprises that are still reliant on state support and indirect subsidies. It

is likely that whatever economic concessions Vietnam makes to the United States

could provoke a domestic backlash and feed into the policy debate as Vietnam

prepares for the tenth national party congress.

4. As Vietnam becomes more fully engaged in the policy-shaping process in

advance of the tenth national party congress, inter-party bickering could emerge

on a wide range of issues, particularly those areas that touch on the role of the

state and private sectors. Until such policy issues are resolved Vietnam can be

expected to experience a period of policy-paralysis.

5. As the tenth national party congress nears, political dissidents in Vietnam can

be expected to take advantage of the public consultation process to write open

letters and petitions to senior party and state officials. There will be calls for

Vietnam to jettison socialism, to end one-party rule, and to adopt a pluralist

multi-party democracy. International media coverage of these developments,

coupled by repressive state action, could strain Vietnam’s relations with a

number of foreign countries.

 15

6. As Vietnam’s tenth national party congress nears, political attention will focus

sharply on leadership change at the highest levels of party and state. It is possible

that the anti-corruption campaign could be used as a vehicle by one party faction

to challenge the leadership credentials of another.

It is likely that up to four members of the current Political Bureau will retire (the

former minister of public security, Le Minh Huong, passed away in May 2004

and his position was left vacant). Given party policy on age and length of service,

it seems reasonable to expect that the current prime minister (Phan Van Khai

aged 71) and minister of defence (Pham Van Tra aged 69) will step down. There

are already reports of jockeying to secure this position. It is unlikely, in my view,

that party Secretary General Nong Duc Manh will be replaced. He has shown

himself to be an effective and dynamic leader who appears to rest comfortably in

the ideological centre of the party. He is also the longest-serving member of the

leadership with three terms on the Political Bureau. But, it should be noted, that

since 1986 no party leader has served a full two-terms.

In 2006, following the tenth national party congress, there will be a normal shake

up in the state leadership (ministers holding Cabinet portfolios) following on the

retirement of incumbents from the Central Committee.

7. Although not discussed in this paper, United States-Vietnam ties are poised to

enter a new era of military-to-military cooperation. Vietnam’s defence minister

visited Washington in late 2003. It is now clear there is an emerging inter-party

 16

policy debate about the extent to which Vietnam should develop defence ties

with the U.S. Vietnam would like to maintain a balance in its external relations

(“making friends with all countries”). But it stands to gain much by agreeing to

sign on to United States’ International Military Education and Training (IMET)

program. This is a major issue that will be debated in the lead up to the tenth

national party congress.

Finally, looking to 2006, three other events will impact on Vietnam:

(1) From January 2006 Vietnam will be required to fully implement the ASEAN

Free Trade Agreement (AFTA) Common Effective Preferential Tariff (CEPT)

scheme’s Temporary Exclusion List. This requires Vietnam to phase out its tariffs

for products included on this list or to reduce tariffs to 0-5%. There are signs that

due to administrative difficulties and/or protectionist pressures Vietnam will

ask for special treatment to delay meeting these requirements.

(2) Myanmar is due to take over as chair of the ASEAN Standing Committee in

mid-year. This may provoke adverse reaction by the EU, the United States and

other countries. This may lead to intra-mural strains in ASEAN and lessen its

international prestige.

(3) President George Bush is tentatively scheduled to visit Vietnam to attend the

Asia Pacific Economic Cooperation (APEC) forum. This visit provides an

opportunity for Hanoi and Washington to put their bilateral relationship on a

much firmer footing.

17
 18

Appendix A

Plenary Meetings of the Vietnam Communist Party’s

Central Committee (9th tenure)

April 23, 2001 first plenum

June 9-10, 2001 second plenum

August 13-22, 2001 third plenum

November 5-13, 2001 fourth plenum

February 18-March 2, 2002 fifth plenum

July 4-15, 2002 sixth plenum

November 7-9, 2002 seventh plenum (1st session)

January 13-31, 2003 seventh plenum (2nd session)

July 2-12, 2003 eighth plenum

January 5-12, 2004 ninth plenum

July 5-10, 2004 tenth plenum

January 2005? eleventh plenum