An anti-corruption drive aims to burnish the Communist Party's image, settle political scores and attract foreign investors.
meeting of Vietnam’s main anti-corruption body held late last month, the
country’s leading politician instructed it to quicken the pace of its
investigations into corrupt officials.
Phu Trong, general secretary of the ruling Communist Party, applauded the
anti-graft body for establishing a list of “urgent cases requiring drastic
settlement,” local media reported but also stressed that much more needed to be
particular, Trong told the body to expedite the case of Trinh Xuan Thanh,
former head of PetroVietnam Construction, a subsidiary of state-owned
PetroVietnam, the country’s largest energy firm. Thanh is accused of losing
hundreds of millions of dollars from the firm through mismanagement and
conviction is clearly important to Trong, who, in May, said he would apprehend
the absconded executive “by any means.” It wasn’t hyperbole: Vietnam risked
major diplomatic fallout with Germany, its largest European trading partner,
after its agents kidnapped Thanh in Berlin in August.
incredulously contends he voluntarily returned, as he “admitted” during a
Vietnamese diplomats were expelled from the country and Germany later cancelled
its visa waiver agreement for Vietnamese diplomats. Germany’s Foreign Ministry
has called for Thanh’s return because he was applying for asylum, though this
is unlikely now that he is headed to trial in Hanoi.
after Thanh’s kidnapping, one of Vietnam’s largest ever anti-corruption trials
got underway over alleged corrupt dealings between PetroVietnam and Ocean Bank,
a partially state-owned bank.
defendants faced charges of dodgy loans between the two firms, embezzlement and
fraud. Since both firms are state-owned – partially and fully – the loss of
state finances, even by mismanagement, is a criminal offence under Vietnam’s
Tham, a former general director of OceanBank and later head of PetroVietnam,
was sentenced to life in prison. Nguyen Xuan Son, a former PetroVietnam
chairman and chief executive of Ocean Bank, was sentenced to death, the first
time the penalty has been handed down for illegal financial activity in years.
49 bankers and officials were handed a myriad of sentences. Thanh’s fate will
be decided by February. Besides the PetroVietnam and Ocean Bank cases, several
other major anti-graft investigations are ongoing, with most focused on the
activities of state-owned enterprises (SOEs).
Trong’s anti-graft campaign as a high-level bid to appease ordinary Vietnamese
angered by the Communist Party’s increasingly visible rot.
trials and harsh sentences are carried out to assuage public anger over
corruption,” Carl Thayer, a Vietnam expert at the University of South Wales in
Australia, wrote in a briefing in September.
analysts also suspect political intrigue. This is partly due to the fall of
Dinh La Thang, the Party’s chief of Ho Chi Minh City, who in May was removed
from his post and dismissed from the Politburo, the first person to be sacked
from Vietnam’s highest decision-making body since 1996.
official line was that Thang had made “very serious mistakes” and engaged in
corruption when he was general director of PetroVietnam from 2009 until 2011.
Thang had appointed Thanh as chairman of PetroVietnam Construction.
analysts note that Thang was also a close ally of former two-term Prime
Minister Nguyen Tan Dung, who was sidelined at last year’s Party Congress. Some
think Trong is now in the process of purging Dung’s protégées and uprooting the
patronage network Dung had built while in office, which may extend to
executives at PetroVietnam and Ocean Bank.
commentators suggest the Party has become more conservative since last year’s
Congress, a move led by Trong. But Trong is arguably better understood as an
“elitist” who wants to return the Party to its historic consensus-based
decision making, which the individualistic Dung threatened.
theory is that this intra-Party schism has overlapped with the government’s
emboldened anti-graft campaign. This is disputed by other analysts, who
consider them separate trends. What is indisputable, though, is where both are
Party Congress, in 2021, will bring a major shakeup of the Party. While pundits
predict as much before any Congress, it is guaranteed at the next meeting due
to the high number of leaders set to retire.
would have been required to step down last year because of his age had it not
been for special permission to continue for an additional term. Trong, 73, is
unlikely to get another after 2021, however.
it can be expected a new generation of officials will rise to the highest
levels of the Party, who may or may not decide to toe the Party’s line. Making
sure that they do appears to be Trong’s ambition.
explanation for Trong’s ramped up anti-graft campaign focuses on the future of
the Communist Party. Corruption, incompetence and embezzlement among Vietnam’s
SOEs have cost state finances dearly in recent years.
presented to the National Assembly’s Judicial Committee last month claimed at
least US$2.6 billion has been lost due to corruption over the past decade,
which may be an underestimate judging by the figures revealed in recent trials.
the government is struggling to raise funds for major infrastructure projects
needed to sustain high economic growth. Public debt was roughly 64.7% of GDP at
the start of the year, while last year the government ran a budget deficit of
4.4% of GDP. Analysts agree that the Party’s unelected legitimacy depends
largely on continued fast growth.
effort to raise revenue through unpopular taxes is one solution; stopping the
illegal flow of money out of SOEs is another. But the government’s past efforts
to tackle corruption within SOEs and the public sector have traditionally been
limited, especially when it comes to reclamation of funds.
US$2.6 billion apparently lost over the past decade, only 8% has been recovered
by authorities, according to the report presented to the judicial committee. If
recovering lost funds is an unlikely way of replenishing state finances,
preventing the loss of future revenue is more achievable.
perceptions about the quality of SOEs’ management are of rising importance as
the government embarks on a major divestment campaign, including the floatation
of big stakes in Saigon Beer Alcohol Beverage (Sabeco), Vietnam’s State Capital
Investment Corporation, and Hanoi Beer Alcohol (Habeco).
have said they hope to raise as much as US$5 billion in selling a majority
stake in Sabeco on December 18. While foreign investors have shown strong
interest in Sabeco and Habeco, the same cannot be said of Vietnam’s other SOEs
whose reputations have been stained by years of economic mismanagement and
the government’s latest anti-corruption drive is also likely designed to
rehabilitate the reputation of its broad state sector, crucial if divestment is
to succeed and SOEs are to attract investors from abroad. But the rot may be
too deep to change many SOEs.
will have little deterrent effect on endemic corruption in Vietnam,” academic
Thayer wrote, “because the root cause is the lack of good governance, including
an independent system of audit, investigation and prosecution that is free from
added: “The shock of these sentences, like a booster inoculation, will wear off