Thayer Political Outlook Vietnam 2005-06

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.

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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 stateowned 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 “WTOplus” 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 stateowned 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.

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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