Friday, January 21, 2011

Vietnam Struggles

Vietnam Struggles
By George H. Wittman on 1.21.11 @ 6:07AM

It appears that Vietnam's Communist Party, which has just completed its 11th National Congress, has approved turning to the nation's private sector to provide greater entrepreneurship and management skills to the economy. The officially reported 1,377 delegates gathered in the immense convention hall in Hanoi in uniform ranks of dark suits seated in appropriately red faux leather auditorium chairs. The gathering ratified what their Central Committee -- or rather the 12 man Politburo -- had already agreed to at the end of last year.

Of course nothing is truly settled until May, when the new national assembly is elected. Interestingly, the national assembly representing the citizenry in general rather than strictly VNCP members has become more aggressive lately in pressing forward its opinions. The movement to bring more private business owners into the Communist Party seems both a logical political and economic move. According to Bloomberg News analysts, about 81.5% of Vietnam's industrial output derives from national and foreign private business. The central government in Hanoi, however, insists 40% of GDP is generated by state-owned enterprises. While these statistics can be manipulated so they are not as contradictory as they first appear, it takes a heavy weighting of non-industrial output to do so. Whatever the true accounting actually is, it seems that the ruling party apparat thinks it's about time to bring some of those private business brains into the "club" in order to get the economy into high gear.

It took a while, but the advice coming out of Beijing was that utilizing the private business skills of Vietnam actually could be beneficial to the economy of their "little brother." No Vietnamese enjoys taking instruction from the giant Han neighbor to the north. But the obvious success of the Chinese Communist Party in using, yet still controlling, its own "capitalist roaders" could no longer be ignored. This was especially true after the disastrous experience with the Vietnamese state shipbuilding enterprise, Vinashin, and PetroVietnam. Hanoi could no longer back up these debt-ridden sovereign conglomerates, forcing credit downgrades by both Moody's and S&P.

There is a general recognition that the officials who have been running Vietnam's state-owned enterprises tend to lack the business planning capability necessary in such operations. Vinashin's debt accumulation was caused by unjustified expansion and mishandling of funds. Hanoi doesn't want to admit it, but endemic corruption and bureaucratic bloat have placed a stranglehold on economic development.

The ordinary Vietnamese have their lives impacted daily by soaring food prices and double-digit inflation. Payoffs to key local officials are a regular occurrence and have become such an embarrassment for the Party that they were mentioned in the opening speeches to the delegates to the Congress. Despite repeated references to bureaucratic corruption and akin civil sins, business observers expected little real change in the near term.

Balancing this legitimate self-criticism there is the traditional blame placed on the United States and other Western nations for shortfalls in "patriotic" efforts to reinforce Communist order and effort. Repeated outside urgings for democratic reform tend either to fall on deaf official ears or are considered the source of discontent that clearly proliferates Vietnam's social and political scene.

Efforts by the American Secretary of State Hillary Clinton in her two visits to Vietnam last year to build a rapport with Hanoi's leadership reportedly has achieved only surface results. Mistaking the customary politeness of the Vietnamese she met for developing friendship, Secretary Clinton actually believed she was making gains in relations between the two nations. This, despite being warned not to overvalue the traditional seeming openness of Hanoi's diplomats. It wasn't until an attack on a U.S. Embassy political officer visiting in Hue that the message got through to the seventh floor of the State Department in Washington.

The political officer, Christian Marchant, attempted to visit with the dissident Roman Catholic priest, Nguyen Van Ly, when police prevented the U.S. diplomat from leaving his car by repeatedly slamming its door against his legs. Luckily for Marchant no bones were broken, though severe contusions and abrasions hindered his ability to walk for several days. Hanoi responded to Washington's official complaints of assault on an accredited diplomat by noting the priest was under house arrest for anti-government actions and the American officer had not cleared his visit with the authorities.

As charming as the Vietnamese people are, their government remains as brutal and suspicious as ever. In the minds of the leadership the revolution is still going on, and that concept is used to justify continued repression under the guise of national discipline. Hanoi has a great distance to travel to balance its political, economic and social objectives. Trying to be a mini-Communist China combining internal totalitarian control with efforts to encourage the development of Western-style entrepreneurship is just not working for Vietnam.

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