Business as usual after Vietnam’s 12th Party Congress

Business as usual after Vietnam’s 12th Party Congress

In January, Vietnam’s 12th Party Congress was held amid rumours of a power struggle for the country’s top political post of General Secretary. Despite this uncertainty, the status quo ultimately prevailed – but what does this mean for investors?

On January 20th 2016, Vietnam held it’s 12th Party Congress. Convened over eight days, the event has been held every five years since 1976.

Largely secretive in nature, the National Congress is structured on the communist principle of democratic centralism, which mandates the activity of all party organisations, in addition to guaranteeing party unity. The Communist Party of Vietnam is the only permitted political actor under this principle, and is organised on the basis of discipline, collective leadership, comradeship and solidarity.

The National Congress is the supreme party organ. It elects the Central Committee, and nominates candidates for central leadership positions, including that of General Secretary, Secretariat and Central Commission of Inspection.

Rumours of political upheaval

In light of Vietnam’s one-party status, the Party Congress is not generally known for its unpredictability. Indeed, leadership decisions are often made months in advance.

Nguyen Tan Dung

Prime Minister Nguyen Tan Dung

However, this year’s Congress saw a break from tradition, with Vietnam’s Prime Minister Nguyen Tan Dung making an unprecedented play for the top post of Secretary General, currently held by Nguyen Phu Trong.

Tensions between the two centre on their differing economic and foreign policy agendas.

Mr Trong, elected as Secretary General in 2011, is a conservative leader, favouring state-owned economic enterprises, and cautious relations with neighbouring China and the United States. Trong has been reluctant to criticise China’s expansionist policies, most notably in the South China Sea.

Mr Dung, on the other hand, is regarded as a pro-reform figure in the Party. Dung also denounced China’s actions in the South China Sea, has favoured closer ties with the United States, and has championed economic liberalisation.

Maintaining the status quo

Despite at one point appearing to be a strong contender for the role of General Secretary, Dung suffered an early setback when he was not selected as a candidate for the role by the elite politburo.

However, Dung’s popularity within the Party meant that he was still in a position to fight for the role.

General Secretary Nguyen Phu Trong

Secretary General Nguyen Phu Trong

Mr Dung was nominated by Congress delegates to be a member of the new central committee, maintaining the possibility that he could contest the leadership. Dung declined his nomination to the central committee, and the party congress voted to accept the Prime Minister’s decision.

In order to contest the leadership, Dung required a majority of the Congress to vote against his withdrawal.

President Truong Tan Sang was also allowed to withdraw at this time.

Dung’s withdrawal ruled out any potential power bid. At the end of the Congress, it was announced that Mr Trong would be re-elected as General Secretary, securing nearly 100 percent of the vote.

Trong announced that he ‘didn’t expect to be introduced and elected’. He stated that there was ‘a lot of work ahead’.

Congress elected current Minister of Security Tran Dai Quang to take over as President, and Deputy Prime Minister Nguyen Xuan Phuc to take over as Prime Minister.

At 66, Mr Dung is too old to serve another term on the central committee, and will retire.

What this means for investors

With Trong re-elected as General Secretary, we can expect little change in Vietnam’s security and economic policy. It is therefore unlikely that we will witness a shift towards enhanced liberalisation.

In many ways, Vietnam can be regarded as an economic success story. According to World Bank estimates, Vietnam’s growth rate averaged 6.4% per year in the 2000’s, and macroeconomic stability has improved.

Vietnam is also expected to benefit from membership in the Trans-Pacific Partnership.

However, more needs to be done to underpin this process. This includes further structural reforms, enhanced competitiveness, and an improved business environment for overseas investors.

Vietnam is also unlikely to strategically rebalance its relationship with China or the United States. Trong is expected to seek stable relations with China, whilst continuing to improve relations with the United States.

In the short term at least, stability, party unity and solidarity will be the Party’s key driving principles.

Categories: Asia Pacific, Politics

About Author

Laura Southgate

Laura Southgate is Lecturer in International Security at the Centre for International Security and Resilience, Cranfield University, located at the Defence Academy of the United Kingdom. She has a PhD in International Relations from the University of Otago, New Zealand, and an MA in International Relations and Security, and a BA in Law and Politics, from the University of Liverpool.