Need to Know

April 02, 2024

Blazing Furnace

Vietnam

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Although the president of Vietnam, Vo Van Thuong, resigned on March 20 for undisclosed reasons, he allegedly ran afoul of corruption laws. He is Vietnam’s second president to leave office early in two years. Former President Nguyen Xuan Phuc resigned from the presidency in 2023 amid graft scandals related to his underlings. Other top-level officials have also left office recently due to allegations of graft.

Vice President Vo Thi Anh Xuan is now acting president, wrote the Associated Press. She is the country’s first female head of state, a role she played after Xuan departed, too.

These changes are signs of instability in a country that has become an important counterweight to China and a potential American friend in Southeast Asia – as the RAND Corporation think tank discussed late last year – as well as a growing global manufacturing hub. RAND also raised questions about Nguyen Phu Trong, the leader of the ruling Communist Party, who really holds the reins of power in the country.

Companies that have sought to avoid American labor costs and Chinese government control in their operations invested almost $37 billion into the country over 2023 alone, according to Bloomberg. Foreigners plowed nearly $4.3 billion into the country’s economy in January and February, an increase of 39 percent compared with last year.

Trong has vowed to root out corruption that has accompanied this investment into Vietnam, wrote World Politics Review. Currently, for example, prosecutors are seeking to imprison – or put to death – a tycoon who allegedly stole $12 billion from the country’s largest financial institution gauged by assets, the Saigon Joint Stock Commercial Bank, reported Reuters. Ninety people have been implicated in the case. Two hundred lawyers are working on it. Thousands are expected to be summoned.

It’s the biggest fraud trial in Vietnam’s history and the biggest to date in Asia.

At the center of the trial is real estate tycoon Truong My Lan. In addition to charges of embezzlement, Lan is also accused of paying bribes and of breaching banking regulations. She risks the death penalty. Other defendants include 15 central bank officials, among whom is a senior inspector accused of taking bribes worth $5.2 million from Lan.

The crackdown on graft in a campaign known as “Blazing Furnace” reflects public discontent over crooked bureaucrats and a lack of transparency in Vietnam, added the Asia Pacific Foundation of Canada. The Vietnamese routinely pay bribes for everyday needs such as medical services or land permits, the UN said in a report.

As a result, fed up Vietnamese protesters have taken to the streets recently to express their frustration over the government’s failure to regulate companies that pollute the environment, for example.

Meanwhile, Thuong was Trong’s ally. Some analysts therefore contended that the president’s resignation was a sign of Trong’s weakening grasp at the top of the Vietnamese political hierarchy. As Voice of America explained, if Trong and his current team in the Communist Party can’t keep a president in office, Trong’s rivals might want to try their hand at running things.

Investors don’t like corruption or protests or infighting among communist leaders, however. But as analysts predict, they will likely have to settle for some instability, however, as Vietnam grows.

This story originally appeared in the April 02, 2024 newsletter, Blazing Furnace.