Vietnam's Bailout Politics
Video Transcript:
Recent news from Vietnam calls attention to the difficulty of managing a nationwide economic bailout while also dealing with a loss of public faith in the regime.
Despite its size and historic north-south division, modern Vietnam has achieved wonders. It fended off both the United States and China in wars to accomplish two things that are rare in Vietnamese history: it unified the country's north and south, and created an effective central government.
In the late 1980s, amid the decline of the Soviet Empire, Hanoi launched an economic opening-up program, on the model of China's liberalization. Since then, Vietnam has had rapid growth on the back of an export manufacturing boom.
Even today, there is tremendous room for Vietnam to keep growing. It has a large population that is mostly young, not fully urbanized, and mostly poor or earning low wages. China and neighbors like Thailand and Malaysia are shifting into a higher quality and higher cost phase of development, giving Vietnam's low-cost manufacturers the opportunity to expand.
However, growth has slowed in the years of the weak recovery of global demand following the 2008 crisis. The slowdown exposed a mountain of internal flaws, namely inefficient state enterprises, massive debt build up, and an imbalanced growth model. The Communist Party leadership spent $6.8 billion propping up the economy since 2008. Fresh from a leadership reshuffle in 2011, it soon found that it needed to undertake structural reforms and has pledged to remove bad loans from the banks' books and begin privatizing the non-strategic elements of the state corporations.
But such reforms are contentious because they will be painful. Already the general problem of slower growth has caused a public backlash and, in turn, an effort by the party to contain it. A range of measures has been introduced to try to win back public trust, including constitutional changes. Similarly, in a move to show government accountability, the National Assembly held a confidence vote on dozens of party leaders on June 11. The prime minister and central bank chief performed among the worst. Meanwhile, the prime minister's rival, the president, performed far better, despite being lower-ranked and a less powerful figure overall.
Demonstrating accountability in this way is important to help rebuild the party's reputation. But it is unusual in Vietnam to see a public display of divisions within the upper echelons of the party leadership, let alone something that pits two of the topmost political elites head-to-head. Vietnam's economic sluggishness and upcoming bailout program are stirring up political tensions that are unfamiliar in a single-party state.
