Estimated reading time: 9 minutes
The past 12-months, since reopening of Vietnam in March 2022, more than a dozen ministries high ranked decision-makers have been arrested or under investigation, including President Nguyen Xuan Phuc dismissal early January 2023 just before Tet lunar new year festivities.
In this article, based on a political and business observer’s long experience, we built a framework -or try to- for decision makers to navigate political decisions affecting à ministry and its related business sectors. First, we define the main stakeholders in Vietnam and their motivation. Second, we put in perspective the ‘dangerousness’ for each business event (generally a highly publicized scandalous situation) and for what reason; it boils down to: can it be or become systemic risk or not. And finally we designed an easy to use Matrix to score the risk level for each of 5 criteria.
Post-Covid reopening is not here yet, which makes almost 3-years ‘closure’ for the country. Visas, work permits and TRC temporary resident cards are not back as before 2019. The foreign visitors and business community is getting impatient.
First secretary Nguyen Phu Trong is reaching 80 years old soon and got a brain stroke a couple of years ago.
Time is of essence to eradicate ‘clear and present dangers’ to the government and to reinstate credibility for Vietnamese people in the long-term leadership of the central party.
How will anti-corruption political arrests impact businesses in Vietnam post-Covid?
Due to abuses in bribes and extortion practices, threatening the sustainability of the central party supremacy, some ministries and sectors had to be ‘disciplined’. Analyzing the ‘breaking news’ events and scandals, we rated the systemic risk to the government in place and pointed out the business sectors that may still feel the pain and a standstill in 2023.
The relationship between the people, the government and the party sustainability
The Vietnam communist party central committee understands that its sustainability depends on the people of Vietnam being ‘happy’. Political unrest by the Vietnamese people is not an option, since the ‘đổi mới’ policy.
The government is also going out of control whether as à individual counter powers, incompetencies in management or massive and organized corruption.
The near bankrupt state of affairs back in 1985, motivated the opening back to foreign world: accelerated by the 1989 fall of Berlin wall when Moscow started to stop aiding Vietnam, isolated by the US embargo since 1975.
This balance was maintained by the Vietnam Communist Central Party for the past 30-years until the Covid years 2020 and 2021 unearthed massive abuses by groups within the ministries.
The first secretary, aged 78, need to re-establish order and deliver a cleaner governing situation to the next generation of people and leaders
The people: financial and health
The first priority is to preserve health and the finance of the Vietnamese people, and to manage continuous growth so the grass is always greener year-after-year for the foreseeable future.
- 2020: +3%
- 2021: +2.5%
- 2022: +8%
This is what all the efforts of the Central Party and the government have been about since 1985, an average of steady growth in most of the socio-economic growth fields
The government: administration and taxes
The government must be in control of the Central party directives to be implemented. Which means in control of the people’s growth, of their own demons (corruption and incompetencies) and of any foreign dominance.
Not collecting taxes means no money for infra-structure developments, which in turn means no growth prospects for the people and the country. GDP per capita is a good index to look at every year.
The Communist Party Supremacy and sustainability
Any event becoming a systemic risk or potentially too big: the party must rule it out to avoid any political turmoils. At 3 levels
Vietnamese citizen unrest is not an option.
Government internal official or non-official ‘organization’ that can create unrest is obviously not viable. The current fight against bribery and now incompetence to manage a national issue.
Systemic or non-systemic risk to the party supremacy
A Systemic risk is the possibility that an event at company level could trigger severe instability or collapse an entire industry or economy, thus the risk of wiping out the Party.
In the case of Vietnam, there are 3 sources that can cause high risk for the supremacy of the party: the people, the government internal feuds or organized groups (as post-Covid unearthed) and the foreign potential influence in stopping Vietnam greater integration and growth.
The Vietnamese people ‘massively’ not being happy would be a systemic risk
Preserving the health and wealth of the people is key to sustainability of the Party.
The dept of vehicles technical controls organized bribery cases that take money from a group of people (the wealthiest who owns a car) but more importantly leave dangerous vehicles unchecked on the roads that are already unsafe for the citizens.
The Viet Y case of corruption of all 64 provinces healthcare authorities and providers of Covid tests and treatments
The party creating its own demons: corruption as a systemic risk
The Covid period ‘made the best and the worst of people emerge’ therefore the unimaginable risks associated with this period. As I write investigations are on-going, therefore more arrests are to come in 2023.
The Viet Y for the Ministry of Health and the department vehicles controls for the Ministry of transportation were ‘a state within the state’, which endangers the unique party supremacy.
The Covid repatriation chartered planes gave birth to an hydra with 8 heads of high-ranked decision makers in ministries of: prime minister/president cabinet, Interior police, Immigration, transportation, health, foreign affairs and tourism. See picture.
The large bond issuance by Novaland or Van Thinh Phat real estate conglomerate or business magnate like TV show celebrity ‘Shark (tank)’ Thuy for Apax education or the F88 pawn shops sold to uneducated people. The amateur investors are sold 12% return ‘Asset backed corporate bonds’ lured by their banks or broker agents. The paper sold will surely backfire into massive protests by naive bank clients.
The real and main problem for the government is what are the stock markets regulatory bodies and appointed State auditors for bond issuance doing? Did they authorize the issuance of a corporate AAA bond as a junk bond by laziness, incompetence or turn a blind eye against a bribe? Investigations are underway.
In the meantime, capital markets and financing are frozen.
Vietnam’s national motto starts with Independence. But development goes with international integration
The recent dismissal of the President of Vietnam 3 years before its term, just before Tet is a strong signal to the people of Vietnam, its leaders and the world community that the Central Party led by first secretary Nguyen Phu Trong is strong on keeping Supremacy.
Anyone can fall if the risk is too high to the political stability and the sustainability of the economy.
Party leaders, business magnates or foreign governments will not impose their rules.
Nevertheless Vietnam is still a developing and poor country, trade, FDI, and NGO help or donations are needed. But more importantly, foreign invested companies and the business community will bring work, technology and financing development, literally putting food on the table of families.
Vietnamese decision makers really value foreign aid, trade and investment to reach the next level of development.
Moving forward in 2023 how will your business stand -or stall- during Vietnam anti-corruption cleaning campaign
The matrix made as simple as possible trying to ‘rate scoring’ the risk of any business event involving a ‘crackdown’ by the police piloted and motivated by the new government cleaning the country of any event ‘causing serious consequences’ ie. systemic risk. The methodology is simple weighted ponderation of 5 criteria from 1 to 5. The final score is the average note out on 5.
The action: events that impacts the people, the government and Vietnam world integration
We have rated the 13 recent and serious business or government officials corruption events. Based on our own experience we rated the low 1 to high impact 5 on People’s life, government functioning and international standing consequences.
For instance, the Covid repatriation case, the cost was of US$5000-to-7000 per person ‘all included’ involving cash payment at travel agents to Vietnam embassies acting as collectors and redistributors. The e-visa (digitally centralized and delivered by Hanoi) was the response to by-pass the diplomatic staff. Obviously since March-2022 official ‘re-opening of Vietnam’, it is flabbergasting to the international community, tourists and businessmen alike, to try to understand why no embassy of Vietnam worldwide can deliver simple visas?!
The evaluation: is it a systemic risk or uncontrolled enough to threaten Vietnam stability
We try to put ourselves in the position of the central party rating the event nascent, or if scaled or already too big to ignore and rate the Central Party own evaluation. The higher the ‘clear and present danger’ the boldest and immediate the move to enforce.
Note: The public servants are not well paid. An acting minister gets a mere US$700-to-1000 per month + stipends. The public sector can not attract talents the private sector does. Therefore in crisis: the evaluation of the situation, the responsive decisions, the management and the consequences or sequelae of those emergency decrees creates absurd then chaotic situations.
The Enforcement: If the risk is too high, the response will be immediate, tough and chaotic
Let’s say a risk above 4 will need immediate and strong action… which can kill the patient.
The example of the clampdown on 250+ traffic vehicles technical control centers: massive arrests from North to south lead to jail terms to hundreds officials, desertion and overwhelmed employees. As we write, the centers have 4 week delays for deliveries of traffic circulation certificates to trucks, used cars and new cars.
Mid 2022, the Viet Y case led to the crackdown investigations on the Ministry of Health. The precipitated new healthcare decrees on public bids for all state hospitals led to a complete stop of Healthcare equipment disruption in the orders of medical supplies by ‘terrorized’ public servants. By September there was a lack of anesthesia drugs… which surely added more suffering to the injury.
Here is the risk evaluation matrix, you can input your own ratings, even add some criteria:
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2023, in conclusion, will be more or less painful for businesses depending on your sector and is a systemic risk to stability
The matrix give a way to measure if the risk score is high, endangering Vietnamese growth and the party stability.
As I write, what is the common denominator on the forceful clampdown of: FLC hospitality group, Van Thinh Phat real estate conglomerate, Apax education, F88 800 pawn shops, Home credit (à false alert by the way)? They all issued questionable bonds to the public, to finance their operations.
Moving forward in 2023, we can bet the banking, insurance and financial services and their regulators, namely the Ministry of Finance, the State Securities Commission, the HOSE and the HSNX stock exchanges markets will be scrutinized and perhaps into… a ‘paralysis by analysis’ of wrongdoings.