France occupied all of Vietnam by 1884. Independence was declared after
World War II, but the French continued to rule until 1954 when they were
defeated by communist forces under Ho Chi MINH, who took control of the
north. US economic and military aid to South Vietnam grew through the 1960s
in an attempt to bolster the government, but US armed forces were withdrawn
following a cease-fire agreement in 1973. Two years later North Vietnamese
forces overran the south. Economic reconstruction of the reunited country
has proven difficult as aging Communist Party leaders have only grudgingly
initiated reforms necessary for a free market.
One of the most important recent political events to happen in Vietnam in
2002 was the election held in May 2002 of the country's new National
Assembly (NA), the highest legislative body, for the 2002-2007 term. 498
individuals were elected as parliament members, including 118 permanent
members, who will work on NA committees during their term, unlike the
majority of members, who usually operate in local areas and only attend
regular meetings of the NA when they are arranged.
The NA has decided on the new government cabinet, whose working term will
also extend from 2002 to 2007. Prime Minister Phan Van Khai was re-elected
and the number of deputy prime ministers cut to three for the next five
years from four in the previous term.
Minister of Trade Vu Khoan, was elected deputy PM in charge of trade and
foreign affairs, replacing Nguyen Manh Cam. Khoan is respected for his
contribution in signing a landmark trade deal between Vietnam and its
former enemy the United States.
Deputy PMs Nguyen Tan Dzung and Pham Gia Khiem continue in their posts for
the next five-year term.
The NA approved the setting up of 26 ministries and ministerial committees,
up from 23 in the previous term. The new formation aims to help ministries
to focus more on their responsibilities and to work more effectively.
Stagnation, overlapping functions and the bulky structure of the
government's administrative bodies was one of the major causes of the
ineffectiveness of government in its previous terms.
Fourteen new ministers and committee heads or 50% of the government's
cabinet have been appointed for this new term, including ministers of
police, justice, trade, transport, construction, industry, planning and
investment, home affairs, science and technology, natural resources and
environment, post and telecommunication, state inspectorate, ethnic
minority people, and population, family and children. Two newly-created
ministries included the Ministry for Natural Resources and Environment and
Ministry of Post and Telecommunication.
The government firmly pledged to implement changes to provide a more
favourable and equal environment to support private enterprises during the
term of the 11th National Assembly, in addition to imposing tougher
conditions for state owned enterprises (SOEs). In practice, the new-found
commitment to the private sector remains to be tested. The government has,
however, moved ahead with economic reforms related to its pursuit of World
Trade Organization (WTO) membership, and its commitments under the
bilateral trade agreement with the US.
In an effort to ease the public's increasing discontent with corruption and
other social ills, the Communist Party general secretary, Nong Duc Manh,
promised to pursue a tough campaign to crack down on corruption and
wrong-doings of party members. Manh has also attempted to breathe new life
into the economic renovation (doi moi) process, but the pace and progress
of economic reform is unlikely to quicken significantly in 2002-03.
The Communist Party:
The Communist Party, easily the most powerful organization in Vietnam with
around two million members, has set targets to consolidate control and
leadership in grassroots groups. The Party says it will clarify the
responsibilities of commune authorities and other social organizations,
make them work under local Party organizations' management, and to consult
citizens regarding their decisions.
For many years, Party organizations have had little effect on people since
the tasks and responsibilities of Party organizations and local governments
have not been clearly defined.
In urban areas, local Party organizations just assemble some retired Party
members for impractical gossip sessions and rarely admit new Party members,
because most Party members are drawn from their offices' organizations.
In rural areas, Party members are also commune authorities, so they have
unchallenged power to decide on local issues, which is the root of
increasing corruption and abuse of power, illustrated by the mounting
number of complaints and criticisms.
The Party only has groups in State-owned enterprises and administrative
offices. While private and foreign invested enterprises keep expanding and
increasing their contribution to the economy, the Party has not yet set up
organizations in those sectors because it still prevents Party members from
operating businesses. The NA's final announcement, however, did not make it
clear if the Party would admit business people into its organization in a
bid to increase its influence in the private sector.
However, not wanting to evade the increasingly important role of private
businesses, the party this year made an historical decision allowing
businessmen to be members and will permit current members to operate
private enterprises. Party members can run private enterprises if they do
not violate laws and have the support of their staff and neighbours. They
can maintain their Party membership if they wish. The Politburo, the
country's political elite, hopes that Party members working in the
production sectors will be excellent businessmen who can make legal
fortunes and encourage other people to make fortunes but do not explain how
these objectives may be realised.
In the Party's previous regulations, Party members could not practice
labour exploitation, because it is contradictory to old Russian socialist
theory, which the Party adopted as a bible. But the Party never clarified
what "labour exploitation" was, resulting in an implicit
understanding that Party members could not run private businesses that
In fact, no Party members are directors of private companies and few are
working in private companies. The permission to do so came along with the
Party's resolutions on boosting the private sector's role in the economy
and on improving the Party's leadership in grassroots organizations.
The Party now has to admit the existence and increasing role of the private
sector. Despite much discrimination and repression, the private sector now
contributes around 60% of GDP. The Party also realizes that it has lost
control, along with its image and prestige at the grassroots level, in
rejecting the private sector, the largest and fastest emerging part of
The political scene in Vietnam is expected to remain stable in the
period 2004-2005 with little change in the leadership of the Communist
party and the government, of the current ruling triumvirate, only the Prime
Minister, Pha Van Khai is affected by speculation over personnel change in
the near future. The party chief Nong Duc Manh and the president Tran Duc
Luong are likely to remain firmly in place. Mr. Khai has served since 1997
and has avoided any serious criticism. However, as he is 70 year-old and
nearing retirement, he could step down in a possible mid-term reshuffle
(between party congresses) in early 2004. Mr. Khai could still see out his
full term however, partly because he appears to be keen to stay on, but
more importantly because there is no obvious successor. One potential
replacement is the first deputy prime minister with responsibility for
economic and internal affairs, Nguyen Tan Dung. However, his recent
performance has been regarded as disappointing. Another possible successor
is Truong Tan Sang who heads the party's economic commission and headed the
Ho Chi Minh city people's committee from 1996 to 1999. However, he may not
yet be close enough to the centre of power and could instead be made a
deputy prime minister and groomed to succeed to the premiership at a later
Despite the likely secrecy that will surround any leadership changes, such
moves will be undertaken with a minimum of fuss and fanfare and will herald
little significant change in policy direction.
There is little risk that Mr. Manh will not serve his full term in office.
His determination to clamp down hard on official corruption is being fairly
well received by the public, although there is some cynicism as to whether
the most serious high-ranking offenders will be dealt with. However,
several prominent government figures received prison sentences earlier this
year for their part in the widely publicised scandal surrounding a Ho Chi
Minh city gangster.
Relatively senior officials have thus been put on notice that contrary to
what they might once have thought, they are not beyond the reach of law.
But the age-old underlying cause of official corruption, a bureaucratic
administration in which salaries are low and opportunities for bribery are
widespread- also needs to be addressed.
The process of dealing with corruption still remains high on the official
agenda. The justice system has not been running smoothly, owing to
corruption and a shortage of lawyers. A "cyber dissident" has had
his sentence reduced, but the government harsh crackdown on dissidents
The extent of corruption in Vietnam is reflected in its poor performance in
regional ranking. The Hong Kong based Political and Economic Risk
Consultancy has been polling business people since 1995 on their
perceptions of corruption. The most recent regional survey, carried out
this year, ranks Vietnam as the third most corrupt country with a score of
8.83, the most corrupt countries were considered to be Indonesia (9.33) and
India (9.30), China was not far behind Vietnam with a score of 8.33.
The government has sent out firm messages on religious freedom. The US and
the EU have been critical of Vietnam's recent human rights record. However,
the country strongly rejected that accusation. The government has moved to
prevent future demonstrations over land expropriation.
The slow pace of reform remains a major risk to high economic growth.
The private sector has continued to boom, but its development has been
hampered. The pace of privatization of state owned enterprises has been
The government has tried to create a more investor-friendly environment,
primarily in response to demands from foreign investors. The US and the EU
have been supportive of Vietnam's bid to join the World Trade Organisation
but have called for greater protection of intellectual property rights.
Tariff levels have fallen in accordance with commitments to the ASEAN
(Association of South East Asia Nations) free trade area (AFTA).
Real GDP has grown by close to 7 percent so far this year. It is unlikely
that Vietnam will be able to push its economic growth rate above 8 percent
as planned in the next two years if the government does not speed up its
economic reforms. The Prime Minister Phan Van Khai has acknowledged that
there are problems that need to be surmounted. Although GDP growth is high,
it is of poor quality because of the unduly high investment rate that is
needed to achieve such rates. The trade deficit has widened rapidly, budget
revenue is unstable and the administrative system is bulky and obstructive.
Industrial output, especially in the private sector has been driving the
economy. Consumer price inflation has fallen below 3 percent and the dong
has depreciated slowly against the US dollar. Rice exports have been robust
despite problems in Iraq, a major export market. Sales of locally made cars
have boomed in recent months ahead of tax increases. The US textile quota
regime has constrained domestic production. The tourism sector has been