Vietnam: Can the Communist Party Keep Up With Market Reforms?

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Vietnam: Can the Communist Party Keep Up With Market Reforms?

Is the Communist Party ready to face political consequences of Vietnam’s economic transformation?

Vietnam: Can the Communist Party Keep Up With Market Reforms?

Posters promoting the 14th National Assembly election are seen on a street in Hanoi, Vietnam (May 20, 2016).

Credit: REUTERS/Kham

In 1986, at the Sixth Congress of the Communist Party of Vietnam (CPV), the country’s ruling elite decided it was time for a change. Ten years had passed since the CPV unified the country under its rule. The Party’s legitimacy, based on a swooping military victory, was starting to wear out. The economy was struggling, strained by hardcore socialist practices not bringing the population enough agricultural or industrial production. The way out was market reforms, the so-called “Đổi Mới,” or Renovation.

Thirty years on, Vietnam has transformed economically and socially, but the country’s politics are still lagging behind. The Communist Party still maintains a monopoly on power, as it seems with little contestation. This has been possible for two main reasons. First, the CPV has been successful in controlling the political environment, barring any other political forces from even entering the public arena. Second, but no less important, the Party has managed to move from the legitimacy of military victory to what sometimes is called “performance-based legitimacy.

Thanks to the renovation reforms, Vietnam is turning into a powerhouse of growth, luring foreign investment and diversifying exports. Low labor costs, a well-educated workforce, openness to foreign capital, and active participation in free trade agreements have all brought international business to Vietnam. The money that was poured into the country was put to good use, with a dramatic fall in poverty rates, growing living standards, and rising life expectancy.

The Communist Party took full ownership of the reforms’ success. It was at CPV Congresses and plenums that key decisions were made; CPV members and leaders were those who designed and implemented market reforms; and the Party did not hesitate to advertise its principal role in reforming the economy. Thus, the population was given a far more solid reason for supporting the Communists than their victory over Southern Vietnam – a durable and successful economic model.

After 30 years and two financial crises, Vietnam is now on the verge of a much more difficult transition. Maintaining and furthering the momentum of economic renovation is no longer just about getting more foreign money in investment, credit, and development assistance. To get out of the middle-income trap Vietnam will have to restructure the economy, increasing the share of high-tech industries, find new export markets, level the playing field for local private businesses, deal with the bulky and ineffective state sector, and significantly improve its institutions.

The CPV seems to realize the herculean labor at hand, as manifested in official Party documents and statements, as well as in the Vietnam 2035 report produced jointly by the World Bank and the Vietnamese investment and trade ministry. However, there is a fundamental contradiction in the economic restructuring that has been underway for the last 30 years and seems set to continue for at least 30 more. The economic transformation has brought about the emergence of whole new social classes and interest groups, which may be relatively well-off and silent now, but will no doubt require political participation to secure their position in the future.

Take, for example, the small and medium enterprises (SMEs) that have proliferated for the last decades. Full acknowledgement of private businesses opened up the dormant potential of Vietnamese capitalism, with the country now home to about 500,000 enterprises, 97 percent of which are SMEs. They now employ half of the country’s workforce. But the CPV is yet so secure in the position of this enormous group, crucial for social stability in Vietnam. SMEs and private businesses in general still crave better access to credit, relaxed red tape, and property rights security, and will thus seek adequate political representation.

Another group overlooked by the CPV is the urban middle class. The Vietnamese middle class is growing fast, from 12 million in 2012 to a projected 33 million in 2020, and is already thought to account for half of the country’s consumption. This group will play an essential role if Vietnam is to build a new economy based in high-value-added industries and services and if it is to become a “startup nation,” as proclaimed by the highest leadership. This is a group with an increased sense of social justice that will drive ad hoc public campaigns via social media, serving as an amplifier for all kind of grievances – from worker strikes to environmental disasters. Moreover, it is through the eyes of the urban middle class – and especially the young part of it – that the world sees events in Vietnam. That is why the CPV would be interested in incorporating the aspirations of this group into the political process.

These are just two examples of new actors emerging in Vietnam’s social scene born out of the economic reforms, but other growth pains may call for political transformation as well. A booming economy has produced all the typical imbalances of rapid development – wide-scale corruption, income inequality and growing disparities between urban and rural areas, as well as the kinh majority and numerous ethnic minorities. In politics, Northerners are still more present in CPV membership and governing bodies as well as on state-owned conglomerates’ boards.

Apart from that, Vietnam remains extremely vulnerable to environmental degradation, deforestation, salinization, and man-made factors like Hanoi’s growing air pollution problem and this year’s massive (and numerous) fish death incidents. Locals have demonstrated that they are willing to protest for the sake of their environmental well-being, as it is not just a quality-of-life issue, but also one that defines the economic survival of vast coastal communities.

All these issues may become a problem for the ruling elite due to a vibrant press community and relatively open social media. Unlike in China, the Vietnamese government did not opt for closing Facebook and other social media in favor of local and easy-to-control alternatives. The result is that political and social news get online immediately, with rather little the CPV can do. The country is becoming more and more transparent, with millions of tourists visiting the country every year, foreign investors caring for domestic stability and governance, and global and local NGOs watching the government’s every step.

This is not to say the CPV has not been wary of the risks that further renovation may bring to its own survival. Quite on the contrary, Vietnamese Communists have been remarkably adaptable throughout the last three decades, bending their approach to ideological and policy issues. For one thing, the CPV is no longer a party of the working class and the peasantry, but represents “the whole Vietnamese people,” which may amount to an expansion of the social foundation.

Furthermore, scholars have noticed that “Ho Chi Minh thought” has been gaining ground in the CPV’s ideological platform, pushing orthodox Marxism and Leninism to the back row. The peculiar thing is that nobody knows what “Ho Chi Minh thought” exactly is, except for “an application of socialism to Vietnamese specifics.” One could easily see how a wide range of policies could be placed under this kind of banner.

It seems that Vietnamese officials themselves are increasingly interested in actual politics. There is a visible drive among government leaders to identify themselves primarily as executives and technocrats, not merely as the Party’s representatives in the State. And with the rise of social media, provincial and government leaders are embracing Western-style public politics, projecting openness to scrutiny and performing PR stunts like taking a swim in the sea to show that it is safe despite an environmental disaster nearby.

The issue of prime concern for the CPV is, of course, its monopoly on power. As Vietnamese society evolves, so does the social basis and the cadres of the Party itself. In 30 years of deeper economic reforms – necessary for Vietnam’s development – the CPV will find itself in a completely different country. Will the Party turn into a different political force with a monopoly on power remaining the only unifying principle? Will it acknowledge factionary competition as the only alternative to a multi-party system? Will the CPV halt further reforms at a point where just one more step will erode monopoly to a point of no return?

Any of these scenarios is possible, but the CPV will have to change along with Vietnam’s economy or lose relevance.

Anton Tsvetov is an Expert at the Center for Strategic Research, a Moscow-based think tank. He tweets on Southeast Asian affairs and Russian foreign policy at @antsvetov. The views expressed here are the author’s own and do not reflect those of CSR.