Thayer Consultancy

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Background Briefing: Vietnam: Is Reform for Real? Carlyle A. Thayer March 7, 2012

[clientnamedeleted] Wewouldlikeyourassessmentofthefollowing: Q1. Vietnam recently a held a party conference on reform and partybuilding. It seemsasthoughtheeventwasratherlesstransparentthancouldhavebeenhoped. ItisuncleartoVietnameseobserversclosetoeventswhatreformswillbeadopted andwhen. Themediawas restrictedinaccess,reportedlyonlytheVietNamNews wasallowedtoattendsessions.Isthisaletdownafterthehopesforgreaterreform or was it in response to the Doan Van Vuon land lease case in Haiphong and the governmentsperceivedneedtoengageinconfidencebuilding? ANSWER: The Vietnam Communist Party is a creature of bureaucratic habit. After lastyearsnationalpartycongressthepartySecretariatwouldhavedrawnupawork plan for the next five years outlining the priority in which key issues are to be discussed. The Central Committee is required to meet a minimum of twice a year. Theholdingoffourplenumsinsuchashortperiodoftimeindicatescommitmentto address certain issues. Partybuilding and party reform is one of the major policy areasthatfollowseachnationalpartycongress.Oncethefourthplenumaddressed this issue in January it follows that some mechanism had to be adopted to implementitsdecisions.Therecentpartyconferenceonpartybuildingandreformis thefirststepinwhatmaybeaprolongedprocesstoforgeinternalpartyconsensus onhowtoproceed.TheVuoncasewouldonlyhaveaddedurgencytoaddressthe issue of land leases and compensation. The party reform agenda involves a much broadersetofissues.PartyreformobviouslyoverlapawiththeVuoncasebecause localpartyofficialwereinvolved. Q2. There has been talk since last year of reform of shambling stateowned enterprises(SOEs)butthishasbeenpushedoffthemorepublicagendabytheissue of land reforms which affect more of the populace daytoday. Are SOEs reforms continuing and is Secretary Nguyen Phu Trong in part warning off powerful but vestedinterestsinthesegroupswhenheattacks"individualism"? ANSWER:Thereformofstateownedenterprises(SOE)resurfacedasapolicyissue after the last national party congress. SOE reform had stalled long before the congress was held in 2011. It is clear that the privatization of SOEs left effective ownershipinthesamehandsandcreatedrobustpatronagenetworks.Theuseofthe

2 termindividualismisalongstandingtermofapprobationbytheparty.Itrefersto corruptofficialswhofeathertheirownnestandthatoftheirnetwork.Individualism isnotjustanafflictionofSOEsandappliestopartyofficialsinothercontexts.SOE reform is back on the agenda but there have been no signs that a stepped up campaignofprivatizationisintheoffingjustyet. But the urgency of dealing with SOE reform pales with the absolute priority that much be given to the land issue. Leases are due to expire across the nation. Land issuesandcompensationcasesarethemainsourceofgrievanceintheruralareas.If mismanagedacrisisoftheorder ofThai Binh province whicheruptedinlate2007 couldbreakout. Q3. What do you think will be the most workable route taken by Party and government when it comes to both SOE and land reforms and how can the governmentshoreuppublicconfidenceafterrecentevents? ANSWER:Themostworkablerouteforthepartytotakewouldbetorenewallland leasesforarelativelylongperiodoftime,anywherefromthirtyyearsto99yearsfor example. And, at the same time, draw up national guidelines or even legislation governing compensation when leased land in resumed by the local government. ThereisnosilverpolicybulletforSOEs.Eachwillhavetobelookedatontheirmerits on a case by case basis. Political factors will weigh alongside economic considerations.Theinherentuncertaintyofalteringthestatusquowillcauseangst amongtheworkers.ThekeytoSOEreformisnottodisadvantagetheemployeesby making them redundant. A government job creation scheme would address this problem. Over the long term the government must rededicate itself to creating a levelplayingfieldforprivateenterprisessotheycanaccesscreditfromthebanks. In the case of reform of land leases the government needs to adopt greater transparency measures so local grievances can be aired and adjudicated fairly. Security of tenure is an absolute must. When leases are not renewed local government must make clear the public interest involved in returning the land to control by local authorities. Real public goods must be created not luxury flats, marketsetc.