Despite political turmoil, Vietnam is worth the risk of doing business
More than 1,000 years ago, in two separate battles, the Vietnamese military utilized sharpened stakes hidden in the Bạch Đằng river to defeat an incoming Chinese naval attack. The recent convulsions in Vietnam could make one think that those stakes were being repurposed to eliminate political leaders.
In rapid succession over the last few weeks, two capable and long-serving deputy prime ministers were removed from their positions, one of whom was a member of the Politburo. And in an unprecedented turn of events, on Jan. 17, President Nguyen Xuan Phuc, another member of the Politburo and Party Central Committee and chairman of the National Defense and Security Council, resigned after just two years into what is usually a five-year term. Vice President Vo Thi Anh Xuan will serve as acting president until a new one is elected.
This disturbance in party leadership may appear remarkably sudden from the outside, yet these resignations have been carefully coordinated over some time and may even be part of a more extensive — and overdue — anti-corruption effort. However, even the best intentions, like routing out corruption, could have unintended consequences if misconstrued as instability by foreign interests.
This anti-corruption campaign was established in 2016 by General Secretary Nguyen Phu Trong when Phuc took office as prime minister. Since 2021, the Politburo and party have disciplined around 70 officials, including five ministers and former ministers, as part of nearly 5,000 people being investigated for corruption. Phuc resigned after several senior officials were found to have committed violations concerning COVID-19 test kits and repatriation flight scandals.
Government accountability, especially at the highest levels, is a good thing. One could even argue that America could benefit from more high-level accountability across both parties. Yet, the inherent complexity of the Vietnamese government can make these moves appear frightening to outsiders, including risk-averse foreign investors.
For years Phuc served as the face of Vietnam to foreign investors and diplomats worldwide while improving ties with America and overseeing one of the world’s fastest-growing economies. In 2022, Vietnam marked its fastest economic expansion in 25 years with a GDP growth rate of over 8 percent and became America’s seventh-largest trading partner.
Will Western diplomats and corporations continue enjoying the warm welcome that attracted them to Vietnam in the first place? Will new Vietnamese leadership take a harder line against the West? The quick and straightforward answers are ‘yes’ and ‘no,’ respectively.
Although the concern is understandable for the casual observer, as a 30-year career diplomat with special expertise in Vietnam, I see a clear message of how deeply Vietnam values its relationship with the West, especially America. It appears these recent departures were carefully designed to be neither punishment for forging closer ties to the West nor for promoting reforms within Vietnam. Instead, the punishments were intended to cultivate better accountability within Vietnam’s Communist Party and its political system.
As more manufacturing transfers into Vietnam, ensuring a stable and reliable business environment — coupled with improved accountability from the government — is something investors should want from Vietnam’s leadership. Additionally, communicating well with foreign governments and the business community to ensure they understand what is happening and why is equally essential.
There will be more changes in Vietnam’s government in the coming months, including the election of a new president. Businesses should be prepared for a slower decision-making process in 2023 because of the inexperience of more cautious government personnel in new positions.
Despite headwinds in 2023, Vietnam is still expected to see economic growth of up to 6.5 percent this year. These achievements can’t be reached without international trade and investment, especially with the West. The party’s greatest pressure is not from any outside force or neighbor but from an internal need for continued growth and prosperity, which depends upon foreign trade and investment. That is why Vietnam has systematically joined regional free trade arrangements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the Trans-Pacific Partnership’s successor agreement), the Regional Comprehensive Economic Partnership, which does not include the United States, and the EU-Vietnam Trade Agreement.
The old saying tells us that “Risk is opportunity.” The opportunity in Vietnam is nearly limitless, but it is not without risk. The government would be wise to do what it can to lower risk and increase opportunity. Moving swiftly to approve a long-awaited power plan is one step the party could take to signal its commitment towards foreign investment from the West and economic stability for its people.
Ted Osius is president and CEO of the US-ASEAN Business Council and served as U.S. ambassador to Vietnam from 2014-2017.