May 27, 1999
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| May 27, 1999 | atimes.com | |
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| Southeast Asia ANALYSIS: Vietnam sets stage for new government purge STRATFOR's Global Intelligence Update May 25, 1999 Summary: The Vietnamese Ministry of Finance on May 20 revealed that in areview of government agencies, $5.8 billion in assets areunaccounted for. According to an official from the PublicProperty Management Office of the Finance Ministry, thisrepresents nearly one-third of the total civil service assets.While high levels of graft and corruption within the governmentare already acknowledged, the release of these figures sets thestage for an internal battle over who takes the blame. The stakesare high, as the outcome could either further entrench governmentcorruption or lead to more open Vietnamese markets. Analysis: Pham Duc Phong, Director of the Office of Public PropertyManagement in the Vietnamese Ministry of Finance, revealed on May20 that $5.8 billion in assets are unaccounted for. Phongsaid the missing assets, made up primarily of property, luxurycars, and office equipment, came to light in a survey of morethan 55,000 government agencies, and represent 29 percent of thetotal civil service assets of those agencies. Phong said, ''Wedon't know what happened to the property,'' and suggested theblame for the assets failing to be accounted for was that''accountants don't know their jobs properly." The revelation that corruption and graft are spreadthroughout the government in Vietnam is not new. Indeed, sinceVietnam ''opened up'' to foreign investment, there have been twosignificant consequences of this corruption. First, as foreigninvestors discovered corruption's true depths in Vietnam, they rapidlydecided not to commit large sums of money to the country. Second, regionaland local corruption has triggered protests and threatened civilstability in some areas. On May 20, 250 Vietnamese from outlyingprovinces gathered outside the National Assembly in Hanoi todemonstrate against corruption in the regional and local government.They complained that their local officials had tricked them, liedto them, and stolen from them, but they were unable to gainrestitution at any other level. The protestors have vowed to stayoutside the assembly until they receive a response from thegovernment. The government has already taken several steps to address theproblem. Vietnam's largest graft trial was held earlier thismonth, and the Finance Ministry has begun plans to conduct auditson state owned enterprises by the end of the year. On May 18, theCommunist Party launched another self-criticism campaign.In fact, the survey that discovered the losses in the first placewas in part to review government operations. However, while thegovernment has acknowledged that corruption exists and needsweeded out, the release of the figures of missing assets opens upa new battle within the government over who is responsible. This will be a battle of high stakes. The grand scale of the missing assets demonstrates the depth of corruption in thegovernment. There is also the continuous struggle between thehard-line communists and the more pro-western reformers,neither of whom are willing to accept the blame for this scandal.The political battle to attribute blame may also have a majoreffect on Vietnam's economic reform process as well. Two main outcomes of this financial andpolitical battle are possible. In the worst case for investors and businesses,there could be a purge of true reformers from the government, thereby further institutionalizing the already rampantcorruption. While this would severely set back any moves toward amore transparent economic system in Vietnam, it would maintainthe status quo for certain investors and other cronies of theadministrative elite who are already operating within the system. On the other hand, the battle could instead help to force themost corrupt individuals out of the government, laying the groundwork for abetter investment climate. This would be welcomed by theinternational community, which has been pushing Vietnam to speedup its reform process. Despite the more accessibleinvestment environment that would open up over the next fewmonths and years, however, there would be a change in the contacts withinVietnam, as many of those dealing with foreign investors may beremoved in the purge. As Vietnam continues to decide its financial future, a battle has begun. The result of the political changes this battlemay cause will carry over into the investment environment inVietnam. A further entrenching of corrupt and secret economicpractices may occur. Or, as corrupt officials areidentified and weeded out, Vietnam could present a more invitinglocation for investment dollars, though with a whole new set ofplayers. Either way, the political and economic situation inVietnam will enter into a period of turmoil as these issues aresorted out. _________________________________ For republication policy contact: STRATFOR, Inc. 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet:http://www.stratfor.com/ Email:info@stratfor.com | |||||||||
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