Vietnam

Politics:

• Analysis

  Vietnam politics: Losing the plot

  Land-grabs in Vietnam: Losing the plot

  Anger rises over corrupt local officials

  THICK envelopes mailed from villages in 57 of Vietnam's 63 provinces are piling up in Le Hien Duc's living room. The subject of the correspondence is land. "The government is seizing it," says Ms Duc, an 80-year-old activist and retired primary-school teacher. "They say it's all about investing in social-welfare projects, but I call it stealing."

  Vietnam's Communist Party came to power wooing peasants on promises of sweeping land reforms. Three-quarters of the country's 90m people still live in the crowded countryside. Though the state still formally owns all the land, in 1993 it gave many farmers 20-year usage rights on farmland. That represented a ground-breaking move following an earlier and disastrous period of state-led agricultural collectivisation.

  Yet in these days of rapacious capitalism, many local officials seize farmland for development projects, compensating villagers at rates far below market value. The party's pro-peasant rhetoric has come to sound hollow. Land grievances dominate complaints sent up to the central government. Followers of China's development will recognise the story.

  Property values have slumped, in tandem with slow-burning economic and banking crises. Yet conflicts over land still fester. Tension is especially acute on the peripheries of the capital, Hanoi, and other big cities. There, the disparity between property values and compensation rates is often widest. Some villagers protest outside government offices. Others, driven to desperation, defend their turf with rocks or homemade weapons. In one example, fish farmers in Haiphong, a port city east of Hanoi, disrupted a planned eviction by battling police with shotguns and homemade landmines. State-controlled media covered the incident extensively, and the prime minister, Nguyen Tan Dung, publicly chided local officials. Many Vietnamese view the farmers, who stand accused of attempted murder, as heroes.

  Beginning in May the National Assembly must decide what to do when the 20-year usage rights start to expire. The betting is that rights will be extended for 50 years. Aid donors, meanwhile, are urging the government to narrow the scope of what sorts of property it may legally seize for development.

  Claiming land for infrastructure projects is often justifiable, and Vietnam badly needs better ports and roads. But regulations permit local officials to seize land for vaguely defined economic development. Small wonder that ordinary Vietnamese, according to a survey led by the World Bank, view land administration as their country's second-most corrupt bit of public life, just behind traffic police. Older farmers in northern Vietnam complain that the land they defended against French and American armies was first wasted through failed Communist experiments and is now being lost to condominiums.

  Police in Hanoi grudgingly allow elderly villagers to protest outside the presidential palace. But gatherings on the dusty outskirts of the capital are more likely to turn violent, spurring chatter and criticism of the government online.

  In Duong Noi, on Hanoi's south-western edge, villagers scuffled with police in late January to prevent bulldozers from clearing land where their ancestors are buried. Some of them have turned up at the Hanoi office of a state-run newspaper to plead for coverage, or sent grievances to Le Hien Duc, the anti-corruption activist. One villager, Tran Van Sang, says he refuses to accept a meagre $9,000 for his 720 square-metre (7,750 square-foot) plot of land. "Land is our source of life," he says. "We'll die to defend it."

  March 16, 2013

• Background

  Vietnam: Key figures

  Nguyen Tan Dung

  Mr Dung, a southerner, rose rapidly up the party and government ranks, ascending to the position of prime minister following the party's tenth congress, in 2006; he is the youngest person to be appointed to the post. Following the election of the 13th National Assembly (NA, legislature) in May 2011, Mr Dung was confirmed as prime minister for a second term. During the 11th national congress of the Communist Party of Vietnam (CPV), held in January 2011, he came under criticism for his management of the economy. Despite having retained the post of prime minister, Mr Dung's authority appears to have diminished, and he will spend much of the rest of his term unwinding the economic policies that he spent his first period in office advocating. His ability to manage those with divergent interests will be tested by the government's attempts to streamline the state-owned sector and shore up the country's banks.

  Truong Tan Sang

  A senior member of the CPV's politburo, Mr Sang is seen as a highly influential member of the party's conservative bloc. In July 2011 he was elected by the NA as president, succeeding Nguyen Minh Triet. Although the role is largely ceremonial, Mr Sang will nevertheless still be able to exert considerable influence as a leading politburo member. He is expected to continue to head a crackdown on the media, and in particular on journalists investigating corruption within the CPV.

  Nguyen Phu Trong

  The general secretary of the CPV and a senior politburo member, Mr Trong is from the capital, Hanoi, and was formerly a professor of linguistics and a long-serving editor of the party organ, the Communist Review. He became a member of the CPV's Central Committee in 1994, joined the politburo in 1999 and served as party secretary from 2000. He occupied the position of chairman of the legislature in 2006-11. The choice of Mr Trong, who is widely regarded as a moderate, as general secretary may have been a compromise, providing a degree of balance to the rivalry between Mr Dung and Mr Sang.

  September 14, 2012

• Structure

  Vietnam: Political structure

  Official name

  Socialist Republic of Vietnam

  Form of state

  One-party rule

  The executive

  The cabinet is constitutionally responsible to the National Assembly, which is elected for a five-year term

  Head of state

  The president, Truong Tan Sang

  National legislature

  The unicameral 500-member Quoc Hoi (National Assembly) meets biannually and typically serves a five-year term. The current chairman is Nguyen Sinh Hung. The assembly appoints the president and the cabinet

  Local government

  Centrally controlled provinces and municipalities are subdivided into towns, districts and villages, which have a degree of local accountability through elected People's Councils

  Legal system

  The regional people's courts and military courts operate as courts of first and second instance, with the Supreme Court at the apex of the system

  National elections

  An election for the National Assembly took place in May 2011; the next is due in 2016

  National government

  The Communist Party of Vietnam (CPV), and in particular its politburo, controls both the electoral process and the executive

  Main political organisations

  The CPV (general secretary: Nguyen Phu Trong); the Vietnam Fatherland Front

  Main members of the cabinet

  Prime minister: Nguyen Tan Dung

  Deputy prime ministers:

   Nguyen Xuan Phuc

   Hoang Trung Hai

   Nguyen Thien Nhan

   Vu Van Ninh

  Key ministres

  Agriculture & rural development: Cao Duc Phat

  Construction: Trinh Dinh Hue

  Culture, sports & tourism: Hoang Tuan Anh

  Education & training: Pham Vu Luan

  Finance: Vuong Dinh Hue

  Foreign affairs: Pham Binh Minh

  Industry & trade: Vu Huy Hoang

  Information & communications: Nguyen Bac Son

  Justice: Ha Hung Cuong

  Labour, war invalids & social affairs: Pham Thi Hai Chuyen

  National defence: Phung Quang Thanh

  Natural resources & environment: Nguyen Minh Quang

  Planning & investment: Bui Quang Vinh

  Public health: Nguyen Thi Kim Tien

  Public security: Tran Dai Quang

  Transport: Dinh La Thang

  Central bank governor

  Nguyen Van Binh

  March 21, 2013

• Outlook

  Vietnam: Key developments

  Outlook for 2013-17

  • The Communist Party of Vietnam (CPV) will maintain a firm grip on power in the forecast period. There is no prospect of major internal instability, despite factional splits between conservative hardliners and reformers.
  • The poor performance of the economy in 2011-12 has reduced the influence of the prime minister, Nguyen Tan Dung, whose strong pro-growth policy bias has been blamed for the reckless expansion of the state sector in recent years.
  • Vietnam will continue to make strides in strengthening its ties with the West, despite intermittent tensions over human rights issues. Relations with China will remain strained over competing territorial claims in the South China Sea.
  • The ability of the authorities to support economic growth through monetary policy will be limited by strong price pressures in 2013-17.
  • The subdued global economy exerted a drag on Vietnamese GDP growth in 2012 and will continue to do so in 2013. In 2014-17 a more favourable external climate will lead to faster real GDP growth, at 6.8% a year on average.
  • The annual rate of inflation has slowed since mid-2011 and will average 7.3% in 2013-14, before accelerating to 8.4% on average in 2015-17.
  • The current account recorded another surplus in 2012, but it will move into the red in 2013 as import growth causes the trade account to return to deficit. Inflows of foreign direct investment will strengthen in the forecast period.

  Review

  • Government efforts to consult the public on constitutional revisions have led to calls for multiparty democracy and open elections. The final version of the changes is set to reduce the dominance of state-owned enterprises (SOEs).
  • In late February Mr Dung approved an economic plan for 2013-20 that appears to reflect a decision by Vietnam's leadership to focus on SOE reform, tackle bad debt, and prioritise economic stability over rapid growth.
  • In mid-February the government reportedly approved a plan to rehabilitate the debt of Vinashin, an SOE that defaulted on a US$600m loan in 2010, and a restructuring plan for Vinalines, another debt-burdened state-owned firm.
  • In another sign that policymakers are placing a greater emphasis on macroeconomic stability, central bank officials have stated publicly that they will resist calls to boost export-competitiveness by devaluing the currency.
  • The inflation rate fell slightly in February, to 7% year on year, from 7.1% in January. Healthcare and education costs were up most sharply in the month.
  • The trade surplus rose to US$900m in February, from US$776m in the previous month, as import growth continued to decelerate.

  March 21, 2013

Economy:

• Background

  Vietnam: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	88.7	Population growth	1.0
  GDP (US$ bn; market exchange rate)	122.8b	Real GDP growth	6.6
  GDP (US$ bn; purchasing power parity)	300.2	Real domestic demand growth	7.4
  GDP per head (US$; market exchange rate)	1,385	Inflation	13.2
  GDP per head (US$; purchasing power parity)	3,386	Current-account balance (% of GDP)	-6.6
  Exchange rate (av) D:US$	20,649b	FDI inflows (% of GDP)	8.4
  a The Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: For much of its history Vietnam has fought off domination by outside powers. In 1945 Ho Chi Minh declared independence from France after nearly 60 years of colonial rule. Vietnam was divided between the communist north and the US-backed south in 1954. The country's war of independence finally ended in 1975 with victory for the north. The Vietnamese invasion of Cambodia in 1978-79 led to more than a decade of isolation from the West and to dependence on the Soviet Union. This state of affairs ended with the Cambodian settlement of 1991, which allowed Vietnam to implement more fully the government's policy of economic renovation (doi moi).

  Political structure: Vietnam is one of the few surviving communist countries to be organised along traditional Leninist lines. It is a one-party state, within which the Communist Party of Vietnam maintains a tight grip on power. Efforts are under way to make local government more accountable and transparent and to restructure government ministries to reduce bureaucratic inefficiency, but broader political change is not on the agenda.

  Policy issues: The government has made progress on reducing poverty, but tough challenges lie ahead, notably in terms of ensuring economic stability, improving the conduct of monetary policy and strengthening the legal framework. The government will continue to focus on supporting the economy, keeping inflationary pressures in check and shoring up confidence in Vietnam's currency, the dong. Economic reforms will improve the operating environment for local and foreign investors, as will the country's membership of the World Trade Organisation. Reform of state enterprises is emerging as an important priority for the government, but progress in this area will be hard to achieve.

  Taxation: A reformed personal income tax system was introduced in 2009. The new income tax structure applies uniform tax rates to Vietnamese and foreign workers and has broadened the tax base significantly. A corporate tax rate of 25% applies to both domestic and foreign-invested enterprises. Certain preferential rates still apply.

  Foreign trade: On a balance-of-payments basis, exports totalled US$96.9bn in 2011, up from US$72.2bn in 2010, while the import bill rose to US$97.4bn, from US$77.4bn in the previous year. As a result, the merchandise trade deficit narrowed to US$450m in 2011, from US$5.1bn in 2010.

  Major exports 2011	% of total	Major imports 2011	% of total
  Textiles & garments	14.7	Machinery, equipment & parts	16.3
  Crude oil	7.6	Refined petroleum	9.2
  Footwear	6.8	Steel	7.5
  Fisheries products	6.4	Materials for textile industry	4.2
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  US	17.6	China	30.7
  Japan	11.0	South Korea	14.3
  China	10.6	Singapore	10.8
  South Korea	4.8	Japan	10.1

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  March 21, 2013

• Structure

  Vietnam: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 21, 2013

• Outlook

  Vietnam: Country outlook

  Vietnam: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The ruling Communist Party of Vietnam (CPV) will maintain a firm grip on power in the next five years. There is no prospect of major instability within the party, although the existence of factional splits between conservative hardliners and relatively reformist moderates is clear. The leadership that emerged from the party's national congress in January 2011 appeared to be evenly balanced. In July of that year the prime minister, Nguyen Tan Dung, was formally re-elected to his post by the National Assembly (NA, the legislature). Meanwhile, two of his main rivals were chosen for other important positions: Truong Tan Sang, formerly the head of the CPV secretariat, was picked as the country's president, while an outgoing deputy prime minister, Nguyen Sinh Hung, became chairman of the NA. Since the congress, however, Vietnam's disappointing economic performance and growing evidence of corruption among state employees has weakened the prime minister, who in late 2012 took the highly unusual step of apologising to the nation for the government's poor performance. Mr Dung's actions in early 2013, including his endorsement of a more conservative policy bent, suggest that he has shored up his political position by partially acceding to the more stability-focused policy preferences of his rivals in the CPV.

  ELECTION WATCH: Vietnam is a one-party communist state, and elections do not play a major role in its political life. Appointments to CPV posts take place behind closed doors, with votes conducted to confirm decisions that have already been made. NA delegates are chosen by popular vote; the most recent election took place in May 2011, and the next poll is due to be held in 2016. Candidates are carefully vetted by the Vietnam Fatherland Front, a CPV-controlled umbrella body that includes all of the country's "mass organisations", and only those deemed suitable are allowed to stand. At the 2011 election only 42 of the 500 people elected to the NA were non-CPV members.

  INTERNATIONAL RELATIONS: Vietnam will continue to make strides in strengthening its ties with the West, and particularly with the US. Vietnamese-US diplomatic relations have been bolstered by high-level exchanges in recent years, and the economic relationship between the two countries has developed rapidly. The US defence secretary, Leon Panetta, courted Vietnam as a potential location for a rotation of US troops while on a visit to Cam Ranh Bay in June 2012. Despite these trends, US concerns over human rights and religious freedom in Vietnam will remain an intermittent source of bilateral tension. The US government said that it was "deeply troubled" by the Vietnamese authorities' crackdown on anti-government activists in early 2013, suggesting that the ongoing rapprochement between the two countries may lose momentum this year.

  POLICY TRENDS: In 2013-14 the government is likely to moderate its traditional policy bias, which has favoured rapid economic expansion over price stability. That approach generated significant macroeconomic instability in 2011-12, including a surge in inflation, repeated currency devaluations and sharply slowing economic growth. After a period of soul-searching and factional struggles within the ruling party, signs are multiplying that those backing a more conservative, stability-oriented policy direction have gained the upper hand. Most tellingly, in February Mr Dung, who had previously championed aggressively pro-growth policies, agreed to an economic plan for 2013-20 that confirms a more cautious approach. The Economist Intelligence Unit's expectations of inflation and GDP growth have not changed significantly as a result, as they are consistent with the new, more stability-focused emphasis of policy. Our central forecast is that both inflation and growth will accelerate steadily during the forecast period, in an indication of our belief that policymakers will succeed in preventing a repeat of the macroeconomic volatility of recent years. However, there remains a risk that the government will lack the required political will if tough measures are required to maintain stability.

  ECONOMIC GROWTH: In 2012 real GDP grew by just 5%, its slowest pace of expansion since 1999. A period of spiralling inflation in 2011 changed consumer expectations, and this caused private consumption growth to weaken to 5% last year, from an average of 7.5% annually in 2007-11. Furthermore, ambiguous policymaking has led to lacklustre expansion in inward foreign investment, which was previously one of the main drivers of economic growth. The State Bank of Vietnam (SBV, the central bank) has loosened monetary policy, but a longer period of slower and steadier inflation will be required to allay the concerns of consumers and investors. Combined with a forecast subdued global economic performance that will cause external demand to remain weak, this underlies our forecast that GDP growth will pick up only moderately in 2013, to 5.2%. A more benign climate from 2014, both at home and externally, will enable Vietnamese GDP growth to accelerate to 6.8% a year on average in 2014-17.

  INFLATION: After averaging 18.7% in 2011, annual inflation decelerated to 9.1% in 2012. We expect the rate of price increases to slow to 7.3% a year on average in 2013-14, as global prices for many commodities will remain fairly stable and annual economic growth will accelerate only modestly, to an average of 5.6%. However, upward price pressures will strengthen in 2015-17, when inflation will average 8.4% as economic growth picks up and global commodity prices rise. In the forecast period the cost of doing business in Vietnam will rise rapidly, as increases in the cost of living and strong employment growth will support continued wage growth and land prices will escalate sharply.

  EXCHANGE RATES: Vietnam will continue to operate a crawling-peg system, allowing the dong's exchange rate against the US dollar to adjust gradually to changing market conditions. In reaction to strong downward pressure on the dong, the SBV devalued the currency on four occasions between November 2009 and February 2011, resulting in a cumulative drop of almost 13% in its value against the US dollar. Vietnam's meagre foreign-exchange reserves mean that the SBV will not be able to counteract further downward pressure by intervening in currency markets. IMF data show that foreign reserves stood at US$21.7bn in September 2012, providing just two months of import cover. The slowdown in inflation reduced the downward pressure on the currency in 2012, so that the dong depreciated by only around 1% against the US dollar last year. As inflation moderates and exports expand, the pace of currency weakening will remain slow in 2013. Stronger growth in imports in 2014-17 will put the currency under renewed pressure, and we expect it to weaken to an average of D23,948:US$1 in 2017.

  EXTERNAL SECTOR: The trade account recorded a rare surplus in 2012, although the surplus was small and largely reflected a sharp slowdown in import growth owing to weak domestic demand. Assuming that inflation remains under control, import growth will accelerate from 2014. Greater economic stability will entice foreign investment back to Vietnam, in turn supporting a rise in imports of capital goods. This, coupled with strong growth in imports of consumer goods, will ensure that the trade account returns to deficit in 2013-17. However, global prices for several exported commodities, including oil, will remain high in historical terms, supporting exports. Coupled with increased production in the low-cost export-oriented manufacturing sector, this will help to narrow the trade deficit between 2014 and 2017. Tourism receipts are expected to rise steadily, boosting services exports. However, Vietnam will remain reliant on a host of imported services. The deficits on the services and income accounts will be partially offset by a continuing large surplus on the current transfers account, supported by remittances from overseas Vietnamese.

  March 25, 2013

• Forecast

  Vietnam: Country forecast summary

  Country forecast overview: Highlights

  • The Communist Party of Vietnam will maintain a tight grip on power in 2013-17. Despite factional splits between conservative hardliners and relatively reformist moderates, there is no prospect of major instability within the ruling party. Political apathy and the regime's intolerance of dissent make it unlikely that any opposition movement will gain traction.

  • Ties with the West, and particularly the US, will continue to strengthen overall. Although diplomatic, military and economic links will continue to develop rapidly, tensions will arise periodically over human rights issues. Viet
  • nam's relationship with China will be more difficult, as consensus on sovereignty over island groups in the South China Sea, or even on joint development of energy resources in the area, remains out of reach.
  • The rate of consumer price inflation slowed to 9.1% in 2012, from 18.7% in 2011. The Economist Intelligence Unit expects the rate of price rises to decelerate further in 2013-14, to an average of 7.3% a year. Renewed increases in global commodity prices will see inflation pick up to 8.4% a year on average in 2015-17.
  • Although the tone of recent policy announcements has shifted towards a greater emphasis on maintaining macroeconomic stability, concerns persist over whether there is sufficient political will to keep inflation under control. Our central forecast remains that the State Bank of Vietnam (the central bank) will succeed in ensuring that annual inflation remains below 10% on average in the forecast period.
  • The fiscal position will remain poor over the forecast period, owing to high spending on infrastructure, social-welfare programmes and the restructuring of ailing state-owned enterprises. The budget deficit is estimated at the equivalent of 4.7% of GDP in 2012 and will remain around this level on average in 2013-17.
  • Although Vietnam's long-term economic growth prospects remain positive, growth will continue to be unspectacular in the early part of the forecast period. Real GDP will grow by 5.2% in 2013 and 5.9% in 2014, but growth will then accelerate to 7.1% a year on average in 2015-17.
  • The trade account recorded a small surplus in 2012, according to government data, largely owing to a drop-off in import growth. Import growth will accelerate from 2014 amid a pick-up in domestic demand, pushing the trade account back into deficit. The trade gap will widen to around US$3.7bn in 2014, before improving terms of trade cause it to narrow in 2015-17.

  

  March 21, 2013

Country Briefing

Land area

331,051 sq km

Population

86m (2009, General Statistics Office estimate)

Main towns

Population (of province) in '000 (2009):

 Ho Chi Minh City: 7,165

 Hanoi (capital): 6,472

 Haiphong: 1,842

Climate

Tropical monsoon; north cool and damp in winter (November-April), hot and rainy in summer; south more equable; centre most subject to typhoons. The rains are highly unpredictable

Weather in Hanoi (altitude 216 metres)

Hottest month, June, 26-33°C; coldest month, January, 13-20°C; wettest month, August, 343 mm average rainfall; driest month, January, 18 mm average rainfall

Weather in Ho Chi Minh City (altitude 9 metres)

Hottest month, April, 24-35°C; coldest month, January, 21-32°C; wettest month, September, 335 mm average rainfall; driest month, February, 3 mm average rainfall

Language

Vietnamese (spoken by about 90% of the population); English (increasingly favoured as a second language); some French; a little Russian and German; minority languages such as Hmong, Thai, Khmer in more remote rural areas

Weights and measures

Metric system. Local land measurement: 1 mau = 3,600 sq metres (north); 1 mau = 5,000 sq metres (centre)

Currency

Dong (D). Average exchange rate in 2012: D20,859:US$1

Time

7 hours ahead of GMT

Public holidays

January 1st (New Year's Day); February 9th-14th (Tet, Lunar New Year, approximate); April 19th (Gio To Hung Vuong Day); April 30th (Liberation of Saigon); May 1st (Labour Day); September 2nd (National Day)

January 22, 2013