The virtual dominance of corrupt state-owned enterprises (SoEs) over the economy is threatening the soundness of Vietnam’s mixed economy model, as well as investor confidence, according to Maplecroft.
Maplecroft notes that a string of corruption scandals, that started with ship-builder Vinashin in 2010 and has now touched Vietnam Electricity (EVN), demonstrates the extreme levels of political interference and mismanagement in the various SoEs.
As the power struggle within the Communist Party of Viet Nam (CPV) intensifies, SoEs whose senior management are perceived to be close to the prime minister are likely to be targeted for investigation. According to the report, this will further threaten the confidence of investors, who are often forced to deal with these SoEs as partners, although existing contracts signed by investors are unlikely to be arbitrarily cancelled.
Vietnam is currently rated as one of the laggards of the region in terms of economic development. This can be mainly attributed to internecine fighting within the CPV, the country’s sole legal party that dominates all aspects of governance.
The old guard, led by President Truong Tan Sang and Party Secretary General Nguyen Phu Trong, is currently engaged in a public spat with Prime Minister Nguyen Tan Dung for control of the CPV. This is manifesting itself in the ‘purging’ of business tycoons and officials known to be sympathetic to or associated with Prime Minister Dung. As a result of these vendettas, the government is neglecting to implement much-needed reforms in the economy, such as liberalising the financial services industry.