A “political earthquake” shakes the succession battle in Vietnam

(Bloomberg) — Vietnam may not see the polarizing elections that divide many democratic nations, but the ouster of a second president in just over a year shows that closed power struggles within a one-party state can be just as brutal.

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President Vu Van Thuong, 53, was a rising star in the Communist Party, an ally and potential successor to ailing 79-year-old party chief Nguyen Phu Trong. Thong's resignation on Wednesday — in a party statement that vaguely said he had “violated rules on what party members cannot do” — instead leaves a leadership vacuum in what has been one of Asia's fastest-growing economies.

“It's another political earthquake in Vietnam,” said Nguyen Khac Giang, a visiting fellow at the ISEAS-Yusof Ishak Institute in Singapore. “It's not really a good sign for a country that often prides itself on its very strong political stability.”

The National Assembly formally approved Thong's resignation on Thursday, according to local media reports. While the position of president in Vietnam is largely ceremonial, and the unrest should not affect the country's economic prospects, observers say it represents a new phase of political uncertainty in the Communist Party's five-decade rule — especially as different factions vie to succeed Trong. , the country's longest-serving leader since the war era.

Vietnam, a communist country with a capitalist bent, has benefited from an investment boom as multinational companies – including major suppliers to Apple – look to diversify their supply chains away from China. The economy is expected to grow 6.9% in the first quarter from a year earlier, according to a Bloomberg survey.

Political turmoil in the frontier economy may unsettle investors elsewhere, but given Vietnam's consensus-based system, some analysts have expressed confidence following recent developments. So far, months of behind-the-scenes power struggles have had limited impact on investors' perceptions of Vietnam.

“This does not change my positive outlook on Vietnam’s long-term economic potential,” said Ruchir Desai, Hong Kong-based fund manager at Asia Frontier Capital Ltd. The government realizes that exports, manufacturing sector and overall economic development are its long-term priorities, so I don't see such policy changes rocking the boat.

Vietnam's stock benchmark VN index rose as much as 1% in early trading on Thursday before paring gains. The currency was little changed, hovering near a record low.

“The president’s position is not very tied to the economy, so investors assume there will be no change in terms of market expectations,” said Nguyen Anh Duc, head of institutional sales at SSI Securities Corp.

However, there is no doubt that the ongoing corruption investigations – which Truong has defended as a much-needed “burning furnace” – have cut a wide swath through the Vietnamese leadership. More senior leaders may fall as the gloves fall in a battle for power between factions in the Communist Party, none of which have been able to consolidate control in a way that has happened to Chinese President Xi Jinping across the border.

Since 2021, an anti-corruption crackdown in Vietnam has resulted in the arrests of four Politburo members, two deputy prime ministers, two ministers, and more than a dozen provincial leaders. In January, authorities arrested the president of a coffee-producing region on charges of abusing his power and position. Earlier this month, police arrested three senior provincial officials for allegedly receiving bribes related to real estate companies Phuc Son Group and Thang Long Property Co.

Potential candidate

While the specific details behind Thong's departure remain unclear, the authorities announced his resignation along with the expulsion of a member of the party's central committee for violating regulations. This member was arrested early this month on charges of receiving bribes related to the Phuc Son Group.

The case was led by Public Security Minister Thu Lam, 66, who has been leading Trong's anti-corruption campaign and is considered by some analysts to be the front-runner to succeed Thung. Lam was mentioned as a potential candidate to become president the last time the position was vacant a year ago.

“I doubt that when the secretary-general started it around 2016, he could have predicted that it would lead to so many senior politicians being punished in this way,” said Linh Nguyen, senior Vietnam analyst at Control Risks. “I have a feeling that he is losing his authority by delegating power to the Anti-Corruption Commission and the Ministry of Public Security.”

Golden steak

However, Lam has also been the subject of controversy: he made headlines in 2021 after footage emerged of celebrity Turkish chef Nusret Gokce, known as Salt Bae, serving him a steak covered in gold leaf in a London restaurant. The footage caused an uproar in Vietnam, with many wondering how a senior official could indulge in extravagant meals during an anti-corruption campaign at the height of the pandemic.

Jiang, of the ISEAS-Yusof Ishak Institute in Singapore, said Lam might be happy to remain in his current position. “Although the president ranks higher than the Minister of Public Security in Vietnamese politics, the actual power lies with the minister,” he said.

However, the presidency is also seen as a potential stepping stone to the role of party president for Trong. Another top candidate for the post, Prime Minister Pham Minh Chinh, is struggling to stay in office after two of his deputies were sacked last year.

Vietnam's Prime Minister is fighting for the future as the economy lags behind its growth target

Once the National Assembly officially backs Thung's resignation on Thursday, the party's Central Committee – currently made up of about 160 members – will meet again in an extraordinary session to choose a new candidate, with Vice President Vu Thi Anh Xuan present in the meantime. The National Assembly will then have to approve this choice. The whole process could take months, as happened in 2023.

Whoever takes over as the next president could provide some clarity on who might ultimately hold the nation's highest office. Either way, it appears that the party infighting has only just begun.

“The original 18-member Politburo has been significantly reduced,” said Carl Thayer, an emeritus professor at the University of New South Wales in Australia. “He will be the last man standing at the party's next national conference.”

-With assistance from Ishika Mukherjee, Abhishek Vishnoi, Nguyen Dieu Tu Uyen, Nguyen Que Giang, Edward Gesmatulin, and David Finnerty.

(Adds National Assembly vote in fourth paragraph.)

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