from Asia Unbound

The Elephant in the Room During President Sang’s Visit

U.S. Secretary of State John Kerry offers a toast with Vietnam's President Truong Tan Sang before a luncheon at the U.S. State Department in Washington on July 24, 2013. (Larry Downing/Courtesy Reuters)

July 25, 2013

U.S. Secretary of State John Kerry offers a toast with Vietnam's President Truong Tan Sang before a luncheon at the U.S. State Department in Washington on July 24, 2013. (Larry Downing/Courtesy Reuters)
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The president of Vietnam, Truong Tan Sang, is visiting Washington, only the second visit by the top leader of the country to D.C. since the end of the Vietnam War, even though Washington and Hanoi have had close relations for nearly a decade now. In part, this avoidance of public visits to Washington is because leaders of Vietnam do not like having to face vocal complaints from congresspeople, journalists, and some American officials about Hanoi’s horrible human rights record, which actually has gotten worse in the last year, with a growing number of arrests of bloggers, activists, and religious figures.

Vietnam’s terrible human rights record would seem to be the elephant in the room during the visit. In his introduction of President Sang at the State Department, Secretary of State John Kerry, who was one of the two American figures most instrumental in getting the U.S. to restore ties with Vietnam in the early 1990s (the other was John McCain) gushed over Mr. Sang and made no mention of Vietnam’s serious abuses. President Obama has largely avoided the topic too, but Vietnam’s crackdown has been at the center of op-eds about the visit, as well as Congress’ discussion of the relationship.

And yet for President Sang, there is a bigger elephant, one that also has gotten little attention during his visit. Although many administration officials and congresspeople still treat Vietnam like a powerhouse economy, a competitor eating the United States’ and other Asian countries’ lunch, in reality Vietnam’s economy continues to tailspin downward; the ruling party—and President Sang—seem paralyzed in trying to stop it. Chinese leaders face their own economic problems today, but they are far more responsive to economic slowdowns, and transparent (it’s all relevant) about their problems than Vietnamese leaders. Vietnam’s state companies remain bloated, the true amounts of the debt on their books largely concealed.

Indeed, no reformer like former Chinese premier Zhu Rongji has been empowered by the party to rapidly clean up the state sector and try to right the economy. The government has, in theory, approved a reform and restructuring plan for the debt-laden state enterprises and the overall financial system in the country, including creating an asset management company to deal with bad debts. But this plan is moving far too slowly into action to be effective, and this slowness is infecting the entire economy. Reformers who are promoted, such as  party secretary of Danang Nguyen Ba Thanh, they and their political allies are stifled by hard-liners in Hanoi, or they are panned off to cosmetic but unimportant posts. And so Vietnam’s economy grew in the second quarter of this year by five percent, but this is well off its 7-8 percent growth for much of the late 1990s and early 2000s. Even this second quarter growth was due in part to foreign investment and rate cuts by the central bank, which are important but will not solve the country’s debt morass. Vietnamese households don’t see a recovery – consumer spending is still way off, and so the economy only sputters. And, with one of the youngest populations in Southeast Asia, Vietnam actually needs to grow faster than five percent to absorb all the young people coming into the job force.

Like China’s leaders, on whom Vietnam modeled its reform programs, top party officials like President Sang essentially rest their legitimacy on economic performance, since they do not allow elections and their credibility from previous wars has eroded. That legitimacy is waning; the current group of Vietnamese leaders can arrest lots of their citizens, but they do not seem able to arrest Vietnam’s decline.

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