Hanoi’s Problems Run Deeper Than the Dong

Duy Hoang|12/02/2010|Articles & Speeches|

Wall Street Journal
February 11, 2010

Economic unease is only part of a deeper crisis of legitimacy facing Vietnam’s Communist Party.

The Vietnamese Communist Party is again in a pickle. Its economic management is on trial in the court of public opinion—and losing, as evidenced by a steadily falling black-market exchange rate that has forced Hanoi to periodically devalue the official rate, most recently by 3.4% yesterday. Inflation is rising again, to 7.6% in January compared to an earlier government projection of 7% for the entire year.

Those economic pressures only add to Hanoi’s other troubles. Whether it’s public anger with Hanoi’s handling of a territorial dispute with China or controversy over land seized from the Catholic Church, the Party has plenty of reasons to be uneasy. The result is a worsening crackdown on dissent.

Despite strong growth in the last decade, the economy is a particular problem. Hanoi responded to the global downturn with a major fiscal stimulus, driving the budget deficit last year to approximately 10% of gross domestic product. Much of the stimulus was funneled through state banks that lent to government-favored enterprises.

Instead of stimulating real growth, the excess money has caused prices to pick up. High inflation and unsustainable fiscal and trade deficits have spurred local residents and businesses to dump the dong for dollars and gold as state-owned enterprises grapple with increasing dollar debts.

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Activists Tran Huynh Duy Thuc (l.), Nguyen Tien Trung, Le Thang Long and Le Cong Dinh on trial, Jan. 20.

The regime’s supposed ability to manage the economy is one of its main claims to legitimacy. The economic unease is translating into action that challenges the government. According to official statistics, there were over 200 unsanctioned labor strikes in the last year, with several walkouts involving tens of thousands of workers. Sit-ins by rural residents protesting land confiscations have become a regular sight outside government offices.

Meanwhile the Party’s other claim to legitimacy—that it will “put Vietnam first” relative to foreign powers according to the mythology it built while fighting the French and the Americans—is also open to question.

The controversy over a Chinese-invested bauxite mine in the central highlands crystallizes this issue. To many observers the mining plan makes no economic or environmental sense. The $15 billion project entails Vietnam mining bauxite ore and refining it into alumina—a low-margin input for aluminum—via a highly toxic process. The alumina would be exported to China. Vietnamese bloggers have alleged that Hanoi is proceeding with this venture for the personal enrichment of high-level officials and to placate China’s need for mineral resources.

Hanoi is also under pressure for its lax defense of Vietnam’s claims to the Spratly and Paracel archipelagos in the South China Sea, which China also claims. Activists inside Vietnam have publicized the cases of Vietnamese fishermen fired on by Chinese navy vessels in Vietnamese waters, while state media often ignore the shooting incidents or mention them only obliquely.

Party leaders themselves understand the threat they face. Marking the Communist Party’s 80th anniversary on Feb. 2, General Secretary Nong Duc Manh declared: “We are trying hard to maintain political stability and we struggle against all the maneuvers of hostile forces by preventing them from profiting from matters such as democracy, human rights, multiparty and pluralism to sabotage the Vietnamese revolution.”

So the Party is cracking down. Since October, authorities have convicted 17 activists in a series of one-day trials for antistate propaganda, subversion and physical assault. The assault charge against renowned novelist Tran Khai Thanh Thuy is representative. She was accused of assaulting a neighbor. In reality, she and her husband were beaten by thugs with the support of police as her 13-year old daughter watched.

Yet so far the regime’s opponents seem undaunted. The Internet helps, enabling Vietnamese to organize without official permission and to share ideas. While the regime has tried detaining bloggers, it cannot restrict the Internet too much because businesses depend on the Web. And if its restrictions go too far, the Communist Party risks alienating millions of Internet users, many of them the young, successful children of the ruling elite.

Last year Hanoi tried to curtail the hugely popular social-networking site Facebook. In November, authorities quietly ordered local Internet service providers to intermittently deny access to Facebook, to bleed the site of user interest. Traffic to Facebook plummeted initially but now Vietnamese users are back, having learned to circumvent the restrictions and because some Internet providers seemingly ignore the government decree.

There are also indications that highly organized hackers based in Vietnam, most likely the authorities themselves given the scale, have started attacking Web sites critical of the regime. The most prominent victim is Bauxite Vietnam, a site which has attracted around 20 million page views in less than a year for its opposition to the mining venture. But if the authorities try to shut down this movement they risk a rupture with a large segment of Vietnamese intellectuals, and perhaps some progressives within the regime.

While it is true that most Vietnamese citizens are not yet prepared to take to the streets, it is an open question how many will actively support the current system if the economy continues to deteriorate and sovereignty issues linger. This week’s currency devaluation is only a symptom of a much larger instability.

Mr. Hoang is a U.S.-based leader of Viet Tan, an unsanctioned pro-democracy political party in Vietnam.