Despite the political turmoil, Vietnam is worth the risk of doing business

More than 1,000 years ago, in two separate battles, the Vietnamese military used sharp stakes hidden in the Bạch Đằng River to defeat an incoming Chinese naval attack. The recent seizures in Vietnam might suggest those fences are being revived to eliminate political leaders.

In rapid succession in recent weeks, two capable and long-serving deputy prime ministers have been removed from their posts, one of whom was a member of the Politburo. And in an unprecedented turn of events, on January 17, President Nguyen Xuan Phuc, another Politburo and Party Central Committee member and chairman of the National Defense and Security Council, resigned after just two years in what is usually a five-year term. term. Vice President Vo Thi Anh Xuan will serve as interim president until a new one is elected.

This disturbance in party leadership may seem extraordinarily sudden from the outside, yet these resignations have been carefully coordinated for some time and may even be part of a larger and overdue anti-corruption effort. However, even the best intentions, such as eliminating corruption, could have unforeseen consequences if misinterpreted as instability by foreign interests.

This anti-corruption campaign was instituted in 2016 by General Secretary Nguyen Phu Trong when Phuc took office as prime minister. Since 2021, the Politburo and the party have sanctioned some 70 officials, including five ministers and former ministers, as part of nearly 5,000 people being investigated for corruption. Phuc resigned after several senior officials were found to have committed violations involving COVID-19 testing kits and repatriation flight scandals.

Government accountability, especially at the highest levels, is a good thing. One could even argue that America could benefit from more high-level accountability between both sides. However, the inherent complexity of the Vietnamese government can make these moves seem scary to outsiders, including risk-averse foreign investors.

For years, Phuc has been the face of Vietnam to foreign investors and diplomats around the world, enhancing ties with America and overseeing one of the fastest growing economies in the world. In 2022, Vietnam marked its fastest economic expansion in 25 years with a GDP growth rate of more than 8 percent and became America’s seventh largest trading partner.

Will Western diplomats and corporations continue to enjoy the warm welcome that attracted them to Vietnam in the first place? Will the new Vietnamese leadership take a tougher line against the West? The quick and direct answers are “yes” and “no”, respectively.

While the concern is understandable to the casual observer, as a 30-year career diplomat with special experience in Vietnam, I see a clear message of how deeply Vietnam values ​​its relationship with the West, especially America. It seems these recent departures were carefully designed to be neither a punishment for forging closer ties with the West nor to promote reforms within Vietnam. Instead, the punishments were meant to cultivate better accountability within the Communist Party of Vietnam and its political system.

As more production relocations to Vietnam ensure a stable and reliable business environment, coupled with increased government accountability, it is something investors should want from Vietnam’s leadership. Also, communicating well with foreign governments and the business community to make sure they understand what’s going on and why is equally essential.

There will be more changes to Vietnam’s government in the coming months, including the election of a new president. Businesses should be prepared for slower decision-making in 2023 due to the inexperience of more cautious government staff in new positions.

Despite headwinds in 2023, Vietnam is still projected to see economic growth of up to 6.5% this year. These results cannot be achieved without international trade and investment, especially with the West. The party’s increased pressure comes not from external forces or neighbors, but from an internal need for continued growth and prosperity, which depends on foreign trade and investment. This is why Vietnam has systematically joined regional free trade agreements, such as the Comprehensive and Progressive Trans-Pacific Partnership Agreement (the Trans-Pacific Partnership’s successor agreement), the Regional Comprehensive Economic Partnership, which does not include States, and the EU-Vietnam Trade Agreement.

The old saying tells us that “risk is opportunity”. The opportunity in Vietnam is almost limitless, but it’s not without risk. The government would do well to do what it can to reduce risks and increase opportunities. Moving quickly to approve a long-awaited energy plan is one step the party could take to signal its commitment to foreign investment from the West and economic stability for its people.

Ted Osius is chairman and chief executive officer of the US-ASEAN Business Council and was the US ambassador to Vietnam from 2014 to 2017.

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