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Background Brief:
Vietnam: Evaluating Nguyen Tan Dungs Prime Ministership, 2006-2012

Carlyle A. Thayer October 16, 2012

[client name deleted We would like your assessment of Prime Minister Nguyen Tan Dungs impact on the economy since he took office in 2006. Q1. In your opinion, what were the critical decisions made by him (both right and wrong) since he took office that has brought Vietnams economy to where it stands nowadays? ANSWER: Vietnam's 1992 state constitution did away with collective leadership and replaced it with a system of individual ministerial responsibility under a Cabinet headed by the prime minister. Vietnam's economic growth has led to a situation where the office of the prime minister arguably became the most powerful institution in Vietnam, eclipsing that of the party secretary general. Nguyen Tan Dung is perhaps Vietnam's first modern prime minister. He took a leading role in crafting and overseeing Vietnam rapid economic growth since 2006. Prime Minister Dung's became a high-profile leader wheeling and dealing with foreign statesmen and foreign investors. Perhaps his greatest weaknesses were hubris and an inability to listen to critical advice. Prime Minister Dung sacked the circle of advisors who surrounded his predecessor, Phan Van Khai. He created his own inner circle and patronage network. Prime Minister Nguyen Tan Dung is an economic nationalist who wanted to integrate Vietnam into the global economy by pursuing high economic growth at virtually any cost. During his first term his policies led to a marked rise in inflation in late 2007 and 2008. When Vietnam was hit by the global financial crisis in 2008 Prime Minister Dung promoted and administered an orthodox stimulus package that insulated Vietnam reasonably well. This is one of his accomplishments. Prime Minister Nguyen Tan Dung also promoted large scale conglomerates in the state sector that he hoped would be competitive globally. As long as economic growth remained high Prime Ministrer Dung did not exert strong monitoring and control. His associates, some would say cronies, flourished in this environment.

2 When Dung assumed the office of prime minister in 2006 he set up an AntiCorruption Steering Committee with himself as nominal head. Day to day affairs were put in the hands of a trusted deputy. Corruption got worse under Prime Minister Dung's tenure because of his lax control. As long as high-growth persisted, Prime Minister Dung did not address pressing structural issues such as the reform of state-owned enterprises and a banking sector with a high rate of non-performing loans. Prime Minister Dung allowed his conglomerates to spread their investments well beyond their core interests. They borrowed from creditors and overextended themselves. Corruption spread through the patronage network. Q2. The party Central Committees sixth plenum ended yesterday. Prime Minister Dung escaped punishment. What will happen next? ANSWER: In effect the Prime Minister has been given an agenda to carry out by the Central Committee. The next plenum is likely to be held in December or early next year. Prime Minister Dung has to make good on whatever promises he made in his self-criticism. There will be a concerted effort to identify and prosecute those responsible for corruption in Vinashin and Vinalines. The new Central Committee Economics Commission will begin providing independent advice and analysis to the party and this will be used to hold Prime Minister Dung to account. The Politburo will have to come up with a concerted plan of action to address all the deficiencies that were identified at the plenum.

Suggested citation: Carlyle A. Thayer, Vietnam: Evaluating Nguyen Tan Dungs Prime Ministership, 2006-2012, Thayer Consultancy Background Brief, October 16, 2012. Thayer Consultancy Background Briefs are archived and may be accessed at: http://www.scribd.com/carlthayer.