Vietnam’s Reform Challenge

By Nguyen Quang Dy, Harvard Nieman Fellow and Former Vietnamese Diplomat

War in Ukraine, pandemic, and heightened strategic competition are driving the need for more vigorous reform in Vietnam, writes Nguyen Quang Dy. But is the Communist Party leadership up to the task?

Vietnam has been transformed by the “Đôi Moi” economic reform launched in 1986. But the reform momentum of what is also termed ‘renovation’ has been lost. Vietnam needs a second round of reform – a renovation 2.0 – to lay the basis of future economic growth. This is even more urgent as pandemic and great power rivalry has exposed the world to new dangers and uncertainty. In pursuit of the goal of reinvigorated reform, the Sixth Plenum of the central committee of the Communist Party of Vietnam, convened in Hanoi on 3 October, could be a critical stepping stone for greater changes.

The first round of renovation has transformed the economy from a Soviet-style model of centralized planning, state-controlled business and subsidies into a market economy. But there are significant gaps, bottlenecks and contradictions that hinder economic efficiency as Vietnam seeks to build a hybrid model of “market economy with socialist orientation”. In order to recover the reform momentum, and to manage new geostrategic and economic conditions, it is high time for Vietnam to launch another round of both political and economic reform.

The report “Vietnam 2035” sponsored by the World Bank and the Ministry of Planning and Investment (MPI) in 2016 provides a reform blueprint based on three key pillars: economic prosperity, balanced with environmental sustainability; equity and social inclusion; and state capacity and accountability. But that blueprint has not been implemented. This is in large part because the economic gains envisaged in the Vietnam 2035 agenda require political reform – much more difficult for the party and government to embrace than economic reform.

The first round of reform proved successful because Vietnam faced urgent problems and had no choice other than to change. In 1986, Vietnam was on the verge of disaster, locked in a long border war of attrition with China without continued assistance from the collapsing Soviet Union and Eastern Europe. The political slogans of the day were “reform or death” and “Let’s save ourselves before God saves us”.

Given Hanoi’s commitment to the idea of a “market economy with socialist orientation” and the desire to preserve party authority, it is reluctant to pursue a second round of reform that would in all likelihood necessitate building state capacity and accountability via institutional change that would undermine existing power structures.

While there are good opportunities for further development, Vietnam is facing the danger of falling behind other regional countries. Commenting on the search for the right socialist model, former planning and investment Minister Bùi Quang Vinh frankly noted: “We are looking for something non-existent”.

Speaking at the 12th party congress in January 2016, Vinh highlighted a contradiction at the heart of the reform agenda. “A political system compatible with the centralised planning economy earlier is no longer compatible with market economy now,” he said. “It has become a barrier standing in the way of further development. Therefore, a comprehensive reform of the political system to make it compatible with the economy is an extremely urgent demand.”

The picture has not changed in the six years since then – Hanoi’s wariness of institutional change remains the key bottleneck. While it is important for the Vietnamese people to preserve traditional culture and identity, it is time for them to think unconventionally and act globally. It is critical they embrace not only new technologies, but also political reform to realise the opportunities of the digital era.

Vietnam is nearing the end of the stewardship of 78-year-old Party Secretary General Nguyen Phu Trong, who won an unprecedented third term in 2021. This term is up in 2026 unless Trong decides to step down sooner. The Sixth Plenum presented a new opportunity for both leadership reshuffle and structural reform. But amid an anti-corruption drive and scandals implicating some leadership contenders, Trong’s power and authority in the party remains strong as a “king maker”.

Since 2016, more than 87,000 officials have been disciplined, including two politburo members, 21 current or former central committee members and 23 generals. Since January 2021 alone, seven central committee members have been disciplined. This is alarming, but it is only the tip of the iceberg.

In his opening remarks to the Sixth Plenum, Trong emphasised that the issues the country’s leaders need to discuss and decide upon were “very important, yet very difficult, complex and sensitive”. Amid intensified great power competition and a global economic slowdown, he noted the “difficulties and challenges” Vietnam faced were “greater than opportunities for growth”. And he alluded to the internal pressures, with reference to “diverse views”.

But to turn those dangers into opportunities, Vietnam must look to a post-Trong era of reform both economically and politically.  As Hanoi for now remains committed to a “socialist orientation”, promoting both exceptionalism and gradualism, political reform could be easily deflected or delayed by interest groups.

The Sixth Plenum offered an opportunity to lay the groundwork for bolder reform in the years to come. The 200-member central committee has the authority and diversity of membership to ensure a pro-growth reform agenda does not fall victim to individual interests.

The Plenum did take some modest steps. As it was wrapping up on 9 October, three central committee members were expelled in a small reshuffle and symbolically Truong My Lan, the billionaire owner of one of Vietnam’s biggest conglomerates, was detained in a corruption investigation. This could lead to higher party officials.

Any moves to rejuvenate the government and to improve transparency and accountability are welcome. But as international competition intensifies, the risk is that the reform process could turn out to be too little, too late.

Nguyen Quang Dy is a Hanoi-based writer. He is a former official in the Vietnamese Ministry of Foreign Affairs. He graduated from the Diplomatic Academy of Vietnam 1971, undertook postgraduate studies at the Australian National University (1976-1979), and attended Harvard University as visiting scholar and Nieman Fellow (1992-1993).

Banner image: Comrade Nguyen Phu Trong  re-elected as General Secretary of the Communist Party of Vietnam Central Committee, for the third time, during the first plenum of the 13th Party Central Committee in Hanoi on January 31. - February 2, 2021. Credit: AJOY DASGUPTA, Twitter.