In April 2018, Vietnam’s National Assembly elected Nguyen Phu Trong to serve as both the General Secretary of the Community Party of Vietnam and the President of Vietnam. The President has bold plans to reduce state-owned enterprises in favor of further expanding the private sector, which already controls 40 percent of the country’s economy. In this article, we will briefly review his biography and his economic policies, as well as analyze how his proposed economic changes will affect the value of the Vietnamese dong.
4 THINGS TO KNOW ABOUT VIETNAM PRESIDENT NGUYEN PHU TRONG
- Nguyen Phu Trong is the De Facto Head of the Politburo
- Nguyen Phu Trong Won the Presidency with 99.79% of the Vote
- Nguyen Phu Trong Allegedly Suffered a Stroke in April 2019
- Nguyen Phu Trong Proposes a Free-Enterprise Policy to Improve Vietnam’s Economy
Let us now look at each of these ideas in more detail:
1. Nguyen Phu Trong is the De Facto Head of the Politburo
Nguyen Phu Trong was born in Hanoi in 1944 to a peasant family. After his university studies, he worked for the Communist Review, a political journal, for many years. In the early 1990s, he rose to the position of editor-in-chief of this Vietnamese Communist Party magazine.
Although this was an excellent position in its own right, Nguyen Phu Trong, leveraged everything he had learned as a journalist about Vietnam politics to rise still higher. He accomplished this rite of passage by finding increasingly powerful positions within the Vietnam government.
In 1999, Nguyen Phu Trong became a member of the Politburo, the executive body of the Vietnamese Communist Party. He served as the Hanoi Party Secretary before chairing the National Assembly for two terms. By 2011, he was elected the General Secretary of the Central Committee of the party and won re-election again in 2016.
After becoming the Secretariat of the party, the Secretary of the Central Military Commission, and the de facto head of the Politburo, Nguyen Phu Trong was the most powerful man in Vietnam. Despite his influential position, holding two out of the four top positions, he remained humble and approachable.
Nguyen Phu Trong has a long-established reputation as a “party man,” putting its interests above his own personal ambitions. This reputation has made it easier to share power with Prime Minister Nguyen Xuan Phuc, a man of considerable experience and competence who is playing a crucial role in Vietnamese foreign affairs.
In fact, he recently met with Australian Prime Minister Scott Morrison, who had stopped over on his way to the G7 Summit in France in Hanoi to resolve the escalating tensions over the geopolitics of the South China sea. Earlier in the week, China had illegitimately tried to lengthen its shadows in the South China Sea by sending a Chinese geological vessel escorted by a pair of Chinese coast guard ships. Rather than feeling intimidated by the superpower, Vietnam sent a military vessel to the area to reassert its rights over the area.
2. Nguyen Phu Trong Won the Presidency with 99.79% of the Vote
Running on an anti-corruption platform—an architect that would crackdown on corruption in Vietnam—Nguyen Phu Trong won a landslide victory to become the President of Vietnam. The Vietnamese Communist Party General Secretary won with only one dissenting vote. Political pundits compared his unparalleled success in the National Assembly to that of Xi Jinping, the Chinese president, who had also won an overwhelming number of votes.
Journalists in Hanoi also favorably compared him to the founder of the Communist Party of Vietnam, Ho Chi Minh, who had died in 1969. He, too, had not only been the top de facto leader of Vietnam but also the head of state. In fact, no other Vietnamese leaders or Party bosses other than the wartime leader, Le Duan (who took power from Ho Chi Minh when he was too ill to govern), had consolidated as much political power as Nguyen Phu Trong.
3. Nguyen Phu Trong Allegedly Suffered a Stroke in April 2019
The people of Vietnam became alarmed when Nguyen Phu Trong stopped making public appearances. Mystery shrouded his disappearance and social media exploded with wild speculations that he was seriously ill. To quell the drama, official sources hinted that he had a stroke. Later news revealed that he had recovered, but one of his arms had remained paralyzed. Social media erupted with positive encourage when the news became public.
His death would have had a disastrous effect on Vietnam. It could have destabilized a country that now relied on Nguyen Phu Trong’s unassuming but highly competent leadership. In addition, the Party would have had to explain why they had waived aside their long-established tacit agreement that no single person could hold more than one out of the top four political offices (the Chairman of the National Assembly Nguyễn Sinh Hùng and Prime Minister Nguyen Xuan Phuc hold the other two top positions).
Analysts maintain different theories about how Nguyen Phu Trong could merge the role of general secretary and president.
One popular theory is that he is following in the path of Xi Jinping, who held exactly the same two top positions in China’s communist party. Although this is a plausible explanation, it seems unlikely that Nguyen Phu Trong would try to model Chinese politics, which has a long history of human rights violations.
A far more credible explanation is that his unique position has allowed him to play a more decisive role in international affairs. While the two communist parties in China and Vietnam can communicate directly with each other, this political framework is unique to communism and does not work well in meetings arranged by the Vietnamese foreign ministry with leaders of Western democracies.
In fact, such a foreign relationship meeting occurred on February 27th, 2019, when President Donald Trump met in Hanoi, Vietnam, with President Trong and Prime Minister Phuc prior to his summit meeting with North Korea’s leader Kim Jong Un. After that brief meeting, Vietnam became one of the United States closest allies. Although not the Prime Minister of Vietnam, who is the head of government, Nguyen Phu Trong played a critical role in the meeting. By consolidating the power of the general secretary with the ceremonial office of president, Nguyen Phu Trong could fully represent the interests of the Vietnamese government.
4. Nguyen Phu Trong Proposes a Free-Enterprise Policy to Improve Vietnam’s Economy
Although Vietnam is a communist country, it has pursued a policy to encourage the rapid growth of private businesses. Under Nguyen Phu Trong’s able leadership, Vietnam now aspires to reach a goal of having 1,000,000 private businesses. This is a lofty goal considering, there were only 500,000 private businesses in 2018.
How will Vietnam be able to double its private enterprises?
One solution proposed by the Vietnam Chamber of Commerce and Industry is to remove barriers that the informal economy faces when trying to build a business, especially to access financing. Vietnam’s informal businesses range from independent motorcycle taxis to sidewalk noodle stands. These have not been formally registered as businesses and form a large sector of the population. While the government of Vietnam still influences the national economy, as much as 56% of Vietnamese, outside farmers and fishers, ply an informal trade to meet their basic needs.
Although mainstreaming the informal economy is not a concept originated by Nguyen Phu Trong, he stands firmly behind it. Encouraging more informal businesses to register will not only allow entrepreneurs to receive the financial incentives they need to improve their businesses, but it will also allow the government of Vietnam to collect far more tax revenue.
The new policy will also encourage the growth of startups from young college graduates out of university. In addition, the country will attract more foreign investors to build companies in Vietnam.
The Vietnamese government is positioning itself as a country that offers many incentives to foreign investors.
There are two reasons why Vietnam is an attractive country for long term investments. First, Vietnam offers cheaper unskilled labor than China. Between 2013 to 2018, wages in China rose by 33%. While wages are also improving in Vietnam, these are still well below China’s wage rates.
Second, since the US-China trade dispute has disrupted the profits of foreign manufacturing companies who had enjoyed the incentives that China had offered their business, Vietnam now looks like a more promising manufacturing base. Many producers and suppliers are moving some of their business out of China and setting up shop in Vietnam. US President Donald Trump’s trade wars have unintentionally reorganized global supply chains. While the US has cooled relationships with China, it has developed warmer relationships with its former enemy, Vietnam.
HOW A MORE ROBUST VIETNAMESE ECONOMY WILL BENEFIT CURRENCY INVESTORS
Although the current regime may appear to echo the Democratic Republic of Vietnam (better remembered as North Vietnam) that existed from 1945 to 1976, modern-day Vietnam remains a communist country. However, Vietnam is no longer a poverty-stricken country and appears to have learned from the lessons of history.
Unlike communist countries like the Union of Soviet Socialist Republics (USSR), the Marxist-Leninist Eurasian state that existed from 1922 to 1991 or North Korea, the Government of Vietnam understands the value of a secondary economy, also known as the informal economy, and is taking steps to absorb private enterprise into its existing political framework.
If you remember, the crackdown on private enterprise, known as the “second economy,” created catastrophic conditions in both the USSR and North Korea. After Mikhail Gorbachev tried to uproot the second economy, the USSR collapsed in 1991 to become the Russian Federation with 15 independent states. In North Korea, a government crackdown on the second economy also proved disastrous. It resulted in the infamous North Korean famine that killed a million people, a long famine that lasted from 1995 to 1998.
Like Hungary, Vietnam has recognized that the second economy balances the flaws in a planned economy. By absorbing the second economy into the system rather than trying to expurgate it, the Hungarian economy flourished. And like China, Vietnam has recognized that it is the capitalism of the private sector, rather than government enterprise alone, that powers huge economic growth.
This radical socio-economic development is good news for Vietnamese currency investors interested in a revaluation of the Vietnamese Dong.
Although still available at a low exchange rate (1 USD equals 23,205.00 Vietnamese dong), this currency has a wonderful future, with a good chance of revaluation. Vietnam has moved away from its long-established political isolation and disinterest in a free enterprise economy. The changes proposed by the President of Vietnam will help the country integrate into the global economy. In fact, the picture looks so promising that Goldman Sachs has projected that Vietnam will probably become the 21st largest economy in the world by 2025. Another prominent financial firm, Price Waterhouse Coopers, agrees with this prediction and believes that Vietnam is one of the fastest-growing countries in the world.
VIETNAM PRESIDENT NGUYEN PHU TRONG
Promising a crackdown on corruption in Vietnam, Nguyen Phu Trong won a landslide victory because the Vietnamese Communist Party and the people of Vietnam immediately recognized that he was the right man for the job, someone who would continue the socioeconomic development that has transformed Vietnam.
Once a centrally planned economy, Vietnam has now become a market economy, transforming from one of the poorest countries in the world to becoming a thriving lower middle-income economy. Vietnam is quickly becoming one of the most robust nations in the Southeast Asian region. Over the course of 30 years, Vietnam has reinvented itself as a rags-to-riches Southeast Asian country because of the wide-sweeping political, economic, and social reforms started by Doi Moi in 1986. There is every reason to believe that General Secretary of the Community Party of Vietnam and the President of Vietnam, Nguyen Phu Trong will continue to follow Doi Moi’s visionary example of how to build a prosperous country.