Crying Over Cheap Milk

Vietnam

Vietnam’s economy

Crying over cheap milk

Questions remain about Vietnam’s commitment to economic reform

Nov 21st 2015 | HANOI | From the print edition

CANS of baby-milk powder are piled high at a Bibo Mart maternity shop in downtown Hanoi. The shelves hold more than 20 distinct products, domestic and imported, and prices range from about $13 to $22 per kilogram. The highest prices used to be higher. But since the finance ministry introduced a price “stabilisation” law, retailers of milk powder, mostly foreign, have had to shave prices by up to a third. As America’s Congress mulls whether to approve the Trans-Pacific Partnership (TPP), an American-led trade agreement whose draft text was released in early November, it all sends a bad signal about Vietnam’s commitment to economic reform.

Vietnam is an eager member of TPP and expects to reap an economic windfall if Congress approves the pact. But it is still asking America and the European Union to drop their designation of the country as a “non-market” economy before 2018, when it is due to expire. A switch to a “market-economy” designation would help Vietnamese firms fight anti-dumping lawsuits. Vietnam has already secured market-economy status with other countries. Yet a statue of Lenin stands tall in Hanoi, and economic planners in the ruling Communist Party still have plenty of Soviet impulses. They draft five-year plans, the next of which will be hammered out at a Communist Party Congress in early 2016. And it is not just baby-formula prices they have sought to control. Since 2002 they have rolled out laws to cap the price of basic goods like petrol, rice and sugar. Such controls initially just applied to state-owned enterprises, but they increasingly regulate private and foreign competitors, too.

The milk law appeared last year after a handful of multinational formula companies were accused by the state-controlled press of price fixing (on flimsy evidence). It may have been designed to hurt foreign firms and benefit their domestic competitors, such as Vinamilk, a dairy giant in which the state owns a 45% stake. Yet the law also affected Vinamilk, and some think it may just reflect old-fashioned thinking about the government’s role in the marketplace. Whatever the reason, foreign firms and embassies are furious. Last year Nguyen Tan Dung, the prime minister, is said to have assured America’s commerce secretary, Penny Pritzker, that the law was temporary. But this spring it was extended until the end of 2016.

The law’s champion is Nguyen ThienNhan, chairman of the Fatherland Front, a Communist Party organisation that purports to speak for Vietnam’s 90m people. MrNhan, a member of the Communist Party’s elite Politburo, is one of its more outspoken populists. He has championed a patriotic campaign to promote Vietnamese goods over foreign ones, and another to raise the average height of Vietnamese children (partly by feeding them more milk). He is also in the running to replace Mr Dung as prime minister after next year’s congress. His consumer advocacy may have raised his political profile.

Yet the milk law’s populism rings hollow. ThanhThuy, a Bibo Mart manager, says it affects high-end products and mainly benefits middle-class yummy mummies who never felt squeezed by high prices. Market volumes of milk powder have dropped by 11% since last year. Foreign brands are winnowing inventories and curbing research and development in a $640m milk-powder industry. In a recent survey by the Vietnam Chamber of Commerce and Industry, 42% of Vietnamese officials, down from 68% in 2011, saw price-stabilisation mechanisms for milk, rice and other products as effective market tools.

Adam Sitkoff of the American Chamber of Commerce in Hanoi says the milk law is a “non-market” intervention that contradicts TPP’s core principles. Persuading America that Vietnam is a market economy will still be a hard sell.

Religion in Vietnam

Higher powers

A proposed law on religion will not help the faithful

Sep 26th 2015 | HO CHI MINH CITY | From the print edition

No peace for ThichKhongTanh

BULLDOZERS are idling outside the Lien Tri Pagoda, a complex of yellow buildings near the Saigon River. Officials plan to destroy it and fill this sparsely populated district of Ho Chi Minh City with skyscrapers. One property firm calls the area the “Pudong of Saigon”, referring to a glittering riverside district of Shanghai. But the pagoda’s chief monk, ThichKhongTanh, is not so enthusiastic. He is fighting eviction.

MrTanh says the lure of profits is not the only reason the authorities would like his pagoda to vanish; it is not officially sanctioned by the Communist Party and is a sanctuary for political dissidents, former prisoners of conscience and disabled veterans who fought for the former South Vietnamese regime. Officials “want to isolate and control us,” he says. “But moving means isolation, so the monks here don’t want to move.”

About 24m of Vietnam’s 90m people identify with a religious faith; Buddhism and Catholicism are the most popular. But the party has always viewed religion warily, in part because three of its former foes—the French, the Americans and the government of South Vietnam—were friendly with the Catholic Church. After the Vietnam War ended in 1975, the party seized church lands and put pressure on worshippers to join approved denominations like the Vietnamese Buddhist Sangha, which was founded in 1981 and reports to the Fatherland Front, a party organisation.

Many religious leaders who refused to accept party control were arrested or harassed. ThichQuang Do, the patriarch of the Unified Buddhist Church of Vietnam, a banned group, has spent three decades in prison or internal exile, or under house arrest in Ho Chi Minh City—“longer than Aung San SuuKyi,” says Vo Van Ai, a church spokesman who lives in France. Other leaders of banned sects, including evangelical pastors in the Central Highlands, a restive region with many ethnic groups, have fared almost as badly.

After a trip to Vietnam in 2014, the UN’s special rapporteur on religion said that planned visits to parts of the Central Highlands and the Mekong Delta, a stronghold for worshippers of the HoaHao Buddhist faith, had been “unfortunately interrupted” and that some Vietnamese he had wanted to meet had been threatened by police. Officials, presumably, wanted to conceal their efforts to suppress religion.

The party has somewhat softened its stance. Since the 1990s, temples, pagodas and churches have been refurbished and allowed to celebrate religious holidays, such as the Buddha’s birthday, that were once taboo. But the government has issued more regulations governing worshippers and their faiths, with dispiriting results. One such was a law on religion passed in 2004 that criminalised the “abuse” of religion to undermine national security. Another decree, issued in 2013, made it more difficult to register religious groups.

Next month the National Assembly, Vietnam’s parliament, plans to debate another law aimed at streamlining these statutes. A draft version includes some small improvements, such as reducing the amount of time a religious organisation must have operated in Vietnam before it can be formally recognised by the state from 23 years to ten. Senior legislators quoted by the official Vietnam News Agency say the law will help to bring domestic religious policy in line with the International Covenant on Civil and Political Rights, which Vietnam signed in 1982. Yet critics, including Human Rights Watch, a New York-based NGO, say the law is so vague that it could give Vietnam’s powerful security state even more freedom to police religious groups that it does not like.

In May the Interfaith Council of Vietnam—a group of dissident religious leaders of various faiths—wrote an open letter of protest denouncing the law as a ploy by the party to reinforce its power and stifle worship. DinhHuuThoai, a Catholic leader and one of the letter’s 22 signatories, says the law’s text is riddled with arbitrary and confusing clauses. For example, it allows worship in homes and other “legal” places, but does not say what is legal.

It is difficult to predict how harshly the authorities will interpret the bill. But its passage will certainly do little to boost the government’s image as a defender of human rights. ThichKhongTanh, the monk at Lien Tri Pagoda, reckons that freedom of worship is only improving for those who belong to state-sanctioned denominations. “Anybody who is independent will face oppression and difficulty,” he says. His own troubles are far from over.

Vietnam and America

Power plays

Vietnam’s new friendship with America reflects political drama at home

Jul 4th 2015 | HANOI | From the print edition

SHOULD all go to plan, America’s government will soon host an unlikely guest. Nguyen PhuTrong’s visit to Washington—perhaps as soon as July 6th—will be the first by a serving chief of America’s old enemy, the Communist Party of Vietnam (CPV). In theory MrTrong is the most senior politician in his country (though not, in practice, the most powerful). His trip marks an upturn in relations between America and Vietnam, just as the latter’s dealings with China have soured. But where the new friendship leads will in part depend on the result of struggles in Vietnam. A party congress in a few months’ time could have a big impact on Vietnam’s policies at home and abroad.

America and Vietnam have had diplomatic ties for two decades, but growing cuddliness is a recent trend.America frets about Vietnam’s atrocious human-rights record, even if it may be improving (on June 27th Vietnam released a high-profile political prisoner, Le QuocQuan, a human-rights lawyer—the latest of several high-profile dissidents to be freed). Yet it appreciates Vietnam’s enthusiasm for theAmerican-led Trans-Pacific Partnership (TPP)—a proposed regional trade pact that would not, at least initially, include China. America is thought to be particularly keen to find a way for its naval ships to dock more freely at Cam Ranh Bay, a base on Vietnam’s southern coast.

For Vietnam the relationship is more urgent, and the stakes much higher.Last spring a state-owned Chinese company moved an oil-drilling rig into contested waters close to the Vietnamese coast, sparking anti-Chinese riots in parts of Vietnam’s central and southern provinces. Spooked by this assertiveness—and by a gaping trade deficit with its moody northern neighbour (see chart)—Vietnam has been seeking new friends. Last October it convinced America partially to lift a long-standing ban on arms sales to Vietnam. But this strategy still worries some conservatives in the CPV, who fear inflaming China further and who believe that America may be quietly trying to undermine the party.

American officials paint MrTrong’s visit as an exercise in “trust-building” between two countries still plagued by deep and troubled memories of their war, which ended 40 years ago. MrTrong, however, may be thinking as much about burnishing the party’s credentials at home. Many ordinary Vietnamese worry that the CPV is too close to China’s Communist Party. His meeting with President Barack Obama may help to allay their suspicions that he and his ally, President Truong Tan Sang, have been soft on the Chinese.

MrTrong may not be on the scene for much longer. He may well end up retiring after the party’s next five-yearly congress, which may take place in January or February. There, Vietnam’s three highest roles—party chief, president and prime minister, among whom power loosely circulates—will be dished out tothree members of the 16-seat Politburo. Forecasting the result is difficult. But with public opinion tilting firmly against China, party factions seen to advocate a tougher line against the Chinese—and a friendlier one towards America, Japan, India and South Korea—look most likely to emerge as winners.

Their leader is Nguyen Tan Dung (pictured, above left, with MrTrong) a self-styled economic reformer and the prime minister since 2006. Despite a poor record in fighting corruption, his government seems open to ideas from Western-educated Vietnamese. Mr Dung seems more eager than other leaders to promote reforms needed to boost feeble productivity growth, not least by pressing on with the part-privatisation of Vietnam’s many state firms—changes which the TPP would probably require. On June 26th the government said it planned to relax limits on ownership by foreigners in several industries.

In part through patronage, Mr Dung has greatly expanded his power: prime ministers are normally much weaker in Communist systems. His ties with provincial party heads and the bosses of state firms have enabled him to dominate the party’s 175-member Central Committee. But this does not necessarily mean Mr Dung will emerge victorious at the coming congress. Enemies will be looking for weaknesses, of which he has shown a few. Mr Dung suffered embarrassment in 2010 following a loan default by Vinashin, a state-owned shipping firm which was meant to be an exemplar of his reform agenda. In 2012 he narrowly survived a campaign by rivals in the Politburo to oust him. Yet he is still widely regarded as the country’s most capable and charismatic politician. China’s aggressive behaviour in the South China Sea, where the two countries are in bitter dispute over maritime boundaries, has strengthened his position by giving him a chance to assert his nationalist credentials.

Mr Dung has already served two terms as prime minister and is forbidden to seek a third. But he is thought to fancy the role of general secretary (MrTrong’s job, at present). Winning that would probably allow Mr Dung toinstall one of two allies as prime minister: Nguyen XuanPhuc, a deputy prime minister, or Nguyen Thi Kim Ngan, a deputy chairwoman of the country’s legislature, the National Assembly. Mr Dung’s camp may still face a challenger, however. President Sang may choose to keep his job, or he may retire and find an ally to replace him (PhungQuangThanh, the defence minister,and Tran Dai Quang, who controls the police, are possibilities.)

But there is also speculation that Mr Dung may try to take on the posts of general secretary and president and toss a concession to his opponents by offering the premiership to a politician close to Mr Sang. That would mark a “major transition” in Vietnamese politics, says a foreign analyst. It would, ironically, make Vietnam’s political system more like China’s, where Xi Jinping enjoys unrivalled influence as both the country’s president and chief of the Communist Party.

Such a grab for power would make some in the party feel queasy.MrDung’s ambition and strong personality have long seemed in conflict with the CPV’s slow, consensus-based processes. But many think that perilous times call for decisive leadership. On June 25th a Chinese maritime authority announced that the state-affiliated oil rig that was moved close to Vietnam last year was again being positioned nearby (though this time just inside waters that are generally considered Chinese). The announcement is probably a sign that China is unhappy with MrTrong’s decision to visit America; the rig’s next movements—towards or away from Vietnamese territory—will show how much displeasure China feels.

Vietnam’s state firms

Excess baggage

The 400 firms the government wants to part-privatise are mostly unappealing

Nov 22nd 2014 | HANOI | From the print edition

Not such a smooth take-off

WHEN the government launched an initial public offering of shares in Vietnam Airlines on November 14th, it was hoping that the flotation of one of few companies widely known outside the country would help it speed up a plan to “equitise” hundreds of state firms. However, the IPO, in which a stake of just 3.5% of the airline was on offer, attracted not one foreign investor. Local banks were the main buyers.

State-owned enterprises (SOEs) account for about a third of Vietnam’s GDP, in industries ranging from finance to fabrics, seafood-processing to shipbuilding. Not all are duds: Vinamilk, a dairy firm, attracted a number of foreign investors to its successful IPO in 2003, and this September foreign investors bought about half of the shares sold in a $57m IPO of Vinatex, a big textiles firm (though the firm did not sell as many shares as it had wanted).

Nevertheless, the opaque bureaucracies at most SOEs make them breeding-grounds for graft and mismanagement. In the most prominent example, in 2010 Vinashin, a shipbuilder, defaulted on a foreign loan, triggering a downgrade of Vietnam’s sovereign debt. Many SOEs are stuffed with “workers” who do little.

The state firms’ poor performance means that Vietnam’s GDP growth, now around 5.5% a year, is weaker than it should be, given its young and educated population, and its wealth of natural resources. Unusually for a communist country, the prime minister, Nguyen Tan Dung, had to endure a confidence vote in the National Assembly last year over his economic record—and he did poorly.

This year, besides restoring his popularity by standing up to China in a territorial dispute, Mr Dung has breathed new life into a long-standing plan to sell minority stakes in SOEs to private investors, in the hope of making them more businesslike. Ones with IPOs planned for next year include Vietnam National Shipping Lines—two of whose former executives were sentenced to death last year in a drive against corruption. Given the condition many are in, Mr Dung’s goal of equitising more than 400 firms by late 2015 is optimistic.