The drive to recentralize Vietnam
The Communist Party is reasserting central command in a reversal of the doi moi reforms that allowed for free markets and limited local democracy
In a rare display of civil disobedience, drivers recently protested the opening of a new tollbooth on a southern Vietnamese highway by paying with the nation’s smallest banknote, the dreaded 100 dong bill, worth just US$0.004.
Considering the toll costs range from between 35,000 and 140,000 dong, it had the intended result of arduous delays at the booths and traffic jams on the roads.
Complaints started in August when tollbooths were placed on a slightly upgraded existing highway, not on the new bypass around the town of Cai Lay, which the surcharge was supposed to fund.
Some drivers even abandoned their vehicles, requiring cranes to winch them away from the booths. More descended onto social media to voice their anger in imaginative ways. The government ordered the police to monitor online troublemakers.
Such was the level of opprobrium that Prime Minister Nguyen Xuan Phuc earlier this month intervened to order a temporary suspension of payments at the tollbooth, a move praised by some as a rare display of government responsiveness to public protest.
Others, however, questioned why the central government decided to get involved in what was a relatively minor kerfuffle, rather than leaving it to the judiciary or local authorities, who are constitutionally supposed to deal with such issues.
Phuc’s intervention comes amid claims the central government is trying to regain more power, a reversal of the decentralization introduced by doi moi, a major reform drive launched in 1986 that has gradually transformed Vietnam from a command to more free market economy.
Last month, during a meeting of Hanoi’s Party Committee, senior officials said they were considering a scheme that would abolish or merge People’s Councils at district and commune levels, in effect making for only one city-wide People’s Council.
Since decentralization began, each administrative level from the province to the commune has had its own People’s Council and People’s Committee. The People’s Councils, elected by the people, choose the members of the People’s Committees, which act as the executive at each administrative level. The Councils serve as supervisory bodies.
There is reportedly another pilot scheme, now being implemented in Quang Ninh province and which might later be rolled out across the country, which merges the positions of District Party Secretary, a position that is currently approved by the Politburo, and Chairman of the District People’s Committee.
In short, that would ensure that the central government’s candidate attains the local level position.
One purpose of decentralization was to make local government more “democratic” by holding regular elections to choose who sits on the People’s Councils. But many candidates remain handpicked by superiors, in effect making it “top-down decentralization,” as some analysts describe it.
The Politburo, for example, decides who serves as Chairman of the People’s Committee of Hanoi and Ho Chi Minh City (along with Da Nang, Can Tho and Hai Phong, as these municipalities are supposed to be run more autonomously than other administrative units). The Central Party Secretariat, meanwhile, chooses who serves as chairman of the provincial People’s Councils and People’s Committees.
Even at a more localized level, nominations are heavily controlled from above. Who serves as Chairman of the District People’s Council (DPC) and People’s Committee is often decided by the Provincial Party Committee.
In the 2000s, there was a failed attempt to abolish DPCs, an effort some analysts saw as central government trying to reaffirm its power over the provinces.
After piloting a scheme across ten provinces, advocates of the measure said removing DPCs improved governance. Indeed, a report in 2013 by independent analysts found that it “significantly improved a wide range of public services that were favored by central authorities,” such as roads, healthcare, and communications.
Opponents, however, contested that removing DPCs was “undemocratic.” One deputy of the National Assembly from Hai Phong commented in 2014: “If the People’s Councils were abolished, then the local government would no longer be of the people and by the people.”
The scheme’s critics eventually won the day. The 2013 Constitution reaffirmed the place of DPCs and a 2015 session of the National Assembly confirmed that all districts must have a People’s Council and People’s Committee.
If the central government is now again trying to grasp more power, then it begs the question why.
The central government, firmly under the control of Party General Secretary Nguyen Phu Trong, is now engaged in a sweeping anti-corruption drive.
This has seen dozens of former executives of state-owned enterprises (SOEs) imprisoned or even sentenced to death in the case of ex-PetroVietnam chairman Nguyen Xuan Son. More high-profile trials will take place in 2018.
According to some analysts the campaign is designed simply to curb corruption, which has tarnished the Party’s reputation in the eyes of many ordinary Vietnamese.
Decentralization, to some extent, has allowed local officials to engage in corruption, with little oversight from central government.
“Increasing autonomy for the local government does not by itself ensure accountability,” Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program in Ho Chi Minh City, wrote in a 2016 paper.
Others, however, suspect the anti-corruption purge has more to do with Trong trying to remove from the Party allies of former Prime Minister Nguyen Tan Dung, who lost his position after serving two terms at the January 2016 Party Congress.
Dung had played an important role in allocating state budgets to local governments alongside his good relationship with business, affording him a significant level of political loyalty, according to an essay by Le Hong Hiep of the ISEAS-Yusof Ishak Institute in Singapore.
Some believe that Trong is distrustful of such local leaders, who may maintain ties to Dung’s remaining allies in the Party.
Dinh La Thang, an alleged Dung protégé, was dismissed as Party Secretary of Ho Chi Minh City in August (he was arrested in early December), while Nguyen Xuan Anh was removed from the equivalent position in Da Nang in October. Both were removed on corruption allegations.
Another explanation is that the central government understands the Party is now in a perilous situation. State funds are diminishing as debts mount and public anger grows. The Party’s key source of legitimacy is a fast-growing economy.
To maintain that fast growth, some believe it will require greater direction by the central government. Because of limited state resources, deciding which infrastructure projects will receive funding will be of utmost importance.
That will require tough choices, such as focusing investment on Vietnam’s richest areas, like Ho Chi Minh City, which are most likely to maintain high levels of revenue for the Party, at the expense of the development of poorer regions.
Such decisions will necessarily have to be made by central government, not local officials. Indeed, one problem of decentralization is that it increases competition among provinces and cities, and not always in the national interest.
“Competition has become so fierce that each province only cares about the economic activities within its territory,” Vu Thanh Tu Anh wrote last year, adding that “GDP growth is used by the central government as virtually the sole measure of the success of the provincial government’s performance.”
One concern is that to get ahead, provincial authorities might turn to borrowing to augment their budgets, a problem given the central government’s own indebtedness.
While an Asian Development Bank (ABD) report published in 2016 stressed that borrowing by local authorities remains “very low,” an earlier World Bank report found that debt incurred by numerous provinces was twice as much as the limits set by central government.
Compared to devolving political power from the center to periphery, fiscal decentralization has been largely viewed as a success, ensuring that funds are shared between provinces and redistributed from the richest to the poorest.
The ADB report found finances “fairly equalized” among regions. It also noted that local government spending now accounts for slightly more than a half of the overall governmental expenditure, a “significant share” for the local authorities in an economy of Vietnam’s size.
But there are indications that the central government is now also trying to regain more financial control. In October, the National Assembly reportedly requested Vietnam’s wealthier cities and provinces to turn over more of their revenue to the central government’s coffers. It is not clear yet if the policy has been approved or enacted.
Under the proposal, Hanoi would lose almost half its revenue, with the percentage of funds the capital’s administration is allowed to keep falling from 42% to 28%. Ho Chi Minh City’s share would fall from 23% to 17%, which the economic hub’s deputy Party secretary said would have “dire consequences.”
A final motivation for the move towards recentralization is that the government thinks social unrest is spiraling out of control. 2017 saw a mass crackdown on government critics and activists, marking a repressive uptick from the level of harassment witnessed in 2016.
Significantly, the repression has been orchestrated nationwide, a likely indication the campaign is being directed by central government and not merely by local officials, as was the case in the past.
This is all the more important to the central government considering that pro-democracy groups and progressive activists are now also uniting across the country, when they too had once been localized and segmented.