Vietnam to boot its military out of business
New legislation requires the armed forces to divest their economic holdings, a move aimed at asserting Communist Party power and revolutionary ideology
As protests erupted across Vietnam last weekend, the enactment of an amended law that could alter the face of the country’s military was largely overlooked.
On June 7, the National Assembly, Vietnam’s rubber stamp legislature, approved an amendment to a law passed last year that will commit the Ministry of National Defense to substantially reduce the number of military-owned businesses.
In recent years, that number has been winnowed down from over 300 to 88 at present. The new amendment’s aim is to reduce that number to just 18, before divesting the military from almost all of its economic activities. At present, military-owned businesses dominate several areas of the economy, including the crucial telecoms sector.
“Once the process is completed, there will be no business units that are entirely economic-driven under the defense ministry,” Vo Trong Viet, head of the National Assembly’s National Defense and Security Commission, said last week at the new law’s enactment.
The communist government has argued since it first passed a resolution on the matter in 2007 that the military must divest “non-essential” businesses in order to advance its modernization campaign and readiness to protect national interests, including territory contested in the South China Sea.
Although the divestment plan was first accepted in 2007, the global financial crisis of the following year “put all divestment on hold and not a peep was heard until recently,” says Carl Thayer, a Vietnam expert at the University of South Wales in Australia.
The recently passed amendments mean the Vietnam People’s Army (VPA), as the military is officially known, could be forced to divest from almost all of its controlled businesses. This possibly includes firms it argues it needs to maintain control for reasons of national security. Some analysts are thus doubtful that full divestment will happen any time soon.
Another explanation for the move is that the ruling Communist Party is keen to assert stronger domination over the military. The relationship between the Party and the armed forces has fluctuated over the decades.
During the 1990s, military representation in the Party boomed, with retired officers becoming state president and Party general secretary. In 2001, however, military representation in the Politburo, the Party’s highest body charged with orienting government and enacting policies, was halved. Today, the minister of national defense is the sole military representative in the 19-member body.
Some have called for even greater separation of the Party from the armed forces. In 2013, during a constitutional revision process, thousands signed a petition calling on the armed forces to be loyal to the homeland and people, and not any specific organizations or political party.
According to one estimate, almost 80% of the 6,000 signatories of the so-called Petition 72 were Communist Party members. Nonetheless, the reworked constitution actually strengthened the military’s responsibility for protecting the ruling Party.
In 2014, after anti-China protests erupted across the country when Beijing positioned an oil drilling platform in contested waters, another petition was sent to the Party’s leadership that again called for the military to be divested from the Party, which some saw as soft-pedaling on China for aid and investment.
Petition 20, signed by some senior military officials, also requested the Party to stop using the armed forces as its enforcer, as was witnessed that year when the army was ordered to put down local protests.
“We need to immediately end the mobilization of this force against the people, such as for land evictions and dispersing peaceful rallies,” the petition stated. That petition, too, was stringently rejected by the Party hierarchy.
Nguyen Ba Duong, of the Institute for Military Social Sciences and Humanities, part of the National Defense Ministry, argued at the time that it was the de-politicization of armed forces that led to the fall of communist regimes in Eastern Europe in the 1980s and ‘90s.
That no doubt explains why the Communist Party is eager for the military to continue doing its bidding, especially as recent years have seen nationwide protests and growing dissent against one-party rule.
At the same time, there is little indication of dissension from within Vietnam’s military ranks, say analysts, especially when compared to the agitation witnessed earlier this decade.
One security analyst suggests it’s likely that some officers think the military should divest itself from the Party rather than its businesses.
Party Secretary General Nguyen Phu Trong, and now Vietnam’s most prominent politician, has spoken about the dangers of “peaceful evolution” within the military, as he has about the Party. This is Party jargon for liberalization and wavering from its Marxist-Leninist roots.
Nonetheless, senior officials from the National Defense Ministry have gone out of their way to insist the military remains the official guardian of the Party. “The Party is the sole and ultimate leader of the military,” National Defense Minister Ngo Xuan Lich reiterated last year.
If the Party is now trying to buttress its domination over the VPA, then curbing the military’s cash spinners is one way of consolidating power. If the army is professionalized in the process, it would be a win-win for the Party.
It is difficult to estimate the worth of all military-owned businesses, but some of them are known to be among Vietnam’s most profitable firms. Official reports from 2015 claim they accrued just under US$13 billion in revenue that year.
Military-owned Viettel Group, the country’s largest telecoms operator with subsidiaries abroad, reportedly earned almost US$2 billion in profit last year, up 12% from 2016. It is likely that the military will hold onto Viettel for the foreseeable future – for national security reasons, it argues – as well as a handful of other profitable companies.
Thayer reckons it will also try to retain control of the ten firms listed in a 2009 Defense White Paper, which includes major interests in the banking, petroleum and construction sectors. Still, the government imposed some telling reforms on Viettel Group in January.
As part of the reforms, the military-controlled company’s general director is now to be selected by the prime minister and the Party’s Central Committee, while the prime minister was also given power to diversify the firm’s ownership if he decides on privatization or partial privatization of certain company assets.
Since 2007, when the Party first made plans for the military’s economic divestment, it has also significantly boosted defense spending. In 2013, the defense budget was US$3.8 billion, according to Stockholm International Peace Research Institute, a defense research institute.
Last year, it was more than US$5 billion and could exceed the US$6 billion mark this year.
It appears that “the Communist Party does want to clip the VPA’s financial independence to maintain its political loyalty,” says Zachary Abuza, a professor at the National War College in America.
Asserting the Party’s domination over the military serves an ideological purpose, too. Since 2016, when he was re-elected Party General Secretary, Trong has orchestrated a sweeping anti-corruption campaign which has convicted several senior figures from civilian-run state-owned enterprises (SOEs).
“The Party thinks that divesting the military from purely-economic ventures is important because those ventures tend to feature substantial corruption,” says Derek Grossman, a senior defense analyst at the RAND Corporation, a US-based think tank.
“Military firms are not subjected to civilian laws but are accountable to the military, so when they make mistakes, they are tried in military court, which makes it unfair to the competing civilian firms,” Grossman adds.
A case in point: Phung Quang Hai, a colonel in the VPA and son of former National Defense Minister Phung Quang Thanh, was involved in a prominent corruption case in late 2016 that some speculated would have been handled more stringently if he was tried as a civilian.
China’s Communist Party has also made explicit gestures in recent years that its military must be “unswervingly loyal” to the Party, in the words of Xi Jinping, China’s president. This, too, aimed at curbing corruption within the armed forces.
“The Vietnamese Communist Party has taken pages out of [Beijing’s] play book under Xi Jinping. Xi’s anti-corruption [campaign] may be a blueprint for the Vietnamese Communist Party’s control over the VPA,” Grossman argues.
Personnel changes also reveal the nature of the Party’s dealings with the VPA. Trong heads the Central Military Party Committee, the main interface for Party-military relations. National Defense Minister Lich serves as its deputy chairman.
At the 2016 Party Congress, some analysts predicted that Do Ba Ty, the VPA’s chief-of-staff and then deputy national defense minister, would be promoted to national defense minister. At the time, he was considered the official responsible for leading the military’s modernization.
In the end, though, Ty was thought to be too close to outgoing Prime Minister Nguyen Tan Dung. Trong has spent the last two years purging the Party of Dung’s loyalists, though it remains unclear if this purge has extended to officials in the military.
Instead, the top defense job went to Lich, a career political commissar with “with absolutely no operational or command experience,” says Abuza, adding the caveat that Lich has since done a good job modernizing the military and developing bilateral relations.
Importantly, Lich is considered a trusted ally of Trong and shares his ideological convictions. And as national defense minister, one of his main tasks is to ensure “ideological rectitude” within the military, Thayer says.
As well as curbing corruption, Trong has also moved to purge the Party of opportunists and those who don’t share his ideological convictions, which are considered conservative if not dogmatic.
Indeed, ensuring ideological rectitude has become Trong’s sine qua non. At a major Party conference held last month, he said improving Party morality will be the deciding factor of “whether the revolution will succeed or fail.”
In line with such thinking, Lich supposedly penned a long essay last year for the National Defense Journal, a ministry publication, on the thoughts of Le Duan, who became Party general secretary in 1960 after the death of revolutionary leader Ho Chi Minh.
Referring to Le Duan’s instructions, Lich wrote it is essential to maintain “the Party’s absolute, direct and comprehensive leadership over the People’s Army…[and] to ensure that these forces be absolutely loyal to the Party.”