Vietnam's south takes leadership
wheel By Karl D John
CHI MINH CITY - Conventional wisdom has long held
that Vietnam's communist north may have won the
war 30 years ago, but the capitalist-friendly
south has won the peace. Recent changes in the
makeup of the ruling Communist Party's leadership
dramatically underscore that point.
party reshuffle reflects the growing prominence of
southerners in Vietnam's national politics. If all
the new leadership is ratified, as expected, two
of the three top leaders will be from the south, a
departure from the past convention of having one
person from each region - north, center and south
- represented in the senior leadership.
This represents a significant change,
indicating that commercially savvy southerners are
now rising faster than northerners inside the
The average age of the new Politburo is five years
younger than the outgoing one, and seven of the 14
newly announced members are from the country's
more entrepreneurial south.
them is first deputy prime minister Nguyen Tan
Dung, 56, who had been groomed for the prime
minister's post for the past nine years. He was
confirmed to the party's top spot on Tuesday,
taking over for the former premier, Phan Van Khai,
72, one year before his second five-year term
"Since the party
congress, he's been very visible, publicly and
among the international community," said Jonathan
Pincus, chief economist of the United Nations
Development Program in Vietnam. "Dung does have a
reputation, like many southerners, as someone who
wants to accelerate the process of economic
Nguyen Minh Triet, 63, another
southerner, was confirmed as president by the
National Assembly on Tuesday. For more than four
years, he has been head of the powerful party
committee in Ho Chi Minh City (HCMC). Triet is
best known for leading a high-profile
corruption-busting campaign in HCMC and his
understanding of the ins and outs of the southern
city's commercial scene.
there is a widespread perception he will be more
active than his predecessor, particularly in
implementing economic and legal reforms that pave
the way for Vietnam's accession to the World Trade
Organization (WTO) this year. "The general feeling
is Triet doesn't want to be just a ribbon-cutting
president," said the UN's Pincus.
polished 56-year-old Dung, meanwhile, has been
marked for top leadership for the past decade,
combining reform experience and years of serving
in senior police and military posts, he was deputy
minister of the interior.
He takes power
at a time when the prime minister's role increases
as the ideological hardliners of the past retreat
from the party stage. "Dung has drive and charisma
beyond anyone else in government," one senior
party source said. "He knows what is needed and he
has built the power and trust to deliver on
Despite his relative youth, he
is no stranger to Vietnam's most secretive
corridors of power, having been groomed for a
decade. He has experience, contacts and backing
across Vietnam's formidable internal security
apparatus and military and its financial sector -
a range few officials can match. He first emerged
as the youngest member of the politburo in the
One of his first key roles was
defusing tensions in the northern heartland
province of Thai Binh, where retired army officers
sparked unrest over corruption in the local
leadership - one of the first signs of peasant
unrest in Vietnam. He arrived in Hanoi from years
of party work in the southern Kien Giang province.
Therefore, he has a good mix of southern and
northern experience for the critical role of
taking Vietnam into the competitive world of WTO.
His nine-year spell as a deputy prime
minister saw him act with premier Khai, a key
reformer, as Vietnam's relations with the region
and the West broadened, its stock market opened
and foreign investors started to return.
While some diplomatic sources familiar
with Dung warn he has yet to prove his own reform
credentials, he has repeatedly warned that
change has been too slow. He also served
as a temporary governor of
the State Bank as it sought to loosen controls
across Vietnam's extensive state-owned banking sector.
The inner circle of power has a
distinctly southern, younger, and more business-friendly face after the
conclusion of the National Congress.
Fading war jealousies After the
northern and southern parts of Vietnam were
reunited after the war with the US ended 1975,
communist authorities made it policy that the
northern capital city Hanoi should develop faster
and grow more prosperous than the southern Ho Chi
Minh City, formerly known as Saigon.
HCMC's greater commercial acumen has
always hit a nerve with Hanoi's central planners,
and along with bitter war memories, has for
decades driven northern imperatives for
maintaining political supremacy in the south.
Hanoi-based political leaders took great
pains to keep foreign commercialism from creeping
too quickly into the capital city, the Communist
Party's stronghold. The KFC chicken chain opened
its first outlet in Hanoi this month, despite
being in Vietnam since 1997 and having 19 outlets
in the south. Rumors have it that McDonald's will
announce its arrival before the end of the year,
with more stores planned for Hanoi than in HCMC.
Now, with the breakneck transition from a
centrally planned to a capitalist economy, big
legal and economic changes are in the cards.
Vietnam is currently the second-fastest growing
country in Asia after China. And some economists
predict the economy will hit a higher growth trend
once Vietnam accedes to the WTO, expected to
coincide with Hanoi's hosting of the Asia-Pacific
Economic Cooperation meeting in November.
The new commercially minded, predominantly
southern leadership is expected to help guide the
north to make the WTO-mandated transition toward
more capitalism. Consider the numbers and the need
for that guidance becomes apparent. In 1995,
Hanoi's contribution to Vietnam's overall gross
domestic product was a mere 6.5%, at a time when
HCMC contributed nearly three times as much to the
national economy. Since, Hanoi has slowly closed
the GDP gap, but still significantly lags HCMC in
overall economic activity.
Vietnam's northern region, where wages are cheaper
than in both southern Vietnam and coastal China,
is starting to reap the benefits of its slow but
steady free-market reforms. Hanoi overtook HCMC in
attracting foreign direct investment (FDI) for the
first time ever in 2005, luring US$1.6 billion
compared with HCMC's $738 million. Vietnam
attracted a total $6.2 billion in FDI last year,
and even before WTO-required opening is on pace to
attract more foreign money this year.
Vietnam's southern regions have much more
experience in dealing with foreign investors. Ever
since HCMC authorities streamlined the investment
process - reducing by a third the time investors
spend on paperwork - the city has seen a huge
increase in FDI. One department has been made the
sole agency that foreign investors need to
contact, and potential investors can now fill out
forms and track the progress of their investment
application through the Internet.
authorities will also pay up-front for clearing
land for major foreign-invested projects and
specific industries for which it seeks investment,
and investors can refund the amount later. To
improve transparency, HCMC agencies have also
started to publicize land-rental prices, project
assessments and other business guidelines.
Those incentives, in many ways still unique to
the north, paved the way for US technology giant
Intel's $300 million investment in the country's
first chip-assembly plant. The company retains the
option to build a second plant that would double
the initial investment.
Singapore has just inked a memorandum of
understanding to build a 700-megawatt power plant
for $450 million. If the MoU leads to an approved
project, as expected, it would bring FDI invested
in HCMC to more than $1.2 billion.
said, new investors are increasingly attracted to
the north by its lower wages, cheaper real estate
and ready access to China's rapidly expanding
economy. The United States remains Vietnam's
largest single-country export market, but many
multinational companies that have recently located
in the north think that may be changing quickly.
For instance, Japanese real-estate giant
Sumitomo first looked to the south when planning
to build a Vietnamese industrial park in 1997.
After comparing HCMC's infrastructure and labor
costs, the developers chose Hanoi instead. The
first two phases of Sumitomo's 300-hectare Thang
Long industrial park in Hanoi sold out two years
ahead of company projections. "It was a surprise,"
admitted Shigeo Fukuda, senior director of Thang
Long industrial park, adding, "We're rushing to
build our third phase as quickly as possible."
The infrastructure is also being put in
place to foster more economic activity in the
north. A new highway has recently been completed
from Hanoi to the Chinese industrial city of
Nanning, cutting traveling time from two days to
"Hanoi is one of the best
locations if you want to sell to China," said
Kenjiro Ishiwata, chief Hanoi representative for
the Japan External Trade Organization. "The
monthly salary in Guangzhou is above $100 now and
in the north of Vietnam, the average is about $50,
so it's actually cheaper to produce here and
roses The bullish investment environment is
still offset by common developing-country woes.
Infrastructure hasn't kept pace with growth, while
electricity, telecommunications and port fees are
still relatively costly across the country.
Restrictive labor laws make it virtually
impossible to fire unproductive workers, and
managers in foreign-owned factories complain about
pervasive government corruption and interference.
There are still some indications that
communist leaders in Hanoi have not completely
gotten with the reform program. In January, Hanoi
abruptly decreed that the minimum wage paid at
foreign-owned factories would rise by 40%, a move
designed to end mass strikes by garment workers in
the south. Similar government interference has
plagued the development of the country's first oil
refinery, which has been snagged in red tape for
about seven years.
Moreover, two major
foreign investors have pulled out of the $1.5
billion project because government officials
insist the refinery be located not in the south,
near existing ports and oilfields, but in the
center of the country, in the hope of aiding that
region's development. And the specter of
corruption, particularly in massive infrastructure
projects, still casts a long shadow over the party
after a scandal that saw the resignation and
arrest of high-ranking Transport Ministry
Vietnam's new southern leaders
will quickly learn that they are no longer just
beholden to the ruling Communist Party, but are
accountable to the rules and regulations of the
wider world economy through WTO membership.
While the competitive lines between
Vietnam's north and south are steadily fading
away, the more intense game of more global
competition is fast coming into view. And
Vietnam's Communist Party has finally acquiesced
to what it has always resisted: that the country
is in better hands directed from the south rather
than the north.
Karl D John is
chief executive officer of The TCK Group
(www.tckgroup.org), a Vietnam-based investment
consulting group. He has more than a decade of
involvement with Vietnam.