President Nguyen Xuan Phuc resigns

Nguyen Xuan Phuc

The career end of the 68-year-old, who served as head of state for less than two years, is the result of a power struggle in the Communist Party (KP).

(Photo: Reuters)

Bangkok International corporations like Apple see Vietnam as one of the most promising alternatives to production in China. But foreign investors are confronted with an ever-growing political crisis in the Southeast Asian country, whose economy grew by eight percent last year.

The turbulence reached the top of the state on Tuesday: President Nguyen Xuan Phuc announced his resignation from all offices – he is also leaving the Politburo, which makes key decisions in the communist-ruled country.

The career end of the 68-year-old, who served as head of state for less than two years, is the result of a power struggle in the Communist Party (KP), which Phuc has now apparently lost.

His opponent, CP General Secretary Nguyen Phu Trong, is considered the most powerful man in the country and is currently taking rigorous action against party friends who have fallen out of favor. A few weeks ago, two deputy prime ministers lost their posts.

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The background to the upheavals in the one-party state is a comprehensive anti-corruption campaign launched by Trong, which in recent years has not only brought high-ranking politicians and officials to court, but also a number of managers. A prosecution committee reported several hundred cases in 2022 and 2021.

Covid-19 testing scandal

Scandals as part of Vietnam’s response to the corona pandemic recently brought the fight against corruption right to the heart of government headquarters in Hanoi. It is about allegations of alleged cheating in the procurement of Covid 19 tests and bribery in the allocation of seats on repatriation flights at the beginning of the pandemic.

Nguyen Phu Trong

CP General Secretary Nguyen Phu Trong is considered the most powerful man in the country and is currently taking rigorous action against party members who have fallen out of favor.

(Photo: via REUTERS)

According to the state media, President Phuc, who has now resigned, assumes political responsibility for the misconduct of subordinates. He was Vietnam’s prime minister until April 2021 – and was therefore responsible for government business in the first year of Corona.

Foreign observers see the fight against corruption as something that is taken seriously: Similar to China, the CP in Vietnam fears that rampant corruption will cause it to lose legitimacy among the population.

At the same time, however, the campaign is also having an impact on the balance of power within the party: Political scientist Arnaud Leveau commented that President Phuc’s resignation is unprecedented and will enable party leader Trong to further expand his political power. Contrary to custom, Trong secured a third term last year. He is considered pro-Chinese, while Phuc, as prime minister, primarily sought closer ties with the United States.

It is unclear whether the power struggle will also affect the reputation of foreign companies, which have increasingly integrated Vietnam into their supply chains in recent years. The extensive personnel changes at the top of the party could raise concerns about political stability and thus Vietnam’s economic development, commented Le Hong Hiep, a researcher at the Institute of Southeast Asian Studies in Singapore.

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From his point of view, however, it is not to be expected that the turmoil will slow down Vietnam’s success story – the country was recently one of the fastest growing economies in Asia. “Trong is still in charge.” There are currently no signs that Vietnam’s political system is shaking.

More: Stock market crash despite economic boom – what emerging market investors can learn from the example of Vietnam

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