Despite political turmoil, Vietnam is worth the risk of doing business

Over 1,000 years ago, in two separate battles, Vietnamese troops defeated Chinese naval attacks using sharp wooden stakes hidden in the Bai Dong River. The recent turmoil in Vietnam might lead to the idea that those shares are being repurposed to eliminate political leaders.

In the past few weeks, two able and long-serving deputy prime ministers, one of whom was a member of the Politburo, were swiftly removed from office. In an unprecedented turn of events, Jan. On the 17th, President Nguyen Xuan Phuc, another Politburo member, member of the Party Central Committee and chairman of the National Defense and Security Commission, resigned after two years of his usual five-year term. Vice Chairman Wu Shi Yingchun will serve as acting chairman until a new chairman is elected.

Such disruptions to the party’s leadership may appear sudden from the outside, but the resignations have been carefully coordinated over a period of time, and may even be part of a broader — long overdue — anticorruption effort. Yet even the best intentions, such as rooting out corruption, can have unintended consequences if misinterpreted by foreign interests as instability.

The anti-corruption campaign was launched by General Secretary Nguyen Phu Trong in 2016 when Nguyen Phu Trong became prime minister. Since 2021, the Politburo and the party have disciplined some 70 officials, including five ministers and former ministers, and nearly 5,000 people under investigation for corruption. Phuc resigned after several top officials were found to have breached scandals over COVID-19 test kits and repatriation flights.

Government accountability, especially at the top, is a good thing. One could even argue that the United States could benefit from a higher level of accountability on both sides. However, the complexities inherent in the Vietnamese government could make such moves appear intimidating to outsiders, including risk-averse foreign investors.

For years, Phuc has been Vietnam’s voice to foreign investors and diplomats around the world, while improving relations with the United States and overseeing one of the world’s fastest-growing economies. In 2022, Vietnam will achieve the fastest economic growth in 25 years, with a GDP growth rate of more than 8%, and become the seventh largest trading partner of the United States.

Will Western diplomats and businesses continue to enjoy the warm welcome that drew them to Vietnam in the first place? Will Vietnam’s new leadership take a harder line with the West? The quick and direct answers are yes and no, respectively.

While onlookers are understandably concerned, as a career diplomat with 30 years of expertise in Vietnam, I clearly see how seriously Vietnam places importance on its relations with the West, especially the United States. These recent departures appear to have been carefully designed as punishment neither for closer ties with the West nor for promoting internal reforms in Vietnam. Instead, these punishments were meant to foster better accountability within the Communist Party of Vietnam and its political system.

As more and more manufacturing moves to Vietnam, ensuring a stable and reliable business environment — coupled with increased government accountability — is something investors should expect from Vietnam’s leadership. Also, it is equally important to communicate well with foreign governments and the business community to ensure they understand what is happening and why.

In the coming months, there will be more changes in the Vietnamese government, including the election of a new president. Businesses should brace for a slowdown in the decision-making process in 2023 as more cautious government officials are inexperienced in new roles.

Despite headwinds in 2023, Vietnam’s economic growth rate is still expected to be as high as 6.5% this year. These achievements would not have been possible without international trade and investment, especially with the West. The party’s greatest pressure comes not from any external power or neighboring countries, but from the internal need for continued growth and prosperity, which depends on foreign trade and investment. This is why Vietnam has systematically joined regional free trade arrangements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the successor to the Trans-Pacific Partnership), the Regional Comprehensive Economic Partnership excluding the United States, and the EU-Vietnam trade agreement.

The old saying tells us that “risk is opportunity”. The opportunities in Vietnam are almost limitless, but not without risks. It would be wise for governments to do what they can to reduce risks and increase opportunities. Quick approval of a long-awaited power plan is one step the party can take to show its commitment to foreign investment from the West and the economic stability of its people.

Ted Osius is Chairman and CEO of the US-ASEAN Business Council and served as US Ambassador to Vietnam from 2014-2017.

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