Vietnam’s Prime Minister Nguyen Tan Dung was handed a second term on Tuesday with economists questioning whether he will stand up to growing corporate pressure to unwind measures adopted this year to right a wobbling economy.
Political allies of Dung appear set to take key cabinet and Communist Party posts, which will likely bolster his power, analysts and diplomats say.
But less predictable is how the 61 -year-old former “Viet Cong” communist guerrilla and one-time central bank governor will use that greater influence over the next five years.
“The big questions are: How is the prime minister himself going to deploy his power? What lessons has he learned in the last three years in terms of macro policy? And how are corporate interests going to affect policymaking?” said one foreign economist who has advised the government.
“I don’t think we will really know until we see how things play out in the first year.”
Economists and international institutions, like the World Bank and Asian Development Bank, say the authorities must stay the course on a sweeping macroeconomic stabilisation strategy known as “Resolution 11” and take bold steps to restructure parts of the economy to enhance competitiveness.
But there is already pressure from vocal corporate interests and the state sector, of which Dung has been a supporter, to ease tight monetary conditions.
A surprise cut in a key policy rate on July 4 did not engender confidence. The International Monetary Fund warned that it could confuse markets and Moody’s called it “premature”.
There was no official explanation for the decision to lower the reverse repurchase rate by 100 basis points with annual inflation above 20 percent and rising, although officials said it did not indicate that they were wavering in their commitment to stabilising the economy.
The National Assembly, or parliament, re-elected Dung with a 94 percent approval rating, state media reported.
This week the rubber stamp legislature elected the top deputy prime minister, Nguyen Sinh Hung, as speaker of parliament and put Truong Tan Sang, who held the number two post in the Party, into the largely titular job of state president.
Analysts say Hung had often differed with Dung on policies and that Sang is an outright rival to Dung. Many expect their influence could be diminished in their new positions.
At the same time, diplomats and others say Le Hong Anh, the current minister of public security and a Dung ally, is tipped to replace Sang in running day to day Party affairs while other officials said to be close to Dung are expected to become deputy prime ministers.
The next five-year term will test Dung’s reformist agenda, as a tentative consumer generation sprouts in the country of almost 90 million people, shaking up Vietnam’s traditional image of rural poverty, rice paddies and sweatshop factories.
Former U.S. Ambassador Michael Michalak called Dung “reform-minded”, according to a confidential U.S. embassy cable written in 2009 and released by WikiLeaks. Analysts generally agree that he favours greater economic reforms and more transparency.
But his record is mixed. He has been a strong supporter of state-owned conglomerates, such as Vinashin, which was revealed to be near bankruptcy under some $4.4 billion of debt last year and restructured.
Private economists generally deride his embrace of lumbering state firms, saying the sector warps the competitive environment, saps precious capital needed elsewhere and is a major source of economic inefficiencies.
“Undoubtedly he must restructure the economy, reform public institutions and adopt a new paradigm of economic growth,” said independent economist and former trade official Le Dang Doanh.
“It means the prime minister must promote independent intellectual thinking and innovation … We have to wait and see what happens. So far, I have not seen the necessary reforms.”