trump nguyen xuan phuc SAUL LOEB/AFP/Getty Images

Vietnam and the Dilemma of New Wealth

Vietnam's mix of one-party governance and market economics has been held up as a model for North Korean leader Kim Jong-un to emulate. But with rapid economic growth fueling rampant corruption and rising inequality, the Communist Party of Vietnam is now facing the biggest test of its leadership in decades.

HANOI – Five days before US President Donald Trump and North Korean leader Kim Jong-un met in Hanoi for their second summit, two former Vietnamese ministers of communications were arrested and charged with “violations related to management and use of public capital.” The two officials are alleged to have approved a state-owned telecom company’s purchase of a private television provider for over four times its estimated value, at a loss to the state of around $307 million.

Similarly, a few months ago, two police vice ministers, a minister of transportation, and a former head of the state petroleum corporation were all brought to court on charges of selling state property to private companies at a loss. Taken together, these cases point to a high level of state capture – a form of corruption, rife in former Soviet-bloc countries, in which powerful private actors use insiders to gain control of public institutions and assets.

Like North Korea, Vietnam started opening its economy while allowing little to no private ownership. However, after three decades, Vietnam – like many developing countries – is not immune to the detrimental effects of extractive elites. There is evidence of powerful private companies’ undue influence over domestic policies. According to a commentary in People’s Daily by former Vietnamese President Trương Tấn Sang, corruption is worse now than at any other time in the Communist Party of Vietnam’s 70-year history. “There is collaboration between those in power and rent-seekers to abuse state policies,” he wrote. “They arrange business deals that benefit some individuals and groups greatly, but cause immeasurable damage to the state budget and disrupt the economy.”