The arrest of one of Vietnam’s top banking tycoons reflects a wider power struggle among the Communist rulers over how to tackle the country’s deepening economic troubles, experts say.
Flamboyant multi-millionaire Nguyen Duc Kien, a shareholder in some of Vietnam’s largest financial institutions and a founder of Asia Commercial Bank (ACB), was detained on Monday last week, and ACB’s ex-head officially joined him in custody three days later.
The arrests, for unspecified economic crimes, caused public panic, wiping about US$5 billion in value from Vietnam’s stock markets and triggering a bank run as depositors rushed to pull hundreds of millions of dollars out of ACB.
However, “the bigger concern is the potential for political instability ... Kien’s arrest could signify increasing discord among political elites and factions,” according to a report by intelligence group Stratfor.
Football-enthusiast Kien, an instantly recognizable 48-year-old financier with a shock of white hair, is widely reported to have close connections to Vietnamese Prime Minister Nguyen Tan Dung and his daughter, a Swiss-trained private banker.
Since the 1990s, as Vietnam opened up economically, power moved from the Communist Party of Vietnam to the state — and, since he assumed the post in 2006, to Dung, who is said to be the country’s most powerful prime minister ever.
Dung, who was reelected to a second five-year term last year, has used this power to aggressively push for high growth rates and champion a South Korean chaebol-style development path in Vietnam, relying on huge state-owned companies to drive overall economic growth.
At first, Vietnam was notching up 7 percent-plus annual growth rates and quickly became a favorite of foreign investors, including global banking giant Standard Chartered, which owns 15 percent of ACB.
However, with economic growth now just 4.4 percent year-on-year in the first half of this year, foreign direct investment down nearly 30 percent in the same period and toxic debt in the fragile banking system at “alarming levels” according to the central bank, there has been increasingly vocal criticism of Dung.
“Never has Vietnamese society faced so many upheavals, which weaken the party’s leadership and threaten the survival of the whole political regime,” a retired National Assembly deputy said.
“Some party leaders have lost patience, and feel it is time to act to eliminate these potential threats and regain public confidence,” he said.
In a scathing op-ed on Thursday, Vietnamese President Truong Tan Sang — one of Dung’s main political rivals — said that “Vietnam is now under not insignificant pressure because of broken state-owned enterprises.”
He criticized “the degradation of political ideology and the morals and lifestyle” of officials — a swipe at wealthy tycoons like Rolls Royce-driving Kien — and called for economic reform and a new anti-corruption drive.
A new round of factional fighting has begun and “the main battleground is economic reform and probity including the state-owned sector and the banking sector and weeding out entrenched large-scale corruption,” Vietnam expert Carl Thayer said.
“Sang and Party Secretary-General Nguyen Phu Trong are now repeating an old but true refrain that corruption is one of the major threats to the legitimacy of Vietnam’s one-party system,” Thayer said.