Vietnam Revises Constitution

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Nov. 28 – This week, the Communist Party of Vietnam (CPV) is expected to approve a number of revisions to the Vietnamese constitution that will tighten government control over the economy and reaffirm the dominance of state companies.

While CPV leaders initially suggested the constitutional changes would push Vietnam’s economy towards a more market-oriented system, the revisions set to be approved this week will retain state-owned enterprises as the mainstay of nation’s economy.

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These disappointing changes to Vietnam’s constitution come amidst relatively slow economic growth forecasts. After growing at its slowest rate in 13 years, Vietnam’s economy is forecasted to grow 5.4 percent this year and 5.8 percent in 2014 – well below the 7 percent yearly growth rate CPV leaders were hoping for.

The decision by the CPV to forestall Vietnam’s transition towards a market economy is viewed by many as an attempt to reaffirm the CPV’s control over the country at a time when social unrest over land rights and dissatisfaction with economic progress has mounted.

Earlier this year, parliament subjected CPV leaders to an unprecedented confidence vote after frustration with slow economic growth led some party members to suggest allowing “political competition” in an alternative charter.

Foreign investors will likely be the most disappointed with Vietnam’s stalled reforms, however, as the Vietnamese government’s lack of transparency and consistency oftentimes frustrates firms interested in FDI.

Corruption, price hikes, and falling revenues have recently placed Vietnamese politicians under considerable pressure to rectify the country’s economic policy. During a confidence vote this June, Prime Minister Dung was rated poorly by almost a third of lawmakers, and Central Bank Governor Van Binh received a similar “low-confidence” vote from over 40 percent of lawmakers.

Silver Lining

While Vietnam’s constitutional revisions are disappointing for foreign investors and stall much-needed structural rebalancing, the CPV’s failure to deliver upon its promised market reforms may soon push the Vietnamese government towards more fundamental policy changes.

A number of analysts see participatory democracy, market mechanisms free of socialist guidance, and a more stable and transparent rule of law in the nation’s imminent future.

If the unprecedented frustration legislators vocalized earlier this year is any indication of where the country is headed, Vietnam’s model of state capitalism combined with one party rule may be nearing its limit.

Many remain hopeful that if Vietnam’s economy does not respond well to the stymied market reforms that have been sacrificed under the upcoming constitutional revisions, more widespread and fundamental change will be on the horizon in early 2014.

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