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The secretive meeting where Vietnam changes leaders

Soldiers stand during a flag raising ceremony at Ba Dinh Square in Hanoi, Vietnam, on Feb. 16, 2019.

YEN DUONG/BLOOMBERG

By JOHN BOUDREAU AND NGUYEN DIEU TU UYEN | Bloomberg | Published: January 29, 2021

Vietnam, one of the world's five remaining Communist states, is about to get new leadership.

The biggest moves will emerge from a secretive, twice-a-decade meeting — the National Party Congress — which started Jan. 25 in Hanoi and ends Feb. 2. From general secretary on down, there'll be a shakeup of the characters who will steer the Southeast Asian nation of 97.6 million people through a period of tense relations involving China and the U.S. While no major policy reset is anticipated, the congress will approve a five-year blueprint for one of the world's fastest-growing economies.

1. How does the system work?

It's an opaque process. Vietnam has a collective "four pillar" leadership structure made up of general secretary, prime minister, president and chair of the National Assembly, the nation's parliament. It governs in consultation with a 17- to 19-member politburo. Nguyen Phu Trong, the current general secretary, also became president in 2018 following the death of President Tran Dai Quang, meaning the top leadership was down to three. Observers anticipate the government will revert to four pillars in 2021.

2. Who chooses what?

About 1,600 delegates to the 13th National Party Congress from across the country will vote to select about 200 members to the Central Committee, which in turn will pick the politburo and from that group the party general secretary. The politburo then nominates candidates for prime minister, currently Nguyen Xuan Phuc, and the cabinet. These will go to a vote in the National Assembly mid-year.

3. What challenges await?

On the one hand, boosting growth in the export-dependent nation following a sharp global recession. On the other, doing so without further upsetting the U.S., its biggest export market. The U.S. put Vietnam on notice in October by opening a trade investigation into its currency policy and then imposed preliminary anti-subsidy duties on Vietnamese car and truck tires, citing an "undervalued currency." In the last days of the Trump administration, the U.S. labeled Vietnam's currency actions unreasonable and restrictive to American businesses, but refrained from imposing punitive tariffs. Vietnam's authorities will be keen to secure greater access to American consumers while tamping down concerns about the surging trade surplus, on pace in 2020 to break the previous year's record $56 billion.

4. How has covid-19 affected the country?

At year-end Vietnam had one of the lowest virus death counts globally — only 35 in a country of nearly 100 million people. In late January, however, the first domestic cases since Dec. 1 surfaced around Hanoi, showing the difficulty of completely containing the pathogen. (Attendees at the congress were being retested.) As for the economy, growth slowed to 2.91% at the end of 2020 as the global downturn brought on by the pandemic sapped demand for made-in-Vietnam products, from smartphones to dress shirts. The government forecasts a 2021 expansion of about 6% compared with 7.02% in 2019.

5. What about superpower relations?

Vietnam depends on China for key materials and equipment to supply its factories. Yet relations with its powerful neighbor — the two countries fought a brief border war in 1979 — are fraught and further inflamed because of competing territorial claims in the South China Sea. (Vietnam's coastline of about 3,400 kilometers, or 2,100 miles, follows one of the world's busiest sea cargo lanes.) Vietnam favors greater U.S. economic and military presence in the region to counter China's growing might and is expected to push for a close relationship with the Biden administration.

6. How are Vietnamese faring?

As decades of market-oriented economic reforms boost incomes and nurture a growing middle class, Vietnam is among the world's most optimistic countries, according to a Nielsen survey. Yet human rights advocates criticize restrictions of basic political and civil freedoms. Arrests and trials of Vietnamese who speak out on issues such as corruption have grown markedly following a new cybersecurity law in 2019, according to Carl Thayer, emeritus professor at the University of New South Wales in Australia. There's typically an up-tick in arrests before the party congress, he said.

7. What will a new government mean for investors?

More of the same. Vietnam's successful handling of the pandemic, improving infrastructure, investor-friendly policies, political stability and its well-educated, young and low-cost workforce is likely to continue attracting international companies. Expect further efforts by the new leadership to sell Vietnam as an increasingly high-tech manufacturing base for suppliers of global giants such as Apple Inc. One concern for companies will be the risk that the trade rift with the U.S. could trigger additional tariffs.