South East Asia in Transition: Power Shifts in Vietnam and Laos

Asia is a region in transition. China’s rise as the premier regional power has spurred growth but also competition, forcing governments to recalculate. However, in the eastern half of mainland Southeast Asia, the prevalence of one-party governments means that political change is usually slow and subtle—and rarely transparent. The past few weeks illustrated this trend in Vietnam and Laos, with the long-ruling Communist parties in each undergoing contentious leadership transitions. In both countries, the debate among party leaders has centered on how best to take advantage of Asia’s growth and engage internationally. Chief among their concerns, of course, is managing relations with China. In neither country, however, does the leadership change herald a fundamental shift in strategic or economic orientation. Instead, high-profile shake-ups in each capital were prompted largely by the desire to preserve the legitimacy of one-party rule amid a rapidly changing domestic and regional landscape. The Vietnam Debate: More than East vs. West In Vietnam, a rare degree of political intrigue surrounded January’s semi-decennial Communist Party National Congress, normally a scripted unveiling of the country’s top leaders and policy priorities for the next five years. The next president, prime minister and National Assembly leader were confirmed without public drama. (They will be formally elected in a rubber-stamp vote by the National Assembly in May.) The Politburo, Vietnam’s top policymaking body, was expanded by three members to broaden representation among various regional and sectoral factions. But the contest for the general secretary position, the most powerful in the country, threatened to spark political crisis in Hanoi. In the end, General Secretary Nguyen Phu Trong unexpectedly outmaneuvered the powerful Prime Minister Nguyen Tan Dung to win at least a two-year extension as Party chief. Mainstream narratives portray the outcome as a win for pro-China conservatives over pro-US reformers. Hanoi is indeed divided on how to live in China’s growing economic and security shadow, but the political controversy surrounding the transition had little to do with specific policy positions. After all, both Trong and Dung have had mixed ties with Beijing, and Trong signed off on a number of pro-West moves, some that angered Beijing. As Stratfor has explained previously, geopolitical imperatives, namely Vietnam’s need to defend itself against China’s push into the South China Sea and to reduce its economic dependence on Chinese trade and investment would compel any Vietnamese leader to pursue economic and security engagement with a range of outside powers. Among the new leadership, the top four have all visited the United States in the past year. Two others in the Politburo were educated in the United States. Meanwhile, consensus on the need for Western economic integration was emphasized repeatedly in policy documents and in statements throughout the Party congress. Notably, the 200-member Central Committee, the country’s second-most powerful body, endorsed Vietnam’s participation in the Trans-Pacific Partnership. And since the end of the plenum, Hanoi has gone to great lengths to counter mainstream narratives that Dung’s ouster will threaten the country’s slow but steady move toward a market economy, which picked up steam under the outgoing prime minister. Instead, the power struggle stemmed more from Party elders’ desire to preserve Vietnam’s consensus-oriented decision-making model, centered around the conservative-dominated Politburo—a model Dung was effectively undermining with his bid to stay in power. More broadly, the focus was on reclaiming control over the pace of Vietnam’s international engagement and economic liberalization to prevent it from subverting Party interests. A self-styled champion of economic reform, the charismatic Dung used his control over sources of state lending and patronage to build a vast power base, along with strong ties with foreign investors, during his 10 years as prime minister. But Vietnam is effectively ruled by committee, a model designed to prevent its historical regional divides from reopening. And the rapid rise of a political maverick like Dung (who hails from the disproportionately wealthy south), along with the growing power of southern factions in the Central Committee, was seen as destabilizing to the Party’s carefully cultivated internal balance. Furthermore, the strengthening of the prime ministerial office and other state institutions under Dung stoked fears that the state would evolve into a parallel power structure rivaling the Party. On economic liberalization, senior conservatives viewed Dung as an overzealous purveyor of crony capitalism who risked becoming captive to his own patronage network — and whose role in some high-profile economic failures and corruption allegations damaged public trust in the Party. On relations with China, he was seen as reckless, too willing to act out of step with the consensus in Hanoi. Thus, Trong and his conservative allies forged a compromise arrangement that will push Dung into retirement but preserve broad regional and factional representation, avoiding a crisis with Central Committee factions that initially balked at Trong’s procedural maneuvers to block Dung’s ascendance. In the near term, this arrangement bodes well for stability and policy continuity, preventing an interfactional scramble to fill the vacuum left behind by the 12 retiring Politburo members. But Vietnam’s collective decision-making model makes Hanoi vulnerable to paralysis and policy incoherence, and makes it slow to adapt to the demands of a demographically young, rapidly modernizing populace. Even under Dung, economic reform tended to limp forward. For example, the government reportedly fell far short of its goal of privatizing nearly 300 state-owned firms in 2015 (and in those that have been opened, only minimal private shares have been offered). This struggle stems in part from Hanoi’s rule-by-committee model, where a relatively small number of Party elites—themselves benefiting from a patronage-heavy system in which power and wealth are typically gained by protecting entrenched interests — have the power to block contentious policies. And the model will continue to slow the push for modernization in Vietnam, despite encouraging consensus on the broad direction the country is headed. Laos: Looking for leverage In Laos, meanwhile, the leadership transition has been portrayed as an attempt to shift away from the country’s growing reliance on China and back toward Vietnam, which backed the Lao Communist takeover in 1975 and has remained its primary patron ever since. Laos is still run largely by an aging generation of former Pathet Lao independence fighters who, with Vietnamese backing, fought off the Americans from a network of secret cave headquarters in the eastern mountains. But President Choummaly Sayasone and, more unexpectedly, Prime Minister Thongsing Thammavong are both stepping down, at least in part due to unease among Party elders about the country’s tilt toward the Chinese over the past decade. Their replacements — Bounnhang Vorachit as president and Thongloun Sisoulith as prime minister — are seen as more wary of Beijing’s influence. Also ousted was Deputy Prime Minister Somsavat Lengsavad, an ethnic Chinese credited with attracting Chinese corporate investment to the country. He was also a main driver of efforts to break ground on a Chinese-backed high-speed rail line, despite mounting concerns about unfavorable financial terms and long-term debt obligations (and the train’s limited utility to the Lao people). Notably, over the past two months, a former finance minister and a central bank governor were arrested on corruption charges related to business ties with the Chinese. A turn back toward Vietnam would be notable, considering that Laos’ hearty embrace of Chinese investment over the past decade was driven, in part, by the need to reduce an over-reliance on Vietnam. But the competition over Laos is hardly a zero-sum game. And as a landlocked, underdeveloped nation (its gross domestic product in 2014 was just $12 billion), Laos has little choice but to seek greater cooperation with all of its more powerful neighbors—even those to which it historically has been subordinate. To capitalize on Southeast Asia’s robust growth and overcome its geographic limitations, Laos has been recasting itself as a corridor country capable of unlocking new trade routes sorely needed in a geographically fragmented region. This endeavor requires substantial foreign assistance, which—combined with the strategic and economic value China sees in the landlocked state—will prevent a major break with the Chinese. Ultimately, Laos is seeking to use competition among outside powers to better dictate the terms of its international engagement, however little leverage it has. Vientiane may seek to renegotiate certain controversial infrastructure and mining projects in the coming years. (China, for example, needs the north-south high-speed railway far more than Laos does.) But it will have limited success in areas where outside powers are not directly competing.