TALK OF MONEY POLITICS AND DISTRUST OF CHINA TOP

C O N F I D E N T I A L SECTION 01 OF 02 HO CHI MINH CITY 000619

SIPDIS

STATE FOR EAP/MLS

E.O. 12958: DECL: 10/8/2024
TAGS: PREL PGOV CH VM
SUBJECT: TALK OF MONEY POLITICS AND DISTRUST OF CHINA TOP
AMBASSADOR'S LUNCH IN HCMC

HO CHI MIN 00000619 001.2 OF 002


CLASSIFIED BY: Kenneth J. Fairfax, Consul General, U.S.
Consulate General Ho Chi Minh City, Department of State.
REASON: 1.4 (b),(d)


1. (C) SUMMARY: The driving force behind CPV politics is the
personal greed of its members, according to a prominent HCMC
businessman with both a long track record of success and good
political connections. He explained that while the CPV includes
large numbers of both conservative ideologues and committed
reformers, the balance of power between those two groups lies in
the hands of party members whose sole motivation is enriching
themselves and their families and whose interests are not
furthered by continued improvements transparency or the fight
against corruption. He also claimed that the pernicious role of
money in CPV decision making is being exploited by China to
further their interests in Vietnam despite widespread
dissatisfaction with GVN/CPV policy toward China. While this
particular interlocutor is more bluntly spoken than many, his
overall skepticism concerning the current direction of the CPV
reflect a wide-spread current among the educated, successful
class of entrepreneurs whose past success and future prospects
are based on the development of Vietnam's private, market-based
economy. END SUMMARY.


2. (C) During an October 25 lunch with the Ambassador and CG,
Nguyen Tran Khanh, the CEO of InvestConsult, shared his views on
current trends and future developments in the Vietnamese
political scene as well as China-Vietnam relations.
InvestConsult is one of Vietnam's oldest business consulting
groups, having been formed in the early days of Doi Moi when
Vietnam was first opening up to foreign trade and investment.
Many of its principals, including Khanh, were particularly
active when the late PM Vo Van Kiet was leading HCMC as well as
later when he was PM.

CPV DRIVEN BY PRIVATE ECONOMIC INTERESTS
--------------

3. (C) Khanh began describing the basic political landscape
within the CPV as consisting of relatively modest groups that
are always conservative or always progressive and a much larger
group in the center that can shift from time to time and from
issue to issue. Unfortunately, he added, for many of the
members of this large central group their decisions are not
based upon reasoned analyses of national priorities but are
instead based on their personal economic interests. In fact, he
said, personal economic interests have become the most
significant factor in determining CPV policy. This money-based
decision making has led to the CPV becoming increasingly
organized along factions defined by shared economic interests.


4. (C) Khanh described the emergence of economic-based factions
as a totally new phenomenon that began after the end of 2005 and
has since become the defining political trend in modern
Vietnam. Party membership is now about money. While there are
still some idealists on both sides of the political spectrum,
most people decide to join the party as a way of advancing the
economic fortunes of themselves and their families. Asked
specifically about To Huy Rua, the newest member of the
Politburo, Khanh described him as a pure ideologue who remains
outside the economic power groupings. Rua, he added, is the
exception rather than the rule and has nonetheless been
supported by economic interests. He added that one very
unfortunate corollary of the rise of the economic groupings has
been the general trend away from transparency, reform and good
governance that characterized earlier years. The reason for
this reversal is not that ideological conservatives have risen
to power but that the economic groupings often view
transparency, free speech and other reforms as antithetical to
their interests. Khanh went so far as to declare that among the
senior leadership of the CPV there are numerous members who
understand that the party will inevitably loose power if it
stays on its current path. Rather than advocating reformist
policies to build popular support for the CPV, however, they are
focusing their energies on holding back change temporarily so
that they can amass fortunes for themselves and their families
before the inevitable anti-CPV movement gains the upper hand.


5. (C) Because of the emergence of political factions based on
economic interest, the traditional division of power between the
north, central and south has lost much of its significance,
Khanh said. He explained that the origin of the traditional
division of power at the top of the CPV was not so much
geography as the history of the CPV and the three, largely
regionally-based parties that were folded into it. From 1975
through 2005, the north-central-south division reflected the
fact that factions within the CPV continued to be organized
along old party lines and to reflect shared war-time
experiences. Since 2006, however, the power sharing is based on

HO CHI MIN 00000619 002.2 OF 002


sharing among economic interests. As one example of how this
has changed CPV dynamics, Khanh stated that traditional rivals
such as PM Dung and DPM Hung have now joined forces in specific
areas to form united economic groups, as they have done in
controlling the development of Phu Quoc island.


6. (C) Asked about often-heard statements that PM Dung keeps
personal control over the largest SOEs and how he could manage
such a feat, Khanh explained that many decisions in Vietnam must
go to the Prime Minister for his personal approval. These
include decisions on the allocation of land, resources and --
most importantly of all -- cheap state-backed credit. Using his
ability to approve or deny such requests, PM Dung is able to
exercise effective control over the big SOEs, which often
compete with each other not in the marketplace but in the race
to provide economic benefits to the family members and key
supporters of CPV members and factions.


7. (C) Khanh concluded that under PM Dung, the SOEs have become
central to the political process and are the CPV's primary
mechanism for amassing wealth for its members. They have also
become even less efficient since the SOEs measure "success" by
their ability to funnel state resources to directors and
supporters rather than by their business performance.

CHINA EXPLOITING CPV GREED
--------------

8. (C) Khanh said that now that the CPV has become driven by
economic interests, China's influence is growing due to
willingness of the Chinese leadership to expend resources to
court CPV members. While China is very unpopular among the
public at large and is even quite unpopular among many parts of
the GVN that associates Chinese business interests with
corruption and shoddy work, China's political star is rising
within the CPV because that is where the Chinese communist party
knows its must concentrate its efforts in order to have real
influence in Vietnam. Khanh invited the Ambassador to study
China's connections in Vietnam, stating that he would find that
they are predominantly with the CPV rather than the GVN.


9. (C) Khanh added that while public attention has been fixated
on a few issues such as bauxite mining in the Central Highlands
or the Spratley and Paracel Islands, China's influence in
Vietnam is growing much more broadly with thousands of Chinese
construction workers, factory workers and others in virtually
every province in Vietnam. According to Khanh, many of these
workers arrive on Service (Official) passports and, under
Chinese-Vietnamese consular protocol, are not subject to visa
rules. Khanh also alleged that many of these workers are not
simple workers at all but are actually members of the Chinese
military.

COMMENT
--------------

10. (C) While Khanh is particularly blunt in expressing his
views, his overall perspective (and pessimism) about current
trends in Vietnamese politics reflect a much larger trend among
the "private sector elite," a loosely defined group of wealthy
business leaders who may have significant political connections
but nonetheless view themselves as "self-made" rather than
beneficiaries of party patronage. While Khanh himself enjoyed
close ties with former PM Vo Van Kiet, for example, his business
is private and continues to prosper despite his lack of ties to
current top leadership. Other members of this class of private
business leaders may have strong ties to certain politicians or
are even related to them, but what sets them apart is that their
businesses are fundamentally private and have succeeded in the
market place. As a whole, this group is extremely -- and
increasingly -- critical of the giant State Owned Enterprises
(SOEs) and (when speaking in private) directly critical of the
role played by PM Dung and others in facilitating what private
business leaders view as the increasingly large and destructive
role the SOEs are playing in the economy. Kahn's suspicions
concerning China are also indicative of a strong current trend,
particularly in the south. While we know of no evidence that
thousands of "under cover" Chinese military establishing a base
in Vietnam, rumors of such developments are commonplace.
Controversies over bauxite mining in the central highlands or a
posting on an official CPV web site that appeared to support
China's claims to all of the "East" (South China) Sea have
helped fuel skepticism towards both China and Vietnam's
political leadership. Khan's comments also suggest that some of
the clampdown on political dissent (which is often,
coincidentally, critical of both China and GVN corruption) may
be a tactical attempt to deflect criticism from senior CPV cadre
FAIRFAX