Monday, August 12, 2013

Vietnam's ruling Communist Party are nepotistic - married to the daughter of the prime minister recycled Vietnamese (Viet Q) brings McDonald's to Vietnam

IT SOUNDS like a familiar American fable of hardship and redemption. Start with a teenaged immigrant, sweating for two summers over the deep fryers at a McDonald's. After years of toil the former burger-flipper, now fully grown, opens his native land's inaugural McDonald's franchise.

So the story goes for Henry Nguyen, now a Vietnamese-American tycoon living in Ho Chi Minh City, who will unveil Vietnam’s first “golden arches” at some point next year. At least that is what McDonald's suggested in a mid-July press release.

That account however overlooks an important and perhaps unsightly fact. Mr Nguyen is married to the daughter of the prime minister, Nguyen Tan Dung. This against a backdrop of critics charging that some of the high flyers in Vietnam's ruling Communist Party are nepotistic

Henry Nguyen likely is a clever fellow and a perfectly competent, perhaps even spectacular, businessman. Yet because of his personal link to one of the top three officials in a secretive, repressive regime, his latest deal has invited unsympathetic speculation in Vietnam's blogosphere. McDonald's has released a statement regarding Mr Nguyen’s life before he married up. “His dream was to someday open a McDonald's in the country of his birth,” it begins. He stayed in touch with the company and asked to be considered to open one of their franchises even before Mr Dung’s daughter entered his life. His office adds that "McDonald's has been his most favorite and passionate brand since he was little". When at last he was chosen, it was because McDonald’s found in him, as they say, “the ideal mix of business acumen, proven record, passion, and ability.” 

To be clear, they add, "the process used in the selection of our partner in Vietnam was the same process we have used, and continue to use, worldwide.”

At the head of government, Mr Nguyen's father-in-law has done much since 2006 to chip away at the Vietnamese public's trust. Mr Dung has presided over a years-long crackdown on political dissidents who challenge his authority or call for democracy; an embarrassing 2010 default by a state-owned shipbuilder on $600m in foreign loans; and a recent slowdown in economic growth that has rattled investor confidence. On July 26th the government launched a debt firm designed to buy non-performing loans, but Fitch, a ratings agency, said the firm is unlikely to fix the country's troubled banking sector unless it is accompanied by "meaningful" reform.

Mr Dung's kin appear to have done well financially during his turn at the helm of this country of 90m. His first son, Nguyen Thanh Nghi, has project-managed for Bitexco, a Vietnamese construction company that owns Ho Chi Minh City's tallest building. His son-in-law, Henry Nguyen, is not only a soon-to-be burger king but was previously the director of IFB Holdings, the company that franchises Pizza Hut and the Coffee Bean & Tea Leaf in Vietnam. And his Swiss-educated daughter, Nguyen Thanh Phuong, is a senior executive at a Vietnamese fund-management firm, Viet Capital

In Vietnam's patronage-fuelled business culture, a good way to acquire wealth and power is to milk one's official connections. In 2006 for instance, an American diplomat wrote of Ms Phuong that although she is talented, her swift advance in Vietnam's business world indicates how the party's elite "ensures that their progeny are well placed educationally, politically and economically," according to cables released by WikiLeaks. "Clearly it makes good political sense to hire the prime minister's daughter to manage an investment fund, especially if that fund is seeking to focus on investment in government-controlled sectors such as oil and gas, banking and information technology," the diplomat observed.

The prime minster's relations are not the only Party-linked people whose stars have risen. In 2011 Nong Quoc Tuan, the son of a retired secretary-general named Nong Duc Manh, for example, was promoted to the Party's Central Committee after just five months as secretary of a provincial one, according to Carlyle Thayer, a long-time analyst of Vietnam and emeritus professor at the University of New South Wales. Mr Thayer has written that other party "princelings" in the central committee "hail from politically influential families".  

Networks of political patronage also bleed into state-owned corporations. In 2007 Pham Thanh Binh, the former chairman of Vinashin, a state-owned shipbuilder, appointed his 27-year-old son Minh the deputy head of a shipbuilding institute. Mr Minh was later appointed to three senior positions at once. The senior Mr Binh also named his brother and brother-in-law to "key" management roles at the company without consulting its board of directors, according to the website of a government ministry. And there has been much chatter in blogs about To Linh Huong, the twenty-something daughter of a senior member of the Politburo, who graduated from journalism school to become an executive at Vinaconex, a state-owned construction company, in April 2012. She resigned after only a few months.

Like Mr Dung's daughter, Ms Huong may be talented; the question is whether she received special treatment because of who her father is. "The great irony is that Communist (countries) like Vietnam are the most feudal," says Hoang Tu Duy, spokesperson for Viet Tan, a American-based activist group that the Vietnamese government has designated as a terrorist organisation. "Crony capitalism and the rise of oligarchs are a huge problem at the moment," he says.

Vietnam's population, one of South-East Asia's youngest, is not permitted to vote in meaningful elections. If it could, it might not look kindly upon the current leadership. A recent survey by Transparency International, a Berlin-based watchdog group, found that since 2010 public perceptions of corruption in Vietnam have increased while trust in the government's "anti-corruption" initiatives has tanked. Nearly half of the thousand respondents surveyed said that the initiatives are "ineffective"—a nearly twofold increase in that perception since 2010.

No one is saying that widespread dissatisfaction with officials’ behaviour, coupled with worsening economic hardship for the country's poor, is about to cause tempers in Vietnam to boil over into Egypt-style street demonstrations, public demands for free elections, or even a serious challenge to the ruling party's authority. Nguyen Tan Dung, having been tested by a leadership scuffle within his party, now looks set to finish out his second five-year term as prime minister, which he won two years ago in the lawmaking national assembly's single-candidate vote. 

Yet even if the economy picks up, and no matter how honest and incorruptible Mr Dung may be, it cannot look good for his party—which preaches social equality—when a prime minister's son-in-law appears be building a corporate fast-food empire. The company, which has nearly 35,000 locations worldwide, says it chose him after a "rigorous selection process that began years ago”. The timing of its announcement in July—roughly a month after Mr Nguyen’s father-in-law survived the national assembly's first-ever "confidence vote"—suggests that it might follow Vietnamese politics rather closely. The Economist

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