The Communist Party of Vietnam has convened its 11th National Congress, its most important meeting, held every five years since 1935, to review the Party's performance and chart the path ahead. Since Vietnam's reunification in 1975, the congress has developed into a more regular and formal benchmark of the country's development. The Vietnamese leadership's status quo since 2006, internationalist leaning, is not breaking apart but may shift a bit more toward greater focus on maintaining domestic control. More important, we know that Vietnam's economy and its foreign policy, namely counterbalancing China, are becoming more difficult to manage.

The 11th Congress

The 11th congress, which runs Jan. 12-19, opened with presentations by Vietnamese President Nguyen Minh Triet, Party General Secretary Nong Duc Manh and permanent member of the Central Committee Secretariat Truong Tan Sang. The first day's declarations focused on meeting the targeted annual economic growth rate of 7 to 8 percent and on the need to couple growth with social improvements such as raising wages and limiting price inflation. At the end of the weeklong meeting, the Party congress will elect a new Central Committee of around 150 members, which will in turn elect a new Politburo, the core 15 or so Vietnamese leaders. The Politburo includes the leading triumvirate of Party general secretary, prime minister and state president (in descending order of importance). The congress also issues a summary political report, a compilation of all the reports at the provincial, district and commune levels reviewing the past five years, and it attempts to set priorities, agendas and policies going forward. The 11th National Congress' themes revolve around continuing the "doi moi" (renovation) process of market-oriented reform so that Vietnam can become a fully industrialized economy by 2020. There is usually a defining policy direction to stem from the five-year congresses, but not every year. In 1986, the 6th Party congress saw the adoption of the doi moi policy, which is the Vietnamese version of marketization and liberalization, a major turn comparable to China's 1978 opening-up. Similarly, the 7th congress stamped out any entertainment of the idea of "multiparty" political reform, a threat that emerged subsequent to the Chinese Communist Party's troubles at Tiananmen in 1989 and the collapse of the Soviet Union. The 10th Party congress, in 2006, has been hailed as the "anti-corruption" congress because of the uproar over a major corruption scandal beforehand and several Party elders' criticisms of corruption within the Party at the time. Usually these symbolic turning points are identified after the Party congress — they are not necessarily official designations but are convenient labels for encapsulating the zeitgeist of each particular five-year meeting. It is crucial to understand that the defining policies associated with different Party congresses do not translate to decisive implementation. Opening up the economy, fighting corruption and other policies are ongoing processes that will never be completed because economic control and political patronage are essential to the Party and state. Aside from policy discussions, Vietnamese Party congresses are the time for a new generation of leaders to get promoted, older generations to retire, and for factions to rise, fall or hold their ground. The congresses have occasioned the fall from grace of various Party figures, including Politburo members or even the Party's general secretary, as happened with Le Kha Phieu in 2001. While individuals have limited impact on the system as a whole, the fortunes of particular individuals can indicate deeper trends in political, economic or military affairs. Since Vietnam's press is state-controlled and information is mostly closed, this type of observation becomes all the more important.

Changes in the Politburo

About half of the 15-member Politburo is expected to turn over when the Central Committee picks the new members, especially if the de facto retirement age of 65 is enforced rigorously. Until the elections are held, it will be impossible to know the exact makeup of Vietnam's future leadership. There is already a general idea of what changes are to take place, however. First, while the 11th congress will not mark a full transition to a new generation of leaders, nevertheless important generational changes are taking place. Triet, the first Vietnamese president from the south, will retire. The presidential role is more ceremonial than that of the Party general secretary or of the prime minister, though it is still part of the ruling triumvirate. The foreign minister most likely will retire, and as many as two deputy prime ministers could as well, in addition to the head of the Central Committee's inspection office. Meanwhile, many important Politburo members who hold posts in the Party's Central Committee and on the state Cabinet likely will not retire, or at least will not be required to because of age. This includes the minister of public security, the minister of defense, both Hanoi's and Ho Chi Minh City's Party chiefs, and the heads of the Central Committee's propaganda and organizational commissions. Most important, Manh, the country's top leader and Party ruler since 2001, probably will retire since he will turn 71 in 2011. Manh's retirement is significant because he has held the general secretary position for longer than any of his predecessors other than Le Duan, who took over from revolutionary leader Ho Chi Minh and ruled the Party through war with the United States, reunification, and wars with Cambodia and China. Manh's own term in office has seen dramatic changes, with Vietnam continuing its economic boom, further integrating into the international system, including by joining the World Trade Organization, Asia-Pacific Economic Cooperation and other organizations, and improving bilateral relations with the United States. Manh's replacement is widely expected to be Nguyen Phu Trong, chairman of the National Assembly. Trong will be the oldest member on the Politburo after the others retire. If the age limits were strictly enforced, however, he also would have to step down. Trong's background is firmly rooted in Hanoi, where he has extensive experience in Party ideology and propaganda, but his competence in state management has been called into question. Trong is viewed as falling on the conservative side of the Party, meaning he is less eager to embrace internationalist reforms. Japanese media suggests he is more pro-China than his predecessor — and implicitly anti-Western — though it is unclear whether this had an impact on his bid for the top post. His move into the general secretary position at least obviates the problem of having a power struggle for the top position between some of the younger contenders. The most important uncertainty for the top leadership relates to whether the current prime minister, Nguyen Tan Dung, will retain his post. The consensus among scholars such as Carlyle Thayer and other media is that Dung will be chosen for another term, but there are reasons uncertainty lingers. Dung took office in 2006 and has managed the country through a boom and bust in global commodity prices, the global financial crisis and recovery, worsening relations with China, and improving relations with the United States and Russia. He is a reformist leader and well-liked by Western partners, though not as highly thought of by the Chinese. His popularity has suffered recently, however, due to criticism over his support for a deal with Chinese mining companies to exploit bauxite reserves in the central Vietnamese highlands, as well as his involvement and handling of the near bankruptcy of state-owned Vietnam Shipbuilding Industry Group (Vinashin). A member of the National Assembly, Vietnam's legislature, proposed a vote of no-confidence in November, which would have been an unprecedented legislative challenge to the state leadership had it transpired. Ahead of the congress, Dung received a challenge for the prime minister's slot from Truong Tan Sang, a leading Politburo member and permanent member of the Central Committee Secretariat under Manh. At the moment, it appears that Dung will hold onto his post and Sang will assume the presidency, an arrangement likely hashed out with Manh's influence or through Dung and Sang's own negotiations. Assuming Dung survives the challenge, the important point is that he will be somewhat weakened in the Politburo as well as in the public eye; Dung will be the leader, but he will be more vulnerable than before. In other words, Vietnam likely will have the same prime minister but a different triumvirate. Politburo member Sang is a rival, but like Dung he is from southern Vietnam, which means the regional balance among the top three leaders will remain the same. (Outgoing President Triet is also a southerner.) Trong will be expected to maintain the balance between the rivals, being a northerner and five years older than Dung and Sang, but he has big shoes to fill with Manh retiring. Moreover, Trong does not appear on the surface to be a powerful player, although personal details are murky and he is, after all, on the cusp of reaching the country's most powerful office.

Policy Challenges

It is impossible to predict exactly what the leadership roster will be until the Party congress has its say. But these individuals will have limited ability to steer the country; the bigger question relates to Vietnam's political, economic and strategic challenges. Barring disaster, the Party will retain its pre-eminent position. The factions will recognize the need to continue making money through economic opening but will struggle to control the additional foreign influence. Even major policy shifts will be limited in effectiveness because of domestic and foreign constraints. (click here to enlarge image) First, the incoming leadership will continue to face difficulties in economic management. Over the past decade, Vietnam has experienced a surge in exports, credit-driven domestic growth and foreign investment. But economic pressures are building, and the global economic crisis and recovery have added volatility, making the economy harder to manage. Inflation is rising (up to nearly 12 percent at the end of 2010 by official statistics, and worse according to people on the ground), the dong currency has weakened by 5 percent since January 2010, and people have been hoarding U.S. dollars and gold. Inflation and the sense that wages have not kept up, along with rapid economic change, have exacerbated the country's social ills, generating more unrest and security crackdowns. Inflation-fueled unrest could ultimately pose a danger to the regime and thus explains why the 11th Party congress will heavily emphasize social policies. Excessive credit growth in recent years, controlled by state-run and state-influenced banks and enterprises, has resulted in a buildup of deep inefficiencies, highlighted in December 2010 when Vinashin defaulted on a $60 million payment on a $600 million international loan, jeopardizing companies' access to foreign credit markets. Hence Sang's statement, on the opening day of the congress, that foreign debt is rising fast and affecting overall economic stability. The government's refusal to bail out Vinashin has scared other state companies about the consequences if they do not manage their finances well, but many are hiding extensive debts, and the full scope of inefficiency in the state-owned sector has not been revealed. The dangers of the state sector also pose the risk of rising nonperforming loans for banks. Though Vietnam, like many Asian states, has a large store of domestic savings to supply its banks with funds, and total deposits are greater than total loans, nevertheless the risks to overall economic health from inefficient companies and bad loans are growing. Vietnam exports rice, oil and other commodities whose prices are rising, but it is also used to running large trade deficits. And its foreign exchange reserves — at around $14 billion — are, according to UBS, merely sufficient to cover the trade deficit and short-term debt of $6 billion to $7 billion. All of these economic challenges have given rise to a trend of economic re-centralization, and economic policy will be hotly contested going forward. Another major problem is managing economic liberalization and globalization. Vietnam will remain committed to expanding free trade deals, such as the U.S.-sponsored Trans-Pacific Partnership, and attracting foreign investment to continue growth in its domestic manufacturing sector and improve infrastructure and technology. But the climate for foreign business remains a chronic problem, not only because of the usual difficulties with red tape, selective enforcement, corruption and crime, but also the growing sense that the central government is becoming stricter, more repressive socially and more protective about foreign intrusion. Hanoi remains committed to providing a tolerable environment for foreign investors, but as economic and social troubles mount it will have a harder time managing its image. Fortunately for Vietnam, rising prices and a deteriorating foreign business environment in China are leading more and more companies to seek alternatives. Yet Vietnam's own challenges are similar to China's, while its infrastructure does not give it the same advantages. Lastly, foreign policy remains a precarious balancing act. The Party congress is domestically focused and not typically a foreign policy moment. It is important to notice, however, that Vietnam has eagerly expanded relations with the United States — and Japan and South Korea — in part to counterbalance China. This is particularly true following increasing friction over territorial disputes in the South China Sea, where China has flexed its muscles, especially since 2007. Still, Vietnam has a fundamental strategic requirement to come to an arrangement with China to prevent hostilities from erupting. There is some evidence that the "pro-China" faction is gaining momentum, with Vietnamese Party leaders fearing the country may have moved too rapidly toward the West in recent years, jeopardizing Vietnam's balance with China. China remains influential through Communist ideology and Party communications, and may have more ability to maneuver with a favorable faction in power in Vietnam. But this must be taken in Vietnam's strategic context: Vietnam has no choice but to try to accommodate China, yet China poses the greatest threat, and so Hanoi will try to draw in as many other players to have an interest in Vietnam for protection. The United States and Vietnam have made clear their position on the South China Sea and that is unlikely to change, but neither will China ease too much, though Beijing apparently has realized the need to be tactful and to shift between finer and blunter tools depending on the atmosphere. Overall, China is asserting itself militarily in the South China Sea and building economic influence in the Mekong region, and Vietnam will want to use regional partners, and extra-regional powers like the United States and Russia, to hedge against it.