Crony capitalism subverts socialist aspirations

December 29, 2017 - 09:10

In a Đà Nẵng plot that has thickened steadily over the last several years, police are seeking a 42-year-old real estate tycoon, Phan Văn Anh Vũ, for criminal charges of “revealing State secrets.”

A poster for the international anti-corruption Day (December 9) by the United Nations Office on Drugs and Crimes (UNODC). — Photo UNODC
Viet Nam News

by Trần Trọng Kiên

In a Đà Nẵng plot that has thickened steadily over the last several years, police are seeking a 42-year-old real estate tycoon, Phan Văn Anh Vũ, for criminal charges of “revealing State secrets.”

For the moment, we are not privy to what the nature of the “State secrets” was, but how did a private sector businessperson happen to access them in the first place?

Then, that the tycoon, who made a name for himself with possession of several former State-owned lands in desirable locations scattered across the third largest city in Việt Nam, gets an inside tip to flee the clutches of the law screams his guilt, and raises troubling questions with some obvious, even more troubling answers.

This man, who has since been referred to as a Đà Nẵng “mafia” by the public and sections of the media, was not just a formidable figure in the real estate market, but also someone who was alleged to be able to wield certain influence on the decision-making of the city’s top authorities.

The “gifts,” like the luxury car and houses that his company’s given to Đà Nẵng’s former disgraced Party Secretary Nguyễn Xuân Anh, are never really free.

The nexus between politicians and businesspeople is one that has not received due attention, with the anti-corruption focus mainly trained on public sector’s officials.

Vũ’s case, a tear in the veil that allows a glimpse into the ugly underbelly of the rapidly developing economy, is a high-profile wake-up call to a problem in the country that has never been identified and named for that it is: crony capitalism.

This begs more questions: how many Vũs lurk in the system, and how will they and conniving officials be brought to justice?

To think that this Socialist republic, established by dint of the sacrifice of “rivers of blood and mountains of bones,” can fall victim to an ugly mutation of its capitalist antithesis, which has also been called “crapitalism,” is not just sad, it is deeply worrying. It would be no exaggeration to say that the nation’s success depends on its ability to deal effectively with this problem.

Crapitalism’s advent

Crapitalism is not a new phenomenon, in Việt Nam or elsewhere; and in certain cases, it has been institutionalised: K-Street and the revolving door between politicians and plum corporate placements come to mind immediately.

While it is natural for businesses and government to form relationships and hold dialogues with each other, understand each other’s legitimate needs and demands, and so on, we cannot accept that crapitalism is a natural extension of this process.

In Việt Nam’s case, it was in the twilight of the nation’s shift to a market-oriented economy that this corruption took root and fester.

The way the spoils of this immoral enterprise are shared is a clue to how the system is corrupted. Businesses get huge profits through under-the-table deals with or favouritism from the government, officials involved get pecuniary and other benefits, such as securing managerial positions in a business.

Then, when the businesses grow to become important players in the local economy, they want to “go to extreme lengths to intervene in certain State management affairs,” as the new Party Secretary of Đà Nẵng, Trương Quang Nghĩa, who replaced the ousted Xuân Anh, put it.

This reminds me of the “too big to fail” corporations that caused the crippling 2007-2008 global financial crisis. That they were bailed out and rewarded, with US taxpayers’ money, instead of being punished for their reckless ventures, only shows how entrenched crapitalism is.

It’s counter-productive to think that these types of alliance only happens with ‘evil big corps.’ No, it’s the phenomenon that can be seen almost everywhere on a daily basis.

In Việt Nam, we have actually been seeing the insidious impacts of crapitalism for some time: projects that blatantly lacked required criteria like proper environment impact assessments and adequate financial strength have been running despite ongoing violations like wrongful use of land. How could this have happened so regularly, so blatantly, if certain authorities had not been bought?

The recent controversies regarding Build-Operate-Transfer (BOT) traffic projects have to do with a stark lack of transparency. With a cash-strapped State budget and the need for infrastructure development, it’s understandable that the private sector is brought in under concessions agreements.

However, the deliberate lack of public information and transparency in the bidding process used to select the most suitable and capable project investors has made this practice a hotbed of corruption.

Government inspectors and auditors have found that in many cases, incapable investors – in terms of both finance and technological qualifications, still ‘won’ the bids.

“It’s obvious that there are powers that backed these [investors] up,” said Hoàng Ngọc Giao, Director of the Institute for Policy Studies, Law and Development. Former deputy head of the National Assembly Office, Nguyễn Sỹ Dũng, has called some BOT projects, a product of illicit power and money trade, ‘muggers’ who’ve preyed on the public.

Then there’s the ongoing equitisation process – divesting State capital and privatising State-owned enterprises (SOEs). We should pay heed to the experience of the former Soviet Union, when many SOEs and their assets were pocketed for scrap value by overnight magnates with close ties to compromised high-ranking officials.

Twenty years into the equitisation process, it was only this year that the Government decided to make public the list of SOEs to be divested from and the equitisation ratio for each year. The change is welcome, but wasn’t it the obvious thing to do a long time ago? The intentional withholding of information regarding the real value of the SOEs – especially land areas under their management – would allow shady investors to buy them at low prices.

Prime Minister Nguyễn Xuân Phúc has several times warned of the need for “careful valuation to avoid losses of State assets.”

Crony capitalism destroys a healthy business environment -- it perpetuates the practice of bribes and grafts, forces honest businesses to choose between going bankrupt or “going with the (low) flow.” It is the most unfair form of competition, and most importantly, it distorts policies and the rule of law while lining the pockets of certain groups of people at the expense of national interests.

When a miniscule percentage of the position gets filthy rich, we can safely assume the rest have to pay the price, or at the very least, not get what’s due.

The bright side

Spearheading a vigorous anti-corruption campaign, Party General Secretary Nguyễn Phú Trọng has on multiple occasions warned that corruption seriously threatens the very legitimacy and even the “existence” of the Party and the State.

“Vested interests groups,” as he called them, typically have goals that are inimical to public interest.

Rather belatedly, the nation’s governing apparatus has officially recognised that anti-corruption campaign should also extend to the private sector, which, since the opening up of the economy, has been treated as a holy cow for the most part. A draft law with a two-pronged approach that deals with corruption in both private and public sector is being completed.

It’s surely a laudable efforts, we cannot be blind to the difficulties and complications that this recognition entails.

For instance, how can the government strike a balance between its promises to cut red tape and foster a ‘better, more transparent business environment,’ without causing a lot of hassles for businesses?

The solutions to thwart crony capitalism and corruption are out there in the open – greater accountability and transparency, more qualified, independent watchdogs that are part of checks and balances needed in a system, robust rule-of-law, and unrelenting, decisive punishment. But tying all this into a powerful anti-corruption weapon would require a strong and unwavering political will. — VNS