CONTINUING economic instability, a tense relationship with China, and no prospect of political relaxation.  These are some of the main conclusions it is possible to draw about the outlook for Vietnam this year after the country’s ruling Communist Party ended its five-yearly congress last month.

Because the proceedings of the secretive congress are not open to the media, observers have little choice but to draw their conclusions based on the content of official speeches and the results of the elections to key positions.

Nearly 1,400 delegates heard speeches by key party members before voting for the new 200-member Central Committee. The latter then selected a new party leader and the 14 members of the all-powerful Politburo.

For those seeking some indication that the government would move to give priority to fighting inflation rather than promoting rapid growth this year, the opening remarks of several leaders at the congress held out some hope. “We must pay attention to the quality and efficiency of growth and sustainable development,” outgoing Communist Party chief Nong Duc Manh told delegates.

The new appointments announced after the congress, however, tell a different story.

Last year, the Vietnamese dong experienced two devaluations. Ratings agencies also downgraded the country, expressing concern that strong lending growth had weakened the balance sheets of the country’s banks. They also raised questions about the financial health of the country’s state enterprises.

Vietnam’s economy grew by 6.8 per cent last year. But inflation has been rising, reaching an annualised rate of 11.75 per cent in December. Middle-class citizens have responded by buying gold and speculating on land.

The reappointment of Prime Minister Nguyen Tan Dung to the Politburo last month implies that the pro-growth policies that produced these problems will remain largely unchanged. Indeed, the Prime Minister’s position appears to have been strengthened. This is suggested by the fact that his main rival, Mr Truong Tan Sang, is to be shifted to the mainly ceremonial post of president.

The appointment of Mr Nguyen Phu Trong, the party’s chief Marxist theorist and an ally of the Prime Minister, as head of the national legislature also appears significant. These appointments will have to be confirmed by the rubber stamp national legislature in May, of course, but there seems little prospect of an upset.

The fact that the Prime Minister did so well came as something of a surprise. Mr Dung had taken much of the blame for the virtual collapse of state-owned shipping conglomerate Vinashin in August last year. This was because many observers – both inside and outside Vietnam – saw the debacle as being the result of official expansion policies designed to ensure that large parts of the economy remained in Vietnamese hands while the country was opened up to more foreign investment. Mr Dung even appeared on local television to apologise. Vinashin had ratcheted up debts totalling US$4.4 billion (S$5.6 billion), equivalent to 4.8 per cent of the economy.

Official statements at the congress gave few clues about the future direction of foreign policy. But the fact that many senior military and security officials gained promotions does suggest a hardening of attitudes towards China.

Against this is the fact that Mr Nguyen Phu Trong, a hardliner with a reputation for being pro-Chinese, became the party’s secretary-general. But Mr Trong may not be as influential as his position suggests. Many observers consider him to have been a compromise candidate, designed to bridge the differences between two more powerful figures – Mr Dung and Mr Sang.

One area where Mr Trong does appear to have solid support, however, is his hardline stance towards the media. At the beginning of the congress, Mr Dinh The Huynh, the editor-in-chief of Nhan Dan, the Communist Party’s official news outlet, joined other leaders of the party hierarchy in calling for an end to “all forms of pluralism”.

Mr Dung followed this up with an executive decree banning local journalists from using unnamed confidential sources in their reports. A fine of US$2,000 will now be imposed on journalists who publish articles that are “not in the interest of the people”.

Communist Party officials still appear to be smarting from local media revelations in 2006 of corruption involving high-ranking officials in the Transport Ministry. Clearly, the political relaxation some observers believed would come after the congress no longer seems likely.

Just where all this will lead is hard to say. Local military hardliners may well find it difficult to pursue a tougher line against China if an ongoing crackdown on local dissidents undermines efforts to develop a stronger relationship with the United States.

Meanwhile, further macroeconomic instability this year could bring Vietnam’s foreign investment boom to a halt. More broadly, Vietnam may also provide Asia with a timely lesson on what can happen to an economy that persists in pursuing growth while ignoring the threat posed by inflation.

Copyright © 2011 Singapore Press Holdings Ltd