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Vietnam’s New Leadership and their Immediate Inflation Challenge

Vietnamese Prime Minister Nguyen Tan Dung will return for a second five-year term. (AP Photo/Irwin Fedriansyah)

Vietnam’s 500-member National Assembly convened on July 21 to formally select the country’s new leadership team for the next five years. The National Assembly’s role has largely been ceremonial because the country’s leadership was already determined behind closed doors at the Communist Party Congress in January. However, political reforms have empowered the legislative branch of the government, and rumors swirled ahead of their voting that there could be some surprises. In the event, there were no such surprises.

Prime Minister Nguyen Tan Dung will return for a second five-year term. The prime minister and his team will now name a new cabinet that should include many new faces, including younger leaders who have been elevated to the Central Committee during the lead-up to the Party Congress. The vote signaled continuity in Vietnamese economic, social, and foreign policies. Expect Vietnam to continue with its economic reforms, proactive foreign and national security policies, and interest in advancing stronger ties with ASEAN neighbors and strategic countries such as the United States, India, Japan, Korea, and the European Union. Guidance from the Party Congress suggests Vietnam has an interest in substantially deepening strategic ties with the United States, including further advancing military relations and intelligence sharing.

The new lineup, in order of traditional precedence:

1. Nguyen Phu Trong, 67, who previously served as chairman of the National Assembly, was selected as general secretary of the Communist Party during the Party Congress in January. Regardless of the leadership changes announced in the current National Assembly session, he remains one of the most powerful figures in Vietnamese politics, both legally and in practice. Over the last decade, however, the general secretary’s role has become more focused on internal party matters, while the president and prime minister have been more actively leading the country and managing relations with foreign partners.

2. Truong Tan Sang, 62, was appointed by the National Assembly to replace retiring Nguyen Minh Triet as Vietnam’s president. Prior to his election, he had served since 2006 as a standing member of the Central Party Committee and had administrative control of the Politburo, running its day-to-day affairs. Upon accepting his new position, Sang nominated Nguyen Tan Dung for a second term as prime minister.

3. Nguyen Tan Dung, 61, was elected to a second term as prime minister with 94 percent of the National Assembly’s votes after weathering reportedly sharp criticisms from party leadership for his handling of the economy. Dung was first appointed prime minister in 2006. Dung is a former central bank governor and former deputy minister of interior from the southern-most province of Vietnam. He has led the country through significant economic reforms started under the Doi Moi initiative, but he has not been able to tackle the predominance of large and inefficient state-owned enterprises.

4. Nguyen Sinh Hung, 65, who served as deputy prime minister since 2006 and was also finance minister, was appointed chairman of the National Assembly. Upon assuming his new post, Hung immediately nominated Truong Tan Sang for the post of president.

5. Nguyen Van Giau, 53, governor of Vietnam’s central bank since 2007, was tapped to be the new chairman of the National Assembly’s economic committee. He is expected to be replaced at the central bank by Nguyen Van Binh, currently one of five deputy governors.

A new cabinet is expected to be announced next week.

The primary focus of the Communist Party and its leadership is survival. That means delivering significant public goods to the citizens of Vietnam—primarily in the key areas of economic growth, education, health care, and infrastructure—while maintaining strong control through socialist values. Engagement with international markets has put a strain on a domestic economy still dominated by state-owned enterprises and a nascent capital market. Macroeconomic trends, especially inflation, have been difficult to manage while maintaining high growth rates sufficient to keep unemployment levels at a sustainable level in Southeast Asia’s third-largest country.

Vietnam’s battle against rising inflation, which is at its highest level since 2008, threatens to dislodge the country from its perch as one of Asia’s fastest-growing emerging economies and magnet for foreign investors. The inflation rate has risen for 11 straight months, reaching 22 percent in July and forcing a series of revised end-of-year economic forecasts by the central bank. The government has sought to hold down prices, cut spending, reduce credit growth, and cut imports, but with mixed results. The country’s newly appointed leaders will face pressure both domestically and from foreign investors to rein in inflation.


Ernest Z. Bower is Senior Adviser and Director of the Southeast Asia Program at the Center for Strategic and International Studies in Washington, DC. This post originally appeared on the CSIS Asia Policy Blog, cogitASIA  

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