The Intersection of Intel, Capitalist Dynamics, and Nguyen Phu Trong's Leadership

Vietnam faces a significant risk extending far beyond the missed opportunity with Intel, a threat many might not immediately recognize.

The Intersection of Intel, Capitalist Dynamics, and Nguyen Phu Trong's Leadership

This article was written in Vietnamese and was published in Luat Khoa Magazine on November 13, 2023. Karie Nguyen translated the article into English.

The recent announcement that Intel Corp. has deferred its investment expansion plans in Vietnam was a stark reality check. This news surfaced soon after U.S. President Joe Biden's visit, dampening the high expectations of those who believed that the elevation of US-Vietnam relations would automatically lead to a surge of high-tech investment from the United States into Vietnam. [1]

Despite the optimistic language used by both nations to describe the upgraded status of their relationship — Vietnam's highest classification for bilateral ties — and a Joint Declaration highlighting critical areas of cooperation, including high-tech supply chains, it appears that the illusionary leaders from Hanoi may have to align more closely with American pragmatism. To attract substantial investment from the United States, it seems Vietnam must undertake more strategic efforts and nuanced approaches. [2]

Power shortages?

Reuters' anonymous source, who participated in the meeting between Intel and the Vietnamese government, said the corporation cited power shortages and inefficient bureaucracy for its decision to postpone investment. [3]

Power shortages were severe this summer in northern Vietnam, close to when Intel decided to delay its investment. [4] Located in strategic geopolitical competition between the United States and China, Vietnam is torn between the influence of the two powers, including in the field of energy security.

The United States and G7 countries late last year, to become a strategic energy partners with Vietnam, supported the country's energy transition plan with the ambitious JETP agreement. [5] Previously, Vietnam was one of the three countries receiving the most significant capital for coal-fired power construction from neighboring China. China is still a country that maintains a close relationship with Vietnam based on the ideology between the two communist parties and is nurturing its global ambitions with the Belt and Road Initiative. [6,7]

Although Vietnam has approved its new Electricity Plan, there is no certainty that electricity shortages will not occur in the coming years as the arrest of environmental activists continues. These arrests are predicted to be an element to slow down any implementation of projects that receive financial support from the JETP agreement with the G7. In contrast, any new coal-fired power project receiving capital from Beijing will undoubtedly face harsh reactions from the domestic public due to environmental concerns and nationalist anxiety. [8] [9] [10]

Or Inefficient Bureaucracy?

Vietnam's bureaucracy, known for its inefficiency and avarice, has been a longstanding challenge for domestic and international investors.

Previously, investors could navigate bureaucratic hurdles relatively swiftly by incurring "facilitation costs"—a subtle term for bribery. However, the intense anti-corruption drive spanning nearly a decade has shifted the landscape significantly. Now, officials, increasingly concerned about their political careers, exhibit heightened caution and reluctance in making decisions, adding another layer of complexity to the bureaucratic process. [11]

This hesitancy is most evident in the stagnation of public investment projects at both central and local government levels. Provinces and cities previously renowned for their dynamism, such as Ho Chi Minh City and Da Nang, now face significant administrative inertia. The issue has become so acute that local leaders have repeatedly been compelled to address and criticize the bureaucratic slowdown. [12] Even in critical sectors like healthcare, the sluggishness of the administrative system has become commonplace, resulting in widespread shortages of drugs and medical supplies across hospitals from the north to the south. [13]

In Vietnam's current politically charged atmosphere, a lackluster and uninspired administrative system is unlikely to retain a foreign corporation's investment actively should there be a change of heart. With the volatile domestic political environment, officials appear to be preoccupied with matters more directly concerning their interests and positions.

Or ... Political Risk?

During the 8th Central Conference last October, Vietnam's supreme leader, General Secretary Nguyen Phu Trong, gave a very notable speech: [14]

“Promoting individual development is indeed important, yet caution is necessary, as without it, we might inadvertently turn into private entrepreneurs and eventually capitalists. This trajectory has already been observed in several countries globally.”

Analyzing Trong's articles and speeches over the years, it's challenging to perceive him as an advocate for the private economy or related aspects from a theoretical standpoint. Instead, Trong emerges as a staunch proponent of what Marxism terms "socialist relations of production." This is evident in his support for concepts such as collective land ownership and the predominance of the state economy. [15]

For years, the ideological leanings of Trong were offset by more pragmatic leaders who focused on expanding the economy before contemplating its division, confident in the notion that their shares would inevitably grow. However, with the removal of his most significant opponents, Trong's consolidation of power and ideological firmness now pose substantial political risks to Vietnam's private sector.

Technology giants like Intel, who epitomize a capitalist ethos valuing individual enterprise, are wary of government meddling and might become apprehensive about the emerging political uncertainties in a country where the supreme leader, as in Vietnam's current state, openly exhibits ideological antagonism.

Of course, foreign investments in Vietnam are typically safeguarded by investment protection agreements that Vietnam has established with the investing country, offering a measure of risk mitigation. [16] However, for corporations such as Intel, why do they need to accept even minimal risk for their significant investments when other, more welcoming countries are available? [17]

Viewed through this lens, the ideological steadfastness of Trong as Vietnam's supreme leader emerges as a formidable barrier to the nation's economic aspirations, potentially stalling progress for a considerable duration.

This reality, more alarming than the loss of an investment from a corporation like Intel, underscores the critical challenge facing Vietnam's economic future.

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