Country Overview > Politics

Vietnam Politics

Picture
When doing business in another country, it is critically important to understand how the political system works (both officially and unofficially). Governments determine the rules on investment, taxes, the degree of competitiveness in the market, and generally how well received a foreign firm will be in their country.

In theory, Vietnam is a Socialist country under one-party rule. Despite the fact that Vietnam is a Communist country, the traditional notions of ideology and rigorous central planning do not apply. Vietnam’s government is wholly devoted to economic development first and foremost with its open-door policies. The government is a far cry from being a representative democracy, as only political organizations affiliated with or endorsed by the Communist Party are permitted to contest elections. The Communist party itself has ruled in the North since independence form France in 1954 and in the South since the end of the Vietnam War in 1975.

Picture






Picture
There have been issues with corruption in Vietnam. Transparency International 2008 ranked Vietnam 121 out of 180 countries, below Communist counterparts China and Cuba. The ranking also places Vietnam below other emerging economies and regional competitors such as India. This indicates that corruption is a major factor when considering doing business in Vietnam.

The highest legislative body in Vietnam is the National Assembly. It has the sole ability to amend the constitution and Vietnam’s laws and is ethnically and socially representative of the population of Vietnam. Although it has evolved from being viewed as a mere rubber stamp for Communist Party policies, the assembly is made up of 80% Communist Party members.


Picture
The President of Vietnam (Nguyen Minh Triet) is the titular head of state and the nominal commander in chief of the military of Vietnam, chairing the Council on National Defense and Security. The President is responsible for signing international treaties, such as trade agreements. However, it is important to note that although the President is elected by the National Assembly, his role is largely ceremonial and he does not exert a lot of influence on the business environment.





Since the final withdrawal of its troops from Cambodia in 1989, Vietnam has emerged from the international isolation that followed its invasion of Cambodia at end-1978. In the past decade, Vietnam has recognized the increasing importance of growing global economic interdependence and has made efforts to adjust its foreign relations to reflect the evolving international economic and political situation in Southeast Asia.
The country has begun to integrate itself into the regional and global economy by joining international organizations. Vietnam has stepped up its efforts to attract foreign capital from the West and regularize relations with the world financial system. In the 1990s, Vietnam became a member of the World Bank, the International Monetary Fund, and the Asian Development Bank.



Picture
The Prime Minister of Vietnam Nguyen Tan Dung is the head of government, presiding over a council of ministers composed of 3 deputy prime ministers and the heads of 26 ministries and commissions. He oversees the day-to-day operations of the government and exerts more influence on the business environment than the President.


Picture
People’s Councils are the form of local government in Vietnam (provincial, district or municipality). They implement the laws and policies of the Communist Party at the local level and are elected by the people of the locality.


 


Vietnam has expanded trade with its East Asian neighbors as well as with countries in Western Europe and North America. Of particular significance was Vietnam’s acceptance into the Association of South-East Nations (ASEAN) in July 1995. Vietnam joined the Asia-Pacific Economic Cooperation forum (APEC) in November 1998 and also hosted the ASEAN summit the following month. In 2005, Vietnam attended the inaugural East Asia Summit and in November 2006, they became a member of the World Trade Organization (WTO).


Vietnam Legislature and Law

Picture

The judiciary is relatively weak and is not independent of the Communist Party. The Supreme Court is the highest court for appeal and review and although the National Assembly theoretically confirms the President’s Supreme Court nominees, most are vetted by the Communist Party to ensure alignment with party policy. There is a severe shortage of lawyers (only about 3000) and knowledge of trial procedures is rudimentary.




Picture
Until 1990, all advertising was illegal, but since then, the laws have been adjusted to fit the economic development in the country. In January 2005, the National Assembly of Vietnam presented the new Commercial Law. It’s relevant because it contains laws about foreign investors and franchising, and it’s considered to be much more specific than the previous one, which reduces the business risk.





Picture
 
The legal framework itself is Common Law, with influences from the Chinese, French and Soviet. As Vietnam undergoes a transition to a more market-oriented economy, the legal system changesfrequently, and at times, significantly. Vietnamese officials have limited experience in drafting legislation and new laws and regulations sometimes are contradictory or unclear. For example, in 2005, Vietnam introduced an anti-corruption law, which is well developed. Yet, bureaucratic procedures, combined with a lack of transparency in government activities, allow a high level of corruption to occur. The law also allows journalists to access public documents to increase the level of political transparency.



Vietnam’s induction into the WTO in January of 2007 brought about significant legal changes that liberalized the service market and reduced import duties for products used in domestic production. The government also offers incentives such as tax breaks and exemption of lands fees for investment in certain industries (manufacture of high tech/biotech products, construction/development of infrastructure and agriculture). 

Vietnam’s legal system is also significant influenced by external funding from bilateral/international donors who are interested in making the system more transparent and streamlined. Organizations such as USAID, the American Bar Association and the UNDP have provided funding to strengthen the rule of law in Vietnam so it is more attractive to foreign investment.