The widespread suppression of “giants” is causing a shock wave in society, causing negative economic and “worrying” policy impacts. The arrest of a series of leaders of three “popular” private corporations caused the market to react pessimistically, showing the unsustainability of economic growth. Moreover, politically, the “criminalization” of economic relations is “worrying”, reflecting the Communist Party’s ideological control policy over the capitalist economic sector in the country.
Under control
In 2022, many economic cases are investigated and handled by authorities related to real estate, corporate bonds, securities, etc., of which there are three typical “hit” arrests showing a strong move of the Party. At the beginning of the year, in March 2022, Mr. Trinh Van Quyet – Chairman of the Board of Directors of FLC Group Joint Stock Company was probed for the crime of manipulating the stock market. In early April, Mr. Do Anh Dung – Chairman of the Board of Directors cum General Director of Tan Hoang Minh Group was arrested for investigation of fraud to appropriate property… And, recently, on October 8, 2022, Ms. Truong My Lan, Chairwoman of the Board of Directors of Van Thinh Phat Group Joint Stock Company, was arrested on charges of fraud in the issuance and trading of bonds.
These cases all had a negative, strong and immediate impact on the market but were still under the control of the Party in the context of the economic recovery after the pandemic and the growth momentum driven by exports of the economic sector having foreign investment. Two arrests in the first half of 2022 are quite “sensitive” because of “obvious” signs of crime in the economic field. Giant Do Anh Dung participated in the land auction in Thu Thiem, a hot spot for land complaints that has existed for many years. According to experts, the giants mainly get rich from land, and, pushing the price of land to “extraordinarily high” compared to the market price can increase the total value of their assets, thereby increasing the value of their assets which helps them reverse debt, borrowing, or issue bonds.
Mr. Trinh Van Quyet used to have a “precedent” of taking advantage of buying and selling securities in contravention of regulations to make a profit but was only fined administratively… And this time, “manipulating the stock market” was a criminal offense. Immediately after these two arrests, the stock market plummeted, sometimes the VN-Index dropped to the bottom after many months of recovering from the pandemic, but the negative effect was not too strong to spread to the whole market.
In addition, the arrest of Ms. Truong My Lan caused market turmoil, but the Government’s quick “reassurance” made the market reaction gradually calm down. Investors rushed to sell off continuously, causing the index to fall below 1,000 points, the lowest level in the past two years, for example, the VN-Index at the end of the session on October 18 decreased by 29% compared to the end of 2021. Massively early withdrawal of savings from Saigon Commercial Joint Stock Bank (SCB) made it, soon after, forced to be put under “special control.” The “bondholders,” especially those who buy corporate bonds (DN) related to An Dong Company under Van Thinh Phat Group or VKC Holdings, are worried whether they will lose their principal money “to lend to the giants”. Although the Governor of the State Bank of Vietnam and the Minister of Finance had to post reassuring messages on TV, the Prime Minister still had to “meet” with 70 presidents and general directors of commercial banks throughout the country to regulate.
“The Party Is Worried”
The signs of market instability have been forewarned, but the Government’s choice of an “authoritarian” solution to target the chairwoman and leaders of Van Thinh Phat Group is still surprising and worrying from a political point of view and institutional reform.
As you know, on August 16, 2022, an online talk on the topic “Development of the corporate bond market” was held. Most experts say that the bond market is “stressed“, businesses, especially in the real estate sector, massively issue bonds beyond their business capacity and ability to pay. Debt poses a risk to financial markets. Experts even warned: “The bond market collapses, defaulting will be the death of the economy” and even “having to erase and redo” the corporate bond market, but there are no recommendations related to the criminalization solution as mentioned above.
The first thing to worry about is the “difficult” communication work of the Party. Due to the sensitive and complicated nature of Ms. Truong My Lan’s arrest, breaking news coverage in the state media is “prohibited” creating space for suspicion. Meanwhile, on social networks, fake news and speculations are rife: The mysterious death of one or two litigants in the case is interpreted as a “law of silence” of the mafia; The element of “Chinese origin“, the personal relationship of the family and friends of Ms. Lan created conspiracy theories; The long-known phenomena in market transformation such as “backyard” enterprises, interest groups, political patronage, corruption, bribery… are associated with the “expansion” process of Van Thinh Phat Group; The next inference will be which “giants“… Almost all of them are unknowingly “inciting” hostility towards the rich, high-rise cars in contrast to poverty and injustice… reminiscent of exploitation and class struggle.
What is more worrisome is when arrests are seen as one of the Communist Party’s ideological policy solutions. It will be logical and grounded for the above comment when the 13th Party Congress Document emphasizes consolidating the “strong Party-State” with the foundation of Marxist-Leninist ideology. This “new” content is geared towards Leninist politics, Marxist economics, and nationalism based on pride in the heroic past, propagating the “economy” independence and self-reliance”… Of course, the Party still focuses on fighting corruption, punishing officials for their moral degradation, reforming the apparatus, and attaching great importance to the organization of cadres, but finding ways to regulate operating the economy, which response to struggling market forces. The “constructive government” of the previous term is only a transition, the current government is showing strength, carrying out many revolutionary solutions.
At the current stage of development, economic relationships have become complex, multi-dimensional, and even contradictory. For example, the system of land ownership by the entire people makes the real estate sector always “hot“, because, on the one hand, it is a source of rapid accumulation of “primitive” capital to form the “giants.” Some of the “successes” moved to other fields such as finance, banking, services, etc. But on the other hand, it was the regime’s “remedy” which fostered the collusion of “greedy” businessmen” with corrupted officials. Market dynamics create a “whirlpool” with increasing numbers of market participants, good people and bad guys, requiring appropriate institutions, market principles and power control mechanisms efficient for the market to function with its downside.
In such a context, the chain of cases against the giants should be carefully considered and evaluated, and policy adjustments should prioritize economic solutions. Although the nature of the case is very complicated, it is impossible not to adjudicate. And many situations are raised, but transparency needs to come first. However, is it possible to prevent “crony capital” from developing when the above “tyrannical” move is only aimed at maintaining the absolute concentration of power – where this type of relationship is born and developed at every opportunity?
Thoibao.de (Translated)
