The arrest this week of Vietnamese banking and soccer mogul Nguyen Duc
Kien comes amid a growing backlash against Vietnam's wealthy tycoons, as the
country struggles with an economy that is going from bad to worse.
Some of Vietnam's Communist
leaders have never been entirely comfortable with their country's pro-market
reforms. Waves of liberalization have often been followed by periods of
inaction.
Analysts now worry that combating
politicians and a hostile public might thwart the reforms needed to recapture
the stellar growth rates that once made the country one of world's most
sought-after emerging markets.
Plans for privatizations have
stalled as bad debts have rippled through the banking system. Meanwhile, top
executives at some state-owned enterprises have been arrested and charged with
mismanaging state resources after the global financial crisis sent many
businesses into a financial tailspin, exposing the shortcomings of Vietnam's
bid to catch up with its neighbors after decades of war and Marxist economic
planning.
The shakeout is spilling over
into the private sector. Politically connected tycoons such as Mr. Kien, who
was arrested Monday and accused of running unlicensed investment firms, are
facing growing scrutiny for allegedly skirting banking regulations. Mr. Kien or
his legal representatives couldn't be reached to comment.
In the latest developments
Thursday, the chief executive of the bank that Mr. Kien helped found in the
1990s, Asia Commercial Bank, resigned for personal reasons. Ly Xuan Hai is now
helping police with their investigation, a bank spokesman said, although
authorities have stressed that ACB itself isn't part of the probe and that Mr.
Kien left ACB in 2010. Mr. Kien owns about 5% of ACB shares in addition to
holdings in other Vietnamese banks. Mr. Hai couldn't be reached to comment.
The share price of ACB, 15%-owned
by Standard Chartered fell again in trading Thursday, down 6.7%. That decline
helped to extend a series of sharp losses on the broader VN Index, which has
lost 10.5% so far this week.
State-run media also reported
Thursday that ACB was given access to up to 46 trillion dong, or $2.2 billion,
in emergency central-bank funds to offset a brief panic among depositors.
A statement on the government's
website said Prime Minister Nguyen Tan Dung met with government agencies and
law-enforcement chiefs on Wednesday and urged them to act quickly to stabilize
the country's banking system after bad debts doubled to about 10% of total
lending in recent months.
The political infighting playing
out in Hanoi could hamper reforms needed to clean up bad debts in the banking
sector and get Vietnam's economy moving again after expanding a sluggish 4.7%
in the second quarter from a year earlier—well below the government's 6%
full-year target.
Other big names have fallen foul
of the authorities in recent months. Businesswoman Dang Thi Hoang Yen became
one of the first tycoons elected to the country's National Assembly last year,
but was ousted in May from the Communist-run legislature for failing to
disclose that she was no longer a member of the party.
In the state sector, eight
executives at Vinashin received prison sentences of up to 20 years in April
after the shipbuilder nearly collapsed in 2010. It had racked up around $4.4
billion in debt.
Analysts say the crackdown is
increasing pressure on Prime Minister Dung, the main architect of Vietnam's
rapid-growth policies. He survived a behind-the-scenes leadership challenge
last year, but his power is being clipped further by the rise of rivals such as
Communist President Truong Tan Sang, who is widely seen as a hard-liner, along
with a national legislature that appears more willing to hold the country's top
leaders to account.
At the height of the Vinashin
scandal, Mr. Dung apologized in a televised session of Vietnam's National
Assembly for failing to properly supervise state-run companies, and executives
at other such companies have since been arrested.
"Vietnam and Mr. Dung
pursued a policy of high growth at all costs, and they were willing to overlook
many things in order to achieve that goal," said Carl Thayer, a veteran
observer of Vietnamese politics at the Australian Defence Force Academy in Canberra.
The backlash against Vietnam's
go-go years, when it averaged annual growth rates of more than 7% for nearly a
decade, isn't confined to the country's inner political sanctum. Anger at
currency devaluations and high inflation rates has demoralized many ordinary
people in recent years.
Popular newspapers have run lurid
stories about wealthy Vietnamese, accusing some of them of cutting open the
skulls of live monkeys and scooping out their brains as a gourmet treat, just
as the country's old emperors were reputed to do.
This week, the Vietnamese press
ran a series of pictures of Mr. Kien's luxury cars, emphasizing the gulf
between the new elites who grew rich during the Vietnam's boom years, and the
millions who now struggle with sky-high interest rates and the threat of
currency devaluations and inflation.
Mr. Kien, who faces up to two
years in prison for his alleged offenses, is an especially high-profile figure.
The 48-year-old is instantly recognizable by his shock of thick, white hair and
is as well-known for his soccer exploits as for his role in establishing Asia
Commercial Bank. Last year, he took control of Vietnam's new professional
soccer league in a bid to increase attendance, and bought a premier league
Hanoi Football Club after his other side was relegated.
"He's a big celebrity
here," said Jonathan Pincus at Harvard University's Fulbright Economic
Teaching Program in Ho Chi Minh City. Mr. Kien's arrest "will make people
sit up and take notice."
—Nguyen Anh Thu in Hanoi and
Natasha Brereton-Fukuiin Singapore contributed to this article.
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