Vietnam party changes send positive signal

By David Brunnstrom

HANOI (Reuters): The apparent choice of reform-minded National Assembly Chairman Nong Duc Manh as the next head of Vietnam's ruling Communist Party has sent a positive signal about reform and investment prospects.

But only time will tell if this translates into real policy changes which will lead to full implementation of an ambitious market reform program and boost sluggish foreign investment.

Party sources said the 61-year-old Manh was picked to replace unpopular conservative Le Kha Phieu, 70, as the party's new secretary-general on Tuesday.

Manh, a member of the ethnic Tay minority widely rumored to be the illegitimate son of revolutionary hero Ho Chi Minh, would be the first minority member ever to become party chief.

Analysts say his roots and background in ethnic affairs should stand him in good stead when it comes to resolving discontent among minority people who staged big anti-government protests in February, the worst in Vietnam for years.

They also see him as someone who would push more than Phieu for reform of the cumbersome bureaucracy and legal system.

"I think it's fair to say he's more towards the reform end than Phieu was," a Western diplomat said. "I think it's going to be viewed positively, but to be honest, there's not a great deal known about his policy stance and where exactly he fits in to the reformist-conservative spread.

"Hopefully, in the near future, we will know more about Manh and exactly what he does stand for and what his thinking is."

The post of secretary general is due to be formally filled at a public session of the party congress running from Thursday until Sunday. The newly elected party chief is due to give a news conference on the final day.

Manh's appointment and the retention of reformist Prime Minister Phan Van Khai and state president Tran Duc Luong leaves Vietnam without a military man in one of its top three posts.

"From a political standpoint it's not a bad thing to have the army moved a little bit further away from the levers of power and depoliticized a bit," the diplomat said.

According to party sources and diplomats, the army suffered further in the reshuffle with a man previously considered an up- and-coming star, Lt. Gen. Pham Thanh Ngan, crashing out of the elite politburo with Phieu.

Defense Minister Pham Van Tra, meanwhile, is still smarting with army chief Le Van Dung from party reprimands in March.

Foreign businessman concerned by a recent surge in anti-U.S. rhetoric in the official media, which diplomats saw Phieu's hand in, have been encouraged by Manh's elevation, even though he remains an obscure figure.

"From what we know, I would say it's an encouraging sign," said an American businessman. "Whether he is truly a reformer or not, he has got legislative experience in perhaps the only political body that is even partially transparent in Vietnam.

"He's had a lot of international exposure, he's youngish, he's got a lot of things going for him. On the surface it looks very, very encouraging."

Even more encouraging was the apparent elevation of Trade Minister Vu Khoan, who negotiated a historic trade pact with the United States last year still to be ratified by both sides.

A party source said Khoan would become a member of a powerful new secretariat consisting of members of the elite politburo as well as other senior party officials.

"Arguably that is an even more positive sign than Manh," the businessman said. He said he expected accelerated reforms with Manh working alongside Prime Minister Khai.

"One would expect accelerated reforms. You don't put someone in that position at that age unless you think they are going to be around. So we might actually have some continuity here."

However, it will take more than a leadership shakeup to boost foreign investor enthusiasm to levels of the mid 1990s, when Vietnam was seen as the next Asian tiger.

"Foreign investors have got more savvy about Vietnam and they are not going to be won over by a political change. They will keep looking at the real economic situation."

Andrew Steer, head of the World Bank in Vietnam, said Hanoi had made some steady progress on reform in the past 18 months, but investors were looking for changes in the attitude of officials.

"When you look at the actual policies, there are several areas where foreign and domestic investors would like to see policy change," he said. "But that's not the real issue. The real issue is attitudes within government towards the private sector at every level in government."

Much would also depend on whether the government seriously engaged private investment in infrastructure projects, he said, adding that there had been some encouraging recent signs here.

Commenting on a 10-year socio-economic strategy due to be approved by the congress, Steer said there was bound to be friction when a government tried to combine the best of market- based and state-managed economies, but added:

"I think the broad message you see is a strong but gradual integration into the world economy."