Dinh La Thang (center) listens as the verdict is delivered on his case in Hanoi, Vietnam, on January 22. Photo: VNA / Doan Tan via Reuters

Dinh La Thang, a former member of the Politburo of the Communist Party of Vietnam, has been sentenced to 13 years in prison.

Given Thang’s political background, his trial was widely viewed as unprecedented. His resume includes stints as a member of the 10th and 11th Central Committees, the 12th Politburo, and the National Assembly, and spells as Minister of Transportation and party boss of Ho Chi Minh City. He was, most recently, chairman of the board of the state-owned oil giant PetroVietnam (PVN) and is the first former Politburo member to be prosecuted in decades.

PVN is one of Vietnam’s largest state-owned enterprises (SOE).

Once a rising political star, Thang represented a modernizing voice for some. He was and remains fairly popular among some segments of the population, known for increasing transparency when he served as party boss of Ho Chi Minh City and for being a strong voice for infrastructure modernization as Minister of Transportation.

Trinh Xuan Thanh, the former head of PVN subsidiary Construction Joint Stock Co. (PVC), was, meanwhile, sentenced to life in prison, avoiding the death penalty. Thanh made headlines last year when he was allegedly abducted by Vietnamese intelligence agents in Berlin after fleeing Vietnam, causing a diplomatic rupture in German-Vietnamese relations.

Twenty other defendants received prison sentences.

Embezzlement

The corruption convictions of Thang, 57, and Thanh, 52, relate to “deliberately violating state economic management regulations, causing serious consequences,” with reference to Clause 3, Article 165, of the 1999 Penal Code. The court found that the proper bidding process had not been observed in awarding PVC a VND1.3 trillion (US$57.3 million) contract to build the Thai Binh Thermoelectric Plant 2, and that these funds were awarded and used improperly.

As an SOE, PVN’s assets are owned by the state.

The state has estimated that the defendants were responsible for 119 billion VND in subsequent annual losses as a result of poor deal-making and collectively embezzled 13 billion VND for personal gain.

The personal relationship between Thang and Thanh is alleged to have been a significant motivating factor in the illegitimate contract being awarded.

The contract under scrutiny, EPC Contract 33, circumvented regulations as PVC – which was known to be riddled with debt and internal problems – was determined by regulators not to have the capacity to take on the thermoelectric project. Thang and Thanh made the arrangement regardless, and PVC’s lack of capacity resulted in woeful construction delays and cost overruns. The charges against Thanh were more severe as he was seen as having been the man most responsible for mismanaging the deal.

Vietnam’s 2015 Penal Code came into force at the beginning of this year; however, the 1999 Penal Code remains in effect for crimes committed before the new code’s effective date.


Anti-Corruption campaign

Vietnam is in the midst of a well-publicized anti-corruption campaign under Communist Party General Secretary Nguyen Phu Trong.

According to state-run media, Vietnamese courts processed thousands of corruption cases in 2016 and 2017. President Tran Dai Quang has called for robust prosecution of crimes related to economic activity and corruption, and recovery of appropriated state assets.

There is speculation that the anti-corruption campaign is targeting allies of former Prime Minister Nguyen Thanh Dung, a political rival of Trong’s who was ousted in 2016 after losing a power struggle. Some believe that large-scale corruption under Dung, and the serious economic consequences stemming from it, are the main motivation. Vietnam suffered heavy economic losses under Dung as a result of widespread mismanagement and corruption.

Dinh La Thang stands in court; behind him, PVC’s former chairman, Trinh Xuan Thanh, sits. Photo: VNA/ Doan Tan via Reuters

Given his high-ranking status, Thang’s fall was surprising. As a point of comparison, former Politburo members Nguyen Ha Phan, Tran Xuan Bach and Le Hong Anh, were previously arrested on corruption or mismanagement charges, but the charges against them were subsequently dropped. Truong Tan Sang, a former president of Vietnam, was reprimanded along similar lines. None of these high-ranking members of the Communist Party were prosecuted.

State media has painted the trial of Thang as the first major case to be prosecuted in the spirit of judicial reform, portraying it as evidence that Vietnam is committed to treating all citizens equally under the law.

The crackdown, however, has not changed Vietnam’s “corruption perception index,” measured annually by Transparency International. Vietnam still ranks 113th out of 176 countries.

SOE model under scrutiny

Corruption and mismanagement trials surrounding Vietnam’s most prominent SOEs in recent years are consistent with the government’s pledge to modernize the economy by de-emphasizing reliance on the SOE model. The story of Dinh La Thang has further exposed the inherent risks of state management of enterprises. That Thang orchestrated a poorly-conceived and poorly-negotiated joint oil and gas project with Venezuela that resulted in substantial losses was revealed during the proceedings. The near-inevitability of such misadventures poses an enormous risk to energy infrastructure and the economy as a whole.

PVN, OceanBank and Vinalines are three SOEs that have been caught in the crosshairs of the crackdown. Vinalines directors Duong Chi Dung and Mai Van Phuc received death sentences in their 2008 trial, while the former general director of OceanBank, Nguyen Xuan Son, a partially state-owned bank, was sentenced to death for embezzlement, abuse of power and economic mismanagement last year. Another 51 high-profile officials and bankers have also been found guilty and given prison sentences.

The perennial corruption uncovered in SOEs puts the continued existence of the model into question, particularly as private enterprise and foreign investment models continue to gain momentum in Vietnam as the economy improves.

Thang’s landmark conviction is the first indication that the crackdown on SOEs has expanded its scope to include political figures who facilitate corruption and economically-debilitating mismanagement.

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