Will more heads topple as Vietnam’s scandalous graft trial nears verdict?

One former deputy state bank governor and four officials from the scandal-besieged state oil firm PetroVietnam have been charged with economic mismanagement.

The State Bank of Vietnam has been named and shamed for a raft of past wrongdoings. More than 50,000 individuals and nearly 400 businesses and organizations have been identified as beneficiaries of what Vietnam’s prosecutors called illegal interest payments worth $70.4 million from a scandal-hit local bank.

These back-to-back developments came to light in just a matter of two weeks against the backdrop of an ongoing multi-million-dollar graft trial in Hanoi. The OceanBank trial, with 51 bankers and businessmen in the dock, heard the proposed sentences against the defendants on Thursday.

Analysts are asking if the scheduled 20-day trial is the yardstick to gauge how far Vietnam is willing to press ahead with the crackdown on its much-cosseted public sector and how determined its top leaders are to punish high-profile individuals in a bid to repair shattered public trust.

In early August, Trinh Xuan Thanh, a former executive accused of financial wrongdoings and embezzlement at a PetroVietnam subsidiary, “turned himself in” after a 10-month international manhunt. A former vice trade minister was also fired last month for “illegally” appointing Thanh.

But the question is, how far is far enough, and how effective has the crackdown been?

Such questions “cannot be answered with certainty,” Carl Thayer, an Australia-based veteran Vietnam analyst, said. “It is like the proverbial question: ‘How long is a ball of string?' The answer depends on how big the ball of string is.”

State oil and gas giant PetroVietnam and the banking sector have been at the center of the crackdown.

Chief among the four PetroVietnam officials prosecuted on September 1 was its vice general director, Ninh Van Quynh, who was the group’s chief accountant from 2008 to 2014, during which time the recently ousted Politburo member Dinh La Thang was at the helm. Quynh’s co-defendants were also all former PetroVietnam board members.

Dinh La Thang was removed from the Communist Party's elite Politburo, the group at the pinnacle of Vietnamese power, in May, and later fired from his position as the leader of Ho Chi Minh City. Thang was held responsible for “serious” violations and mismanagement during his time as PetroVietnam's chairman from 2009 to 2011.

Thang was also held accountable for an excessive stake purchased in OceanBank. PetroVietnam held a VND800 billion ($35 million) stake in the bank, but that was completely written off when the central bank took it over in 2015.

The punishment handed down to him was the harshest to be meted out to a Politburo member in years, if not decades.

Following Thang’s dismissal, Communist Party chief Nguyen Phu Trong told his constituents at a meeting in mid-May: "More will come, you should wait,” when asked about the corruption crackdown he has been spearheading. (Trong is also an elected legislator.)

The State Bank of Vietnam building is seen in Hanoi on September 8, 2017. Photo by Reuters/Kham

Since May, Thang has been demoted to the post of vice head of the Central Economic Commission, which advises the Party on economic policies. The head of that commission is Nguyen Van Binh, who was the central bank governor between 2011 and 2016.

In early September, government inspectors issued a report highlighting violations that took place at the central bank between 2010 and 2015. They included turning a blind eye to staff that ignored banking protocol, failing to detect and warn of insolvency risks among weak lenders and refusing to follow anti-corruption regulations.

A week later, a criminal investigation was launched into Dang Thanh Binh, the deputy governor of the State Bank of Vietnam from 2005 to 2014, to establish his role in the OceanBank case that cost the country's banking sector VND9 trillion ($400 million). Binh, 63, has been placed under house arrest and is facing charges of "dereliction of duty causing serious consequences".

Analysts say the fight against deep-rooted graft in Vietnam requires a political sledgehammer to fix a badly broken system. Otherwise, yet another cosmetic campaign will only further chip away at public confidence.

In its Corruption Perception Index 2016, Transparency International, a Berlin-based advocacy group, ranked Vietnam 113th out of 176 countries and territories. But what is of more grave concern is the growing public disenchantment with the political rhetoric on fighting corruption. In another March survey by Transparency International, over half of Vietnamese respondents reported their government was doing a poor job of fighting corruption.

Reuters on Wednesday quoted Le Thi Thu Hang, Vietnam’s foreign ministry spokeswoman, as saying that the Party and state were resolute in dealing with corruption or lawbreaking by any organization or individual. "Based on the results of the investigation, the functional agencies shall strictly handle those who violate the law in accordance with the provisions of Vietnamese law," she told the newswire.

Vietnam’s top echelons have pressed ahead with the handling, investigation and trial of major corruption cases, which mainly involve the energy and banking sectors.

Analysts say, however, infrequent but harsh punishment can only serve as a deterrent to contain large-scale corruption in the short run. They say without a major overhaul of the public sector, which has proved a drag on the economy, corruption will remain endemic.

State-owned enterprises (SOEs) dominate large parts of Vietnam’s economy. Analysts say they are often corrupt as they gobble up capital and diversify from their core businesses into sectors such as property and stocks with dismal results.

“SOEs in Vietnam are something of a sacred cow,” Thayer said. “They provide a patronage network for their managers, and they provide support for a network of political-economic relations. They are one source – a very important source - of entrenched corruption,” he said.

But as past scandals indicated, Thayer noted, “the government itself can be a source of entrenched corruption as well.”