HANOI — The arrest of one of Vietnam's top banking tycoons reflects a wider power struggle among the Communist rulers over how to tackle the country's deepening economic troubles, experts say.
Flamboyant multi-millionaire Nguyen Duc Kien, a shareholder in some of Vietnam's largest financial institutions and a founder of Asia Commercial Bank (ACB), was detained on Monday, and ACB's ex-head officially joined him in custody three days later.
The arrests, for unspecified economic crimes, caused public panic, wiping some $5.0 billion in value from Vietnam's stock markets and triggering a bank run as depositors rushed to pull hundreds of millions of dollars out of ACB.
But "the bigger concern is the potential for political instability... Kien's arrest could signify increasing discord among political elites and factions", according to a report by intelligence group Stratfor.
Football-mad Kien, an instantly recognisable 48-year-old financier with a shock of white hair, is widely reported to have close connections to Prime Minister Nguyen Tan Dung and his daughter, a Swiss-trained private banker.
Since the 1990s, as Vietnam opened up economically, power moved from the communist party to the state -- and, since he assumed the post in 2006, to Dung, who is said to be the country's most powerful prime minister ever.
Dung, who was reelected to a second five year term in 2011, has used this power to aggressively push for high growth rates and champion a South Korean chaebol-style development path, relying on huge state-owned companies to drive overall economic growth.
At first, Vietnam was notching up seven percent-plus annual growth rates and quickly became a favourite of foreign investors including global banking giant Standard Chartered, which owns 15 percent of ACB.
But with economic growth now just 4.4 percent year-on-year in the first half of 2012, foreign direct investment down nearly 30 percent in the same period and toxic debt in the fragile banking system at "alarming levels" according to the central bank, there has been increasingly vocal criticism of Dung.
"Never has Vietnamese society faced so many unheavals which weaken the Party's leadership and threaten the survival of the whole political regime," a retired National Assembly deputy told AFP.
"Some party leaders have lost patience, and feel it is time to act to eliminate these potential threats and regain public confidence," he added, speaking on condition of anonymity.
In a scathing op-ed on Thursday, President Truong Tan Sang -- one of Dung's main political rivals -- said that "Vietnam is now under not insignificant pressure because of broken state-owned enterprises."
He criticised "the degradation of political ideology and the morals and lifestyle" of officials -- a swipe at wealthy tycoons like Rolls Royce-driving Kien -- and called for economic reform and a new anti-corruption drive.
A new round of factional fighting has begun and "the main battleground is economic reform and probity including the state-owned sector and the banking sector and weeding out entrenched large-scale corruption", said Vietnam expert Carl Thayer.
"Sang and Party Secretary General Nguyen Phu Trong are now repeating an old but true refrain that corruption is one of the major threats to the legitimacy of Vietnam's one-party system," Thayer said.
Public discontent over official corruption has bubbled over into violent protests several times this year.
The case of a farmer who used home-made explosives to fight forced eviction by corrupt local officials dominated the front pages in January.
Thayer pointed to the significance of a decision earlier this month to remove control of the anti-corruption steering committee from the prime minister and hand it back to the party.
Dung has previously come under pressure for corruption scandals in the state-owned companies he promoted, and in 2010 was forced to accept personal responsibility for the near-collapse of state shipping giant Vinashin.
While the moves against Kien are not expected to force Dung from his post, more of the prime minister's allies are likely to be targeted, observers predict.
Kien "may be the most prominent and wealthy" thus far, but he was not the first nor will he be the last, said Thayer, emeritus professor at the University of New South Wales in Australia.
Dung himself, in what experts see as an effort at self-protection, has praised the police efforts to investigate corruption in bank reform and called for punishment of culprits "no matter who they are".
Copyright © 2013 AFP. All rights reserved. More »