Rise of Vietnamese Kleptocracy – How 24 year old daughter of Politburo Member became CEO of a Billion Dollar State owned Company

The story of princelings in China is quite well known with the sons and daughters of powerful members of the Chinese Communist Party ruling billion dollar business empires. The rule of law is not very strong in the countries and it takes a special kind of luck and connections to be decently wealthy in China. In China “guanxi” and “jugaad” in India are essential for a citizen to rise above stark poverty. These words have a broad meaning which is mainly “being connected” and the ability to get things done through non-official channels. These frequently involve illegal acts and bribing to get work done.

The fall of Bo Xilai in China has shown how millions and billions of dollars have been illegally stashed in foreign banks accounts and real estate by corrupt Party officials. The children of the Party leaders occupy top positions in state owned companies. Now Vietnam too is seeing this corruption as the country has prospered. The most stark proof of the Vietnamese kleptocracy was the appointment of a fresh 24 year old graduate daughter of a Politoburo member to the CEO of a billion dollar state owned company. There are more instances of the children of the Party becoming the CEOs of other big state owned companies.

NY Times

The daughter of a member of the Vietnamese Communist Party’s Politburo, the country’s most powerful political body, Ms. Huong had only days before been appointed the head of a state-owned construction company. Commentators on the Internet expressed outrage that someone so young — she is reported to be 24 — held such a senior corporate post. Ms. Huong left her state-run company in June, three months after her appointment, and the daughter of the prime minister recently left one of her posts, at a private bank. While Ms. Phuong is among the better known of the so-called “children of the powerful,” the list is long. It includes her brother, who is the deputy construction minister, and Ms. Huong, the young woman who headed the construction company and is the daughter of To Huy Rua, a powerful member of the Politburo. Others have moved up in the party. The son of Nong Duc Manh, who retired as general secretary of the Communist Party last year, is a member of the party’s Central Committee. In reporting the collapse of one of the largest state-owned conglomerates, Vinashin, the state-run news media revealed that at least three family members of the company’s chairman, Pham Thanh Binh, held senior positions in the company, including his son and brother.

Bronte Capital has come out with an interesting post on how China is ruled by thieves and explains the macroeconomics behind it. Note other developing countries like India too suffer from this disease where politicians control massive business empires explicity or implicity (benami)

I start this analysis with China being a kleptocracy – a country ruled by thieves. That is a bold assertion – but I am going to have to assert it. People I know deep in the weeds (that is people who have to deal with the PRC and the children of the PRC elite) accept it. The SOEs are the center of the Chinese kleptocracy. If you manage your way up the Communist Party of China and you play your politics really well may wind up senior in some State Owned Enterprise. This is your opportunity to loot on a scale unprecedented in human history.

Us Westerners see the skimming arrangements. If you want to sell kit (say high-end railway control equipment) to the Chinese SOE you don’t sell it to them. You sell it to an intermediate company who on-sell it in China. From the Western perspective you pay a few percent for access. From the Chinese perspective – this is just a gentle form of looting.

And it is not the only one. The SOEs are looted every way until Tuesday. The Business insider article on the spending at Harbin Pharmaceutical is just a start. The palace pictured in Business Insider would make Louis XIV of France (the Sun King) proud. This palace shows the scale (and maybe the lack of taste) of the Chinese kleptocracy.