Dual Covid corruption scandals rock Vietnam

Heads roll as investigations lead to high-profile party expulsions, arrests of government and business people

Heads are rolling in Vietnam as investigations have led to high-profile Party expulsions and arrests of high-level government officials, military officers, health officials, and business executives, shining new light on the country’s endemic institutional corruption.

Two Covid-19-related corruption scandals have come to light in recent months involving high-level ministries including the Ministry of Health and the Ministry of Foreign Affairs. The twin scandals represent the largest corruption and abuse of power cases in recent memory in the one-party Southeast Asian country.

The Viet A affair

The first scandal involves a broad, country-wide price-gouging scheme for Covid-19 testing kits, which were desperately needed amid a severe outbreak last year. Over 60 now-detained suspects conspired at the highest levels of government with the Ministry of Health, Ministry of Science and Technology, the Military Medical Academy, more than a dozen local health departments and the state-owned Viet A Technologies JSC (Vie.

Many of those arrested were high-profile government officials. In US dollar terms the conspiracy amounted to hundreds of millions taken from the state purse.

Health Minister Nguyen Thanh Long was removed from his position, expelled from the Communist Party of Vietnam (CPV), and charged last week. Hanoi Party Chairman and former Minister of Science and Technology Chu Ngoc Anh met the same fate. Deputy Minister of Science and Technology Pham Cong Tac was sacked from his position on direct orders from the prime minister. Long’s Deputy Health Minister Nguyen Truong Son resigned from his position on June 6 amid speculation that he too could soon be implicated in the scandal.

Colonels Ho Anh Son and Nguyen Van Hieu of the Military Medical Research Institute have also been detained along with 12 other Institute officials. Anh, when he headed the Ministry of Science and Technology, approved the budget for ta state project entitled “Research and manufacture RT-PCR of real-time RT-PCR biological kits to detect the new strain of corona virus 2019 (2019-nCoV),” undertaken by the institute in collaboration with Viet A. Misconduct was detected by investigators early on.

The arrests come after a six-month investigation. The investigation was initiated at the behest of Prime Minister Pham Minh Chinh last December. Authorities promptly gained investigative momentum, arresting and charging Viet A CEO Phan Quoc Viet along with local Hai Duong Center for Disease Control (CDC) director Pham Duy Tuyen in January. The latter received upwards of US$2.15 million (VND30 billion) in illegal kickbacks from the Viet A head.

Thirty-seven of those arrested in the subsequent sweeping investigation were CDC directors, leaders, and health officials in 14 provinces.

Consequent to the investigation, the Politburo and Secretariat concluded that the Party Committee of the Ministry of Science and Technology (formerly headed by Anh), the Party Committee of the Ministry of Health, Anh, and Long had committed gross violations, “causing severe consequences, losses to the money and assets of the State, undermining the Covid-19 fight, causing social unrest, and affecting the reputation of the Party, the health ministry, and science ministry.”

The investigation continues to unfold as Hanoi CDC director Truong Quang Viet was arrested on June 10 and charged with “violating regulations on bidding, causing serious consequences.” The center’s chief accountant was similarly detained and charged. Truong Quang Viet had served for only four months as Hanoi CDC director, a position that had been vacant for nearly two years after his processor Nguyen Nhat Cam had been arrested, charged and convicted for similar wrongdoing in December 2020 as the result of a separate investigation. Cam is currently serving a ten-year prison sentence.

Truong Quang Viet had previously issued a denial last December when allegations of price gouging by the company were first made. “We did not buy any Covid-19 test kits from Viet A. In the years 2020-21, we mainly received test kits from sponsors,” he told Tuoi Tre news at the time.

A dire Covid-19 outbreak occurred throughout Vietnam beginning in April of last year prompting widespread lockdowns and other strict measures to curb the infection rate. This development led to soaring demand for Covid-19 test kits.

After initiation of the 2019-nCoV project, Viet A was licensed by the Ministry of Health in April 2020 to supply test kits to dozens of local health centers, a move that granted the company de facto monopolistic distribution rights. The company subsequently set the price of a test kit at around US$20 (VND 470,000), representing a 45% hike.

The unprecedented increase was the result of manipulating the price structure used to determine the selling price as the company overstated the cost of equipment and input materials. Viet A’s illicit machinations were facilitated by ministries and bureaus all over the country.

Investigators have revealed that Viet A supplied test kits to medical facilities in 62 provinces and municipalities, generating US$172.6 million (VND 4 trillion) in subsequent profits thanks to the illicit price scheme. To secure distribution of the product, Phan Quoc Viet delivered illegal kickbacks worth a total US$34.51 million (VND800 billion) to local health bureaus, similar to what he provided to Tuyen.

Bureau officials then bought the test kits at the inflated price, draining public coffers. The monopolistic contract arrangement with Viet A created fertile ground for widespread graft and corruption.

Repatriation flights

A separate Covid-19-related scandal involving the highest level of the Ministry of Foreign Affairs (MFA) also continues to unfold. The scheme revolved around repatriation flights in 2020 for Vietnamese citizens living abroad. Many such citizens were migrant workers who found themselves in desperate situations unable to make a living amid pandemic lockdowns and other measures in their host countries.

The scandal involved bribes, collusion between the MFA and several travel agencies, and extortion of Vietnamese citizens as they attempted to return home.

Several high-ranking members, including General Director of the Ministry of Foreign Affairs Consular Department Nguyen Thi Huong Lan, Deputy Director Do Hoang Tung, Chief of Staff Le Tuan Anh, and Deputy Head of the Citizen Protection Bureau Luu Tuan Dung were arrested in January while Deputy Minister of Foreign Affairs To Anh Dung was arrested in April. Three travel agencies’ general directors have also been detained.

The implicated ministers licensed a handful of travel agencies to complete repatriation flights for Vietnamese citizens abroad. However, the ministers and travel agencies used the opportunity to line their own pockets. Desperate seat seekers urgently needing to return home faced exorbitant airfare prices, additional quarantine fees and overly cumbersome bureaucratic procedures to secure spots on repatriation flights. Many thus had to sacrifice years’ worth of personal savings to make the trip.

The Ministry of Public Security has reported that a repatriation flight netted an average of US$43,600 (VND1 billion), much of which went into ministers’ private accounts rather than state coffers. To date, there have been around 2,000 such flights from over 60 countries. The scheme thus netted its perpetrators upwards of US$87 million at the expense of the country’s working-class citizens.

Vietnam has been slow to reopen the country to foreign visitors in the wake of the pandemic. There is speculation that such efforts have been severely hampered by widespread corruption at the MFA.

The Blazing Furnace and endemic corruption

The Blazing Furnace (“đốt lò” in Vietnamese) campaign is CPV Chairman Nguyen Phu Trong’s anti-graft and corruption initiative, which began in 2016. The aforementioned arrests and prosecutions are a part of that push.

Trong, who secured a rare third term as Party chief last year, recognizes that institutional corruption and the severe dissatisfaction it arouses in the populace add up to one of the few remaining existential threats to the legitimacy and survival of the regime amid steadily rising incomes and living standards in the country. The situation is similar to that of Xi Jinping’s communist China.

To stay in power, Vietnamese and Chinese leaders likely draw lessons from the former Soviet Union’s perestroika and glasnost reforms.

The former, a set of major market reforms, has been emulated with astounding success in the two countries with the “Renovation” (Đổi Mới) and “Reform and opening-up” (“Gǎigé kāifàng”) initiatives, respectively.

However, glasnost, a set of major social reforms which allowed transparency, press freedom, and criticism of the government, is blamed in the two countries as a significant factor in the USSR’s dissolution. Not imitating glasnost seems to be a priority. Corruption is embedded in the system and media are still tightly controlled by the state with little reason to anticipate reform.

Vietnam’s one-party system is vulnerable to its own machinations. For example,

Vietnam’s judiciary is independent from the government under the country’s constitution, it still falls under the auspices of the CPV, rendering any independence of action nonexistent in practice. Party members are known to face four levels of potential disciplinary action: reprimand, warning, demotion, and expulsion. In practice, high-ranking CPV members are often insulated from prosecution, thus necessitating the de facto need to expel offending individuals from the Party before issuing criminal charges.

Bribes and under-the-table fees, commonly seen as part of the cost of doing business, also play a major role in Vietnam’s massive informal economy.

Equally important, the Blazing Furnace campaign merely targets individual corruption, not institutional corruption. Despite the Party’s best efforts, what has been accomplished is tantamount to hundreds of instances of individual cases that do little to stem institutional factors.

With millions of people on the state payroll, wages and benefits remain mostly meager. Those wishing to join the state apparatus are, in practice, required to pay a fee. Afterward, when a degree of power is accumulated, such individuals are exposed to a variety of corrupt practices that are intrinsic to maintaining the status quo.

Corruption is thus not an individual choice but an institutional necessity. Those who refuse corruption tend to find themselves on the outside looking in.

Apart from domestic political concerns, graft and corruption represent major roadblocks for Vietnam’s future development. Vietnam has been a winner in the recent US-China trade war with manufacturers and foreign investors seeking alternatives to China. Vietnam is substantially dependent on foreign trade and continued integration with the global economy. Curbing corruption, which carries potential risk for investors, is thus an economic necessity as well as a political one.

Hundreds of government officials and business executives have been arrested under the Blazing Furnace campaign in recent years, including at the highest levels of the government in the central committee and Politburo. A few notable cases have resulted in death sentences.

Nonetheless, the now six-year-old campaign has failed to deter wrongdoing. Widespread institutional corruption, particularly under scrutiny during the height of the pandemic, remains the most serious existential threat to CPV rule and legitimacy in the country.

By Nate Fischler – Asia Times – June 20, 2022