Corruption in Vietnam

Overall, Vietnam is characterised by corruption, a weak legal infrastructure, financial unpredictability and conflicting and negative bureaucratic decision-making. Surveys reveal that petty corruption has decreased significantly throughout the country, while high-level corruption has increased.[1] Corruption is considered an obstacle for doing business in Vietnam, and the use of facilitation payments are widespread when dealing with frontline civil servants.[2] Corruption has moved up the political agenda in Vietnam, and the legal framework for tackling corruption is now better developed.[1]

Transparency International's 2017 Corruption Perception Index ranks the country 107th place out of 180 countries.[3]

Defining CorruptionEdit

Prior to any discourse on Corruption and its related components, it is important to ascertain its definition from various perspectives.

The often-cited definition of corruption comes from Transparency International.[4] They define corruption as ‘the abuse of entrusted power for personal gain”, going further to elaborate on 3 categories of corruption: Grand, Petty and Political Corruption. They define:

Grand Corruption as ‘The abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society’,

Petty Corruption as ‘Everyday abuse of entrusted power by public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services’, and

Political Corruption as ‘ Manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth’

Other sources such as Coffey[5] make references to Vietnam's ranking on the Corruption Perception Index, where in 2013, it ranked 116 out of 177 countries. The more recent 2017 Corruption Perceptions Index by Transparency International ranked Vietnam at 107 out of 180 countries. While it has improved over the years since the Doi Moi reforms, corrupt practices remain evident in the business landscape. Corruption in Vietnam occurs at various levels of government, and even within private organisations. Segon & Booth[6] noted that at least 30% of public and civil servants have indicated that they are willing to take a bribe. The work by Segon and Booth was centered around managerial perspectives of expatriate managers who have been working in Vietnam for a few years. Much of the data they gathered from these exchanges revolved around the corrupt practices that were observed within Vietnamese companies and the public sector. Dr. Segon is an Associate Professor with the CQ University in Australia, who was working as an Ethics and CSR specialist for a western business consultancy at the time this article was published, thus his work appears centered around a western perspective on the practices the west defines as corrupt, as one may expect from a business consultant. This business/profit centered approach was also adopted by Coffey, an international consultancy that counts the UK Department of International Development among its clients, which also commissioned the study on the state of corruption in Vietnam as cited in this entry.

A survey of businesses in various sectors by Maruichi and Abe[7] showed that companies can expect anywhere between US$50 to US$500 to obtain required permits, licenses and business registration. Coffey[5] postulates that this corruption erodes the positive consequences of Vietnam's economic growth and development. The Vietnamese Government had implemented an anti-corruption law in 2005, and established the Office of the Central Steering Committee for Anti-Corruption in 2006 as part of their efforts to combat corruption. Martini[8] notes that while the law and legal framework was lauded as one of the best in Asia to combat corruption, it was also reported that the effects of the Anti-Corruption efforts have been limited due to the weak enforcement of laws and lack of information regarding the work of Anti-Corruption agencies. It is observed that these definitions, frameworks and benchmarks are from western or western-sponsored sources and organizations. Martini's work was part of a report by Transparency International, where she worked at the time of this report. Hence, her statements in the report are likely bound to the constraints put upon her by the organization that has its own set definition.

Hence, it is therefore equally important that the Vietnamese definition of corruption be examined as well.

The Vietnamese State, through its Anti-Corruption law passed in 2005, defined corruption as ‘acts committed by persons with positions and/or powers of abusing such positions and/or powers for self-seeking interests’. Corrupt acts stated in the law include, but are not limited to, (1) Taking and/or offering bribes, (2) Abusing Powers while performing tasks or duties for self-seeking interests, and (3) Taking advantage of positions to influence people for self-seeking interests. At the societal level, the Vietnamese seem to have a looser definition of corruption. Sato[9] notes that the lay citizen in Vietnam views corruption as a customary practice needed to maintain harmony within the community and support their shared interests. In other words, corruption is seen as a necessary evil to get things done. This view is supported by Gillespie[10] who mentioned that locals from both elite and common circles view accept some level of official misconduct.

It can be seen that western definitions of corruption are aligned with the Vietnamese State's definition at the macro level. Vietnam ratified the UN Convention Against Corruption in 2009, committing to implement measures to combat corruption. A UN Office of Drugs and Crime (UNODC)[11] report of noted Vietnam's partial implementation of the different articles of the convention, such as the toughening of bribery and embezzlement laws. News outlets have also reported about Vietnam stepping up in its Anti-Corruption drive, arresting former high-ranking officials on charges relating to corruption, though critics have indicated that these arrests could be politically motivated.[12]

Despite the progress, from the UNODC[11] report that Vietnam has made various exceptions, such as by not criminalizing bribery in the private sector. This may indicate that while there may be some alignment on certain aspects of corruption with the international actors, the Vietnamese government understands what makes Vietnamese society thrive. It would appear that the Vietnamese citizens understand and view corruption differently. Hence, there exists a mismatch of paradigms that could be one of the sources for the misunderstandings. Neither the Vietnamese nor the international actors have been able to paint an accurate picture on the state of corruption in Vietnam, because what western foreigners may perceive as corruption can be perceived as ‘patronage’ or clientalism by the local Vietnamese, which Sato[9] mentioned is part of their culture. This mismatch is exacerbated by rankings such as the Corruption Perceptions Index. This Index, founded and managed by Transparency International, is one that many around the world use as the basis for their academic or professional work. It is supported by various western countries and western-based international Non-Profits and organisations, who also serve as the donors to Transparency International. While popular among scholars, the Index itself does have some limitations. One of them is that the definitions, benchmarks and methods employed by the Corruption Perceptions Index is based on western perspectives and values, which may have a varied perspective on the issue of corruption, its causes and consequences compared to other non-western nations it assesses. Another limitation is the Index only looks at public sector corruption, thus does not paint a comprehensive picture of a country's corruption due to the absence of data from other sectors. Finally, the index itself is based on ‘perceptions’ of corruption. Kaufman, Kray & Mastruzzi[13] mentioned in their work that one of the ways which corruption is being measured is through gathering ‘informed views of relevant stakeholders’ such as firms, NGOs, individuals, public officials and donors from both within Vietnam and abroad. Kaufman, Kray & Mastruzzi[13] also acknowledged in their work that there can be no precise measure of corruption, regardless of whether subjective or objective indicators were used. This suggests since the data collected is largely subjective and inaccurate, it could impact the accuracy of scholarly studies based on this data.

As there is no universally accepted definition, understanding or measurement of corruption, it is therefore difficult to prescribe how corrupt a country is. Not all countries in the world, such as Vietnam, subscribe to the Transparency International definition or benchmark for corruption, although its arbitrary definition and benchmark overlaps with the Transparency International in some areas.

Vietnam: A Hotbed for Corruption?Edit

The Socialist Republic of Vietnam is a fast-developing country of about 96 million people, nestled near the heart of Southeast Asia. Vietnam today is an attractive location for doing business. Over the course of the last 2 decades, Vietnam's Gross Domestic Product (GDP) has seen a meteoric rise, from about US$131 billion in 1997 to about US$647 billion in 2017,[14] pointing to a substantial middle class with significant purchasing power. With globalization and the internet, the Vietnamese are exposed to global trends and thus, creates a demand for foreign goods. This makes Vietnam an attractive market for consumer goods. Vietnam also has a youthful population, with a report by the OECD Development Centre[15] stating that out of Vietnam's overall population of about 90.4 million people, about 70% of them are in the working ages of 15 to 64 years old. This indicates a youthful and vibrant workforce that can participate in a variety of professions, such as farmers in agricultural primary industries, heavy manufacturing and food processing in secondary industries, and provision of services in tertiary industries. Vietnam's close proximity to East Asian nations such as Japan, China and Korea allow for the seamless movement of services and goods to some of its largest investors and markets. Along with its abundance of its natural resources, these provide a multitude of reasons for foreign businesses to base themselves in Vietnam, hire Vietnamese workers and sell to the Vietnamese market. Today, Foreign Direct Investment (FDI) in Vietnam stands at about US$13 billion, and comes in the form of investments in Manufacturing & Processing, and Real Estate industries.

In sum, the reasons for foreigners to do business in Vietnam: (1) Stellar record of economic growth that gave rise to a burgeoning middle class, (2) Youthful workforce, (3) Close proximity to East Asian nations and (4) Abundance of natural resources. However, intertwined with this success story are the accusations of corruption by various actors, both from within and outside of Vietnam. Conventional thought points out that corruption slows down economic growth, diminishes state power and marginalizes the poor, among many other things. Despite the bleak portrayal of corruption, Vietnam is a nation that sees an upward trajectory for growth and development, with no indication of slowing down. Subsequent segments will examine a variety of perspectives on different sides of the discourse in relation to the themes of Bribery and Nepotism.

Bribery and its Effects on Vietnamese SocietyEdit

Transparency International[16] has defined bribery as ‘The offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust’. Examples of these advantages can include gifts, rewards, donations and favours. Bribes are the most commonly utilised mode of corruption which is prevalent in public and private sectors as well as Vietnamese society. The act of bribery causes negative repercussions for the country's economic growth by making companies less competitive due to the payment of ‘informal costs’ to keep the business going.[5]

Monetary Forms of Bribery

In 2011, 44% of Vietnamese have reportedly paid a bribe, commonly as a form of ‘grease money’ to expedite or fulfill basic tasks or services.[17] Bribery can also be found in the higher education sector. McCornac[18] mentioned that corrupt practices are the norm in Vietnamese higher education, citing the low salary of teachers as a key reason why the practice of bribing to gain entry into educational institutions and to cheat in the examinations became commonplace. He also stated that the bribes were not only monetary, but also come in the form of expensive gifts such as phones and expensive bags. Anh, Nguyen & Tran-am[19] determined through their study that corruption hampers economic growth, though they have noted in the same study that corruption is positively correlated to human capital, which is also positively correlated to economic growth. Up to this point, Coffey, Anh, Nguyen & Tran-am and McCornac have clearly illustrated that corruption brings about negative effects to the country's economy and is detrimental to the nation's education sector. The study by Anh, Nguyen & Tran-am was sponsored by the UK Department for International Development and was presented at the 2014 Vietnam Economists Annual Meeting to foreign economists, scholars and students. The authors were also western educated in the area of economics, which suggests that the study was based on a western economics perspective of corruption, consistent with earlier definitions by Transparency International. McCornac was also similarly educated in Economics and thus, his study was also based on an economics perspective. McCornac has previously taught in Vietnamese universities for about 10 years and in a related study published in 2008, he conducted informal surveys and interviews with undergraduate students, faculty members and university administrators, many of whom shared instances where they personally observed situations of corruption in the form of gift-giving and aiding to cheat.

There are, however, scholars who think otherwise. Leff[20] stated that bribery is needed in the developing world to reduce rigidities that inhibit investments and economic growth. Corruption, or more specifically bribes in this case, would help companies reduce the amount of uncertainty because bribes enable the companies to control and dictate the actions of government officials they deal with. Though Leff's work is dated, he basically provided a reason why ‘grease money’ is needed in Vietnam, in response to Coffey. In a more recent study, Lui[21] argued that paying bribes could allow customers to achieve ‘social optimal equilibrium’, where after factoring in other associated costs such as waiting, it may be more cost-effective to pay the bribe and allow the company to continue its profit-generating work.

Lui and Leff's main argument is that bribes help move things along, especially if the institutions of the state are corrupt or unable to police itself. While their arguments seem logical, I find them too simplistic because they do not take into account the intentionality of the officials being bribed, as they can decide the bribe amount arbitrarily or even add on more obstacles to extract additional payment. Hence, there is no sustained reduction of uncertainty for businesses, who could continuously need to pay bribes of varying amounts which could lead to higher operating costs and less competitiveness. On McCornac's article regarding corruption in the higher education sector, his account of teachers accepting bribes in exchange for helping students cheat is clearly a negative case of corruption. The practice of ‘bribing ‘or paying your way for admission into university is not a phenomenon unique to Vietnam. As an Associate Professor in a community college based in the US, he would have been aware that within the US itself, there is a longstanding practice of ‘paying for a place in US universities’ through donations as soon as or even before the student was admitted.[22] This practice is usually only done by affluent families, which seems to mirror what McCornac mentioned about buying university admission in Vietnam. While it can be argued that donations go to the university while bribes go to the individual, the effects of this practice are the same, less qualified candidates gain entry while more qualified students may be deprived of admission.

Non-Monetary forms of Bribery

In Vietnam, business transactions may not only take place within the confines of the office. Much of these can spillover after hours, where businessmen may host their prospective clients for social activities or ‘business drinking’, which is aimed at cajoling them into finalizing a business deal. These activities usually involve drinking at nightspots, where Kimberly Kay Hoang[23] noted that a substantial number of business deals in Vietnam which contributed to its economy have been facilitated through such drinking sessions. According to Horton & Rydstorm,[24] what also usually accompanies these sessions is the presence of sex workers who would be offered to the business clients as an additional incentive for closing a deal. This view is also supported by Kimberly Kay Hoang, an associate professor from the University of Chicago who spent about a year, between June 2009 and August 2010 undercover at Ho Chi Minh city's Khong Sao bar and other similar places to observe the dynamics of the different stakeholders of these nightspots. She observed during her research while serving as a hostess and bartender that businessmen from Vietnam's top finance, real estate and trading companies would be engaged in sex for business purposes, spending anywhere between US$1000 to 2000 per night out on their prospects to encourage them to close business deals.

The Anti- Corruption laws of several western countries, including the US, the UK and Germany, have given Bribery a very broad definition, but the main idea is essentially that bribery can take the form of both money and services which includes but is not limited to, as Dao[25] a law scholar from Hanoi, stated in his comparative analysis of Vietnamese and Swedish laws, sexual services. Hence, from the western legal perspective, social drinking and the purchase of sex for their clients in this instance can be seen as a form of Bribery, where the host seeks to influence the outcome of the business deal by buying the prospective customer alcoholic drinks and showing them a good time. Hooker (2008), a professor of Business ethics from Carnegie Mellon, supports this view by mentioning in his business article that western businesses view bribes as problematic as it makes people abandon established rules and procedures which govern the system.

Both Hoang[23] and Horton & Rydstorm[24] noted that the purchase of sex and drinks for business contemporaries was another way of projecting masculinity which correlates to one's financial status, for which financial prowess is a trait that prospective clients and partners look out for as a sign of assurance. Going out for drinking and engaging sex workers is not merely a means to relax and seek gratification, but also a way to assess the suitability of a prospective business partner. Hence, the intent to bribe their clients through non-tangible means of gratification may have been a secondary reason to, according to Hoang,[23] the showcase of Vietnamese women as symbols of the nation's economic progress which would engender confidence in their prospective business partners and clients of the benefits on investing in Vietnam. On the subject of intent, Dao[25] notes that according to Vietnamese criminal law, there needs to be ‘direct intent’ to bribe someone and an awareness of the wrongful nature of bribery. In other words, the person needs to have unequivocally intended to bribe someone and is fully aware that Bribery is an offence yet still commits it. Similarly, the person receiving the bribe also needs to be aware that they are receiving an unwarranted advantage or gratification. Further on the perspective of Vietnamese law on bribery, Dao,[25] also notes that Vietnamese law views the giving and/or receiving of ‘purely intangible values’ does not constitute as bribery on basis that, in the case of public officials, the exercise of public duties can only be distorted by the receiving or giving of material benefits. Dao's legal perspective coupled with the research findings of Hoang and Horton & Rydstorm illustrates the local perspective of non-monetary forms of bribery, which suggests that the social activities of business drinking and sexual services do not constitute as acts of bribery.

In 2017, Vietnam announced that it would be revising its penal code on forms of bribery to include the receiving of non-material gratification such as sexual services, with their timeline projected for implementation to be sometime in 2018.[26]

Effects of Nepotism and CronyismEdit

While different in the strictest definition, Nepotism and Cronyism have similar characteristics, which are about favoritism based on acquaintances and familiar relationships by exploiting power and authority to provide a job or favour to a family member or friend, even though he or she may not be qualified or deserving. Nepotism and cronyism are mechanisms seen to promote incompetence at the expense of the organization. Vu[27] mentioned that for high raking government positions, nepotism is typically an underlying criterion for selection. Hence, this would put the competence and qualifications of these people into question. It has also been reported that Vietnamese state officials have secured contracts for their family members and close acquaintances, misusing their authority in the process.[28] The award of contracts to family members and acquaintances who may not be the best people to effectively execute the job may end up incurring cost overruns or delays, which would affect the people which the contracted services are meant for.

Despite the negative connotations associated with Nepotism, there are scholars who have presented the benefits that Nepotism can contribute to economic growth. Nguyen, Lee, Mujtaba and Ruijs[29] conducted a culture study of Vietnam and found that its society has a collectivist culture, which emphasizes strong ties and cohesive groups that looks after their members in return for their loyalty. Hence, a person of power and position may see it as his responsibility to look after his family and associates through the provision of such opportunities. Stinchfield and Gavor[30] are an associate professor specializing in entrepreneurship and a student of business studies respectively from the Frank & Marshall College in the US. Their research interests, besides entrepreneurship, include corruption, social, and environmental issues. They noted that in countries where there is low trust in state institutions such as Vietnam, recruiting family members and close acquaintances into new business ventures was a way of getting a compliant pool of staff who would support the company founder's corrupt practices, such as using grease money to remove bureaucratic rigidities. Recruitment of family members ensures that the benefits that the company reaps also stays within the family, where they can then continue to build on that wealth.

Scholars have presented Nepotism in the public sector as detrimental to the nation as a whole, but some of these scholars have also noted that in western countries such as the US, there are instances where its leaders have put their own family members and acquaintances into positions of power, in return for support typically during election campaigning, characteristic of a Patron-clientalism relationship. Lewis,[31] a Professor in Political Science, notes that it is commonplace for the US President, upon election into office, to put his supporters, campaign workers and party officials who have helped the president get elected, into positions of power. Using the term ‘Patronage’, he stated how they are put into public positions of power and prestige because of their political connections, despite some of them being less qualified than other possible candidates within the same agency. He cited the George W Bush administration as a case study in his work, and mentioned that political appointees typically get placed in agencies that are already aligned with the President's agenda and where the political appointees’ impact on the agency's performance is minimal. In both the US and Vietnamese contexts, scholars Vu and Lewis's description of these practices show similarities between the two countries in terms of how relationships and by extension, cronyism, is present and prevalent in various segments of society such as politics and business. One of the largest corruption investigation cases in Vietnam's anti-graft campaign is the Mobifone case in which the police accused the former information minister Nguyen Bac Son of taking $3 million in bribe in connection with Mobifone.[32]

Anti-corruption effortsEdit

In order to improve the business climate and attract foreign investment, Vietnam has taken efforts to combat corruption. The government established a new anti-corruption body and issued the National Strategy for Preventing and Combating Corruption Towards 2020. Vietnam's Anti-Corruption Law 2005 is considered by the World Bank to be among the best anti-corruption legal frameworks in Asia; however, it is considered complicated and challenging for its implementation.[33]

See alsoEdit

ReferencesEdit

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  2. ^ "Investment Climate Statement- Vietnam 2012". The US Department of State. Retrieved 25 June 2014.
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