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"Steel Punch" PVN, Arsonist and Socialist

Updated on April 9, 2019
Tuan Leminh profile image

An enthusiast for economic development and political issues in Vietnam.

The Junin 2 project in Venezuela by Vietnam National Oil and Gas Group (PVN) is not merely an economic investment. It is also a political task. The socialist-oriented market economy needs "steel fists" to prove its superiority. General Secretary Nguyen Phu Trong may sue PVN with an anti-corruption campaign but never abandon socialism.

General Secretary and President Nguyen Phu Trong just punishes PVN or he will change the policy of economic development?
General Secretary and President Nguyen Phu Trong just punishes PVN or he will change the policy of economic development?

"Platform", "mainstream", "key", "steel punch"

Hanoi, April 19, 2001.

More than a thousand party members gathered at the Ba Dinh Hall, preparing to open the IXth Congress of the Communist Party of Vietnam and making big decisions both in terms of personnel and strategy.

That was the time when socialism had completely collapsed in the Soviet Union and Eastern Europe for 10 years. And the party is still struggling to solve its theoretical problems.

VTV's television lens at the time did not miss a grizzly haired man, the rising star of the party, who deeply understood the theory of communist organization: Standing Member of the Politburo, Hanoi Secretary of Party Committee, Vice Chairman of the Central Reasoning Council Nguyen Phu Trong.

This is the character directing the drafting of the congress documents.

Since the beginning of Doi Moi in 1986, Vietnam has gradually shifted from a centralized economy to a market economy. However, due to the peculiar nature of the totalitarian state, instead of just playing a role in regulating the economy, they still try to do business directly. This is an important tool, bringing great benefits to the regime, beyond the normal profit-making business goal.

Mr. Trong has not only satisfied the former Marxist members of the apparatus who spent all life fighting with the enemy, as well as with their comrades, but he also raised the level of reasoning to a new level of the socialist-oriented market economy.

He terminated the concept of a state-owned economy to round up the notion of a state economy which was looming before: “Socialist-oriented market economy has many forms of ownership, many economic sectors. Among these sectors, the state economy plays a key role; The state economy together with the collective economy has become a solid foundation”.

The state economy consists of two main pillars: the first is the state policy for the economy, the second is the state enterprise.

However, due to lack of premise on theory as well as economic mind, the drafting committee did not concretize policies for the state economy, the resolution of the last party only stipulates that "state-owned enterprises keep those key position; leading the application of scientific and technological advances; set the example of productivity, quality, socio-economic efficiency, and law observance."

If the 3rd Central Conference in 1987 only said "state-owned enterprises play a key role in the economy", now the party has expanded its scope greatly. We can understand, the one-sided party acknowledges and opens up other economic sectors such as the private economy, the individual economy, the foreign-invested economy, etc. But the party never gives up its ambition: dominating the economy at a higher level.

In 2006, when Nguyen Phu Trong was the Chairman of the National Assembly and Chairman of the Central Reasoning Council, directly directed the drafting of the Xth Party Congress Document, along with the high power of Nguyen Tan Dung during the time. Meanwhile, the state economy is not only mainstream but also a foundation: "Developing the economy with many forms of ownership and many economic sectors, in which the state economy plays a key role; The state economy together with the collective economy has become increasingly a solid foundation of the national economy."

Along with that, state-owned enterprises have greater power: "State-owned enterprises have property rights, are truly autonomous, self-responsible in the market and before the law".

However, the policy mechanism for the state economy cannot be concretized in the resolution, which means a heavy task that the party has given to Mr. Dung. He had to choose the Chaebol model himself, completely incompatible with Vietnamese political practices and institutions.

Before the great task entrusted by the party, corporations such as Vietnam National Oil and Gas Group (PVN), Vietnam Shipbuilding Industry Group (Vinashine), Vietnam Maritime Group (Vinalines) and the Group Vietnamese chemicals (Vinachem) ... going fast to become "steel punch". The steel punches are poured a lot of money and struggling with spending money: expanding many production activities outside the industry, appointing internal contractors, building and exploiting lum. Of course, once it is big, it is impossible not to invest abroad. The Junin 2 project in Venezuela is just one of the projects to be implemented, which is a political task.

Prime Minister Nguyen Tan Dung and former Chairman of PVN Dinh La Thang and some government officials.
Prime Minister Nguyen Tan Dung and former Chairman of PVN Dinh La Thang and some government officials.


Throughout history, the Vietnamese economy is mainly self-sufficient and small-scale trading, the investment abroad is completely unfamiliar.

Understanding the lack of experience, it is difficult to require PVN to invest profitably when it is "reaching out to the big sea", Vietnamese leaders have invested in socialist brother countries. For business purposes, there is less economic than politics purposes. Hugo Chavez's Venezuela is a country that has just converted to a socialist faction. There is a lot of affection for a brother across the hemisphere that is a better entity to do business.

Since taking office, Chavez has nationalized all oil businesses, the industry accounted for 90% of national income. Not only that, but he also chased foreign capitalist corporations, cooperating with similar countries like Cuba, Russia, China, and Vietnam.

Chavez visited Vietnam in 2006, prompting PVN to invest in this country. Along with the highest oil price in history, Vietnamese leaders could not refuse to the policy of investment cooperation. Chavez gave Vietnam preferential treatment when Participant Bonus (an international standard tender guarantee) is only half compared to Russia and China when investing here, at the amount of $584 million.

But apart from Chavez, the cooperation between PVN and Venezuela National Petroleum Corporation (PDVSA) does not have any feasibility:

- Lack of policy corridors for PVN: Even at the time of 2019, our country has never had a Law on Overseas Investment stipulated for state enterprises in particular and enterprises in general. The highest legal basis in the period of PVN investment in Junin-2 mine is Decree 78/2006 / ND-CP. The 2005 Investment Law has a chapter on offshore investment but it is very brief and sketchy.

- PVN lacks the capacity and experience: Before 2008, PVN has almost no significant investment projects in oil and gas exploration and exploitation abroad. PVN only cooperates with corporations from Russia and the West with more advanced technology, better mining technology. On the other hand, Junin 2 is a land oilfield while the experience of PVN is exploiting offshore oilfield.

- PDVSA lacks production capacity: PVN lacks the capacity and experience, its partners not only do not have abundant financial resources but also lack both production capacity and technology. Since Chavez came to power, PDVSA has not had the capital and technology of capitalist countries, skilled employees and key experience leaders have all been laid off to replace the political body with the party right. This is the key reason for both China and Russia to lose completely when investing in Venezuela, not only PVN.

Despite the potential risks, the socialist brotherhood and the fast-paced mission of leading steel punch urged Hanoi's top leaders to invest in Junin 2. Cooperation between PDVSA and PVN became manifestation political statues.

President Hugo Chavez and President Nguyen Minh Triet witnessed the signing of a petroleum cooperation agreement in Hanoi in 2006.
President Hugo Chavez and President Nguyen Minh Triet witnessed the signing of a petroleum cooperation agreement in Hanoi in 2006.

Authority to decide investment: Including both Dung and Trong?

In the Vietnamese political environment, the supreme authority is the Politburo of the Party Central Committee. All major issues were decided by this group of people, in which the four leaders of the General Secretary, the President, the President of the National Assembly and the Prime Minister had a particularly important voice. It will not be easy for tens of trillion project to be approved if one of the four people opposes. Then Prime Minister Nguyen Tan Dung will be unable to cover the sky once Nguyen Minh Triet, Nong Duc Manh and Nguyen Phu Trong disagree.

But it is about the party, as for state law, which controls the mutual power between the four pillars, Vietnam still has its own rules. Normally these regulations do not have great value, sometimes it becomes bureaucratic, cumbersome and confusing. This situation combined with the personality of the Prime Minister and Chairman of PVN at the time, they surpassed the National Assembly of Junin-2 oil investment.

Resolution No.66/2006/QH11 stipulates that projects with more than VND 20,000 billion and exceeding 30% of state capital must be approved by the National Assembly. However, in fact, many projects at that time were using the law in many different ways.

For example, a series of power projects are based on the electricity plan, or the additional power plan of the prime minister, to approve investment projects without going to the National Assembly such as: Long Phu power plant approved by decision 5843 / QD-DKVN in 2010 of PVN with a total investment of VND 29,500 billion, Song Hau power plant was approved by Decision 2824 / QD-DKVN in early 2011 with a total of over VND 32,500 billion ... There are also many projects break down to avoid having to pass the National Assembly as the Central Highlands Bauxite project is split into Nhan Co and Tan Rai projects and ask directly to the Politburo, ignoring the law that the National Assembly enacted.

So is Junin 2. When reporting to the Standing Committee of the National Assembly and feeling troubled, PVN pushed the ratio of state capital contribution from 956 to 547 million USD on the total of 1.82 billion USD (29.9%). The remaining capital is borrowed, but it is still guaranteed by the state. Since then, the National Assembly has no reason to bind the government and PVN to invest in the project. Minister Vo Hong Phuc then had to issue an investment certificate based on the Constitution.

Party leaders are directly involved in the decision to invest abroad.
Party leaders are directly involved in the decision to invest abroad.

Loss, responsibility, and punishment

No need to exploit a single drop of oil, based on what happened, Junin-2 project loss isn't strange. The state pet like Vinacomin, Vinachem, Vinalines, Vinashine, PVN... is the clearest evidence for the failure. They represent the collapse of the communist theory of economic work.

But the party certainly does not seek responsibility from policy writers and policymakers whose party will test good children to implement those policies. A series of persecution of officials, such as Pham Thanh Binh, Duong Chi Dung, Dinh La Thang... are only a consequence of the rapid progress of advancing into "steel punch", "foundation", "mainstream", "key". This is the business, try to imagine a government machine with more than one million billion in the annual budget, struggling with the money and the task of the party entrusted is even more complicated.

The Junin 2 deal dragged $532 million into the river. It was blood, sweat, and tears. There will be people convicted to run charges for the party, but the ultimate responsibility will still be only the people. The magic of the people in that, they were incarnated into the state obviously. It was obvious that there was no need to hide through the famous sentence of Former National Assembly Chairman Nguyen Sinh Hung: "Don't say who making wrong policy must go to prison [...], the National Assembly is elected by the whole people, people decide wrongly, people will suffer, but not discipline anyone".

Understanding the "high sense of responsibility" of the National Assembly and people, the Dung Quat shipbuilding project with a loss of VND 5,000 billion was submitted to the National Assembly for bankruptcy even though the National Assembly did not decide to invest in this project.

Saying that, but the party did not recognize the big mistake from its policy. The party quietly corrected it. The Resolution of the Party Congress in 2011 and 2016 has no longer mentioned the state economy and state-owned enterprises. Instead, the party reserved the viewpoint of "socialist-oriented market economy". Along with that is the process of divesting capital from the food units made to loss-making units such as Sabeco, Vinamilk, PVN, ... However, nothing guarantees the future of other "socialist orientation" state enterprises.

The process of punishing loss-making state enterprises is the most important blow in the "fight against corruption" launched by the General Secretary and State President Nguyen Phu Trong. PVN suffers from the most severe pain, since 2016 up to now. The whole group lived in fear. There are businesses where the number of people arrested and fled to the mass. Dinh La Thang was arrested, the successor of Phung Dinh Thuc was arrested, not long after his successors Nguyen Quoc Khanh, Nguyen Xuan Son and now Nguyen Vu Truong Son also became "firewood".

Meanwhile, the loss projects, the violations committed by these people have been warned for a long time but the party still appointed and suddenly detained and tried to make the public question "is this the fight against corruption?

But despite any form of "burning furnace", the party can kill PVN, not socialism. General Secretary Nguyen Phu Trong understood this better than anyone.


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