Vietnam's leaders are losing their way:

The Financial Times (London)
By Jeremy Grant

Every morning, loudspeakers across Vietnam play martial music and shrill messages urging people to heed Communist party directives. Red banners strung across the streets of Hanoi declaim: "May The Communist Party Live Forever!"

But while the outward signs of its power seem unassailable, underneath, one of the world's few remaining communist systems has lost its way.

Adrift in a policy vacuum filled with factional divisions, the leadership seems to have shrunk from confronting the challenges posed by a stagnating economy, plunging foreign investment, and peasant unrest - despite a recent reshuffle that held out the promise of change.

Calls for action have come from within the party's own ranks. This week, it emerged that three party intellectuals had appealed for "radical political reform" for the party to avoid collapse.

One accused party leaders of wielding "dictatorial power". Another, retired general Tran Do, said the party had no strategy for the future, and warned of further trouble in the countryside. Hanoi has called Gen Do's letter consistent with internal party debate.

Diplomats believe that Hanoi, stung by the Asian financial crisis but lacking any response to it, faces its biggest dilemma since the collapse of its erstwhile patrons in the Soviet Union and east Europe.

"They simply don't know what to do. And when they don't, they do nothing," said one. "But if they don't do anything, in two years' time places like Indonesia and Thailand will have reformed, and Vietnam will be left even further behind."

No one is predicting the collapse of the Communist party. It maintains a formidable security apparatus, bolstered with the recent choice of a military figure, General Le Kha Phieu, as party boss. Most Vietnamese have no appetite or instinct for political opposition.

The immediate challenge facing the party is the classic dilemma of such systems: how to reconcile the inevitable shift to a more market-driven economy with continued political control.

According to Adam Fforde, an economist at the Australian National University: "I think they'll just muddle along. I can't see anyone with sufficient political capacity at a very senior level who can cut through it all and impose order."

The main problem is the collective structure of the leadership, which recently underwent convulsive change. That has stirred intense factional rivalry.

Far from being a battle between reformists, conservative and military figures - the traditionally held view - the real contest is between clans jealously defending their business interests.

"These labels are wrong. People have misunderstood this system from the beginning. As far as the highest leadership is concerned, their main aim is to defend the status quo because their personal interests are involved. From this point of view they are opportunists," said one analyst.

This week's calls for reforms are not new, but their timing and tone point to widening rifts that do not bode well, either for the party or for Vietnam's ability to attract capital.

An unprecedented encounter between the prime minister, Phan Van Khai, and hundreds of foreign investors last week was designed to demonstrate Vietnam's concern over negative investor sentiment. Mr Khai said he would set up a hotline to his cabinet, inviting businessmen to phone him with complaints. Many saw this as an admission of the system's chronic shortcomings.