Vietnam must tame self-serving elites

The arrest of Nguyen Duc Kien, one of Vietnam's wealthiest and most prominent businessmen, on suspicion of "economic violations", has severely rattled the country's economy. Yet this episode is only the most recent evidence of an emerging struggle over the country's economy. Vietnam, which has been widely assumed to have a bright developmental outlook, is now in the doldrums. And there is profound uncertainty as to whether and how it can get out.

Concerns about the economy have been brewing for some time. The near-collapse of the state-owned Vinashin group in 2010 under a mountain of bad debt and a cloud of shady dealings was only the most spectacular in a series of business failures featuring state-owned and state-linked firms.

Anything-goes lending and rampant property speculation have contributed to double-digit inflation, at once corroding the economy while undermining the economic security of vulnerable households. Nor is relief in sight. Foreign investment has declined precipitously alongside the global recession, further dampening growth and employment. In the meantime, prices for food and essential services continue to rise. None of this has helped Hanoi's performance legitimacy.

And, yet, none of this comes as a surprise to Vietnam watchers. Lax governance and market liberalisation - a hazardous combination in any setting - are occurring within the context of a highly opaque polity in which power and rank is increasingly put at the service of self-maximising ends.

To some, the arrest of banker Kien, who is close to Prime Minister Nguyen Tan Dung, suggests that a power struggle is under way. At the very least, the arrest has shaken Vietnam's economy and its secretive political establishment.

Vietnam's current troubles are profoundly political. Perhaps more than any other country in East Asia, Vietnam's elite has historically been a pluralistic one. In the past, it has been argued, such pluralism ensured unity and strength in the face of adversity. In the context of a market economy, however, elite pluralism has devolved into pluralistic opportunism that is now endangering growth. Using elite membership as a licence to cash in, a new breed of elite, nurtured largely within and on the borders of the party, is endangering the country's prospects.