Truong My Lan, a prominent figure in Vietnam’s real estate sector, was this month sentenced to death for embezzling a staggering 304 trillion dong (equivalent to $12.5 billion), in one of the country’s largest cases of financial fraud. As the executive of Van Thinh Phat Holdings Group, a major real estate corporation, Lan was found guilty of orchestrating a sophisticated scheme. The elaborate plan involved diverting $12 billion from Saigon Joint Stock Commercial Bank (SCB), an institution that had been under her control for over a decade, into shell companies. She held indirect ownership of 91.5 percent of SCB’s stake and instructed the bank’s leaders to authorize loans for companies within Van Thinh Phat’s network, facilitating her withdrawal of funds from the bank.
Beyond its monetary value, the Van Thinh Phat case reflects a widespread practice among successful real estate businesses in Vietnam: utilizing a specific bank as a personal piggy bank to finance large-scale property acquisitions. Given Vietnam’s extensive and capable security apparatus, it is hard to believe that the Communist Party of Vietnam (CPV) remained completely unaware of this corruption before Lan’s arrest in late 2022. It also seems improbable that no influential party members were involved in the firm’s illicit activities prior to its downfall. This raises questions about the CPV’s selective approach to exposing corruption, implying a deliberate strategy in choosing which cases to publicize. From this perspective, the decision to bring the Van Thinh Phat corruption case to light is particularly intriguing, given its potential negative economic and political consequences for the CPV.
First, the economic fallout of Lan’s corruption case and the ongoing anti-corruption campaign is already being felt. Initially arrested on bond fraud charges, Lan’s apprehension stirred panic among SCB depositors, igniting a bank run. Lan’s arrest, coupled with her subsequent trial and sentencing, has generated uncertainty within the business community. This case will probably further paralyze the bureaucracy as it avoids making business decisions for fear of being implicated in a corruption case. Vietnam’s economy slowed sharply in the January-March quarter, partly attributed to a worsening real estate sector crunch amid the ongoing anti-corruption campaign. Similar to China, corruption has acted as a catalyst for Vietnam’s economic development; thus, intensifying the anti-corruption drive may inadvertently hamper economic growth. Given that the CPV’s legitimacy is heavily reliant on economic performance, the decision to publicize this corruption case is rather puzzling.
Second, the exposure of this corruption case again sheds light on the underlying structural weaknesses of the system. While it may demonstrate the CPV’s genuine commitment to combat corruption, it also reinforces the public’s perception of institutional shortcomings. For example, questions may arise regarding how Truong My Lan’s fraudulent activities could have persisted unchecked for so long, casting doubt on the competence of authorities to address such issues effectively.
The escalation of the anti-corruption campaign further underscores the fact that corruption is systematic in nature. Corruption on such a massive scale as the Van Thinh Phat incident further highlights that corruption is not anomalous but is rather a symptom of deeper weaknesses in the political system. Addressing this requires institutional reforms rather than sporadic interventions involving the punishment of specific corrupt businesses or officials. However, the lack of serious consideration and adoption of such reforms raises suspicions that the anti-corruption campaign has been, and may continue to be, exploited for political gain. It is not surprising that some argue that revealing the Van Thinh Phat case may, indeed, reduce trust in the CPV as it could be interpreted as yet another instance of internal conflict among officials.
In light of these costs, the CPV’s efforts to bring this corruption case to light, and allow widespread coverage of by state media outlets, are particularly puzzling. Why is the CPV so committed to uncovering this corruption case and intensifying the anti-corruption campaign despite the potential repercussions? I think that by doing so, the current leadership of the CPV is attempting to signal its determination, enduring strength, and ability to address challenges to its authority and power at a time when some predict that its power is weakening.
Some have speculated that the CPV’s goal of turning Vietnam into an upper-middle-income economy by 2030 and a high-income economy by 2045, will eventually spur political change due to both internal and external pressures. Externally, this economic ambition requires Vietnam to further integrate into the global economy, meaning more free-trade agreements and closer ties with democratic countries. This, as a result, may create favorable conditions for a strong civil society at home to demand political reforms. Internally, given that corruption has facilitated economic growth, faster growth in Vietnam will almost inevitably mean more corruption, which could eventually make the current system vulnerable to challenge.
However, the CPV has signaled its capacity to handle both threats to its stability. For example, it has effectively tightened its grip on the public sphere, arresting many activists and restricting the activities of non-governmental organizations (NGOs) and social movements, especially since 2016. This action, which comes as Vietnam integrates more deeply into the global economy, highlights the CPV’s determination and capacity to deal with unintended consequences.
In this context, intensifying the corruption crackdown signals the determination of the CPV, particularly the political faction that currently holds power, to wipe out corrupt activities (and the involved politicians) in order to prevent this from destabilizing the CPV from within.
First, the death sentence handed down to Lan clearly signals the CPV’s willingness to crack down on once-untouchable figures. By touching one of the most powerful businesses in the country, the CPV has once again emphasized its ultimate power and authority. It is worth noting that Lan and Van Thinh Phat were once considered very secure in their business ventures. At a time when other tycoons in real estate faced legal issues, the company was still able to acquire prestigious land and expensive properties. It developed five-star hotels and commercial centers or left land unused for decades without concern for efficiency.
Second, considering that super-successful businesses often require political connections and backing, it would not be surprising if retired or current high-ranking officials associated with this business were soon to be or have already been arrested. The sentencing of Lan likely signifies just the initial phase of a broader crackdown on both political figures and businesses. Indeed, it is rumored that Van Thinh Phat’s rise and fall were linked to Le Thanh Hai, the former secretary of the Ho Chi Minh Party Committee and member of the Politburo during 2006-2016.
While he only received disciplinary action in 2020 for violations in planning the Thu Thiem Urban Area in Ho Chi Minh City, the revelation of the Van Thinh Phat fraud may send a message that politicians linked to the company and Hai’s network could soon become targets of the anti-corruption drive. While only one State Bank of Vietnam team has been implicated so far, many other businesses and politicians may now perceive the CPV’s stance as a warning.
Publicizing this case suggests the CPV’s confidence in its ability to manage the situation and willingness to confront any unintended repercussions. Those overseeing the corruption investigation may be asking themselves, “If we’re not confident, why bring this to light?” This move hints at the rapid expansion of the anti-corruption campaign and may foreshadow an imminent political shakeup.