Topic No.11.

(Politics) Corruption isrampant in every level of Vietnam’s political, economic and social hierarchy.It takes on many forms, de-functionalizes the system the and heavily cripplesthe life of its citizens. Give a detailed report of the extent of the problem,at every level and aspect.     “Corruptionin Vietnam is serious, blatant and rampant” – said Le Van Lan, the deputyoffice chief of the Central Steering Committee for Anti-Corruption in a conferencein July, 2012 held by the National Assembly’s Standing Committee. Corruption,as it was defined in the Anti-corruption Law of Vietnam (Clause 2, Article 1,No, 55/2005/QH11), is the behavior of individuals with status and power whotake advantage of their position to commit actions against the law in their owninterests.

It is indeed one of major challenges in the era of integration andsustainable development as it threats public expectation in the government andaffects the pace of social-economic progress. The problem can be encountered inmany sectors and at many levels. In the long term, unless corruption wassufficiently addressed, a number of potential consequences brought to societywould be disastrous.           To commence with, corruption from theperspectives of citizens is a serious threat. According to the 2006 GlobalIntegrity Report retrieved in 2010, corruption accounted for 3-4% of lost GDPfor Vietnam each year. Moreover, in 2009, public procurement, considered themost susceptible sector to corruption, had its total annual cost of around388,958 trillion, accounting for more than 22% of the Vietnam GDP that year. Areport from VCCI in 2014 established a connection between corruption andeconomic growth. In particular, the study said thatwithout any transmission channel, a one unit increase in Vietnam’s corruptionperceptions index (CPI) leads to an increase in annual growth rate by 0.

23%(from 2000 to 2012). For example, if Vietnam’s CPI in 2012 had increased by oneunit, its 2012-2013 growth rate would have ramped up to 5.65% and its GDP in2013 would account for $164,624 million at 2012 price level.

When investment isincluded as a transmission channel, the analysis shows that a 1% increase inthe share of domestic investment in GDO will lead to an approximate 0.2%increase in GDP growth rate. Statistics lend support to the view thatthe situation is becoming widespread and devastating, and its financial andsocial costs are astounding.  Estimatesshow that corruption can add 10-25% to the costs of public procurement everyyear, and in some case even 40-45%; government procurement is generally between14 to 20% of Vietnam’s GDP, while on a global scale, it accounts more than 5%,from $8.

16 trillion to $11.65 trillion annually.          Since Doi Moi, Vietnam has taken serioussteps toward analyzing and controlling corruption with varieties ofauthorities’ perspectives covering in many aspects, one of which is the threemain levels of the situation. According to Business Anti-corruption website, IndividualCorruption exists primarily in relations between individual residents andpublic official and authorities. One common example is when public authoritiessometimes postpone residents’ access to passport or documents processing inorder to extort bribes, according to the Human Rights Report 2013. Another casecan be observed in health sector, reported from Transparency InternationalVietnam 2011, when patients have to give doctors or nurses some informalpayments to ensure that they receive better health care.  The second group in the list is businesscorruption which occurs in relations between enterprises and public officials. Agood case in point would be kickback on procurement contracts, which is a sortof bribe to obtain an undue advantage, that is, illicitly award the contract tothe firm in return.

According to the Investment Climate State 2013, more than50% of foreign investors surveyed in Vietnam responded that they paid acommission when involving in public bids. Besides, about 26% domestic businessexecutives regard the use of bribery as an essential step to award contracts.The third position belonged to political corruption, taking place in the higherpositions of public administration and on a political level. Probably this isthe most complex level since authorities and top officials often deploy theirpowers and influences to hinder law enforcement forces and control mass mediaover investigating the crimes. Yet there are several clues may lend support tothis secretive circumstance, for example a luxurious life-style or significantincrease in assets of some public officials that is inappropriate to theirlegal income.           Corruption presents in many forms, commonlyconsist of gifts and facilitation payments. Vietnamese culture perceives giftgiving on certain occasions as a traditional practice to express respect andgratitude. However, a certain sector in Vietnamese society recognize gift as aform of bribery.

To be specific, according to data reported from corruptiondone by World Bank Group, in 2009, 15.2% of Vietnamese firms expected to givegifts to get an operating license, whereas 53.7% of firms responded expected togive gifts to secure government contract. “Showing gratitudeused to have more spiritual value than material value. But over the years, ithas become more material and less spiritual, and now in the market economy itis like a transaction”, said Nguyen Huu Ngoc, a well-known scholar in Hanoi inan interview with the BBC Vietnamese journal. And while the line between a giftand a bribe has becoming blurred, there are yet a number of differences betweenthem that need to be identified.

Tran Thu Ha, vice-director of Research andTraining center for Community development stated on BBC Vietnamese: “A gift canbe given in public or anywhere, it needs time to talk and to say thank you,whereas a bribe is often given very quickly and both the giver and the receiverare afraid of being seen by other people”.  Facilitation payments, on the other hand, madewith the purpose of expediting or facilitating the performance by an officialof a regular governmental activity. In other word, such payments seem to be anorm, as they induce public authorities to perform their works. Nonetheless,those unofficial payments, to some extent, change their purpose to the negativeside. Some factual information can be found to prove the point, especially inhealth and education sector. Vietnamese citizens perceive that giving envelopesas a cultural practices when they require medical treatment.

 The situation has become widespread, accordingto a survey in 2012 done by the World Bank and Vietnam’s GovernmentInspectorate, as the number of patients giving envelopes to their doctorsincreased two times over three-year period. In education sector, facilitation payments may perform in terms ofadmittance to favorable schools, awarding academic grades or secure bettermarks.           As regards the frequency of corruption,the issue exists early in 8 sectors related primarily to business operation, includingjudicial system; police; licenses, infrastructure and public utilities; landadministration; customs administration; public procurement and contracting;environment, natural resources and extractive industry. Several high-profilecorruption cases went to trial in Vietnam in 2012-2013. In Hanoi, formerchairman of the Vietnam National Shipping Lines were found guilty ofembezzlement when he paid $9 million dollar for a floating dock in poor qualityand alleged pocketing over $80 million dollar. Another case was the workbetween the Ministry of Public Security and Interpol to apprehend fugitive PhamThanh Hai, an accountant in the government’s department of cinematography, withstealing 42 billion VND from the department’s annual budget beginning in 2009. However,the most dominantly debatable case related to ODA project working incollaboration with Japanese partners.

Japanese media reported that JapanTransportation Consultants Inc. told police they had bribe Vietnam Railwayauthorities to secure a contract for Hanoi’s urban railway plan. In recent time,corruption appears prevalently in the management of land and natural resources,where authorities take bribes to grant title deeds; in the financial bankingsector; in construction which inflate building costs; in management of stateassets where embezzlement, faking invoices occur; in human resource managementwhere bribers gives presents or an amount of money for jobs, promotion; and injudicial sector where judges receive bribes to alter verdicts.

In terms of bankingsector, for instant, one of serious corruption case was the loss of over 1.4billion VND for the Asia Commercial Bank (ACB) allegedly caused by illegalsecurities purchases and deposits by 6 former executives in 2009 and 2011. Anotherproof was the alleged bribe-taking case of the former governor of the StateBank of Vietnam, Le Duc Thuy, who received an undisclosed amount of money fromthe Reserve Bank of Australia and helped this partner to win the banknotesupply contract from 2002 to 2009 in return.

     Corruption in Vietnam, as elsewhere aroundthe world, is a vast challenge and poses many obstacles for future development.Its negative consequences result in various aspects, including investment,business operation and public trust. From a macro perspective, a research doneby VCCI in 2014 reported that corruption affects the national economy mainly ininvestment. Enterprises in Vietnam from 2005 to 2011 conducted by the researchshowed that if a firm bribes, the probability of improving a product decreaseby 6.2%. The data might be inappropriate, however, since the time under surveyis probably long enough to identify and change the trends of the market andfirm’ direction. Nevertheless, the cumulative negative impact of corruption onmacroeconomic performance should not be denied, since another study of CIEM(2012) concluded similar results, that bribe-paying SMEs are less able todevelop and expand their business, and more likely to leave the market.

Fromresident viewpoints, the PAPI (Public Administration Performance Index)findings revealed that in 2012, 42% of citizens agreed that bribes are requiredto receive medical care; 44% of them bribe to get a job in the civil service;25% for their children to receive better treatment at schools. Moreimportantly, those who refuse to give bribes are less likely to have adequatetitles to their property which affects their ability to start and growbusiness; receive inadequate health care, influence their lives and the healthstatus of their children; lose opportunities to obtain education leading tofurther career advancement and wealth. Particularly in education, corruption ineducation threatens to increase educational costs for families and worsen theequality of accessing educational services.

The total costs was more severe topoor families compared to those middle-class as the former pay more for corruptpractices to ensure their children enrolling in the same schools, especiallythe gorgeous ones. Hence, corruption directly increases the inequality inaccess to education. Considering the effects towards public administration,corruption is recognized in AC Strategy of Government of Vietnam, 2009:”Corruption is leading to adverse effects in many ways, eroding the confidenceof the people in the leadership by the Party and the management of the State,giving rise to potential conflicts interest, social resistance, and protest,and widening the gap between the rich and the poor. Corruption has become amajor obstacle for the success of Doi Moi and the fighting force of the Party,threatening the survival of the regime”.     Corruption is typically a national illnesswhich results in serious consequences in the future.

Corruption adverselyaffects long-term economic growth through its impact on investment, taxation,public costs and human development. To be specific, the VCCI’s report publishedon August, 2014 said that corruption is negatively correlated with Vietnameconomic growth through slow down the rise of GDP per capita over years, lowergrowth rates, per capita income as well as human development.  A study from Rotterdam University aboutCorruption and Growth found that corruption affect the quantity, quality, costand profitability of investment for companies. Private sector, although accountsfor nearly 90% of total number of enterprises, are mainly small and mediumscale. They have difficulties in getting access to resources such as land andfinancing for development.

In order to get things done more quicklyappropriately, they used petty bribery, by money, presents or compensation fromthe revenue, to officials and authorities. Some reported that the expendituresfor corruption even cost 20-30% of an investment contract. What’s more, sinceSate-owned companies, based on their relationship with the government, takeadvantage on regulatory privileges in allocating and using resources, they aretreated in a more favorable way, leading to economically inefficient growth forcompanies in both sector and ultimately affect the government’s directiontowards a socialist-oriented market economy. In term of social growth,corruption would raise the cost to obtain health services among resident, thus lowerpeople’s health and reduce longevity. Besides, the costs to acquire educationalservices would rise as well, therefore reducing children going to school,lowering education outcomes (scores, school rankings). Its impact on the humandevelopment would finally undermine long-term sustainable development socialequality.

     General speaking, corruption, in themodern world, is one of pressing issues that is identified in many sectors,ranging from business operation, public administration to health, education andother services. It can be encountered in many levels, from private to topposition of public authorities with increasingly complexity. Vital consequencesbrought to society can be anticipated and, become more destructive once theissue remains unsolved.     

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