Anti-corruption: Vietnam’s ‘blazing furnace’ crackdown a double-edged sword for lawyers
Aerial view of Ho Chi Minh City where the[Truong My Lan] trialtook place and where Saigon Commercial Bank was based efired/Adobe.Stock.com
As the Vietnamese government continues its corruption ‘purge’, lawyers say it’s causing initial headaches – but they expect longer-term benefits.
‘The goal is to remove corruption as far as possible’, says Boris Hall, a lawyer at law firm Baker & McKenzie who’s based in Ho Chi Minh City. ‘There might be some short-term turbulence but the long-term result will be less corruption, which can only be good for a country.’
Vietnam currently ranks 83rd out of 180 countries in Transparency International’s 2023 Corruption Index. Here it fares better than neighbouring Thailand, which ranks at 108, with Cambodia at 158 and Laos at 136.
Corruption in Vietnam can play out in the form of facilitation payments, kickback schemes and bribes used to circumvent or speed up bureaucratic processes – as well as to influence decisions – in what the Asian Development Bank classifies as one of Asia’s fast-growing economies.
Problems can arise in much of Asia ‘because of the infrastructure developments and the roles of multilateral development banks and aid funders’, says Rob Wyld, a Member of the IBA Anti-Corruption Committee Advisory Board and a consultant on commercial civil and criminal law at Johnson Winter & Slattery in Sydney.
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[Blazing furnace] presents an opportunity for lawyers to offer their services
Hanim Hamzah
Member, IBA Law Firm Management Committee Advisory Board
But corruption in Vietnam isn’t limited to foreign investment. Nguyen Khac Giang, a Vietnamese writer and current affairs researcher, describes corruption as ‘inherent’ in the country. In April, for example, the country’s biggest ever financial fraud case saw local businesswoman Truong My Lan sentenced to death for her role in fraud amounting to $12.5bn.
The Vietnamese government, led by the Communist Party, has attempted to tackle corruption for many years but recently has taken a harder stance – an anti-corruption drive called the ‘blazing furnace’. The campaign has led to arrests and resignations at the highest levels, the likes of which haven’t been seen elsewhere in the region, says Hai Hong Nguyen, an associate research fellow at the Centre for Policy Futures within the University of Queensland.
The motivation is to create an image of a clean government, says John Frangos, a partner at Southeast Asian law firm Tilleke & Gibbins. ‘The Communist Party of Vietnam stakes their legitimacy in large part on being there for the people, and if the people of Vietnam view the system as corrupt, it weakens the party’, he explains.
The last several months have seen multiple government ministers arrested as part of the clampdown and its resulting investigations. Alongside the anti-corruption drive, there has been further upheaval in the government, with Vo Van Thuong resigning as Vietnam’s President in March, and Vuong Dinh Hue, the head of the country’s parliament, stepping down in April. In each case the Communist Party said that unspecified ‘violations and shortcomings’ were the reason for the resignations.
That this is happening to high-profile personnel ‘indicates to lower-level officials that they have to be very careful’, says Frangos. This means delays and an increase in bureaucracy as local lawyers look to navigate business and investment deals. Lower-level officials, who have jurisdiction over the business environment, are opting to escalate decisions to superiors where previously they’d have simply used their own discretion, Frangos says. ‘But at the same time, it’s better in the long-term to have a less corrupt environment’, he adds. ‘It’s better for the economy and it is a better environment to do business and for the country’s development.’
Already Vietnam is seeing the benefits as more companies, such as Samsung, view the country as a viable choice for increased investment, says Nguyen. The lawyers behind such opportunities will, however, need to be mindful of the more stringent context in which they’re operating.
They should be mindful of regulations and take a conservative approach when advising clients, Frangos says, ‘in other words, don’t push the envelope so much [or] take an expansive view of regulations’. He adds that clients should have strong anti-corruption compliance programmes in place.
Lawyers and their clients must also be careful as to how they make payments and engage with third parties and government, says Wyld. ‘People have to be far more attuned to what might have normally been done [and] almost double and triple check it so that if payments are requested […] because a third party is involved, [ask] why’, he says.
The situation presents an opportunity for lawyers to offer their services, says Hanim Hamzah, Member of the IBA Law Firm Management Committee Advisory Board and KPMG Law’s Asia Pacific Regional Leader for Legal Services, as companies look for greater clarity in times of change. ‘There’s a new scope of work that is borne out of laws and regulations because clients need guidance’, she explains.
‘The best outcome is to pre-emptively have the systems, policies, training, audits and due diligence in place to avoid compliance issues happening within your supply chain or organisation’, says Hall of Baker & McKenzie. As a result of the anti-corruption drive and the measures companies will now implement, Hall believes that in ten years’ time, corruption in Vietnam will probably be substantially reduced.
This will require the further embedding of thinking around anti-corruption into the legal system, says Nguyen. In this sense, Giang believes Vietnam can learn from Singapore, which has a Corrupt Practices Investigation Bureau. Transparency International have given the city-state a corruption ranking of five, which stands in contrast to the rest of the region.
However, Frangos says that Southeast Asia isn’t like Europe, where countries might influence each other’s legal approaches. Instead, it’s more siloed by nature, and neighbouring countries won’t necessarily follow the ‘blazing furnace’ crackdown in Vietnam.
Hamzah believes the eradication of corruption in Vietnam itself remains ‘another generation and a half away’ because poverty persists alongside limited access to infrastructure and services in the country. These can be driving factors behind corruption. When people lack the essentials they need to survive, ‘one would argue it would compromise certain values’, she says.