Will Vietnam’s Richest Man Be Safe?

Rumours spread like wildfire on Vietnam’s social media channels last week that Pham Nhat Vuong, Vietnam’s richest man and chairman of Vingroup — Vietnam’s largest private conglomerate — had been subject to overseas travel restrictions. This fuelled speculation that he would soon fall victim to the Vietnamese government’s anti-corruption campaign. In recent months, authorities have prosecuted some prominent business people, including Trinh Van Quyet, founder and chairman of FLC Group, and Do Anh Dung, chairman of Tan Hoang Minh Group.

However, on 11 July 2022, Lieutenant General To An Xo, the spokesperson of the Ministry of Public Security (MPS), dismissed the rumours as fake news. He announced instead that the Ministry was probing nine people in seven localities for spreading this false information. Nevertheless, his statement failed to completely dispel the suspicion of some netizens that Vuong might really be in trouble, as they pointed out that his case followed the pattern of previous arrests. For example, Trinh Van Quyet was similarly restricted from overseas travel in late March, and a day after the MPS dismissed rumours that he would be arrested, Quyet was arrested on stock manipulation charges.

These rumours seem to have led to a selloff of Vingroup shares on the stock market. On 6 July 2022, Vingroup’s share price tumbled 6.64 per cent to hit its lowest point in three years. In subsequent days, its shares were traded in the red most of the time.

Despite the inconsistency in the MPS’s messaging, there are strong grounds to believe that Vuong will likely stay safe, at least for the foreseeable future.

This is not the first time that rumours about Vuong’s legal troubles have abounded. In 2018-2019, there were similar rumours that Vuong’s passport was withheld and that he was prevented from travelling abroad. Then, the rumours seemed to arise from the investigations into Vuong’s younger brother, Pham Nhat Vu, for his involvement in a grand corruption case related to the state-owned mobile carrier Mobifone’s fraudulent acquisition of AVG, a media company of which Vu was chairman. The rumours worried investors and prompted some to seek verification. However, Vuong was not implicated in that scandal.

This time around, two possible issues may have fuelled the new rumours about Vuong. The first is related to the Vietnamese government’s ongoing crackdown on illegal corporate bonds. In April, the principals of Tan Hoang Minh Group were arrested and prosecuted for illegally issuing bonds and using the raised capital for unauthorised purposes. Vuong’s Vingroup is known as one of the largest corporate bond issuers in Vietnam. In May, the company issued US$525 million in bonds to international investors to raise capital for its automobile business. The following month, it raised another US$100 million for its real estate projects. Vingroup’s massive bond issuances may have led some netizens to speculate that Vingroup would also be targeted in the crackdown. However, so far there have been no indications that Vingroup’s corporate bond issuances have violated regulations or are subject to investigation.

However, in a country where corruption remains widespread and most businesses still rely on political connections to prosper, business owners are aware that the same politicians that built them up may one day bring them down.

The second possible reason may be related to Vingroup’s real estate business. Vinhomes, Vingroup’s real estate arm, is known to have acquired land for some of its past real estate projects, especially in Hanoi and Ho Chi Minh City, from state-owned enterprises (SOEs) or government agencies without going through a public bidding process. However, while some projects by other developers that acquired land in the same way have been investigated, none of Vinhomes’ projects have officially been probed.

It should be noted that the government normally only criminalises government officials or SOE managers who approved the unauthorised transfers of public land to private investors at undervalued prices. So far, the government has largely spared the developers, lest this scares off investors and causes market routs. In most cases, the developers were allowed to keep the land, especially if it had been developed, but would be asked to make additional payments to the government to match market prices for the land acquired unlawfully.

An important factor that also plays in Vuong’s favour is Vingroup’s status as Vietnam’s largest private conglomerate. The company operates in a multitude of different industries, ranging from real estate and hospitality to education, healthcare and manufacturing. It is a major taxpayer and employs tens of thousands of employees. Prosecuting its founder and chairman will definitely send shockwaves through the Vietnamese stock market and might even threaten to destabilise the economy.

At the same time, VinFast, the company’s new automobile business, is now leading Vietnam’s efforts to build an indigenous automotive industry. Vuong’s bold efforts in this area have received strong support from the Vietnamese government as they align with the country’s industrialisation plans and embody Vietnam’s ambition to become a high-income economy by 2045. VinFast’s recent plan to invest US$4 billion to build a major electric vehicle factory in North Carolina, USA has added to Vuong’s leverage with the Vietnamese government. If Vuong is in legal trouble, the project may derail, depriving Vietnam of a promising avenue to strengthen its economic links with the United States.

The likelihood that Vuong has fallen from grace and will be sanctioned by the Vietnamese government is slim. Vuong will likely continue to be left alone to run his businesses and make further contributions to the national economy.

However, in a country where corruption remains widespread and most businesses still rely on political connections to prosper, business owners are aware that the same politicians that built them up may one day bring them down. Vuong would have to play his political game carefully and wisely to protect his fortune while further growing his business empire.

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