- Vietnamese real estate tycoon Truong My Lan has been sentenced to death for his role in a $12.5 billion fraud case.
- Lan’s fraud case is part of Communist Party Secretary Nguyen Phu Trong’s fight against corruption.
- The anti-corruption campaign has impacted Vietnam’s economy and investment climate.
A mega fraud case has shaken Vietnam, shining the spotlight on an emerging economy that is positioning itself as an alternative to China.
On Thursday, Vietnamese real estate tycoon Truong My Lan was sentenced to death. for his role in a $12.5 billion fraud that took place over a decade, representing approximately 3% of the country’s GDP. Prosecutors say damages from the fraud could reach $27 billion.
Lan, president of real estate developer Van Thinh Phat Group, was arrested in 2022 for this fraud case. She was found guilty of embezzlement, corruption and violating banking rules.
Lan has denied the accusations and intends to appeal, according to media reports.
The high-profile fraud case has scandalized the country and raised questions about the single party. Vietnam has become a leading country for manufacturing outside of China, as global companies seek to diversify their supply chains.
To put the scale of the Vietnam fraud case in context, consider the 1MDB affair, which shook Malaysia and the world when it began to unravel in 2015. In that scandal, investigators believe that top officials stole $4.5 billion from the Malaysian state fund. The Lan case concerns figures almost three times higher.
Foreign direct investment in Vietnam reached a record high of $36.6 billion in 2023, according to official data.
Hanoi’s corruption crackdown hits Vietnam’s economy
Lan’s fraud case is just one example of Vietnamese Communist Party Secretary Nguyen Phu Trong’s sweeping crackdown on corruption.
Notably, two Vietnamese presidents resigned in two years amid repression. The Vietnamese Communist Party did not specify the reasons for their resignations, but they were linked to the country’s anti-corruption campaign.
The so-called “Burning Furnace” crackdown on corruption has damaged investment and market confidence, with investors questioning whether Hanoi can guarantee the integrity of its banking system, bond market and economy in a context of rapid economic growth in the country. Vietnam’s GDP grew by 5.05% in 2023 and 8.0% in 2022.
“Government regulators are overwhelmed,” Zachary Abuza, a Southeast Asia expert at the National War College in Washington DC, told Bloomberg. “They can’t keep up with the growth of the economy. Look at the volumes of money flowing into the country. They just don’t have the manpower. And they’re paid so poorly.”
Foreign investors have been “cautious” since the Lan deal was announced, Trang Bui, country director of Cushman and Wakefield, a commercial real estate services company, said at a news conference in December, according to Nikkei .
Vietnam’s benchmark VN index fell 33% in 2023 due to the anti-corruption campaign. It is up 12% this year to date.
For now, government officials are reviewing license and project approvals, further slowing down bureaucratic processes.
“Especially now, everyone is afraid,” Bui said, according to Nikkei. “It’s a big cleanup.”
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