Vietnam's president resigns after raising questions about country's stability

(Reuters) — Vietnam's Communist Party has accepted the resignation of President Vo Van Tuong, the government announced Wednesday, a sign of political turmoil that could hurt foreign investor confidence in the country.

The government said in a statement that Duong had violated party rules, and that the shortcomings had negatively affected public opinion and damaged his reputation in the party, the state and personally.

The party's Central Committee, the top decision-making body in Vietnam ruled by the Communist Party, approved Tuong's resignation a year after his election.

The president has a mostly ceremonial role but is one of the four most important political positions in the Southeast Asian nation.

A call to the president's office was not returned Wednesday.

The committee meeting is scheduled ahead of an extraordinary session of Vietnam's parliament this Thursday, when representatives are expected to confirm the party's decisions.

The government statement did not detail Thuong's shortcomings, but recent major leadership changes in the one-party state have been linked to a broader “burning furnace” anti-corruption campaign. It aims to stamp out widespread corruption, but is suspected by critics as a tool for political infighting.

Foreign investors and diplomats have repeatedly blamed the campaign for slowing decisions in a country already struggling with a complex bureaucracy.

Duong, 53, stepped down days after Vietnamese police announced the arrest of a former leader of the central province of Quang Ngai on corruption charges a decade ago.

He was also a senior party official in Ho Chi Minh City Economic City, which has been rocked by a multibillion-dollar financial embezzlement that is currently under investigation.

Duong was widely regarded as Vietnam's most powerful figure and a key architect of the anti-corruption campaign, Nguyen Phu Trong's aging secretary-general.

Foreign investors

Last year, former President Nguyen Xuan Phuc stepped down after the party blamed “violations and irregularities” by officials under his control, and lawmakers took a month and a half to name Thuong as his successor.

The current political crisis could be resolved by quickly electing a new president, but repeated leadership changes risk hurting business sentiment in a country that relies heavily on foreign investment.

The Ho Chi Minh stock market, the country's main stock exchange, fell nearly 3% in the first hour of trading on Monday after news of the president's imminent resignation began to circulate.

Net sales by foreign investors were about $80 million in the first two days of the week, according to broker Mirae Asset Securities.

Tuong's “removal may further slow down political and administrative decisions because officials are more anxious about the course of the anti-corruption campaign,” said a Vietnam-based adviser to foreign companies, though noted that Vietnam's stance on key policies would remain. No change.

Investors, who often praise political stability, won't take kindly to the early departures of two presidents in about a year.

The latest developments raise questions about the “predictability, reliability and inner workings of the system” on which investment decisions are based, said Florian Feyerabend, the Vietnam representative of Germany's Konrad Adenauer Foundation.

However, he noted that “the overall political regime remains stable” and that Vietnam's foreign policy, which aims to maintain good relations with both the US and China, will not change.