Vietnam Approves New Leadership

By NGUYEN PHAM MUOI

HANOI—Lawmakers approved Truong Tan Sang as Vietnam's next president Monday, as the communist country moves to cement its leadership for the next five years at a time of major economic challenges.

Mr. Sang, 62 years old, moves to the largely ceremonial role from his current position as a standing member of the Central Party Committee, second in power only to the general secretary of the Communist Party.

The government said in a statement the National Assembly had endorsed Mr. Sang to succeed Nguyen Minh Triet, 70, who is set to retire.

Having confirmed Mr. Sang, the National Assembly—Vietnam's most powerful lawmaking body—is expected Tuesday to officially approve a second five-year term for Prime Minister Nguyen Tan Dung, who survived a potential revolt over his perceived mishandling of the economy and the debt bomb that nearly brought down state-run Vietnam Shipbuilding Industry Group, also known as Vinashin.

Vinashin was on the brink of bankruptcy last summer after amassing $4.4 billion in debt, damaging the government's efforts to build up large, state-run conglomerates.

The new government and the cabinet, expected to be unveiled next week, will face an economy that was once one of the most promising among emerging markets but still needs a desperate shake-up.

Carlyle Thayer, a professor at the Australian Defence Force Academy at the University of New South Wales and an expert on Vietnam, said the promotions more likely signal a continuation of the status quo than a meaningful shift in policy. The officials set to be promoted are "known quantities"—technocrats from within the system, he said. "So there's continuity."

"There is no sign of massive reform," he added.

Battered by spiraling inflation and rising trade deficits, the Vietnam government was pressured earlier this year into shifting away from its long-standing policy of focusing on growth, and under what's called Resolution 11 will trim credit growth, ban the use of foreign currencies in the market, limit the use of gold, trim public investment and seek to boost domestic production.

The policy changes appear to have had little impact so far. Data released on Saturday showed prices in July were up 22.16% from a year earlier, exceeding June's 20.82% increase—indeed, it the biggest increase since December 2008. For the January-July period, the country had a trade deficit of $6.639 billion.

Nor has the stock market shown much confidence; the main index is down 15.5% this year.

"People's tolerance of inflation is getting less and less. Pressure on the new cabinet on this front is naturally overwhelming," said Vuong Quan Hoang, of Hanoi-based DHVP Research & Consultancy, adding that the country's large trade deficit won't be fixed in the short term, and that unemployment could also emerge as a major problem. In short, economic turmoil is likely during Mr. Dung's second term, "since these problems have not been addressed adequately, and have not even appeared clearly on the new agenda."

Saturday, lawmakers voted to appoint Deputy Prime Minister Nguyen Sinh Hung as chairman of the National Assembly, the assembly said in a statement. Mr. Hung recommended Mr. Sang as the sole candidate for the position of the state president.

They also chose Vietnamese central bank Gov. Nguyen Van Giau as chairman of the National Assembly's economic committee. Mr. Giau is expected to leave his post at the bank later this week. He will be succeeded by Nguyen Van Binh, who is expected to be appointed by the government early next week.

Write to Nguyen Pham Muoi at phammuoi.nguyen@dowjones.com