Vietnam's economy has been performing remarkably well in recent years. Unemployment is just 2.3 percent. Growth is expected to exceed 6 percent annually until 2019. Disbursed foreign direct investment is set to rise to more than $16 billion this year a record while manufacturing has been booming as companies shift production from China.

Yet even as its economy thrives, Vietnam's politics have been getting more restrictive, with dissidents getting sentenced to increasingly harsh prison terms. Although international criticism has had little effect, this repression is now threatening to curtail the country's hard-won economic progress -- and that may finally get the attention of the ruling Communist regime.

Silencing political criticism has become a depressingly common tactic in the one-party state. Just this year, the prominent blogger Nguyen Ngoc Nhu Quynh known as "Mother Mushroom" was jailed for 10 years for being an "anti-State instigator." Tran Thi Nga, another dissident, got a nine-year term for "spreading propaganda against the State." Last year, the blogger Nguyen Huu Vinh and his assistant, Nguyen Thi Minh Thuy, were both locked up for "abusing democratic freedom." Although all these cases have been decried by human-rights groups, there has been little sign that the regime intends to relent.

The case of Trinh Xuan Thanh, however, may prove to be a turning point. Thanh, a former executive at the state-owned PetroVietnam Construction Joint Stock Corp., fled to Germany last year after being accused of embezzlement. While German officials were considering his asylum request, Thanh was abducted in Berlin, in what the authorities allege was a kidnapping orchestrated by Vietnam's intelligence service. When Thanh resurfaced on Aug. 3, he delivered a televised confession in which he claimed he had voluntarily returned home to face justice -- on charges that could carry the death penalty.

Germany has reacted to the incident in strong terms, lodging an official protest, summoning Vietnam's ambassador to the foreign ministry, expelling an intelligence officer, and threatening to revise its economic and aid relationship with Hanoi.

Far more pressing, the incident could jeopardize a long-sought free-trade agreement between Vietnam and the European Union. The EU is Vietnam's second-largest trading partner, trailing only China. In the past decade, trade between the two has expanded from $10 billion to more than $48 billion. The proposed deal would slash tariffs on products ranging from textiles to footwear to seafood, and give Vietnam a country heavily dependent on exports greater access to a market of 500 million people. By one estimate, the agreement would boost its gross domestic product by about 2.7 percent a year.

Yet even before the kidnapping, some EU states had been arguing that the deal ought to be ratified only on the condition that Vietnam improve its human-rights record. Angering the strongest economy in the EU bloc by conducting an extra-judicial detention on its territory will hardly improve things.

Such tactics are also likely to impede investment. Many of Vietnam's regional rivals for attracting overseas investors such as Indonesia and the Philippines are democracies. They have problems of their own, of course. But research has found that democratic institutions can reduce risk for foreign investors, and that Vietnam could increase its FDI significantly by expanding democracy. Further repression, in other words, would be a competitive disadvantage.

Vietnam has long ignored international pressure to allow greater freedom of expression and to respect the rule of law. Its trading partners should demand better as a condition for further cooperation. If criticism won't change any minds in the ruling party, perhaps the bottom line will.

By Ilaria Maria Sala - Bloomberg - August 24, 2017