Speculation had been rife that premier Nguyen Tan Dung's nomination for the party's new central committee on Sunday signalled he was manoeuvring to challenge the politburo's sole candidate for party chief, the incumbent Nguyen Phu Trong.
Dung's withdrawal effectively ruled out a power bid because he would need to be a committee member to be elected to its politburo and rise to the top post.
Dung, 66, who has served two terms as premier, was overlooked by the elite politburo when it agreed on its nominations for four key leadership posts prior to the congress. Moves against its choices are rare.
Several party sources, who requested anonymity because of the sensitivity of the issue, confirmed to Reuters the congress had voted in favour of accepting Dung's withdrawal, and that of President Truong Tan Sang.
Analysts say Dung, a political heavyweight widely credited with pursuing a pro-business agenda, was at odds with party stalwarts wary of him entrenching his power and influence.
He is believed to have cultivated broad support among businessmen and the wider party. His exit will temper excitement building in Vietnam about the prospect of a rare leadership showdown in a secretive party officially ruled by consensus.
Though Vietnam posted one of Asia's fastest growth rates last year at 6.7 percent and attracted record foreign investment, analysts say resentment has festered among the party's old guard about crises in the banking sector and among state-owned firms during Dung's premiership.
Last year saw unusually fast paced liberal measures being introduced, however, including Vietnam's accession to multilateral free-trade accords, including the U.S.-led Trans-Pacific Partnership.
'Personal politics'
Christian Lewis, an associate at Eurasia Group, said the party's top brass had shown a desire for a balanced leadership and a "reluctance to tolerate the strong brand of personal politics exhibited by Dung."
Dung has neither declared publicly an intention to retire, nor any ambition to lead the party. He has not commented on Monday's outcome and is expected to remain prime minister until the legislature approves a new premier later this year.
It was not immediately clear how many of the more than 1,500 delegates voted to approve Dung's declining the nomination.
To stand a chance of joining the new central committee, according to party rules, Dung had to decline the nomination, then have a majority of the congress vote against his withdrawal. That would have created a path for him to contest the leadership.
David Brown, a Vietnam expert and retired U.S. diplomat, said a new leadership could slow reform momentum.
"Dung is not a flat-out reformer... but while there are people who are dismissive of Dung, there are people who say he's definitely the best of the bunch," he said.
"He knows how to run a government, they're pretty well organised and know where they're going."
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