Vietnam's Economic Reform: Approaching the 1990s

Author(s): Ronald J. Cima

Source: Asian Survey, Vol. 29, No. 8 (Aug., 1989), pp. 786-799
Published by: University of California Press
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VIETNAM'SECONOMICREFORM
Approachingthe 1990s

Ronald J. Cima

In the determination of national policy, Vietnam's

leaders in the closing years of the 1980s are constrained by economic con-
siderations. Fourteen years after victory over the United States and unifi-
cation of the North and South, the Socialist Republic of Vietnam (SRV)
remains one of the poorest countries in the world. With a standard of
living that for most Vietnamese is lower than at any time since 1975, a
shrinking per capita income variously estimated to be between US$180 and
US$300 per year, unemployment amounting to between 20 and 30%, fal-
tering food production, and soaring inflation, Vietnam carries a "least de-
veloped nation" label. It is one of the few countries in modern history to
experience an economic decline in a postwar reconstruction period and,
along with North Korea, is one of only two communist nations to have
defaulted on its international debt.
Commercially isolated from most of the world, Vietnam's precarious
economy discourages foreign investors despite the potentially profitable
appeal of its low-cost, relatively high-quality labor force. Added to this is
an agricultural and industrial production system characterized by low la-
bor productivity and underutilization of resources, managed by a bloated
centralized bureaucracy ill-equipped to make economic decisions. In
short, the country's economy largely defies standard economic models and
has been termed a basket case by several observers, and a coffin case by at
least one. In contrast, Vietnam is surrounded by Asian neighbors enjoying
unprecedented economic prosperity. Even Cambodia, struggling with its
political instability, stalemated military conflict, and nascent economic in-
frastructure, remains relatively free of Vietnam's oppressive inflation rate
and appears to be faring better in undertaking needed economic change.

Ronald J. Cima is an Asian area specialist with the Library of

Congress. The views expressed herein are the author's and do not necessarily representthose
of the Library of Congress or the United States government.
( 1989 by The Regents of the University of California

786

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 RONALD J. CIMA 787
The South appears to be going its own way economically, with or with-
out Hanoi's consent. The momentum of its pre-1975 economy has proved
more than the central government can, or is willing to control. Rather
than keep it in check, there is increasing evidence that Vietnam's economic
planners have opted to exploit its potential. The worst unrest in the South
since the end of the Vietnam War and the first officially reported public
protests in Communist Vietnam occurred in 1988. Beginning in July, the
demonstrations were held in district and provincial capitals throughout
southern Vietnam, culminating in a Ho Chi Minh City protest in Novem-
ber that involved 300 farmers carrying banners demanding the ouster of
local "mandarins" and the return of confiscated farmland. The protests
stemmed from disputes arising from landowners who were dispossessed in
a 1983 agrarian reform and now were taking advantage of a new agricul-
tural management reform to reappropriate their former properties. A
Central Committee decision in April 1988 to cut back state cooperatives
and farms whose size made them impossible to manage and to redistribute
the land to peasants, although a popular decision, touched off numerous
instances of reappropriation. Many former landowners, from whom land
was seized during Hanoi's collectivization drive in the late 1970s, forcibly
reclaimed what was originally theirs from peasant beneficiaries of the
state's change in policy.
Postwar Vietnamese society is populated by a majority of people in their
20s and younger who, when compared to older veterans of the first and
second Indochina wars, are less oriented to the party, less tolerant of the
rigidity inherent in an authoritarian system, and less wary of Western in-
fluence. People's confidence in the party's leadership has weakened and
old standards of party discipline have broken down. Internal divisiveness
has intensified while opposition to corruption and incompetence among
the cadres has escalated dramatically. The possible consequences posed by
social unrest were amply demonstrated to Vietnam's leaders by the break-
down in political order in Burma in 1988, largely for economic reasons.
The parallel with Vietnam is compelling because of the economic discon-
tent that is present in Vietnam over conditions that are more desperate
than Burma's.1
Disaffection with the regime has been remarkably open. The October
1988 meeting of the Congress of National Trade Unions was extremely
critical of the government's economic failures, particularly low labor pro-
ductivity, the inefficiency inherent in a production system where equip-
ment operated at an average 50% capacity, and the slowness of the food
transportation system where deliveries were often up to three months late.

1. Alan Dawson, "A Burma Lesson for Hanoi," Bangkok Post, October 25, 1988, p. 6.

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 788 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

Delegates openly proclaimed that they would no longer tolerate the falsi-
fied reporting caused by higher echelons not wanting to hear about
problems and difficulties (officially admitted to be a primary cause of food
shortages in the North in the spring of 1988), and bluntly demanded that
party officials explain the reasons behind the difficult living conditions of
the people.
The Fourth Session of the Eighth National Assembly opened in Decem-
ber 1988 amid official pledges that it would be allowed to exercise powers
free of party influence. Since no Central Committee meeting preceded the
session there was nothing to rubber stamp, and the Assembly proceeded to
debate issues in an unprecedentedly frank manner. Vo Van Kiet, Viet-
nam's best known economic planner, addressed the Assembly and warned
that the country's economic problems needed to be addressed before tack-
ling any other problem. Painting a bleak picture of the state of the econ-
omy, he reported that the social, economic, and financial position of the
country had not improved in 1988, although the year "marked the begin-
ning of the democratization process in socio-economic activities."2

Prelude to Change
Recognition of the need to impose some manner of economic reform began
in the late 1978-early 1979 period. The communique of the September
1979 sixth plenum (Fourth Central Committee) introduced several eco-
nomic innovations: a quota and contract system, readjusted purchasing
prices for agricultural products, a measure of factory autonomy and inde-
pendence for local import and export companies, and authorization for
provincial-level state banks to lend money to local entrepreneurs. The
Sixth Party Congress in December 1986 reaffirmed these initial steps and
manifested a new level of commitment to liberalization and reform. The
appointment of reformer Nguyen Van Linh to lead the party, and the pro-
motion of other comparatively young reform-oriented leaders-while rep-
resenting more of an incremental change than an obvious watershed for
the passing of leadership from one generation to the next-reflected, nev-
ertheless, the aspirations of a new Vietnamese generation intent on social
and economic change. It also signaled the end of an era governed solely by
revolutionaries who emphasized security at the expense of social welfare
and modernization. The shifts experienced at the highest levels were ac-
companied by changes in the composition of the Central Committee. The
percentage of party and state functionaries-provincial party secretaries,

2. The full report is in Nhan Dan (Hanoi), December 14, 15, 1988, translated in Foreign
Broadcast Information Service, Daily Report, East Asia (hereafter FBIS, DR/EA), January 4,
1989, pp. 64-71, and January 6, 1989, pp. 74-83.

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 RONALD J. CIMA 789
economic specialists, and technocrats-increased at the expense of central-
level party and government officials and military officers.
Linh's campaign for doi moi (renewal) was launched immediately fol-
lowing the congress, but the progress of change, particularly economic
change, failed to keep pace with expectations. Linh's support stemmed
from the grass-roots where he was praised for battling the aging, corrupt
civil service and entrenched party hacks, but he was strongly opposed
within the ranks of the party's leadership. Economic reforms were initially
stalled or blocked by the resistance efforts of a strong conservative coali-
tion of party leaders made up of ideological conservatives, bureaucrats,
and members of the military establishment. Their differences with reform
advocates centered on the pace of change and the extent to which the
party's institutional role and prerogatives would need to be altered to ac-
commodate change.

Factors Resistant to Change

To the ideological conservatives, relinquishing the party's tight hold on the
economy to the vagaries of the marketplace is perceived as an invitation to
chaos and anarchy; to the bureaucrats, reform means changing the status
quo and threatening the established and often corrupt power hierarchy;
and to the military, it represents a threat to national security because it
diminishes the importance of military strength in favor of economic devel-
opment. Both Defense Minister Le Duc Anh and Chief-of-Staff Gen.
Doan Khue have publicly expressed their concern that economic reform is
being emphasized at the expense of national security and that emphasis on
the economy could demoralize the army. A plan introduced in mid-1988
to cut the country's armed forces to "around one percent" of the popula-
tion as an economizing measure is not likely to be implemented any time
soon, although it was discussed early in 1989 as a possibility once troops
were withdrawn from Cambodia. Such a cut would mean halving the 1.26
million-man army and would be expected to free both funds and man-
power for transfer to the economic sector.3
Implementing economic change has also been subject to the limitations
of Vietnam's communist ideology, which has not been sufficiently revised
to reflect new economic policies. Although the level of ideological dia-
logue concerning the integration of capitalism has been raised, and Linh
has advocated redrawing the boundaries between capitalism and socialism,
there remains the question of how far the party is willing to go. The party,
for instance, is not quite ready to accept the concept of profit because it is
unsuited to the ideals of social egalitarianism. Although rhetoric on the

3. "Military Strength Reportedly to be Halved," FBIS, DR/EA, September 6, 1988, p. 58.

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 790 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

subject supports the idea as a theoretical means to rescue the economy, the
bureaucracy continues to stand in the way of entrepreneurs because of
concern that they might become rich in the process of contributing to pro-
duction.
The same shortsightedness accounts for the lack of competent cadres
and the abysmal condition of the training establishment directed toward
preparing a new generation of technocrats and economic managers.
Although the Vietnamese have always been pragmatic Marxists, never
fully conforming to the red-vs.-expert conceptualization for advancing
their revolution, ideological considerations nevertheless played an impor-
tant role in governing past economic decision-making and, in some cases,
encouraged the substitution of ideological purity for economic competence
in choosing cadre destined to fill managerial roles. The study of economic
theory or management techniques was not encouraged until very recently.
Most importantly, however, the future of Vietnam's economic reform is
likely to hinge on the character of the collective leadership that emerges
following Nguyen Van Linh's eventual retirement. He is said to be in ill
health and his departure could change the balance of reformers and con-
servatives on the Politburo, possibly forcing others to step down in order
to maintain the current balance. If indeed Linh should step down sud-
denly, his likely replacements at this time are Vo Chi Cong, Do Muoi,
Tran Xuan Bach, or Nguyen Duc Tam, none of whom has Linh's commit-
ment to reform, his charisma, or his popularity. A possible longer-range
replacement is Pham The Duyet, 53, party secretary for Hanoi. He is not
yet a member of the Politburo, but he is closely identified with Linh and is
viewed as leading a generational change in Vietnamese leadership.
It is probably safe to say that in 1989 no Vietnamese leaders stand
against the idea of reform. To the contrary, the commonly held view
among senior party leaders is that economic reform policy is "correct."
Vietnam observer Douglas Pike has suggested that the feature separating
factions within the Politburo is less a distinction between reformers and
conservatives than between risk-takers and non-risk-takers. It would be a
mistake, however, to underestimate the strength of the remaining non-risk-
takers, and the drive to move rapidly continues to meet with their resis-
tance. Nonetheless, the old ways appear to have been sufficiently discred-
ited to suggest that the course of change is irrevocable. The currently
popular slogan, doi moi hay la chet (renewal or death), is taken seriously.4
One Vietnamese source was quoted as saying that "it's no longer a ques-

4. Huynh Kim Khanh, "Vietnam's Reforms: 'Renewal or Death'," Indochina Issues, no.
84, September 1988.

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 RONALD J. CIMA 791
tion of taking one step back to leap two steps forward. If we take another
step back, we're dead."5

Domestic Policy Innovations

In addressing Vietnam's socioeconomic problems, party leaders in late
1988 and early 1989 were uncharacteristically bold in their identification
of problem areas as well as in their proposals for change. Nguyen The
Phan, head of the theoretical department of the Marxist-Leninist Institute,
told a January 1989 meeting of high-ranking officials that by following the
Soviet economic model, Vietnam had developed a centralized and subsi-
dized economic system "inferior to capitalism," and "had abolished moti-
vation in people and society." He called on party leaders to learn from
capitalist countries about marketplace competition and science and tech-
nology development, and to discard old theories of Marxism-Leninism
that promote the inevitability of conflict between socialism and capitalism
and the importance of class struggle to social development.6
Goals established and reinforced at the meeting of the National Assem-
bly in December 1988 were consistent with those themes. The primary
goal of reform was described as the development of a commodity economy
that would be more subject to the rules of the marketplace than to govern-
ment regulation. To accomplish this, all economic transactions were to be
based on business accountability, particularly in state-run economic units,
in order to further develop the influence of the market on production and
goods circulation. Expansion of the private sector would be necessary, and
various state-run economic establishments would be guaranteed the right
of autonomy. The system of centralized bureaucratism also would need to
be abolished and, to this end, government staff in all services would be
reduced and superfluous intermediary levels eliminated. Next, the system
of state subsidies-whether for food, import-export operations, or for
state-run enterprises operating at a loss-would be eliminated, and the tax
system revised to rectify unfair tax policies that reduce revenue and incen-
tives.
The Assembly instructed the Council of Ministers to work out immedi-
ately ways to guarantee the actual salaries of wage earners; to adopt appro-
priate settlement measures for groups of wage earners such as the
administrative and service sectors and the armed forces; and to increase
the level of actual income so that the wages paid in these sectors would

5. Frederick Z. Brown, "The Next War in Vietnam," The International Economy 2:6, No-
vember/December 1988, p. 50.
6. Murray Hiebert, "Changing the Guard," Far Eastern Economic Review (hereafter
FEER), January 19, 1989, p. 19.

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 792 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

approximate those of the production and business sector. Wages were to

be more closely linked to the results of labor and the efficiency of produc-
tion. Ideally, responsibility for guaranteeing the minimum level of actual
wages would be placed in the hands of the grass-roots unit directors.
One of the most important managerial innovations under consideration
by the National Assembly was to impose business accountability on state-
run economic units and make them responsible for their own losses. As
Vo Van Kiet pointed out, to do so would require that a clear distinction be
made between the functions of the Council of Ministers and people's com-
mittees, which carry out state administrationin the economic field, and the
functions of the grass-roots units, which directly manage production and
business activities. The result would encourage greater efficiency in the
use of resources, particularly equipment and machinery. In contrast to
past practice, where underutilized machinery and equipment simply sat
idle, business accounting and responsibility for incurred losses could be
expected to enhance production potential by encouraging autonomous en-
terprises to rent out to collectives or private parties what they did not use.
The Assembly also stressed the need to develop uniform measures to
prevent unexpected price changes and to develop the active influence of
the market on production and goods circulation. It further pointed out
that to correctly use grain and preserve the state's grain stocks required a
switch to grain trading, universal application of business prices, buying
and selling at negotiated prices, using profits in one area to make up for
losses in another, and ending state compensation for trading losses. As-
sembly members concluded that Vietnam in 1989 would be expected to
renovate its management mechanism, meet the minimum demand for
food, and increase its grains stock reserves. It would try to check inflation
and reduce the rate of price increases. The administration would be fur-
ther expected to pay attention to the development of energy, fertilizer, and
cement; step up urban-ruraland inter-regional goods exchange; encourage
direct ties between producers and consumers; and refrain from intervening
in the activities of the production units.
In most cases, initial steps had already been taken to further these goals.
By the end of 1988 a plan to renovate agricultural economic management
was in place, and a measure of autonomy had been granted to some state-
run economic establishments. There was evidence of an increase in non-
governmental economic enterprises, and various industrial, trade, supply,
and banking establishments had already installed business accounting sys-
tems. In addition, some effort had been made to gradually do away with
subsidies through prices, credit loans, and capital investments. To stimu-
late agricultural production, more responsibility for rice-growing had been
turned over to individual farmers; a newly implemented land tenure sys-

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 RONALD J. CIMA 793
tern guaranteed farmers 10-year leases on land; and the revision of a con-
tract system permitted farmers to keep 45-50% of their output rather than
the 25% in effect under the initial system.
To help fight inflation, Ho Chi Minh City authorities decided in the final
months of 1988 to base the salaries of municipal employees on the price of
rice, and a series of devaluations brought the official rate of the dong closer
to the free market rate. The national government also changed its official
policy to encourage the importation of gold, which was formerly forbid-
den. A law passed in early January 1989, intended to help free the
Vietnamese economy from central control, granted entrepreneurs the right
to pool capital and set up their own business organizations. Under it, indi-
viduals and corporations were permitted to establish their own bank ac-
counts, obtain loans, hire labor, and distribute their own manufactured
products. To boost economic activity, the State Council announced in
mid-March its decision to reform tax and excise regulations by lifting du-
ties entirely on some exports and imports, and by reducing taxes on indus-
trial and commercial activities. Agricultural tax policy was also revised in
an effort to make it more fair and uniform nationwide.
The Central Committee's sixth plenum in late March 1989 was con-
vened specifically to review the reforms introduced since the Sixth Party
Congress. The plenum concluded that although new policies were in place
and goals established, the real problem lay in the failure to implement re-
form plans or institutionalize party resolutions in a timely manner.7 To
accelerate the economic reform process, the plenum resolved to emphasize
the implementation and institutionalization of reforms and resolutions al-
ready on the books.
Apparently, it was also decided sometime in early 1989 that acceleration
of economic reforms required that further promotion of political openness
be temporarily halted. A clue to this change in direction was provided in a
speech given by Nguyen Van Linh early in the year to a meeting of jour-
nalists. Linh's message was that the press should moderate its criticism of
the party, a reversal of the role he had encouraged the press to play follow-
ing the Sixth Congress when he had urged journalists to be the vanguard
of the campaign against corruption within the party and to explore contro-
versial topics.
Since the Sixth Congress in December 1986, Vietnam had followed the
Soviet example of glasnost (openness) and, like the Soviets, had moved
more quickly on political than economic reforms. In shifting direction and
concentrating more on economic change, Vietnam deliberately discarded
the Soviet model in favor of the approach to reform that had been pursued

7. Murray Hiebert, "Inflationary Pressures," FEER, April 13, 1989, p. 34.

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 794 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

by China. Experience may have led Vietnam's leaders to reason that

Soviet-style openness was inappropriate to an Asian nation coping with
one of the highest levels of poverty in the world, and the example set by
China may have appeared better suited to Vietnam's immediate needs-
namely, the rapid implementation of free-market reforms. China had
achieved some success at raising rural incomes, introducing free-market
incentives, and improving agricultural production, but had done so while
maintaining a tightly controlled political system. The Soviet approach to
reform (glasnost followed by perestroika)won public support for change by
initiating political reforms before turning to economic restructuring. In
reversing this approach, first Chinese and then Vietnamese leaders may
have reasoned that the economic problems of their respective countries
were more immediate and required solutions first.8

Foreign Policy Innovations

The pursuit of economic reform has initiated a change in the world view of
Vietnam's leaders from an ideologically dominated perspective, emphasiz-
ing both Vietnam's independence and the division of the world into com-
munist and noncommunist camps, to a nonideological view, stressing the
world's complex economic interdependence and Vietnam's need to play a
role. As is true of the high priority given economic considerations in do-
mestic policy changes, the need to undertake change for the sake of eco-
nomic salvation has been abundantly evident in the dramatic shifts that
have occurred in Vietnam's foreign policy in 1988 and 1989. One example
of such a policy shift occurred when Vietnam in 1988 displayed a renewed
interest in the International Monetary Fund (IMF) after 10 years of virtu-
ally ignoring the organization. In its effort to regain eligibility for addi-
tional loans, Hanoi instituted IMF recommendations for reforms in tax
practices and money supply controls and discussed plans to settle out-
standing loans.
Another example occurred when, in a gesture to promote goodwill with
its Asian neighbors, Vietnam in 1989 reversed its long-standing policy de-
nying refugees the right to return home and began to repatriate them,
starting with a group of boat people who voluntarily returned from Hong
Kong in March 1989. In initiating this shift in policy, Vietnam acted to
remove an obstacle to improved relations with its neighbors that had been
a source of friction since the first wave of refugees was generated in 1975.
As countries of first asylum for Vietnamese refugees, many of Vietnam's
neighbors-including Thailand, Malaysia, the Philippines, and Hong

8. A discussion of Vietnam's experience with perestroikais in Ma Zongshi, "Perestroikain

Vietnam," Indochina Report (Singapore), no. 17, October-December 1988.

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 RONALD J. CIMA 795
Kong-had been unduly burdened over the years by the responsibility of
having to provide refuge for the enormous number of people fleeing Viet-
nam. Hanoi's decision to accept refugees who were willing to return was
viewed by the region as an important sign of Vietnam's willingness to ad-
dress regional issues.
The decision to remove all remaining Vietnamese military forces from
Cambodia by September 30, 1989, or even earlier, is in large part moti-
vated by Vietnam's need to remove the single largest obstacle barring its
admission to the regional and world economic community. By disengag-
ing its troops, it hopes to convince China, its noncommunist neighbors,
and the West that it is ending its occupation of Cambodia, thereby ending
its diplomatic isolation and expanding its economic links with the capital-
ist world.
China's role in this endeavor stems in part from Vietnam's need to pre-
cipitate a favorable relationship with its neighbor in the wake of Beijing's
renewed ties with Moscow resulting from the May 1989 Sino-Soviet sum-
mit in Beijing. However, the history of Sino-Vietnamese relations suggests
even more strongly that Vietnam's economic well-being depends upon
China's good will. The absence of a threat from the north in the past has
coincided with periods of relative prosperity for Vietnam. In today's con-
text, reconciliation with Beijing would fundamentally free Hanoi of a ma-
jor strategic distraction and permit the Vietnamese to pursue economic
goals with greater focus. A conciliatory mood developed on both sides of
the border in 1989, partially because Vietnam's proposal to undertake a
complete military withdrawal from Cambodia responded to a basic Chi-
nese condition for improved relations. Formal talks at the deputy foreign
minister level were initiated, and a flourishing cross-border trade in Chi-
nese and Vietnamese goods, centered on the Vietnamese border town of
Lang Son, appeared to confirm that the relationship was in the process of
mending and that economic mechanisms were easing the way.
Similarly, the improved status of cooperation with the United States on
MIA (missing-in-action) and humanitarian issues, initially observed in the
fall of 1987, is rooted in the belief that such overtures of goodwill will
move Washington to stop blocking U.N. aid and World Bank loans to
Vietnam as well as end U.S. opposition to investment from Japan and
Western Europe.
The Politburo is already acting as if the Cambodian situation were re-
solved, having met as early as September 1988 and again in January 1989
to discuss policy in the "post-Cambodia" period.9 Foreign Minister
Nguyen Co Thach referred to this in early January, and earlier he had

9. Murray Hiebert, "Mixed Signals from Hanoi," FEER, November 17, 1988, p. 42.

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 796 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

remarked that Vietnam faced a great opportunity to develop quickly but

development would require putting "an end to the policy of autarchy and
closing our door to the outside world."10 This view was supported by
Pham Doan Nam, a research fellow at the Foreign Ministry's think tank
and a former close aide to Thach, who wrote in the party theoretical jour-
nal, Tap Chi Cong San, in November 1988 that "only by renovating think-
ing about the way of assessing the relationship between our country and
the world . .. can we satisfactorily solve the question of national construc-
tion and defense. It would be shortsighted if we used only the class char-
acter of a nation's ruling circle to determine whether it is friend or foe." 1I
In accordance with these viewpoints, the Politburo concluded that at-
tracting foreign investment was crucial, but that the foreign investment
code approved in 1987 needed to be refined and clarified and a proper
foreign investment infrastructure established. The lack of a proper infra-
structure had caused a number of projects presented by foreign investors
to be turned down. To remedy the situation it was decided that a foreign
trade office should be established as well as a Central Office to Supervise
Foreign Investment. The Ministry of Foreign Economic Relations con-
vened a three-day conference in February 1989, attended by 500 delegates
associated with foreign trade, which discussed modifying Vietnam's ex-
isting foreign economic policies and mechanisms in order to more effec-
tively project their reliability to foreign investors. The following month
the State Council established a State Commission for Cooperation and In-
vestment to draft investment policies, guide both Vietnamese and foreign
partners in cooperation and investment ventures, monitor the implementa-
tion of contracts with foreigners, and assess the success of foreign-invested
undertakings. Ho Chi Minh City went one step further in authorizing the
establishment of a "Zone of Fabrication and Exportation" where foreign
companies would be free to import commodities, assemble products, use
low-cost local labor, and reexport final products.12
The 1987 investment law offered a two-year tax moratorium for joint
ventures, tax exemptions for certain imports and exports, guarantees that
investment capital would not be expropriated or joint ventures national-
ized, and preferential treatment for overseas Vietnamese. By the end of
February 1989, the Ministry for External Economic Relations had issued
some 35 licenses to foreign investors and authorized 26 foreign companies

10. "Nguyen Co Thach Interviewed on Development," FBIS, DR/EA, January 3, 1989,

pp. 70-72. Thach concluded this interview by saying that he and his Politburo colleagues
had "seen light at the end of the tunnel."
11. Hiebert, "Mixed Signals," p. 42.
12. Jacques Bekaert, "Politburo Economic Policy Session Reported," Bangkok Post, Janu-
ary 18, 1989, 4, FBIS, DR/EA, January 19, 1989, pp. 57-58.

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 RONALD J. CIMA 797
to open offices in Vietnam. Ho Chi Minh City, followed by Vung Tau-Con
Dao Special Zone, led all other localities in the number of foreign invest-
ment projects and joint ventures initiated. A large proportion of the inves-
tors were overseas Vietnamese. In 1988 and 1989, the number of visiting
foreign businessmen increased substantially and trade expanded with es-
tablished noncommunist trading partners such as Japan, Singapore, Hong
Kong, France, Indonesia, and India.
Oil exploration contracts were signed with the Indian Oil and Natural
Gas Commission, Belgium's Petrofina, Shell Oil of the Netherlands, and
British Petroleum, although most of the oil produced in 1988 and 1989
came from Soviet-Vietnamese joint ventures. Silk production in the Cen-
tral Highlands, an industry previously aided by Soviet bloc countries
alone, attracted some foreign investment in 1989 from Thailand, Japan,
India, and South Korea. Agreements were signed with the Soviet Union
on cooperation in the cultivation and harvesting of sea products; produc-
tion of rubber, coffee, tea, textiles, leatherware, and shoes; and for Soviet
technical help to the coal industry. An agreement also was signed with
Laos and Cambodia for the exploitation of forests and the production of
plaster; and for the first time, multilateral agreements were signed with the
CMEA countries on making and repairing ocean-going ships, and manu-
facturing machine tools, bicycles, and accessories.
Vietnam's relationship with the ASEAN nations, particularly Thailand,
was determined by the leadership in Hanoi to be of critical importance to
the future of Vietnam's economy. An improvement in relations with Thai-
land, following a January 1989 official visit by Thai Foreign Minister Sitthi
Savetsila, surpassed all expectations and led Thai Prime Minister Chat-
ichai Chunhavan to encourage Thai businessmen to expand trade relations
with the Indochinese countries through the transfer of technology and
joint ventures. The Thai banking community discussed extending Thai
banking services to Vietnam, and a joint Vietnamese-Thai floating restau-
rant opened in Bien Hoa in March 1989. Prospects also improved for ex-
panding economic relations with other ASEAN nations. A joint
Vietnamese-Indonesian bank was established in Ho Chi Minh City; Philip-
pine Foreign Secretary Raul Manglapus ended an official visit to Hanoi in
November 1988 with an agreement on landing rights for the two countries'
national airlines and promises to improve trade ties-and Philippine Air-
lines opened an office in Ho Chi Minh City shortly afterward; and in antic-
ipation of developing expanded trade links with Singapore, the Vietnamese
were reported to be examining sites in the Mekong delta for construction
of additional ports.
The possibility of settling the decade-old Cambodian conflict in the near
future has caused the ASEAN nations to reassess their relationships with

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 798 ASIAN SURVEY, VOL. XXIX, NO. 8, AUGUST 1989

Vietnam, and Thailand appears to have taken the lead. The Thai goal,
rooted in a vaguely defined plan that Vietnam-with its keen interest in
encouraging Thai trade ties-appears to support, is to turn the Southeast
Asian peninsula into an economic "Golden Land" (Suwannaphume in
Thai) with Thailand as its center. According to Chatichai, the cornerstone
of the new policy would be the transformation of "Indochina from a bat-
tlefield into a trading market."13 Although the plan is controversial and
has been criticized for being neocolonial, it reflects, nevertheless, a very
different regional view of Vietnam and Indochina as a whole than pre-
vailed just a short time ago. Regional priorities appear to have shifted
from security to economic concerns. Such a development can be expected
to open the door to Vietnam's eventual participation in regional markets
and cooperative ventures and ultimately serve Vietnam's long-term eco-
nomic interests.
Finally, Vietnam's economic relations with India were greatly improved
as a result of Linh's January 1989 official visit to New Delhi. Memoran-
dums of understanding signed between the two countries permitted Viet-
nam to delay its debt repayment until June 1991, and granted the
Vietnamese credit for the purchase of Indian manufactured goods. India
also expressed an interest in aiding Vietnam to develop its raw silk indus-
try.

Prospects for the 1990s

Although change in the near future may stop short of systemic reform, the
Vietnamese have a history of suspending dogma when required and
pragmatically adopting from foreign cultures what is needed to survive.
As the 1990s approach, Vietnam appears to have finally come to terms
with its peacetime economic problems. Party leaders, having mastered the
art of military struggle in defeating first France and then the United States,
appear to have accepted that yet another struggle is underway that re-
quires the kind of focused resolve previously displayed in wartime. One
Western observer terms the task the "Fourth Indochina War."14 The
country's economic condition having come to the fore in this manner, after
having taken a back seat for decades to the grander goals inspired by
revolution and ideology, is a reflection of a nation in the process of matur-
ing, newly cognizant of its need to claim a place in the global community.
Preparations reportedly are already underway for the party's Seventh
Congress, scheduled to be held in 1991. It is difficult to predict whether

13. This concept is discussed in Paisal Sricharatchanya, "The Golden Land," FEER, Feb-
ruary 23, 1989, 11-12.
14. F. Brown, "The Next War," pp. 46-50.

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 RONALD J. CIMA 799
Vietnam will truly be in a "post-Cambodia" period by then or if the pace
of economic reform will have altered in the interim. It is clear that Viet-
nam's reform leaders anticipate a massive increase in foreign investment
once Cambodia is behind them, and that they believe this will stimulate a
rush of activity to save the economy. But it is premature to expect that
resistance to increasing the pace of economic change will necessarily de-
cline in the next few years. From the point of view of those leaders con-
cerned about diminishing party control, the stakes may remain too high.
Economic liberalization, in their view, invites political liberalization and
the subsequent risk of a decline in party power. At the same time it is
evident that Vietnam's leaders are collectively aware of the social unrest
fostered by economic hardship, and the geopolitical trend that has seen
both socialist and capitalist systems turn away from military confrontation
in favor of economic development. Therefore, should the Cambodian situ-
ation be resolved in a manner satisfactory to Vietnam by 1991, delegates to
the planned congress will be offered an unprecedented opportunity to con-
centrate on economic development issues. The party may very well seize
the opportunity to transform the congress into a vehicle for establishing a
plan for the 1990s that might raise the level of acceptable political risk to
whatever is required to achieve necessary economic goals.

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