Where is Vietnam heading?

by Michael Alexandros

Michael Alexandros is an Australian socialist currently living in Vietnam. This article was originally presented as a talk at the second Asia Pacific International Solidarity Conference in Sydney.

CONTENTS
Vietnam: Behind the region?
Post-war impoverishment and the Cambodian war
‘Doi Moi’ economic renovation
Early 1990s
The challenge of 1997
Post-1997 economic changes
Economic direction
WB/IMF/WTO demands
Reactions to World Bank agenda
How socialist is the state sector?
Political changes under the post-1997 leadership
Party, state and masses
Workers' struggles


How far have the Vietnamese people progressed along the road to socialism, the second goal of the historic leadership of the Vietnamese Communist Party (VCP), which led the unquestionably successful struggle for the country's national liberation?
To begin to answer this question, we need to look at the country they inherited in 1975. US bombing—the most devastating attack on any country in history—ensured that the economically devastated nation would not have the material foundations to build socialism, or to offer any attractive alternative to neighbouring peoples. This helped restrict the revolutionary wave to impoverished Vietnam.
The impressive health, education and welfare statistics we regularly cite regarding Cuba, and their contrast with the misery throughout the capitalist Third World, have been a huge inspiration to socialists. But Cuba was able to achieve this through decades of relative peace.
Moreover, Vietnam exists within the one region of the capitalist Third World, south-east Asia, that has actually experienced considerable growth. Therefore, the contrasts we make between Cuba and the misery of capitalist Latin America are reversed—Vietnamese "socialism" is said to bring poverty, compared to the "dynamism" of capitalist south-east Asia.
In the early 1990s, the then prime minister, Vo Van Kiet, visited various south-east Asian countries and reported that Vietnam was decades behind the region. For him this was a strong case for not only continuing with the market-oriented economic reforms begun in 1986, but for deepening them to a point that threatened Vietnam's socialist foundations.

Vietnam: Behind the region?

Here I want to offer a counter-argument, which is not aimed at denying Vietnam's poverty, and the appalling conditions, including health and education conditions, which Vietnamese share with most of the Third World. That Vietnam is behind the region in terms of GDP per capita is hardly surprising given that these other countries were able to grow in peace for decades while Vietnam was being "bombed back into the Stone Age".

Table 1: Economic and Social indicators in Some Asian Countries (World Bank, World Development Indicators, 1999, for the year 1997)
Vietnam
Bangladesh
India
Indonesia
Philippines
Thailand
GDP per capita
$350
$350
$440
$972
$1092
$2593
Literacy
94%
40%
56%
86%
95%
95%
Life expectancy
68
58
63
65
68
69
Infant mortality/1000 births
29
75
71
47
35
33
Maternal mortality/100 000 births
105
850
440
390
210
200
People/hospital bed
263
3300
1250
1428
910
600
People/doctor
2500
5000
2500
7000
10 000
5000
Child immunisation measles/diphtheria
96/95%
97/98%
81/90%
92/91%
83/83%
92/96%
Births medically assisted
79%
8%
35%
36%
53%
71%

But if we compare Vietnam's social indicators to those of these capitalist countries with higher GDP per capita, and to those with similar levels to Vietnam, a different picture emerges, which suggests that a socialist revolution even in such adverse conditions brings a considerably better distribution of what wealth is created.
Vietnam's key 1997 indicators—a literacy rate of ninety-four per cent, life expectancy at sixty-eight years and an infant mortality rate of twenty-nine per 1000 births—were roughly equivalent to those of Thailand and the Philippines, which had GDP per capita levels eight times and three times higher; the maternal mortality rate and the number of births attended to by skilled medical staff were better for Vietnam than for regional countries.
When converted to people's purchasing power (PPP), which gives a better measure of what can be bought in these countries with this amount of dollars, Vietnamese GDP rises to $1689, still far behind Thailand, the Philippines and Indonesia, whose figures rise to $5456, $3555 and $2651 respectively.
But even PPP tells us little about which people get to spend this money. Perhaps sweatshop, brothel and plantation owners in Thailand can buy lots of cars, but that doesn't mean that Thai peasants have more food, schools or health clinics than Vietnamese peasants.
Indonesia, formerly seen as an aspiring "tiger", has a literacy rate eight points behind that of Vietnam, life expectancy three years behind, infant mortality nine per thousand worse than in Vietnam and maternal mortality four times as high.
Vietnam's $350 per capita in 1998 puts it on the level of Kenya ($334), Bangladesh ($348) and Haiti ($370), while its PPP is roughly the same as that of Pakistan ($1715) and Guinea ($1782).
The table shows how drastically lower are the social indicators in Bangladesh. Similarly, in Guinea only thirty-six per cent of adults are classed as literate, the life expectancy is forty-seven years and infant mortality stands at 124 per 1000. These figures for Pakistan are forty-four per cent, sixty-five years and ninety-five and for Haiti forty-seven per cent, fifty-four years and ninety-one.
One of Vietnam's worst statistics is its thirty-three per cent child malnutrition rate in 2000. However, the rate was fifty-three per cent just five years earlier. The rate was forty-two per cent in Indonesia and thirty-four per cent in the Philippines in 1995, before the 1997-98 crisis hit these countries.
The UN Development Program commended Vietnam on the success of its poverty alleviation program, saying, "The rate of poverty has registered one of the sharpest declines of any developing country on record, falling from a high 58 per cent in 1993 to around 37 per cent in 1998 according to the World Bank's poverty measure".1 The rate is now estimated at thirty-two per cent.
One of Vietnam's best indicators is its ninety-six per cent child immunisation rate against six major infectious diseases. This places it fourth in the east Asian region, ahead of not only Thailand, Malaysia, Indonesia and the Philippines, but also South Korea, Singapore and Hong Kong.
As Table 1 also indicates, Vietnam still boasts a better health infrastructure than the richer countries of the region, largely inherited from its pre-market "reform" days.
Other strong points include the twenty-seven per cent representation of women in the National Assembly, the highest in Asia and the ninth highest in the world, and the seventeen per cent representation of ethnic minorities, who make up thirteen per cent of the population.

Post-war impoverishment and the Cambodian war

These achievements have been made despite war devastation as bad as suffered by any country in history, but the postwar period was little better. The US offered Vietnam $3.5 billion in reparations in 1973, but never paid a cent. The US still pretends to be "researching" whether Agent Orange had any effect on the Vietnamese; the estimated two million people suffering from its effects are Vietnam's own problem. Meanwhile, 150,000 tons of unexploded bombs still litter the Vietnamese countryside; 84,000 people have been killed by these bombs since the end of the war. They still kill people every week. The enormous cost of clearing up this mess is borne by Vietnam. Some seven million people, nearly ten per cent of the population, are physically disabled, an incalculable financial strain on the impoverished country.
In late 1978, Vietnamese troops entered Cambodia following two years of devastating border attacks by Cambodia's genocidal Khmer Rouge, which had killed tens of thousands of Vietnamese. They were welcomed by the Cambodian masses, who together with the Vietnamese internationalist fighters, drove the KR out to the Thailand border.
Vietnam was condemned by the US-dominated UN, and an international embargo was slapped on, for the crime of helping its neighbours escape genocide. The US and China, via the right-wing military regime in Thailand, armed and financed the KR; having Thailand as sanctuary enabled the KR, despite lack of local support, to maintain a terrorist war against Cambodia, forcing Vietnam to remain there throughout the 1980s.
This, alongside a US-backed Chinese invasion of Vietnam in 1979, followed by years of Chinese military pressure on the northern border, meant a doubling of the size of the Vietnamese army, and a completely unsustainable military budget. This, along with the embargo and the general devastation of the country, was the background to a catastrophic economic crisis in 1986-87.

'Doi Moi' economic renovation

It was at this time the government launched the economic reform program known as "Doi Moi" (Renovation). At the Sixth VCP Congress in 1986, the leadership resigned en masse; a new guard, led by "Vietnam's Gorbachev", Nguyen Van Linh, took the helm.
The pre-1986 system needed reform. An overcentralised bureaucratic mechanism ran most facets of the country's economy; the desperate poverty of the administrative system and the cadres working within it made this central planning extremely inefficient. This was coupled with a repressive political regime, if not as repressive as its Soviet and Chinese counterparts. The leaders derived from a revolution still fresh, in which many of them had made great sacrifices for a cause they had in common with the workers and peasants; many maintained close links to the masses. Nevertheless, having only Soviet and Chinese models, they applied many of the features of that system, if with more sensitivity. This system of centralised control and directive and subsidy-based economics was essentially a continuation of decades of "war communism"; similarly, the political repression derived from the siege mentality that develops out of being invaded and bombed for decades.
The economic desperation precluded stressing moral incentives in the manner of Cuba's concurrent "Rectification" program. Inspiring people to share their poverty can be successful for limited periods, and Vietnam's time was up—Doi Moi stressed market orientation and concessions to local and foreign capital. The collapse of the USSR made this course all the more inevitable—just as it forced Cuba to abandon Rectification in favour of its own version of Doi Moi. Marxists believe that the forces of production ultimately determine the relations of production; historically, capitalism led to industrialisation and technological progress, which creates wealth which socialists aim to share around. Underdeveloped countries like Vietnam, emerging out of feudalism and colonisation, do not have this wealth or technology. But the existence of the USSR gave Cuba and Vietnam an alternative source of capital and technology; Soviet "subsidies" were largely "fair prices" for developing world products, as opposed to the monstrously unfair prices imposed by capitalist "free trade".
With the collapse of the USSR, this alternative no longer existed. Capital, technology, technical aid and expertise, and general development aid were now available only on the free market, through foreign investment and loans from organisations like the World Bank and the Asia Development Bank, with all the ensuing conditions.
The following are the main aspects of the Doi Moi program launched in 1986-88:
A liberal foreign investment law. Foreign capital now accounts for thirteen per cent of GDP and poured in at a rate of 5.5 per cent of GDP throughout the 1990s.
Large sectors of the economy were declared open to private capital. Small private capital has played a vital role in a poor country where the state does not have the resources to run everything.
Smaller in size but vaster in numbers is the private household enterprise sector, in which families run small shops and petty trading activities. This sector was never entirely illegal, but since the late 1980s has undergone an enormous explosion.
State subsidies for various consumer items were brought to an end, and the prices of most goods were freed from state control on the domestic market. While this led to a jump in prices, the result was not so dramatic because inflation had been going through the roof for several years beforehand; the state's attempt to suppress prices artificially had had little success. Inflation fell drastically at the end of the 1980s.
Related to this was the abandonment of the bureaucratic planning mechanism, by which the state had given out directives to economic organisations all over the country about what and how much to produce, which was then given to state authorities to dispose of and decide the prices of, which then delivered inputs of capital and materials to the enterprises. In the postwar period, the inefficiencies of this system became clearer, especially because postwar poverty meant the lack of an efficient administrative apparatus to run such a giant concern. This led to corruption as bureaucrats in these positions abused their power—often by selling state goods illegally on the "free market". In the new period, state enterprises were given autonomy in decision making, obliging them to turn more to what was really required by the market. This combination of state property with autonomy and market mechanisms has been extraordinarily resilient; in the first half of the 1990s, the state increased its share in the economy from thirty-three to forty per cent, largely due to the impressive growth in state industry.
End of agricultural cooperatives. All North Vietnamese peasants had been organised into cooperatives, and after 1975 the government attempted to spread them to the south, successfully on the south central coast, and with no success at all in the Mekong delta. Many advances had resulted from these cooperatives, and they provided a form of social insurance for war-disabled farmers. However, being part and parcel of the centrally run economic apparatus, including bureaucratic control of pricing, inputs and marketing, they reflected its weaknesses. The country's poverty limited the inputs the state could provide to encourage cooperation. This was made worse by the cut-off of all Chinese aid (largely consumer goods) in 1977-78, and the Soviet Union changing its aid to loans at the same time—only a few years after the end of the war. The ten-year involvement in Cambodia further accentuated the state's bankruptcy. Poverty also encouraged every level of the state, particularly the provincial and district levels, to increase taxes and the percentage of goods peasants had to hand over to cooperatives, and cooperatives to the state, with little in return. A contract system was introduced within the cooperative structure in 1981; peasants were allowed to sell on the free market anything above the amount of goods contracted for by the cooperative. While positive, the contracted amount and other taxes steadily rose, reaching sixty to eighty per cent of output in some places. The changes in the late 1980s were not originally aimed at abolishing the cooperatives, but at reforming them: the peasant household was declared the central unit of production, cooperatives were declared to be voluntary, and peasants were guaranteed a higher share of their produce; this went together with the liberalisation of domestic prices, marketing and inputs. However, the government set up no alternative system. How were new voluntary cooperatives to be run, how would collectivised land be divided, what would be the new cooperatives' relation to the state? Most cooperatives rapidly collapsed, and many better placed farmers or officials divided up the land so as to grab the best land and market opportunities for themselves. In the liberal wave of the time, the party declared that those who were the "most productive" should get the most land; fortunately, the 1993 Land Law dropped this idea and divided agricultural land on a very equal basis. Most peasants have gained from being in charge of more production decisions and having long-term leases over their plots, both boosting rice production and diversifying agricultural production. However, these advances—including Vietnam going from being an importer of rice to the world's second largest exporter—cannot be entirely attributed to the end of cooperatisation. Rice production had been rising gradually almost every year since 1975, except for a few crisis years; it was a question of time for it to pass the threshold to exports. That this occurred in the late 1980s when all the imperialist, ASEAN and Chinese embargoes were lifted, is hardly surprising; China, initially the largest market for Vietnamese rice, was until 1989 closed to Vietnamese products. By far the biggest gains in rice production and export were made in the Mekong delta, which had not been cooperatised, so the end of cooperatisation made no difference; that region's success in rice production was due to the same reason the peasants there resisted cooperatisation—land is relatively abundant and plots are large enough for economies of scale. Many years of state investment in the region finally came to fruition in the late 1980s with several new major irrigation projects in the delta, and 400,000 hectares of new rice land reclaimed from swamp. The other region to experience a significant jump was the Red River delta, where a modified form of cooperative continued to exist in many areas. In the rest of the country, rice production showed little or no change.
The most negative change was the introduction of small "user fees" for education and health, as directed in most World Bank programs. Though many categories of poor people and ethnic minorities are officially not liable for the fees, it remains a case of who is defined as poor, left to the discretion of local authorities, or school and hospital authorities themselves, mired in poverty as they are. This came on top of the collapse of educational and health services provided by the defunct cooperatives. In addition, greater emphasis on private household production in agriculture led many peasants to see their children as more useful on the farm than in school.

Early 1990s

This new atmosphere of economic insecurity led to a dangerous period for Vietnamese socialism. Many of the articles highly critical of Doi Moi were written in the mid-1990s, quoting collapsing health and education indicators, including a resurgence of malnutrition and malaria and a decline in primary school attendance and literacy rates. This was also leading to unrest among workers and peasants, including peasant battles over land.
In mid-1994, the newspaper of the Vietnamese People's Army attacked large-scale party "bureaucratism, authoritarianism and corruption", which would lead the party to "disintegrate, as experienced by parties in many countries". It was no longer just "foreign-inspired elements", which the army had previously emphasised. It was necessary "to restore the people's trust in the party and state" before the situation "leads to the collapse of the regime", and hence "we must promote true democracy" because "the principles of democratic centralism have not been seriously and correctly implemented".2
The army also attacked the "pragmatism, commercialism and extreme individualism" that the market was introducing. It declared that its mandate was not only to defend the country against foreign enemies but also against attempts to "dilute the idealist goal of socialism". In 1996, it declared that the foreign forces trying to do this included the International Monetary Fund, the World Bank and the Asian Development Bank. Other voices also attacked the corruption of the Doi Moi process, notably that of its idealistic founder, Nguyen Van Linh.
On the other extreme, the rise in the 1990s of Prime Minister Vo Van Kiet represented an extreme "pragmatic" wing that believed in classless "modernisation", technology, global integration, "development", free market forces-without such old "ideological" constraints as Marxism. Kiet was perfect for the times—an autocratic economic liberal who made no pretence about being interested in democratic political reform. Despite Western fantasies about political and economic liberalism marching together, Kiet, like Deng in China, proved the opposite: anti-popular market "reforms" require an authoritarian hand to keep down protests by battered workers and peasants.
Between the growing protests by workers and peasants and the new assertiveness of the army and other misnamed "conservatives" on the one hand, and the rise of a naked economic "pragmatism" on the other, the party leadership under Do Muoi in 1993 began to modify its course. At the Fourth Plenum, the leadership noted that health and education had deteriorated and culture had become commercialised and decided it was time to reverse these trends. Do Muoi stated that the first priority of economic development must be accorded to human beings and not just to increases of GDP "as in the past".3
This new assertion of socialist principles has guided the party to redistribute some of the wealth being created by the market reforms to poverty alleviation, health and education. It is this that resulted in the improvements, later in the decade, in Vietnam's health and education indicators. The highly equitable Land Law of 1993 and the worker-friendly Labour Law of 1994 both reflected this revised thinking.
Before the 1996 congress, Kiet put out a secret policy document to the Politburo calling for the scrapping of the dominant position for state enterprises in the key sectors—one of the few things the party holds onto in its resistance to outright capitalism. The IMF and World Bank told the party that if Kiet's proposals won, hundreds of millions of dollars for "structural adjustment" but also for needed development would come through; if he lost, the money would not be forthcoming.4
Kiet lost at the congress, and a new compromise collective leadership emerged, the traditional VCP way of doing things. While Western commentators decry this "consensual" style, which allegedly holds up important decisions, it is happily different from the traditional Stalinist way of dealing with differences—purge and kill your opponents. As Kiet wasn't able to deal with the opponents of the IMF-WB line in this way, they blocked their funds as promised.

The challenge of 1997

The new troika emerging in 1997 consisted of General Le Kha Phieu as party chief, representing the army's socialist "conservatism", Phan Van Khai as prime minister and arch-advocate of economic liberalism and Tran Duc Luong as non-aligned president. Despite the continuous Western media analysis of the late 1990s as a period of "conservative comeback" and "slowing of reform", in the next few years this leadership brought about a large number of changes, including democratic political changes, further economic opening and the social advances listed above.
The new leadership was immediately confronted by two momentous events in 1997:
the Asian economic crisis. Western commentators and local liberals tried to blame Vietnam's post-1997 economic slowdown on a "resurgence" of economic conservatism. In reality, it was caused by the economic crisis hitting Asia's "miracle" capitalist economies, which Kiet had been so impressed by. Most foreign investors are from Asia—the economies that were battered—so the crisis rubbed off on Vietnam. Yet Vietnam escaped the worst of it, providing an ideological victory to the socialist "economic conservative" pole.
a mass peasant uprising which broke out in the northern Red River delta province of Thai Binh in May 1997. While there had been many outbreaks throughout the country since the late 1980s over corrupt provincial and district "taxes" and corrupt land allocation, there had been nothing this massive. Local government offices were attacked in 128 villages; some officials were killed by peasant mobs. Peasants refused to pay any more taxes. This revolt led to a concerted anti-corruption campaign and a number of quasi-democratic changes.
According to Vietnam watcher Adam Fforde from the National University of Singapore:
Vietnam delivered by far the best performance in ASEAN during 1998. This has been spectacularly ignored by ... organisations such as the World Bank and the IMF. This is because Vietnam's still protected and "unreformed" economy was her major source of protection. Not having followed some advisers and opened up her capital markets to foreign investors, there were no major opportunities for speculative positions to be taken against the dong, nor for capital flight.5
By no means a socialist, Fforde had to admit that "concentrating resources on less inefficient State Owned Enterprises (SOEs) whilst sharply braking imports have helped see the country through these troubled times".6 Of course, "less inefficient SOEs" in the mouths of foreign economists usually means efficient ones, but very few believe there is such a thing.
Despite Western complaints about the amount of bank credits going to SOEs in this period, Fforde is clear that this saved Vietnam:
Growth is still positive and in double digits (in 1998). As a result of the fact that the state sector remains the main beneficiary of bank credits, this remains the fastest growing Vietnamese sector. Compared with many other countries in the region, Vietnam's industrial growth of near 12% for the first ten months looks rather good.7
Of course, "economic growth" does not always mean much. Nevertheless, as this is what the neo-liberals usually quote to back up their positions, it is interesting to look at post-1997 economic growth in southeast Asia, comparing less liberal, semi-socialist Vietnam to its capitalist neighbours (Table 2).
While many of these economies experienced some revival in 2000, Vietnam once again did far better in the "Asian Crisis Mark II" in 2001 (Table 3).
It is also interesting to look at what this has meant for GDP per capita, which has constantly risen in Vietnam while declining or crashing elsewhere (Table 4).

Table 2: GDP growth in Asian countries, 1996-2000
1996
1997
1998
1999
2000
Indonesia
7.8
4.7
-13.2
0.2
4.1
Malaysia
10
7.5
-7.5
5.4
11.7
Philippines
5.8
5.2
-0.5
3.2
3.4
Singapore
7.5
8
1.5
5.4
8
Thailand
5.9
-1.8
-10.4
4.1
5.2
Vietnam
9.3
8.8
5.8
4.8
6.75

Table 3: GDP growth, 2001
Indonesia
3.5
Malaysia
-1.3
Philippines
2.9
Singapore
-5.6
Thailand
1.9
Vietnam
6.8
China
7.8
Hong Kong
-0.3
Taiwan
-4.2
S. Korea
2.7
Japan
-0.8

Table 4: GDP per capita in Asian countries, 1996-2000
1996
1997
1998
1999
2000
Indonesia
1,115
1,079
615
673
617
Malaysia
4,908
4,772
3,389
3,429
3,248
Philippines
1,152
1,117
868
1,009
1,046
Thailand
3,084
2,460
1,819
1,949
1,949
Vietnam
323
326
342
372
400

Post-1997 economic changes

After 1997, an internal struggle pitted party leader Le Kha Phieu, the military-backed socialist "conservative", against Prime Minister Phan Van Khai, head of the economic "liberal" faction. The "slowness of reform" after 1997—i.e., the role of the state sector in saving Vietnam—was said to be due to the former blocking the "reforms" of the latter.
However, while the further economic liberalisation can be attributed to Khai, there is no indication that Phieu or other "conservatives" acted to block it. Whenever Phieu spoke about economic issues he was in support of greater foreign investment, of promoting local private business, of "equitising" a portion of the SOEs. What made him a "conservative" was that he also continued to stress the long-term socialist orientation, the need for the state and cooperative sectors to maintain their dominant position alongside private and foreign capital and his opposition to Communist Party members getting their hands dirty with capitalist wealth. The "conservatives" may have delayed some economic changes, due to their desire to have their social effects democratically discussed and mitigated, rather than believing in the self-repair dogma of the neo-liberal "free market".
Indeed, while the state sector was crucial after 1997, there was still a need for further opening to domestic private capital. As Fforde noted, "the non-state sector, still heavily constrained, is showing a growth of (only) 6%. This pattern of output growth is creating very little employment and adding to social strains",8 especially because the state sector was still concentrated in heavy industry.
This recognition led to the most significant of the post-1997 economic changes, the new Enterprise Law of January 2000, simplifying the procedures for setting up a private business, which now takes seven days rather than three months. Before the Enterprise Law, there were huge legal impediments to small private enterprises being set up to fill gaps not covered by the state—not socialist impediments, such as progressive labour, taxation or environmental laws, but rather masses of red tape, creating huge opportunities for corruption. Since the Enterprise Law, 35,000 new private enterprises have been established, half the total number since 1990, creating 1 million jobs.
Other changes, whether necessary or purely regressive, included:
amendments to the Foreign Investment Law in 2000, which among other things allowed joint ventures to convert to 100 per cent foreign-owned enterprises;
a dramatic increase in the rate of "equitisation" of SOEs, with some 500 of the 6000 SOEs equitised since 1997, compared to a total of 10 throughout 1992-97;
the deregulation of electricity prices, timed local telephone calls, and the introduction of a value added tax;
the setting up of the first stock exchange, in Ho Chi Minh City, in mid-2000;
the bilateral trade agreement with the US in 2000, in which Vietnam accepted drastic future reductions in protection; when it was ratified last year, one-third of the National Assembly voted against, confirming the strength of differences over such issues.
It is strange to call all this a "slowing down" of the misnamed "reform process"; indeed, the last three measures heralded the brutal ascendancy of the liberal faction. However, a few points should be made about "equitisation".
Aside from the strategic economic sectors, SOEs also run many small enterprises, in sectors that are not in any way strategic, relying on the advantages they have as state enterprises to compete with private enterprises. Many are debt-ridden, costing the state money to keep them running, with no positive social outcomes. Many are run by local and provincial state structures, and often their difference from outright private enterprise are minimal except for the constant state debt-relief. Many are hotbeds of corruption, asset stripping and diversion of state funds to private businesses.
The party argues that those that cannot be reformed and which continue to cost the state money would be better "equitised". This means partial privatisation, where the state maintains some share, the workers are offered cheap shares, and private individuals buy shares in the rest. Depending on how important the enterprise is, the state keeps a majority or minority share. In more important enterprises, a degree of equitisation is also seen as a way for SOEs to raise capital.
Vietnam now has 5600 SOEs, of which about 2600 will be equitised, sold, leased or dissolved in the next five years. This may sound like a gigantic attack on the state sector; yet these enterprises are mostly small, locally run, loss-making SOEs, making up a very small amount of SOE capital.

Economic direction

Therefore, equitisation does not threaten the dominant role of the state sector. According to the party's Socio-Economic Development Strategy, released at the Ninth Congress in 2001, the party aims to "establish state-owned corporations strong enough to be the core players in large economic groups in petroleum, electricity, coal mining, aviation, railways, maritime transport, telecommunications, mechanical engineering, metallurgy, construction materials and other essential products, chemicals, fertilisers, import-export, banking, insurance and auditing".9 This is an impressive and ambitious list for a poor country.
In terms of total development capital, in 2000, of the $10 billion invested, the state sector accounted for fifty-eight per cent. Of the remaining forty-two percent, foreign investment made up nearly half at eighteen per cent, and most of the rest was made up by the domestic small household economy at 19.8 per cent; since Vietnam remains an overwhelmingly agricultural country consisting of small peasant households, this is hardly surprising. The true domestic private business sector accounted for a mere 4.4 per cent.10
When we compare this to contribution to GDP, the share of the state sector falls to thirty-nine per cent, and that of foreign investment to thirteen per cent, while small household production rises to thirty-two per cent. This is easily explained: millions of poor peasant households don't invest much money, but rice and other crops still account for significant GDP, while the state sector and foreign investors are carrying out large-scale investment in equipment and new technology. Domestic private enterprises account for only 3.3 per cent of GDP, and there are some vague figures for "cooperatives" and the "mixed sector".
The state sector makes up forty-six per cent of industrial production, and foreign enterprises thirty-two per cent. Of the remainder, nearly all comes from household petty industrial production—only 2.2 per cent of industrial production is in the hands of true private capitalists.
Moreover, even private businesses, as opposed to households, are overwhelmingly small businesses, with very few large capitalists. The average SOE employs 312 workers, the average foreign enterprise 266, and the average private business only thirty-one. In terms of operational capital, the average SOE holds $3.4 million and the average foreign enterprise $8.2 million, while the average private domestic enterprise disposes of only $177,000.
To sum up, the state is still clearly dominant in domestic large-scale production, its main competitor being foreign investment, which is needed because a poor country needs capital and technology. Moreover, the state tends to direct foreign investment into joint ventures with itself, and into production to help build the industrial base. The nature of the country means there is a huge sector of small-scale production in agriculture, services, retail, handicrafts and petty manufacture, which is run by households. The private capitalist sector is relatively small, and mostly small-scale.

WB/IMF/WTO demands

However, Vietnam is under relentless pressure from the IMF and World Bank to change course, and this is reflected in debates within the party. Following are some of the points on which they are demanding Vietnam intensify "reform", and the differing degrees to which Vietnam is resisting.
They oppose Vietnam's right to maintain unopposed state ownership in any key areas; the major proposal in a recent paper by the World Bank, Asian Development Bank and the United Nations Development Program is that Vietnam scrap this state "monopoly", as it is "inconsistent with WTO accession".11 It rejected either putting aside certain areas as outside competition from the private sector, or the state investing heavily to strengthen its competitive edge in areas it aims to keep. The government, however, is strengthening the key state sectors to face competition as barriers fall: the day after the congress, it announced that another $2 billion would be pumped into the electricity, coal, steel, electronics and information technology industries in 2001. Nevertheless, statements following the Fifth Plenum in February 2002 appeared to water down the areas of state monopoly. According to Committee for Enterprise Development and Reform's vice-president, Pham Viet Muon, a decree in July clarified that "SOEs which operate in six important areas—chemicals, explosives, radium substances, the international and domestic information network, national power systems and cigarette production—will remain under state control. Apart from these, SOEs which have capital of $1.33 million or more and contribute at least $200,000 to the state budget over a three year period will stay wholly state owned. SOEs which have capital of between $700,000 and $1.33 million would be equitised, with the state maintaining dominant shares. SOEs which have capital of less than $330,000 (60 per cent of all SOEs) would be equitised, sold, leased or contracted out."12 It is unclear whether such new policy statements, or the congress resolutions, will take precedence in practice.
They demand that the equitisation process be fast-tracked, promising that the massive job losses—which the WB estimates may be up to 600,000 workers—will be rapidly overcome by employment in the dynamic private sector that would result. At the Third Plenum, party leader Nong Duc Manh expressed the different perspective of the "conservative" wing of the party, that "equitisation" is only one of a number of methods that may be used to "reform" and "strengthen" the state sector, stressing "there are many ways to reform SOEs, and application of foreign experiences without taking into account Vietnam-specific conditions would not be successful. The process must be conducted in a specific and experimental manner to ensure stability and development. As always, accountability must reign supreme in business, but Vietnamese SOEs are driven by a socialist orientation, so the social impacts of economic operations must be taken into account."13
They insist on stepping up the rate of tariff reductions and other such measures to fast-track WTO entry, leaving Vietnamese industry unprotected in the savage world of global imperialism. Vietnam is taking it all very much at its own pace, while passing new regulations against foreign companies that dump cheap goods onto the Vietnamese market thanks to massive home country subsidies.
They insist on fewer restrictions on foreign investment. For example, while foreign investors are currently limited to thirty per cent ownership in equitised firms, the US-Vietnam trade agreement states, "Seven years after entry into force of the Agreement, US companies shall be allowed to establish 100 per cent US-owned companies to engage in trading activities in all products".
They demand the abolition of import and export quotas and the "further liberalisation of the rice trade".14 At present, the state controls rice exports and decides how much will be exported; rice-producing peasants sell the rest domestically on the free market. This ensures that domestic rice prices are not too high because they do not reflect higher world market prices. According to the WB, this export quota is inequitable because, although it means lower prices for urban dwellers, it means the farmers, who are poorer than urban workers, get less for their rice. It therefore advocates that any private rice farmer or rice trader be allowed to export as much as they like. This is dishonest, because only a fraction of larger farmers, largely in the Mekong delta, produce a surplus for export; the poorest rural areas are rice deficit areas, where peasants would suffer more than urban workers. Moreover, the rice-producing farmers are now suffering from the world collapse of rice prices. So some state rice farms are now setting up contracts with rice farmers to deliver export rice over a period of years, with a price set just above the current market price, to ensure stability for the farmers in the face of world price fluctuations. Many farmers are seeing the advantages and signing on.15
They demand Vietnam "abandon the push to set up new cooperatives"16 after the new cooperative law came into effect in 1998. This conflicts with a renewed emphasis, from the "conservative" wing of the party, on the leading role of collective property alongside the state sector. Nong Duc Manh at the party's Fifth Plenum stated that "the collective economy, in which cooperatives play a key role, must expand in diversified forms" because "the state and collective economies should become a mainstay for the national economy".17 Former party leader Le Kha Phieu explained the need for cooperatives: "The household economy has its limitations, due to its small size, a shortage of capital, and a lack of specialisation. The market economy and large-scale production require cooperation between households in many fields, such as irrigation, water drainage, guarantees for loans etc. The need for cooperation is greater and more urgent in today's peasant household economy. Let's take the purchase of rice and the sale of fertiliser as examples. Currently, these are carried out mainly by state-run businesses, but because the channels for contacting every peasant household are imperfect, the actual direct purchases are made by private business people who impose their own prices on the peasants. If forms of cooperation developed, they would certainly benefit both the householders and the state-run business."18
The WB agrees that the small peasant household is too small. Vietnam has one of the highest population densities in the world, and this means very small land-holdings. But the WB opposes the route of cooperatives; rather, it advocates "further liberalisation of land ownership" and a "true land market".19 Yet what leads to millions living in wood and cardboard shanties surrounding cities is the violence with which this "true land market" has driven millions of peasants off the land. In Thailand, the peasantry has been locked out of some fifty per cent of all cultivable land in recent decades, as giant private plantations growing cash crops enrich a tiny minority. The greater ability of Vietnamese peasants to hold onto land despite the pressures of debt, corruption and the market is, ironically, due to the fact that they don't own the land outright. The Vietnamese constitution declares all land the property of the state; peasants lease agricultural land for twenty years at a time, these leases being instantly renewable and inheritable. While an indebted peasant may sell or mortgage the land, and the "market" has resulted in various degrees of landlessness and land concentration, the process is limited because the sale is limited to the period of the lease, following which the land may revert to the state, which then can re-lease it to peasants. The WB advocates full private ownership of land, which includes the full right to lose land, arguing that the resulting land concentration will result in "economies of scale" that can employ advanced technology in agriculture.

Reactions to World Bank agenda

Above, two "conservative" party leaders were quoted on the importance of cooperatives. The liberals, particularly Prime Minister Phan Van Khai and his deputies, Nguyen Tan Dung and Nguyen Cong Tan, say nothing on this but, like the WB, they continually stress the importance of "large farms". According to Dung, "Land accumulation is a process which is part of the development of agriculture".20 Reacting to criticism that this was the kind of farming model the party shed blood for decades to get rid of, Khai responded, "The farmland owners of Vietnam today are much different from the landlords of the past ... we are making money for ourselves and for the wealth of society."21
In 2000 Khai legislated to encourage "large farms", now called the "farm economy", but as these proposals came under considerable attack, voices were lowered about full privatisation. Nevertheless, in particular in the Mekong delta and the central highlands, "liberalisation of land ownership" has been marching forward. In the delta, there were already officially 86,000 landless families in 1997.22 In the central highlands, this process, in which large landholders growing cash crops greatly restrict the traditional land of ethnic minorities, was largely the cause of the uprising in February 2001.
Similarly, the liberals want to fast-track equitisation because they believe that the state sector is by definition inefficient. Like the WB, they believe the fewer SOEs, the better, mainly in less profitable areas or basic infrastructure and social services. By contrast, the "conservatives" view equitisation as one of a number of possible means to strengthen the role of the state sector. Party leader Manh at the Third Plenum in August stressed: "We cannot accept the view that state-owned enterprises inevitably lead to low efficiency. These ideas are prejudiced, short on objectivity, and downplay the role of SOEs. SOEs should constantly reform themselves and develop to absorb advanced technology in order to fulfil their decisive role in maintaining the nation's socialist track."23
Despite Manh's continued resistance, the liberal agenda is ascendant. After the Fifth Plenum it was declared that no new SOEs would be set up in the future. Maximum share limits in equitised SOEs are being scrapped. Regulations are being drawn up to "punish those enterprises which fall short of the equitisation requirements" in terms of their restructuring to make them attractive to share buyers. In February 2002, Khai demanded that all economic sectors put forward their equitisation plans. Indeed, the 2600 targeted enterprises include all SOEs capitalised at less than $330,000, plus many more. This demand for an arbitrary equitisation process, with numerical targets, cuts across the idea that equitisation may be a solution for unreformable loss-making enterprises, or that it may be beneficial to inject capital into important enterprises that need expansion. Rather, "The government will equitise all small SOEs despite their business performance", declared Truong Tan Sang, director of the party economic commission, to satisfy neo-liberal dogma. With equitisation fast-tracked and large, it will be impossible for the party to check corrupt deals and violations of the rights of workers in enterprises with "new management structures".
How much of this will translate into practice is another matter. The liberals' declarations aside, forcing the process through without taking full account of the needs of the workers will be no easy process. For example, the equitisation of the massive Thai Nguyen steelworks-violating the party's list of "strategic" industries not to be equitised—by selling it to the workers, which they can buy using their pensions, has been mooted. Yet this attempt to bankrupt the 11,000-strong unionised work force has been firmly rejected by the workers, and is therefore unlikely to proceed. According to the World Bank's Kazi Matin, "reforming the SOE sector is proving to be the toughest part of the game, and the slowest too".24

How socialist is the state sector?

Unfortunately, the bureaucratic and inefficient nature of much of the sector, and corruption within it, give ammunition to the liberals. Moreover, if a state sector is undemocratic and corrupt, to what extent does it still represent any gain for working people?
Many Third World crony capitalist states, as well as ex-socialist eastern European countries, have large state sectors, usually organs of the mafias that run such states, milk these enterprises, and funnel state assets into their private empires. Even better examples, such as Nasser's Egypt, Cardenas' Mexico and Kemal Ataturk's Turkey, where the state sector did play a progressive role, did not abolish the capitalist nature of the state.
The party's own attempt, in the Political Report for the Ninth National Congress, to explain the difference between Vietnam's "socialist-oriented market economy" (SOME) and capitalist countries with state sectors, included the following:
Firstly, socialist orientation—the some aims to harness all sectors, including the capitalist sector, to build up the productive forces to carry through the country's industrialisation in order to create the economic basis for socialism. This is sound materialist thinking. But what ensures that the leadership will stick to such a path over the next twenty years, as more and more opportunities for private capital accumulation present themselves to people in power?
Secondly, the SOME combines market mechanisms with planning and regulation, to maximise positive and minimise negative aspects of the market economy, and it distributes benefits both with an eye to economic efficiency and to ensure that economic progress leads to social equity. All social democratic regimes claim to do these things; nevertheless, in the context of the Third World, where there is no social democracy, Vietnam has been doing this relatively well given its economic level, as noted above. However, compared to its own past, vast social inequality has emerged; the Gini index, now around 35, still looks good compared to 50 in Thailand, but not compared to about 20 in Vietnam in the 1980s.
Finally, despite encouragement of the private sector, the stress remains on the dominant role of the state and collective sectors. This ability of the state to exert greater control over its economy, through the SOEs and the land policy, has allowed for a better spread of wealth than in many Third World countries. But what ensures that the state sector remains a weapon for socialism rather than becoming a device for illegal capital accumulation, a prop for a growing capitalist class?
In fact, there is a medium-term danger of capitalist restoration in Vietnam, not so much from the current small businesses, as through corrupt accumulation of capital and illegal quasi-privatisation via the state sector and its other weaknesses.
One of the problems is the SOE debt, which is a problem not only of the small SOEs facing equitisation, but also of some strategic ones, threatening their collapse and bargain sale: the SOE debt now accounts for thirty-three per cent of GDP. Only half of SOE capital is actually owned by the state; the rest is from bank loans.
This is not insurmountable. The SOE debt rose dramatically after 1997 as the result of an attempt to maintain investment and exports in the face of the east Asia crisis and the ensuing fall in foreign investment. This rescue operation by the state sector was harshly criticised by the IMF and WB, yet it allowed Vietnam to ride out the crisis with a few scratches; ironically, as the IMF and WB continued to predict doom if Vietnam continued on its current course, it also rode out the 2001 Asian crisis.
Despite this rise in debt, Adam Fforde notes, "Since the regional economic crisis started ... no balance of payments crisis has arisen, thereby removing the need for government compliance with WB and IMF policy suggestions".25
Aside from debt, other problems of many SOEs are inefficiency, opaqueness and corruption. Moreover, in many cases inefficiency is not really the problem, but rather the lack of democratic control by workers and the community. A glaring example was the state coal company, Vinacoal, which tried two years ago to lay off 50,000 miners but retreated in the face of an all-out strike. The problem arose because the unaccountable management claimed to be more inefficient than it really was.
Claiming to have over 4.34 million tonnes of unsold stockpiled coal, double the real figure, Vinacoal inflated costs to defer loan repayments and get new loans, which were spent on foreign currency trading and investing in non-coal businesses, rather than on upgrading equipment; it asked the government to allow it to export coal at lower than regulated prices, retrench workers and cut salaries. Dozens of export contracts were signed at low prices, resulting in losses of hundreds of thousands of dollars to the state.
While "equitisation" and joint ventures may be necessary from a financial point of view, in order to inject extra capital into enterprises, the entire argument has been bought that it is also necessary to "reform the management structure" of the SOEs. Foreign and other private investors allegedly want "transparency", so only people buying equity in SOEs can "reform" management—despite various pronouncements, the idea of democratising them via workers' control and open community management is unheard of. Vinacoal had already set up six joint ventures with foreign companies, which did not stop the scams.
While there is no way of assessing how widespread is such corruption, embezzlement of funds and de facto privatisation, if it is unchecked by workers' and community control, it has the potential to destroy Vietnamese socialism just as surely as the IMF/WB agenda would. To what extent have the quasi-democratic changes since 1997 improved the ability of the masses to defend and extend socialism against the encroachment of corrupt officials?

Political changes under the post-1997 leadership

While Khai's liberal technocrats have pushed economic changes, they have had little to say on democratic reform; like Kiet, they refused to conform to the Western media fantasy of political and economic liberalism being related. Ironically, it was the "military conservative" Le Kha Phieu who continually called on the grassroots of the party to "supervise, expose and denounce" corrupt and authoritarian leaders, and a series of quasi-democratic and anti-corruption measures tended to be his initiative.
Why would "conservatives" push grassroots democracy and call on the rank and file to speak out against corrupt leaders? The problem again is Western media confusion of economic and political "conservatism". It seems a faction of honest economic conservatives who still believed in some kind of socialism attempted to turn to the battered people to stem the greatest threat to socialism—party leaders and officials using the market reforms to line their pockets.
The quasi-democratic measures over the last few years include:
The "Grassroots Democracy Degree" of February 1998, mandating increased consultation between local officials and residents. Attempts to raise funds for local projects require a majority vote of those affected; to supervise development projects such as roads and irrigation works, and double-check accounting, each ward now appoints four or five villagers, who are not necessarily party members.
It also mandates increased consultation between employees and managers of SOEs, but this is very limited; employees must be "informed" about company business plans and the distribution of yearly profits.
In March 1998, there were three new anti-corruption laws, including one that bans family members of leading SOE officials from buying into equitising companies operating in a field related to the original SOE, and from being appointed to positions within such an SOE.
Claiming that corruption and other "degenerate" ethics of party members put "our regime, our independence and our nation at stake",26 in February 1999 Phieu launched the "Movement for Party Building and Rectification", based on a call on every party branch in the country to meet to engage in self-criticism, and for the party rank and file to criticise leaders and officials who were corrupt or authoritarian.
Non-members were also able to engage in this criticism campaign, via letter boxes set up for people's complaints, and People's Committees being mandated to set aside certain times to hear complaints.
In late 1999, local authorities delivered a pamphlet to every house in the country setting out the basic legal guarantees of democracy, including local authorities' obligations to reveal their budgets and popular participation in the decision-making process.
Phieu spelled out that party leaders had to declare their assets and all sources of income.
The public release of the draft political resolution, with party members around the country discussing it and amending it for months, and the public (members or non-members) around the country also sending in comments and amendments, which were daily printed in newspapers and televised, resulting in a large number of amendments.
The empowering of the National Assembly, with all sessions, including fierce debates among party members, televised to the public. This was at the initiative of the then National Assembly chair, Nong Duc Manh, also an economic "conservative". Manh replaced Phieu as party leader at the 2001 congress. Unfortunately, his new role as party leader meant he had to give up his good work in the National Assembly, giving the liberals a dominating role in that body since the congress.
It is interesting to note the origins of these campaigns. The government's initial response to the Thai Binh uprising was to impose a media blackout while investigating. The rise of Le Kha Phieu later that year was said to be due to the stepped up "security" atmosphere in reaction to this uprising.
Yet instead of moving in to crush the uprising, the "conservative" military faction began acting in a most unconservative way. Statements from the new party leadership began to identify with the demands of the peasants. "They [the peasants] just couldn't bear the corruption any longer", according to Dao Duy Quat, the deputy head of the Central Committee for Ideology and Culture and a key "conservative" ally of Phieu.27 Blame was put squarely on corrupt officials. Estimates range between an unprecedented 800 and 1800 officials who were sacked, demoted or disciplined in the province.
Party leaders and media have since continually referred to Thai Binh when discussing their grassroots anti-corruption campaign.
It is also interesting to note who have been major victims of the anti-corruption drive. Bourgeois conventional wisdom claims corruption is rife among "conservatives" who profit from the loopholes in a half-socialist, half-capitalist situation, while economic liberals are honest people who aim to eliminate such loopholes by making everything better for legal capitalism. If that seems to work nowhere else—neither in neighbouring capitalist "tigers" that the liberals want to emulate, nor in countries like Russia that have fast-tracked privatisation—facts don't get in the way of neo-liberal dogma.
Certainly, we may speak of a "corrupt" faction in certain SOEs and provincial administrations, entrenched by the Doi Moi process, which offered them decentralisation without democratisation. Perhaps some of them masquerade as "socialist conservatives" if they are in a position in an enterprise they feel currently serves them better remaining in quasi-state hands rather than being privatised. Such people have little in common with ideologically committed socialist "conservatives" like the current and former party leaders, neither of whom have any mark against their name regarding corruption.
Yet in reality, both legal capitalist enterprises and the liberal faction have come off badly in the anti-corruption campaign. The largest corruption scandals have involved private capitalist companies, most notably a bank fraud that enabled two private capitalist companies, Minh Phung and Epco, to steal $280 million. Two banking officials were put to death and almost 100 state officials, including 49 party members, were imprisoned.
Secondly, most of the corruption scandals seem to have implicated leaders from the economic liberal faction. These include the 1998 West Lake Waterpark scandal, involving land theft, fraud and profiteering, in which unofficial sources claim sixty officials were bribed to give the go-ahead;28 the 2000 scandal over the disappearance of large amounts of money targeted for ethnic minorities;29 the gradual collapse in a mire of corruption of the Khiem mega-private company in the last few years;30 and the massive Nam Cam mafia scandal currently shaking up to 100 top Ho Chi Minh City police and party officials.31
It thus appears to be the free-marketeering "liberal" mob who head Vietnam's state of corruption—perhaps because they have no socialist "ideological baggage" to restrain their pursuit of cash.
According to a Reuters dispatch during the party congress, "a news conference highlighted the failure of an anti-corruption drive launched two years ago on which Phieu had staked his reputation ... the party had expelled nearly 3,000 members and disciplined more than 16,000 others, including senior officials, in the period to clean up graft and mismanagement." Reuters doesn't tell us which other Asian ruling parties commit such "failures" by expelling thousands of members and continuing to call on their ranks to make such denunciations.
Yet the Political Report at the Congress highlighted how much still needed to be done, stating that "ideological, political, ethical and lifestyle degradation, as well as corruption and bureaucratisation among a not-small segment of party officials and members have become very serious", and are "hindering the implementation of Party guidelines, decisions and policies, causing resentment among the population and eroding their trust".
The results of the grassroots democracy and party rectification campaigns have been limited. Faced with a political culture that long predates the Communist Party, many fear openly denouncing corrupt leaders. Corrupt leaders may also use the situation for their own benefit, wrongly denouncing others. Leaders' links to local police units make denunciations difficult. Of course these same problems would occur in the initial stages of any opening. While much analysis of the workings of the Grassroots Democracy Decree still needs to be done, even if it were to evolve into a weapon for proletarian and peasant democracy, it concerns only local-level democracy. At the SOE level, its regulations are unclear and minimal; at the highly corrupt provincial level, it has little bearing at all.
Furthermore, the party's attempts to reform in a quasi-democratic direction became a victim of its other obsessions. It is still difficult for many of its leaders to appreciate that more democratic openness in general, particularly real debate in the media, is necessary to polemicise against the neo-liberal agenda. Rather, their fear remains imperialist subversion via further democratic openings. Veteran party leader General Tran Do was expelled in 1999 for actively campaigning for real democracy to bring down the corrupt. This is very short-sighted, as many of the young professional set, Vietnam's future leaders, therefore believe whatever information they now easily get hold of on CNN or the internet.

Party, state and masses

Hence, if one possible guarantee of the future socialist orientation is expanding workers' and grassroots democracy, there is little at present to rely on. The only current guarantee is the continuing organic connection of a strong part of the party, the government and the army to the masses whom they led in the revolution. While there was never much in the way of organs of workers' democracy, Vietnam could not be considered a state run by a "hardened bureaucratic caste" separated from the workers and peasants. There is bureaucracy, but it has not shown the kind of violence against the masses that the Chinese bureaucratic caste exhibited at Tienanmen Square or during the Cultural Revolution, not to mention Stalin's purges. It is this total separation from the masses that allows the Chinese, Russian and East European bureaucrats and ex-bureaucrats to transform themselves into a new capitalist class.
The reaction to the Thai Binh uprising is a case in point. Many peasant protests have erupted since then. In March 1999, a tax strike began in Giao Thuy district in Nam Dinh province, next door to Thai Binh, and has continued to the present. The government of one commune was thrown out, but even there the strike has continued, as peasants demand to know what happened to money unaccounted for. As a result of their protest, taxes have been lowered; early this year, a party leader went to the district and essentially, if belatedly, laid blame on officials, making promises to resolve the problem.
The Nam Dinh peasants have taken their protests to the national parliament in Hanoi, where peasants from different parts of the country now regularly gather and sleep out in protest, as they also do in Ho Chi Minh City. According to Tuan, a French Vietnamese Trotskyist who regularly returns to the country:
At the office of the National Assembly (in hcmc), for one year now the pavement opposite has been occupied by 200 people who are there permanently, night and day. They have constructed a forest of placards and banners, which say "Long live president Ho Chi Minh!" and "Long live the Vietnamese Communist Party!" but also carry complaints against the behavior of the bureaucrats of this or that village and demand justice ... the government is disarmed for these are the families of heroes of the fight for Independence and the use of brutal methods would be seen very badly by the people.32
Many protesting peasants are veterans of the revolution. I have likewise been told that the Thai Binh uprising was led by veterans. Small wonder the "conservative" Vietnamese army, whose revolution was based on the peasantry, not only does not crush the protests but may to some extent sympathise with them.
One group from the Mekong delta, from the impoverished border province of Dong Thap, took its protest all the way to Hanoi in 2000, with a small demonstration outside the National Assembly. A couple of months later, the party chief of that province was up on corruption charges.

Workers' struggles

The same points can be made of the upsurge in workers' strikes over the last few years. The victory of the laid-off striking miners was noted above; "there are few other jobs in the province, and everyone wishes to avoid violence and social instability", explained a mine manager.
There have been hundreds of strikes, mostly against small foreign capitalist enterprises, especially from Taiwan and South Korea. Some seventy per cent have occurred in private firms, many of which brazenly violate the labour laws and force workers to work horrendously long hours in appalling conditions.
During a strike by 4000 workers against the Taiwanese shoe company Hue Phong in 2000, the district labour federation, the local branch of the Ministry of Labour and the police entered the scene. According to Pham Ngoc Duan, the chairperson of the labour federation, the three parties agreed that the workers' grievances were justified and the company was in serious violation of the Vietnamese labour code.
In most cases I've seen, this has been the pattern. The labour federation is part of a tripartite delegation with the local state body and the police who go in on the side of the workers and force the bosses to re-employ workers, to pay compensation, to pay back wages, to commit to the labour law, to allow unions to organise.
While under the control of the same party that rules Vietnam, Vietnam's Labour Confederation and its campaigning newspaper Lao Dong quite openly state that their role in defending workers' interests may at times not coincide with government priorities. When the Labour Confederation was campaigning to raise the minimum wage, Lao Dong reported that this might be "rebuffed by the government because of its concern for the country's competitiveness".
Yet the government has allowed this space for more independent working class organisation, allowing party cadres in the unions to play their proper role of defending workers from the ravages of its own policies. The Vietnamese labour code allows the right to strike, places considerable emphasis on collective bargaining and allows the spontaneous formation of new unions—all at variance with the labour laws in neighbouring China.33 This labour code was adopted after thirty drafts in 1994, after being thrashed out over months of discussion on the factory floor.
It is this continuing organic connection with the workers and peasants that is currently staving off the threat of large-scale capitalist restoration.

Notes

1. UN Development Assistance Framework Report on Vietnam, 2000. Here and throughout the article, emphasis in quotations is added.
2. Quoted in Gabriel Kolko, Anatomy of a Peace, Routledge, 1997, p. 132.
3. Carlyle Thayer, "Mono-Organisational Socialism and the State" in Ben Kerkvliet and Doug Porter, ed., Vietnam's Rural Transformation, Institute of South East Asian Studies, 1995, pp. 40-42.
4. Kolko, pp. 135-8.
5. Adam Fforde, "Vietnam: Monthly Economic and Social Analysis", in Aduki newsletter, February 1999, http://www.aduki.com.au.
6. Adam Fforde, "What Works, What Doesn't", Vietnam Economic Times, December 1999.
7. Fforde, Aduki newsletter, November 1998.
8. ibid.
9. Communist Party of Vietnam, Strategy for Socio-Economic Development 2001-2010, Ninth National Congress, April 2001.
10. Figures here and below from Vu Long, "All Together Now: The State Plays the Leading Role", Vietnam Investment Review, April 2001.
11. World Bank, Asian Development Bank, United Nations Development Program, Vietnam 2010-Entering the 21st Century, Vietnam Development Report 2001.
12. "Ground Rules Set for SOE Restructuring Programme", Vietnam Investment Review, July 8-14, 2002.
13. Quoted in "SOE Reform Vital for Ensuring Socialist Orientation", Viet Nam News, August 23, 2001.
14. World Bank, Advancing Rural Development in Vietnam-A Vision and Strategy for Action, June 1998.
15. "Seeds of Doubt", Vietnam Economic Times, February 2002.
16. World Bank, op. cit.
17. Nong Duc Manh, opening address, Vietnamese Communist Party Central Committee Fifth Plenum, February 2002.
18. Interview with Le Kha Phieu, Vietnam Economic Times, August 1997, pp. 20-21.
19. World Bank, op. cit.
20. "Landless: Survival of the Fittest for the Delta's Farmers", Vietnam Economic Times, December 1997.
21. Quoted in "Large-Scale Farms Plan Causes Dread", Vietnam Investment Review, January 2000.
22. "Landless", op. cit.
23. Quoted in Vietnam Investment Review, August 2001.
24. "World Bank Rallies Nation for Reform", Viet Nam News, November 29, 2001.
25. Fforde, "What Works, What Doesn't", op. cit.
26. "A Critical Crossroads", Vietnam Economic Times, February 2000.
27. ibid.
28. "Justice Seen to Be Done", Vietnam Economic Times, December 1999.
29. Margot Cohen, "Robbing the Poor", Far Eastern Economic Review, January 25, 2001.
30. Margot Cohen, "Open Season", Far Eastern Economic Review, August 22, 2000.
31. Bbc World Service, "Vietnam's Former pm Linked to Scandal", May 20, 2002.
32. Interview with "Tuan" by Jean-Michel Krivine, "Return From Vietnam 2000", International Viewpoint, February 2001.
33. For a comparison of the Chinese and Vietnamese labour codes, see Anita Chan and Irene Norland, "Vietnamese and Chinese Labour Regimes: On the Road to Divergence", in Anita Chan, Ben Kerkvliet and Jonathan Unger, ed., Transforming Asian Socialism, Rowman and Littlefield, 1999.

Why the continuity is as important as the change at the 9th Congress of April 2001

Why the continuity is as important as the change at the 9th Congress of April 2001

By Michael Karadjis

(Originally published in the June 2001 issue of Vietnam Economic Times, Hanoi)

Asked to comment on the Communist Party’s 9th Congress, my initial reaction is to wonder what authority I have to judge the actions of people who successfully led decades of resistance to the most powerful imperial states in history.

After all, as a 13-year old schoolboy marching against my country’s involvement on the US side in the most devastating attack on any country in history, I was already late – Uncle Ho had passed away three years earlier, General Giap had led one of history’s most decisive battles 18 years earlier – and my future wife was being evacuated from Hanoi with thousands of other children as US bombers wreaked unprecedented vengeance on the civilian population right up to the very second before signing the Paris 1973 Accords.

My first reaction, therefore, to being invited to the Congress as a representative of the Australian Democratic Socialist Party, is that it is quite an honour.

However, a quarter of a century later, what does this Congress have to say about the progress towards the non-exploitative society called socialism that both Vietnam’s fighters and, in our own modest way, many anti-war protesters in the West were together marching for?

At least that is my question. Yet for many of my fellow expats, it would seem the very opposite question is foremost in their minds. Some things are slowly changing, but the Congress still spouted the “same old dogma”. The Party talks about reform of State Owned Enterprises (SOE’s), but when are they going to end this “monopoly” completely and sell them off to the highest bidder? Despite the continually increasing incentives to foreign investment, when will all restrictions and guidelines be swept away to open the floodgates? Indeed when are they just going to forget about “tired old ideas” like socialism altogether?

In fact, there were many changes in policy detail regarding economic policy and administrative reform – while I won’t go into detail here, it is enough to say that they were sufficient to move the IMF to coming through with a $368 million loan held up for five years, and the World Bank to offer a new $400 million loan for economic development and poverty reduction. Vietnam needs loans and investment, so it has to please such organisations.

But the Post-Modern catastrophe called Russia and the collapse of the Asian “miracle” tell us that Vietnam’s caution in going little further than necessary is very wise.

Regarding overall socio-economic direction, much is fundamentally similar to that pointed to at the last Congress in 1996. While continuing to emphasise the need for the growth of both the private capitalist sector and of foreign investment, right through the political resolution there is a strong reaffirmation that the State sector aims to play the dominant role in the economy and that socialism remains the goal.

Which allows me, and millions of other communists and socialists and people concerned about equality and social justice around the world, to breathe a sigh of relief.

There is no question that Vietnam needs considerable change in a host of theatres. Change in any society is good and necessary – an unchanging society suggests a lack of dynamism. Anyone who’s ever read Marx or Lenin would understand that calls for constant renewal of policy, of tactics, of personnel, and going to the masses to root out bureaucratic inertia, were fundamental to their entire political philosophy. The gigantic bureaucratic machines built by Stalin and Mao and their heirs were not, as is often thought, a “dogmatic” version of Marxism-Leninism, but rather, its antithesis.

The crucial question is however, what kind of changes? Aside from the changes in socio-economic policy detail, there were a number of important changes.

Firstly, there were important changes in personnel. The new leader is 10 years younger, the official position of older Advisers was scrapped, a new Central Committee was elected with an average age of 54 years, 92 per cent of whom have university degrees.

Yet this change also reflects continuity of tradition. Renewal at the leadership level has been reasonably constant in Vietnam since 1986, when the bulk of the older leadership stepped down. After every five-year Congress there have been personnel changes to the Politburo, the Central Committee and the Party leadership. In the last 15 years there have been an average of three Party leaders, three Prime Ministers and three Presidents. How come a US President can be around for 8 years, but if Vietnamese leader rules for five years that’s too long – yet on the other hand, if former leader Le Kha Phieu ran the show for only one year less than that, that is suspiciously short?

Secondly, a renewed emphasis was put on addressing ethnic minority issues. Frequent interventions from Congress delegates addressed the issue. Cu Hoa Van, head of the Party’s Nationalities Commission, stressed that economic development in minority regions must be higher than the national average; that the cultural identity, including language and writing systems, literature and art, of each minority must be preserved; that education and training of minorities for cadre development must be stepped up; and that democracy and transparency in socio-economic development programs must be enhanced, with minorities and local people participating more decisively in framing and developing such projects.

Notably, these points build on already established policies. Regarding the last theme, the 1998 Grassroots Democracy Degree allows international funding bodies to deal directly with people at the commune level, bypassing various levels of bureaucracy and hence undercutting opportunities for corruption – while getting more direct popular input.

The high rate of poverty in highland and remote areas where minorities live has been reduced by 4-5 per cent annually over the last two years – and a major corruption scandal busted. Regarding languages, last year nine ethnic minority language radio stations were established – and lets not forget that one of the earliest acts of the revolution in the 1950’s was to establish writing systems for a host of minority languages.

Having someone from the Tay minority run the Party is also highly symbolically important – a Palestinian-Australian friend of mine e-mailed me to congratulate the Party on this. After all, he simply can’t imagine when Australian society will ever be mature enough to accept an Aborigine running the country, and of course the rights of the Palestinian people are daily violated on a massive scale.

Thirdly, there was the process of making changes to the political resolution after the draft was published. This consisted of nightly televising of input from people around the country, leading to a huge number of amendments. It is interesting to quote the Far East Economic Review on this, where it conceded “Those may sound like small steps toward "grassroots democracy," but for Vietnam, they are meaningful.”

Just a moment. “For Vietnam”? The irony may have escaped you. Perhaps the FEER should explain where else such public input is encouraged into major policy documents. I can’t think of any off hand. Nothing has ever approached it in Australia. It is unimaginable in any other state in south east Asia.

Fourthly, there were continual calls at the Congress for more “grass-roots democracy”, defined by the FEER article as “bottom-up participation in decision-making and budget supervision, and linking party promotions to public feedback”. These were commended by the article, but also relegated to the status of a “safety valve” for the Party. Perhaps. But still, grass roots participation in supervising a budget has never been a noted feature in capitalist countries, where economic experts – inevitably economic rationalists – zealously guard the elite knowledge and right to rule of their caste. Popular pressure for better health, education or welfare funding can be dismissed as the ravings of people who do not understand supposedly eternal, immutable economic “laws.”

Again, it is notable that this call on grass roots party members throughout the country to “supervise, identify and denounce” state and party leaders who were corrupt or authoritarian did not first appear at the Congress, but has been forcefully repeated since 1998 by none other than former leader Le Kha Phieu – something a little different to the usual western media picture of a “conservative.”

According to a Reuters dispatch during the Congress, “a news conference on Friday afternoon highlighted the failure of an anti-corruption drive launched two years ago onwhich Phieu had staked his reputation. Senior central committee official Pham Van Tho said the party had expelled nearly 3,000 members and disciplined more than 16,000 others, including senior officials, in the period to clean up graft and mismanagement.”

Note that for Reuters, this is obviously a failure; one wonders how many other ruling parties in south east Asia or elsewhere have expelled thousands of members for corruption and continue to call on the grass roots to take such action. And don’t give me the one about corruption being more serious here than in neighbouring countries.

If you are corrupt in Thailand, and you have been involved in military coups, you become the prime minister. If you are unimaginably corrupt in Indonesia or the Philippines, you stay in power for decades backed by the military and have to be overthrown by the people. In Vietnam, if your corruption reached unsurpassed levels, you were probably in the former Saigon regime and had to employ the entire US arsenal to remain in power. All countries, mind you, based on the unfettered “free market.”

Which leads to the other major theme of the Congress – a stepped-up fight against corruption, which Nong Duc Manh declared would be a life and death issue for the future of both the Communist Party and of any progress towards socialism in Vietnam.

He’s right. Not because corruption is worse here. It isn’t. But when corruption exists in capitalist countries, which already promote the cult of flamboyant wealth for the few, massive inequality and a “blame the poor” mentality, even huge corruption can only ever be a blemish. In a country aiming for socialism, it attacks the very essence.

Moreover, if the evil isn’t rooted out, it will make much of what was pushed at the Congress, from poverty alleviation and ethnic minority participation to clearing away administrative hurdles to private investment and promoting the leading role of the State sector, merely a lot of fine words.

What of the overall socio-economic direction. While cautiously welcoming the leadership change, the Washington Post noted that “political analysts and diplomats say they do not expect Manh to move radically away from a socialist economy.”

This was certainly made clear in the political resolution. “Public ownership of the key means of production is the outcome of a developed economy with highly socialized, modern productive forces; it is to be established gradually and will hold absolute superiority once socialism has been built.” This path involves “bypassing the establishment of the dominating position of capitalist production relations and superstructure, but acquiring and inheriting the achievements recorded by mankind under the capitalist regime.” Well said.

This path “requires a long period of transition with many transitional stages and forms of socio-economic organization… In the period of transition, there are many forms of ownership of the means of production, many different economic sectors, classes and social strata… therefore there inevitably remain class contradictions and class struggle."

While promoting these many different sectors, the Socio-Economic Development Strategy calls for building “State corporations sufficiently strong to operate as the core of major economic groups, such as in petroleum, electricity, coal, aviation, railways, high sea transport, telecommunications, mechanical engineering, metallurgy, chemicals, building materials, import-export, banking, insurance, auditing etc.”

That of course shocks the economic rationalists, but not those of us who in the West have campaigned against privatisation of all kinds of public utilities, because we don’t believe people’s access to them should depend on the size of their wallet, or that planning in such basic areas should depend on the needs of the owner’s profit-making rather than human need.

It should be noted, however, that this wording only expresses an aim for the State sector – it does not any special privileges for it in terms of credit or subsidies, something which the Congress affirmed. According to FEER, “The advantage of ambiguity is that the broad platform does not commit Vietnam to a detailed plan to pump up the state sector at the expense of the private sector.”

That’s true. But neither does it prevent it from pumping up the State sector. The May 4 Viet Nam News, just after the Congress, announced that VND28.142 billion will be pumped into the electricity, coal, steel, electronics and information technology industries this year “to make them more productive and competitive.” Those advocating that this not happen are advocating that Vietnamese industry be smashed when it joins AFTA and the WTO.

According to the April 22 Washington Post, “foreign business and political leaders have been disappointed that this nation has not moved faster to inject free-market policies into its moribund economy, dashing hopes that it would become Asia's next economic force.”

Yes, there is always more that can be done, especially in terms of removing unnecessary and overlapping administrative hurdles and improving legal clarity. However, is it insignificant that, under the former leadership, the Enterprise Law was passed, resulting in 10,000 new business registrations last year? Or that last August, the Law on Foreign Investment was amended, leading to a 7 per cent increase in FDI capital in the first quarter of 2001 compared to last year?

Those decrying the decline of foreign investment over the last few years rarely remember the Asian crisis since 1997 – Asia is where most investors are from. The whole of the Third World is in fierce competition for foreign investment, 75 per cent of which flows between the developed countries – ie those with the biggest market – and half the remaining quarter goes to China. That leaves little for the rest of Asia, the Middle East, Africa and Latin America. Economic liberals are trying sell an illusion to Vietnam, that if you get down on your hands and knees, foreign investors will just flow in. Many foreign investors are already offered an eight-year tax holiday in Vietnam, something many local private businesses complain about.

Presumably, “Asia’s next economic force” means being like the economies which collapsed in 1997 due to a false boom and unfettered economic liberalism. According to Vietnam expert Adam Fforde from the National University of Singapore, “Vietnam delivered by far the best performance in ASEAN during 1998. This has been spectacularly ignored by the world, especially organisations such as the World Bank and the IMF. This is because Vietnam's still protected and 'unreformed' economy was her major source of protection. Not having followed some advisers and opened up her capital markets to foreign investors, there were no major opportunities for speculative positions to be taken against the dong, nor for capital flight.”

Many Vietnamese I speak to seem overcome by a grand inferiority complex in relation to Asia. The view that we are “far behind the region” has been repeated so often that it has almost become unquestioned. The implication is that open capitalism will accelerate Vietnam’s development.

I am an absolute dissident on this issue.

The fact that Vietnam is behind countries in the region in terms of GDP per capita is hardly surprising given that they had the opportunity to grow in peace for decades while Vietnam was being “bombed back into the stone age,” to quote US President Johnston.

However, a look at a number of key social indicators, rather than the often meaningless GDP figures, tells us that a socialist-oriented country, even in conditions as adverse as those in Vietnam, can bring about a considerably better spread of what wealth is created.

Vietnam’s key indicators - a literacy rate of 94 per cent, life expectancy at 68 years and an infant mortality rate of 29 per 1000 births (World Bank 1997 or more recent figures) – are roughly equivalent to or better than those of regional capitalist countries like Thailand and the Philippines which have far higher GDP levels. Malaysia does much better on infant mortality, but much worse on literacy.

As for Indonesia, a country with GDP per capita three times that of Vietnam, its literacy rate is eight points behind that of Vietnam, life expectancy three years behind and infant mortality is 47 per thousand – 18 points behind Vietnam.

In some respects, Vietnam is ahead of all of them – while it still suffers a maternal mortality rate of 105 per 100,000 births, the figure is double in Thailand and the Philippines (200, 210), while in Indonesia it stands at 390 – four times the Vietnamese rate. Similarly, Vietnam’s 96 per cent child immunisation rate, against 6-10 major infectious diseases, places it ahead not only of Thailand, Malaysia, Indonesia and the Philippines, but also South Korea, Hong Kong and Singapore – virtually the whole region except China and Japan. Vietnam has been “evaluated by the UN as a leading country in the implementation of the UN Convention on the Rights of the Child,” according to Morton Giersing, the UNICEF Representative in Vietnam.

One of Vietnam’s worst statistics is its 33 per cent child malnutrition rate, a continuing legacy of the US obliteration of Vietnam’s productive forces and years of embargoes. However, the rate was 53 per cent just five years ago – quite a dramatic reduction, given the Asian crisis took place during that period. In 1997 the Philippines’ rate was 33 per cent and that of Indonesia 42 per cent - before the onset of the crisis that has doubled the rate of poverty throughout capitalist south east Asia.

Notably, the United Nations Development Assistance Framework has commended Vietnam on the success of its poverty alleviation program, claiming “the rate of poverty has registered one of the sharpest declines of any developing country on record, falling from a high 58 per cent in 1993 to around 37 per cent in 1998 according to the World Bank’s poverty measure.”

Much of this reflects Vietnam’s better health infrastructure than the GDP-richer countries of the region. While this is not to deny that the situation is dire compared to anywhere in the First World, it is remarkable that, according to World Bank 1997 figures, there was one hospital bed for every 263 people in Vietnam, for every 500 people in Malaysia, for every 600 in Thailand, for every 910 in the Philippines and for every 1428 in Indonesia. In 1993, in Vietnam there were 1200 people per doctor, in Malaysia 2700, in Thailand 5000, in the Philippines 8300 and in Indonesia around 7000.

Is heading down the capitalist path then really a good idea, if having many times its current GDP translates into health, education and poverty levels either no better or considerably worse than at present? In fact, Vietnam’s relative strengths in these social fields reflect the continuation of an overall socialist framework, and a continuing commitment to redistribute the new wealth that the capitalist sector is helping to create. Much as market reform and development of a capitalist sector were necessary for Vietnam to break out of the bureaucratic centralist logjam in the 1980s, it is the cautiousness of this process that have allowed Vietnam to translate growth into relative equity. If it were purely the “market” and the capitalist sector that were doing the trick, then what went wrong in the rest of the capitalist Third World would be a mystery.

Over the last couple of years, there has been a certain push to further “liberalise”, ie privatise, agricultural land, which would result in vast land concentration and landlessness – the kind of society that the Communist Party overthrew. With relief, I saw that socialist ideals prevailed and there was no mention of it in the political resolution. Anyone who thinks it’s a good idea, and that Vietnam should follow the path of its neighbours, ought to look at what happens there to the absolutely landless.

For example, Vietnamese were shocked when the Philippine garbage dump landslide tragedy revealed that 80,000 people live on the dump outside Manila – and that’s only the example that came to light. So let’s not spread myths that the “free market” automatically sets up businesses to employ all these victims of the “free market” in land.

Likewise, glitter can hardly hide the fact that Thailand’s role in the “globalised” world has been transformed into the “global brothel”. NGO sources in Thailand claim some 2 million women and 800,000 children have been driven into prostitution (according to Naruemon Thabchumpon in the classic study of the Asian victims of pseudo-development, The Dispossessed). That’s a country where small farmers have been shut out of 50 per cent of all cultivable land by giant cash crop plantation owners.

Other strong points include the 26 per cent representation of women in the National Assembly, the highest in Asia and the ninth highest in the world, and the 17 per cent representation of ethnic minorities, who make up 13 per cent of the population. In 1999, Vietnam won the UN Population Award for its population and family planning efforts, conducted at a grassroots level largely by the Vietnam Women’s Union. Some 75 per cent of women aged 15-49 in Vietnam are estimated to use contraceptives, the third highest rate in the Third World (after China and Brazil) of those countries with estimates.

Market reform was necessary for Vietnam to break out of the bureaucratic logjam in the 1980s, but it is Vietnam’s socialist commitment to redistributing the wealth the private sector is helping to create that allows it to translate growth into relative equity.

That is why I am just as impressed with the policy continuity at the Congress as with the policy changes – sticking up for your principles in today’s world takes guts.

Moreover, who are others to lecture - the very land of the “free market”, the US, boasts GDP per capita 80 times that of Vietnam - and 37 million homeless. Vietnam can do better than that.

Finally, the effects of the US war are still major – Vietnam never saw a cent worth of reparations. The Hanoi-based NGO Resource Centre claims that seven million people are disabled. This is an incalculable economic burden on a poor and devastated country. During President Clinton’s visit last year, some criticised Le Kha Phieu for demanding the US accept its responsibility for the war and come up with significant reparations. I couldn’t have agreed with him more. I have been thrilled to see Nguyen Thi Binh continue to hammer away at that message recently. Despite the hype of Clinton’s visit, no significant money was promised to help clear this ordinance, while the US is still “researching” whether Agent Orange had any effect on its victims! (Of course there was plenty of money for his 2000-strong circus).

No economic approach is perfect. But considering what’s on offer and Vietnam’s particular situation, the direction pointed to at the Congress is largely appropriate for the “new millenium” – one in which most of the world’s problems, like the widening North-South divide, are the same or worse than in the last.