Vietnam from the Left

In recent years, many analysts have concluded that the Chinese Communist Party (CCP) is engaged in all-out capitalist restoration,¹ and some have reached similar conclusions about the Vietnamese Communist Party (VCP).²

Both are largely agricultural countries that experienced peasant-based, Communist-led revolutionary movements. Both began openings to the market and private sector in the late 1970s, but still maintain large state economic sectors and ruling Communist parties.

In these underdeveloped countries, an injection of private sector activity and the market has helped boost the productive forces for a long transition period to lay the material basis for socialism. However, there was an enormous difference in the level of productive forces between the two when they launched their reforms.

China's reforms began following 30 years of bureaucratic-socialist development in conditions of peace. China "had a rate of accumulation as a share of total output of around 33-35 percent in 1978-79, compared with Vietnam's 12-13 percent ... the Chinese economy was already generating large surpluses before the transition started."³

Vietnam's reforms began in 1986-89, following decades of war, US bombing and destruction on an apocalyptic scale, partition, the Chinese invasion, the decade-long Cambodian war and international embargo. As the Cambodian war and embargo came to an end in 1989, the collapse of Vietnam's East bloc trading partners dealt a final blow. By 1990, Vietnamese GDP per capita had dropped to $78.

Thus, for Vietnam, the changes were necessary to avoid systemic collapse. China needed change but, given its far better situation, the speed of hurtling towards capitalism appears a conscious choice. China had "accomplishments as well as problems. It was by no means obvious that market reforms were the only solution. Economic performance and living standards could have been improved by upgrading the technical capacity of Chinese planning", raising agricultural prices and improving material incentives.⁴

There were also differences in the parties' backgrounds. The VCP never experienced a crushing defeat like that of the CCP in the 1920s, which turned the CCP into a revolutionary peasant army until the 1949 revolution. The VCP throughout this period carried out activity in working-class strongholds while also organising among the peasantry. The August 1945 revolution was an urban uprising. While the French attack drove the VCP into rural guerrilla warfare, it was neither crushed in its urban strongholds, nor did it abandon clandestine work there. The later rural-based guerrilla struggle against the US-installed southern regime had the backing of the northern workers' state.

This struggle meant that bureaucratic conservative tendencies in the north were reduced; to mobilise support for the revolutionary war in the south, the VCP maintained a close relationship to its worker-peasant base. Yet the war also intensified an undemocratic climate of internal siege—a combination of contradictory effects similar to a long period of "war communism".

The Chinese elite was sufficiently distant from the masses to launch ultra-bureaucratic campaigns that did not arise from mass pressure and which entailed great violence against the masses. There were no Vietnamese equivalents of the Great Leap Forward and the Cultural Revolution.

In certain respects, their post-reform developments have diverged sharply. In both countries, early, mild market reforms benefited the masses, "liberating" small peasants and petty-bourgeois elements from premature state control. The greater urgency of Vietnam's situation meant such reforms were even more essential. However, from 1992, China became the radical reformer, while Vietnam's government paused from the mid-1990s, once the crisis was overcome. Despite the problematic nature of certain policies implemented by the VCP and the dangers of growing capitalism, no definitive point of capitalist restoration has been passed.

China's deeper pro-capitalist reform is far more anti-popular than earlier stages, strengthening new wealthy classes against smallholders, privatising industries and laying off masses of workers. This stage began after the massacre of the worker-student movement in Tiananmen Square in 1989. No equivalent event has occurred in Vietnam, where popular pressure has more often influenced state policy.⁵ The biggest challenge was the peasant uprising in Thai Binh in 1997, which the state responded to with concessions to the peasants and the disciplining of 2000 cadres. In the following years came other concessions to the masses and a slowing of the "reform" process.⁶

Differences in collectivisation and de-collectivisation

China had collectivised the entire countryside in 1955-56, and in the Great Leap Forward the size of the "revolutionary people's communes" reached 3000-3500 households each. North Vietnam's collectivisation began in 1957, "stretched over many years and was never thoroughly implemented". By 1960, 86 per cent of rural households were in "low-level cooperatives", and not till 1969 were 92 per cent members of collectives. The average collective grew from sixty to eighty-five households in 1960 to 150 in 1970.⁷ The bigger the collective, in a poor country without effective transport and communications, based on primitive agricultural technology, the deeper the peasants' alienation from any role in management.

The VCP tendency to accommodate the masses often meant greater leeway for small markets and private operations, allowing more flexibility within state planning. The proportion of household income from private plots and non-collective activities rose from around 50 per cent in 1961 to over 60 per cent in 1978, compared to no more than 27 per cent in China.⁸

In 1978-81, both countries allowed small-scale market activities, boosted state procurement prices for peasant produce and introduced a "contract" system for cooperatives. The cooperative remained intact, but peasants could sell on the market anything above a quota sold to the state at plan-determined prices. China also reduced the authority of the huge communes.

In 1981 the CCP jumped ahead of Vietnam, making households, rather than the collective, the key production unit, responsible to supply a certain volume of output to the state and pay taxes. This coincided with Deng Xiaoping's overall economic program. This shift away from collective production did not occur until 1988 in Vietnam, as a response to the systemic crisis. While China's earlier, more radical, approach in this respect is usually credited with the huge success of Chinese agriculture in the early 1980s, a number of qualifications are in order.

First, while China recorded rural output growth of 55 per cent in 1978-84, and staples output per capita rose by nearly a quarter, Vietnamese staples output also grew by a third between 1979 and 1982, and agricultural output rose 35 per cent in 1981-88.

Secondly, China's gradual rise in agricultural productivity had already begun before the 1978 reforms, due to rural industrialisation, irrigation, diversification and "a comprehensive green revolution package under collective auspices". The more radical de-collectivisation reforms were not widely implemented throughout most of China until 1982-83,⁹ but it was in 1978-84 that China increased per capita rural incomes two and a half times.¹⁰

Third, the wealthier Chinese state could afford to pay better prices for the contracted part of the peasants' produce. In 1978, Vietnam's state prices were one-tenth of market prices, whereas China's were 40 per cent. Vietnamese prices rose from 10 to 40 per cent in 1978-81, leading to a huge boost in production and procurement,¹¹ but then fell to 20 per cent by 1985 as inflation reduced real prices. Moreover, when China's state price for compulsory deliveries is combined with the higher price the state paid for above-quota produce, the overall state price was higher than the market price. Thus the success of early "radical" Chinese reforms was due to a six-fold rise in state subsidies to peasants from 1978 to 1984.¹²

Land was divided up fairly equitably in 1981-83 in China and 1988-89 in Vietnam, based on earlier land reforms. It was not market-driven privatisation. Land officially belongs to the state, so it is not owned outright and cannot be lost outright. It is leased to peasants for extended periods; land changing hands during the lease period can be redistributed later to maintain equality. This limits land concentration and landlessness compared to elsewhere in the region.

While de-collectivisation is usually given all the credit for boosting agricultural production in both countries, its egalitarian rather than market-driven nature was popular with peasants¹³ and played a key role in sustaining the growth, as did state investment.¹⁴

In Vietnam, peasants have land-use rights for 20 years on agricultural land, while in China the period is 30 years or longer. Land leases are renewable and inheritable, but shorter leases restrict the period of intervening land concentration. Vietnam allows up to three hectares of land per household, but China imposes no limits.¹⁵ In both cases, Vietnam is more "conservative", and thereby landlessness is more limited.

In China, the government provides special financial backing and subsidised inputs to "specialised peasant households", chosen "because they are already generating a higher income".¹⁶ In Vietnam, the 1988 reforms advocated that more "efficient" farmers get the best land, and some economists pushed for privatisation. This led to massive peasant resistance.¹⁷ Rural delegates from many regions at the party Seventh Congress in 1991 opposed such moves.¹⁸ The 1993 land law laid this to rest, calling for an egalitarian land distribution,¹⁹ another "conservative" victory. Later, in 1998, the National Assembly rejected a Central Committee proposal to extend land leases to 50 years and abolish ceilings on plot sizes, reflecting widespread opposition. A bill in 2000 watered this down, allowing "large farms" mainly where individuals had cleared "wasteland".

However, Vietnam was more "reformist" in a way benefiting peasants—it abolished compulsory deliveries to the state at below-market prices in 1989, while China continued to impose them until the mid-1990s. In 1984, the Chinese state stopped buying large over-quota amounts, so the new quota prices were overall lower than the previous combined price,²⁰ leading to a downturn in Chinese agricultural growth. "A sinking underclass of totally immiserated families has been hurt by cheap grain requisitions", as quotas imposed during de-collectivisation "became the families' personal responsibility. Households that subsequently became more prosperous are not obliged to provide any more low-priced grain to the state than the most impoverished families."²¹

Agricultural taxes are much more burdensome in China;²² Vietnam has shelved its small land tax, except for bigger farms. Agricultural growth in China has hovered around 2.8 per cent,²³ little more than half that in Vietnam, so the urban-rural gap has widened more markedly since the early 1990s.

In both countries, overall rural poverty has fallen by world records, in Vietnam from over 70 per cent in the late 1980s to 28 per cent in 2002. However, while the division of the land among tiny smallholders is egalitarian, it cannot raise incomes much beyond absolute poverty, because it reduces economies of scale and leaves peasants vulnerable in the market. World Bank advice stresses "land consolidation" and "land markets", so that efficient farmers get larger plots. If this occurs faster than industrialisation, a new class of landlords develops, to whom landless peasants sell their labour. The opposing solution is voluntary cooperatisation, so that smallholders can collectively achieve economies of scale, invest in irrigation, market products and buy inputs with better bargaining power, or combine food security with cash cropping.

In 1998, Vietnam introduced a law to encourage "new cooperatives". Party leaders continue to stress the leading role of state and cooperative sectors,²⁴ and the government has introduced a raft of incentives.²⁵ At this stage, however, they play a very minor role in the economy.

The differences in land policies have led to sharper rural inequality in China. In both countries, many rural dwellers, with little or no land, migrate to insecure urban jobs. In China the "floating population" is estimated to be some 150 million people, dramatically higher than equivalent Vietnamese numbers. Vietnam's land reforms, while undermined by the market, appear still to offer a degree of security; "the looming threat is of a flood of farmers coming into the cities. So far, this has not happened."²⁶ Nevertheless, in regions where the "land market" and "globalised production" have bitten deepest—the central highlands and the Mekong delta—much more significant numbers have been deprived of land.

Differences in SOE reform

The first phase of Chinese reform (1978-83) called for "a planned economy supplemented by market regulation". This included the rise of the "collective" industrial sector and an opening to foreign capital in certain coastal cities, called special economic zones (SEZs). A small private household sector was restricted to a maximum of eight workers.²⁷

The next phase (1984-92) was a "planned commodity economy". SEZs expanded, and a larger private sector, with more than eight workers, was legalised in 1988. Vietnam also legalised the domestic private sector in 1987.

Dual-track pricing was introduced in both countries, allowing state-owned enterprises (SOEs) to sell a proportion of production on the market, granting them some autonomy and a share of surpluses. This is called "growing out of the plan",²⁸ as a proportion of goods are allocated by the plan at fixed state prices but the rest are allocated by the market at market prices. In theory, the state can control the main economic levers and ensure basic supplies of low-priced goods to the economy, while SOEs can compete on the market with their surpluses to boost production and profits.

In reality, SOE or state bureaucrats often exploited the price difference, created false shortages and diverted produce to the free market, pocketing the difference.²⁹ This led to an attack on state assets, unofficial privatisation and a financial weakening of the state.

These problems, combined with the collapse of the Eastern bloc, whose "fair trade" prices had subsidised the state and cooperative sectors in Vietnam, led the VCP to abolish two-track pricing and allocation in 1989, putting SOE operations essentially onto a market basis. China held onto the dual-key system longer, until the mid-1990s.

Other aspects of Chinese reform were more radical. The SEZs offered far wider scope for foreign, domestic capitalist, "collective" and reformed SOE development in a policy of coastal exceptionalism. These zones "initially had almost no links to the remainder of the economy".³⁰ After 1984, their numbers greatly expanded. All sectors were encouraged to form joint ventures with foreign capital.³¹ In Vietnam, joint ventures between only SOEs and foreign capital were legalised in 1987.

SEZs were not "simply factory sites with special attractions for foreign investment and export production. The wage differential between Hong Kong and China, and cross-border family and ethnic ties, supported a dizzy expansion of SEZs."³² In 1988, the entire coastal region was converted to a gigantic SEZ.

Roles of state sectors change in opposite directions

Given that the Vietnamese SOEs were more "out of plan" by 1989 than were the Chinese, one might have expected more rapid privatisation in Vietnam. Yet the opposite occurred. China had far stronger domestic private sector growth than Vietnam, while in every respect the role of the state sector crashed in China yet increased in Vietnam. As the Vietnamese state recovered from its crisis, it used new revenues from liberalisation to re-centralise economically in the early 1990s, state revenue rising 38 per cent annually.³³

The state managed a new kind of SOE-led planning despite their formal escape from the plan.

While local authorities gained greater discretion over some budgetary matters, the central state increased its command over state revenue by consolidating revenue collection. [This] diverge[s] sharply from China, where fiscal decentralisation was radical by comparison, and where localities' increased discretionary powers impinged on the coherence of the national state.³⁴

In China in 1978, state revenue accounted for 29.5 per cent of GDP, but fell to 13.3 per cent by 1999.³⁵ In Vietnam, state revenue rose from 14 per cent of GDP in 1986 to 25 per cent in 1994, levelling off at 22 per cent in the late 1990s.³⁶ Taxation as a proportion of GDP is higher in Vietnam than in Thailand, the Philippines and Indonesia,³⁷ even though in Vietnam workers earning under $200 a month and farmers with average plot sizes pay no tax.

In China the share of the state in total investment fell from 68 to 47 per cent from 1990 to 2000.³⁸ The amount of investment under the control of the central as opposed to the local state in China fell even more drastically, from 53 per cent in 1978 to 20 per cent in 1986.³⁹ In Vietnam, the share of state investment rose from 42 per cent in 1995 to 58 per cent by 2001.⁴⁰ Of the remainder, foreign investment made up 18.3 per cent and the small household sector 19.2 per cent, the domestic private corporate sector making up a mere 4.4 per cent.⁴¹

In China, the state sector's weight in GDP plummeted from 85 per cent in 1978 to 38 per cent in 1998,⁴² before the massive increase in privatisation after that year. Chinese leaders now put the SOE share at only 20-25 per cent of GDP, this being "not a matter of concern".⁴³ By contrast, state sector weight in GDP grew in Vietnam, from 33 to 40 per cent in the 1990s.⁴⁴

In 1998, before the huge increase in Chinese privatisation, there were similar figures for the domestic private sector (33 per cent in China, 35.5 per cent in Vietnam), the total private sector (51 per cent in China, 48 per cent in Vietnam), and the total non-state sector (62 per cent in China and 61 per cent in Vietnam).⁴⁵ However, even these early figures mask differences.

First, the role of agriculture in GDP is much higher in Vietnam than in China (23 compared to 14 per cent), making up a larger part of the domestic "private sector" figures.

Second, there is a huge industrial "collective" sector in China, at 23 per cent, compared to 8.5 per cent in Vietnam. As explained below, many "collectives" are actually private enterprises. The International Finance Corporation (IFC) divides Chinese collectives in half between "true" collectives and "collectives" that are private firms, raising China's domestic private sector to 45 per cent. If all the Chinese "collective" sector and the Vietnamese "collective" and "mixed" sectors are classed as "non-state", the domestic "non-state" sector in China accounted for 57 per cent compared to 48 per cent in Vietnam, including agriculture.

Third, Vietnam admits to 4 per cent for the "mixed" sector, but there is no figure for China, despite the proliferation of "joint stock" firms with a state share, on a far more massive scale than in Vietnam. A significant part of the "state" share in China is thus "mixed".

Fourth, in Vietnam, of the 35.5 per cent of GDP from the "private" sector, most is "household" enterprise—including the peasantry; only 3.3 per cent is classified as private "corporate" sector. While there are no clear figures for China, evidence of a much larger private sector is considerable—"many of the sole-ownership firms surveyed were large (the average net fixed capital stock of these firms was RMB15 million [$1.8 million])".⁴⁶ In Vietnam, the average private corporate firm disposes of capital of $177,000 (while the average SOE holds $3.4 million). According to a World Bank/ADB/UNDP report, the atmosphere for Vietnam's private firms was until recently "grudging rather than supportive—Vietnam differs markedly from China, where the private sector has been recognised as a key partner in development".⁴⁷

However, FDI (foreign direct investment) in Vietnam covers twice as much GDP as in China, representing the greater need of a poorer country, but also a greater reluctance to permit a domestic capitalist class. This covers a greater distinction, since much FDI comes from Hong Kong and Taiwan. In Vietnam, these are foreign countries, but in China, such capital has a "national" character,⁴⁸ and some is actually domestic Chinese capital diverted via Hong Kong and reinvested on the mainland.⁴⁹

Finally, one reason for the rise in Vietnamese SOE weight was the growth of industry, dominated by SOEs. Yet SOE weight in industry itself also rose initially—market reform was not conducive to the "inefficient" traditional non-state sector.⁵⁰ The later decline in the SOE share in industry to 46 per cent by 2001⁵¹ was due to the growth of foreign investment—all domestic sectors' shares declined. Of the 22 per cent of domestic industrial non-state output, only 2.2 per cent was "private corporate" in 2001.⁵²

Share of Gross Industrial Output by Sectors in China (%)
Year	State	Urban Collective	Private	Foreign
1978	77.6	22.4	0.0	0.0
1990	54.6	35.6	5.4	4.4
1995	34.0	36.6	36.6	16.6
2001	21.7	30.1	30.1	29.5

China has also experienced a rapid growth of industry, to 51 per cent of GDP,⁵³ compared to 38 per cent in Vietnam, so one could expect a larger state sector. Yet the role of Chinese SOEs in industry crashed from 77.6 per cent in 1978 to 54.6 per cent in 1990 and 20.3 per cent in 1999. In the 1980s, its role gave way to "collectives", which grew from 22.4 to 35.6 per cent, but in the 1990s, "collectives" declined, while the private sector rose from 3 per cent in 1985 to 44.3 per cent of industrial production by 1999 (not including "collective" firms that are private).⁵⁴

Percent Share of State Sector in Gross Industrial Output in Vietnam⁵⁵
1991	1995	1999
45.5	51.4	46.3

It could be argued that this greater development of the private sector is a positive for China, creating jobs and economic growth. The question is whether the state sector keeps up with this private growth to maintain a leading role or the private sector is growing at the expense of the state sector. In Vietnam, while private and foreign firms were unleashed and grew rapidly in the early 1990s, SOE growth doubled that of non-state sectors, SOE income growing 7.7 times in 1991-95.⁵⁶ By contrast, output by Chinese private firms grew at 10 times the rate of SOEs in the 1990s.⁵⁷ While Vietnam has experienced a marked increase in FDI and private industrial growth since 2000, SOE industrial growth has continued at over 10 per cent every year since the early 1990s—13 per cent in 2001. In China, in 2002, private profits surged 38 per cent, those of FIEs (foreign-invested enterprises) 23 per cent, while SOE profits fell 11 per cent.⁵⁸

Why the difference?

This contrast is ironic considering that China had far higher accumulated funds available. This suggests Chinese state sector surpluses are used to fund the capitalist class, yet this has not been done openly. According to the IFC, "the private sector has achieved this impressive growth with relatively few resources ... less than 1 per cent of working capital loans went to the private sector". Though Vietnamese state banks are also accused of providing little credit to the private sector, a much higher proportion goes to the legal private sector than in China.⁵⁹

How did the Chinese private sector gain the capital to become so important, and what does the state do with SOE-produced revenues if the state budget and social sectors have crashed? The answers cover both illegal methods of capitalist accumulation and legal peculiarities.

In both countries, much private capital has come from corruption as state and SOE officials divert assets to themselves or their families. The much greater development of China's private sector, with less access to credit, suggests greater reliance on such methods. One study shows that 90 per cent of China's richest people accumulated their wealth illegally and evaded taxes.⁶⁰

Despite massive private tax evasion in China, the role of the non-state sector in providing tax revenues increased from 33 per cent in 1992 to 64 per cent in 2001.⁶¹ By contrast, in Vietnam in the early 1990s, SOE contributions to state revenue increased by 50 per cent per year,⁶² and in 2001 accounted for 50 per cent of state revenues, while the private sector paid 13 per cent.⁶³

This contrast could mean either that Vietnam is more successful at getting money from its SOEs, which are healthier than their Chinese counterparts, or that China is more successful in taxing the private sector.

Evidence of the ransacking of China's state sector is enormous. China's National Administration of State Property reported that 300 million yuan ($36 million) in state property disappeared each day in the 1990s; accumulated losses in the 10 years to 1994 were 500 billion yuan ($60 billion). Assets often vanish when SOEs form joint ventures or become "joint stock" firms: that is, state assets are diverted to the private sector.⁶⁴

Yet big business tax cheating is also enormous—in 2002, only four of the top 100 Forbes-listed Chinese billionaires and their companies were listed in the top 50 tax-paying private firms.⁶⁵ Medium and large private enterprises turned in only one-thirteenth of private sector tax.⁶⁶ Thus the private sector tax contribution is bigger only by default.

The Chinese state sector is being robbed on a massive scale, while the private rich are also paying little tax; this explains why China's state revenues have crashed while Vietnam's have grown, and how the private sector has amassed capital.

The other side of China's more rapid private sector development lies in certain specific factors that enabled the state legally to divert assets to the private sector under a number of "hats".

Firstly, the massive state investment in SEZs to promote foreign investment also helped promote the domestic capitalist class via "round-tripping", whereby domestic private entrepreneurs invested through offshore companies, via family and ethnic ties with Hong Kong "foreign" capital, to qualify as foreign investors.⁶⁷

The second "hat" was the "collective" firms. China's stronger economic situation allowed the "collective" industrial sector to boom. In Vietnam the small industrial and craft cooperatives that existed before doi moi ("renovation") mostly collapsed, losing Eastern bloc markets and being exposed to full-scale "market mechanisms".

Chinese "collectives" were originally firms theoretically owned by their workers, plus the "township and village enterprises" as the leadership bodies of former rural collectives began investing in light industry; various formations bridged state and private sectors.⁶⁸ Whether the state benefited from an injection of private capital or private capital benefited from state cover varied, but was ultimately decided by the trajectory of society.

Some private firms became "collectives" by paying an "administration fee" to a state or collective firm or local government, and other private entrepreneurs paid a collective rent and operated the firm as a contractor. Accumulating assets, they were able to reduce the share of collective ownership and transform the enterprise.

"Collective" status helped secure access to land, assets, finance and markets. If the firm made a profit, it went to the firm. If it incurred a loss, the local government shouldered it. Thus many "collectives" were a primary means of private capital accumulation via the state.⁶⁹

In the 1990s, "collectives" were massively transformed into "joint stock" companies. "In the place of 'big collectives', joint stock enterprises with stocks being held by the State, the collective and the individuals were set up; with regard to medium or small enterprises, the stocks could be held by collectives, individual staff members and individuals from outside of the enterprise. The individual was allowed to be the controlling shareholder. In 2001 over 95 per cent of township enterprises went through a variety of transformations."⁷⁰

Massive privatisation in China and slowdown in Vietnam

The new phase of Chinese reform was heralded by the 1991 establishment of the stock exchange (a decade before Vietnam) and Deng's early 1992 southern tour, in which he encouraged cadres to take a lead in the market economy. At the Fourteenth Congress in 1992, the "socialist market economy" was endorsed. Vietnam's claim to be building "a multi-sectoral market economy with a socialist orientation" is more honest about not yet being socialist. Anything in China inconsistent with socialism can be claimed as "Chinese characteristics".

The VCP asserts that the state and collective sectors are to be dominant, and the CCP maintains this about "public ownership". However, changes cast doubt on what "public ownership" means. At the Fifteenth Congress in 1997, Jiang Zemin called for privatisation of medium and small SOEs through "joint stock partnership or sell-off", while converting 520 major SOEs into "standard corporations" to become "highly competitive, large enterprise groups".

In 1994 there were 33,000 joint stock companies in China. By 2001, "among the 2710 pilot enterprise groups, the parent companies of 1994 transformed into companies; among the 520 key enterprises owned by the State or with the State as the controlling shareholder, 430 were transformed into companies, 82.7 per cent of the total. With state-owned enterprises transformed into companies, the company stock listing was constantly expanding. From 1992 to 2001, the number of listed companies rose from 53 to 1160."⁷¹

Becoming "companies", "standard corporations" or "enterprise groups" does not say much about ownership, but the following description gives us an idea:

One Chinese chaebol is CITIC Pacific, run by Larry Yung, the son of China's vice-president. Mr Yung has transformed CITIC into a conglomerate listed on Hong Kong's stock exchange, worth $12 billion. Its interests span power stations, toll roads, airlines and shopping malls ... [Another] is Beijing Enterprises, whose share price more than tripled when listed on the colony's stock market.

These conglomerates receive "asset injections". "A parent company, usually a municipal government or a ministry, provides its protégé with the opportunity to acquire a state-run business—a toll-bridge for instance—at highly preferential terms."⁷²

This wording suggests the "protégé" is not an SOE, so rather than a device to strengthen groups of state firms, the "enterprise group", including state "parents" and private subsidiaries, listed on the Hong Kong stock exchange, is a means to sanction legally the transfer of state assets to private hands. The fact that billion dollar joint stock companies may be headed by a son of the vice-president. is also a serious issue.

This calls into question how "state" is the dominant part of the "state" sector. As 82.7 per cent of the key 520 SOEs have been transformed into "companies" whose "stock listing was constantly expanding", the term "public ownership" seems to mean open to "public" share trading. By 2001, "over 90 per cent of newly established firms were joint stock enterprises".⁷³

Of these thousands of "SOE" share companies, only 1160 are listed on the stock exchange, but these "cover some of the most strategic parts of the Chinese economy", including major telecommunications, power and heavy machine building. Chinese "SOEs" on the Hong Kong stock exchange "are the biggest and of the most strategic importance", producing "telecom cable, ships, power equipment, iron and steel, petrochemicals, trucks and machine tools".⁷⁴

The 2002 congress broke up state "monopolies" in aviation, telecommunications, automobiles, insurance, petrochemicals, nonferrous metals and military production, with massive lay-offs.⁷⁵ Thus the private Junyao Group acquired the Three Gorges airport and an 18 per cent stake in state-owned Wuhan Airlines.⁷⁶ Most growth in the airline industry is controlled by "SOEs not under direct government control. State-owned but not state-controlled Hainan Airlines is growing faster than any CAAC airlines. Hainan is listed in Shanghai. George Soros holds a significant stake. Its rapid growth was mostly fueled by acquisitions of less efficient state-owned airlines."⁷⁷ Note the ambiguity of the term "SOE"—it is "state-owned but not state-controlled", listed in Shanghai, part-owned by Soros and acquiring other state firms!

This legal shift of assets to the private sector worsened the illegal shift, as managerial buyouts involved "the looting of public assets or undervalued sales of public firms by managers and officials to friends and family. Between 1997 and 1999, capital flight from China amounted to $52 billion." Under-the-table deals involved SOEs "sold far below cost and quickly stripped of all worthwhile assets, thus enriching the SOE manager and his government supervisor."⁷⁸

Some argue that this "rationalisation" has allowed more important SOEs to consolidate and increase profits and tax revenue. However, this extra revenue is merely the private investment into what is still called the state sector. "Of some significance (in this turnaround) is the cash that many of the better-adjusted SOEs have gained listing shares. $59.5 billion has been raised, culminating in several multibillion dollar listings in the past few years."⁷⁹

This has created a category of "state-held" firms. As state capital declines, "state-held" firms can be said to be growing: "Value added of state-held firms (those that are wholly or partly owned by the government) grew rapidly, reflecting the recent acceleration of government attempts to sell down its equity in former wholly state-owned enterprises."⁸⁰

In Vietnam, strong SOE performance has been unambiguously in state firms. Most equitised firms are small—the 1700 equitised by 2004 account for 3 per cent of SOE capital. Of these, half have a state majority holding, and only 10 per cent of equitised capital has gone to outside investors (rather than workers, farmers or state input firms).⁸¹ Thus they cannot be used to boost "state-held" sector performance. Those targeted for equitisation by 2005 make up only 7 per cent of SOE capital, and the program is well behind schedule.⁸² In 1998-2001, 300 new SOEs were set up, in areas like sugar, cement, gas, electricity and fertiliser "with capital far in excess of the total" of the equitised SOEs.⁸³

The government is committed to state dominance in strategic industries. The party's Ninth Congress in 2001 stated "... state-owned corporations [must be] 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, chemicals, fertilisers, import-export, banking, insurance and auditing".

Vietnam's equitisation drive is aimed at small firms. The 700 most strategic firms, with the bulk of SOE capital, will remain "untransformed", while some 2000 medium firms will become either "single member limited liability firms" in which the state is the "single member", or equitised with a dominant state stake. Many smaller SOEs will also require a state majority, as this depends not only on size. Even some being equitised with a state minority stake are covered by "special legal decisions" to maintain state dominance.⁸⁴

The Vietnamese stock exchange, set up in 2000, has 24 medium companies listed, including no major SOEs, with a total value of $144 million, about 0.4 per cent of GDP. By 2000, China's stock market capitalisation had reached $579 billion, 53.8 per cent of GDP!⁸⁵

Party, bureaucracy and capitalist business

A sharp ideological shift accompanied Chinese privatisation. In 2001, Jiang Zemin invited capitalists to join the CCP. The Sixteenth Congress in 2002 accepted Jiang's "Three Represents" theory that the CCP represents "the advanced productive forces", "advanced culture" and the "fundamental interests of the Chinese people",⁸⁶ rather than the workers and peasants.

A party representing "advanced productive forces", i.e. the capitalist class, would be unlikely to defend the interests of workers and the poor when they clash with these "forces". It may also be beneficial for party leaders to lead such "advanced" forces. "The bureaucracy is intimately involved in promoting private economic activity, supporting some firms and inhibiting others and often having close economic and family ties to entrepreneurs."⁸⁷

Those invited to join the party and assume leading political roles are not small businesspeople. Xu Guanju, millionaire president of the chemical Chuanhua Group and chairperson of the Zhejiang Federation of Industry and Commerce, who owns assets worth 800 million yuan ($97 million), is vice-chairperson of the Zhejiang People's Political Consultative Conference (CPPCC). Vice-chairperson of the CPPCC in Chongqing is Yin Mingshan, listed in Fortune magazine as one of China's top 50 millionaires, chairperson of the Lifan Hongda Industrial Group and vice-chairperson of Chongqing's General Chamber of Commerce.⁸⁸

Zhou Zerong, number 24 on Asiamoney's list of China's 100 richest people, is on the Guangzhou CPPCC, with "impeccable links to the Chinese Communist Party", and has property investments in Australia.⁸⁹ The CCP deputy mayor of Dongguan city, Yuan Lisong, is managing director of Fook Man Development, a multimillion-dollar Hong Kong firm, a board member of three other Hong Kong firms, and part-owner of a 500room Los Angeles hotel.⁹⁰

The CCP's People's Daily calls for "a calm and composed attitude to billionaires", who produce a lot of jobs and wealth for society. Rejecting the view that they "should repay more to our society and be more duty-bound", the article says, "We don't know what 'repay' and 'duty' here refer to and why there is a 'more' here." Having to turn down extra demands "is one of the reasons why the rich are unable to live an easy life. It is unreasonable to ask the rich to do goodwill work."⁹¹

Although the VCP still claims to represent the workers and peasants, in 2002 it resolved that doing private business was not an impediment to membership. Both countries are composed overwhelmingly of small household business owners. People running small shops, cafes, farm businesses and so on had long been party members. This was not an invitation for billionaires to join a party "representing" them—the Ninth Congress excluded "capitalist" business. The party debate on what kind of business bars membership is currently deadlocked.

Mass layoffs in Chinese privatisation

In mass privatisations between 1997 and 1999, 25 million Chinese workers lost jobs in SOEs and 15 million in "collectives". In this period, only seven million jobs were created in the domestic private sector and seven million in FIEs, while eight million became self-employed—a shortfall of eighteen million.⁹² Another nine million SOE workers are to lose their jobs over the next three years.⁹³

Traditionally, the SOE "iron rice bowl" provided pensions, medical care, childcare, education and housing for their workers. In 1997 the World Bank estimated these payments equaled SOE "losses". This paints too bright a picture given the size of criminal losses from SOEs, but it indicates the problems of judging SOEs on purely "economic" criteria.

All this came under attack. SOEs were supposed to give laid-off workers a monthly allowance of 250 yuan ($30) for three years. "But with no social security law to enforce payments, most firms deal with the problem on an ad hoc basis. Many cash-strapped firms simply refuse to pay the allowance, leaving workers to fend for themselves in the private sector."⁹⁴

In Vietnam the World Bank claims one reason "for the slow pace of [SOE] transformation is resistance by insiders, among them workers in SOEs", because it "is difficult to implement without the consent of the director and a majority of the workforce".⁹⁵ The workers congress is "the highest authority within an enterprise".⁹⁶ There is little movement in equitising firms that would result in job losses. Surveys of equitised firms show better performance and job gains because "the best-performing enterprises were transformed first". The bank's full program would lead to at least 250,000 "job separations" by 2005, and more later.⁹⁷

A survey of equitised Vietnamese firms found that 83 per cent were paying higher wages, but were "still operating under old management who have not adapted their business philosophies and have failed to renovate their operations".⁹⁸ Such unadapted "philosophy" and lack of "renovation" may be why they were paying better. Chu Hoang Anh from the Labour and Industry Ministry explains, "If an enterprise wants to make big changes, they have to convince workers to change or nullify their labour contracts. This is not easily accepted by employees."⁹⁹ Workers' resistance is holding up "reform" in Vietnam, and the VCP is yet to use force against its working-class constituency.

Labour and unions

The right of workers to organise against privatising SOEs or exploitation by private capital highlights another difference. The Information Center for Human Rights and Democracy reported 100,000 stoppages in China in 1999, as former SOE workers demanded unpaid pensions and wages.¹⁰⁰ In March 2002, "protests involving more than 90,000 workers [occurred] in northeastern China, demanding work, unpaid wages or other unpaid social benefits, and punishment for corrupt government and enterprise officials".¹⁰¹

In 2002, two leaders of these protests were charged with "subversion", a charge that could lead to execution. The All China Federation of Trade Unions took the side of the state.¹⁰² State repression of labour movement activity is the rule in China. A US corporate intelligence site claims "the primary reason" SOE reform can resume "is the present security environment. Beijing has prevented the emergence of an organized labour movement. [It] knows the dangerous political ramifications of allowing organized labor and successfully suppressed it" because otherwise privatisation would have been brought "to a grinding halt".¹⁰³

In China's private and foreign factories, "tens of millions of industrial workers are struggling for laws to allow them to bargain collectively. And they are losing."¹⁰⁴ Workers are "beaten with cattle prods, exhausted by 14 hour working days in sweatshops where child labour, forced overtime, curses, beatings, searches, needless industrial accidents, and the military repression of workers, especially trade unionists, is routine. Most live in crowded dormitories above their factories. At night doorkeepers lock the women behind barred windows and doors. Tens of thousands of young workers have lost their lives in the epidemic of factory fires, explosions, and accidents."¹⁰⁵

While many bosses attempt similar exploitation in Vietnam, unions are given greater state support to fight. Taiwanese bosses complain they are unable to beat workers or arbitrarily force them to work long hours in Vietnam, but this is normal in China. In Vietnam, "if the managers pushed them too far, they would just go on strike". The labour law allows a maximum of 300 hours a year overtime. In China, "workers often work for a few months without any days off. In Taiwanese enterprises, the average number of work hours was 11 hours each day. In the export toy industry in Guangdong in the busy season workers laboured for up to 14-18 hours with no days off." The difference lies in the activism of Vietnamese unions, and this being allowed by the government, compared to the Chinese government's repression. The Chinese unions act as a tool of management, whereas the Vietnamese state and unions are stricter in demanding compliance with the labour law.¹⁰⁶

Some claim the conditions for strikes in the Vietnamese labour law virtually criminalise them,¹⁰⁷ although it is far more pro-worker than the Chinese law, which bans strikes and spontaneous workers' organisation.¹⁰⁸ The reality depends on practice. The Vietnamese General Confederation of Labour claims that "every strike" to date has been technically illegal, but they have all been justified. Although most strikes were led by spontaneous workers' groups rather than official unions, and although most "did not follow proper legal procedures, they were tolerated by the government with no reports of retribution against the strikers".¹⁰⁹ In virtually every case reported, official unions forced bosses to relent to workers' demands.¹¹⁰ Furthermore, "labour rights sentiments are backed by a conciliation system and a judiciary sympathetic to labour demands".¹¹¹ Investors complain that Vietnam's law protects employees more than employers; according to the manager of Nike Vietnam, when workers go on strike unlawfully, officials support them!¹¹²

Differences within the ruling parties

Both ruling parties contain "conservatives", who aim to preserve more socialism in the mix, and "reformers", who want more drastic marketisation. This is unrelated to political "conservatism" or "reform". The participation of leading economic reformers like Deng in the 1989 massacre highlights the link between economic "reform" and political repression.

While market reform in Vietnam has also been accompanied by the maintenance of a fairly closed political regime and occasional arrests of a handful of opponents, there has not been China-style violence against the masses; the VCP's susceptibility to pressure from its traditional base is evidenced by the blocking of privatisation by workers and the blocking of more overt land privatisation or "wagers on the rich" agrarian policies by peasant opposition.

Fourteen high-ranking Chinese "orthodox leftists" signed a declaration opposing the Three Represents Theory and the admission of capitalists into the party. In 2002 Jiang closed down their journals and arrested some leaders. The Hong Kong South China Morning Post asserted that Jiang "ordered that anti-reform leftist forces be 'exterminated at the budding stage'", fearing "a rise in the influence of leftists would drive away foreign businessmen at a time when the country is about to join the WTO".¹¹³ However, "their influence is small. The overwhelming majority of technocrats and bureaucrats—the backbone of the CCP—have benefited handsomely from the restoration of a capitalist market economy."¹¹⁴

"Conservatives" appear stronger in the VCP, another factor stalling "reform". "Unlike China, the top party echelon in Vietnam is not unanimous in their backing of market reforms. There are still crosscurrents among the leadership group that can block or delay major reform."¹¹⁵

However, pressure is growing from a section of the party, "entrepreneurial" SOE managers, the Vietnam Association of Financial Investors, the stock exchange and international "donors" to further "reform" the state sector. According to the Economist Intelligence Unit, "the government appears ready to equitise a handful of larger firms in the next two years, including Bao Minh Insurance, the Mekong Housing Bank, and Saigon Tourism".¹¹⁶ In March 2004, Prime Minister Phan Van Khai called for equitisations in areas such as power, aviation, telecommunications, banking and insurance and for an expanded role for the stock market.¹¹⁷

In April 2004, the Finance Ministry proposed limiting state holdings in equitised firms. "The state should hold a controlling stake in major or 'sensitive' sectors related to security and national defence while those involved in key industries such as electricity, banking, insurance, telecommunications, and chemicals should be equitised."¹¹⁸ This well summarises the view pushed by one wing of the party.¹¹⁹

This view is rejected by others. Party leader Nong Duc Manh asserted, "There are many ways to reform SOEs. The process must be conducted in a specific and experimental manner. We cannot accept the view that state owned enterprises inevitably lead to low efficiency. These ideas are prejudiced, short on objectivity ... SOEs should constantly reform themselves and develop in order to fulfil their decisive role in maintaining the nation's socialist track."¹²⁰ Whether the proposed changes will be pushed through thus remains to be seen.

The common association of socialist "conservatives" with political authoritarianism is a caricature. If it has a grain of truth, it works against their interests; if economic reform proceeds without opposition from below, party "conservatives" will become isolated. Support for the CCP "leftists" "comes mainly from old cadres" who will pose an alternative only "if they forge alliances with the disenchanted under and unemployed", which they are "doing more consciously".¹²¹ Some "old leftists" express solidarity with the struggling workers.¹²² Meanwhile, Wang Hui, a participant in the Tiananmen movement, is part of "a new group of Marxist critics who call themselves China's new left". His book, China's New Order, attacks China's leadership for using "state interference and even violence" to promote capitalism.¹²³

Such signs of specific convergence between economic "conservatives" and popular discontent are less in evidence in Vietnam, because the "reformers" themselves have chosen not to clash with the worker and peasant base, but to act within the VCP consensus.

Health and education

China and Vietnam made great achievements in health and education during the socialist era, but both have introduced user fees and private sector entry. Compared to Cuba's state spending of 6.1 per cent of GDP on health and 8.5 per cent on education, that of China (2 per cent on both) and Vietnam (1.5 per cent on health and 3.5 per cent on education) is low.

This has led to stark inequalities and injustices incompatible with socialist orientation, although Vietnam made these changes in 1989, during the systemic crisis when the state was bankrupt, a situation with no equivalent in China.

Yet Vietnam remains far ahead in health and education of countries at similar levels of income. Vietnam's life expectancy of 69 years, literacy rate of 93 per cent and infant and maternal mortality rates of 30 per 10,000 and 95 per 100,000 stand in astonishing contrast to countries with similar levels of GDP per capita, such as Bangladesh (61, 41, 51, 380), Pakistan (60, 41, 83, 530), Ghana (57, 73, 57, 210) and Haiti (49, 51, 79, 520).

Moreover, although Vietnam is a much poorer economy ($430 per capita), it keeps up with China and richer underdeveloped capitalist countries (with incomes per capita of $1100 in China and the Philippines and $2000 in Thailand). These four countries have life expectancies of around 69-70 and infant mortality rates of around 30 per 10,000, according to UNDP Human Development Indicators, while the latest data from the UN's Millennium Indicators suggest that Vietnam's infant mortality rate may have fallen to 20 per 10,000.¹²⁴

Cuba has 590 doctors for every 100,000 people, while China has 167 and Vietnam only 52—still ahead of Thailand's 24 and Indonesia's 16.¹²⁵ Seventy per cent of Vietnamese births are performed in health facilities and 79 per cent attended by skilled specialists; the figures for China are 57 and 85. Only 71 per cent of Thai births are attended by skilled specialists, while the figures for the Philippines are 28 and 53, and Indonesia 18 and 36.¹²⁶

Vietnam's literacy rate of 93 per cent is much better than China's,¹²⁷ masking a bigger difference: China's female literacy is only 78 per cent,¹²⁸ the lowest in the region and the largest gap between male and female rates; in Vietnam, female literacy, at 91 per cent, is only a few points behind male.¹²⁹ Primary school enrolment had reached 88 per cent in Vietnam in the late 1980s but crashed to 78 per cent in the early 1990s. However, it rose to 95 per cent in 2001, while in China it fell from 97 to 93 per cent between 1991 and 2001.¹³⁰

In the 1990s, Vietnam eradicated polio, neonatal tetanus and leprosy, reduced malaria fatalities by 97 per cent and cut diphtheria and measles fatalities by 80 per cent.¹³¹ In 1997, Vietnam was one of only two countries in the world to meet World Health Organisation targets of diagnosing more than 70 per cent of TB infections and curing 85 per cent of patients. By 2002, the number of countries was 22, but Vietnam was "the only high-burden country among them",¹³² where "high-burden" includes all the populous countries of east, southeast and south Asia. By contrast, WHO reported in 2000 that TB was causing 150,000 deaths a year in China and that more than 400 million were infected.¹³³

Vietnam's relatively good social indicators, and the fact that the rising inequalities and injustices introduced by the market are less drastic than in China, is paradoxical, because Vietnam's state health spending, at 1.5 per cent of GDP, is low—China and Thailand spend 2 per cent, the Philippines the same as Vietnam, while only Indonesia spends less at 0.6 per cent.

Of course, a larger budget may mean more money for luxury health services. Vietnam appears to have spread health spending better, with 170 primary health clinics at the village level per million population, compared to only 32 in Indonesia, 63 in China and 141 in Thailand. There is a hospital bed for every 389 Vietnamese, compared to every 465 Chinese, 665 Thais, 910 Filipinos and 1743 Indonesians.¹³⁴ By the late 1990s, nearly every one of Vietnam's 10,000 communes had a primary school and a commune health centre.¹³⁵

Thus basic health can be more efficiently brought about even with a lower budget. While Vietnam diagnoses 82 per cent of TB cases, Thailand manages only 73 per cent, the Philippines 58 per cent, Indonesia 30 per cent and China 27 per cent!¹³⁶ Vietnam also has the highest success rate in curing TB, 93 per cent. By contrast, "the resurgence of TB in China was linked to the fact that 80 per cent of TB patients could not afford the cost of treatment".¹³⁷

Vietnam has the highest percentage in the region for free child immunisation against major diseases. While Vietnam immunises 99 per cent of children against TB, China manages only 77 per cent. While 96 per cent of Vietnamese children sleep under a net to guard against malaria, in Indonesia the figure is only 32 per cent.¹³⁸

China's less efficient spread is exacerbated by decentralisation. While Vietnamese provinces now fund 60 per cent of state health spending,¹³⁹ in China the figure is 100 per cent because the Chinese central government contributes zero. A similar contrast exists in education.¹⁴⁰ So regional inequality has been less marked in Vietnam, allowing "unprecedented access to primary and lower-secondary education as well as preventative health services", compared to the "Hayekian nightmare in many parts of rural China".¹⁴¹

Nevertheless, while Vietnam's education spending has grown, health spending remains low. Moreover, as Vietnam charges user fees, like Third World capitalist countries, it is hardly possible to talk about "socialist" health or education systems, even if fees are low. What aspects of Vietnam's socio-economy explain its relatively high performance in these areas?

First, overall state social spending is high. A category called "social protection" accounts for 3.5 per cent of GDP, covering war-affected assistance and special poverty reduction programs. "War-affected" spending includes benefits to families of martyrs, disabled veterans, sick veterans, heroic mothers, others who helped the war effort—several million poor people.

Second, the "social protection" budget partly covers the energetic poverty alleviation programs, along with funds from other departments, mass organisations, state enterprises and international aid. These campaigns include free education and health insurance for the poor, building schools, clinics, roads, irrigation and infrastructure in remote areas, subsidised credit, building clean water systems etc. The effectiveness of these campaigns can be partly attributed to the dedication of large numbers of cadres who see fighting poverty as a continuation of the armed struggle they once engaged in for a socially just society.

Third, in poor areas the army runs health, education and infrastructure programs funded outside the health and education budgets, building schools and clinics, dispensing health care and providing teachers to 80,000 pupils. Evidence suggests they are effective and well received. The Defence Department runs 335 SOEs, employing one-sixth of the army, and the profits save the state budget and can be used for social programs.¹⁴²

Fourth, the Communist Youth Union has reintroduced the "volunteer spirit". Every summer, it recruits thousands of volunteers from campuses and elsewhere to go to rural areas to help with agricultural activities, build houses and roads and run literacy classes and health campaigns.

Fifth, the backbone of Vietnam's political economy are the dominant SOEs, some of which directly fund health and education. In the mid-1990s, the VCP launched the "socialisation" of health and education funding. This is ironic, as it means mobilising funds from local people in addition to state funding, and is often seen as giving fee-paying a nice name. Yet fees were introduced in 1989, and the government claims that "socialisation" aims to mobilise extra funds from local firms and wealthy people; evidence is that the poor are not always exempt.¹⁴³

In any case, there do appear some good examples, like the Lam Son Sugar SOE, which has invested massively in local infrastructure, schools and health care centres.¹⁴⁴ Another is a national project to build or upgrade classrooms to abolish school "shifts", for which half the funding will come from SOEs, which must contribute "between 1 and 2 per cent of their after-tax profits, with each responsible for one class". The state Song Da corporation pledged to build 100 classrooms in poor provinces by 2005.¹⁴⁵

Finally, the resilience of Vietnam's land reforms, the other major aspect of its political economy, should be borne in mind when neo-liberals hail the power of private peasant interest in Vietnam's success. If full land privatisation had occurred, there would be vastly more landless. Without whitewashing fee-paying, one reason Vietnam nevertheless has such higher standards than any comparable country is that its political economy allows a much larger proportion of petty owners to accumulate some paying power.

However, while Vietnam can be commended for its achievements, sharp injustices abound. National preventive programs for all are free, and ethnic minorities, young children and many officially classed as "poor" are exempt from user fees. But the classification of the "poor" is often suspect, and large numbers just above the official "poor" are left out. A family member falling seriously ill can drive a family into poverty; the number of people classed as poor in 1998 was greater by 2.6 million people due to the cost of operations or the inability to work.¹⁴⁶ Part payment for operations is the norm in the developing world, but is difficult to stomach in a country with a socialist orientation.

To some extent, this is inevitable in a poor country where most people are small peasants. Peasants are not taxed, and it is difficult for the nonagricultural parts of the economy to cover health and social security for the 70 per cent of the population in rural areas. Further industrialisation is essential. However, the VCP's claim that in a socialist orientation, social goals must not be neglected for the sake of growth, often appears less than fully applied. To raise the relative level of health spending as the economy expands, requiring a small amount of investment to be diverted from industrial growth, would greatly alleviate the harsher burdens on the poor, such as fees for operations, and strengthen political support for the VCP.

Socialist orientation and the nature of SOEs

Thus the vision of the VCP's "socialist orientation" is vague. Objectives like reducing poverty are claimed by many non-socialist governments. The VCP claims that in a socialist-oriented market economy undergoing industrialisation, while a gap exists between rich and poor, no-one is to get poorer, as they do in capitalist industrialisation—the poor simply improve their situation more slowly. And this appears to be the case. However, the fact that some of the worst burdens on the poor are not alleviated as the economy grows undermines claims of a fundamentally different orientation. Yet since Vietnam has achieved far more positive social indicators and reduced poverty more than would be expected for its level of income, there may be a connection between its socio-economic system and these results.

The dominant role of the state sector appears the main concrete aspect of socialist orientation, and its strengthening is one of the clearest contrasts with China. However, many capitalist countries have significant state sectors, sometimes organs of a state-mafia elite that milks their assets and sometimes purely commercial firms in areas where the capitalist state has essential needs that cannot be met by a weak bourgeoisie. There is no doubt that both forms of SOE exist to some extent in Vietnam. Given the autonomy of Vietnamese SOEs after 1989, to what extent do they still constitute "social" firms operating differently from private firms?

While neo-liberal agencies complain about SOEs "inefficiency", a great many are in fact efficient and profitable.¹⁴⁷ SOEs provide a great deal more state revenue than private firms in Vietnam, but even this could serve as an excuse to make them more "efficient", so to pay more taxes, regardless of how "efficiency" is achieved. The large amount of tax is not achieved via a higher tax rate—SOEs keep their surpluses above tax. In private firms, the surplus is profit for the boss. If SOEs keep large surpluses, how does this help society?

Vietnamese leaders claim SOEs are used to "regulate" the economy, that the state plays a role in investment decisions and that SOEs have "social obligations", aspects not conforming to market principles. "Social obligations" often mean non-monetary on-the-job benefits for SOE workers, but today most SOEs only pay those regulated by law such as health insurance and pensions, which foreign firms and even formal sector private firms are supposed to provide.

But in agricultural countries, peasants, the unemployed and informal sector workers are poorer and less secure than formal sector workers; SOE workers, a small part of the population, have good conditions. Thus social obligations and regulatory uses of SOEs should have relevance outside the SOE. Of central concern to the Soviet NEP debates in the 1920s was state industry producing cheaper goods for the peasants and maintaining the worker-peasant alliance.

The World Bank argues that the SOE "monopoly" in agricultural export and import lowers prices for farmers' produce and raises prices for inputs like fertiliser, and that SOEs take much state credit in heavy industries that create little employment. It uses this as an argument for privatisation and argues that more credit should go to private firms, which create most jobs.

In fact, SOEs now get a proportion of credit equivalent to their share of GDP, and Vietnam provides a high proportion of subsidised credit to the poor. In "dynamic" areas like garments, SOEs create jobs just as well as private firms. The fact that heavy industry does not create many jobs is unrelated to SOE ownership; this argument amounts to advocacy of shutting down heavy industry to make way for "cheap" imports, demolishing thousands of jobs. SOE dominance of heavy industry does not impede private firms creating jobs in light industry.

Imports are "cheap" only at certain times; at other times world market prices are higher, and SOE control of sectors basic to the economy allows the state to keep prices low, lowering SOE profits. In May 2004, the coal, oil, electricity, fertiliser and cement SOEs declared that they would not raise prices despite a dramatic rise in the price of imported oil, big rises in the cost of imported fertiliser and imported inputs for the cement industry and demands by foreign electricity investors for price rises. Holding the prices of such basic products had a flow-on effect throughout the economy.¹⁴⁸ For all the talk of SOE "monopoly" causing higher prices, where SOEs really have "monopoly", as in electricity and water, they keep prices lower than demanded by the World Bank to attract investors.

The same is true of the bank's claim regarding fertiliser imports. Import prices were lower in the late 1990s, when China banned such imports, leaving a massive surplus on the world market. Once oil prices began rising in 2001 and China began importing again, world prices shot up, in 2003-04 to record heights. These import prices are driving up prices in Vietnam because the SOEs cannot cover all domestic needs, but SOE prices are now lower than import prices.

In the late 1990s, the rice export price was high due to massive Chinese and Indonesian imports. Therefore, export quotas were applied via the large food trading SOEs to prevent domestic prices getting too high for poor consumers (including many peasants who do not grow rice), thus playing an important social role. This may have kept prices lower for rice-growing peasants, but this is unlikely since private traders, who link peasant households with big SOEs, make the killing in such times, because poor farmers have to sell after harvest to pay debts and so have little bargaining power. Only via peasants re-organising voluntary cooperatives can this problem be overcome.

Yet when the world rice price crashed in 2000-01, the SOEs were required to subsidise farmers' prices by paying the government's "floor price", substantially above the market price, meaning the SOEs could barely break even. No private traders or exporters came rushing to pay under the market price. The SOEs were hesitant but had no choice "because they are state-owned enterprises whose function is to some extent politically oriented".¹⁴⁹ Finally, many large agricultural SOEs (rice, tobacco, sugar, cotton, milk) have been directed to sign contracts with farmers in poor communes to provide stable prices and markets, technical assistance, interest-free loans and infrastructure development.¹⁵⁰

Many SOEs have non-market roles directly aiding farmers and local communities. Examples of SOEs contributing to local health and education have been mentioned above. When the government drew up its funding sources for its national "Hunger Eradication and Poverty Alleviation Campaign" in 1998, the 17 largest state corporations were included as funders, with each responsible for particular poor communes. Thus, despite their "independence", their untaxed surpluses can still be used as an arm of state finance.

As an example, the Gia Lai People's Committee has a program of agricultural equipment subsidies for ethnic minority people, reducing the prices by 30 to 50 per cent. Of VND700 million to be spent in 2003, "VND400 million will come from the provincial budget, and the rest from state-owned equipment manufacturers".¹⁵¹ In an Oxfam study, SOEs in Nghe An were providing their own fertiliser and other subsidies to poor people on top of state subsidies delivered via those SOEs.¹⁵²

Asked why it uses little imported dairy products, which are cheaper, state Vinamilk director Mai Kieu Lien responded, "A business should think of not only profits, but also social obligations. Vinamilk has since 1991 followed a policy of using domestic dairy products, progressively reducing imports. Though profits were thereby lower by an average of VND30 billion a year, Vinamilk has effectively provided thousands of rural jobs via the development of herds of dairy cows. The number of dairy cows has risen from several thousands in 1991 to 29,000 in 1999. This has created relief from social burdens and a rise in social security."¹⁵³

Neo-liberals claim these non-commercial roles reduce SOE "efficiency". One Vietnamese expert complains that SOE operations "have not been entirely focusing on profits" but also have "other social burdens", especially "in remote areas where the local administration lacks resources to provide these services". A survey of 91 SOEs revealed "profit maximization was put on a par with creating employment for workers as the first operation targets of SOEs".¹⁵⁴

SOE wages and conditions are far superior to those in private or foreign firms, wages being around one third higher.¹⁵⁵ While this may be helping only the minority who work for SOEs, it helps trade unions in the private sector prevent extreme exploitation by acting as a standard. The World Bank's advocacy of mass privatisation would put thousands of secure workers onto the "labour market", driving down their bargaining power. Similarly, the relative resilience of Vietnam's land reforms means that, while poor, peasants have some basic food security and can return to the farm if the level of exploitation in private factories becomes unbearable.¹⁵⁶

Problems ahead for Vietnam

However, Vietnam's socialist orientation remains at the edge of a precipice. Its scheduled entry into the WTO in 2005 will force the scrapping of investment restrictions, undermining the ability of the state sector to dominate key economic activities, opening up basic services and further exposing the poor to "free trade". Working-class and "conservative" resistance will be decisive.

The fact that a large layer of cadres who dedicated their lives to the struggle for a just society are still active in many positions in party and state, SOEs, local governments, the military, trade unions and mass organisations is key to Vietnam's socialist "conservatism". However, the VCP has not been able to transmit this heritage to youth. The young professional set are swamped with illusions in western capitalism; virtually everyone wants "to become a businessman" in the future. Being sent abroad in large numbers to study economics in western universities doesn't help, essential though it may be.

Further, VCP ideology appears incapable of countering the influence of the market on basic incentives. Leon Trotsky's observation that under the NEP "the rising tide of capitalism was visible everywhere" strikes a chord with the situation in modern Vietnam; the market encourages the domination of individual over the social incentives necessary to construct a socialist society, with declining social solidarity and rising individualism, crime and depoliticisation. Lenin believed widespread petty production could be brought toward socialism by encouraging cooperation among producers and consumers to promote collective spirit and organisation; there is little evidence of this today in Vietnam.

Finally, there is a need for expanded socialist democracy. This need not mean multiple parties, for which there seems little demand; the VCP still has a popular mandate. Nor can more democracy solve all problems, as it would confront the same dilemmas in building socialism in a poor country. Examples above indicate that workers and peasants have far more control over the political situation than can be understood by seeing the VCP as something rigidly separate; there remains an organic connection. The Grass-Roots Democracy decree of 1998 strengthened democracy in local communes and SOEs, but its success has been uneven.

However, the top-down, commandist tradition inherited from the past and decades of war communism remains strong, and there is little evidence that local communities have real control over important decisions. The stultifying nature of the media drives the young to major western news channels accessible on the internet and satellite TV. The VCP's preference to keep out undesirable views rather than politically confronting them makes these ideas seem radical. Open discussion on the way forward at these crossroads is crucial.

The negatives should be set in context. The lack of US reparations following "bombing it back into the Stone Age" has left a legacy of 2 million people affected by the chemical weapon Agent Orange, and weekly deaths from unexploded us bombs. The government has to find money for basic subsistence for these people, and other surviving crippled veterans. Some 7 million people live with physical disabilities, 9 per cent of the population. Finally, Vietnam's problems cannot be separated from underdevelopment and imperialist control of the world market. Only new revolutionary developments in some larger countries may offer a pole of dissent from dominant world capitalism. If the worker-peasant upsurge in China could reverse the course in that country, it would be a huge boost to Vietnamese socialism.

The party that led the victory in 50 years of conflict with imperialism is now trying to steer through this extraordinary situation. Any criticisms need as their starting point a mixture of solidarity and deep respect for the great achievements this party has made in war and peace.

Footnotes

1. See for example W. Hinton, The Great Reversal: The Privatisation of China, 1978-1989, Monthly Review Press, New York, 1990; R. Smith, "The Chinese Road to Capitalism", New Left Review, MayJune 1993; G. Greenfield and A. Leong, "China's Communist Capitalism: The Real World of Market Socialism", Socialist Register, 1997; E. Cheng, "China: Is Capitalist Restoration Inevitable?", Links, 11, January-April 1999; B. Foley, "From Situational Dialectics to PseudoDialectics: Mao, Jiang and Capitalist Transition", Cultural Logic, 2002, http://eserver.org/clogic/2002; Liu Yufan, "A Preliminary Report on China's Capitalist Restoration", Links, 21, May-August 2002; M. Hart-Landsberg and P. Burkett, "China and Socialism", Monthly Review, July-August 2004.

2. For example, G. Kolko, Vietnam: Anatomy of a Peace, Routledge, London 1997; G. Greenfield, "The Development of Capitalism in Vietnam", Socialist Register, 1994.

3. Adam Fforde, "From Plan to Market: The Economic Transitions in Vietnam and China Compared", in Anita Chan, Benedict J. Tria Kerkvliet and Jonathon Unger (eds.), Transforming Asian Socialism: China and Vietnam Compared, Rowman and Littlefield Publishers, Maryland, 1999, pp. 51.

4 Susan Shirk, The Political Logic of Economic Reform, University of California Press, 1993, pp. 23, 34.

5. "In Vietnam the most fundamental taboo has been one which even the highest leaders have to respect, and that is not to press against the interests of the people." Melanie Beresford and Dang Phong, Authority Relations and Economic Decision Making in Vietnam, NIAS Publications, 1998, p. 12.

6. The period included the Grass-Roots Democracy decree, the party anti-corruption drive, rejection of a plan to allow "large farms", a new cooperative law, a new wave of subsidised rural credit, a dramatic expansion of the poverty alleviation program and a big expansion of the army's social programs.

7. Benedict J. Tria Kerkvliet and Mark Selden, "Agrarian Transformations in China and Vietnam", in Transforming Asian Socialism, op. cit., pp. 101-4.

8. ibid., pp. 102, 105.

9. ibid., p. 110.

10. J. Fewsmith, Dilemmas of Reform in China, M. E. Sharpe, Armonk, New York, pp. 153. China reduced poverty by 400 million people from 1980 to 2000, but "about half of this progress was in the first half of the 1980s", i.e., before deeper economic reforms bit in. World Bank press release, "Global Poverty Down By Half Since 1981 But Progress Uneven As Economic Growth Eludes Many Countries", Washington, April 23, 2004.

11. Ngo Vinh Long, "Some aspects of cooperatisation in the Mekong Delta", in D. Marr, and C.P. White (eds.), Postwar Vietnam: Dilemmas in Socialist Development, Southeast Asia Program, Cornell University, New York, 1988, pp. 170-71. The huge drop in state procurement of rice in 1978-79 was related to very low procurement prices and the inability of the state to provide subsidised inputs, especially following the Chinese embargo in 1978, the Cambodian war and Chinese invasion.

12. J. Fewsmith, Dilemmas of Reform in China, M. E. Sharpe, Armonk, New York, pp. 153-54, 156.

13. Villagers saw use rights rather than ownership "as a way to avoid land being accumulated by a few people and to help assure that all families who rely on farming have fields to plant". This enabled periodic reallocation of land "according to the number of people in their household and other factors". B. Kerkvliet, Everyday Politics in Collective Farming: Vietnam 1955-1990, Research School of Pacific and Asian Studies, ANU, 2003, p. 284.

14. "Much of the performance of the agricultural sector in the late 1980s through early 1990s was the result of (state) investments made in the late 1970s through the early 1990s." Choeng-Hoy Chung, "Role of State Investment in Agriculture", Vietnam's Socio-Economic Development, Autumn 1997.

15. Kerkvliet and Selden, op. cit., pp. 112-13.

16. Hy Van Luong and Jonathan Unger, "Wealth, Power and Poverty in the Transition to Market Economies: The Process of Socio-Economic Differentiation in Rural China and Northern Vietnam", Transforming Asian Socialism, op. cit., pp. 144-45.

17. G. Kolko, Vietnam: Anatomy of a Peace, Routledge, London, 1997, pp. 91-99.

18. Ngo Vinh Long, "Reform and Rural Development, Impact on Class, Sectoral and Regional Inequalities", William Turley and Mark Selden (eds.), Reinventing Vietnamese Socialism, Westview Press, Boulder, Colorado, 1993, pp. 191-93.

19. "This policy encountered resistance at the local level ... by 1993 most communities in northern Vietnam had divided almost all of their fields on an egalitarian basis among villagers, regardless of gender and age." Luong and Unger, op. cit., pp. 124-25, 145.

20. Fewsmith, op. cit., pp. 154-56.

21. Kerkvliet and Selden, op. cit., p. 118; Luong and Unger, op. cit., p. 131.

22. Li Changping, a former township party secretary, calculated that peasants bear the burden of 70-80 per cent of the township expenditures. Zhang Kai, "Intensified Contradictions and People's Resistance", International Viewpoint, June 2002.

23. Economist Intelligence Unit, Country Report—China, April 2004.

24. E.g., current party leader Nong Duc Manh, opening address, Vietnamese Communist Party Central Committee Fifth Plenum, February 2002; former party leader Le Kha Phieu, interview, Vietnam Economic Times, August 1997, pp. 20-21.

25. "The government action program", Viet Nam News, September 23, 2002.

26. A. Fforde,"Light Within the ASEAN Gloom", Southeast Asian Affairs 2002, Institute of Southeast Asian Studies, Singapore, 2002, p. 366.

27. Ross Garnaut and Song Ligang, China's Emerging Private Enterprises: Prospects for the New Century, International Finance Corporation (IFC), 2000, p. 8.

28. B. Naughton, Growing Out of the Plan, Cambridge University Press, Cambridge 1995, pp. 89, 13.

29. R. Smith, "The Chinese Road to Capitalism", op. cit.; G. Porter, Vietnam: The Politics of Bureaucratic Socialism, Cornell University Press, Ithaca, 1993, pp. 130-32.

30. Naughton, op. cit., p. 11.

31. Market Oriented Reforms of China's Enterprises in Retrospect, China Internet Information Centre, November 7, 2003.

32. William S. Turley and Brantly Womack, "Asian Socialism's Open Doors", Transforming Asian Socialism, op. cit., pp. 88, 94-95.

33. Le Dang Doanh, "Economic Developments and Prospects", in Suiwah Leung (ed.), Vietnam Assessment: Creating a Sound Investment Climate, Curzon Press, ISEAS/NCDS, Singapore 1996, p. 10.

34. Jonathan D. London, Social Provision and the Transformation of the Socialist State: Mass Education and Health Provision and Vietnam's Market Transition, PhD Thesis, Department of Sociology, University of Wisconsin, 2004.

35. Liu Yufan, "Will China shake the world?", International Viewpoint, March 2002.

36. Le Dang Doanh, op. cit., p. 10.

37. In the 1990s, taxation in Vietnam accounted for 24.6 per cent of GDP, in Indonesia 18.4 per cent, Philippines 12.7 per cent and Thailand 12.5 per cent. Ngo Dinh Quang and Nguyen Tien Dung, Vietnam's Socio-Economic Development, Summer 1997, p. 7.

38. Development of the Non-State-Owned Sector, China Internet Information Centre, china.org.cn, November 7, 2003.

39. Fewsmith, op. cit., p. 184.

40. Vu Long, "All Together Now: The State Plays the Leading Role", Vietnam Investment Review, April 2001; Le Dang Doanh, op. cit., p. 12.

41. ibid.

42. IFC, op. cit.

43. "China shares its experiences of State companies reform", Vietnam Investment Review, July 17, 2003, quoting Zhou Fang from China's Finance Ministry; similar figures given in "Private enterprise produces 75 per cent of GNP", CNN web site, January 30, 1999.

44. Le Dang Doanh, op. cit., p. 17.

45. Figures here and in next four paragraphs for China, IFC, 1999, and Vietnam, Vu Long, 2001.

46. IFC, op. cit.

47. WB, ADB and UNDP, Vietnam 2010—Entering the 21st Century, Vietnam Development Report 2001.

48. In 1988, 65 per cent of FDI into China came from Hong Kong and Macao and 7 per cent from Taiwan. R. Smith, "The Chinese Road to Capitalism", op. cit.

49. IFC, op. cit.

50. Le Viet Duc, "Vietnam's Industry: 15 Years of Renovation", Vietnamese Studies, No. 2, 1999, The Gioi Publishers, pp. 125-26.

51. Martin Painter, "The Politics of Economic Restructuring in Vietnam: The Case of StateOwned Enterprise Reform", Contemporary Southeast Asia, April 2003, p. 25.

52. Vu Long, op. cit.

53. Economist Intelligence Unit, Country Report—China, April 2004.

54. K.C. Kwok, "China's Private Sector", TDC Trade, Economic Forum, July 21, 2001.

55. Pham Quang Huan, "Solutions for the Stateowned enterprise reform", Vietnam's Socio-Economic Development, No. 14, Summer 1998, p. 4; Vu Long, op. cit.; M. Painter, op. cit., p. 25.

56. Pham Quang Huan, op. cit., p. 3; Le Viet Duc, op. cit., pp. 125-26.

57. IFC, op. cit.

58. Allan Zhang, "Hidden Dragon: Unleashing China's Private Sector", in PricewaterhouseCoopers Macroeconomics Unit, Executive Perspectives—Re: Business, April 2003.

59. World Bank, Vietnam: Delivering on its Promise, Hanoi, 2002, p. 23, complains that 25 per cent of new loans are "still" going to SOEs, while the Asian Development Bank, Country Economic Review: Socialist Republic of Vietnam, 2000, p. 9, claims "only" 27 per cent of loans are going to private firms.

60. Allan Zhang, op. cit.

61. Development of the Non-State-Owned Sector,op. cit.

62. Pham Quang Huan, op. cit., p. 3.

63. World Bank, Asian Development Bank, Vietnam: Delivering On Its Promise, Hanoi, 2002, p. 125. Import and export duties, in which SOEs also play a major role, other non-tax contributions by SOEs to revenue and joint ventures, are not included in this figure—the total SOE contribution is estimated to be around 70 per cent or more.

64. Eva Cheng, "Growing privatisation of Chinese economy", Green Left Weekly, September 17, 1997.

65. Liu Wei, "Don't be so sensitive to billionaires", People's Daily, September 26, 2003.

66. Report on the Development of the Private Sector, China Internet Information Centre, china.org.cn.

67. IFC, op. cit.

68. R. Smith, "The Chinese Road to Capitalism", op. cit., gives a good description of how industrial "collectives" in the 1980s differed from both local SOEs and private firms.

69. Last two paragraphs from IFC, op. cit.

70. Development of the Non-State-Owned Sector, op. cit.

71. Market Oriented Reforms of China's Enterprises in Retrospect, op. cit.

72. Economist, June 7, 1997.

73. Development of the Non-State-Owned Sector, op. cit.

74. Eva Cheng, "Growing privatisation of Chinese economy", Green Left Weekly, September 17, 1997.

75. Eva Cheng, "CP welcomes capitalists into its ranks", Green Left Weekly, November 20, 2002.

76. Eva Cheng, "Capitalists gain ground as 'old guard' makes way", Green Left Weekly, April 2, 2003.

77. Jamal Munshi, The Private Sector in China, International Securities Consultancy, Hong Kong, 2001.

78. "Hu, Wen and Chinese SOE Reform", Stratfor, February 16, 2004.

79. "China's state sector reform a success", Asian Economic News, Dec 18, 2000.

80. Economist Intelligence Unit, Country Report—China, April 2004.

81. "To consider establishment of economic groups in some industries", VNEconomy, April 23, 2004, http://vnexpress.net/Vietnam/Home/.

82. World Bank, Asian Development Bank,, op. cit., pp. 2224; Economist Intelligence Unit, Country Report—Vietnam, April 2004.

83. "SOEs: Are they waxing or waning?" Vietnam Investment Review, September 915, 2002.

84. A. Fforde, "SOE, Law and a Decade of Market-Oriented Socialist Development in Vietnam", Conference "Law and Governance: Socialist Transforming Vietnam", The Asian Law Centre and the School of Law at Deakin University, Melbourne Law School, June 2003.

85. Le Xuan Sang, "The development of Vietnam's and China's stock markets", Vietnam's Socio-Economic Development, No. 39, Autumn 2004.

86. Eva Cheng, "CP welcomes capitalists into its ranks", Green Left Weekly, November 20, 2002.

87. IFC, op. cit.

88. "Private entrepreneurs gain political status", China Daily, December 3, 2003.

89. Hamish McDonald, "Friends in High Places", Sydney Morning Herald, February 14-15, 2004.

90. R. Smith, "The Chinese Road to Capitalism", op. cit.

91. Liu Wei, "Don't be so sensitive to billionaires", People's Daily, September 26, 2003.

92. China Statistical Yearbook, 2000, from K.C. Kwok, op. cit.

93. "Hu, Wen and Chinese SOE Reform", Stratfor, February 16, 2004.

94. Jeremy Page, "Murky figures cloud China state sector reform", Reuters, June 19, 2000.

95. World Bank, Asian Development Bank, op. cit., pp. 22, 26.

96. M. Beresford, "The political economy of dismantling the bureaucratic centralism and subsidy system in Vietnam", K. Hewison et al. (eds.), Southeast Asia in the 1990s, Allen and Unwin, Sydney, 1993.

97. World Bank, Asian Development Bank, op. cit., pp. 28, 71.

98. "Equitised enterprises pay higher salaries", Viet Nam News, July 30, 2002.

99. "State workers tell ministry all is well", Vietnam Investment Review, September 915, 2002.

100. "Hu, Wen and Chinese SOE Reform", op. cit.

101. Eva Cheng, "China: Increased resistance as capitalist restoration deepens", Green Left Weekly, November 13, 2002. This article has much detail of similar workers' protests throughout the country.

102. Eva Cheng, "Workers' leaders could be executed", Green Left Weekly, January 15, 2003.

103. "Hu, Wen and Chinese SOE Reform", op. cit.

104. J. Kahn, "China's Leaders Manage Class Conflict Carefully", New York Times, January 25, 2004.

105. R. Smith, "Capitalism with Chinese characteristics", New Left Review, March-April 1997.

106. Anita Chan and Hongzen Wang, "Raising Labor Standards, Corporate Social Responsibility and Missing Links: Vietnam and China Compared", Conference on The Labor of Reform: Employment, Workers' Rights, and Labor Law in China, University of Michigan, March 2003.

107. Greenfield, 1994, op. cit., p. 228.

108. Anita Chan and Irene Norland, "Vietnamese and Chinese Labour Regimes: On the Road to Divergence", in Transforming Asian Socialism, op. cit.

109. US Department of Commerce, Antidumping Duty Investigation of Certain Frozen Fish Fillets from the Socialist Republic of Vietnam—Determination of Market Economy Status, November 2002.

110. Reports are numerous. A few examples from Viet Nam News: "Workers strike against impossible quotas", May 8, 2003; "Paper company relents to striking workers", April 16, 2003; "Wildcat strike forces workplace reforms", May 9, 2003; "Labour dispute resolved at plastics company", May 16, 2003.

111. US Department of Commerce, op. cit., quoting Economist Intelligence Unit, Risk Wire, Vietnam Risk: Alert: Labor Reform, April 2, 2002.

112. VDC Business Newsletter, December 21, 2004.

113. "A Struggle Within the Chinese Communist Party", Monthly Review, May 2002; "Letter of the Fourteen", Monthly Review, May 2002; Ma Bin and Han Yaxi, "A Letter to Comrade Jiang Zemin and the Party Central Committee", Monthly Review, May 2002.

114. Liu Yufan, "Will China ...", op. cit.

115. Thien Pham, "The Chinese Economic Model: Some Tentative Conclusions for Vietnam", in Binh TranNam and Chi Do Pham (eds.), The Vietnamese Economy: Awakening the Dormant Dragon, Routledge Curzon, London, 2003, p. 170.

116. Economist Intelligence Unit, Country Report—Vietnam, April 2004.

117. "By June 2004 two big corporations will be chosen to be privatised", Vinachem, March 5, 2004.

118. "Limit State stake: MoF", VDC Media/Vietnam Style, April 19, 2004.

119. For advocacy of such a minimal state role, Nguyen Minh Tu, "The reform of state businesses in Vietnam", Vietnam's Socio-Economic Development, Winter 1997, and Le Dang Doanh, op. cit.

120. Nong Duc Manh, "SOE Reform Vital for Ensuring Socialist Orientation", Viet Nam News, August 23, 2001, and Vietnam Investment Review, August 2001.

121. Liu Yufan, "Will China ...", op. cit., and "A Preliminary Report ...", op. cit., p. 59.

122. Ma Bin and Han Yaxi, "A Letter to Comrade Jiang Zemin and the Party Central Committee", Monthly Review, May 2002.

123. Jonathan Mirsky, "Questioning Beijing's Capitalism", Far Eastern Economic Review, April 1, 2004.

124. United Nations, Statistics Division, Millennium Indicators, 2003.

125. UNDP, Human Development Report, 2003.

126. WHO, World Health Report, 2002.

127. Vietnam, Thailand and the Philippines have literacy rates around 93-95 per cent, compared to China, Indonesia and even Malaysia, at around 85-87 per cent. UNDP, op. cit.

128. UNICEF, Information by Country, 2000.

129. United Nations, Statistics Division, op. cit.

130. UNDP, Human Development Report, 2003, op. cit. In the east Asia and Pacific region overall primary enrolment declined from 97 per cent in 1991 to 92 per cent in 2001. World Bank Vietnam, "Global Poverty Down By Half Since 1981 But Progress Uneven As Economic Growth Eludes Many Countries", Press release, Washington, April 23, 2004.

131. World Bank, Asian Development Bank, op. cit., p. 58; "Roll Back Malaria: Inspiring Reports: Viet Nam: The Will to Succeed", Bulletin Medicus Mundi, No. 78, October 2000.

132. WHO, Global Tuberculosis Control—Surveillance, Planning, Financing, 2004. In 2004 WHO awarded Vietnam a prize for this achievement.

133. Eva Cheng, "China: SARS exposes looming health crisis", Green Left Weekly, June 4, 2003.

134. Satyajit Singh, "Vietnam shows the way to health with little wealth", Asia Times on Line, April 10, 1999; World Bank, World Development Indicators, 1999.

135. J. London, op. cit.

136. WHO, Global Tuberculosis Control—Surveillance, Planning, Financing, 2004.

137. Eva Cheng: "China: SARS exposes looming health crisis", Green Left Weekly, June 4, 2003.

138. UNICEF, Information by Country, 2000.

139. World Bank, Asian Development Bank, op. cit., p. 60.

140. The Vietnamese central government allocates 14 per cent of its budget to education and 4 per cent to health, while the Chinese central government allocates 2 per cent to education and zero to health. UNICEF, Information by Country, 2000.

141. J. London, op. cit.

142. C. Thayer, "The Vietnam People's Army as a Constituency in the Political System of the Socialist Republic of Vietnam", Conference on "Prospects for the Constituencies of Vietnam in Changing Times", Asia-Pacific Center for Security Studies, Hawaii, Vietnamese Professionals of America, 2001.

143. Oxfam GB, Save the Children UKand the World Population Fund, "Contribution to the 2002 Consultative Group Meeting", Vietnam, 2002.

144. ActionAid, Report on Trade Liberalisation and Sugar, pp. 40-41, 49-50.

145. "Schools set goal of putting an end to evening classes", Viet Nam News, July 20, 2003.

146. World Bank, Asian Development Bank, op. cit., p. 61.

147. Gainsborough, op. cit.; Painter, op. cit.; A. Fforde, "Light Within the asean Gloom", Southeast Asian Affairs 2002, Institute of Southeast Asian Studies, Singapore, 2002.

148. "Coal prices, markets remain stable", VDC, May 21, 2004; "Local fuel price to be maintained unchanged", VDC Business Newsletter, May 11, 2004; "EVN, Finnish partner want out of power deal", VDC, May 5, 2004; "Cement group guards prices from hike", VDC, May 7, 2004.

149. "Seeds of Doubt", Vietnam Economic Times, February 2002.

150. "Govt eyes closely meshed farm sector", Viet Nam News, December 18, 2002; "State giants pledge to raise spending in nation's cash-starved provinces", Vietnam Investment Review, July 17, 2002.

151. "Province helps ethnic minority people", Viet Nam News, July 3, 2003.

152. Oxfam GB/HK Rice for the Poor, 2001.

153. "Vinamilk—Vietnamese Icon", Vietnam Economic News, No. 9, 2000.

154. Vu Quoc Ngu, "SOE equitisation in Vietnam", Southeast Asian Affairs, 2003, pp. 333, 337.

155. K. Navdi and E.B. De Armas, "Globalisation and the Vietnamese Garment Industry", Paper at DFID workshop on "Globalisation and Poverty in Vietnam", Hanoi, September 2002.

156. "The widespread land access was important in helping to provide income entitlements to poor farmers, whose bargaining position as migrant workers was thereby enhanced." A. Fforde and S. De Vylder, From Plan to Market: The Economic Transition in Vietnam, Westview, Boulder, Colorado, 1996, p. 262

An uphill reforestation battle

An uphill reforestation battle

Michael Karadjis, Hanoi

http://www.greenleft.org.au/back/2005/646/646p20.htm

Vietnam is facing the dilemma of a highly successful campaign to restore forest destroyed during the US war, combined with continuing deforestation resulting from break-neck economic development.

Green Left Weekly asked famous Vietnamese environmentalist and biologist professor Vo Quy about how much forest destruction was due to war rather than other causes. He explained that “around 2 million hectares of tropical forests were destroyed, and another million hectares severely damaged, by 80 million litres of herbicides, 13 million tonnes of bombs creating 25 million craters, napalm, and a huge fleet of bulldozers”.

Given that the forest cover is estimated to have dropped from 43% (about 14 million hectares) in 1945, to 24% (8 million hectares) in 1980, the percentage of forest destroyed directly by war represents about one-third of total forest destruction.

Vo Quy, a Communist Party member since 1954, is a world-renowned environmental expert and activist, who has discovered many new species, has documented the destruction caused by US chemical weaponry, and has contributed greatly to the environmental revival in his country. In 2003, he became the first Vietnamese person to win the prestigious Blue Earth award for contributions to the environment.

According to Vo Quy, the reasons for further deforestation include the high rural population and its expanding demand for farmland — especially given the terrible post-war economic conditions, and more recently rapid economic growth under market conditions with its big demand on land and timber — and continued poverty among many people living in or near forests. Then there is illegal logging, which has been very difficult to control — in the first half of 2003, there were 15,000 violations of forest laws in the first six months.

Reforestation undermined
Thus, despite an active reforestation campaign beginning in the 1980s, between 1975 and 1995 a further 2.8 million hectares of native forest were lost. This almost neutralised the effort, with forest cover only creeping up from 24% to 28% between 1980 and 1998.

The rapid development of cash cropping, particularly coffee in the Central Highlands and shrimp in various coastal regions, has been extremely damaging to forest. Vo Quy explained: “I was part of the team of experts who in the early 1980s made an assessment of how much land could be sustainably planted with coffee. Yet the area of land now planted is double our estimates. Not only has such a great expansion of coffee plantations resulted directly in further deforestation, but it also encroached on lands ethnic minorities in the region formerly used as part of their shifting cultivation, thus driving them to encroach more on the forest. In addition, coffee requires a lot of water, and the amount planted went well beyond what was sustainable given the amount of water available.”

Further, when the world coffee price collapsed in the late 1990s, it left many farmers who had switched to coffee in poverty, and many workers who had sold land to work on growing plantations out of work, fuelling further problems. “Fortunately, the country’s leadership has recognised the errors, and is now distributing large quantities of land to minorities who had previously lost it. These problems have allowed some of the [ethnic minorities] to be exploited by US-based reactionary exile organisations.”

Many of Vietnam’s valuable coastal mangroves were destroyed by US bombing, yet the great work of restoring them over decades is now under threat from the expansion of shrimp farming. According to a publication by the Vietnam Association for Conservation of Nature and the Environment, co-edited by Vo Quy, the development of shrimp farming “has gone beyond the management and control of the fishery sector and local authorities. For example, in Tien Hai 50 industrial-sized shrimp ponds were constructed at the expense of 108 hectares of coastal protection mangrove forests that had been planted by the local people over many years as part of the government’s own reforestation program. In many cases, the mass media has helped detect such violations, and prosecutions have taken place.” Yet in other cases the destruction goes on.

While some targeted development of shrimp farming is encouraged to reduce poverty, its uncontrolled development has great poverty inducing effects, wiping out the mangroves on which poorer coastal communities depend for diverse varieties of fish and seafood, while massive pollution and epidemics in the shrimp ponds drive all but the richest shrimp-pond owners into bankruptcy.

In 1998, the Vietnamese government launched the campaign to plant 5 million hectares of forest to make up for what had been lost since 1945. Despite continued deforestation, the very active nature of this campaign has allowed Vietnam to finally begin to get on top of the problem.

Forest quality
Forest cover increased from 28.8% in 1998 to 33.2% in 2000 and to 35.8% in 2002. While forest cover increased at an annual rate of 86,000 hectares in the 1990s, since 2000 this has increased to 130,000 per year.

However according to Vo Quy, “this is largely low-quality forest. In fact, while overall there is a significant rise in forest cover, during the 1990s there continued to be a small decline in the cover of high quality forest.

“It is difficult to replant high-quality forest in the areas it previously grew. It had previously existed under a thick canopy that enabled new plants to grow shaded from the tropical sun. When we initially tried to replant forest in denuded areas, seedlings withered away and died.

“Therefore, we have to first establish a forest cover using fast-growing non-natives, and once it has established a canopy we can begin replanting native forest. These fast-growing trees are what account for the rapid growth of low and medium quality forest. The main plant used is Acacia, which has been far more successful than Eucalyptus.”

In addition to general forest cover, “Vietnam has now established a conservation network with 27 national parks, 60 nature reserves and 39 historic or cultural sites, as well as a number of UNESCO-protected world heritage sites and biosphere reserves. This network covers 7.6% of Vietnam’s territory.”

However, there has been much discussion about the question of local people living in forest and protected areas, particularly ethnic minorities. According to Vo Quy, “The greatest challenges to the protection of national parks is local people’s settlements within these areas. Agriculture, hunting and forest exploitation are crucial for their survival and thus their presence is an obstacle to protection activities. Conflicts often result from inadequate attention given to the fact that the locals are poor and population growth is high. The locals should benefit appropriately from conservation activities.

“Only when the first national park, Cuc Phuong, was established in 1962 did we completely remove the people living there, and this was a process that took some years, as people continued to return there, even though we provided land outside, seeds, technical help and so on. In those days we had little experience, and there were no models of a better approach.

“Experience shows that cooperation with local residents and recognition of their needs is more effective in conservation than mere relocation. Buffer zones are now set up in the semi-forested areas around the actual national park boundaries, where we allocate land to people living in the park. These zones provide employment for local people and enhance their quality of life through improving their knowledge of the forest’s effect on sustainable development, transferring new agro-forestry techniques, afforestation, gardening, animal husbandry etc.”

Incentive and violations
In these zones, people may carry out a mixture of different types of agricultural production and agro-forestry. In some cases they are paid to grow forest on part of their allocated land to expand the area of protected forest, in other cases they are encouraged to grow plantation timber with a guarantee of sale to the state-owned forestry enterprises and paper mills.

“Such activities stimulate protection of natural resources, as they give local inhabitants other lands for conserving biodiversity, so they do not exert any more pressure on the protected areas.”

GLW also spoke to Vi Pham, who works for the Centre for Natural Resources and Environmental Studies, which was set up by Vo Quy in 1985.

Pham noted that it is only in national parks that local people are relocated to buffer zones. In other areas, reforestation involves either allocating local people forested areas that they are paid to protect, or allocating them land where they are either paid to carry out reforestation, or given contracts to provide timber to state paper companies. While they are not permitted to cut down trees, they are able to use many non-timber forest products that have long been part of their livelihoods, including edible plants and medicinal herbs.

However, she also noted some of the problems associated with relocation of people to buffer zones around national parks.

In one province bordering a national park, her team found that land distribution for those relocated had been carried out rigorously fairly, and local cadres of the Vietnamese People’s Army were doing their utmost to assist the people.

However, the problem was there was simply not enough available land to give each relocated person very much, as most land was already occupied by others.

Yet in another province, in the buffer zone surrounding the same national park, Pham found that the land that was supposed to be allocated to 75 relocated households had been taken by a mere five households of leading “cadres” in the region. They told her that they employ the relocated households, and pay them a fraction of what the government pays for each hectare of land.

This was in 2000, and the regulations for grassroots democracy in the communes, which aimed to address these kinds of violations, were still new. It is unclear what has happened in that area since, but many cases of corruption in land allocation have come before courts in recent times.

In August 2005, eight cadres from local departments and people’s committees in the province of Kien Giang were sentenced to between three and 11 years in prison for sharing out hundreds of hectares of protected forest land in Kien Giang and neighbouring Phu Quoc island among family members.

From Green Left Weekly, October 26, 2005

New SOE Equitisation Push

New State Enterprise "Equitisation" Push

by Michael Karadjis

June 2005

http://www.aseanfocus.com/asiananalysis/article.cfm?articleID=854

Last December, the Vietnamese government passed Decree 187 on 'equitisation' of State Owned Enterprises (SOEs). To date, the 2000 SOEs equitised have been only the smallest, accounting for 7 per cent of SOE capital. This is in line with Party policy of shedding smaller SOEs in areas which the State did not consider strategic, such as the local ice cream parlour.

However, the new regulations call for equitisation of the majority of subsidiary companies of major state corporations, in the areas key to state economic ownership - heavy machinery, electricity, telecommunications, aviation, oil, steel, coal, cement, fertiliser, paper and the like. As the theory goes, since the parent corporation remains state-owned, it can continue to control the overall direction of these sectors. While this is debatable, it is also less than unanimous - one report suggested that 'when these (equitised) subsidiaries have proven to be business efficient, the Government (should) then equitise the parent companies.' (Vietnam News, 23 Mar. 2005)

Such an eventuality would not only herald a breakthrough in the most major of all 'reforms' demanded of Vietnam by international lenders, but would also abolish the most fundamental pillar of the ruling party's claim to a 'socialist orientation' - a state sector dominant in key areas.
Whether it happens in any hurry is another question. If the process has been considered slow with small enterprises, the stakes are much bigger with key firms, and resistance from workers, some managers, sections of the party and various state bodies will be greater. With the threat of large-scale redundancies, it is hardly surprising that the World Bank reports that one reason for the slow pace is resistance by SOE workers, as it 'is difficult to implement without the consent of the enterprise director and a majority of the workforce.' (Vietnam: Delivering on its Promises, 2002)

For all the catastrophist talk from international agencies that a major crisis is around the corner unless Vietnam follows through with ever more 'reforms', the country's pragmatic mixed economy approach, since leaving behind the 'everything state-owned' doctrine, has resulted in a mixture of economic growth and poverty reduction - both of record levels - with social indicators typical of a middle income country; the disaster forever waits in the wings. Yet it is now expected to follow an 'everything privatised' doctrine, the purpose of which is questionable.
Last year, when world oil prices shot through the roof, sending coal, cement, fertiliser and electricity prices skyward, the State prevented its oil, coal, cement, fertiliser and electricity SOE's from raising prices, thus wearing the cost themselves and lowering their profits, to keep down the cost of products which flow throughout the economy (VDC, 21 May 2004). When an oil price rise was eventually allowed in the face of relentless international rises, it was still so far below the 'market' prices in neighbouring countries that there has been a serious smuggling problem.

Some years ago, international wisdom advocated a removal of protection for cement and fertiliser SOEs as the import price was lower. At the time, this would have crippled them. Yet today the prices of locally produced cement and fertiliser are lower than import prices, as a result of doggedly pursuing such relatively unprofitable production. Vietnamese cement prices are now the lowest in the region.

To stabilise the local market, since it still relies partly on expensive imports and private distributors, the government told cement SOEs earlier this year to keep prices down while expanding distribution in remote regions and taking a cut in profits (Vietnam Business Forum, 7 Jan. 2005) - a message that could hardly be delivered to a private company. Such examples should be kept in mind when discussing the 'unprofitable' state sector.

Meanwhile, in the State's highly successful Hunger Eradication and Poverty Reduction Program, the 17 major state corporations are assigned provinces where they have to assist the poorest districts, thus being treated as arms of state social policy.

Private firms are creating more employment than SOEs, but this is more related to the types of areas they dominate. SOEs dominate in heavy industry; the employment argument amounts to advocating the demolition of heavy industry, not SOEs, which in areas such as the garment industry also create jobs. The state sector's employment share has actually grown slightly since 1995, from 8.7 to 10.4 per cent, whereas that of the domestic private sector declined from 90.9 to 88.3 per cent in 2003. Foreign firms employ a smallish 1.3 per cent of the workforce. (P. Taylor (ed.), Social Inequality in Vietnam and the Challenges to Reform, 2004, p.79)
Moreover, nearly all those working in the 'private' sector are employed by the traditional small, technically backward, household sector. While the numbers employed by real private business have risen, they remain small, and to the extent that these firms invest in technology and improve 'efficiency', they cease being the best job creators. Some years ago it was widely believed that if the state industrial sector collapsed, there would be more than enough private firms in 'dynamic' light export industries to absorb the laid off workers.

Yet this illusion that the only thing restricting unlimited expansion were petty restrictions on business ignored precisely & the market! Garment exports to the US exploded after the signing of the Bilateral Trade Agreement - until the US imposed quotas; and in the first two months of 2005, with the end of world garment quotas, Chinese garment exports have shot up by 30 per cent (65 per cent to the US), while those of Vietnam only crept up 1.4 per cent - stagnant on the US market and falling 10 per cent in the EU (Viet Nam News, 22 Mar. 2005). Also, US protectionist measures against Vietnamese shrimp exports have driven the price of black shrimp to an all-time low, threatening massive bankruptcy (Thoi Bao Kinh Te, 13 May 2005).
Surveys show that most equitised firms have not shed workers and some may have even increased employment. What all this means is anybody's guess, given that the problem of mass redundancy is always cited as a key problem slowing equitisation: the World Bank speaks of hundreds of thousands of redundancies.

One possible meaning is that the only firms equitised so far have been small, non-key firms in good shape that thus did not need to shed labour; whereas the equitisation of those small firms in bad shape, whose profitable revival requires lay-offs, have been held up by worker resistance. That's without even touching the large firms - the idea that new private owners of 'inefficient' steel, coal, cement and fertiliser plants would launch into employment creation is questionable to say the least.

The other possible meaning is that making firms profitable requires shedding workers who have traditionally enjoyed decent conditions and replacing them with new workers willing to work faster for less. Yet as Chu Hoang Anh from MoLISA explains, 'if an enterprise wants to make big changes, they have to convince workers to change or nullify their labour contracts. This is not easily accepted by employees.' (Vietnam Investment Review, 9-15 Sept. 2002).

WATCHPOINT: Will the new SOE equitisation regulation become reality without provoking social upheaval?

Michael Karadjis
Department of Political and Social Change
Research School of Pacific and Asian Studies
Australian National University, Canberra

To WTO or Not To WTO

To WTO or Not To WTO

by Michael Karadjis

http://www.aseanfocus.com/asiananalysis/article.cfm?articleID=803

Following China's dramatic entry into the World Trade Organisation (WTO) in 2001, Communist-ruled Vietnam is one of the last countries in the Asian region to be still negotiating entry. While the government appears determined to join, the extent to which the conditions being imposed on Vietnam for entry are fair and in the country's best interests are a matter of some dispute, which is dragging out the process.

There is a level of cynicism, regarding the motives of the world's richest countries in pushing free trade. This is partly due to Vietnam's treatment. For example, the US Department of Commerce (DoC) ruled in January 2003 that Vietnam was dumping catfish on the US market, leading to punitive tariffs against Vietnam's frozen fish imports. Vietnam cannot afford to subsidise exports, and Vietnamese farmers are too poor to sell below cost price to break into a market.

Therefore the DoC justified its case with an even more remarkable decision that Vietnam was 'not a market economy' for the purposes of trade with the US. This designation enables the US to claim the sale price of an export from that country can be assumed to be lower due to alleged 'distortions' in the overall economic structure - you do not have to prove actual subsidies. The DoC's decision opened the way for punitive tariffs as high as 64 per cent.

In October 2003, the US Congress introduced the 'Shrimp Importation Financing Fairness Act', accusing Vietnam, Thailand, China, Indonesia, India, Mexico and Ecuador of dumping shrimp, and demanding that these countries reduce their shrimp exports to the US to 3 million pounds per month.

At the same time as erecting these trade barriers, the massive agricultural subsidies practiced by the US and the European Union via the spurious use of WTO regulations are themselves threatening to flood Vietnam with imports, if all trade barriers come down as required by WTO membership. According to Professor Vo Tong Xuan from An Giang University in the Mekong, when US maize and soybean arrive in Vietnam under the Bilateral Trade Agreement, local farmers will be wiped out, as subsidised US prices are around half the current price in Vietnam.
Thus, there is room for healthy scepticism, to put it mildly, regarding who is meant to benefit from 'free trade' under WTO guidelines. However, for some, this is precisely an argument in favour of hurrying up Vietnam's accession. They argue that the US was able to impose its catfish decision because Vietnam is not in the WTO, and when it is, it will have the benefit of WTO legal procedures, which otherwise are prohibitively expensive for poor countries.

However, according to a recent report by Oxfam, membership makes little difference, as 'smaller developing countries have been prevented from defending their rights through the WTO by the high costs of the process, a lack of technical capacity, and by political pressures' (Oxfam, Extortion at the Gate, Nov. 2004). Vietnam has already adopted a series of trade liberalising measures as conditions of the Asia Free Trade Area (AFTA) and the Bilateral Trade Agreement (BTA) signed with the US in 2001. However, to date the government has attempted to move slowly, to avoid any radical shifts that would cause hardship to the Communist Party's traditional base among workers and peasants. Vo Tri Thanh, a Vietnamese expert writing in a Hanoi-based journal, claimed that China's WTO commitment in the area of services 'is the most radical of all countries,' while Vietnam 'has tried to slow the pace of liberalising service sectors.'

This has not earned it points in certain quarters. According to the Economist Intelligence Unit in April 2004, 'Vietnam had to offer lower tariffs, although in some categories, including vehicles, the proposed tariffs are still considered too high. Vietnam did not improve its image as a believer in free trade when, in December 2003, it imposed import quotas on seven groups of agricultural products: eggs, corn, ingredients for uncondensed and condensed milk, salt, tobacco and cotton.' Some concern for farmers' welfare thus remains official policy.

The Far Eastern Economic Review also reports that Vietnam is 'falling behind schedule in its efforts to join the WTO & key documents are being revised at a sluggish pace & a lot of conservative people are not necessarily in favour of international economic integration.'
Membership conditions require not only a more thorough scrapping of trade protection measures, but also to some extent a dismantling of the Communist Party's fundamental socio-economic structure, as even the dominant state-owned enterprises (SOEs) would lose protection and all key areas they now control would theoretically be opened up to private and foreign investors.

To make such a mammoth move, the country clearly needs to be convinced of its benefits. In general, the benefits are assumed to be a big increase in export earnings, as Vietnam is able to export to WTO countries, which also have to drop trade barriers. Aside from the problems noted above regarding the massive agricultural subsidies rich countries get away with under the WTO and their punitive use of WTO mechanisms against poor countries, there are also indications that the best, assumed benefits may be illusory.

According to the most thorough research, global trade liberalisation to the level necessary for WTO membership would result in a big expansion of the garment sector and tiny expansions in textiles and services, while all other sectors - raw agriculture, forestry and fishery, food processing, other light manufacturing, chemicals, metals, transport equipment, machinery and electronics, and mining - would suffer losses. Food processing - vital for agricultural industrialisation - would crash 23 per cent (Quoc-Phuong Le, 'Vietnam's International Economic Integration', in Binh Tran-Nam & Chi Do Pham (eds.) The Vietnamese Economy, London: Routledge Curzon, 2003, p.129).

But even if garment exports appear the only real winner, this sector also has its problems. In the first year of the free trade agreement with the US, Vietnamese garment exports rose 20 times, a most remarkable expansion. Then the US imposed quotas, to keep it from rising. It is now argued that, if Vietnam joins the WTO, the quotas will disappear. However, all garment quotas are to disappear soon, and Vietnam has done well out of an ensured market in the EU. With the world garment market wide open, it is unclear how well Vietnam will compete with newer and cheaper players, and with the Chinese giant, expected to produce 50 per cent of all world garment exports within a few years.

Moreover, as Oxfam points out, in the BTA with the US, Vietnam made a number of concessions, which go beyond WTO rules (WTO-Plus). These may now serve as a starting point for WTO negotiations, making them tougher. One of its provisions gives the US the right to restrict Vietnamese garment imports if 'market disruption' is threatened.

Under its cautious approach to economic reform, Vietnam has achieved remarkable economic growth and world-record poverty reduction while increasing already relatively good social indicators. WTO membership may eventually be inevitable, and be at least no worse than the subsequent punishment if left out of what is becoming an international club. However, there is also good argument that the benefits are far from assured and the risks are many, especially given the attitude of the wealthy countries. So continuing slowly and cautiously may be the country's best alternative.

WATCHPOINT: How well can Vietnam continue to protect elements of its own national economy strategy while making enough concessions to join the WTO by 2005? Till now, it has been rather adept at such tight rope walking.

Michael Karadjis
Department of Political and Social Change
Research School of Pacific and Asian Studies
Australian National University
Canberra

VIETNAM: 30 years after victory: Towards capitalism or socialism?

VIETNAM: 30 years after victory: Towards capitalism or socialism?

Michael Karadjis

http://www.greenleft.org.au/back/2005/625/625p14.htm

Thirty years ago, the Vietnamese people carried out a world-historic defeat of US imperialism, under the banner of constructing a new, socially just, society. Yet today, rising capitalism, corruption and a growing rich-poor gap are evident in Vietnam. The question arises: how different is this emerging society from the US-backed Thieu dictatorship it replaced?

After reunification in 1975, the Communist Party of Vietnam initially attempted to extend the socialist economy of former North Vietnam to the south. However, in 1986, the CPV changed tack, and introduced Doi Moi (Renewal). The aim remained socialism, but the CPV decided that an extended period of mixed economy, operating via a state-managed ‘‘market mechanism’‘, was necessary to harness the capital and the energy of the private sector and foreign investment, to build the productive forces to lay the basis for future socialism, given the poverty of the Vietnamese state and the end of the fair-trade arrangement with the Soviet bloc.

The Vietnamese Revolution inherited a country destroyed by the most massive armed assault in history, yet was denied US reparations. Then the genocidal Khmer Rouge regime in Cambodia launched a brutal three-year war against Vietnam, until Vietnamese troops went in to help liberate the Cambodian people. The US, China and Thailand armed the Khmer Rouge along the Thai border, while an embargo was imposed on Vietnam by the imperialist powers, the right-wing Asian regimes and China. China invaded Vietnam in 1979, and though driven back, forced Vietnam to keep half a million troops on its northern border and double the size of its armed forces.

The catastrophic inflation that resulted almost forced the collapse of the system based on state-owned enterprises and rural cooperatives. The collapse of the Soviet bloc was the coup de grace, cutting Vietnam off from its major source of international aid, trade and technical assistance. Only by moving to market mechanisms was Vietnam able to take advantage of the end of the Cambodian war and international embargo in 1989 to push exports and bring in foreign capital to avert collapse.

A fine line

The CPV claims to maintain a ‘‘socialist orientation’‘ within this mixed economy, channelling economic growth in a socialist direction via the state-owned sector and a gradual renewal of cooperatives, while aiming to minimise the negative impacts of the market and private sector.
This requires walking a fine line between encouraging private investment and offering material incentives, and being swamped by rising capitalism with its profit-driven, individualistic and consumerist incentives, which contradict the collective and moral incentives that sustained the war effort and are necessary for socialism. While the market economy has brought a great many evils, the CPV’s attempt to walk this line has been shaky but successful.

Vietnam has experienced the world’s second-highest economic growth, doubling its GDP in the 1990s. This was accompanied by a fall in poverty from 75% in the late 1980s to 28% in 2002, the most rapid poverty reduction on record. A new World Bank report claims Vietnam reduced ‘‘extreme poverty’‘ from 51% in 1990 to 14% in 2002.

The active Poverty Alleviation and Hunger Elimination Program builds schools, health centres, clean water systems and roads in remote areas, delivers free healthcare and education, and delivers a large amount of subsidised, low-interest collateral-free credit to the poor, to help them set up or improve small household businesses in farming, handicrafts and the like. In the coming five-year plan, some 7.5 million households will have access to subsidised credit.

Following the Soviet collapse, Vietnam introduced small fees for education and health. This blow against socialist fundamentals was forced by necessity: Vietnam’s per capita GDP had dropped to $78 by 1990. The great progress the country has made in health and education since is evidence of the CPV’s desire to overcome this.

Vietnam is a ‘‘low income’‘ country (US$430 per capita GDP), but its educational and health indicators are on par with, or better than, ‘‘middle income’‘ countries such as Thailand ($2000 GDP per capita), China and the Philippines, and far above those of similarly poor countries, such as Bangladesh, Pakistan, Kenya and Tanzania.

Primary school enrolment rose from 88% to 95% between 1990 and 2001. The World Bank contrasted this with the East Asia and Pacific average where ‘‘net enrolment declined from 97% in 1991 to 92% in 2001.’‘ Secondary school enrolment shot up from 62% to 72% since 1998. Vietnam’s literacy rate of 94% is equivalent to Thai and Philippine levels, and above that of richer China, Indonesia and Malaysia, where literacy stands around 85-87%. Vietnam’s female literacy is only several points behind male, compared to a 13-point gap in China.

Average class sizes have steadily dropped, from 30 to 23 in primary schools, and 28 to 23 in secondary schools. The fees introduced for primary school in 1989 were later shelved, but unofficial fees of $1-$2 remain common, except for ethnic minorities and the very poor. There are now plans to abolish all fees for lower secondary school by 2010.

Vietnam has cut child mortality to 23 per 10,000 live births, and infant mortality to 19, lower than Thailand, China and the Philippines, and dramatically lower than India and Indonesia. The equivalent numbers in Bangladesh are 69 and 46, and in Pakistan, 103 and 81. Vietnam’s life expectancy of 69 is equivalent to wealthier China, Thailand and the Philippines, higher than Indonesia and India, and a decade higher than the low-income country average. Maternal mortality stands at 130 cases per 100,000 births, well below the Philippines (200), Indonesia (310) and India (540).

In the 1990s, Vietnam reduced malaria fatalities by 97%, in a campaign praised by the World Health Organisation as ‘‘a story to be shared.’‘ In 1997, it was one of only two countries in the world to meet WHO targets of diagnosing more than 70% of tuberculosis (TB) infections and curing 85% of patients, and remains ‘‘the only high-burden country’‘ to achieve this goal. Thailand manages 75% diagnosed, the Philippines 58%, India 47%, China 33%, Indonesia 21% and Pakistan only 9.8% of cases.

Vietnam has 170 health clinics at the village level per million people, compared to 32 in Indonesia, 63 in China and 141 in Thailand. There is a hospital bed for every 389 Vietnamese, compared to every 465 Chinese, 665 Thais, 910 Filipinos and 1743 Indonesians.

Despite fees, some services are free, including many reproductive health services (antenatal examinations, tetanus-toxoid shot, contraception), treatment for target diseases such as TB and malaria and child vaccinations against seven major infectious diseases, for which Vietnam has the highest rate in the region, around 98-99% coverage. Nearly 80% of married women use contraception, one of the highest rates in the Third World.

The cost of a simple hospital visit for minor health problems averages around 2000 dong (13 cents), but it is the fees for major operations and expensive medicines that crushes the poor, who have to go into debt. Such services are too expensive for any Third World country to fully cover, given the cost of advanced equipment and medicines monopolised by the international pharmaceutical cartel, but Vietnam could reduce the fee burden if its low health budget was raised.

Not everyone pays fees. Health is free for ethnic minorities (13% of the population), people defined as ‘‘the poor’‘, to whom the Health Care Funds for the Poor program gives free health cards (now issued to some 11 million people, over 13% of the population), children under six years’ old, workers in state, foreign and registered private firms (12-15% of the population) covered by workplace schemes, people retired from these sectors, and various war-affected groups. School children are covered by health insurance with a compulsory parent payment of 15,000 dong ($1) for the year.

World Health Organization field visits observed that fee exemptions, free essential drugs, health insurance and hospital funds for the poor have been launched ‘‘on a large scale since 2001’‘ and have been ‘‘greeted enthusiastically by both patients and health workers’‘.

While significant, these programs leave many in serious difficulty, including many just above the ‘‘absolute poor’‘, and some of the most expensive services are not 100% covered. Health workers’ low salaries often lead them to charge unofficial fees or give preferential treatment to paying patients.

A positive sign is a Politburo resolution in January calling for rapid increases in health funding to achieve universal health insurance by 2010 and ‘‘gradually reduce direct payment of hospital fees from patients’‘.

Neoliberal success story?

Neoliberals believe Vietnam’s successes, rather than the problems, have been caused by the market and private capital. But the capitalist countries that Vietnam compares so favourably to also have a market and private capital. Doi Moi has not been merely about markets and private sectors.

The state sector’s contribution to GDP has risen since Doi Moi, from 33% in 1990 to 40% today. The share of the state in investment rose from 42% in 1992 to 58% in 2001, and state budget revenues rose from 14% to 22% of GDP. ‘‘Equitisation’‘ (partial share privatisation of ‘‘non-strategic’‘ state-owned enterprises) has only affected 3% of state capital. New legislation calls for ‘‘equitisation’‘ of subsidiaries of state corporations in key sectors, but it unclear whether this can be pushed through against significant opposition.

A significant share of the GDP not from the state sector comes from foreign investment, which is necessary for capital and technology, and some 10% is from cooperatives or the ‘‘mixed’‘ sector. Of the 35% of GDP in the domestic ‘‘private sector’‘, only 4-5% can be called capitalist — most is the small urban and rural ‘‘household sector’‘, including millions of peasants, who constitute most of the population.

Of course, operating in a market economy, many state-owned enterprises become completely commercially oriented, or hotbeds of corruption. However, the impression that they are all purely market-based entities independent of social control is false. State-owned enterprises pay much more tax than private firms; state-sector garment workers receive pay around 30% higher than in private and foreign firms. The annual Workers’ Congress must agree to the overall enterprise plan, trade unions and mass organisations are represented on management boards, and under the 1998 Grassroots Democracy decree, workers have rights and responsibilities to discuss decisions and monitor finances. The World Bank complains that ‘‘equitisation’‘ is held up due to opposition by workers, who must agree in their majority.

Many state-owned enterprises have non-economic roles, ranging from employment maximisation to regional policy goals. The 17 major state corporations have been allotted provinces where they must contribute to the state’s Poverty Alleviation Program, via after-tax profits or other production levies. Through control over key products like oil, coal, steel, cement, fertiliser, chemicals, paper and electricity, the state works to stabilise prices of products used throughout the economy, keeping them lower than import prices, sometimes directly telling the state-owned enterprises to ‘‘lower their profits’‘ to this end. This could hardly be demanded of a private firm.

The egalitarian land distribution is also fundamental to Vietnam’s success, providing a form of rural social security. Despite de-collectivisation, land is leased for 20 years rather than owned, restricting its value to a buyer or creditor — land bought during the lease period can be reallocated at its end. A ceiling is placed on the size of land holdings. Diversification is combined with continued emphasis on food security, so that the food sector is not fully exposed to market volatility. However, in some regions such as the Central Highlands and Mekong Delta, land concentration and landlessness are approaching levels typical of neighbouring capitalist countries.

Vietnamese unions actively fight violations of workers’ rights. Though almost every strike has been led by spontaneous workers’ organisations and ‘‘did not follow proper legal procedures’‘ they were ‘‘tolerated by the government with no reports of retribution against the strikers’‘, according to a hostile report by the US Commerce Department, which further claims that ‘‘labour rights sentiments in Vietnam are backed by a conciliation system and a judiciary sympathetic to labour demands’‘. In virtually every case, official unions intervene and force the bosses to relent to workers’ demands.

In a research project on attitudes to workers in China and Vietnam, Taiwanese bosses complained that they were unable to beat Vietnamese workers or force them to work long hours, as they did in China, due to the activism of Vietnamese unions and the support given them by authorities. Nevertheless, the rapid proliferation of small private firms leads to many violations that the unions are often slow in busting.

Another revolutionary inheritance are the ‘‘mass organisations’‘, the women’s, farmers’, youth and veterans’ unions, which encourage solidarity and mobilise funds for poorer members. The Women’s Union spreads health education, information and free services to women down to the village level; the Youth Union organises thousands of volunteers to work in poor rural areas. The Vietnamese People’s Army also carries out large-scale free health and education programs in remote areas.

Challenges

Nevertheless, the challenges to socialist orientation in a poor country within global capitalism are enormous. Drawing the line between incentives for private investment and crass displays of wealth is not easy. It is difficult to argue that the state cannot afford free health care while more expensive cars and houses appear daily. Yet those with this wealth are a tiny minority. Company taxes stand at 28%, while the top personal tax rate is a reasonably high 50%. The government is now preparing to strengthen the tax on high income earners, but there will be a limit to how much private capitalists can be taxed before they hide their profits, turn to mafiosi business (thus pay no tax), or invest overseas — and much of this more visible wealth is already in this category.

Despite its achievements, Vietnam remains poor. Despite phenomenal advances in food production, 19% of the population remains undernourished. Only 73% of Vietnamese have access to improved water sources, though this is a 20% leap since 1998. The rising inequalities of the ‘‘market economy’‘ show up as street children, prostitution, drug abuse and petty crime. While the AIDS epidemic remains well below Thai and Cambodian levels, the current 200,000 infected may be the tip of the iceberg.

While tremendous re-greening has healed many scars of US destruction, rapid growth leads to environmental recklessness. Women account for 27% of National Assembly seats, the 10th highest position in the world; but the market economy eats away at women’s equality in familiar ways, including rising domestic violence. Ethnic minorities account for 17% of NA seats and benefit from free healthcare and education, but their health and education indicators remain significantly lower.

The inequalities and injustices plaguing Vietnam despite phenomenal successes must be set in context. The lasting legacy of the US war includes 2 million people affected by Agent Orange, resulting in a plague of cancers and horrific birth defects, and weekly deaths from unexploded US bombs 30 years later. Some 7 million people live with physical disabilities, about 9% of the population. Our main stance should be to continue demanding the US pay up.

The pressures of Doi Moi have their effect on the CPV, which admits to very serious corruption among ‘‘a not small segment of party officials and members’‘. However, it would be premature to declare it a creature of corrupt and capitalist forces. Many of those who dedicated their earlier lives to fighting for a socially just society are now in positions in government, local people’s committees, state-owned enterprises, trade unions and mass organisations, exerting a counter-pressure to that of ‘‘new money’‘.

The CPV has taken some democratic steps such as the 1998 Grassroots Democracy decree detailing the rights of people at commune level to participate in decision making, petition authorities and oversee budgets. However, greater openness in debate will be necessary for those dedicated to socialism to publicly confront the massive illusions of today’s middle class youth in archaic neoliberal ideas, which may otherwise appear radical and innovative.

From Green Left Weekly, May 4, 2005

Thursday, September 28, 2006

Agent Orange victims sue US chemical companies

Michael Karadjis

Three Vietnamese victims of Agent Orange — the herbicide sprayed over Vietnam by the US military during its war against Vietnam in the 1960s and '70s — are suing more than 20 US chemical companies for compensation.

The three victims — Nguyen Thi Phi Phi, Duong Quynh Hoa and Nguyen Van Quy — and the recently established Vietnam Association for Agent Orange Victims, filed the suit on January 30 with a US federal court in New York. They are seeking compensation from firms which produced the chemical warfare agent, including Monsanto and Dow Chemicals.

The US government sprayed 72 million litres of Agent Orange and other deadly defoliants on Vietnamese forests and farms in a campaign known as Operation Ranch Hand. This was the longest and most destructive chemical war in history. Washington's goal in using Agent Orange was to destroy the jungle cover that Vietnamese resistance fighters used to move around the country and to destroy the crops which fed the guerrillas.

The number of surviving victims of Washington's use of defoliants is estimated to be in the millions. The legacy lives on in children and grandchildren in the form of horrific birth defects. The deadly chemical dioxin present in the defoliants is passed on through blood and breast milk. The water and soil of significant parts of southern Vietnam remain contaminated, spreading cancer and other deadly diseases to residents who drink the water or eat the food grown there.

The Second International Conference on Herbicides in War held in Hanoi in 1993 reported that health problems in humans resulting from exposure to the deadly chemical dioxin in Agent Orange included parentally transmitted diseases, reproductive disorders including birth defects, spontaneous abortion, trophoblastic diseases, cancer and disturbances of the central and peripheral nervous system.

Officially, the US government is “still researching” whether its chemical weapons are responsible for the enormous plague of cancers, deadly diseases and birth deformities present on a massive scale in the regions most affected by the defoliation operations it conducted.

One study found that levels of dioxin in fatty tissues among people living in affected southern regions of Vietnam ranged between 14.7 and 103 parts per trillion, compared to 0.6 parts among those in the north. Another found that 5% of Vietnamese war veterans who had been active in heavily affected areas fathered children with birth defects, compared to only 1% among veterans who had remained in northern Vietnam.

Such “circumstantial” evidence is not enough for the US government, which demands “sound scientific” evidence of a causal connection between defoliants and birth defects. However, Washington has done nothing to help gather such evidence.

Meanwhile, testing is enormously expensive for a poor country like Vietnam. To test a single tissue or soil sample for the presence of dioxin costs around US$1000, and testing just one area would require hundreds or thousands of samples. A thousand dollars for one test is about 100 times the monthly pension the Vietnamese government is able to provide disabled veterans.

The hypocrisy of Washington's position is revealed by the fact that, following several decades of research and campaigning by US veterans' organisations, the US government agreed to compensation for thousands of US vets for diseases such as cancers, sarcomas, skin diseases, Hodgkin's disease and others.

The Vietnamese victims' lawsuit is based on a US federal law allowing foreigners to seek damages for violations of international law, and common laws concerning a company's responsibility for its products.

Other investigations have been underway for some time regarding the possibilities of international legal action against the US government. The UN General Assembly in 1969 declared that the Geneva Protocols outlawing the use of chemical and biological weapons did apply to herbicides, but it was not until April 1975 that the US became a party to this protocol.

In the meantime, the Vietnamese government does what it can to help Agent Orange victims, but most still live in extraordinarily difficult circumstances. A country with a GDP per capita of $410 per annum has to try to provide care for an estimated 5-7 million people living with disabilities, many of them war-related.

Donations to aid Vietnam's Agent Orange victims can be made to the National Fund for Vietnamese Children (35 Tran Phu Street, Hanoi, Vietnam, e-mail: . Account: 001.0.37.0002165 Vietcombank, 198 Tran Quang Khai Street, Hanoi, Vietnam) or to the Agent Orange Victims Fund (82 Nguyen Du Street, Hanoi, Vietnam. Account: 001.0.37.0217596 Vietcombank, 23 Phan Chu Trinh Street, Hanoi, Vietnam).

From Green Left Weekly, February 18, 2004

http://www.greenleft.org.au/back/2004/571/571p18.htm

VIETNAM: the terrible legacy of US weapons of mass destruction

BY MICHAEL KARADJIS

HANOI — “Several times, a large area was coated white. After a couple of days the leaves in the forest and the gardens turned yellow and fell off." This is how 50-year-old Nguyen Van Loc describes his first vision of a US chemical attack on his village in the central Vietnamese province of Quang Tri during the US war against Vietnam.

For Loc, this vision lives on today not as an unpleasant memory but as daily devastation. His two surviving sons, aged nine and 13, were both born with severe physical deformities and impaired intellects. His eldest son has already died.

They are among the estimated 1 million surviving victims of the longest and most horrific chemical war in history, launched by the United States against the people of southern Vietnam, which Washington claimed to be “saving from communism", between 1961 and 1975.

The US dropped 72 million litres of the deadly defoliant Agent Orange on the south Vietnamese countryside to destroy forests, mangroves and crops. The aim was to crush the peasant resistance fighters of the National Liberation Front, who took cover in the forest, and to destroy the crops of the villagers who supported the resistance fighters.

The legacy of Washington's use of weapons of mass destruction lives on in children and grandchildren. The deadly chemical dioxin present in the defoliants is passed on through blood and breast milk, while the water and soil of significant parts of southern Vietnam remain contaminated, spreading cancer and other deadly diseases to local residents.

The majority of victims are helpless to look after themselves. Mere survival is an enormous, often unsuccessful, struggle. Most victim families are poor, living by working the fields. Often older relatives are needed to guide the children's every movement, as both parents must work. As the children grow up, they are unable to help in the fields.

US `still researching' effects

While the US is gearing up to spend billions of dollars to lay waste to Iraq with its latest weapons of mass destruction — under the guise of safeguarding the world from Iraq's mythical WMD — it has refused to provide a cent to help its Indochinese victims.

Officially, the US is “still researching" whether the chemical weapons it used in Vietnam are responsible for the enormous plague of cancers, other deadly diseases and horrific birth deformities present on a massive scale in the regions most affected by them.

One study found that levels of dioxin in fatty tissues among people living in affected southern regions ranged between 14.7 and 103 parts per trillion, compared to 0.6 among those in northern Vietnam. Another found that 5% of Vietnamese veterans who had been active in heavily affected areas fathered children with birth defects, compared to only 1% among veterans who had remained in the north.

Such “circumstantial" evidence is not enough for the US, which demands “sound scientific" evidence — which it has done nothing to help gather.

Testing is enormously expensive for Vietnam — to test a single tissue or soil sample costs around US$1000, and testing just one area would require hundreds or thousands of samples.

Despite a decade of rapid economic growth and poverty reduction which the United Nations Development Program sees as leading the developing world, Vietnam remains a very poor country, due to 50 years of war, foreign invasion and embargo. $1000 for one test is about 100 times the monthly pension the government provides disabled veterans.

Yet following $200 million in research in the US, and campaigning by US veterans' organisations, Washington agreed to compensation for thousands of US vets. They have qualified for diseases such as cancers, sarcomas, skin diseases, Hodgkin's disease and others. Up to $2000 a month can be awarded. Most US vets served for a year in Vietnam, while Vietnamese veterans and villagers were fully exposed for 10 years to Washington's chemical warfare.

At a recent meeting in Hanoi to launch a campaign to aid victims, long-time Vietnam resident Lady Borton of the American Friends' Service Committee lashed out at this double standard: “The US initiative to require `proof' that Vietnamese are victims of Agent Orange dioxin poisoning is an outrage. It's racist. It's time consuming, expensive and wasteful. We already know toxins cause cancer. We already know toxins cause birth defects. While the US shuns this moral, humanitarian issue, there are families in need."

Borton described her first exposure to the horrors of US chemical warfare, when she visited a hospital in Ho Chi Minh City in 1983 and “saw the specimen room lined floor to ceiling, wall to wall with glass crocks, each containing a molar foetus or a full-term baby with alarming birth defects. The mothers had all come from sprayed areas."

A few years ago, the US periodical Mother Jones, after being refused an interview with the US embassy in Hanoi, submitted eight written questions. The embassy issued “a terse, two-sentence response saying merely that the United States believes the Agent Orange issue should be addressed on a scientific basis". The US ambassador, Pete Peterson, was widely seen among liberal expatriate circles and some NGOs as some kind of “friend of Vietnam", rather than the stooge for imperial malevolence this response reveals him to be.

The US embassy's science and technology officer, Mike Eiland, stated that “Agent Orange is not at the top of our list”, and suggested the periodical instead write a piece on US-Vietnam trade talks or the US soldiers “missing in action”, of whom there remain a couple of thousand. The 300,000 Vietnamese MIAs were, until recently, completely ignored by the US.

Unexploded ordinance

“A 40-year-old man died and his wife were seriously injured in a warhead explosion on October 1 in the central highlands of Gia Lai... Four children were seriously maimed in a B40 warhead explosion on September 21 in the central coastal province of Nha Trang... A 28-year-old woman died and her husband was seriously maimed in a fragmentation bomb explosion on August 26 in the central province of Binh Thuan."

Perhaps the war is still raging? In fact, these reports are from 2002, a mere sprinkling of what is reported in the Vietnamese media every week.

Chemical warfare was only part of the war, during which the US also dropped 15 million tonnes of bombs, three times that dropped in all theatres of World War II.

The legacy of these bombs and chemicals are three million people killed, 25 million bomb craters and the destruction of 2.2 million hectares of forest and half the country's mangroves.

An estimated 250,000 to 750,000 tonnes of ordinance is still lying around the Vietnamese countryside, much of it unexploded, alongside countless millions of land mines, covering 5-10% of the Vietnam's land area. Since the war ended in 1975, 84,000 people have been killed by the US war legacy, often farmers working their fields.

The horrifically bombed central province of Quang Tri was the borderland between Communist-ruled North Vietnam and capitalist-ruled South Vietnam. Millions of unexploded bombs and mines cover 40% of Quang Tri's land area, severely limiting agricultural production in this dirt-poor region where per capita income is $217, half the national average. Three percent of all children in the province have been disabled by exploding ordinance.

Estimates of the number of disabled people in Vietnam range up to 7 million people — 9% of the population. Three million are in dire need of orthopaedic surgery and artificial limbs. They are not all war victims, but the inordinately high numbers reflect the war legacy.

Until recently, the US ignored this legacy as whole-heartedly as its chemical devastation. Following US President Bill Clinton's visit to Vietnam in 2000, a minuscule $3.5 million has been provided by Washington for the removal of unexploded US bombs. This is less than the amount funded by the US Vietnam Veterans Memorial Fund in 2001, drawn from donations and sympathetic war veterans themselves, to merely carry out a survey of the problem. The VVMF is also funding a project to raise awareness of the dangers, and to help disabled victims with simple work skills training.

During the recent US war on Afghanistan, much was made of the destruction of the giant Buddha statues by the reactionary Taliban regime. While this was rightly condemned, US outrage was supreme hypocrisy.

During a 1972 offensive to reconquer Quang Tri, which had been liberated by the NLF, the US launched a monstrous attack on the historic palace in the town centre, killing 10,000 defenders and completely destroying the monument — and much of the city. Similar numbers were killed when the US reconquered Hue during the NLF's 1968 Tet offensive, and a similar level of devastation was wreaked on the medieval citadel of the city, now a UNESCO World Heritage Site.

A little further south of Hue stand the ancient ruins of the pre-Vietnamese Cham civilisation in My Son, which has likewise received UNESCO heritage status. This temple complex, the Cham equivalent of Angkor Wat in Cambodia, was the centre of a 1000-year civilisation lasting from the 3rd to the 14th centuries. Dozens of the majestic towers were bombed into rubble by the US war machine.

The `Dien Bien Phu of the sky'

Recently, people in Hanoi commemorated 30 years since one of their darkest moments, the infamous Christmas bombing campaign conducted by the US in December 1972, in order to force the Vietnamese to sign a peace treaty that would leave intact Washington's puppet regime in Saigon.

For 12 days and nights, 1000 fighter-bombers and 200 B-52 heavy bombers dropped 40,000 tonnes of bombs on Hanoi, killing 2368 civilians, destroying 5480 buildings, including houses, factories, schools, hospitals and railway stations.

The Bach Mai hospital, Vietnam's biggest, was bombed, and the main building collapsed, killing medical staff and patients. On December 26, 1972, the densely populated Kham Thien street was carpet bombed, killing 287 people and injuring an equal number, completely destroying everything in the street.

While these events further revealed the barbarity of US imperialism and drove even larger numbers of horrified American civilians into the streets in protest, the incredible Vietnamese fightback was less visible.

The Vietnamese air force, troops and civilians went into action with Russian-supplied surface-to-air missiles, anti-aircraft guns and MiG-21 fighter planes. Technological dwarfs compared to the high-tech savagery coming from the sky, determination nevertheless paid off.

The legendary General Vo Nguyen Giap, who had led the defeat of French colonialism at Dien Bien Phu in 1954, made a stirring speech calling on the people to “Give the US Air Force a `Dien Bien Phu' right over Hanoi".

And that's what happened. The defenders shot down 81 US warplanes, including 34 B-52s, until then considered invulnerable.

Far from viewing the January 1973 Paris accords as a disastrous compromise imposed on them by the 1972 Christmas bombing campaign, the Vietnamese saw it then, and see it now, as a victory imposed on the US by their resistance. Whatever the text of the accords, the withdrawal of US forces from their country meant a fatal weakening of the puppet regime in Saigon.

Without massive on-the-ground US military backing, the Saigon regime was completely unable to stand up to the resistance movement's offensive in 1975. It took only eight weeks from the launching of that offensive in Vietnam's central highlands to the final victory of the NLF and the Vietnam People's Army on April 30, 1975.

Reparations

On signing the Paris accords, the US agreed to provide $3.5 billion in reparations — more than $35 billion in today's inflated dollars. It hasn't even come through with a penny.

For years, Western “experts" lamented the economic woes of Vietnam under Communist leadership, and have heralded the economy's rapid growth since the introduction of the “free market” in 1989. Yet few of these “experts" noticed that war and embargo only ended in 1989 — the 1990s were Vietnam's first decade of peace since 1940.

It is incalculable what could be done if such an entirely justifiable, and probably underestimated, reparations bill had been paid. Even a small amount of it could bring about a tremendous difference to the lives of those suffering from US chemical warfare.

“Tran Minh Nguyet sits immobile, her stunted legs hidden by a long shirt", according to Vietnam News. “Her young brother is lost in his own world, oblivious of what is going on around him." When Dr Nhan from the Hue Medical School, which raises funds from foreign donations, brought her a wheelchair, “her face turned radiant. `Now I can help my father', she says. Like other children with disabilities, she wants desperately to feel useful."

A simple wheelchair may not seem much, but providing wheelchairs for hundreds of thousands of injured people is well beyond the Vietnamese government's means. It does what it can — various treatment and rehabilitation programs, ``peace villages'' for many affected children to help them adapt, some interest-free loans, orphanages and US$7 a month for each affected person.

The US, however, has its priorities elsewhere — wreaking devastation on a country already reduced to food rationing by a 12-year-old trade blockade.

If it seems inexplicable to many people why the US would be gearing up to murder hundreds of thousands more people in Iraq, then perhaps a desperate desire to reverse the long-term restrictions on its global power caused by the defeat the Vietnamese workers and peasants inflicted on it in 1975 is part of the answer.

[Donations to aid Vietnam's Agent Orange victims can be made to the National Fund for Vietnamese Children, 35 Tran Phu Street, Hanoi, Vietnam; email: ; account 001.0.37.0002165 Vietcombank, 198 Tran Quang Khai Street, Hanoi, Vietnam; or, Agent Orange Victims Fund, 82 Nguyen Du Street, Hanoi, Vietnam, account 001.0.37.0217596 Vietcombank, 23 Phan Chu Trinh Street, Hanoi, Vietnam.]

From Green Left Weekly, March 12, 2003

http://www.greenleft.org.au/back/2003/529/529p12.htm

Wednesday, September 27, 2006

Unions fight to restrain `market forces'

BY MICHAEL KARADJIS

Headlines such as “Workers strike against impossible quotas” and “Wildcat strike forces workplace reforms” abound in the Vietnamese media. They not only indicate the proliferation of labour struggles, but also the unabashed sympathy of the state-controlled media with the workers.

Speaking about the hundreds of strikes in Vietnam in recent years, Chau Nhat Binh, head of the international relations division in the Vietnam General Confederation of Labour (VGCL), noted that “almost every strike has been technically illegal”, as it didn't follow the lengthy procedures in the labour law. Nevertheless, the VGCL regards “every one” of these technically illegal strikes to be justified.

In Vietnam's precarious balance between mobilising private and foreign capital to help develop the war-ruined country and trying to maintain a dominant state-owned sector and a “socialist orientation”, the role of organised labour is crucial in stopping “market forces” from undermining labour standards.

The “market mechanism” has certainly challenged such standards. Yet while Vietnamese trade unions resolutely denounce bosses who abuse workers' rights, they almost never initiate strikes.

Strikes

Virtually every strike has been a “wildcat” action led by spontaneous workers' committees. Binh explains that it is often difficult to get union members in privately owned factories because many workers are from rural areas, intending to work temporarily during the “down season” between sowing and harvest. They have no culture of unionism, don't want to fork out for union dues and don't want to lose wages through strikes.

But union membership grows due to experience — these workers find they are brutally exploited and so launch wildcat strikes without the unions. Even when unions are present, the official procedures would delay the strike. Yet, though seemingly sidelined, the union intervenes and forces the bosses to submit to the workers' demands — “in 100% of cases”, according to Binh. In this process, the union recruits the workers.

These strikes belie hopes among capitalist investors that rural migrants are easily exploited. A factor in this may be that most rural migrants still have some land due to past revolutionary land reforms.

Binh's claim is backed by countless reports in the media, which routinely report the intervention of the district labour federation, the local branch of the labour ministry and the police to force bosses to relent to the workers' demands.

The evidence of this is also backed by a more hostile source — the US commerce department. A 2002 US commerce department report (available at ) noted that “although the majority of the strikes did not follow proper legal procedures, they were tolerated by the government with no reports of retribution against the strikers”.

State proclivities also tend to aid victory for workers. The report claimed that “labor rights sentiments in Vietnam are backed by a conciliation system and a judiciary sympathetic to labor demands”.

Binh admits that the VGCL at times has conflicting views on labour issues with the government, but claims the government is generally supportive. He claimed globalisation may promote a “race to the bottom” in terms of wages and conditions, but the Vietnamese unions were not worried about this because they are confident about fighting its negative impacts.

The VGCL “refuses to accept investment under any conditions”, said Binh. It sometimes expels companies from the country. He claims that union actions in the late 1990s have even tamed the rogue footwear company Nike.

Not everything goes their way — recent amendments extended maximum overtime allowed from 200 to 300 hours per year, capitulating to lobbying by foreign investors, despite the VGCL's objections. However, this is far less than what the bosses wanted, and they have to go through detailed procedures to prove the necessity of overtime above 200 hours.

Contrast with China

The Vietnamese government sees the role of Communist Party cadres in unions as defending workers from the ravages of its own “market” policies. The labour code allows the right to strike and the spontaneous formation of new unions — at variance with the situation in neighbouring China.

This contrast was shown in a March 2003 report by Anita Chan and Hong-zen Wang into Taiwanese bosses in China and Vietnam (“Raising Labor Standards, Corporate Social Responsibility and Missing Links — Vietnam and China Compared”, available at < href="mailto:standards.com/DownloadResources.htm">).

Chan and Wang found that, while Taiwanese employers expected Vietnamese workers to be easier to deal with than mainland Chinese workers since Vietnam is a poorer country, the reverse was true. The bosses “observed repeatedly that they had to abide by the law” in Vietnam, and “were surprisingly frank about the harsh management methods they personally had used in China”.

One Taiwanese boss complained: “You can't even touch the Vietnamese workers, let alone abuse them. In China, physical punishments were very common, including even hitting, like in the military.”

Another claimed the problem with Vietnamese workers was that “their human rights awareness is very high. Taiwanese have to face a lot of labour disturbances and strikes. They easily stage mass protests. Their labour and democratic consciousness is very high... This is not just a problem at my factory, this is a problem of the entire society. In Vietnam their protection of labour rights is too stringent.”

Regarding overtime, Vietnamese workers said they wanted one day off a week and an absolute maximum of 12 hours overtime. “If the managers pushed them too far, they indicated they would just go on strike”, Chan and Wang reported.

By contrast, “in China, during busy seasons workers often work for a few months without any days off ... a survey of China's footwear industry found that in Taiwanese enterprises, the average number of work hours was 11 hours each day ... (in) the export toy industry in Guangdong in the busy season workers laboured for up to 14-18 hours with no days off.”

A fundamental difference is the attitude of the governments. A supervisor from China trained by the Taiwanese to work in Vietnam claimed that “Chinese workers' conditions are more miserable than the Vietnamese, whose rights are better protected. Why is there such a difference? The government. The Chinese government wants to make money and therefore just neglects workers' rights.”

State-owned enterprises

While most reports are about labour activity in private and foreign companies, Binh claims 30% of strikes take place in state-owned enterprises (SOEs). Overall, however, SOE wages and conditions for manual workers are far ahead of those in the other sectors.

In the garment industry, for example, average wages in SOEs are around one-third higher than in the other sectors. While almost 90% of workers in SOEs have labour contracts, only 40% do in private enterprises. While workplace accidents have declined in SOEs, they have risen between 18% and 31% in private enterprises.

What attitude does the VGCL take towards “equitisation”, the partial rivatisation of a portion of the state sector, either to rescue debt-ridden SOEs, relieve the state of control of smaller firms, or inject private capital to improve “efficiency”?

Binh said the VGCL views equitisation as a “dilemma”. In economically weak SOEs, it injects more investment funds, so profits rise and so do wages. But this depends on the percentage of private and state investment and the position of workers within the process.

Binh claims that despite the regulations and official limitations on the size of private shareholdings, “most equitised enterprises end up more in private than in state hands. There have been coups d'etat when private interests seize management from workers — workers are given shares, but in many cases, management buys them all out shortly after equitisation”, though it is officially frowned upon and technically illegal.

Therefore, trade unions “are very cautious about equitisation and opposed to doing anything without clear planning”. In fact, there is evidence that workers are having some influence in keeping the process on hold, despite Binh's negative examples.

There is much hype about equitised enterprises paying higher wages or not laying off workers. However, this is because equitisation has so far succeeded mainly in enterprises where it would not affect workers' jobs. The World Bank is bemoaning the “slowness'” of the equitisation process — it is years behind schedule.

A survey of equitised enterprises found that 83% were paying higher salaries, but that the old management “have not adapted their business philosophies and have failed to renovate the operations of their enterprises”. Translated from “reform”-speak, Chu Hoang Anh from the labour ministry said that “if an enterprise wants to make big changes, they have to convince workers to change or nullify their labour contracts. This is not easily accepted by employees.” Thus it seems if workers don't agree, it won't happen.

From Green Left Weekly, December 10, 2003.

http://www.greenleft.org.au/back/2003/565/565p21.htm

VIETNAM: `Not a market economy country'

BY MICHAEL KARADJIS

HANOI — The United States Department of Commerce (DoC) ruled on January 24 that Vietnam is “dumping” catfish on the US market. The ruling was based on a decision made by the commerce department last November that Vietnam is “not a market economy country” for the purposes of trade with the US.

The DoC's decision could lead to punitive tariffs of 64% against Vietnam's frozen fish exports to the US. The livelihoods of 400,000 Vietnamese farmers and thousands of workers involved in fish processing factories could be jeopardised by such punitive tariffs.

The ruling is surprising given that over the last decade Vietnam has allowed the growth of domestically-owned capitalist businesses, opened up to foreign capitalist investors, decollectivised farming and allowed most domestic prices to be market-determined.

Two years ago the US and Vietnamese governments signed a bilateral trade agreement in which Vietnam agreed to accept many of the “market economy” conditions for foreign trade set out by the World Trade Organisation (WTO).

What then could the DoC be up to?

The January 24 DoC ruling was in response to an “anti-dumping" suit launched by Catfish Farmers of America (CFA), which alleged that imports of Vietnamese catfish were being subsidised and sold in the US below the cost of production.

Anyone familiar with how rich countries manipulate “free trade” will recognise this as a typical case of how these countries can pay lawyers to launch spurious lawsuits which cause huge losses to farmers in poor countries.

Vietnam simply cannot afford to subsidise exports, and Vietnamese farmers (earning an average of US$35-50 per month) are simply too poor to sell below cost price to break into an overseas market. But with such low labour costs, the sale price of Vietnamese farmers' produce is correspondingly low.

Trade liberalisation theorists assert that countries should export whatever they can sell more cheaply, anywhere in the world. Their theory of “comparative advantage” crashes when a poor country manages to break through the monopolisation of rich-country markets by held by Western industrial, agribusiness and trading cartels. When that happens, “free market” theory goes out the window and the Western monopolies bring in their highly paid lawyers.

CFA first launched an unsuccessful “sanitary" case against Vietnamese catfish imports. Even the US embassy in Hanoi has substantiated the fact that growing conditions for catfish in Vietnam are hygienic; catfish farmers use traditional methods.

CFA then banned Vietnamese farmers using the term “catfish” for their catfish exports to the US, forcing them to re-label the product as Tra and Basa. Finally, CFA launched the anti-dumping suit.

Subsidies

Despite its ruling, the DoC knows there are no Vietnamese government subsidies on catfish exports. But, as aim of the DoC is to protect the profits of US agribusiness, it dug up the WTO guidebook on swindling and found that if you call a country a “non-market economy country”, then the sale price of an export from that country can be assumed to be lower due to alleged “distortions” in its overall economic structure. No proof of government subsidies is required.

While catfish farming is a traditional occupation in Vietnam, since the country began exporting catfish to the US the quantity of catfish farmed has risen from 2000 tons in 1998 to 60,000 tons in 2001, with large amounts of land previously used for rice farming being converted to catfish production.

Catfish farming relies on huge inputs of animal feed. Not surprisingly, US animal feed and agricultural trade corporation Cargill has been a major pusher of the expansion of Vietnamese catfish farming, organising credit for fish cages in the Mekong River delta.

If the DoC imposes punitive tariffs on Vietnamese catfish exports to the US such that these exports decline, Cargill will simply sell more animal feed to US catfish producers instead of to Vietnamese farmers, large numbers of whom will be burdened for years with their debts to Cargill.

The same scenario is now occurring with shrimp. In October, the Shrimp Importation Financing Fairness Act was introduced into the US Congress, accusing Vietnam, Thailand, China, Indonesia, India, Mexico and Ecuador of dumping prawns, and demanding these countries reduce their prawn exports to the US to 4.8 million kilograms per month.

In addition, fierce competition and increased supply from European countries reduced world shrimp prices by 20-30% in 2002. While Vietnam's shrimp exports rose by 10.7% in the first half of 2002, the earnings from these exports rose only 4.4%.

Vietnam is currently undertaking a massive expansion of shrimp production for export. The wisedom of this strategy is open to question, given the catastrophic environmental and disease problems familiar to other countries which have gone heavily into shrimp production. Uncultivable saline wastelands and thousands of heavily indebted, landless farmers have often been the result of unsustainable production in vain attempts to help farmers “escape poverty" by investing in “higher value crops".

High-value export crops

Yet poor countries often have little choice about entering high risk areas and pushing them to unsustainable levels — they need the export income to pay for increasingly expensive imports of industrial products from rich countries. Such imports are turning into a flood as tariffs, quotas and other trade barriers, erected by underdeveloped countries to protect nascent industries, are being torn down under the pressure of the International Monetary Fund, the World Bank and WTO entry conditions.

Ironically, poor countries are also being flooded by certain agricultural imports, where rich country agribusinesses have grain surpluses. Large US catfish farmers claim to be protecting their own livelihood from cheap imports, even though Vietnamese catfish accounts for only 2% of the US market. Yet such protection measures are banned for poor countries.

According to Professor Vo Tong Xuan from An Giang University, when US maize and soybean arrive in Vietnam under its bilateral trade agreement with the US, local farmers will be wiped out, as subsidised US prices are up to half the current price in Vietnam. The US government provides hundreds of billions of dollars in export subsidies to rich farmers, but Vietnam cannot afford to sue Washington for “dumping”.

To pay for these imports, even more export crops are needed, of whatever the West currently does not produce — coffee yesterday, shrimp today — until competition among poor countries to pump out as much as possible sends the corporate-controlled “world price” tumbling.

Vietnam's Ministry of Agriculture and Rural Development has admitted in a recent major report that coffee-centred trade liberalisation in the Central Highlands has caused a “great shock" to the region, particularly to the poor and the ethnic minorities, following the massive crash in coffee prices in the late 1990s.

Vietnam has been cautious about trade liberalisation, but has not been able to avoid it. The trade agreement with the US, the Asia Free Trade Area (AFTA) requirements and World Bank conditions attached to a current Comprehensive Poverty Reduction and Growth Strategy all mean further trade liberalisation.

The government has wisely delayed for six months massive tariff cuts, due this month, on 96% of imports from Asian countries under AFTA, but it cannot escape for long, and is now talking of early entry into the WTO.

Limited privatisation

Is the “non-market" label then purely an excuse for US protectionism or does Washington have more fundamental problems with Vietnam's trade liberalisation process?

According to the DoC: “The department recognises that the government of Vietnam has taken substantial steps to open its market to the international community and to allow limited forces of supply and demand affect the development of its economy. The government has promulgated many positive legal reforms that have led to the marked and sustained growth of the private sector.

“However, the level of government intervention in the economy is still such that prices and costs are not a meaningful measure of value. The Vietnamese currency, the dong, is not fully convertible, with significant restrictions on its use, transfer, and exchange rate. Foreign direct investment is encouraged, but the government still seeks to direct and control it through regulation. Although prices have been liberalised for the most part, the government pricing committee continues to maintain discretionary control over prices in (certain) sectors.

“Privatisation of state-owned enterprises and the state-dominated banking sector has been slow, thereby insulating the state sector from competition. Finally, private land ownership is not allowed and the government is not initiating a land privatisation program.”

What the DoC really objects to is not so much the low prices of Vietnamese catfish exports, but that Vietnam has used a number of mechanisms to maintain public control over its economy. Government-owned enterprises remain dominant in the “commanding heights" of the economy — heavy industry, banking and foreign trade in strategic goods.

Foreign investment is directed by the government into promoting industrial development and into joint ventures with the state sector; price subsidies are maintained on some basic goods to keep them affordable to poor people; government control is maintained over the currency, which helped save Vietnam from the 1997 Asian financial crisis and economic collapse.

Agricultural land is state-owned, with farmers leasing renewable and inheritable titles for 20 years, helping prevent the large-scale land concentration and landlessness afflicting most of the underdeveloped world (where “full” private ownership of land means the “full” right of farmers to lose the land they work on). Moreover, the government is making a renewed push to encourage farmers to set up voluntary cooperatives.

Just in case Vietnam thought it had a sovereign right to freely choose such an economic direction, the US government has just given it a reminder of who makes the rules that govern “free trade” in today's world.

From Green Left Weekly, February 12, 2003.

http://www.greenleft.org.au/back/2003/525/525p19.htm

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Friday, October 20, 2006

Socialism and the market—China and Vietnam compared

An uphill reforestation battle

New SOE Equitisation Push

To WTO or Not To WTO

VIETNAM: 30 years after victory: Towards capitalism or socialism?

Thursday, September 28, 2006

Agent Orange victims sue US chemical companies

Agent Orange victims sue US chemical companies

VIETNAM: the terrible legacy of US weapons of mass destruction

VIETNAM: the terrible legacy of US weapons of mass destruction

Unexploded ordinance

The `Dien Bien Phu of the sky'

Reparations

Wednesday, September 27, 2006

Unions fight to restrain `market forces'

Unions fight to restrain `market forces'

Strikes

Contrast with China

State-owned enterprises

VIETNAM: `Not a market economy country'

VIETNAM: `Not a market economy country'

Subsidies

High-value export crops

Limited privatisation