Vietnam Communist Party Holds 10th Congress

Vietnam Communist Party Holds 10th Congress

By Michael Karadjis

A wide-ranging public discussion in the lead-up to the 10th National Congress of the Communist Party of Vietnam (CPV) focused on issues of corruption, calls for greater democracy and accountability, and whether to allow CPV members to take part in capitalist business.

As is usual practice, the main reports were released several months early to allow for public input. Tens of thousands of comments flooded in form around the country, aired nightly on television, printed daily in newspapers and posted on various web discussion sites. Western media hyped this as ‘unprecedented’, yet the atmosphere in the lead-up to the previous 9th Congress was remarkably similar.

The question of allowing CPV members to engage in capitalist business and allowing capitalists to join the party was a major issue in the discussion. The principle that the CPV could include people who carried out some form of business had previously been clarified at the 5th Plenum in 2003.

This was logical, particularly in an underdeveloped country like Vietnam, where the petty ‘household business’ sector consists of many millions of people who cannot be classified as workers or peasants.

However, there were two major issues of confusion. Firstly, the party statutes said that if members employed anyone, they could not engage in “exploitation.” Yet while the owner of a small workshop employing a few people was hardly a capitalist, the Marxist concept of “exploitation” is not simply a reference to appalling treatment of workers by big business; rather it objectively describes the relationship involved in private waged employment in a market economy.

The second problem was the unstated assumption that “business” referred to small business. The 12th Plenum of the CPV Central Committee last year passed an amendment to add the words “without limitation in scale”.

Voices were raised both in favour and against. Nguyen Duc Binh, former rector of the National Political Academy, wrote that if Communist Party members can become capitalists, the party should change its name. The capitalist class plays its role in the country’s development, but the role of the CPV is to represent working people.

Others said party members should have this right because the law doesn’t restrict business scale. The private sector is recognised as having a role in the current phase of development of the productive forces “in transition to socialism,” but it creates uncertainty if they are seen to have less rights.

By allowing capitalists to be members, it gives the party greater control over them, they argued. Party membership could help orient them to make greater contributions to poverty reduction and set standards for good payment and benefits for workers.

A more radical argument was put by Hong Ha from the CPV’s Theoretical Council that “it is a big waste not to make full use of party members’ knowledge and capital” by allowing them to develop the economy as capitalists.

Some 10 percent of CPV members are industrial workers and 30-40 percent are farmers, the majority of the population. Others include intellectuals, professionals and officials. Those in favour of the change claimed few capitalists would join, claiming that in China only 1.5 percent of Communist Party members are capitalists.

China officially admitted large capitalists into its CP in 2001, and adopted a new statute that the CP represents the “advanced productive forces, advanced culture and the entire nation,” where the ‘advanced productive forces” are widely understood to mean the capitalist class.

The CPV has yet to release the final document as amended by the Congress. However, indications are that the final outcome may have been much tamer than in the draft put to the Congress by the outgoing CC.

On the one had, the words “must not engage in exploitation,” when employing people, were removed, as they were a logical contradiction. Instead, the words “where there will be no exploitation of human by human” was added to the definition of the CPV’s socialist goal.

On the other hand, the draft amendment to Congress had read:

Party members engaged in the private economy without restriction on scale, apart from strictly observing Party statutes, the law and government policies, must also follow a number of defined regulations and conditions

In the only passing reference I’ve yet seen since the Congress, the words “without restriction on scale” were omitted; however, it is unclear whether this means they were dropped or merely omitted in that media article.

Other themes revolved around corruption and greater accountability of party and state leaders. These themes were highlighted by the busting of an enormous corruption scandal just weeks before the congress.

This involved leading officials in the Transport Ministry siphoning off 7 million dollars from the PMU18 unit, responsible for utilizing foreign loans for major infrastructure works. The director of the unit, Bui Tien Dung, was caught gambling 2 million dollars on football. Dung and the deputy Transport minister, Nguyen Viet Tien, have been arrested, and the Minister Dao Dinh Binh resigned.

Veteran leaders, including national hero General Vo Nguyen Giap, General Chu Huy Man, and the previous CPV general secretary, Lieutenant-General Le Kha Phieu, petitioned the police demanding a full investigation even if it led to the highest levels.

Giap said such scandals have “frozen the leading role of the Party and the management of the State and the supervision of the people." Phieu called for a new ‘Doi Moi’ (Renovation) of democracy similar to the economic Doi Moi Vietnam has carried out over the past 20 years.

Regarding the thousands of comments that flooded in from the public, it was significant that “most of the comments involved ways to improve the party's leadership, rather than challenging its primacy or demanding a multiparty system,” said Carlyle Thayer, a Vietnam expert at the Australian Defense Force Academy in Canberra.
The media played a prominent role in keeping the heat on the scandal. Western media reports also saw this as “unprecedented,” yet the media have been playing this role for many years now, since Phieu demanded the scalps of “giant rats not little mice” back in 1999, bringing down the deputy prime minister in a land scandal.

As Margot Cohen reported in the Far East Economic Review of January 25, 2001,
in relation to an embezzlement scandal involving funding designed for ethnic minorities, “it points to the increasing boldness of the Vietnamese press and the national assembly in demanding public accountability. Local newspapers began uncovering irregularities three years ago. As the investigation stretched into 2000, the press became more aggressive.”

Like at the 9th Congress, leaders again were frank that corruption and ethical degradation have taken hold of “not a small part” of the party membership and leadership and are a mortal threat to the party. What the new measures announced will achieve remains to be seen. The sincerity of current party general-secretary, Nong Duc Manh, is evident, and a great many corruption cases have been pulled down over the last few years. The problem is that they also keep coming up.

''I don't see corruption here running totally out of control,'' said Martin Gainsborough, a Vietnam specialist from Bristol University. ''Yes, corruption is endemic. But it is not as endemic as in some other places.'' This is certainly true. Yet there is also the sense that many Vietnamese are exasperated with many of their own leaders, regardless of the situation elsewhere.

The greater political openness and checks from below that have been evolving need to be strengthened. However, corruption is not only about ‘bad people’ who need ‘good governance’, but is caused by the kind of incentives inherent in a market economy, with growing commercialisation and rising inequality, both within the country and as part of its “integration” into the global capitalist economy.

These trends are facts of life for a small socialist-oriented country surrounded by world capitalism. However, whether the process leads to socialism, or back to capitalism via corrupt primitive accumulation, depends on the party defeating this cancer.

Party resolutions reaffirmed that, in the “socialist-oriented market economy,” the state-owned economy plays the “leading role.” However, they also state that the process of converting state companies in areas “where the state does not need to keep 100 percent” into share companies – known as ‘equitisation’ – will be stepped up.

Whether this increases the state’s leadership in the economy, or increases the power of private shareholders over the state, remains to be seen. A recent report claims Vietnam will equitise 1700 of the remaining 2700 state enterprises by 2010. However, figures are deceptive: the 2500 state enterprises equitised to date represent half the original total number of SOEs, but account for only 10 percent of state enterprise capital; the 1000 that would still remain in full state hands are the most strategic firms in key areas. However, a number of larger corporations are scheduled for the coming period, including Vietcombank, one of the leading state banks.

In addition, proceeds from equitising smaller state companies may be ploughed back into the more important ones, increasing state investment. The Financial Times noted “Vietnam's maiden sovereign bond in October raised Dollars 750m”, but complained that “Vietnam’s leaders are pouring resources into state companies such as Vinashin, the shipbuilder, which was granted the entire proceeds of the bond.”

Vietnam has maintained the fastest economic growth in south east Asia since 1998, and reduced poverty from 58 percent in 1993 to 22 percent in 2005, a record achievement. Its health and education indicators are equivalent to those of middle income countries, despite remaining a low income country with some $US 500 GDP per capita. These are the achievements of a mixed economy, utilizing the mostly small-scale private sector and foreign investment under the leadership of a dominant state-owned economy.

Those advocating it go all the way with the market and capitalism ought to look around at the misery of the capitalist third world. Ironically, to amass the private capital necessary for a large-scale capitalist class, it would be necessary to harness the loot of the corrupt. The PMU18 officials embezzled money by awarding public-works contracts to private firms owned by family and friends. While the new regulation on party members partly aims at corruption by making such business ownership more transparent, the question is whether it may have the opposite effect of encouraging its spirit.

The Congress was held between April 18 and 25, attended by 1,176 delegates representing 3.1 million members, of whom 750,000 joined in the last five years. The Congress voted for 160 full and 21 alternate Central Committee members from lists of 207 and 46 nominated or self-nominated candidates. There was some 50 percent turnover on the central Committee, and eight of fourteen members of the Politburo are new. "A young leadership is in place and it cements the process of accelerated reforms," said Thayer.
Manh, widely seen as a consensus-maker between different tendencies, kept the post of CPV general secretary, despite a challenge from Nguyen Minh Triet, the party chief in Ho Chi Minh City. Triet looks likely to replace the president, Tran Duc Luong, while another southerner, Nguyen Tan Dung, is being groomed to replace prime minister Phan Van Khai, and Luong, Khai and the head of the National Assembly, Nguyen Van An, were dropped from the Politburo due to age.

(This is an extended version of an article first appearing in Green Left Weekly May 15, 2006, at http://www.greenleft.org.au/2006/668/6651)

Workers fight foreign bosses and win

VIETNAM: Workers fight foreign bosses and win

Michael Karadjis

Beginning late last year, tens of thousands of Vietnamese workers downed tools at dozens of foreign-invested enterprises (FIEs) in southern industrial zones around Ho Chi Minh City, demanding implementation of a 40-48% wage rise decreed by the Vietnamese government in September.
While strikes are common in Vietnam — some 900 have been reported since 1995 — the current wave is the largest in recent Vietnamese history.
Some strikes have turned violent. According to the January 26 Christian Science Monitor, “In the Song Than industrial zone, some smashed windows and attacked machines, spurred on by ringleaders who distributed handwritten messages urging action against low pay and poor conditions, say factory owners”.
Most Western media has reported that the strike wave ended around January 6 when the Vietnamese government relented to the strikers’ demands for a 40% pay increase. The January 28 Economist reported: “What is especially unsettling for investors is how the workers got their extra dough. Since late December, wildcat strikes have swept through the industrial zones surrounding Ho Chi Minh City. Apparently caught off-guard, the government issued a decree earlier this month raising the minimum wage in foreign-owned factories. Most strikers have now returned to work, but some have not, and investors are fuming over production stoppages and a higher wage bill.”
However, the Vietnamese government’s announcement to foreign investors that it is doing them a service in ending the strike wave by decreeing a massive wage rise is to some extent tongue in cheek, because the government decreed the rises long before the strike wave.
As the September 25 Vietnamese daily Saigon Giai Phong (Liberated Saigon) reported, “The Ministry of Labour, Invalids and Social Affairs [MOLISA] has called on FDI [foreign direct invested] enterprises to increase the minimum wages they pay their employees. It wants firms based in Hanoi, HCM City, Dong Nai and Binh Duong to pay at least 870,000 dong [about US$55] per month, those in Hai Phong, Ha Long, Da Nang, Nha Trang, Vung Tau and Can Tho to pay 790,000 dong [$50], and those in other areas to pay 710,000 [$45].” The new minimum salaries replace the previous minimums of 626,000, 556,000 and 480,000 dong respectively.
This decision was due to earlier lobbying by the Vietnam General Confederation of Labour (VGCL), the country’s peak trade union body.

Bosses delay pay rise

The strikes broke out because many foreign investors asked the government to defer the wage rise until after the Tet (Lunar New Year) holiday, beginning on January 28, because they “couldn’t afford” the wage rise and also pay the Tet bonus. The Tet bonus is the equivalent of a 13th-month salary that Vietnamese workers are entitled to. The government thus left it up to the bosses and workers to bargain over when it would be implemented.
Figuring they could “afford” not to get the rise less than the bosses could “not afford” to give it, the Vietnamese working class showed its bargaining strength, with the full knowledge that it had the law, the open sympathy of most Vietnamese, the discreet sympathy of the government, and the active support of the VGCL on its side.
According to the January 11 Viet Nam News, the VGCL claimed “the reason for recent strikes is that companies have announced wage policies and bonuses late. Also, companies have yet to improve working conditions and meals for labourers, while at the same time requiring them to work overtime.”
The government did not announce a new policy to end the strike wave, but merely stated that the existing policy had to implemented no later than February 1.
Foreign investors, governments and the Western media responded with hostility to the workers’ struggles. The Economist quoted bosses claiming that “outside agitators stoked the protests, distributing notes at factory gates while police stood idly by”, and noted that “some observers find it implausible that [the protests] could occur without the prior knowledge of the ruling party, which forbids independent trade unions. Workers are allowed to join only a pliant, party-affiliated union.”
But this fiction of “a pliant, party-affiliated union”, which Western “democracies” and their pliant media pretend to be concerned about, has blown up in their faces, and they are now revealing that it is precisely “pliant” unions that they would prefer to the militant, Communist Party-affiliated union leadership in Vietnam.
The Economist goes on to ask, “Why didn’t Vietnam crush the illegal strikes?” Taiwan’s deputy foreign affairs minister Michael Kau stepped in to demand the Vietnamese government “protect Taiwan investors and their businesses”, warning that if the government did not deal with the strikes properly and quickly, it would have an adverse impact on Taiwanese investment in Vietnam.
The European Chamber of Commerce wrote to the prime minister, Phan Van Khai, to warn him that investors set up shop in Vietnam because, they imagine, “the workforce is not prone to industrial action”.

Government support

In reality, the reason the Vietnamese government did not do the bidding of investors from “democratic” countries and crush the strikes is because it never does. A hostile 2002 report by the US Department of Commerce, Socialist Republic of Vietnam — Determination of Market Economy Status, asserted that although most strikes are led by spontaneous workers’ groups rather than official unions, and though most “do not follow proper legal procedures, they are tolerated by the government with no reports of retribution against strikers”.
I have also observed during my four years in Vietnam that in virtually every strike reported, the official Communist-led unions stepped in and forced bosses to relent to workers’ demands. In one example during a similar strike wave last October-November, reported in the November 25 Viet Nam News, the 1000 workers who struck at the Hong Kong-owned Rieker footwear factory only returned to work “after a meeting between company’s management and the provincial Nam authorities and Quang Nam Labour Federation”, when “the company’s management agreed to a worker pay raise, better lunch and better working conditions” — i.e., the strikers’ demands.
The VGCL and its campaigning newspaper Lao Dong [Labour] continually supports strikes, even though it rarely organises them. Chau Nhat Binh from the VGCL’s international department told Green Left Weekly that many plants employing rural migrants do not have union chapters, because the migrants initially think they want to keep out of trouble. However, once they discover the nature of exploitation and launch “wild-cat” strikes, and the VGCL helps them win their demands, they sign up as union members.
This observation is backed by the Economist Intelligence Unit, which claimed in an April 2, 2002 Risk Wire report that “labour rights sentiments are backed by a conciliation system and a judiciary sympathetic to labour demands”. Likewise, investors complain that Vietnam’s law protects employees more than employers. According to the manager of Nike Vietnam, quoted in a December 21, 2004 VDC Business Newsletter, when workers go on strike unlawfully, officials support them!

Minimum wage

Minimum wages at foreign enterprises are already set at about double the domestic minimum wage. However, the domestic minimum of US$20 per month is an extremely low figure that virtually no-one is paid. It is a minimum safety net for small household businesses that employ poor farmers casually, in the “idle period” between crops, when any extra cash is welcome.
According to Pham Minh Huan, director of MOLISA’s salary policy department, every employee at a state-owned enterprise (SOE) is paid more than the minimum — at least 35% higher for unskilled workers and 134% higher for newly recruited, skilled employees. On top of that, SOE employees share the profit via the bonus and welfare funds. When I visited a major state-owned cement plant last year, employees’ salaries ranged from $200-$250 per month, and at a major state paper mill, from around $120-$180.
On the other hand, while the FIE minimum rate was designed as a bare minimum and companies were expected to designate appropriate salaries for workers based on skill levels, length of service and other factors, many FIEs paid unskilled workers the absolute minimum, and some paid their skilled workers only 1-2% higher.
Thus in practice, many domestic firms, particularly state-owned firms, were paying higher than foreign firms despite having a minimum rate of only half the latter. Nguyen Thi Thanh Mai of MOLISA told the October 15 Viet Nam News that since the last minimum wage rise at foreign firms in 1999, the price of food and consumer goods had gone up nearly 40% and 25% respectively, and in practice, average monthly wages at Vietnamese firms had risen 35-50%, but “the minimum wage at foreign-invested firms has stayed the same”.
In January, MOLISA clarified that the new minimum wage applied only to unskilled labour, and that the monthly salary for workers who have done vocational courses must begin at least 7% higher. In addition, to prevent companies from “bargaining” over conditions when delivering the rise, MOLISA stressed that “allowances, bonuses, travel expenses, meals, and housing fees paid to staff by FIEs would be maintained when the new minimum pay is applied”. The VGCL also required enterprises to immediately announce Tet bonuses.
The current rise in the FIE minimum rate is also good news for workers in local firms, because MOLISA announced in October that the department was planning to introduce a single minimum wage for all forms of business in 2008.
To enforce the new law, deputy chairman of HCM City People’s Committee Nguyen Thien Nhan asked trade unions to make up-to-date reports on wages being paid at FIEs. The VGCL has instructed grassroots trade unions to oversee the payment of wages and bonuses and visit FIEs to help workers understand the government’s decision.
Not all workers returned to work immediately. On January 9, workers at the Korean-invested footwear company Daeyun in Linh Trung IP No.1 walked out, refusing to work overtime, because of the management’s delay in making a decision on the increases.

http://www.greenleft.org.au/2006/656/7431

From Green Left Weekly, February 15, 2006.

Socialism and the market—China and Vietnam compared

Socialism and the market China and Vietnam compared

http://links.org.au/node/14

 

By Michael Karadjis

This article first appeared in Links International Journal of Socialist Renewal, No. 27, January-April 2005.

At the time of writing, Michael Karadjis was living and researching in Vietnam.

Contents

Differences in collectivisation and de-collectivisation

Differences in SOE reform

Roles of state sectors change in opposite directions

Why the difference?

Massive privatisation in China and slowdown in Vietnam

Party, bureaucracy and capitalist business

Mass lay-offs in Chinese privatisation

Labour and unions

Differences within the ruling parties

Health and education

Socialist orientation and the nature of SOEs

Problems ahead for Vietnam

Footnotes

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