MELANIE BERESFORD, a senior lecturer in South-east Asian history at Wollongong University, recently spent three and a half months doing a research project on industrial development in northern Vietnam. She is also author of National Unification and Economic Development in Vietnam and Vietnam: Politics, Economics and Society. She was interviewed for Green Left by BERNIE BRIAN.
Could you briefly outline the nature of the reforms being undertaken in Vietnam? Are we likely to see a repetition of the crises that beset eastern Europe and the former Soviet Union?
The Vietnamese economy is the most reformed of all the countries that still have a Communist Party in power. The reforms have involved such things as liberalisation of prices and the exchange rate as well as the privatisation of industry.
The economy is basically, but not completely, operating according to market principles. There are still quite a few areas that require serious reform, particularly the financial sector, although it looks as though they may have stabilised inflation and the exchange rate for the time being.
The Vietnamese are very conscious of what has occurred in eastern Europe and are tending to proceed cautiously, particularly in the area of political reform. There has been a marked opening up and democratisation of society, especially in the Communist Party, but they are determined, at least for the time being, not to have a multiparty system so as to avoid the chaotic unravelling of society that occurred in Eastern Europe.
The reforms have been implemented much more successfully in Vietnam than in Europe. Another
reason for this is that the south has never really had an entrenched socialist system, so it was able to implement the market reforms more quickly. The north is still saddled with different ways of thinking, bureaucratic ways of doing things, and some people with vested interests in the old system are resisting change.
What are the social impacts of the reform process?
People in Hanoi are particularly worried about the negative social impacts and the uncertainty that the changes are bringing. For instance, people are complaining that the health system is collapsing, and workers in the health system are becoming demoralised.
The budget deficit is enormous, and the state can't afford to pay its workers decent wages. Salaries in the health and education sectors are very low, forcing most of these workers to find supplementary means of earning an income. So it is very difficult for these workers to provide an adequate service.
As well, cities like Hanoi are growing very fast due to the removal of restrictions on population movements, and the provision of water and sewerage is not keeping up with this growth. The authorities can no longer afford even to spray the city for mosquitoes.
There is also a huge amount of unplanned development going on, particularly in the area of private housing. I was told private investment in housing is now higher than the state's investment in industry and economic development. All over town private houses are going up.
This is also creating environmental problems such as flooding because many of Hanoi's lakes, which play a significant role in drainage, are being filled in to build housing. However, the housing boom is renewing Hanoi's housing stock as well as
It could cost $6-10,000 dollars to buy a small block of land and then another $10,000 to build a house in Hanoi. Considering that the average public sector worker would earn $8-$10 a month and a factory worker on piece rates $20-$25 a month, it raises the question of who has the money to buy houses. Indications are that there are some very rich people around. Legal means of earning an income are not very remunerative, so corruption and smuggling are common practices. There is a lot of smuggling across the Chinese border.
Corruption is a serious problem. For instance, you hear stories of motorcyclists being stopped by police. The standard fine for offences is $30, and the police will let you off if you pay them $15. I witnessed the police demanding large amounts of money from street traders outside my flat. The party keeps purging people for corruption and trying to eliminate the problem by focusing on the individual, but it mainly stems from the state not having enough money to raise wages.
Is unemployment a problem?
With many state and collective industries going bankrupt as a result of restructuring, it is estimated that unemployment could be as high as 20%.
However, it is difficult to determine the true level because, under the old system, people saw themselves as employed only if they were part of the state or cooperative sector. So when these people are laid off, they describe themselves as unemployed even if they are elsewhere employed in the informal sector. Underemployment is probably a more accurate description of the situation.
Are there signs of improvement in the economy?
Everyone you talk to says life is better now, and they can get most of the things they need to live. Industrial production was 17% higher in the first six months of this year compared to the same period last year.
However, severe structural problems remain. The country's capital stock is very old and it will have to be modernised to get industry growing. This requires money from either foreign investment or domestic savings. The government has been singularly unsuccessful in mobilising domestic savings, and a serious reform of the banking system is necessary. At the moment people would sooner save their wealth in gold or under a mattress.
The taxation system is also in serious need of reform. The government is unable to raise enough revenue to meet the expenditures it carries out at the moment, let alone increasing public sector salaries or spending more on such things as education. Some provincial and local authorities collect illegal taxes and do not pass on the revenue to the central authorities. The government is currently getting assistance from the Swedish in designing a new taxation system.
It is somewhat alarming to find out that their more immediate models for development are South Korea, Taiwan and the Philippines. I think there is a lot of confusion over what these models really mean.
For instance, some economists I spoke to see South Korea and Taiwan as successful export-oriented models of growth. But they ignore the fact that these economies also have a massive state sector. These same economists tend to be in favour of privatising the public sector. They are selectively taking features of these models that they think suit Vietnam, without too much investigation into the real nature of these economies.
How successful have the Vietnamese been in attracting foreign investment, and are we likely
to see the United States lift its blockade?
The government is trying very hard to attract foreign investment. I was told it was planning to reduce the minimum wage in a foreign company from $50 a month to $25 a month. I think they have been seduced by the neoclassical dogma that cutting wages will increase investment. Compared to the Philippines' average wage of $120 a month, Vietnam's wages are very low.
The main hindrance to further investment is the poor infrastructure and the US embargo. The south is more attractive to foreign investment because of the existence of oil deposits, a road system (legacy of the US military presence) and a population much more familiar with the functioning of the market.
Vietnam has a highly educated and disciplined population which should be attractive to foreign investors. The Japanese are keen to invest. The Japanese launched a stinging attack on the US embargo at the recent Asian Development Bank. All indications are that the embargo may be lifted after the US elections. If it isn't, the Japanese may break it anyway.
It has been particularly difficult attracting foreign investment to the north because of the passivity endemic among the managers, who under the old system were never encouraged to manage and now don't know how. They are tending to sit back and wait for circumstances to change.
Is there still a commitment to socialism?
The Vietnamese say that the end result of restructuring will be a socialist market economy, although it's very hard to say what this means in practice. For the time being, they have a singular obsession with getting their economy functioning efficiently and growing. They want to have a good
social welfare system, but that requires that they get rid of their budget deficit. What they continually say, however, is that socialism does not mean shared poverty.
However, the inevitable consequence of creating a market economy is that you create a much more diverse society composed of people with all kinds of different interests, and that's bound ultimately to reflect itself in political life.
However, I didn't see any evidence of a concerted push for multiparty democracy. People are more critical, but this is more a reflection of the new openness in the society. People in general believe the party is moving in the right direction.