Newsgroups: bit.listserv.seasia-l
Date:         Tue, 18 Aug 1992 05:19:24 PDT
From:         "Indonesia Publications/Task Force" <apakabar@IGC.APC.ORG>
Subject:      VN: Economic Reforms
X-To:         seasia-l@msu.edu

/* Written  8:59 pm  Aug 18, 1992 by peg:greenleft in cdp:greenleft.news */
/* ---------- "Green Left issue 67, August 19" ---------- */
Vietnam: `Socialism does not mean shared poverty'

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.

Question: 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.

Question: 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
providing employment.

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.

Question: 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.

Question: 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.

Question: 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.

Question: 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.
Comments: Gated by NETNEWS@AUVM.AMERICAN.EDU