National Trade Data Bank ITEM ID : ST BNOTES VIETNAM DATE : Oct 28, 1994 AGENCY : U.S. DEPARTMENT OF STATE PROGRAM : BACKGROUND NOTES TITLE : Background Notes - VIETNAM Source key : ST Program key : ST BNOTES Update sched. : Occasionally Data type : TEXT End year : 1992 Date of record : 19941018 Keywords 3 : Keywords 3 : | VIETNAM VIETNAM BACKGROUND NOTES (MAY 1990) PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS US DEPARTMENT OF STATE May 1990 Socialist Republic of Vietnam PROFILE Geography Area: 329,707 sq. km. (127,330 sq. mi.); larger than Virginia, North Carolina, and South Carolina combined. Cities: Capital-Hanoi (3.1 million); Other cities-Ho Chi Minh City (formerly Saigon) (3.9 million); Haiphong (1.5 million). Terrain: Varies from mountainous to coastal delta. Climate: tropical monsoon. People Nationality: Noun and adjective--Vietnamese (sing. and pl.). Population (Vietnam census, Apr. 1989): 64.4 million. Annual growth rate (1989 census): 2.13%. Ethnic groups: Vietnamese (85-90%), Chinese, Muong, Thai, Khmer, Cham, mountain groups. Religions: Buddhism, Hoa Hao, Cao Dai, Christian (Roman Catholic and Protestant), animism, Islam. Languages: Vietnamese (official), French, Chinese, Khmer, mountain area languages. Literacy (1989): 82%. Health (1989): Birth rate--33/1000. Infant mortality rate--51/1000. Life expectancy--62 yrs. male, 66 yrs. female. Death rate--8/1000. Government Type: Communist people's republic. Independence: Sept. 2, 1945. Reunification: July 2, 1976. Constitution: Dec. 18, 1980. Branches: Executive--Council of Ministers; State Council (Collective Chief of State); "People's Committees" governing in local jurisdictions. Legislative--National Assembly; locally, People's Councils. Judicial--Supreme People's Court. Administrative subdivisions: 40 provinces, 3 municipalities under central government control, one special zone. Political party: Vietnamese Communist Party, formerly (1951-76) Vietnam Worker's Party, itself the successor of the Indochinese Communist Party founded in 1930. Sufferage: Universal over 18. Central government budget: Revenues $3.2 billion; expenditures $4.3 billion, including $528 million in capital expenditures (1987). Defense: Current figures not available; 40-50% of central government budget (1987 est.). Flag: Red with large yellow star centered. Economy GDP: $13.9 billion (1988). Real growth rate: 5.8% (1988). Per capita income: $198 (1987). Inflation rate: 74.5% (1989 proj.). Natural resources: Phosphates, coal, manganese, bauxite, chromate, offshore oil deposits, forests, rubber, marine products. Agriculture (40% of GDP; 38% of export earnings): Products--rice, rubber, fruit, vegetables, corn, manioc, sugar cane, coffee, fish. Cultivated land--less than 7 million hectares per year. Land use--30% arable; 60% forest and woodland; 10% other. Industry (27% of GDP; 34% of total exports): Food processing, textiles, cement, chemical fertilizers, steel, electric power. Trade (1988): Exports--$880 million: primarily agricultural and handicraft products, seafood, rubber, wood flooring, coffee, coal. Major partners--USSR (57%). Eastern Europe, Japan, France, Singapore, Hong Kong. Imports--$1.9 billion: petroleum, steel products, transport-related equipment, chemicals, fertilizers, medicines, raw cotton. Major partners--USSR (73.5%), Eastern Europe, Japan. Official exchange rate: Fluctuating rate; 4,500 new dong (D) per US dollar (1990). Fiscal year: Calendar year. Membership in International Organizations UN and some of its specialized agencies--Food and Agriculture Organization (FAO), International Bank for Reconstruction and Development (IBRD), International Civil Aviation Organization (ICAO), International Monetary Fund (IMF), UN Development Program (UNDP), UN Educational, Scientific, and Cultural Organization (UNESCO), World Health Organization (WHO), International Maritime Organization (IMO), World Intellectual Property Organization (WIPO)--Asian Development Bank (ADB), Council for Mutual Economic Assistance (CEMA), Colombo Plan, Economic and Social Commission for Asia and the Pacific, INTELSAT, Mekong Committee, Nonaligned Movement. GEOGRAPHY The southern part of Vietnam is dominated by the estuary of the Mekong River system, making the country low, flat, and frequently marshy. The rich soil in the Mekong Delta makes this area the most fertile in the country, particularly for rice. The area immediately north and east of Ho Chi Minh City is much more varied--low-lying tropical rain forest, upland forest, and the rugged terrain of the Annamite Mountain chain. Most of northern Vietnam is mountainous or hilly. The rugged highland areas are covered by a thick canopy of jungle (about half the total land area). The lowlands consist principally of the Red River Delta and coastal plains, which extend northeast and south from the delta. Heavily populated and intensively cultivated, the lowlands are almost entirely covered by rice fields. Much of the delta region is seasonally flooded; a complex network of dikes and levees prevents serious flood damage. The north has a monsoon climate--a hot, humid, wet season from mid-May to mid-September (southwest monsoon), a relatively warm, humid dry season from mid-October to mid-March (northeast monsoon), and two short transitional seasons. Although Ho Chi Minh City and the Mekong Delta to the south experience a year-round tropical climate, the central lowlands and mountainous regions are cool from about October to March, and the temperature sometimes drops to 10o C (50-55o F). Rainfall is heavy in the delta and highlands in summer and in the central lowlands in winter. PEOPLE Ethnic Vietnamese constitute almost 90% of the population. Originating in what is now southern China and northern Vietnam, the Vietnamese people pushed southward over several centuries to occupy the entire eastern seacoast of the Indochinese Peninsula. This expansion began in 939 AD, after a millenium of Chinese occupation. Although Vietnamese culture was strongly influenced by traditional Chinese civilization, the struggle for political independence from China developed a strong sense of national identity in the Vietnamese people. Nearly 100 years of French rule (1858-1954) introduced important European elements, but the Vietnamese still attach great importance to the family and continue to observe rites honoring their ancestors, indicating the persistence of tradition. Various ethnic groups make up the remaining 10% of the population, with the approximately 1.2 million Chinese, concentrated in southern Vietnam, being the most numerous. The Chinese have long been important to the Vietnamese economy, having been active in rice trading, milling, real estate, and banking in the south and shopkeeping, stevedoring, and mining in the north. Various restrictions on economic activity in the years following reunification seriously affected the Chinese business community congregated in the Cholon section of Ho Chi Minh City. The general deterioration in Vietnamese-Chinese relations also strained relations between the Socialist Republic of Vietnam (SRV) and the Chinese minority. In 1978-79, some 450,000 ethnic Chinese left Vietnam by boat as refugees (many officially encouraged and assisted) or were expelled across the land border with China. The second largest minority, the southern Montagnards (mountain people), comprises two main ethnolinguistic groups--Malayo-Polynesian and Mon-Khmer. About 30 groups of various cultures and dialects are spread over the highland territory. The third largest minority is the Khmer Krom (Cambodians), numbering about 600,000, who are concentrated in southern provinces near the Cambodian border and at the mouth of the Mekong River. Most are farmers. Other minority groups include Chams (remnants of the once-mighty Kingdom of Champa, destroyed by the Vietnamese in the 16th century). The government administers virtually all educational facilities. Literacy is high among the general population, but among the Montagnard groups the rate is still low. Government efforts to upgrade school facilities and improve the educational infrastructure have been hampered by Vietnam's high birth rate and continuing economic problems. Educational opportunities have been limited by the exclusion of missionaries or teachers from other than the Soviet Union or East European countries. Educational emphasis is on applied sciences and vocational training. Vietnam annually sends about 15,000-20,000 students to the Soviet Union and other communist countries under various bilateral technical assistance programs. Since 1980, over 200,000 Vietnamese have been sent to the Soviet Union and East European countries in a controversial labor and training program. In addition, since 1986, Vietnam has sent both skilled and unskilled workers to Algeria and Iraq, expanding the presence of Vietnamese labor to countries in the Middle East and North Africa. HISTORY In BC 111, ancestors of the present-day Vietnamese, inhabiting part of what is now southern China and northern Vietnam, were conquered by forces of China's Han dynasty. Chinese rule lasted more than 1,000 years (until 939 AD) when the Vietnamese ousted their conquerors and began a southward expansion that, by the mid-18th century, reached the Gulf of Siam. Despite their military achievements, the Vietnamese continued to suffer from internal political divisions. Throughout most of the 17th and 18th centuries, contending families in the north and south struggled to control the powerless kings of the Le dynasty. During this period, Vietnam was effectively divided near the 17th parallel, just a few kilometers above the demarcation line established at the 1954 Geneva conference. French Rule Vietnam was reunited following a devastating civil war in the 18th century but soon fell prey to the expansion of European colonialism. The French conquest of Vietnam began in 1858 with an attack on what is now the city of Danang. France imposed control gradually, meeting heavy resistance, and only in 1884 was Vietnam officially incorporated into the French empire. Fiercely nationalistic, the Vietnamese never truly accepted the imposition of French rule. By 1930, the Vietnamese Nationalist Party had staged the first significant armed uprising against the French, but its virtual destruction in the ensuing French repression left the leadership of the anti-colonial movement to those more adept at underground organization and survival-- the communists. In that same year, the recently formed Indochinese Communist Party (ICP) took the lead in setting up short-lived "soviets" in the Nghe An and Ha Tinh Provinces in northern Vietnam, an action that identified the ICP with peasant unrest. The ICP was formed in Hong Kong in 1930 from the amalgamation of the Vietnamese and the nascent Lao and Khmer communist groups, and it received its instructions from the Moscow-based Communist International (Comintern). Communist Movement The Vietnamese communist movement began in Paris in 1920, when Ho Chi Minh, using the pseudonym Nguyen Ai Quoc, became a charter member of the French Communist Party. Two years later, Ho went to Moscow to study Marxist doctrine and then proceeded to Canton as a Comintern representative. While in China, he formed the Vietnamese Revolutionary Youth League, setting the stage for the formation of the Indochinese Communist Party in 1930. French repression of nationalists and communists forced some of the insurgents underground, and others escaped to China. Other dissidents were imprisoned, some emerging later to play important roles in the anti-colonial movement. Ho Chi Minh was abroad at that time but was imprisoned later in Hong Kong by the British. He was released in 1933, and in 1936 a new French government released his compatriots who, at the outset of World War II, fled to China. There they were joined by Ho, who organized the Viet Minh-- purportedly a coalition of all anti-French Vietnamese groups. Official Vietnamese publications state that the Viet Minh was founded and led by the ICP. Because a Vichy French administration in Vietnam during World War II cooperated with occupying Japanese forces, the Viet Minh's anti-French activity was also directed against the Japanese, and, for a short period, there was cooperation between the Viet Minh and Allied forces. When the French were ousted by the Japanese in March 1945, the Viet Minh began to move into the countryside from their base areas in the mountains of northern Vietnam. By the time Allied troops--Chinese in the north and British in the south--arrived to take the surrender of Japanese troops, the Viet Minh leaders had already announced the formation of a Democratic Republic of Vietnam (DRV) and on September 2, 1945, proclaimed Vietnam's independence. Deep divisions between Vietnamese communist and non-communist nationalists soon began to surface, however, especially in the south, and with the arrival of Allied forces later in September, the DRV was forced to begin negotiations with the French on their future relationship. The difficult negotiations broke down in December 1946, and fighting began with a Viet Minh attack on the French in Hanoi. Civil War A prolonged three-way struggle ensued among the Vietnamese communists (led by Ho Chi Minh), the French, and the Vietnamese nationalists (nominally led by Emperor Bao Dai). The communists sought to portray their struggle as a national uprising; the French attempted to reestablish their control; and the non-communist nationalists, many of whom chose to fight alongside the French against the communists, wanted neither French nor communist domination. Ho Chi Minh's Viet Minh forces fought a highly successful guerrilla campaign and eventually controlled much of rural Vietnam. The French military disaster at Dien Bien Phu in May 1954 and the conference at Geneva, where France signed the Agreement on the Cessation of Hostilities in Vietnam on July 20, 1954, marked the end of the eight-year war and French colonial rule in Indochina. 1954 Cease-Fire Agreement and Partition The 1954 cease-fire agreement negotiated in Geneva provided for provisional division of the country at approximately the 17th parallel; a 300-day period for free movement of population between the two "zones" established thereby; and the establishment of an International Control Commission--representatives of Canada, India, and Poland--to supervise its execution. The cease-fire agreements also referred to "general elections" that would "bring about the unification" of the two zones of Vietnam. The agreement was not accepted by the Bao Dai government, which agreed, however, to respect the cease-fire. Following the partition of Vietnam under the terms of the Geneva agreements, there was considerable confusion in the south. Although Bao Dai had appointed a well-known nationalist figure, Ngo Dinh Diem, as prime minister, Diem initially had to administer a country plagued by a ruined economy and by a political life fragmented by rivalries of religious sects and political factions. He also had the problem of coping with 850,000 refugees from the north. The communist leaders in Hanoi expected the Diem government to collapse and come under their control. Nevertheless, during his early years in office, Diem was able to consolidate his political position, eliminating the private armies of the religious sects and, with substantial US military and economic aid, build a national army and administration and make significant progress toward reconstructing the economy. Meanwhile, the communist leaders consolidated their power in North Vietnam and instituted a harsh "agrarian reform." In the late 1950s, they reactivated the network of communists who had stayed in the south (the Viet Cong) with hidden stocks of arms, reinfiltrated trained guerrillas who had been regrouped in the north after 1954, and began a campaign of terror against officials and villagers who refused to support the communist cause. The communists also exploited grievances created by mistakes of the Diem government as well as age-old shortcomings of Vietnamese society, such as poverty and land shortages. By 1963, the North Vietnamese communists had made significant progress in building an apparatus in South Vietnam. Nevertheless, in 1964 Hanoi decided that the Viet Cong (VC) cadres and their supporters were not sufficient to take advantage of the political confusion following the overthrow of Diem in November 1963. Hanoi ordered regular troops of the North Vietnamese army (People's Army of Vietnam--PAVN) into South Vietnam, first as "fillers" in VC units, then in regular formations. The first regimental units were dispatched in the fall of 1964. By 1968, PAVN forces were bearing the brunt of combat on the communist side. US Assistance In December 1961, President Diem requested assistance from the United States. President Kennedy sent US military advisers to South Vietnam to help the government deal with aggression from the North. In March 1965, President Johnson sent Marine units to the Danang area to defend US installations. In July 1965, he decided to commit up to 125,000 US combat troops to Vietnam. By the spring of 1969, the United States had reached its greatest troop strength--543,000--in Vietnam. The US bombing of North Vietnam, which began in March 1965, was partially halted in 1968. US and North Vietnamese negotiators met in Paris on May 15, 1968, to discuss terms for a complete halt and to arrange for a conference of all "interested parties" in the Vietnam war, including the Government of the Republic of Vietnam (GVN) and the National Liberation Front. President Johnson ordered all bombing of the North stopped effective November 1, 1968, and the four parties met for their first plenary session on January 25, 1969. The Paris meetings, which began with so much hope, moved slowly. Beginning in June 1969, the United States began a troop withdrawal program concurrent with the assumption by GVN armed forces of a larger role in the defense of their country. While the United States withdrew from ground combat by 1971, it still provided air and sea support to the South Vietnamese until the signing of the cease-fire agreements. The peace agreement was concluded on January 27, 1973. After the 1973 Peace Agreement While Hanoi continued to proclaim its support of the peace agreement, it illegally sent thousands of tons of materiel into South Vietnam, including sophisticated offensive weaponry new to the South. Tens of thousands of PAVN troops infiltrated South Vietnam to join the 160,000 there at the time of the cease-fire. Numerous attacks were carried out against installations, lines of communication, economic facilities, and, occasionally, population centers. At the beginning of 1975, the North Vietnamese began a major offensive in the South that succeeded in breaking through the central highlands defenses. After taking over provincial capitals in that area, a combination of forces from the demilitarized zone area and the highlands routed South Vietnamese defenders. Pressures from the highlands and from the Cambodian border region led to a general GVN military collapse, which in turn resulted in the fall of Saigon itself by the end of April. Faced with the threat of a takeover by a communist regime, tens of thousands of Vietnamese fled the country. The exodus of dissatisfied Vietnamese--both from the North and the South--continues today. Reunification For the first few months after the war, separate governments were maintained in the northern and southern parts of the country. However, in mid-November 1975, the decision to reunify the country was announced, despite the vast social and economic differences remaining between the two sections. Elections were held in April 1976 for the National Assembly, which was convened the following June. The assembly ratified the reunification of the country and on July 2 renamed it the Socialist Republic of Vietnam (SRV). It also appointed a committee to draft a new constitution for the entire country. The party Central Committee approved the constitution in September 1980. New National Assembly elections were held in April 1981. The fourth congress of the Vietnam Worker's Party, held December 4-20, 1976, selected a new party leadership and established major national policies. It reelected Secretary General Le Duan who, in effect, had led the party since Ho Chi Minh's death in 1969. In addition, the fourth party congress changed the party's name to the Vietnamese Communist Party and enlarged the Politburo and the full Central Committee by about 60%. New members tended to be younger, with some technical and administrative expertise. A considerable percentage were southern cadre long involved in the war there. Despite the new faces, top positions went to established leaders, assuring continuity with the past. Similarly, the fifth party congress (1982) maintained continuity by reconfirming the top leadership, despite its age, while expanding the Central Committee to bring in new members who were younger and who had more economic experience. In 1986, the death of Secretary General Le Duan, as well as the alarm over the economy's downward spiral, set the stage for the watershed sixth party congress (December 1986). Spearheaded by Nguyen Van Linh, who was named the new party leader, the congress endorsed the need for sweeping economic reform and "renovation" of the party, as well as a policy of "openness" patterned, to a degree, on the policies being promoted in the USSR. While reaffirming Vietnam's alliance with the Soviet Union, the congress softened Hanoi's anti-Beijing posture and called for more attention to developing relations with non-communist nations. The balance of power in the leadership shifted to the "reformers," with the remaining "conservatives" arguing for a slower pace. The lingering influence of the conservatives, as well as bureaucratic malaise and severe economic problems, has adversely affected formulation and implementation of the reform policies. GOVERNMENT In Vietnam, governmental policy is largely the prerogative of the communist leadership, with policy being set by the Politburo and carried out by the Secretariat, the governmental organ which oversees day-to-day policy implementation. The most important political institution in Vietnam is the Vietnamese Communist Party (formerly the Vietnam Worker's Party) headed by Secretary General Nguyen Van Linh. Overlapping party and state positions continue to be held even though there has been some effort to discourage both that practice and direct party interference in government affairs. All but five party Politburo members concurrently hold high positions in the government. This is also the case at lower levels, where provincial, district, and village party officials dominate the administrative councils. The highest powers of the party are nominally vested in the National Assembly and the Central Committee elected by that congress. The large and unwieldly assembly is supposed to meet every five years, with 1,129 delegates in attendance at the last session in December 1986. The Central Committee membership represents less than 10% of the national congress and meets about twice a year. Many major policy directives are issued as Central Committee resolutions but are formulated by the all-powerful Politburo; many others emanate directly from the Politburo. The Secretariat oversees the implementation of these decisions. The most recent party congress (the sixth) was held in December 1986. It ushered in a major change in leadership, marking some political gains for reform-minded factions within the party. Nguyen Van Linh was named Secretary General, replacing Truong Chinh who had held the post briefly following Le Duan's death in July 1986. However, while the sixth party congress brought the retirement of aging conservative members Le Duc Tho, Pham Van Dong, and Truong Chinh (since deceased), it hardly represented a decisive victory for so-called reformers. Hard-line elements retained strong political as well as advisory positions within the party hierarchy. The most important powers within the Vietnamese government--as opposed to the Communist Party--are the executive agencies: the State Council and the Council of Ministers (most of whose members are also on the Communist Party Central Committee). The State Council, which was established by the constitution as a collective presidency, has as its current chairman Vo Chi Cong, who also functions as chief of state. According to the constitution, these bodies, as well as the heads of ministries and commissions, are elected by the National Assembly. Interim ministerial changes are made by the State Council, which is normally the highest organ of the state. The Council of Ministers is headed by a chairman (Do Muoi) and six vice chairmen, four of whom are members of the Politburo, as are the key ministers and commissioners--defense, foreign affairs, planning, and public security. The highest legislative organ is the National Assembly, members of which are to be elected according to the constitution every five years. The assembly meets twice yearly and theoretically exercises wide lawmaking and appointive authority. In practice, however, it has simply given formal approval to proposals of executive organs but in recent years has been given increasing latitude in questioning policies and formulating laws. The State Council is empowered to act for the assembly in instances when it is not in session. Local legislative bodies, called people's councils, are elected at provincial, district, and village levels and are under strict central control. The councils choose administrative committees that handle routine business on the local level and are ultimately responsible to the State Council. Their function is more executive than legislative. Principal Officials Secretary General of the Communist Party--Nguyen Van Linh Chairman, Council of Ministers--Do Muoi State Council Chairman--Vo Chi Cong National Assembly Chairman--Le Quang Dao Politburo (Full Members in Rank Order) Nguyen Van Linh Vo Chi Cong Do Muoi Vo Van Kiet Le Duc Anh Nguyen Duc Tam Nguyen Co Thach Dong Sy Nguyen Tran Xuan Bach Nguyen Thanh Binh Doan Khue Mai Chi Tho Dao Duy Tung ECONOMY Under the overly ambitious initial five-year plan and the more conservative 1981-85 plan, the Vietnamese have made little progress in raising output and living standards beyond the levels of the 1960s. Despite record harvests in 1982 and 1983, the largely agricultural, market-oriented southern economy has yet to recover from its near collapse or be integrated into the more industrialized--but stagnant--communist system of the north. Economic development plans have been hampered by endemic weaknesses and poor management. They also have been seriously disrupted by Vietnam's occupation of Cambodia, which led most non-communist industrial countries to halt aid to Vietnam and diverted Vietnamese resources and leadership attention from economic tasks at home. The government tried to deal with unemployment and urban-rural imbalance by pressing, and later forcing, relocation to "new economic zones" in the south. Many of the resettled individuals have drifted back to their former homes, and the unemployment problem has worsened as the economy has stagnated. After 1979, the government liberalized economic planning, relaxed controls on domestic and external trade, instituted production incentives for industry, trade, and agriculture, and slowed the pace of agricultural collectivization in the south. These incentives, plus good weather, have stimulated production, but inflation and shortages of raw materials and supplies, such as fertilizers, exacerbated by corruption and inefficiency, have kept living standards low. The third five-year plan (1981-85) called for attaining food self-sufficiency, strengthening export and consumer industries that support them, and improving transport and energy production. Targets for average annual increases in agriculture, industry, and national income during this period were based on continued aid from the Council for Mutual Economic Assistance (CEMA) countries as well as on adherence to liberalization and incentive policies. During the 1980-87 period, national income increased by an annual average of about 5.5%, industry grew by a little more than 8%, and agriculture experienced annual growth averaging approximately 4.2%. While this period was marked by a fair amount of progress, distortions of the Vietnamese economy's price structure had the effect of increasing the central government's budget deficit, which, by 1985, had contributed largely to a significant increase in inflationary pressure. The pressing need for the Vietnamese to adopt a reorientation toward their economic policy was addressed at the sixth party congress (1986) where strategies for substantial reforms in areas such as the exchange rate, foreign investment, and government revenue and expenditure were approved. The primary target of economic reform was the commodity sector whereby government rules and regulations were to be deemphasized in favor of marketplace forces. As a result, light industry, agriculture, and exports were seen as the most promising targets for investment for the last four years of the fourth five-year plan (1986-90), implying movement away from heavy industrial investment. In addition, the National Assembly in 1987 passed a more liberalized foreign investment law, the main features of which sought to improve the overall investment climate in hopes of fostering renewed foreign investment interest in Vietnam. As Vietnam enters the 1990s, party leaders have given top priority to addressing the questions surrounding the severe economic problems that plague the country. Perhaps the most important area in which Vietnam has made significant inroads is in attacking the problem of runaway inflation, which averaged almost 500% in 1986 and remained at around 300% through 1987. Progress in combating Vietnam's volatile inflation rate has moved at an unexpectedly rapid pace, with inflation falling from a monthly rate of 8% in the fourth quarter of 1988 to just under 4% in April 1989. Authorities, however, viewed this early success in reducing Vietnam's inflation with a certain degree of caution, since it reflected important seasonal factors. Still, the drastic reduction over the past few years indicates the importance that Vietnamese economic planners have placed on this area of economic reform. The apparent departure of Vietnamese occupation forces from Cambodia by the end of September 1989 has been widely interpreted as a gesture on the part of Vietnam to signal its desire to improve relations with the West, China, and its regional neighbors in hope of ending its diplomatic and economic isolation. In addition, the concept of doi moi (renovation), Vietnam's version of the USSR's perestroika, has as its aim the fostering of a domestic climate that will facilitate further reforms and enhance the likelihood of increased trade, as well as substantial economic links with capitalist countries. Vietnamese economic policy now places important emphasis on the development of greater domestic sources of, and self-sufficiency in, consumer goods, particularly in the area of food. Also, the structure of the Vietnamese economy is seen as moving more toward a greater orientation toward trade. However, while attempts to bring about much needed reforms have been instituted by the party, overall systemic economic reform has been limited by both Vietnam's communist ideology and a bureaucracy viewing reform as a threat to the status quo. Any substantial long-range policy aimed at the reform of Vietnam's economy will involve a great degree of political risk-taking on the part of the party hierarchy. Agriculture and Industry Output goals under the 1981-85 five-year plan and the hope for rapid development of an efficient, integrated economy remained unfulfilled. In particular, targets for national production gains averaging an annual 15%, and for self-sufficiency in food by 1980, failed miserably. From a rate of 9% in 1976, actual economic growth declined to 2% in 1978. Increases in agricultural procurement prices and private production have contributed to agricultural recovery since 1980. Despite efforts to facilitate development of unused land, however, shortages of fertilizer, insecticides, and farm equipment adversely affected yields, but good weather and incentives led to record harvests and Vietnamese claims of self-sufficiency in 1989. In efforts to increase agricultural output, Vietnam's 1981 constitution formally nationalized state farms, producer cooperatives, and private farms. Collectivization of agriculture in the south moved slowly during the early 1980s, and it was not until the end of 1985 that around 90% of the south's cultivated acreage had been formally collectivized. With the announcement in 1988 of Party Decree No. 10, new emphasis was put on the reestablishment of the family farm as the rural economy's basic unit. This marked a dramatic shift of priorities toward the agriculture sector by reducing the powers of the cooperatives. However, the perceived impact that a reorientation toward family farming might have on social stability, especially in overcrowded areas of the country, led Vietnamese leaders, by early 1989, to reverse their position on family farms and reinstate cooperatives as an essential element of Vietnam's agriculture development scheme. In practice, however, the southern part of Vietnam has maintained an orientation toward family farming to a greater degree than the north and center, which have leaned more toward the cadre-led system of collective agriculture. Vietnam is heavily dependent upon exports such as coffee, tea, and rubber (so-called hard crops) for the success of its future economic development. Rice exports are seen as an important factor contributing to Vietnam's future economic development, although the sustainability of the rice crop due to environmental factors remains an open question. Yet with the central government under pressure to meet supply obligations to its East European trade partners, exports of commodities from these sectors are sometimes inhibited by government-imposed price ceilings. While rice remains Vietnam's principal crop, efforts to expand the acreage of subsidiary crops have not been successful due in part to consumer resistance and disparities in the free-market price structure. Paralleling its efforts to increase agricultural output, Vietnam has sought to revitalize industrial production. With the exception of electric power (which has shown increases in efficiency and productivity due to Soviet aid), most branches of heavy industry--cement, phosphate, steel--have stagnated or declined. State-owned and operated enterprises making up the limited modern industrial sector are marked by low productivity and inefficiency, the result of a command-style economic system applied to an extremely underdeveloped country. Southern industry--largely textiles, food processing, and light manufacturing--operates well below capacity and depends on imported machinery, raw materials, and technology. While reforms advocated since the sixth party congress have done much to strengthen Vietnam's potential for future industrial competitiveness, the low quality of the current output of state sector enterprises guarantees, at least for the present, Vietnam's inability to become a world competitor in advanced manufactured goods. Trade and Balance of Payments Failing to achieve the declared agricultural and industrial goals, Vietnam continues to rely on economic assistance and imports. Vietnam initially tried to broaden its economic links but became increasingly dependent on the Soviet Union after the end of Chinese aid in 1978 and, following the occupation of Cambodia, of most non-communist assistance. Depleted foreign-exchange reserves, limited SRV capability to borrow on commercial terms, a low level of exports, and the economic isolation of Vietnam by the West due to the occupation of Cambodia have made Hanoi even more dependent on the Soviet Union and Eastern Europe. Vietnam's inability to increase exports substantially, or to cut imports without reducing its own output and income below acceptable levels, will probably ensure the need for concessional aid well into the 1990s. Vietnam's difficulties are compounded by a massive external debt. FOREIGN RELATIONS During the second Indochina war, North Vietnam balanced relations with its two major allies, the Soviet Union and China, and forged closer links to the communist parties of Cambodia and Laos, which had been formed in the early 1950s out of the Indochinese Communist Party. By 1975, with the end of the war and Beijing increasingly viewing Vietnam as a potential Soviet instrument to encircle China, Beijing began increasing its support for the Khmer Rouge and pushing Hanoi to side with China on Sino-Soviet disputes. In turn, Vietnam viewed the Khmer Rouge as an instrument by which China was seeking to outflank Vietnam on its southwest border. Thus, Hanoi attached a high priority to persuading China to distance itself from the Khmer Rouge and permit Vietnam to steer an independent course between the two communist giants. After the death of Mao Tse-tung and the arrest of the "Gang of Four" in China, Hanoi renewed its diplomatic efforts to persuade the Chinese leadership to distance itself from the Khmer Rouge. Only after those initiatives failed, as did similar efforts to persuade the Khmer Rouge to distance themselves from China, did Hanoi turn decisively to the Soviet Union. The Soviet strategy of "containing" China dovetailed perfectly with Vietnam's putative requirement to defend itself against its large neighbor with which it has shared a complex and often stormy relationship going back over 2,000 years. Shortly after the fall of Saigon and the capture of Phnom Penh by the communist Khmer Rouge in 1975, Vietnamese and Khmer Rouge troops clashed over disputed offshore islands in the Gulf of Thailand. Negotiations failed to resolve festering disputes along the land border and, in April 1977, Phnom Penh stepped up attacks on Vietnamese settlers and villages on both sides of the border, to which Hanoi responded with a mix of offers to negotiate and gradually escalated counterattacks. Although an erstwhile communist ally of Vietnam during the "anti-imperialist" struggle, the vicious attacks of Pol Pot's Khmer Rouge were a feckless attempt to regain territory lost to the more powerful Vietnamese in previous centuries. The Cambodians' attempt to regain lost territory and punish their traditional enemies extended to their western borders where Thai villagers suffered similar brutality. Breaking relations with Hanoi in December 1977, Phnom Penh protested Vietnam's forceful attempt to create an "Indochina federation." Hanoi responded with charges of "unprovoked" Cambodian attacks on Vietnamese territory. In December 1978, some 200,000 Vietnamese troops invaded Cambodia, installing a regime led by Heng Samrin in Phnom Penh in early 1979. Several Khmer groups, including forces loyal to the ousted Democratic Kampuchea regime, continue to resist the Vietnamese installed regime. A loosely organized resistance coalition formed in mid-1982 includes non-communist organizations led by Prince Norodom Sihanouk and former Prime Minister Son Sann--respectively, the coalition's president and prime minister--and the Khmer Rouge, under the nominal leadership of Khieu Samphan. Over the past 11 years, the United States has worked with the Association of South East Asian Nations (ASEAN) and other interested parties to achieve a comprehensive political settlement in Cambodia that provides for verification of the complete withdrawal of Vietnamese forces, prevention of a return to power of the Khmer Rouge, and genuine self-determination for the Cambodian people. These principles are incorporated in the declaration of the UN-sponsored July 1981 International Conference on Kampuchea and have been approved since by each UN General Assembly by overwhelming majorities. Vietnamese-Chinese relations, which deteriorated during the mid-1970s as Beijing's ties with the Khmer Rouge regime in Cambodia grew, took a precipitous turn for the worse following Hanoi's announcement in March 1978 of a ban on private trade which most affected Sino-Vietnamese. Charging that this policy deliberately "persecuted" ethnic Chinese, Beijing accused Vietnam of drawing closer to the Soviet Union against China and of harboring aggressive designs toward Cambodia. Hanoi responded with a counterclaim that Beijing had not only fomented the exodus of Sino-Vietnamese but also incited Khmer Rouge attacks on innocent Vietnamese civilians. After that, Beijing began incrementally cutting project aid to Vietnam in May 1978 and terminated all economic assistance in July 1978. Following Hanoi's December 1978 invasion of Cambodia, Chinese troops launched a month-long expedition in February across the Sino-Vietnamese border. Beijing declared that this was "punishment" for Vietnamese provocations along the border, but it was actually in large part retaliation for Vietnam's overthrow of China's ally in Cambodia. In fact, the Vietnamese forces acquitted themselves very well; it is doubtful that Hanoi "learned its lesson." As relations with China worsened, Vietnam looked increasingly to the Soviet Union for support. A treaty signed in November 1978 provided a basis for increased military aid, which was expanded after the Vietnamese occupation of Cambodia and the Chinese incursion in 1979. The Soviet Union and other CEMA countries (Vietnam joined in June 1978) provide most of Vietnam's aid and trade; Soviet economic and military aid is estimated at more than $3 billion per year. Since the sixth party congress in December 1986, Vietnam has attempted to open and run its economy in a more rational and less political manner and adjust its international relations to reflect the evolving international economic and political situation in Southeast Asia. Hanoi hopes to use the September 1989 withdrawal of its troops from Cambodia as leverage for improved relations with ASEAN, Japan, and the West. It has stepped up its efforts to attract foreign capital from the West and regularize relations with the world financial system. US-VIETNAM RELATIONS The United States does not have diplomatic relations with Vietnam. In the late l970s, the Carter administration considered normalizing relations with Hanoi. Bilateral discussions began, but the effort was short-circuited first by Vietnam's demand for reparations, then by the December 1978 Vietnamese invasion of Cambodia. It has been US policy since the early 1980s that normalization of relations with Vietnam can and should be considered only in connection with the Cambodian situation. Our position since then has been clear: normalization can occur only after a complete and verified withdrawal of Vietnamese troops from Cambodia in the context of an acceptable, comprehensive political settlement of the Cambodian conflict. The Vietnamese understand that the pace and scope of the development of a US-Vietnamese relationship will depend on their continued cooperation with us on the prisoner of war/missing in action(POW/MIA) issue and other humanitarian concerns. In spite of political constraints caused by the Cambodian conflict, the United States and Vietnam have developed and sustained an active relationship on a range of humanitarian issues, in particular on a matter which the Bush and Reagan administrations have deemed of the highest national priority--achieving the fullest accounting possible of Americans missing and unaccounted for in Indochina. The two countries have agreed to handle these issues as a separate, humanitarian agenda, without reference to political differences. Presidential special emissary Gen. John W. Vessey, Jr., visited Hanoi October 29-30, 1989, for the second time in little more than two years, where he held productive meetings with Vietnamese Deputy Prime Minister Nguyen Co Thach and other officials on POW/MIA accounting and other humanitarian issues. Agreement was reached with the Vietnamese to expand and strengthen cooperation on resolving the POW/MIA issue. They also discussed progress in the orderly departure program, the emigration of Amerasian children from Vietnam, and the resettlement of former "reeducation center" detainees. In addition, Gen. Vessey reviewed with the Vietnamese the efforts of American non-governmental organizations to assist the people of Vietnam with humanitarian aid, particularly in the areas of prosthetics and child health, in keeping with the commitment he made during his August 1987 visit that the United States would encourage and facilitate such efforts. Travel Advisory The Department of State advises that the United States does not maintain diplomatic or consular relations with Vietnam. No third country represents the interests of the United States in Vietnam. While US passports are valid for travel to Vietnam, the US Government is not in a position to accord normal consular protective services to US citizens in Vietnam and, therefore, discourages travel to Vietnam. Transactions Advisory Unless authorized by the US Treasury Department, transactions with Vietnam or its nationals are prohibited by the regulations that are administered by Treasury's Office of Foreign Assets Control. Specifically, Section 500.201(b)(1) prohibits all unlicensed transactions by persons subject to the jurisdiction of the United States involving property in which Vietnam or a national thereof has an interest of any kind. Persons subject to the jurisdiction of the United States include offshore corporations that are owned or controlled by US persons; associations and other entities organized in the United States; persons located in the United States; and US citizens and permanent residents, wherever located. Specific inquiries may be referred to: Office of Foreign Assets Control 1331 G Street, NW Washington, DC 20220 Tel: (202) 376-0392