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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: [phone]