URL: http://www.msnbc.msn.com/id/15674091/site/newsweek/
Vietnam: The South Has Finally Won
Hanoi's communists won the Vietnam War, but
southern-born reformers are leading an economic
boom as the country opens up to the world.
By Michael Hastings and George Wehrfritz
Newsweek International
Nov. 20, 2006 issue - Grainy black-and-white
photos show thin men riding bicycles along
streets devoid of cars. A prominent chart tracks
paltry monthly rice allotments to every category
of Vietnamese, even communist cadres. Assorted
ration cards and food stamps fill a display case
above the stilted caption queuing to rice was
always a suffering. These bits of recent
historypart of a new exhibit staged in Hanoi's
popular Museum of Ethnology through next
monthchronicle the painful decade after North
Vietnam's communist armies toppled the
U.S.-backed government in Saigon in 1975. An
introductory message describes the period as one
of "inappropriate socioeconomic management."
That's an understatement: from 1975 to 1986,
Vietnam's rulers oversaw a disastrous experiment
in Stalinist collectivization, herded thousands
of Southern capitalists into labor camps and
unleashed an exodus of boat people across the
region. The human suffering was immense.
The government calls the show "Hanoi Life Under
the Subsidy Economy, 1975-1986." But a sexier
title would be "How the South Won the War." The
Vietnamese capital portrayed in the exhibit bears
scant resemblance to the bustling present for one
simple reason: Hanoi is now playing by Saigon's
rules. Economic reforms pushed by Southern
entrepreneurs have fueled an economy that's grown
nearly as fast as China's over the last decade.
Manufacturing jobs are plentiful, and the
national poverty rate has plummeted from 57
percent in 1993 to about 18 percent today. Hanoi
now boasts the trappings of affluenceimported
cars, boutique coffee shops and stores brimming
with everything from Louis Vuitton handbags to
the newest Mercedes-Benzes. It's also home to
several high-ranking political leaders from the
South, including Prime Minister Nguyen Tan Dung
and President Nguyen Minh Triet, elevated to their posts earlier this year.
All of this will be on display when U.S.
President George W. Bush and other world leaders
arrive for this year's Asia-Pacific Economic
Cooperation summit in Hanoi this weekend. Hanoi
has cast the conclave as a coming-out partyand
it is. Timed to coincide with Vietnam's accession
to the World Trade Organization, the meeting will
showcase the emergence of what could become
Southeast Asia's most important industrial
economy in the coming decades, with the potential
to surpass Thailand. This year alone, Vietnam is
on track for $7 billion in foreign direct
investment, roughly the same as giant India.
"Overall, Vietnam is doing better than almost any
other less-developed country," says Harvard University economist David Dapice.
Hanoi credits the turnaround to policies known
simply as doi moi, or "renovations," launched
with great fanfare in 1986. In fact, local
leaders in Saigon, now known as Ho Chi Minh City,
began testing the new approach years earlier by
tapping an ethnic-Chinese business class that
Hanoi viewed as ideologically suspect. Those
officials later rose to national prominence, even
as local entrepreneurs helped build a globally
competitive, export-led economy funded mainly by
foreign investment. Foremost among the
forward-thinking southern leaders was Vo Van
Kiet, who became deputy premier in 1986 and
helped launch doi moi. He served as prime
minister in the 1990s. "The official history of
Vietnam's reforms doesn't include this first
chapter," says Pham Chanh Duong, a key
businessman from that era. "We gave [Hanoi] a
practical example for the reforms they enacted in
1986, but nobody dares talk about that."
The conquered South led the economic charge in
part because it had experience with colonial
markets and benefited from America's wartime
infrastructure of roads, highways, airbases and
ports. Over the past decade, though, the
North-South divide has narrowed. Hanoi has
improved its own roads, rails and ports to such
an extent that light manufacturing now flourishes
there and in nearby Haiphong. And the importance
of opening the economy, once pushed by
southerners, has become accepted wisdom in the
capital. "There are a lot of stereotypes about
the North and South having different points of
views," says Minh Vu, a senior economic adviser
to Prime Minister Dung, noting that the regional
divide no longer plays a great role in shaping policy.
Like China, Vietnam is governed by a collective
leadership. But having southerners certainly
helps keep up the momentum for reform. Dung, 56,
is Vietnam's youngest postwar prime minister. He
grew up in the impoverished southwest of the
country, joined the Army as a teen and served for
20 years. Prior to his new appointment, he ran
the country's central bank, and he's led
Vietnam's WTO negotiations. Before becoming
president, Triet, 63, was most recently Ho Chi
Minh City's Communist Party boss, where he led a
high-profile anti-corruption campaign. "Our
leadership is based on consensus building, and
there's a consensus [to reform]," says Vu.
That consensus has been decades in the making.
Duong, the Saigon businessman, was a small-time
trader before 1975. Then he was asked by city
officials to help manage a new company called
Cholimex (short for the Cholon Investment and
Import-Export Company) in Saigon's swampy Chinese
enclave. Remarkably for the period, the firm was
structured as a public-private joint venture in
which ethnic Chinese like Duong ran the business
and could buy shares using gold. Their mission
was to jump-start idle factories seized by the
government. "Local officials told us, 'We'll give
you the license. Find money yourself'," Duong recalls.
Cholimex pooled gold from more than 1,000
shareholders to procure and export rice and other
agricultural goods, then leveraged the proceeds
to import raw materials to make things like
fertilizer, detergent and MSG for sale
domestically. Soon they were brewing beer and
rolling cigarettes, too, shipping frozen shrimp
and catfish abroad and reinvesting the profits to
build a textile industry. Hanoi bought out
private shareholders and nationalized Cholimex in
1983, but in a nod to its good work, the company
was allowed to operate much as before.
One of the Saigon leaders who green-lighted
Cholimex was Vo Van Kiet. A Southerner and
communist war hero, he was instrumental in
opening the country to foreign investors ahead of
U.S. diplomatic recognition. As prime minister
from 1991 to 1997, he joined ASEAN and pushed
Vietnam further down the capitalist road. Much of
the outside investment he cultivated went into
light manufacturing clustered in
export-processing zones, which were essentially
an expansion of the export-import model pioneered by Cholimex.
Often compared to China, Vietnam is actually more
similar to Taiwan circa 1970, an economy then
burgeoning with small and medium enterprises
ready to burst onto the global scene. "Today
there are over 70 export processing zones in
Vietnam," says Albert Ting, who oversees the Tan
Thuan zone outside Saigon, where U.S. President
Bill Clinton made a speech during his historic
2000 visit. At that time, some 20,000 Vietnamese
worked in Tan Thuan's foreign-owned or
joint-venture factories. Today the tally is
55,000, and it could double again over the next
decade. In its latest report, the Vietnam
Consultative Group (comprising key international
development agencies) praises Vietnam for its
"unusually diverse business sector" and notes
that "roughly every other household runs a small business of some kind."
Vu, the prime minister's adviser, says that
political leaders have changed with the times,
too. "A lot of them been trained abroad," he
notes. The country's minister of Agriculture
spent time at Harvard, while the minister of
Education holds a German Ph. D. Vu, 42, studied
first in the Soviet Union and later at Princeton.
To the Hanoi native, the American war is a
distant childhood memory of "watching the
missiles fly across the sky, like a game."
Vu has worked closely with Dung for seven years.
He says that in 2001, when negotiations for a
bilateral trade agreement with the United States
reached a deadlock over banking services, Dung
gave his delegation authority to make concessions
at a "critical moment," paving the way for a
deal. "The Americans remember him for his role in
that," says Vu. Over the past two years, the
government has changed more than 50 laws to
comply with WTO rules. More recently, Dung and
the leadership have even invited businessmen to join the Communist Party.
The struggle to develop Vietnam is far from over,
of course. Both North and South face the same
challenges, including rationalizing hundreds of
money-losing state factories, fixing the
country's outdated banking system, stemming
corruption and improving rule of law. And even
those fixes won't matter much unless industry
advances up the value chain. According to Ben
Wilkinson, head of Harvard's Fulbright program in
Vietnam, the country needs to work on what
economists call "backward linkages"meaning local
companies must start tapping the expertise of
foreign firms to produce their own high-tech
parts and develop a class of skilled managers.
Leaders like Dung are more open to economic than
political reform, too. Still, there's a reason
Vietnamese are so optimistic. Anyone in their
teens is too young to recall ration books,
collectivized farms or other aspects of the
postwar crisis. For them, the formative
experience will be their country's entry into the
WTO and the vibrancy of a new Asian tiger
beginning to roar. For now the South's commercial values are winning the peace.
© 2006 Newsweek, Inc.
