Vietnam’s Economy Needs Reoriented Foreign Policy

After the Vietnam War ended in 1975, the country’s Communist Party embraced a Soviet-style economic model. By the mid-1980s, the country’s elites could not help but compare results of Soviet and Chinese economic models and undertook Chinese-style reforms to enjoy globalization’s benefits. The surge of foreign investment capital since has led to reckless credit expansion and inflation. Businesses struggle with debt, state-owned firms are bloated and farmers are distraught about land loss and rapid development. “Confidence in the party's economic management has been severely shaken,” writes retired US diplomat David Brown. Many blame the Communist Party, which holds a monopoly on power and nurtures a close relationship with China. The history of the two nations is marked by alliances and conflict, most recently clashes over maritime claims in the South China Sea. Both single-party governments thrive on nationalism and internal security. Critics in Vietnam use the imbalanced relationship with China as a wedge issue to insist on reforms from their own government. – YaleGlobal

Vietnam’s Economy Needs Reoriented Foreign Policy

Vietnam’s leaders try to hedge with China; dissidents call it kowtowing
David Brown
Wednesday, February 20, 2013

HANOI: The Vietnamese Communist Party, once credited for opening the country and joining the global economy, is in crisis. Its factional conflict, economic mismanagement and inattention to quality-of-life issues have eroded its claim to be "the force leading the State and society." With the country’s earlier blazing growth slowing to around 5 percent, the public mood is bitter, openly and unprecedentedly critical. Holding a virtual monopoly over political life, the Communist Party is alone in sharing the blame for globalization gone awry.

In a scenario repeated in many countries joining the fast-moving globalized economy, Vietnam’s  economic crisis was heralded by a surge of foreign investment capital that – unsterilized, or offset by central bank action to reduce the money supply –led to reckless expansion of credit followed by a severe bout of inflation. Inevitably, the government was forced to retrench early in 2011. With loans now difficult to obtain, businesses are hard-pressed to collect from clients or pay interest on what they owe. Aspirant members of the middle class have seen their savings wiped out by speculative investments gone wrong. State-owned companies are bloated, bankrupt and heavily indebted to state-owned banks. Land clearance for commercial development has been managed so ruthlessly that farmers, long a bulwark of the regime, are turning mutinous. Confidence in the party's economic management has been severely shaken.

Nor does the party retain a revolutionary aura. It is nearly six decades since the last French soldiers left a divided Vietnam and four decades since American forces exited the civil war that brought Vietnam's southern half under Hanoi's sway. Few of the nation's 90 million citizens remember those wars or care much that independence and unification was achieved under party leadership. No amount of harking back to the virtues of Ho Chi Minh and his comrades can restore the party's elan nor, it seems, root out systemic corruption.

Older Vietnamese often point out that things used to be much worse. They tend to credit the party with recognizing the failure of Soviet-style “socialism” and instituting the "doi moi" – or renewal – reforms that liberated latent capitalist energies and in the course of a quarter-century quadrupled living standards. Conditioned by argument that only the party's firm leadership can fend off "chaos, instability, economic disintegration and the worst crisis the nation has ever seen," most simply hope that the regime will find its footing again.

The median age in Vietnam is 28. Well over half of Vietnam's population has no experience of the pre–doi moi past. They have savored the joys of consumerism made possible by globalization. Near universal access to cell phones and the internet has freed minds. Acceptance of the political status quo is conditioned on delivery of a higher standard of living – not just material goods but also quality education, medical care and efforts to clean up the environment. Younger Vietnamese not only loathe corrupt cops, venal officials and mindless propaganda; many also can imagine a world without them.

By directing a browser to an offshore server, a citizen can tap into reassurance that such disenchantment is shared by thousands of Vietnamese bloggers and the many thousands more that post criticisms of the regime on Facebook.

It's harder to read the thoughts of party members, nearly 4 percent of the population. As a rule, they don't post comments online unless they’re one of the 900 polemicists employed by the party's propaganda commission to counter "the distorted allegations of enemy forces." It’s evident, however, that a struggle is underway for the party’s soul. This is not a contest linked to rival leaders Prime Minister Nguyen Tan Dung and President Truong Tan Sang, whose semi-public scrap last year over spoils and patronage obscured the larger issue: What ought the party do to defend its monopoly of political power?

The existential question is whether, once again, the party can repair itself. In 1986, reformers managed to reverse a disastrous decade-long effort to "build socialism," Soviet-style. Now, say reformers, the economic and social forces liberated a quarter-century ago require the party to cleanse its ranks, adapt its leadership style and articulate a compelling vision. Not buying that argument, conservatives are dead set against “openness,” regarded as a code word for experiments with pluralism. They oppose dismantling state monopolies in the heavy industry sector or pruning powers of the Public Security Ministry, in effect rejecting what globalization dictates. They point to the example of Mikhail Gorbachev, the general secretary of the Communist Party who oversaw the dissolution of the Soviet Union, and East European regimes swept away by "color revolutions." Admitting any mistakes, they're apt to argue, puts the party on slippery slope; if the party's swept away, the elites could lose their pensions.

The pragmatic question is whether the party can lessen its dependence on two bulwarks of the regime that have become major liabilities: The first is the Chinese Communist Party, and the second is the state's own internal security apparatus.

Vietnam and China are linked by a web of party-to-party relationships, assiduously tended by the regime. These reflect the two regimes’ ideological affinity and have, for Vietnam, served as a hedging strategy to stabilize relations with its giant neighbor. Hedging goes so far, however: In recent years, Beijing's unrelenting pursuit of its dubious claim to sovereignty over the South China Sea has frayed the Sino-Vietnamese fraternal solidarity.

Well aware that Vietnam's naval and air power is no match for China's, and that the country is highly vulnerable to economic reprisal, the regime has dodged direct confrontation. To the regime's critics, reliance on diplomacy in the face of Chinese aggression is an intolerably limp-wristed posture. Dissidents paint what others might regard as prudent hedging as kowtowing to Beijing. They also fault, for example, Hanoi's grant of concessions to mine bauxite in environmentally sensitive border regions, its reliance on Chinese credits, and its failure to counter Chinese harassment of Vietnamese fishermen.  Many express alarm that Hanoi relies on Chinese credits and contractors to build infrastructure, allows low-quality Chinese goods to flood across the border and posts a huge bilateral trade deficit with China – $12.5 billion in 2012.

Party-to-party ties are reinforced by intimate exchanges between the Chinese and Vietnamese internal security agencies. Though it's hardly surprising that the police share experience and surveillance technologies, this cooperation provides Vietnamese dissidents a ready explanation of why Hanoi won't "stand up to China" and why it stops them from marching on the Chinese Embassy every Sunday. 

Of greater concern, particularly for the party’s reform wing, is the ability of the Ministry of Public Security to define threats to the regime and methods for dealing with them. This is not just a matter of surveillance, harassment and random prosecution of bloggers and other malcontents – but also manifests itself in rejection of proposals to narrow the definition of subversive behavior in the Constitution and criminal code, definitions now so broad as to eviscerate constitutional guarantees of basic human rights.

Coincidentally, a constitutional revision process is underway, something the regime does every decade or so. This time Vietnam's public debate is far less choreographed. Remarkably, there's a groundswell of support for deleting the passage that accords the party a supra-constitutional leadership role. An unusually large number of retired party members and "revolutionary intellectuals" have signed on to the idea.

That sort of political opening won't happen now, but the current ferment suggests that its time may yet come.


David Brown is a retired American diplomat who writes on contemporary Vietnam. He may be reached at
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