Background Notes: Vietnam, October 1998 
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State

Official Name: Socialist Republic of Vietnam



Area: 329,560 sq. km. (127,243 sq. mi.); larger than Virginia, 
North Carolina, and South Carolina combined.
Cities (1994): Capital--Hanoi (3.5 million); Other cities--Ho Chi 
Minh City (formerly Saigon) (5 million); Haiphong (1.5 million).
Terrain: Varies from mountainous to coastal delta.
Climate: tropical monsoon.


Nationality: Noun and adjective--Vietnamese (sing. and pl.).
Population (1997): 77 million.
Annual growth rate (1997): 1.9%.
Ethnic groups: Vietnamese (85-90%), Chinese, Hmong, Thai, Khmer, 
Cham, mountain groups.
Religions: Buddhism, Hoa Hao, Cao Dai, Christian (Predominantly 
Roman Catholic, some Protestant), animism, Islam.
Languages: Vietnamese, English (increasingly favored as a second 
language), some French, Chinese and Khmer, mountain area 
Literacy: 88%.
Health: Birth rate--28/1000. Infant mortality rate--36/1000. Life 
expectancy--63 yrs. male, 67 yrs. female. Death rate--7.92/1000.


Type: Communist people's republic.
Independence: September 2, 1945.
Reunification: July 2, 1976.
New Constitution: April 1992.
Branches: Executive--President (Head of State and chair of 
National Defense and Security Council) and Prime Minister (heads 
cabinet of ministries and commissions); "People's Committees" 
govern in local jurisdictions. Legislative--National Assembly; 
locally, People's Councils. Judicial--Supreme People's Court.
Administrative subdivisions: 61 provinces, 3 municipalities under 
central government control, one special zone; urban quarters and 
rural districts; and urban precincts and rural communes.
Political party: Vietnamese Communist Party, formerly (1951-76) 
Vietnam Worker's Party, itself the successor of the Indochinese 
Communist Party founded in 1930.
Suffrage: Universal over 18.


GDP: $25.6 billion (1997).
Real growth rate: 8.8% (est. 1997). Projected rate for 1998: 4-
Per capita income: $320 (1997).
Inflation rate: 3.6% (1997).
External debt: 31.4 % of GDP (1994-96).
Natural resources: Phosphates, coal, manganese, bauxite, 
chromate, offshore oil deposits, forests, rubber, marine 
Agriculture and forestry (25.7% of GDP -- 1997): Products--rice, 
rubber, fruit, vegetables, corn, manioc, cashews, sugar cane, 
coffee, fish. Cultivated land--less than 7 million hectares per 
year. Land use--21% arable; 28% forest and woodland; 51% other.
Industry and construction (31.7% of GDP -- 1997): Food 
processing, textiles, cement, chemical fertilizers, steel, 
electric power.
Services (42.6% of GDP -- 1997): Trade, restaurants, transport, 
postal and telecommunications.
Trade (1997): Exports--$8.8 billion: crude oil, textiles, marine 
products, rice (second-largest exporter in world) and coal. Major 
partners--Japan (26%), Singapore, Germany, Australia and China. 
Imports--$11.2 billion: petroleum, steel products, transport-
related equipment, chemicals, fertilizers, medicines, raw cotton. 
Major partners--Singapore (14%), Japan, South Korea, France and 
Taiwan. Exports to U.S.--$388 million; imports from U.S.--$287 
million (1997).


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 millennium of Chinese 
occupation. Although Vietnamese culture was strongly influenced 
by traditional Chinese civilization, the struggle for political 
independence from China instilled 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 grouping of Central Highland peoples, 
commonly termed 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), Hmong, and Thai, in the 

The government administers virtually all educational facilities. 
Literacy is high among the general population and most Vietnamese 
have at least a primary school education. However, government 
efforts to upgrade school facilities and improve the educational 
infrastructure have been hampered by Vietnam's high birth rate 
and continuing economic problems. The number of parochial and 
private schools has grown as the Vietnamese education system has 
deteriorated. Educational emphasis is on applied sciences and 
vocational training. In the 1980s, over 200,000 Vietnamese were 
sent to the Soviet Union and East European countries in a 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. A large number of temporary workers live in 
Germany and other former East Bloc countries. Growing numbers of 
Vietnamese students are now traveling to Western Europe, 
Australia and the United States to study.


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 

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 

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 8-year war and of 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 U.S. 
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" program. 
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.

U.S. Assistance

In December 1961, President Diem requested assistance from the 
United States. President Kennedy sent U.S. 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 U.S. installations. In July 1965, he 
decided to commit up to 125,000 U.S. combat troops to Vietnam. By 
the spring of 1969, the United States had reached its greatest 
troop strength--543,000--in Vietnam.

The U.S. bombing of North Vietnam, which began in March 1965, was 
partially halted in 1968. U.S. 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 

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.


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 voted to enlarge the 
Politburo and the full Central Committee by about 60%. While many 
of the new members were young and had technical and 
administrative expertise, top positions went to established 
leaders from the north, assuring connection 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 had more economic experience.

In 1986, the death of Secretary General Le Duan, as well as 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 U.S.S.R. 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. Economic reforms were deepened in 1989 and a 
stabilization campaign to control rampant inflation was 

As communism came under attack in Eastern Europe, the former 
Soviet Union, and China in the late 1980s, Vietnam tightened 
domestic political controls, cracking down on political 
dissidents before the seventh party congress in June 1991. The 
congress itself introduced significant leadership changes while 
avoiding specifics on the details of economic reform or swinging 
power significantly to the side of either advocates of economic 
and political liberalization or to orthodox communists. However, 
given a certain amount of stress over the collapse of Vietnam's 
communist allies, senior figures in the security apparatus gained 
representation. Seven members of the 12 man ruling Politburo, 
including Secretary General Nguyen Van Linh, were dropped from 
their posts. (Linh was replaced by Do Muoi, the Prime Minister, 
whose old position was given to Vo Van Kiet, a liberal 
southerner.)  Limited political reform appeared on the agenda but 
did not threaten the political primacy of the Communist Party in 
Vietnamese society. However, plans for internal democratization 
of the Party were agreed upon. On economic issues, the congress 
was vague, instead focusing on questions of party ideology in the 
face of the collapse of Communism in Eastern Europe. The removal 
of Foreign Minister Nguyen Co Thach, who had opposed closer ties 
with China, signaled Vietnam's willingness to improve relations 
with its northern neighbor.

A new constitution was approved in April 1992, reaffirming the 
role of the Communist Party as the leading force of state and 
society but also promulgating government reorganization and 
increased economic freedom. At the midterm Party conference in 
January 1994, four new members were appointed to the Politburo, 
tipping the balance of political power toward those who favored 
more rapid and thoroughgoing economic reform. In late 1997, a new 
President, Prime Minister and party General Secretary were named. 
There were changes in the Politburo as well. While the leadership 
says it is committed to reform, the pace of that reform continues 
to be debated. In the 1990s, though Vietnam remains a one party 
state, adherence to ideological orthodoxy has become less 
important than economic development as a national priority.


A new constitution, approved in April 1992, introduced a major 
restructuring of the government while reaffirming the role of the 
Communist Party of Vietnam as the leading force of State and 

The new constitution states that the Party should operate within 
the framework of the constitution and the laws of the country and 
that it should no longer be allowed to direct the day-to-day 
operation of the government. The National Assembly, which was 
granted an increase in its power and independence, is designated 
as the highest representative body of the people and the only 
body with legislative powers. The constitution promulgates an 
expansion of the body's oversight powers as well as an extension 
of choice in the balloting process for elections to the National 
Assembly, which for the first time permitted non-party members to 
be elected in 1992. The collective Council of State, which had 
served as the parliament's standing committee and whose chairman 
acted as ceremonial head of state, was abolished. It was replaced 
by an office of the President with real administrative powers, 
authority over the armed forces and the power to recommend the 
dismissal of government officials (subject to the approval of the 
National Assembly). The revised constitution also replaced the 
cumbersome Council of Ministers with a cabinet headed by the 
Prime Minister.

In Vietnam, governmental policy is largely the prerogative of the 
communist leadership, with policy being set by the Politburo and 
carried out by the five-man Standing Board, the party 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 Le Kha Phieu. The large and unwieldy Party Congress, 
which is supposed to gather every 5 years, last met in 1996. The 
Central Committee membership, which is elected from this group, 
represents less than 10% of the national congress and meets about 
twice a year. The Party's influence appears to be diminishing 
throughout Vietnam as the rate of new membership has decreased 
since the 1980s.

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 Standing 
Board oversees the implementation of these decisions. 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. Many of the 19 party 
Politburo members concurrently hold high positions in the 
government and 85% of the deputies in the National Assembly are 
Party members. This is also the case at lower levels, where 
provincial, district, and village party officials dominate the 
administrative councils.

The most important powers within the Vietnamese Government--as 
opposed to the Communist Party--are the executive agencies: the 
offices of the President and the Prime Minister (most of whose 
members are also on the Communist Party Central Committee). The 
Vietnamese president, Tran Duc Luong, functions as head of state 
but also serves as commander of the armed forces and chairman of 
the Council on National Defense and Security. According to the 
constitution, these bodies, as well as the heads of ministries 
and commissions, are elected by the National Assembly. The Prime 
Minister of Vietnam is Phan Van Khai who heads a cabinet composed 
of five Deputy Prime Ministers as well as the directors of the 
country's 31 ministries and commissions. Three members of the 
Prime Minister's cabinet are concurrently members of the 

The highest legislative organ of the government is the National 
Assembly, members of which are elected, according to the 
constitution, every 5 years. The chairman of the National 
Assembly is Nong Duc Manh, the first member of an ethnic minority 
to hold this post and the first to simultaneously command a 
position in the Vietnamese Politburo. The assembly meets twice 
yearly and theoretically exercises wide lawmaking and appointive 
authority. In the past, it has simply given formal approval to 
proposals from the executive organs. The constitutional 
amendments of 1992 strengthened the legislative and oversight 
authority of the National Assembly, granting it authority over 
defense and security policy, as well as financial matters. The 
Assembly's Standing Committee and permanent committees were also 
granted new powers. Local legislative bodies, called people's 
councils, are elected at provincial, district, and village 
levels. The councils choose administrative committees that handle 
routine business on the local level and are ultimately 
responsible to the office of the Prime Minister. Their function 
is more executive than legislative. The National Assembly has 
exercised greater authority in the past 2 years.

Principal Government Officials

Secretary General of the Communist Party--Le Kha Phieu
Prime Minister--Phan Van Khai
President--Tran Duc Luong
National Assembly Chairman--Nong Duc Manh
Ambassador to the United States--Le Van Bang
Ambassador to the United Nations--Ngo Quang Xuan

(elected in 1991 with 1994 additions -- full members in rank 

Le Kha Phieu
Tran Duc Luong
Phan Van Khai
Nong Duc Manh
Pham The Duyet
Doan Khue
Nguyen Manh Cam
Nguyen Duc Binh
Nguyen Van An
Pham Van Tra
Nguyen Thi Xuon My
Truong Tan Sang
Le Xuan Tung
Le Minh Huong
Nguyen Tan Dung
Pham Thanh Ngan
Nguyen Minh Triet
Phan Dien
Nguyen Phu Trong

Vietnam maintains an embassy in the U.S. at 1233 20th Street NW, 
#400, Washington, DC (tel. 202-861-0737; fax 202-861-0917).


The period after reunification from 1975 to 1985 was marked by 
economic stagnation; the Vietnamese made little progress in 
raising output and living standards beyond the levels of the 
1960s. Development was hampered by the centrally planned economic 
model applied by Vietnam's communist government, poor economic 
management and endemic weaknesses. The economy also was 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.

Distortions in the Vietnamese economy resulted in the onset of an 
economic crisis by the mid-1980s. With inflation running at 700% 
in 1986, Vietnam recognized the pressing need to reorient its 
economic policy. That year, the sixth party congress approved 
strategies for substantial reforms in areas such as the exchange 
rate, foreign investment, and government budget management. This 
marked the beginning of a major economic reform effort, which the 
Vietnamese refer to as "doi moi" or renovation. Major reforms 
undertaken during the decade 1986-96 included: decollectivization 
of agriculture; land reform that created greater security of land 
tenure; a reorientation of investment away from heavy industry to 
agriculture, light industry and exports; price reforms, including 
elimination of virtually all administered prices; liberalization 
of foreign trade and foreign investment; interest rate 
liberalization; exchange rate unification; and progress toward 
establishment of a legal framework for the encouragement of 
private-sector led growth.

During much of this period, party leaders and government 
officials gave top priority to implementing reforms addressing 
the severe economic problems that plagued the country with 
impressive results. Vietnam became one of the fastest growing 
economies in the world, averaging around 8% annual GDP growth 
from 1990 to 1997. Vietnam's inflation rate, which stood at an 
annual rate of over 300% in 1987, fell steeply; in 1997, 
inflation was less than 4%. During this same period, there was a 
three-fold increase in investment and a five-fold increase in 
domestic savings. Agriculture production doubled, transforming 
Vietnam from a net food importer to the world's second largest 
exporter of rice. Economic reforms also resulted in a dramatic 
increase in foreign trade, which now represents about 80% of GDP, 
and foreign direct investment inflows, equivalent to 8% of GDP in 
1997. Progress that has been made away from a centrally planned 
economy towards a more market-oriented economic model has 
resulted in an improvement in the quality of life for many 
Vietnamese. Per capita income, which was $220 in 1994, rose to 
$320 by 1997 with a related reduction in the share of the 
population living in acute poverty.

With the departure of Vietnamese occupation forces from Cambodia 
by the end of September 1989, Vietnam's relations with the West, 
China and its regional neighbors improved. Bilateral and 
multilateral aid to Vietnam resumed in 1993 when the Clinton 
administration rescinded its ban on international financial 
institution lending to the country. Donors pledged $2.4 billion 
in assistance to Vietnam in 1997.

The striking economic progress that, to date, has marked the 
1990s is not expected to continue in the remaining years of the 
decade. Vietnam is facing twin challenges from the East Asian 
economic crisis and a loss in the momentum of growth as the 
impact of the first generations of reforms is fading. Structural 
reforms has slowed during the past 2 years, and investors have 
expressed increasing concern about reversal of policy reforms and 
the lack of transparency. Among the serious structural problems 
that the Vietnamese government must address immediately are its 
perennially high current account deficit, a relatively high level 
of external indebtedness at 23% of GDP in 1997, and rising levels 
of non-performing loans in the banking sector. In addition, 
Vietnam's national savings rate, at under 18% in 1997, is among 
the lowest in East Asia and must be raised to fund much needed 
public investment.

Continued pervasive government control of the economy and a non-
convertible currency protected Vietnam from the early impact of 
the East Asian crisis, but with the deepening of the regional 
recession, it is becoming increasingly obvious that the impact 
will be severe. In recent years, 60% of Vietnam's exports have 
gone to Asian countries and 70% of its foreign direct investment 
has come from the region. As a result, the economists anticipate 
that GDP growth will fall to 4-5% in 1998. Export growth and 
foreign direct investment inflows are also expected to fall this 
year. In the first nine months of 1998, exports rose by 4% as 
compared with 20-30% in previous years. During that same period, 
approvals for new foreign direct investment fell by more than 50% 
over the already depressed 1997 figures. These trends are 
expected to continue into the beginning of next century.

The international community has told Vietnamese leaders that the 
situation calls for a bold new round of structural economic 
reforms. While the Asian financial crisis has helped focus the 
new leadership on the importance of a continuing commitment to 
economic reform, the reforms implemented to date have not 
adequately addressed the core issues. These are privatization of 
state enterprises, financial sector reform, trade liberalization 
and adoption of a flexible exchange rate system. To date, 
however, the country's leadership has chosen to follow a less 
ambitious, slow-paced reform program.

Overall systemic economic reform has been limited by both 
Vietnam's communist ideology and a bureaucracy which views reform 
as a threat to the status quo. Economic reforms have stalled in 
some parts of the country because powerful political and 
bureaucratic interests feel their access to government largess 
threatened, and because the state fears losing its support should 
it proceed all the way with liberalization. On the other hand, 
the fact that Vietnam's state sector is smaller than that in many 
other socialist economies in transition could help make reform 
comparatively less difficult.

Should economic growth, exports and foreign investment inflows 
decrease as expected, the country will have to tackle a rising 
unemployment problem or suffer social unrest. Layoffs in the 
state sector and foreign-invested enterprises together with the 
lasting effects of an earlier military de-mobilization have 
exacerbated an already serious unemployment problem. Official 
unemployment increased from 3.4% in 1989 to 7% in 1998 though 
unofficially it is believed that 20% or more of the workforce may 
be unemployed or underemployed. (These statistics are even higher 
in urban areas.)  Any substantial long-range policy aimed at the 
reform of Vietnam's economy will necessarily involve a great 
degree of political risk-taking on the part of the country's 

Agriculture and Industry

Increases in agricultural procurement prices and private 
production have contributed to agricultural recovery since 1980. 
Despite shortages of fertilizer, insecticides, and farm 
equipment, good weather and incentives led to record harvests and 
Vietnamese claims of self-sufficiency in 1989. Land reform and 
the decollectivization of agriculture produced further 
improvements in agricultural productivity in the 1990s, and the 
country became the second-largest exporter of rice in the world. 
However, Vietnamese agriculture is close to the limit of its 
ability to feed Vietnam's population which is growing at 1.8% a 
year. Vietnam often has to suspend rice exports due to domestic 
shortages caused by smuggling, severe weather conditions such as 
floods and droughts, and concerns about food security.

Vietnam is heavily dependent on exports such as rice, coffee, 
tea, cashews and rubber for its future economic development. 
Earnings from rice and other agricultural exports are seen as an 
important factor in funding Vietnamese industrialization, 
although the sustainability of rice production remains an open 
question due to environmental factors and population growth. 
Nonetheless, agriculture's share of economic output has declined, 
falling as a share of GDP from 42% in 1989 to 26% in 1997, as 
production in other sectors of the economy rises.

Paralleling its efforts to increase agricultural output, Vietnam 
has sought with some success to revitalize industrial production. 
Industry contributed nearly  32% of GDP in 1997. However, most 
branches of heavy industry -- cement, phosphate, steel, etc. -- 
have stagnated or declined. State-owned enterprises which 
comprise most of the limited modern industrial sector are marked 
by low productivity and inefficiency, the result of a command-
style economic system applied in an underdeveloped country. 
Southern industry -- largely composed of textiles, food 
processing and light manufacturing -- is somewhat more efficient. 
Of late, Vietnam has achieved some success in increasing exports 
of some labor-intensive manufactures, and the export structure 
has become more oriented toward light industrial products. 
Subsidies have been cut to some inefficient state enterprises. 
The government has also repeatedly stated its intent to privatize 
-- or "equitize" as it is known locally -- state enterprises, 
although few enterprises have been privatized to date. These 
reforms have not been sufficient to significantly increase 
Vietnam's industrial competitiveness. For the time being, the low 
quality of the current output of state enterprises will continue 
to prevent Vietnam from becoming a world competitor in advanced 
manufactured goods.

Trade and Balance of Payments

From the late 1970s until the 1990s, Vietnam was heavily 
dependent on the Soviet Union and its allies for trade and 
economic assistance. To compensate for drastic cuts in Soviet-
block support after 1989, Vietnam liberalized trade, devalued its 
exchange rate to increase exports, and embarked on a policy of 
regional and international economic re-integration. As Vietnam's 
integration into the global community progress, bilateral and 
multilateral aid to the country resumed.

As a result of these reforms, exports expanded significantly, 
growing by 20-30% per year. By 1997, exports accounted for 35% of 
GDP. However, imports also rose during the same period leading to 
persistent trade and current account deficits. Despite strong 
export growth and considerable efforts to control import growth, 
Vietnam ran a $2.4 billion trade deficit in 1997. Prospects for 
Vietnamese exports and overall current account performance will 
improve once the country has completed discussions currently 
underway on accession to the World Trade Organization and for a 
Bilateral Trade Agreement with the United States, which must be 
completed and approved by Congress before Vietnam receives normal 
trading rights (formerly known as "most-favored nation" 

Foreign investment in Vietnam has ballooned in recent years. By 
the end of 1997, more than 2,200 investment licenses had been 
issued to foreign firms valued at $31.4 billion, with firms from 
East Asia predominating. As of December 1997, Singapore firms 
have received licenses to  invest $4.9 billion in Vietnam. Other 
important international sources of investment include Taiwan, 
Hong Kong, Japan and South Korea. The United States is the eighth 
largest source of foreign investment with licenses to invest over 
$1.1 billion in the country. Foreign direct investment inflows 
reached an all time high of $2.6 billion in 1997, more than 
covering the country's $2 billion current account deficit. 
However, structural economic problems and the Asian financial 
crisis have begun taking a toll, causing foreign investment 
license applications and approvals to fall dramatically and 
warning of potential future balance of payments problems.

The country's persistent current account deficit, its inability 
to cut imports without significantly reducing its own output and 
incomes, and declining foreign investment inflows will probably 
ensure the need for concessional assistance well into the next 
century if Vietnam is to avoid significant balance of payments 


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 itself 
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. 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, continued to resist the 
Vietnamese installed regime. A loosely organized resistance 
coalition formed in mid-1982 included 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 

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. Beijing terminated all economic assistance 
to Vietnam 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 to "punish" Vietnam 
for its 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. Through the 1980s, Vietnam received nearly $3 
billion dollars a year in economic and military aid from the 
Soviet Union and conducted most of its trade with the USSR and 
other Council for Mutual Economic Assistance (CEMA) countries.

In the 1980s, the United States worked closely with the 
Association of Southeast Asian Nations and other interested 
parties to achieve a comprehensive political settlement in 
Cambodia. By 1989 Vietnam had withdrawn most of its troops from 
the country facilitating the 1991 Paris Agreements, which led to 
a UN-governed ceasefire in Cambodia and preparation for free and 
fair nationwide elections in 1993. The accord also precipitated 
the normalization of diplomatic and economic relations between 
Vietnam and ASEAN as well as the countries of Western Europe and 
Northeast Asia. China reestablished full diplomatic ties with 
Vietnam in 1991.

Vietnam's reorientation of foreign policy actually preceded its 
1989 withdrawal from Cambodia. 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. Political 
relations have been oriented away from Eastern Europe and Russia 
to the West and the non-communist nations of Southeast Asia. 
Vietnam has stepped up its efforts to attract foreign capital 
from the West and regularize relations with the world financial 
system. In the 1990s, following the lifting of the American ban 
on multilateral loans to the country, Vietnam became a member of 
the World Bank, the International Monetary Fund and the Asian 
Development Bank. The country has expanded trade with its East 
Asian neighbors as well as with countries in Western Europe and 
North America. While agriculture and forestry products remain 
Vietnam's largest exports (36%, 1994), light industrial exports, 
such as textiles, are growing in importance (up from 14% in 1991 
to 19% in 1994). By 1994, Vietnam's top five trading partners 
were all Asian--Japan, Singapore, Hong Kong, South Korea and 
China. Vietnam became a member of ASEAN in July 1995. Vietnam 
joined APEC in November 1998.

However, border tensions still occasionally arise between Vietnam 
and its neighbors (especially China). Vietnam and China as well 
as the Philippines, Malaysia, Taiwan, Indonesia and Brunei each 
claim part or all of the Spratley Islands, an archipelago in a 
potentially oil-rich area of the South China Sea. Conflicting 
claims have produced over the years small-scale armed 
altercations in the area. China's assertion of control over the 
Spratleys and the entire South China Sea has elicited concern 
from Vietnam and its Southeast Asia neighbors.

Membership in International Organizations

Vietnam belongs to the 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), 
Colombo Plan, Economic and Social Commission for Asia and the 
Pacific, INTELSAT, Mekong Committee, Nonaligned Movement, Pacific 
Economic Cooperation Council; the Asia-Pacific Economic 
Cooperation (APEC) forum; observer status in the WTO. Vietnam 
obtained membership in the Association of Southeast Asian Nations 
in July 1995.


President Clinton announced the normalization of diplomatic 
relations with Vietnam on July 11, 1995. This followed the 
establishment of Liaison Offices in Hanoi and Washington, DC in 
January 1995 and the lifting of the U.S. trade embargo on Vietnam 
in February 1994. The Liaison Offices were upgraded to Embassies 
in August 1995. In 1997, the U.S. opened a Consulate General in 
Ho Chi Minh City, and Vietnam opened its own Consulate in San 
Francisco. Most recently, President Clinton granted a Jackson-
Vanik waiver to Vietnam in March 1998 which made certain U.S. 
trade and investment support programs available in Vietnam. The 
Jackson-Vanik waiver is also required along with Congressional 
approval of a bilateral trade agreement in order to grant Vietnam 
normal trading rights. This waiver must be renewed annually.

American companies have entered the Vietnamese market and the 
U.S. is now the 8th largest foreign investor in Vietnam with over 
$530 million committed in 34 projects as of June 1995.

The U.S. maintains ongoing full cooperation with Vietnam on the 
issue of  Americans missing from the war in Vietnam. It has been 
U.S. policy since the early 1980s that normalization of relations 
with Vietnam be based on continued cooperation on the prisoner of 
war/missing in action (POW/MIA) issue and other humanitarian 

In the 1980s, despite the constraints posed by the Cambodian 
situation, the United States and Vietnam developed and sustained 
an active relationship on a range of humanitarian issues, in 
particular on a matter which the United States deemed of the 
highest national priority--achieving the fullest possible 
accounting of Americans missing and unaccounted for in Indochina. 
The two countries agreed to handle these issues as a separate, 
humanitarian agenda, without reference to political differences.

From 1987 through 1990, Gen. John Vessey, Jr., the President's 
special emissary to Vietnam, proposed an initiative which sparked 
increased repatriations; over this four-year period 122 remains 
were identified. The removal of Vietnamese troops from Cambodia 
in 1989 lead to an improvement in U.S.-Vietnamese relations. In 
June 1993, progress in repatriating the remains of American 
servicemen increased and an office was established in Ho Chi Minh 
City to facilitate better accounting operations in the south. A 
month later, the U.S. dropped its objection to bilateral and 
multilateral lending to Vietnam. In 1994, based on significant 
cooperation on the part of the Vietnamese on POW/MIA issues, 
President Clinton removed the American trade embargo on Vietnam.

Since 1992, Vietnam has unilaterally, or through U.S./Vietnamese 
recovery team operations returned 281 sets of remains believed to 
be American to the U.S.; 104 were subsequently identified as 
previously unaccounted-for Americans. Additionally, the 
Department of Defense has confirmed the fate of all but 43 out of 
196 individuals last known to be alive in Vietnam. Often referred 
to as discrepancy cases, these 196 individuals were last seen 
alive in Vietnam, but were not repatriated alive, nor had their 
remains been repatriated. At the end of hostilities in 1973, 
2,583 Americans were unaccounted for. There are 2,079 Americans 
still unaccounted for from the war in Southeast Asia; of that 
total, 1,552 are unaccounted-for in Vietnam. As of October 1998, 
504 Americans have been recovered, identified, and returned to 
their families-375 of them from Vietnam. The United States 
Government remains committed to achieving the fullest possible 
accounting for those American citizens who did not return from 
the war in Southeast Asia, and whose fates remain unknown.

Principal U.S. Embassy Officials

Ambassador--Douglas B. (Pete) Peterson
Deputy Chief of Mission--Dennis Harter

The U.S. Embassy in Vietnam is located at 7 Lang Ha, Ba Dinh 
District, Hanoi, Socialist Republic of Vietnam (tel. 84-4-843-
1500; fax 84-4-835-0484).

Principal U.S. Consulate General Official
Consul General--Charles Ray

The U.S. Consulate General in Ho Chi Minh City is located at 51 
Nguyen Dinh Chieu, District 3, Ho Chi Minh City, Socialist 
Republic of Vietnam (tel. 84-8-822-9433; fax 84-8-9434.


The U.S. Department of State's Consular Information Program 
provides Travel Warnings and Consular Information Sheets. Travel 
Warnings are issued when the State Department recommends that 
Americans avoid travel to a certain country. Consular Information 
Sheets exist for all countries and include information on 
immigration practices, currency regulations, health conditions, 
areas of instability, crime and security, political disturbances, 
and the addresses of the U.S. posts in the country. Public 
Announcements are issued as a means to disseminate information 
quickly about terrorist threats and other relatively short-term 
conditions overseas which pose significant risks to the security 
of American travelers. Free copies of this information are 
available by calling the Bureau of Consular Affairs at 202-647-
5225 or via the fax-on-demand system: 202-647-3000. Travel 
Warnings and Consular Information Sheets also are available on 
the Consular Affairs Internet home page: 
and the Consular Affairs Bulletin Board (CABB). To access CABB, 
dial the modem number: 301-946-4400 (it will accommodate up to 
33,600 bps), set terminal communications program to N-8-1(no 
parity, 8 bits, 1 stop bit); and terminal emulation to VT100. The 
login is travel and the password is info. (Note: Lower case is 
required). The CABB also carries international security 
information from the Overseas Security Advisory Council and 
Department's Bureau of Diplomatic Security. Consular Affairs 
Trips for Travelers publication series, which contain information 
on obtaining passports and planning a safe trip abroad, can be 
purchased from the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954; 
telephone: 202-512-1800; fax 202-512-2250.

Emergency information concerning Americans traveling abroad may 
be obtained from the Office of Overseas Citizens Services at 
(202) 647-5225. For after-hours emergencies, Sundays and 
holidays, call 202-647-4000.

Passport Services information can be obtained by calling the 24-
hour, 7-day a week automated system ($.35 per minute) or live 
operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per 
minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). 
Major credit card users (for a flat rate of $4.95) may call 1-
888-362-8668 (TDD: 1-888-498-3648).

Travelers can check the latest health information with the U.S. 
Centers for Disease Control and Prevention in Atlanta, Georgia. A 
hotline at 877-FYI-TRIP (877-394-8747) and a web site at give the most recent health 
advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and 
countries. A booklet entitled Health Information for 
International Travel (HHS publication number CDC-95-8280) is 
available from the U.S. Government Printing Office, Washington, 
DC 20402, tel. (202) 512-1800.

Information on travel conditions, visa requirements, currency and 
customs regulations, legal holidays, and other items of interest 
to travelers also may be obtained before your departure from a 
country's embassy and/or consulates in the U.S. (for this 
country, see "Principal Government Officials" listing in this 

U.S. citizens who are long-term visitors or traveling in 
dangerous areas are encouraged to register at the U.S. embassy 
upon arrival in a country (see "Principal U.S. Embassy Officials" 
listing in this publication). This may help family members 
contact you in case of an emergency.

Further Electronic Information

Department of State Foreign Affairs Network. Available on the 
Internet, DOSFAN provides timely, global access to official U.S. 
foreign policy information. Updated daily, DOSFAN includes 
Background Notes; Dispatch, the official magazine of U.S. foreign 
policy; daily press briefings; Country Commercial Guides; 
directories of key officers of foreign service posts; etc. 
DOSFAN's World Wide Web site is at

U.S. Foreign Affairs on CD-ROM (USFAC). Published on an annual 
basis by the U.S. Department of State, USFAC archives information 
on the Department of State Foreign Affairs Network, and includes 
an array of official foreign policy information from 1990 to the 
present. Contact the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To 
order, call (202) 512-1800 or fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S. Department 
of Commerce, the NTDB contains a wealth of trade-related 
information. It is available on the Internet ( 
and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more 


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