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
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,
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
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
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
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.
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
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
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.
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.
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.
GOVERNMENT AND POLITICAL CONDITIONS
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
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
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
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
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
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
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.
TRAVEL AND BUSINESS INFORMATION
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: http://travel.state.gov
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
http://www.cdc.gov/travel/index.htm 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 http://www.state.gov.
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 (www.stat-usa.gov)
and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more
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