The State Department web site below is a permanent electronic archive of information released prior to January 20, 2001.  Please see www.state.gov for material released since President George W. Bush took office on that date.  This site is not updated so external links may no longer function.  Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.

Background Notes: Vietnam, August 1999 Released by the Bureau of East Asian and Pacific Affairs U.S. Department of State

OFFICIAL NAME: Socialist Republic of Vietnam

PROFILE

Geography

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.

People

Nationality: Noun and adjective--Vietnamese (sing. and pl.).
Population (1998): 78 million.
Annual growth rate (1998): 1.8%.
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 languages.
Literacy: 88%.
Health: Birth rate--28/1000. Infant mortality rate--36/1,000. Life expectancy--63.08 yrs. male, 67.25 yrs. female. Death rate--7.92/1000.

Government

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.

Economy

GDP (1998): $26 billion.
Real growth rate (1998 est.): 3.5%. Projected rate for 1999: 3%.
Per capita income (1998): $333.
Inflation rate (1998): 9-10%.
External debt (1994-96): 31.4 % of GDP.
Natural resources: Phosphates, coal, manganese, bauxite, chromate, offshore oil deposits, forests, rubber, marine products. Agriculture and forestry (23.5% of GDP--1998): Products--rice, rubber, fruit, vegetables, corn, manioc, cashews, sugarcane, coffee, fish. Cultivated land--less than 7 million hectares per year.
Land use--21% arable; 28% forest and woodland; 51% other.
Industry and construction (34% of GDP---1998): Food processing, textiles, cement, chemical fertilizers, steel, electric power.
Services (42.5% of GDP--1998): Trade, restaurants, transport, postal and telecommunications.
Trade (1998): Exports--$9.4 billion: crude oil, textiles, marine products, rice (second-largest exporter in world) and coal. Major partners--Japan (26%), Singapore, Germany, Australia, and China. Imports--$11.4 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.--$519.5 million; Imports from U.S.--$269.5 million (1998).

PEOPLE

Ethnic Vietnamese constitute almost 90% of the population. Originating in what is now southern China and northern Vietnam, the Vietnamese people pushed southward over several centuries to occupy the entire eastern seacoast of the Indochinese Peninsula. This expansion began in 939 AD, after a 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 north.

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.

HISTORY

In BC 111, ancestors of the present-day Vietnamese, inhabiting part of what is now southern China and northern Vietnam, were conquered by forces of China's Han dynasty. Chinese rule lasted more than 1,000 years (until 939 AD) when the Vietnamese ousted their conquerors and began a southward expansion that, by the mid-18th century, reached the Gulf of Siam.

Despite their military achievements, the Vietnamese continued to suffer from internal political divisions. Throughout most of the 17th and 18th centuries, contending families in the north and south struggled to control the powerless kings of the Le dynasty. During this period, Vietnam was effectively divided near the 17th parallel, just a few kilometers above the demarcation line established at the 1954 Geneva conference.

French Rule

Vietnam was reunited following a devastating civil war in the 18th century but soon fell prey to the expansion of European colonialism. The French conquest of Vietnam began in 1858 with an attack on what is now the city of Danang. France imposed control gradually, meeting heavy resistance, and only in 1884 was Vietnam officially incorporated into the French empire.

Fiercely nationalistic, the Vietnamese never truly accepted the imposition of French rule. By 1930, the Vietnamese Nationalist Party had staged the first significant armed uprising against the French, but its virtual destruction in the ensuing French repression left the leadership of the anti-colonial movement to those more adept at underground organization and survival--the communists.

In that same year, the recently formed Indochinese Communist Party (ICP) took the lead in setting up short-lived "soviets" in the Nghe An and Ha Tinh Provinces in northern Vietnam, an action that identified the ICP with peasant unrest. The ICP was formed in Hong Kong in 1930 from the amalgamation of the Vietnamese and the nascent Lao and Khmer communist groups, and it received its instructions from the Moscow-based Communist International (Comintern).

Communist Movement

The Vietnamese communist movement began in Paris in 1920, when Ho Chi Minh, using the pseudonym Nguyen Ai Quoc, became a charter member of the French Communist Party. Two years later, Ho went to Moscow to study Marxist doctrine and then proceeded to Canton as a Comintern representative. While in China, he formed the Vietnamese Revolutionary Youth League, setting the stage for the formation of the Indochinese Communist Party in 1930. French repression of nationalists and communists forced some of the insurgents underground, and others escaped to China. Other dissidents were imprisoned, some emerging later to play important roles in the anti-colonial movement.

Ho Chi Minh was abroad at that time but was imprisoned later in Hong Kong by the British. He was released in 1933, and in 1936 a new French government released his compatriots who, at the outset of World War II, fled to China. There they were joined by Ho, who organized the Viet Minh--purportedly a coalition of all anti-French Vietnamese groups. Official Vietnamese publications state that the Viet Minh was founded and led by the ICP.

Because a Vichy French administration in Vietnam during World War II cooperated with occupying Japanese forces, the Viet Minh's anti-French activity was also directed against the Japanese, and, for a short period, there was cooperation between the Viet Minh and Allied forces.When the French were ousted by the Japanese in March 1945, the Viet Minh began to move into the countryside from their base areas in the mountains of northern Vietnam. By the time Allied troops--Chinese in the north and British in the south--arrived to take the surrender of Japanese troops, the Viet Minh leaders had already announced the formation of a Democratic Republic of Vietnam (DRV) and on September 2, 1945, proclaimed Vietnam's independence.

Deep divisions between Vietnamese communist and non-communist nationalists soon began to surface, however, especially in the south, and with the arrival of Allied forces later in September, the DRV was forced to begin negotiations with the French on their future relationship. The difficult negotiations broke down in December 1946, and fighting began with a Viet Minh attack on the French in Hanoi.

Civil War

A prolonged three-way struggle ensued among the Vietnamese communists (led by Ho Chi Minh), the French, and the Vietnamese nationalists (nominally led by Emperor Bao Dai). The communists sought to portray their struggle as a national uprising; the French attempted to reestablish their control; and the non-communist nationalists, many of whom chose to fight alongside the French against the communists, wanted neither French nor communist domination.

Ho Chi Minh's Viet Minh forces fought a highly successful guerrilla campaign and eventually controlled much of rural Vietnam. The French military disaster at Dien Bien Phu in May 1954 and the conference at Geneva, where France signed the Agreement on the Cessation of Hostilities in Vietnam on July 20, 1954, marked the end of the eight-year war and 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 centers.

At the beginning of 1975, the North Vietnamese began a major offensive in the South that succeeded in breaking through the central highlands defenses. After taking over provincial capitals in that area, a combination of forces from the demilitarized zone area and the highlands routed South Vietnamese defenders. Pressures from the highlands and from the Cambodian border region led to a general GVN military collapse, which in turn resulted in the fall of Saigon itself by the end of April. Faced with the threat of a takeover by a communist regime, tens of thousands of Vietnamese fled the country.

Reunification

For the first few months after the war, separate governments were maintained in the northern and southern parts of the country. However, in mid-November 1975, the decision to reunify the country was announced, despite the vast social and economic differences remaining between the two sections. Elections were held in April 1976 for the National Assembly, which was convened the following June. The assembly ratified the reunification of the country and on July 2 renamed it the Socialist Republic of Vietnam (SRV). It also appointed a committee to draft a new constitution for the entire country. The party Central Committee approved the constitution in September 1980. New National Assembly elections were held in April 1981.

The fourth congress of the Vietnam Worker's Party, held December 4-20, 1976, selected a new party leadership and established major national policies. It reelected Secretary General Le Duan who, in effect, had led the party since Ho Chi Minh's death in 1969. In addition, the fourth party congress 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 USSR. While reaffirming Vietnam's alliance with the Soviet Union, the congress softened Hanoi's anti-Beijing posture and called for more attention to developing relations with noncommunist 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 implemented.

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 society.

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 its five-man Standing Board, 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 gathers every five years, last met in 1996. The Central Committee membership, which is elected from this group, represents less than 10% of the national congress and usually meets twice a year. The Party's popular support 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. 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 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 Politburo.

The highest legislative organ of the government is the National Assembly, members of which are elected, according to the constitution, every five 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. In the past, it simply gave formal approval to proposals from the executive organs, but in recent years has begun to exercise more genuine lawmaking and appointing authority. 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 three 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

Politburo (Eighth Pary Congress Politburo, named Dec. 29, 1997; listed in order of rank as of August 1, 1999)

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
Phan Dien
Nguyen Phu Trong

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

ECONOMY

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 towards 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 might not continue in the remaining years of the decade. Vietnam is facing twin challenges from the East Asian economic crisis and a falling growth rate as the impact of the first generations of reforms is fading. Structural reforms slowed during the past two 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 percent of GDP in 1997, and rising levels of non-performing loans in the banking sector. In addition, Vietnam's national savings rate, 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 may fall below 3% in 1998 (IMF est.). Export growth and foreign direct investment inflows are also expected to decline this year. In the first nine months of 1998, exports rose only 4% compared to 20-30% increases 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 leadership.

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" treatment).

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 problems.

FOREIGN RELATIONS

During the second Indochina war, North Vietnam balanced relations with its two major allies, the Soviet Union and China, and forged closer links to the communist parties of Cambodia and Laos, which had been formed in the early 1950s out of the Indochinese Communist Party. By 1975, with the end of the war and Beijing increasingly viewing Vietnam as a potential Soviet instrument to encircle China, Beijing began increasing its support for the Khmer Rouge and pushing Hanoi to side with China on Sino-Soviet disputes. In turn, Vietnam viewed the Khmer Rouge as an instrument by which China was seeking to outflank Vietnam on its southwest border. Thus, Hanoi attached a high priority to persuading China to distance itself from the Khmer Rouge and permit Vietnam to steer an independent course between the two communist giants. After the death of Mao Tse-tung and the arrest of the "Gang of Four" in China, Hanoi renewed its diplomatic efforts to persuade the Chinese leadership to distance itself from the Khmer Rouge. Only after those initiatives failed, as did similar efforts to persuade the Khmer Rouge to distance themselves from China, did Hanoi turn decisively to the Soviet Union. The Soviet strategy of "containing" China dovetailed perfectly with Vietnam's putative requirement to defend itself against its large neighbor with which it has shared a complex and often stormy relationship going back over 2,000 years.

Shortly after the fall of Saigon and the capture of Phnom Penh by the communist Khmer Rouge in 1975, Vietnamese and Khmer Rouge troops clashed over disputed offshore islands in the Gulf of Thailand. Negotiations failed to resolve festering disputes along the land border and, in April 1977, Phnom Penh stepped up attacks on Vietnamese settlers and villages on both sides of the border, to which Hanoi responded with a mix of offers to negotiate and gradually escalated counterattacks. Although an erstwhile communist ally of Vietnam during the "anti-imperialist" struggle, the vicious attacks of Pol Pot's Khmer Rouge were a feckless attempt to regain territory lost to the more powerful Vietnamese in previous centuries. 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 noncommunist organizations led by Prince Norodom Sihanouk and former Prime Minister Son Sann--respectively, the coalition's president and prime minister--and the Khmer Rouge, under the nominal leadership of Khieu Samphan.

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, East Asia and the noncommunist 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 and hosted the ASEAN summit in December 1998. 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 Spratly 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.

U.S.-VIETNAM RELATIONS

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.

President Clinton granted a Jackson-Vanik waiver to Vietnam in March 1998 which he extended for additional one-year periods in June of 1998 and 1999. (A Jackson-Vanik waiver is required along with congressional approval of a bilateral trade agreement in order to grant Vietnam normal trading rights. This waiver must be renewed annually.) In July, the U.S. reached agreement in principle with Vietnam on a Bilateral Trade Agreement. When completed, the Bilateral Trade Agreement will fundamentally change Vietnam's trade regime and contribute to a broader liberalization of its domestic economy.

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 concerns.

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 1993, Vietnam has unilaterally, or through U.S./Vietnamese recovery team operations returned 275 sets of remains believed to be American to the U.S.; 118 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 2,057 Americans still unaccounted for from the war in Southeast Asia; of that total, 1,533 are unaccounted-for in Vietnam. As of July 1999, 526 Americans have been recovered, identified, and returned to their families-388 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 4 Le Duan Street, District 1, 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 publication).

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 information.

[end document]

EAP Background Notes | EAP Bureau Home Page | Return to the DOSFAN Home Page This is an official U.S. Government source for information on the WWW. Inclusion of non-U.S. Government links does not imply endorsement of contents.