Hanoi looks to join the tigers of South-east Asia

WHATEVER its symbolic importance, the American decision to lift trade sanctions on Vietnam has little practical effect. Consumer products such as Coca-Cola and Kleenex are already available on the streets of Hanoi or Ho Chi Minh City, smuggled in by the country's growing army of entrepreneurs.

The 30-year-old embargo has been progressively eased in recent years. Its impact was greatly reduced last autumn when the Clinton administration finally dropped its opposition to Hanoi receiving loans from the International Monetary Fund and the World Bank. That concession is expected to pump at least dollars 5bn (pounds 3.3bn) over five years into an economy that has been growing fast since Vietnam's Communist leadership decided to abandon doctrinaire socialism. But it simply increased the frustration of American businessmen, who felt that they were the only ones still suffering any pain from the embargo. Washington tacitly admitted this by allowing them to bid for projects financed by international institutions, but they face stiff competition from European and Asian companies, some of which have been established in Vietnam for years.

The end of the embargo will make commercial banks less wary of lending to Vietnam, although the country's continuing poverty limits its ability to digest too much money too quickly. The main prize, which continues to elude Hanoi, is full normalisation of relations with the superpower it defeated. This has prevented Vietnam from playing a full part in international affairs, something which pricks its fierce national pride.

American companies can expect to receive some lucrative contracts in Vietnam, if for no other reason than politics. This was thought to have been an important factor in a recent offshore oil exploration deal awarded to Mobil. The country needs better relations with the US to pursue its new aims of joining Asia's 'tiger' economies and becoming a member of the club to which many of them belong, the Association of South-East Asian Nations (Asean). This is an ambition shared by Indochina's two other former members of the socialist bloc, Cambodia and Laos.

A thaw would also serve US strategic interests in the Asia-Pacific region. Vietnam remains a traditional rival of China and still maintains one of the largest standing armies in the world, although its equipment is obsolete and its officers are increasingly interested in business, like their Thai and Chinese counterparts. For less battle-hardened nations alarmed by China's expansionist tendencies in the South China Sea, the Vietnamese look like useful allies.

Vietnamese officials privately admit that their country is as reluctant as any other in the region to see the US reduce its presence. The need to find a balance to Chinese power has been the theme of more than 1,000 years of Vietnamese history; the father of the Vietnamese revolution, Ho Chi Minh, turned to Moscow only after his appeal to Washington for support was rejected. Vietnam has even suggested that American forces might return to the giant naval base they built at Cam Ranh Bay, which was taken over by the Soviet navy after the US withdrawal in 1973.

The urge for reconciliation with the US seems to override any fear that opening the country to yet more foreign influences might weaken the Communist Party's hold on power. Although it still draws legitimacy from its struggle against foreign invaders, fading memories and corruption are eroding its prestige. Last month the party held a special mid-term congress, apparently intended to restore its sense of purpose, at which ageing leaders were replaced. It proved less easy to agree a coherent political line. Closer contact with Washington will simply heighten Vietnam's contradiction between traditional Marxism-Leninism and free-market economic policies.

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