Vietnam: tiger economy that failed to roar

With election results due this weekend, Hanoi is facing up to flawed policies

In the heady days of the 1980s, financiers touted it as the next booming "Asian Tiger" economy. Investors and speculators rushed to grab property and business franchises, expecting profits to sky-rocket. But to the dismay of many, Vietnam's "economic miracle" failed to materialise, and a much- applauded programme of reforms launched by the Hanoi government in 1986 has lost its lustre.

There are none more disappointed than the Vietnamese themselves: wracked by decades of war, the people of this hard-line communist nation are proud of their costly victories on the battlefield. But among them, there is a sense of weariness at their continuing economic hardship which the all- powerful Communist Party has vowed, but has as yet failed, to relieve.

In this still half-closed society, misgivings rarely appear to outsiders. But there are recognisable signs that reform is now being strongly demanded in Vietnam. A trickle of reports emerging from the rural north, an area traditionally steeped in communist orthodoxy, speak of public unrest over living conditions, some say the worst expression of open discontent in Vietnam for years. Thousands of angry farmers in the remote province of Thai Binh converged on the region's main town this month to protest against official corruption and poor economic development.

Their peaceful protests, led by a decorated veteran of the country's war with the United States, turned violent and in running street battles with the security forces, houses of local communist officials were ransacked and burnt to the ground. The troubles have not been mentioned in the state media, a sign of the communist administration's unease at the potential for these disturbances to spread to other dissatisfied regions, say observers.

"I think everyone was too optimistic that the reform process would bring them prosperity, or at least make some sort of difference to their lives," said one Hanoi-based investor who requested anonymity.

A decade ago, amid a worsening economic crisis compounded by the withdrawal of aid by the crumbling Soviet Union, the Hanoi administration launched a programme of radical economic restructuring, known as doi moi. It was greeted with wide international approval: the currency, the dong, was permitted to fall in value to realistic levels on the international exchanges; the agricultural sector was opened to privatisation; and international corporations scrambled to profit from one of Asia's most liberal foreign investment codes.

However, since then, the pace of much-needed economic reform has slowed considerably. State enterprises still dominate commerce, and there is acute need for banking reform. But although economists and international observers have been warning of a renewed crisis in Vietnam, the government says it is confident of achieving an economic growth rate of 9 per cent in 1997 without further liberalisation of its policies.

"The reforms of the 1980s were absolutely necessary for the country to stay afloat. Now, there is much less urgency for the government," said one diplomat. "The hardliners in power find further economic change difficult to stomach. They are still strong advocates of state control," he added.

For the moment, there is little indication of that shift happening, although all eyes are now looking in hope to the possible successors to Vietnam's troika of aged top leaders, who are stepping down to make way for "new blood" later this year. Results from nationwide elections to choose a new National Assembly are expected to be announced this weekend. The assembly, which is the nearest thing the people of Vietnam have to a representative body, is scheduled to approve a new prime minister and figurehead president during its first sitting this September. The good news for the Vietnamese is that the likely appointee for the prime-ministership, Pham Van Khai, is a communist known as an able statesman, and an energetic proponent of economic reform.

But the top job, that of all-powerful Communist Party chief, is likely to be awarded to a more conservative figure. The man tipped for the post is Le Kha Phieu, now in charge of political affairs within the armed forces. With interests in manufacturing, and joint ventures with foreign companies, the military has profited from the loosening of trade restrictions in the past. Now it has a strong interest in preserving the status quo, doing very little to allay concerns that Vietnam's path towards economic prosperity will continue to be slow and arduous.