US to invade Vietnam again

PRESIDENT Clinton's decision to end a 19-year embargo on trade with Vietnam closes an unhappy chapter in US foreign relations and opens a potentially lucrative one.

US companies, latecomers in the drive to profit from Vietnam's post-war resurgence, are lined up on the border of a country that is still among the world's poorest, with per capita GNP estimated at dollars 200 (pounds 135). But, based on its dramatic growth since the mid-1980s, Vietnam is widely expected to be the next Asian 'tiger'. The thriving entrepreneurs of Ho Chi Minh City defy the assertion that theirs is still a socialist culture, the second-largest remaining Marxist-Leninist state.

Surprisingly, Vietnam has achieved its recent successes without outside help and by ignoring the advice of the World Bank for more 'top-down' reforms that would give government a starring role.

This does not mean that the government did not play its part. However, the reforms that it launched in 1979 and accelerated in 1986 were more in the mould of China than Eastern Europe or the former Soviet Union. They have been gradual and accompanied by strong growth. Vietnam's economy grew by 8 per cent in 1989, dropped back a bit, with the end of Soviet aid, to 5 per cent in 1990-91 and then bounced back to 8.3 per cent and 7.2 per cent.

According to the work of John McMillan of the University of California at San Diego, Vietnam's success is largely the result of 'bottom-up' microeconomic initiatives led mainly by its people. In other words, the dynamism is coming from below, from thousands of private enterprises (200,000 small retailers in Ho Chi Minh City alone), from an informal financial market based on cash transactions, from semi-official privatisations and a kind of 'spontaneous' privatisation that McMillan describes as dubious in ethical terms but highly efficient economically.

The latter occurs when state-owned companies sell shares in themselves (the state turns a blind eye) or hive off parts of the company, often to relatives and friends. State property may not end up in the hands of those who deserve it, but the end result is efficiency.

The semi-official privatisations, in which state companies were merged or allowed to go bankrupt and their assets sold to workers, and the spontaneous privatisa tions have gone much faster than official privatis ations of state companies. The Vietnamese government calls this process 'equitising': 50 per cent of shares are sold to employees, 30 per cent to the state, 20 per cent to outsiders, and the new board is elected in proportion to shareholdings. As a result of the entire priva tisation process, employment in the state sector fell by 27 per cent between 1987 and 1992, while it tripled in the private sector. By 1993, the private sector accounted for 60 per cent of national income.

McMillan says the bottom-up reform process of formerly planned economies is too much ignored by experts who dispense advice on macroeconomic policies that stress the government's role. He noted that a recent 250-page World Bank report on Vietnam devoted no space at all to its private sector. But global big business is not ignoring this vibrant sector or the consumer market potential of Vietnam.

Mobil, Caterpillar, Microsoft, Westinghouse, Boeing, Chevron, United Airlines, Coca-Cola and Citibank are just a few of the US companies planning ventures in Vietnam. With the lifting of the embargo, business opportunities are expected to total dollars 2.7bn in the first two years, rising to dollars 8.2bn by the fifth year, according to a survey of 110 US companies by the US-Asean Council for Business and Technology.

Boeing, for example, which trails its rival Airbus Industrie in Vietnam, estimates that the country will be in the market for 60 to 80 jetliners over the next decade.

Caterpillar estimates that a projected dollars 7bn in development projects will yield dollars 700m in sales of earth-movers and other heavy equipment. Mobil expects to exercise an option to begin drilling offshore in the South China Sea. And the Gannon Company of Missouri expects to do big business with packaged tours to Vietnam's China Beach, formerly a haven for US soldiers on leave from the rigours of war.

The irony is that a country associated with the decline of US economic superiority under the 'guns and butter' policies of former administrations is today seen as a land of US economic opportunity.