ASIAN AFFAIRS INTERVIEW WITH LE DANG DOANH
President - Central Institute for Economic Management
WE ARE TOO SLOW
Serge Berthier.- The reform process in Vietnam seems to have slowed down. One line of thought is that it is a consequence of the Asian crisis. A more pessimistic view is that there are fundamental problems that are not addressed because there is a lack of consensus at the highest level on how to proceed further. What is your view?
Le Dang Doanh.- If Vietnam is to succeed, it must solve different issues, and it can only do that step by step. There are three fundamental stages in such process. The first one is to decide how best to move from a centrally planned economy to a market economy. Such a step entails many subsidiary issues, because it means that the economy has to be reformed, not only in relation to its economic mechanisms, but also politically and socially. The second stage is to move from a developing economy to an industrialized economy, in other words, to modernize the economy in order to reach economic prosperity and social development. The third stage will be to shift to a knowledge-based economy in a global order. Now, if you consider our situation in this context, one may say that Vietnam is moving on the right track. We joined ASEAN and APEC thus moving towards integration, and are broadly speaking developing democracy.
SB.- A quick look at the Foreign Direct Investment (FDI) shows that the international economic community is not really convinced that the economic reform process is on the right track (1).
LDd.- One has to understand that Vietnam has spent nearly the whole of the past century fighting. In the last fifty years, Vietnam sacrificed a lot to achieve national independence and to unify the country (2). Then, we tried to explore a type of socialist economy as a way to become prosperous, but that experiment proved not to be an efficient way to reach such a goal. A centrally planned economy is efficient for war-time conditions, it is not an efficient model for peace and for a dynamic scientific progress. In the past fifteen years, what Vietnam has been doing more or less was to establish the basis of a market economy, to develop the private sector, to move away from the loose markets of the former Soviet Union and Eastern European countries to a globalized market (3). It also transformed the country socially and politically. As a result, Vietnam has increased its wealth in the past fifteen years, more than it did for the previous fifty years (4). But the gap is still high. With about 400 USD per capita income, Vietnam is poor and a low-developing country, however looking at the potential of its people, the country has a rich potential to develop.
SB.- No one denies that Vietnam has made substantial progress. From being an importer of food, it is now an exporter. However Vietnam was an exporter of food in the early XXth century (5), so the progress is not as much a step forward as a natural consequence of peace, yet the gap between the potential of the country and the level of wealth remains terribly high specially.
LDd.- Indeed, one of the main challenges for Vietnam is how to reduce the gap with the other countries of the region and how to reduce the gap between the existing livelihood and the obvious tangible potential of the people.
SB.- In China, in 1992, the reform process was slowing so much that Deng Xiaoping, at 89, took the bold step to go South to urge more speedy and bold reforms even though there were arguments at the highest level that it would further increase the gap between the rich regions and the poor ones. But the result was spectacular, since 75% of the FDI currently invested in China since 1979 came after his trip. Don’t you think that the reform process needs such bold actions to reignite the interest of the investors?
LDd.- What you point out is important. When I was adviser to the General Secretary in the early 1990s, Nguyen Van Linh (6), the speed of reform was very fast, but after an impressive start, there was a period of slowdown. It is true that if Vietnam achieved a lot, what was achieved was not the achievable. We could have done more. In other words, there is no doubt that the speed of reform could be increased.
SB.- Why is it not? What are the constraints?
LDd.- There are many. One of them is Vietnam’s conception of development. There are still divided opinions as to what is the best way to develop the economy. Some still believe a socialist economy based on State-ownership remains the best, there are those that still believe that industrialization means in broad terms “heavy-industrialisation”, in other words a Stalinist-type of economic development. A second constraint is a human resource one. There is a lack of competence, and you need a certain level of knowledge to frame the suitable solution.
SB.- What you refer to is a problem of education, but other countries were facing the same constraint. I don’t see it as an absolute constraint. Why would Vietnam have more problems in that respect than China, for example?
LDd.- There is something specific to Vietnam, it is the war mentality. The country was more or less one of the fiercest battlefields of the last century. The heritage, besides the cost, is that a lot of people still believe that there are a lot of enemies around. Many don’t understand that the world has changed, that there are nowadays co-operation and competition, and that competition is not war. Indeed, Vietnam is engaged in a lot of co-operation and it is done within a permanent competition. For some of the people, it is still difficult to understand the difference. They look at any issue as if they are in a fight. In their mind, there are only win-lose situations as during the war, but no win-win solutions.
SB.- One does not have such feeling when strolling in the street. Do you refer to the society at large or is it more at institutional level, at the bureaucratic level that such a perception is affecting the way people think and behave?
LDd.- The society at large is not really affected by this perception. The people are friendly and do not see the competition as a matter of life and death. I would say it is rather at the elite level of the country that such perception is, in some quarters, still very much alive. Look at the way Vietnam enters into trade agreements. It is very clear, on closer analysis, that the State is always hesitating as to how and with whom to sign a trade agreement. There is still a lot of argument about the way we should conduct the diversification of our trade or relationship with one country or another. The latest example is the argument arising about the United Nations University. Are we going to accept one to be here or are we going to turn it down? The argument is not about education needs, but rather about the influence of the backers of the University and the role such influence can play (7).
SB.- Why so much paranoia about the influence of ideas?
LDd.- Maybe we should look at history. A very striking phenomena is that, when Ho Chi Minh took power in 1946, traveling on a French warship on his way home from Fontainebleau, he could invite a lot of Vietnamese intellectuals trained in France to come back with him, to organize the resistance against the French (8). Today, if Vietnam wants to catch up with a knowledge-based economy, it must attract again a lot of the overseas Vietnamese, living in France, or in the US and elsewhere to come back to Vietnam to help our society to understand what marketing is, what economic management is, so on and so forth. But it didn’t happen and one wonders why what Ho Chi Minh did, the leadership can’t do today.
SB.- Although I see the similarity as regards the importation of ideas, socialist ideas at the time of Ho Chi Minh, and liberal economic ideas today, I also see an important difference. Ho Chi Minh was the leader and his ideas were not challenged by his supporters and associates. Today, the overseas Vietnamese have different ideas, and in order to use an easy example, they do not have a Vietnamese Deng Xiao-ping to focus on.
LDd.- People need to focus on one man. To take your example, we do not have a Deng Xiao-ping to focus the energy and make the decision, but we actually need one.
SB.- If a collective leadership, to a point, brings different views coming from various segments together, how can it build a strong consensus on contentious issues such as the switch to a market economy?
LDd.- What can be said because it is obvious is that the consensus must be reached daily, in other words, every day, for every new decision, a new consensus must be reached.
SB.- Earlier you mentioned that people still have arguments about the efficiency of the Stalinist economic theory, if there is one. Can we just say that there is a conflict of generations, as no economist of any shade of the new generation will pay any serious attention to such a model, while some economists and engineers trained in Moscow in the early 1950s may have some inkling to cling to it.
LDd.- Its is undoubtedly a matter of generation. I like to compare that situation with that of physics before and after the quantum theory. Physicists of the classic physic did not understand quantum physics, and to support their views, even remarkable physicists went astray, while the new generation immediately accepted the quantum theory of Max Plank. In Vietnam, in a manner of speaking, we are in a similar situation. The new generation will come with new conceptions and a new understanding of the world and the new paradigm will be accepted readily, probably because of the internet and new technology developments everyone can witness.
SB.- Can then Vietnam afford to wait for an old generation to go and a new one to take the lever, because it seems to me that it is a rather long process?
LDd.- I really do hope that we could shorten that natural process, to move forward as fast as possible. The problem is to catch the train of the XXIst century as soon as possible.
SB.- From the attitude of overseas Vietnamese and foreign investors, one can conclude that there is an awareness that the government, in spite of the official declarations, being not so confident on the course to take, is unable to instill confidence in others, while in China, the government seems to be trusted. Why is it so?
LDd.- Indeed, the political sphere lacks the confidence you see in China, but it is not surprising. Only when there is a tangible progress, when you have job creation for everybody, when prospects are better for the next generation than for the old one, will confidence be achieved. But when you have doubts because you have to push people aside, when a lot of people can’t find jobs, when there is rampant corruption, it is difficult to be confident. You know, there is a saying in Vietnamese and in Chinese, that there are two kinds of confidence, one is from the mouth and the other from the heart. You could hear people saying they are confident, but it is difficult to know if their heart is actually that confident.
SB.- Do you mean that the reform process is for some a half-hearted endeavor?
LDd.- Well, I think people were very much reform-minded at the beginning of the reform. Today, some are getting less reform-minded because they are now afraid that the private sector is getting too strong.
SB.- It comes back to the old communist argument. Private property is wrong. The Chinese communists are way past this argument. Are the Vietnamese communist ideologues still pondering the role of the private property in an economy?
LDd.- Let’s say that the discussion is still not yet over in Vietnam. There is still discussion about the concept of ownership and private property.
SB.- Does that mean that the question is still whether private ownership is acceptable or not, or is it just a discussion on the relationship and balance between the private and the public sector?
LDd.- It is not a discussion on the right to own private properties, but rather whether a party member, a communist, can run some private business. In other words, how can you be a communist and a bourgeois at the same time? There are arguments of that sort. But, to come back to the bottom-line, it is clear for all that job creations will only come from the private sector. It is not disputed that there is no other way.
SB.- Is the concept that a centrally planned economy cannot be efficient admitted, with all what such admission entails?
LDd.- If you allude to the freedom for the people to decide by themselves what they want to do, I think it is. In the past, the State tried to decide for everybody how much they will eat, how they will work and live. It failed. Today, the State must come to the conclusion that it can fix the environment and assist the people to develop and improve their life. But there are still a lot of hesitation and constraints.
SB.- The more I listen to you, the more I think that the constraints are politically motivated rather than really a dispute on the efficiency of the “heavy industry” versus the efficiency of the “light economy” and so on and so forth. It must be clear to everyone that if the overseas Vietnamese can compete elsewhere, and they have been quite successful, why can’t the Vietnamese do the same in the country? So, what is at stake is the political structure, its ideology and the lever of command. I don’t think we should comment on personalities, because they seem not to matter much, but on ideologies. If Vietnam has to wait a new generation to change its mindset, it is absolutely too long…
SB.- Nevertheless, a change is likely to take time. In the meantime, can we say that there is a risk of reversal, or none at all?
LDd.- Time is supporting the reform, therefore there is no other way to return to the past because, ultimately, life is always stronger than power. Now I am living in Vietnam, I cannot say more. I am already exercising the acrobatic feat of “l’art du possible”.
SB.- China is a good example of a revolution being accomplished without affecting the institutional frame and the authority of the central power. So it should give some comfort to the Vietnamese authorities to see that a transition from centrally planned economy to a market-led economy can be achieved peacefully and without political disruption, but of course the Chinese political establishment does not really have the win-lose mentality you mentioned earlier. Can anyone keep a win-lose mentality while its economy is more and more under pressure from the global order?
LDd.- That is precisely the point. People today have to understand that if someone wins, it does not mean necessarily that we have a loser. Today such view is irrelevant. More people no longer wait for the state to come to its senses. Take agriculture, one of the few success stories of Vietnam. In that sector, the people are innovating and their achievements are not the state’s achievement. For example, it was prohibited to have large private farms, of, say 100 hectares. But the people managed to create such farms, by accumulating lands in order to improve the productivity of the farm. They also looked for new seeds to improve yields. Finally, they turned the country from a food-importer to a food-exporter. The State had little to do with that. It just liberated the energies. But in a globalized world, Vietnam is facing more and more challenges and we need to improve the quality of our products to get higher prices.
SB.- Is globalization well accepted in Vietnam?
LDd.- The globalization process is giving in fact new ammunition to the conservative faction of the political establishment. All the time, the press is printing speeches from Fidel Castro or Dr Mahathir when they are lambasting the concept or outlining the negative side of the process. Of course, you have nothing in the press to support the positive side of it.
SB.- But does the government realize that you can lambaste a system for its flaws, as Dr Mahathir does, and take advantage of it, as Malaysia is doing very successfully?
LDd.- I am not sure. The truth is that although there is no other way, you can’t avoid to have people that see some enemies there waiting for them. Indeed, Dr Mahathir is actually playing the game very well and has improved his country a lot. Why Vietnam couldn’t do the same?
SB.- Maybe it comes back to your original remark: the problem of leadership. Is collective leadership more efficient that a single strong minded leader?
LDd.- I agree. France had General de Gaulle to push it out of the war devastation. If you look at every economy, at every country, the final and last actor is the leader.
SB.- Vietnam has an ageing collective leadership, even though there are new faces here and there (9). In the past, some special events such as a war would put to the fore a personality. But today, what sort of structure do you think is needed when so many decisions have to be taken that challenge past systems and require a different mindset?
LDd.- You touch a fundamental question. How to find the appropriate way of Vietnam to go to the next stage, which is to change one tenet for another. There is no guarantee that a system is good or bad. Look at Taiwan. People were angry at the corruption of the Kuomintang, and so they did not elect its candidate. A mighty pluralistic democracy is therefore not so powerful if it does not stop corruption. Then, compare Singapore to Hong Kong. One can hardly say that Hong Kong is an example of democracy, but it is an example for low corruption. So the power is very much entrenched. What do we learn? That if a State is corrupt but the economy is flourishing, people are likely to accept it, but not for ever.
SB.- You imply that corruption is the number one danger for a government. It is no secret that Vietnam has a corruption problem and it is recognized at the highest level that it must be tackled. But people are very cynical about the commitment of the state.
LDd.-Why deny it? Corruption is endemic and is everywhere. The reason is that bureaucracy breeds corruption to a certain extent. Take for example the Enterprise Law that we are now implementing. It was realized a while ago that there were too many licenses. The Prime Minister has just abolished 84 of them: the license to have the right to type on a typing machine as a dactylograph, one to paint a portrait, one to operate a photocopy machine, to repair musical instruments, to run billiard facilities, to name a few. Once they were abolished on February 3rd 2000, people started to speak out. They had to bribe monthly or quarterly the officers when the licenses were up for renewal. What does it show? That the government is moving on the right track, but that, at every layer of the bureaucracy, there is something going on. The Vietnamese National Assembly has strongly condemned the corruption as a natural disaster. The problem is to find the way and the means to stop it. Among those are a free press, less regulations and a responsible justice. We are not yet there and probably must admit that there are a lot of problems still to be solved.
SB.-What about the role of the army in the economy?
LDd.- I can’t answer that question.
1.- Foreign investment inflow continued its decline this year. After an average inflow of USD2 billion a year for three years until 1997, it fell to USD 800 million in 1998, and was running at around 600 million in 1999. The biggest decline came in foreign investment from East Asia and Japan. Most foreign direct investments are into heavy industry (24,1 %), oil and gas (22,2 %) and the real estate sector (17,8 %).
2.- Ho Chi-minh declared Vietnam independent of French colonial rule on September 2, 1945, after Japan’s surrender in World War II, but the French returned to rule Vietnam which was still divided into three different regions which could not agree on an unified constitutional framework. The French government decided to pull out of Indochina after the military defeat at Dien Bien Phu in 1954, leaving Vietnam divided into a communist North and a non-communist South. For the next nine years, fighting between the Soviet and Chinese supported communist North, and the United States-backed South intensified. In 1965, the U.S committed its armed forces to the war in Vietnam, where they remained until the 1973 Paris Peace agreement. But fighting between Vietnamese forces continued until April 30, 1975, when the communist troops captured Saigon and reunified the Country. In December 1978, following two years of Khmer Rouge attacks across the border, Vietnam invaded Cambodia with more than 200,000 men and ousted the Khmer Rouge regime. China reacted to the invasion by launching a fierce attack into northern Vietnam to “teach it a lesson”, then pulled back after a few months, but cross-border artillery bombardments continued in the 1980s to keep up the pressure on Vietnam to reach a compromise settlement over Cambodia. For a decade, Vietnam remained bogged down in a protracted guerrilla in Cambodia, finally withdrawing from the country in September 1989.
3.- Vietnam, as North Korea or India, was mainly trading with the Soviet Union. 80% of its foreign trade was with other communist countries. When their economies collapsed, so did the trade, leaving Vietnam without significant foreign trade until it became again an exporter of rice, which it was already at the beginning of the XXth century under the French rule.
4.- To punish Vietnam for the fall of the non-communist regime, an international trade embargo was put in place which was reinforced when it invaded Cambodia. After the withdrawal of the Vietnamese army from Cambodia, the trade sanction which had brought an influx of boat-people to the shores of Hong Kong and other Asian countries went under much criticism. Vietnam stayed under embargo for most of the end of the XXth century, making it impossible for the country to turn around its economy. It was only in February 1994 that the United States lifted their trade embargo with Vietnam.
5.- During the Colonization of Vietnam by the French in the 19th century, Vietnam was divided into three different “countries”, different administrative regions: Tonkin, Annam and Cochinchina, each one separately integrated into so-called “French Indochina”, which also included Cambodia and Laos and was ruled by a French Governor General.
Before 1918, almost all the estates allocated to French settlers were put under rice. Indochina, and Cochinchina in particular, were exporting 800 000 tons in 1900, and 1.2 million in 1920. Between 1892 and 1913 the value of export skyrocketed from 26 million piastres to 102 million, and import from 19 million piastre to 110 million, though the profits from the foreign trade went back mostly to just a few large trading companies such as UCIA and Denis Frères.
8.- Ho Chi Minh was born May 19, 1890 in Nghe An Province from a family of a village schoolteacher. He was educated in Hue, the former capital, at the National College (1905-1910). In 1918, he joined the Socialist party of France. In 1920 he attended the Tour Congress of the French Socialists where he joined the majority in voting for the creation of the French Communist Party. In 1924, he took part in the 5th World Congress of the Komintern in Moscow as a representative of Indochina. In 1930, he chaired a conference of Vietnamese Communists at Kowloon, Hong Kong, at which the Communist Party of Vietnam (later the Communist Party of Indochina, the Vietnam Workers’ Party, and finally the Communist Party of Vietnam) was formed. In 1945, he read out the Declaration of Independence of Vietnam. In 1956, the National Assembly elected him President and appointed him Prime Minister of the Democratic Republic of Vietnam. In 1960, at the 3rd Congress of the Vietnam Workers’s Party he formulated two tasks for the Vietnamese revolution: the building of a socialist society in the North and the Liberation of the South. In 1965, he was appointed Chairman of the Supreme Defense Council. He died September 2, 1969 of a heart attack at his home in Hanoi.
9.- The actual members of the Politburo are : Le Kha Phieu, Tran Duc Luong, Phan van Khai, Nong Duc Manh, Pham The Duyet, Doan Khue, Nguyen Manh Cam, Nguyen Duc Binh, Nguyen Van An, Phan Van Tra, Nguyen Thi Xuan My, Le Xuan Tung, Truong Tan Sang, Le Minh Huong, Nguyen Tan Dung, Pham Thanh Ngan, Nguyen Minh Triet, Phan Dien, Nguyen PhuTrong.