Vietnam's Contradictions

NOT A SYNDROME, BUT A COUNTRY

In November, President Clinton will become the first U.S. president to set foot in a unified Vietnam. His visit will finally draw American attention to a country that is vastly different from the one many remember. Contemporary Vietnam is characterized by paradoxes and contradictions. The bustling streets of Hanoi and Ho Chi Minh City are packed with youth on Honda Dream motorbikes, weaving between the bicycle-taxis and the many peddlers balancing enormous pyramids of vegetables or other wares. The energy is palpable: 60 percent of Vietnam's population is under 30 years of age, and 85 percent is under 40.

But first impressions are often misleading, and appearances frequently deceive. The vibrant and hard-working younger Vietnamese love to congregate at the many "cybercafes" or more modest street-front computer rental shops. But this country of 80 million people -- the 12th most populous in the world -- still has fewer than 60,000 Internet subscribers, two-thirds of which are ministries and other governmental or Communist Party institutions. An hour on the Internet costs more than the average Vietnamese earns in a day (per capita GNP in 1999 was $320). When one looks into those cybercafes and sees very little "surfing" going on (a lot of word-processing and games instead), the Internet revolution appears a long way from opening Vietnamese society to the outside world.

In the early to mid-1990s, the Vietnamese economy seemed to be opening, and many foreign investors rushed in with high expectations of future growth. But as a result of Vietnam's three-year-old economic decline, these investors have mostly disappeared. The newly built hotels and office buildings that now stand empty starkly symbolize the lowered expectations.

Many Vietnamese would welcome the economic opportunities that increased foreign investment would create. But the country's leadership has been hesitant to open the economy. Frequent warnings cite the dangers of "peaceful evolution," a term used to deride those perceived as seeking to discredit communism by advocating the "Western" values of capitalism, democracy, and human rights. Vietnam has yet to reconcile its centrally controlled economy, one-party political system, and historic fear of foreign interaction with the growing pressures for change in a rapidly globalizing world.

PRESENT-DAY PARADOXES

The end of what the Vietnamese call the "American war" was a truly epochal triumph for the North. Independence was finally won in 1975 after a century of struggle against the French, the Chinese, the Japanese, and ultimately the Americans. Hanoi was the cockpit of this fight and is now the nation's capital; Ho Chi Minh, the nation's deeply venerated founder, lies here in a mausoleum fully equal to Lenin's on Red Square. But on April 30, 2000 -- the 25th anniversary of the final victory against the United States and South Vietnam's "liberation" from foreign influences -- Hanoi lay eerily quiet. Ho Chi Minh City (formerly Saigon, the capital of South Vietnam) hosted the major ceremony instead. The authorities' tight control over the day's festivities belied the populist rhetoric celebrating the "people's uprising." The official explanation for keeping the celebration inside the gates of the Palace of Reunification, formerly the presidential palace, was the wish to keep the costs down. But limiting the setting also protected against possible political demonstrations.

Another contradiction is that although the North won the battle, the South may yet win the war. A "Northernization" campaign during the first decade after independence included a deliberately brutal policy of land collectivization and forced more than 400,000 people into ideological "re-education" camps for as long as a decade. Tens of thousands were killed and more than 100,000 fled in boats. The government imposed communism on the South and severely curtailed freedom of speech and religious practice. The resulting economic tailspin created large pockets of famine, a tragic anomaly in a country rich with agricultural promise.

Today a gradual "Southernization" of the North is becoming visible. The industrial parks on the outskirts of Ho Chi Minh City and the rice paddies of the Mekong delta now drive the national economy, producing two-thirds of the nation's wealth and accounting for 80 percent of its tax revenue. Southern constituents urging privatization, entrepreneurial initiatives, and capitalist ideas are pressuring party politicians and the rigid ministerial bureaucracies of the North to change. The more robust economy of Ho Chi Minh City rewards its inhabitants with considerably higher wages than those earned in the nation's capital. Thus in the struggle for the "hearts and minds" of the people, the former Saigon could win over Hanoi after all.

This battle today lies at the center of Vietnam's greatest paradox: both the Vietnamese people and the leadership want to strengthen the economy and improve the quality of life, but their proposals for how to do so are highly contradictory. The communist leadership talks of the need for a "market-based but socialism-driven structure of economic development." This jumble of Karl Marx and Adam Smith reveals the party's ambivalence about reforming its economic ways. But the population is growing more impatient. A surprisingly rudimentary knowledge of the outside world (the media is tightly controlled and opportunities for travel are few) has not prevented the Vietnamese from understanding that without moves toward a free-market economy, the country will be unable to reap the fruits of globalization and compete economically, even within the Asian region. Indeed, Vietnam is likely to continue its present troubling decline.

The Vietnamese government feels the mounting pressure of the people's concerns, but it also knows that any move toward capitalism would undoubtedly require a simultaneous political step toward a more democratic society. Above all, the party leadership fears social disorder and a loss of control. Globalization, some of Vietnam's top officials believe, could erode the authority of a state and party still based on Marxist-Leninist principles. Throughout the leadership is a deeply rooted anxiety that too rapid a pace of change could increase expectations, generate instability, and erode the levers of political control essential to the maintenance of a one-party state.

COMMUNISM À LA VIETNAMESE

The Vietnamese Communist Party (VCP) still pervades all dimensions of life in the country, even if it faces an uncertain future. This dominance is key to understanding contemporary Vietnam. The VCP's exclusive role in government is constitutionally mandated, and advocacy of a multiparty political system is forbidden. Party members control the top echelons in the ministries, the military, the internal security services, the media, and the many state-owned enterprises. Accordingly, drawing a distinction between government and party is close to meaningless. The National Assembly is subject to party direction and the VCP approves most candidates; the judiciary is fully subservient to the government; People's Committees of the VCP begin at the hamlet level and run up through the village, district, province, and so on. In effect, Vietnam's population of 80 million is now ruled by a party membership of approximately 2.5 million.

Vietnam is run by a "troika" of the president, the prime minister, and the general secretary of the VCP. The current top leadership, selected in late 1997 by the 18-member Politburo, was a cautious compromise. Prime Minister Phan Van Khai, an economic reformer, was intended to balance General Secretary Le Kha Phieu, a conservative and dedicated party worker who had climbed the ranks as a political commissar within the army. President Tran Duc Luong stands in the middle. The struggles and secretive inner workings of the Communist Party are arguably even more difficult to fathom than were those of the Soviet Union. Nevertheless, the fissures do not always remain hidden. Le Kha Phieu has emerged as the most aggressive and powerful within the troika and reportedly will seek the presidency in the next reshuÛe, due at the Ninth Party Congress in 2001. Meanwhile, Phan Van Khai, having tried and failed to obtain greater political support for economic reform, has offered to resign and is clearly on his way out.

This discord within the triumvirate presents a microcosm of the VCP's current dilemmas. Today the party is divided over the economic and political questions that reach to the heart of independent Vietnam's identity. How can it respond to the forces of globalization when the need to adapt the country's command economy to the world marketplace is still in dispute? If the wisdom of established economic doctrine falls into question, how can the party confidently ensure the continued political direction of the nation? This dissonance within the party leadership presents a serious problem because important decisions require the unanimous consent of the Politburo. Dispute frequently leads to paralysis, as evidenced in the yearlong delay in agreeing to the recently signed trade deal with the United States.

Many -- though not all -- in the VCP's younger generation and even some elder statesmen understand the urgent necessity for economic reform and closer integration into the global economy. But Vietnam is a Confucian society that venerates seniority, and these younger voices speak with less authority than the older leaders. The turnover is low and slow in the all-powerful Politburo, which remains the domain of conservative communists who fear that opening Vietnam would invite capitalism, and perhaps even democracy.

These party elders spent their formative political years successfully fighting for the independence of their country. The legacy they carry is a residual fear of foreign interference, which in turn influences the Vietnamese government's foreign policy: many senior party members instinctively question too much interaction with the outside world. They feel threatened by the emerging transnational forces and "soft power" of the twenty-first-century global system. In a widely noted speech marking the VCP's 70th anniversary, Le Kha Phieu condemned technology-driven globalization and pledged that Vietnam would not "change its colors" of socialism.

The party tapestry, however, is not woven purely of anachronistic threads. Members are also united by the substantial privileges that accompany party affiliation. Good public-sector jobs, better houses, cars, and opportunities for funded overseas travel come with party membership or contacts. Even in the growing but still limited private sector, obtaining the required approvals and licenses from the heavy-handed bureaucracy can be difficult without political assistance. So the VCP continues to attract some of the "best and brightest" of the younger generation, even if they personally care little about its ideology.

Inevitably, such a culture engenders pervasive corruption. General Tran Do, former head of the Ideology and Culture Department of the VCP's Central Committee, admitted being disillusioned with the party he had joined as a teenager in 1941. He observed that "exclusive power inevitably leads to the abuse of power." Abuses extend to the regional and local levels. Protests have occurred in the countryside, with angry farmers facing the local People's Committees that hold sway over crop pricing, local taxation, housing, and land distribution. In 1997, farmers from more than 100 villages in Thai Binh province, south of Hanoi, attacked local officials who had imposed multiple taxes. Although the Politburo has responded to criticism with an anticorruption campaign that brought the 1999 dismissal of Deputy Prime Minister Ngo Xuan Loc and some showpiece executions, a great deal of cynicism about its true degree of commitment remains. Indeed, some believe that conservatives have used the anticorruption campaign to justify the removal of some reformers.

Concessions to change, moreover, are hard to make when the leaders of the VCP talk of the need for maintaining "stability," a euphemism for continued party control. Many of these officials oppose economic reforms that might undermine their political power. The drama and chaos of Indonesia in recent years is cited as an example to be avoided.

More haunting to the Vietnamese leadership is the specter of the Soviet Union's collapse and the disintegration of its empire in Eastern Europe. Many in the cadre were educated in the Warsaw Pact countries, with which Vietnam enjoyed close fraternal relations for 30 years. The communist bloc's demise has not shattered the Vietnamese leaders' faith in communism as a political and economic system. Rather, they view Mikhail Gorbachev as having lost control of that system by recklessly undertaking economic reforms without assuring political stability. Communism's collapse is blamed on avoidable political mismanagement rather than a bankrupt economy or a failed ideology.

IDEOLOGICAL DISCORD

In contrast to Vietnam's leaders, most of its citizens are generally indifferent to communism. Ideology and politics cannot rival the people's primary and often sole concern: putting sufficient food on the table and making ends meet. Even the small proportion of the population (mostly city dwellers) that has some disposable income is preoccupied with buying a motorbike, a TV set, or a better place to live. Most Vietnamese dismiss the historic struggle for independence and the "American war" as events before their time that lack the immediacy of daily concerns. The streets of Hanoi and Ho Chi Minh City may be replete with banners displaying hammers and sickles or statues of Ho Chi Minh, but these symbols go largely ignored.

Economic concerns help account for the widespread ideological apathy, but fear and intimidation also play a role. In a society with no legal opposition, no right of assembly, and no autonomy for the national press, arbitrary arrest and detention remain conceivable results of political expression. The underdeveloped judicial system provides no guarantees because it lacks independence. The internal security apparatus is thought to be massive and intrusive, comparable to East Germany's Stasi. Such circumstances prohibit free speech as it is understood in the West. Speaking critically of the party means criticizing the state and is therefore treasonous. Few Vietnamese want to subject themselves to the harassment that will inevitably ensue.

Even senior party members muffle themselves, deterred by the VCP's severe discipline. Only a very few venerable elders whose party credentials are irreproachable have felt sufficiently secure to constructively criticize the country's present direction -- and their fate will not inspire more to do so. General Tran Do was one such daring critic. The 1997 farmers' riots in Thai Binh, his home province, confirmed his belief that the party had lost touch with the masses and was leading the country to ruin: "In the past, party and people were one. ... Today the party and the people are two. The party is an elite group of rulers over the people. People remain the voiceless subjects."

Tran Do -- like many other Vietnamese -- recognized the irresolvable contradiction between a market economy, essential for Vietnamese economic development, and the socialist direction of the VCP. Rejecting the often-asserted view that economic improvement must precede talk about political reform, he argued that economic reform actually requires vigorous political reform. Furthermore, loosening communist structures could be beneficial to Vietnam: "Claiming that democracy will end political stability is illogical." Refusing to stop his criticism after warnings from party boss Le Kha Phieu, Tran Do was stripped of his party membership in January 1999, ostensibly for having talked to the foreign media.

Colonel Tan Bin was another outspoken dissenter who was punished. Well-known as the officer who accepted the surrender of the South Vietnamese government in 1975, he had become a high-ranking party member, the widely read deputy editor of the party daily, Nhan Dan, and a trusted "barbarian handler" (the name given to those tasked with dealing with foreigners). But when he wrote honestly about the party's corruption and called for a legal opposition, he was forced into exile and now resides in a communist-voting suburb of Paris.

To become an outcast in Vietnam brings not only excommunication from the VCP and severed ties with former associates but threats of house arrest, cut phone lines, surveillance, and other forms of harassment. As history has shown, revolutions often consume their children, and Vietnam is no exception.

Political repression is only one black mark on a Vietnamese human rights record that has been a point of contention with the United States for many years. The State Department's most recent annual report on human rights concludes that in 1999, the Vietnamese government continued to limit some basic freedoms and commit numerous abuses, including unwarranted imprisonment in harsh conditions. Limitation of religious practices poses a particular problem. After 1975, the government banned the pre-independence Buddhist organization of southern and central Vietnam and replaced it with a state-sponsored group created specifically to put Buddhist activities under government control. Recalcitrant monks have been imprisoned or placed under "pagoda arrest." The eight-million-member Catholic Church also lies under various restrictions designed to limit its growth and influence.

Although religious and other freedoms have very gradually been increasing, Human Rights Watch this year released a strongly critical report concluding that the Vietnamese government systematically silences dissident voices. The Hanoi authorities deeply resent such charges as unwarranted interference in domestic affairs. They assert that constitutionally approved freedoms are ensured in practice and that no political prisoners exist except those convicted of breaking the law.

The next test of Vietnam's political system will be a crucial one -- the Ninth Party Congress in March 2001. The internal debate there about the country's direction over the next five and ten years could be fierce, although it will likely remain opaque to outsiders. Still, signs of discord are already evident. In April, little agreement could be reached at the plenum of the Central Committee, part of the run-up process to the party Congress. Five years ago the Eighth Party Congress's disagreements resulted in temporizing on most issues. This logjam is the price of a political system that considers consensus essential and allows elders to hold on to power for too long. The Politburo's awareness of the country's fundamental problems does not assure forward progress.

What may come out of the Ninth Party Congress remains decidedly uncertain, even contradictory. The recent decision to sign the U.S.-Vietnam trade agreement after a year of hesitation suggests that the party finally recognizes the need to engage more fully in the global economy. The invitation to President Clinton also indicates a new openness. On the other hand, the past 18 months have witnessed a return to the old-style rhetoric that is the hallmark of the conservatives. General Secretary Le Kha Phieu has led the party into a self-criticism campaign with the avowed aim of fighting "individualism," giving priority to "stability" over "reform," and emphasizing the importance of resisting "peaceful evolution." At the November 1999 Central Committee plenum, the VCP leaders focused on "party-building work," avoiding internal disunity, and closing ranks against any external challenges. Hanoi bureaucrats, skilled at reading the tea leaves, have turned more cautious. This development suggests that the primary concern of retaining political power will continue to override all other interests. How long such an approach can last, given Vietnam's precarious economic condition, is the critical question.

UNREALIZED POTENTIAL

A striking contradiction lies in the huge gap between Vietnam's economic potential and its actual performance. The country is rich in resources. Its young, industrious, and disciplined population grew up in a culture that gives priority to education (Vietnam has a 92 percent literacy rate) and possesses a strong work ethic. Already a major exporter of petroleum, rice, seafood, and coffee, the country has abundant natural resources and a primitive but large agricultural base, both waiting to be exploited. Opportunities for developing an information-technology sector abound. Yet Vietnam has been unable to match the economic progress of most of its ASEAN neighbors.

The first decade after the "American war" was disastrous, as the widespread famine resulting from forced collectivization made Vietnam depend on assistance from the Soviet Union and, to a lesser extent, China. By 1986 the rigidities of the command economy had become so debilitating that the VCP was forced to embark on its policy of doi moi, or economic renovation, that reduced the state's omnipotent control. For the first time, small-scale private commerce and foreign investment, tightly regulated and limited to minority ownership in joint ventures, were permitted. Substantial economic growth and macroeconomic stability followed, but the benefits were unevenly spread. A small, consumer-oriented middle class emerged in the major cities, while in the rural areas -- where 80 percent of the population resides -- 45 percent of farmers remained below the poverty line.

For the past three years, the economy has been in sharp decline, despite the preceding decade of improving performance. Annual growth in 1999 stagnated at four percent, less than half the rate of the mid-1990s and barely enough to tread water for such a poor country. Government revenue has decreased by five percent of GDP. Stagnant job creation has left increasing numbers of the 1.3 million people annually seeking to enter the work force either jobless or underemployed. Exports have lagged, especially the goods produced by the state-owned enterprises that cannot compete in global markets but remain a major sector of the economy, accounting for 30 percent of GDP.

Particularly notable is the drop in foreign direct investment, down to $1.4 billion in 1999 from $8.3 billion three years earlier. Expecting Vietnam to become the next Asian tiger, with its enticing consumer market of 80 million people, international companies rushed in during the early to mid-1990s. After several years of deep frustration with the massive red tape of the Hanoi bureaucracy, not to mention the abundant corruption, however, many firms have just as quickly moved out.

Fortunately, today two supplementary sources of income help balance the economy: $2 billion per year in family remittances from the 2.5 million Viet kieu (Vietnamese living overseas), mainly in the United States; and an additional $2.2 billion in official development assistance from donor nations and international lending agencies. But clear indications show that the lack of adequate economic reform is inducing "donor fatigue," which would be disastrous for the country.

Vietnam's current economic difficulties cannot be more than partially attributed to the Asian economic downturn, which some VCP conservatives cite to counter arguments for closer global integration. In fact, the country was too isolated from the world economy to have caught the Asian flu. Rather, Vietnam's key problems are internal. Poor management of the state-owned enterprises means that they require subsidies to stay solvent and thus drain scarce government resources. Structural weaknesses plague the banking sector, also largely government owned. Moreover, a Byzantine bureaucracy, unclear licensing rules, and inadequate foreclosure and bankruptcy laws persist. The centrally planned economy lacks flexibility and transparency and just is not compatible with today's fast-moving, increasingly integrated global economy.

Economic liberalization would require major reforms in Vietnam's still highly restrictive regulatory framework, which hinders foreign investment, financial services, telecommunications, intellectual property rights, and information flows. But the Vietnamese government has made some tentative steps in this direction. To stem the decline in foreign investment, amendments to the Foreign Investment Law in May 2000 streamlined the many legal and foreign-exchange control regulations that had frustrated foreign companies. Two months later, after eight years of procrastination, Vietnam's first stock market opened in Ho Chi Minh City. Initially, however, only four companies were licensed to list shares, trading was restricted to three days per week, and daily price fluctuations were capped at five percent.

The most hopeful advance to date was Hanoi's recent decision to move ahead with the U.S.-Vietnam trade agreement, signed on July 13. The signatures came after three years of laborious negotiations that began in 1996, with Hanoi surprising all observers in September 1999 by suddenly balking just before it was expected to sign, and a subsequent further year of government hesitation. Finally, the deadlock within the Politburo broke to the advantage of the reformers.

Given the severe deterioration in Vietnam's economic situation, the trade agreement was most likely motivated by desperation to reverse the economic decline. Vietnam is one of only a handful of countries to which the United States has not yet granted permanent normal trade relations (PNTR). Increased American investments and access to American markets through the granting of PNTR could help arrest the erosion of Vietnam's economy. The reduction in U.S. tariffs by as much as 40 percent could quickly raise Vietnamese exports to the United States to $800 million from the 1999 level of $500 million, according to World Bank estimates. And the long-term potential for trade is far greater.

Another factor contributing to Vietnam's signature was Beijing's late-1999 decision to sign a comparable trade deal with Washington. The U.S.-Vietnam trade agreement, like its Chinese counterpart, will boost the country's hopes for joining the World Trade Organization (WTO). By agreeing to reduce tariffs on goods and services and abide by WTO rules on intellectual property rights and trade in services, Hanoi will similarly increase its chances by becoming more compliant with the organization's requirements.

These necessary changes, however, will be far from rapid. Vietnam insisted on, and received, considerable grace periods and conditions. American banks may not open fully owned subsidiaries for nine years or issue credit cards for eight years. Telecommunications providers (which can erode the government's ability to exercise political control) will have to wait four years before entering into joint-venture agreements with local partners. Even then, they will be allowed to take only a minority equity stake. American retailers have permission to enter the market, but are limited to a single retail store per city. A great deal will depend on how the government implements this comprehensive trade agreement over the years.

As these problems suggest, the trade agreement will not bring significant economic benefits to the United States for some time. In the six years since President Clinton lifted the nearly 20-year-old trade embargo, U.S. exports to Vietnam have averaged less than $300 million annually, or just three days' worth of exports to Japan. The agreement will likely raise exports, but to no more than an estimated $800 million to $1 billion annually. Nevertheless, new safeguards for direct investment will encourage American companies to enter the market and establish manufacturing facilities. Market access for U.S. products, whether agricultural or industrial or services, will now be guaranteed. In 1999, the United States ranked only eighth among Vietnam's trading partners. Unfortunately, Congress is unlikely to approve the trade agreement this year, due to its crowded calendar, union opposition in an election year, and the White House's preoccupation with the China trade bill. But its passage in the next session appears safely assured.

The agreement's chief benefit could be its catalytic impact, providing momentum for economic reform and political development toward a more open, entrepreneurial, and democratically accountable society. To implement the agreed-upon measures, the Vietnamese government will have to remove the trade barriers that now protect inefficient state-run companies. The pact will also force Vietnam to adopt international norms on such matters as accounting and corporate governance and could accelerate the privatization of state-owned industry. This move should greatly help develop an expanded and more vibrant private sector. To the extent that these advances are well implemented and become the norm for bilateral trade relationships with other countries, Vietnam can better integrate itself into the regional and world economy. At that point, the contradiction between Vietnam's economic potential and its reality will have largely disappeared.

A DELICATE BALANCING ACT

Contradictory Vietnamese attitudes about the appropriate policies toward the United States and China show that, despite Vietnam's hesitation about deeper international engagement, there is a growing impatience with its relative isolation. For the reformers and much of the educated younger generation, the United States represents modernity; its technology, universities, and popular culture are especially attractive. Opportunities for travel to America and Europe are much sought after. For the conservatives and a sizable portion of the political and bureaucratic class, the United States represents an undefined threat in a dangerous and unstable world. Some within the military and security services suspect that Vietnamese-Americans, hostile to Hanoi, might seek to intervene in southern Vietnam -- the war in Kosovo is held up as a bizarre example. American visitors to Vietnam, however, remark that the proverbial people in the street could not be more friendly toward the citizens of a nation that used to carpet-bomb their country. The war was a quarter-century ago and apparently is best forgotten.

Vietnamese-American relations remained frozen for the first two decades after the fall of Saigon. But in 1994, President Clinton lifted the U.S. trade embargo on Vietnam in recognition of Hanoi's cooperation on soldiers missing in action (MIAS); the following year, diplomatic relations were established. Former member of Congress Pete Peterson, for six years a denizen of the infamous "Hanoi Hilton" (the prison where American flyers were incarcerated), has moved back to the city as the American ambassador. The thawing process is now gradually continuing but remains incomplete. For example, when Secretary of State Madeleine Albright visited Vietnam in September 1999, her conversations about the importance of human rights received a very cool response.

In March, William Cohen became the first serving secretary of defense to visit the Socialist Republic of Vietnam, after Hanoi had cancelled two earlier trips. The two countries reached agreement to provide equipment to clear an estimated 3.5 million remaining land mines, undertake joint research on the harmful effects of Agent Orange, and continue cooperating on American MIAs. In turn, the Vietnamese requested assistance in finding their own MIAs, who number in the hundreds of thousands. The two sides also discussed low-level military-to-military contacts, but the Vietnamese made it clear that they preferred to proceed very slowly on matters of security and foreign policy.

President Clinton's visit will mark a new stage in relations between the two countries, but whether its lasting impact will be greater on the American psyche or on Vietnamese realities is an open question.

When dealing with the United States, the Vietnamese look over their shoulder at the reactions of the Chinese leadership. Fear of provoking anxiety in Beijing deters rapid or substantive rapprochement with Washington. China is the neighborhood titan, with growing dominance in Asia and a long, troubled history with Vietnam. Intermittent conflict between this Asian David and Goliath has gone on for more than 1,000 years and continued after Vietnam's independence. In 1979, China made a short but bloody incursion into northern Vietnam, ostensibly to punish Hanoi for its own 200,000-troop intervention in Cambodia that deposed the pro-Chinese Khmer Rouge regime. In 1988 their long-standing dispute over the Spratly Islands also led to naval clashes. Although a treaty on the Vietnam-China border was reached at the end of 1999 and the two countries have since committed to finalizing soon an agreement on a demarcation line in the Gulf of Tonkin, conflicting claims over the Spratly and Paracel Islands -- which possibly hold massive oil and gas reserves -- remain unresolved.

The Soviet Union's collapse has given Hanoi no choice but to mend its ties with Beijing. The Vietnamese are actively seeking to improve and fully normalize relations through a series of high-level visits and accords. Nevertheless, apprehension and disagreement persist about China's intentions, just as with the United States. Vietnamese conservatives, especially in the military, value China as the last important remaining communist ally. Reformers, including officials of the Foreign Ministry, point to the threat that China could pose in a decade or two as it builds up its military strength, especially the navy. The historic mistrust between the two countries is deep and will not soon dissipate.

In recent times, Vietnamese diplomacy has become increasingly active in other areas. Vietnam joined the Association of Southeast Asian Nations in 1995 and has since developed ties with the member countries. And it also rekindled economic and cultural contacts with France following a summit of francophone nations in Hanoi in 1997. The country maintains close contacts with Cuba and several of the formerly communist states of eastern Europe. Yet most important in the long run will be Vietnam's delicate balancing act between China and America.

1. HUNGER FOR CHANGE

After more than 80 years of French colonial rule, nearly 20 years of terrible war, 15 years of xenophobic isolation and entanglement in the Soviet Union's economic web, and the last 10 years adrift as a communist country in a noncommunist world, Vietnam has reached a crucial crossroads. Will it transform itself to become a Thailand or a progressively changing China? Or will it slide into the backwardness of Cambodia or Laos? Of the four countries divided by World War II and the Cold War, Vietnam was the first to reunify. Yet compared to Germany, Taiwan, and South Korea, its performance has been abysmal. Today it faces being relegated to the communist dustbin of North Korea, Laos, and Cuba.

Change is inevitable. The real question is, Will the change be evolutionary or revolutionary? Casual observers of Vietnam, impressed by the size and vitality of the "Honda at the cybercafe" crowd, speak of a coming generational change that will sweep aside today's geriatric leadership. But this optimism is far too simplistic. True, the French-speaking veterans of the "senior" generation, esteemed for having fought the wars and unified the nation, are rapidly passing from the scene. But the next generation, 40 to 60 years of age, has begun to run the country and will not readily give up power and privilege. This "middle" generation, trained in Moscow and the capitals of the Soviet bloc, is committed to the VCP. The "junior" generation that grew up in the more open environment of the past decade will have to wait. Moreover, within this younger generation there will be competition, as the sons and daughters of current party members vie to inherit jobs and privileges.

The traditional Vietnamese way of transition is evolutionary. Thus gradual reform from within the structures is the most likely path. A Soviet-style breakup of the VCP in the next ten years is unlikely. But nothing lies beyond the realm of plausibility. In those rural areas mired in poverty and corruption, a new wave of riots targeted at the local People's Committees could erupt. In the increasingly crowded major cities, which attract peasants seeking work, unemployment is rising. Within the younger, educated elite an increasing dissatisfaction feeds hunger for fundamental change. All of Vietnamese society is subject to the revolution of rising expectations. The VCP's legitimacy cannot continue to be based on the victorious wars of the past century. Legitimacy will now have to be earned through sound management of the economy and widening prosperity in the twenty-first century. How long a one-party state can continue to absorb these pressures before moving toward pluralist democracy is uncertain.

The risk remains that the desperately needed economic overhaul and political rejuvenation will not come about soon enough. Without reform, Vietnam will fall still further behind its ASEAN colleagues, now recovering from the Asian economic flu. Even the communist government in Beijing is moving faster toward a market economy. Given its impressively rich potential, however, Vietnam can turn itself around and become a prosperous, multiparty, democratic nation. But when?