Vietnam's Communists Eye New Vices as Market Worries Rise

To the young and hip in Ho Chi Minh City, the Dash Rush restaurant is more than a fast-food outlet serving noveltiesuchas hamburgers: It is also a popular place to hold a wedding banquet.

In Hanoi, those looking for something more stylish can rent the ballroom of the five-star Hanoi Daewoo Hotel, where some 700 people attended a recent event.

Vietnam's young brides and grooms have more choices of large venues than ever. But not everyone is happy about this.

The government has launched a campaign against big wedding parties, using its press and brandishing unspecified punishments.

"Many families, including those of senior officials, have held big wedding parties or funerals to gain prestige or money," said the official Vietnam News. "These phenomena have become social ailments that degrade traditional morals and the people's thrifty, modest, and fine way of living."

Socialism vs. markets

For a good part of the past decade, Vietnam's state-run media have periodically, and unsuccessfully, rallied to stamp out prostitution and illicit drugs. This latest addition to the government's list of social vices underscores the ruling Communist Party's predicament as it tries to reconcile socialist ideals with a burgeoning market economy.

Hanoi's leaders, watching how other Asian nations handle similar problems, see nearby Thailand as a mixed model. While Thailand allows private business to be dynamic, it also allows "too much of a widening gap between the rich and the poor, the cities and the rural areas," says government economic adviser Do Duc Dinh.

Opening in 1986

Ever since Vietnam embarked on its economic reforms known as doi moi in 1986, the gap between the rich and the poor has steadily grown. Moreover, some areas of the country have benefited more than others from the market economy. Ho Chi Minh City, the nearby Dong Nai province, and Hanoi alone attracted some 60 percent of the pledged foreign capital last year, yet they account for just 12 percent of the 75 million people in Vietnam. All this is not lost upon the Communist Party, which draws much of its power base from rural areas where some 80 percent of the population live.

Though some people complain that the pronouncement against big wedding parties is a case of excessive Big Brother intervention, the Vietnamese government sees it as a necessary step to defuse political unrest. Last year, a string of protests erupted in several provinces as villagers complained about low wages, tax increases, and corruption among local officials.

Vice worries conservatives

Some Western analysts believe that the uprisings fueled conservative elements within the party's ruling Politburo and slowed the pace of economic reforms. As a result, direct foreign investment in new projects fell by almost half last year compared with 1996. This was the first time that investment growth in Vietnam declined since doi moi was initiated.

"As the government courts international interest, it simultaneously constrains investors with tight restrictions on advertising spending and a long licensing process," says a Western businessman who declined to be identified.

The market has not grown as much as many international companies had expected, and some firms have moved out or scaled down operations. Dutch airline KLM Royal suspended its flights to Ho Chi Minh City in March.

This is in stark contrast to just four years ago, when the United States lifted its embargo against Vietnam and foreign investors rushed in, attracted to the country's relatively educated population, low-cost labor, and opening economy. "The reforms in the early '90s were quite radical by any standards," says International Monetary Fund representative Erik Offerdal.

These days, investors are less enthusiastic, and they are increasingly concerned about the government's often-conflicting policies of freeing the market and tightening controls.

According to Daewoo's public relations manager in Hanoi, Phan Hong Nga, the South Korean conglomerate's apartment building adjacent to its hotel had a low occupancy rate in 1996 and early 1997 because companies were uncertain about the market. "Investors in Vietnam are quite cautious and unwilling to sign a long-term lease - which is understandable," she says. Ms. Nga adds that the building now allows three-month leases.

Government officials "haven't seen the need for further reforms in recent years," says Mr. Offerdal. "It has been several years since significant market reforms have been implemented."

There are signs, however, that Vietnam will kick-start its economy again. Last September, the Communist Party Central Committee changed its leadership by naming two market reformers to the posts of president and prime minister: Tran Duc Luong and Phan Van Khai.

New leader's direction

Yet Hanoi-based foreign businessmen caution that it is too early to tell what the new leadership will mean to the economy. In late December, conservative Army official Le Kha Phieu was elected Communist Party secretary general, traditionally the most powerful member of the triumvirate. Mr. Phieu has a record of opposing a free-market system, and he is seen as a counterbalance to the new president and prime minister.

However, since assuming his new post, Phieu has said that he favors economic reforms. "We will continue to carry out renovation," the Nhan Dan daily reported him as saying.

Some businessmen warn that Phieu's recent statements in the official press cannot be taken at face value. "I doubt that he could have changed his ideology just because he has a new title," says one Ho Chi Minh City-based businessman who spoke on condition of anonymity. "A leopard can't change his spots."

Other analysts are more optimistic. "The reforms will definitely continue at a fast pace," says Mr. Dinh, the government economic adviser.

Offerdal agrees, pointing out that Vietnam's decisionmaking process is based on consensus: "I don't think that any one person can change Vietnam's commitment to market reform."

Vietnam's leadership overhaul came at a particularly difficult time. Vietnamese products' competitiveness fell as other Asian currencies plummeted. South Korea, Vietnam's largest investor last year, is tending to its problems at home. And investment from other East Asian nations, which together with South Korea accounted for some 70 percent of Vietnam's trade last year, may continue to decline as the region deals with its financial crisis.

Though the government forecasts GDP growth of 9 percent this year, many Western economists believe this figure is optimistic. "I don't think that it can be achieved given the regional situation," says Offerdal.

Control above reform

Ironically, the regional troubles and last year's disappointment may prove to be an "impetus for reforms," Offerdal says. "Over the past year, it's become apparent that new initiatives are needed."

However, party leader Phieu indicated that Communist control must still be incorporated in the government's economic plans.

"Maintaining political stability is the fundamental condition to carry out the renewal process," he told the official Nhan Dan daily newspaper recently.