Vietnam

Economy—overview: Vietnam is a poor, densely populated country that has had to recover from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities of a centrally planned economy. Substantial progress has been achieved over the past 10 years in moving forward from an extremely low starting point, though the regional downturn is now limiting that progress. GDP growth of 8.5% in 1997 fell to 4% in 1998. These numbers masked some major difficulties that are emerging in economic performance. Many domestic industries, including coal, cement, steel, and paper, have reported large stockpiles of inventory and tough competition from more efficient foreign producers, giving Vietnam a trade deficit of $3.3 billion in 1997. While disbursements of aid and foreign direct investment have risen, they are not large enough to finance the rapid increase in imports; and it is widely believed that Vietnam may be using short-term trade credits to bridge the gap—a risky strategy that could result in a foreign exchange crunch. Meanwhile, Vietnamese authorities continue to move slowly toward implementing the structural reforms needed to revitalize the economy and produce more competitive, export-driven industries. Privatization of state enterprises remains bogged down in political controversy, while the country’s dynamic private sector is denied both financing and access to markets. Reform of the banking sector is proceeding slowly, raising concerns that the country will be unable to tap sufficient domestic savings to maintain current high levels of growth. Administrative and legal barriers are also causing costly delays for foreign investors and are raising similar doubts about Vietnam’s ability to maintain the inflow of foreign capital. Ideological bias in favor of state intervention and control of the economy is slowing progress toward a more liberalized investment environment.

Disputes—international: maritime boundary with Cambodia not defined; involved in a complex dispute over the Spratly Islands with China, Malaysia, Philippines, Taiwan, and possibly Brunei; maritime boundary with Thailand resolved, August 1997; maritime boundary dispute with China in the Gulf of Tonkin; Paracel Islands occupied by China but claimed by Vietnam and Taiwan; offshore islands and sections of boundary with Cambodia are in dispute; sections of land border with China are indefinite

Illicit drugs: minor producer of opium poppy with 3,000 hectares cultivated in 1998, capable of producing 20 metric tons of opium; probably minor transit point for Southeast Asian heroin destined for the US and Europe; growing opium/heroin addiction; possible small-scale heroin production

Northern Vietnam is rich in mineral resources, especially anthracite and lignite coal. Other minerals found in the north include iron ore, lead, zinc, bauxite, copper, chromium ore, tungsten, and tin. Some petroleum deposits exist off the southern coast.

Vietnam is heavily dependent on foreign aid, supplied mainly by the Soviet Union until 1991. Imports exceed the value of exports. Until the late 1980s the Soviet Union was Vietnam’s main trading partner. During the early 1990s its main partners were Japan, Taiwan, Thailand, and Singapore, and Vietnam had begun to attract trade and investment from a number of Asian and Western countries. Imports include fuel and raw materials, machinery, and foodstuffs; exports are dominated by raw materials and handicrafts.

From the mid-1980s, prompted in part by serious economic problems and in part by similar developments in the Soviet Union, Vietnam’s government enacted a series of economic reforms, including significantly more liberal policies toward private enterprise. Following the dissolution of the Soviet Union in 1991, Vietnam improved relations with a number of Asian and Western nations, and there were signs that its international isolation was ending.

For seven years the French opposed independence, and Ho Chi Minh led guerrilla warfare against the French in the First Indochina War, which ended in a Vietnamese victory at Dien Bien Phu on May 7, 1954. An agreement was signed at Geneva on July 21, 1954, providing for a temporary division of the country, at latitude 17º N, between a communist-led and Soviet-supported northern half and a U.S.-supported southern half. The activities of North Vietnamese guerrillas and procommunist rebels in South Vietnam led to U.S. intervention and the Second Indochina War, or Vietnam War (1955-75), which caused great destruction and loss of life. A cease-fire agreement was signed in 1973, and U.S. troops were withdrawn. The civil war soon resumed, however, and in 1975 North Vietnam launched a full-scale invasion of South Vietnam that resulted in the collapse of the South Vietnamese government and its replacement by a regime dominated by the communists. On July 2, 1976, the two Vietnams were united as the Socialist Republic of Vietnam.

CAMBODIA - Kambodsja

Economy—overview: After four years of solid macroeconomic performance, Cambodia’s economy slowed dramatically in 1997-98 due to the regional economic crisis, civil violence, and political infighting. Foreign investment fell off, and tourism has declined from 1996 levels. Also, in 1998 the main harvest was hit by drought. The long-term development of the economy after decades of war remains a daunting challenge. Human resource levels in the population are low, particularly in the poverty-ridden countryside. The almost total lack of basic infrastructure in the countryside will continue to hinder development. Recurring political instability and corruption within government discourage foreign investment and delay foreign aid. Even so, growth may resume in 1999 at, say, 2%.

Disputes—international: offshore islands and sections of the boundary with Vietnam are in dispute; maritime boundary with Vietnam not defined; parts of border with Thailand are indefinite; maritime boundary with Thailand not clearly defined Illicit drugs: transshipment site for Golden Triangle heroin; possible money laundering; narcotics-related corruption reportedly involving some in the government, military, and police; possible small-scale opium, heroin, and amphetamine production; large producer of cannabis for the international market.

Cambodia has a developing economy, and it is one of the world’s poorest countries. Agriculture employs three-fourths of the workforce and is dominated by subsistence farming. Rice is the chief staple, and rubber is the major cash crop. Authorities have successfully encouraged farmers to plant paddies with local strains of rice, which germinate at higher rates than do imported strains. Limited quantities of cassava, sugarcane, sweet potatoes, and corn (maize) are also produced. Livestock raising (mainly cattle, pigs, and water buffalo) and maritime fishing have increased.

Manufacturing industries are inconsequential and centre on the processing of locally grown rubber, rice, and other agricultural commodities. Small quantities of rubber, agricultural products, and wood (such as teak) are exported. Most capital and consumer goods must be imported. Only about one-fifth of Cambodia’s roads are paved. Inland waterways include the Mekong and Sab rivers and Tonle Sap. The country’s principal deepwater port is Kâmpóng Saôm on the Gulf of Thailand. There is an international airport near Phnom Penh.

A peace accord was reached by most of the Cambodian factions under UN auspices in 1991, and a UN-supervised interim government held free elections in 1993. Sihanouk soon afterward returned as the country’s monarch, heading a coalition government that was opposed only by the Khmer Rouge.

LAOS

Economy—overview: The government of Laos—one of the few remaining official communist states—has been decentralizing control and encouraging private enterprise since 1986. The results, starting from an extremely low base, have been striking—growth averaged 7% in 1988-96. Because Laos depends heavily on its trade with Thailand, it fell victim to the financial crisis in the region beginning in 1997. Laos is a landlocked country with a primitive infrastructure. It has no railroads, a rudimentary road system, and limited external and internal telecommunications. Electricity is available in only a few urban areas. Subsistence agriculture accounts for half of GDP and provides 80% of total employment. The predominant crop is glutinous rice. In non-drought years, Laos is self-sufficient overall in food, but each year flood, pests, and localized drought cause shortages in various parts of the country. For the foreseeable future the economy will continue to depend on aid from the IMF and other international sources; Japan is currently the largest bilateral aid donor; aid from the former USSR/Eastern Europe has been cut sharply. As in many developing countries, deforestation and soil erosion will hamper efforts to regain a high rate of GDP growth.

Disputes—international: parts of the border with Thailand are indefinite Illicit drugs: world’s third-largest illicit opium producer (estimated cultivation in 1998—26,100 hectares, a 7% decrease over 1997; estimated potential production in 1998—140 metric tons, a 33% decrease over 1997); potential heroin producer; transshipment point for heroin and methamphetamines produced in Burma; illicit producer of cannabis

Laos is one of the world’s poorest countries. It has a slowly developing, largely centrally planned economy based mainly on agriculture and international aid. The gross national product (GNP) per capita is one of the world’s lowest. Agriculture employs about three-fourths of the workforce and is dominated by the production of rice. After the (communist) Pathet Lao took control of the country in 1975, all land was nationalized and the government encouraged the spread of agricultural cooperatives. By the early 1990s, however, the government had begun taking steps to liberalize the economy, such as permitting the return to family-based farms and allowing foreign investment. Farmers are allowed to sell rice on the open market; the quantity of rice sold to the state has increased sharply as a result of higher prices and a lowering of the agricultural tax. Production of rice, however, frequently falls short of domestic demand and is supplemented by imports from Thailand. Significant quantities of sweet potatoes, sugarcane, cassava, potatoes, pineapples, corn (maize), spices, coffee, medicinal oils, tobacco, and cotton are also produced. Opium is an important cash crop in northern Laos, the Laotian portion of the "Golden Triangle." Pigs, water buffalo, and cattle are reared. Forestry and fishing are also elements of the economy. Fish from ponds and the Mekong River are the major source of protein in the Laotian diet. The country’s manufacturing industries are of negligible importance outside Vientiane and centre on the processing of agricultural products and domestic raw materials, of which timber is the most important. Electricity is generated almost entirely from hydroelectric power. Most electricity generated by the Nam Ngum Dam is exported to Thailand and serves as a major source of foreign exchange. Wood, coffee, tin, and gypsum are other important exports. Much of Laos’s external trade, including the import of food, fuels, and manufactured goods, is ordinarily channeled through Thailand. Thailand, Japan, and China are the country’s main trading partners.

At the Geneva Conference (1954), a unified and independent Laos was established as a buffer state between communist-aligned North Vietnam and Western-oriented Thailand (formerly Siam). During the 1950s the Pathet Lao struggled with rightist and neutralist factions for control of Laos. A second Geneva Conference (1962) formed a neutral coalition government that included the Pathet Lao. For the rest of the decade Laos became increasingly involved in the war in Vietnam. Pathet Lao forces aligned themselves with North Vietnam and fought Laotian government forces for control of the country. In 1973 a cease-fire was signed, and the next year a Provisional Government of National Unity, composed of the Pathet Lao and rightists, was formed. In 1975, coinciding with the fall of the anticommunist regimes of Saigon and Phnom Penh, the Pathet Lao took control of the country, revealed the existence of a secret Laotian communist party, and established the Lao People’s Democratic Republic. Laos maintained a close relationship with Vietnam during the 1980s, but Vietnamese influence had diminished by the early 1990s. The country held its first election in 1989 and promulgated a new constitution in 1991.