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Carlyle A. Thayer ∗
[Paper to conference on Vietnam’s Integration into the World and State
Sovereignty Issues, co-organized the Centre d’Études et de Recherches
Internationales and Centre Asie-Europe, Sciences Po and le École des Hautes
Etudes en Sciences Sociales, Paris, France, October 25, 2004]
Introduction
∗
Professor of Politics and Foundation Director of The University of New South
Wales (UNSW) Defence Studies Forum at the Australian Defence Force Academy
in Canberra. In 2005, Professor Thayer will take up the position of C.V. Starr
Distinguished Professor of Southeast Asian Studies at the School of Advanced
International Studies, Johns Hopkins University in Washington, D. C. Revised
October 27, 2004.
1For broad overviews of the regional integration process consult Le Van Sang
(1998), Vu Duong Ninh (1998), Tran Khanh (2003), Luan Thuy Duong (2004) and
Vu Van Hien (2004); on the ASEAN Economic Community consult: Dang Cam Tu
1
2 Thayer
This paper is organized into five parts. Part 1 discusses several key
conceptual and definitional issues. Part 2 traces the origins of
Vietnam’s multi-directional foreign policy and Hanoi’s decision to
join ASEAN. Part 3 reviews Vietnam’s experience with
multilateralism as a member of ASEAN both before and after the
Asian financial crisis of 1997-98. Part 4 reviews the costs and benefits
of Vietnam’s participation in ASEAN with particular focus on the
ASEAN Free Trade Area (AFTA) agreement and the reform of State-
Owned Enterprises (SOEs). It also includes a short discussion of the
‘code of conduct’ in the South China Sea and the Myanmar question.
Part 5 offers some conclusions arising from Vietnam’s experience
with multilateralism.
(2004) and Tran Phuong Lan (2004); and for the impact of globalisation, consult:
Do Trong Ba (2003) and Van Quang (2003) .
Vietnam’s Regional Integration 3
them multilateral (1992:566-568). He argues that it is not simply the
number of actors involved but the qualitative dimension or character
of their cooperation. According to Ruggie, multilateral relations
involve three or more states coming together to tackle a specific issue
or set of issues on the basis of generalized principles of conduct. In
other words, multilateral institutions adopt appropriate conduct for
a class of actions irrespective of particular interests or circumstances.
It was not until May 1988 that Vietnam’s new foreign policy
orientation was codified. This took the form of Politburo Resolution
no. 13 which asserted that ‘economic weaknesses, political isolation
and economic blockade are major threats to our country’s security
and independence’. Therefore Vietnam should pursue ‘the
establishment of a framework for the Indochinese-ASEAN peaceful
co-existence as conditions for maintaining peace, developing the
economy and consolidating the relationship of cooperation and
solidarity among the three countries’ (quoted in Luu Doanh Huynh
2004:30). The objective now was ‘to maintain peace, take advantage
of favorable world conditions’ in order to stabilize the domestic
situation and set the base for economic development over the next
ten to fifteen years (Nguyen Dy Nien 1996:47). This was a landmark
policy decision that set Vietnam firmly on a ‘multi-directional
foreign policy’ orientation.
In August 1991, Phan Van Khai, first vice chairman of the Council of
Ministers, speaking at an international symposium in Hanoi,
signaled Vietnam’s desire to cooperate with ASEAN members. Pham
Van Tiem, chairman of the State Price Committee, stated that
‘ASEAN can become the bridge between Vietnam and the world’
(quoted by Andrew Sherry, Agence France-Presse, August 25, 1991).
In September, during the course of a visit to Hanoi by Thailand’s
Foreign Minister, Vietnam expressed its willingness to accede to the
1976 ASEAN Treaty of Amity and Cooperation and then followed
up by officially notifying the Philippines of its intention (Kavi
Chongkittavorn, The Nation, September 24, 1991).
Sixty per cent of Vietnam’s foreign trade was with ASEAN states. In
1994, Singapore overtook Japan to become Vietnam’s biggest trading
partner. Four of the ASEAN countries ranked among the top fifteen
foreign investors in Vietnam. Singapore and Malaysia ranked sixth
and seventh, respectively, after Hong Kong, Taiwan, South Korea,
Australia and France (figures published by the State Committee for
Cooperation and Investment, August 11, 1994). The industrializing
economies of Thailand and Malaysia also made them important
models for Vietnamese emulation.
The collapse of the Soviet Union in late 1991, coupled with the prior
collapse of the socialist system in Eastern Europe in 1989, drastically
altered Vietnam’s strategic environment. Military confrontation of
the Cold War era was now a thing of the past. More importantly,
Vietnam suffered from the abrupt loss of Soviet aid and markets.
Figures released at the end of 1995 revealed that ASEAN states had
invested in 234 projects with a total investment capital reaching
US$3.2 billion. As of 16th May 1997, these figures had risen to 312
projects with a total capitalization of US$7.6 billion or 20% of the
total foreign direct investment in Vietnam. Singapore ranked first in
both the number of projects, totaling 156, and capital invested,
US$5.1 billion (Le Quoc Phuong, Saigon Times Daily, May 21, 1997).
5This section draws on Thayer (1999c and 2004b). For contemporary views consult
Nguyen Vu Tung (1993), Hoang Anh Tuan (1994 and 1996), Goodman (1996),
Nguyen Manh Hung (1996), Singh (1997), Zagoria (1997), Pham Duc Duong (1998)
and Takahiro (1999).
Vietnam’s Regional Integration 11
economic motivations. According to one official, for example,
Vietnam expected ASEAN membership to provide enhanced
national security, external support for economic development, and
as a catalyst to its domestic reform process (Doan Manh Giao 1995).
According to Nguyen Phuong Binh and Luan Thuy Duong
(2001:186-189) there were three ‘driving forces’ behind Vietnam’s
desire to join ASEAN: (1) a favourable external environment with
peaceful and friendly relations with neighbouring countries; (2)
economic co-operation; and (3) enhanced standing in the wider Asia-
Pacific region and the world (including relations with the United
States, Japan, China, Russia and India).
I have written elsewhere that Vietnam joined ASEAN with the prime
strategic objective of securing of a more peaceful international
environment in which to guarantee Vietnam’s national security
against external threat (Thayer 1999). This has been misconstrued by
one writer as implying that Vietnam joined ASEAN in order balance
China. (Nguyen Vu Tung 2002). The word ‘threat’ was not meant
exclusively in its narrow military sense as Politburo Resolution No.
13 had already identified economic threats (such as embargoes) as
one of its main security concerns. 6
Vietnam also joined ASEAN primarily for the political and strategic
benefits it calculated it would gain vis-à-vis the ‘great powers’,
China and the United States. This constitutes the second aspect of the
politico-strategic dimension. Vietnam’s membership in ASEAN was
expected to lead to enhanced standing and prestige in the wider
Asia-Pacific and the world. And this in turn provided Vietnam with
an enhanced bargaining position in global affairs. Vietnam expected
to be able to leverage its ASEAN membership with the major powers
without any detrimental effect on its existing external relations.
The AFTA came into being in January 1992 with the objective of
eliminating tariff barriers among ASEAN members and thus
integrating the ASEAN economies into a single production base and
regional market by 2010 (ASEAN Free Trade Area n.d.; Bowles 1997;
and Southeast Asia: A Free Trade Area 2002). This target date was later
brought forward and separate deadlines were set for newer
members. The key mechanism is the Common Effective Preferential
Tariff (CEPT) scheme. Signatories are required to classify all
manufactured goods into one of four categories: Inclusion List,
Temporary Exclusion List Sensitive List and General Exclusion List.
AFTA members have agreed on a schedule to reduce tariffs on goods
in the first two lists to within the range of 0-5% according to an
agreed schedule. AFTA members are also required to remove
quantitative restrictions and other non-tariff barriers (Lao-Araya
2003:61; Ahmad 2003).
8This is also a current concern. Hoang Thi Thanh Nhan (2004) and Tran Khanh
(2003) argue that the development gap between ASEAN members adversely
affects regional economic security. For difficulties in narrowing this gap and
achieving ‘convergence’ consult (Gates 2000, 2001 and 2001b); and for a more
general discussion on the lessons for Vietnam, see Tran Van Tung (2003), Van
Quang (2003) nd Vu Anh Tuan (2004).
Vietnam’s Regional Integration 17
to a slow-down in ASEAN decision-making and consensus-building
and new members were an economic and political burden.
Vietnam used its status as the host for ASEAN’s sixth summit
meeting in December 1998 to successfully obtain endorsement from
other ASEAN members for special treatment for the four newer
members: Cambodia, Laos, Myanmar and Vietnam. In order to
overcome the development gap between ASEAN’s more developed
and less developed economies, the ASEAN 6 (the five original
members plus Brunei) agreed to assist and grant special treatment to
the latter in their development efforts. This ‘positive discrimination’
was embedded in the Hanoi Plan of Action and other documents
adopted by the sixth summit. The theme of reducing the
development gap between the ASEAN 6 and ASEAN’s newer
members has become of central feature of ASEAN economic
programs, such as the ASEAN Investment Initiative.
Vietnam has had close and long-standing historical ties with the
regimes in Cambodia, Laos and Myanmar (CLM) which pre-dated
their membership in ASEAN. After the ‘CLM’ countries were
admitted into ASEAN, and particularly after the 1997-98 debate over
‘constructive intervention’, Vietnam has moved to ensure that
bilateral relations remain as firm as ever. In addition, Vietnam has
also developed develop multilateral cooperation through a grouping
18 Thayer
of Mekong states at sub-regional level. These economic and political
linkages may be designed to mirror the influence of the ASEAN 5/6
within ASEAN itself and may represent a nascent caucus of
politically closed states within the Association (Thayer 2000c).
Vietnam’s decision to join AFTA marks the first time Vietnam has
20 Thayer
taken part in regional economic cooperation. The AFTA is one of the
least restrictive regional trading agreements (Lao-Araya 2003:62).
Timetables for the implementation of CEPT commitments vary
among individual states (Vo Thi Thanh Loc 2001:3). An AFTA
Council was set up to supervise AFTA’s implementation but it too
has no powers to force members to comply. This section explores the
nature of ASEAN multilateralism with reference to AFTA and the
reform of Vietnamese state-owned enterprises (SOEs), the ‘code of
conduct’ in the South China Sea, and the Myanmar question.
Urban 2,208
Midlands 408
Total 6,366
13The World Bank defines equitization as ‘a process whereby some or all of the
state capital in the enterprise is sold in the form of shares at a price based on the
book value of the assets’(2002:22).
14The Steering Committee was replaced in 2001 by the National Steering
Committee on Enterprise Reform and Development.
26 Thayer
only five SOEs were equitized due to various administrative
difficulties and because of the unwillingness of SOE managers and
workers to participate (Vu Quoc Ngu 2003a:329). 15 New directives
issued in June 1998 resulted in a speeding up of the equitization
process. By the end of 1999, 370 SOEs had been equitized. Then the
process stalled during 2000 and the first half of 2001. By May 2002
the number of total SOEs equitized stood at 645 and rose to nearly
1,000 by the end of the year. 16
It should be noted that new SOEs were also being created but this
process came to a virtual halt in mid-2001. The net result was that
the SOE sector increased in absolute size. But due to the growth of
the private sector, the relative size of the state sector, as a proportion
of the Vietnamese economy, declined (The World Bank 2002:24).
The purpose of SOEs reform was to make them more efficient in the
market place and to curb the drain on state finances. Many of these
SOEs were small in size, inefficient, loss-making, and indebted to
state banks. In 1990, for example, it was reported that thirty-eight
percent of SOEs were operating as a loss (Vu Quoc Ngu 2003b:161).
In 1997, 40 percent of SOEs were classified as profitable, 44 percent
as ‘temporary loss makers’ and 16 percent as ‘permanent loss
makers’ (Painter 2003:26).
15By the end of 1997, only seventeen enterprises had been converted into joint
stock companies, a figure that rose to twenty-five by June 1998 (Vu Quoc Ngu
2003a:328).
16Of the total numer of SOEs equitized between 1997-2002, the industrial and
construction sector accounted for half; trade companies accounted for about one-
third with the remainder in transportation, agriculture and aquaculture (Vu Quoc
Ngu 2003a:329).
17The future disposition of the remaining 226 SOEs was not specified.
18General Statistics Office quoted by Saigon Times Magazine, August 26, 2004.
Vietnam’s Regional Integration 27
policy mechanisms were developed. First, the Ministry of Finance
was given carriage over the state’s interests as the ‘owner’ of
individual SOEs. Secondly, in 1994-95, general corporations were
created to take charge of SOEs on the basis of the number of
affiliated or member enterprises involved and capital holdings. In
1995, SOEs were given legal status in law and increased autonomy to
determine their production and financial strategies. SOEs could now
enter into agreements with foreign partners, set wages, and hire and
fire employees. Eighteen national general corporations in electricity,
coal, petroleum, post and telecommunications, steel, and textiles and
garments were set up (Painter 2003:30). Ownership rights remain
with the establishing authority while management functions are the
responsibility of the Board of Management.
The ninth national congress of the VCP, which met from 19th-22nd
April 2001, endorsed a five-year program of SOE reform involving
the transformation of about 1,700 enterprises by 2005. 20 At the end of
this reform period it is projected that the state would retain control
over 2,700 enterprises (The World Bank 2002:26). The ninth congress
reforms laid out ambitious plans for the future roles of SOEs
including provision of public utilities and catering to the needs of
national defence and security. The new party Secretary General,
Nong Duc Manh, made SOE reform one of his top priorities (Thayer
2003b). A government decision the following year (No.
58/2002/QD-TTg) set out the criteria under which an SOE would be
retained or equitized. In sum, the state would retain one hundred
percent ownership of large and profitable general corporations in
‘strategic’ areas, such as public utilities and state monopolies in
explosives, toxic chemicals, and radioactive materials.
Six states have territorial claims in the South China Sea. China,
Taiwan and Vietnam claim the entire area, while the Philippines and
Malaysia claim specific features. Brunei’s Exclusive Economic Zone
overlaps with a feature occupied by Malaysia. Chinese assertiveness
in the South China Sea in 1992 and 1995 prompted ASEAN to issue
public statements of concern. After Vietnam’s membership in
ASEAN, the issue of overlapping territorial claims in the South
China Sea became a matter of discussion between ASEAN and
China. ASEAN senior officials first raised it at a bilateral meeting of
senior officials held in Kunming in April 1999.
23Until the promulgation of the Enterprise Law there was no adequate legal
framework to convert SOEs into companies.
Vietnam’s Regional Integration 31
Vietnam has initiated a tourist visit to Truong Sa Lon and announced
that it would commence flights to the island after the 600 metre
runway was repaired and tourist facilities constructed. The
Philippines and China, without prior consultation with other
claimants, have agreed to conduct joint seismic tests in the South
China Sea. Taiwan, a non-signatory, has constructed a bird watching
station on a feature. China responded to Vietnamese actions by
dispatching a naval flotilla to the area. In a development which is not
unrelated, Hanoi approached the United States to arrange the first
official visit of its Defence Minister, Politburo member General Pham
Van Tra, to Washington, D.C. General Tra announced that the
purpose of his visit was promote mutual understanding and ‘joint
efforts to build a framework of friendly cooperative ties for peace,
and long-term stability in the Asia-Pacific region’ (Vietnam News
Agency, November 12, 2003). Shortly after Tra’s visit, the USS
Vandegrift made the first American naval port call to Ho Chi Minh
City since the end of the Vietnam War.
Vietnam was put on the spot again in 2000-01 when, as chair of the
ASEAN Standing Committee, its foreign minister was required to
visit Myanmar on behalf of the association to determine Yangoon’s
willingness to adopt political liberalization measures. According to
diplomatic sources, Vietnam did so in a perfunctory manner.
Vietnam reported back to ASEAN that Myanmar was not willing to
make any concessions at this time. In 2004, Vietnam was placed in a
similarly difficult role as host of the 5th Asia-Europe Meeting (ASEM)
in Hanoi. According to one source, Vietnam ‘conveyed the
arguments of both sides and really made a lot of efforts’. 25 ASEM 5
was almost postponed due to disagreement between the Europe
Union and ASEAN over Myanmar’s attendance. Vietnam played a
key role as interlocutor with Myanmar, dispatching no less than
retired prime minister Vo Van Kiet to Yangoon to extract a
concession on its participation.
Part 5 — Conclusion
Vietnam has been able to prevent the erosion of state authority with
respect to its dealings with the major powers, the policy debate over
‘constructive intervention’ and the Myanmar question. As noted
above, Vietnam has shored up its bilateral relations with both China
and the United States. Vietnam has not only developed robust
bilateral ties with the CLM states, but has initiated cooperation
among the three states of the former Indochina. Vietnam has played
a blocking role in trying to prevent any modification of the principle
36 Thayer
of non-intervention. 28 These efforts have resulted in an informal
caucus of politically closed states within ASEAN designed to uphold
juridical sovereignty in sensitive political matters.
28Ironically, blocking unpalatable policies within ASEAN in effect keeps ASEAN from
developing into a more effective multilateral organization. For example, the perception that
ASEAN was weak and lacking in cohesion in failing to respond adequately to the triple
crises of 1997-98 may have contributed to a decline in foreign direct investment to the
region including Vietnam.
Vietnam’s Regional Integration 37
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