A. Nature of Political Relationship with the United States

On July 11, 1995, President Clinton normalized diplomatic relations with the Socialist Republic of Vietnam (SRV) and on August 6, 1995 the U.S. opened its first embassy in Hanoi. Since then, the U.S. government has continued to pursue the fullest possible accounting for Americans unaccounted-for from the war in Southeast Asia as its highest priority while expanding the bilateral relationship in every area. A major focus is on efforts to normalize economic relations, to include agreements on trade, civil aviation and protection of intellectual property. Most sectors of the government, the Communist Party and society favor expansion of the bilateral relationship, though some remain wary. The number and variety of official and private exchanges is increasing rapidly, including exchanges between government agencies, legislators, academics and business people.

B. Major Political Issues Affecting the Business Climate

Vietnam's foreign policy is to cultivate friendly relations with all nations and integrate itself into regional and global organizations. In domestic policy, though it is hindered by corruption and a cumbersome bureaucracy Vietnam is committed to economic reform and opening to the world economy.

1. Domestic Policy: Since introducing the "doi moi" policy of economic reform in 1986, Vietnam's leadership, the Party and the Government have remained committed to reforming Vietnam's economy and integrating it into the region and the world. The official economic model is a "market-based economy with socialist orientation", the definition of which is unclear but generally interpreted to mean allowing market mechanisms but with a leading role for the State and maintenance of one-party rule.

Debates continue over the proper pace of reforms and the role of state-owned enterprises and of foreign investors in Vietnam's economy. The Eighth Congress of the Party in June reaffirmed Vietnam's commitment to continuing reforms under "doi moi." The Congress re-elected Party General Secretary Do Muoi, President Le Duc Anh and Prime Minister Vo Van Kiet, all of whom are committed to "doi moi." There will be changes of Cabinet ministers and/or the top leadership in the coming year. This is not expected to result in a significant shift in policy direction, only in the pace of reform.

A Party proposal to allocate state-owned enterprises a 60% share in the economy was dropped due to domestic protest and foreign concern, but the Party and Government have publicly supported assigning the state sector a leading role in the economy. Political commentators within the Party and Government write often about the need to attract foreign capital and technology, while protecting against undue foreign influence in the economy and society. These concerns took concrete form in two government campaigns in early 1996, one against "social evils" including foreign cultural forms, and the other against advertising signboards using foreign words.

The government is engaged in extensive efforts at legal and administrative reform, including in areas affecting economic activity and foreign investment. Decrees promulgated in 1995 in support of the 1993 Land Law have caused considerable public debate as citizens and officials try to resolve decades-old competing claims over land use rights throughout the country. The third set of amendments to the foreign investment law is due for debate by the National Assembly in October 1996, and is expected to pass in 1997.

In the months surrounding the Party Congress, some high Party officials urged formation of Party cells within every enterprise, including foreign joint ventures and wholly-owned foreign enterprises. Foreign investors are watching warily how this issue develops, concerned it will increase Party control of businesses. Technically, wherever three or more Party members work, they should form a cell, and Party members are to actively recruit new members in their workplace. Some Party officials believe the cells have not been active enough.

Widespread official corruption and inefficient bureaucracy are blamed by Vietnam's leadership, press and citizenry, as well as by foreigners, as obstacles to continued economic growth and foreign investment. Despite regular denunciations of corrupt practices and individual Party and Government officials in public speeches and the press, the problem remains pervasive. Competition among government agencies for control over business and investments has created a confusion of overlapping jurisdictions and bureaucratic procedures. Also, decisions handed down by the central authorities often do not translate into action at the province or district level, where the interests of local authorities or other economic actors may be counterposed.

2. Foreign Policy: Vietnam has adopted an "open-door" policy of cultivating friendly relations with all nations in order to end its former diplomatic isolation and to support its economic development and attempts to attract foreign investment. In July 1995, Vietnam normalized relations with the United States, became a member of the Association of Southeast Asian Nations (ASEAN) and, thereby, of the ASEAN Free Trade Area (AFTA), and signed a memorandum of understanding for cooperation with the European Union. Vietnam and China normalized relations in 1991. Dispute over their borders, especially over control of the Spratly and Paracel island groups, remains problematic and a potential source of regional instability in the medium to long term. For the time being, both countries remain committed to negotiation and conduct regular talks on the issue. Vietnam and Cambodia continue to dispute their border and, occasionally, the status of ethnic Vietnamese in Cambodia, but there appears to be little danger of major conflict between the two countries.

C. Brief Synopsis of Political System, Schedule for Elections and Orientation of Major Political Parties

The Socialist Republic of Vietnam (SRV) is a one-party state controlled by the Vietnamese Communist Party (VCP). The VCP's constitutionally mandated leading role, the occupancy of nearly all senior government positions by Party officials, and the Party's extensive network down to the village level and through mass organizations ensures the primacy of guidelines from the Party's Political Bureau (politburo). The Government has a long-standing policy of not tolerating dissent and of prohibiting independent political, religious and labor organizations. The National Assembly, chosen in elections in which all candidates are approved by the Party and most are Party members, remains largely subservient to the VCP, as does the judiciary.

In late June 1996, the Party held its Eighth Congress, bringing together delegates elected by Party organizations at the local, district and provincial level, successively. Party Congresses are held every five years. Members of the National Assembly, Vietnam's highest legislative body, are elected for a term of five years. The present assembly was elected in July 1992. The National Assembly convenes for only twice annually, with each session lasting about six weeks. The next major session is scheduled for April 1997, marking the first meeting of the National Assembly following the Eighth Party Congress. Changes of cabinet ministers are expected following this session.

An effort is underway to reduce Party intrusion into government operations, and government officials are gaining more latitude in implementing policies. The regime uses the Ministry of Interior as well as a system of household registrations and block wardens to monitor the population, concentrating on those suspected of engaging, or being likely to engage, in unauthorized political activities.

Citizens do not have the right to change their government and there are significant restrictions on freedom of speech, association, the press and religion. The Government detains people for peacefully expressing political and religious objections to government policies and sometimes denies citizens the right to a fair and expeditious trial. However, the trend toward reduced government interference in people's daily lives continues, as does the opportunity toward greater freedom to engage in economic activity. Within still-narrow parameters, the National Assembly and the press are engaging in increasingly vigorous debate, and there is continued progress in building a legal infrastructure.

Last update: March 1997 by VACETS