- The Washington Times - Sunday, February 8, 2004

VINH THANH TRUNG, Vietnam - Vo Van Tuong patiently feeds the fish on his floating farm. The 53-year-old father of six has no trouble keeping a smile on his face, even as he voices deep worries about the future of his business and family.

“The last year or two haven’t been good,” says Mr. Vo, who moved his farm to this tiny village in the Mekong Delta in southwest Vietnam nearly six years ago. “The government buys our fish at a very low price, while the price of fish food has increased. The farmers haven’t been able to turn almost any profit.”

Mr. Vo is one of hundreds of catfish farmers who became victims of one of Vietnam’s first big attempts to trade with the United States.

The communist government, which owns the fishing industry, stumbled badly by flooding the U.S. market with catfish. In return it was hit with punitive duties and new labeling rules for having violated U.S. trade and trademark laws.

Until a year ago, Vietnam’s catfish industry — a key part of the country’s small but rapidly growing economy — enjoyed prosperity previously unknown to this poor, war-ravaged nation.

Following the end of the U.S. trade embargo in 1994 and the signing of a bilateral trade agreement in 2000, Vietnamese catfish in the American market became a big moneymaker.

In 2002, exports of frozen fish fillets to the United States reached nearly $66 million — a modest amount in a world where global trade is measured in billions, not millions.

Nevertheless, it was a promising start for Vietnam, which is beginning to eye with envy the prosperity promised by globalization and achieved by neighboring China.

The honeymoon didn’t last long. U.S. farmers and producers, represented by the Catfish Farmers of America, filed a complaint with the U.S. government.

They charged that the imports from Vietnam broke U.S. laws against dumping — selling at below cost — and that the low prices hurt the American catfish industry.

Moreover, they argued that the Vietnamese fish were not really catfish and should not be allowed to use that name.

The Vietnamese lost on both counts: Hefty import tariffs were imposed on their frozen fillets — the product in dispute — and they were banned from using the name “catfish.” Now they call them “basa fish.”

To no one’s surprise, the new name and higher prices resulting from the tariffs hit Vietnam’s fish industry hard.

In January 2003, fish exports to the United States peaked at $10 million, only to fall to $2 million the following month as the new duties and labeling rules took effect, according to the U.S.-Vietnam Trade Council.

Despite a modest recovery, exports are not expected to reach 2002 levels anytime soon.

Keeping a lid on

The failure illustrates a key obstacle in Vietnam’s cautious approach to the outside world nearly three decades after the Communist Party took control of the entire country following years of war, first with France and then the United States.

“The Communist Party still wants to control everything in this country and at the same time wants to join the international community and have good relationships,” said a senior Western diplomat in Hanoi, the capital.

“They really feel the country will explode the way the Soviet Union did, with mass disorder and dislocation, so they want to open up but step-by-step,” the diplomat said. “The thing they are most cautious about is allowing a free discussion in a democratic way.”

No one predicts multiparty democracy to spring up in Vietnam, a single-party state in which political dissent is severely punished.

What is not clear, however, is how far Vietnam is willing to follow the path chosen by China — opening its economy while keeping tight control of political life.

Vietnamese officials appear reluctant to go too far in adopting market-friendly fixes — such as allowing private companies to replace government bureaucrats as brokers in a global economy.

Their focus instead is more narrow, in this case on mistakes made by government planners in the catfish venture.

“We didn’t know how to trade with the United States, but we are starting to learn,” said Do Duc Dinh, president of the Center for Economic and Social Research in Hanoi, a government think tank.

This is exactly the point that Le Linh Lan, a professor at the Institute of International Relations (IIR) in Hanoi, makes to her students.

“The catfish-trade dispute showed that we don’t understand the U.S. domestic political system, which prevents us from reaching a balanced assessment of the United States,” she said in an interview. “Now we try to explain the multiple influences and different actors in the U.S. foreign-policy process and outcome.”

Some early stumbles

Officials say that, in their rush to trade with the United States after decades of sanctions, they did not do their homework.

Not only did they fail to grasp U.S. rules and regulations, but they put almost all their eggs in one basket, sending more than 60 percent of their exports of fresh-water frozen fish fillets to the United States.

“They are not very savvy,” a Western diplomat said. “They flood the market with one product” and then depict themselves as victims when the strategy backfires.

“The government should encourage different ownership and more private investment,” said Buu Huy, deputy director of the Afiex Co., which operates a fish-processing factory in the town of Long Xuyen, a 10-minute boat ride across the river from the fish-farming village of Vinh Thanh Trung.

The factory had to close for a month twice last year for lack of orders.

“They should offer more incentives and more favorable conditions to foreign investors, and there should be equality between private and state-owned companies,” Mr. Buu said.

The ruling Communist Party introduced its “doi moi” policy of market-oriented economic reforms in 1986. Today, officials insist that Vietnam has a market economy, even if the rules limit the flow of goods and services between producers and consumers.

The party justifies preserving its leading role by labeling its model “socialist-oriented.”

The United States and other Western countries consider this a market-oriented socialist economy, compared with China, a socialist-oriented market economy.

While the distinction is subtle in linguistic terms, the outcome is not.

China has taken far bigger steps in opening its economy and attracting foreign investors than Vietnamese officials now appear willing to consider.

Unlike China, Vietnam, a nation of about 80 million, has no ambitions to match or rival the major-power status of the world’s most populous country.

While Vietnam remains a poor country still recovering from the ravages of conflict and a centrally planned economy, it has gone a long way since the government adopted the “doi moi” policy.

The changes led to a real-growth rate of 8.5 percent in 1997, which, even though it has fallen by a percentage point or two since then, is the envy of some of the world’s largest economies.


Adapting to realities

But Western experts warn that behind the impressive numbers lie significant structural problems.

“State-enterprise reform, financial-sector reform and restructuring of Vietnam’s trade and investment regimes, as well as introduction of more transparency in its business regulation and law are all necessary if Vietnam is to ensure its economic development is strong and sound,” the U.S. Embassy in Hanoi says in an assessment posted on its Web site.

The Vietnamese defend the switch to an economic model that has little to do with the teachings of Karl Marx or other communist theorists by arguing that every system must adapt to new realities.

“Even capitalist countries have to pay attention to social factors, so they have changed, too,” said Mr. Do of the Center for Economic and Social Research. “Now we are less equal, but we have equal opportunity, rather than equal distribution.”

Ha Anh Tuan, a researcher at the IIR and a recent graduate, said that Vietnam’s one-party system is justified because the government takes good care of its people.

“Socialism means that the people have access to basic needs: food, education, health care,” he said. “And if the government can provide those needs, then the people will support it.”

Young people, most of whom hardly remember the days of the centrally planned economy, denounce central planning with ease and conviction.

“The planned economy cannot improve our development,” a female undergraduate student at the IIR said. “We need a strong economy.”

Another student said a “market economy is better than planned.” But she insisted that Vietnam’s “socialist-oriented market economy is not like capitalism — it means that the government still controls the economy, and it’s aimed at having a socialist society.”

With their keen interest in politics, the students at the IIR, Vietnam’s main institution for training future government officials, are hardly representative of the country’s youth.

“Politically apathetic” is how both Vietnamese and foreigners characterize the huge majority of young people — and everyone else, for that matter.

“They are apathetic,” another Western diplomat in Hanoi said. “They don’t necessarily like the Communist Party, but nor do they see any reason to change it.”

The realization that communist rule will be around for some time, in a country where even nongovernmental organizations are controlled by the government, has forced many to make a deliberate effort to stay away from politics.

In that escapism, they developed a pervasive obsession with making money — mostly in the big cities, though that phenomenon also is beginning to spread to the countryside.

“It’s not a good idea to talk about politics, and if my mother was here, she would tell me to shut up,” a 24-year-old student, who recently studied in New Zealand, said on a flight from Hanoi to Ho Chi Minh City, formerly Saigon. “I don’t mind [the government] — I just want to make a lot of money. Let the politicians do their job.”

Urban prosperity

Hoang Anh Tuan, director of research at the IIR, said the important thing is that life in Vietnam has improved under the communist government and there is no reason to seek its removal.

“What people here care about is not the political system, but how the economy develops and how they can earn more money to send their children to school,” he said. “There are people smiling in the streets, which you couldn’t see a decade or two ago.”

Few would question the fact that in the big cities — particularly in Ho Chi Minh City — the changes for the better are overwhelming. The glitzy five-star hotels and elegant shops that could easily rival the best boutiques in Paris are only the surface.

More Vietnamese can afford to travel abroad than ever before. Even a government salary provides enough to pay for what many have long considered luxuries.

A 30-year-old, relatively low-level Foreign Ministry official in Ho Chi Minh City said a masseuse comes to her house every weekday after work to give her a massage — it costs only $2, but that buys you much more in Vietnam than it does in the United States.

In the countryside, however, life does not seem much different from what it must have been a century ago.

Many people live in poverty; even more have no running water in their houses, which are nothing more than hastily assembled wooden sticks and boards that seem on the verge of collapse.

Unemployment is widespread in the countryside, but even fish farmers like Mr. Vo, who sell thousands of tons of fish to the factories every year, have not been able to improve their families’ lives.

And even as the catfish industry was flourishing, the farmers did not benefit as much as they expected because of government controls on their business.

Small businesses also are having a hard time, squeezed in a market with numerous participants and little respect for abiding by the rules, which the government itself often prefers to ignore.

The senior Western diplomat said half-jokingly, “The Vietnamese are good capitalists and as ill-disciplined as anyone else in the world.

“They are very selfish on the road — they don’t look at anybody else — but that’s the mentality,” he said. “The government could crack down on traffic if they wanted, but they don’t.”

Most of the traffic in the big cities consists of motorcycles, which have replaced bicycles as the main form of transportation — an indication, some say, of the country’s development. They hope that more cars on the road in the future will signal an even better economy, though they worry about the number of vehicles a city can accommodate.

Fierce competition

Another example of the government’s failure to impose its own laws, the senior diplomat said, is the growing number of street vendors without a license.

“There are many regulations they are supposed to follow — and some do — but in many cases they are not enforced,” the senior diplomat said. “You are not supposed to sell anything on the sidewalk or park your motorcycle, but look around.”

Nguyen Thi My was one of those vendors more than 20 years ago, when she turned her kitchen into a bakery and began selling her products on the streets of Ho Chi Minh City. She is a legitimate businesswoman now, with a proper bakery and a staff of more than 50.

“It was much better in the old days,” reminisced Mrs. Nguyen, 51, who said she used to work from 4 a.m. until 10 p.m., 365 days a year. “The competition now is fiercer than ever.”

Mr. Vo and his fellow catfish farmers, of course, do not know or understand the fine details of government policy, nor all the twists in the “catfish war,” as it has become known.

But even though they realize their hardship was caused by the more difficult access to the American market, which translated into a decline in the price the state-owned processing factories pay for the farmers’ fish, they hardly blame the United States.

Even executives at those factories say that the Vietnamese government — in effect, their employer — should have known better.

“If the government knew,” Afiex’s Mr. Buu said, “it should have warned us.”

• Daniel Rosenbaum contributed to this report.

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