Asia Times: US, China maneuver for influence over Vietnam



	November 4, 1999	atimes.com

Southeast Asia

US, China maneuver for influence over Vietnam
STRATFOR.COM
Global Intelligence
Update November 3, 1999

Summary:

The United States donated over 25,000 tons of wheat to Vietnam on November 2, the largest agricultural donation to Hanoi since the end of the Vietnam War. The US donation is another move in its diplomatic chess game with China, as both sides maneuver to woo Vietnam. As such, these moves are not signs of US confidence in the Vietnamese economy, but are instead motivated by strategy.

Analysis:

Since the Asian economic meltdown, the United States has been uninterested in Vietnam's economy. Rampant corruption discredited the economic reformers in the government and a resurgent Communist Party has reasserted control. Economic restructuring by the Party has resulted in increased centralization and state control of firms, often at the expense of efficiency. As of March this year, Vietnam's state-owned enterprises accounted for two-thirds of the country's industrial output, but at least 30 percent of those firms were operating at a loss. In most countries, such major economic difficulties would generally discourage heavy US involvement.

Nevertheless, on November 2, US Ambassador Pete Peterson presented the Vietnamese Ministry of Finance with a 25,000-ton wheat donation and proclaimed that the US-Vietnamese relationship had reached ''a new height''. Peterson went on to predict that the success of the program would lead to further cooperation between the two countries. Cooperation would be extremely valuable to both sides. For the Vietnamese, the sale of the wheat will bring in more than $3 million for humanitarian projects such as rural development, dikes and hospitals. The United States, on the other hand, stands to gain an increased role in Southeast Asia.

The end of the Asian economic boom not only renewed the geopolitical competition between the United States and China, but shook up the old system of US alliances in the region. As a result, both nations have been working to re-establish links with the rest of Asia, especially the southeast. Vietnam is a key part of both country's strategies, as it borders China and Cambodia - where the United States has shown increased interest - and maintains a claim to the disputed Spratly Islands.

Vietnam has been the object of entreaties from both sides, as Chinese and US government officials have increased visits to Hanoi. Visitors have included US Senator Richard Shelby, the chairman of the Senate Intelligence Committee, and Secretary of State Madeline Albright. Not to be outdone, the Chinese set up separate meetings in China between Vietnamese leaders, Chinese Defense Minister Chi Haotian and delegations from the Central Committee of the Communist Party. To top it off, Chinese Premier Zhu Rongji is to visit Vietnam in December.

Aside from the rather obvious gift of grain, the major US diplomatic effort toward Vietnam has been the negotiation of a trade agreement. Since 1996, the two sides have worked to open Vietnam's markets and increase trade with the United States. The agreement was finalized in July. However, the Vietnamese postponed signing the deal, leading to speculation about Chinese influence in Hanoi. At the same time, China was working on its own trade deals with Vietnam.

Meanwhile, the diplomatic dance continues. The US will continue to play to its strengths, namely economic benefits such as outright gifts like the grain donation, and the promise of increased private investment within Vietnam. Economic engagement makes sense for the US government, but not necessarily for potential investors. The US interaction with Vietnam is based on strategic reality, rather than economic reality. The US policy does not mean Vietnam's economy has recovered from its past corruption and inefficiency.

(c) 1999, Stratfor Inc.

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