VIETNAM REVISITED: TURN TO THE RIGHT? War damage has been cleaned up, but the economy is still a wreck. The new dogma is capitalism, and the comrades would like the U.S. to pitch in.
By Colin Leinster REPORTER ASSOCIATE Edward Prewitt

(FORTUNE Magazine) – ASSOCIATE EDITOR Colin Leinster lived in Vietnam from 1967 to 1969 as a correspondent for Life magazine. He recently returned and found a country still divided into North and South. The most the two halves seem to share is profound economic privation. In search of a brighter future, the Vietnamese now want Americans -- whom they call ''my,'' the same word they use for ''beautiful'' -- and other international investors to come back as business partners. What would the U.S. be getting into this time? Leinster's report:

''Yesterday,'' croons the Japanese businessman who has barged onstage at Maxim's Nite Club and Restaurant in Saigon, ''all my troubles seemed so far away.'' The ten-piece Vietnamese band follows along gamely. At least it isn't ''Feelings''! Maxim's is packed tonight, and every night, and very loud. The few foreigners -- Russians and Soviet bloc nationals, an Australian TV crew, a table of Japanese straining to hear their compatriot above the hubbub, and I -- are lost among some 300 local patrons. A huge wedding party swaps toast after toast, pouring from bottles of smuggled Martel cognac. Small children play hide-and-seek around the giant speakers at the edge of the stage. Lovers and black-marketeers whisper at tables on the balcony. Chau Hon, my host, leans close and inquires politely after the health of Nguyen Cao Ky, the former air force marshal, prime minister, and vice president of what used to be South Vietnam. I shout back that Ky, a former California liquor store owner, went bankrupt. He lost thousands of dollars, I say, gambling in Las Vegas. My host clucks in sympathy at life's reversals. Hon was a successful baker in Cholon, Saigon's Chinese section, having unpropitiously started his business during the 1968 Tet offensive. When the Communists swept into Saigon seven years later, he was arrested, sentenced without trial to a reeducation camp for ten months to repent his capitalist ways, and then sent away for a year or so of hard labor, including time in the rice paddies. Today, after several tough years trying to make ends meet, he's a successful baker again. The People's Committee of Saigon, now Ho Chi Minh City, needed bread to feed the populace and invited him to reopen his bakery. He now has five -- all privately owned with family-member shareholders who split the profits -- and eagerly anticipates expanding his bread, noodle, and cookie empire. ''It is the law of creation,'' says Chau Hon of his rehabilitation. ''A thing returns to normal once it has turned full circle.'' Thirteen years after a North Vietnamese tank rolled through the gates of Saigon's Independence Palace, Vietnam's Communist rulers are openly waving the economic equivalent of a white flag. At the pivotal Sixth Party Congress in December 1986, a new leadership wrested control of the politburo from contemporaries of Ho Chi Minh. In a historic reversal of dogma, Party General Secretary Nguyen Van Linh, 74, has begun acknowledging that a strong dose of capitalism is essential to revive Vietnam's moribund economy. Like the perestroika pushed by Mikhail Gorbachev in the Soviet Union, Linh's new program of economic renovation, called doi moi, in no way rejects traditional socialist policies like central planning and state ownership of industry. But all state companies are now expected to make a profit. Many are being turned over to workers as cooperatives. Linh has also encouraged Vietnamese entrepreneurs to start their own small businesses, allowing them to keep the profits.

At the macroeconomic level, things have mostly gone from bad to worse in the 18 months since doi moi was announced. Inflation zoomed to almost 1,000% a year, spurred in part by fears that the dong, Vietnam's currency, was about to be devalued. Food shortages, prompted both by successive poor harvests and mismanagement, have left perhaps three million of Vietnam's 65 million citizens face to face with famine. The country's infrastructure -- hospitals, roads, housing, schools -- remains a wreck. Most of Hanoi's 2 1/2 million & residents still have insufficient drinking water. VIETNAM'S hard currency supply has also nearly run dry. The International Monetary Fund, stiffed for about $120 million, has suspended further lending until Vietnam comes up with overdue interest payments. To earn more foreign exchange, the government recently announced an extraordinarily liberal foreign investment law. Modeled on those of Singapore, Taiwan, and other fast-growing Asian economies, the new legislation sets few limits on foreign ownership of joint ventures or repatriation of profits. For now, though, there may not be much profit to repatriate. The Vietnamese economy is so weak that gold, cigarettes, and U.S. dollars serve, as they did during the war, as the country's true currency. In any case, a U.S.-led embargo prompted by Vietnam's continued military occupation of Kampuchea, or Cambodia, still bars trade between Vietnam and America's European and Asian allies. Despite these staggering problems, the latest turn of creation's wheel in Vietnam is spinning hope for a better life for a small but growing number of individuals. Like baker Chau Hon, Nguyen Van Muoi Hai, a 29-year-old perfume and cosmetics tycoon, typifies the country's new capitalist class. Hai began two years ago in his home, a tiny house down a Saigon alley. Today his business has about 200 workers and four retail outlets. His manufacturing centers, spread throughout the city, are scarcely high tech. To make shampoo, male employees use paddles to stir ingredients in five-gallon plastic drums. Women bail the mixture into bottles, lick the labels, and affix them. Hai boasts that his products have already edged out the competition from Thailand and Singapore and are Vietnam's top sellers. He now has hundreds of shareholders and pays them a monthly dividend of 15% on their investment. Though the government collects 10% tax on his profit, he claims to have lots left for himself. Much of Hai's success stems from his flair for advertising and publicity -- art forms he learned when relatives who had settled in Canada came home for a visit. He stages beauty shows for men and women, sponsors bicycle races, and plasters huge ads on the walls of soccer stadiums. Hai also hires top entertainers to endorse products, such as his Charlie line of perfume. He is the biggest advertiser during the most widely watched slot on Saigon's state-owned television -- a block of nonstop commercials from 6:30 to 7 p.m. before the propaganda-laden evening news. ) More typical of the changes under way in Vietnam is Saigon's Dong Tam Mechanical Co., which makes cultivators, plows, and other agricultural equipment. Nguyen Tien Anh, the company's deputy director and an engineering graduate from Saigon University, says it is one of about 4,000 cooperatives now operating in the country. The 250 workers are equal shareholders. They vote in closed meetings on such things as renewal of Anh's employment contract or whether to work on May Day, a holiday in Vietnam as in most Communist countries. (The workers recently said yes to Anh, but no to working on May 1.) According to Anh, even after paying interest to the government on a roughly $30 million loan and investing another 10% of profits in capital improvements, the company earns enough to pay its worker-owners considerably more than $17 a month -- the average Vietnamese's income. ONE OF VIETNAM'S fastest-growing enterprises -- and probably the biggest earner of hard currency -- is state-owned Ho Chi Minh City Food Co., headed by Mrs. Nguyen Thi Thi, a onetime political crony of the company's namesake. She is responsible not only for feeding Saigon, but also for ensuring enough surplus to supply the North and increase exports. The company manufactures, packages, and freezes all kinds of food, from crackers to shrimp. Mrs. Thi, who put the system together from scratch, ships the produce from the rich farmland and fishing waters outside Saigon into the city by truck, sampan, and bicycle. It is stored in warehouses and then sent by pedal-powered vehicles either to food-processing plants or to retail outlets. ''We surround the city just as we did during the War of Liberation,'' she says, using a long wooden pointer to tap out her supply-line strategy on a big wall map. Different colored lights flash off and on, denoting routes to the city, target delivery areas, and retail stores -- a technological advance over the maps nervous U.S. majors had at their disposal to brief their generals. Probably no Vietnamese has experienced a more astonishing turnaround than economist Nguyen Xuan Oanh, 67, architect of the country's new investment code. According to his resume, which he delivered personally to my hotel, tooting his way through the Saigon traffic in his silver Volkswagen Beetle, Oanh earned a B.A. in economics from Japan's Kyoto University (1949) and a Ph.D. from Harvard (1954). He served in a variety of top political jobs under the former South Vietnamese government, and was even acting prime minister in 1966. After the North Vietnamese stormed into the city in 1975, Oanh spent the next year in his home under solitary house arrest. ''I was terrified,'' he recalls, though he jokes that the experience ''gave me a chance to catch up on my reading.'' AFTER A RETURN to grace by a route he will not discuss, Oanh became vice chairman of the state bank. A deputy (equivalent to a Congressman) in the National Assembly and a senior economic adviser to General Secretary Linh, Oanh is also pushing to establish a competing, private bank. He will visit the U.S. soon and hopes to turn public opinion around on America's trade embargo. Vietnam recently announced plans to withdraw nearly half its 120,000 troops in Kampuchea, which should help. Claims Oanh: ''The U.S. is the cork in the bottle.'' In fact, to release its economic potential, Vietnam badly needs to heal some wounds at home. In many ways it remains two countries. In Saigon -- only party dogmatists and schoolteachers call it Ho Chi Minh City -- people take pride in their capitalist elan and dress with stylish color. Northerners, on the other hand, are more reserved and tend to be skeptical of the wisdom of economic liberalization. They consider themselves better educated than Southerners, more sophisticated and tasteful. Hanoi-born Tran Le Tien, 28, the guide and interpreter provided by Vietnam's foreign ministry, is an unabashed Northern chauvinist who disdains almost everything Southern, especially the South's ''too fatty'' version of pho, Vietnam's ubiquitous breakfast soup. And because political power remains concentrated in the North, the South's freewheeling capitalists must constantly look over their shoulders lest the current reform wave suddenly reverse. A Western diplomat tells me that the clocks stopped twice in Vietnam: once in the North, when the French were forced out in 1954, and again in the South, when the U.S. left in 1975. Those who have driven north say the 17th parallel, where the country once was divided, is highly visible. The American-built paved highway abruptly turns into a bumpy country road. Downtown Hanoi still looks and feels French, though its tree-shaded boulevards, grand crumbling buildings shimmering beneath red-tile roofs, and Gallic plumbing and telephone equipment are distinctly the colonial France of a half century ago. Saigon, on the other hand, retains the feel of a city garrisoned by U.S. troops. Rusty barbed wire curls over walls outside buildings where GIs were billeted and around the villas that were home to seersuckered U.S. civilians with no visible means of support. On a hangar at Tan Son Nhut airport, a peace sign painted by some forgotten GI still blisters in the sun. In Saigon people in their 40s or older often display smatterings of American slang. On a Sunday outing I communicate in pidgin English with the driver of my cyclo, one of the three-wheel pedal cabs you see everywhere in Vietnam, and at the end of the trip he startles me by asking, ''How you doing, man?'' It turns out he was a sergeant in the South Vietnamese air force who had worked with a unit from Texas. His wife had worked at the U.S. embassy as a translator. After Liberation, as the other side calls it, the couple burned all their papers. Today they are nonpersons. Like so many former U.S. supporters, they live desperate lives of poverty in Saigon's squalid Fourth District. The former sergeant says only that he was ''sad'' when the U.S. left. Other veterans react more violently. Once a group of them mistook an Austrian television crew for Americans and smashed the windows of their car. I HAD a very different reception when I called at 11B Tran Cao Van, my home for nearly three years. The current occupant, Tran Van Hoang, a retired North Vietnamese army colonel, invited me in. He lost four members of his family in the war, he said, but was willing to be friends with Americans. He presented me with a set of U.S.-made golf clubs that had come with the house. They weren't mine, but he insisted I keep them. One of the few things common to North and South is a taste for rock-and- roll. On this trip I never heard Jimi Hendrix, the Doors, or any of the others whose music was such an integral part of the war years. But there is plenty of rock to be heard in student hangouts in Hanoi and in Saigon nightclubs. In Hanoi, thanks to the popularity of the Swedish rock group ABBA, it is a commonplace that rock is a Swedish invention. As a result, the overcheckered pants that ABBA's members often wore are considered trendy by the young. Still, the performers at a concert I attend in Hanoi include a look-alike, sound-alike Elvis Presley singing ''My Way.'' The main act is a petite and pretty girl in a fringed miniskirt who, almost in English, belts out ''Material Girl.'' The Beatles can be heard all over. ''Hey Jude'' blasts in its original from a teenagers' club in Hanoi and as a rearranged bossa nova in a Saigon honky-tonk. IN BOTH REGIONS Vietnamese at every level of society read a lot. Novels are published in serial form in many newspapers, and favorites include several U.S. authors -- Mark Twain, John Steinbeck, and Jack London. Mr. Huong, the Hanoi cyclo driver who adopts me as his regular, fills his waiting hours absorbed in a translation of For Whom the Bell Tolls. Not surprisingly, one of the three channels on the color television in the lobby of Saigon's Cuu Long hotel is devoted to Russian programming -- soccer games, cartoons, a costumed 19th-century saga (Little Dacha on the Prairie?). I am surprised to learn, however, that the BBC's Follow Me, an English instruction series, is Hanoi's most popular television show. My first official interview after I arrive in Hanoi is with the No. 2 man at the Viha bicycle factory. The state-owned plant looks positively Dickensian. Its French-built equipment and tools, even the hammers and overhead fans, are ancient. Workers put in the six-day workweeks common in Vietnam in semigloom beneath a huge stained-glass window. Though broken in places, its intricate pattern appears intact because someone has ingeniously plugged the holes with abacuses. The women assembling the bikes challenge their visitor with the same bold eyes that Third World factory workers have worldwide. But the factory's production chain is pure Vietnam. Parts are largely imported from the Soviet Union; sales are mostly to Laos, Kampuchea, Cuba, and other Soviet supported countries. The bikes themselves are inelegant and clunky. They would have scant chance of selling in the West. Dependence on such captive markets is almost universal among Vietnamese exporters and is the source of both the country's foreign currency shortage and its sorry capital base. The No. 3 Clothing Co. in Saigon makes men's shirts and pants and all manner of female wear for the Soviet bloc, which contracts for 90% of its output. But profits in Kampuchean riels, Russian rubles, or East European currencies cannot be reinvested except in other Communist countries. Only the few garments sold in Hong Kong and Thailand generate hard cash that can go toward badly needed new Western sewing machines. The Vietnamese seem not to care much for their Soviet allies. A city planner in Hanoi reserves comment on the bleak Russian architecture that already blots much of the city and then allows: ''The Vietnamese prefer something more tropical. We like more shade.'' The Russians are also notorious for driving hard bargains. As a result, Xoo long, the Vietnamese phrase for Russian, has taken on another meaning, though not necessarily a derogatory one. One Vietnamese will say to another if he is bested in a deal: ''Oh, you Russian, you!'' The Russians pour an estimated $2.5 billion a year into Vietnam, mostly in ''loans.'' They are also underwriting the costs of Vietnam's military occupation of Kampuchea. In return, they get Cam Ranh Bay -- now their biggest military base outside the Warsaw Pact countries -- and are pumping oil off the southern coast. BUT WHATEVER the cost-benefit calculations show, one senses that the Soviets too are having second thoughts about the Vietnamese. Perhaps the country's infamous intransigence is driving them to sanity's brink, a feeling U.S. veterans will recognize all too well. Or perhaps it is the rife corruption. There are still bully boys in the villages with government contacts; smugglers who ship in motorbikes, televisions, French cognacs, anything that other do- wells can afford; ''bankers'' who deal in dollars, gold, cigarettes, and MSG, which is valued as an inflation-proof commodity; crooked military commanders with the power of drafting rich men's sons; privateering senior officials (many of the goods that find their way to the black market are said to have fallen off ships in Saigon's busy port); and layer after layer of corrupt bureaucracy. Recently a Vietnamese military commander was convicted and jailed for selling newly delivered Soviet tanks to a Japanese scrap merchant. IN HANOI a senior Soviet diplomat on the party circuit complains to any Westerner who will listen: ''These people will never get started again. You Europeans have experience in the Third World. Maybe, you and us, we should start a joint venture. You've got to help us.'' At the Russian embassy, a former school for daughters of senior French administrators and now painted turquoise, I am received graciously, though I learn nothing in an interview with a political officer. But as he later leads me to the gate, he offers this revealing bit of chat: ''The joke we tell around here these days is that we're getting Vietnam ready for the West!'' But will Western businessmen want to come? They're certainly not here yet, not in any great numbers. Hanoi's foreign community is a mere dot of an island where everybody knows everybody else. Among the multinational employees of the United Nations Development Program, which is helping Vietnam repair its basic services, are Finns, who are putting in city plumbing, and a lone French Canadian here to catalogue the ministry of agriculture's many libraries. Diplomats rarely miss each other's parties, regardless of national antagonisms. Thus, the genial representative of the PLO goes to the Australians' Friday night beer bash, and the Cubans to Thursday's wine and cheese soiree at the French embassy. When the British ambassador leaves his residence in his white London taxi with Union Jack aflutter, the Vietnamese at the gate (coached by God knows whom) snaps a smart salute and calls out: ''Bugger off, squire!'' To his credit, the ambassador has made no move to end this ceremony. If the U.S. and its Western allies were to lift their embargo on trade with Vietnam soon, it is likely that Japan would get there first. At the moment the Japanese government officially endorses and supports the U.S. position. But a spokesman at Japan's Hanoi embassy, after genially repeating his government's policy, adds with a chuckle: ''Of course, we have no control over our businessmen.'' And for whatever reasons, Japan is planning to build a huge new embassy. In the meantime Japanese electronic consumer products can be seen everywhere. Often the air conditioners and elevators in hotels are Japanese. A Western diplomat estimates that Japan does about $260 million a year in trade with Vietnam, exchanging electric fans, perhaps, for cuttlefish. So far, the balance of that trade is in Japan's favor. Despite the difficulties, Japanese businessmen are scouting not only cities for future business but rural areas as well. In Saigon they tour in air-conditioned Toyota minibuses, taking photographs out of the windows. The Vietnamese consider them brash. FOR NOW Vietnam remains heavily dependent for foreign exchange upon the more than one million of its citizens who have fled the country since 1975. The Vietkieu, as they are known, send home an estimated $200 million a year from around the globe. They long ago spurned the state bank, which offers an official exchange rate of about 350 dong to the U.S. dollar -- a pittance compared with the black-market rate, which recently topped 3,000. Instead, the Vietkieu send cash via a shadowy network of overseas brokers who, for a minimum 25% fee, deliver dong to relatives at close to the black-market rate. To snare some of this black money, the government recently introduced a separate exchange rate for Vietkieu of about 900 dong. It even began to , provide free stamped airgram envelopes for locals writing to relatives in the U.S., say, or France, or Australia. The envelopes are inscribed with the names of banks in the U.S. and elsewhere that will transmit money internationally. Many overseas Vietnamese also send relatives gifts such as TV sets. In turn, the relatives can sell the goods on the black market. To catch some of that action, reformer Nguyen Oanh, the Harvard economist, suggested setting up ''dollar stores,'' a half dozen of which now ply their trade in Saigon. Goods can be shipped directly to Cosavina, the company that manages the operation, or brought in and sold for dong. The goods then are offered at retail to anybody who walks in with hard currency, such as U.S. dollars or West German marks. Rubles are not accepted. The stores use the hard cash to back up lines of credit in Thailand or Japan for orders of clothing and a variety of consumer items. THE ENTHUSIASM with which Vietnamese describe their capitalist-influenced future can be contagious while you are there. But can Vietnam ever be made safe for market socialism? In one encouraging development, doi moi and the new political climate have spurred many editors and reporters to become investigative journalists in search of official corruption. Nguyen Ngoc, the impish editor of Art and Literature, a weekly, delightedly shows off a number of such stories in his paper. One identified a village party boss who had been extorting money from farmers. The party boss, who had a friend in the politburo, wrote to object and his letter was published. In response, more than 200 people wrote to say the party man was a crook -- and signed their names. It took two weeks, but Ngoc published excerpts from each of the letters, with the writers' names. In case anyone missed the names, he listed all of them again the third week. The party member finally was recalled to Hanoi. Ngoc says he faces risk in publishing what he does: ''Our struggle is still full of danger. Much of the social mechanism, or the part that's wrong, is still close to high officials. But I believe the change we're going through is irreversible.'' And yet, and yet. It's easy to get paranoid in Vietnam. The green uniforms with the scarlet collar tabs of rank worn by all kinds of officials are downright unnerving, especially to anybody who has seen Rambo or watched any of the movies where Chuck Norris rescues MIAs. On my way out of Saigon, I meet very stern stuff in the form of a senior female customs officer. Remember Lotte Lenya as the renegade KGB Colonel Kleb in From Russia With Love? Here was Kleb's Vietnamese counterpart. She takes all my notes and disappears. I protest, but only mildly. I'm no Rambo. Half an hour later, she returns my notes, seemingly intact. I suppose she photocopied everything. If so, I wonder what she made of what I wrote. For me, many of the interviews have blurred into one, an introductory polemic and lecture followed by often tedious answers to questions. Vietnamese tend to speak in great detail, making their points one by one with careful enumeration. It's not unusual for somebody to say: ''Reason No. 6, part three . . .'' and to go off on the shortage of electricity, say, or a let-me-count- the-ways that foreign investment could best be spent. STILL TRYING to sort it all out, I arrive at Saigon's Tan Son Nhut airport, where my leave-taking is as frenetic as it ever was during the war. The customs colonel does not help, and there are hordes battling for attention at check-in and emigration desks. An Aeroflot flight to Moscow is scheduled to leave at the same time as my Air France plane to Bangkok. The Soviet passengers have immense piles of baggage, a half-dozen television sets each it seems, tape players, and all manner of other consumer goodies produced either in Japan or in the knockoff factories of Singapore and Thailand. Vietnamese facilitators wave their charges' tickets, $5 and $10 bills for exit taxes, and various last-minute forms. After all that, the flight is five hours late, by which time the airport canteen has run out of food and drink. When I finally board, I am hot, exhausted, and angry.

The cold of the air-conditioned cabin and the welcome from the crew is like a balm. I can't wait to get out of Vietnam. But as the plane leaves the runway and begins a steep climb -- over the hangar with the peace sign -- I feel the same numb sadness I'd felt almost 20 years ago. I want to go back to Vietnam someday. What will I see? I'd like to think that I'll see a place that's hopping and pretty much in step with the outside world. If I do, I'd also like to see Budweiser beer on the shelves. But I suspect it will be Kirin from Japan.