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Huw Watkin

The People's Army of Vietnam (PAVN) is continuing a rear-guard action against reform of an economy it heavily influences after more than a decade of rapid growth in its commercial activities.

 It appears that, for now at least, military leaders have no intention of following the example of the mainland's People's Liberation Army, which has all but dismantled its business links.

 The military controls such an array of businesses it is thought to have amassed enough power to influence economic policy, according to a new study of its commercial activities.

 The study's author, Carl Thayer of the Hawaii based Asia-Pacific Centre for Security Studies, cautions that as Vietnam considers information on the activities of its military a state secret, his examination provides little more than a snapshot.

 He concludes that the PAVN, which has historically looked to the PLA as a model for its own structure, function and philosophy, is going in the opposite direction to its mainland counterpart.

 It is likely to continue to build up its commercial activities in order to earn revenue for the government and its own modernisation, Mr Thayer believes.

 The military's activities already include housing and hotel construction, road building, mining, fishing and seafood processing, the manufacture of cement, asphalt and garments, real estate development, managing hotels and nightclubs, banking and aviation.

 It is also involved in the production of electronic goods and is moving increasingly into high technology.

 'Vietnam's new development objectives also [include] a major role for the country's national defence industries in developing and acquiring technology with a dual civil-military application,' Mr Thayer said.

 'Army-run enterprises [have already become] heavily involved in electronics, computing and telecommunications.

 'In 1998, the army telecommunications company, Vietel, was approved as Vietnam's fifth Internet service provider.

 'The Military Electronics Telecommunications company [has also] entered into a joint venture with the American company NewTel to manufacture telephones, fax machines, pagers and consumer electronic products.'  Self-sufficiency has been a fundamental philosophy of the military since its inception in 1944. Among its early economic activities were food production, construction, road-building and transportation.

 Mr Thayer said the demands of those roles intensified with the severe economic crisis and food shortage of the mid-1980s, an environment which eventually forced the country's leadership to abandon centralised planning and adopt doi moi or economic renovation.

 That resulted in a tentative opening of Vietnam to the world's economy, but it also prompted a change of emphasis from 'economic activity' to the embracing of 'free enterprise', in which particular units adopted specific commercial objectives. Some were charged with the production of processed timber, building materials and the construction of hydro-electric power plants; others with oil and gas exploration, commercial transportation and the production of foodstuffs for sale in civilian markets.

 In 1989, nine military economic units were granted legal status as corporations with independent accounting responsibility, and within a year the PAVN was producing annual revenues of about US$27 million. By 1995 the number of military enterprises had grown to about 300 companies and revenues had reached $360 million.

  The following year, the military's commercial operations were restructured, reducing the number of enterprises from more than 300 to 193, and, according to Mr Thayer, that process continued in the next two years with a directive that army-run businesses should improve efficiency and their ability to tackle major projects. By late last year, the military had also set up 13 'special economic defence zones' with a total investment of $215 million along the borders of the mainland, Laos and Cambodia.

 Units in those zones have been given the task of building infrastructure and clearing agricultural land for an estimated 84,000 families to be resettled there by 2013.

 Foreign defence attaches now estimate that almost 20 per cent of PAVN personnel - about 100,000 - are involved in commercial activities which produce annual revenues totalling more than $600 million.

 Clearly the past decade has seen Vietnam's army evolve into a potent business conglomerate, an evolution, according to Mr Thayer, driven by a increase in its representation within Vietnam's political structure.

 'In 1992, Vietnam adopted a new state constitution that gave the military an enlarged role of defending the socialist regime,' he said.

 'The military pressed for and obtained the appointment of Le Duc Anh, former minister of national defence, as state president.

 'Under Anh's patronage . . . [protege] Le Kha Phieu was elevated to the politburo. In addition, two generals, Dao Trong Lich and Nguyen The Tri were . . . elected to the Central Committee.'  Le Kha Phieu rose to head the communist party in December 1997 and immediately appointing four conservatives to the politburo, the country's most powerful political institution.

 'Among the new appointees was Lieutenant General Pham Thanh Ngan, deputy general director of the PAVN's General Political Department,' Dr Thayer said.

 The military's presence within key political organisations is now higher than at any time since the mid-1980s, he said.

 One obvious implication of that is that the military now has a greater influence in formulating economic and trade policies.

 And given its commitment to modernisation through commercial enterprise, it seems unlikely to welcome calls for faster economic reform and a more open door to foreign competition in the country's domestic markets.



Army adds economic muscle