China on the Offensive
How the Ukraine War Has Changed Beijing’s Strategy
Viet Nam has become more than a small country in South- east Asia. It has become a symbol of a new kind of American involvement in world affairs and a focus for intense and bitter divisions throughout every facet of American society. Few issues have produced a greater flow of books, articles, speeches, journalism and TV reports and commentaries. This stream of words has been devoted almost exclusively to two subjects: the conduct of the war, with speculations about appropriate military strategy and prospects, and the political and moral issues of the position of the United States and its allies. Whether the people of Viet Nam prosper or become permanent economic and political cripples or dependents, and how they may construct a viable nation after the fighting ceases, are issues that are rarely discussed. Yet the answers to such questions may determine the future even more than the direct outcome of the war itself. Whether the sacrifice of lives and treasure has been wasted, what lies ahead for Southeast Asia as a region, and indeed, the future standing and influence of the United States in the Pacific Basin will depend largely on the skill-or lack of it-with which the postwar economic development and reconstruction of Viet Nam, both South and North, are planned and carried out.
The task of postwar planning, of creating a design and a strategy for the transition from a wartime to a peacetime footing, and of making an objective assessment of the prospects of South Viet Nam's economy in the years ahead has been assigned to a Joint Development Group, an organization composed of a private American company, Development and Resources Corporation, and a group of Vietnamese professionals. The Joint Group has been engaged on this assignment for nearly two years. In January 1969, the Vietnamese people and their leaders will be presented with a comprehensive report and a work-program for 1969 and 1970 dealing with virtually every aspect of these postwar prospects and how to begin to turn them into realities.
This is not a detached planning exercise dealing only in the abstract with an uncertain future period; much of it is linked to development that is starting now. Experience indicates that economic development programs and action for South Viet Nam are both feasible and necessary even during the war. Based on the work we have been able to accomplish, we perceive a clear though little recognized relationship between political accommodation and stability on one hand, and economic stability on the other. That relationship is simply that successful civil economic plans and development, even when begun in wartime, can themselves serve as fundamental bases for evolving political settlements. It also is clear to us that the process of postwar planning and the process of program implementation are substantively as important as the plans themselves. Central to those processes is the real participation of the Vietnamese, not a course of action imposed from the outside or masterminded in the United States.
It needs to be understood that the conditions under which this work is going forward are difficult in the extreme, and unique. We are working in a war zone, where the whole country is the zone of war. We are dealing with a new Government and a completely new legislative body, not with a long- established independent government and a long habit of governing. We are dealing with untested provincial officials. We are dealing with Vietnamese economists and other technical people with only limited experience, most of it in a colonial setting or during a period of war.
Despite the difficulties, the work of postwar planning, involving many programs that are beginning now, has shown that the "postwar," in a very real sense, already exists. The Joint Group's involvement, however, remains separate from the military and paramilitary activities (the so-called pacification program) of the Vietnamese and United States Governments. Moreover, the Joint Group's activities are distinct from the work of the large American AID Mission, which deals principally with day-to-day problems.
When the Governments of Viet Nam and the United States decided late in 1966, at the Manila Conference, to prepare specific plans for the postwar and long-term civil development of Viet Nam, it was agreed that the task should not be undertaken by existing government agencies but by a new group that could function without the constraints of past commitments, policies or programs. The resulting Joint Development Group, established in Saigon early in 1967, is comprised mainly of private Vietnamese citizens, headed by a distinguished man of affairs, Professor Vu Quoc Thuc, in partnership with senior staff of a private American development company. Today there are 55 resident Vietnamese in the Group; a resident American staff of six is regularly supplemented at any one time by up to six additional senior staff from the Corporation's U.S. headquarters. Although Professor Thuc has very recently joined the Cabinet of President Thieu as Minister of State, most of the Vietnamese hold no posts in the Government. The Group is being financed jointly by the United States, through a contract administered by USAID, and by the Government of South Viet Nam.
In the group on both sides are economists, engineers and managers, as well as specialists in agriculture, industry, finance, transportation, forestry and other fields. Some are working on the problems of refugee resettlement and manpower training; others are concerned primarily with such technical problems as water control, rice production and public utility reconstruction and extension. But there is one thing that the Joint Development Group is not: it is not a group with a Vietnamese façade and the American members doing the actual work, but a full partnership in every sense of that word, with a division of labor to match particular skills.
The members of the Joint Development Group, Vietnamese and American, occupy the same offices, removed from the headquarters of the Vietnamese and U.S. Government establishments in Saigon. This we think important, but equally important is effective communication and interaction with numerous Vietnamese ministries and with a broad range of private interests.
Professor Thuc and the writer, as co-chairmen of the Joint Development Group, made an initial report to President Thieu the day after the new Government was installed in November 1967. Our "call to action" stressed the specifics of the task in the immediate future and did not minimize the difficulties in carrying out the early stages of a plan for civil development in the midst of the war. The planning is now going forward in both the public and the private sectors of the economy, in areas such as highways, ports, utilities and other sectors of the infrastructure needed to support the private economy, and in the whole range of social services such as education and public health and medical services, conceived in terms of Viet Nam's own resources. The objective is not primarily to create a comprehensive national plan, certainly not at this time. Instead of a grandiose and conventional "five-year plan," we prefer a more pragmatic approach-in other words, to examine some of the more critical and specific problems of the transition from war to peace, such as unemployment, and to identify opportunities for immediate action.
While excellent non-bureaucratic working arrangements have provided ready access to the President and other top officials of the Government of South Viet Nam, many programs, such as refugee resettlement in the Central Highlands or the relocation of rural and town dwellers in the Delta in preparation for flood control and irrigation works, require the active support of local leaders and of private groups. Accordingly, the Joint Group often discusses project plans with leaders of such groups as the Hoa Hao, Cao Dai, Catholics and Buddhists to obtain their understanding and criticism.
The basic philosophy, and a central objective even more important than the process of planning, is to stimulate the Vietnamese to devise and carry out plans themselves. The importance that both the Vietnamese and their American associates attach to this is evident from the Group's organization and operating methods. We seek to avoid sterile planning by foreigners and to ensure as far as possible the close participation of the Vietnamese in actual programs and problems of civil development. This is made trebly difficult by the shockingly inadequate compensation paid our Vietnamese associates.
The Joint Development Group is focusing on two central streams of activity. First is the civil development planning going forward in every major sector of the Vietnamese economy:
Economic Policy. The Group is now considering a range of policies and procedures to deal with such postwar fiscal problems as income and employment growth, stability of balance of payments and the stimulation of savings and investment.
Manpower. Estimates are being made of the size and distribution of the labor force, the civil skills available in the military establishment and the possible future need for allocation and absorption of the labor force in the postwar period. Training and education programs are being planned to support the reëmployment of the labor force during the period of transition from war to peace.
Agriculture. Recognizing that agriculture will continue to predominate in the postwar economy, a varied agriculture development program is under way, ranging from feasibility and research studies directed toward agricultural diversification (from duck feathers to cinnamon bark) to a broad review of the capability of the land, soil and climate of the whole country.
Forestry. The emphasis is on practical ways to increase the flow of raw material to the nation's forest-processing facilities. Later studies will be directed toward a comprehensive forest policy for Viet Nam, but today the urgent need is for building materials in the reconstruction effort.
Industry. Planning for industry is closely linked to the agricultural effort; definitive appraisals are in progress for an integrated forest- products industry and for fertilizer. A whole range of commodities and industries that may be profitably developed domestically are being analyzed, as are incentive programs for stimulating private investment and financial institutions to assist the investment process.
The Problems of Saigon. Metropolitan Saigon, with roughly 20 percent of the population of South Viet Nam, continues to grow under the stimulus of migration from agricultural regions of people seeking security and the jobs and better incomes that urban life affords. Even more than in the many other major burgeoning cities of Southeast Asia, because of the war the effects of this growth are reflected in desperately overloaded utilities, shockingly inadequate social services, shortage of housing and limited ability to function as an efficient urban complex. The Joint Group, with other agencies and private citizens' groups, is seeking to identify the key issues in the future growth of Saigon and what, specifically, and piece by manageable piece, can be done to make it a more livable city after the war.
Infrastructure. A principal emphasis here is the planning for conversion to civilian use of the prodigious and extensive port, highway and utility systems which have been created for military purposes.
Social Services. The Joint Development Group is reviewing fundamental questions of education and public health, the objective being to determine the levels of these social programs which can, realistically, be afforded and supported by Viet Nam in peacetime.
Opportunities exist to initiate some of the foregoing programs immediately and staff effort is directed to getting these under way in the very near future.
High on such a list is the design of a water-control system in the Vietnamese Delta of the Mekong River. Schedules call for the beginning of construction of this system early in 1970. Land-survey and soil-boring crews began work in the Delta in November 1968 to secure information for the design of what probably will be the largest single development in Viet Nam and one of the largest agricultural programs ever undertaken. In this effort we have been working with the Mekong Coördination Committee Secretariat in Bangkok, which under United Nations auspices has been assembling basic data on the unified development of the river basin as a whole. Viet Nam has participated in this multinational effort, so that the Delta project will be an integral component of a future Basin-wide program. By its present action in the Delta, however, Viet Nam will soon be the first of the four riparian nations to utilize the main stream of the Mekong. The Delta project, by controlling floods, extending water use in irrigation and improving cultivation practices, will at a minimum double the production on nearly five million acres of land. The first stage, now in an active engineering design phase, will probably require a five-year construction period, encompass up to one million acres of land and cost in the order of $50-$80 million for basic flood control and drainage work.
The second major objective of stimulating Vietnamese activity is realized in the process of planning itself. Studies of a variety of special problems are entirely in Vietnamese hands. For example, in 1967 the Vietnamese mounted a survey of rural areas, conducting interviews in 634 villages, to assess popular aspirations as a basis for a future rural development program. In the past year, this research ranged from inventories of sawmill facilities for the production of sawn timber for refugee housing, to setting priorities for the improvement of national highways. This work is providing opportunities for the Vietnamese, young men and women as well as the more experienced, to participate in the planning and implementation of programs.
As the work of the Joint Development Group proceeds, the wealth of South Viet Nam is becoming apparent. One of the Group's reports emphasizes this:
For several years well over a million men on both sides have been fighting in the country, but physical destruction is minimal and, in spite of many pressures, the economic wealth of the country in physical facilities has increased.
South Vietnam has a system of modern ports that will not require major renovation and is capable of expansion; an agriculture that is diversifying, that is beginning to benefit from the potentials of new types of rice and that has a basis for absorbing other technological improvements; an industrial structure that has not seriously suffered and that has investment funds available when the risk-reward calculation is favorable; and a labor force that has acquired useful skill.
In economic terms, Vietnam does not have a large debt or debt service burden, and its foreign exchange reserves are sufficient to finance six months of imports even at inflated import levels.
By many measures South Vietnam is in an enviable position in relation to the experience of other countries at the end of a war, including Korea more than a decade ago. There are serious problems in the number of refugees, the dependence on United States aid, and distortions in the economy, but overall, economically the country is fortunate.[i]
These structural strengths, however, cannot obscure the terrible seriousness of the problems that will beset Viet Nam at the end of twenty years of war. Construction and other activities by the United States and the allies have accounted for perhaps a quarter of the country's income and have employed 140,000 people at the peak. The phasing down of such activities will cause economic pressure to create jobs and income. The need to resettle refugees, rehabilitate agriculture, provide for urban housing and control the economy to avoid serious inflation or deflation will all add to the difficulty of making a smooth and successful transition. The demobilization of military manpower and the shifting of employment out of military-related activities alone mean that the economy will have to find jobs for a large number of people, including refugees, and will require investment and foreign exchange. All sectors and all social classes will be affected to some degree, for men for the army have been drawn from them all. By a rough calculation, in the first 18 months or two years 500,000 people must find new jobs or shift from one to another. We believe that this is feasible. This judgment, based largely on extensive observation of the average Vietnamese citizen's extraordinary adaptability, resourcefulness and quickness to learn new skills, is shared by American construction contractors in Viet Nam and by outside labor experts.
Employment in agriculture is the safety valve. Not only will the agricultural sector absorb much of the manpower and provide necessary food, but it will form a major source of export earnings. Of all the programs presently under consideration by the Joint Group for the long-run development of agriculture, that dealing with the Mekong River Delta is the most advanced and easily the most significant. Other less extensive opportunities for agricultural diversification are being examined-for example, in the five northern provinces, on the north coastal plains, in the provinces around Saigon and in the Central Highlands where there may be opportunities for small-farmer forestry in combination with traditional crops and animal production.
It is implicit in such agricultural development that major population shifts may be needed. For example, the coastal strip north of Qui Nhon has more people than it can support, while there are under-used lands in the Highlands (on the Darlac plateau, for example) and in surrounding areas that appear favorable for settlement and development. But the incentives for people to move there from the overpopulated areas are still lacking; and the memory of forcible migration to the Highlands under President Diem is a deterrent. The need to protect the tribal rights to the land of the non-Vietnamese hill people has not yet been adequately considered. Nevertheless, a major shift of agricultural population from the north coast into the Highlands, and secondarily into the Mekong Delta, appears to be virtually the only way of improving the lot of the people involved in a permanent way. The process of opening up these lands to settlement will be costly and tedious, but the long-run benefits may appear to the Vietnamese to be worth the price.
Among agricultural programs many people automatically give "land reform" the highest priority. Often land reform is equated with the breaking up of big units into small ones and the passing out of land titles. In the writer's opinion, based on years of non-academic and non-political experience in the realities of food production, the slogan of land reform has, in this sense, scant reality. In Viet Nam, even if all landlords with more than, say, 100 acres were suddenly dispossessed and the land redistributed in small plots, the total numbers affected would be small. The difficulties facing land reform are of a different nature: the fragmentation of land into plots (or single furrows) so impossibly small that no decent living can be made from them; the insecurity of farm tenure and the exorbitant rents; the inability to get fertilizers and seeds on realistic terms and in steady supply; and the lack of equipment. The real problems have to do with the size of efficient productive units and the necessity of raising farm incomes above subsistence levels. In short, the problem of land reform in Viet Nam is to reconstruct and modernize agriculture.
The major burden of insuring an orderly and efficient transition to peace falls, of course, on the Government. Several kinds of governmental programs are required. First, we estimate that the Government needs to provide between 100,000 and 150,000 jobs, primarily on public works programs. Plans are being made so that these may be set in operation quickly when peace comes. As an example, up to 75,000 men might be employed in forestry projects, including planting fast-growing industrial trees, rehabilitation of forests, building small roads, small dams and diversion ditches. Such works can be started quickly, will use large numbers of unskilled workers with simple and inexpensive tools and can be expanded or contracted without serious disruption. Moreover, being largely rural projects, they can hold part of the labor force away from urban areas. They might also provide temporary jobs for refugees. Similar opportunities may also exist in road building and housing. With such prospects the target figure for employment on public programs does not appear exorbitant.
But the private sector must share in the task; it might be counted on to supply from 50,000 to 75,000 new jobs in manufacturing and construction, according to current estimates. It seems likely that there are private investment funds available that simply await favorable circumstances in the economy. The Joint Development Group has established working arrangements with agencies such as the Viet Nam Development Bank, the Industrial Development Center and the commercial banks, which in conjunction with the private sector are available to prepare the way for the mobilization of private investment. Such programs in the public and private sectors can be expected to stimulate a secondary effect in commerce, trade and services, where employment is closely linked to the levels of national income and manufacturing, construction and government activities.
The public and private investments required for development will over- strain the resources of Viet Nam, even though transfers can be made from defense to public works. The Joint Development Group has recommended that taxes and other sources of revenue be maintained and increased where possible, but it seems inevitable that even heroic measures will not provide sufficient domestic resources to fill the need; the gap must be filled by external aid. A development program requires foreign exchange to purchase raw materials, capital goods and consumer goods which cannot be produced efficiently at home. Viet Nam has always had a deficit in its balance of commodity trade and has relied on private and official capital flows to maintain its balance of payments. The recent levels of imports, swollen by wartime demand, provide little guidance as to what may be required in the future. The Joint Development Group has addressed itself to this whole question of the cost of postwar development and of finding the sources of the needed capital. Its first estimates were prepared for President Thieu's use at his talks with President Johnson in Honolulu last July. Recent forecasts suggest that for the economy to make the adjustment to peacetime and to grow thereafter will probably require an average of $500 to $600 million in imports annually over the next ten years, or about 15 to 20 percent of projected levels of the gross national product. At the peak figure in 1963, Viet Nam's exports amounted to about $80 million a year. It is estimated that within five years exports could double and continue to rise to $200 million or more. The increase will come not only from traditional exports but from new commodities such as pulp, wood products, processed seafood and special agricultural products. For example, Viet Nam produces the highest grade of cinnamon bark in the world; export earnings from it alone could be on the order of $10 million annually.
After the initial transition period, import requirements should slacken, but there will still be an annual gap of $300 to $400 million in the commodity balance of trade. Even if, as seems indicated, private capital will be attracted to the country, from $250 to $350 million per year will still be required in aid. Some of this might be in the form of soft currencies, but about $200 million annually will be needed in hard currencies. Since annual averages are often deceptive, it is better to say that aid on the order of $2 billion spread over a ten-year period will be needed.
In spite of the difficulties described, the prospects for rehabilitation and growth in Viet Nam in a peaceful environment are favorable. Although comparisons between countries are not fully trustworthy, Viet Nam should be able to show sustained growth at a rate at least on the order of Thailand's, which has been about 6 percent annually. That, however, will require both the help of other nations and its own effective action. If external aid is forthcoming, and if Viet Nam adopts the appropriate policies for growth, it is reasonable to expect that the country can achieve economic independence within ten years (and possibly less), at which time aid can cease. Such a performance would exceed that achieved by most recipients of aid.
Economic independence of this kind will be greatly welcomed by the United States, which has carried a disproportionate share of aid throughout the world. It will be no less welcomed by the Vietnamese who understand that their goal of political independence cannot be achieved without it.
The United States has made a commitment in the war; it has doubly made such a commitment to peace and to the support of efforts to maintain conditions of peace. This is not a burden which the United States can or, I believe, will shoulder alone. It must be shared among many, not the least being those nations in the Pacific Basin itself. The American pledge to support the development of Southeast Asia needs to be matched by others who have been involved directly or indirectly in the events of the past years-as allies, as economic beneficiaries of the war (notably Japan) and, indeed, as critics. Ally and critic alike have a responsibility to help find a viable and lasting path of development for Viet Nam and for Southeast Asia as a whole.
The corollary to the need for external aid in achieving economic independence is the need for South Viet Nam to adopt appropriate policies of growth. Understandably, after 20 years of war, during the last few years of which large numbers of foreigners have been prominent and influential in the country, various forms of xenophobia have appeared, inspired by a sense of nationalism and pride of culture. In the economic field, this has created a preference for import substitution rather than export promotion, for the public sector to assume responsibility over wide areas of economic activity and exercise tight controls over the private sector, and for direct controls rather than competitive market processes. In general, this attitude looks inward and is conservative rather than outward-looking and expansive.
It is clear, even now, that Viet Nam cannot successfully make the transition to a peaceful footing if such autarchic policies are dominant in its economy. Ultimately, they meet neither the need for efficiency in the use of resources nor the requirements of social justice. If carried to an extreme, they would make it difficult if not impossible for Viet Nam to attain or enjoy economic independence. Long-continued economic dependence on foreigners would make a tragic travesty of the sacrifices made in the cause of political independence.
Although South Viet Nam can most certainly develop as an independent nation, its future course and prosperity are tied in an important sense to the development of its neighbors in Southeast Asia, including Cambodia, Laos, Thailand and North Viet Nam. Regional integration could bring extra benefits to all. But a regional instrument is needed to start the process, to erase any lingering memory of French-dominated Indochina and to forge new relationships between the present sovereign states. The development of the resources of the lower basin of the Mekong River provides this opportunity. By this means the four riparian countries can slowly learn to negotiate, to compromise, to coöperate and in the process secure very considerable benefits for each and all of them. For ten years the United Nations has been working through the Mekong Coördination Committee in Bangkok to realize these aims; the effort has met with only limited success thus far, but when peace comes to Southeast Asia the chance for results will substantially increase.
Opportunities for regional coöperation also exist in trade and commerce, monetary and clearing-house agreements, pooling of facilities in research and development (and possibly higher education), and interconnection of transportation and communication systems. In addition, there are other immediate and quite specific opportunities for economic intercourse between South Viet Nam and its neighbors. An example is the movement of Cambodian logs downstream to the centers of the Vietnamese Delta where timber is lacking. The economics of this traditional movement and the conditions under which it might be reëstablished are now being studied by the Joint Development Group. Similarly, Laotian timber could be used in a proposed industrial complex of forest products under consideration at DaNang. This will necessitate reopening an existing highway from Laos over the divide of the Annamese Range.
Perhaps the most productive opportunity for economic liaison is the one least considered. That is with North Viet Nam. In the formulation of long- term strategies for growth in the South, it is hopelessly unrealistic in an economic sense to exclude the complementary functions of the North; nor does it seem impossible to achieve the necessary coöperation in human terms. This has nothing whatever to do with the unification of the two countries, which may be a generation away; the questions concerned are purely functional, such, for example, as the respective industrial roles of Saigon and Hanoi. Even more immediate and more tangible relationships will become practicable when the war ends, such as reopening the main highway between Saigon and Hanoi, reëstablishing traditional exchange of agricultural produce, especially rice, and possibly extending it to include woodpulp, tropical fruits and fibers in return for northern minerals and manufactures. Finally, there are other kinds of exchanges, of a human sort . Many times people in Saigon speak of their divided families and their longing for personal news from their original homes in the North, and similar expressions are heard in Hanoi. So simple a measure as a resumption of direct postal service should have priority on the lists of both sides.
On May 23, 1968, in what was called the "Tokyo Statement," leading Asian figures, prominent among them important Japanese intellectuals, agreed upon this statement: "The cessation of hostilities in Viet Nam will call for a large coöperative international effort of reconstruction and rehabilitation." If the spirit of this resolution is followed, a significant step will be taken to turn some of the postwar prospects for development, peace and stability in Viet Nam into reality. To this end, we propose the early formation of an informal working conference of the countries that are the most likely source of postwar aid and assistance, with the aim of establishing a mechanism for developing a future program of multinational aid. The United States, Japan and other Pacific countries should obviously be included in the group. The initiative in convening the conference could most appropriately be taken by the Asian Development Bank. Such an informal consortium should not confine its attention to South Viet Nam alone. The problems of North Viet Nam and its need for aid in developing the Red River and rehabilitating its industry and natural resources should also be included. If, as we have estimated, $2 billion of aid is needed for South Viet Nam, the total required for both North and South Viet Nam will be substantially larger.
Writing of Viet Nam in a recent issue of Foreign Affairs, the editor of this journal concluded with these words: "In the final accounting, the United States will be judged by its behavior when the fighting is over." Much the same accounting should be applied as well to the behavior of others "when the fighting is over": South Viet Nam; North Viet Nam; members of the international community which have been supporting one or the other of the combatants, or have been critical of them; and Japan, which is so deeply concerned in Southeast Asia's future.
[i] Dr. F. T. Moore, "Economic Policies in the Transition to Peace and After," Working Paper No. 23, Saigon, 1968.