Vietnam's quiet transformation in the past 40 years (The Straits Times)

ON APRIL 30, 40 years ago, I watched on as a young reporter as North Vietnamese tanks smashed the gate of Saigon’s presidential palace and raised the red and gold communist flag.

Hundreds of thousands of Vietnamese fled the country, while helicopters criss-crossed the skies, flying sorties out to the warships of the United States Navy’s Seventh Fleet to whisk the last remaining Americans to safety.

At the time, the end of the five-decade-long Vietnam War was seen as marking the retreat of capitalist America and the triumph of socialism.

What a dramatic reversal the intervening four decades have brought about! Vietnam today is the US’ largest trading partner in South-east Asia and a favourite destination of foreign capitalists.

The crowning moment of transformation will come next month, when the general secretary of Vietnamese Communist Party, Mr Nguyen Phu Trong, is received at the White House by President Barack Obama and the two former adversaries’ fledgling strategic ties are sealed.

The geopolitical upheaval that has facilitated this transformation – principally the astonishing rise of China, Vietnam’s historic nemesis – is easy to see. But what is less noticed is the Socialist Republic of Vietnam’s economic transformation while maintaining one-party rule.

Given its history, this is a formidable achievement.

During the first decade following its momentous victory in 1975, the Vietnamese Communist Party ran the newly unified country into the ground with its socialist policies.

Ravaged by famine and unemployment, and concerned by growing public anger, the party changed course in 1986, liberalising agriculture and opening up to foreign investment.

Freed from the party’s shackles, farmers in the Mekong Delta, the country’s granary, turned Vietnam into the world’s fourth- largest rice exporter. Shortly thereafter, Vietnam began to export crude oil as well as manufactured goods and components.

From an annual export average of US$1.7 billion in the first decade after 1975, Vietnam’s yearly exports have grown to US$131 billion (S$173.7 billion) – of which almost a quarter go to the US.

In the past 11/2 decade, disbursed foreign investment in Vietnam has reached US$12.35 billion, from just US$2.4 billion in 2000. Eager to court further foreign direct investment, Vietnam’s leaders have dismantled much of the country’s restrictive regulations, lowering the tax burden and tariffs.

Foreign investors have noticed that the World Bank’s Ease of Doing Business index for 2015 ranks socialist Vietnam at 78th, well above both India (142nd) and China (90th).

Hanoi is now negotiating to join the 12-nation Trans-Pacific Partnership talks – something that over-regulated India is a long way from joining. Once the trade agreements take effect, Vietnamese exports will receive a strong boost, creating further job opportunities for its young population.

In recent years, Vietnam has also been successful in attracting foreign investors fleeing from China because of its rising labour cost.

Production by Samsung, which invested US$2 billion in a plant, has been growing so big that it has now obtained a dedicated terminal in Hanoi’s airport.

Despite its remarkable successes, Vietnam is still burdened by its one-party rule, bloated and corrupt state-owned businesses, and heavily indebted to the state bank. Despite its near-universal literacy, Vietnam’s poor education system has failed to produce workers with the kind of skills that a modern economy requires.

While the use of the Internet has spread, the government clampdown on bloggers and critics discourages innovative thinking.

Still, having spent almost half of the last century fighting “US imperialism and its lackeys”, the Vietnamese leader’s upcoming visit to Washington marks the crossing of a historical and ideological Rubicon.

To be sure, the White House handshake does not mean the Vietnamese party has fully embraced the US’ capitalist mores, but it will signal to party members at home that there are useful lessons to be learnt from the enemy that withdrew in defeat 40 years ago.

The writer is editor-in-chief of YaleGlobal Online, published by the MacMillan Centre, Yale University