BIEN HOA, Vietnam
The aging furnace at southern Vietnam's largest steel mill here belches smoke, sparks and flame as grimy workers pour molten metal into long orange streams and visitors step over large chunks of hot iron lying on the dirt floor.
The scene looks like something out of the 19th century, a Vietnamese version of the Industrial Revolution. Except in this case, the metal comes from U.S. tank treads and artillery pieces.
At the Bien Hoa steel complex, not far from what was once the largest U.S. military base in Vietnam at Long Binh, the feed stock comes from acres of junked American trucks, tanks, armored cars, jet engines, shell casings, engine blocks, helmets and assorted other war materiel collected from all over southern Vietnam. In a variation on the biblical theme of beating swords into plowshares, Vietnam today is melting tanks into rebars -- steel rods used for reinforcement in construction work.
The steel complex represents a rare economic benefit from the Vietnam War. According to Nguyen Thuong Chi, the director of the biggest of seven plants in the complex, there is enough scrap left over from the war to feed the mills for five more years.
However, there are few other bright spots in Vietnam's basically subsistence economy. Not only is the country still struggling to recover from a decade of war with the United States that ended 10 years ago this month. It also is grappling with the postwar problems of inexperienced and inefficient management, continued isolation from the West because of the Vietnamese occupation of Cambodia, and apparent confusion about how to deal with the freewheeling southern half of the country that has been reluctantly "reunified" with the north.
"Using standard economic criteria, the country is in a bloody mess," said one western ambassador in Hanoi.
The steel complex here helps to illustrate several points about Vietnam's economy 10 years after the Communist takeover of South Vietnam imposed a policy of "socialist transformation" to wipe out the vestiges of U.S.-style capitalism. Formerly owned by Ly Long Than, a Sino-Vietnamese tycoon described here as an adopted brother of former South Vietnamese president Nguyen Van Thieu, the main plant in the complex was the first factory to be nationalized by the Communists, plant director Chi said.
Previously, he said, the plant was run by 15 Taiwanese managers. Now, according to an engineer, all of the pre-1975 managers have been replaced. Most of the new ones are from northern Vietnam. Like Chi, the directors of the other plants in the complex are southerners who went north with the Communists when the country was divided in 1954 and received special training to prepare them for eventual assignments in the south.
The grip of northerners or northern-trained cadres on key positions in the south has become a sore point with some native southerners, including members of the Communist Vietcong who fought the U.S.-backed government of South Vietnam. Standard of Living Eroded
Another sore point is the erosion in the standard of living of many southerners, including those who are now employes of the state.
In a move seen as reflecting this erosion, Vice Premier Tran Phuong told reporters in Hanoi Saturday that Vietnam's currency, the dong, was being devalued from its official rate of 11.7 to the dollar to a new rate of 100 to the dollar, representing a loss in value of 850 percent. Japan's Kyodo news agency quoted him as saying the devaluation was decided last week, but there was no immediate word on when it took effect. In any case, the devaluation still leaves the official rate far out of line with the black-market exchange rate of about 350 dong to the dollar.
In one example of comparative living standards, Doan Giai, 45, a furnace worker in the steel mill here since it started operating in 1969, said that before the 1975 fall of Saigon he earned a salary equivalent to about $46 a month.
Now, he said, he averaged 1,000 dong a month, $10 at the new official rate but only $2.85 at the more applicable black-market rate, and is the only provider for a family of five.
"Normally it's enough to live on," he said. "But if someone has to go to the hospital, I can't afford the medicine."
The situation has engendered a "passive resistance" in the south -- particularly in the former capital of Saigon, now officially called Ho Chi Minh City -- to the north's "socialist transformation" policy.
Among recalcitrant southerners, the policy is seen as a northern effort to raise its living standard at the richer south's expense by spreading the north's poverty nationwide.
Indeed, that is roughly what has happened in the 10 years since the war ended on April 30, 1975. Like the baskets of a don ganh, the ubiquitous carrying pole, the north and the south have been finding a balance, probably at a level similar to that prevailing before the war.
"Here the poverty is well-distributed," said Foreign Minister Nguyen Co Thach as he labored to compare Vietnam favorably to its economically dynamic neighbors in Southeast Asia. "So once the poverty is well-distributed, there is no social injustice. If there is no social injustice, there is stability. We are very poor, but we have no instability as in other countries which are richer than mine."
Asked in an interview in Hanoi if spreading poverty were not a strange policy for any government, Thach replied, "No, we would like to become richer, but we will have equal distribution of wealth, not as in the United States and other countries where the gap between rich and poor is so big." For example, he said, "here you can see no family is as rich as the Rockefellers, but we do not have so many beggars as in Harlem."
Thach may be right. But there are plenty of beggars on the streets of Hanoi, Ho Chi Minh City and points in between, and many workers are dressed in rags. Yet the fact remains that Vietnam today ranks as one of the 20 poorest countries in the world, a nation with a per capita income officially figured at about $160 a year. It is a country unable to feed itself, where the per capita availability of rice, as calculated by the International Monetary Fund, stands below that of India and Bangladesh and does not meet minimum nutritional needs.
It is a country where a tube of Colgate toothpaste costs more than three months' basic salary of an average government worker in Hanoi, and a dozen eggs sell for nearly two weeks' wages.
It is a place where the exchange-rate system is so distorted that the average cadre's basic salary of 300 dong a month now comes to $3 at the official rate and about 85 cents at the more realistic black-market rate. In four years, the value of the dong has fallen from 60 to the dollar on the black market to about 350 to the dollar.
From Hanoi to Ho Chi Minh City, a standard complaint is that, in economic terms at least, people lived better during the war than they do now. Constantly rising prices in the free market, which even government workers must rely on to supplement their meager rations, seem to be the biggest grievance.
Asked when the best years were, a government employe in Hanoi answered, "In the 1960s and early 1970s." Mainly because of abundant foreign aid, she said, "it was better during the war."
Like other government employes, her 300 dong monthly salary is supplemented by rations worth another 1,000 dong a month, $10 at the official rate. But to make ends meet, she must moonlight as a private tutor, earning up to 1,200 dong, or $12, a day.
"Everybody has a sideline," she said.
While living standards may be lower than during the war, they have been improving, especially in the countryside. In 1981, the government implemented a policy called the "contract system." Under that system, farmers can sell surplus produce on the free market at higher prices than the quotas they must sell to the state. Now, many Vietnamese say, peasants in the countryside generally live better than city-dwellers.
Still, that situation seems precarious at best. Population Rise Outstrips Rice Crops
Rice production has been rising in recent years, but the increases have been outstripped by a population growth estimated at 2.4 percent a year. In addition, natural calamities have set back minimal self-sufficiency achieved in 1983, leaving the country with a shortfall of nearly 1 million tons of food grain in 1984 and forcing authorities to seek emergency food aid from the United Nations this year.
According to Tran Phuong, the vice premier in charge of economic affairs, the World Food Program agreed to supply 10,000 tons -- out of a request for 15,000 tons -- and that aid is on the way. Nevertheless, Phuong said, Vietnam this year may have to import 200,000 to 300,000 tons of rice, although the United Nations has estimated needs at about 500,000 tons.
The situation represents a serious setback for Vietnam, which has hailed self-sufficiency in rice production as one of its great achievements since the end of the war.
Other difficulties facing the country, according to western diplomats and economists, include inflation running between 50 and 90 percent, foreign exchange reserves of only $16 million, a foreign debt of more than $6 billion, a balance of payments deficit of $175 million, and a cutoff in IMF lending because of an inability to make debt payments.
"In terms of international trade and balance of payments, it's a country that is close to bankruptcy," said an official of an international relief agency. "If I were a bank, I would not extend any credit. It's a country that is not credit worthy under the present circumstances."
"For the time being I must say that we are not good in economic management," Vice Premier Phuong said. But, he added, "a lack of spirit in economic management is understandable" because Vietnam waged war for 30 years against the French and Americans and had only the last 10 years to concentrate on economic development.
Western diplomats view Vietnam's economic difficulties as a major impetus behind cautious moves to open the country more toward the West.
Vietnam is drafting a new investment law to attract foreign capital by offering guarantees and incentives, said Foreign Minister Thach. He said the most important incentive concerns "the rate of profit." Further details were not available, but western diplomats said the law was expected to be published by the end of the year.
"The Vietnamese realize that if they want to have western capital here they have to give the normal capitalistic conditions," said a European diplomat. He said hard-line ideologues probably opposed this, as they have other economic reforms. "But I think everybody realizes that getting this country industrialized is something they won't be able to do themselves."
A former South Vietnamese general who has sided with the Hanoi government put the problem more succinctly: "Now we are suffering," he said. "We make no secret of it. We want to be friends with the United States."
Vietnamese officials make it clear that, while they appreciate the aid they receive from the Soviet Union, it falls short of the country's needs. Phuong said foreign aid, mainly long-term loans, amounts to nearly $1 billion a year, of which 60 percent comes from the Soviet Union. The remainder comes from Eastern Europe, he said. Other estimates put the Soviet aid alone at up to $2 billion a year, including military assistance.
In any case, said Phuong, "the aid from the Soviet Union is the biggest" received by Vietnam, "but it is still not enough."
Part of the problem, Vietnamese officials say, is that living standards and public expectations were raised artificially by massive wartime aid to the north and south, totaling about $1 billion for each side by the end of the war, according to Phuong.
Drop in Aid Hurts
The termination of this aid, much of it grants, at the end of the war led to an inevitable decline in the economy that many Vietnamese, particularly disaffected southerners, blamed on the Communists, the officials said.
Western diplomats agreed that the drop in aid has been a factor in the current economic difficulties, but they attributed much of the country's plight to Hanoi's failure to tap the economic potential of the more dynamic south.
"Ten years of American dollars in the south was a fairly heady influence," said one ambassador. "It's going to take awhile to get over that, if they ever do."
"The areas easiest to develop quickly are all in the south," another diplomat said, "and that poses a major problem because Hanoi is unwilling to give the south more economic muscle. They don't want to give the south that much freedom. It's dangerous."
The result has been a seemingly vacillating policy by Hanoi of crackdowns and letups on private enterprise in the south, all the time maintaining the guiding principle that Vietnam "is a state of proletarian dictatorship."
The 1980 constitution says the central economic goal is the "socialist industrialization" of the country. It gives the state a monopoly on foreign trade and provides for the nationalization of "all economic bases of feudal landlords and comprador capitalists" without compensation.
When necessary, the new constitution also allows the state to "purchase or requisition, with or without compensation, the property of individuals or of collectives." Free Markets Flourish
Within Vietnam's Stalinist limits, however, free markets have burgeoned. Even in Hanoi, small-scale private traders are flourishing at the Dong Xuan market, where they sell everything from live rabbits and goldfish to mangoes and pork chops. Nearby on crowded Hang Dao Street, Russians and other East Europeans bargain with private shopkeepers for Japanese watches and calculators or western-style T-shirts that merchants say have been brought up from Ho Chi Minh City or smuggled in on ships calling at Haiphong port.
While the markets have blossomed in recent years since the contract system spurred agricultural and industrial production, Hanoi still has an austere look compared to the south. There, far more is available, and agricultural produce costs far less than in the north.
In Ho Chi Minh City, one can buy anything from the latest Japanese television sets, video recorders and -- illegally, western pornographic tapes -- to children's games like "Smurf bumper cars." Few cars ply the streets compared to the traffic-jammed old days. But far more people have motorcycles and mopeds than in Hanoi, where traffic consists almost entirely of bicycles, and oxcarts on downtown streets are a common sight.
While the contract system has "brought progress" in the past few years, "not all" members of the ruling Communist Party agree with it, said Gen. Tran Cong Man, the editor of Hanoi's Army newspaper, Quan Doi Nhan Dan.
Last year, however, the system received an important endorsement from Party Secretary General Le Duan for the first time in a public speech.
According to Mai Chi Tho, a Central Committee member who serves as Ho Chi Minh City's mayor in his capacity as chairman of its People's Committee, "we realize that we will not be able to achieve our final goal of socialist construction unless we continue to apply a transition-period formula for those people" who are engaged in private trade. Mai Chi Tho, the younger brother of senior Politburo member and former Paris peace negotiator Le Duc Tho, said, "We are prepared to accept that their income is higher than our own, as long as they accept our policies and do not exploit the situation or other people to enrich themselves."
While black-marketeers continue to do business openly, the state has cracked down in recent months on private restaurants and cafes, taxing many of them out of existence and forcing others to enter "joint ventures" with the government. Last year Ho Chi Minh City's long-surviving book market was closed, its private kiosks dismantled by police. Farmers Prodded to Join Co-ops
At the same time, many farmers and private workers have been prodded into joining cooperatives, although the arrangements sometimes seem to make little difference. In the Mekong Delta town of Can Tho, for example, a university rector said his brother, a farmer, was keeping 612 tons of rice in his house because the government was not offering him a high enough price.
"He doesn't need the money now, so he decided to keep it," the rector said. "But in the north, no, he would have to sell it."
The rector added, "sometimes the government asks farmers to produce a certain crop, but if it doesn't increase their income they don't go along."
"Now we're in the process of cutting the tail of the bureaucrats," said another agricultural specialist at the Can Tho University. A majority of Mekong Delta farmers are now in cooperatives, he said, but these are "loosely organized." He suggested that the farmers were in a fairly strong position because the Mekong Delta, which comprises nine of the country's 44 provinces, accounts for 43 percent of Vietnam's total production of about 17 million tons of rice and grain equivalent.
According to Vice Premier Phuong, "in the south only 50 percent of the farmers and peasants have joined cooperatives," while in the north the figure exceeds 90 percent. "Definitely we do not order or force peasants to join cooperatives," he said. "Some local authorities might have done so, but we have given instructions that they should not do that."
With or without co-ops, western diplomats said, the Vietnamese are approaching the limits of rice production increase without major new investment, which the state now appears unable to provide.
The Hanoi leadership is placing great hope for future growth in several major projects, notably a 1,
920-megawatt hydroelectric plant at Hoa Binh in the north that authorities say will be bigger than Egypt's Aswan Dam plant and crude oil production off the coast of southern Vietnam. The hydroelectric plant is to start operating partially in 1987 and be completed in 1991; the oil project is scheduled to reach full production at an as yet unspecified level in 1990, Phuong said. Both projects involve Soviet aid.
"We hope that in the next five years things will change, and we will not be one of the poorest countries in the world anymore," he said.