HO CHI MINH CITY, VIETNAM -- Twelve years after 15 North Vietnamese infantry divisions arrived to "liberate" the south and set it on the road to socialist transformation, the southern part of Vietnam appears poised to "liberate" the north from economic decline and rigid, doctrinaire thinking.
Take the case of a woman named Nguyen Thi Thi.
In 1980, when the Communist rulers of this former South Vietnamese capital once known as Saigon decided to replace the city's top-heavy, money-losing food department, they turned to Thi, a former Viet Cong guerrilla fighter in the south's Mekong Delta region.
Using private sector principles and operating under a government monopoly, Thi first consolidated a network of rice retailing shops. Then she pared down the staff, diversified into new products such as instant noodles and cookies, increased exports and introduced a sliding pay scale -- called "contract wages" -- to give workers incentive to work harder. In the process, she also increased productivity of the former city bureaucracy about thirtyfold.
Thi has run her food company so successfully that she has plans to build a small oil refinery and a solar power system to keep her factory running during the frequentpower failures and electrical shortages here.
"It's a new way of thinking," she explained, standing before maps and miniature-scale models that outline the future expansion of her food empire. "Abolish subsidies, abolish bureaucracy. This is socialist economy."
Thi's profitable food company is one of the most visible success stories that can be attributed to a liberal, experimental brand of economic thinking in this area that was a bastion of capitalism before the fall of Saigon in 1975.
Far from eradicating the economic system here in the south, Vietnam's communist rulers recently have turned to embrace some of capitalism's guiding principles -- the ideas that industries must turn a profit, that employes will work harder if pay is pegged to productivity and that small entrepeneurs, making anything from television antennas to medical instruments, should be encouraged and supported.
The extraordinary Communist Party Congress in December gave special priority to small private enterprises -- called "family economies" -- and officially recognized the role of the private sector in reviving Vietnam's economy.
Many of the private sector "reforms" approved by the party Congress already had been in effect here, sparing the south much of the economic ruin that has been visited on the rest of the country. "This city's policies encouraging family and private economies were proven right during the sixth party Congress," said Nguyen Cong Ai, vice chairman of the People's Committee here.
An indication of the importance of the south's role in rescuing the country's economy was the elevation to top party and government positions of a new generation of leadership -- in outlook if not in age -- whose members have spent most of their careers in the south and have been responsible for implementing some of the liberalizing reforms.
When he was party secretary in Ho Chi Minh City in the early 1980s, Vietnamese leader Nguyen Van Linh, 71 and a northerner by birth, spearheaded many economic reforms aimed at granting more autonomy to state enterprises. Linh was aided here by Vo Van Kiet, chairman of the state planning commission, who has been elevated to a more powerful position on the Politburo.
The change in thinking about capitalism also has resulted in the reemergence of some of the old capitalists of the defeated Saigon regime.
The prototypical capitalist now working for the socialist regime is Nguyen Xuan Oanh, a Harvard-trained economist and a deputy premier in the former American-backed Saigon government. Oanh, also known by the American name Jack Owens, is an unrepentant capitalist who plays the stock market through a New York broker and keeps a current account at Riggs bank in Washington. His key chain is decorated with miniature plastic facsimiles of U.S. dollar bills.
Oanh recently was elected as a non-Communist Party member to the new National Assembly, and he serves as an economics adviser to the Communist authorities. Now Oanh, with the help of some of his capitalist cronies from the pre-1975 days, is putting up the funds to establish socialist Vietnam's first commercial bank, with offices here and in Hanoi and branches in provinces that can come up with enough shareholders.
"Socialism can be interpreted many different ways," Oanh said. "You can't build socialist Vietnam in one day. There is no model for Vietnam. We must grope in the dark and find our own way."
Oanh may be the most prominent, but by no means the only, capitalist from the old days who has found that there is still a profit to be made in Vietnam.
Nguyen Huu Ha worked as a government architect in the former Saigon regime, dabbling in private businesses on the side. He also was relatively prosperous, owning four cars.
When the Communists came in April 1975, Ha thought that his capitalist days were over. "At that time, I didn't think there would be private ownership," he said. "I thought there would only be collective ownership under the communist regime." He switched sides, giving three of his four cars to the state and working briefly for a provincial Communist Party committee.
But now Ha is back in business, this time producing television antennas both for export and the burgeoning domestic market of television viewers in the south. He also produces plastic containers and other household items on the side. "I try to adapt myself to the demands of the consumer," he said, voicing typical capitalist thinking. "I decided to make the product that meets the demands of the market. There are more TV sets now, so more antennas are needed." And if the market becomes saturated? "We'll just switch to another product."
Since a government directive early last year essentially legalized the private shops, up to 3,000 have sprung up here, employing more than 25,000 workers, city officials estimate. The private economy has made Ho Chi Minh City awash in every conceivable consumer item, from stereos to French perfume to imitation Izod shirts made in Thailand.
So far, the reemergence of the southern capitalists has brought no crisis of ideology for Vietnam's communist rulers. They say the "family economies" -- such as Ha's antenna shop -- are just one more sector of the economy that must be unharnessed if Vietnam is to survive.
"The demands of society are big and variable, and the state cannot satisfy all those demands," said Ai, the People's Committee vice chairman here. "The point here is to encourage and free all the productive forces of society to meet all the demands." The private sector, he said, "achieves things the state cannot always achieve."
Communist officials, by encouraging the revival of the private sector, also have allowed the recreation of a wealthier class of private businessmen. By causing an upper class to come back into existence, they have challenged one of the goals of communism -- the elimination of social classes. The capitalist class is, they say, a necessary evil.
"We are using capitalists in order to improve our economy," said Huu Tho, economics editor of the Communist daily Nhan Dan in Hanoi. "Marxism is against exploitation -- not against being rich."
"Sometimes we misunderstand Marxism," he said. "That there will be no rich people and everyone will be equal can only happen in the advanced phase of socialism," a phase that Vietnam may not reach in this century, he said. In the meantime, he said, "we have to put up with people being rich because they are talented and have a good mind."
As long as the state controls the key sectors of the economy, from transportation to energy to industry, there is no danger of socialist Vietnam being submerged by a wave of capitalism, according to most party officials interviewed during a two-week visit to Hanoi, Ho Chi Minh City and surrounding provinces. Most of the officials drew a distinction between the "productive capitalists," whose talents are badly needed, and so-called "trading capitalists," who make their money as middle men moving goods. "Trading capitalists," they said, are still unwanted in the new Vietnam.
Ideally, Communist officials would like to see a merger of capitalist productivity and the needs of the state -- and they consider Tran Van Lam something of a model. Lam is the director of a small company making badly needed medical equipment, such as stethoscopes and devices to test blood pressure.
Lam is a former automobile mechanic who quit his profession after the fall of the U.S.-backed government in South Vietnam, thinking "that under socialism, people don't use cars. But I saw that under socialism, even more equipment was needed." So working to fill state contracts for hospitals, Lam hopes one day to be able to cover his initial investment and eventually "get a lot of profit out of it." In the meantime, he is filling a badly needed shortage in the health care field, producing equipment using mostly local resources at a fraction of the cost of importing supplies.
"If you want to live under socialism and gain the support of society, you have to provide a service," he said.
Still, Lam in many ways seems the exception, not the rule, as many of the new private enterprises appear to be producing luxury goods or consumer items, and not filling the more desperately needed shortage areas.
But along with self-sufficiency in food and an increase in exports sufficient to pay for needed imports, increasing the production of consumer goods was one of three priorities laid out by December's party Congress for Vietnam's 1986-to-1990 five-year plan.
In a country that has been desperately lacking almost everything, the definition of "consumer goods" is hazy. "Saigon used to be a consumer society," said economist Oanh. In a part of the country used to freewheeling consumerism, "you cannot go without ice, without coffee, without televisions and fans. So these have to be supplied first for the internal market," he said.
The consumer-capitalism of the south already has shown signs of having crept northward, as many Hanoi entrepeneurs have responded to the new regulations on "family economies" by pulling down the front walls of their houses and turning their front rooms into colorful sidewalk stores offering everything from Mickey Mouse T-shirts to the latest rock cassette tapes.
The revival of capitalism resulted from economic necessity. In a country with an estimated population of 60 million people, per capita income is a meager $250 a year, millions are unemployed and there is a critical shortage of hard currency. Hyperinflation is raging at about 1,000 percent a year, despite repeated and chaotic devaluations.
The official exchange rate is 80 dong to the dollar, but well-known and well-frequented tablecloth shops in Hanoi and antique dealers here recently were offering 900 dong per dollar.
The national budget also has been drained by costly food subsidies, and the leadership has virtually conceded that the country is being propped up by its annual $2 billion injection of Soviet aid, which, they now admit, has been "wasted."
The subsidies have emerged as perhaps the country's most symbolic legacy of the past 12 years of economic mismanagement. Simply put, since agricultural reforms ended the system of farmers growing a quota of rice for the state, the government has been forced to buy rice from peasant farmers at near-market rates. The state then sells that rice in the urban areas at highly subsidized prices, creating huge budget deficits.
"We buy rice from the peasants at market price -- a very high price -- and we sell it to people" for one-tenth the price, Foreign Minister Nguyen Co Thach said in an interview here. "And we've been doing that for 10 years! Now we know it is crazy. We must change." Vietnam has lost millions of rubles in Soviet aid supporting this costly subsidy system, he said.
With the cooperation of the International Monetary Fund, Vietnam's leaders have now embarked on an ambitious economic stabilization plan to control the runaway inflation and eliminate the costly rice subsidies while simultaneously increasing workers' salaries so they can afford to pay the market rates.
"We are now preparing to abolish that subsidy system," said Nhan Dan economics editor Huu Tho. "The state is preparing to sell rice at the market price." He said the system could be completely abolished by the end of this year, but the government fears speculation and hoarding by traders.
Asked how long it will take for the stabilization plan to have an impact and for Vietnam's economy to turn around, Oanh, the Harvard-trained economist, replied, "That is the $4,000 question." He estimated that it will take at least two years for the country to stabilize, based on the experiences of other countries, notably Israel and Argentina, that have experienced hyperinflation. Beyond that, he predicted another three years for Vietnam to begin to see real growth.
But much of the wishful economic thinking depends on a raft of uncertainties and imponderables, such as passage of a new investment code that will allow foreign firms to come in as joint partners with the state or to operate individually. That investment code is expected by the end of this year. Huu Tho, the economics editor, said there is still some debate over the right of investors to withdraw their capital.
Vietnamese economists and government officials are looking to export processing to be the country's engine for future growth. As a model, they cite Thi's successful food company and the Number One Frozen Seafood Export Co. here.
The seafood company made $17 million last year and expects to reap $20 million this year, sending packaged frozen shrimp, squid, eel and froglegs to Hong Kong, Japan, Singapore, Australia and the Eastern Bloc. The seafood company has been successful, according to vice director Dao Thi Minh Van, partly because of liberalizing reforms introduced in 1985 that gave the firm more freedom in negotiating its export contracts directly with overseas buyers.
"We can directly negotiate with foreign trade partners and can directly make contracts," she said. "Before 1985, we could do it, but not on such a large scale."
The company's triangular relationship with Japan points the way to the potential types of arrangement that many economists here would like to see in the future. Japan takes shrimp and dried squid to satisfy its huge domestic market. In return, it gives the seafood company the equivalent amount in consumer goods -- sometimes fishing equipment such as nets, but also television sets and portable stereo and Walkmen players. The seafood company, in turn, trades those highly valued Japanese consumer items to local Vietnamese fishermen in exchange for their fish.
The seafood company has operated successfully under this city's liberal regulations that granted unusual autonomy to state firms before the idea was fashionable. Now the crucial question -- and one many here are asking -- is whether Linh and the new southern-trained leadership in Hanoi can transplant the south's liberal economic policies to a nationwide setting, or whether the south is unique because of its capitalist past?
"The leadership of our city gave us a green light, and the person who gave us a green light is now the party secretary general," said Thi. To implement the same reforms nationwide, she said, "will take a longer time, because you must first change the brain."