The credit lines on two photographs of Vietnamese Foreign Minister Nguyen Co Thach were incorrect last Saturday. The photos were taken by Helayne Seidman for The Washington Post. (Published 10/16/90)

NEW YORK, OCT. 12 -- Vietnam's foreign minister, Nguyen Co Thach, said today that 40 years of a communist economic system turned his nation into a "charity house," stifling individual initiative and creating a general overdependency on the state.

Thach, in the United States on a three-week diplomatic offensive to improve U.S.-Vietnamese relations, called the system "our great mistake during these past 40 years" because such a state-dominated economy "couldn't work."

Thach's criticism, also expressed in a speech last week at the United Nations, signals a growing willingness on the part of Vietnam's communist rulers to admit past economic failures -- much as communist reformers in Eastern Europe and the Soviet Union have done in recent years.

Criticism of the political system, however, has not been so freely allowed, many observers have said, noting the expulsion in March of the leading liberal on the 13-member Politburo.

But Thach, widely known as an exceptionally adept politician and negotiator, insisted today that Vietnam is committed to both political and economic reform. He brushed aside news reports of a crackdown against dissidents by Communist Party hard-liners in the ruling Politburo, saying that "We have released 94,000 . . . people from re-education camps," and that there are "less than 100 people in the camps . . . and we will release them in the very near future."

U.S. officials and other experts on Vietnam say the central problem facing the country is that the old guard dominating the party is desperately attempting to hang on to power even as Vietnam moves, with some substantial initial success, to a market economy.

The 68-year-old foreign minister, believed to be the most prominent member of a pro-West, reform faction on the Politburo, said Vietnam learned from the upheavals in communist regimes in Europe that "if you have no reforms, you will collapse" and that "if you have only economic reform and no political reform, it could not work."

Thach, who is scheduled to meet with the Senate Foreign Relations Committee next week in Washington, said he is "optimistic that with the solution of the Cambodian problem we can have normal relations" and compared current negotiations toward ending the civil war in Cambodia to the "last 15 minutes of a soccer match."

Thach met Sept. 29 with Secretary of State James A. Baker III in the first high-level discussion between the United States and Vietnam in 17 years. He said he and Baker "have discussed a schedule of our normalization, but I could not leak it to you now."

U.S. officials, however, said no formal discussion on normalization of relations would begin until the 20 countries involved in the Cambodian peace process, including Vietnam and the four Cambodian factions, sign an agreement in Paris on how to hold U.N.-supervised elections.

Vietnam invaded Cambodia in late 1978 to oust the radical communist Khmer Rouge, who are believed responsible for the death of up to 2 million people in their three-year rule. Vietnam withdrew its troops last year, after installing a friendly government in Cambodia that is now under attack by a three-part coalition including two non-communist factions and the Khmer Rouge.

Another purpose of Thach's trip to Washington is to confront the second major obstacle to normalizing relations -- the satisfactory accounting by Vietnam of the nearly 1,700 U.S. servicemen lost there whose status has not been resolved.

Thach will meet with Gen. John Vessey Jr., former chairman of the Joint Chiefs of Staff who is special negotiator for this issue, and Anne Mills Griffiths, head of the National League of Families of American Prisoners and Missing in Southeast Asia.

State Department officials and private organizations have accused the Vietnamese of holding the remains of hundreds of servicemen and of not allowing full access to Vietnamese archives and possible witnesses.

Thach said he understands the concerns because members of his family were never found after the Vietnam War. He said Hanoi had been coooperative and would continue to be so, but he mentioned no new efforts.

"I try my best," he said, but some of the archives have been bombed by the United States. In addition, records have deteriorated because "we are a tropical country and have no air conditioning," he said. "It is amazing that you think other {countries} will be just like the United States" in terms of ability to keep historical records, "but it is not the same."