Thayer Vietnam's Regional Integration

VIETNAM’S REGIONAL INTEGRATION: THE COSTS
AND BENEFITS OF MULTILATERALISM
Carlyle A. Thayer ∗
[Paper to conference on Vietnam’s Integration into the World and State
Sovereignty Issues, co-organized the Centre d’Études et de Recherches
Internationales and Centre Asie-Europe, Sciences Po and le École des Hautes
Etudes en Sciences Sociales, Paris, France, October 25, 2004]
Introduction
According to the thematic background paper provided by the

conference organizers, the Vietnamese state’s authority has come
under challenge (disputation and questioning) as a consequence of
its twin policies of domestic renewal (doi moi) and ‘open door’
foreign policy. The thematic background paper argues that current
dynamics operating at the national and supranational levels have, in
fact, weakened the vertical power of the executive and called into
question, to some extent, the sovereignty of the Vietnamese party-
state.
Finally the thematic background statement asserts:
From a foreign policy point of view, the increasing number of

commitments linking the Vietnamese State to its foreign partners
constitutes another limitation on national sovereignty. Vietnam’s
integration into the world community and international
organizations, as well as its open-door policy towards foreign
investors, implicitly require Vietnamese authorities to accept some
exogenous norms and political decisions, and eventually even some
transfers of competence away from the national domain.
This paper will explore these propositions by focusing on the process

of Vietnam’s regional integration through membership in the
Association of South East Asian Nations (ASEAN) from 1995 until
the present. 1
∗
Professor of Politics and Foundation Director of The University of New South
Wales (UNSW) Defence Studies Forum at the Australian Defence Force Academy
in Canberra. In 2005, Professor Thayer will take up the position of C.V. Starr
Distinguished Professor of Southeast Asian Studies at the School of Advanced
International Studies, Johns Hopkins University in Washington, D. C. Revised
October 27, 2004.
1For broad overviews of the regional integration process consult Le Van Sang
(1998), Vu Duong Ninh (1998), Tran Khanh (2003), Luan Thuy Duong (2004) and
Vu Van Hien (2004); on the ASEAN Economic Community consult: Dang Cam Tu
1
2 Thayer
This paper is organized into five parts. Part 1 discusses several key
conceptual and definitional issues. Part 2 traces the origins of
Vietnam’s multi-directional foreign policy and Hanoi’s decision to
join ASEAN. Part 3 reviews Vietnam’s experience with
multilateralism as a member of ASEAN both before and after the
Asian financial crisis of 1997-98. Part 4 reviews the costs and benefits
of Vietnam’s participation in ASEAN with particular focus on the
ASEAN Free Trade Area (AFTA) agreement and the reform of State-
Owned Enterprises (SOEs). It also includes a short discussion of the
‘code of conduct’ in the South China Sea and the Myanmar question.
Part 5 offers some conclusions arising from Vietnam’s experience
with multilateralism.
Part 1 — Multilateralism, Sovereignty and the State
Vietnam’s membership in ASEAN is effectively an exercise in

multilateral cooperation or multilateralism. At the onset it is
important to consider just what is meant by this term as there are
differing ‘brands of multilateralism’ (Quilop n.d.). States may
cooperate to attain a common interest, or they may cooperate to
avoid a particular outcome. In the case of the former, states
cooperate when there is an overlap in national interests and the
particular area of overlap cannot be attained by independent action.
Thus, states collaborate to attain common interests. But states also
share an interest in avoiding certain outcomes. In these
circumstances states need only to coordinate their actions to avoid
certain outcomes. In other words, these two brands may be
identified as collaborative multilateralism and multilateral
coordination (Stein 1990).
The international relations literature on multilateralism distinguishes

between ‘minimalist’ and ‘maximalist’ positions, identified with the
writings of Robert Keohane and John Ruggie, respectively. Keohane
(1990) defines multilateralism as ‘the practice of coordinating
national policies in groups of three or more states though ad hoc
arrangements or by means of institutions’ (1990:731). This definition
is termed the ‘minimalist definition’ because of its quantitative
nature (three or more states) and because multilateral institutions are
defined as simply ‘multilateral arrangements with persistent sets of
rules’.
Ruggie asks what is it about international institutions that make
(2004) and Tran Phuong Lan (2004); and for the impact of globalisation, consult:
Do Trong Ba (2003) and Van Quang (2003) .
Vietnam’s Regional Integration 3
them multilateral (1992:566-568). He argues that it is not simply the
number of actors involved but the qualitative dimension or character
of their cooperation. According to Ruggie, multilateral relations
involve three or more states coming together to tackle a specific issue
or set of issues on the basis of generalized principles of conduct. In
other words, multilateral institutions adopt appropriate conduct for
a class of actions irrespective of particular interests or circumstances.
Ruggie identifies three generalized principles that are important:

non-discrimination, indivisibility, and diffuse reciprocity. The first
principle is virtually self-explanatory. States that engage in
multilateral cooperation do so on an equal basis. The principle of
indivisibility means that decisions made through a multilateral
institution are mutually binding on state parties. This principle may
be illustrated with reference to the General Agreement of Tariffs and
Trade (GATT) or the most-favoured-nation (MFN) principle. Under
GATT and MFN the trade system is an indivisible whole and all
parties agree to treat each other in a like fashion. The principle of
diffuse reciprocity means that all members are expected to share
equivalent benefits over a period of time. To take another example
from the international trading regime, with respect to exports, for
example, each party should receive roughly the same amount of
benefit in aggregate over a period of time as all the other parties.
A final point on multilateralism needs to be made: the practice of

multilateralism varies across regions. Multilateralism in Europe, as
embodied in the European Union (and its predecessors), is heavily
institutionalized, based on rules, regulations and laws, and involves
some derogation of national sovereignty (Gramegna 1997, Lim 1997
and Job 1997). In Asia, the process of multilateralism tends to focus
more on process and is shaped by norms and principles (Acharya
1997). A quick comparison of the European Union (EU) and ASEAN
will bear this out (this point will be discussed at the conclusion of
this section).
The notion of state sovereignty grew out of a distinctly European

tradition. It is one of the central concepts that defines the
contemporary international system. Sovereignty was adopted by
Southeast Asian’s nationalist leaders and their successors as the
cardinal principle of interstate relations in the post-colonial period.
In general usage, sovereignty has two distinct meanings – supreme
power’ and ‘autonomy’ (freedom for constraint or independence).
The Westphalian notion of sovereignty precluded the existence of
any higher authority beyond state borders. Sovereignty has both
domestic and external dimensions. Sovereignty defines the holders
4 Thayer
of state authority and their prerogatives and grants them supreme
authority within their territorial boundaries and in dealing with each
other.
But sovereignty is not a static concept or a material given (O’Hagan

2004). For example, in its original form state sovereignty in Europe
emerged from a medieval system characterized by overlapping
systems of authority that were unified under the concept of
Christendom. Popular sovereignty, embodied in the American and
French revolutions, led to an alteration in the locus of state, authority
and legitimacy from rulers to ‘the people’. The rise of the concept of
‘self-determination’ led to a further modification of how sovereignty
was perceived. Whatever the historical period state sovereignty was
never absolute.
As is the case with multilateralism, there are differing ‘brands’ of

sovereignty. It is common in the field of international relations to
distinguish between juridical and empirical sovereignty. Empirical
sovereignty refers to a state’s ability to demonstrate its political and
economic capacity for self-governance while juridical sovereignty
refers to sovereignty as a moral right. Stephen D. Krasner (1999; see
also Krasner 2001), for example, identifies four distinct types:
interdependence sovereignty, 2 domestic sovereignty, international
legal sovereignty and Westphalian sovereignty. 3 In sum, state
sovereignty today is based on norms and practices and shared
understandings among states that evolved as a particular historical
process.
The phenomenon of so-called failed states has increasingly blurred

the distinction between domestic and external sovereignty. This
situation presents formidable challenges to the international
community in deciding on who (which actors) forms the sovereign
community. The impact of globalization has also touched off another
debate over whether globalization undercuts or reconfigures state
sovereignty.
As noted above, ASEAN is a different type of multilateral
2Krasner is highly critical of this concept, which is defined as ‘freedom from

external influences’, because it is historically inaccurate and because it confuses
‘control’ with ‘authority’.
3Westphalian sovereignty rests on two principles – territoriality and the exclusion
of external actors from domestic authority structures. Krasner terms this concept
‘organized hypocrisy’ because states have never been free from external
intervention in their domestic affairs.
organization from the European Union falling somewhere in
between the minimal and maximalist positions. ASEAN has
eschewed formal institutionalization for most of its history. The
powers of the ASEAN Secretary General are quite limited and the
ASEAN Secretariat comprises no more than one hundred full-time
staff. ASEAN puts a premium on consultation and consensus
decision-making based on the norms of non-interference in a
member state’s internal affairs. And, according to one Vietnamese
writer, ASEAN is a ‘loose economic alliance’ and ‘not really a
coherent bloc’ (Tran Phuong Lan 2004).
ASEAN’s generalized principles are enshrined in the 1967 Bangkok

Declaration, the 1976 Treaty of Amity and Cooperation (TAC or Bali
Concord I), and the more recently adopted Bali Concord II (2003).
The norms and principles that guide ASEAN decision-making are
known collectively as ‘the ASEAN Way’. A detailed study by Tobias
Nischalke (1999 and 2000) of fourteen case studies of ASEAN foreign
policy behaviour concluded that ASEAN’s ‘shared meaning
structures’ were based on a ‘narrow foundation of regional norms of
conduct and agreement on the benefits of power balancing in
security affairs’. The Nischalke study found that ASEAN states quite
often took unilateral foreign policy decisions without prior
consultations with other members. ASEAN, he concluded, was not
an identity-based community but an emerging rules-based
community in which the norms of the TAC were increasingly
accepted.
In sum, ASEAN and the ‘the ASEAN Way’ operate as a process

designed to prevent a clash between institutional multilateralism
and state sovereignty (the question of Myanmar is discussed in part
three). ASEAN has no mechanisms to force compliance with its
decisions. Its main dispute resolution mechanism, the ASEAN High
Council, has never operated. The one possible exception is the AFTA
and its implementing mechanism the Common Effective Preferential
Tariffs (CEPT) arrangements discussed in part three below.
Increasingly, on other economic matters, ASEAN has adopted a
decision-making formula that permits members who disagree on a
certain policy proposal to opt out, while other states, which are in
agreement, to proceed. ASEAN also practices ‘positive
discrimination’ in economic matters in relation to its newest and less
developed members Vietnam, Laos, Myanmar and Cambodia.
If the concepts of multilateralism and sovereignty are problematic, so

6 Thayer
too is the nature of the Vietnamese state. 4 Scholars have debated
whether Vietnam is a ‘weak’ or ‘strong’ state (Dauvergne 1998,
Migdal 1988). Some argue that the Vietnamese state is strong in some
policy spheres while weak in others. Some academics see an erosion
of party-state fusion with the state taking on a more powerful role
via the National Assembly and other government institutions. Still
other scholars question whether concepts of ‘strong’ and ‘weak’ state
are at all useful in characterizing contemporary relations between
Vietnamese party-state authorities and society (Painter 2003:22). This
issue will arise in part three below within the context of an official
program to equitize state-owned enterprises (SOEs).
Part 2 — Vietnam’s Multi-Directional Foreign Policy
Since the birth of the Democratic Republic of Vietnam in 1945, and

more particularly since the partition of Vietnam in 1954, communist
Vietnam has been relatively isolated in international affairs. During
the Vietnam War Vietnam was dependent on aid and assistance
from the Soviet Union and China. Perhaps its only major experience
with multilateralism came through membership in the Council for
Mutual Economic Assistance (CMEA). Vietnam was grouped with
Cuba and Mongolia as less developed members and held a
dependent subordinate place in Moscow’s international division of
labour (Thakur and Thayer 1992:173-198 and 224-226). Vietnam’s
foreign policy was almost entirely framed by communist ideology
and political-strategic dependence on the USSR.
During the 1980s, a remarkable transformation took place in how

Vietnam’s policy elite conceptualized foreign policy. The roots of this
transformation were two fold. They lay in domestic circumstances
arising from the socio-economic crisis that confronted Vietnam at
that time. And secondly, they also lay in external influences arising
from the ‘new political thinking’ emanating from Gorbachev’s Soviet
Union. Vietnam turned from a foreign policy framework heavily
structured by ideological considerations to a foreign policy
framework that placed greater emphasis on national interest.
Vietnamese officials now emphasized global economic forces and the
impact of the revolution in science and technology over military-
industrial aspects of power when weighing the global balance
(Nguyen Manh Cam 1995:223-230, and Vu Khoan 1995:71-76). The
old and new foreign policy frameworks overlapped and co-existed
4See summary overviews by Gainsborough (2002 and 2003), Kerkvliet (1995a,

1995b, 2003a and 2003b) and Thayer (1995).
for a period of time.
In December 1986, at the sixth national congress of Vietnam

Communist Party (VCP), Vietnam adopted the policy of doi moi. This
policy was mainly concerned with overcoming the domestic
economic crisis by the adoption of socio-economic reforms. But the
sixth party congress sanctioned the beginnings of the open door
foreign policy; Vietnam now began to encourage foreign direct
investment from developed free market economies.
It was not until May 1988 that Vietnam’s new foreign policy
orientation was codified. This took the form of Politburo Resolution
no. 13 which asserted that ‘economic weaknesses, political isolation
and economic blockade are major threats to our country’s security
and independence’. Therefore Vietnam should pursue ‘the
establishment of a framework for the Indochinese-ASEAN peaceful
co-existence as conditions for maintaining peace, developing the
economy and consolidating the relationship of cooperation and
solidarity among the three countries’ (quoted in Luu Doanh Huynh
2004:30). The objective now was ‘to maintain peace, take advantage
of favorable world conditions’ in order to stabilize the domestic
situation and set the base for economic development over the next
ten to fifteen years (Nguyen Dy Nien 1996:47). This was a landmark
policy decision that set Vietnam firmly on a ‘multi-directional
foreign policy’ orientation.
After Vietnam’s withdrawal from Cambodia in September 1989, both

Vietnamese and Southeast Asian leaders began to discuss the
prospects of and conditions for Vietnam’s membership in ASEAN. In
November 1990, Indonesia’s President Suharto became the first
ASEAN head of state to pay an official visit to Vietnam. In March
1991, Malaysia’s Prime Minister proposed the initiation of a dialogue
between ASEAN and the non-member states of mainland Southeast
Asia (Vietnam, Myanmar, Laos and Cambodia). This was
immediately welcomed by Vietnam which also signaled its desire to
attract investment from ASEAN businessmen. These developments
took place while a comprehensive political settlement of the
Cambodian issue was being negotiated.
An important elaboration of Vietnam’s ‘multi-directional foreign

policy’ was adopted by the seventh national party congress in June
1991 (Vu Khoan 1995:75). Vietnam now sought ‘to be friends with all
countries’. Vietnam’s Strategy for Socioeconomic Stabilization and
Development Up to the Year 2000, declared that Hanoi would
‘diversify and multilateralise economic relations with all countries
8 Thayer
and economic organizations...’ Since the seventh party congress,
Vietnam succeeded in diversifying its foreign relations. The major
accomplishments of this new orientation were fivefold:
normalization of relations with China (November 1991), the
restoration of official assistance from Japan (November 1992) and in
1995 normalization of relations with the United States, membership
in ASEAN, and the signing of a framework agreement with the
European Union. For the first time, socialist Vietnam had established
relations with all five permanent members of the UN Security
Council and equally importantly, with the world’s three major
economic centers: Europe, North America and East Asia. Vietnam’s
overall diplomatic relations expanded to include diplomatic ties with
163 countries by the end of 1996. In 1989, Vietnam had diplomatic
relations with only twenty-three non-communist states.
In August 1991, Phan Van Khai, first vice chairman of the Council of
Ministers, speaking at an international symposium in Hanoi,
signaled Vietnam’s desire to cooperate with ASEAN members. Pham
Van Tiem, chairman of the State Price Committee, stated that
‘ASEAN can become the bridge between Vietnam and the world’
(quoted by Andrew Sherry, Agence France-Presse, August 25, 1991).
In September, during the course of a visit to Hanoi by Thailand’s
Foreign Minister, Vietnam expressed its willingness to accede to the
1976 ASEAN Treaty of Amity and Cooperation and then followed
up by officially notifying the Philippines of its intention (Kavi
Chongkittavorn, The Nation, September 24, 1991).
The Cambodian peace agreement, signed in October 1991, and the

collapse of the Soviet Union in December that year represented a
major watershed in the development of Vietnam’s ‘omni-directional’
approach to foreign policy (for the effects on Vietnam’s economy
consult Flatters 1997). The Cambodian settlement meant that
Vietnam was no longer an international pariah state subject to an aid
and trade boycott. After the Cambodian settlement, Vietnam quickly
moved to restore relations with the individual members of ASEAN
and with ASEAN as a regional organization.
Vo Van Kiet, then chairman of the Council of Ministers, led a high-

level government delegation to Indonesia, Thailand and Singapore
in October-November 1991. The following year Kiet visited
Malaysia, the Philippines and Brunei. Kiet’s trips marked a return of
Vietnam into the regional fold and a turning back of the clock to
1976–77 when Vietnam-Southeast Asia relations were at an all time
high. Since Kiet’s ground-breaking visits, Do Muoi, Secretary
General of the Vietnam Communist Party, paid visits to Singapore,
Malaysia, Thailand, New Zealand, Australia, Japan, South Korea and
Myanmar.
The end of the Cambodian conflict also brought with it an end to

ASEAN’s trade and aid embargo. This led to unprecedented levels of
commercial interaction. ASEAN investment increased ten fold in just
three years (1991–1994), and made up fifteen per cent of total direct
foreign investment. ASEAN states became involved in over 147
projects with a paid up capital of US$1.4 billion by the first half of
1994. Thirty-seven development agreements were signed between
Vietnam and ASEAN businesses during this period.
Sixty per cent of Vietnam’s foreign trade was with ASEAN states. In
1994, Singapore overtook Japan to become Vietnam’s biggest trading
partner. Four of the ASEAN countries ranked among the top fifteen
foreign investors in Vietnam. Singapore and Malaysia ranked sixth
and seventh, respectively, after Hong Kong, Taiwan, South Korea,
Australia and France (figures published by the State Committee for
Cooperation and Investment, August 11, 1994). The industrializing
economies of Thailand and Malaysia also made them important
models for Vietnamese emulation.
The collapse of the Soviet Union in late 1991, coupled with the prior
collapse of the socialist system in Eastern Europe in 1989, drastically
altered Vietnam’s strategic environment. Military confrontation of
the Cold War era was now a thing of the past. More importantly,
Vietnam suffered from the abrupt loss of Soviet aid and markets.
Since 1992, in preparation for membership, Vietnam joined six

ASEAN committees and five ASEAN projects on functional
cooperation, including science and technology, environment, health
services, population, tourism, culture, civil aviation and maritime
transportation. In 1992 and 1993, Vietnam attended the annual
ASEAN Ministerial Meetings as an observer. In July 1992 Vietnam
acceded to the 1976 ASEAN Treaty of Amity and Cooperation. By so
doing Vietnam renounced the use of force or the threat to use force
in foreign relations. And Vietnam committed itself to the non-violent
resolution of any conflict which might arise under mechanisms
spelled out in the 1976 Bali Treaty. Two years later, at the ASEAN
Ministerial Meeting in Bangkok, ASEAN officially invited Vietnam
to become its seventh member. Vietnam’s application was formally
approved in late 1994 and it became a member in July 1995. Vietnam
also joined the ASEAN Regional Forum at this time (Nguyen
Phuong Binh 1994a:30-34 and Vu Tung 1994:28-33).
10 Thayer
Upon joining ASEAN, Vietnam reorganized its bureaucracy by
creating a National ASEAN Committee headed by a Deputy Prime
Minister with responsibility of coordinating all institutions that
interacted with ASEAN or ASEAN-affiliated bodies. An ASEAN
Department was created within the Foreign Ministry.
In sum, Vietnam’s new multidirectional foreign policy paid

handsome dividends in terms of international prestige and economic
benefit. As a member of ASEAN Vietnam could bask in the prestige
of the organization itself and participate in its various socio-
economic and cultural programs, including regional economic
integration. Vietnam attended the fifth ASEAN summit and the first
Asia-Europe Meeting (ASEM) both held in 1995. That same year
Vietnam exchanged thirty-five major delegations with ASEAN
states. President Le Duc Anh visited the Philippines and Vietnam
hosted the King of Malaysia.
Figures released at the end of 1995 revealed that ASEAN states had
invested in 234 projects with a total investment capital reaching
US$3.2 billion. As of 16th May 1997, these figures had risen to 312
projects with a total capitalization of US$7.6 billion or 20% of the
total foreign direct investment in Vietnam. Singapore ranked first in
both the number of projects, totaling 156, and capital invested,
US$5.1 billion (Le Quoc Phuong, Saigon Times Daily, May 21, 1997).
Part 3 — Vietnam in ASEAN
Since Vietnam joined ASEAN there has been a new openness in

Vietnamese official pronouncements on foreign policy and an
increased productivity of academic writing on foreign affairs. This
material has provided greater nuance to our understanding of
Vietnamese foreign policy motivations at this time. This section
reviews the factors that influenced Vietnam’s decision to join
ASEAN and how Vietnamese officials and scholars evaluated
membership both before and after the Asian financial crisis of 1997-
98.
Why did Vietnam join ASEAN? 5
Vietnam joined ASEAN primarily for a mix of politico-strategic and
5This section draws on Thayer (1999c and 2004b). For contemporary views consult
Nguyen Vu Tung (1993), Hoang Anh Tuan (1994 and 1996), Goodman (1996),
Nguyen Manh Hung (1996), Singh (1997), Zagoria (1997), Pham Duc Duong (1998)
and Takahiro (1999).
economic motivations. According to one official, for example,
Vietnam expected ASEAN membership to provide enhanced
national security, external support for economic development, and
as a catalyst to its domestic reform process (Doan Manh Giao 1995).
According to Nguyen Phuong Binh and Luan Thuy Duong
(2001:186-189) there were three ‘driving forces’ behind Vietnam’s
desire to join ASEAN: (1) a favourable external environment with
peaceful and friendly relations with neighbouring countries; (2)
economic co-operation; and (3) enhanced standing in the wider Asia-
Pacific region and the world (including relations with the United
States, Japan, China, Russia and India).
I have written elsewhere that Vietnam joined ASEAN with the prime
strategic objective of securing of a more peaceful international
environment in which to guarantee Vietnam’s national security
against external threat (Thayer 1999). This has been misconstrued by
one writer as implying that Vietnam joined ASEAN in order balance
China. (Nguyen Vu Tung 2002). The word ‘threat’ was not meant
exclusively in its narrow military sense as Politburo Resolution No.
13 had already identified economic threats (such as embargoes) as
one of its main security concerns. 6
There were at least two main aspects to Vietnam’s politico-strategic

strategy. The first aspect was to overcome the recent historical legacy
of suspicion and mistrust with its ASEAN neighbours. It has only to
be recalled that Thailand and the Philippines both provided air and
naval bases to the United States during the Vietnam War. Thailand
contributed armed ground forces for combat while the Philippines
provided civic action teams to assist in pacification. The ASEAN
states took a strong stand opposing Vietnam’s decade-long
occupation of Cambodia. Thailand worked with China in providing
bases and assistance to the anti-Vietnamese resistance forces. The
non-communist resistance forces received support from Singapore
and Malaysia as well. By joining ASEAN Vietnam signaled a
fundamental change in its foreign policy orientation. Vietnam now
sought ‘security with’ rather than ‘security from’ Southeast Asia.
Vietnam moved quickly to resolve such problem areas as the

repatriation of Vietnamese refugees, demarcation of continental
shelves, overlapping territorial claims involving Malaysia, the
Philippines and Thailand and fishing disputes (Kawi
6For a detailed evaluation of Vietnamese views of the ‘China threat’ consult

Thayer (2002c).
12 Thayer
Chongkittawon, The Nation, January 29, 1992 and Amer 1999, 2003
and 2004). These legacies of history were seen as irritants that could
impede the development of close ASEAN-Vietnam relations.
Vietnam also joined ASEAN primarily for the political and strategic
benefits it calculated it would gain vis-à-vis the ‘great powers’,
China and the United States. This constitutes the second aspect of the
politico-strategic dimension. Vietnam’s membership in ASEAN was
expected to lead to enhanced standing and prestige in the wider
Asia-Pacific and the world. And this in turn provided Vietnam with
an enhanced bargaining position in global affairs. Vietnam expected
to be able to leverage its ASEAN membership with the major powers
without any detrimental effect on its existing external relations.
Vietnam did not join ASEAN to balance against China. As noted by

Hoang Anh Tuan, ‘Vietnamese history shows that one-sided
relations have led to political isolation and economic difficulties....
Therefore, Vietnam’s ASEAN membership should be achieved in a
way that would strengthen instead of harm Vietnam’s relations with
China’ (1993:288-289). Chinese assertiveness in the South China Sea
in 1992 was undoubtedly a consideration in Vietnamese decision-
making regarding ASEAN membership, but was not the prime
motivating factor. In Hanoi’s view, ASEAN membership
transformed what was a bilateral issue between Beijing and Hanoi
into a multilateral one involving China and ASEAN as a group.
Vietnam also sought membership in ASEAN as a means to improve

its relations with the United States. In 1994, before Vietnam was a
member, it was still subject to a US-imposed trade and aid embargo.
In Hanoi’s view, Vietnam would be strategically more important to
Washington as a member of ASEAN. Vietnam hoped that ASEAN
membership would transform its image as a ‘communist trouble
maker’ into a potential ‘partner for peace’. Indeed, the United States
lifted its embargo just as Vietnam joined ASEAN.
Hanoi expected that ASEAN membership would provide it some

political ‘insulation’ in its dealings with the United States and
Europe on such issues as human rights and democratization.
According to one Vietnamese political analyst, Vietnam would be
‘quite happy to hide behind’ Malaysia and Singapore on those issues
(Adam Schwartz, Far Eastern Economic Review, March 16, 1995 and
Nguyen Phuong Binh 1994b:26).
According to Nguyen Vu Tung (2002), the above explanations, based

on realist and neo-institutionalist paradigms, are not wholly
adequate in explaining why Vietnam joined ASEAN. Tung, basing
his analysis on the constructivist paradigm, stresses the importance
of state identity. Tung concludes his analysis:
The tentative argument is that there is a strong linkage between the

search for a new state identity in the aftermath of the Cold War and
the making of foreign policy in Hanoi. The search for a new state
identity - which is compatible to that of the ASEAN states – suggests
that Vietnam would forge a closer co-operative relationship with the
ASEAN states, and that membership in ASEAN would inform
Vietnam’s present and future foreign policy.
This point of view deserves further consideration. But it should be

born in mind that as late as 1992 ideological considerations
continued to shape Vietnamese foreign policy perceptions (Bui Tin
1995:191; and for the contemporary period see Phan Doan Nam
2003). When Vietnam joined ASEAN in 1995 it subscribed to the
principles of the Treaty of Amity and Cooperation. Yet one
Vietnamese writer has revealed that Hanoi retained reservations.
According to Pham Cao Phong, ‘despite announcing its commitment
to the Treaty of Amity and Cooperation… Hanoi is not so certain
whether it accepts the rules of the game, that is, accepts all the
written and unwritten norms of the relationship among ASEAN
countries without any exceptions’ (Trends, Business Times Weekend
Edition, June 29-30, 1996).
According to Hoang Anh Tuan, ‘[p]olitically, due to ASEAN’s high

international prestige, ASEAN membership would enhance
Vietnam’s diplomatic standing and integrate Vietnam’s security with
the security of the whole of Southeast Asia, thus creating an external
environment favorable for economic development’ (1993:283). In
other words, Vietnam’s second major motivation for joining ASEAN
was economic. This motivation has several dimensions.
First, as a member of ASEAN, Vietnam expected to learn from the

developmental experience of its original members and receive their
support in addressing Vietnam economic concerns, especially as a
developing country. In other words, membership in ASEAN would
act as a catalyst for and further accelerate domestic reforms in
Vietnam. Second, Vietnam expected to benefit from increased trade
and investment from ASEAN states (Ramasamy 1996:29-47 and Le
Quoc Phuong). And third, Vietnam wanted to secure integration
with the regional and global economies as a long-term goal.
It is significant to note, in light of the state identity question, that

when Vietnam initially sought admission to ASEAN it requested not
14 Thayer
to participate in the AFTA process (Flatters 1997:1). ASEAN
members, however, made this a requirement for entry (Guina
1997:13). ASEAN foreign affairs and economic ministers were split
on the modalities of Vietnam’s admission and Vietnam took
advantage of this to obtain a three-year extension in meeting AFTA’s
tariff reduction goals (Guina 1997:24). Vietnam’s membership in
AFTA was not expected to greatly affect the other ASEAN
economies as trade with Vietnam at that time comprised about 2.5
percent of the existing intra-ASEAN total.
The AFTA came into being in January 1992 with the objective of
eliminating tariff barriers among ASEAN members and thus
integrating the ASEAN economies into a single production base and
regional market by 2010 (ASEAN Free Trade Area n.d.; Bowles 1997;
and Southeast Asia: A Free Trade Area 2002). This target date was later
brought forward and separate deadlines were set for newer
members. The key mechanism is the Common Effective Preferential
Tariff (CEPT) scheme. Signatories are required to classify all
manufactured goods into one of four categories: Inclusion List,
Temporary Exclusion List Sensitive List and General Exclusion List.
AFTA members have agreed on a schedule to reduce tariffs on goods
in the first two lists to within the range of 0-5% according to an
agreed schedule. AFTA members are also required to remove
quantitative restrictions and other non-tariff barriers (Lao-Araya
2003:61; Ahmad 2003).
On 15th December 1995, Vietnam signed the protocol acceding to the

agreement on the CEPT as a first step in joining the ASEAN Free
Trade Area (Setboonsarng 1996:36-38). Vietnam was required to
provide information on its trade regime and reduce tariffs on its
immediate Inclusion List to 0-5% by January 1996. In actual fact, all
857 lines on Vietnam’s immediate Inclusion List already met this
requirement. Vietnam retained 1,189 tariff lines (54% of the total) on
its Temporary Exclusion List and 26 tariff lines on its Sensitive List
(1% of the total). Vietnam was obligated to phase in tariff reductions
on its temporary exclusion lines in five equal installments beginning
in January 1999 and ending by January 2003. By 2003, ninety-two per
cent of all tariff lines used by Vietnam would fall under the CEPT
scheme. Most of Vietnam’s sensitive list includes unprocessed
agricultural products.
In 1996, after the first anniversary of Vietnam’s membership in

ASEAN, Vietnamese officials were generally upbeat in their
assessments. Foreign Minister Nguyen Manh Cam stated that
Vietnam made the right decision to join ASEAN despite the
difficulties it now faced in liberalizing its economy in an effort to
catch up with the other six members (1995:223-230 and Lee Kim
Chew, The Straits Times, September 10, 1996). Cam also mentioned
difficulties caused by differences in the political systems, noting in
particular Vietnam’s socialist government, planned economy,
inexperience with the free market, and the lack of English-speaking
officials. Nonetheless, Cam stated, Vietnam would meet its
obligations to open its economy under AFTA by 2006. ‘We want to
strengthen the trend towards regionalism and international
integration. This will promote peace and stability’, he declared.
Among the Vietnamese foreign policy elite there too was a general
consensus that the decision to join ASEAN was correct and had been
a success (Vu Khoan 1998).
By May 1997, three ASEAN countries—Singapore, Malaysia, and

Thailand—ranked among the ten largest foreign investors in
Vietnam (Indonesia ranked eighteenth, the Philippines twenty-first).
Singaporean investment was concentrated in the fields of hotel
construction and tourism. Malaysia and Indonesia invested in
Vietnam’s oil sector, while Thailand has concentrated on mineral
exploitation and processing. ASEAN investment was expected to rise
as investors sought to exploit Vietnam’s lower labor costs in resource
and labor intensive industries (Nguyen Xuan Thang 1998).
What was the situation with trade? By 1997 Vietnam developed a

trade imbalance and growing deficit with other ASEAN members. 7
As intra-ASEAN trade expanded Vietnam reoriented its exports to
take advantage of this large market. About thirty percent of
Vietnam’s exports went to ASEAN states. Imports from ASEAN
accounted for nearly one-half of Vietnam’s total imports. The
volume of trade with ASEAN countries rose markedly in dollar
value terms and resulted in a situation in which more than half of
Vietnam’s trade deficit of US$3.5 billion (1996 figures) was with
other ASEAN countries.
The Asian Financial Crisis and After
In 1997 ASEAN was affected by a series of crises that severely tested

its unity and cohesion. These included the Indonesian ‘haze’
problem, the violent breakdown of coalition government in
Cambodia, and the impact of the Asian financial crisis. The later
provoked serious political instability and unexpected leadership
7For a contemporary macroeconomic assessment of the Vietnamese economy see

Do Duc Dinh (1998).
16 Thayer
change in Indonesia. These triple crises overlapped with ASEAN’s
expansion in membership to include Myanmar and Laos (Thu My
1998). According to two Vietnamese writers, ASEAN members
became preoccupied at this time with internal stability and sought to
recover by emphasizing policies of self-help over regional
cooperation. The Asian financial crisis also undermined both
regional and national resilience as well as ASEAN’s collective self-
confidence (Nguyen Phuong Binh and Luan Thuy Duong 2001; for a
general assessment see Pham Duc Thanh 1998). Vietnamese writers
assert that ASEAN’s disarray in dealing with these issues also served
to reinforce those voices in Vietnam who urged a go slow approach
to economic integration (and political reform).
Vietnamese officials became alarmed by three developments in

particular. The first concerned the impact of these multiple regional
crises on Vietnam’s economic and political stability. In late 1997
Vietnam was wracked by a series of peasant disturbances in Thai
Binh province (and elsewhere) that may have contributed to a
change in leadership at this time (party Secretary General Do Muoi
was replaced by Le Kha Phieu in December; Thayer 2001).
The second development concerned the economic impact of the

Asian financial crisis and ASEAN disarray on Vietnam (Pham Quoc
Tru 2003). This took multiple forms. Several ASEAN members
reduced their expected contributions to Vietnam’s economic
development at intergovernmental and private sector levels.
Monetary devaluations in the region resulted in stiff competition in
some sectors as ASEAN goods entered the Vietnamese market place
in greater amounts (Nguyen Phuong Binh and Luan Thuy Duong
2001:185-205). In other words, economic transactions between
ASEAN and Vietnam became less effective as the structure of trade
worked against Vietnam’s economic interests.
As ASEAN’s cohesion came under challenge, Vietnamese leaders

worried that the development gap within ASEAN between old and
new members would widen and create a two-tiered organisation. 8
Vietnamese concerns were fueled by statements attributed to
officials from the original ASEAN 5 that alleged enlargement had led
8This is also a current concern. Hoang Thi Thanh Nhan (2004) and Tran Khanh
(2003) argue that the development gap between ASEAN members adversely
affects regional economic security. For difficulties in narrowing this gap and
achieving ‘convergence’ consult (Gates 2000, 2001 and 2001b); and for a more
general discussion on the lessons for Vietnam, see Tran Van Tung (2003), Van
Quang (2003) nd Vu Anh Tuan (2004).
to a slow-down in ASEAN decision-making and consensus-building
and new members were an economic and political burden.
The third development concerned a move by Thailand, supported by

the Philippines and the Deputy Prime Minister of Malaysia, Anwar
Ibrahim, to modify ASEAN’s long-cherished principle on non-
interference in the internal affairs of other member states (Thayer
1999). Thailand’s proposal was aimed at Myanmar whose domestic
policies, it was alleged, spilled over and threatened regional stability.
Malaysia’s Deputy Prime Minister wanted Cambodia included in
this discussion on constructive intervention. Vietnam supported the
status quo.
The Asian financial crisis and its aftermath shook Vietnam’s

expectations of mutual support from fellow ASEAN members and
raised serious concerns in Hanoi about the benefits and advantages
of multilateralism through membership in ASEAN. As a result
Vietnam adopted what might be termed a three-pronged approach
in its external relations: (a) ‘positive discrimination’ in the case of
ASEAN’s new members; (b) developing a caucus of less developed
politically closed states within ASEAN (Thayer 2000c); and (c)
increased emphasis on bilateral relations with China and the United
States.
Vietnam used its status as the host for ASEAN’s sixth summit
meeting in December 1998 to successfully obtain endorsement from
other ASEAN members for special treatment for the four newer
members: Cambodia, Laos, Myanmar and Vietnam. In order to
overcome the development gap between ASEAN’s more developed
and less developed economies, the ASEAN 6 (the five original
members plus Brunei) agreed to assist and grant special treatment to
the latter in their development efforts. This ‘positive discrimination’
was embedded in the Hanoi Plan of Action and other documents
adopted by the sixth summit. The theme of reducing the
development gap between the ASEAN 6 and ASEAN’s newer
members has become of central feature of ASEAN economic
programs, such as the ASEAN Investment Initiative.
Vietnam has had close and long-standing historical ties with the
regimes in Cambodia, Laos and Myanmar (CLM) which pre-dated
their membership in ASEAN. After the ‘CLM’ countries were
admitted into ASEAN, and particularly after the 1997-98 debate over
‘constructive intervention’, Vietnam has moved to ensure that
bilateral relations remain as firm as ever. In addition, Vietnam has
also developed develop multilateral cooperation through a grouping
18 Thayer
of Mekong states at sub-regional level. These economic and political
linkages may be designed to mirror the influence of the ASEAN 5/6
within ASEAN itself and may represent a nascent caucus of
politically closed states within the Association (Thayer 2000c).
Finally, it is notable that in the aftermath of the Asian financial crisis,

Vietnam moved to improve its bilateral relations with the major
powers. In 1999, Vietnam was one of the first ASEAN members to
sign a long-term cooperative framework agreement with China that
sets the context for bilateral relation into the first decade of the 21st
century. By the end of 2001, all other members of ASEAN had
entered into roughly similar long-term cooperative framework
agreements with China (Thayer 2003a).
Bilateral relations with the United States took on a decidedly new

dimension in 2000 when Vietnam finally agreed to the terms of a
long-term Bilateral Trade Agreement (BTA) with the United States.
Vietnam must undertake a comprehensive set of commitments on
tariffs and non-tariff barriers for industrial and agricultural goods,
services, intellectual property rights, investment, transparency and
other matters. This has required Vietnam to amend legislation and
bring new laws and regulations into effect in order to meet its BTA
commitments. In addition to gaining access to the American market,
the BTA will act as a stimulus to further domestic economic and
legal reforms and serve as a solid foundation for membership in the
World Trade Organization. 9
The improvement of Vietnam’s bilateral relations with China and the

United States should be seen as complementary actions. As a near
neighbour, Vietnam must adjust to the rise of the Chinese economy.
At the same time, Vietnam needs access to the world’s largest market
if it is to become fully integrated with the world economy, a goal
long advocated by its leaders. In sum, Vietnam too has pursued self-
help measures to advantage itself in light of ASEAN’s disarray
following the Asian financial crisis.
Vietnam’s decision to join ASEAN was heavily influenced by both
9According to Deputy Prime Minister Vu Khoan, ‘Vietnam depends on the world

economy in terms of both input and output. Therefore, the need for the country to
join the WTO is necessary… Besides WTO members have pledged to remove
quotas by 2005. Not being a WTO member, Vietnam will face numerous
difficulties as it will still have quotas imposed. That’s why the WTO admission is
not the government’s ambition or [anybody] else, but an objective need’; Viet Nam
News Agency, December 13, 2003. For an overview consult: Nguyen Thanh Nga
(2003), Nguyen Van Thanh (2003) and Vu Van Phuc (2003).
the domestic and external environments. Domestically, Vietnam
faced a major economic crisis in the mid-1980s to which it responded
with a policy of economic renovation. At the same time, the success
of export-led growth by the East Asian ‘tiger’ economies spurred
Vietnamese leaders to adopt outward-orientated economic policies
in order to catch up with its Southeast Asian neighbours (Guina
1997:10l and Tran Van Tung 2003).
Externally, the Cold War era of confrontation and regional

polarization gave way to a period of heightened regionalism and
cooperative security among the states in Southeast Asia. Vietnam
quickly moved to defuse the outstanding irritants with its
neighbours left over from history. For the first time since
independence, Vietnam faced no imminent military threats to its
borders. This resulted in a massive ‘peace dividend’ as Vietnam
slashed defence spending and demobilized over two-thirds of its
main forces (Thayer 2000b). These developments helped shape a
peaceful regional environment in which Vietnam could engage in
economic development.
ASEAN experienced a number of difficulties in managing

differences among its members on such issues as democratization
and human rights, security perceptions, and attitudes towards
international institutions and the great powers. This was particularly
the case in the period of the Asian financial crisis and its aftermath
(Thayer 2004a). Disarray in ASEAN meant that ASEAN became less
effective as an organization in dealing with external powers.
Singapore, for example, pursued a policy of self-help in negotiating a
number of free trade agreements with external powers (Mahani
2002). Vietnam, for its part, sought to shore up bilateral relations
with China and the United States.
Part 4 —Costs and Benefits of Multilateralism Through ASEAN

Membership
At the height of Vietnam’s dependency on the Soviet Union,

Vietnam’s leaders were widely known for their nationalism and
independence in defence of state sovereignty. When Vietnam joined
ASEAN it had to become a ‘team player’ and adjust its external
policies to fit in with the ASEAN consensus (Truong Giang Long
1997:57-59). The ASEAN process is a weak form of multilateralism.
Institutionalization is at a nascent stage and ASEAN has no formal
compliance mechanisms to compel or punish its members.
Vietnam’s decision to join AFTA marks the first time Vietnam has
20 Thayer
taken part in regional economic cooperation. The AFTA is one of the
least restrictive regional trading agreements (Lao-Araya 2003:62).
Timetables for the implementation of CEPT commitments vary
among individual states (Vo Thi Thanh Loc 2001:3). An AFTA
Council was set up to supervise AFTA’s implementation but it too
has no powers to force members to comply. This section explores the
nature of ASEAN multilateralism with reference to AFTA and the
reform of Vietnamese state-owned enterprises (SOEs), the ‘code of
conduct’ in the South China Sea, and the Myanmar question.
ASEAN Free Trade Area 10
As noted above, during preliminary discussions about ASEAN

membership, Vietnam requested that it be permitted to join without
being required to become a party to the ASEAN Free Trade Area
agreement. ASEAN declined and five months after joining, Vietnam
signed on to the Common Effective Preferential Tariff scheme. 11 The
deadlines for CEPT tariff reductions have been repeatedly brought
forward so Vietnam is now required to reach the last stage of tariff
reductions in 2006. The deadline for the ASEAN 6 states came into
force in 2004. AFTA also included a forty percent local content rule
on goods traded between two members (this has recently been
reduced to twenty percent). In addition to tariff reductions, ASEAN
members are required to end quantitative restrictions and remove
non-tariff barriers.
10For a general discussion see Ahmad (2003) and Bowles (1997).
11Vietnam’s commitment to AFTA is generally pictured as imposing obligations

on Vietnam. For a contrary view, that argues AFTA represents an opportunity
consult Flatters 1997.
ASEAN’s experience with the implementation of the CEPT scheme

has generally been quite good (see Figure 1). The ASEAN six are
basically CEPT compliant although ‘certain long-standing member
countries have not fully complied with requirements of the CEPT
scheme in spite of written deadlines’ (Lao-Araya 2003:62). ASEAN
has not moved to force compliance when its members experience
genuine difficulties. In May 1997, Vietnam instituted a ban on
imported fans to save foreign exchange and to protect local industry.
This ban violated AFTA provisions and was quietly revoked two
months later (Flatters 1997). In the case of Malaysia, for example,
tariff reductions on its automotive industry were agreed before the
full effects of the Asian financial crisis were known. Malaysia has
continued to provide protection for this industry and is involved in
dispute settlement talks with Thailand, the country most affected by
this delay. ASEAN has also had to back track in the situation where
members first announced tariff reductions on items on their
Temporary Exclusion List (TEL) only to rescind these reductions in
the face of protectionist pressures. ASEAN has agreed only to permit
this for goods on the last schedule of the TEL.
Despite Vietnam’s initial reservations, there are a number of

advantages to its participation in AFTA and the CEPT scheme. First,
Vietnam’s participation in AFTA has resulted in trade creation and
trade diversion benefits to Vietnam. Trade between Vietnam and the
other ASEAN members has risen. Vietnam imports quality materials
from ASEAN that it uses in both domestic production and export.
This has benefited its textile, garment, leather and electronic
assembly industries the most. Vietnam has also benefited from
increased ASEAN foreign direct investment (although this has
22 Thayer
declined following the Asian financial crisis). Vietnam has also
benefited from modest technology transfers. Vietnam’s participation
in AFTA has provided it with familiarity with the norms and
practices of international trade. This experience has facilitated
Vietnam participation in the Asia Pacific Economic Cooperation
(APEC) forum which Vietnam joined in November 1998 (Do Nhu
Dinh 2003). This experience should also stand Vietnam in good stead
as it prepares for membership in the World Trade Organization. And
finally, Vietnam’s participation in AFTA provides it was a modest
buffer against China’s economic rise and an off-set to goods
smuggled from China (Vo Thi Thanh Loc 2001:7).
The above optimistic picture needs to be qualified somewhat.

Although Vietnam’s trade with ASEAN is increasing, Vietnam’s
trade with China and the United States is increasing at an even faster
rate. One economic study argues that it is ‘too soon to conclude that
ASEAN is the dominant market for Vietnamese products’ due to
Singapore’s role in re-exporting Vietnamese goods (Vo Thi Thanh
Loc 2001:6). According to this same study: ‘AFTA does not have
direct impact on import-export relations of Vietnam. Equivalently,
AFTA will not create any extremely quick momentum or
fundamental changes for Vietnams trade unless there are
improvements in the structure of domestic production’ (Vo Thi
Thanh Loc 2001:7).
Vietnam has been reliant on tariff revenues for a major portion of

state revenues as well as a protective device for inefficient industries
(Lao-Araya 2003:59 and Vo Thi Thanh Loc 2001:9). This will now be
lost as tariff reductions kick in. Vietnam has had to adopt a Value
Added Tax in compensation and this will require greater capacity in
the administration of tax collection. Vietnam has also protected
sensitive economic sectors by including them on the General
Exclusion List (GEL). 12 This is in contravention of the purpose for
which the GEL was established (Flatters 1997). Finally, it may be too
early to make a definite assessment of the costs and benefits of AFTA
to Vietnam until Vietnam implements the last stage of CEPT-
mandated tariff reductions.
12According to Guina (1997:15), ‘Vietnam’s General Exclusion List (GEL) as a

proportion of tariff lines is by longest among ASEAN. Vietnam’s GEL is presently
under discussion since many items in the list do not satisfy the criteria for
inclusion in this category. Contentious products include computers, milk,
petroleum, radio, cars and other passenger vehicles, used clothing and sewing
machines’.
Since joining AFTA, Vietnam has been under constant pressure to
reduce tariff barriers to meet ever-advancing deadlines (Thayer
2002a). The IMF, World Bank and donor countries have also applied
their own pressures (a discussion of these institutions is outside the
scope of this paper see: Painter 2003:32-34 and Clarke 2001:22). A
lowering of tariffs and other barriers to trade under AFTA mean that
Vietnamese enterprises will be forced to compete with their ASEAN
counterparts. The positive side of this process for Vietnam will lie in
its ability to import material used in export production at cheaper
prices than before. Vietnam will also be able to participate in an
ASEAN-wide labour chain of production utilizing its comparative
advantage of cheap skilled labour.
While Vietnam’s export sector has demonstrated robust growth in

the years preceding the Asian financial crisis, as indicated by the
increasing share of exports as part of Vietnam’s GDP, one economic
study has concluded ‘there is no firm econometric evidence to
suggest that exports are an engine of economic growth and
development in Vietnam as they have been in other East Asian
economies…’ (Phan Minh Ngoc, Nguyen Thi Phuong Anh and Phan
Thuy Nga 2003:229). There are a number of factors that account for
this including the static nature of Vietnamese exports (low value-
added unprocessed agricultural products and minerals), the lack of
an efficient service industry to support exports and excessive
concentration on too few export partners.
Reform of State-Owned Enterprises
Vietnam is now facing crunch time where the obligations of

multilateralism intersect with national sovereignty and touch on
highly sensitive issue involving political power and political
economy. These issues are highlighted with respect to the SOE sector
which have come under domestic and external pressure to
restructure and reform. According to one study, ‘[a]s Vietnam
completes its AFTA commitments in 2006, intra-ASEAN traded
goods will flood the domestic market and hamper the development
of domestic sectors unless Vietnam’s economy is sufficiently strong.
At present, competitiveness of the Vietnamese enterprises has not
yet been well established’ (Vo Thi Thanh Loc 2001:14).
Although Vietnam is developing a market economy, party ideology

maintains that the state sector should remain the dominant sector.
Vietnam’s SOE reform process can be traced back to the early 1980s
with a focus on modest changes in management and planning. Prior
to the commencement of economic reforms in the mid-1980s there
24 Thayer
were over 12,000 SOEs operating in Vietnam, with the majority at
provincial level or lower. These SOEs employed a relatively small
share of the total work force, 7.5 percent in 1982, a figure that
declined to five percent half a decade later. The SOEs, however,
contributed significantly to state revenue – 23 percent (excluding oil
royalties).
As a result of the first round of reforms, the number of SOEs was

reduced by half to approximately 6,300 enterprises (including 2,000
industrial enterprises) in 1992, three years before Vietnam joined
ASEAN (see Table 1 for 1996 figures). Locally run SOEs made up the
vast majority of closures and mergers. Approximately 1.1 million
workers were affected (Quan Xuan Dinh 2000:362).
Table 1 – The SOE Sector (1996)
Geographic Area Number of SOEs
Urban 2,208
Northern mountain provinces 501
Midlands 408
Red River Delta 1,353
Central Vietnam 681
Central Highlands (Tay Nguyen) 363
Mekong Delta 812
Central State Owned Enterprises 40
Total 6,366
Source: Dang Duc Dam 1997:124-125.
In late 1991, the second plenum (seventh congress) of the VCP

Central Committee approved a proposal to ‘equitize’ SOEs. 13 The
SOE equitization program was promulgated by prime ministerial
Decision 183 (November 20, 1991) and Directive 202 (June 8, 1992).
The National Steering Committee for State-Owned Enterprise
Reform was set up to take charge of the equitization program. 14 The
SOE reform process involves the transformation of SOEs into joint
stock companies, merger with other SOEs, public sale as single
owner limited liability companies, contracting out, leasing, or
bankruptcy. State policy has determined that public utilities,
industries that produce for defence and other designated industries
will remain under state control.
During the five–year period from mid-1992 until mid-1997 the

number of transformations under a pilot program was quite low.
The total number of SOEs was reduced by only five hundred and
13The World Bank defines equitization as ‘a process whereby some or all of the
state capital in the enterprise is sold in the form of shares at a price based on the
book value of the assets’(2002:22).
14The Steering Committee was replaced in 2001 by the National Steering
Committee on Enterprise Reform and Development.
26 Thayer
only five SOEs were equitized due to various administrative
difficulties and because of the unwillingness of SOE managers and
workers to participate (Vu Quoc Ngu 2003a:329). 15 New directives
issued in June 1998 resulted in a speeding up of the equitization
process. By the end of 1999, 370 SOEs had been equitized. Then the
process stalled during 2000 and the first half of 2001. By May 2002
the number of total SOEs equitized stood at 645 and rose to nearly
1,000 by the end of the year. 16
It should be noted that new SOEs were also being created but this
process came to a virtual halt in mid-2001. The net result was that
the SOE sector increased in absolute size. But due to the growth of
the private sector, the relative size of the state sector, as a proportion
of the Vietnamese economy, declined (The World Bank 2002:24).
In 2002, Vietnam announced plans to restructure 2,857 of its 4,704

SOEs by the end of 2005. Of this number, 2,045 were to be equitized,
386 merged and 200 transferred or sold. 17 The ultimate goal was to
reduce the number of SOEs to between 900 and 1,000 by 2007. 18 The
state announced it would retain one hundred percent ownership of
those SOEs involved in electricity, petroleum, cement, production
related to ‘national economic security’ and public utilities.
The purpose of SOEs reform was to make them more efficient in the
market place and to curb the drain on state finances. Many of these
SOEs were small in size, inefficient, loss-making, and indebted to
state banks. In 1990, for example, it was reported that thirty-eight
percent of SOEs were operating as a loss (Vu Quoc Ngu 2003b:161).
In 1997, 40 percent of SOEs were classified as profitable, 44 percent
as ‘temporary loss makers’ and 16 percent as ‘permanent loss
makers’ (Painter 2003:26).
In an effort to reduce the power of line ministries to interfere in

business management and capture profits and rents from SOEs, two
15By the end of 1997, only seventeen enterprises had been converted into joint
stock companies, a figure that rose to twenty-five by June 1998 (Vu Quoc Ngu
2003a:328).
16Of the total numer of SOEs equitized between 1997-2002, the industrial and
construction sector accounted for half; trade companies accounted for about one-
third with the remainder in transportation, agriculture and aquaculture (Vu Quoc
Ngu 2003a:329).
17The future disposition of the remaining 226 SOEs was not specified.
18General Statistics Office quoted by Saigon Times Magazine, August 26, 2004.
policy mechanisms were developed. First, the Ministry of Finance
was given carriage over the state’s interests as the ‘owner’ of
individual SOEs. Secondly, in 1994-95, general corporations were
created to take charge of SOEs on the basis of the number of
affiliated or member enterprises involved and capital holdings. In
1995, SOEs were given legal status in law and increased autonomy to
determine their production and financial strategies. SOEs could now
enter into agreements with foreign partners, set wages, and hire and
fire employees. Eighteen national general corporations in electricity,
coal, petroleum, post and telecommunications, steel, and textiles and
garments were set up (Painter 2003:30). Ownership rights remain
with the establishing authority while management functions are the
responsibility of the Board of Management.
Since 1995 competitive pressures from other economic sectors has

created difficulties for industrial SOEs with a larger proportion
making losses. Nevertheless, the reform process has had a positive
effect on overall economic performance. One study, which examined
SOEs over the period 1976-98, revealed that there was an average
annual increase in Total Factor Productivity of 3.05 percent over the
whole period of the study, a 4.22 percent growth during the period
of partial reforms, and a 5.37 percent increase during the period of
full reforms. Total Factor Productivity increases accounted for 40.9
percent of the change in SOE industrial output (Vu Quoc Ngu
2003b:168-169).
As a result of the Asian financial crisis, SOE reform nearly came to a

halt. Due to currency devaluations across the region imports into
Vietnam became relatively cheaper and Vietnamese industrial firms
faced increased competition from private and foreign–invested firms
operating domestically.
Vietnam’s relatively high economic growth rates, both before and

after the Asian financial crisis, have been led by high growth in the
industrial sector and export-orientated manufacturing industries in
particular. Despite nearly two decades of reform efforts, Vietnam has
still not succeeded in leveling the playing field for all its economic
sectors. The state sector is privileged over the private sector in terms
of preferential bank credit, tax breaks, state contracts, access to land
and government services (Vu Quoc Ngu 2003a:330; Quan Xuan Dinh
2000:363; and Flatters 1997). The SOE sector is also heavily indebted.
Outstanding bank debts are estimated at US$6 billion or roughly
forty-fifty percent of total domestic credit (Vu Quoc Ngu 2003a:331
28 Thayer
and The World Bank 2002:23). 19
In the period 1991-2000, Vietnam’s gross domestic product (GDP)

growth rate averaged 7.6 percent while industry grew at an annual
rate of 13.7 percent. SOEs grew at a rate of 12.3 percent and
contributed nearly half of the industrial output (Vu Quoc Ngu
2003b:158). In 1999 it was estimated that SOEs accounted for thirty
percent of Vietnam’s GDP (Clarke 2001:2), a figure that increased to
38 percent in 2002 (The World Bank 2002:22).
The ninth national congress of the VCP, which met from 19th-22nd
April 2001, endorsed a five-year program of SOE reform involving
the transformation of about 1,700 enterprises by 2005. 20 At the end of
this reform period it is projected that the state would retain control
over 2,700 enterprises (The World Bank 2002:26). The ninth congress
reforms laid out ambitious plans for the future roles of SOEs
including provision of public utilities and catering to the needs of
national defence and security. The new party Secretary General,
Nong Duc Manh, made SOE reform one of his top priorities (Thayer
2003b). A government decision the following year (No.
58/2002/QD-TTg) set out the criteria under which an SOE would be
retained or equitized. In sum, the state would retain one hundred
percent ownership of large and profitable general corporations in
‘strategic’ areas, such as public utilities and state monopolies in
explosives, toxic chemicals, and radioactive materials.
The third plenum (ninth congress) of the VCP Central Committee in

August 2001 adopted a detailed SOE reform plan. Only 150 SOEs
were restructured in 2002, and 365 SOEs were restructured in 2003
out of a target of 1,646. 21 Seven hundred SOEs were slated for
19Another source estimated SOE debts at US$13.6 billion of which nearly 72

percent was owed to commercial banks and credit organizations; the remainder
was owed in taxes. See: Vietnam Investment Review quoted by Xinhua News
Agency, January 18, 2004.
20In March 1991, the government adopted a five-year SOE reform plan that
included annual targets. During 2001-03, for example, 1,800 of nearly 6,000 SOEs
were to be subject to transformation 1,400 through equitization, 140 through
divestiture, and 220 through liquidation. These targets were not met due to
resistance by those with vested interests.
21Vietnamese figures are often inconsistent. A second source states that 945 SOEs
were restructured in 2003 (Nong Thon Ngay Nay, March 9, 2004), while a third
source claims that 537 SOEs were equitized in 2003; Thanh Nien, February 16, 2004,
11. There is a distinction between restructuring and equitization.
equitization in 2004 and one thousand in 2005. 22 If the current SOE
reform program is successfully implemented up to half a million
SOE workers stand to be retrenched. They will need to be provided
with social welfare benefits (Clarke 2001:8).
Vietnam must race to complete SOE reforms in order to be able to

compete with ASEAN products that could flood Vietnam’s market
and damage its domestic industries. One study singles out as
particularly vulnerable SOEs producing petroleum, steel, chemical
fertilizers and cement (Guina 1997:14). Meanwhile, State commercial
banks continue to pour credit into industries that are most at risk
from ASEAN competitors (Nguyen Manh Hung 2004:301).
Detailed studies of Vietnamese SOEs and the SOE reform process

reveal a complex picture of the state in Vietnam (Fforde 2004a 2004b
and 2004c; Painter 2003; Clarke 2003; and Quan Xuan Dinh 2000).
SOEs are ‘owned/controlled’ at national, provincial or district level
by line ministries and various local government departments. As a
result of equitization, one analyst has argued that SOEs have become
‘virtual stockholding companies’ in which the lines of ownership
and control are overlapping and blurred between state and party
(Fforde 2004c). A Vietnamese scholar notes ‘[f]rom the owner’s point
of view, it is still unclear who is going to represent the government
in firms where the government holds shares. Before equitization, the
‘line ministries’ or ‘people’s committees’ being the establishing
agencies owned the entire firms and the Ministry of Finance was
charged with the responsibility of controlling financial matters
Another scholar has argued that the state in Vietnam should be
viewed as ‘strong’ because of its ability to navigate between these
competing interests in order to achieve policy objectives (Painter
2003:23).
The above analyses raise serious questions of what constitutes ‘the

state’ in Vietnam. It is clear that the prime minister, other office
holders at central level and their advisers in state-run institutes,
support SOE reform and equitization as essential to Vietnam’s larger
process of economic renovation. Outside agencies such as the IMF,
World Bank and donor countries play an important role in
strengthening the position of those pushing for further SOE reforms.
The reformist component of the state is opposed by conservative
party officials at national and local level, as well as managers and
‘owners’ of SOEs, who wish to maintain control over the capital
22Voice of Viet Nam News, August 3, 2004.

30 Thayer
funds and other assets of their enterprises (for an analysis of events
during 1995-1999 see Quan Xuan Dinh 2000:365-375 and Flatters
1997). Managers and workers also oppose equitization out of fear
they will lose guarantied wages and retirement benefits. This later
group still clings to protectionism to ward off external competitive
pressures and domestic resistance to transform. Indeed, it is the
resistance by ‘insiders’ including SOE directors and workers that
partly accounts for the slow pace of transformation at present (The
World Bank 2002:25-26 and Vu Quoc Ngu 2003a:230). 23
Conduct of Parties in the South China Sea
Six states have territorial claims in the South China Sea. China,
Taiwan and Vietnam claim the entire area, while the Philippines and
Malaysia claim specific features. Brunei’s Exclusive Economic Zone
overlaps with a feature occupied by Malaysia. Chinese assertiveness
in the South China Sea in 1992 and 1995 prompted ASEAN to issue
public statements of concern. After Vietnam’s membership in
ASEAN, the issue of overlapping territorial claims in the South
China Sea became a matter of discussion between ASEAN and
China. ASEAN senior officials first raised it at a bilateral meeting of
senior officials held in Kunming in April 1999.
Both sides also engaged in protracted negotiations for over a decade

on a ‘code of conduct’ for the South China Sea (Nguyen Hong Thao
2000 and Thayer 2000a). Vietnam argued for the inclusion of the
Paracel Islands and supported defining the geographic scope of the
proposed code. The Philippines sought the inclusion of Scarborough
Shoal, located to the north of the Spratly archipelago. China opposed
Vietnam on both counts; China also opposed a ‘code of conduct’ on
the grounds that it was too legalistic. In the end a compromise was
reached in 2002, China and ASEAN agreed to a watered down
document entitled ‘Declaration on the Conduct of Parties in the
South China Sea’. According to one analyst, this declaration ‘is a first
steps towards the establishment of a code of conduct’ (Nguyen Hong
Thao 2003:279).
Article 5 of the ‘Declaration on the Conduct of Parties in the South

China Sea’ calls on the parties ‘to exercise self-restraint in the
conduct of activities that would complicate or escalate disputes and
affect peace and stability’. This article has been honoured in the
breach. Chinese nationals have been resettled in the Paracels.
23Until the promulgation of the Enterprise Law there was no adequate legal
framework to convert SOEs into companies.
Vietnam has initiated a tourist visit to Truong Sa Lon and announced
that it would commence flights to the island after the 600 metre
runway was repaired and tourist facilities constructed. The
Philippines and China, without prior consultation with other
claimants, have agreed to conduct joint seismic tests in the South
China Sea. Taiwan, a non-signatory, has constructed a bird watching
station on a feature. China responded to Vietnamese actions by
dispatching a naval flotilla to the area. In a development which is not
unrelated, Hanoi approached the United States to arrange the first
official visit of its Defence Minister, Politburo member General Pham
Van Tra, to Washington, D.C. General Tra announced that the
purpose of his visit was promote mutual understanding and ‘joint
efforts to build a framework of friendly cooperative ties for peace,
and long-term stability in the Asia-Pacific region’ (Vietnam News
Agency, November 12, 2003). Shortly after Tra’s visit, the USS
Vandegrift made the first American naval port call to Ho Chi Minh
City since the end of the Vietnam War.
The Myanmar Issue
From the very moment when ASEAN signaled its intention to

include Myanmar among its members, the organization came under
pressure from the United States and several European states who
opposed the move on the grounds of human rights violations arising
from the suppression of the pro-democracy movement led by Aung
San Suu Kyi. Thailand pursued a policy of ‘constructive
engagement’ towards Myanmar in the expectation this would lead a
reduction in the illicit flow of drugs across the border, a halt to
border clashes and an improvement in human rights. In 1997 when
Myanmar joined ASEAN, there had been a worsening on all three
issues.
In 1997-98 ASEAN was affected by a series of crises: the ‘haze’

problem in Indonesia, the Asian financial crisis, and a violent
upheaval in Cambodia leading to the collapse of the coalition
government. These inter-related developments provoked a debate in
ASEAN over its cardinal principle of non-interference in the internal
affairs of its members. The Thai Foreign Minister, Surin Pitsuan, and
the Deputy Prime Minister of Malaysia, Anwar Ibrahim’ both
advocated ‘constructive intervention’ in cases where the domestic
problems of a members state spilled over and affected regional peace
and security. Due to opposition from other ASEAN members
Thailand’s proposal for ‘constructive intervention’ was altered to
‘flexible engagement’ (Thayer 1999b). This issue was considered
informally at an ASEAN meeting in Manila in 1998 and watered
32 Thayer
down to ‘enhanced interaction’. A year later ASEAN approved
guidelines for an ASEAN Troika to offer its good offices in such
cases provided all parties to the issue consented.
As noted above, Vietnam expected membership in ASEAN to

provide some insulation from external pressures on its domestic
affairs including human rights (Adam Schwartz, Far Eastern
Economic Review, March 16, 1995). Vietnam was unpleasantly
surprised by ASEAN’s internal policy debate at this time. Vietnam
supported the admission of Cambodia at the 30th ASEAN Annual
Ministerial Meeting held in Kuala Lumpur in July 1997. But ASEAN
foreign ministers took the decision to postpone Cambodia’s
membership. When Vietnam, acting as host of the Sixth ASEAN
Summit in Hanoi, attempted to use its position to prematurely push
for Cambodia’s inclusion, it suffered the embarrassment of having to
back down in the face of opposition from other members. In
ASEAN’s unique style of diplomacy it was left to Vietnam to
determine when conditions were ripe. Cambodia was admitted on
30th April 1999 only after it held ‘free and fair’ national elections. 24
Vietnam was put on the spot again in 2000-01 when, as chair of the
ASEAN Standing Committee, its foreign minister was required to
visit Myanmar on behalf of the association to determine Yangoon’s
willingness to adopt political liberalization measures. According to
diplomatic sources, Vietnam did so in a perfunctory manner.
Vietnam reported back to ASEAN that Myanmar was not willing to
make any concessions at this time. In 2004, Vietnam was placed in a
similarly difficult role as host of the 5th Asia-Europe Meeting (ASEM)
in Hanoi. According to one source, Vietnam ‘conveyed the
arguments of both sides and really made a lot of efforts’. 25 ASEM 5
was almost postponed due to disagreement between the Europe
Union and ASEAN over Myanmar’s attendance. Vietnam played a
key role as interlocutor with Myanmar, dispatching no less than
retired prime minister Vo Van Kiet to Yangoon to extract a
concession on its participation.
Vietnam has been extremely wary about over-riding ASEAN’s

principle of non-intervention, a key component of ‘the ASEAN Way’.
It is clear that triple crises of 1997-98 caused friction within ASEAN
24This was the twenty-fourth anniversary of the fall of Saigon to communist

forces.
25Didier Lauras, Agence France-Presse, Hanoi, October 6, 2004. For an overview
of Hanoi and the ASEM process consult Luong Van Tu (2004).
between old and new members. Vietnam has responded by shoring
up its bilateral ties with Laos, Myanmar 26 and Cambodia and by
developing multilateral ties at the sub-regional with Cambodia and
Laos (Thayer 1999a and 2000c). Vietnam initiated the first summit of
the Indochinese members of ASEAN in 1999. The second summit of
the three Indochinese states, which met in 2002, proposed the idea of
a ’development triangle’. The most recent third Indochinese summit,
has refined this proposal for approval by ASEAN ministers at their
Tenth Summit to be held in Laos in November 2004. 27 In sum,
Vietnam has created a ‘caucus’ of politically closed states within
ASEAN to protect unwanted political intrusion into matters of
domestic sovereignty.
Part 5 — Conclusion
This overview of Vietnam’s regional integration through

membership in ASEAN has generally borne out the main contention
of the conference organizers that state authority in Vietnam has
come under challenge as a consequence of its twin policies of
domestic renovation (doi moi) and ‘open door’ foreign policy. The
findings of this paper are not conclusive, however, on the question of
whether the state’s vertical power and sovereignty has been
weakened.
ASEAN represents a weak form of multilateralism, one found at the

minimal end of the minimal-maximalist spectrum. ASEAN does not
have any mechanism to force its members to comply with agreed
economic and political policies. The ASEAN process of
multilateralism ‘positively discriminates’ in favour of the newer less
developed members (rather than uphold strict non-discrimination).
This is not only the case with AFTA and the CEPT scheme, but also
with the proposed Free Trade Agreement between ASEAN and
China (Wattanapruttipaisan 2003). ASEAN has been flexible in its
application of the criterion of indivisibility particularly with respect
to CEPT commitments. ASEAN does pursue diffuse reciprocity as
part of the long-term objectives of AFTA.
26Burma and the Democratic Republic of Vietnam extended diplomatic relations

in 1947. Prime Minister U Nu visited Hanoi in November 1954; President Ho Chi
Minh reciprocated in February 1958. More recent visits include: Secretary General
Do Muoi (May 1997), Prime Minister Phan Van Khai (May 2000), President Tran
Duc Luong (May 2002), Marshall Than Shwe (March 2003), former Prime Minister
Vo Van Kiet (August 2004), and Prime Minister Khin Nyunt (August 2004).
27 Vietnam News Agency, July 21, 2004, Viet Nam News, July 23, 2004.
34 Thayer
AFTA and the CEPT scheme provide only a limited test of the extent
to which external pressures challenge state authority in Vietnam.
This is so for two main reasons. First, Vietnam has not reached its
final CEPT deadline and so it is too early to measure the impact of
CEPT compliance on state authority. Second, the impact of external
pressures on Vietnam from the IMF and World Bank are probably
more decisive at this stage than AFTA. A much better test case of the
impact of external pressures on state authority is Vietnam’s trade
agreement with the United States but this is bilateral. A better test
case of the pressures arising from membership in a multilateral body
will be the World Trade Organization when Vietnam becomes a
member (Dinh Trong Thinh 2004).
Vietnam’s participation in AFTA has brought repeated pressures on

state authorities to advance the deadlines for tariff reductions and to
restructure state revenue from import taxes to the collection of VAT.
It remains to be seen if Vietnam will be able to meet its final tariff
reduction commitments or whether ‘special circumstances’ will be
invoked for delays in specified areas. State authority will be
weakened to the extent that Vietnam is compelled to remove goods
wrongly placed on its General Exclusion List. These goods were
initially placed on the GEL in order to afford domestic industry some
measure of protection against competition.
ASEAN’s weak form of multilateralism has also led to particular

foreign policy challenges to Vietnamese sovereignty and hence state
authority. Vietnam joined ASEAN, inter alia, to be able to deal more
effectively with a rising China and to insulate itself from external
pressures on its domestic political arrangements. ASEAN has not
been able to function as an effective buffer in its dealings with China
on the question of overlapping territorial claims in the South China
Sea. ASEAN failed to negotiate a ‘code of conduct’ and individual
members have pursued activities designed to advance their
territorial claims.
Vietnam also joined ASEAN in the expectation that the norms

included in ‘the ASEAN Way’ – non-interference in particular –
would strengthen state sovereignty. Yet the debate over this very
norm within ASEAN has served to undermine this expectation. It is
Myanmar, however, not Vietnam that is in the hot seat on this issue.
But Vietnam has been placed in the difficult position of having to
represent the ASEAN consensus to Myanmar when plainly
Vietnam’s national interests run parallel to the regime in Yangoon.
The case study of SOES reform has thrown up light on an internal

contestation within Vietnam on the very structure of the political
economy of the state and state power. This case study has exposed
the nexus between external and domestic pressures on the state to
alter policy in conformity with international norms and practices in
economic matters.
The above instances do not conclusively demonstrate that the

‘current dynamics operating at the national and supranational levels
have, in fact, weakened the vertical power of the executive and
called into question, to some extent, the sovereignty of the
Vietnamese party-state.’ Recall the observation made in the
introduction that no state has ever exercised absolute sovereignty
and Krasner’s view that the concept of interdependence sovereignty
is historically inaccurate. Krasner also argues that Westphalian
sovereignty is a form of ‘organized hypocrisy’ because states have
always experienced some form of external intervention in their
internal affairs.
Quite clearly the nature of the Vietnamese state is being contested by

domestic groups. Vietnam’s membership in ASEAN can be viewed
as a mechanism that puts pressure on Hanoi’s policy makers to push
through with reforms (Guina 1997:11). At the same time, state
authorities have used Vietnam’s membership in ASEAN to
strengthen their position by binding Vietnam to economic policy
changes and thus acting as a constraint on backtracking or even
policy reversal.
Vietnamese state authorities have used both domestic reform and an

open door foreign policy to strengthen the state. For example, major
SOE reforms were carried out before Vietnam joined ASEAN. Many
SOEs, mainly in the textile and garment industry, were able to
restructure without direct cash subsidies from the state. They are
commercially profitable and able to successfully export. When tariffs
are lowered these SOEs will undoubtedly face competitive
challenges but this does not necessarily mean they will all perform
badly (The World Bank 2002:27).
Vietnam has been able to prevent the erosion of state authority with
respect to its dealings with the major powers, the policy debate over
‘constructive intervention’ and the Myanmar question. As noted
above, Vietnam has shored up its bilateral relations with both China
and the United States. Vietnam has not only developed robust
bilateral ties with the CLM states, but has initiated cooperation
among the three states of the former Indochina. Vietnam has played
a blocking role in trying to prevent any modification of the principle
36 Thayer
of non-intervention. 28 These efforts have resulted in an informal
caucus of politically closed states within ASEAN designed to uphold
juridical sovereignty in sensitive political matters.
Multilateralism tends to work well when the external environment is

stable. Economic set backs and other strains, such as were
experienced in Southeast Asia in the late 1990s, have taught Vietnam
that the principles of non-discrimination, indivisibility, and
reciprocity can be manipulated to shore up state sovereignty. It is
only to a limited extent that Vietnam’s external commitments have
required it to accept norms and principles of behaviour that are not
of its making. Vietnamese state authorities have proved particularly
adept at maneuvering around these constraints when it suits their
purpose. Vietnam continues to emphasize the importance of
relations with individual Southeast Asian states as well as ASEAN as
an organization. Vietnam has been at the forefront of ensuring that
ASEAN adopts socio-economic policies designed to reduce the
development gap between new and old members. In sum, Vietnam
has adopted a more realistic view of ‘the ASEAN Way’ and the
benefits of multilateralism in a weak institutional setting. Vietnam is
now more adept at pursuing multilateral and bilateral foreign
policies in tandem.
28Ironically, blocking unpalatable policies within ASEAN in effect keeps ASEAN from
developing into a more effective multilateral organization. For example, the perception that
ASEAN was weak and lacking in cohesion in failing to respond adequately to the triple
crises of 1997-98 may have contributed to a decline in foreign direct investment to the
region including Vietnam.
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VIETNAM’S REGIONAL INTEGRATION: THE COSTS

AND BENEFITS OF MULTILATERALISM

According to the thematic background paper provided by the

Finally the thematic background statement asserts:

From a foreign policy point of view, the increasing number of

This paper will explore these propositions by focusing on the process

Part 1 — Multilateralism, Sovereignty and the State

Vietnam’s membership in ASEAN is effectively an exercise in

The international relations literature on multilateralism distinguishes

Ruggie asks what is it about international institutions that make

Ruggie identifies three generalized principles that are important:

A final point on multilateralism needs to be made: the practice of

The notion of state sovereignty grew out of a distinctly European

But sovereignty is not a static concept or a material given (O’Hagan

As is the case with multilateralism, there are differing ‘brands’ of

The phenomenon of so-called failed states has increasingly blurred

As noted above, ASEAN is a different type of multilateral

2Krasner is highly critical of this concept, which is defined as ‘freedom from

ASEAN’s generalized principles are enshrined in the 1967 Bangkok

In sum, ASEAN and the ‘the ASEAN Way’ operate as a process

If the concepts of multilateralism and sovereignty are problematic, so

Part 2 — Vietnam’s Multi-Directional Foreign Policy

Since the birth of the Democratic Republic of Vietnam in 1945, and

During the 1980s, a remarkable transformation took place in how

4See summary overviews by Gainsborough (2002 and 2003), Kerkvliet (1995a,

In December 1986, at the sixth national congress of Vietnam

After Vietnam’s withdrawal from Cambodia in September 1989, both

An important elaboration of Vietnam’s ‘multi-directional foreign

The Cambodian peace agreement, signed in October 1991, and the

Vo Van Kiet, then chairman of the Council of Ministers, led a high-

The end of the Cambodian conflict also brought with it an end to

Since 1992, in preparation for membership, Vietnam joined six

In sum, Vietnam’s new multidirectional foreign policy paid

Part 3 — Vietnam in ASEAN

Since Vietnam joined ASEAN there has been a new openness in

Why did Vietnam join ASEAN? 5

Vietnam joined ASEAN primarily for a mix of politico-strategic and

There were at least two main aspects to Vietnam’s politico-strategic

Vietnam moved quickly to resolve such problem areas as the

6For a detailed evaluation of Vietnamese views of the ‘China threat’ consult

Vietnam did not join ASEAN to balance against China. As noted by

Vietnam also sought membership in ASEAN as a means to improve

Hanoi expected that ASEAN membership would provide it some

According to Nguyen Vu Tung (2002), the above explanations, based

The tentative argument is that there is a strong linkage between the

This point of view deserves further consideration. But it should be

According to Hoang Anh Tuan, ‘[p]olitically, due to ASEAN’s high

First, as a member of ASEAN, Vietnam expected to learn from the

It is significant to note, in light of the state identity question, that

On 15th December 1995, Vietnam signed the protocol acceding to the

In 1996, after the first anniversary of Vietnam’s membership in

By May 1997, three ASEAN countries—Singapore, Malaysia, and

What was the situation with trade? By 1997 Vietnam developed a

The Asian Financial Crisis and After

In 1997 ASEAN was affected by a series of crises that severely tested

7For a contemporary macroeconomic assessment of the Vietnamese economy see

Vietnamese officials became alarmed by three developments in

The second development concerned the economic impact of the

As ASEAN’s cohesion came under challenge, Vietnamese leaders

The third development concerned a move by Thailand, supported by

The Asian financial crisis and its aftermath shook Vietnam’s

Finally, it is notable that in the aftermath of the Asian financial crisis,

Bilateral relations with the United States took on a decidedly new

The improvement of Vietnam’s bilateral relations with China and the

Thayer Vietnam's Regional Integration

Thayer Vietnam's Regional Integration