Vietnam - Industry

Industry

The pattern of Vietnamese industrial growth after reunification was initially the reverse of the record in agriculture; it showed recovery from a depressed base in the early postwar years. Recovery stopped in the late 1970s, however, when the war in Cambodia and the threat from China caused the government to redirect food, finance, and other resources to the military, a move that worsened shortages and intensified old bottlenecks. At the same time, the invasion of Cambodia cost Vietnam badly needed foreign economic support. China's attack on Vietnam in 1979 compounded industrial problems by badly damaging important industrial facilities in the North, particularly a major steel plant and an apatite mine.

National leadership objectives during the immediate postwar period included consolidating factories and workshops in the North that had been scattered and hidden during the war to improve their chances of survival and nationalizing banks and major factories in the South to bring the financial and industrial sectors under state control. The government's continued use of wartime planning mechanisms that emphasized output targets and paid little heed to production or long term costs caused profits to erode, however, and increased the government's financial burdens. Economic reforms undertaken in 1977 gave factory management some independence in formulating production plans, arranging production resources, and containing production expenses. Such additional pragmatic steps as the adoption of incentive-structured wages and the realignment of prices better to reflect costs were also considered.

This first experiment with reform was relatively short-lived, partly because it ran counter to the overriding policy of socializing the South and integrating it with the North by reducing the centralized administrative control obviously needed to do the job. Some reform measures stayed on the books, however, and were revived in the 1980s.

Vietnamese statistics indicate that the gross value of industrial output in 1980 was not much higher than in 1976 and that the value of output per capita declined more than 8 percent. For example, cement production was relatively stagnant; it averaged 1.7 million tons annually during the Second Five-Year Plan, but only 1.4 million tons in 1985.

In general, fuel production increased at more than 10 percent annually. Coal output grew from 5.2 million tons in 1975 to 6 million tons in 1978 and fell to 5.3 million tons in 1980. According to official figures, 1985 coal production remained at, or somewhat below, the 1981 level of 6 million tons. Coal accounted for about two-thirds of energy consumption in the 1980s. Coal mining remained handicapped by coordination and management problems at mining sites, incomplete rail connections to mines, equipment and materials shortages, and inadequate food and consumer goods for miners.

Some light industry and handicrafts sectors mirrored the difficulties experienced in agriculture because they used agricultural raw materials. By 1980 the Vietnamese press was reporting that many grain, food-product, and consumer-goods processing enterprises had reduced production or ceased operations entirely. Although detailed statistics on sector performance were insufficient to show annual results, the total value of light industry output peaked in 1978; by 1980 it was nearly 3 percent lower than it had been in 1976. Increasingly severe shortages of food (particularly grain and fish) and industrial consumer goods lessened workers' incentives.

Total industrial production during the Third Five-Year Plan reflected high levels of investment, averaging some 40 percent of total annual investment during the plan period. In 1985 the industrial sector accounted for some 32 percent of national income, up from approximately 20 percent in 1980.

From 1981 through 1985, industrial growth was unevenly distributed and in many instances simply restored production levels to their 1976 levels. The highest production growth rates were recorded in the manufacture of paper products (32 percent per year), and food processing (42 percent per year). Both sectors had declined in production during the Second Five-Year Plan. Production of processed sugar increased from 271,000 tons in 1981 to 434,000 tons in 1985, almost ten times the 1975 production level. The processing of ocean fish increased from 385,000 tons in 1980 to 550,000 tons in 1985, not quite reaching 1976 and 1977 levels, but clearly reversing the steady decline this sector had experienced in the late 1970s. (The decline had been generated in part by the use of fishing boats in the South as escape craft to flee the communist regime.) Other light industries grew at annual rates of 10 percent or more during the early 1980s, which essentially restored production to 1975 or 1976 levels. Brick production increased steadily to 3.7 billion bricks in 1985, after regular declines during the previous plan. Production of glass reached 41,000 tons in 1985, exceeding 1975 levels for the first time. Paper production in 1985 again reached the 1976 level of 75,000 tons, up from 42,000 tons at the beginning of the plan in 1981; and the textile subsector exhibited an 8-percent average annual growth rate during the plan period as cloth production more than doubled to 380 million square meters in 1985.

Among heavy industries, machine-building and chemical industries (including rubber) registered annual average production gains of approximately 25 percent. Chemical fertilizer production continued to exceed the 1975 level and, in 1985, reached 516,000 tons despite relatively underdeveloped mining and enrichment processes for apatite and pyrite ore and underutilization of the Lam Thao Superphosphate of Lime plant (Vinh Phu Province). Pesticide production also maintained a decade-long growth trend to reach 11.74 billion tons in 1985.

Fragmentary figures for iron and chromium ore production were discouraging and suggested a continuation of the decline from 1975 levels. Ferrous and non-ferrous metallurgical production actually declined overall, reflecting exhausted and obsolescent plants, low investment rates, and probably dwindling supplies of scrap left from the end of the Second Indochina War. Modest gains were reported annually in steel production, which reached 57,000 tons in 1985.

Electric power production, although handicapped by uncompleted projects and shortages of oil and spare parts, grew at an average of 8 percent per year. Vietnamese statistics on the annual output of primary products showed that production of electricity increased by almost 60 percent to nearly 3.8 billion kilowatt hours from 1976 through 1978, then declined to around 3.7 billion kilowatt hours in 1980. By 1985, however, production of electricity had increased to 5.4 billion kilowatt hours. Energy-producing industries generally remained stagnant, however, which caused tremendous difficulties for the other sectors of the economy. Power output grew very slowly, and power shortages forced many factories to operate at only 45 to 50 percent of capacity. The government planned that in the 1980s energy production would be tripled by the completion of three big Soviet-assisted projects: the 500-megawatt thermal plant at Pha Lai, Hai Hung Province; the 300-megawatt hydroelectric plant at Tri An, Dong Nai Province, and the giant, 1,900-megawatt hydroelectric plant at Hoa Binh, Ha Son Binh Province, which has been called the "Asian Aswan Dam."

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