(4) Real wages in the public sector. In common with most countries faced with inflation. Vietnam has made the Civil Service and the armed forces bear much of the brunt of inflation by holding down wages....

(5) High Consumption and Low Saving...For lack of financial assets in which to invest, the public has had to buy consumers goods or services....

(6) Corruption. It is generally acknowledged that Vietnam is corrupt. But there is no evidence that it is more corrupt than its South-East Asian neighbors. If it is, the reason may be that the war and wartime policies provided many opportunities for corruption....

From an economic point of view corruption can be thought of largely as a symptom of ill conceived and restrictive policies that impede economic development. The corruption itself may be thought of as a lubricant of a system that would otherwise break down. It is far better, however, to create a system that requires no such lubricant. It is hard to think of any interference with the market system in Vietnam that cannot be regarded as an impediment to development.

Facilitations of Development. On the other side of the ledger the war has changed the traditional situation in ways that are distinctly favorable to development.

(1) Manpower (and womanpower). Both the million men who have served in the RVNAF and the 250,000 who have worked for the U.S. as civilians provide the base for an industrial labor force with modern skills and attitudes, provided reasonably good employment opportunities are provided for them, and they are not permitted to lapse into urban or rural unemployment.

Moreover, the expansion of the service industries as a result of the war may facilitate industrialization. Usually new-born industry has to draw on agriculture, and it is well known that the economic incentives needed to get people out of agriculture may be greater than their marginal product in industry. The transfer of labor from declining restaurants into industry may be much easier than the transfer from agriculture.

As part of the pacification program, the government has expanded both primary and secondary education to a remarkable extent during the past five years. Literacy rates are distinctly high for an underdeveloped country.

A further point of great importance is the increased participation of women in business. Men imbued with French cultural tradition often do not take readily to the rough ways of the market place. But Vietnamese women seem to have no such inhibitions and have shown remarkable skill in business. While their opportunities have largely occurred in importing and other trading, these skills can be transferred to industry, as the experience of other countries, such as Pakistan, has shown.

Taken by itself, the entrepreneurial situation in Vietnam seems distinctly promising, in relation to its past. But one must bear in mind that it will have to compete with Koreans and Taiwanese, who lack neither skill nor energy. However, Vietnam also has its Chinese community. One sometimes gets the impression that in every successful Vietnamese business venture an attractive Vietnamese woman dazzles the public while an efficient Chinese partner lurks in the background.

(2) Infrastructure. The war has provided Vietnam with paved high ways from end to end, with more airfields than it can possibly use, with spectacular harbors, with an elaborate communications system, with power plants, and with potable water in Saigon. In these areas, its future problems will be to maintain what it has rather than engage in new construction. Against these assets must be set the neglect of the water system in the Delta, the destruction of highway bridges, the damage caused by defoliation and the damage to timber by artillery fire. In addition the Vietnam railroad has been put out of commission. But that may turn out to be a benefit, provided it is permanently abandoned.

While it is impossible to make an accurate inventory of the changes in the infrastructure during the war, the impression is inescapable that the plusses greatly outweigh the minuses.

IV. External Resources. If Vietnam is to embark on a course of development, especially while it remains mobilized to any appreciable degree, foreign aid must continue at least for a decade or more. There are three cogent reasons why this is true. First, however well contrived its fiscal and monetary policies, it cannot save enough from its own resources to provide the capital needed for any significant degree of development. Secondly, even under the most favorable circumstances, exports plus private capital inflow cannot be expected to pay for even a minimum feasible level of imports for a good many years. This fact is fully supported by the experience of Korea and Taiwan. The arithmetic supporting these statements is included in the Appendix. It must be emphasized that the amounts needed will be of the order of $.5 billion a year during the next decade. At the outset virtually the whole amount will have to be supplied (as it now is) from public sources. If development succeeds and national security increases, private capital inflows can be expected to contribute an increasing share of the total...

V. The Role of International Organizations

One of the unfortunate aspects of Vietnam is the overwhelming importance of the United States involvement. "Free world assistance" military or civilian has not been sufficient even to provide a facade of international endeavor. And Russia did not make the mistake of being absent from the UN, as it did at the time of Korea. In terms of world esteem and political support, the U.S. has paid a high price for its solitary position. For the sake of Vietnam. South East Asia as a whole, to say nothing of the United States, it is of great importance that the security, prosperity, and the stability of the region become a matter of international concern. The following possibilities of international action should be considered.