Subsidies period (Socialist Indochina)

A textile factory

Subsidy period (Vietnamese: Thời bao cấp) is a way to say the Indochinese period of 1977-88, of which changed itself from an market-oriented economy to the planned economy, a feature of any Socialist countries at that time. The private sector was changed to the mixed sector (or autonomous collectives), with the state sector became increasingly dominant. Although it was partially implemented in state sectors during the period of 1956-76, it was only officially implemented from 1977 as the alarming indications for a future war at the northern border is inevitable. It is also marked with mass militarization and modernization of the army, with the Naval Forces became increasingly "professionalized" for a large-scale naval war.

At this period, the demand was changed from the light industry to defence industry, with production increased drastically for the latter sector to prepare for a future war. Agricultural productivity per capita was slowly increased thanks to the continuance of the "Green Revolution" despite the fast growing of the population. The "household registration system" was formed to keep a tight surveiliance on its' citizens. Five-year Plans were fully implemented, with specific quotas on every sectors, somewhat resembling the first two Five Year Plans of the Soviet Union, signaling the continuance of the mass industrialization. Free market was heavily restricted, with trade reduced to a more secret, insecure black market.

Background

The booming of the Indochinese economy was continued thanks to the efficient budgetary investment and labour discipline. However, it was, still an agricultural-dependent economy (of which 35% of it still dependent on the agriculture and its' related sectors). Ambitious economical projects were continued at this time, with the most successful ones were the Son La Dam and Hoa Binh Dam, of which could capable of fulfilling demand of electricity for all Indochina. Infrastructure projects were also successful, with the recovery of Trans-Indochinese railways (including smaller railways) was faster than expected (7 years instead of 10 years).

While Lê Duẩn, Kaysone Phomvihane, So Phim, General Võ Nguyên Giáp and others (the moderate reformist) wanted to remained the mixed economy to develop socialism, the "slient majority" faction led by Nouhak Phoumsavanh wanted to introduce the centrally-planned economy to bolster Indochinese industrialization, which was necessary for the development for a strong Indochina. While the economic growth during the period 1973-77 was still fast, about 8% in average, it was a huge slowdown compare to 12% during the period of 1966-72. And in order to fulfill the demand of industrialization, a 10% economic growth was needed, as it was said in the Second and Third Five-Year Plan. This was a great chance for the conservative group to obtain a greater power amongst the central committee.

At the 7th Congress of the Socialist Party of Indochina in 1976, while the reformers retained their seats in the Politburo, the conservatives rose unexpectedly with the appointment of Nouhak Phoumsavanh as the President of the Republic, the nominally second-ranked position in the Politburo. The Resolution of the Congress also took a more conservative stance, of which emphasize the collective leadership of the people in economy, and in national policy. This could be obtained by implementing Hungarian reforms (Kadarism), of which nominally collectivize the economy, while de facto let the private sectors remained intact under the name of the state.

Changes

Economy

The resolution of the 7th Congress was adopted. Therefore, it would officially took a new line towards socialism, without using market economy as a base, into forming "a concentrated, efficient economy", which later to be known as centrally-planned economy. However, unlike the Soviet-type central planning, the Socialist Party of Indochina adopted the Hungarian version of economic planning, of which allows some sector of the economy to form its' own planning (such as consumer goods, food industry). The slogan "Faster, stronger and more stable in our roads to socialism" remained, while "Be educated, work hard and be successful in life" was removed after its' personalist tendencies.

The Ministry of Planning and Investment, although opposed Phoumsavanh's plans in the plenum, but due to the faction's strength in the Central Committee, it was submissive. There was two options: an immediate plan for implementing centrally-planned economy or a 10-year plan. The immediate plan would increase the industrialization rate but would be considered unsuitable for the agriculture, while the 10-year plan might slowered the rated of the industrialization but would be adaptable for the agriculture. It was agreed that the 10-year plan would be more suitable for nation development while not hampered the industrialization plan.

Agriculture

Farmers at the fields

At the 7th Congress, the resolution was more concern of forming collectives, as it was one of the most important part to form a Soviet-style socialism. It was known by the people before the Congress that there would be a forced, large-scale collectivizations in the future. Nouhak Phoumsavanh wanted to concentrated on state dominance of the economy (could be compared to the Soviet intervention of all sectors of the economy). However, it was opposed by the majority of the Politburo and the Secretariat, therefore a compromise on the economy was needed. A simillar policy compared to the NEP (New Economic Policy) was implemented, of which specified when a small-scale (maximum of 20 people) private business (agriculture sector only) was big enough (monthly about 160,000 Indochinese piastres in 1977, or 31 million Indochinese piastres in 2021), it would joined the autonomous collectives (maximum of 500 people), which retained the rights of profit.

This new, more moderate apporoach was accepted by the lower and the upper-middle classes, which was not being influenced by the Chinese Vietnamese. However, a considerable part of it the upper classes opposed the government approach due to its' revocation of business rights, which was a cautious plan to counter any uprisings in the nation, especially in the southern areas (Southern Region of Vietnam and Cambodia/Kampuchea). On adaptation of science on the agricultural sectors, it was agreed that it would be continues, and officially rejected Lysenkoism after 21 years of silence.

There were also reforms in state enterprise (also known as state collectives), of which increasingly subordinated directly to state control. The local government now in charge of financial affairs of these agricultural enterprises, later including in charge of management. State budget would be increased to provide assistance for the collectives in buying or providing machineries such as tractors, others included fertilizers could be assisted during this period. However, quotas should be planned by the local government, of which usually made impossible quotas (even if implementing the former market economy, it was at that time considered to be "unbelievable").

While the competivity was increased at that time (due to some autonomy that the state left), the agricultural growth during the period of 1977-86 was only about 5-6% due to impossible planning, inefficient management and restricted control of the local government with enterprises. This was also due to historical domination, competition and animosity between the Hoa people and the Vietnamese until the compromise was reached in 1983 (after the reformists gained the majority against the conservatives)

After that, the Central Committee had to issued the Resolution 100, of which recognized the private sector of the agricultural part of the economy, and allow further autonomization of the collectives and allow to keep their profit after paying taxes and export to other market if the demand was fulfilled. This would reflected the failure of the collectivization that the conservatives initiated during the period of 1977-86. Laws on Collectives and State Enterprises would be issued a year later, of which recognized the full autonomy of state-owned collectives and large-scale state enterpries, allowing them to freely compete with private sectors in a free market.

Industry

Buying radio in a shop at Hanoi

Industrial part of Indochina was better due to the preparation of super-industrialization during the "first transitional period". The Resolution of the VII Congress of Socialist Party of Indochina declared: "Further industrializing the socialist state, providing machineries and providing materials for supporting socialism, changing the state from a medium-scale production state to a large-scale production socialist state; give the heavy and light industry a equal priority; combining with agriculture to form an agro-industrial state; together with developing the producing forces and complete a new relations of production, combining growing economy with increasing capability of state defense"

With that, the second super-industrialization period began at this point. The central government gave 55 billion piastres (1982 prices) on developing new types of industries and developing large factories, especially with heavy industries, of which considered as the nation's weakest point. However, light industry was not forget as a part of the transitioning to a planned economy. A state subsidization of industries was implemented paralleled with the nationalization of industries. Machines were imported from the Soviet Union and East Germany. At this point, the government also continued the electrification of the nation, with further planning for the completion of Sơn La Dam and Hòa Bình Dam, which was a part of the 4th Congress's Resolution.

On heavy industry, it was heavily invested by the State as it was the main issue of the VII and the first half of the VIII Congress. About 60% of the budget of 37 billion piastres was concentrated on this sector of industry. Machineries were concentrated as the conservative leadership considered "heavy industry would successfully fulfilled and supported the light industry". As such, the heavy industry got a miraculous growth that hadn't seen in the second period of the first economic miracle, with an averagely growth of 12-15% during the period of 1980-85, without negatively affected the environment due to the use of Western technologies.

On consumer goods - light industry sectors, things were deteriorated in the first 5 years. Although the nominal growth was about 8-9%, the overall demand of the people (or "the consumers'" during the reform period) was too high that the average growth of amount of consumer goods per capita was only about 2-3% annually. This was due to inefficient budget investment, of which due to the centralized planning's inefficiency. Things were improvied after the VIII Congress when the government adopted Kadarism in economics, of which granted autonomies for the enterprises to plan it themselves. As such, the sector's growth was improved during the period of 1981-85, about 5-7% annually, of which slowly fulfilled the demand of the people by 1987.

At this period, the rise of a new industry, the military industry occured, as a part of the modernization of the armed forces in general. While having to import the weapons from the Soviet Union, the National Armed Forces could capable to produce local artilery and ammunition, of which would be later uses for the Sino-Indochinese War. The military industry, with the support of the Soviet Union produced light weapons such as guns (mostly assault rifles), heavy weapons such as artilleries (mostly 100mm cannons) and assisting on import the radar system. This new industry would gave a profitable amount of hard currency for Indochina, especially during the period 1980-88 when the United States imposed a trade tariff on Indochina after the Sino-Indochinese War.

In general, the industrial sector was generally improved, with the increasing labour discipline was one of the factor for this. This industry model, of which combining Kadarism with some of the old capitalistic elements, slowly increased the competitivity of the nation, and therefore improve the quantity and quality of the products. However, the increasing demand of the people, of which had aligned themselves with the old market economy, couldn't be fulfilled.

Services

Angkor Wat was recovered to attract tourism during the 1170th Anniversary of Siem Reap

Tourism was properly conducted during this period as it was during in the first reform period, and the importance of this sector of the economy was increasingly important as it was one of the only way to obtain hard currency (mostly either United States dollar, British pound sterling and the West German mark), to increase the financial stability of the nation. As such, the government had merged three Government-controlled General Departments (General Department of Tourism, General Department of Sports and Department of Culture) to formed the Ministry of Culture, Sports and Tourism.

Indochinese tourism concentrated on the diversity of culture and nature of three federal state, the renovation and the popularity of historical monuments and sites (Settha Palace Hotel in Vientiane, Angkor Wat in Phnom Penh and Imperial Citadel in Hanoi for example). The Government also organized major events to commenmorate the tourism-related events and to attract more tourism attractions such as the 500th Anniversary of Phnom Penh (including renovation of historical sites and military parades) as the capital of the federal state of Cambodia. Conversion of slums into apartments in large cities were initiated as a part of services' sector as a way to improve the view of the city and to improve the environment of those major cities.

MIR 2, the first computer in Indochina

Telecommunications in Indochina was also began to enjoyed its' booming from here, with the government subsidized plans on increasing telephones per household (10-year plan on telecommunications to provide communications in 1975-85, starting by putting telephones to state offices such as departments) using the common CDMA system. At first, before the U.S embargo in 1981, the plan was supported by the AT&T with fast paces and some successes. After 1981, it was supported by the Soviet Ministry of Communications. Computers were introduced after that to provide support for the proposed modernization.

To make the modernization faster, student exchange in Indochina was formally implemented, with young students being educated to be specialists in telecommunication and computing. Most of the specialists graduated from the St. Petersburg State University of Telecommunications. Computer production began in 1985 with the production of the once-imported home computer Robotron KC 87 with the supervision of East German specialists, marking the popularization of the computer industry in a agro-industrial state. State institutions began to communicate by telephone and computers, allowing easier control of subordinate institutions.

Western-made computers were legally then later, illegally imported due to the US embargo. The mass available of Western-made computers (mostly from the USA) surged the popularity and demand of the telecommunications sector of the service industry, later be ranked second only to the tourism as one of the most profitable sector to the national budget, allowing the economy to survive during the command economy period, and calming down the inflation.

Politics

Domestic politics

In this period, the national policy has a great change, more concentrative towards the defense policy. Especially with the protests at Cho Lon made by the Hoa (Chinese-originated) people, and the border skrmishes during the period of 1977-78, in response to the Indochina's closer alignment to the Soviet Union, especially with its' intention to join the Council of Mutual Economic Assistance (or CMEA) to support the former's industrialization, at a time when Sino-Soviet split became increasingly more imminent. There was a few proposals for the counter-attack. The first one was to increase military exercise, and spend about 10% of the national budget for the militarization of the society; the second plan was to limitiedly increase their budget on buying weapons and the amount of military exercise. The latter was accepted due to the current conditions of Indochina.