Two of his uncles served in the defeated South Vietnam military that was allied with the United States during what’s known locally as the “anti-American war.” After the country was unified under the Communist Party of Vietnam, his mother was denied admission to a university because of her brothers’ ties to the southern regime. Even as Vietnam relaxes old regulations that punished those associated with the former Republic of Vietnam, many in the south believe the system still favors those with Communist ties.

Cao didn’t even bother applying to Vietnam’s state-controlled companies that offer employment security, bonus payments and increased job opportunities for family members. “To be able to get jobs in the state system, one must have parents or relatives working there, so those are not accessible for normal people like us,” said Cao, a graduate of the Ho Chi Minh City Foreign Trade University.

Discussing one’s ties to the old Saigon government is a sensitive topic and Cao asked to use only his last name. In the end, he found work at a private real estate company. “If state-owned companies care about my family background, I am sure I would fail,” he said.

War Within

His experience reflects an economic reality for south Vietnamese 40 years after communist troops reunified the country — and a supreme irony. Even as relations between the U.S. and Vietnam have improved dramatically since full diplomatic ties were restored in 1995, the societal wounds within haven’t completely healed from a fratricidal war that claimed as many as 3 million Vietnamese.

Vietnam remains a stratified nation in which the legacy of discrimination against former U.S. allies holds the economy back by keeping some of the country’s best and brightest from top positions at state-owned companies and government posts. The unresolved war tensions at home also keep away potential investment and the needed expertise of many overseas Vietnamese.

The Vietnamese-American community, which at 1.8 million strong is the largest diaspora group outside the homeland, is divided in its relationship with the communist regime. Many are reluctant to invest money and expertise in the homeland because the government still views them suspiciously, said Thinh Nguyen, who left a career in Silicon Valley to start a software company in Ho Chi Minh City.

“Unless the overseas communities see some reconciliation efforts, Vietnam will not draw the cream of the crop from overseas,” he said. “A lot of times overseas Vietnamese are not being treated fairly, let alone being welcomed here.”

A major obstacle to Vietnam’s economic development is a skills shortage because its college system does not meet the demands of a modern economy, said Trinh Nguyen, a Hong-Kong based senior economist for emerging Asia at Natixis SA. “One of the easiest ways for Vietnam to meet this gap is to develop policies that attract and retain skilled overseas Vietnamese.”

Hanoi’s stance, that the conflict was not a civil war but a revolution against the U.S. and the puppet Saigon government, is the “biggest obstacle to reconciliation,” said Huy Duc, a former Hanoi resident and author of “The Winning Side,” a book about Vietnam after reunification.

“This present regime has never seriously thought of true reconciliation issues,” said Duc. “They always affirm themselves as the winner of the war and the master of the nation.”

After the war, trusted Communist Party members and their families were awarded with top posts, while Vietnamese who were allied with the U.S. were punished and their children denied opportunities. Many northerners were sent to the conquered south. Today, those policies have contributed to an enduring system that still appears to tilt toward northerners and Communist Party members:

Twenty-two of Vietnam’s 25 largest state-owned enterprises are based in Hanoi, the nation’s capital.The Communist Party prohibits membership if one’s parents (or those of a spouse) worked in the government or “armed forces of the enemy.”Two-thirds of Vietnam’s roughly 3 million Communist Party members resided in the country’s northern provinces from Quang Tri and above as of 2010, according to Carlyle Thayer, an emeritus professor and Vietnam expert at the Australian Defence Force Academy in Canberra. The north accounts for 46 percent of the nation’s 87 million people.Some 70 percent of the current government’s cabinet are northerners, compared to 30 percent who are from southern and central provinces.

Vietnam’s Communist Party, Ministry of Foreign Affairs and Ministry of Public Security did not respond to questions on reconciliation before publication.

In an April 30 Ho Chi Minh City speech marking the 40th anniversary of national reunification, Prime Minister Nguyen Tan Dung called on Vietnamese in the homeland and abroad to “uphold nationalism, patriotism, humanitarian tradition, tolerance, not discriminating the past, rising above differences, for sincere national reconciliation.”

Post-War Backlash

After the communist takeover, Saigon was renamed Ho Chi Minh City and more than 1 million people, including those who fought alongside American troops or served in the former Republic of Vietnam government, were sent to re-education camps, according to a United Nations High Commissioner for Refugees report.

Whole families, typically extending to three generations, were deemed as having “bad family backgrounds” because of their ties to the fallen government. That system of background checks, which still exists today, prevented many from getting jobs and entering colleges. The harsh treatment contributed to the exodus of more than 1 million Vietnamese as refugees.

“It’s discriminatory to have regulation that bans party membership for people whose parents or parents-in-law worked for the old regime,” said Vu Tien, who attends university in Ho Chi Minh City and asked not to use his full name. His father served in the South Vietnam military, and he’s decided to emigrate to a western country because he sees better economic prospects for himself overseas. “It’s nonsense and an unfair policy, since the war ended 40 years ago.”

In many ways, enmity has softened over the decades between the once bitter enemies, and regional attitudes also contribute to the political and economic imbalance. The daughter of Dung, a southerner who was wounded as a Viet Cong medic during the war, is married to Vietnamese-American Henry Nguyen, whose father worked for the South Vietnam government. Vietnamese with ties to the old regime can now gain some positions in government and state-owned enterprises, though they likely can’t hold top positions, said Duc and other researchers.

The split in party membership between the north and south is tied to the legacy of the war — most of the communist revolutionaries were from the north — and an indifference among southerners about the party, Thayer said. “This is pretty stark,” he said. “Joining the party is not necessary for their careers. ‘I couldn’t be a public security man, so what?’ The north won the war and the south won the economy.”

Many young graduates, particularly those in the south, prefer to work for foreign companies such as Intel Corp. and Samsung Electronics Co. Vietnam’s bustling economy — which the government predicts will expand 6.7 percent next year, the fastest pace in nine years — offers many career opportunities outside the state sector. Many young professionals in the south also say they have no interest in joining the Communist Party.

Ho Chi Minh City, Vietnam’s financial hub and home to Vietnamese with ties to the old southern regime, generates almost a quarter of the country’s gross domestic product. Hanoi, in contrast, contributes 10 percent of GDP.

Advantages for the victors of the war, though, continue to alter the economic landscape, from the hiring of key government officials who shape fiscal policy to the preponderance of state-owned companies based in the north that receive preferential access to capital from government-aligned banks. State-owned companies use about 50 percent of Vietnam’s public investment and tap 60 percent of the country’s bank loans, while contributing to just a third of GDP, according to government data.

Loyalty Matters

Post-war terminology that have prevented access are still a part of the southern Vietnamese psyche and vernacular today: official forms for family histories required for schools and jobs ask applicants to list what family members did “before and after April 30, 1975.” To this day, the term “nguy” for “puppet regime” is still in common usage.

Vietnamese write to online news outlets and to lawyers on the web to ask if they can join the Communist Party if they have family members who served in the “nguy” regime. A law firm fielded a question online in October if marriage to a police officer would be approved when a partner has ties to the old regime. (The lawyer responded that it would not be allowed by the Ministry of Public Security). A man asked for legal help after provincial officials denied him a job, citing his father-in-law’s work as an accountant in the Saigon government.

“The Vietnamese political system values loyalty,” said Nguyen Xuan Thanh, a Ho Chi Minh City-based senior fellow at Harvard’s Kennedy School of Government in Vietnam. “There is still a genuine concern about what they call peaceful evolution — senior people in the government system slowly becoming anti-party and losing their belief in socialism.”

Meanwhile, veterans and others who “contributed to the revolution” — a heroic designation still used today — and their families receive mandated monthly allowances, health insurance and preferential treatment in school admissions and employment. Communist veterans are treated to priority airline boarding.

Economic Benefits

The prevailing sentiment toward those who were defeated is illustrated by a dilapidated cemetery near Ho Chi Minh City for thousands of South Vietnam troops. Some of the graves are nothing more than mounds of dirt and others lack tombstones. Security guards use the cemetery to raise chickens. Across a nearby highway, the graves of veterans who fought on the side of the Communists are carefully tended to and are surrounded with flower beds in the “martyr’s cemetery.”

The reconciliation of old wounds would give the economy a further boost, said Tuong Lai, a sociology professor and Communist Party member, who served as an advisor to the late prime minister Vo Van Kiet. The former premier oversaw the economic reforms in the 1990s, resumption of diplomatic relations with the U.S. and called for national reconciliation in a 2005 newspaper interview.

“To integrate with the world, Vietnamese authorities first need to reconcile and become friends with its people whom they consider foes,” Lai said. “If we fail to have a true reconciliation within the nation, how can we do that with the world ?”

By John Boudreau & K Oanh Ha - Bloomberg - December 23, 2015