Make Money, Not War

They dress like soldiers and talk like soldiers, but many soft-palmed South Viet Nam army colonels holding high posts in the Defense Ministry act more like business executives--which indeed they are. By tapping the monthly paychecks of their troopers, the colonels have built a string of army-owned business ventures. They have also provoked << enough protest, both, from soldiers and | from competing private entrepreneurs, -that the South Viet Nam government last month began a high-level investigation. Last week, under pressure from the U.S. embassy, the government dismissed five Defense Ministry officials and ordered the tyro tycoons to turn over their operations to the government-owned Viet Nam Commercial Bank, claiming that it is illegal for the army to run private businesses. Now the bank is supposed to return to the soldiers all the funds that had been collected from them.

Conglomerate. Defense Minister Nguyen Van Vy may also lose his job because he founded the army's corporate empire in 1968, and has been running it ever since. Vy's vehicle was the Servicemen's Mutual Aid and Savings Fund (SMASF), which was financed by dunning every soldier 25-c- a month. Initially, Vy's goal was to encourage savings so that the soldiers would have some money to spend when mustered out. In theory, each army veteran was to collect all the SMASF money deducted from his paychecks, plus interest; similar payments were to go to the families of those killed in action. But bookkeeping at SMASF has bee-c-n loose, and many families have had difficulty claiming the cash owed to them. SMASF accumulated $9,600,000, but only $156,000 has been paid out to soldiers or their families.

Last summer Vy began buying or starting private enterprises for the army. He wound up with five: the Bank of Industry and Commerce (BIC); Vicco, a builder of bridges and roads; Vi-navatco, a transportation firm; Icico, an insurer; and Foproco, a food processing and canning company. Vy detached from war duties 155 army officers who had business experience to operate these enterprises.

Artificial Pump. Army chiefs could legitimately argue that South Viet Nam desperately needed new businesses to lift its weak economy. Desirable though the new businesses might be, however, many citizens doubted that the army should own and run them. Private businessmen feared that the army would use its power as a customer to divert revenues to its own companies. The army seemed likely to become the largest buyer of Foproco's canned foods, for example, and to have all its roads and bridges built by Vicco. Said an executive of one army company: "Private businessmen have a reason to worry. Our companies will probably force many of them out of business. But we will do it fairly."

Soldiers, too, began complaining about the companies they were forced to finance. Some people suggested that Vy's army colonels have profited personally from their enterprises--rather than the soldiers who through SMASF are theoretically the owners of the companies. Many of them, expecting preferential treatment from the army bank, applied for loans only to be turned down because they lacked sufficient collateral. Says BIC director General Nguyen Chanh Ly: "This is a commercial bank, not a social bank. The needy can go to the government. Our profit certainly isn't for the soldiers."

Indirect Aid. Now it is unclear what the Viet Nam government will do with the army's conglomerate. Turning the operations over to the state-owned bank or private businessmen is not the entire solution. The current companies are not yet big profit makers, and several have yet to win a group of civilian customers. The government faces a difficult choice; it will have to funnel state money directly into the army's businesses in some fashion, or risk the collapse of one of the few groups of new enterprises in the country.

As in all things Vietnamese, Americans have a more than passing interest in the outcome. The U.S. Agency for International Development has been involved in Vy's enterprises. AID officials had to approve all purchases made by the army's companies, and recently have been delaying such requests. In addition, more than half of the South Vietnamese soldiers' pay comes from AID funds, so Americans have indirectly helped finance the army's entrepreneurial fling.

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