The demise of the Eastern bloc fundamentally altered Vietnam's foreign policy and forced it to reach out to noncommunist states. This process began in conjunction with domestic economic liberalization in 1988. The withdrawal of Vietnamese forces from Cambodia led to a dramatic improvement in relations with China. The foreign policy emphasis shifted from emphasizing ideological solidarity with the Communist bloc toward a pragmatic attempt to attract overseas investors.
In November 1991, China and Vietnam normalized relations, effectively ending Vietnam's international isolation. Meanwhile, Vietnam made a rapprochement to the West, in particular with Germany and the United States. Vietnam also launched an initiative to improve relations with Japan, Russia, and its Southeast Asian neighbors. As a result, the United States lifted its trade embargo against Vietnam in 1994 and normalized diplomatic relations the following year. In return, Vietnam pledged continued cooperation in locating and returning the remains of U.S. soldiers. German, Japanese, and other Asian firms have invested heavily in Vietnam since 1994. These achievements culminated with Vietnam's entry into the Association of Southeast Asian Nations (ASEAN) on 28 July 1995.
When the economic meltdown hit Asia in the late 1990s, Vietnam was affected by the drying up of investments. The government's unwillingness to bow to the demands of foreign investors and their governments also hampered growth. Following the investor euphoria of Vietnam's opening up, a sense of disappointment with red tape, Party control, and corruption set in. The Party was perceived as being in denial about the state of its economy, even as it became more dependent on foreign aid. Reforms promoted by lenders such as the International Monetary Fund (IMF) were rejected when they did not fit into the leadership's socialist vision for the nation.
Other international commitments will be harder for the Party to ignore, however. As a member of ASEAN, Vietnam is committed to drastically lowering tarriffs, a move that imperils many state-owned enterprises. Manh has overseen improved relations with the United States. In 2002, a new trade deal came into force (the United States-Vietnam Bilateral Trade Agreement), allowing for greatly expanded exports to the world's largest economy and opening the door for negotiations on entry to the World Trade Organization. Vietnam enjoys good relations with its communist neighbor Laos and generally good relations with all the nations of ASEAN, although it has a long-standing dispute with China, the Philippines, Malaysia, and Brunei over the Spratly Islands, a small archipelago in the South China Sea thought to contain rich reserves of oil and natural gas.
In spite of the new realities of international trade links, much of Vietnam's foreign policy still is influenced by old affiliations from the Cold War era. Manh visited India in May 2002, an expression of long-standing close ties between the two countries. In February 2003, Cuban President Fidel Castro visited Vietnam, providing an occasion for celebrations of relations between two of the last surviving communist states. Vietnam offered its backing to Saddam Hussein's Iraqi government against the U.S. invasion in March 2003.