FOCUS : Soviets May Divert Loans From Southeast Asia

Just when it seems that Indochina is within grasp of winning the international financial aid it so desperately seeks, a powerful competitor comes along and grabs all the attention from lenders.

As the World Bank-International Monetary Fund (IMF) annual meeting begins here Tuesday, countries such as Vietnam and Cambodia find themselves vying for attention and dollars against the Soviet Union, which managed to obtain associate IMF membership last week.

As an associate member, the Soviet Union will receive technical assistance and training.

The Soviets are not yet eligible for IMF loans, but most observers anticipate that aid to the Soviet Union will be a hot topic of discussion at the World Bank meeting.

Meanwhile, even though Cambodia and Vietnam are both official World Bank-IMF members, neither has received loans from the international lending organizations for years.

The World Bank did, however, announce on Oct. 1 that another Indochinese nation, Laos, has been granted a $40-million credit from the International Development Assn.. The IDA is a World Bank affiliate that lends on concessional terms to the world’s poorest countries.

Cambodia has had no official representation at the World Bank or IMF because it still does not have an internationally recognized government, said Philippe Annez, a World Bank staff executive based in Bangkok.

“We’re looking forward to having peace in Cambodia,” Annez said, referring to the scheduled signing of a peace accord in Paris in late October that would signal the end of the civil war that has torn Cambodia apart for more than a decade.

On Sept. 23, Prince Norodom Sihanouk, head of one of the four warring Cambodian factions and chairman of the recently formed Supreme National Council (SNC) representing all four groups, asked the World Bank and IMF to accredit an SNC delegation to the bank’s annual meeting.

The request has been approved, and the SNC delegation will be able to attend the World Bank conference as a special guest.

The delegation will have access to all plenary sessions. But as special guests only, it will not be able to officially address the World Bank’s board of governors, said a bank staffer. Informal discussions with bank executives, however, may well take place.

“We need World Bank assistance from the international community as a whole to rehabilitate our economy and to rebuild our country,” said M. H. Lao, director of Cambodia’s Institute of Public Administration and a member of the Khmer People’s National Liberation Front, a non-communist faction.

In Cambodia, the Communist Party’s announced liberalization policies may also be jeopardized unless World Bank-IMF funding comes through in the not too distant future.

“Without substantial assistance in the form of loans,” Lao said, “it’s very difficult for the private sector to develop.”

Some Cambodians, he added, “feel the World Bank has shown its interest and has started to build a relationship with all the factions.”

But in recent years, the World Bank has not dispatched study missions to Cambodia the way it has done with Vietnam, even though the bank has frozen lending to Vietnam until that country pays back the $136 million it owes the IMF. World Bank study teams have been observing and gathering information about Vietnam’s economic programs and needs.

Before the World Bank would be willing to resume regular lending to Vietnam, the change would have to have the “active support” of World Bank directors, said a bank staffer. “At present, there is no such consensus,” he said.

In the interim, the World Bank has arranged for bridge loans to help Vietnam pay its arrears to the IMF, Annez said. “The only thing we need is a green light from the G-7,” he said.

The Group of 7 includes the United States, Canada, Japan, Germany, France, Great Britain and Italy.

Although the United States may not have a deciding vote in the matter of resumption of loans to Vietnam, it does exert influence.

It has been consistently opposed to extending World Bank-IMF funds to Vietnam and has vetoed a rescue plan suggested by France and other Western nations to help Vietnam pay back its IMF debt.

Also, a U.S. trade embargo against Vietnam remains in effect. Washington imposed an embargo against North Vietnam in 1964 and extended it to all of Vietnam after the communists took over in 1975.

Any change in this policy is contingent on Vietnam’s help in resolving the Cambodian conflict and an accounting of American servicemen missing in action from the Vietnam War. Progress has been made on both fronts.

In September, 1989, Vietnam officially withdrew its forces from Cambodia. Next month, with an SNC meeting planned in Phnom Penh and the promise of elections in Cambodia, peace may be just around the corner in that country.

And this month, Gen. John Vessey, U.S. special envoy for missing-in-action affairs, visited Hanoi in an effort to pursue the MIA issue and discuss normalization of relations.