Vietnam to Repay U.S. for Loans Made to South

Vietnam agreed Monday to repay more than $145 million in debts to the United States incurred by the defeated South Vietnamese regime, eliminating a major roadblock to the normalization of economic and trade relations between Washington and Hanoi.

Hanoi’s commitment came in an accord signed jointly by Vietnamese Finance Minister Nguyen Sinh Hung and U.S. Treasury Secretary Robert E. Rubin, who is visiting Hanoi this week as part of a trip through Southeast Asia.

U.S. officials said Vietnam is scheduled to make a down payment of more than $8.5 million within 30 days and then begin regular payments aimed at paying off the entire $145 million by 2019.

Rubin said in a speech in the Vietnamese capital Monday that the accord “removes an important obstacle to closer ties” between the two countries, which have established diplomatic relations but still have not set up normal economic ties.

Officials said the next step is for the two countries to complete work on a bilateral trade agreement under which Vietnam agrees to reduce its trade barriers and to open its economy to more foreign investment.

The $145 million in loans stem from the late 1960s and early 1970s, when the United States was channeling hundreds of millions of dollars a year into South Vietnam to prop up its government. North and South Vietnam merged in 1976, the year after northern troops captured Saigon, the South’s capital.

U.S. officials said none of the loans were used to finance military operations. About $76 million of the debt constitutes the unpaid principal from agricultural and development loans for road construction, power projects and grain purchases. The remainder is interest due.

Vietnam initially refused to repay the loans but changed its mind when it wanted Washington’s blessing to encourage foreign investment. The United States has argued that Hanoi incurred South Vietnam’s debts when the two countries merged.

Analysts said Hanoi’s decision to repay the debt, more than two decades after its troops captured Saigon, now Ho Chi Minh City, shows how urgently the Communist regime wants to establish normal economic relations and integrate itself into the world economy.

However, U.S. officials said Vietnam still faces some major challenges if it wants to qualify for the kinds of trade preferences and financing that Washington traditionally provides for its allies.

Under 1974 legislation that set restrictions on U.S. trade benefits for the former Soviet Union and its satellites, Hanoi must allow free emigration of anyone wanting to leave the country before it can become eligible for such benefits.

That would mean a major change for Vietnam, which has impeded thousands of would-be asylum-seekers from leaving the country.

Vietnam also would have to meet minimum fair-labor standards to qualify for U.S. trade benefits.

Rubin urged Vietnam on Monday to speed its move toward a free-market economy by reducing its trade and investment barriers, passing laws that protect trademarks and patents and streamlining its bureaucratic procedures.

Rubin’s visit itself was significant.

Aides said he is the first U.S. secretary of the Treasury to visit Vietnam and the highest-ranking Cabinet officer since Warren Christopher traveled there last year as secretary of State.

The United States lifted its economic embargo against Vietnam in 1994, and the two countries established diplomatic relations the following year.

President Clinton has named former Rep. Pete Peterson (D-Fla.) as the U.S. ambassador to Vietnam, pending Senate confirmation.