Vietnam Paying U.S. Its War Debt -- $146 Million Settles Loans Made To South
HANOI - U.S. Treasury Secretary Robert Rubin signed a pact with the Vietnamese government today that requires the communist country to repay the $146 million wartime debt of its defeated foe, South Vietnam.
"This is a significant step in the normalization of relations between our countries and the integration of Vietnam into the international financial community," Rubin said.
The agreement follows months of negotiations on the amount of overdue debt incurred by the former South Vietnamese government that Hanoi was to absorb.
Rubin, on a three-day visit here, is the highest-ranking economic official to come to the country since the end of the Vietnam War in 1975. He also stopped in Japan and the Philippines during his stay in Asia.
The United States and Vietnam have been slow to develop trade ties since establishing diplomatic relations in 1995. President Clinton in 1994 lifted a decades-old embargo on Vietnam, but a trade pact and most-favored-nation trade status remain elusive.
The Vietnamese government, which has been very willing to discuss the debt issue with the United States, welcomed today's agreement. It is hoping the pact will lead to financing from the Export-Import Bank and other economic assistance from Washington to help fund Vietnam's impressive growth.
"We had to agree on old debts so we could have new relations, such as new loans and cooperation agreements," said Nguyen Manh Hoa, a Finance Ministry director.
According to U.S. Treasury Department figures, about $76 million of the wartime debt is principal from agricultural and development loans. The remaining $70 million is negotiated interest payments.
The overdue loans date to a time when Washington was channeling hundreds of millions of dollars into South Vietnam to try to prop up its besieged government.
Hanoi will repay four loans used for grain imports, road building and power development. None of the money to be repaid was used for military purposes during the Vietnam War, Treasury Department officials said.
"The signal sent by this agreement will be important to the rest of the world in building confidence in Vietnam in a way that will benefit its economy," Rubin said today.
Vietnam is to make an initial $8.5 million payment to Washington; full repayment is scheduled to take place over the next 21 years.
The Paris Club of creditor nations in 1993 laid the foundation for today's accord, agreeing to slash Vietnam's debts in half and reschedule more than $4 billion owed both by Hanoi and the former Saigon government. The United States is the last of the creditor nations to reach a debt accord with Vietnam.
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