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Vietnam to Repay $145 Million for U.S. Loans to South Vietnam

By Art Pine
Los Angeles Times

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 eventual 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 the year 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 restored diplomatic relations but still have not resumed 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 1975 after northern troops captured Saigon.

U.S. officials said none of the loans was used to finance military operations. Some $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 had refused to repay the loans, but later 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 after Saigon's defeat in 1974.

Analysts said Vietnam's decision to repay the debt, more than two decades after its troops captured Saigon, shows how urgently the existing communist regime wants to establish normal relations and integrate itself into the world economy.