VIETNAM'S FOREIGN EXCHANGE CRISIS: A STRANGLEHOLD ON THE ECONOMY

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• Sequence Number: 2
• Publication Date: October 1, 1984
• Content Type: REPORT

Directorate of -sraft-
Intelligence
Vietnam's Foreign Exchange
Crisis: A Stranglehold
on the Economy
EA 84-10177
October 1984
Copy 282
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Vietnam's Foreign Exchange
Crisis: A Stranglehold
on the Economy
This paper was prepared by
Office of East Asian Analysis. Comments and queries
are welcome and may be directed to the Chief,
Southeast Asia Division, OEA,
Secret
EA 84-10177
October 1984
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secret
Vietnam's Foreign Exchange
Crisis: A Stranglehold
on the Economy F
Key Judgments Rapidly growing payments on Vietnam's $1.5 billion hard currency foreign
Information available debt, combined with a dismal export performance, have produced the worst
as of 14 September 1984 foreign exchange shortage since the formal reunification of the country in
was used in this report.
1976. As a result, Hanoi has virtually stopped making debt payments to
non-Communist creditors.
The foreign exchange problems seem certain to persist for the near term,
and the economy will, at best, achieve only marginal growth for the
remainder of the decade, despite roughly $1 billion a year in Soviet
economic assistance. Nonetheless, it is unlikely that economic hardship will
translate into any domestic or foreign policy shifts. Hanoi has consistently
refused to withdraw its troops from Kampuchea despite offers of substan-
tial economic aid from Japan and Australia. The inability to trade with or
to borrow from the West, moreover, will probably push Vietnam even
further into the Soviet embrace. And Moscow will use that dependence to
ensure continued access to Vietnamese military facilities, particularly at
Cam Ranh Bay, and to increase involvement in the Vietnamese economic
policy making apparatus.
Even under the most optimistic assumptions for debt rescheduling and
export growth, arrears on Vietnam's foreign debt are likely to approach $1
billion by 1987. A multilateral rescheduling of Vietnam's hard currency
debt is unlikely, however, as long as Hanoi refuses to adopt an IMF-
supported austerity program and move ahead with economic reforms. The
current leadership believes these measures would reverse progress toward
achieving a socialist economy.
Even with a debt rescheduling, Hanoi would find it difficult to expand
exports to the West because of supply limitations, low-quality products,
and poor expertise in international trade practices. In addition, about
three-fourths of Vietnam's future exports may have already been ear-
marked as partial repayment for its $4.5 billion debt to the Soviet Bloc.
iii Secret
EA 84-10177
October 1984
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Declining Economic Relations With the West
After the reunification of Vietnam in 1976, Hanoi
looked to an expansion of economic relations with the
West to play a key role in financing the reconstruc-
tion and development of its war-devastated economy.
While maintaining predominant economic contact
with its Communist supporters-the Soviet Union
and China-Hanoi envisioned a resumption of com-
modity exports to the West, a substantial inflow of
foreign aid from non-Communist governments, pri-
vate foreign investment in manufacturing and off-
shore oil exploration, and eventual access to commer-
cial loans from private Western banks. In 1976 Hanoi
took up the former Saigon government's seats at the
IMF and the Asian Development Bank, gaining
access to concessional financing. At the time, finan-
cial analysts projected an annual inflow of foreign
capital approaching $500 million in 1976-80 to sup-
plement the larger aid flows promised by Communist
nations.
Financial assistance of this magnitude never materi-
alized. Vietnam's invasion of Kampuchea in Decem-
ber 1978 sharply cut Hanoi's economic contacts with
non-Communist countries. As a result of a Western
trade and aid embargo, the annual inflow of econom-
ic aid and loans fell from roughly $500 million in
1978 to about $100 million in 1983, and most
Western foreign aid personnel were withdrawn. The
value of Vietnam's foreign trade with the West fell by
25 percent in the same period.
In addition, the worsening economy-a result of bad
weather, poor management, and attempts to rapidly
collectivize southern agriculture-and intransigent
Vietnamese officials discouraged most private invest-
ment. By 1981 the last Western oil company drilling
in the South China Sea abandoned the search, frus-
trated by the lack of commercial finds and an
unbending Vietnamese bureaucracy
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Vietnam's Foreign Exchange
Crisis: A Stranglehold
on the Economy
Although Vietnam at present has only limited eco-
nomic contacts with non-Communist countries, its
earlier economic flirtation with the West left Hanoi
with a burdensome $1.5 billion hard currency debt.'
Most of this debt stems from borrowings in the late
1970s to finance oil imports and to fund ambitious
development projects. Roughly $1 billion is owed to
official creditors-largely Iraq, Algeria, France, and
Japan-and $300 million to private creditors. About
$150 million is owed to international organizations.
The largest private creditor is Japan, which has
provided most of Vietnam's short-term import credits.
No US institutions are directly involved because
Hanoi in 1975 repudiated most of the debts incurred
by the South Vietnamese Government.
Vietnam's foreign debt obligations, moreover, have
accelerated since 1980 because of rising international
interest rates and the expiration of grace periods on
most of its borrowings. Total scheduled debt-service
payments to the West (principal and interest) rose
from $136 million in 1979 to an annual average of
$280 million in 1981-83, one and a half times Hanoi's
hard currency export earnings (see figure 1).
This rapid increase coincided with a sharp decline in
foreign exchange earnings. Official foreign exchange
receipts fell by 50 percent between 1978 and 1983 to
$326 million. In addition to the drop in Western loans
and grant aid, hard currency export earnings-which
Hanoi once hoped would finance machinery imports
from the West-have also proved disappointing. In
1983 exports to non-Communist countries were $178
million, just enough to pay for two-thirds of Viet-
nam's imports from the West (see appendix A, table
3).
' Statistical sources for this paper include IMF publications, official
Vietnamese and Soviet statistics, and refugee reporting. Where
possible, Vietnamese statistics are used for consistency. The terms
foreign exchange and hard currency are used interchangeably.
Figure 1
Vietnam: Growth of Foreign Debt, 1979-838
a IMF estimates. Includes obligations to the IMF
and short-term credits.
Debt to non-
Communist
countries
Debt to Soviet
Bloc
By 1981 Vietnam's reserves of hard currency were
exhausted, and Hanoi had essentially stopped pay-
ment on its foreign debt. Overdue debt payments
jumped to $251 million in 1982 and reached $428
million last year. Hanoi at the end of last year had
less than $16 million of foreign exchange.2
2 Vietnam's official foreign exchange reserves also include 735,000
ounces of gold, half of which is pledged as collateral for a $102
million loan. Hanoi maintains it is reserving the remainder of its
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There is little indication that the situation has im-
proved in recent months. Vietnamese press reports
indicate that export growth continues to lag this year
after increasing only 10 percent last year-far less
than the 60 percent called for in Hanoi's economic
plan. Moreover, the remaining Western aid projects
are nearing completion and will bring little additional
hard currency to Vietnam.' As a result, Hanoi has
probably fallen behind in its debt payments by at least
another $150 million so far this year.'
Vietnam's reputation as a poor credit risk-even for
short-term import credits-is growing. The Japanese
Export Insurance Association earlier this year limited
to $300,000 the value of shipments to Vietnam it
would insure
Letters of credit issued in Singapore for Vietnamese
imports now require a guarantor's signature-in
many cases either the Vietnamese Foreign Trade
Bank or the Moscow Narodny Bank must cosign,
More troublesome for Hanoi's foreign exchange man-
agers is the prospect of large rice purchases this year.
Bad weather and a severe insect infestation have
damaged the rice crop in the north, where the spring
harvest was down about 10 percent from the previous
year. Hanoi is concerned that the crop to be harvested
later this year will also be a poor one. Although
prospects for the rice crop in the south-which pro-
duces nearly 60 percent of the country's rice-are
fairly good, Hanoi, as a precaution, has already
bought more than 100,000 metric tons of rice from
Thailand and Burma,
' The major Swedish aid project-a pulp and paper mill-opened
last year, but lack of pulp forces it to operate at less than 50 percent
of capacity, according to press reports. A Finnish-built shipyard
near Haiphong was commissioned early this year although several
more years will be needed to complete the project
' The foreign exchange crunch has also proved embarrassing in
diplomatic circles. Hanoi over the past two years has closed
embassies in Pakistan, Denmark, and Norway because of lack of
funds.
More bad weather could force Hanoi back
into the international market, preempting hard cur-
rency intended for other uses.
Hanoi has also run afoul of the IMF, reducing
Vietnam's prospects for balance-of-payments assist-
ance. Since February, Hanoi has missed all scheduled
payments for loans to which it has been automatically
entitled as an IMF member and by midyear was $15
million in arrears. The IMF, which considers making
such payments essential to a member's good standing,
is debating Hanoi's access to further funds. Top
Vietnamese leaders appear unaware of the seriousness
of the situation, according to diplomatic reporting,
and continue to request IMF balance-of-payments
assistance before settling the arrears. Hanoi has even
proposed using some of Vietnam's bank accounts in
the United States, blocked since 1975, to repay the
IMF. The United States refuses to discuss releasing
these funds, which once belonged to the South Viet-
namese government and total roughly $100 million, as
long as Vietnam maintains troops in Kampuchea.
To continue importing from the West, Hanoi has
attempted to stretch out payment of both principal
and interest on its hard currency debt and has
repeatedly stated it would not repudiate its debts.
Vietnam has also appealed several times, without
success, to the IMF for balance-of-payments assist-
ance and to the Paris Club-an organization of
official creditors-to sponsor a multilateral debt-
rescheduling package, which it has refused to do.
This has left Hanoi to pursue debt relief on a bilateral
basis, and Vietnam between 1981-83 succeeded in
stretching out about $250 million in loans from Libya,
Iraq, Algeria, and commercial banks in the United
Kingdom, West Germany, and Belgium
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The deteriorating foreign exchange situation this year
has caused Hanoi to intensify these efforts. Tentative
agreement has been reached for the refinancing of
$170 million in arrears to private Japanese banks,
delaying payment until 1986-92. Hanoi is currently
negotiating the rescheduling of another $400 million
with Algeria, Libya, and India. If all these talks are
successful-which we believe is unlikely-Vietnam
would be granted $290 million of debt relief in 1984
but would remain nearly $400 million in arrears.
Hanoi has been less successful in expanding its for-
eign exchange earnings. Since 1980 Vietnam has
devalued the currency by 70 percent, introduced
incentives for improved export performance, raised
the priority of export industries for domestic invest-
ment funds, and encouraged the roughly 1 million
overseas Vietnamese to send cash instead of parcels to
relatives at home. These measures produced tempo-
rary results as the value of exports to the West rose by
35 percent in 1982, and remittances from abroad
through official channels increased sharply to almost
$50 million (see figure 2).
This success was short-lived, however, as Marxist
hardliners in the Politburo renewed efforts to bring
the reinvigorated private sector under control by
sharply increasing taxes on private businesses, stiffen-
ing restrictions on currency transfers from overseas,
and reintroducing central control over the activities of
foreign trade companies. As a result, the growth of
export earnings slowed markedly in 1983 and overseas
remittances fell by about 20 percent.
The key to easing the foreign exchange crunch in the
near term is a multilateral rescheduling of Hanoi's
hard currency debt which-on present terms-will
require payments averaging $260 million annually
during 1985-87 and much better export performance.
Even with bilateral debt relief and moderately opti-
mistic assumptions for export growth, overdue pay-
ments are likely to increase sharply over the next few
years as debt service approaches $300 million annual-
ly by 1987.
Figure 2
Vietnam: Principal Exports, 1979-83
a Coal and seafood exported largely to
non-Communist countries.
Without a multilateral debt rescheduling, Hanoi's
accumulated arrears will probably approach $1 billion
by 1987 (see table 1). Only with sustained export
growth of about 30 percent a year would Vietnam's
debt service ratio fall below 50 percent before the end
of the decade. Financial analysts generally consider a
debt service ratio higher than 20 to 25 percent a
danger sign.
or, %I I
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Prospects for a spurt in export earnings by the end of
the decade, moreover, are poor (see appendix B). The
major impediment to increased commodity exports is 25X1
the large but unknown extent of Hanoi's contractual
export obligations to the USSR.
70 to 80 percent of Vietnam's future
exports may already be mortgaged to Moscow as part
of the price of continued Soviet economic assistance.
Handicrafts and
light manufactures
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Table 1
Vietnam: Projected Hard Currency Debt Service Ratios
and Debt Arrears Under Differing Export Growth Scenarios a
Million US $
(except where noted)
Total debt service payments b
185.9
216.5
270.7
292.5
298.3
290.6
224.0
Principal
96.9
128.0
177.2
182.5
169.8
149.0
73.6
Interest c
89.0
88.5
Debt service ratio under alternative export scenarios d
Low growth (percent)
88.0
100.0
114.0
116.0
104.0
92.0
65.0
Moderate growth (percent)
88.0
92.0
96.0
89.0
73.0
60.0
38.0
High growth (percent)
88.0
85.0
82.0
70.0
53.0
40.0
23.0
Accumulated arrears under alternative export scenarios b, d
Low growth
356
536
745
975
1,178
1,344
1,380
Moderate growth
356
530
735
954
1,142
1,271
1,271
High growth
356
495
639
762
809
739
228
a On loans taken out before 1 January 1984.
b Assuming bilateral rescheduling negotiations under way in mid-
1984 are completed.
c Includes imputed interest on arrears.
d Low growth= 10 percent annually.
Moderate growth=20 percent annually.
High growth=30 percent annually.
We believe the development of exports to the West is
also hindered by poor port facilities, lack of technical
know-how and marketing skills, and severe quality-
control problems.
Vietnamese managers do not un er-
stand the concept of flexible prices and believe the last
price they have been quoted-even if months old-is
the correct price, whether world prices have since
risen or fallen.
We expect Vietnam's severe foreign exchange prob-
lems to persist at least during the rest of this decade.
Hanoi's chances for a multilateral debt rescheduling
depend on improving relations with the IMF and on
adopting an IMF-recommended austerity program in
return for balance-of-payments assistance. These re-
forms would probably include:
? Another large currency devaluation. The 1981 de-
valuation has been more than offset by rapid domes-
tic price increases, especially in key export indus-
tries such as seafood.
? Slowed growth of credit and government spending,
including military spending, to limit inflation.
? Sharp reductions in consumer subsidies, especially
the rice subsidy to government workers.
We believe the current leadership, however, is unlike-
ly to adopt these reforms because-in Hanoi's view-
they would reverse the country's progress toward a
socialist economy and also require insupportable aus-
terity measures.' Nor is Hanoi likely in the near term
to take the steps necessary to stimulate exports or to
attract foreign capital from non-Communist coun-
tries. Although the government could probably in-
crease the inflow of official remittances from overseas
Vietnamese by assuring them that their families at
home had use of the funds, even a doubling of
remittances from abroad would make little headway
in reducing overdue debts.
' The proposed budget cuts would probably not reduce Hanoi's
military operations in Kampuchea because most of the cost is, we
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Hanoi's deteriorating external finances have forced it
to rely more heavily on the Soviet Union for economic
support-a dependence that complicates Vietnam's
attempts to ease its foreign exchange problems. The
Soviet Union-and its East European allies provide
roughly $1 billion annually in economic and techni-
cal assistance along with between $500 million and
$1 billion in military assistance. In return, Hanoi
allows Moscow to use Vietnamese military facilities,
principally Cam Ranh Bay. According to Vietnamese
trade statistics, the Soviet Bloc provides four-fifths of
Vietnam's imports, including almost all of its oil
supplies as well as industrial machinery and most of
Vietnam's supply of fertilizer. Hanoi in turn must
send the bulk of its exports to the Soviet Union and
Eastern Europe, leaving little for sale to hard curren-
cy areas
Vietnam's large trade deficit with the Soviet Bloc-
about $800 million in 1983-is financed by convert-
ing the deficit to long-term, low-interest loans, ac-
cording to the IMF. Since 1981
Hanoi's external financial problems as a consequence
will continue to severely hamper efforts to improve
economic performance and to boost real growth be-
yond the annual average of 3 percent registered since
1979. Soviet Bloc economic aid at $1 billion annually
will be insufficient to move the Vietnamese economy
forward at more than a snail's pace:
? According to UN experts, future food production
may lag behind population growth-at 2.4 percent
annually one of the highest in East Asia 6-without
a sharp increase in the application of improved seeds
and fertilizer.
? Hanoi's inability to purchase petroleum supplies
above the 36,000 b/d provided by the Soviet Union
last year will perpetuate the severe power shortages
that force the industrial sector to operate at less
than 50 percent of capacity and to limit operation of
irrigation pumps.
increasingly been provided in the form of long-term,
concessional loans instead of outright grants. What-
ever the form offinancing, Hanoi's debts to the Soviet
Bloc have more than doubled since 1979 to $4.5
billion in 1983. Vietnam-unable to export enough to
the Soviet Bloc to pay for its imports-is also falling
behind on debt payments to Communist countries.
Hanoi, however, is not charged interest on the missed
payments, according to the IMF.
Nonetheless, according to press reports and refugee
reporting, Moscow in the past few years has pressed
Hanoi to make some effort at debt repayment. About
one-third of the wages of the more than 60,000
Vietnamese now working in the Soviet Union and
Eastern Europe is reportedly withheld by these coun-
tries as debt payment,
Moreover, the long-term economic cooperation agree-
ment that Moscow and Hanoi signed last November
calls for increased Vietnamese shipments of agricul-
tural products, minerals, and light industrial goods
to the Soviet Union, making it even more difficult for
Hanoi to increase exports to the West.
? Financial constraints seem certain to slow develop-
ment of petroleum resources.' Over the past few
months, Hanoi-which is engaged in a joint oil-
drilling venture with the USSR in the South China
Sea-has been desperately searching for drilling
equipment to supplement that provided by Moscow
but has been unable to complete the financial
arrangements.
? Hanoi's inability to increase imports of raw materi-
als, machinery, and spare parts from the West slows
the revival of the Western-built manufacturing sec-
tor in the south
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These severe constraints on growth must be raising
some questions in Hanoi about the viability of a policy
that precludes increased economic relations with non-
Communist nations. Although we have little informa-
tion on the views of individual leaders, the existence in
the Politburo of a moderate faction on economic
policy is widely reported. Vo Van Kiet, a Politburo
member and head of the state planning apparatus, is
mentioned in diplomatic circles
as a contender for the top spot in a post-Le Duan
government. Kiet apparently has been favorably im-
pressed by the economic policy process in Hungary-
which, among East European countries, places the
most emphasis on production incentives and economic
rela ion% with the - cording to refugee report-
ing.
Moreover, Vietnamese leaders, while staunch Com-
munists, are extremely nationalistic, and many refu-
gees report that younger officials and party cadres are
concerned about the growing Soviet influence. It is
possible that a future leadership may try to balance
this influence by adopting economic reforms neces-
sary to gain IMF financing. If this occurs, Vietnam
will find it easier to increase economic dealings with
the West.
Whatever the future leadership picture in Hanoi, we
do not believe that either economic hardship or
concern about Soviet influence in Vietnam will en-
courage the current leadership to alter its domestic or
foreign policy objectives any time soon. Hanoi in the
past has shown no willingness to change its policies for
badly needed economic assistance, and over the past
few months Hanoi has refused offers of substantial
economic aid from Australia and Japan that were
conditioned on Vietnam withdrawing its troops from
Kampuchea
The short-term prospects, therefore, are for even
closer economic ties to the Soviet Union as Vietnam's
inability to buy or borrow from the West forces it to
continue to rely heavily on Soviet economic and
military aid. And Moscow in turn will use that
dependence to ensure continued access to Vietnamese
military facilities, particularly at Cam Ranh Bay, and
to increase involvement in the Vietnamese economic
policymaking process.
there are already a growing number of Soviet advisers
attached to Vietnamese economic ministries and
teaching in economic management schools. In addi-
tion, an increasing number of Vietnamese are study-
ing economic planning in the Soviet Union.
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Appendix A
Table A-1
Vietnam: Details of External Debt to Official Creditors,
as of December 1983
Organizations
Date of
Amount of
Maturity Period
Interest Rate
and Countries
Loan
Loan
(percent)
in millions
of currency units
First Repayment
Last Repayment
Asian Development Bank
1974
US $ 38.6
5 Jan 1979
10 Jan 2001
1.5-2.5
World Bank
1979
US $ 60.0
1 Jan 1989
1 Jun 2028
0.8
OPEC
1979
US $ 10.0
10 May 1983
4 May 1998
0.8
1978
US $ 7.0
1983
1997
0.8
Algeria
1975
US $ 235.7
1980
1988
2.0
Belgium
1979
F 250.0
31 Dec 1989
2008
NA
Denmark
1976
DKr 150.0
10 Jan 1985
4 Jan 1990
NA
1978
DKr 40.0
1 Apr 1988
10 Jan 2012
NA
1979
DKr 80.0
1 Jan 1986
10 Jan 2013
NA
1982
DKr 60.0
1 Oct 1992
1 Apr 2017
France
1973
F 70.0
1977
1986
3.0-7.0
1974
F 191.0
1977
1986
3.0-7.0
1975
F 290.0
1976
1981
3.0-7.0
1976
F 467.7
1978
1987
3.0-7.0
1977
F 593.0
1978
1983
3.0-7.0
India
1978
Rs 100.0
1982
1991
5.0
1980
Rs 50.0
1983
1992
5.0
1981
Rs 100.0
1984
1993
5.0
1982
Rs 100.0
1986
1996
5.0
Iraq
1975
ID 64.8
1 Jan 1979
1 Jan 1986
2.0
1975
ID 40.5
1 Jan 1985
1 Jan 1986
2.0
1979
US $ 70.0
1 Jan 1982
1991
2.5
1980
ID 1.9
30 Sep 1982
30 Sep 1999
2.0
Italy
1978
US $ 20.0
1980
1989
4.0
1980
US $ 10.0
24 Feb 1982
24 Aug 1991
4.0
Japan
1978
Y 10,000.0
20 Jul 1988
20 Jul 2008
2.0
1979
Y 22,000.0
20 Jul 1988
20 Jul 2008
2.0
Kuwait
1979
US $ 10.0
1984
2004
2.5-5.5
Libya
1976
US $ 102.0
1979
1983
2.5
Netherlands
1980
f. 5.0
1989
2012
2.5
United Kingdom
1979
US $ 12.3
1979
1989
7.9
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Table A-2
Vietnam: Details of External Debt to Private Creditors,
as of December 1983
Country
Creditor
Date of
Loan
Amount of
Loan
Maturity Period
(in millions
of currency
units)
First Repayment
Last Repayment
Austria
Credietwien a
1978
DM 8.3
30 Jun 1986
30 Jun 1988
1978
As 540.0
31 Mar 1982
30 Jun 1990
Belgium
Societe Generale de Banque a
1978
BF 506.4
1 Feb 1982
1 Aug 1989
1979
BF 750.0
31 Dec 1982
2008
1980
BF 15.7
1 Feb 1982
1 Aug 1989
Germany
Bank fur Gemeinwirschaft a
1981
DM 11.8
30 Jun 1986
30 Jun 1988
Landesbank
1980
DM 5.0
1 Jan 1984
30 Jun 1986
Hong Kong
Wardley Limited a
1976
HK $ 45.0
31 Dec 1978
30 Dec 1988
India
1978
Rs 300.0
1983
1995
1980
Rs 150.0
1986
1995
Italy
Banca Commerciale Italiana a
1978
US $ 10.4
1980
1989
1978
US $ 19.1
1980
1989
Japan
Bank of Tokyo
1977
DM 30.0
1981
1982
1977
DM 73.5
27 Mar 1981
27 Sep 1982
1978
DM 87.7
17 Jan 1982
17 Jul 1983
1978
DM 38.0
1981
1983
Taiyo Kobe Bank (London)
1978
DM 8.4
22 May 1981
22 May 1983
Mitsubishi Bank (Singapore
)
1978
DM 60.0
25 Nov 1981
25 Nov 1983
Taiyo Kobe Bank (Tokyo)
1978
DM 6.0
17 Jan 1982
17 Jul 1983
Mitsui Bank (Tokyo)
1978
DM 18.0
17 Jan 1982
17 Jan 1983
Dai-Ichi Kango (Tokyo)
1978
DM 14.0
1982
1984
Sauwa Bank (Hong Kong)
1978
DM 12.0
29 May 1982
29 Nov 1982
Bank of Tokyo (Tokyo)
1977
US $ 13.3
27 May 1981
27 Sep 1982
Mitsui Trust (Tokyo)
1977
US $ 13.8
23 Jun 1981
22 Dec 1981
Bank of Tokyo (Hong Kong)
1977
US $ 7.0
29 Sep 1980
27 Mar 1983
Long-Term Credit Bank of
1978
US $ 7.5
3 Oct 1981
3 Apr 1983
Japan (London)
1978
F 15.0
1982
1989
1979
F 22.4
1987
1998
Norway
1977
NKr 45.0
31 Dec 1983
31 Dec 1992
Sweden
1978
SKr 175.0
1979
1985
Switzerland
Bankunion Zurich
1978
Sw F62.5
1978
1984
United Kingdom Hill Samuel London
1979
L 5.8
31 Dec 1980
30 Jun 1987
Private creditors
1979
DM 3.6
Jul 1980
United Kingdom Lazard London
1979
L 4.4
15 Jan 1985
15 Jul 1990
Private creditors
1979
L 9.0
Hill Samuel (Technotible)
1979
DM 3.7
Aug 1981
Aug 1984
Interest Rate
(percentage
points unless
otherwise noted)
LIBOR + 1.625
NA
7.75 percent
7.75 percent
7.75 percent
LIBOR + 1.75
LIBOR + 1.75
H. K. prime +
1.75
8.25 percent
8.25 percent
LIBOR + 0.75
LIBOR + 0.75
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.625
LIBOR + 1.75
LIBOR + 1.75
LIBOR + 1.75
LIBOR + 1,625
LIBOR + 1.75
LIBOR + 1.8
2.5 percent
2.5 percent
NA
NA
5.5 percent
7.5 percent
LIBOR + 1.625
7.75 percent
LIBOR + 1.625
LIBOR + 1.625
a All or parts of these loans have been previously rescheduled.
Secret 8
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LJCLd V L
Table A-3
Vietnam: Balance-of-Payments Summary
1978
1979
1980
1981
1982
1983 a
Communist area
522
485
416
348
431
474
Imports
1,485
1,599
1,296
1,398
1,429
1,550
Non-Communist area
459
433
294
270
265
260
Communist area b
1,026
-1,166
1,002
1,128
1,164
1,290
Services and transfers (net)
-50
-49
-29
-65
44
-28
Interest payments c
23
36
41
72
77
73
Tourism and private
transfers
19
14
19
20
49
35
Nonmonetary capital (net)
904
979
786
895
575
750
Receipt of loans and
grants
1,006
1,091
987
1,272
931
1,061
Non-Communist area
495
398
346
193
88
113
Communist area
511
693
641
1,079
843
948
Repayments
102
112
201
377
356
311
Non-Communist area
95
100
173
203
246
180
Communist area
7
12
28
174
110
131
Errors and omissions d
-69
100
17
-140
33
1
Overall balance
-52
18
15
-241
-186
-175
Increase in arrears c
0
0
0
38
213
177
Accumulated arrears
0
0
38
251
428
a Preliminary. These data understate Vietnamese trade with non-
Communist and Communist areas and capital inflows from the
Communist area.
b Data for Communist area cover exports and imports of goods and
services.
c Includes imputed interest on arrears.
d Includes SDR allocations.
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.7V iVt
Appendix B
Principal Vietnamese Exports
Vietnam faces severe problems with its major poten-
tial exports to the West.
Coal
The north's major hard currency earner, Vietnamese
anthracite has been exported to Japan for decades.
Vietnam also has small amounts of bituminous coal
which it is beginning to exploit. The national plan
places heavy emphasis on coal as a source of power
and as a foreign exchange earner, but damage by the
Chinese invasion in 1979, delapidated equipment, and
an inadequate transportation network have held coal
production to an annual average of 6 million metric
tons in the past three years-roughly the same level
achieved in 1977. Moreover, problems of port capaci-
ty and reduced Japanese demand have plagued Ha-
noi's coal exports since 1981. Efforts by the Vietnam-
ese to gain new markets for coal in South Korea,
Taiwan, and Western Europe have so far met with
little success.
Rubber
A major export for the south, rubber earnings equaled
or exceeded those from rice in many years. The
rubber plantations suffered severe damage during the
Vietnamese war and many were abandoned. Rubber
from the remaining plantations is now exported to
CEMA countries at prices equal to a five-year-
moving-average of world rubber prices. Since 1978,
however, Hanoi-with Soviet assistance-has under-
taken extensive renovation and planted new estates.
Many of the new trees will be ready to tap in two to
three years, but Hanoi may face problems assuring a
steady labor force.
workers brought to rubber estates from Ho Chi Minh
City frequently leave after a few weeks. Moreover,
both rubber production and processing suffer from
poor quality, and the Vietnamese have received little
technical help since the Malaysian Government with-
drew its aid program in 1978.
Rice
Although the north has historically been a rice deficit
area, the south in the early 1960s exported over
300,000 tons annually. Nonetheless, the reunified
country, even with good weather, is barely able to
provide its rapidly growing population of 60 million
with a nutritionally adequate level of rice. Hanoi has
over the past few years, however, exported small
amounts of high-quality Mekong Delta rice and im-
ported a much larger amount of low-quality rice from
Thailand and Burma. This practice is likely to in-
crease in good crop years.
Seafood
The sale of frozen seafood-largely to Japan-has
been Vietnam's export success story over the past few
years. Private Japanese companies provided ships and
refrigeration equipment on easy credit and buy most
of the output. Frozen shrimp is also exported to
Singapore, where,
some is repackaged and shipped to
Western Europe and the United States
Tea and Coffee
Once exported to Europe, tea and coffee now go
largely to the Soviet Bloc. Hanoi has renovated some
tea plantations and is beginning to ship good-quality
tea to Singapore.
Manufactures
The production of light manufactures and handicrafts
spurted after the reforms of 1979-81. These items are
exported almost entirely to the Soviet Bloc, where
complaints of low quality are common.
25X1
25X1
25X1
25X1
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