Vietnam forges new links with Eastern Europe

Vietnam forges new links with Eastern Europe

By John Rogers

HANOI (Reuter): Despite a hefty debt burden and not much
investment money in the bank, Vietnam and ex-communist countries
of Eastern Europe are starting to forge new relationships on the
back of old friendships.

Vietnam remains communist-ruled but is grafting a market
economy onto its old command system, and the new relations with
Eastern Europe are not political.

"These relations will be based on totally new foundations,
mutual benefit and equality," said Nguyen Van Khieu, in charge of
relations with Eastern Europe and ex-Soviet Central Asia at the
Foreign Ministry. "It's not the way it was before."

And the Vietnamese say both sides have agreed not to let
Hanoi's debts stand in the way.

"The governments have agreed that the debt issue will not
affect bilateral relations," Khieu said.

New links will be based on increased trade and, Hanoi hopes,
more investment flowing from the old East Bloc into Vietnam's
emerging market economy.

Shipping, transport, construction, clothing and other light
industry, food processing and possibly oil and gas exploration
are among areas in which deals could be done.

Hanoi had close economic and political ties with Eastern
Europe under the Moscow-centered Comecon trade grouping, now
defunct.

But the old friendships marked time after communist regimes in
Eastern Europe fell in 1989-90 and democratically elected
governments took power.

While these were finding their feet, Vietnam was busy building
up its links with non-communist Asia and the West.

Now, both are ready to revive relations on the basis of old
political capital, which includes thousands of Vietnamese
officials and professionals trained in Budapest, Warsaw, Prague
or Bucharest and 30,000 students, workers and traders still
living in Eastern Europe.

Hanoi set the ball rolling with a tour late last month by
Deputy Prime Minister Tran Duc Luong to Hungary, Rumania, Poland
and the Czech and Slovak republics.

It uncovered prospects for trade, which sagged to $50 million
last year from $200 million in the late 1980s.

Luong signed agreements on investment promotion and protection
with Hungary, Rumania and Poland, on avoidance of double taxation
with Hungary and Poland, and on trade with the Czech republic.

"The importance of the visit was that we prepared a new legal
foundation for new cooperation and relations in the future,"
Khieu told Reuters.

The problem of debt has dogged Vietnam's relations with all
its former allies in Comecon. But the 500 million "transferable
roubles" it owes the East European countries is only a 20th of
its debt to Moscow and looms less large in overall relationships.

Vietnam owes Poland only $7 million to $8 million, for
instance, Polish diplomats say.

The transferable rouble was a non-convertible Comecon trading
currency, and the problem is how to convert it into U.S. dollars
now that the Russian rouble, on which it is based, has been
devalued to more than 2,000 to one dollar.

Since 1992, Vietnam has serviced its debt to the East
Europeans in kind, mainly coffee, rubber and other agricultural
products, at a rate of eight million to nine million transferable
roubles a year to each country.

"In general the debt question is under consideration in a
spirit of mutual understanding and friendship," Khieu said.
Experts will work out solutions.

With Hungary, for instance, plans are afoot for part of a debt
incurred for construction of a lightbulb factory in Vietnam to be
written off in exchange for equity in the concern.

Hanoi owes its biggest East European debt to Hungary, with
nearly 300 million transferable roubles outstanding, diplomats
said.

Lack of East European capital for investment is a major
problem in building a new economic relationship. The region
counts for a tiny 0.3 percent of the total $10 billion pledged in
foreign investment to Vietnam since 1988.

But Luong's talks made a start, at least, in seeking areas for
joint ventures and increased trade.

In Poland, the biggest regional trading partner, Luong held
out the prospect of Vietnam's using Polish shipyards, ports and
the offshore oil exploration firm Petrobaltic, according to the
Polish news agency, PAP.