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US squeezes Vietnam's economy

Through international aid donors, the United States is moving further to tighten the economic screws on Vietnam. The intention, State Department officials say, is to "isolate" Vietnam not only diplomatically but also economically. The ultimate aim of the ever-increasing pressure is to force the Vietnamese to withdraw their occupation army from neighboring Cambodia.

The total loss in potential aid to Vietnam resulting from US actions and from those undertaken by other Western nations as well as by international agencies could come to as much as half a billion dollars a year, economists say.

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The pressure could hardly come at a worse time for Vietnam. Because of a combination of bad weather, mismanagement, and other factors, the country faces severe food shortages. The main ally of Vietnam, the Soviet Union, has food problems of its own and has apparently been reducing its shipments of grain to Vietnam.

A Food and Agriculture Organization (FAO) report speaks of a critical situation. Refugees recently leaving Vietnam are reported to be citing economic reasons far more than any other for their flight from the hard-pressed Southeast Asian nation.

The economic squeeze on Vietnam is not a new phenomenon. But the full impact on Vietnam is only now becoming apparent. The squeeze began not long after the Vietnamese invasion of Cambodia in 1978. The Carter administration laid down the basic tenets of the strategy and helped to exert pressure on the World Bank and other donors to cut off their assistance to Vietnam. US officials say some countries undertook their own punitive economic actions, without any great prompting from the United States.

The Reagan administration has carried on with the same strategy, but appears to be pursuing it with greater intensity. The next target seems to be the United Nations Development Program (UNDP), which has contributed over a five-year period $49 million in economic development assistance to Vietnam, mostly to support food production. UNDP officials were hoping to increase the amount to $118 million for the next five-year period, but, apparently for budgetary reasons, they are being told to "program" $90 million.

American officials intend to question that proposed UNDP contribution to Vietnam in the light of UN resolutions that have called for the withdrawal of Vietnam from Cambodia.

At almost every turn, Vietnam's sources of outside assistance seem to be dwindling. The World Bank ended its program in 1979, partly because of conditions set by the US Congress in exchange for approving US contributions to that international institution. The Asia Development Bank (ADB), which has been slowly increasing its relatively modest contributions to Vietnam, declined to make new commitments. Most West European donors, as well as the Japanese, also refrained from making new commitments.

The Vietnamese found a friend in the International Monetary Fund, and the IMF early this year approved two loan "facilities," one a $32 million short-term loan and the other a $33 million long-term loan which is to be provided at extremely low interest rates. The main aim of these was to bolster Vietnamese agriculture, currently a disaster area because of drought, typhoons, floods, and an overzealous push toward the formation of farm cooperatives.

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Now the IMF funding is in doubt. Economists say that the Vietnamese have agreed to economic reforms proposed by the IMF that would reduce central planning and allow for more private initiative. But even then, they say, the occupation of Cambodia constitutes such a significant drain on the Vietnamese economy that it would be difficult to justify further IMF support.

The Soviet Union, meanwhile, beset by its own problems, does not seem capable of filling the gap left by lost Western aid. The Soviets are already estimated to be providing Vietnam with $3 to $6 million a day in economic and military aid. But, said one economist, "The Russians are really tightening up on the Vietnamese."

Special correspondent Louis Wiznitzer reports from the United Nations:

A diplomatic solution to the impasse over continued Vietnamese occupation of Cambodia appears unlikely, at least for the time being.

Even though a UN-sponsored international conference on Cambodia will meet in New York in July, UN Secretary-General Kurt Waldheim is said to have doubts about the usefulness of such a meeting when Vietnam, Laos, and the present Cambodian regime have made it clear they will not attend. Mr. Waldheim has no choice, however, but to organize the meeting since he has been mandated to do so by the UN General Assembly.

Still, the noncommunist countries that constitute the Association of Southeast Asian Nations (ASEAN) -- Thailand, the Philippines, Singapore, Malaysia, and Indonesia -- hope that by keeping the focus on the problem they may help the ousted Khmer Rouge to retain their representation at the UN for another year.

A more debatable objective of the conference, according to sources close to the parties involved, is to persuade UNICEF and other UN organs to stop providing Cambodia with food and other aids at present furnished under humanitarian considerations, but considered by Chinese and Southeast Asian foes of Vietnam to "contribute to the reconstruction of a pro-Vietnamese Cambodia."

Some high-level Western and Japanese officials believe that a policy of intensified military, economic, and political pressure on Vietnam may be counterproductive and only harden Vietnam's resolve to dig in.

Others, however, feel that Vietnam's economic problems have reached such a critical stage that it will be forced to seek a way to extricate itself from Cambodia, provided enough pressure continues to be applied to it.

For the moment, though, Vietnam is trying to counter the ASEAN move at the UN by pressing instead for a purely regional conference with only Southeast Asian states participating to discuss "the situation in the region" rather than in Cambodia only. Presumably one item on the agenda would be China's threats to Vietnam and support to the Khmer Rouge forces fighting against the Heng Samrin regime in Cambodia.

According to Hanoi, it is the Chinese and their Cambodian "puppets" who foster instability in the area. The Vietnamese have suggested that their troops would leave Cambodia once Chinese and Thai support to the Pol Pot forces were withdrawn.

The ASEAN countries feel they cannot accept this position and insist that Vietnam must end its occupation of Cambodia before they can sit down with it and find ways to assure the stability of the region.

While the ASEAN objective is to free Cambodia from the Vietnamese yoke, China's aims, according to informed diplomats, go well beyond these diplomatic boundaries. "What China seems to want," says one analyst here, "is to destabilize the Vietnamese regime itself."

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