World Bank loans of US$228m bring Hanoi back into the fold

THE world's development banks have kept Vietnam out in the cold since 1978.

That was when it received a loan from the World Bank for an irrigation project. Shortly after, it fell into arrears with the International Monetary Fund (IMF) and, under the vengeful eye of the United States, became an international leper.

Its isolation from the comforting warmth of the World Bank club lasted 15 years, until President Bill Clinton gave the go-ahead this year to the various institutions to restart loans to Hanoi.

Then, under France and Japan's initiative, Hanoi paid off its US$140 million IMF debt this month.

It is now set to join the growing club of current and former socialist economies receiving welcome boosts from the Washington band of altruistic technocrats.

Late yesterday, the World Bank's governors agreed two loans, worth a total of $228 million, as the first step in helping Vietnam's leaders along the rocky road to doi moi, or modernisation.

It might seem that the bank's decision was quick, capitalising on the recent turn of events. But World Bank personnel have been at work in Vietnam since 1989, researching the country's needs and preparing for when lending could start again.

The first fruits of that labour can be seen in the loans - $158.5 million for a huge road repair project and $70 million to help rebuild the country's schools.

Another loan to boost Vietnam's rice and rubber crops and help small farmers is set to be agreed early in December.

The two loans agreed yesterday were made under the Bank's International Development Agency agreement, which offers soft terms for the poorest countries. The repayment terms are over 40 years, with zero interest.

The loans are symbolic, in that they reflect two of the country's serious problems as discussed in an internal bank report finished last month. The 250-page report highlighted infrastructure and human resources as an essential companion to the leadership's programme of economic and fiscal reform.

The road to be repaired is the main North-South artery, the 1A road. The bank's report noted that only 10 per cent of Vietnam's roads were paved, and that 40 per cent of its road network was in ''very poor'' condition.

Project manager Sigfus Sigfusson said farmers also used the main highways to dry their rice on, crippling traffic flow.

The bank describes Vietnam's transport expertise as 25 to 30 years old, and expects to train local staff in applying modern techniques to future projects.

The education project is equally ambitious. The schools, in a serious state of disrepair even to the extent of being health hazards, will be rebuilt to modern designs.

Project manager Kathryn Johnson said: ''Conditions in most schools in Vietnam, particularly in urban areas, are some of the worst in the world in terms of overcrowding and structural disrepair.'' The bank hopes the loan will help remodel 10,300 classrooms, starting in Hanoi, Ho Chi Minh City, Haiphong and Danang, and progressing to the rural areas. About 12,000 toilets and 1,000 safe water systems will be built.

Although the bank believes the general teaching standard is good, it is also helping supply textbooks and giving pupils better access to them. It will also set up primary teaching centres to train teachers.

It will also supply mother-tongue textbooks to the country's ethnic minorities - a sector the Government has largely neglected in education.

The bank's vice-president for East Asia and the Pacific, Gautam Kaji, said: ''These two loans should be seen as a strong vote of confidence by the international community in Vietnam's economic reform programme, and also as a sign of willingness to help Vietnam attain its development goals.''