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2.44 am

The Economic Secretary to the Treasury (Mr. Richard Ryder) : I thank my hon. Friend the Member for Harrow, East (Mr. Dykes) for his kind words at the outset of his speech. As to the enticing words at the end, I must resist any temptation to make a Ryder declaration tonight. I assure him that no dikes will be broken. I also congratulate my hon. Friend on initiating the debate. As the hon. Member for Islington, South and Finsbury (Mr. Smith) said, it is appropriate that he should have done so, in view of his long-standing and consistent interest in the issue, the most recent example of which we heard at Prime Minister's Question Time earlier today. There has been some speculation in the past few days about the timing of the United Kingdom's entry into the exchange rate mechanism. Let me make this very clear. It is not a question of whether sterling will join ; it is simply a question of when. The Government believe that, in the right context, membership will be helpful to us, but the context must be right.

As the House knows, the Prime Minister set out the conditions for our entry clearly when she returned from Madrid last June. She said then that we will join the ERM when the level of United Kingdom inflation is significantly lower, when there is capital liberalisation in the Community and real progress has been made towards completion of the single market, and when there is freedom of financial services and strengthened competition policy. Those conditions still stand--and my right hon. Friend the Chancellor of the Exchequer reaffirmed them only last week in his Budget speech. We shall not join the mechanism until they have been met.

The hon. Member for Islington, South and Finsbury and my hon. Friend the Member for Harrow, East raised the question whether German monetary union would have any bearing on the timing of our entry into the ERM. The Germans have not yet taken any decisions on the details of monetary union between east and west, much less announced them, but I am sure that the German authorities are well aware of the need to manage the operation in a way that does not lead to higher inflation or disrupt the markets or the ERM. Therefore, the latest developments in Germany should not affect sterling's entry, so our conditions remain unchanged. They have not altered one iota.

Mr. Dykes : Can my hon. Friend add that the Government do not intend to add any additional conditions to our joining the ERM as time goes on?

Mr. Ryder : The conditions were set out clearly at Madrid. Those conditions still stand, and once they have been met, they will enable us to enter the ERM.

Since June, the Community has advanced in a number of the areas that the Prime Minister listed after Madrid. All those countries required to abolish their exchange controls by 1 July 1990 under the 1988 capital liberalisation directive have now done so, apart from Italy. France lifted its remaining controls on 1 January, while Belgium and Luxembourg announced the end of their two-tier exchange market earlier this month, well ahead of the 1992 deadline they had been set. Italy is reported to be aiming to remove all its controls by May. Progress has also been made on competition policy and on liberalisation of financial services.

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But further important decisions still need to be taken. For example, as yet only 60 per cent. of the measures contained in the original White Paper on the single market have been agreed at Community level. In the financial services area, the draft investment services directive is still under discussion and the associated capital adequacy directive has not yet been adopted by the Commission. Above all, we need to make more progress in reducing inflation here at home.

Against that background, it would be foolish to attempt to make any precise prediction about the timing of sterling's entry. However, my hon. Friend the Member for Harrow, East will be well aware that one of the elements in the so-called stage 1 measures recommended by the Delors committee in its report on economic and monetary union was that all Community currencies should be included in the exchange rate mechanism and that the same rules should apply to each. The Government have fully endorsed that section of the committee's report, so there can be no doubt that sterling will enter the mechanism during stage 1, which begins on 1 July this year.

As my right hon. Friend the Chancellor told the House yesterday in the last speech in the Budget debate, progress is being made towards entry, and join we will, once the conditions that the Prime Minister set out at Madrid have been met.

Mr. Beith : As the Minister is aware, I cannot make my own speech because I have a debate later. I merely wanted to inquire whether the Chancellor's forecast of much slower progress in bringing down inflation will lead to a long delay in entry or a recognition that membership might assist us in defeating inflation.

Mr. Ryder : By a happy chance, I happen to have a transcript with me of what my right hon. Friend the Chancellor of the Exchequer said. The hon. Gentleman seems to be referring to the interview that the Chancellor gave on the television at the weekend. My right hon. Friend was asked by Jonathan Dimbleby about the ERM and whether the reduction in inflation to 5 per cent. or thereabouts would "constitute, for you, a substantial reduction?"

My right hon. Friend replied :

"Well, it is a large reduction. I think it the really important question is not of itself the reduction of our inflation but the fact that our inflation rate and the inflation rate of our European partners should be proximate. If their inflation rate was all about the same as ours at the moment, then the conditions effectively would probably be met. It is the proximation of our inflation rate to theirs that is the most important factor."

That gives the hon. Gentleman the reply that he sought.

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Vietnam (Aid)

2.50 am

Mr. William McKelvey (Kilmarnock and Loudoun) : I am grateful for the opportunity to raise this important issue. However, when I applied for the slot--I am still grateful for it--I did not realise that I might be speaking in the small hours of the morning. For that reason, I am glad that I am given a relatively high position in the list of debates, so that we are here at this time. I do not need to apologise to the Minister for Overseas Development for keeping her here at this time of morning. If we had not had three statements yesterday, we might have debated this matter at about ten minutes past eleven. Perhaps she should ask her right hon. and hon. Friends why the statements had to be made yesterday.

Aid to Vietnam is an important issue. I shall be fairly brief, because the key points that I wish to make are not controversial--at least we can agree on them. Vietnam is desperately poor. Poverty is the main reason why the boat people attempt to flee the country. Despite all the efforts of the Vietnamese Government, who are trying to reform the economy and to establish economic regeneration, they can begin to regenerate only when the international economic embargo imposed on them is brought to an end.

No one would dispute the range of poverty in Vietnam. Recent figures show that the average per capita income is about £100 a year. Half of all the children who survive suffer from some form of malnutrition. Even if they do not suffer from malnutrition now, the ravages of malnutrition over the years have left their scars on them. They suffer from the health problems associated with malnutrition. I am indebted to Roger Mathews of the Financial Times for an article that he wrote on 8 March. It said :

"In 1987 and 1988 thousands of Vietnamese were starving and millions more barely had enough food to survive. In April 1988 the Government had to appeal to United Nations agencies for urgent aid, citing 3m people suffering famine conditions and 7m with insufficient food, out of a total population of about 65m.

Eighteen months later not only was Vietnam satisfactorily feeding its population, but to its own amazement had more than 1m tonnes of rice to export, about 10 per cent. of its total production. For the past 20 years Vietnam had been a consistent net importer, now overnight it has become the world's third largest exporter. Those officials who feel like jumping on chairs and cheering have restrained themselves, but privately they are cock -a-hoop despite the characterisation of this achievement by Mr. Nguyen Van Linh, the Communist Party's general secretary, as a great revolutionary drive by the peasant masses'.

The revolution had been wrought not in the paddy fields of the Red River and Mekong deltas, not by a change in climatic conditions nor by a new strain of rice, but by Ordinances Nos. 10, 169, 170 and 193 of the Central Committee of the Communist Party of Vietnam, 1988. They stated, very simply, that for the first time peasant farmers were to be given long-term rights to the land they tilled"-- on a 15 or 25 year lease--

"that, after paying taxes and commissions, they could sell what remained of their crops on the free market, that private traders had the same rights as the state to buy argicultural produce ; and that state employees were no longer to receive heavily subsidised rice allowances."

That economic miracle regarding the supply of food was achieved in 18 months and must be admired.

The country has been drained of resources by 30 years of war, first against the French and then against the Americans. It has had no access to international aid or investment in that time to help to rebuild its central

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economy. Some may say that the country's attempts at reform are meagre and certainly there have been none of the sweeping changes witnessed in the Soviet Union as a result of perestroika and glasnost. The communist leadership of Vietnam has begun to reform the central economy and for the first time market principles have been introduced. Some state controls have been lifted and a liberal foreign investment law has been passed.

There is an urgent need for foreign funds because Vietnam is so poor that it cannot raise sufficient funds for investment inside the country. Foreign funds are desperately needed to purchase imports, to invest in the infrastructure, and to help to support the economic reforms that have begun.

The international embargo is led by the Americans who banned all aid and trade with Vietnam following the war. The Americans, of course, have a tremendous influence on many western nations which follow their example. When the Vietnamese invaded Cambodia in 1979, almost all European countries stopped any aid they had supplied. Last year the International Monetary Fund mission returned to Washington and praised the economic reforms under way and proposed IMF funding. Thanks to a United States and Japanese veto, that proposal was squashed. The United Kingdom stopped aid to Vietnam in 1979 when the Vietnamese invaded Cambodia. Since Vietnam's partial withdrawal from Cambodia the Government's excuse for not giving aid has been that the Vietnamese are not fulfilling their commitment to their people, including the boat people. They will not accept compulsory repatriation and therefore the Government are refusing to give aid.

Last month the Minister of State visited Hanoi, and it was expected that he would offer British aid at least to the areas from which the boat people were attempting to flee. The Vietnamese however, remained intransigent on compulsory repatriation and, therefore, the hon. Gentleman did not offer any aid.

There has been a slight shift in ministerial policy, which was revealed during the most recent Foreign and Commonwealth Office questions. I was pleasantly surprised by some of the responses that were given by Ministers. My hon. Friend the Member for Monklands, West (Mr. Clarke) asked about aid to Vietnam and when the Government would use their influence to stop the international embargo that "appeals to the Pentagon, but to no one else".

The Minister answered :

"The hon. Gentleman may remember that my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs and I had a meeting with a number of non-governmental organisations on 14 November 1989. At that meeting we invited the NGOs to put forward a number of proposals which may help people coming from the area where the boat people came from. We have only received the proposals in the last week, but we shall be considering them urgently."--[ Official Report, 12 March 1990 ; Vol. 169, c. 18.]

Another two weeks have passed since then. While I appreciate that such decisions cannot be made too hastily and must be carefully considered, because the Minster has indicated a slight shift in policy, I hope that she will be able to tell us tonight whether any progress has been made on the matter, and whether any of the suggestions of non-governmental organisations can be followed up by some sort of positive action from the United Kingdom.

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The Minister will probably understand why many Opposition Members need to feel that we are still applying whatever pressures we can to the Government to make them seriously consider, as I am sure that they are, the NGOs' projects. However, funding is essential and should be done as quickly as possible.

While the Minister is considering the NGOs' suggestions, will she look at the possibility of restoring bilateral aid to Vietnam and, through her good offices and those of her right hon. Friends, apply some pressure on the United States to end its embargo, particularly in relation to the International Monetary Fund and the World bank? Through her connections--I am sure that she has many in the European Commission--will she encourage other member states to consider seriously the possibility of giving aid to Vietnam?

Only if we give such aid, and encourage others to do so, will the Vietnamese economy begin to pick up. That will help not only to solve the problem of the boat people, which is most urgent, but to eradicate poverty in an area where we can hopefully begin to establish some useful trading links.

3.3 am

Mr. Jim Lester (Broxtowe) : Even at this time of day, I am delighted to return to a subject in which I have taken an interest and have followed for some time.

In the previous debate, it was said that, with the exchange rate mechanism, we now have a global economy which is fast moving. One of the big draws of the eastern European countries that I have visited recently is the fact that they feel that they are out of the global economy. Those of us who have been to Vietnam know that that is exactly what many Vietnamese feel.

In south-east Asia there are tremendous, live, developing countries. Vietnam and possibly Burma are probably the only countries to have been left out of that growth, for the reasons described by the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey). In this changing world, at this time of flexibility before things are once again set in concrete, there is a great opportunity to restore Vietnam into the family of nations, restore its economy, deal with its previously aggressive actions and lock it into south-east Asia and its economy. It is interesting that when my right hon. Friend the Minister of State visited this part of the world and attended the conference of the Association of South-East Asian Nations, the ASEAN Ministers, apart from condemning the Khmer Rouge and Pol Pot for the first time in direct terms, suggested that in future they wanted not a Foreign Office Minister but an economic Minister. That bears out what many of us feel, that the time is right to take an economic view as well as a political one.

The first time that a real interest was taken in these matters was in 1986 when the Select Committee on Foreign Affairs looked at south-east Asia and examined Britain's relationship with the region as a whole. We made three recommendations when we returned from Vietnam. First, we pressed for a normalising of relationships between Vietnam and the United States. Secondly, we said that even before there was a withdrawal from Cambodia--we had no doubt that there would not be one before 1990--there should be a common European policy and approach. We never managed to achieve that. Thirdly, we said that a Europewide aid programme should be planned

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in advance of the withdrawal from Cambodia so that from day one things could start to happen. Again, that was not achieved. I suspect that if it had been, the problems of the boat people and those that we have in Hong Kong would not have arisen. We would have been giving some encouragement to the reforms that have been introduced in Hanoi and a sense of hope, which those of us who visit the country know is sadly lacking. We would have been able to start to build bridges, as it were. That is an essential element in the current relationship. As I see it, Vietnam is in a Catch-22 situation. It has left Cambodia, but we are not able yet to obtain a United Nations seal of approval because of the protracted negotiations that are taking place over Cambodia. I welcome the statement that my right hon. Friend the Foreign Secretary made to me in which he detailed the part that the British Government are playing in bringing about a settlement through the Security Council and the various discussions that are being held. That is obviously the key. As soon as we can obtain a United Nations or European seal of approval to what has happened in Cambodia, it will be much more difficult for America, especially, to stand against what needs to be an international effort to restore normal relations.

Secondly, Vietnam is in a Catch-22 situation because, as the hon. Member for Kilmarnock and Loudoun has said, my right hon. Friend the Minister of State has done a great deal to prepare for what might be called the first stages of rehabilitation, and that is joint funding of non-governmental organisation projects in North Vietnam. I hope that that is not too specifically connected to only the boat people because, as the hon. Gentleman said, poverty is pretty universal. There would be difficulties in targeting merely where it is thought that the boat people have left. It would be better for the region to target more broadly and to deal with poverty generally. That is the Overseas Development Administration's principal aim in most of its aid programmes.

The scene is set in that the programmes have been given to my right hon. Friend and she is considering them. I have seen many of them already and I know that they are effective. We have pressed the Vietnamese Government to facilitate the opening of offices of NGOs in Hanoi to make this element of policy really work. I press my right hon. Friend the Minister of State and the diplomatic wing of the Foreign Office that there should not be a direct link to the agreement to take back the boat people involuntarily. Hanoi wants more than anything else to normalise relationships with the United States, and the United States has taken a deliberate view on the returning of anyone involuntarily to Vietnam. This is another Catch-22 situation. The Vietnamese are torn between the two pressures. They are trying to assist the Vietnamese boat people and recognise their difficulties, but they do not want to do anything that makes it more difficult to normalise relations with the United States.

The joint funding operation could take place under all the existing agreements. My right hon. Friend the Minister for Overseas Development has courageously started a similar operation in Cambodia, which we welcome. I judge that it would be better to introduce some carrot into the argument rather than always relying on stick. I say that for a reason. I have just come back from Washington. While I was there, I argued the case personally with Ministers and members of the State Department responsible for this area of policy. One came up against a stone wall on every

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issue. It was impossible to convince those responsible that the Vietnam that they constantly discuss is the Vietnam of 1979 rather than the Vietnam of 1990 or that the situation in Cambodia is not as they remember it, as those of us who have been there on more than one occasion realise.

Now is the time to persuade America that if it cannot normalise relations, it should stand back. I understand the trauma that normalising relations would entail. One has only to see the memorial to Vietnamese veterans in the park outside the White House to know how deeply the war affected American society. But that does not excuse the Americans from not getting the correct facts on which to base a policy judgment. I pay tribute to the Foreign Office which, like the Select Committee, has taken many hours and days to try to persuade the State Department that the situation is as we see it. Even with the great skills of Foreign Office officials and the Foreign Secretary himself, that has not been possible.

That means that we have to think again. We cannot allow matters to continue in limbo. We cannot accept the fact that the United States is strongly against the involuntary return of the boat people. As the hon. Member for Kilmarnock and Loudoun suggested, the Americans use their influence with all the international organisations. The IMF has said that the amount of debt to which my right hon. Friend the Minister referred when we last questioned her on the arrears was not a great matter and that it could be dealt with ; it was not the debts but pressure from the United States in particular that was delaying matters.

There is also a block over the settlement in Cambodia. The United Nations Development Programme has been prevented from visiting that country to assess its needs. It has not sent one of its diplomats, although almost all the countries now interested and involved have sent a stream of diplomats. It is one thing if, for their own reasons, the Americans want no relations with Vietnam and are prepared to provide no aid. But we ought at least to persuade them to stand aside and let others get on with a job that desperately needs doing. That is the tack that my right hon. Friends the Minister and the Foreign Secretary should now take. If America does not want to get involved, it should at least stop blocking other international organisations such as the European Community and the IMF and preventing them from starting to establish much more secure and sensible relationships. We have a particular problem because of the boat people. But that is a consequence rather than a reason. As the hon. Member for Kilmarnock and Loudoun suggested, the reason for their flight is abject poverty, which is coupled with dramatic economic change. Increasingly, the Vietnamese economy has become an open market economy, and the result of an open market economy in a country where there is no safety net is that people who lose their jobs have no other source of income and nowhere else to go. That is one of the major reasons why so many people have left. I expect that the flow will not be so great this year. The Vietnamese Government, the United Nations High Commissioner for Refugees and others have done a massive job of persuasion that the great route to California, Australia or Canada is not to be found through Hong Kong or by taking to the boats.

It is imperative that we respond, at the earliest possible date, by agreeing to joint funding and by re-establishing bilateral aid--if necessary, through an overall economic

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agreement. But if America insists on trying to stop such an agreement, it will have to come about without that country. I say with absolute sincerity that it was impossible to get through to the United States officials who are currently responsible for policy the real situation in either Vietnam or Cambodia. Things were easier on Capitol Hill. It was easier to talk to Congressmen. There has been a welcome move in the House of Representatives, as, indeed, there has been in the Senate. I am hopeful that in a very short time two eminent senators will visit Cambodia. But we cannot wait for the American system to work on its own officials.

The situation in that part of the world is sufficiently critical to justify our discussing it at 3.15 in the morning. For all the reasons that have been mentioned, we could give a lead. We and our European colleagues could start to build the bridge that would enable Vietnam to come back into the family of nations and restore a decent standard of living to its people. This would facilitate precisely the sort of change that we are seeking to encourage in previously socialist countries of eastern Europe.

3.18 am

Mrs. Ann Clwyd (Cynon Valley) : On this subject there has been a chorus of unanimity. My hon. Friend the Member for Kilmarnock and Loudoun (Mr. McKelvey) and the hon. Member for Broxtowe (Mr. Lester) have sung the same song. Their message is that current Government policy towards Vietnam is very difficult to understand or explain. The hon. Member for Broxtowe and I visited Hanoi fairly recently. We saw and heard for ourselves some of the changes that are taking place in Vietnam. Perestroika and glasnost may not be as obvious there as they are in some other countries, but there is a mood of change. This mood has been recognised by some international organisations, such as the IMF, which pay considerable compliments to Vietnam for the efforts that are being made to liberalise its economy.

I remember well some of the people that we met. We were impressed by their vigour and their enthusiasm to bring about change and to forge links with countries in the west. A woman took us on a tour of Ho Chi Minh's summer house, where the clock had stopped at 8.36 am. I think that most visitors have been on that guided tour. People file past to glance at the books on the desk and then to feed the massive goldfish in the pond outside. In a country where so many people are poor, where there is so much malnutrition, it is obscene to see these massive goldfish leap out of the pond to grab pieces of bread. As my hon. Friend the Member for Kilmarnock and Loudoun and the hon. Member for Broxtowe have said, it is not surprising that the Vietnamese flee their economic plight. Vietnam is one of the poorest countries in the world. The average income there is less than £100 a year. Half of all children suffer from malnutrition, and the country has never recovered from the devastation caused by 30 years of fighting--first against the French, and then against the Americans. It is particularly ironic that Vietnam is the only country among the poorest 50 to which, according to British aid statistics, we give no aid.

During the Vietnam war more bombs were dropped on Vietnam than were dropped throughout the second world war, an estimated 2 million Vietnamese died, more than

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one third of the land in southern Vietnam is still affected by chemicals such as agent orange, and serious post-war problems remain such as bomb craters, much physical disability, a high incidence of birth defects and the effects of agent orange.

It is particularly tragic that a great country such as the United States is still fighting the Vietnam war. I am reminded of a visit that I made a couple of years ago to the American base at Upper Heyford when I saw one of the song books that the American forces were using, and one of the songs was about nuking the gooks. The gook mentality is still strong in the United States. We all sympathise with the families of those who were killed in the Vietnam war, but it is time that the American Government took less notice of the veterans' associations. We all sympathise with them, but it is ridiculous to pursue the vendetta against Vietnam because of the Vietnam war.

I am sorry to say that the gook mentality still appears to be strong in America and, thanks to the American-led, international economic embargo, Vietnam has been starved of funds to rebuild its economy. Farmers work without fertilisers and workers without adequate tools because of the shortage of foreign exchange to pay for imports. There is no money for basic services. For example, in Hanoi, 1 million people now rely on a drinking water system built by the French to serve the 1945 population of 100,000 people.

An end to Vietnam's economic isolation is essential. The struggling economy needs foreign aid. Everybody says so. It needs aid, trade, loans and investment to get off the ground. There has never been a more appropriate time for Britain to initiate such international action. Vietnamese troops are out of Cambodia, the boat people in Hong Kong are living testimony to the desperate conditions in Vietnam that they have fled, and the economic reforms now under way in Vietnam make it one of the best long-term bets for foreign aid and investment.

At Question Time on 12 March, the Minister mentioned Vietnam's outstanding arrears to the IMF and said that there would be no active lending programme by any of the major donor countries, which seemed to be a justification for the continuing block on the United Kingdom giving aid to that country. But the IMF report is clear. It was written by IMF staff after visits to Vietnam in May and July 1989. It may be written in IMF language, but it is difficult to miss the point, which is that Vietnam is making every effort to reform its economy and to fulfil the conditions necessary to win the international funds which it desperately needs, and the internatonal community should provide them.

When asked to comment on the report on 19 February, the Minister said ;

"The Government welcome the positive initial steps taken by the Vietnamese authorities towards more market-oriented policies." The fundamental reforms under way, however, are hardly initial steps. They require a stronger response than a grudging welcome. Arrears to the International Monetary Fund are not a reason for continuing our embargo. Far from treating arrears to the IMF as an obstacle, the report commends Vietnam for making every effort to meet its payments. It says

"Vietnam's financing needs are immense--to rebuild the infrastructure, support the reform process and strengthen the growth momentum. Towards this end, Vietnam is seeking to

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normalise is relations with western creditors and has despite minimum reserves--commendably remained current on obligations falling due to the fund in 1989."

Far from identifying arrears as a problem, the efforts that Vietnam has made to repay the IMF are surely a reason for lifting the embargo.

As the report states, the Vietnamese authorities

"are giving priority to clearing overdue obligations to the fund Through payments made since March 1989, Vietnam has stabilised outstanding arrears to the Fund at their end-1988 levels and intends to remain current on future obligations falling due to the Fund."

Despite its poverty, it has even taken out a commercial bank loan to clear its overdue obligations to the fund. Therefore, it is clear that it is the political will that is lacking and not arrears, and that political will is the obstacle within the IMF board and within the British Government.

The Japanese are already investing in Vietnam. The Government should encourage British industry by restoring full diplomatic relations, bilateral aid and export credit guarantees.

The Minister told us about, and I am aware of, the moves made by non- governmental organisations, which have put forward a series of projects which they think ought to be supported by the Overseas Development Administration. They made a powerful case to the Minister for aid for those projects. In their submission to her they said that they were

"concerned, above all to see the vast needs of ordinary Vietnamese people addressed to the best of our own ability and that of the international community we believe that economic improvements in Vietnam would be a powerful factor in dissuading departures of boat people to Hong Kong and elsewhere."

There has never been a better time for the British Government, if they are serious about solving the problem of the boat people, to assist Vietnam to keep its people within that country.

After years of unsuccessful, rigid economic planning--and the hon. Member for Broxtowe and I had talks with several Ministers on the subject--the Vietnamese Government are now trying desperately to turn the economy round. They have steadily scrapped Marxist dogma. They have encouraged market forces and have probably passed the most liberal foreign investment law in Asia.

Some of the conversations that we had with Vietnamese Ministers were reminiscent of some of the language used by Ministers on the Government Front Bench. We were rather surprised to hear the sort of language that was being used to show that they were serious about turning the economy round and attracting foreign investment. For example, to bring inflation down from the 400 per cent. mark in 1976, the Government cut spending, tightened monetary policy and slashed state subsidies.

Some would argue that austerity works, because inflation fell dramatically ; but it did so at a cost--the cost of falling wages, bankruptcies and unemployment, and enormous cuts in health and education spending. That, of course is a familiar scene in this country as well. During our visit we heard of one factory that could no longer afford to pay its workers in money ; instead, it paid them in the bicycles that they produced.

International aid should be flowing in to support the reform, both to cushion families from the harshest short-term costs and to kick-start the Vietnamese economy into long-term growth. Many developing

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countries have attempted such drastic economic overhaul, but few--even with massive international assistance-- have survived the course. Vietnam has followed IMF advice consistently, and last year--as I have said--received a glowing report on its fundamental reorientation. Even so, it has not received one penny, one dollar or one dong of IMF money.

Last September--as my hon. Friend the Minister for Kilmarnock and Loudoun said--the United States and Japan vetoed an IMF loan about which Vietnam has been desperately optimistic. Until relations are restored with the IMF, other multilateral agencies and private banks will probably keep away.

Both British and European aid stopped in 1979 in protest at the Vietnamese occupation of Cambodia. While the troops remained there, it was accepted that there was little chance of restoring economic ties with the west ; but, as the troops withdrew, expectations mounted inside Vietnam, which expected a sudden rush of unfettered foreign funds. That, of course, was not to be : western Governments, apart from Sweden, have found new reasons to leave the Vietnamese to deal with their economic problems alone. For the British Government, the occupation became only one consideration in the question whether to resume the aid programme : the goalposts were moved--as we have seen so often with Cambodia--and the ban has continued.

We are told that the Minister of State visited Vietnam recently. Unfortunately, he has not made a full statement to the House, and newspaper reports have not made it clear whether he offered aid conditional on compulsory repatriation. If we read between the lines, however, that seems to have formed part of his conversation with Vietnamese Ministers. It is unfortunate that his mission to Hanoi left that impression ; not surprisingly, the Vietnamese resented such an approach.

If the Government seriously want to boost economic growth in Vietnam, rather than merely securing their own repatriation policy, there is much that they can do. As my hon. Friend the Member for Kilmarnock and Loudoun has said, they should press the United States to end its comprehensive economic boycott ; more important, the United States must withdraw its veto on assistance to Vietnam from the multilateral agencies. It is ridiculous that IMF officials should be able to go to Vietnam, write a glowing report and express enthusiasm about giving the country aid, while the United States--the largest shareholders in the IMF, as well as in the World bank-- can pull the plug on its officials' recommendations.

Within the international agencies--the World bank, the International Monetary Fund, the Asian Development bank and the European Community-- Britain should be advocating funding for investment in Vietnam's infrastructure. The lack of roads, railways, water supplies, power and telephones hampers development at all levels--from grass roots community work to inter-regional trade and investment projects by foriegn companies.

I hope that before long the Minister will find that she can announce a bilateral aid programme consisting of substantial technical and financial assistance to help industry and agriculture to get back on their feet. Britain has great expertise in telecommunications and oil. Vietnam desperately needs that expertise. Moreover, that age-old skill of ours-- English language teaching--is also much in demand in Vietnam. Until translators are trained, western instruction and advice will be limited.

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The Government should also fund the work of the development agencies. I hope that the Minister's response to the submissions that they have made to her will be rapid. I repeat that in order to boost foreign investment and trade the Government ought to provide export credit guarantees to British companies in their dealings with Vietnam.

British Telecom and British Petroleum have already signed contracts to work in Vietnam, but smaller companies need Government assurances before embarking on such a long-term and uncharted course. We visited one of the rural co-operatives and saw the enthusiasm of the Vietnamese workers. They showed us with pride their lacquer work, rush work and other rural products. They have great enthusiasm, but their resources are extremely limited. They are desperate to sell their beautiful lacquer work in other countries. They pressed us to push their case.

We saw many women working in the co-operatives. They work extremely hard there and also as the prime producers of food. That has an adverse effect on their health. The Overseas Development Administration is supposed to be enthusiastic about the development of opportunities for women. Aid for Vietnam would help them. They are in desperate straits.

While Vietnam remains isolated, it is not surprising that the Vietnamese lose hope. Instead of taking flak from the United States for forcibly repatriating boat people, the British Government could be tackling the main source of the problem by leading a concerted international effort to end Vietnam's economic isolation. I hope that the Minister will say as much in her reply.

3.40 am

The Minister for Overseas Development (Mrs. Lynda Chalker) : Like the hon. Member for Kilmarnock and Loudoun (Mr. McKelvey), I welcome the debate, if not the hour at which it is taking place. It is rather sooner for me to respond on this issue than I had hoped when we discussed the matter at Question Time on 12 March. The proposals from the NGOs had arrived in my office literally that day, so I have not had much chance to examine them. The suggestions that are now coming forward are sensible and worthy of thorough discussion. While I will not hold up anything, I must do what needs to be done thoroughly. I make that point as a precursor to the rest of my comments tonight. I welcome the fact that my hon. Friend the Member for Broxtowe (Mr. Lester) and the hon. Member for Cynon Valley (Mrs. Clwyd) have taken part in the debate. They have long experience of these issues and have visited Vietnam together on more than one occasion. The Government and hon. Members in all parts of the House--and many members of the general public, thanks to television--are aware how sad Vietnam is. The people there live in extreme hardship. The poverty is grinding and, despite the increasing agricultural capacity, they still have great need.

We must be realistic and appreciate that Vietnam's relations with the west have been strained in recent times by a number of factors. There are three main ones. The first is the Vietnamese invasion of Cambodia in December 1978, and I shall return to that. The second has been the tide of emigrants, many of them economic emigrants

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rather than refugees as defined in international agreements. They have left Vietnam for other countries in the region. Many of them have left in recent years, and particularly last year. We cannot ignore that, because behind it lies Vietnam's responsibility towards its own citizens, and that is bound to have a bearing.

The third factor that has greatly influenced Vietnam's relations with the west--I shall discuss this issue at some length--has been the problem that Vietnam has with the international financial institutions. Vietnam has had major arrears in payments to the IMF and to the Asian Development bank.

On the first factor--the Vietnamese in Cambodia--we welcome the fact that the withdrawal of Vietnamese combat units from Cambodia seems to have been completed at the end of last year. We believe that some Vietnamese may be back in Cambodia. We hope that they are there as advisers and are wanted by the Cambodian people. So it would not be correct to say that all the Vietnamese have gone from Cambodia, nor will that probably ever be the case. But if they are there in a peaceful role, that is much better than the situation that has existed for many years.

The second and third factors are continuing to pose substantial obstacles to the establishment of the good relations that we wish to establish with the Vietnamese Government. I mention that because when the Minister of State visited Hanoi following the EC-ASEAN meeting in Kuching, he made many efforts with his interlocutors there to get a result by which we could move forward in our relations with the Vietnamese Government.

The majority of participants at the meeting of the United Nations High Commissioner for Refugees steering committee in January accepted that mandatory repatriation of boat people, who have been determined through internationally accepted procedures not to be refugees, should begin on 1 July 1990. A full consensus would have enabled an orderly and internationally supported programme to go ahead. But that, sadly, was blocked by the United States and Vietnam, the latter because, I think, it believed that it could be to its economic advantage to agree with the United States to block it at that time, and the former for the reasons that we know, together with the hurt, which seems to overshadow all else in the minds of Americans when approaching this issue.

The American position, of course, is that repatriation should be confined to volunteers. We should prefer that, but that is not possible at present because it is clear that such an approach would not make a significant impact on the large numbers present in Hong Kong--numbers that represent an increasing and intolerable burden on the finances and physical facilities of Hong Kong. That is not to say that we have come to a halt on the issue. We have not. We shall continue to try to obtain an agreement from the Vietnamese Government to take the responsibility for Vietnamese people to return to Vietnam. There are letters outstanding between the British and Vietnamese Governments, and we await a response from Hanoi on this issue at the moment.

My hon. Friend the Member for Broxtowe mentioned his efforts in Washington, and I am grateful to him for what he sought to do there with members on the Hill and also with officials on the vexed issue of the return of the boat people. I shall be going to Washington next month and I, too, shall try to bring some light into this difficult subject. We cannot ignore the fact that there are many

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people--who are not refugees--in Hong Kong whom Vietnam should accept back and whom we should encourage to go back voluntarily, if possible, but whom, if not, we should return just as, for example, the United States, will return those who come illegally to the United States and as so many other countries do. We must resolve the issue, and I should not want it to be said that we can ignore the situation.

Mr. Lester : The problem is that, when one makes that comparison to State Department officials, they constantly reiterate that Hong Kong is returning not economic migrants but political refugees to a tyrannous Government. They will not accept our case that the boat people are economic migrants. The Americans say that those people are returning to a tyrannous Government who operate on the lines of the 1979 Vietnamese Government, not the Government in 1990. I warn my right hon. Friend before she arrives in Washington that the argument about sending back Haitians and Mexicans drips off people there like water off a duck's back.

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