TNAG-1788-FCO40-2548-Hong-Kong-Vietnamese-refugees-general-1988 — Page 240

CONFIDENTIAL

Twelve might contribute to a solution and invited M. Martin's

assessment of the situation following his recent visit to the

region. M. Martin said that he was struck by the extent of economic

decline in Vietnam. It was nine years since he had last been in

Hanoi but it was clear that the country was getting steadily poorer.

There was no end in sight. Everyone talked about reform but nobody

did anything about it. No one knew what the new Prime Minister

would do. Those in charge of economic policy were still inclined to

blame the situation on external factors. He had spent three or four

days trying to correct this view and he had been pressed to say when France would give Vietnam soft loans. He had replied that first

there would have to be fundamental economic reform and a solution to

the Cambodian problem. He was also asked why the French Government

prevented companies such as Michelin and Peugeot from investing in

Vietnam. M. Martin had explained that these were purely commercial

decisions by the companies themselves. Even if the Government

pressed them, they would not invest in Vietnam in present

circumstances.

3. M. Martin said that whilst Vietnamese leaders still did not

understand the need for economic reform, they did recognise that a

withdrawal from Cambodia was crucial. But they wanted the PRK to

remain in place and they also feared a return of the Khmer Rouge. They might therefore withdraw partially whilst keeping some forces in the East. During 90 minutes of "blunt" discussion with the

Vietnamese Foreign Minister, Co Thach had told M. Martin that the

PRK had to stay, with Hun Sen in charge. The French should dissuade

Sihanouk from saying things which upset Hun Sen, since there was a

lot that the two should do together. Mr McLaren asked whether the

Vietnamese wanted a de facto partition. M. Martin was unsure but

had the impression that the Vietnamese would be very happy to cross back into the Western part of Cambodia if the Khmer Rouge returned, in particular if they threatened Phnom Penh. They believed that the international community would applaud them if they did so in these

circumstances.

4.

M. Martin believed that Vietnam was attending the JIM only under pressure from the Soviet Union. They did not have the will to negotiate seriously. M. Martin had pressed Co Thach several times

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