11 OCTOBER 1975, Page 4

OPEC money

Sir: In his suggestion of a long-term OPEC bond loan to finance manufacturing investment, Stuart Holland (October 4) is at least twelve months out of date. I argued for precisely this approach in a Fabian pamphlet, State Holding Companies, published last October.

It seemed like a good idea at the time but! have since found reasons to doubt its iracticability — at least in the immediate future. First, the oil-producing countries have shown an "absorptive capacity" for their own revenues in terms of imports of capital equipment and armaments far beyond anyone's wildest dreams — or "forecasts" as they are n v called. Even Saudi Arabia now plan o absorb almost all its revenues betw i now and 1980 in a $150 US Billion Development Plan. Secondly, other Arab, Islamic and 'Third Word' countries are already pre-empting much of the loanable surplus. Thirdly, OPEC money .is already contributing to the growth of industrial capacity in France and Italy by providing working capital for major capital goods suppliers.

The OPEC cupboard is barer than expected and may be totally empty by 1980. Unless, of course, the price of oil rises substantially in real terms before then. In that case, if the UK is willing to display no less independence of the United States than does Ecuador, it may be possible to borrow against a conservative depletion policy for the North Sea.

Donald Roy 15 Rusholme Road, London SW15