A COMPARISON OF THE ECONOMIES OF NORTH AND SOUTH VIETNAM

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• Document Creation Date: December 27, 2016
• Document Release Date: August 22, 2013
• Sequence Number: 1
• Publication Date: December 1, 1961
• Content Type: REPORT

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SECRET
Economic Intelligence Report
A COMPARISON OF THE ECONOMIES
OF NORTH AND SOUTH VIETNAM-
CIA/RR ER 61-50
December 1961
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
N? 106
s'7)
SECRET
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SECRET
Economic Intelligence Report
A COMPARISON OF THE ECONOMIES
OF NORTH AND SOUTH VIETNAM
CIA/RR ER 61-50
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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CONTENTS
Summary and Conclusions
Page
1
I.
Comparative Resources
5
A.
Natural Resources
5
1. Agricultural Resources
5
2. Mineral and Energy Resources
6
B.
Industrial Assets
7
C.
Human Resources
7
1. Population
7
2. Labor Force
9
3. Technology
9
II.
Economic Planning and Policy
10
A.
Economic Administration and Control
11
B.
Economic Policy
11
1. North Vietnam
12
2. South Vietnam
14
III.
Domestic Production
15
A.
Gross National Product
15
B.
Industry
16
1. General
16
2. Heavy Industry
18
3. Light Industry
21
C.
Agriculture
23
1. General
23
2. Food Crops
25
3. Commercial Crops
27
D.
Transportation
28
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Page
IV.
Foreign Economic Relations
29
A.
Foreign Trade
30
1. Level of Trade
30
2. Commodity Composition of Trade
31
3. Direction of Trade
32
B.
Foreign Economic Assistance
34
V.
Allocation of Resources
36
A.
Gross Domestic Investment
37
1. Level of Investment
37
2. Allocation of Investment
38
B.
Consumption
40
1. Food Supply
41
2. Nonfood Consumption
43
Appendixes
Appendix A. Statistical Tables 45
Appendix B. Methodology
57
Tables
1. North and South Vietnam: Land Utilization, 1960 . . 47
2. North Vietnam: Gross Value of Industrial Production,
47
1956-60
South Vietnam: Estimated Index of the Gross Value
of Industrial Production, 1956-60 48
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Page
4. North and South Vietnam: Production of Major
Industrial Products, 1956-60 49
5. North Vietnam: Gross Value of Agricultural Production,
1956-60 51
6. South Vietnam: Estimated Index of the Gross Value
of Agricultural Production, 1956-60 52
7. North and South Vietnam: Production of Major Agri-
cultural Products, 1956-60 53
8. North and South Vietnam: Estimated Foreign Trade,
1955-60 54
9. North Vietnam: Sino-Soviet Bloc Credits and Grants
Extended, by Year of Extension, 1955-61 55
10. North Vietnam: Percentage Distribution of Gross
National Product, by End Use, 1955-60 56
Illustrations
Figure 1. North and South Vietnam: Per Capita Production
of Selected Commodities, 1960 (Chart) 2
Figure 2. North and South Vietnam: Estimated Population,
1954-60 (Chart) 8
(7-Figure 3. North and South Vietnam: Growth of GNP and Per
Capita GNP, 1956, 1958, and 1960 (Chart) . . . 16
Figure 4. North and South Vietnam: Index of Gross Indus-
trial Production, 1956, 1958, and 1960 (Chart)
following page 16
Figure 5. Indochina and Northeast Thailand: Selected
Transportation Routes (Map) inside back cover
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Page
Figure 6. North and South Vietnam: Foreign Trade
as a Percent of GNP, 1955-60 (Chart) 30
Figure 7. North and South Vietnam: Commodity Composition
of Foreign Trade, 1959 (Chart) following page . 32
Figure 8. North and South Vietnam: Direction of Trade,
1960 (Chart) 33
Figure 9. North and South Vietnam: Allocation of Invest-
ment in Fixed Assets, 1960 (Chart) 4o
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A COMPARISON OF THE ECONOMIES OF NORTH AND SOUTH VIETNAM*
Summary and Conclusions
Although seriously affected by partition, the economies of North
and South Vietnam have substantially recovered from the disruptions of
World War II and the French-Indochinese War. Postwar reconstruction
and development of the two economies, however, has required large
amounts of economic assistance from abroad. Whereas North Vietnam
(DRV)** has allocated a large proportion of economic aid from the Sino-
Soviet Bloc and of its own domestic resources to investment in new pro-
ductive capacity, South Vietnam (GVN)*** has devoted relatively more of
its resources to the expansion of consumption. North Vietnam, as a
result, has become much less dependent than South Vietnam on grants and
credits from abroad and has laid the groundwork for continued rapid in-
creases in industrial production.
Since 1956, economic activity has expanded at roughly the same pace
in both North and South Vietnam; in 1960, the gross national product
(GNP) of both countries was about one-third higher than in 1956. Average
annual rates of growth for GNP, gross industrial production, and gross
agricultural production from 1956 to 1960 are as follows:
Percent?
North Vietnam
South Vietnam
GNP
8
8
Industry
26
21
Agriculture
5
7
The estimates and conclusions in this report represent the best
judgment of this Office as of 1 November 1961.
** Viet Nam Dan Chu Cong Hoa (Vietnam Democratic Republic -- commonly
known as the DRV [Democratic Republic of Vietnam]).
*** Viet Nam Cong Hoa (Vietnam Republic -- commonly known as the GVN
[Government of Vietnam]).
t The very high rates of growth in industry are calculated on a base
(1956) that is low in absolute amount and reflects the effects of war-
time interruptions to production. In addition, the rates of growth in
both industry and agriculture are affected by biases in official sta-
tistics, especially in the case of North Vietnam. It is believed,
nevertheless, that rates of growth and [footnote continued on p. 2]
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The relatively faster growth of industry* in North Vietnam is
attributable to (1) North Vietnam's relatively favorable inheritance
in mineral resources and industrial assets, (2) the priority of in-
dustry in the allocation of state investment, and (3) the large propor-
tion of aid imports that has consisted of machinery and equipment and
industrial materials. The postwar success of South Vietnam in agricul-
ture, in turn, has reflected South Vietnam's comparative advantage in
agricultural resources. In North Vietnam, although agricultural pro-
duction as a whole has increased at an average annual rate of about
5 percent, production of food crops has lagged behind the increase in
population; in 1960, drought and flood caused per capita food produc-
tion to fall well below traditional requirements of the North Viet-
namese population. In contrast to this poor performance, production of
food crops in South Vietnam has increased at an average annual rate of
about 7 percent. Per capita production of major agricultural and in-
dustrial products in North and South Vietnam in 1960 is given in the
accompanying chart, Figure 1.
RICE RUBBER
(Kilograms) (Kilograms)
380 6
260
CEMENT
(Kilograms)
NTationVe
SUGAR
(Kilograms)
SUGARCANE
(Kilograms)
60
25
ELECTRIC POWER
(Kilowatt -hours)
COAL APATITE
(Klograms) (Kilograms)
1 0 31
2
0
COTTON CLOTH RAYON CLOTH
(Linear meters) (Linear meters)
25
6.6
16
26
5.4
2.5
5.8
0.9
, 0,
0
I I North Vietnam n South Vietnam
. H
Figure I. North and South Vietnam: Per Capita Production of Selected Commodities, 1960
35579 11.61
comparisons between the economies of North and South Vietnam made in
this report are valid provided that limitations on the accuracy of the
.data are kept in mind. For more information on the problems in this
general area, see Appendix B, Methodology.
* Unless otherwise indicated, the general term industry as used in
this report includes production by both handicraft and modern (or fac-
tory) industry.
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Expanding domestic production has been augmented in both countries
by large net imports, financed under the various economic aid programs
to North and South Vietnam. During 1956-60 the net inflow of goods and
services into North Vietnam is estimated to have amounted to 8 percent
of GNP and the net inflow of goods and services into South Vietnam to
13 percent of GNP. On an absolute basis, South Vietnam received more
than two and one-half times as much economic aid as North Vietnam dur-
ing 1956-60. Whereas external economic aid as a proportion of GNP in
North Vietnam has declined from about 15 percent in 1956 to about 4 per-
cent in 1960, grants and credits to South Vietnam in 1960 still remained
about 10 percent of GNP. The law level of South Vietnamese exports of
rice and rubber and the poor prospects for a large increase in these ex-
ports suggest that the gap between import requirements and the capacity
of the economy to export will not be closed during the next 5 to 10
years.
With enlarged domestic resources and increased import availabilities,
North Vietnam has chosen to expand investment and military expenditures,
holding down consumption relatively if not absolutely. In South Viet-
nam, on the other hand, a large proportion of resources has been used
for maintaining a standard of living that is very high not only in re-
lation to North Vietnam but also in relation to other countries in
Southeast Asia. North Vietnam has raised investment as a percent of
GNP from less than 10 percent in 1955 to more than 20 percent in 1960.
In comparison, South Vietnam during the same period has allocated a
fairly stable 8 to 10 percent of GNP to investment. In North Vietnam,
advances in the standard of living have been no greater than those
considered by the regime to be necessary to allay public discontent;
in South Vietnam, the government has been reluctant on political
grounds to take measures to reduce the relatively high standard of
living. Life on the two sides of the border, accordingly, has been
marked by increased disparity in standards of living and in growth
potential.
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I. Comparative Resources
In June 1954, as a result of the Geneva conferences) Vietnam was
divided at the 17th parallel into two roughly equal parts,* the north
under the Communist Democratic Republic of Vietnam (DRV) and the south
under the pro-Western Republic of Vietnam (OVN). Although still over-
whelmingly agricultural, the area falling to the Communists contained
all of the developed mineral resources and most of the established manu-
facturing industries of undivided Vietnam. The OVN, on the other hand,
fell heir to the great rice-growing region of the Mekong River Delta, a
region that had exported more than 1 million tons of rice a year before
World War II. In contrast to the rice-surplus area of South Vietnam,
the DRV was a food-deficit area, dependent on imports of rice and sup-
plementary foodstuffs.
A. Natural Resources
1. Agricultural Resources
Agriculture in North Vietnam is limited by rugged terrain)
dense vegetation, and poor soil -- roughly two-thirds of the country
is covered by mountain soils that lend themselves to the cultivation of
only tree and shrub crops. Only about 1.95 million hectares,** or
12 percent of the total land area, is under permanent cultivationxxx
(see Table lt), and the amount of cultivated land per capita in North
Vietnam is only abo,L 0.12 hectare.
Inheriting more than half of the land under permanent cul-
tivation in undivided Vietnam, South Vietnam is richly endowed in agri-
cultural resources. About 2.2 million hectares, or 13 percent of the
total land area of South Vietnam, are under permanent cultivation.tt
The amount of cultivated land per capita is about 0.15 hectares, or
an amount about one-fourth again as large as the cultivated land per
capita in North Vietnam. Whereas opportunities for the expansion of
agriculture in North Vietnam are limited, there is good virgin land
still awaiting settlement in South Vietnam -- it is estimated that
about 1.1 million hectares of fertile but hitherto uncultivated land
* North Vietnam comprises roughly 48 percent of undivided Vietnam,
or 158,750 square kilometers compared with South Vietnam's 170,850
square kilometers.
** One hectare equals 2.471 acres.
*** Double-cropping increases the sown
lion hectares.
t Appendix A, p. 47, below.
tt Double-cropping increases the sown
lion hectares.
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area to approximately 2.75 mil-
area to approximately 2.8 mil-
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are available for agricultural expansion. Because of these unexploited
agricultural resources, South Vietnam has a far greater potential in
agricultural production than does North Vietnam.
2. Mineral and Energy Resources
Although North Vietnam has only limited mineral resources
by world standards, it is one of the richest codhtries in Southeast Asia
in mineral reserves. There are substantial deposits of iron ore (150
million metric tons*), phosphate rock (1.billion tons), and chromite
(5 million tons) and less important deposits of tin, zinc, tungsten,
manganese, bauxite, and salt. In addition, there are mall deposits
of copper, antimony, lead, silver, mercury, sulfur, mica, asbestos,
and gold. Energy resources consist of sizable reserves of coal, ex-
tensive although depleted forest resources, and an undeveloped poten-
tial for hydroelectric power.** Reserves of coal, which are comparable
in magnitude to those of Japan and Czechoslovakia, include at least
20 billion tons of high-quality anthracite coal and considerably smaller
amounts (about 19 million tons) of bituminous coal and lignite. These
reserves constitute a resource of unsurpassed importance in view of the
great deficiency of petroleum resources and the serious depletion of
fuelwood resources. Deposits of oil shale -- estimated to be about
15 million tons -- have recently been reported at Dong Ho: but there
are no known resources of crude oil or natural gas. The lack of natural
crude oil is the one conspicuous weakness in the resource pattern of
North Vietnam.
Favored in terms of agricultural resources, South Vietnam
is almost completely lacking in mineral wealth. The most important of
known mineral resources -- the anthracite deposits at Nong Son -- are
decidedly inferior to those of North Vietnam; workable reserves are
estimated to be about 500,000 tons. Other known minerals include salt,
lignite, gold, and copper. As in North Vietnam, deposits of limestone,
clay, and white sand of varying quality also exist in various parts of
the country. South Vietnam's deficiency in mineral fuels has not been
offset by the development of its resources for hydroelectric power --
essentially all of its power is thermal power, using imported fuels.
The development of unused hydroelectric resources is considered to be
essential to future industrial development in South Vietnam as in
North Vietnam.
* Tonnages are given in metric tons throughout this report.
** The DRV's hydroelectric power potential is estimated to be nearly
14 million kilowatts (kw).
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B. Industrial Assets
Industry in prewar Vietnam was small* and consisted primarily
of the small-scale native craft industries that supplied the essential
requirements of food, clothing, and shelter. Modern manufacturing in-
dustry, almost exclusively the creation of French private enterprise,
was developed as an adjunct to the export of agricultural and mineral
products; major facilities included rice mills, sawmills, sugar re-
fineries, a zinc smelter, tobacco factories, and distilleries and
breweries. The two major industries developed apart from raw material
exports were the cement industry at Haiphong and the textile industry
at Haiphong and Nam Dinh. These industrial installations together with
a useful railroad system; the port installations of Saigon, Haiphong,
and Hong Gay; a few electric powerplants; and a number of mining enter-
prises constituted the industrial structure inherited 7- in extremely
poor repair -- by North and South Vietnam in 1955.
More than 70 percent of production of modern industry in pre-
war Vietnam had originated in the northern half of the country, and
about 90 percent of the labor force in modern industry had been em-
ployed in the mining and manufacturing enterprises of North Vietnam.
Except for electric power, all heavy industry -- consisting, of mining
and metal-processing and the cement industry -- was located north of
the 17th parallel. The DRV, therefore, fell heir to all the developed
mineral resources, most of the established manufacturing industries,
and more than half of the installed electric power capacity** of un- ,
divided Vietnam. South Vietnam's inheritance of industrial assets was
limited to light industrial facilities in the tobacco, alcohol, soft
drink, match, sugar, and rice-milling industries. North 'Vietnam's
relatively more favorable inheritance in industrial assets, however,
was somewhat balanced by the comparatively greater damage suffered by
industry in the north during the French-Indochinese War.
C. Human Resources
1. Population
At the time of the Geneva agreements in 1954 the popula-
tion of North Vietnam was 1.3 times that of South Vietnam, and since
then its natural rate of increase has been about 2.5 'percent a year
* The proportion of the population engaged in handicraft industry,
mining, and manufacturing was extremely small, perhaps no more than
5 percent.
** At the time of the Geneva agreements in 1954 the installed capac-
ity of powerplants in North' Vietnam was about 55,000 kw compared with
an installed capacity in South Vietnam of about' 117,000 kw.
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(see the accompanying chart, Figure 2). The population density as of
mid-1960 averaged about 100 persons per Square kilometer compared with
15.1
11.6
14.7
12.4
14.5
MILLION PERSONS
13.0
14.9
13.3
15.3
13.5
15.6
138
16.0
14.1
1954
35580 11-61
1955 1956
1957
1958
North Vietnam El. South Vietnam
1959 1960
Figure 2. North and South Vietnam: Estimated Population, 1954-60 (Midyear)
about 80 persons per square kilometer in South Vietnam. A country of
about 12 million inhabitants in 1954, South Vietnam absorbed within
less than 2 years (1955-56) and under the most unfavorable-circumstances
a group of about 900,000 refugees from the north. The sudden increase
in population was a tremendous economic and financial burden, intensify-
ing the problem of unemployment already existing in urban and rural
areas and delaying postwar reconstruction and development. In spite of
the rapid growth in population since 1954, South Vietnam does not suf-
fer the extreme pressure of population on agricultural resources that-
characterizes North Vietnam as well as many other parts of Asia.. The
pressure of population on land is, in fact, still among the lowest for
the countries of Southeast Asia.
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2. Labor Force
In North and South Vietnam, as in most other Asian coun-
tries, there is a chronically inadequate employment of the abundant
manpower resources. In normal times this condition takes the form of
underemployment and low productivity of labor rather than outright
unemployment. The composition of the labor force in both countries
remains predominantly agricultural -- in North Vietnam approximately
75 percent and in South Vietnam more than 80 percent of the labor force
are engaged in agriculture. The low level of industrialization is re-
flected in the fact that only about 125,000 persons are employed in
factory industry in North Vietnam -- handicraft workers still account
for more than 80 percent of the total industrial labor force of 645,000.
The industrial labor force of South Vietnam -- less than 5 percent of
the total labor force -- is composed primarily of handicraft workers.
3. Technology
North and South Vietnam both have been faced with a critical
shortage of competent technical, administrative, and managerial per-
sonnel. At the beginning of the Three Year Plan (1958-60) in North
Vietnam, only about 5 percent of industrial workers were listed as
skilled workers and another 20 percent as semiskilled workers. The
DRV announced that, in proportion to its population, North Vietnam had
only about one-fiftieth as many skilled workers and one-twentieth as
many semiskilled workers as the USSR had in 1913 and only about one-
tenth as many semiskilled workers as Communist China had in 1949. In
the higher skills, such as engineering and advanced technology, North
and South Vietnam are particularly lacking. There was, for example, in
North Vietnam in 1958 only one engineer for every 1,400 workers in
industry. The acute shortage of skilled industrial labor has been a
major obstacle to economic development in both countries.
Of the administrative, managerial, and technical positions
in municipalities, utilities, industries, and transportation services
operated under the French, about 15,000 key positions in North Vietnam
were held by Frenchmen and about the same number of important subordi-
nate positions by Vietnamese. The departure in 1955 of the French tech-
nical experts and supervisors and their trained Vietnamese staffs* left
the DRV with the problem of filling about 25,000 important positions in
government, industry, and transportation. Lacking the trained personnel
for these more highly specialized positions, North Vietnam has been de-
pendent on technical assistance from other Sino-Soviet Bloc countries.
The influx of several thousand technicians from Communist China and the
* An unknown number (probably more than half) of the trained Vietnamese
personnel in important operational jobs left with the evacuees.
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USSR -- essentially a stopgap remedy -- has been the major feature of
the Bloc technical assistance program; which has included the supply-
ing of technical data, advice in planning, and the training of Vietnamese
abroad.* The North Vietnamese also have been devoting substantial ef-
forts of their own to the training of technicians and skilled workers.
Reflecting the trend in other Bloc countries, there has been a consider-
able emphasis in the educational system on practical, scientific, and
technical education, with an increasing tendency to combine formal
education with practical experience in factories, cooperatives, and
other enterprises. In spite of the increased efforts of the regime to
close the gap between requirements and supply of skilled manpower,
limitations in training facilities still preclude the training of
adequate numbers of engineers, technicians, foremen, and other super-
visory personnel. Until such time as trained manpower becomes avail-
able, the DRV will remain highly dependent on technical assistance from
abroad.
Technical assistance extended to South Vietnam since 1955
has amounted to approximately $24 million,** or roughly 2 percent of the
total US economic assistance to South Vietnam. These funds have been
provided for the training of government.administrators and statisti-
cians, nurses, and teachers; the improvement of agricultural techniques;
and the financing of economic surveys. Each of these training programs
in South Vietnam has been supplemented by an extensive overseas train-
ing program under which Vietnamese students, civil servants, and other
officials have been sent abroad for observation tours, on-the-job train-
ing, and specialized academic training. As of June 1960, approximately
1,100 Vietnamese participants had received overseas training -- mainly
in education, agriculture, public health, and public administration.
II. Economic Planning and Policy
In North Vietnam, as in all Communist societies, the government
has assumed control over the allocation of all productive resources
and exercises this control through a central economic plan. South
Vietnam, like many other underdeveloped economies, also has subscribed
to the need for central planning in the allocation of resources. But
whereas the Communist regime in North Vietnam quickly established
effective political and military control over the country and insti-
tuted central planning and direction of the economy, South Vietnam --
operating under less authoritarian conditions and preoccupied with the
threat to internal security posed by DRV subversion and guerrilla
* In 1960, approximately 1,000 North Vietnamese students were reported
to be studying abroad.
** Except when otherwise indicated, dollar values in this report are
given in current US dollars.
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warfare and the external military threat posed by the numerically supe-
rior North Vietnamese army -- has been unable to devote a large share
of its resources and attention to long-range economic development.
A. Economic Administration and Control
The USSR first pioneered the development of central planning
and direction of a socialist economy. Communist China borrowed heavily
from Soviet administrative organization and techniques of planning,
and North Vietnam in turn has adopted the Chinese economic administra-
tive structure. All important economic decisions are framed by the
Politburo of the Party Central Committee, which is made up of the dozen
or so most powerful leaders of the Dang Lao Dong (Communist Party).
Within the context of economic policies prescribed by the Party, the
State Planning Committee (attached to the Council of Ministers) draws
up the annual and long-range plans that govern the operation of the
economy. The formal execution of the national economic plan is the,
primary responsibility of the administrative hierarchy of the govern-
ment, but a Party structure paralleling and often interlocking with
that of the government provides the top leadership of the Party with
an effective means of overseeing the execution of plans at all levels
of operation. Detailed targets for the main sectors of the economy,
including the level of production for major commodities and the
amount and types of capital construction, are sent down through the
economic control structure to individual operating units. At regular
intervals, these individual producing units report to supervising
authorities (a central economic ministry or local government) on the
degree of plan fulfillment. On the basis of these periodic progress
reports, top-level administrators may order adjustments in the alloca-
tion of labor and materials to insure fulfillment of announced plan
goals, or they may revise plan targets in keeping with changed economic
conditions.
There is as yet no rigidly defined economic administrative
structure in South Vietnam. The National Economic Council, appointed
by President Ngo Dinh Diem and chaired by Vice President Ngyun Ngoc Tho,
is constitutionally responsible for the development and coordination
of national economic policy, under the President's supervision. A
staff department, the General Directorate of Planning, also has been
organized for the actual preparation of national economic plans. In
practice, however, all important and many minor economic decisions
are referred directly to President Diem.
B. Economic Policy
The actual extent of national planning has varied greatly be-
tween North and South Vietnam. The DRV, like other centrally planned
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economies, has attempted to implement plans affecting the entire econ-
omy. In South Vietnam, on the other hand, national economic plans have
dealt mainly with major programs to be implemented in the public sector.
1. North Vietnam
The Communist regime in North Vietnam has'adopted an eco-
nomic program that has the following major features: (a) in industry,
a program designed to restore prewar industrial facilities, to expand
consumer goods industries, and to build up those branches of heavy
industry -- such as iron and steel, electric power, simple machinery,
and basic chemicals -- that are fundamental to any industrial develop-
ment program; (b) in agriculture, a program designed to expand produc-
tion rapidly and transform North Vietnam from a food-deficit to a food-
surplus area; (c) in foreign economic relations, a program for absorb-
ing material and technical helP from other members of the Bloc and for
expanding exports to match the level of imports; and (d) in economic
administration, a program to force the whole economy into the typical
Communist mold of detailed state control over every facet of economic
life.
Economic policy in North Vietnam in 1955-57 was essentially
a program of reconstruction after long years of international and civil
war. The chief efforts of the regime were devoted to the rehabilitation
of basic transportation and communications facilities and the restora-
tion of prewar levels of production. Comprehensive government control
was established over banking, modern industry, foreign trade, and
domestic wholesale trade; the government moved slowly, however, in the
socialization of agriculture, subordinating the goal of collectiviza-
tion to that of increased production. The major goals of the Three
Year Plan (1958-60) were as follows: (a) large increases in agricul-
tural and industrial production, aiming, in the first instance, to pro-
vide an adequate food supply and greater export surpluses and, in the
second, to lay the foundations for an industrialized state; (b) "basic
completion" of socialization, which was represented as the inclusion of
at least 75 percent of peasant households in low-level cooperatives,
100 percent of nonhandicraft workers in state or joint state-private
establishments, and 75 percent of handicraft workers in low-level pro-
ducer cooperatives; (c) limited improvement in the material standards
of living; and (d) the strengthening of national defense. Second only
to the task of building up production in heavy industry under the new
First Five Year Plan (1961-65) is that of consolidating state control
over agriculture, handicrafts, and retail trade.
The DRV has adjusted, when necessary, Communist principles
of economic development to the realities of existing conditions in
North Vietnam. Recognizing the limitations in economic resources, DRV
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leaders have spoken of the potential of the economy in terms of self-
sufficiency in food, the development of a limited range of industries,
and economic integration with the rest of the Bloc, but they have not
proclaimed the more ambitious goal of the USSR and Communist China of
economic self-sufficiency. In contrast to the USSR and China, North
Vietnam has from the beginning given full attention to the development
of agriculture. Agricultural policies have aimed at the fuller employ-
ment of North Vietnam's abundant labor force through the adoption of
labor-intensive methods of increasing crop yields. The relatively
greater emphasis on light industry has been an accommodation to limita-
tions in capital plant and to the shortage of technical and managerial
skills rather than an ideological deviation from the traditional Com-
munist policy of a rapid expansion of heavy industry. Finally, in
contrast to Soviet and Chinese emphasis on the construction of large-
scale industrial facilities, the DRV has relied an the operation of
small-scale industrial facilities, which employ available labor in
quantity and afford the greater use of traditional production processes.
Although similarities in the population-resource base of
Communist China and North Vietnam -- notably the enormous population
relative to the amount of arable land -- have invited similar approaches
to economic development, North Vietnam has been proceeding along the
path of socialist development at a slow pace compared with China. DRV
policies have fallen short of Peking's bold measures in breadth and
vigor. In converting the bulk of private agriculture to the socialist
system, for example, the DRV has followed the Chinese example of staged
economic transformation, beginning with land reform and progressing
through the formation of manpower-exchange teams to low-level agricul-
tural producer cooperatives and finally to high-level cooperatives on
the order of the Soviet collective farm. Socialization of agriculture
in North Vietnam, however, has proceeded at a much slower pace than in
China.* The regime has been compelled to move cautiously for fear of
provoking active peasant opposition.
* At the end of 1960, roughly 85 percent of peasant households and
about 75 percent of all cultivated land in North Vietnam were organized
in cooperatives, but only about 10 percent of the 40,000 cooperatives
had reached the "higher level" at which the means of production are
owned in common. Organized on a township level, cooperatives were re-
ported to average about 60 families (less than 10 percent had 100 to
200 families, only about 1 percent had 200 to 300 families, and a few
dozen had about 1,000 families). The goal for agricultural socializa-
tion in 1965 closely resembles the organization of agriculture achieved
in Communist China in 1957 -- high-level cooperatives organized on a
village level, each composed of about 200 peasant families.
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2. South Vietnam
Since World War II and the French-Indochinese War the
government of South Vietnqm has assumed increasing responsibility for
the allocation of national resources. With its control over the na-
tional budget and its regulation of foreign trade, it has influenced
greatly the level of consumption, investment, and military expenditures.
But in contrast to North Vietnam -- where state ownership of the means
of production is prescribed on ideological grounds -- centralized allo-
cation of resources in South Vietnam has not implied direct participation
by the state in economic production. The government has left agriculture,
handicrafts, and small-scale industry exclusively in private hands, and
even in large-scale industry it has stepped in less on grounds of doc-
trine than of necessity when it has considered that private initiative
has lagged.
The GVN has tried to adjust South Vietnam's economy as
rapidly as possible to the loss of prepartition sources of supply. In
industry the policy of the government has been to encourage production
of commodities historically produced in the North -- in particular,
textiles, cement, and paper. The government also has undertaken the
development of a number of hitherto unexploited natural resources,
such as the Non Son coal deposits and the water power of the highlands.
The development of private industry has stressed those light manufac-
turing industries that serve the internal market and that therefore are
assured of adequate demand. New enterprises for production of textiles,
glassware, plastics, rubber goods, and pharmaceuticals have been added
to the traditional industries of rice milling, sugar refining, beer and
soft drink manufacture, and match and cigarette making.
The 5-year development plan (1957-61) also has emphasized
the expansion and diversification of agricultural production so as to
insure a more abundant and better-balanced food supply, an adequate
supply of raw materials for local industry, and a greater variety of
export commodities. A major part of the program in agriculture has
been land reform -- a long-recognized need in South Vietnam, where
large landholdings were the general rule before World War II. As of
June 1960, more than 4310,000 hectares of riceland had been redistributed
to more than 100,000 persons.* Whereas socialization of agriculture in
North Vietnam has proved to be a difficult and uncertain task, forced
on a reluctant and individualistic peasantry, agrarian reform in South
Vietnam has met with substantial success. No information available to
date indicates widespread evasion by landlords or administrative
* In North Vietnam, more than 800,000 hectares -- or roughly twice the
amount of land redistributed to date in South Vietnam -- reportedly was
distributed in 1955-57 to more than 1 million persons.
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corruption, and prices set for the land on the whole appear to be fair
and within the ability of new owners to pay without hardship.
III. Domestic Production
Both North and South Vietnam by now have made substantial economic
recovery from the French-Indochinese War. Because of heavier war damage
in the north, however, a larger proportion of economic growth in North
Vietnam than in South Vietnam represents recovery from the postwar low
of 1954-55 and a smaller proportion represents growth above pre-World
War II levels of production.
A. Gross National Product*
Since 1956, economic activity has been expanding at roughly the
same pace in both North and South Vietnam. In 1960 the GNP of both
countries was about one-third higher than in 1956. The comparatively
faster recovery of industry in the North resulted in relatively higher
rates of growth in GNP in North Vietnam in 1956-59, but the serious de-
cline in production of agriculture in North Vietnam in 1960 -- although
somewhat compensated for by a large increase in production of industry --
resulted in an absolute decline in GNP in 1960 compared with 1959, as
shown in the following tabulation:
Index
(1956 =
100)
1956
1957
1958
1959
1960
GNP
North Vietnam
100
110
119
138
135
South Vietnam
100
102
118
128
135
Per capita GNP
North Vietnam
100
107
113
128
122
South Vietnam
100
100
114
121
124
Average Annual
Increase
(Percent)
8
8
In contrast, the GNP of South Vietnam increased by approximately 5 per-
cent in. 1960 as a result of an increase in agricultural production of
about 3 percent and an increase in industrial production of about
28 percent. On a per capita basis, GNP in both North and South Viet-
nam in 1960 was about one-fourth higher than in 1956.
* For the methodology, see Appendix B.
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In absolute amounts the GNP of North Vietnam in 1960 was
roughly three-fourths that of South Vietnam or $1.1 billion com-
pared with $1.5 billion in South Vietnam.* The per capita GNP of
North Vietnam, about $70, was about two-thirds that of South Vietnam,
Which was about $110 (see the accompanying chart, Figure 3).
GROSS NATIONAL PRODUCT
(Million Constant US Dollars)
1140
820
1350
975
1540
1110
35581 11-61
1956 1958
PER CAPITA GROSS NATIONAL
PRODUCT
(Constant US Dollars)
90
100
65
55
110
1960 1956 1958 1960
r---1 North Vietnam
n South Vietnam
Figure 3. North and South Vietnam: Growth of GNP end Per Capita GNP, 1956, 1958, and 1960
B. Industry
1. General
Industrial production in both North and South Vietnam has
registered large percentage gains since 1956, when production was
severely curtailed as an aftermath of war (see the chart, Figure )4-**).
In North Vietnam, production of industry in 1960 was about two and
* For an explanation of the rates used in converting dong and piasters
into dollars, see the methodology, Appendix B.
** Following p. 16.
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NORTH AND SOUTH VIETNAM
Index of Gross Industrial Production, 1956, 1958, and 1960
Figure 4
TOTAL INDUSTRY
100 100
162
142
250
213
1956 1958 1960
35582 11-61
HEAVY INDUSTRY
143
114
100 100
280 LIGHT INDUSTRY
139
1956 1958 1960
169
149
100 100
238
1231
North Vietnam r7 South Vietnam
1956 1958 1960
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one-half times that in 1956, representing an average annual increase
of about 26 percent, and in South Vietnam the total industrial pro-
duction was more than twice that of 1956, representing an average
annual increase of about 21 percent (see Tables 2 and 3*). These in-
creases in production of industry, although very large in percentage
terms, represent for the most part a recovery to prewar levels of out-
put.** In spite of more than a doubling in production, industry in
both countries in absolute terms still remains small -- in North Viet-
nam it accounts for only about 16 percent and in South Vietnam for only
about 8 percent of gross domestic production. In total value, industrial
production in North Vietnam in 1960 was about 1.3 to 1.5 times that in
South Vietnam.
Industrial production in both North and South Vietnam still
consists largely of handicraft production. Only since 1959 has the
modern sector of industry in North Vietnam surpassed handicrafts in
over-all productionl*** and in South Vietnam the great bulk of indus-
trial production is still confined to native handicraft workshops. In-
creases in production of modern industry in North Vietnam have reflected,
in large measure, the restoration of existing large plants, although
during 1958-60 the construction of new capacity in the electric power,
machine building, cement, food-processing, and textile industries has
resulted in relatively large percentage increases in output.t Since
1956, production of modern industry has increased at an average annual
rate of about 34 percent and production of handicraft industry at an
average annual rate of about 18 percent. In South Vietnam, increases
in output of the food-processing industry -- which accounts for roughly
two-thirds of the total value Of industrytt -- have been primarily in-
creases in handicraft production resulting from an increase in the
supply of raw materials. The restoration of modern prewar facilities
and the construction of new capacity in the electric power, chemical,
textile, and glassware industries have resulted in an increase in modern
industry of about 12 percent a year.
* Appendix A, pp. 47 and 48, respectively, below.
** In the important case of coal, for example, production in North
Vietnam in 1960 had just barely regained the peak prewar production of
about 2.6 million tons.
*** Whereas handicraft production in 1956 accounted for approximately
59 percent of North Vietnam's total industrial production, in 1958 it
accounted for about 52 percent and in 1960 for about 46 percent.
t At low absolute levels of output, production of a single new
plant, such as the Hanoi machine tool plant, can result in a doubling
or tripling of output in an industry.
ft All percentage breakdowns of the total value of industrial pro-
duction are in terms of gross value of production.
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2. Heavy Industry
The growth of heavy industrial production in North Vietnam
has been more than three times as fast as that in South Vietnam -- at
an average annual rate of increase of about 29 percent compared with
about 9 percent in South Vietnam. The rapid recovery of heavy indus-
try in the north has reflected (a) the DRV's relatively favorable re-
source base for heavy industry; (b) its inheritance of all of the heavy
industrial assets, except for electric power, in undivided Vietnam;
(c) the priority of heavy industry in the allocation of state invest-
ment; and (d) the large proportion of aid imports that have consisted
of machinery and equipment and industrial materials. During 1956-60
the value of production in heavy industry in North Vietnam increased
from about 29 percent of the total value of industrial production to
about 32 percent. Heavy manufacturing and mining now contribute about
equally to the economy, each accounting for roughly one-sixth of the
total value of industrial production. In South Vietnam, on the other
hand, mining is negligible, and heavy manufacturing is limited to
handicraft production of simple machinery for agriculture and construc-
tion, a few small shipbuilding and repair facilities, and several small
enterprises producing industrial chemicals and rubber goods.
Increases in production of heavy industry have been due in
large measure to the increase in Production of electric power in both
countries. As a result of increased demand and added capacity,* pro-
duction of electric power in North Vietnam has almost tripled since
1956, but, even so, it is less than three-fourths of production of
power in South Vietnam.** Among the countries of Southeast Asia, North
Vietnam exceeds only Burma, Cambodia, and Laos in production of elec-
tric power per capita. The most important single indication of the place
of modern industry in the economy is, however, production of electric
power for industrial purposes. Whereas industrial use of electricity
in North Vietnam now accounts for about 80 percent of the total power
consumption, in South Vietnam the percentage of power consumed by in-
dustry is less than one-half of the total consumption. In 1960 the
amount of electricity used by North Vietnamese industry was approximately
* With technical and material assistance from the USSR and other
Sino-Soviet Bloc countries, the North Vietnamese regime has added
roughly 55,000 kw to capacity since 1955 -- by the end of 1960 the
total installed capacity is estimated to have been about 110,000 kw.
All of the new plants constructed since 1955 have been thermal instal-
lations -- hydroelectric facilities account for not more than 3 per-
cent of North Vietnam's. total installed capacity. In the future,
however, development of the country's hydroelectric potential is to
receive greater emphasis.
** For production statistics on electric power and other industrial
products, see Table 4, Appendix A, p. 49, belaw.
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179 million kilowatt-hours (kwh) compared with about 140 million kwh
in South Vietnam.
Although insignificant in terms of the over-all output of
the Bloc,* production of minerals and metals in North Vietnam is im-
portant in terms of the total production by industry and the total
value of exports. In 1960 the gross value of mining constituted ap-
proximately 15 percent of the total value of industry, and exports of
minerals and metals -- consisting of the total production of chromite
and tin and a substantial part of production of coal, iron ore, apatite,
and cement -- accounted for roughly one-third of the total value of
exports. In South Vietnam, on the other hand, mining is limited almost
entirely to the coal and salt industries, and production in both in-
dustries is negligible by world standards. South Vietnam, therefore,
imports all its domestic requirements for minerals and metals except
salt.
As in prewar days, the most important heavy industry in
North Vietnam is the mining of anthracite coal, although production
surpasses that of only Albania and Mongolia in the Bloc. In 1960 the
value of coal output constituted more than 80 percent of the total
value of mining. Not only is coal the major source of energy in North
Vietnam, but it also is the DRV's most important export commodity.
Roughly 50 percent of current production is exported to Communist
China, Japan, and Eastern Europe, making North Vietnam second only to
China in the export of coal in Asia. In 1960 the value of coal ex-
ports accounted for more than two-thirds of the total value of North
Vietnamese exports of minerals and metals. Production of coal in
South Vietnam is only about 1 percent of that in North Vietnam. The
only coal-mining area -- the Nong Son coal mine -- is currently being
developed to an annual production of 150,000 tons, about 6 percent of
the total output in North Vietnam in 1960.
The predominant mineral in North Vietnam, aside from anthra-
cite coal, is iron ore. By 1960 the annual output is estimated to have
reached 135,000 tons, the peak prewar (1939) production. Most of the
iron ore produced since 1955 has been exported, principally to the
European Satellite countries, but since 1959 a small but increasing
amount of iron ore has been consumed domestically in small blast fur-
naces. Although iron smelting on a very small scale has been practiced
historically in North Vietnam (in primitive native furnaces fired with
charcoal), the country has never had a modern plant for production of
iron and steel. In an effort to correct this major deficiency, the DRV
* Production of only two minerals, phosphate rock and chromite, ex-
ceeds 1 percent of the total output of the Bloc.
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began in 1959 the construction of its first iron and steel plant at
Thai Nguyen.* If planned construction of new capacity is successfully
carried out, domestic production after 1965 should be adequate to sup-
ply most of the country's planned requirements for iron and steel.
The principal contribution of North Vietnam to the Bloc in the field
of alloying materials is proaaction of chromite concentrates, all of
which are exported to Communist China and North Korea. Planned pro-
duction In 1960 of 20/000 tons represented roughly 2 percent of the
total Bloc output. In South Vietnam, on the other hand, there is cur-
rently no production -- and only a very limited potential for produc-
tion -- of any of the ferrous ores and metals. The GVN, therefore,
is expected to continue to meet its domestic requirements by imports
of iron and steel products.
Aside from coal, only three of the various nonferrous
minerals and metals -- phosphate rock, salt, and tin -- are produced
in North Vietnam in quantities of significance to the domestic economy.
Of the three, only phosphate rock is significant in terms of over-all
Bloc output -- in 1960, production of apatite and phosphorite consti-
tuted roughly 8 percent of the total output of the Bloc. Production of
apatite may well be an area in which the DRV will make a contribution
of importance to the economies of the Bloc. Current plans indicate
that North Vietnam will supply significant quantities of phosphate
rock to Communist China and Rumania during 1961-65, and, with expanded
output, exports to other countries can be anticipated.
Whereas North Vietnam is one of the largest producers and
exporters of cement in Southeast Asia, South Vietnam is completely de-
pendent on imports. Since 1955, domestic production has been more than
adequate for North Vietnam's limited construction program, and it is
estimated that as much as 50 percent of the total production has been
exported to Communist China, Cambodia, Burma, Indonesia, and Hong Kong.
In 1960, exports of cement were valued at more than $4 million. In
contrast, South Vietnam has imported, on the average, about 300,000 tons
of cement a year since 1955. Plans for the construction of the GVN's
first cement plant have just recently been announced.
In both North and South Vietnam the machine building and
chemical industries are underdeveloped in relation to mining, agricul-
tural processing, and other light industry, although the relatively
more favorable industrial resource base of North Vietnam has supported
a comparatively greater expansion of these industries than in South
Vietnam. Production of the machine building industry in North Vietnam
comes primarily from a single plant -- the Hanoi machine tool plant,
which was financed and equipped almost entirely by the USSR. Completed
* The Thai Nguyen iron and steel plant, with an initial annual capac-
ity of 150,000 tons of pig iron and 100,000 tons of crude steel, is
being constructed with imported equipment and technical assistance from
Communist China.
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in April 1958, it is now reported to be producing a narrow range of
light metalcutting machine tools and other machinery, including mechan-
ical irrigation pumps, simple reaping and sowing machines, threshing
machines, concrete mixers, small-size electric motors, and conveyors.
Production of transportation equipment is insignificant*; all locomo-
tives, heavy rolling stock, and vehicles must be imported. Munitions
and military equipment also are almost entirely imported. The chemical
industry, consisting of a few small enterprises producing industrial
alcohol, acetylene gases, oxygen, pharmaceuticals, and rubber goods,
is still a weak and lagging sector of the economy. Nearly all domestic
requirements for chemical fertilizers) insecticides, and industrial
chemicals must be imported. Construction of new capacity in the chem-
ical industry, however, is laying the groundwork for future rapid in-
creases in production.**
South Vietnam's modern machine building industry consists
only of a few small shipbuilding and repair facilities, and its chemical
industry consists solely of a few small enterprises producing industrial
chemicals, pharmaceuticals, and rubber goods. US aid to South Vietnam
during the past 5 years has provided for the expansion or new construc-
tion of two rubber goods plants, four pharmaceutical plants, an indus-
trial chemical plant, and three synthetic resin and fiber plants.
3. Light Industry
Production of light industry in both North and South Vietnam
increased at roughly the same pace during 1956-60. Large percentage
increases in production of textiles and processed foods resulted in
an over-all increase in light industry of about 24 percent a year in
North Vietnam and about 23 percent a year in South Vietnam.
As in prewar days, the food-processing industry (including
both handicraft and factory industry) is the single most important
* Only a few railroad repair shops engage in limited production of
light railroad freight cars. The shipbuilding industry consists mainly
of the assembly of prefabricated components received from the Bloc --
production in 1960 was limited to a small number of naval patrol boats,
tugboats, barges, and wooden fishing boats. A few large automobile
garages engage in limited production of automotive spare parts, but
North Vietnam has no capacity for production of complete motor vehicles
or major motor-vehicle components and has no aircraft industry.
** With the assistance of Communist China and the USSR, construction
began during 1958-60 on plants for production of phosphorus and nitroge-
nous fertilizers, insecticides, sulfuric and hydrochloric acids, cal-
cium carbide, caustic soda, chlorine, automobile tires, synthetic resins
and fibers (nylon), and pharmaceuticals. Only the pharmaceutical plant
at Hanoi had begun production by the end of 1960; construction of the
other plants has been typically behind schedule.
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industry in both North and South Vietnam. In 1960 it contributed
almost one-third of the total value of industry in North Vietnam and
roughly two-thirds of the total value of industry in South Vietnam. -
Increases in output in South Vietnam have been primarily those in
handicraft Production resulting from an increase in the Supply of
raw materials, whereas increases in output in North Vietnam have
resulted primarily from added capacity in modern factories, although
also from an increase in the supply of agricultural products. During
the past 5 years the DRV has invested relatively large amounts of state
funds in the construction of 14 new rice mills, a tea factory, a fish
cannery, 4 sugar _refineries, and 2 cigarette factories. The rapid
growth of the industry has been characterized, however, by imbalances
and lack of planning and coordination. Because the regime was anxious
to accept offers of factories and equipment from other countries of
the Bloc,* standardization of equipment and factory operations has
been neglected. In particular, the development of the tea-processing
and fish-canning industries has not readily corresponded to the needs
of the economy, the supply of raw materials, or the level of native
technology.
Whereas domestic production of consumer goods in North
Vietnam has now displaced imports as the major supplier of the simple
everyday items of current consumption, in South Vietnam imports of
manufactured consumer goods still are more important in total consump-
tion than domestically produced items. The US commercial aid program
to South Vietnam has supported large annual imports of consumer goods,
which have tended to inhibit the development of local industries. In
both North and South Vietnam, production of light industrial goods --
largely confined to production of textiles and other articles of daily
use -- is still small in per capita terms.
Production of cotton cloth, the most important product of
light industry, in North Vietnam in 1960 was roughly 2.5 times that in
South Vietnam -- the per capita production of 5.4 meters** (m) was
roughly twice that in South Vietnam. XXX The DRV's relative advantage
All of the new agricultural processing plants in North Vietnam are
aid projects. The 14 rice mills, the 2 cigarette factories, and 3 of
the 4 sugar refineries were constructed by Chinese Communist aid, and
the tea factory and the fish cannery were built with Soviet equipment
and technical assistance. Poland supplied the technical assistance for
the fourth sugar refinery at Ha Dong.
** Meters are given in linear meters throughout this report.
XXX Per capita production of cotton cloth in North Vietnam in 1960
was less than one-third of per capita production (16.6 m) in North
Korea and only about three-fifths of per capita production (9.4 m) in
Communist China.
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in production of cotton cloth stems largely from its inheritance of the
cotton textile industry at Nam Dinh, the largest manufacturing industry
in prewar Vietnam. With Chinese Communist assistance the Nam Dinh
textile mill has been expanded and equipped with modern machinery, and
in 1960 the mill was reported to have 106,000 spindles and 2,000 looms
compared with 54,000 spindles and 1,300 looms in 1939. The construction
of several new textile mills* in South Vietnam in 1958-60 resulted in
almost tripling output of cotton cloth since 1956, but production is still
far from adequate for domestic requirements. Annual imports of cotton
cloth have averaged approximately 60 million m during the past 5 years,
and textiles in 1960 remained the number one import of South Vietnam by
value. In North Vietnam, also, textile imports are still necessary to
meet even a very low level of consumption.
A major postwar development in light industry in South
Vietnam has been the rapid growth of the rayon textile industry, using
imported yarns. Per capita production of rayon cloth in 1960 was more
than twice per capita production of cotton cloth. In contrast, North
Vietnam currently produces no rayon yarn or cloth.
C. Agriculture
1. General
The economies of both North and South Vietnam are based
primarily on agriculture, which furnishes the bulk of the food con-
sumed, supplies most of the raw materials for light industry, and pro-
vides the major exports of the two countries. In North Vietnam, agri-
culture constitutes the principal occupation of 85 percent of the
population and contributes almost half of the GNP. In South Vietnam
the predominance of agriculture is even greater -- more than 90 percent
of the population earns its living from agriculture, which contributes
roughly three-fifths of the GNP.
As in Communist China, agriculture in North Vietnam has
been the lagging sector of the economy. Since 1956 the total value of
agricultural production has increased at an average annual rate of
about 5 percent, but annual increases have been quite irregular. More-
over, most of the increase in production has been in livestock produc-
tion and in secondary occupations** of the peasants (see Table 5***).
* For example, two important US aid projects, the Vietnam Textile
Company plant in Saigon (equipped with 20,000 spindles and )400 auto-
matic looms) and the Vietnam American textile mill in Thu-Duc (equipped
with 17,200 spindles and 300 automatic looms) began production in 1960.
** Secondary occupations include fishing, forestry, hunting, elementary
processing of basic food crops and slaughtering for farm home consumption,
and handicraft production for home use.
*** Appendix A, p. 51, below.
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Increases in production of food crops* have lagged behind the increase
in population, and in 1960, moreover, per capita production of food de-
clined well below the established per capita requirements of the North
Vietnamese population, as follows:
1956 =
100
1956
1957
1958
1959
1960
Index of agricultural
production
100
103
119
129
121
Index of food crops
100
92
105
121
99
Index of per capita production
of food crops
100
89
100
112
90
Traditionally a food-deficit area that relied on the south to balance
its food needs, North Vietnam is now self-sufficient in food -- but
only at the sacrifice of prewar levels of consumption. Tight state
controls over the distribution and consumption of grains, rather than
production increases, have brought about a minimal self-sufficiency
for the area.
Postwar recovery of agriculture has been rapid in South
Vietnam. Since 1956, both agricultural production and the total pro-
duction of food have increased at an average annual rate of about
7 percent (see Table 6**). Whereas per capita production of food in
North Vietnam in 1960 was about 10 percent below that in 1956, in
South Vietnam it was more than 20 percent above the level of 1956.
Indexes for the agricultural sector of South Vietnam are as follows:
1956 =
100
1956
1957
1958
1959
1960
Index of agricultural
production
100
102
118
128
132
Index of food crops
100
94
117
129
132
Index of per capita production
of food crops
100
92
113
122
122
The North Vietnamese government in its agricultural statistics in-
cludes five crops under the category "food crops": rice, corn, sweet
potatoes, manioc, and beans. In this report, data for South Vietnam
have been arranged to conform to this usage.
** Appendix A, p. 52, below.
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However, although production of food in South Vietnam is now substan-
tially greater than in prewar days, exports of milled rice (more than
1 million tons a year before World War II) still amount to only about
one-third of prewar exports of rice, largely because of increased
domestic consumption, a lack of export markets, and Viet Cong* inter-
ference with the rice export program. On the other hand, Production
of rubber -- mostly for export -- now exceeds prewar output by more
than 40 percent.
2. Food Crops
In both North and South Vietnam, rice is the principal
crop and staple of diet. Roughly 90 percent of the total sown acre-
age in both countries is planted to rice. Although rice yields have
fluctuated during the past several years -- in large measure a reflec-
tion of the close dependence of agriculture on weather conditions --
they have averaged approximately the same in both countries.** Pri-
marily the result of an increase in acreage, production of rice in
South Vietnam has increased from about 3.4 million tons in 1955 to
about 5.4 million tons in 1960. In North Vietnam, production of rice
has roughly kept pace with that in South Vietnam except for 1960, when
the poor rice harvest in North Vietnam was less than 80 percent of the
South Vietnamese rice crop (for production statistics on rice and other
agricultural products, see Table 7xxx). Per capita production of rice
in North Vietnam, however, has been consistently below that of South
Vietnam. Whereas in 1956-57 it was about 90 percent of per capita pro-
duction in South Vietnam, in 1958-59 it was about 85 percent and in
1960 only about 68 percent of per capita production in the south as
shown in the following tabulation:
Per Capita Production
(Kilograms)
1956
1957 1958
1959
1960
North Vietnam
Production
285
265
299
333
263
Index (1956
100)
loo
93
105
117
92
South Vietnam
Production
318
291
359
385
384
Index (1956 =
100)
100
92
113
121
121
* The Communist subversive and guerrilla apparatus in South Vietnam.
** In 1956-60, rice yields in both North and South Vietnam averaged
2.0 tons per hectare compared with about 4.6 tons per hectare in Japan,
2.9 tons per hectare in Taiwan, 2.8 tons per hectare in Communist China,
2.8 tons per hectare in South Korea, and 1.6 tons per hectare in Burma.
*** Appendix Al p. 53, below.
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With expanding production of rice, South Vietnam increased its annual
exports of rice (in milled rice equivalent) from about 70,000 tons in
1955 to about 340,000 tons in 1960, but in spite of this fourfold in-
crease, exports of rice in 1960 constituted less than 10 percent of
domestic production and only about one-third of prewar exports of rice.
A net importer of rice before World War II, North Vietnam is now a net
exporter, but only because of enforced law levels of consumption within
the country. Exports of rice, as reported by the government, averaged
approximately 393,000 tons in 1957-60, or more than 12 percent of
domestic production, as shown in the following tabulation)
Thousand Tons
1955 1956 1957 1958 1959 1960
North Vietnam 0 0 180 427 415 550
South Vietnam 70 0 183 113 246 340
In late 1960 and early 1961, however, the North Vietnamese apparently
were having difficulty in meeting their rice export commitments -- in
several instances, planned deliveries of rice were altogether canceled.
" Production of food crops has not been uniformly successful
in North Vietnam. The increase in production of rice has been offset by
a decline of more than 20 percent in production of subsidiary food
crops -- corn, sweet potatoes, manioc, and beans -- as follows:
Thousand Tons
1956 1957 1958 1959 1960
Rice (paddy) 4,136 3,948 4,577 5,193 4,205
Subsidiary food crops
(in terms of paddy) 551 379 338 493 430
Total production of food crops
(in terms of paddy) 4,687 4,327 4,915 5,686 4,635
The new policy of the First Five Year Plan in North Vietnam, however,
calls for a considerable expansion in acreage devoted to subsidiary food
crops in 1961-65, and their output therefore is expected to increase
somewhat faster than production of rice during 1961-65. Primarily as a
result of an expansion in acreage, production of subsidiary food crops
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in South Vietnam has increased steadily since 1956. In absolute
amounts, however, production of corn, sweet potatoes, and manioc has
lagged considerably behind that in North Vietnam.
3. Commercial Crops
After partition, all the rubber plantations of undivided
Vietnam were left in South Vietnam. In spite of a considerable'reduc-
tion in the area under cultivation,* the total production of rubber now
greatly exceeds the prewar output. Substantial increases in rubber
yield** have resulted in an expansion in production from about 66,300
tons in 1955 to about 78,000 tons in 1960. With the exception of a
little more than 2,000 tons, which is consumed by local industry, all
the rubber produced in South Vietnam is exported -- formerly almost
exclusively to France but now mainly to the US. In recent years,
rubber has temporarily supplanted rice as the countryts chief money
crop, constituting in 1959 about 62 percent and in 1960 about 57 per-
cent of the total value of exports. In spite of its being an important
rubber-producing country, South Vietnam still imports 3,000 to 4,000
tons of manufactured rubber products annually. In North Vietnam, pro-
duction of rubber is negligible, and all domestic requirements are met
by imports.
Although the North Vietnamese regime has encouraged produc-
tion of commercial crops such as sugarcane, cotton, jute, oilseeds,
tobacco, tea, and coffee, expansion of output has been slow. Occupy-
ing less than 5 percent of the total cultivated land area, commercial
crops in 1960 are estimated to have contributed about 3 percent of the
gross value of agriculture. In the future, North Vietnam plans to cap-
italize on its unique position as the only Bloc country (other than
Communist China) located in the subtropical zone by emphasizing exports
of coffee and tea and tropical fruits. A comparatively large proportion
of foreign assistance has already been earmarked for the expansion of
production of commercial crops and for the construction of facilities
to process these crops. Output of these crops is therefore expected
to increase at a faster rate than food crops during 1961-65.
A principal aim of the development program of South Viet-
nam has been the diversification of agricultural production so as to
* In 1960, approximately 83,000 hectares of land, or roughly 75 per-
cent of the total land area devoted to rubber before World War
were planted to rubber trees.
** Increases in rubber yield have been the result of new production
techniques such as leaf analysis, improved configuration in planting
new trees, and better fertilizer practices. Together these new tech-
niques are expected to raise production on large plantations from the
present 1,200 kg per hectare to 1,500 kg per hectare.
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insure a more abundant and better balanced food supply, an adequate
supply of raw materials for local industry, and a greater variety of
export commodities. Lack of experimental data, the farmers' resistance
to new crops, and the lack of trained technical personnel, however,
have hindered implementation of the program -- as of 1960 the area
devoted to crops other than rice or rubber was less than 10 percent of
the total sown acreage. Probably the most successful of the various
crop development programs has been the project for fiber crops, which
are needed for the fabrication of rice and sugar bags and fish nets.
Formerly imported in large quantities, fibers are now being success-
fully produced locally,* eliminating about 32.5 million of import re-
quirements. For lack of a more diversified agriculture, however, South
Vietnam still imports many other agricultural commodities, including
milk and dairy products, fresh fruits and vegetables, wheat flour,
sugar, and tobacco. Only small amounts of coffee, tea, and cereals
are currently exported.
D. Transportation**
In no sector of the economy did North and South Vietnam suf-
fer more war damage than in transportation and communications. Of
the more than 1,000 kilometers (km) of rail lines existing in North
Vietnam before World War II, only the 100-km Hanoi-Haiphong line was
operable in 1955 -- bridges, tunnels, and large sections of track and
roadbed had been destroyed on the remaining three lines. Of the
1,400 km of railroad lines in South Vietnam, about 900 km were oper-
able, but this length was divided into two 'portions separated by a
gap of about 500 km. The condition of most highways, of the telecom-
munications system, and of the canal network in both countries was
equally poor.
In spite of the emphasis given by both governments to the re-
habilitation of transportation, the rail, motor, and inland water
transport systems of North and South Vietnam have not yet been re-
stored to their prewar capacity. In North Vietnam, traffic has been
restored on the two rail lines fram.Hanoi to the South China border
but on the line south of Hanoi only as far as Thanh Hoa. Work on
the remainder of the line to the 17th parallel has been slowed by the
* Production of both kenaf and ramie (which produce fibers similar to
those of jute) was first introduced into South Vietnam in 1959, and
by the end of 1960 about two-thirds of the local milling requirements
for kenaf and all local requirements for ramie were being met by do-
mestic production. Since 1955) production of jute has increased about
fivefold, but, even so, South Vietnam still imports more than three-
fourths of its total annual requirements.
** The transportation network in North and South Vietnam is shown on
the map, Figure 5, inside back cover.
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difficulty of constructing some large bridges. A major extension of
the rail system was, however, completed in 1960 with the construction
of a new 120-km line from Dong Anh (just north of Hanoi) to Thai Nguyen,
the site of the new iron and steel plant. Although the track was con-
structed to meter gauge (3 feet 3 inches), the roadbed was reported to
have been prepared for a standard Chinese gauge rail line (4 feet
8-1/2 inches). Apparently, no other steps have been taken to achieve
the announced plan of converting the rail system of North Vietnam to
standard gauge. With the use of army units and conscripted road gangs,
the DRV has rebuilt more than 2,500 km of roadway destroyed during the
French-Indochinese War, and, in addition, it has constructed about
700 km of new roads. But although the condition of certain roads has
been improved, the highway network in general has not been restored
to prewar standards. Since 1955, water transport has lagged behind
other modes of transportation because of a lack of river and coastal
craft, inadequate docking and repair facilities, and a shortage of
construction materials.
A major achievement of the South Vietnamese government to date
has been the restoration of through passenger and freight service on
the 1,100-km Saigon - Dong Ha railroad, the first such service in 12
years. Several spur lines from this main north-south rail line, in-
cluding a 32-km line to the Nong Son coal mine, are now under construc-
tion. The entire railroad system in South Vietnam, as in North Viet-
nam, has been reconstructed to its original (single-track) meter gauge.
The network of national, provincial, and local roads (totaling about
11,700 km before World War II) has been only partially rehabilitated.
Patchwork repairs by the South Vietnamese government in 1955-57 kept
the major roads open to civilian traffic, although the over-all system
was inadequate for military requirements. Since 1958 a comprehensive
highway development program has been undertaken (with US economic aid)
that will vastly improve South Vietnam's economic and military support
facilities within the next few years.*
IV. Foreign Economic Relations
Eighty years of French administration changed Vietnam from a static,
agricultural, and self-sufficient economy into a colonial economy ex-
porting agricultural and mineral products in exchange for imports of
manufactured goods. With production seriously disrupted by 10 years
* The construction of the new $35 million, 32-km Saigon - Bien Hoa
highway represents the largest completed US aid project since the re-
settlement of the refugees from the north. In May 1960 the reconstruc-
tion of National Route 21, an important east-west highway (152 km in
length) was completed at a cost of approximately $14 million in US aid
funds. Two major highways are now being reconstructed -- National
Route 19 fram Pleiku to Qui Nhon (187 km in length) and National
Route 14 from Ban Me Thout to Pleiku (196 km in length).
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of wartime destruction, North and South Vietnam have emerged from the
Geneva agreements even more dependent, rather than less, on foreign
economic relations. Foreign trade has played, and will continue to
play, a vital role in the economic development of both countries.
?
A. Foreign Trade
1. Level of Trade
Whereas the level of foreign trade in North Vietnam has
more than doubled since 1955, it has remained approximately the same
in South Vietnam (see Table 8*). In spite of the substantial increase
in trade in North Vietnam, however, the value of North Vietnamese im-
ports and exports in 1960 was less than 50 percent of South Vietnam's
total trade. Since 1955, North Vietnamese imports and exports have
been equal in amount to about one-seventh of North Vietnam's GNP. In
comparison, total imports and exports have been equal in amount to
about one-fourth of South Vietnam's GNP (see the accompanying chart,
Figure 6).
SOUTH
VIETNAM
31%
7/7,,
NORTH
VIETNAM /
13%
Exports
//
Imports
Exports
Imports
20%
23%
20%
32%
18%
21%
16%
20%
21%
16%
77--
1955 1956 1957 1958 1959 1960
Figure 6. North and South Vietnam: Foreign Trade as a Percent of G NP, 1955-60
35583 11.61
* Appendix A, p. 54, below.
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Imports, entering North and South Vietnam primarily as
grants-in-aid, have been the dominant element in trade in both coun-
tries. Annual reductions in the value of imports in North Vietnam dur-
ing 1958-60, however, have been reflected in a leveling off of the total
trade during the period of the Three Year Plan. Although North Viet-
namese exports expanded eightfold during 1955-60, they are still sub-
stantially less than total imports, accounting in 1960 for less than
two-thirds of the total value of imports. Whereas pre-World War II
rice exports (averaging more than 1 million tons annually) together
with sizable rubber exports assured a favorable balance of trade for
South Vietnam, since 1955 the exports of South Vietnam have covered
only about one-fourth of the total value of imports. As in the case of
North Vietnam, large-scale external aid has made up the deficits.
2. Commodity Camposition of Trade
The pattern of foreign trade in North and South Vietnam
has been essentially that of prewar colonial Vietnam, with emphasis
on exports of agricultural and (in the case of North Vietnam) mineral
products in exchange for imports of manufactured goods. The composi-
tion of Vietnamese imports of manufactured goods, however, has changed
greatly in recent years, with capital equipment and industrial materials
growing in relation to imports of consumer goods.
Imports have been particularly important in North Vietnam's
economic development program. Priority has been given to imports of
complete plant installations, machinery and equipment, and industrial
materials. In 1959, equipment and industrial materials together ac-
counted for approximately 85 percent and manufactured consumer goods
(largely cotton fabrics) for only about 15 percent of total imports of
$102.5 million (see the chart, Figure 7*). Virtually all of the ma-
chinery and equipment for state investment has been imported. At its
present stage of industrialization, North Vietnam must import all or
most of its petroleum, iron and steel products, machinery, metal manu-
factures, locomotives and rolling stock, vehicles, spare parts, in-
dustrial chemicals, chemical fertilizers, medicines, and raw cotton.
Goods available for export have grown in variety and improved in
quality -- in particular, exports of handicraft and light industrial
products have increased from about 5 percent of total exports in 1955
to about 15 percent in 1959. Nevertheless, exports of coal, cement,
apatite, and rice still account for the bulk of foreign exchange earn-
ings. In the future, North Vietnam plans to capitalize on its unique
position as the only Bloc country (other than Communist China) located
in the subtropical zone by emphasizing exports of coffee, tea, rubber,
and fruits. In its exports of mineral products and tropical agricul-
tural commodities the DRV may make a contribution of significance to
the economies of the Sino-Soviet Bloc.
* Following p. 32.
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Domestic production in South Vietnam supplies the basic
foodstuffs and simple manufactuted goods of the economy, and external
trade procures the capital equipment and machinery, industrial raw
materials, and most manufactures. With the beginning of industrializa-
tion, imports of machinery and equipment (boilers, steam engines,
trucks and other vehicles, electrical equipment, and machine tools) and
imports of industrial materials (petroleum and petroleum products,
Metals and ores', construction materials, chemicals, and cotton yarn)
have increased in relation to imports of consumer goods, accounting in
1959 for approximately two-thirds of total imports. However, a wide
variety of consumer goods cotton fabrics, plastic goods, glassware,
wood and wood products, paper products, and foodstuffs are still
imported into South Vietnam with dollar funds granted to the South
Vietnamese government. In 1959, agricultural products accounted for
approximately 16 percent, textiles for about 12 percent, and other
consumer goods for about 7 percent of total imports. As in prewar
days, exports of rubber and rice still account for more than 90 per-
cent of the value of South Vietnamese exports, and duck feathers,
cassia, cereals, tea, and other minor items make up but a small frac-
tion of total exports. The degree of concentration on the export of
rubber and rice has long been considered excessive, as it has left
South Vietnam vulnerable to changes in supply and demand for the two
products.* Since 1955 the government has promoted the production of ,
kenaf, ramie, jute, coffee, tea, coconuts, cocoa, and sugar as impor-
tant potential export products.
3. Direction of Trade
Before World War II, trade in Vietnam between the more
industrialized north and the agricultural south was of great mutual
economic advantage. Since partition, however, economic intercourse
between the two countries has been completely cut off, and the direc-
tion of foreign trade has reflected the political orientation of the
two countries. Since 1955, more than 90 percent of North Vietnam's
trade has been with other members of the Bloc, Comunist China and
the USSR together accounting for almost 70 percent of total trade.
The relative importance of China and the USSR has declined, however,
as trade with the European Satellites increased from about 3 percent
* In 1958, for example, the value of the total exports dropped by
31 percent as exports of rice fell from 183,872 tons in 1957 to
112,702 tons in 1958 and as exports of rubber fell from 73,255 tons to
68,116 tons. In addition to the decline in the volume of exports of
rubber, there was a drop in world prices of rubber.
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a
NORTH AND SOUTH VIETNAM
Commodity Composition of Foreign Trade
1959
NORTH VIETNAM
IMPORTS
102.5 MILLION DOLLARS
Figure 7
.:Agricultural Products
40%
0%
ft/
Construction Materials
SOUTH VIETNAM
IMPORTS
224.6 MILLION DOLLARS
35584 11-61
EXPORTS
54.4 MILLION DOLLARS
EXPORTS
75.1 MILLION DOLLARS
50X1
50X1
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of total trade in 1955 to about 25 percent in 1960 (see the accompany-
ing chart, Figure 8). Trade with non-Communist countries has grown
NORTH VIETNAM
35585 11-61
SOUTH VIETNAM
Indonesia
7%
" . West Germany
Figure 8. North and South Vietnam: Direction of Trade, 1960
from an insignificant percentage in 1955 to about 15 percent of the
total trade in 1960. Japan, which ranks as the fifth most important
trading partner of North Vietnam, accounts for roughly two-thirds of
the total trade with the Free World.
Historically the most important trading partner of Vietnam,
France lost its position in 1959 as the leading supplier to South
Vietnam. The gap left by France has been filled by mainly the US and
Japan, both of which have increased their shares in the South Viet-
namese market. Since 1959 the US has been the number one supplier.
In spite of the drop in French shipments to South Vietnam, France has
remained the best customer for South Vietnamese goods, purchasing in
1960 more than one-third of South Vietnam's total exports. A signifi-
cant development since World War II has been the emergence of West
Germany as the fourth best market for South Vietnam's exports, behind
France, Hong Kong, and Indonesia. Since 1955, South Vietnam has had
no trade relations with any member of the Communist Bloc.
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B. Foreign Economic Assistance*
In the 6-year period 1955-60, North Vietnamese imports are
estimated to have exceeded exports by $392 million, and in the same
period South Vietnamese imports have exceeded exports by approximately
$1,058 million. Foreign economic assistance extended to North and
South Vietnam has. made up the difference. On a per capita basis, eco-
nomic aid in these 6 years has amounted to about $25 in North Vietnam
and about $80 in South Vietnam.
In North Vietnam the regime was able to raise exports as a per-
cent of imports from about 10 percent in 1955 to more than 60 percent
in 1960, but in South Vietnam exports still account for only about one-
third of the total value of imports. External economic aid as a pro-
portion of GNP in North Vietnam, therefore, has been declining --
from about 15 percent in 1956 to about 4 percent in 1960 -- whereas
the proportion of grants and credits to GNP in South Vietnam did not
drop below 10 percent during 1955-60. North Vietnam consequently has
become less dependent than South Vietnam on large annual extensions of
grants and credits.
The total economic assistance extended to North Vietnam since
1955 has amounted to $944 million (see Table 9**). Almost half of
this aid -- in particular, the two Soviet credits announced in late
1960 (totaling 3200 million) and the Chinese Communist credit extended
in early 1961 (amounting to $157 million) --,has been earmarked for de-
velopment projects scheduled under the First Five Year Plan. Of the
$523 million available for use during 1955-60, roughly three-fourths
had been used by the end of 1960 for the purchase of Bloc goods and
services. It is estimated that about 70 percent of aid by the Bloc has
been used for the reconstruction of basic productive facilities (in-
cluding transportation facilities),and for net additions to industrial
capacity. Of secondary importance have been aid shipments of food and
other consumer goods.
Communist China and the USSR have together provided almost
90 percent of the total aid by the Bloc to North Vietnam. Other coun-
tries of the Bloc have given financial support, some in substantial
* In this report the discussion of the aid programs in North and
South Vietnam is confined to a discussion of the economic aid programs
(defined as the net import of goods and services) in the two countries.
It is certain that military aid -is being received by North Vietnam
from other members of the Bloc, but precise information on types and
%mounts is lacking. US military assistance extended to South Vietnam
over the past 6 years has amounted to almost $500 million, or about
2 percent of the total US military aid extended to all countries.?
* Appendix Al p. 55, below.
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amounts and others in token amounts. The entire Bloc seems to be giv-
ing aid and advice in the areas most appropriate to the capabilities
of the contributing country. Whereas the Chinese have furnished larger
quantities of basic materials and manpower, the USSR has sent relatively
more machinery and equipment. The Chinese have assumed the leading
role in the rehabilitation and expansion of North Vietnam's transporta-
tion and communications facilities as well as in the reconstruction
and development of its irrigation system. They also have been largely
responsible for the growth of light industry in North Vietnam, haying
undertaken the construction of 14 rice mills, 3 sugar refineries, 2
cigarette factories, a match factory, and a knitted goods factory.
Soviet aid projects in the field of light industry have been limited
to the Haiphong fish cannery and the Phu Tho tea-processing plant.
In the electric power and mining industries, on the other hand, Soviet
influence has been predominant. Chinese and Soviet technicians have
been equally active in the field of heavy manufacturing. Whereas the
Chinese have financed and directed the construction of the iron and
steel plant at Thai Nguyen, the Hanoi rubber goods factory, and several
of the industrial chemical plants, the USSR has undertaken the con-
struction of the Hanoi machine tool'plant and the Lao Kay superphos-
phate plant.
Economic assistance extended to South Vietnam since 1955 under
the various US economic aid programs* has amounted to approximately
$1,440 million, or about 8 percent of the total US economic aid to all
countries. Non-US sources** have contributed another $75 million. Of
this total economic assistance to South Vietnam, more than 90 percent
has been extended as grants-in-aid, whereas only about 4o percent of
the total aid by the Bloc to North Vietnam has consisted of grants.
Initially provided in the form of grants-in-aid, economic aid to North
Vietnam now consists almost entirely of long-term, low-interest
credits, but, in contrast, there has been no shift from grants to loans
in the US aid program to South Vietnam. As of the end of 1960, about
* US economic aid to South Vietnam has included grants-in-aid ad-
ministered by the International Cooperation Administration ($1.3 bil-
lion), long-term credits extended by the Development Loan Fund ($19.5
million), commodity shipments of tobacco under PL 48o ($118 million),
and voluntary contributions from US charity organizations ($2.5 million).
No loan assistance has been given as yet by the Export-Import Bank or
the International Bank for Reconstruction and Development.
** The Japanese have provided $56 million in accordance with the
terms of a reparations agreement concluded in late 1959, the French
have provided $14 million for education and land reform, Colombo Plan
aid is estimated to be about $4 million, and international organiza-
tions such as UNESCO and FAO have provided about $500,000 in technical
assistance.
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three-fourths of the total economic aid extended to South Vietnam dur-
ing 1955-60 had been used in financing the country's large net imports.
Second only to South Korea, South Vietnam has been the larg-
est recipient of US economic aid. Since 1955, annual extensions of
grants-in-aid have averaged more than 3200 million. Only about 15 per-
cent of this aid has consisted of direct shipments of goods and ser-
vices similar to those provided by the Sino-Soviet Bloc to North Viet-
nam. Goods received have included the supply of machinery and equip-
ment and basic materials for the restoration of South Vietnam's war-
damaged transportation system, the expansion of industrial capacity,
and the extension of health and educational facilities, and services
have included the provision of technical assistance in the fields of
health and education, public administration, agriculture, industry,
and transportation. By far the greatest part of US economic aid to
South Vietnam has been indirect aid, which has involved the extension
of dollar credits to the South Vietnamese government to pay for im-
ports. The local currency (piasters*) accruing to the government
from the sale of the ICA-financed commercial imports has been used to
cover internal costs of both military and economic aid projects.
During the past 6 years these counterpart funds have provided at least
two-fifths of South Vietnam's entire budget revenue. Only about 20
percent of these budget receipts from US aid, however, have been
allocated to economic projects -- the great bulk of US-financed bud-
get revenue has been used to help meet the annual defense expendi-
tures of about 6 billion piasters.
V. Allocation of Resources
Expanding domestic production in North and South Vietnam has been
augmented by large annual import surpluses, estimated to amount in
1956-60 to 8 percent of GNP in North Vietnam and 13 percent of GNP in
South Vietnam. The allocation of total available resources among con-
sumption, investment, and government has reflected the different eco-
nomic philosophies of the two governments. The emphasis in North
Vietnam has been on present sacrifice for promised future benefits,
and the standard of living has been kept low in order to squeeze out
capital for investment. In South Vietnam, on the other hand, the
population has been enjoying a comparatively high standard of living,
and the government has imposed few if any austerities.
* Piasters are credited to the counterpart fund at the official rate
of exchange of 35 piasters to US $1. The greatest single segment of
the total US aid to South Vietnam is therefore converted into goods
and services at a rate that values US aid dollars in terms of piasters
at the lowest of many existing valuations.
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A. Gross Domestic Investment*
1. Level of Investment
By Communist standards, the DRV was able during 1955-57
to allocate to investment only a small percent of the total available
resources -- most of its small GNP was by necessity used to bring a
starving population up to a tolerable level of subsistence. During
1958-60, however, the regime was able to raise gross domestic invest-
ment as a percent of GNP to the level generally associated with rapid
economic development (15 percent or more). After 1955, when gross
domestic investment was only about 9 percent of GNP, investment in-
creased to about 17 percent of GNP in 1959 and about 22 percent in
1960 (see Table 10**). In absolute amount it is estimated to have
increased from 210 million dong in 1955 to 856 million dong in 1960,
as follows:
Million Current Dong
1955
1956
1957
1958
1959
1960
Budgeted state invest-
140.5
260.1
251.0
314.0
494.2
716.0
mentxxx
Miscellaneous budgeted
34.9
99.3
151.5
147.2
142.2
91.1
investmentxxx
Nonstate investment***
34.4
40.5
41.7
48.4
52.5
49.1
Total
209.8
399.9
444.2
509.6
688.9
856.2
* In North Vietnam, state investment in the construction of mili-
tary bases and plants producing military goods is included in gross
domestic investment, whereas investment in defense in South Vietnam
is included under government expenditures rather than under gross
domestic investment. The term investment as used in the two countries
is therefore not exactly comparable.
** Appendix A, p. 56, below.
*** The three main components of gross domestic investment in North
Vietnam may be defined as follows: state investment is investment
under the state plan for new plant and equipment and other fixed
assets; miscellaneous budgeted investment includes increases in the
value of industrial and commercial inventories and government ex-
penditures for geological surveys; and nonstate investment is peasant
investment in fixed assets, such as farm buildings and houses, small-
scale irrigation and water conservation works, draft animals, tools,
and machinery. For the methodology used in estimating gross domestic
investment in North Vietnam in 1955-60, see Appendix B.
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The DRV has been able to support an investment program of these in-
creasing proportions only because of the continuing large net inflow
of goods and services from the Bloc. During 1955-57, foreign economic
assistance extended to North Vietnam by other members of the Bloc was
used to support not only the small initial program of investment but
also actual consumption requirements. Since 1958 the pattern of im-
ports supported by the high level of economic assistance has shifted
dramatically away from consumer goods to investment goods such as
capital machinery and equipment and industrial materials.
Gross domestic investment in South Vietnam remained a
fairly stable 8 to 10 percent of GNP during 1955-60. Because of its
necessary preoccupation with the problems of internal security and
military preparedness, the government has been able to allocate to
investment only a small share of its total budget revenue. Further-
more, the unsettled security situation, the uncertainty regarding GVN
economic policy, and other factors creating an unattractive economic
climate have tended to discourage private domestic investment. Whereas
investment in fixed assets in North Vietnam in 1960 was equivalent to
approximately 20 percent of GNP, in South Vietnam investment in fixed
assets was equal to less than 10 percent of GNP. In absolute amount
the total investment in fixed assets in South Vietnam of about $134
million was less than three-fourths of the total investment in fixed
assets in North Vietnam.* The GVN i8 still almost completely dependent
on imports for investment goods, but, in contrast to North Vietnam,
there has been no restriction on imports of consumer goods in favor
of imports of investment goods.
The investment program in North Vietnam has been financed
primarily through the consolidated state budget, which includes foreign
aid. Nonstate investment has accounted for less than 10 percent of
gross domestic investment. In South Vietnam, government investment
also has claimed an increasing share of total investment, not primarily
because of a consistent and deliberate drive to increase public in-
vestment but rather because of the considerable influx of foreign aid.
In 1958, government investment financed by US aid was about four times
as large as the capital formation financed by the South Vietnamese
government from domestic resources.
2. Allocation of Investment**
Of the total state investment in North Vietnam in 1955-60,
approximately 38 percent (or 830 million dong) was allocated to industry,
* Gross domestic investment in North Vietnam was converted into US
dollars at the rate of exchange of 4 dong to US $1.
** This discussion of the allocation of investment in North and South
Vietnam is limited to investment (both public and private) in fixed
assets and does not include changes in the value of inventories.
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with heavy industry accounting for more than 70 percent of the total
industrial investment. Because a large part of industrial production
was channeled into agriculture in the form of agricultural machinery,
fertilizer, and construction materials, a substantial proportion of
this investment in heavy industry represented indirect investment in
agriculture. State expenditures for agriculture (approximately 12 per-
cent of the total state investment) indicate that much reliance was
placed on local peasant efforts requiring considerable labor but rela-
tively little capital equipment. Nonstate (peasant) investment accounted
for over half of the total investment in agriculture. Relative to in-
vestment in irrigation and water conservation projects, only small
amounts of state funds were directed to the improvement of agricultural
techniques, land reclamation, mechanization, and the organization of
state farms. Investment in transportation and communications (about
25 percent of the total state investment in 1955-60) was second only
to investment in industry in the allocation of state funds. The major
part (roughly )4.0 percent) of investment in transportation went to rail-
road construction, but a considerable share was used in the improvement
and expansion of roads, especially those near the South Vietnamese and
Laotian borders. The allocation of 7 percent of state investment to
trade resulted in the construction or restoration of 113,000 square
meters of floorspace in stores and 991,000 square meters of floorspace
in warehouses. North Vietnam's policy of holding down "nonproductive"
investment is reflected in the fact that only about 9 percent of state
investment in 1955-60 was allocated to health, education, scientific
research, and culture; only about 5 percent to housing and public
works; and only about 4 percent to government administration.
In South Vietnam the government has adjusted its invest-
ment outlays to those of the private sector. The expansion of public
investment has been directed mainly toward the expansion of transpor-
tation and communications facilities, an increase in production of
electric power, the growth of financial services, and the development
of economic and social institutions that are essential to general eco-
nomic development. The government has of necessity assumed the leading
role in investment in these fields in which private enterprise has
shown the least initiative. In the field of industry, on the other
hand, governmental policy has been to restrict public investment in
favor of private enterprise, and the government's role has been essen-
tially that of a sponsoring agency. Agriculture has received the
highest priority after transportation and communications in the in-
vestment plans of the state, and in an effort to expand domestic food
supplies and primary exports the government has put more than 15 per-
cent of its investment effort into irrigation and water control projects,
land reclamation, and the improvement of agricultural techniques. Of
the total investment -- both governmental and private -- in fixed assets
in 1960, roughly 30 percent went to transportation and communications,
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28 percent to agriculture, 20 percent to industry, 12 percent to hous-
ing, 8 percent to government and other services, and 2 percent to trade
(see the accompanying chart, Figure 9).
NORTH
VIETNAM
SOUTH
VIETNAM
35586 11.61
Million US Dollars
Trans ortation
Industry
Agriculture
00u*
,
18%
.
str?
.?4n9
;W.1??P???M0??44 4?. 44..S 4t..?;.4.11,l04t0? . ....4. 44 444.0.0r441o1,14?.4.t
4? 4.44*
,.il.- ,,,0,4:4.4,,,,V. 4Atfr:A
1
30%
,
,'t:
..
20%-
",--
. /-2,8%',
/ /?..- / .7,',

A, ,
, ?,.
22% ,-.. ?
134.1
*Other includes Government, Culture, Education, Scientific Research, Health,
Trade and Finance, Housing, etc.
Figure 9. North and South Vietnam: Allocation of Investment in Fixed Assets, 1960
B. Consumption
191.3
Increases in consumption in North Vietnam, although fairly
large in percentage terms, reflected primarily economic recovery from
the depressed levels of consumption during the war years. As the Com-
munist program for socialization gave the regime increasing control
over the allocation of resources and as the level of consumption ap-
proached the prewar standard of living, increases in consumption in
1958-60 fell off appreciably compared with those in 1955-57. Advances
in the standard of living were no greater than those considered neces-
sary by the regime to allay public discontent. Moreover, with a de-
cline of more than 10 percent in aggregate consumption in 1960 com-
pared with 1959 -- a reflection of decreased production in agriculture --
per capita consumption dropped below 1956 levels. Indexes of aggregate
and per capita consumption in North Vietnam are as follows:
1955
= 100
1955
1956
1957
1958
1959
1960
Index of aggregate consumption
100
123
131
135
148
132
Index of per capita consumption
100
125
129
130
140
121
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The Diem government, for political reasons, has been reluctant
to take measures to reduce South Vietnam's relatively high standard of
living -- high not only in relation to North Vietnam but also in rela-
tion to other countries in Southeast Asia. Expanding production in
agriculture and light industry has raised per capita consumption to a
point above prewar levels. Moreover, whereas in North Vietnam the regime
has increasingly restricted imports of foodstuffs and other consumer
goods, in South Vietnam the US commercial aid program has continued to
support a standard of living higher than the GVN could maintain on its
own resources. Imports of agricultural products and consumer goods in
North Vietnam have declined from about 55 percent of the total imports
in 1955 to about 10 percent in 1960, but they still account for more
than one-third of the total value of imports in South Vietnam. In 1960
the value of foodstuffs and other consumer goods imported into South
Vietnam was almost 10 times the value of similar imports into North
Vietnam.
. Food Supply
The present serious food situation in North Vietnam began
in May-June 1960 with the poor fifth-month rice harvest and became
worse in the fall as a result of another poor rice crop. By March
1961, critical shortages of food were reported in various localities,
especially the northern and western areas near the Chinese and Laotian
borders, where many people reportedly were starving. In Hanoi and
other towns the monthly rice allotment per person, which had been
progressively cut during the fall of 1960, was further reduced to 9 kg
in May 1961, and the rationing of meat was instituted for the first
time.* These new diet restrictions, coupled with protracted work-
hours, are reported to have caused widespread suffering from malnutri-
tion and fatigue, and in some areas food shortages are reported to
have spurred discontent and caused local outbreaks of resistance to
officials. The regime, however, has been able to quell these local
food riots promptly.
By the end of May 1961 the worst point in the food crisis
apparently had passed, as new crop supplies of rice, corn) sweet pota-
toes, and beans began to appear in the markets. But although the new
rice harvest will temporarily avert more serious trouble, it may not
be adequate to insure complete recovery. The extent and duration of
the probable respite are largely dependent on the size of the more
* In September 1960 the monthly rice ration was reduced to 15 kg per
person; by October it was 12 kg; and by early November, some classes,
including private traders and others outside the socialized sector,
were limited to 10 kg per month. In May 1961, individual rice rations
were reduced to a new low of 9 kg per month, and the allotment of meat
and animal fats was limited to 500 grams per person per month.
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important tenth-month rice crop (harvested in October and November)
and the level of output of minor crops. In the long run, however,
the prospects for alleviating the food supply problem in North Vietnam
are only fair. On the assumption of normal weather conditions, pro-
duction of food is expected to increase at an average annual rate of
about 3 percent and to reach approximately 6 million tons in 1965, or
two-thirds of the First Five Year Plan goal of 9 million tons. The
acceleration of the rural collectivization program, however, may
generate sufficient additional peasant resistance to place even this
achievement in doubt. Even if this output is achieved, per capita pro-
duction of food in 1965 will be only about 2 percent higher than in
1958-60. Estimates of future growth provide little hope, therefore,
of any significant improvement in the North Vietnamese diet.
Expanding production of food in South Vietnam has been
augmented by large annual imports of food, which in 1960 were valued
at approximately $36 million, or 15 percent of the total value of im-
ports. Per capita consumption of food in South Vietnam since 1955,
therefore, has been considerably above prewar standards. Although the
amount of meat and fish in the North and South Vietnamese diets is now
roughly the same, per capita consumption of rice and sugar in South
Vietnam is significantly higher than in North Vietnam, as shown below:
Kilograms
1955
1956
1221_
1958
1959
1960
Rice (milled)
North Vietnam
115*
151
150
150
161
150
South Vietnam
186
200
186
222
234
235
Sugar
North Vietnam
0.6
1.0
1.1
1.1
1.2
N.A.
South Vietnam
5.7
5.9
6.1
5.9
8.2
10.3
There also is more diversification in the South Vietnamese diet
-- in
particular; the supply of tropical fruits, coffee and tea, and cocoa
is much greater.
North Vietnam is acutely aware of its unfavorable position
compared with South Vietnam in the per capita supply of food. Some
observers have attributed the DRV's intensified drive against South
Vietnam, including its efforts in Laos, primarily to its desire to
obtain the food resources in the south. -This interpretation probably
* This figure probably does not include North Vietnamese imports of
rice in 1955.
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overstates the importance of that factor, but the North Vietnamese
leadership certainly looks on the food supplies of the south with a
covetous eye. Current surpluses in production of rice and other food-
stuffs, as well as the considerable potential in South Vietnam for in-
creased agricultural production, would provide a happy solution to the
chronic food supply problem in North Vietnam.
2. Nonfood Consumption
The striking difference in the supply of consumer goods
and services in North and South Vietnam is illustrated by the follow-
ing comparison of per capita consumption of cloth (all types), the
major nonfood item of consumption in both countries:
Meters
1955
1956
1957
1958
1959
1960
North Vietnam
3.5
5.0
5.2
4.5
5.0
N.A.
South Vietnam
N.A.
10.9
12.2
12.5
10.5
14.1
The South Vietnamese consumer has the advantage not only in the sup-
ply but also in the quality and style of consumer goods, and he also
has better housing. Although precise information on per capita resi-
dential floorspace is not available, new urban housing is being con-
structed more rapidly in South Vietnam than in North Vietnam. In
1958-59, it is estimated, 826,000 square meters of new urban housing
(excluding houses with thatched roofs) were added in South Vietnam
compared with about 600,000 square meters in North Vietnam, which
has almost 2 million more people.
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APPENDIX A
STATISTICAL TABLES
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Table 1
North and South Vietnam:
1960
Land Utilization
Percent
?
North Vietnam South Vietnam
Forests
28.8
Cultivated land
12.3
12.8
Rice paddies
9.5
11.0
Rubber plantations
Negl.
0.5
Miscellaneous crops
2.8
1.3
Other
37.9
58.4
Total
100.0
100.0
Total land area (square kilometers)
158,750 170,850
Table 2
North Vietnam: Gross Value of Industrial Production
1956-60
Million 1956 Dong
1956 1957
1958 1959
1960
Heavy industry 180.1 203.9
258.4 425.4
504.9
Light industry 446.8 661.0
754.7 885.8
1,062.0
Total 626.9 864.9
1,013.1 1,311.2
1,566.9
Index (1956 = 100) 100 138
162 209
250
lor
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Table 3
South Vietnam: Estimated Index of the Gross Value of Industrial Production 2/
1956-60
1956
= 100
Heavy industry
1956 Weights 12/
1956
1957
1958
1959
1960
Commodity
Sector
Electric power
99.9
loo
106
113
126
138
Coal
0.1
100
589
956
948
1,300
Heavy industry
100.0
20.0
100
106
114
127
139
Light industry
Cotton cloth
9.4
100
152
163
119
259
Rayon cloth
6.7
100
293
268
585
1,000
Silk cloth
0.9
100
267
583
67
50
Other cloth
4.1
100
158
333
267
4o0
Sugar (refined)
5.3
loo
105
150
289
393
Meat
32.2
100
104
112
114
131
Rice (polished) 2j
4o.8
loo
94
128
152
145
Matches
0.6
loo
79
73
54
69
Light industry
100.0
80.0
100
121
149
176
231
Index for total industry
100.0
100
118
142
166
213
a. For the methodology, see Appendix B.
b. Weights are gross-value weights, as explained in the methodology.
c. Based on deliveries into Saigon.
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Table 4
North and South Vietnam: Production of Major Industrial Products
1956-60
Unit
Country
1956
1957
1958
1959
1960
Electric power
Million kilowatt-hours
North Vietnam
94
121
160
210
254
South Vietnam 2/*
265
280
299
334
366
Coal
Thousand metric tons
North Vietnam
1,214
1,085
1,549
2,202
2,575
South Vietnam
2
12
20
20
27
Apatite
Thousand metric tons
North Vietnam
24
66
136
261
490
South Vietnam
0
Phosphorite
Thousand metric tons
North Vietnam
34
22
32
51
47
South Vietnam
0
0
0
0
0
Chromite
Thousand metric tons
North Vietnam
1
4
6
7
N.A.
South Vietnam
0
0
0
0
0
Iron ore
Thousand metric tons
North Vietnam
18
20
120
125
135
South Vietnam
0
0
o
o
o
Salt
Thousand metric tons
North Vietnam
88
110
125
130
190
_
South Vietnam
60
80
62
61
N.A.
Cement
Thousand metric tons
North Vietnam
197
165
302
381
406
South Vietnam
0
0
0
0
0
Timber
Thousand cubic meters
North Vietnam
457
439
458
630
684
South Vietnam
555
479
407
353
320
Rice (milled)
Thousand metric tons.
North Vietnam
98
279
295
418
209
South Vietnam
N.A.
N.A.
N.A.
N.A.
N.A.
* Footnotes for Table 4 follow on p. 50.
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Table 4
North and South Vietnam: Production of Major Industrial Products
1956-60
(Continued)
Unit
Country
1956
1957
1958
1959
1960
Sugar (refined)
Thousand metric tons
North Vietnam
5
4
6
11
14
South Vietnam
24
25
36
69
93
Beer
Million liters
North Vietnam
0
0
0.3
2
4
South Vietnam
51
54
53
50
51
Cigarettes
Thousand metric tons12/
North Vietnam
0.4
0.5
1
2
2
South Vietnam
6
6
6
6
7
Cotton yarn
'Thousand metric tons
North Vietnam
7
9
9
lo
lo
South Vietnam
0
0
0
0
0.7
Cotton cloth
Million linear meters
North Vietnam
48
63
66
78
86
South Vietnam
14
20
22
16
35
Rayon cloth
Mill on linear meters
North Vietnam
0
0
0
South Vietnam
8
24
22
48
82
Matches
Million boxes
North Vietnam
26
87
83
115
183
South Vietnam
48
38
35
26
33
a. Adjusted by adding 25 percent to account for power generated independently by individual industrial plants which was not included in the
basic data.
b. Production of cigarettes in North Vietnam is converted from packages to tons on the basis of 1.25 ounces to 1 package.
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Table 5
North Vietnam: Gross Value of Agricultural Production
1956-60
Million 1956 Dong
Food crops
1956
1957
1958
1959
1960
1,030.4
944.4
1,084.3
1,243.0
1,020.1
Other crops
246.1
274.2
309.1
336.3
N.A.
Livestock
271.1
328.3
470.8
464.3
N.A.
Secondary occupations of peasants
295.3
346.8
336.7
340.5
N.A.
Total
1,812.9
1,893.7
2,200.9
2,384.1
2,230.0
Index (1956 = 100)
100
103
119
129
121
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Table 6
South Vietnam: Estimated Index of the Gross Value of Agricultural Production
1956-60
1952-54 ,
Equivalents 2/
Production
(Thousand Metric Tons)
1956
1957
1958
1959
1960
Rice (paddy)
100
4,140
3,870
4,840
5,310
5,420
Corn ,
100
19
18
29
26
28
Sweet potatoes and manioc
35
245
293
298
384
393
Sugarcane
100
523
870
761
824
846
Coconuts
165
18
26
26
29
30
Tobacco .
860
7
7
7
5
5
Rubber
715
70
70
72
75
78,
Tea
1,000
4
4
3
4
4
'Livestock li
820
h2
44
47
48
55
Index for total agriculture
(1956 = 100)
100 102 118 128 132
a. The average farm value of 1 metric ton of each commodity relative to the value of 1 metric ton of
rice (paddy).
b. Data on livestock have been converted to the' dressedmeat equivalent'.
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Table
North and South Vietnam: Production of Major Agricultural Products
1956-60
Thousand Metric Tons
Country
1956
1957
1958
1959
1960
Rice (paddy)
North Vietnam
4,136
3,948
4,577
5,193
4,205
South Vietnam
4,140
3,870
4,840
5,310
5,420
Rubber
North Vietnam
Negl.
Negl.
Negl.
Negl.
Negl.
South Vietnam
70
70
72
75
78
Corn
North Vietnam
243
197
192
247
198
South Vietnam
19
18
29
26
28
Sweet potatoes and manioc
North Vietnam "
1,233
726
578
982
953
South Vietnam ,
245
,293
298
384
393
Beans (including soybeans)
North Vietnam
26
28
32
34
N.A.
South Vietnam
6
7
8
8
10
Sugarcane
North Vietnam
202
385
495
451
403
South Vietnam
523
870
761
824
846
Cotton (raw)
North Vietnam
6
6
6
6
4
South Vietnam
N.A.
N.A.
1
1
Negl.
Tobacco
North Vietnam
1
2
1
1
N.A.
South Vietnam
7
7
7
- 5
5
Tea (raw)
North Vietnam
2
3
3
2
3
South Vietnam
4
4
3
4
4
Coffee
North Vietnam
0.3
0.3
0.3
0.5
N.A.
- South Vietnam
2.5
3.3
2.5
3.3
3.5
Peanuts
North Vietnam
19
24
32
35
N.A.
South Vietnam
12
16
22
19
23
Coconuts
North Vietnam
Negl.
Negl.
Negl.
Negl.
Negl.
South Vietnam
18
26
26
29
30
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Table 8
North and South Vietnam: Estimated Foreign Trade
1955-60
Million Current US $
1955
1956
1957
1958
1959 1960
North Vietnam 21
Imports
68.7
121.7
122.4
107.5
102.5
97.1
Exports
6.8
19.5
38.7
47.8
54.4
6o.6
Total trade
75.5
141.2
161.1
155.3
156.9
157.7
South Vietnam
Imports
262.0
217.7
288.7
232.1
224.6
239.5
Exports
66.9
45.1
80.5
55.2
75.1
84.1
Total trade
328.9
262.8
369.2
287.3
299.7
323.6
a. Estimates of the foreign trade of North Vietnam in current rubles (pre-1961 rate of exchange) were
converted to US dollars at the rate of 4 rubles to US $1.
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Table 9
North Vietnam: Sino-Soviet Bloc Credits and Grants Extended
by Year of Extension
1955-61
Total
1955-61
1955
1956
Credits
Communist China
232
USSR
260
7.5
Czechoslovakia
7.5
Poland
7.5
Rumania
Bulgaria
2.5
Hungary
9.5
Total
972.5 a/
16 si
Grants
Communist China
225
200
USSR
105
100
Czechoslovakia
9
9
Poland
8
8
Rumania
4
4
East Germany
15
15
Bulgaria
4
4
Hungary
2.
2
Mongolia
Negl.
Negl.
Albania
Negl.
Negl.
Total 372 342
Credits and grants
Communist China 457 200
USSR 365 100
Czechoslovakia . 18.5 9
Poland 15.5 8
Rumania - 41.5 - -. 4
East Germany 15 15
Bulgaria 6.5 4
Hungary 11.5 2
Mongolia Negl. Negl.
Albania Negl. Negl.
Total aid ? 944.5 Ej 358 21
7.5
? 7.5
37.537.5
Million Current US $
1957
1958
1959
1960
1981
75
157
11.8
20.7
25
195
7.5
7.5
2.5
2
.. 7.5
11.8
20.7
100
197
219.5
25
5
25
5
100
157
11.8
20.7
25
200
7.5
7.5
37.5
2.5
2
7.5
11.13
20.7
202
219.5
a. Czechoslovakia, Poland, and Rumania together extended credits totaling $16 million in 1955. Neither the terms of this credit nor the portion extended by each
country has been announced. The $18 million are not. included in the total aid listed for the three countries.
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Table 10
North Vietnam: Percentage Distribution of Gross National Product, by End Use
1955-60
Percent
1955
1956
1957
1958
1959
1960
Consumption
92
91
88
83
80
72
Gross domestic investment
9
14
14
15
17
22
Government
10
10
9
9
8
10
Total available resources
111
115
111
107
105
104
Net exports of goods and services
-11
-15
-11
-7
-5
-4
GNP
100
100
100
100
100
100
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APPENDIX B
METHODOLOGY
1. Computation of the Index of the Gros S Value of Industrial Production
in North Vietnam in Table 2*
The index series in Table 2 for the gross value of industrial pro-
duction in North Vietnam is based on official statistics for the gross
value of heavy and light industry. A. rough check on this series was.
made by computing an index series based on 18 major industrial commodi-
ties. The resulting series Was somewhat layer, as follows:.
1956 =
100
1956
1957
'1958
1959
1960
"Official" series-
100
138
162
209
250
"Check" series
100
136
159
210
239
2. Computation of the Index of the Gross Value of Industrial Production
in South Vietnam in Table 3**
The index series in Table 3 for the gross value of industrial pro-
duction in South Vietnam represents the first attempt at an index of
industrial production for the country. This index should therefore be
considered a preliminary estimate, subject to refinement as more data
become available. The index was computed in two stages, as follows:
a. Computation of the Sector Weights and Indexes
In the first stage the 10 industrial commodities used in the
index were classified into two sectors, heavy industry and light in-
dustry. Within each sector the commodities were weighted in propor-
tion to their estimated gross value of production (physical output
multiplied by factory door price per unit) in 1956. Because of the
lack of data on factory door prices in South Vietnam, the price used
for each commodity was the yuan price per unit in Communist China in
1957. The exceptions to this procedure were the unit price of rayon
* Appendix A, p. 47, above.
** Appendix A, p. 48, above.
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cloth, which was based on the relationship of the official wholesale
price of rayon yarn to that of cotton yarn in South Vietnam in January
1960, and the unit prices for silk and "other" cloth, which were based
on the relationship of the prices of Japanese exports of silk and wool
cloth to that of cotton cloth in 1960.
The production indexes for each commodity were based on phys-
ical production in 1956-60, as shown in Table 4.*
Indexes for heavy industry and light industry were then com-
puted by combining the appropriate commodity indexes within the sectors
in proportion to the gross value of production of each commodity.
b. Computation of the Index for Total Industry
In the second stage the index of industrial production as a
whole was obtained by combining the heavy industry and light industry
indexes in proportion to the aggregate value of production in heavy
and light industry. The sector weights for 1956 used in the index
were 20 percent for heavy industry and 80 percent for light industry.
These weights were estimated by judging the importance of the 10 com-
modities in relation to all commodities through analogy with the in-
dustrial structure of North Vietnam in 1956.
3. Computation of the Indexes of the Gross Value of Agricultural
Production in Tables 5 and 6**
The index of the gross value of agricultural production in North
Vietnam is based on official statistics that are given in Table 5.
The index of the gross value of agricultural production in South
Vietnam in Table 6 was constructed by multiplying production (in tons)
of each commodity by its value equivalent and then summing the result-
ing aggregates for each year. The total aggregate for a given year was
then divided by the aggregate for the base period to obtain the index.
The value equivalents represent the average farm value of 1 ton of
each commodity relative to the value of 1 ton of rice (paddy) in 12
countries of the Far East*** and 4 countries of South Asiat in 1952-54.
* Appendix A, p. 49, above.
** Appendix A, pp. 51 and 52, respectively, above.
*** Burma, Cambodia, Indonesia, Japan, Laos, Federation of Malaya,
the Philippines, Singapore, South Korea, South Vietnam, Taiwan, and
Thailand.
t Afghanistan, Ceylon, India, and Pakistan.
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4. Computation of Gross National Product
a. In North Vietnam
Estimates of GNP (in constant 1956 dong) for North Vietnam in
1956-60 are based on (1) official statistics on "national income" (as
defined by the Communists) and on (2) estimates of value added in
government and consumer services -- the two major components of GNP
not included in the Communist definition of "national income." Value
added in government was estimated to be 40 percent of the total govern-
ment purchases of goods and services, and consumer services were esti-
mated to be 15 percent of aggregate consumption. GNP, therefore, was
calculated on the basis of the following formula:
"National income" plus 0.40 Government plus 0.15 Consumption = GNP
or, in other words,
"National income" plus 0.40 Government plus 0.15 (GNP minus invest-
ment minus Government minus Net Export of Goods and Services) = GNP.
Official statistics on "national income" are given in constant
1956 prices.
Budget data on government expenditures, however, are given in
current prices. It was assumed that military pay and allowances (as
well as the cost of military purchases) stayed the same during the
5-year period; budget data on expenditures for administrative, Social,
and cultural purposes, however, were used for only the base year 1956.
The official index on the number of governmental administrative and
professional personnel was then applied to 1956 budget expenditures to
calculate government purchases in these fields in 1957-60.
Gross domestic investment was derived by summing (1) official
statistics for state investment in fixed assets; (2) estimates of
stockpiling of construction materials and equipment, investment in
operating inventories, and general geological prospecting; and (3) esti-
mates of nonstate (peasant) investment. It was assumed, in estimating
the second category, that 80 percent of budgeted expenditures for eco-
nomic construction over and above that portion invested in fixed assets
represents increases in inventories and other tiscellaneous investment.
It also was assumed that there was no significant change in the average
price of investment goods during 1956-60. Estimates for the third
category rest on the assumption that nonstate investment was a constant
2.2 percent of the gross value of agricultural production (given-in
constant 1956 prices).
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It was assumed that during 1956-60 there was no significant
change in the ruble prices used in valuing more than 90 percent of
North Vietnam's total imports and exports. Estimated statistics on
the net export of goods and services in current rubles, therefore,
were used for the entire period.
Estimates of aggregate consumption in each year were derived
as the residual, by subtracting gross domestic investment, government
expenditures, and the net export of goods and services from estimates
of GNP.
GNP in constant 1956 dong was converted into US dollars at
the rate of 3.5 dong to,US $1. This rate represents the best esti-
mate of internal dong values based on rates of exchange between the
dong and Free World currencies.
b. In South Vietnam
No unified series of statistical data is available from South
Vietnamese sources on GNP in 1956-60. Official statistics on.GNP in
the one year 1956 (prepared by the Research Department of the National
Bank of Vietnam) were used as the basis for estimating GNP (by sector
of origin) in 1957-60. Agriculture in South Vietnam in 1956 was esti-
mated to have contributed about 6o percent and industry about 5 per-
cent of the total production, mainly on the basis of a comparative
study of the economic structure of North Vietnam in 1956.* The com-
puted indexes for agricultural and industrial production were then
applied to the estimated value.added in agriculture and industry in
1956. In each year, value added in these two sectors was estimated
to represent about two-thirds of GNP.
GNP in constant 1956 piasters was converted into US dollars at
the rate of .exchange of 60 piasters to US $1, a rate considered by the
International Cooperation Administration (ICA), the State Department,
and the Ford-Brookings group of economists to be a more realistic con-
version rate (in terms of internal purchasing power) than the official
rate of exchange of 35 piasters.to US $1 or the limited-access (for
tourists and diplomats), free-market rate of 72 piasters to US $1.
5. Statistics on Population
Data on population in North and South Vietnam are estimates of
this Office that differ slightly from official statistics. Because
of apparent discrepancies, official statistics were not used.
* In North Vietnam in 1956, agriculture contributed about 50 percent
and industry almost 10 percent of the total production.
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