ECONOMIC PLANNING AND ORGANIZATION IN NORTH VIETNAM 1955-57

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000400190002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 44
• Document Creation Date: November 9, 2016
• Document Release Date: August 21, 1998
• Sequence Number: 2
• Publication Date: November 28, 1956
• Content Type: IM

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INTELLIGENCE MEMORANDUM
,,~- 4P6 I
ECONOMIC PLANNING AND ORGANIZATION IN NORTH VIETNAM
~
1955-57
CIA/RR IM-442
28 November 1956
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 7914., THE TRANSMISSION OR REVELATION OF
WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS
PROHIBITED BY LAW.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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FOREWORD
This memorandum concerns the interim stages of the reorganiza-
tion of the economy of North Vietnam from the control of the French
Administration into the planned economy sought by the Viet Minh
regime. It does not alter, with some qualifications, the estimate
of probable economic developments in North Vietnam through 1957
which appears in CIA/RR IM-1+02, Estimated Economic Gains to the
Soviet Bloc in North Vietnam, 25 October 1954, SECRET OFFICIAL USE
ONLY.
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S -E-C -R-E -T
CONTENTS
Page
Summary and Conclusions . . . . . . . . . . . . . . . . . 1
I. Economic Problems . . . . 5
. . . . . . . . . . . . .
A. Background and Current Situation . . 5
B. 1956 State Plan for the Restoration
of the National Economy . . . . . . . . . . . . 10
1. Agriculture . . . . . . . . . . .
. . . .
2. Industry . . . . . . . . . . . .
12
15
II. Foreign Economic Relations . . . . . . . . . . . . . 17
A. With the Sino-Soviet Bloc . . . . . . . . . . . . 21
1. Communist China . . . . . . .
2. USSR . . . . . . . . . . . . . . . . . .
3. Czechoslovakia . . . . . . . . . . . . . . .
4. East Germany . . . . . . . . . . . . . . . .
5. Hungary . . . . . . . . . . . . . . .
6. Poland . . . . . . . . . . . .
7. Bulgaria . . . . . . . . . . . . . . . . . .
8. Rumania . . . . . . . . . . . . . . .
9. North Korea and Outer Mongolia . . . . . . .
.
B. With the Free World . . . I . . . . . . . . . . .
21
22
23
2I.
24
24
25
25
25
26
1. South Vietnam, Laos, and Cambodia . . . . . . 26
2. Rest of the Free World . . . . . . . . . . . 26
III. Transport and Telecommunications System . . . . . . . 28
A. Transport . . . . . . . . . . . . . . . . . . . . 28
1. Highway Transport . . . . . . . . . . . . 28
2. Rail Transport . . . . . . . . . . . . . . . 29
3. Water Transport . . . . . . . . . . . . . . . 32
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4. Civil Air Transport . . . . . . . . . . . . . 33
5. Transport Prospects . . . . . . . . . . . . . .31
B. Telecommunications . . . . . . . . . . . . . ? ? 35
1. Radio . . . . . . . . . . . . . . . . . . 35
2. Wireline . . . . . . . . . . . . ? ? ? ? ? ? 35
Appendixes
Appendix A. Gaps in Intelligence . . . . . . . . . ? ? ? 37
Appendix B. Source References . . . . . . . . . . . . . 39
1. Estimated Production in 1955 and Planned production
for 1956 of Selected Agricultural Commodities 13
in North Vietnam . . . . . . . . . . . . . . . .
2. Estimated Production in 1955 and Planned Production
for 1956 of Selected Industrial Products 16
in North Vietnam . . . . . . . . . . . . . . . . . .
3. Estimated Volume of Oceanborn4~ Imports by the DRV
from the Soviet Bloc, May-December 1955 20
and January-February 1956 . . . . . . . . . . . .
4. Estimated Value of Selected Oceanborne Imports 20
by the DRV from the Soviet Bloc, May-December 1955
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CIA/RR IM-442 S -E -C -R -E -T
(ORR Project 15.1058)
ECONOMIC PLANNING AND ORGANIZATION IN NORTH VIETNAM
_L955_)'(*
Summary and Conclusions
In January 1956 the Communist government in North Vietnam,**
known as the DRV,*** announced its first economic plan, the 1956
State Plan for the Restoration of the National Economy.XXXX This
Plan recognizes that the DRV does not yet have a viable economy and
that the prospects for its economy becoming viable within the next
several years depend upon overcoming the agricultural deficit and
upon increased aid from other Sino-Soviet Bloc countries. The Plan
is limited in scope to restoring agricultural and industrial produc-
tion generally to the prewar levels, which means that traditional
imports of about 200,000 metric tonsf of food grains will have to
be maintained for subsistence until subsequent plans for boosting
indigenous production are realized.
The 13.5 million people of North Vietnam are approximately 90
percent dependent on agricultural pursuits for their livelihood,
and their principal crop is rice, of which there are 2 harvests a
year. An unprecedented series of natural calamities in 1955, in-
cluding the continuation of a 2-year drought, the worst floods in
100 years, a devastating typhoon, and plagues of insects, led in
* The estimates and conclusions contained in this memorandum
represent the best judgment of ORR as of 15 August 1956.
** As used in this memorandum, the term North Vietnam refers to
the geographical area of the former state of Vietnam north of the
17th parallel.
*** DRV is the abbreviation for Democratic Republic of Vietnam
(Viet Nam Dan Chu Cong Hoa), which is used in this memorandum to
designate the governmental apparatus of the Viet Minh, a common
abbreviation for Viet Nam Doc Lap Dong Minh Hoi (Vietnam Indepen-
dence League), the Communist Party of Vietnam.
**** Referred to hereafter in this memorandum as the 1956 State
Plan or the Plan.
J Tonnages throughout this memorandum are given in metric tons
unless otherwise indicated.
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the fall of the year to the fourth consecutive poor harvest. Relief
supplies of Burmese rice were shipped to the DRV by the USSR in late
1955 and early 1956, but these have been too small to make up the
rice deficit. It is claimed that the results of the spring 1956
harvest exceeded planned goals, but the results are insufficient to
alleviate preharvest food shortages. The primary agricultural
measures of the Viet Minh regime are intensive labor projects in
irrigation and flood control and modest increases in provision of
fertilizer and improved seeds. Heavy emphasis is placed on land
reform and peasant participation in Mutual Aid Teams, which are
organizational changes that have had no apparent effects as yet in
increasing production. Thousands of cadres have been assigned the
task of completing land redistribution in 1956 as well as the task
of enlisting the peasants in Mutual Aid Teams and enforcing their
cooperation in meeting assigned production quotas and taxes in kind.
The 1956 State Plan is also designed to overcome the severe dis-
ruption of industry caused by the withdrawal of French technicians
and plant managers and by shortages of repair parts, equipment, and
raw materials. Domestic production of cement and coal, the princi-
pal traditional exports, was very small in 1955 (about 760,000 tons
of coal compared with a past record of 2.6 million tons and. less
than 100 tons of cement compared with past production of 300,000 tons).
Furthermore, the institution of new taxes and the introduction of
government personnel into enterprises formerly private have brought
a majority of industrial firms to the verge of bankruptcy in order
that the Communist regime might take over their direction as "joint
state-private enterprises." The establishment of state merchandising
shops and marketing cooperatives has been pushed as rapidly as pos-
sible, curtailing private initiative and activity in these fields.
The foreign trade of the DRV has been at least temporarily cur-
tailed by the effects of war and the drought, greatly limiting the
availability of foreign exchange in a traditionally food deficit
area. Widespread shortages of goods of all kinds have resulted in
severe inflation. An attempt to establish "normal relations" with
South Vietnam and the conclusion of trade and aid agreements with
the countries of the Sino-Soviet Bloc, especially Communist China
and the USSR, are only beginning to have their effect in greatly in-
creased trade in 1956 over 1955. The largest of these agreements --
US $327 million* in aid to be received over a 5-year period -- was
* Unless otherwise specified, all dollar values in this memorandum
are in terms of US dollars.
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with Communist China. The aid is to be used primarily for economic
rehabilitation. A second aid agreement -- for $100 million over a
period of 2 years -- was signed with the USSR. This aid will be
used for the rehabilitation and construction of 25 enterprises, for
technical aid,, and for foodstuffs.
Despite the catastrophic occurrences -- floods, drought, and
disease -- and the industrial stagnation, the military strength
of the Viet Minh has been substantially increased as a result of
numerous truce violations by the Chinese Communists, who have
supplied extensive quantities of heavy military equipment. The
maintenance of a large military force is a further strain on the
local economy, although the floods and continuing drought in 1955
made necessary the wholesale application of military manpower
resources to the vital economic tasks of repair of dikes; emer-
gency irrigation work; and restoration of road, railroad, and
telecommunications networks.
It is not expected that the industrial development possible with
the scale of Sino-Soviet Bloc assistance as projected will result
in overcoming the trade deficit, at least over the next several years.
The area contains significant deposits of coal, iron ore, phosphates,
tin, manganese, chrome, and tungsten, the production of which could
be developed far more than it was under the French. The future
economic success of the DRV depends largely upon the commercial ex-
ploitation of North Vietnam's industrial raw materials, for which
adequate markets exist in the Free World even if Bloc supplies are
ample for Bloc industrial requirements.
In contrast with performance in other fields, the DRV's rapid
restoration of transport and communications facilities in North
Vietnam stands out as a significant accomplishment strategically and
economically. Because of extensive Chinese Communist aid and the
military ability of the DRV regime to conscript corvee labor, the
repair and extension of the road, railroad, and telecommunications
systems have progressed rapidly. Despite the debilitating effect
of famine on the general population, the Viet Minh government has
forcefully pushed both the construction of new military supply roads
along the Laotian frontier and the rehabilitation of railroads.
By the end of 1955 the road network had been restored to the prewar
level, and intensive work continued on improvements to the existing
Tonkin Delta road net. Completion of the Hanoi - Nam Quan railroad
early in 1955 and of the Hanoi - Lao Kay railroad in August 1956
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and further construction on the southern railroad line, which is
now restored to a point below Nam Dinh, have permitted the with-
drawal of most of the Chinese advisers on these projects. More-
over, the northwest railroad line will be connected to the
Chinese meter-gauge Kunming - Ho-k'ou railroad (which is planned
for completion by the end of 1956), thus linking Yunnan Province
for the first time, via the Lao Kay - Hanoi - Nam Quan line,
with the main standard-gauge Chinese railroad system. As the
North Vietnam meter-gauge system requires continued transloading
at the Chinese station of Ping-hsiang in Kwangsi Province, it
was decided in March 1956 to undertake conversion of the North
Vietnam railroad system to standard gauge. The amount of progress
made is not known. In support of this intensive railroad and road
construction work, telecommunications facilities have been ex-
panded, with the emphasis clearly on landlines similar to those
of the former French colonial system.
The total impact of economic reverses has been further compli-
cated by the lack of technically trained manpower and by delay in
establishing the essential elements of an economic control and
planning administration. The National Planning Board was estab-
lished only in October 1955, and a state statistical service in
November. The 1956 State Plan was hastily prepared, probably with
the aid of Soviet and Chinese Communist technicians, and was finally
promulgated only in January 1956. Thus an economic control a(hninis-
tration comparable to those in other Sino-Soviet Bloc countries is
only in process of development and probably is heavily dependent on
Soviet and Chinese technical advice. The need for satisfying the
minimum requirements of subsistence in the face of existing condi-
tions of food deficit, epidemics, inflation, and the maintenance
of the military establishment -- even before a sound base for fur-
ther economic development is created -- indicates that North 'Viet-
nam will continue to be an economic drain on the rest of the Bloc
at least until 1958 and possibly longer.
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I. Economic Problems.
A. Background and Current Situation.
Official pronouncements by the Viet Minh have indicated that
the continuation in 1955 of the adverse weather of 1954 resulted in
harvests at least as bad as and possibly worse than those of 19)i-5,
when .2 million people are reported to have died of starvation.
Since the establishment of peace with the signing of the Geneva
Accords in the summer of 1954, the Viet Minh leaders have described
the conditions facing them as a "famine unprecedented in the nation's
history," / and, in lieu of adequate resources of their own to cope
with these conditions, / they have obtained increases in the planned
Sino-Soviet Bloc aid in the form of 200,000 tons of Burmese rice
shipped to Haiphong by the USSR in the period September 1955 - April
1956. At that time the rice shortage was estimated to exceed 500,000
tons, and the Communist government has since referred to "preharvest
famine" and "food-short" conditions to be overcome in the spring and
summer of 1956. L/
The roots of the present situation date from 1954, when a
drought reduced the spring harvest. /! A review of developments
during that period indicates that the Sino-Soviet Bloc's increased
provision of truck transport units and logistic support to strengthen
Viet Minh military forces necessitated extensive road rehabilitation
in the north and northwest provinces of Tonkin. The Viet Minh decision
to engage in a decisive battle at Dien Bien Phu and the utilization
of newly acquired Soviet artillery required the labor of thousands
of coolies and human carriers for restoration of roads and for the
deployment of Viet Minh military forces and equipment. The conscrip-
tion of human carriers, coupled with maximum induction of eligible
men into military service, proved costly to the Viet Minh, both dur-
ing the 8 months before the battle and during the subsequent redeploy-
ment of Viet Minh units to the Delta, when the rainy season left a
large part of the military truck park inoperable on temporary hinter-
land roads. This enforced diversion of labor from agriculture re-
portedly helped to reduce the spring and fall harvests of 1954 in some
areas to about 50 percent of normal. J
The provision of large quantities of military supplies by the
Chinese Communists during and after the Geneva negotiations, in violation
For serially numbered source references, see Appendix B.
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of the truce agreements -- apparently in preparation for a continued
Viet Minh assault on the remaining French positions in the Delta
should the Geneva discussions fail -- placed the Viet Minh in pos-
session of a stockpile of arms and ammunition sufficient for at least
3 months' further operations. Thus the conclusion of the Geneva
Accords found the Viet Minh well supplied with arms and ammunition
but short of food and well organized for military operations but
lacking in civil administrative machinery. The Viet Minh government
administration, organized originally for a military support program,
had consisted principally of a Ministry of Defense and a Ministry of
Finance. The Ministry of Defense had operated its own war produc-
tion factories, established its own economic departments in the
military interzones, and circulated its own national war bonds. -7/
Similarly, the Army had collected food from the peasants and operated
the military supply depots to provide food for the population after
military requirements had been met. The Ministry of Finance had
operated the State Bank as the bank of issue, its currency being held
generally in low regard.
Three factors which contributed to the spread of famine con-
ditions in 1955 were the following: the levying of manpower from
the paddy fields for military support in late 1953 and during the
first 6 months of 1954, which reduced the harvest and left rice in
some cases unharvested in the fields; the requisitioning of food by
the military and the deployment of military supply depots with their
units in rapid. and continuous movement, which disrupted local sub-
sistence and food distribution patterns; and crop failures, the lack
of usual imports, and increasing opposition to rice collection, which
created shortages of rice for urban distribution.
Upon arrival in Hanoi in October 1954, the Communist govern-
ment stated that, in order to overcome the current food shortages,
the peasants would have to engage in self-help and that the planting
of manioc, maize, and other supplementary food crops should be empha-
sized. In the ensuing interharvest period, rice prices rose pro-
hibitively in the hinterland. In Hanoi, where strict rationing
measures were imposed and rice prices were controlled in order to
create the impression of well-being, the control machinery proved
inadequate to prevent hoarding, shortages, black market`s, and a
spiraling inflation. Until late 1955, these conditions caused delay
in fixing exchange rates between Sino-Soviet Bloc currencies and the
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Viet Minh dong.* 8J Noting the disappointing 1955 spring crop, the
Minister of Agriculture, in opening an agricultural conference,
called upon the cadres to "correct the weak points" of fifth-month
rice production with a view to increasing the next crop. J Never-
theless the government sought to carry out its planned collection of
agricultural taxes in kind. Because of tax assessments and insuf-
ficient reserves of food for their families, the peasants in many
places gathered the rice from the fields before it had ripened. 1.0
The tax effort was subsequently acknowledged to be only 65 percent
successful. ll/
This was the setting in 1955 for the worst climatic assault
on Indochina in 100 years, opening with the intensification of drought
in the spring of the year. As in 1954 and contrary to the traditional
pattern of the monsoon season, almost no rain fell in North Vietnam
during April and May. Newly planted rice had to be replanted in
many areas. In June and July, efforts at reconstructing dikes came
to a halt, as the lack of irrigation water necessitated breaching
the river dikes. In some cases, dams were built across the reduced
rivers to divert water into irrigation ditches. 12 There then oc-
curred an unusual variation of weather patterns: the monsoon rains
passed over North Vietnam and deluged China's hinterland areas of
Yunnan, Szechuan, Tsinghai, and Tibet. Northeast India had the
worst flood in a century as the Brahmaputra, draining from Tibet,
covered most of East Bengal. Lhasa was reported to have had 196
inches of rain,, and the new Sikang-Tibet highway was inoperable for
several months. The Salween River reached an unprecedented flood
level, washing out communications in Burma. The Mekong and Red
Rivers and their tributaries carried their share of this great run-
off into Indochina.
The Tonkin Delta dike system was designed to handle water
levels not in excess of 36 feet. Normally, the water levels of the
main tributaries of the Red River would not exceed 7 to 9 feet during
high water. The Black, Clear, and Gam streams reached levels between
55 and 73 feet during July, August, and September. The Delta dikes,
which in many places had been breached to divert trickles of water
* The Bong, the currency unit of the Viet Minh Ministry of Finance,
was originally intended to circulate on a par with the piaster of
the Banque de l'Indo-Chine, but the dong deteriorated during and
immediately after the war to about one-eightieth of the exchange
value of the piaster.
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into the dry paddy fields, were inundated by unprecedented water
levels. As the flood waters diffused from the deep valleys of the
uplands into the nearly flat Delta, only a few areas near the sea-
coast and remote from the river system escaped serious damage. Dur-
ing this period the government created an emergency Flood Control
Committee, assigned a large portion of the military forces to dike-
work, mobilized nearly half a million people for emergency construc-
tion, and endeavored to save essential communications. In the
hinterland, land brought into use for supplementary crops -- which
the government had hoped to employ as a palliative until the fall
hary9st -- also was affected. 13
The worst flood in 100 years was followed on 26 September
by the last and worst typhoon of the season, which struck the
Tonkin Delta area where the rice had not yet been harvested. The
Viet Minh coastal provinces all suffered dike breaches and flooding.
Power utilities were destroyed or damaged in many towns, including
Hanoi, and transportation was again interrupted. In the highlands,
where the typhoon expended itself, most of the remaining supplementary
food stocks were destroyed, either directly or through a plague of
worms and grasshoppers which followed the typhoon. 14,/ Before and
after the floods and typhoon, the drought paradoxically continued.
To cope with the disaster as well as to initiate long-range planning,
the government set up a National Planning Board, largely composed of
members of the Council of Ministers, whose first immediate concern
was the flood and famine situation. L
The continuing inadequacy of food over several years had
caused conditions of debility among the people, which facilitated
the spread of epidemics of malaria, amoebic dysentery, tuberculosis,
yaws, gastroenteric diseases,: and trachoma. To check the spread of
diseases, a major Sino-Soviet Bloc medicinal aid program 16 was
inaugurated. Closely paralleling the human epidemics, a cattle plague
in the fall destroyed a large portion of the country's livestock. 17/
Evidences of popular resentment against government measures
were noted during the 1955 floods when the regime frequently and pub-
licly condemned "saboteurs" who were impeding flood control work and
who "severed communication lines" in an alleged "unsuccessful effort
to thwart the government." 18 It is appaxent that grain collections,
drought, flood, food shortages, and the spread of disease, which had
influenced Catholic opposition and increased emigration to the south,
also contributed to popular resentment and that this mood was further
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encouraged by the government's efforts to take over non-Communist
currencies which were in the hands of the public. Official exchange
conversions were temporarily authorized at rates disadvantageous to
the holders of such currencies, 19 and in November 1955, free
Indochinese piasters were outlawed by the Viet Minh for business
transactions. :Popular opposition was also stimulated by the con-
tinued dependence of the government on the military supply depot
system for distribution of rice to civilians. Under this system,
as was officially admitted in November 1955, no food was distributed
in some areas, and the newly established civilian food distribution
organization was provided with such limited stocks that its prospects
of success depended on new supplies.
Negotiations which had been undertaken with urgency in June
1955 in Peiping and Moscow were concluded to provide for large-
scale international Communist aid to the DRV. Upon his return from
Moscow in July, Ho Chi Minh thanked the USSR for its new $100-million
aid program to increase agricultural and industrial production and
called upon the people to "do their best to be worthy and merit this
aid." 20 The appeals made to the Bloc at that time resulted in ship-
ments of over 100,000 tons of rice, largely from Burma, to Haiphong
in the last quarter of 1955. 21 This relief may be compared with
the normal import requirements of 200,000 tons and with the rice pro-
duction deficit of about 400,000 tons under the average annual pro-
duction for all North Vietnam; the total imports amounted to less
than 1 month's food requirements. On 27 December the government
announced that the country was "experiencing an unprecedented famine." 22
The Public Health Service confirmed the existence of famine conditions
in reporting that, during 1955, the average caloric intake per person
had declined to 500 calories a day compared with the previous state-
ments that 2,000 calories would be considered by the government to be
a bare minimum for subsistence.
Further weather reverses occurred in 1956. The drought con-
tinued, and in January a cold wave brought to the Delta freezing tem-
peratures, the first ever recorded in Tonkin. Urgent requests for
winter clothing were made to Peiping, and broadcasts from Hanoi indi-
cated that much rice had to be replanted. 23 Orders placed with the
Bloc for irrigation pumps were slow in being met, complicating both
the problems of irrigation of dry lands and pumping of flooded lands.
It was stated in a Hanoi newspaper article in February 1956 that, be-
cause of shortages of pumps and of road transport facilities to convey
the pumps even if they were available, irrigation had been restricted
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on those fields in the interior which were more than 23 feet above
sea level. The article called on the young men in the country to
use manpower to overcome nature. 24
Beginning in January 1956, references by the Hanoi radio to
"continuing drought," "widespread disease," and "precautionary
measures against a third-month famine" indicate that health and
climatic conditions were still problematical and that, in the absence
of further substantial imports, famine conditions might become more
acute before the June harvest. L5/
B. 1956 State Plan for the Restoration of the National
Economy. 262
The Council of Ministers had intended 1955 to be the first
of 2 years of planned economic recovery for North Vietnam, after
which a larger scale plan of longer duration would be launched. But
climatic reverses, the government's lack of experience in economic
administration and planning, and the delay in developing comprehensive
plans and in obtaining Sino-Soviet Bloc technical aid and equipment
contributed to make 1955 generally a year of trial and error, of
false starts and backing, and probably of acute distress in large
parts of the country. Only in the fields of railroad and road re-
building and telecommunications, where Chinese Communist aid was
most readily available, was substantial progress made.*
The formation of a National Planning Board in October 1955,
the creation of a statistical service in November 1955,-and the
arrival of Sino-Soviet Bloc advisers and technicians enabled the
government by early 1956 to inaugurate planned economic development
and to utilize effectively Sino-Soviet Bloc aid for that purpose.
Up to the end of 1955, very little progress had been achieved in
developing production of the established industries, such as coal,
cement, electric power, ferrous and nonferrous metals, and textiles.
Rehabilitation and development projects other than irrigation, flood
control, and restoration of the transport and telecommunications
systems, which took immediate priority, had to be delayed pending the
availability of aid equipment, which began to arrive in the second
quarter of 1956.
* These developments are discussed in III, below.
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The 1956 State Plan was formulated by the National Planning
Board after its appointment in October 1955 and was first announced
by Ho Chi Minh in December 1955? It was elaborated in more detail
and its principal points were. emphasized by Nguyen Van Tran, Vice-
Chairman of the National Planning Board, and by Premier Pham Van
Dong and the ministers responsible for its execution in articles
and public statements in January 1956, when it was discussed and
heavily, publicized in a series of conferences of Party cadres, mer-
chants, industrialists, trade union leaders, and educators. Al-
though no over-all figures of financial allocations were given,
the total expenditures planned for the various ministries in carry-
ing out the Plan show the following allocations: agriculture
and irrigation;, 20 percent; industrial construction, 38 percent;
transport and communications, 23 percent; and culture, health,
education, and miscellaneous, 19 percent. 27
The formulators of the Plan, apparently under the influence
of and with the advice and assistance of Soviet or-Chinese Communist
technical consultants, developed the Plan along the lines of Chinese
experience in :L949-52, taking into account the existing characteris-
tics, the assets, and the liabilities of the economy of North Vietnam.
On the debit side, in their view, were the remnants of the colonial
system and a system of land tenure and private ownership of produc-
tive facilities which were repugnant to the Communist leadership but
which had to be utilized in developing production. Other liabilities
were the devastation of war, the debilitating effects of 2 years of
adverse weather, industrial stagnation, and the removal of industrial
equipment by the French, as well as the lack of training and skills
on the part of the existing labor force for executing a national
economic plan. On the asset side, in their view, were the "rich"
natural resources and the productive agricultural potential of the
land, which they believed could be more fully realized than ever
before by the completion of the agrarian reform, by the inauguration
of preliminary socialist forms of Mutual Aid Teams and marketing co-
operatives, and by the friendly aid of the "People's Democratic
countries," which would augment the strength of the Vietnamese people.
Aims of the Plan included: expansion of the state-owned sector;
preparation of peasants' organizations and private industries for
transition to socialism; restoration of production to the prewar level;
rehabilitation and repair of old industries; development of new in-
dustries and processes; and intensive technical training of cadres
and workers. The accomplishment of these aims was expected to build
the strength of the DRV for the eventual peaceful unification of North
and South Vietnam under the Viet Minh government.
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Premier Pham Van Dong and the responsible ministers on the
National Planning Board elaborated at length on the difficulties
which would attend the execution of the Plan. The need was stressed
for education of cadres who could train, instruct, and encourage the
workers. Decisions concerning the Plan were publicized so that they
might be studied and understood by all classes of the population.
A basis was laid for close coordination between the governmental
ministries and such people's organizations as trade unions, farmers,
educators, youth organizations, merchants, and industrialists.
The Plan is broken down into six categories of programs and
objectives, as follows: agriculture, industry, transport and com-
munications, commerce, public health, and education and culture.
The elaboration of these programs by the responsible ministers before
the various conferences of people's organizations in January 1956
involved considerable repetition of slogans; encouragement to study
and hard work; and warnings to avoid idleness, waste, and sabotage
by enemies within. Under the mass of verbiage it is clear that the
goals have been set for the planned development of the DRV.econony,
with work norms, Stakhanovite emulation, rationing, and strict allo-
cation of resources for achievement of production goals.
1. Agriculture.
Although it is constantly reiterated that agricultural
rehabilitation is the most important program under the 1956 State
Plan and is fundamental to the recovery and development of the other
sectors, agriculture does not receive the largest allocation of
funds in the state budget 20 percent compared with 38 percent for
industry and 23 percent for transport and communications. Yet this
degree of emphasis is greater than in any other Communist country
and constitutes recognition that self-sufficiency in agricultural
raw materials and overcoming of the food deficit are prerequisites
to a sound development of the economy as a whole and to the expan-
sion of industry and foreign trade. Production of raw cotton is to
be strongly encouraged (although it was found uneconomic under pre-
vious administrations). Increased production of sugar, tea, coffee,
soybeans, castor beans, sesame seeds, peanuts, timber, and various
fruits is also needed to provide the raw materials for local indus-
try, handicrafts, and restoration of transport facilities and for
expansion of foreign trade. Improvement in selection of seeds,
provision of fertilizers, breeding of draft animals, and irrigation
and flood control are to be vigorously supported and publicized.
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Mutual Aid Teams are to be widely organized with a view to increased
production, extension of improved techniques, and rational division
of labor. Nghiem Xuan Yem, the Minister of Agriculture, has annpunced
that 50,000 hectares of reclaimed land will be brought under cultiva-
tion and that acreage under cultivation in rice and subsidiary crops
will be substantially increased. The major goals of the 1956 State
Plan for agriculture, compared with previous levels of production and
estimated production in 1955, are shown in Table 1.
Estimated Production in 1955 and Planned Production
for 1956 of Selected Agricultural Commodities in North Vietnam
1956
Previous
1955
1956
Plan Goal
as a
Commodity
_ Unit
Level of
Production
Estimated
Production
Estimated
Goal
Percent
of 1955
Rice
(paddy)
Thousand metric
tons
2,400
1,820
2,220
122
Sweet
potatoes
Thousand metric
tons
150
101
150
149
Manioc
Thousand metric
tons
45
30
45
149
Cotton
Metric tons
1,122
490
1,122
230
Sugar
Thousand metric
tons
28
12
28
250
Tobacco
Metric tons
4,162
1,26D
4,200
330
Industrial
wood
Thousand cubic
meters
385
160
410
250
The Viet Minh Council of Ministers apparently has deter-
mined to follow the model of Communist China in the organization of
the economy. Agrarian reform, involving land redistribution, and
Mutual Aid Teams, involving mobilization of the masses under Communist
cadre supervision and institution of fixed quotas for production,
taxes in kind, and deliveries to marketing cooperatives, are patterned
after Communist China's agricultural reorganization of 1949-53. Now
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in its fifth and "final decisive phase," agrarian reform is a heavily
emphasized feature of the 1956 agricultural program. It provides
for the expropriation of lands belonging to landlords (almost non-
existent as a class in the Tonkin Delta), traitors, reactionaries,
and democrats, and the formation of Mutual Aid Teams as a first step
toward collectivization. "Where the village has a reduced popula-
tion and a large amount of land for redistribution fa- direct refer-
ence to areas affected by the mass migration of 850,000 people to
the south families of fallen. soldiers, as well as the landless and
impoverished, will benefit." The "rich peasant" is the chief victim
of the seizures, although it is emphasized that the current agri-
cultural crisis necessitates "all-class cooperation" to restore nor-
mal production. 28
The chief source of revenue in the DRV is the rice tax,
which is collected after each of the year's two harvests. Thus,
in order to increase the effectiveness of tax collection by the
Ministry of Finance, the agrarian reform measures require the regis-
tration of land holdings and assessment of their productivity. The
dispatch of thousands of Communist cadres into the rural areas and
the establishment of a network of branches of the State Bank are
designed to provide the mechanism for tax collection, for registra-
tion of land holdings and more effective assessment of each far='s
productivity, for controlling output, for extending control of cur-
rency in circulation, and for establishing a more pervasive security
apparatus. 29 Inasmuch as at least 90 percent of the country's
population derives its income directly from agriculture, the popular
desire to increase production appears to fit in with the government's
desires for increased tax revenues and for economic growth. The
Viet Minh regime's attack on this problem appears to differ somewhat
from the typical Communist approach to the problem of economic de-
velopment in a backward country -- that of seeking to control agri-
cultural production in order to siphon off investment funds for
reconstructing and expanding the industrial sector. The Viet Minh
leaders appear to recognize the need of first overcoming the tra-
ditional food deficit of their agricultural economy and the effects
of the recent series of natural calamities and shortages of agri-
cultural investment goods. The outcome of the current program will
depend largely on whether the provision of investment goods -- which
are channeled to the peasants through the imposed Communist institu-
tions.-- is adequate both to support the planned increase in produc-
tion and to serve as inducement to the peasants to cooperate in the
prescribed new forms.
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The government has publicized its rather limited efforts
to assist the peasant with seeds, fertilizer, draft animals, irriga-
tion and flood control equipment, and credit. The government is
largely dependents however, on Sino-Soviet Bloc aid for the necessary
investment goods to improve agricultural production. Among the
various foreign aid projects already begun are the following: a
Czechoslovak project to provide pumps and technical assistance for
irrigation, Soviet provision of fertilizer, and an East German aid
project first to restore production of phosphate fertilizer to
30,000 tons per year and later to increase it to the previous level
of 150,000 tons. The main efforts to aid agriculture, however, are
the government's mass labor projects in flood control and repair of
dikes, which were begun in 1955.
It is not clear what will be the effect of government
pressure on the peasant to participate in Mutual Aid Teams, market-
ing cooperatives, and other organizational changes which lead to
government control of output. Government pressure may meet peasant
resistance in the form of decreased production. The first announce-
ments of the results of the June harvests of 1956 claim overfulfill-
ment of goals, so that, as reported by Nghiem Xuan Yem, Minister of
Agriculture, "the chronic food shortage in preharvest days has been,
generally speaking, lessened and in many localities eliminated." 30
The inference from this statement, despite the claim of overfulfill-
ment, is that the DRV itself is not entirely satisfied with the first
half year's results under the agricultural program of the 1956 State
Plan.
2. Indus try .
In its program for industry the National Planning Board
recognizes that the rate of expansion of the industrial sector would
be dependent on the resources available from industry and from agri-
culture. The availability of food and raw materials from agriculture
would be dependent on increases of production and hence, to some
extent, on an increase in the production of chemical fertilizer and
on favorable weather. The goals for the production of phosphate
were fixed at :392 percent above the 1955 total and for the production
of cotton textiles at a "large" increase above that in 1955. Other
goals, as published, were the following: canvas shoes, 200 percent
above the 1955 total; bricks and tiles, 162 percent. For the repair
of locomotives at Gia Ism, the goal was fixed at 50 percent above
that in 1955, with the same increase set for the construction and
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repair of passenger cars and freight cars. Production of electric
power at the Hanoi power plant was to increase 32 percent, whereas
costs were to be lowered 24 percent; total output of electric power
was to increase 152 percent,. Although, as in the case of agri-
culture, the goals are designed to bring production somewhere near
the prewar levels and are therefore relatively modest, the planners
indicated the expansion of output meant the increase of foreign
trade, which would bring more foreign exchange for the purchase:
of machines and industrial raw materials. Estimated production in 1955
and goals for 1956 of selected industrial products are shown in Table 2.
Estimated Production in 1955 and Planned Production
for 1956 of Selected Industrial Products in North Vietnam
1956
Plan Goal
Previous
1955
1956
as a
Commodity
Unit
Level of
Production
Estimated
Production
Estimated
Goal
Percent
of 1955
Coal
Thousand metric
tons
2,500
760
1,700
228
Tin
Metric tons
1,625
450 J
1,500
329
Phosphate
Thousand metric
tons
150
30
150
492
Cement
Thousand metric
tons
312
20
300
1,500 b
Cotton
Tons
yarn
13,500 100
13,500
13,500 b
Electric
Million kilowatt-
power
hours
140 J
40
100 1
252
Paper
230
Soap
416
Leather
184
a. Metal content of tin concentrates.
b. Given in the published Plan as "barge" percentages.
c. Including numerous small diesel plants whose production has not
hitherto been recorded.
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For the period since the assumption of control by the
Viet Minh in May 1955, production has been nominal in the estab-
lished industries. Probably the coal industry has made the best
record, with a production of possibly 760,000 tons for 1955 (in-
cluding the period of French control), which may be compared with
the previous peacetime record of 2.6 million tons in 1939. Cement
production was resumed at the Haiphong plant only in December 1955
and, it is estimated, may reach its forfner rate of approximately
300,000 tons per year by the end of 1956. With the benefit of
Soviet Bloc technical aid and equipment, electric power production
in 1956 may possibly resume the prescribed goal of 100 million
kilowatt-hours. The DRV plans to produce 150,000 tons of phos-
phate for fertilizer in 1956 despite the small output in 1955.
CIA estimates, however, as a result of East German aid, that pro-
duction in 1956 will reach 100,000 tons and the goal of 150,000
tons in 1957. The need for exportable ferrous and nonferrous
minerals to redress North Vietnam's traditional trade deficit
has occasioned the enlistment of Sino-Soviet Bloc aid in projects
to increase production of these ores. These and the industrial aid
projects, insofar as they have been mentioned in official announce-
ments and intelligence reports, are discussed in II, below.*
II. Foreign Economic Relations.
Having been severely hampered in 1955 in their efforts at eco-
nomic rehabilitation by the natural calamities of drought, flood,
typhoon, and the resulting severe food shortage, the Viet Minh
leaders turned to the Sino-Soviet Bloc for greater assistance than
apparently had been planned under the aid agreements of July 1955.
The USSR underwrote large shipments of rice purchased from Burma --
possibly 250,000 tons, of which over 100,000 tons had been received
by the end of 1955. 32 Communist China sent some rice in addition
.to its original planned shipment of 10,000 tons in December 1954.
Other Sino-Soviet Bloc countries made token shipments of rice. To
save the remaining crops, some Soviet fertilizer and a number of
Czechoslovak pumps were imported. 33 Additional aid totaling less
than $500,000 has been offered or sent to prevent the spread of
J Although the DRV obtained additional aid from the
epidemics. 34
Bloc, the restoration and development of the rest of the economy
has consequently had to be slowed down. Moreover, the need for
* For detailed information on industrial facilities, mineral re-
sources, and production, and on prospects for development thereof
through 1957, see source 31/.
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ships to transport rice from Burma has reduced considerably the al-
ready limited shipping and port accommodations available for im-
porting goods from the Bloc.
Because restoration of the economy depends in part on the de-
velopment of foreign trade, the Viet Minh officials turned their
attention to the rehabilitation of transport links with the Sino-
Soviet Bloc. With Chinese aid, the restoration of the overland
routes to China was soon accomplished, and Haiphong, the only
major port in North Vietnam, was opened. One large dredge arrived
from the USSR in March 1956, and additional dredges and cranes to
increase the port's capacity are on order from the Bloc. 35
Although the announcements of volume and value of trade lack
precision, it is clear that total trade in 1955 increased above
that in 1954. Viet Minh officials have claimed that government
exports more than doubled, but have stated merely that government
imports were "superior to the 1954 level." 36 The reported in-
creases in trade with the Sino-Soviet Bloc, however, suggest a very
large increase in total imports. Thus the DRV has claimed that,
compared with 1954, trade "in both imports and exports" has increased
400 percent with China and as much as 700 percent with other Soviet
Bloc countries. 37
Trade in 1956 is scheduled to increase 91 percent under the
1956 State Plan. 38 The Communist reporter Burchett, however,
in commenting on this Plan, has stated that "this year's foreign
15
trade may be 5 or 6 times that of 1955" after considering the "con-
tracts signed already and others about to be signed." 39 Later
reports indicate that trade with Communist China (as distinct from
aid) is expected to be 2.5 times the amount of total trade in 1955.
Trade with other Bloc countries is expected to be "4 times higher
than during 1955, with Soviet Russia and Czechoslovakia, respec-
tively, 5 and 6 times higher." 4/
The DRV's foreign trade during 1955 was carried on almost entirely
with the Sino-Soviet Bloc. Trade with the Free World was largely
limited to Hong Kong, Japan, and (illegally) South Vietnam. Rice
imports from South Vietnam through April 1955 were valued at $4 mil-
lion. The implementation of the trade agreement with France and the
probable increase in trade with Japan in 1956, however, should in-
crease slightly the Free World's share of the DRV's trade.
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In 1955 the DRV concluded trade agreements with Communist China,
the USSR, Czechoslovakia, and France. Trade agreements for 1956 have
been or will be signed with all Sino-Soviet Bloc countries except
possibly North Korea, Albania, and Outer Mongolia.
An analysis of shipping (see Tables 3 and 4*) and other trade
data indicates that rice was the major import in 1955, amounting
to over 145,000 tons. In addition, probably 15,000 tons of rice
were received from Communist China, Bulgaria, and Poland.** 41
Thirty thousand more tons of rice probably reached the Viet Minh
from South Vietnam via Haiphong. 42 Since the cession of Haiphong
in May, some rice probably has been purchased clandestinely from
the south. It is estimated that approximately 14,000 tons of fer-
tilizer and at least 16,000 tons of petroleum, possibly including
2,000 tons received overland, have been sent by the Soviet Bloc.
Possibly 6,000 tons of cotton and textiles were also obtained from
the Bloc. The volume of metals, machinery, and vehicles is un-
known, but may not have been much more than 5,000 tons in 1955?
Small amounts of paper, medicines, cement, chemicals, and other food-
stuffs also were imported. In the first 2 months of 1956, 57,000
tons of rice and 10,800 tons of petroleum probably reached North
Vietnam.
The DRV is making strenuous efforts to expand exports in order
to earn foreign exchange. Much of the technical assistance from
the Sino-Soviet Bloc is directed into those light industries and
extractive industries which will produce goods for export. Probably
the largest export in 1955 was coal, although some of the coal was
earmarked as payment to the French for the transfer of the Hongay
mines. Mining equipment has been imported to expand coal output and
to develop other mineral resources which are largely untapped. Bloc
technicians are surveying these resources, especially the phosphate
deposits. Czechoslovakia is providing material and technical assist-
ance for the exploitation of the forest resources of North Vietnam.
Despite these efforts to develop the major export resources in
addition to all kinds of minor exportable products, the outlook for
any great volume of exports is unfavorable. Many exportable prod-
ucts are unknown in the Bloc, and it is necessary to develop a mar-
ket for them. Thus the DRV has exhibited various products to the
Bloc at the Leipzig, Plovdiv, Poznan, and Hungarian International Fairs.
Tables 3 a:nd 4 follow on p. 20.
Rice from Poland, normally an importer, was a transshipment from
Burma.
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Table 3
Estimated Volume of Oceanborne Imports by the DRV
from the Soviet Bloc
May-December 1955 and January-February 1956
-December 1955
Ma
January 1956
February 1956
Commodity
y
Rice
106,900 /
24,700 -
32,500 a/
Other foodstuffs
1,600
Fertilizer
13,800 a/
9,500 a/
Petroleum and its products
14,100 a
10,800 aJ
Metals
2,500
200
Machinery
100
Cotton and textiles
6,200
300
Paper
600
Unknown
1,900
6,700
700
147
52,200
32,500
,
a. Probably imported on Soviet account.
Estimated Value
Table 4
of Selected Oceanborne Imports by the DRV
from the Soviet Bloc
May-December 1955
dit
Volume
(Thousand Tons)
Representative
price a/
(US $ per Ton)
Value
~7lion US )
y
Commo
107
140
15
Rice
Fertilizer
14
65
1
Petroleum and its products
14
50
1
135
17
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Direct aid. from the Sino-Soviet Bloc has supplemented the limited
foreign exchange available to the DRV from exports. Nearly every
Bloc country -- even North Korea and Outer Mongolia -- has given some
aid to the DRV. Communist China has extended aid totaling $327 m'll-
lion over a 5-year period, and the USSR has granted $100 million
over a 2-year period. The other countries have not revealed the
amount of their aid.
A. With the Sino-Soviet Bloc.
1. Communist China.
a. Trade and Aid Agreements.
Trade protocols between the DRV and Communist China
were signed for 1955 to cover general trade and the special border
trade. 44/ These protocols provided for a fourfold increase in
trade over 19`54. Communist China probably exported commodities
similar to those exported in 1954 -- cotton textiles, machinery,
transport and communications equipment, medicines, and paper -- in
exchange for agricultural and mineral products from North Vietnam.
In July 1955, Communist China and the DRV signed an
agreement "to present without compensation to the Government of the
Democratic Republic of Vietnam 800 million Chinese yuan" (1,224
billion Bong, or $327 million) to help the DRV rebuild railroads, river
docks, highways, and bridges and to restore and construct textile
mills, tanneries, factories for manufacturing medical equipment,
electrical equipment, and agricultural implements, a "paper mill,"
and the like. In addition, Communist China will provide technicians
and train DRV workers as apprentices in Chinese enterprises. This
aid also will cover the cost of studies for DRV students in China.
The aid will be extended over a period of 5 years. 45
Z.j
It is reasonable to assume that imports of military
supplies from the Bloc are continuing, probably under a separate
and secret military aid or loan agreement.
b. Imports.
Little is known about the commodity composition of
the trade between China and the DRV. The DRV has reported receipt
of cement, machinery, paper, sugar, textiles, and rice. Although
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it is difficult to distinguish between aid and trade, most of these
supplies probably have been imported as aid.
c. Exports.
Chinese Communist ships have been reported at Hai-
phong loading coal destined for China. L6/ Another source has re-
ported the export of antimony and tin ores to China, 47/ amounting
to 20 to 24 tons a day, which, however, appears to be optimistic.
As China has long been an exporter of these metals, such imports
probably would be intended for reexport.
a. Trade and Aid Agreements.
Throughout 1953 and 1954 there were few references
to Soviet aid to or trade with the Viet Minh. A major Soviet aid
agreement, however, was signed in July 1955 during Ho Chi Minh's
visit to Moscow. L8/ At that time a joint statement announced that
the USSR had granted 400 million rubles* as aid over a period of
2 years. The agreement promised Soviet aid in "the reconstruction
and building of 25 industrial and public utility enterprises" 49//
and aid in checking epidemic diseases and in the providing of
food. 50/ The growing famine conditions apparently prompted Hots
visit, for the USSR subsequently contracted to buy up to 250,000
tons of Burmese rice for North Vietnam. 51 A trade agreement also
was concluded during Ho's visit. 52 No official announcement of
the intended exchanges has ever been made, however, and there have
been no official statements on trade arrangements for 1956 other
than estimates of a fivefold increase of trade.
b. Imports.
Probably most of the Soviet exports to the DRV have
been shipped by sea. Sea shipments might be quicker than rail ship-
ments in some cases and are less expensive. Over 100,000 tons of
rice have been reported in 1955 moving from Burma on Soviet account. 53
It is estimated that the DRV received 14,000 tons of fertilizer, pos-
sibly of Soviet origin, in 1955. The Viet Minh referred to these
shipments as having played an important role in saving the food crops.
* Equivalent at the official rate to US $100 million.
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Fourteen thousand tons of petroleum arrived during 1955. Smaller
amounts of cotton and textiles (6,000 tons), metals (2,500 tons),
paper (600 tons), vehicles, and machinery were reported to be
moving by sea. Several thousand tons of machinery, vehicles,
metals, petroleum, and medicines probably also came by rail
through China.
Expected shipments of rice and petroleum from the
USSR in the first 2 months of 1956 totaled 57,000 tons and 10,800
tons, respectively. Ten thousand tons of fertilizer arrived in
Haiphong in January. It is obvious that these imports have been
designed to relieve the serious local shortages.
c. Exports.
Little is known about exports from the DRV to the
USSR, although the exports probably consist of indigenous agri-
cultural products.
3. Czechoslovakia.
Several agreements for 1955 were signed on 10 August 1955
between the DRV and Czechoslovakia. A commercial agreement called
for Czechoslovak deliveries of diesel motors, water pumps, other
machines, textiles, and chemicals in exchange for oilseeds, timber,
rattan, tea, coffee, and spices. 55 A second agreement was signed
providing aid for the rehabilitation of the economy. Czechoslovakia
agreed to supply scientific and technical experts in addition to
"machines and commodities." The DRV will send students to Czecho-
slovakia for technical studies. 56/ On 27 January 1956 a goods ex-
change and payments agreement was signed for the year 1956. The DRV
will continue to export those products mentioned in the 1955 agree-
ment. Czechoslovak exports will be similar to those of 1955. The
volume of exchange will increase fivefold over 1955, according to
the agreement, 57 or sixfold, according to a July 1956 statement. 58
A triangular agreement with Japan has been worked out
under the Czechoslovak-DRV trade and payments agreement. Japan will
import coal from the DRV and export two 5,000-ton freighters to
Czechoslovakia on a switch account basis; Czechoslovakia's exports
to the DRV will be settled under the trade agreement. 59
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4. East Germany.
The signing of trade agreements between the DRV and East
Germany in 1954 has been reported twice. The first report indicated
that an agreement covered the period from 10 October 1954 to 1 March
1955, and the second report indicated the signing of an agreement
in December 1954, apparently for 1955. 60 Neither of these reports
seems very reliable. No trade agreement with East Germany was men-
tioned by the Communist reporter, Burchett, until 1956. The announce-
ment by the DRV in February 1956 that a trade agreement would be
signed shortly suggests that this is the initial trade agreement
with East Germany. According to the DRV, the over-all principles
of the agreement had been agreed on, but the final selection of ma-
chinery and heavy equipment would be made at the Spring Fair in
Leipzig. Thus in March 1956 it was announced that the trade agree-
ment had been signed in Leipzig on 2 March. According to the terms
of the agreement, the DRV will export timber, peanuts, sesame,
coffee, and handicraft products in exchange for East German machinery,
chemicals, and medicines. 61
An economic aid agreement was also signed on 31 January
1956 whereby East Germany will provide optical equipment, chemicals,
machine tools, equipment for chemical works, mining equipment, poly-
graph printing works, and automatic telephone exchanges. The agree-
ment specifies that East Germany will supply technicians and machines
to survey and develop phosphate deposits in North Vietnam. 62
5. Hungary.
Hungary has sent aid supplies to the DRV since 195., but
the first formal agreement was not signed until 16 December 1955.
Hungary will give agricultural, industrial, and other machinery; trans-
port Vehicles; metals; medicine and medical instruments; and consumer
goods to the DRV in 1955-56. In addition, Hungary will send scientists
and technicians. 6/ At the same time, a protocol was concluded which
laid the groundwork for a trade agreement for 1956. L4/
6. Poland.
As in the case of other Satellites, aid goods were dis-
patched to the DRV by Poland before formal economic relations were
established. In July 1955, Polish aid consisted of automobiles,
trucks, rice, medicine, and medical equipment. / It was only on
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7 February 1956 that aid was formalized in an agreement covering 1955
and 1956. Under this agreement Poland will provide machinery, equip-
ment, tugboats, barges, motor cars, tools, rice, pharmaceuticals,
textiles, 6/ and other products.
On the same day a goods exchange and payments agreement
was signed providing for DRV exports of coal, minerals, agricultural
products, forest products, and handicrafts in exchange for Polish
machinery, metals, pharmaceuticals, chemicals, and "stable" indus-
trial consumer goods. L7/
7. Bulgaria.
Bulgaria had sent to the DRV such items as rice, clothing,
canned meat, and oil before a trade agreement was signed on 10 January
1956. The trade agreement provides for exports from the DRV of such
items as lumber, peanuts, sesame, opium, ores, and almond oil in ex-
change for electrical goods, chemicals, medicines, and industrial goods
for construction purposes. 68
8. Rumania.
On 17 April, two agreements were signed between the DRV
and Rumania for 1956 and 1957 providing for Rumanian exports of elec-
trical apparatuses and various consumer goods in exchange for tea,
timber, agricultural products, and handicrafts, and for Rumanian
technicians and aid goods -- agricultural equipment, generators, and
cloth. 69
9. North Korea and Outer Mongolia.
A North Korean delegation was reported visiting Hanoi
and Haiphong in August 1955. !/ In a November article in the Hanoi
press it was mentioned that North Korea, among other countries, was
giving aid to the DRV. 71 Apparently the aid is small, and there is
no need for a formal aid or trade agreement. Outer Mongolia has
made.a token gesture of friendship by presenting to the DRV 600 animals,
200 tons of meat, 25 tons of butter, and 25 tons of sausage. 72
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1. South Vietnam, Laos, and Cambodia.
From December 195+ until the cession of Haiphong to the
DRV in May 1955, shipments to Haiphong increased rapidly. In January
1955, 1,214 tons were shipped from South Vietnam to Haiphong. In
February, shipments rose to 6,000 tons; and in March, shipments had
jumped to 15,000 tons. The 22,000 tons shipped in these 3 months
may be compared with 12,000 tons shipped in the comparable period
of 1954. The increase in 1955 shipments was caused by the critical
shortage of rice in North Vietnam and by French traders taking the
opportunity of stockpiling all kinds of goods in anticipation of
trade with the DRV after the turnover of Haiphong. Although the
issuance of rice shipping permits for Haiphong was stopped on 15
April, it has been estimated that 3-2,000 tons would be shipped by
18 May under licenses already issued. 73
After the cession of Haiphong, all legal trade with North
Vietnam ceased. Some smugg:Ling continues between North Vietnam and
South Vietnam, however, and the loss of the tax on goods smugg=led
may be sufficiently large to encourage South Vietnam to legalize trade
with North Vietnam. The Viet Minh has reported that the interchange
with South Vietnam has increased greatly. Thus one (ambiguous)
statement made in August 1955 claimed that the quantity of goods
exchanged "during the early half of 1955 alone was 1.5 times that of
1954." 74 The considerable volume of Viet Minh propaganda in the
first half of 1955 calling for the establishment of normal relations
with South Vietnam has dwindled, and little mention has recently been
made of this issue.
2. Rest of the Free World.
Upon the cession of Haiphong, French technicians re-
mained at the Hon Gay Coal Mines and the Haiphong Cement Works to
assist the Viet Minh in their operation. Reimbursement for the
transfer of these two assets has been estimated as 5 billion dong,
or 1 million tons of coal, over 15 years for the coal mines and
25 billion dong for the cement works. 75
On 1 June 1955 the French were reported to have sold the
Hanoi tramway for 300 million francs in 50 semiannual installments
of 6 million francs each. 76 On 19 September 1955, however, the
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French agreed to pay the Viet Minh 265 million francs for damages
to equipment removed from public buildings during the evacuation
of North Vietnam. 77
In October 1955 the French and the Viet Minh came to
terms over trade in an agreement providing for 500 million francs
($1,L+30 000) in trade each way for 1 year. According to this agree-
ment, 6l the DRV will deliver coal (possibly 100,000 tons), 79
raw silk, agricultural products, forest products, and handicraft
products in exchange for such imports as French machines, spare
parts, textiles, vehicles, pharmaceutical goods, chemicals, build-
ing materials, ironware, and books. Reports during the negotiations
suggested that both tungsten and teak would be exported by the
DRV, / but no mention was made of these items in the announcement
of the agreement. Payment will be through reciprocal French franc
accounts in the DRV National Bank and the Bank of France.
Trade between the DRV and the rest of the Free World
has been small. Only a few Western ships have been reported going
into Haiphong, and some of these ships may have pip goods in
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Hong Kong and Macao on Chinese Communist account.
The DRV's cotton requirements may be partially satisfied
from Egypt. A local Egyptian paper reported in December 1955 that
the DRV and Egypt had completed a draft trade and payments agreement
envisaging Egyptian exports of cotton yarn, textiles, and agricultural
products for rice, starch, silk, zinc, lime, tin, coal, and cement. 82
According to a 9 March broadcast from Damascus, Egypt had concluded
a trade transaction with the government of the DRV for the exchange
of up to $5 million worth of Egyptian cotton for quantities of coal,
cement, and valuable woods. The transaction was concluded between
Egyptian and DRV delegations at the Spring Fair in Leipzig in East
Germany (25 January 1956). 83
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III. Transport and Telecommunications System.
A. Transport.
1. Highway Transport.
The highway system of North Vietnam originally comprised
about 12,250 kilometers of main and secondary roads, about two-fifths
of which were usable only in dry seasons. During the war the road
net was heavily damaged, only half the total distance being usable
at the time of the armistice. The intensive labor of army units
and corvee gangs on road reconstruction beginning from the fall of
1954 made possible the restoration of two-thirds of all war-damaged
highways by January 1955. 85 In order to facilitate the receipt
of Chinese aid, the reconstruction of roads in the Tonkin Delta took
priority 86 in a major communications development program. Bylo-
kilo-
September 1955 it was announced that between 5,600 and 5,900
meters of roads had been rebuilt but that bridge construction on
both highways and railroads remained the chief problem in the Delta
and south along the coast. 87 An announcement about highway con-
struction in December 1955 revealed that 4,000 kilometers of roads
had been reconstructed or newly built during the year. 88 Two
main trunk routes were included in this figure: one from the port
of Haiphong via Son La to Lai Chau in the northwest, which accom-
panied the development of military depots along the Laotian frontier
in support of the Pathet Lao, and the other extending from the town
of Nam Quan on the Chinese border through Hanoi, south along the
coast toward the 17th parallel. It was also stated that the :Length
of highways open to traffic in December 1955 was twice that of the
summer of 1954. 8/
The announcement by the Viet Minh on 20 January 1956 that
about 3,500 kilometers of roads would be reconstructed in 1956 indi-
cates a little more clearly the condition of the present road sys-
tem. 90/ Previous announcements of road restoration apparently re-
flected the results of intensive Sino-Viet Minh efforts to restore
essential roads to limited use for the movement of supplies. The
1956 rehabilitation and construction program appears to aim at the
further improvement of some of these roads, such as the Hanoi. - Son
La - Lai Chau trunk highway serving the northwest, to become limited
all-weather roads. In February 1956 the road from Lai Chau north
toward Ban Nam Koum on the Chinese border was under major reconstruc-
tion. The establishment of labor camps along the unmaintained road
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south of Lai Chau to Than Giao and repair activity farther south to
Dien Bien Phu may indicate an intention to establish a motorable road
between the Chinese and Laotian borders. 91 As Hanoi had stated in
early 1955 that by mid-1956 the prewar network of roads would be
restored to use, 9 it seems clear that tl1e reconstruction effort
is to be largely completed in 1956, when a total of approximately
5,900 kilometers of roads will have been restored since the armistice.
Two trunk routes are of strategic significance. One --
the Nam Quan - Hanoi road -- which constituted the first transport
artery to be restored, has since been extended southward a consider-
able distance toward the demarcation line. The other route -- from
Haiphong to Lai Chau -- which in the past was a poor, secondary
road, has been rehabilitated and improved into a limited all-weather
truck route. 93/ Recent reliable information indicates that a spur
of this road has been extended into Sam Neua from Moc Chu to support
the substantial Communist military supply activity along the Laotian
border. These two trunk roads, along which bridging efforts con-
tinue, would make possible the rapid movement of military forces and
supplies to any point along the entire Laotian - South Vietnam border.
Although road repair has proceeded rapidly, even in the
face of destructive floods, numerous temporary ferries have had to
be employed, limiting the through capacity of the main road system. 94/
The government's bridge-building efforts in 1956 are intended to
eliminate most of the ferries on primary roads.
The truck park of the DRV now consists of more than 3,000
vehicles, which is an increase of about 1,000 since the Geneva Accords.
There have been large imports of trucks, vehicles, and spare parts
under the Sino-Soviet Bloc assistance program, 95 and it is probable
that a larger percentage of trucks is now operational than during the
war years. Although the capacity of DRV roads is a relative considera-
tion and dependent on seasonal weather patterns, the present truck park
and improved road system are believed to be adequate to support major
military operations in the area.
Rail Transport.
In the fall of 1954 the Viet Minh inherited from the French
a badly damaged 1,080-kilometer meter-gauge rail system, consisting
of 4 lines radiating from Hanoi. Only the 100-kilometer Hanoi-Haiphong
line was operable, and numerous culverts and bridges needed to be re-
built. Of the remaining three lines, the most important logistically
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and strategically was the line north from Hanoi to Nam Quan on the
Chinese border, which was accorded priority. On the 167-kilometer
line north of Hanoi, 96 some 100,000 laborers were mobilized for
construction work under the direction of the Chinese Communist 102d
Military Railroad Engineering Battalion. 97 The line was rebuilt
to the original meter gauge and restored to service between December
1954 and March 1955; through passenger service was initiated between
Communist China and North Vietnam in August 1955. 98 Roadbed
and bridge construction work has continued to attain satisfactory
standards, reportedly for the purpose of preparing for eventual con-
version to the Chinese standard gauge (4 feet 8-1/2 inches), which
was expected by mid-1956. The conversion would aid considerably
in augmenting capacity and would eliminate the delays necessitated
by transloading at the change-of-gauge point on the Chinese side of
the border at Ping-hsiang.
The most substantial progress in rail restoration during
1955 was on the 296-kilometer Hanoi - Lao Kay line, a part of the
Kunming-Hanoi-Haiphong line completed by the French in 1910. The
line had been largely destroyed in the French - Viet Minh fighting,
and the adjoining 176-kilometer section from Lao Kay to Pi-se-chat
in China's Yunnan Province also had been destroyed during World War II.
On the Chinese side, about 250 tunnels and 47 bridges, including
the famous Tunnel Gorge bridge destroyed in World War II, were to
be rebuilt, with the entire line scheduled to go into service again
in 1956. The Viet Minh officially stated that construction began
on their portion of the line in March 1955, 100 although the col-
lection of old rails and ties and preliminary construction had al-
ready been under way for at least 6 months. 101 Their original.
schedule provided for complete restoration before the end of 1955,
but floods, a high incidence of disease among the laborers, and
necessary bridging and trestle construction (including such key pro-
jects as the Viet Tri bridge) delayed completion and prevented ex-
tension of rail services up the Red River valley. Only about 104
kilometers of new track were operable by January 1956. 102 By
April, however, it was announced that the line had reached Lao Hay,
and on 7 August through service to the border was inaugurated with
the dispatch of a train from Hanoi. 103 It is believed, therefore,
that the entire line may well be in use from Haiphong to Kunming
by the end of 1956, permitting Yunnan's strategic minerals to be
exported through the ocean port of Haiphong and linking Southwest
China for the first time, via North Vietnam, with the main Chinese
rail system. 104
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Recently, more frequent reports have been received of work
under way on the line from Hanoi south toward the 17th parallel. 105
During 1955 the 80-kilometer segment to the textile center of Nam
Dinh was restored to use, and farther south, where more than 200
bridges had been demolished by the Viet Minh, 106 construction re-
sponsibilities have reportedly been assigned to the local population.
Particular difficulty was known to have been encountered last fall
at the site of the 525-foot steel-arch bridge at Ham Rong near Thanh
Hoa. 107 In this section, thousands of ties and rails were re-
ported to have been observed in stacks along the right-of-way.
It seems likely, given the imminent restoration of the Lao Kay line,
that acceleration of construction on the line south from Hanoi will
occur. The government has indicated that the line will have the
highest priority in 1956, and it would seem that continued Chinese
aid and corvee labor could return the line to service 240 kilometers
south to Vinh by the end of the year. Rail service at least to Vinh
would be advantageous to facilitate the receipt of ocean cargoes
via the adjacent seaport of Ben Thuy. Military needs along the nearby
section of the Laotian border would also be more adequately met, as
the frontier road network is not so well developed as in the Delta.
The Viet Minh has depended heavily upon the Chinese Com-
munists not only for reconstruction assistance but also for aid in
the operation of the rail system itself. The Chinese have supplied
the Viet Minh with locomotives and freight cars from the Dairen
Rolling Stock Plant 108 and with numerous items of bridging equip-
ment and rails from Chungking, Chu-chou, and Shanhaikwan (Lin-yu). 109
The present Viet Minh park consists of 67 locomotives, 1,131 freight
cars, and 36 passenger cars, of which most are of 1910-15 vintage. 110
At least five locomotives are known to have been supplied by the
Chinese. 111 The Chinese have also stationed technical personnel at
the Gia Lam Railroad Workshops, largest in North Vietnam. 112
The Viet Minh has stated that 480 kilometers of rail line
were restored in 1955, bringing the total serviceable track kilometrage
to 544 in February 1956. 113 Although it is planned to construct 320
kilometers more during 1956, it would seem that an amount of line
similar to that restored in 1955 could realistically be scheduled for
1956, in view of the recent completion of the Lao Kay line and the
continuing work on the southern line below Nam Dinh.
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3. Water Transport.
The most important prize in water transport gained
by the Viet Minh was the acquisition of Haiphong, the port for Hanoi,
in May 1955. Control of Haiphong, a valuable adjunct to overland
international connections, permitted direct foreign trade with coun-
tries other than Communist China, thereby reducing the economic
dependence of North Vietnam on its northern neighbor and relieving
road and rail facilities of a growing burden.
In June 1955, ships began to arrive at Haiphong
loaded with Soviet Bloc aid. The volume of coastal traffic 'between
the DRV and Communist China apparently has been of less importance.
By April 1956, Haiphong had received about 106,000 tons of cargo
from the USSR and the European Satellites, including ammonium sul-
fate, machinery, motor vehicles and spare parts, iron and steel,
and petroleum products, plus about 150,000 tons of rice acquired
by the USSR under a trade agreement with Burma and given as aid
to the Viet Minh. Exports from Haiphong, as well as from other
ports of North Vietnam, have been negligible, although there is
evidence of increasing activity in coal traffic from Hon Gay and
Cam Pha in British and Japanese vessels. 114
The port of Haiphong, about 18 miles inland from the
Gulf of Tonkin, is the principal ocean port for North Vietnam.
Part of the Soviet aid program announced last summer provided for
the rehabilitation of the ports of Haiphong, Hon Gay, and Ben
Thuy. 115 Because of constant silting and a lack of dock rail-
roads, only 3 of Haiphong's 11 pre-World War II docks were open
to ocean shipping by the end of 1955. 116 The presence of Soviet
advisers during 1955, however, contributed to a number of improve-
ments, including the establishment of maritime radio facilities,
installation of the first new off-loading cranes in 20 years,
construction of new warehouses and storage facilities for petroleum
and its products, and the initiation of a shipbuilding effort. 117
The shipbuilding effort, focused on the old Robert Ship Repair
Shop, has resulted in the production of six 200-ton barges. 118
One dredge has been received from the USSR, and several more dredges
are on order from the Netherlands and the USSR, which are to be
used in restoring the channel to 24-foot depth, permitting greater
use of Haiphong's berthing area by larger vessels. 119 The USSR
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and China have supplied new tugs and barges and are to deliver more,
so that processing of deep-water shipping at Hon Gay and the port of
Ben Thuy may be expedited. 120
The extensive silting of the port of Haiphong pre-
vented much shipping activity, and only a few small Soviet, Chinese,
European Satellite, British, and Japanese ships were able to berth
there in the first few months following the change in government.
The critical nature of the DRV economy, which necessitated the
summer aid negotiations in Peiping and Moscow, was the occasion for
early provision of Bloc technical assistance for the opening of
Haiphong to deep-water vessels. This permitted the accommodation
of the emergency shipments of Soviet-aid rice from Burma in the
latter part of 1955. Even with Soviet assistance since mid-1955,
the unloading capacity probably is not in excess of the 4,000
tons per day estimated for 1952, because of the further deteriora-
tion of the port since that time. 121
b. Inland Waterways.
North Vietnam has, during high water, 800 kilometers
of navigable waterways and always had a considerable amount of small-
craft traffic in the Tonkin Delta. 122/ The unusually great dif-
ference in high. and low seasonal water levels, precluded year-round
use of the larger rivers. At high water, craft with a draft of 7
feet can proceed 320 kilometers up the Red River to Lao Kay. It is
not believed, in view of increased road and rail transport capa-
bilities, that the damage to levees during the floods in 1955-56
will have a seriously retarding effect on total traffic volume. 123
4. Civil Air Transport.
Before 1956 the DRV was solely dependent for civil air
transport on services set up by Poland to provide transport for its
delegation to the International Control Commission (ICC) between
Hanoi and Nanning-Peiping. Up to this time the French Union had
been supplying internal air transport to the ICC. In December 1955
the DRV established a Civil Aviation Administration and announced
the activation of a new civil air service, whose mission is, in part,
to provide internal air transport to the ICC. On 1 January 1956, 124
5 new air transports -- 2 C-47's and 3 Aero-45's -- supplied by the
Chinese Communists under a trade contract concluded on 30 December 1955,
were delivered at Hanoi, 125 and there are reports of Viet Minh
pilots being trained in Communist China. The Viet Minh has assumed
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control of air operations within its own airspace and has established
an increasingly effective air weather service and air defense or-
ganization. 126 Communist Chinese technicians have directed an im-
portant airfield rehabilitation program and taken over operational
control of airfields in North Vietnam. The Chinese also extended
their scheduled domestic air service to Hanoi on 24 April 1956. 127
5. Transport Prospects.
The success of Viet Minh efforts to restore transport
services is reflected in plans for major increases in freight
carried by rail, road, and water transport, which are to perform
a total of 291 million ton-kilometers in 1956. 128 Plans to in-
crease performance may be overly optimistic. Transport equipment
left by the French is old, 129 and the railroads, faced with
increased demands, are experiencing a shortage of rolling stock. 130
Viet Minh capabilities to repair equipment are increasing, however,
and the Bloc is capable of supplying the locomotives and rolling
stock required to meet increased transport demands. 131
The breakdown of the 1956 target figure among the various
carriers -- rail, 123 million ton-kilometers; water, 137 million ton-
kilometers; and highway, 31 million ton-kilometers -- suggests that
rail and water transport are resuming their former dominant positions.
Motor transport, on the other hand, will be used in its traditional
role as a means of local distribution rather than for the long-haul
carriage required during and immediately following the war when rail-
roads were inoperable. Furthermore, the growing dependence on rail
and water transport will free large numbers of trucks for other uses,
particularly for the collection and distribution of agricultural
products.
More important, in potential at least, are the strategic
implications of transport rehabilitation. Continuation of the rail
line south along the coast from Nam. Dinh, accompanied by the already
completed restoration of the trunk roads to Lai Chau and Vinh, 132
will greatly increase the capability of the Viet Minh to move troops
and supplies toward the 17th parallel as well as toward the Laotian
frontier, in the event of renewal of hostilities in either area.
Completion of the Hanoi - Lao Kay line, along with fulfillment of
planned restoration of its partially dismantled connection to Kunming
by the Chinese in 1956, 133 perhaps will be of greater advantage to
the Chinese. Basically, it will facilitate the development of
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Southwest China's mineral resources, which then can be transshipped
through Haiphong instead of being hauled long distances overland to
consuming and export centers in China. Accompanied by fulfillment
of plans to link Kunming directly with the Chinese rail net at
Chungking, 13/ it could provide the developing industrial and agri-
cultural areas of central-west China with access to the sea through
Haiphong, the southernmost major Communist port. Consequently, the eco-
nomic and military capabilities of Communist China would be brought
closer to the Southeast Asian countries which it is attempting to influence.
B. Telecommunications.
Both domestic and international telephone and telegraph
communications facilities are government monopolies in the DRV. The
key radio station is located in Hanoi, and a secondary station is
located in Haiphong. 135 All official business is allowed a 50-
percent reduction in telephone and telegraph rates, with state
enterprises receiving priority service. 136
The DRV is increasing the effectiveness of point-to-point
radio telecommunications, with this element of the over-all communica-
tions system consisting of about 13 stations. 137 These provide
adequate liaison with Hanoi's central radio station. Viet Minh press
statements indicate that some of these stations are now 16 times more
powerful than those in use immediately after the 195+ cease-fire.
In the meantime, the point-to-point system is being enlarged, with
at least nine stations being added during 1955. 138
Offices for the collection and distribution of interna-
tional telegrams have been established at 17 post offices in North
Vietnam. 139/ These offices are geographically well distributed
throughout the country. At present, all messages to countries in
communications contact with Communist China are reportedly routed
through China, under the provisions of the December 1954 bilateral
treaty. 11+0
2. Wireline.
There are now in operation in the DRV 6 telegraph lines
and 13 telephone lines for interprovince telecommunications, con-
necting some 30 post offices. 11+1 This provides adequate coverage
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to serve the internal administrative needs of the government. From
the beginning of 1955 through August 1955, 1,500 kilometers of
telephone and telegraph lines were strung. During the same period,
about 575 kilometers of wireline were repaired. 142
It is estimated that more than 1,900 kilometers of
telephone and telegraph lines will be restored during 1956. Four
telephone lines are now being strung from Hanoi to Thanh Hoa and
Vinh. 143 Characteristically, new lines and restored lines are
to serve the essential economic and administrative needs of the
country and follow the former alignment of landlines under the
French colonial administration. Generally, the requirements for
additional communications construction under the 1956 State Plan
reflect improvements for the existing system, as the Viet Mirh
has been successful since 1954 in converting the formerly exten-
sive radio networks to landline use.
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APPENDIX A
GAPS IN INTELLIGENCE
Information pertaining to economic resources, production facili-
ties, and physical output is fairly complete for the period before
the French withdrawal from North Vietnam, so that the economic base
of the area can be described with fair precision. For the brief
period since the Viet Minh obtained control of the country, accurate
information is lacking as to the extent of deterioration or develop-
ment of resources and production for almost all commodity categories
and for changes in population and the labor force. The available
information on food shortages makes the general subsistence level
appear unbelievably low. Trade data can be estimated generally on
the basis of Sino-Soviet Bloc trade and aid agreements, ship move-
ments, and trade of the DRV with the Free World. Information per-
taining to restoration of transport facilities is more complete
than in other fields, but details are lacking on volume of tons-
originated and ton-kilometers of performance.
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APPENDIX B
SOURCE REFERENCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information Information
Doc. - Documentary 1 - Confirmed by other sources
A - Completely reliable 2 - Probably true
B - Usually reliable 3 - Possibly true
C - Fairly reliable 4 - Doubtful
D - Not usually reliable 5 - Probably false
E - Not reliable 6 - Cannot be judged
F - Cannot be Judged
"Documentary" refers to original documents of foreign govern-
ments and organizations; copies or translations of such documents
by a staff officer; or information extracted from such documents
by a staff officer, all of which may carry the field evaluation
"Documentary."
Evaluations not otherwise designated are those appearing on
the cited document; those designated "RR" are by the author of
this memorandum. No "RR" evaluation is given when the author
agrees with the evaluation on the cited document.
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