ECONOMIC VULNERABILITY OF NORTH VIETNAM TO PROPAGANDA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01049A002400140002-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 56
• Document Creation Date: December 9, 2016
• Document Release Date: April 5, 2001
• Sequence Number: 2
• Publication Date: March 30, 1962
• Content Type: REPORT

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ECONOMIC VULNIERABIL.ITY OF NORTH VIETNAM
TO PROPAGANDA
(ORR Project 10.3533)
30 March 1962
Prepared by
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FOREWORD
This report is limited to a discussion of US propaganda themes to be found
in the economic situation in North Vietnam (Democratic Republic of Vietnam --
DRV). Thus, many potentially good propaganda themes -- such as the persecution
of Catholics and tribal minorities by the DRV, the lack of political and personal
freedom in North Vietnam, and the subordination of national political objectives
(for instance, the reunification of Vietnam) to the over-all interests of the
Communist Bloc -- are beyond the scope of the report.
The purpose of the report is to point out ways in which US propaganda can
exploit the weak points in the Communist direction of the DRV economy.
Accordingly, developments favorable to the North Vietnamese regime have not
been presented. Within the framework of themes selected for discussion, however;
the attempt has been to present the facts accurately and completely, according
to the best information available.
In every case, the target audience of the propaganda is assumed to be the
North Vietnamese people. Although in many cases these same themes could probably
be used effectively in other Bloc countries and even in non-Bloc countries
(such as South Vietnam) as anti-Communist propaganda, the economic conditions
described all have special relevance to the every-day experience of the average
North Vietnamese. Where a certain group -- such as the farmers or the urban
population -- should be particularly receptive to a given propaganda theme,
,that group has been singled out as the approprigte target.
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The selection of propaganda themes for this report rests on the assumption
that US propaganda directed to North Vietnam should aim at driving a wedge
between the North Vietnamese people and the Communist regime. Thus, the
separate propaganda themes all highlight some aspect of the DRV's economic
program that suggests that the regime is not primarily concerned with the
economic well-being of the people, that, in fact, it at times works at cross-
purposes with the real interests of the people.
Because this propaganda is intended for the North Vietnamese people and is
designed to stimulate their hatred and contempt for the regime, this paper has
included international comparisons (in which North Vietnam'a economy might be
compared unfavorably with that of some other country) only as background
information. If US propaganda were primarily intended to convince the Indians
or the South Vietnamese of the advantages of a free, competitive economic
system, then it might be well to point out the comparatively poor showing of
North Vietnam's socialized agriculture. But it hardly seems convincing to tell
the North Vietnamese about South Vietnam's greater success in agricultural
production or the relatively higher standard of living of its people. Such a
propaganda theme is outside their normal experience to confirm or deny and in
the absence of first-hand knowledge of the economic situation in South Vietnam,
they are likely to be suspicious of such a laim Therefore, the propaganda
themes presented in this paper are directly concerned only with domestic economic
conditions that have an immediate bearing on the lives of the North Vietnamese
people.
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Although the over-all clastification of this report is CONFIDENTIAL, any
piece of ieormation may be regarded as UNCLASSIFIED when divorced from
context ualess otherwise marked..
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CONTENTS
Summary
I.
and Conclusions
Industry. ? ?????? ***************** /Goa
Page
1
3
A. Priority of Heavy Industry. ....... . .. . ? .
3
B. bcport of Light Industrial Production . . . . . ? & ? ? ?
ti
?
4
5
C. Poor Quality of OUtput. . 0 M. .. ? .. ? ? ? ? ? ? ? .
6
II.
Agriculture
8
A. institutional Arrangements in Agriculture . .. t ......
8
B. Communist Agricultural Policy . ? . ? ? ?. ? . ? ? ?
.
.
?
10
C. HeaVy Burden of Industrialization on the Peasant, .
.
.
.
14
III,
Domestic Trade. .
?
.
.
18
IV.
Foreign Trade . ? . ??***.o ************ it
20
A. Direction of Trade. ? ? . **
20
B. Commodity Composition of Trade ** .. .... . ?????
?
22
1. Imports I
22
2. Exports ? . . di P ? * ft
?
?
?
25
C. Quality of Bloc Goods ?00000arefOa0O, 40.?
o
a
a
26_
D. Bloc Trade with NOrth Vietnam as an Instrument of Control
.
.
.
28
V.
Foreign economic Assistance . . .. . . a o . a ... o????
a
?
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30
A. Misdirection of Aid
30
B. Credits Rather than Grants. . . 0 0 0 ? 0 0 0 0 0 ? ? 0 ?
0
o
a
34
v
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C. Deficiencies and Limitations in Bloc Economic Aid Programs. . 36
D. Aid as an Instrument of Foreign Control 38
E. Foreign Technicians ? o ? ? ? ? ? 44
Appendixes
Appendix A. Bloc Aid Projects Scheduled for Construction
During 1961-65 4 ? e
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MORONIC VULNERABILITY OF NORTH VIETNAM TO PROPAGANDA
Smmiary
US propaganda that is aimed at the people of North Vietnam should stress
the regime's sacrifice of both individual and national welfare to the interests
of international Communism. It should emphasize also the inefficiency of the
government in operating the economy. Specific propaganda themes should be
based on the following considerations:
In industry, heavy industry always has been given priority in the allocation
of manpower materials relative to light industry, which supports the standard
of living. Moreover, a large portion of investment in light industry has been
in plants that produce goOds for export rather than for domestic supply.
In agriculture, the peasant not only has been subjected to capricious changes
in the rules governing his income but also has had to put up with control by
officials who know little about farming. In addition, the regime's emphasis on
developing heavy industry has deprived agriculture of the resources needed to
increase production and improve rural living standards. One phase of this
discrimination against the peasant has been the establishment Of artificaay low
prices for agricultural products.
In &nestle trade, Private trade has been supplanted by a socialized trade
network that has involved new hardships for both the consumer and the state
trader. In the process, theusands of small traders have lost their traditional
means of livelihood..
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In foreign trade, the regime has abandoned traditional markets because of
its political commitment to the Communist Bloc, and, as a result, trade moves
in-less advantageous channels. Control over foreign trade has been used by
the government as one means of furthering the political and military aspirations
of the regime at the expense of the consumer. For example, even at a time of
serious domestic food shortages in late 1960 and early 1961, the regime was
continuing to export rice and other foodstuffs in exchange for imports of
machinery and equipment. Another sore point with the North Vietnamese consumer
is the inferior quality of Manufactured consumer goods from the Bloc as
contrasted to the quality of goods formerly imported from the West.
In foreign economic assistance, US propaganda should not attempt to belittle
the total amount of Bloc aid or its over-all impact on the economy of North
Vietnam. Bather the propaganda should concentrate on certain specific short-
comings, such as the building of factories for which no materials are available
and the high living of Bloc technicians. US propaganda should also point out
that North Vietnam must repay most of this aid at i future date through exports
of foodstuffs.
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I. Industry
Whether it be North Vietnam, the USSR, Communist China, North Korea, or
the European Satellites, the broad objective of the Communist regime is rapid
industrialization, with highest priority on the development of heavy industry.
The ultimate goal is political and military power. Thus, even in Borth Vietnam,
a small, predominantly agricultural country with only limited mineral resources
(by world standards), the Communists are devoting their greatest energies to the
establishment of a heavy industrial base. In contrast, they are contributing
little to the solution of North Vietnam's serious food problem and are doing
even less to support those other sectors -- such as light industry and trade --
that support the standard of living.*
A. Priority of EleavyMaAmast
US propaganda on the general subject of industry should stress the
fact that although: the people would benefit most directly from more investment
in the food, textile, and other consumer goods industries, the overriding
emphasis of the Communist program of industrial development is on the build-up
of heavy industry.** Instead of more rice, More sugar, more textiles, and more
T During Z9 the regime allocated more than 30 percent of total state
investment to heavy industry, compared with an allocation of oeIy about 11 percent
to agriculture, about 10 percent to light industry, and about 7 percent to trade.
Since 1955 the priority of heavy industry in the state investment program has
increased every year; in 1961 investment in heavy industry Constituted approximately
38 percent of total state investment
** Since 1955, over 70 percent of total state investment in industry has been .
allocated to heavy industry. For every dong invested in the construction of a rice
mill, sugar refinery, textile mill, or 'plastic geode factory, the regime has invested
2.6 dong in the construction of an iron and steel mill, machine tool plant, or
industrial chemical plant, Since 1955 (when investment in heavy industry constituted
about 75 percent Of total investment in industry) the priority Of heavy industry
has increased every year, until in 1961 it represented approximately 84 percent of
total industrial investment.
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paper, the regime is producing more coal, more cement, more apatite, and more
machine tools.* And in the future, although it promises only relatively
small increases in the per capita production of meat, cloth, sugar, and house-
wares, it is planning new production of steel and larger increases in the
production of electric power.** Thus, even at a time of critical food shortages
in the country, the regime is thinking only of an even greater emphasis on heavy
industry -during the period of the First Five Year Plan (1961-65) than during
* During :05-6601 North Vietnam's major heavy industrial products registered
the following percentage increases in production: apatite, 1,942 percent; iron
ore, 650 pereent; electric power, 170 percent; coal, 112 percent; and cement,.
106 percent. During the same period, the production of selected light industrial
products (modern sector only) increased, as follows: rice (milled), 113 percent;
sugar, (refined) 180 percent; tea (processed), 42 percent; canned fish, 4 percent;
cotton yarn, 43 percent; cotton cloth 79 percent; and soap, 45 percent. These
percentage increases in production are given for background use only; they should
probably not be Used in US propaganda. For two important reasons, they consider-
ably overstate the production of light industry relative to heavy industry. First
of all, the 'percentage increases are based on production figures for modern industry
only (excluding handicraft production). In the case of heavy industry, which is
produced almost entirely by modern industry, they closely reflect the real increase
in total production by heavy industry. But in the case of light industry, which
consists predominantly of handicraft production, they overstate the increase in
total production to the extent that modern industrial production has increased
More rapidly than handicraft production. Secondly, the percentage increases in
(modern) light industry are computed on very low base figures. At such low
absolute levels of output, production of a single new light industrial plant can
result in a doubling or tripling of output in an industry. For example the. increase
of 180 percent in the production of' refined.sugar was an. increase of only 9,000
tons of sugar, whereas the increase of 106 percent in the production of cementwas
an increase of 209,000 tone of cement.
** During 1961-65 the production of heavy industry is planned to increase at an
average annual rate of 26 percent and the production of light industry at an
average annual rate of 16 percent. The development of industry will stress the
production of electric power, machine-tools, and iron and steel, in that order.
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the period of the Three Year Plan (1958-60). Since hungry people can hardly
eat steel -- or wear cement -- or live in a machine tool plant -- this stepped-
up program of industrialization would seem to hold little -- except more
sacrifices -- for the already hard-pressed North Vietnamese consumer.
Light In4uatrial
Although the regime has made some progress in its efforts to establish
at least the framework of a modern light industrial sector, this development of
light industry has not brought about a comparable improvement in the people's
standard of living. Per in North Vietnam, as in Mongolia, the development of
light industry has been largely directed to the export of processed agricultural
commodities and light industrial products, Thus, increases in light industrial
production have mainly supported Borth Vietnam's imports of machinery and
equipment, rather than an increase in domestic consumption. . Almost all of the
output of the DRV's 14 new modern rice mills, its 4 new sugar refineries, the
Haiphong Fish Cannery, and the Etat 'rho Tea-processing Plant is reportedly
reserved for export. Yet, these 20 new industrial facilities constitute the core
of the Communist program in light industry. The development of a modern light
industrial sector, therefore, has had considerably less impact on the Standard of
living:than it has on production statistics in light industry. For example,
although during 1955-59 per capita production of rice (milled) increased 4 times,
per capita consumption of rice increased by less than 10 percent.* Similarly,
It?
Production data are based on production by modern industry only; if handicraft
production had been included, total production in light industry would have
increased more slowly. Consumption data, on. the other hand, include all
consumption, including:that produced by both modern and handicraft industry as
well, as that Imported for domestic consumption.
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although per capita production of sugar increased 6 times, per capita consumption
only doubled. Per capita production of cigarettes increased 18 times, but
consumption by only 33 percent. Per capita production of cloth increased 7
times, but consumption by only 41 percent. Finally, per capita production of
paper increased 4 times, but consumption by only 75 percent. Thus, VS propaganda
can legitimately argue that most of the increase in the production of light
industry has been exported; it has certainly contributed little to an Improvement
in the low standard of living. (The percentage figures for increases in
produotion given in Section I are based on official claims for increases in the
production of modern industry (excluding handicrafts). Therefore, in some cases
(particularly in light industry) these figures exaggerate the over-all increase
in 'production (by the economy as a whole) of a particular commodity, for example,
rice and sugar).
C. Poor Quality of Outet
The inefficiency of the Communist management of the economy is illustrated
by the poor quality of goods produced by industry, including goods used in
agriculture. US propaganda might make use of the following passage from an
official North Vietnamese article* in Economic Research in October 1961:
* Article is by Le Vinh in N ien Cuu Kith Te (Economic Research), Hanoi,
October 19610 pp. 4-11 and 1y, as translated in JPRS: 12593, "Translations
from North Vietnamese Periodicals, No. 21"? 21 Feb 62.
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"...the quality of the capital goods our industry supplied to
agriculture was poor and their cost was high. The model 51
ploughs were broken within alear or even in a single crop,
hence a nickname 'single year ploughs'. Some ether models
are too heavy (ranging from 4o kg to more than a ton) to
become suitable for our Present draught power and transportation
situation. Replanting machines are sometimes improperly made
with still-too-fresh wood and still-too-soft iron which make
the frame warp and the prongs unusable. The Phu Tho Committee
supplied its villages up to 500 replanting machines, but so
far, there remain only 40 usable ones.. An gaditionag
obstacle to the application of new production techniqnes in
agriculture was the lack of a widespread network of repair shops."
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II. amElculture
A. Institutionallaert114.1-1,11025.11..-
An effective propaganda theme on the general subject of agriculture
would-be one emphasizing the complete uncertainty of institutional arrangements.
under the Communist regime. US propaganda should point out that at any time --
with little warning -- the regime is likely to institute some new scheme,such
as forced deliveries of rice to the state, or some new collective form of
agriculture, peutws one even as radical as the Chinese commune, for increasing
state control over agricultural production. Practically overnight, the regime
is likely to overturn basic agricultrual institutions or change long-established
.farming practices. Today the peasants may be alloyed _to sell: all the produce of
their small "garden plots" on the free market; tomorrow the free markets may
all be closed and private plots and livestock confiscated by the state. Such
is the uncertainty of life in a Communist society, where the state arbitrarily --
even capriciously -- destroys old social institutions and re-shapes new ones.
In converting the bulk of private agriculture to the socialist system,
the DRV is following the established Communist pattern of staged,economic
transformation, beginning with land reform and progressing through the formation
of manpower-exchange teams to low-level agricultural producer cooperatives and
finally to high-level agricultural producer cooperatives on the order of the
' Soviet collective farm.* Thus, although in comparison to other Communist countries
* ManeemEtex_lich!lge_Imel are a rudimentary form Of socialization in which peasants
pool their labor to accomplish certain farm jobs but retain ownership of land,
buildings, animals, and tools as, well as of the crops produced. Agricultural
p_l_ee_rodtrssamag_eve are a "higher" form of agricultural collectivization in which
peasants pool their land and tools under centralized management; the collective
income is then divided on the basis of the peasants contributions of land and
capital as well as labox.a In hi level cultural aroducer co.,eratives a
member's share of the collective income is determined solely on the asia of the
work performed.
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North Vietnam may not yet have progressed very far along this path of socialist
development,* it is only a matter of time before the regime will institute the
orthodox economic controls associated with socialized agriculture in the USSR,
Communist China, North Korea, and other Communist states.** For instance, a
cooperative in North Vietnam is now still allowed to sell its surplus produce
(after taxes) either to the state or to private buyers, as it so chooses. Very
soon however, the government can be expected to requisition fixed amounts of
rice and other crops under a state procurement system. The price of agricultural
coMmedities thus procured by the state will of course be -arbitrarily fixed by the
state. in North Vietnam, as in Communist China, the state also will, it may be
anticipated, soon altogether priehibit free trade in certain commodities -- for
example, staples such as ride, cora, sweet potatoes, and manioc. in these
Important commodities the state will thus have a monopoly in.domestid trade.
The DRV, like Communist China, may even someday experiment with the complete
abolition of the rural "free markets,' forcing the peasants to sell only to the
state. . Such direct control over the distribution Of all agricultUrel commodities
4-7?'"Airreifia?embeFTV-91,rou?Yhiy 90 percent of the peasant households in North
Vietnam had joined cooperatives. Less than 30 percent of these faMilies, however,
belonged to high-level ceoperatives. Thus With the exception of Polandl North
Vietnam has to date proceeded more slowly than any of the ether Bloc countries
in socializing agriculture.
** A recent, major change in North Vietnam's government administration -- the
appointment of Truong Chinh as Chairman of the State (Bdonomic):.Plenning Committee
in January 1962 -- would seem to Underline the DRV's determinetien to push the
socialization of agricultUre. TuongChinh? publicly associated With the harsh
excesses of the land reform program, is known to favor a more doctrinaire policy,
especially an accelerated program to bring the peasants under increased
governmental control.
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would give the regime unprecedented control over what the peasants produce and
consume. Another radical feature of Chinese Communists agricultural policy --
the confiscation by the commune of the peasants' small private plots and
livestock -- may also some day be tried in North Vietnam. Then all vestiges
of private property will vanish from the Borth Vietnamese countryside. The
peasant, like his Chinese counterpart, might find himself completely detached
from his land, arbitrarily shifted from field work to canal digging to road
building, as local conditions and national objectives require.
US propaganda should point out that a steady, relentless drive to extend
state control over agriculture (along the lines outlined above) has characterized
the economic program of every Communist society. Thus, the establishment of a
state procurement system -- which the DRV is just now beginning to talk about
is but the first of a series of measures that will give the regime increasingly
tight control over nearly every aspect of the life and work of the North
Vietnamese peasant. In the future, there will always be other schemes and new
collective organizations -- each more restrictive than the lat. For the
Communists apparently believe that most problems in agriculture are primarily the
result of weak organization; therefore, new solutions to the agricultural problem
always involve organizational changes. Thus, the farmers can be sure of but one
.thingt there will always be change -- and sudden, radical change, at that.
B. .2.CE90211110-11/441-1011,16.219A------LSE
The North Vietnamese farmer not only lives with the uncertainty of
Institutional arrangements in agriculture, he works under the constant harassment
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of local Party officials, who, though unskilled in agricultural techniques,
propose to tell him exactly what to do and how to do it. US propaganda Should
emphasize the clumsiness of such overcentralized farm management, which has
provided, at best, erratic,: and, at worst, irrational direction in agriculture.
Socialized agriculture in Borth Vietnam, as in all Communist countries,
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has certain inherent inefficiencies. At all times, whether the policy line is
hard or soft, direction over agricultural production is exercised through a
huge Party apparatus made up of officials that are selected mainly for their
political qualifications rather than their technical or managerial skills. Thus,
even sound agriculearal policies -- if imperfectly understood by these local
Party officials and thus inadequately expltined to the farmers, or if
fanatically pushed by the regime beyond their reasonable advantages -- can have
a negligible, if not negative, effect on agricultural production.* Similarly,
new methods that show promise in selective areas -- if mechanically applied on
* For, example, the Chinese Communist agricultural policy instituted.in the
spring of 1958 collies for an increase in the acreage sown to cora was reasonable
in view of the high yield of corn. But When pushed to the extreme, it was
wasteful, as the production of corn far exceeded demand. while the production
of other crops dropped below domestic requirements. SiLlaely, the intensive
? campaign against sparrows carried out in 1959 could have been Justified, on
economic grounds, in some areas, where the brids were really farming crops.
But again, when carried to an extreme, it became ridiculous. Only too late was
it discovered that the sparrows had prevented an evelly serious problem --
namely insect damage.
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on a wide scale with little regard to local conditions -- can do more harm
than good.* Finally, agricultural policies, as formulated by the Communist
leadership, can themselves be more politically inspired than economically sound.
In the extreme, as in Communist China during the "leap forward" (1958-60) ouch
ill..conceived agricultural policies can prove disastrous to prOduction;** at the
minimum* they will contribute to the Communists' chronic difficulties in
agriculture.
In view of such past serious errors in Communist agricultural policy and
the general inefficiency of its overcentralized farm management* US Propaganda .
* For example, close planting was certainly- a technique to be recommended for
certain crops in some areas of China. But when applied indiscriminately, it was
extremely wasteful as inputs of fertilizer were far from adequate to support the
closer planting and insufficient air and light often caused a. decline in yields.
** For example, the Chinese mass labor delves and crash production programs of
1958-60 such as the drive to produce large quantities of iron and steel in
the famous. "backyard blast furnaces'? and other heavy industrial products (such
as coal. and farm implements) in the countryside -- led to a reckless expansion
of activities in complete disregard of the cost and usefulness of the effort
expended. Rural construction projects to -expand irrigation and flood control
projects and to build local road resulted in huge crop looses in 1958, as more
than a third of the work force was diverted from the fields to off field projects
just at the height of harvesting. The stress on collective activities such as
the drive to expand collective raising of hogs occurred at the expense of
important private economic activities. such as the cultivation of private plots
and private raising. of livestock'. Other major blunders included the loss of
millions of tons of grain through experiments with too-close planting, the
destitation of the clay floors of paddy fields as the result of toe-deep plowing,
the of soil in North China through reckless irrigation schemes, and
the disruption of the normal rotation patterns reqaired to maintain soil
fertility. Taken together, these policy errors contributed significantly to the
present agricultural crisis in China.
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might well question the Party's ability to direct agricultural production. Such
a propaganda theme should find a very responsive audience among north Vietnam's
farmers, who inevitably resent outside direction and guidance, and all the wore
so when -- as in the DRV -- it comes from technically unskilled, inexperienced,
sometimes incompetent Party officials who promote agricultural policies of
dubious economic value. Thus, our propaganda sh ul 0 stress the erratic,
irrational elements of Communist policy: the crash production programs (to
Increase output of corn, sweet potatoes, and hogs) and frantic work drives (to
expand irrigation and flood control projects, build local roads, and produce
heavy industrial products in the countryside) that seem to have an irrestible
appeal to rulers desperately looking for short cuts to increased agricultumal
production. These mistaken policies have been tried again and again, and only
reluctantly corrected when the Appalling human and material costs involved can
no longer be overlooked. In the future, they will surely be tried again; for
in North Vietnam, as in Communist China, the economic realities of scarce food
supplies, hunger, and poverty are combined with a fanatic revolutionary spirit to
create a climite of intense effort and restless experlmentation. And yet all
the time, what is really needed in North Vietnam, as in other underdeveloped,
agrarian economies, is sound agricultural policy -- featuring agricultural
extension stations (as a sure, though less dramatic, way of training agricultural
technicians), greater inputs of chemical fertilizer and the introduction of
improved seeds (as the most effective way of increasing crop yields), and increased
material incentives (as the surest way of stimulating peasant effort and initiative).
The Communists definitely do not provide this kind pf policy.
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C. Heavy_Burden of Industrialisation on the Peasant
In all underdeveloped, agricultural countries - whether Burma, Thailand,
Taiwan, or North and South Vietnam -- there is apparently a general feeling
among the people that the welfare of the farmer is being sacrificed in the
interests of all other groups in the economy. Whether this is actually true or
not, farmers in these countries would be inclined to believe propaganda that
tended to reenforce this popular conception. In North Vietnam, where the regime
is actually promoting investment in industry with resources extracted primarily
grain the rural population, such a propaganda theme shoul4 be particularly
convincing. In this case, it can be honestly argued that the farmer is getting
a poor break in the distribution of available resources.
In support of this general argument, US propaganda should simply point
out, first of all, the overwhelming priority of industry especially heavy
industry -- in Communist economic planning. The regime ha 13 openly and repeatedly
proclaimed this, as it has also admitted. the lesser importe.nce of agriculture.
For example, the Five Tear Plan has clearly stated that "socialist industrialization
is go b the central task of the whole period (1961-65); industry -- above all,
heavy industry -- is to play the leading role in Sorth Vietnam 'i7 socialist
economy." The investment program of the state has closely reflected these
announced priorities. During 1955-60, over 4.0 percent of total state investment
(including investment financed by Bloc aid) was allocated to industry; only
about 11 percent went to agriculture. In 1961, state investment in industry
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of 328 million dong* was roughly 3 times that in agriculture.** Thus, our
propaganda can reasonably conclude that, in spite of the overwhelming importance
of agriculture in the North Vietnamese economy,** the CommUnists are really
interested only in the development of industry. The overriding priority of
industry must reflect the political and/or military aspirations of the leadership
rather than a concern for the real interests of the great majority of the North
Vietnamese people. NO less than 90 percent Of the total population live in
rural areas and is supported by agrioulture; yet, the regime chooses to build
iron and steel mills, machine tools factories, industrial chemical plants, and
cement factories rather than help the peasants expand irrigation and flood
control projects, reclaim abandoned land, and mechanize agriculture.
Yet it is the peasants who are carrying the heaviest burden in the
forced-draft industrialization. For in North Vietnam, as in the USSR and .
"4"--frillgrieWirofintinent goods, the dong may be converted into US dollars
at the rate of 4 dong to US $1 for purposes of rough comparison. However,
dollar figures probably should never be used in any US propaganda directed toward
North Vietnam.
** In contrast, agriculture has generally received a higher priority than
industry in the investment programs of.the non-Bloc countries of Southeast Asia,
which,. like North Vietnam, are predominantly agriculturalecenomies. Of total
investment, both government and private, in fixed assets in South Vietnam in
? 1960, about 28 percent went to agriculture and approximately 20 percent to industry.
In North Vietnam, on the other hand, almost 45 percent vent to industry and only
about 17 percent to agriculture'. .
*** In 1960, industrial production (including handieraft production) constituted
only about 13 percent of North Vietnam's gross national protect ( 0 whereas
agriculture contributed- alMost half of theiGNP. In value-added, agricultural
production was approximately 2.8 times as great as industrial production. Whereas
more than 6 million persons (dr 77 percent of thetotal labor force) were engaged
in agricultural pursuits, only about 616,000 persons (or 7 percent of the labor
force) were employed in modern industry (126,000) and handicrafts (490,000).
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Communist China, the regime is pushing investment in indudtry with resources
squeezed out Of the rural population. Both the tax structure and the price
system are, in fact, weighted against the farmer, in favor of the industrial city
worker. Propaganda stressing the inequity of the price system Should be
particularly effective,* as North Vietnamese farmers daily experience the real
discrepancy between the low prices paid to them for their agricultural products
and the high prices paid by them for industrial commodities.**
North government has itself used this propaganda theme very
effectively against South Vietnam. Among the farmers in the South, the Viet
Cong agents have exploited anger over searing prices for fertilizer and rice
bran. Unfortunately, the Government of South Vietnam has given the Viet Cong
much ammunition for this propaganda by its price control measures that seem to
suhsieize the urban population at the expense of the farmer. In attempting to
please the urban masses of Saigon with cheap pork, President Diem has set a
ceiling; price on hose so low that the farmers will not deliver the animals to
the Saigon slaughter hoeses. Recently &igen was able to export 10,000 hose
monthly to Kong; Kong, but now the exports have suddenly halted, since the farmers
will not bring their hogs to town. There is no reason why this some propaganda
theme should not be even. more effective in exploiting peasant opposition to the
regime in North Vietnam, where the price differential between agricultural and
industrial products is even greater than in South Vietnam.
4H1 To be most effective, VS propaganda shou/d include detailed, up-to-date
information on official prices for specific agriculture' and. industrial products.
Such 4 list of prices would dramatize the relative cheapness of fart products
and the expensiveness of manufactured consumer and producer goods. For example,
in March 1962 the official purhcase price for both rice and corn was 0.02 dung
per kilogram, for green beaus 0.05 dong per kilogram, for peanuts 0.04 dem per
kilogram, and for jute 0.05 dong per kilo. At the same time, a pair of leather
shoes reportedly cost 18 to 20 dons, (Begin CONFIDENTIAL) a wrist watch 103,00
dong, a bicycle Wolipo dons, a wool sweater 30 to 45 dons (Dad CONFIDENTIAL).
Since 1956, the farmers unfavorable terms of trade have actually worsened, as
prices of agricultural products have steadily fallen, while prieee of industrial
consumer goods and agricultural producer goods have continued to rise. In 1959,
the official index of prices paid to farmers for agricultural products howed a
2-percent drop in prices as compared to 1956.' During the same period, on the
other hand, the official index showed an increase of 5 percent in the price of
dressmaking materialsvan Increase of 13 percent in the price of household articles,
an increase of 3.7 percent in the price of household fuels, and an increase of 10
percent in the price of cultural products. US propaganda should follow such
changes in prices over the period a month, 6 months, 'year, etc. When the price
ef rice, or corn, or any other foodstuff is falling compared to the price of
cloth, household items, or any piece of farm equipment, our propaganda should
quote these price changee to highlight the fact that the farmers are being caught
in 4 price squeeze that makes life for them increasingly difficult?
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US propaganda should point out that in arbitrarily fixing the price of
food and other agricultural commodities very low in relation to the price of
cloth, shoes, earthenware, matches, bicycles, farm equipment, and other items
normally purchased by the farmers, the regime is actually depriving the peasants
of their fair share of available goods. In essence, the state is not paying
the farmers as much as their goods are worth;* it is overcharging them for their
purheases of industrial goods produced in the cities (especially producer goods,
such as farm implements, fertilizer? and irrigation pumps); and it is pouring
state money into industry (steel mills, and cement planta, not chemical
fertilizer plants) rather than agriculture. The farmers are being denied the
fruits of their labor, in the overriding interests of rapid industrializationpand
the wealth of the countryside is being shifted to the cities in the creation of
new industrial centers.
g-Wreip-----agandJacanemphasizrthe fact that the regime is not paying the farmers
enough for their agricultural products by pointing out that the state trade
Ministry has been reselling foodstuffs in the cities at very, much higher prices
than it has paid for them thereby making large profits in the transaction. For
example, the average purchase price for rice in the fall of 1956 was reportedly
225 (old) dong per kilogram. At the same time, the (official) retail price of
rice in state stores was 390 (old) dons per kilogram.
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III. Domestic Trade
Any theme that emphasizes certain doctrinaire elements of Communist economic
policy should make effective anti-regime propaganda, for example, one emphasizing
the arbitrary suppression of private domestic trade inplorth Vietnam. Communist
policies aimed at the destruction of privAte trade and its replacement by
socialized trade have involved new hardships for both consumers and those still
engaged in trade. Private traders have been faced with the unpleasant alternative
of working for the new state trade organization or losing their means of livelihood.
Those small traders absorbed in the state system as wage earners have had to
work very much harder, for less reward. Thousands Of others have been left
unemployed. (They, of course, would be very receptive to propaganda criticizing
the regime's arbitraryiheavy-handed treatment of traders.)
I?
These small traders used to provide an effective network for the marketing
of agricultural products and handicraft goods in both the cities and rural areas.
The system of trade cooperatives and state retail stores that has replaced the
private trade network has proved a less satiSfactory alternative. Supply and
marketing cooperatives and government-owned stores are few In number compared with
the former large number of private merchants. Customers must form yueues and
wait long periods for service. Moreover, state stores are typically poorly
stocked with both foodstuffs andmwstactured consumer goods compared with the
general availability of such products in the hands of private traders. Thus,
customers may wait in line a long time only to find out that the store has
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been sold out of a particular commodity. Because of the regime 0 arbitrary
reatrictionJ on the import of consumers goods, many goods formerly imported
under the French are entirely missing from the shelves. Others in short
Supply -- such as rice, meat, sugar, bread, rice alcohol, beaus, condensed
milk, soya cake, and cotton cloth -- are strictly rationed. Finally, most
shops are now authorized to deal in but one or two categories of merdhaudise.
CustoWers, therefore, must go to any number of different stores to buy all
they need. For all these reasons, shopping in North Vietnam today is a much
more inconvenient, tiring, and frustrating business than in pre-Communist
days under a free trade systeM. U$ propaganda should cite this as but
another example of the regme's arbitorry sacrifice of consumer satisfaction.
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IV. Foreign Trade
Over no other sector of the economy has control by the regime been more
effectively established than over North Vietnam's foreign trade. During 1955-
58 the role of the private foreign trader declined rapidly; since then, foreign
trade operations have been completely controlled by the state. The planned
character of foreign economic relations and the state monopoly of foreign trade
operations represent a radical departure from traditional foreign trade
practices; NbreOver, Communist policies with respect to the direction of trade
and the commodity composition of trade have changed dramatically the basic
prewar pattern of trade. The major propaganda themes to be exploited in the
field of foreign economic relations deal with this systematic distortion by the
regime of Worth Vietnam's natural trade relationships.
A. Direction of Trade
The direction of North Vietnam's foreign trade normally should depend on
its geographical location, its comparative advantage in production, and its
pattern of economic development. The DRI's relatively favorable -position (for
Southeast Asia) in mineral reserves and industrial assets and the Communist
program for industrialization would suggest, therefore, a natural orientation
in trade toward the other countries of Southeast Asia -- with the latter importing
'mineral raw materials and industrial products from North Vietnam in exchange for
exports of agricultural commodities to North Vietnam. But in contrast to other
countries where trade on the whole is determined by economic considerations, trade
in North Vietnam is constrained by ideological ahd political considerations.
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Since 1955: its foreign trade has thus remained securely tied to the other Bloc
countries; less than 10 percent of total trade has been with the Free World
(mainly Japan). Under the Communists, Borth Vietnam has been economically,
as well as politically, isolated from the rest or Southeast Asia, in particular
from the former states of French Indochina. Before World War II, trade between
the more industrialized northern part of Vietnam and the agricultural southern
part was of great mutual economic advantage but since partition, economic
.intercourse between North and South Vietnam has been completely cut off. Thus,
the North has been denied its logical market for coal, cement, paper, chemicals,
glass, sad other Industrial products, and, at a time of serious food shortages,
has been cut off from the rice surpluses of the South.
The North Vietnamese people -- especially the better-informed groups --
presumably resent this abrupt termination of all normal economic relations with
South Vietnam and other neighboring Free World countries.. DB propaganda should
direct this resentment against the regime, by linking North Vietnam's economic
isolation in Southeast Asia to the introduction into Korth Vietnam of a
political doctrine alien to Southeast Asia. The distortion of Borth Vietnam
natural foreign trade relationships should be viewed as a serious economic
liability of its political COMmitment to the Sine-Soviet Bloc. The regime's
sensitivity on this isaue has been revealed recently by the emphasis given in
its propaganda campaign to increased trade relations with non-Bloc areas. In a
recent radio-broadcast, Hanoi noted that since 1955 the BBV had concluded formal
trade agreements with 19 non-Bloc countries in Asia, Africa, and the Middle Bast.
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With but few exceptions, however, these agreements are designed primarily for
propaganda purposes. Trade with thesenon-Bloc areas is expected to be of
neg34g1ble economic significance. In-the future, as in the past, North Vietnam's
foreign trade is expected to remain firmly committed to the Sino-Soviet Bloc.
US propaganda should emphasize that this unnatural orientation in trade
towards the Communist Bloc has involved considerable economic cost. For example,
imports of capital machinery and equipment from the USSR and. the Euro-pean Satellites
have involved extra transportation costs that could be avoided by importing
similar products from Japan and other Free World countries. Freight charges on
the long haul by sea from Eastern Europe to North Vietnam are at least three
times as high as those on the short haul from Japan to North Vietnam. In so far
as trade moves from the Satellites and the USSR to North Vietnam by ran, the
difference in freight rates is even greater. Under the Communists, therefore,
North Vietnam's foreign trade has been directed -- for 'political purposes
into uneconomic channels.
B. Commodily.Composition of Trade
1. Imports
North Vietnam's .domestic needs for foodstuffs, soft goods, and
consumer durables far exceed the ability of the economy to supply these goods
and. there is a?videspread unsatilfied demand for imports of foreige consumer
goods. However, the regime has deliberately restricted imports of foodstuffs
and other consumer goods in favor of imports of complete plant installations,
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machinery and equipment, and industrial materials. Under the Communists, there
has, in fact, been a systematic distortion of the composition of North Vietnamese
-imports that has sacrificed consumer welfare to the regime's program for
industrialization.
The natural composition of NorthVietnamesa Imports is suggested by
the composition of prewar imports into French Vietnam and present-day imports
into South Vietnam. In 3.939 more than 90 percent of total Vietnamese imports
consisted of consumer goods (luxury consumer goods accounted for about 49 percent
and non-luxury consumer goods for about 42 percent); producer goods constituted
only about 9 percent of the total value of imports. Although with the beginnings
of industrialization in South Vietnam, imports of consumer goods have declined
in relation to imports of machinery and equipment, in 1960 they still accounted
for roughly 40 percent of the total value of imports. Since 105 a wide
variety of consumer goods -- cotton fabrics, plastics goods, giasaware, wood and
wood products, paper products, and foodstuff% -- have been imported with dollar
funds granted to the South Vietnamese government.
But whereas the. UB economic aid program to. South Vietnam has continued
to finance large annual imports of consumer goods, the pattern of north
Vietnamese imports supported by the high level of economic assistance from
Bloc countries has shifted dramatically away from consumer goods to investment:
goods such as machinery and equipment and industrial materials. In 1955, consumer
goods accounted for approxiMately 55 percent of the total value of North Vietnam's
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imports, but by 1960 they constituted less than 10 percent of total imports.
During the entire period 1955-60, they averaged only about 25 percent of total
imports. In 1960 the value of foodstuffs and other consumer goods imported
into South Vietnam was roughly 10 times the value of similar imports into
North Vietnam, which had almost 2 million more people.
Foreign trade policy with respect to the composition of imports
represents the easiest and most flexible way of channeling resources into
either investment or consumption. If the regime were truly interested in the
North Vietnamese consumer, it could most quickly raise the low standard of
living by relaxing the arbitrary restrictions on the import of consumer geode.
Since imports have averaged no less than 10 to 15 percent or the gross national
product ONO of North Vietnam, the composition of imports has had an unusually
important influence on the over-all allocation of resources in the economy. Thus,
if in 1960 North Vietnamese imports of consumer goods had constituted 40 percent
of total imports as they did in South Vietnam, per capita consumption in North
Vietnam would have been at least 5 percent higher than it actually was. US
propaganda should highlight the regime's artificial restrictions on imports of
consumer goods in the face of large and growing popular demand for more consumer
goods.
Our propaganda might also mention one specific consequence of the
regime's restrictive policy on imports of consumer goods. Not only have many.
goods formerly imported under the French now become totally unavailable to
consumers In North Vietnam, but many handicraft workers --formerly dependent on
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foreign sources for imported raw materials -- have been deprived of their
traditional means of livelihood. For example, those handicraft workers who
used to make rubber goods (such as shoes) with rubber Imported from South
Vietnam would certainly have great difficulty today in securing their needed
raw materials. (They presumably would be very receptive to US propaganda
emphasizing the dislocation of handicraft production that has resulted from
the regime's arbitrary restrictions on the import of consumer goods).
2. Exports
A major economic policy of North Vietnam has been the promotion of
exports to match the level of imports. In particular, the regime has emphasized
an expansion in exports of agricultural and mineral products to pay for imports
of machinery and equipment: The drive to expand agricultural exports obviously
has meant reduced food supplies for an already undernourished population.
During 1956-60, exports of agricultural products increased by more than: /50
percent whereas total production in agriculture increased by only about 20 percent.
A net importer of food before World War 11, North Vietnam is now a net exporter,
but only because of enforced low levels or consumption within the country. US
propaganda should emphasize the regime's utter disregard -- by its continued
determination to export scarce foodstuffs -- of the people's legitimate demands
for an improvement in the food supply. During 1958-630 exports of rice, as
reported by the government, averaged about 1600000 tons, or roughly 5 percent of
total domestic production. At the estimated level of per capita consumption of
rice in 1960 (150 kilograms), these annual rice exports would have been adequate
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to support over 1 million additional persons, or they would have provided an
additional 20 kilograms of rice per persons thereby raising per capita consumption
by about 7 percent. Even at a time of serious food shortages in North Vietnam
In late 1960 and early 1961, the regime was continuing to export reduced
quantities of rice and other foodstuffs. US propaganda should attribute the
recent difficulties with the domestic food supply primarily to these large
annual exports of foodstuffs, rather than to lowered agricultural production
due to bad weather. When food is scarce, a rumor that the regime is exporting
large amounts of grain to Communist China and other "friendly governments"
should be especially effective in arousing public opinion against the regime.
C. QAalitLELAREAMIE
The poor quality of many of the goods imported from the Bloc might be
effectively exploited in US propaganda.
Under the French, the North Vietnamese had over 50 years of experience
with Western technology and Western manufactured products. During that period,
French standards were implanted deeply in most areas, and. 1/stern bec
a. benchmark for comparison. Today the North Vietnamese apparently still regard
both the technology and industrial products of the West as generally superior in
quality to what the USSR, Communist China, and other Bloc countries now are
offering them, In recent months, criticism of Bloc goods and services has even,
on occasion,bien expressed in the press. For example, an article recently
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published in Thoi Nol admitted frankly that "people are saying that American-
made goods are cheaper and better, and, altb.ough the former regime is now
criticized, then everything was very cheap and beautiful." A constant
propaganda battle has had to be waged by the regime in an attempt to convince
the people that goods and services furnished by the Bloc are actually as good,
if not better, than those furnished by the West. The goveriament, however,
apparently is having great difficulty in proving that Communism does not
automatically bring in its train a lowering of standards, shortages, and. the
able of poorly manufactured products. Thus, the North Vietnamese should be
very receptive to 'US propaganda on the general subject of the inferiority
of the North Vietnam's Imports from the Bloc compared. to prewar imports from
the West.
Because of the lack of Western observers in North Vietnam who might
report firsthand on the quality of North Vietnamese imports of Bloc goods,
little information is available on specific commodity shipments that could. be
used as examples in US propaganda. General conclusions as to the over-all
quality of Bloc exports can, however, be drawn from the experience of other
countries. In general, Bloc exports of foodstuffs and. induatrial raw materials
such as cotton and petroleum have presented no special problem. On the other
hand, exports of manufactured consumer goods have been consistently inferior
and invariably more expensive. They have, in fact, found no markets among
the Western indilstrial countries, where comparisons can easily be made. In
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particular, complaints have been voiced about the quality of Bloc textile
products, especially those sold by Communist China. Even when the materials
are durable and the colors do not fade, the patterns are often monotonous
and the colors dull. Bloc clothing manufacturers have also been accused of
a cavalier attitude toward sizes (for example, a size 12 dress may have size
20 shoulders). But perhaps the most questionable of Bloc exports have been its
capital goods. While not necessarily inferior for conditions within the USSR,
heavy, massive Soviet equipment has not always been found satisfactory in other
countries. For example, Soviet jeeps applied. to Indonesia (and. presumably
to North Vietnam as well) had windshields that were so distorted by tropical
heat that it was difficult to see through them; the steering mechanism was
also poorly designed, resulting in "shimmying" at higher speeds; and the springs
reportedly were of insufficient strength for heavy loads of local roads.
D. Bloc Trade with North Vietnam as an Instrument of Control
The Bloc countries have the desire and the ability to use forei trade
alone or in combination with aid, as an instrument of political and. military
policy.- The contrast between the Western system of uncoordinated decisions by
numerous private parties and state trading under totalitarian control is obvious
and striking. In a Communist society in which .all trade activities are centrally
controlled, purchases and sales can be increased or decreased and. switched from
one country to another' whenever the central authorities so choose. At the
extreme, such abrupt changea in the volume direction, or commodity composition
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of trade can be clearly politically motivated, as fluctuations in Bloc trade
following changes in political relations with 'Yugoslavia in 1958 and the
recent cut -back in Soviet trade with Communist China and Albania would indicate.
The fact that the USSR has applied economic sanctions against these other
members of the Bloc in a political dispute must make the DRV Apprehensive about
the reliability of Communist countries as trading partners. in the future,
North Vietnam's two powerful Communist trading partners, the USSR and China,
might well adopt the same tactics and threaten a reduction in the over-all
.volume of trade or a cut-back in shipments of high-priority items in an effort
to make certain of North Vietnam's support of specific foreign policy objectives.
The DRV's dependence on Sino...Soviet Bloc imports. for its industrializtition program
and its militarylndlA-up would make it highly vulnerable to such external
political pressure applied through trade. US propaganda should emphasize Borth
Vietnam's potential loss of economic and political independence by so complete
an orientation in trade towards the Sino-Soviet Bloc. To this end, it should
publicize the USSR's recent economic sanctions against Communist China and
Albania, such as the unilateral withdrawal of Soviet technicians from China
in mid-1960 (at a time when many aid, projects were only partially completed) and
the sharp drop in trade (including the termination of al/ credit agreements)
with Albania in 1962. This propaganda theme should be especially effective with
those persons who already resent the regime's break with its established prewar
trading partners.
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V. Foreign Economic Assistance
Although not particularly impressive when compared with US economic aid
to South Vietnam,* Bloc economic aid to North Vietnam has been quite substantial.
Moreover, it has been crucial to the economic recovery of North Vietnam from
the effects of the Indochina War. Thus, 11.32Lo_a_p_mcy.L.,skaLlAssot attempt to
belittle the total amount of Bloc aid or its altes:4211.22L2altsyorth
Vietnamese ecaatnE; rather, it should concentrate on the few obvious shortcomings
of the aid program. The most effective US propaganda themes would probably
be (1) the mlexiirection of Bloc aid, (2) the necessity for paying:back Bloc
credits (with interest) in exports of much-needed foodstuff is and other consumer
goods, (3) certain deficiencies and limitations in the aid program, (4) the
use of aid as an instrument of foreign economic control, and (5) the high costs
of the Bloc technical assistance program that must be borne by the North
Vietnamese government.
A. Misdirection of Aid
The most effective US propaganda theme on the general Subject of Bloc
economic aid to North Vietnam would almost certainly be one emphasising that
Bloc aid has not really benefited the North Vietnamese consumer. US propaganda
r?Siirirrioniti extended to Seuth Vietnam for use during:1955-60 Was more than
two and one-half times as much as economic aid extended bythe-BIoc to North
Vietnam, or about US $1,400 Million compared with about US $525 million. Whereas
foreign economic assistance ter South Vietnam is estimated to have been equal
in amount to about 13 percent a South Vietnam's P,. economic aid to North
Vietnam was equivalent to approximately 8 percent of North Vietnam's GNP. As
Mentioned at an earlier pant in the report, this kind of information is given
as background onlyvnot as usable propaganda material.
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should point out that whereas the other Bloc countries bsme invested heavily in
the reconstruction and expansion of North Vietnam's heavy industry, they have
contributed relatively little to the development of the food and other consumer
goods industries that would support a higher standard of living; and where
they have provided aid for light indust*, it has been used mainly for the
expansion of facilities to process agricultural commodities for export.
Furthermore, the Bloc has invested only small amounts of aid funds in the
expansion of agricultural production, the extension of health and educational
facilities, and the improvement of housing conditions. US propaganda should
stress that although the North Vietnamese people want mere foodstuffs, more
textiles, and more chemical fertilizers, the Bloc economic aid program has
provided more capital mathine* and equipment for new heavy industrial projects,
more petroleum, and other industrial raw materials.
Almost three-fourths of total aloe economic aid to North Vietnam has,
in facts been used for the reconstruction of basic productive facilitiee
..(iacluding transportation facilities) and for net additions to heavy industrial
capacity. Aid shipments of food and other consumer goods and Bloc assistance
in the construction of light industrial projects have been secondary. For
example, Soviet aid projecti have included the following heavy industrial
facilities: The Hanoi machine tool plant, the Lao Kay apatite mine, the Phu Tho
superphosphate plant, and 6 electric power plants. The only 2 light industrial
projects undertaken with Soviet aid have been the Haiphong fish cannery and the
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Phu Tho tea-processing plant. Similarly, most of Communiet China's economic
aid has been used to finance the reconstruction of North Vietnam's prewar
transportation and. communications network and. the new construction of an iron
and. steel plant, several industrial chemical plants, and two electric power
plants. (The Chinese have, however, also undertaken the construction of a few
important light industrial projects, such. as rice mills, sugar refineries, a
knitted. goods factory, and. a rubber goods plant). Aid. projects scheduled. for
construction wider North Vietnam's First Five Tear Plan (1961-65) reflect even
more the overwhelming priority of heavy industry. Out of 75 total projects, 50
are to be in heavy industry, 6 in transportation or communications, and. 19 in
light industry. In total value, Bloc aid for heavy industry will. be more than
3 times that for light industry. The specific aid projects that have been
announced to date are listed in Appendix A.* They may be useful as examples in
support of the general argument that Bloc economic aid has been of little
direct benefit .to the North Vietnamese people.
US propaganda on this subject may want to point out the striking
difference in the pattern of imports supported by the Bloc and US economic aid
programs. For example, whereas Bloc economic assistance to North Vietnam has
consisted. largely of shipments of, complete plant installations, machinery and
equipment, and. Industrie/ raw materiels, US-,financed imports into South Vietnam
have been overwhelmingly consumer goods. Thus, our propaganda should indicate
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that the Free World programs of economic assistance are of an entirely
different nature from those of the Bina-Soviet Bloc. Whereas the US is
concerned for the welfare of the people as well as the development of the
economy, the other Bloc countries are interested only in the economic and
military power position of the Bloc. Thus, US aid programs have financed
large annual imports of food, clothing, paper products, and pharmaceuticals,
whereas the Bloc countries have ignored the legitimate demands of the Borth
Vietnamese people for an Immediate improvement in the low standard of living
and have restricted imports of consumer goods in favor of imports of Investment
goods.
US propaganda can reinforce the argument that Bloc economic aid has had
no appreciable effect on living standards in North Vietnam by pointing out
that this aid -- extended primarily in the form of credits had to be repaid
in exports of agricultural and light industrial products. Because Bloc aid has
mainly supported imports of investment goods for North Vietnamfs industrialization
program and because these seeds must be paid for by Vie export of foodstuffs and
other consumer goods, the over-all effect of the aid prep= has been to shift
resources from consumption to investment. In the interests of rapid
industrialization -- involving large annual imports of capital machinery and
elpipment, financed by Bloc credits -- the regime has thus committed. North
Vietnam to long-term exports of much needed consumer goods, thereby demanding
continued sacrifice on the part of the North Vietnamese consumer for many years.
Moreover, the investment has aimed at making North Vietnam strong politically and
militarily rather than at ultimately bettering the lot of the conslamer.
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B. Credits Bather than Grants
When it comes to boasting of "unselfish assistance," Soviet and Chinese
Communist propaganda implies that Bloc economic aid to North Vietnam is given
with no strings attached. let, in fact, Soviet and Chinese aid to North
Vietnam has largely involved material and technical assistance for which a
charge (repayment of the loan plus interest) has been made. Only about 40
percent of total Bloc aid to North Vietnam has consisted of free grants.
Initially provided in the form of grants, economic aid since 1958 has consisted
almost entirely of long-term credits; all of the ald extended in support of the
Five Year Plan (1961-65) has been credit aid. In contrast, there has been no
shift from grants to credits in the US aid program to South Vietnam. Mire than
90 percent of total US economic assistance to South Vietnam has been extended
as grants-in-aid. Thus, another basic difference between the US and Bloc aid
programs is that whereas the DS has provided economic aid as a free gift, the
Bloc countries have extended aid primarily in the form of credits that must be
repaid in full, with interest. In the latter instance, although Bloc economic
assistance has contributed importantly to North Vietnam's economic growth, it
had also placed heavy demands on the economy. By 1965 North Vietnam's total
indebtedness to the Bloc will amount to more than US $500 million, the major
part of which must be paid back within 20 years. The =auk/ debt -- representing
more than 10 percent of the 1961 state budget and more than two-thirds of the
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total value of exports in 1961 -- will constitute an excessive financial
burden. Therefore, one can legitimately ask whether, in the coming years,
this indebtedness will not be too high a price to pay for the gains acquired.
The Bloc decision to extend aid as credits rather than as grants
tests on cold economic eonsiderations. No matter how favorable the interest
and repayment conditions of Communist loans may he, the lending countries
each year receive partial repayment of the principal plus the interest accrued.
Thus, the Soviet argument* that gifts are not in the hest interests of the
receiving country should he attacked as insincere. US propaganda on the subject
of credits vs4 grants must be handled with care, however. Experience has shown
that the USSR has not always demanded repayment on loans extended to other Bloc
countriee, when financial difficulties have made this impossible. The Soviet
cancellation of credits extended to North Korea during 1954-56, for example,
has been well publicised with the Bloc and should be known to the North
Vietnamese. On the other hand, the Bloc has not, to date, cancelled any or the
economic credits extended to North Vietnam, although a major purpose of Premier
Pham Van Donee recent trip to the other Bloc countries was to request additional
economic aid in the form of a cancellation of these earlier credits. In 1961 the
USSR is believed not to have cancelled or even deferred repaydent on long-term
sran?a7C---kionswiththeoc are deliberately represented in Communist
propaganda as straight business. The commercial basis of the aid program is
said to avoid the impression of an unequal relationship between a powerful
and. paternalistic contributing nation and a dependent and subservient
recipient nation.
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credits incurred by the Chinese Communists, even though payment has been
extremely difficult at a time of economic trouble in China. DB propaganda
should publicize this latter example of Soviet intransigence with respect
to the repayment Of economic loans.
The general propaganda theme that Bloc economic aid must be repaid
in full, with interest, can be made even more effective by pointing out that
repayment of Bloc credits must be made in exports of fpodstuffs and other
consumer goods (as discussed above). Xt should be underscored that the North
Vietnamese will pay dearly (in terms of their standard of living) for imports
of investment goods currently financed by foreign credits.
C. Deficiencies and Limitations in Bloc EconomisIllpmem
Imbalances and lack of planning in the Bloc aid program in support of
North Vietnam's drive for industrialization can be effectively exploited by
US propaganda. For example, the development of particular food industries in
North Vietnam has not readily corresponded to the needs of the economy, the
supply of raw materials, or the level of native technology. The tea processing
plant at Phu Tho and the fish canning factory at Haiphong, both major Soviet aid
projects, have produced products of poor qualityand operated at considerably. less
than capacity because of inadequate and irregular supplies of raw Materials* and
T7F3FIEFEiRrutitt---TOWic-Eiliea factory in 1960 was still operating at less than
two-fifths of its rated. capacity o Similarly, after almost 3 years in operation,
the output of the fish cannery in late 1960 was only about 10 percent of its
total capacity. Fishing in North Vietnam is too primitive to serve satisfactorily
as the basis for modern fish processing facilities* A steady supply of fresh fish
must emelt the adequate development of modern deep-sea fishing operations.
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the lack of adequately trained technicians.* Another emphasis of a foreign
aid project that has not readily corresponded to the needs of the North
Vietnamese economy is the Haiphong plastieware factory, built with Chinese
Communist assistance. US propaganda might cite these three specific aid
projects to show how, in many instances, Bloc economic aid to North Vietnam
has been poorly planned, aud therefore largely wasted.
US propaganda might also point out the institutional features of the
Bloc economic aid.program that have been deliberately designed. to limit North
Vietnam's free Choice of goods imported under the aid program And its free choice
of trading partners. In this regard, the restrictive Bloc economic aid. program
should be contrasted to the US economic aid. program, which has allowed the
recipient country considerable discretion in the use of aid funds. In every
instance, Bloc economic aid to North Vietnam has been tied to the shipment of
Bloc goods and the dispatch of Bloc technicians to North Vietnam ?.in other
words, Soviet economic assistance has meant the delivery, of Soviet goods and
services, just as Haat German economic 'aid has involved the Shipment of only
East German goods and services.. In contrast, only about 15 percent of US
.economic aid to South Vietham has consisted of direct shipments of goods and
r"-E?Eisie?s-rizigiy-77?mia7?before both of these, plants were built, there was a
dispute between Soviet and non-Soviet foreign specialists in North Vietnam over
the economic soundness of the two Projects. Nen-Soviet Specialists argued that
the investment would. not be justified by the supply of fish and tea available .
(French researchers had previously concluded that not enough fish were available
in Haiphong Bay to support a cannery) 4 The two plants vere'nonetheless built,
at Soviet insistence.
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services similar to those provided by the Sino-Soviet Bloc to North Vietnam.
By far the greatest part of US economic aid, has been indirect aid, which has
involved the extension of dollar credits to the South Vietnamese government to
pay for imports. In the open competition for South Vietnam's import market,
US goods have competed freely with those of many other non-Bloc countries.
During 1954-60, goods and. services of US origin constituted. only about 20
percent of the total value of South Vietnam's aid-financed imports. Since
mid-1960 the US share of the market for aid-supported imports has increased.
to about 40 percent. Thus, our economic aid program has allowed the South
Vietnamese considerable freedom in the choice of the supplier of its aid-
supported imports, whereas the Bloc aid program has obligated North Vietnam
to import goods and. services only from the contributing Bloc country. 1.13 the
latter instance, the DRV may have little o?pportunity to bargain for price and
quality advantage and may thus be prevented from 'obtaining the maximum benefit
from loan funds by purchasing the most suitable goods at the lowest prices
available in world markets.
D. Aid. as an Instrument of Foreign Control
An effective US propaganda theme would certainly be one suggesting that
French colonialism was defeated in North Vietnam only to be replaced by a new
kind of imperialism, that of the USSR and Communist China. Such a propaganda
theme would appeal strongly to certain powerful sentiments in North Vietnam,
such as the desire for economic independence and. a respected status in inter-
national relations. Proudly independent and nationalistic, the North Vietnamese
are sure to resent any suggestion of foreign economic control of their country.
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Throughout the whole of its history, Vietnam has always been aware of the
ever present threat to her national independence from Its powerful and demanding
neighbor to the North. The attitude of most Vietnamese toward China -- one of
strong dislike mingled with fear -- is the product of centuries of long experience.
Having been, twice annexed by China (remaining under Chinese domination for a
thousand years on the first occasion but only for a short period of 20 years
on the second), the North Vietnamese now jealously guard the right to govern
and administer themselves without outside intervention. Thus US propaganda that
suggests that Ho Chi Ninh's commitment of North Vietnam to the Communist Bloc
.has opened the door to Soviet and Chinese Communist penetration should be
effective in arousing public hostility not only against foreign elements in
? .North Vietnam (such as the Bloc technicians and advisers) but also against the
regime.
In particular, US propaganda should condemn the Bloc economic aid
program an being a major instrument of foreign economic control. The North
Vietnamese probably are not so naive as to believe that Bloc economic aid to
North Vietnam is purely altruistic. let they have been favorably conditioned
by Communist propaganda that stresses Soviet and Chinese willingness to help
others, even 'when their Oen domestic economies could well use the additional
resources. A major objective of US propaganda should be to promote the genera/
suspicion that exploitation and economic domination are, atter all, the real
ulterior motives underlying the Bloc aid program Certain features of the
Bloc aid program, such as the extension of credits rather than grants, should
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be presented as having been deliberately designed. to give the other Bloc
countries maximum direct influence over economic planning and development in
North Vietnam. It is important to emphasize that foreign economic Assistance,
by itself, does not necessarily imply exploitation or foreign economic control.
Otherwise, the US economic aid program in South Vietnam also would be suspect.
Rather, US propeganda should highlight those particular features of the Bloc
economic aid program that give the other Bloc countries a measure of control
over internal economic developments in North Vietnam that is unknown in US
economic relations with, say, South Vietnam.
For example, the extension Of credits rather that grants has assured
the contributing Bloc countries of a long-term position of influence in North
Vietnam. According to profesSed Soviet thinking, grants-in-aid are fundamentally
unsuitable for forming long-term economic relations the economic relations
attendant thereupon are practically completed with the delivery of the goods
comprising the, aft. In the case of loans, on the other hand, economic relations
continue over the entire time span of repayment, during which period the
contributing Bloc countries reserve the right to adjust North Vietnam's
repayment obligations at any time, according to the prevailing economic and
political situation. As it is highly doubtful that the aid received by North
Vietnam will sufficiently stimulate production of exportable commodities to
permit the DRV to'lignidate its indebtedness for a good many years, the other ?
Bloc countries have effectively secured North Vietnam's continuing economic
dependence for -a long time.
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Restrictions on the ,import of aid goods have also allowed the contributing
Bloc countries to exert considerable direct influence on economic developments
in North Vietnam. Where the aid program has guaranteed the delivery of only
Bloc goods and services, it has created a kind of derived dependence on the
Bloc. For example, *Wade Soviet equipment has been provided, spare parts will
always be needed from the same source. Thus, every aid transaction has served
as a nucleus of techniques or Skills that are specific to the country of origin.
In this manner, the Bloc economic aid program has made the North Vietnamese
economy increasingly dependent on imports of Bloc goods and technical services,
and thud increasingly vulnerable toexternal economic pressures from the Bloc.
Perhaps the most ObVious of external economic controls .has been the
Bloc technical assistance program0'whiehhas involved the sending of several
thousand technicians to North Vietnam from CommUnist China, the USSR, and the
other Bloc countries. In 1957 alone, no fewer thane31000 Chinese and about 1,000
Soviet technicians reportedly were working in North Vietnam.- In 1961 perhaps
one-half that number were Still in the DRV. Acting in an advisory capacity to
the various economic ministries and key technological cOmmissions, foreign
economic consultants have influenced in varying degrees the organization and
character of virtually all Of North Vietnam's development programs. Attached
to specific economic and technological projects, these foreign technicians also
have directed the daily operations of all its major industrial enterprises. Tho:
presence of a large number of Bloc advisers has thus become -- and is expected
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to remain -- an important factor in the economy. The North Vietnamese apparently
resent. this great influx of foreige advisers and technicians who are running
a large portion of their economic affairs. US propaganda should be able to
exploit these feelings of hostility by suggesting that eeondmic development
In North Vietnam planned and directed, as it has been, by foreign specialists--
has been overly responsive to the needs and reqpirement? of the other Bloc
countries, sometimes even to the sacrifice of North Vietnam's own economic
interests.
US propaganda can lend substance to this general charge that the other
Bloc countries are exploiting North Vietnam by pointing out those industries
being developed with Bloc aid primarily for export to the Bloc.* (Begin
CONFIDENTIAL) For example; Soviet advisers have been particularly active in the
apatite mining industry at Lao Kay. Since the DRV still has no facilities for
the conversion of apatite into seperphoephate fertilizer, the total production
or apatite is being exported; mainly to the USSR. The entire area in the
vininity of Lao Kay is even reported to be under the control Of the USSR, 'which
Begin te North Vietnamese would almost certainly be very
sensitive to any suggestion that certain industries are being developed with
Bloc aid primarily for export to the Bloc.. The workers at the 'Haiphong Fish
Cannery, a Soviet aid project, are even reported to have tried to sabotage the
Plant in late 1961, when they learned that all the output Of canned fish was
being reserved for export (End CONFIDENTIAL). 25X1A
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is conducting geological surveys ear uranium in this area. As of late 1961,
280 Soviet specialists were reportedly directing mining operations at several
of the 8 areas known to contain uranium deposits. Entry into these areas is
apparently restricted to Soviet technicians only, not even North Vietnamese
being allowed in, and all of the uranium ore is reportedly being shipped from
Haiphong to the USSR Mad CONFIDENTIAL). The most obvious example of foreign
economic assistance extended to North Vietnam largely in the economic self-
interest of the contributing Bloc country is the aid given by Communist China
for the reconstruction of North Vietnam's rail lines. Since 1958, the Hanoi-
Dons Deng and the Hanoi-Lao Kay lines have become almost integral parts of the
rail system of China, transporting Chinese goods between K'un-ming In Southwest
China and the main Chinese rail net in South China. Roughly two-thirds of the
freight carried on these lines across the China-North Vietnam border in 1958-60
was Chinese freight in transit across Borth Vietnam. During 1961-65 the
meter gauge (3 feet, 3 inches) of these same rail lines is to be widened --
with Chinese Communist and Rumanian aid -- to standard Chinese gauge (4 feet,
8-1/2 inches) to complete the integration of the two rail ystems. The
exceptional nature of this undertaking -- in which one country's railroad gauge
is being changed at considerable cost to accomodate another country -- suggests
the overriding interest of the Chinese in the project.
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E. Foreign Technicians
The presence of large numbers of Bloc advisers and technicians in North
Vietnam has involved certain costs as well as benefits for the North Vietnamese
economy. US propaganda should emphasize the high costs of the program, which
consist essentially of the payment of high salaries to the foreign technicians,
the provision of first-class living accomodations and board, the granting of
free transportation services, and the furnishing of other side benefits
compatible with the foreigners privileged employment status. All of these
local operating costs of the program (not including salaries) must be borne by
the North Vietnamese government. Only the salaries of the foreign advisers
are included under technical assistance, and they, of course, must be repaid.
From the outset, Bloc technical and advisory groups have encountered
hostility on the part of the North Vietnamese, stemming mainly from the latter's
jealousies over the special treatment accorded Bloc personnel but 'aggravated in
many instances, by the arrogance displayed by Soviet and Chinese Communist advisers
in their dealings with their Vietnamese counterparts. CS propaganda can hope
to intensify the ill will between the two groups by attributing to the forel
technicians a general feeling of impatience and disdain for North Vietnamese
abilities and by pointing up the high standard of living enjoyed by these foreign
advisers at Vietnamese expense. To this end, it should publicize the withdrawal
of most of the Bast German technicians from North Vietnam in late 1961 in protest
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against the general incompetency of the North Vietnamese in economic matters.
(East Germany was the only European Satellite country not to extend economic
credits to North Vietnam under the Five Year Plan (1961-65), bearing out its
contention that the DIN is not capable of running its own economic affairs
efficiently and therefore not worth aiding.) Our propaganda should, therefore,
picture the life of the foreign adviser in North Vietnam as one of special
privilege (as it actually is), is the midst of an underprivileged society.
The following quotations from reports on foreign technicians in North Vietnam
(actual descriptiont of living conditions in 1955-61) are given as back-up
information for this suggested propaganda theme. (They should not be voted
verbatim). ?
(Begin CONFIDENTIAL) "The Soviet technicians have used their
very high pay to buy in great quantities the worthwhile things
for sale in North Vietnam. One Soviet technician ordered 33
suits and 50 sweaters to be made of textile stocks left by the
French."
"Although there is a housing shortage, the foreigners
usually live in large villas or first class hotels. Even
people who are living in their own homes are evicted to make
room for foreign advisers. Government officials take over these
homes offering excuses such as 'it is our duty to see that our
friends live in comfort to work for our country. The average
foreign adviser's family has one or two women servants who act
as the childrens' nurses, a cook, a gardener, a Chauffeur, an
interpreter, and a guard to watch the door. Delegation chiefs
have their own cart, usually the luxurious Soviet ZIS-type
automobile.
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"Advisers from the Bloc are not well dressed when they first
arrive in North Vietnam, but it does not take them long to fit
themselves out in clothing made of find imported materials..
Technicians leaving the country with suitcases bulging with
choice items are a familiar sight to the native of Hanoi.'
-
"The best-known summer resorts are reserved for the
foreign delegations as Vacation places; these include Ma Pa,
Tem Dao, and Do Son. The Vietnamese must spend their
vacations in remote places like Sam Son. Vietnamese outside
of Hanoi have little contact with the foreign advisers.
"In June 1958 foreign advisers. technicians, and professional
workers enjoyed the following mouthy salaries: delegation chief,
5 million dong; technician, from 2 million to 3 Million dots;
professional worker and specialist, / million. If they lived in
a hotel, the chief and the technicians got an allowance of from
30,000 to 50,000 deng a month for expenses, and the lover grades
got 10,000 dong. In addition, the DRV supplied furniture,
stationery, books0 magazines, radios, soap, work clothing,
cigarettes and refreshments in the offices, and even an
allowance for hair cute. Advisers and technicians paid only
about 15,000 dong a month for food, and workers from 7,000 to
10,000 dong; for banquets and other special occasions,, the DRV
provided food and imported French wines. (In comparison to the
above salaries paid to foreign advisers and technicians a high-
ranking DRV civil servant in. June 1958 was paid from 140,000 to: 25X1A
600000 dong a month; the chief or a city district, 140,000; the
chief of a district security service, 30,000; a two-star general
in the Army, 40,000; and a three-star general, 5000000" (End
CONVIDECITIAL)
Oct /041r 6
DetcAsstrieP a. nett
a
Thus the several thousand foreign advisers in North Vietnam are living
in a manner that is not only far beyond the reasonable expectations of all but
a few North Vietnamese but also is quite probably much above their own standard
25X1A
of living in their home countries. US propaganda should point out that the Bloc
technical assistance program goes mainly into supporting the very high Salaries
paid to these foreign technicians.; telhoalso receive additional fringe benefits
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from the North Vietnamese government. Thus, the whole program of technical
assistance is a costly one for the DRY, which must in time repay an the
technical aid with exports of North Vietnamese goods and services and in
addition, meet all the current local operating costs of the program. For
such expensive programs as this, it should be pointed out the North
Vietnamese people are being taxed excessively by the regime.-
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Appendix A
Bloc Aid Pro cots Scheduled for Construction During 26l-6
riss.ff Induam
Expansion of three electric power plants at Viet Tri, Thai Nguyen, and Co
Dinh (Communist Chita)
Expansion of Co Dinh chromium mine (Communist China)
Establishment of iron mine at Linh Ham (Communist China)
Expansion of Thai Nguyen iron and steel plant (Communist China)
Construction of two blast furnaces at Thanh Hoa and Vinh (Communist China)
Construction of three cement plants between Haiphong and Hon Gay (Communist China)
Expansion of Haiphong cement plant (Communist China)
Expansion of a caustic soda factory (Communist China)
Construction of Six electric power plants at Uong H10 Thac Sal Quang Cu,
Lang Hit, Lao Van Chay, and Nam Han (USSR)
Expansion of two electric power plants at Lao Kay and Vinh (USSR
Expansion of Hon Gay - Cam Pha coal mine (USSR)
Construction of two coal mines at Mho Ehe and Dam Dau and an apatite mine (USSR)
Expansion of Hanoi Machine Tool Plant (USSR)
Construction of two machine tool plants (USSR)
Construction of 6 repair shops for mining equipment (2)0 motor vehicles (1),
aircraft (1)0 electric motors (1), and telephones (1) (USSR)
Construction of a diesel engine factory (USSR)
Construction of a buoy factory (USSR)
Construction of an automobile accessories plant at Haiphong (USSR)
Construction of a chemical fertilizer factory (Rumania)
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Construction
Construction
Construction
Construction
Construction
Expansion of
Construction
(Hungary)
Construction
-Installation
Construction
Construction
of a repair shop for mining equipment (Rumania)
of a cement factory at Haiphong (Poland)
of a brick factory (Poland)
of a repair shop for locomotives and rolling stock at Ula Lam (Poland)
of an electric power plant at Quang Binh (Hungary)
Thanh Hos. Electric Power Plant (Hungary)
of a -#actory for the manufacture of telecommunications equipment
of a brick factory at Dap Cao (Czechoslovakia)
of air conditioning at Nam Dinh Textile Mill (Czechoslovakia)
of three electric power plants (Bulgaria)
of a cement factory (Bulgaria)
Tompaslealm_and Telecommunications
Widening of Hanoi . 14111D Nam Qumn Railroad (Communist China)
Construction of a railway Station at Yen Vien (Communist China)
Construction of rail and highway bridge at Ham Fong (Communist China)
Construction of an airfield at Vinik (Communiat China)
Instalation of modern telecommunications in several industries (USSR)
Widening of Lao Nay - Haiphong Railroad (Rumania)
.Light zwilaam
Expansion of two sugar refineries at ligho An and Viet Tri (Communist China)
. 49 -
C-0-N-F-I-D-E.N-T-I-A-L
Approved For Release 2001/04/30 : CIA-RDP79T01049A002400140002-8
Approved For Release 2001/04/30 : CIA-RDP79T01049A002400140002-8
Construction of two new sugar refineries at Thai Nguyen and Quang Binh
(Communist China)
sion of Barn Dinh Textile Mill (Communist China)
Construction of a silk factory (Communist China)
Construction of three writing paper factories at Vinh, Thai Nguyen, Quang Binh
(Communist China)
Construction of a corn flour mill (USSR)
Construction of a cosmetic factory in Hanoi (USSR)
Construction of a pharmaceutical antibiotics factory (USSR)
Construction of .a factory for production of Aousehold implementa (Hungary)
Construction of a alaughterhouee (Hungary)
Construction of a tannery (Czechoslovakia)
Construction of -a frutt cannery (Bulgaria)
ConstrUction of two flour mills (Bulgaria)
Construction of a slaUghterhouse (Bulgaria)
50 -
Approved For Release 2001/04/30 : CIA-RDP79T01049A002400140002-8