THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010008-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: July 6, 2012
• Sequence Number: 8
• Publication Date: July 27, 1970
• Content Type: IR

Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010008-4
Secret"
Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Economic Situation in South Vietnam
(Biweekly)
Secret
Al
27 July 1970
No. 0427/70
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010008-4
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Secret
WARNING
This document contains information affecting the national defense of the
United States, within the meaning of Title 18, sections 793 and 794, of the
US Code, as amended. Its transmission or revelation of its contents to or
receipt by an unauthorized person is prohibited by law.
GROUP 1
EXt LUDED FROM AUTOMATIC
DOWNGRADING AND
DE[ LAASTFICATIOR
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
27 July 1970
The Economic Situation in South Vietnam
Summary
Loans to farmers by South Vietnam's Agricultural
Development Bank in 1969 did not increase above the
1968 level, but lending increased considerably
during the first quarter of this year as the bank
acquired more funds from the government. Four
privately-owned rural banks already have been
established in district towns, and government
officials expect 20 to be operating by the end of
this year.
The Viet.Cong increased taxes on the rice crop
in the delta in 1970 in order to meet pressing
financial needs.
Retail prices in Saigon increased further
during the two weeks ending 20 July to a level 31
percent above the average price level for December
1969. Black market currency and gold prices
continued to fluctuate during the period.
ANNEX: Monthly and weekly currency and gold prices
(graph)
South. Vietnam Economic Indicators
(graph)
SECRET
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SECRET _YWAVI
AgriculturaliCredit
1. The government's Agricultural Development
Bank (ADB) failed to meet its 1969 loan goal presumably
because of insufficient funds. During 1969 loans
to farmers totaled 4.6 billion piasters ($39 million
at the official rate of exchange) -- the same as in
1968 - Whereas the goal had been 5.6 billion
piasters. The number of recipients increased, how-
ever, from 70,000 to 89,000, three fifths of whom(
received unsecured loans. The share of funds being
used to finance crop production declined slightly
during 1969 -- from 83 percent in 1968 to 72 percent
in 1969, while the share going to livestock producers
and fisheries increased from 14 to 23 percent. The
remaining five percent of the funds financed handi-
craft and forestry operations. Almost all of the
loans were short-term, under 18 months, carrying an
interest rate of one percent per month. Because
the rate of inflation is much higher than the interest
rate, farmers who receive ADB loans are in effect
being subsidized by the government.
2. The ADB apparently was unable to extend
as much credit as planned because repayment6.were
slower than anticipated and the government has
been slow in releasing funds to the bank. In mid-1969,
however, the government released an additional 1.5
billion piasters to the bank and in April 1970
approved a non - interest bearing one-billion-
piaster loan to the ADB. The bank intends to use
40 percent of this recent loan to finance crop
loans to tenant farmers who receive title to their
land under the land reform program. The bank's
lending operations increased substantially during
the first quarter of this year when loans were more
than double those of the first quarter of 1969.
3. In an effort to strengthen farmers' and
fishermen's associations, a special Agri-Business
Loan Fund was established in late 1969 by the ADB,
the Ministry of Land Reform and Agribulture, and
USAID to finance the import and distribution of
agricultural inputs by these groups. Loans are
being made from a revolving one-billion-piaster
fund using counterpart piasters derived from
SECRET
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SECRET mew
US-financed imports. The first loan from the fund,
which is administered by the ADB, was made in January
to the Tenant Farmers Union of the Vietnamese Con-
federation of Labor, which will use the monty to
import fertilizer and farm machinery.
4. The ADB continues to push the development
of a privately-owned rural banking system, which
it hopes eventually will assume most of the
responsibility for short-term credit in rural
areas, freeing the ADB to concentrate on financing
medium- and long-term agricultural development
projects. Since September 1969 four banks have
been established in district towns in four provinces,
and ADB, which supervises the private banks, expects
to inaugurate 20 new banks this year. ADB officials
are very encouraged by the rate at which the rural
banks are attracting savings deposits, which by mid-
March totaled 12 million piasters.
Increased VC Tax Goals for 1970
5. In order to help meet its financial needs,
the Central Office of South Vietnam (COSVN) has
ordered increased taxation of the delta rice crop
in 1970. Rice probably accounts for about 80 percent
of Viet Cong (VC) revenues, while the remainder
consists mostly of cash from transportation and
business taxes and "contributions."
Although the tax
rate is only slightly higher in 1970, the amount of
Tice to be collected is substantially greater because
of the large increase in paddy production in IV Corps
this year. Tax goals for most other areas of the
country also are higher.
6. The VC have not been successful in achieving
tax goals in the past and probably will be no more
successful this year. They admitted a shortfall of
25 percent in 1968 tax collections. The Government
of Vietnam, however, which hies to collect a much
SECRET
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SECRET mv~
smaller tax on agricultural land, has an even poorer
collection record, COSVN directives continually
point out the shortcomings of the Finance-Economy
Section cadres and exhort them and the local military
forces to aid in harvesting and concealment of
the crop from allied forces. Because the amount of
tax revenues varies directly with the extent of VC
military control, however, the principal means of
achieving increased tax collections would be a
significant expansion of VC-controlled areas.
Prices
7. Retail prices in Saigon continued to increase
during the two weeks ending 20 July. On that date
the USAID weekly retail price index already was
six percent above the average price level for June
and 31 percent above the level of December 1969.
During January through mid-July 1969 prices rose
only 11 percent.
8. The USAID monthly average price index for
imported commodities rose 17 percent during January-
June compared with eight percent during the first
half of 1969.
Currency and Gold
9. Black market currency and gold prices in
Saigon continued to fluctuate during the two weeks
ending 21 July. The price of dollars rose five
piasters to 380 piasters per dollar, and the rate
for MPC (scrip) was unchanged at 190 piasters per
dollar on 21 July after having risen to 210 piasters
the previous week. The price of a dollar's worth
of gold leaf,which had been declining for several
weeks, rose ten piasters to 474 piasters. (A
graph on monthly and weekly currency and gold
prices is included in the Annex.)
SECRET
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;aigon Free Market Gold and Currency Prices
GOLD Basis gold leaf worth $35 per troy ounce
US $10 GREEN
99399 7-70
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Saigon Cost of Living lndex* (For Working Class Family Without Rent)
800
*Official GVN-index
South Vietnam Money Supply
South Vietnam Foreign Exchange Reserves*
t:r ;s fUS Dollar
PAO
o2 *Excluding holdings of commercial banks
99184 7-70 CIA
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o Pi t es
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Secret
Secret
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