THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010029-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 29
• Publication Date: October 6, 1969
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
State Dept. review completed
USAID review completed
Secret
6 Otto er 1969
No..0504/69
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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.
iROUP 1
FROM AUTOMATIC
GRADING AND
A$SSFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
6 October 1969
The Economic Situation in South Vietnam
(Biweekly)
Summary
American businessmen in Saigon find
it frustrating to do business in South
Vietnam and are pessimistic about invest-
ing there in the future. They are highly
critical of government regulation of
business activities and believe political
instability and security conditions will
deter new investment during the next few
years.
By 29 September retail prices in
Saigon had declined seven percent from
the peak reached at the end of August.
At the end of September the USAID indexes
for retail prices in Saigon and for prices
of imported commodities were 16 and 26
percent, respectively, above the levels
prevailing at the beginning of the year.
Free market dollar and gold prices were
relatively stable during the last two
weeks of September, while the rate for
MPC (scrap) fluctuated.
ANNEX: Currency and Gold Prices (graph)
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Pessimism of American Businessmen in Saigon
l? There is no doubt that the South Vietnamese
economy will need considerable private foreign invest-
ment in the post-hostilities period if it is to
reduce its dependence on foreign aid. The war and
uncertain political future of the country naturally
have discouraged such investment at present, but
it appears that the Vietnamese government has thrown
up its own barriers against foreign businessmen who
might be interested in investing there. In a recent
survey American businessmen in Saigon voiced frus-
tration at doing business in South Vietnam and
pessimism regarding the future of private investment
there. On a confidential basis, embassy officials
interviewed all key American businessmen in Saigon
who have had considerable experience in the area
and in dealing with Vietnamese government authorities.
All but one of those interviewed described his
business as "at best a holding operation," and
the consensus was that American companies had been
expanding their activities only when they had
excess piasters that could not be repatriated.
All were critical of constant changes in government
economic policies and of the officials who manage
them. They also were very critical of the excessive
government regulation of business that requires a
government authorization for even the smallest
transaction. Massive and confusing government
controls over business activities in South Vietnam
present greater difficulties for foreign than for
Vietnamese businessmen, since the latter can more
easily operate "illegally" by making the necessary
payoffs.
2. A major deterrent to American investment
in South Vietnam is the Vietnamese government's
refusal--for almost two years--to approve projects
for which US investors could insure the full value
of their investments with AID. The Vietnamese
government fears that the US Government will
exercise its option to require the Vietnamese govern-
ment to reimburse AID for any war damage claims
paid by the US Government to the investor. Americans
also cited their difficulties in hiring trained
personnel to replace high-cost American employees.
Many businessmen would prefer to reduce costs by
hiring Vietnamese who could be trained at the firm's
home office, but claim that the government's restrictive
travel policies effectively prohibit training abroad.
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3. When questioned about prospects, all stated
that political instability, the military situation,
and government restrictions on business would deter
new investment. None of those interviewed were
interested in further investment in South Vietnam
except to the extent of using piasters they could
not repatriate. Even in those instances, the
investors are only interested in short-term invest-
ments and anticipate small profits. While acknowl-
edging South Vietnam's great potential and the need
for major new investments, the common reaction was
"why invest here then there are so many other
attractive places to invest?" Many businessmen
concede that the laws regulating foreign investment
in South Vietnam, which were passed in 1963, are
reasonable and provide sufficient incentives to
investors, but claim that the government apparently
has no intention of implementing them. The
businessmen believe that the Vietnamese resent
foreign influence and that the wealthy and established
industrialists in South Vietnam, who fear competition
from foreigners, will never allow the government
to carry out the provisions of the investment laws.
Prices
4. Retail prices in Saigon declined four per-
cent during the week ending 22 September and held
steady through the end of September. On 29 September
the USAID index was 16 percent above the level
prevailing at the beginning of the year--down seven
percent from the peak reached at the end of August
when speculators pushed up prices of rice and sugar.
The increase of 16 percent for the first nine months
of the year compares with increases of 30-36 per-
cent during the first three quarters of each year
during 1965-68. Prices of imported goods declined
slightly during the last two weeks of September,
although they remain 26 percent above the level of
7 January.
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USAID Retail Price Indexes for Saigon
(1 January 1965 = 100)
All Items
Food Items
Nonfood Items
2 Jan 1968
308
344
241
6 Jan 1969
400
443
319
15 Sep 1969
484
22 Sep 1.969
462
535
326
29 Sep 1969
463
535
327
Currency and Gold
5. Free market dollar and gold prices held
steady during the two weeks ending 30 September.
The price of a dollar's worth of gold leaf was
unchanged at 308 piasters. The price of dollars
declined only one piaster to 225 piasters per
dollar, compared with the official rate of 118
piasters per dollar. The average price of dollars
during the month of September--225 piasters--was
the highest ever reported. The rate for MPC
(scrip) fluctuated during 16-30 September closing
at 139 piasters per dollar. (A graph on monthly
and weekly currency and gold prices is'included
in the Annex.)
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Saigon Free Market Gold and Currency Prices
PIASTERS PE
R US DOLLAR
- - - -
- ---------------
31AUG
30
214
30SE
IIIIIIIIIIIII
JULAUGS P
1969
1965 1966 1967
Apps
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Secret
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