THE ECONOMIC SITUATION IN SOUTH VIETAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010030-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 30
• Publication Date: September 8, 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
8 September 1969
No. 0502/69
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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.
GROUP i
e;XCLUDED FROM AUTOMATIC
DOWNGRADING AND
DEOLA&SIFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
Economic policy in the new Khiem
government will be formulated and carried
out by a group of men known for their
competence, aggressiveness, and past
good working relationships with US
officials. The key man is Nguyen Huu
Hanh, a former minister of economy and
finance and former governor of the
National Bank of Vietnam, who will be
a part-time adviser to President Thieu
and who hand-picked the appointees for
the economic positions in the cabinet.
Economic activity in IV Corps
reportedly is increasing steadily as a
result of improved security. Higher
paddy prices and declining transportation
costs have brightened the outlook for
most delta farmers.
After almost a year of relative
stability, retail prices in Saigon began
to increase early in August mainly as a
result of sharp increases in the prices
of rice and sugar. From August 1968
through July 1969 the average monthly
retail price index increased only ten
percent compared with an increase of
24 percent during August 1967-July 1968.
Between 4 and 25 August 1969, however,
the USAID index rose 13 percent. Accord-
ing to US officials, the higher prices
for rice and sugar are the result of
speculation based on anticipation of
future low stocks rather than of any
current shortages. The price index
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for imported commodities also increased
sharply during August largely because of
the higher sugar and rice prices. Free
market currency and gold prices continued
the upward trend that began in mid-May.
On 26 August the price of gold leaf was
the highest reported since the devaluation
of the piaster in mid-1966.
ANNEX: Currency and Gold Prices (graph)
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New Economic Administration
1. Nguyen Huu Hanh, former minister of economy
and finance and former governor of the National
Bank of Vietnam (NBVN), refused a position in the
cabinet, but agreed to become Thieu's chief economic
and financial adviser, a post which US officials
believe will make him the key decision-maker for
economic policy in the Khiem government. This
interpretation of his role is supported by the
fact that the new ministers of economy and finance
and almost all their deputies have worked with
Hanh at the NBVN and were recommended to President
Thieu by him. Pam Kim Ngoc, the new minister of
economy, ably served as Hanh's deputy during the
latter's term as minister of economy and finance
in 1967 and has been associated with the commercial
arm of the NBVN, Credit Commercial. Prior to
becoming the new minister of finance, Nguyen Bich
Hue was the research director of the NBVN. Tran
Cu Uong and Ha Xuan Trung, who were appointed to
the newly created positions of vice minister of
economy for commerce and vice minister of finance,
respectively, also worked with Hanh at the National
Bank. The sixth member of the team is the vice
minister of economy for industry, Pham Minh Duong,
who has been associated with the government-owned
paper mill Cogido. Hanh will continue to serve
in his present position as an alternate executive
director of the International Monetary Fund and
will divide his time between Washington and Saigon.
2. On their first day in office, 1 September,
the new appointees met with US officials and outlined
some of their objectives. First priority will be
given to halting the current increase in price of
key commodities such as rice and sugar. In
addition, the new team will concentrate on guide-
lines for the volume and type of goods to be
imported during the remainder of 1969 and will
meet with representatives of the business community
to discuss grievances. Hanh and the new cabinet
members apparently plan to work more closely with
US officials than their predecessors, a practice
for which Hanh was criticized during his tenure
in the cabinet. US officials in Saigon are pleased
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with the new appointments and expect management
of economic affairs to improve considerably.
Americans always have considered'Hanh among the
most able and decisive Vietnamese administrators,
but his decisivenes and sometimes abrasive
personality have caused difficulties between him
and other Vietnamese officials in the past.
IV Corps Economic Activity
3. According to AID's economic reports officer
in IV Corps, economic activity in the delta during
July was increasing steadily, especially in newly
pacified areas. Moreover, the outlook for delta
farmers was good because of high paddy prices and
increasing security. Except for rice, food as
well as nonfood prices remained steady, and the
cost of transporting goods to Saigon continued to
decline as road security improved. Traffic counts
on Route 4, the major route from the delta to
Saigon, showed 50 to 100 percent more vehicles
on the road than during July 1968. A further
increase in traffic is expected this month with
the completion of a project to widen and repave
Route 4 between My Tho and the Mekong River.
Canal traffic also should increase following a
navy clearing operation on the Mang-Thit Nicolai
Canal, one of the major waterways in the delta.
The exceptions to this generally encouraging
report are that the coastal fishing industry still
is relatively inactive and that there has been a
dislocation of several hundred workers as a result
of US troop withdrawals from the delta.
Prices
4. Largely because of further increases in
rice and sugar prices, retail prices in Saigon
rose eight percent during the two weeks ending
25 August. Prices began to increase steadily
early in August ending the long period of relative
stability that had prevailed since August 1968.
From August 1968 through July 1969 the average
monthly retail price index increased only ten per-
cent compared with an increase of 24 percent
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vav~
during August 1967 - July 1968. Between 4 and
25 August 1969, however, the USAID index increased
13 percent. On 25 August rice prices were 13 to
29 percent higher than on 21 July, and sugar prices
were more than double. According to US Embassy
reports, these increases were the result of
speculation based on anticipation of future low
stocks rather than of any current shortages.
5. The ceiling prices on rice announced by
the government on 9 August failed to stop the
increase in prices. As a result, the government
decided to expand its control over the rice
market by requiring the rice deficit provinces
in III Corps to buy all instead of one third of
their rice needs from government-owned stocks.
This step combined with the sale of rice to govern-
ment employees and their dependents at official
prices is designed to reduce the size of the com-
mercial market for rice--thereby putting pressure
on merchants to reduce, or at least not raise,
their prices. It is too early to tell how
effective this-tactic will be, but prices of
domestic rice in Saigon reportedly began to
stabilize by the end of August. According to
embassy officials, rice prices in the northern
rice deficit provinces (I and II corps) have not
been affected by the increases in Saigon.
6. Vietnamese officials believe the advantages
of halting the rise in prices outweigh the risk of
depleting stocks more rapidly. By mid-September,
when additional imports are scheduled to arrive,
stocks will be down to about one month's supply,
or one third of the desired level. Should the new
shipments be delayed rice prices could again
spiral, and shortages could occur in some of the
northern provinces.
7. The increase in sugar prices appears to
stem from speculation that there may be a reduction
in imports of sugar -- which account for more than
half of total supply -- at a time when sugar is in
great demand for making moon cakes for the children's
mid-autumn festival and the government is considering
plans to provide large quantities of free sugar to
its employees as part of their promised wage increase.
A recent agreement between the Vietnamese Government
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and USAID to transfer the portion of sugar imports
financed by the US to GVN financing with its own
foreign exchange holdings apparently has led to
fears that sugar imports will be reduced. The
government's decision to ban the production of
moon cakes in order to conserve sugar probably
has fueled the speculation. There is, however,
no shortage of sugar in the country; stocks are
at a normal levels and import orders now being
processed will maintain regular import levels
through October.
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
11 Aug 1969 464 537 329
18 Aug 1969 485 567 332
25 Aug 1969 499 586 337
8. The USAID price index for imported commodities
increased eight percent during the period 12-26 August
mainly as a result of higher prices for sugar, rice,
and motorcycles. The government's decision in
April to suspend imports of motorcycles has led
to a decline in inventories and a sharp increase
in the price of this item. The average monthly
import price index for August was 23 percent
above that for January. Most of the increase has
occurred since June when the government imposed
higher taxes on most imported goods.
Currency and Gold
9. During the two weeks ending 26 August free
market dollar and gold prices continued the gradual
upward trend that began in mid-May. The price of
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dollars rose five piasters to 214 piasters per
dollar, compared with the official rate of 118
piasters per dollar. The price of a dollar's
worth of gold leaf increased nine piasters to
303 piasters -- the highest price since the
devaluation in mid-1966. On 26 August the rate
for the new series of MPC (scrip) issued on
12 August was 149 piasters per dollar, an increase
of three piasters from the previous week and 31
piasters above the official rate. (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
US $10 MPC Military Payment Certificates (scrip)
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