THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010040-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 40
• Publication Date: April 7, 1969
• Content Type: IR

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Weekly)
USAID review completed
State Dept. review completed
Secret
7 April 1969
No. 0488/69
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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.
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
Despite a decline in paddy production, there
currently appears to be no cause for grave concern
about the rice situation in South Vietnam this
year. The current offensive seems to be having
little effect on the rice trade. Deliveries of
rice from the delta to Saigon are running at a
high level and prices are holding steady. More-
over, because stocks of domestic and imported
rice from last year still are large, imports of
rice during 1969 will be well below those of the
past two years.
Retail prices in Saigon have been remarkably
stable for many months. The index for the week
ending 24 March was at the same level that pre-
vailed at the end of July 1968. Supplies have
been ample and.consumer demand has not been as
strong as had been anticipated. Free market cur-
rency and gold prices again were mixed.
ANNEX: Weekly Retail Prices in Saigon (Table)
Currency and Gold Prices (Graph)
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Rice Situation
1. Despite an estimated six percent decline
in paddy production during the 1968/69 crop year,*
there currently appears to be no cause for grave
concern about the rice situation in South Vietnam
during 1969. Deliveries of surplus rice from the
delta to Saigon are running at a high level, paddy
prices in the delta and retail prices in Saigon
are holding steady, and stocks are ample, although
too heavily concentrated in Saigon. There have
been no reports of disruption to the rice trade as
a result of the enemy's current offensive.
2. Although the major portion of the harvest
has been completed, the Ministry of Agriculture has
not yet issued an official estimate for paddy pro-
duction in the 1968/69 crop year. Embassy officials
however, report a preliminary estimate of 4.4
million metric tons of paddy, a decline of six
percent from the 1967/68 crop of 4.7 million tons.
Earlier estimates indicated that the decline in
output would range from 10 to 15 percent because
of the damage caused by drought in the delta and
floods in I Corps. Paddy production in South
Vietnam reached an all-time high of 5.3 million
tons in 1963, but has failed to reach that level
since then.
3. Deliveries of milled rice from the delta
to Saigon totaled 66,300 tons during January and
February 1969, the largest amount for this two-
month period since 1965. Stocks in the delta re-
portedly are ample, and US officials anticipate
that deliveries will continue at a high level.
Deliveries from the delta for all of 1969 currently
are projected at about 335,000 tons compared with
deliveries of 310,000 tons last year.
4. Since the increase in the official price
of imported US rice in late November 1968 and the
ensuing increase in farm and retail prices for
domestic rice, rice prices have been relatively
Crop year 1 June 1968 - 31 May 1969
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stable. During December-February the price delta
farmers received for their paddy averaged 13.4
piasters per kilogram, about eight percent above
the prevailing price during the same period a year
ago. The retail price of intermediate grade milled
riced in Saigon has fluctuated very little since
the end of 1968, ranging from 31 to 32.5 piasters
per kilogram. Since mid-March, retail rice prices
have begun to decline slightly, probably reflecting
the high level of delta deliveries during the
post-harvest period.
5. Government stocks of rice have declined
from the excessively high levels of late 1968, but
at the end of February they still amounted to
about 250,000 tons--enough to meet the normal de-
mand for imported rice for more than four months.
Imports of rice totaled only 5,000 tons in January,
and there were no imports during February. Import
arrivals are scheduled to resume in May, and, in
the meantime, consumption requirements will be met
from delta deliveries and drawdowns from stocks.
By the end of May stocks are expected to be down
to a more manageable level--probably about 165,000
tons. Because of the high level of stocks of both
domestic and imported rice, imports of rice during
1969 will be well below those of the past two
years. Although total stocks currently are ample,
they are not distributed according to need. The
supply situation in parts of I and II Corps re-
portedly is tight. The transfer of at least
120,000 tons of rice from Saigon to I and II Corps
began in November, but shipments have been running
far behind schedule. Embassy officials expect,
however, that the government will be able to move
enough rice to prevent any real shortages in the
northern rice deficit provinces.
6. The Saigon retail price index rose one
percent during the week ending 24 March as prices
of both food and nonfood items increased slightly.
Despite small fluctuations from week to week,
prices have been remarkably stable since the end
of July 1968 when the USAID price index was at the
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'sir'
same level as on 24 March. Although there is no
clear explanation, price stability apparently has
resulted from a combination of factors affecting
both supply and demand. Supplies of most goods have
been ample, and there have been few problems in
transporting goods to market, even during the cur-
rent offensive. The price of rice--the most heavily
weighted item in the USAID index--has been relatively
stable, and the rice trade has been functioning
normally. The supply of imported goods also has
been ample as the result of the large volume of
orders placed during the last half of 1968. The
revival of consumer demand, which began in the fall
of 1968 following the recession created by the Tet
offensive, apparently has not been so strong as had
been anticipated, The growth of the money supply
has slowed considerably as the burst of government
spending on mobilization and reconstruction passed
its peak and revenues held steady and then began to
increase. From the end of July 1968 to the end of
February 1969, the money supply increased only 11
percent compared with an increase of more than 40
percent during January-July 1968.
7. In mid-1968 most observers of South Viet-
nam's economy were expecting that a revival of de-
mand would result in a sharp increase in inflation.
The large increase in the money supply during the
first half of the year was presumed to have been
withheld in cash hoards, creating a monetary over-
hang or reserve of purchasing power. As consumers
began spending these cash hoards on domestically
produced goods, prices were expected to rise. There
are several possible reasons why this did not happen.
First, it is possible that the size of the monetary
overhang was not so large as at first believed be-
cause of inaccuracies in price measurement. The
USAID price index, for example, does not reflect
prices of consumer durables and housing on which
part of the consumers' cash holdings might have
been spent. Secondly, the supply of goods increased;
in particular, import licensing rose sharply during
the second half of the year and increased expendi-
tures on imports must have absorbed part of the in-
crease in the money supply. Finally, consumers and
businessmen continued to be cautious in their spending
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patterns. The velocity of circulation (the rate
at which money changes hands for purchases of goods
and services) apparently did not increase from the
low level that prevailed following the Tet offensive.
(A table of weekly retail prices in Saigon is in-
cluded in Annex.)
Currency and Gold
8. During the week ending 24 March, the free
market price of dollars was unchanged at 194 piasters
per dollar, while the rate for MPC (scrip) rose
three piasters to 153 piasters per dollar. The of-
ficial rate for both dollars and scrip is 118 pias-
ters per dollar. The price of a dollar's worth of
gold leaf fell six piasters to 281 piasters per
dollar. (A graph on monthly and weekly currency
and gold prices is included in the Annex.)
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Weekly Retail Prices in Saigon
2 Jan
6 Jan
3 Mar
10 Mar
17 Mar
24 Mar
1968
1969
1969
1969
1969
1969
08
400
403
2
L
2~2
M7
Index for All Items 3
_
~42
45
IL
Q2
440
4.46
Index for Food Items 344
-
Of Which :
(In Piasters)
Rice-Soc Nau (100 kg.)
2,500
3,100
3,200
3,200
3,100
22
0
3,050
240
Pork Bellies (1 kg.)
220
260
250
230
1
0
320
Fish-Ca Tre (1 kg.)
230
310
300
310
33
220
220
Nuoc Mam (jar) 150
220
220
220
Q2
06
0
0
Nonfood Items
fo
I
d
L4
1
319
r
ex
n
1
Of Which:
(In Piasters)
Firewood (cu. meter) 600
800
770
740
740
760
22
Cigarettes (pack) 14
22
22
22
22
68
68
White Calico (meter) 52
82
70
70
10
Kerosene (liter) 9
10
11
10
10
a. Data are from USAID sources. For indexes 1 Jan 1965 = 100.
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Saigon Free Market Gold and Currency Prices
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