THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010047-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: July 6, 2012
• Sequence Number: 47
• Publication Date: February 10, 1969
• Content Type: IR

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Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010047-1
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Cruz
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Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Economic Situation in South Vietnam
(Weekly)
Secret
118
10 February 1969
No. 0480/69
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010047-1
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010047-1
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
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010047-1
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010047-1
-we
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
Summary
In the hope of encouraging local governments
to increase their own revenues, US and Vietnamese
officials have worked out a new formula for the
payment of central government subsidies. The
central government's earlier decision to turn over
all proceeds of the property tax to the local
governments did not result in the anticipated in-
crease in revenues for the villages in 1968.
Retail prices in Saigon and the USAID price
index for imported goods each declined one percent
during the week ending 27 January. Free market
dollar and gold prices also declined slightly, but
the rate for MPC (scrip) increased.
ANNEX: Weekly Retail Prices in Saigon (table)
Monthly and Weekly Currency and Gold
Prices (graph)
SECRET
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Village Finance
1. In an effort to strengthen village govern-
ments and stimulate them to increase local revenues,
US and Vietnamese officials have devised a new
formula for paying central government subsidies.
In 1967 the central government subsidized the en-
tire payroll for salaried village officials in 89
percent of the villages under South Vietnamese
Government (GVN) control. Only three percent of
the villages had local revenues large enough to
permit them to pay officials' salaries without help
from the central government. Salaries for the re-
maining villages were paid partly by the villages
themselves and partly by the central government.
Local government revenues have been declining
steadily during the past several years. Local of-
ficials are not trained in the administration of
public funds and have failed to change tax rates
or develop new sources of revenue. In addition,
because most local officials are paid from central
government funds, they make little effort to col-
lect taxes.
2. In 1968 the central government tried to
reduce the subsidy to local governments by turning
over to them all property tax revenues, which
formerly were shared between the central and local
governments. The anticipated increases in local
revenues did not occur, however. Receipts from
property taxes are not large and have been declin-
ing steadily largely because of the deterioration
of security and the collection mechanism in rural
areas.
3. In order to reduce the discouraging effect
of the subsidy, representatives from the GVN,
USAID, and CORDS agreed on a new payment formula.
The new formula still would require that the vil-
lages assume more of the salary payments as their
revenues increase, but the villages' share of the
payments would increase at a slower rate than
under the present formula. It thus would allow
the villages to retain more funds for their own
development projects, which are essential if the
local governments are to become responsive to the
needs of the villagers.
SECRET
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VLV1~L -
4. The new subsidy formula is scheduled to
become effective in April, but problems involved
in implementing the change may cause delays.
USAID officials hope that adoption of this formula
coupled with the Ministry of Interior's budget-
taxation training program this year for village
officials will in time greatly increase the ability
of villages to generate their own revenues.
5. The retail price index for Saigon de-
clined slightly during the week ending 27 January
as food prices were down one percent and nonfood
prices were generally stable. Prices of most
protein foods and many vegetables declined. As a
result of massive imports of day-old chicks during
the past few months, the price of chicken has
dropped to its lowest level in nine months. Fresh
pork prices also have been relatively low, partly
because of the availability of low priced imported
frozen pork through government commissaries. The
price index for nonfood items was stable as a de-
cline in the price of firewood offset an increase
in the price of white calico. The USAID price
index for selected imported goods declined slightly
as new shipments arrived. (A table of weekly re-
tail prices in Saigon is included in the Annex.)
Currency and Gold
6. During the week ending 27 January free
market dollar and gold prices declined slightly
for the second week. The price of dollars fell
three piasters to 192 piasters per dollar, and the
price of a dollar's worth of gold leaf fell five
piasters to 282 piasters. The rate for MPC (scrip),
on the other hand, rose three piasters to 151
piasters per dollar, compared with the official
rate of 118. (A graph on monthly and weekly cur-
rency and gold prices is included in the Annex.)
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010047-1
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:at , e an urrency.. Prices
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Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010047-1