THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010020-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: July 6, 2012
• Sequence Number: 20
• Publication Date: February 9, 1970
• Content Type: IR

-r- 4
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DIRECTORATE OF
INTELLIGENCE
ap" SecrTt
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
Secret
_ 12
9 February 1970
No. 0415/70
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Secret
25X1
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
I FXI."I.UDED FROM AUTOMATSC
DOWNURADINO AND
~_ DEDLAR FZOATION
ecret
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SECRET
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
During the past several months the rice
situation in South Vietnam has deteriorated steadily.
Prices have risen, deliveries from the delta have
fallen off, and government stocks have declined
rapidly, necessitating sizable emergency imports.
Retail prices in Saigon rose about ten percent
during January, primarily because of the increased
demand for foodstuffs and other goods associated
with the celebration of Tet. Black market dollar
and gold prices fluctuated widely during January
largely in response to rumors concerning devaluation.
ANNEX: Monthly and Weekly Currency and Gold Prices
(graph)
SECRET
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SECRET --
Rice Market Difficulties
1. Once again the rice market in South Vietnam
is beset by supply and price problems. During
January-July 1969 the market appeared to be operating
smoothly. Retail prices were relatively stable,
deliveries of rice from the delta were at a very
high level, stocks were declining to more manageable
levels, and import requirements were lower. Since
the end of July, however, the situation has deter-
iorated considerably. Retail rice prices in Saigon
have risen almost steadily. Despite a bumper harvest,
deliveries from the delta to Saigon during October-
December were smaller than deliveries during the last
quarter of any preceding year. Government stocks
of rice (mainly imported) in Saigon also declined
to an all-time low, and during December and January
emergency imports were necessary to meet current
demand and to begin replenishing stocks.
2. In mid-January retail prices of domestic
rice in Saigon were 25 to 50 percent above the
levels prevailing at the end of July 1969. Prices
began to increase late in July. The increase
apparently was due largely to speculation by
merchants who were aware that government stocks
were diminishing, but higher paddy prices in the
delta probably also were a factor. Subsequently,
the October increase in austerity taxes set off a
new round of price rises.
3. Deliveries of rice from the delta during
1969 totaled 327,000 metric tons, the largest
amount since 1965. More than 85 percent of the
deliveries, however, arrived during the first
three quarters of the year. Fourth-quarter deliveries
were at an all-time low despite the fact that the
harvest of the 1969-70 rice crop--estimated to be
the largest in five years--had already begun and
paddy prices are roughly double what they were
during the previous year's harvest. Although
deliveries increased during January 1970, partially
due to government purchases, they still were below
the level of January 1969. Several explanations
have been offered for the low level of deliveries
from the new crop, but it is difficult to judge
their accuracy. Rice farmers or merchants or both
SECRET
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SECRET --
apparently are holding rice off the market in
expectation of higher prices or a devaluation of
the piaster. Other reasons include delays in
harvesting due to out-of-season rainstorms and
the fact that farmers, whose real incomes rose
in 1969, are under less financial pressure to
sell their crop quickly.
4. Government stocks of rice in Saigon and
the northern rice deficit provinces, which amounted
to 302,000 tons at the end of 1968, were down to
47,000 tons, of which only 7,000 tons were in
Saigon, at the end of 1969. (US and Vietnamese
officials consider 150,000 tons, or a normal
three-month supply, the most satisfactory level
of stocks.) Although deliveries from the delta
are smaller than a year ago, the tight supply
of rice results from the low level of imports
during 1969 and increased demand for rice from
government stocks. Imports totaled 336,000 tons
in 1969 compared with 679,000 tons in 1968 and
750,000 tons in 1967. A decline from the high
level of government rice stocks at the beginning
of 1969 was desirable, but once stocks reached a
point below the 150,000-ton level and import
schedules slipped, the decline itself became a
major cause of speculation. Issuances of rice
from government stocks in Saigon, which had
been running about 450 tons a day during 1968
and the first half of 1969, have risen greatly,
as shown in the following tabulation.
1 Aug-28 Oct 687 m.t.
29 Oct-27 Nov 1,243 m.t.
11 Dec-12 Jan 829 m.t.
When speculative hoarding began to drive up prices
in July and August, the government responded by
releasing more rice from stocks for sale to
private retailers in Saigon and procurement
officials in rice deficit areas.
SECRET
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5. By January 1970, however, stocks had
fallen to an extremely low level and rice prices,
although they had declined somewhat, still were
very high. Therefore, the government reversed
its distribution policy and decided to restrict
issuances from stocks to government civilian
and military employees and their dependents.
Provinces in III Corps and some areas in I Corps
now must buy all their rice on the free market.
Meanwhile, the government will rebuild its stocks
through emergency imports. Recently the government
arranged to import an additional 156,000 tons of
rice, of which about two thirds should have
reached Vietnam by the end of February.
6. It is anticipated that the higher prices
that will result from shifting demand from govern-
ment stocks to the domestic rice market will draw
more rice out of the delta and cause dishoarding.
The hope is that ultimately as both domestic and
imported rice supplies increase, hoarding will
cease and demand will return to a more normal
level. Prices, in turn, should decline or at
least stabilize.
Prices
7. Incomplete data indicate that by 2 February
the USAID weekly retail price index for Saigon
had increased about ten percent above the December
1969 monthly average. The increase probably
reflects the usual increase in demand associated
with the Tet holidays (6-8 February). During the
week ending 2 February the general price level
rose six percent, with protein food prices in-
creasing eight percent and rice prices two to
three percent. The USAID price index for imported
commodities, on the other hand, apparently
declined about four percent from the December
monthly average.
SECRET
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Currency and Gold
8. During January the Saigon free market
prices of dollars and gold changed erratically,
apparently in response to differing rumors about
devaluation. From 362 piasters on 6 January the
price of dollars fell to 303 piasters on 20 January,
but then climbed again to 328 piasters per dollar
by the end of the month. The price of a dollar's
worth of gold leaf fluctuated between 438 piasters
and 391 piasters. The rate for MPC (scrip) was
more stable, ranging between 155 and 160 piasters
per dollar during January. The decline in mid-
January reportedly reflected President Thieu's
public statement that there would be no devaluation
of the piasters, but subsequent rumors of a post-
Tet devaluation helped push rates up again. In
addition, currency dealers apparently have been
manipulating prices by periodically withholding
dollars from the market. (A graph on monthly
and weekly currency and gold prices is included
in the Annex.)
SECRET
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Saigon Free Market Gold and Currency Prices
1965
GOLD Basis gold leaf worth $35 per troy ounce
US $10 GREEN
JAN FEB MAR
1970
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cret lum~
Secret
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