THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010026-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: July 6, 2012
• Sequence Number: 26
• Publication Date: November 17, 1969
• Content Type: IR

Iwoq. Ch.NA
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
J
et
Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Economic Situation in South Vietnam
(Biweekly)
Secret
17 November 1969
No. 0507/69
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
Secret
WARNING
1 his 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.
XCLCDED FROM AUTOMATIC
DOWNORADINC AND
DER.ASSSFICATION '
Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
SECRET ne
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
Summary
The USAID retail price index for Saigon rose
13 percent during the two weeks following the 23
October announcement of higher taxes on imports,
but had declined somewhat by 10 November. Prices
of some items that were not affected by the tax in-
crease, such as rice, milk, and sugar, rose 15 to
30 percent as merchants took advantage of the op-
portunity to raise prices of all goods--imported
and domestic. The government has acknowledged some
errors in categorizing goods for the new tax rates
and has indicated that the tax increase on kerosene
for cooking, for example, may be abolished because
it is an unjust burden on the poor. During the
week ending 6 November black market dollar and gold
prices declined from the peaks reached at the end
of October, but still were at a high level.
The government has announced several addi-
tional measures affecting imports, most of which
are designed to allow consumer demand rather than
government controls to determine the volume and
type of goods to be imported.
Output of most of South Vietnam's important
industrial products during the first eight months
of.1969 indicates that industry has completely re-
covered from the disruption caused by the enemy
offensives in 1968.
ANNEX: Monthly and Weekly Currency and Gold Prices
(Graph)
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
SECRET `""~
Prices
1. Retail prices in Saigon have declined, at
least temporarily, following some sharp increases
in the wake of the higher austerity taxes on imports
decreed on 23 October. From 20 October to 5 Novem-
ber the USAID retail price index rose 13 percent,
but by 10 November had declined to a level 10 per-
cent above that prevailing on 20 October. Prices
of several items increased as much as 15 to 30
percent between 20 October and 7 November. Among
the goods registering such price increases were
some such as rice, condensed milk, and sugar, that
were not affected by the higher taxes. These
products had been subject to speculative price
fluctuations for several weeks prior to the tax
increase, and merchants were quick to take advantage
of the uncertainty in the market to raise prices of
these goods as well as those of goods directly af-
fected by the higher taxes. Prices of domestic
rice increased 16 to 20 percent between 20 October
and 7 November, while the price of imported rice,
supplies of which are adequate, rose only 5 percent.
The bulk of the rice currently being consumed in
Saigon, however, is imported rice. Domestic rice
supplies are at a seasonal low and the new crop will
not be available until December.
2. A sizable increase in the price of kero-
sene, widely used as a cooking fuel, has been
strongly criticized by several legislators who main-
tain that kerosene is a basic necessity and there-
fore should have been exempted from the tax increase.
The government already has announced a 60 percent
increase in the official retail price of kerosene
as a result of the higher taxes, but the Minister
of Economy has said he would consider abolishing
the tax increase for this product. The government
has acknowledged that other errors were made in
drawing up the new austerity tax rates and has in-
dicated that adjustments will be made. There almost
certainly will be no changes made, however, in the
new tax rates for gasoline, which also were attacked
by members of the National Assembly. The higher
taxes on POL are expected to account for almost 10
percent of the total increase in revenue resulting
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
from the new austerity tax rates. Gasoline prices
in South Vietnam have been among the lowest in the
world with regular gasoline selling for about S0 cents
per gallon (or about 35 piasters at the official
rate of exchange). The new official price of
regular gasoline now has been set at about 62 cents
per gallon.
Currency and Gold
3. Black market dollar and gold prices,
which jumped sharply following the 23 October an-
nouncement of increased taxes on imports, declined
somewhat during the week ending 6 November but re-
mained at very high levels. The price of dollars
fell from 275 piasters per dollar on 31 October to
250 piasters on 6 November--still 25 piasters above
the average price for September. The price of a
dollar's worth of gold leaf fell 19 piasters to 362
piasters compared with an average of 309 piasters
for September. The rate for MPC (scrip) declined
from 146 piasters per dollar on 31 October to 130
piasters per dollar on 6 November, the lowest price
reported since the new series of scrip was issued
in August. (A graph on monthly and weekly currency
and gold prices is included in the Annex.)
Additional Import Measures
4. Following the increase in austerity taxes
on imports the Vietnamese government has announced
several supplementary measures affecting imports.
Most of these are designed to allow the market to
operate more freely with consumer demand rather
than government controls determining the volume and
type of imports.
5. During the past several months the Ministry
of Economy has issued lists of goods for which im-
port license applications would be considered. Im-
port of goods not :on-the lists, such as motorbikes,
have been temporarily suspended. The government now
has announced that there no longer will be any re-
strictions on the types of goods that may be imported.
In addition to liberalizing licensing, the government
has said it will make $40 million of foreign exchange
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
Or,un.C 1
available for imports during both November and
December, or almost double the monthly average
value of import licenses approved during the first
eight months of this year. The government prob-
ably hopes that these two measures will dampen any
speculation that shortages of imported goods will
develop as a result of the austerity measure.
6. Government officials should be able to
judge quite rapidly the degree to which the new,
higher tax rates will affect the demand for
imports. In order to obtain a quick indication
of this effect, the government decided to allow
importers to cancel or amend without penalty the
import orders they had placed prior to the tax
increase. Preliminary indications from US
officials supervising the US-financed Commercial
Import Program (CIP) are that possibly ten percent
of the applications for imports financed under
the CIP had been withdrawn because of the tax
increase by the end of October. During the first
week in November, however, there have been some
requests for reinstatement, reportedly reflecting
an improvement in business confidence since
President Nixon's speech on 3 November.
7. During the first eight months of 1969
output of most of South Vietnam's important
industrial products was well above output
during the corresponding period of 1968. There
was, of course, considerable disruption of
production in 1968 because of the damage result-
ing from the major enemy offensives, but industry
apparently has recovered completely and, as shown
in the following tabulation, output in most cases
surpassed the record of January-August 1967.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
1%0*1
*MW
Unit of
Jan-Aug
Jan-Aug Jan-Aug
Measure
1967
1968
1969
Cotton Yarn
(000 m.t.)
4.6
2.7
4.7
Cotton Fabric
(mil mtrs)
28.9
13.8
31.7
Glass Bottles
(000 m.t.)
8.6
5.0
10.9
Cement
(000 m.t.)
109.7
65.2
114.7
Beer
(mil ltrs)
99.0
76.1
92.0
Soft Drinks
(mil ltrs)
85.8
58.2
87.5
Cigarettes
(000 m.t.)
6.4
6.9
6.4
8. Overall industrial output fell 9 percent
in 1968, the first decline in output reported
since the government began publishing an industrial
production index in 1962. From 1962 through 1967
industrial output increased at an average annual
rate of 9.6 percent.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
Saigon `Free Market Gold and Currency Prices
GOLD Basis gold leaf worth $35 per troy ounce
US $10 GREEN
liiI11
SEPOCT NOV
1969
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4
Se et
Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82SO0205R000200010026-4