THE ECONOIMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010033-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 33
• Publication Date: July 14, 1969
• Content Type: IR

Approved For Release 2007/03/08: CIA-RDP82S00205R000219Q1Q3C6
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
State Dept. review completed
USAID review completed
Secret
14 July 1969
No. 0498/69
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au MT
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
sXCIUDED FROM AUTOMATIC
DOW NORADINO AND
UEUI,AFSTFIOATION
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
(Biweekly)
Summary
The Vietnamese Government has presented to the
National Assembly a major new land reform program which
would give all tenant farmers and squatters free title
to the land they are now cultivating and would recog-
nize ownership rights of peasants given land by the
Viet Cong. The transfer of ownership would affect more
than one third of the cultivated area in South Vietnam
and could benefit at least a half million farm families.
The reform, if approved and implemented, would cost I
about $400 million, part of which would be covered by
the US.
South Vietnam's holdings of foreign exchange
have declined steadily since the fall of 1968 because
of a substantial increase in imports. Reserves may
level off during the second half of 1969, but further
losses are anticipated next year if US expenditures
in South Vietnam are reduced.
During the first six months of 1969 retail prices
in Saigon rose ten percent compared with an increase
of 17 percent during the first half of 1968. Prices
of imported goods, which were unchanged during the
first half of 1968, increased 13 percent during Janu-
ary-June 1969 partly because of higher taxes on imports.
On 1 July free market dollar and gold prices were only
one percent higher than they were at the beginning of
the year, but the rate for MPC (scrip) was at a new
high.
ANNEX: Monthly and Weekly Currency and Gold Prices
(Graph)
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New Land Reform Program
1. The Vietnamese Government has embarked on an
ambitious land reform program to convert tenant farmers
and squatters into landowners--all at government expense.
The proposal presented to the National Assembly by Presi-
dent Thieu on 1 July would give every tenant farmer and
squatter free title to the land he now tills. The trans-
fer of ownership will involve approximately one million
hectares* of privately owned land, or more than one third
of the total cultivated area in the country, and could
benefit at least 500,000 farmers. Under the proposal
farmers could acquire up to a maximum of five hectares,
depending on the size of their families and the size of
the plots they now cultivate. Plots currently cultivated
average 1.5 to two hectares in the delta and less than
one hectare in the central lowlands.
2. Roughly 18,000 to 20,000 landlords will lose
their rental lands as a result of the reform, but they
still could remain relatively large landowners. Land-
lords will be able to retain the land they are now cul-
tivating themselves. Currently, a person may own up to
100 hectares of which he may cultivate up to 30 hectares
himself. Undoubtedly, landlords will do all they can to
take advantage of the 30 hectare allowance.
3. The government will compensate landlords for
the expropriation of their rental lands by giving them
20 percent of the value of the land in cash and the re-
maining 80 percent in interest-bearing eight-year bonds.
In order to maintain real value during a period of in-
flation, the cash value of the bonds will be tied to the
price of rice. US officials currently estimate that the
average price per hectare will run about 45,000 piasters,
or about $150 per acre. This appears to be a favorable
price for many landlords, particularly those living in
insecure areas where rents are difficult or impossible
to collect.
4. In an effort to gain the support of peasants
the government, under the land-to-the-tiller concept,
will recognize the ownership rights of individuals who
received their land through Viet Cong distribution pro-
grams. In addition, on 2 July installment payments were
terminated for those farmers who purchased land under
*One hectare equals approximately 2.5 acres.
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previous government reform programs. Finally, tenants
will not be required to pay back rents which may have
gone uncollected because of Viet Cong interference.
5. In addition to distributing the land pres-
ently owned by individuals, the government hopes to
complete as soon as possible the distribution of the
land that was donated by the French and expropriated
from large Vietnamese landowners in the late 1950s.
These lands--almost all ricelands in the delta-- to-
talled about 700,000 hectares, of which only about half
had been distributed by the end of 1968. The communal
lands currently owned and rented out by villages will
also be available for distribution, but they are not
extensive.
6. The cost of the new land-to-the-tiller pro-
gram is estimated at $400 million of which some $80 mil-
lion would be paid in cash. The US already has agreed
to provide indirect support by financing $10 million
worth of additional imports to reduce the inflationary
effects of the program. The release'of these funds,
however, is contingent on the legislature's approval of
the land reform proposal, the issuance of the necessary
decrees, and the provision of sufficient funds by the
Vietnamese Government to finance the cost of the first
year's down payments to former landlords. As the pro-
gram gets under way, additional US support probably will
be forthcoming. Vietnamese officials anticipate that
after the program is approved by the legislature imple-
mentation will take one to three years.
Foreign Exchange Reserves
7. South Vietnam's holdings of foreign exchange
declined steadily since the fall of 1968 because of a
very large increase in imports. From a high of about
$375 ntillion at the end of September 1968 official hold-
ings of gold and foreign exchange at the National Bank
of Vietnam (NBVN) had fallen to approximately $270 mil-
lion at the end of June 1969.* During the 12 months
ending 30 June (US Fiscal Year 1969) the government is-
sued foreign exchange for imports amounting to $462 mil-
lion, or almost 90 percent more than during FY 1968.
*Data exclude foreign exchange holdings at commercial
banks, which amounted to $16 million in September 1968
and $24 million at the end of May 1969.
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Licensing
of
all imports increased 51 percent during
FY 1969,
as
shown in the following tabulation (in mil-
lions of
US
dollars) :
FY 1968
FY 1969
GVN-financed
247
462
US-financed
245
283
492
745
Since late 1968 the availability of larger amounts of
imported goods and the relatively slow growth of the
money supply are largely responsible for holding in-
flation to a comparatively moderate rate.
8. Both imports and the level of foreign ex-
change reserves probably will level off during the
second half of 1969. There could, however, be a re-
newed loss of reserves in 1970 as a result of a decline
in earnings of foreign exchange from the US presence.
Since the purchase of piasters for dollars by the US
Government for official and personal spending in Viet-
name is the source of three fourths of the GVN's earn..
ings of foreign exchange, further reductions in the US
commitment will eventually lead to a reduction in these
earnings. There already are indications that the gov-
ernment is concerned about the decline in exchange re-
serves and is becoming more cautious in authorizing the
use of foreign exchange. According to US officials,
the Ministry of Economy recently placed a ceiling of
$20-25 million per month on import licenses. The gov-
ernment also has reduced the amount of foreign exchange
that Vietnamese tourists and businessmen may buy from
the NBVN for use on trips abroad, although the amount
of foreign exchange used by travelers is only a small
part of total foreign exchange expenditures.
Prices
9. During the first half of 1969 the amount of
money in circulation increased about five percent and
retail prices in Saigon rose ten percent. During the
corresponding periods of 1968 and 1967 prices rose 17
percent and 19 percent, respectively. The USAID price
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index declined slightly during the two weeks ending
30 June as a decline in food prices more than offset an
increase in the prices of some nonfood items. As of
30 June food and nonfood prices were 11 percent and two
percent, respectively, above the level of 6 January.
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
16 Jun 1969
446
514
318
23 Jun 1969
449
518
321
30 Jun 1969
440
502
324
10. After remaining stable during the first three
months of 1969 the price index for imported goods rose
15 percent between mid-April and the end of June, partly
because of higher taxes on imports. During the first
six months of 1968 the index for imported goods showed
no increase.
Currency and Gold
11. All free-market currency and gold prices in-
creased during the two weeks ending 1 July. The rate
for MPC (scrip) reached a new high of 161 piasters per
dollar, an increase of 11 piasters over the price quoted
on 17 June. The price of dollars also rose 11 piasters
to 202 piasters per dollar, compared with the official
exchange rate of 118 piasters per dollar. A dollar's
worth of gold leaf increased from 282 piasters to 287
piasters. Despite these increases, the black market
rates for dollars and gold were only one percent higher
on 1 July than they were at the beginning of the year.
(A graph on monthly and weekly currency and gold prices
is :included in the Annex.)
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Noe
Saigon Free Market Gold and Currency Prices
PIASTERS P
ER US DOLLAR
31 MAY
275
L
185
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