THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010035-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 35
• Publication Date: June 2, 1969
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
State Dept. review completed
USAID review completed
Secret
2 June 1969
No. 0495/69
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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
EXCLUDED FROM AUTOMATIC
DOWNGRADING AND
DEULASSSFICATION
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
Vietnamese civil servants will receive a
25
percent increase in their basic pay on 1 July
1969--
the first such increase since mid-1966.
The Vietnamese Government is reluctant to al-
low any more foreign workers to enter the country
and is taking steps to bring those already in the
country under stricter control. US contractors
claim they need additional skilled foreign workers
to complete essential defense contracts, but their
plans to lay off thousands of unskilled Vietnamese
workers probably will stiffen government resistance
to foreigners.
After discussing the rice situation with delta
merchants, US embassy officials have concluded
that the recent steady increase in retail prices
is partly the result of speculation by rice mer-
chants.
Saigon retail prices increased less than one
percent during the week ending 19 May, and free
market currency and gold prices were stable.
ANNEX: Currency and Gold Prices (Graph)
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Pay Increase for Civil Servants
1.
all Viet-
namese civil servants will receive a 2 percent
increase in their basic pay effective 1 July 1969.
no pay increase for military
personnel was planned "at this time," but that ad-
ditional foodstuffs will be sold at subsidized
prices to all government employees through the
government-controlled commissaries.
the pay increase for civil servants will add 10
billion piasters (US $85 million) to government
expenditures this year alone, but that the govern-
ment had no alternative because the civil servants'
financial situation had been ignored for too long
The news of the pay increase, however, already has
reached Saigon newspapers, and US embassy officials
foresee demands for a parallel pay increase by the
armed forces and by Vietnamese employed by the US
Government and American contractors. Vietnamese
military personnel received a wage increase in
January 1968, and Vietnamese employees in the US
sector of the economy already have received the
first step of a two-step increased scheduled for
1969.
Employment of Third Country Nationals
3. The Vietnamese Government is delaying the
approval of applications by US contractors to bring
more skilled foreign laborers into the country.
The government not only has been having difficulty
regulating the activities of these workers, but
also would prefer to see Vietnamese workers re-
place as many of them as possible. US contractors'
plans to lay off large numbers of Vietnamese per-
sonnel this year probably will stiffen government:re-
sistance to allowing employment of more foreign
personnel in South Vietnam.
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4. Currently there are 20,000-25,000 third
country nationals (TCNs), mainly Koreans and
Filipinos, in South Vietnam. Most of these TCNs
are working for US contractors and their subcon-
tractors in skilled blue collar jobs or in
professional and technical occupations. Accord-
ing to the US embassy, in mid-May there were about
1,500 applications for work permits or visas for
additional TCNs being held by the ministry of
Interior and 600 more were to be filed shortly.
US contractors have been protesting to the embassy
that the situation is intolerable and that the
TCNs are necessary to complete essential defense
contracts. At the same time, however, the con-
tractors plan major cutbacks in the number of
Vietnamese they employ. The largest US construc-
tion consortium in South Vietnam reportedly plans
to lay off at least 9,000 Vietnamese workers by
the first of October. The Vietnamese minister of
labor has indicated to embassy officials that the
government has little reason to be cooperative on
TCN applications when large-scale reductions of
Vietnamese employees are in the offing. The con-
tractors' position is that there are not enough
skilled Vietnamese for the work that must be done
nor is there time to train them.
5. Many Vietnamese resent the presence of
TCNs in their country, and the TCNs have posed
some specific problems for the government. Ac-
cording to a recent embassy survey, the average
wage paid to TCNs, excluding housing and other
fringe benefits, is about US $6,700 per year,
which is far above the average wage paid to Viet-
namese employees, most of whom are unskilled. The
embassy survey also indicates that a large share
of the earnings of TCNs probably enters South
Vietnam's currency black market. It is estimated
that in 1969 as much as US $60 million could enter
the market as TCNs convert their earnings into
piasters on the black market.
6. The Vietnamese Government tries to regulate
strictly the entry and exit of TCNs, but many are
in the country without valid visas or work permits
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which are required by Vietnamese law. On 14 May,
the government announced that within one month
employers must submit to the Ministry of Interior
lists of their TCN employees, indicating the status
of passports, visas, work permits, and residence
cards. After 15 June, the government will not
accept requests for regularizing the status of any
TCNs, and workers and employers will be liable for
fines and/or imprisonment. US officials hope to
open discussions soon on an agreement setting out
the responsibilities of both governments regarding
the status of TCNs. Such an agreement could con-
siderably reduce friction on the issue of TCNs,
but the Vietnamese Government may be less willing
to negotiate if US firms continue to ask for more
TCNs while laying off Vietnamese.
7. Delta rice merchants who recently were
interviewed by US embassy personnel expressed
satisfaction with the current rice situation, and
especially with the rising retail price of rice
in Saigon. The merchants estimated their stocks
of paddy at about 300,000 metric tons and guessed
that farmers might have an additional 250,000 tons
stored on their. farms. No one could say how much
of this rice will be delivered to Saigon, but
Vietnamese officials anticipate that deliveries to
Saigon will exceed the 310,000 tons of milled rice
delivered to Saigon during 1968. Deliveries
through April already have reached 140,000 tons
despite the fact that the recently completed
harvest was smaller because of a drought during
the last few months of 1968.,
8. From the end of March to the middle of
May prices paid to farmers increased 30-35 percent,
and retail prices in Saigon rose about 12 percent.
Merchants attributed the steadily rising price of
paddy to smaller farm stocks as a result of the
drought and to a substantial increase in inter-
provincial rice shipments on which the government
lifted restrictions last September. Embassy of-
ficials believe that speculation on the part of the
rice merchants is a factor in the rising retail
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price of rice. Aware that the stocks of imported
rice in Saigon are dwindling because of transship-
ments to the northern provinces and no new ar-
rivals, the merchants are holding their stocks as
long as they can while prices in Saigon rise.
Government stocks of imported rice in Saigon were
down to about 80,000 tons at the end of April,
from a high of 197,000 tons last August. As of
15 May, the government held in Saigon only 6,000
tons of US medium grain rice, the type of imported
rice most competitive with domestic varieties. US
officials expect that merchants will begin to sell
their stocks as new imports begin to arrive or the
loans they took to finance their paddy purchases
come due.
Prices
9. After showing moderate increases for four
consecutive weeks the USAID retail price index for
Saigon increased less than one percent during the
week ending 19 May. Food prices increased slightly
as the price of rice continued to go up, while non-
food prices were unchanged. The price index for
imported commodities also increased less'than one
percent.
USAID Retail Prices 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
5
May
1969
417
470
319
12
May
1969
423
480
318
19
May
1969
425
483
318
Currency and Gold
10. All free market currency and gold prices
were stable during the week ending 20 May. The
prices of dollars and gold leaf were unchanged at
181 and 263 piasters per dollar, respectively.
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The rate for MPC (scrip) increased one piaster to
139 piasters per dollar. (A graph on monthly and
weekly currency and gold prices is included in
the Annex.)
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300
aaigon Free Market Gold and Currency Prices
PIASTERS P R US DOLLAR
30 APR
a
N
267
185
11111111
MAR APR
M Y
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