THE ECONOMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010019-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: August 25, 2006
• Sequence Number: 19
• Publication Date: February 23, 1970
• Content Type: IR

Ap Ved For Release 2007/03/08: CIA-RDP82S00205R0002SOA
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
State Dept. review completed
USAID review completed
Secret
112
23 February 1970
No. 0416/70
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becei
'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.
( CROUP 1
EXCLUDED FROM 1-0177-
DOWNORADINO ANDECLASSIFICATION
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
Orders for imports reached a new high in 1969
and were at near record levels during November and
December despite the increase in import taxes levied
in October.
The joint US/Vietnamese loan fund established
to aid commercial and industrial firms damaged or
destroyed during the 1968 enemy offensives has been
almost fully committed, but apparently was able to
meet no more than half of the demand for reconstruc-
tion loans.
Data on retail prices in Saigon are not yet
available for February. Black market currency and
gold prices rose again during the first half of
the month as rumors of devaluation persisted.
ANNEXES: South Vietnam Economic Indicators (charts)
Currency and gold prices (graph)
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Demand for Imports
1. During 1969 orders for imports reached a
new high of $737 million, or 18 percent above the
level of 1968. Moreover, the large increase in
austerity taxes on most imports in late October
did not reduce demand--the value of commercial, im-
port licenses issued during November and December
for imports financed both by the Vietnamese govern-
ment and by USAID's Commercial Import Program '(CIP)
was higher than for any two-month period since mid-
1966 when the piaster was devalued. Preliminary
data for January 1970 indicate that orders continued
at a high level. The persistent rumors of another
devaluation probably have contributed to the recent
high demand for imported goods.
2. South Vietnam has financed more than half
of total orders for imports during the last three
years from its own holdings of foreign exchange
(see tabulation), but the US still directly or in-
directly finances most of the country's imports.
During each of the last four years, US Government
purchases of piasters for use in Vietnam have pro-
vided most of South Vietnam's earnings of foreign
exchange.
Import Licensing
(US$ millions)
1966
1967
1968
1969
C.I.P.
321
80
139
199
Food for Peace
93
160
106
116
(PL-480)
GVN Financed
246
292
380
422
TOTAL
660
532
625
737
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War Reconstruction Loan
3. The reconstruction loan fund established
by the Vietnamese and US governments in mid-1968
following the enemy offensives has been almost
fully subscribed. The fund consists of a one
billion piaster ($8.5 million) grant from the
Vietnamese government for repairs and replacement
of both plant and equipment and a $10-million grant
from AID limited to the purchase of replacement
equipment and spare parts of US origin. During the
1968 Tet and May-June offensives more than 100 com-
mercial and industrial firms were damaged or des-
troyed and the cost of repair, reconstruction, and
equipment replacement was estimated at about $50
million.
4. Of the $8.5 million Vietnamese portion of
the fund, $8.1 million had been committed by the end
of January 1970. Because only half of the US grant
had been used as of August 1969, Vietnamese and US
officials decided that the remaining $5 million in
US funds would be made available for the expansion
as well as reconstruction of plants damaged during
the offensives. As a result of this change, seven
loans were approved in January 1970 for the purchase
of about $5 million worth of US machinery for ex-
panding the capacity of Vietnam's textile industry.
All US funds, therefore, have now been committed.
Although the total value of reconstruction loan ap-
plications is not known, at least $30 million had
been applied for by the end of 1968. Thus, it would
appear that the reconstruction loan fund satisfied
no more than half of the demand for funds. Avail-
able information does not indicate whether business-
men who were turned down by the government were able
to get funds from private sources, continued to operate
at reduced capacity, or closed up shop.
Currency Black Market
5. Saigon black market currency and gold rates
rose again during the first half of February in re-
sponse to rumors of devaluation. Issuance of new
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piaster notes in 100, 200, and 500 denominations
added strength to the rumors despite official
statements that the new banknotes were to replace
worn ones and have nothing to do with devaluation.
The price of dollars increased from 328 piasters
per dollar on 27 January to 345 piasters on 16 Feb-
ruary. The price of a dollar's worth of gold leaf
rose from 403 piasters to 436 piasters during the
same period. The rate for MPC (scrip) jumped to
an all-time high of 182 piasters per dollar com-
pared with the official rate of 118 piasters per
dollar. According to embassy officials, the sharp
increase in this rate probably was due to new rumors
that the official MPC exchange rate is to be changed
to 180 piasters. (A graph on monthly and weekly cur-
rency and gold prices as well as charts on the cost
of living, monty supply, and foreign exchange re-
serves are included in the Annex.)
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Saigon Cost of Living Index* (For Working Class Family Without Rent)
700
1
*Official GVN-index
South Vietnam Money Supply
Billions of Piasters
South Vietnam Foreign Exchange Reserves*
Millions of US Dollars
X 9 6 ' - --(-- --- -19B 1 1969 1 1970
*Excluding holdings of commercial banks
976532-70
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rr
Saigon Free Market Gold and Currency Prices
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Secret
Secret
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