THE ECONOIMIC SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82S00205R000200010025-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: July 6, 2012
• Sequence Number: 25
• Publication Date: December 1, 1969
• Content Type: IR

Declassified in Part - Sanitized Copy Approved for Release 2012/07/06: CIA-RDP82S00205R000200010025-5
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Economic Situation in South Vietnam
(Biweekly)
Secret
1 December 1969
No. 0508/69
117
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*MW Secret 1
25X1
"WARNING
document contains information affecting the national defense of the
ted States, within the meaning of Title 18, sections 793 and 794, of the
Code, as amended. Its transmission or revelation of its contents to or
by an unauthorized person is prohibited by law.
GROUP 1
MU FROM AUTOMATIC
W NO!IAUINO ANU
I LABStFICATION
Secret
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
The Economic Situation in South Vietnam
Summary
The government responded to criticism of the
recent austerity tax increase on imports by reduc-
ing the rates on several commodities, some of which
are important items in the budgets of the poor.
Small motors for use in farming and fishing also
were given preferential rates. As a result of the
rate reductions, officials estimate about a 6 per-
cent loss in 1970 revenues from imports, which
account for more than half of total government
revenues.
Retail prices in Saigon were relatively stable
during the first half of November at a level 35
percent above that prevailing at the beginning of
the year. Prices of imported goods, which rose 45
percent immediately following the austerity tax
increase decreed on 23 October, also were stable
at the new higher levels during the first two weeks
in November. Vietnamese officials in Da Nang report
greater price stability in I Corps than in Saigon
due to the operation of an unofficial, but influen-
tial, price control board.
All black market currency and gold prices in-
creased during the three weeks ending 25 November.
The price of dollars reached a new high almost two
and a half times the official exchange rate.
ANNEX: Currency and Gold Prices (Graph)
6EUKE'l
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Reductions in Austerity Tax Rates
1. In response to public and legislative
criticism of the hardships created by the 23
October increase in austerity tax rates on imports,
the government has announced reductions in the new
rates for several commodities and switched others
to categories of goods with lower rates. The
prime minister and the ministers of economy and
finance met with National Assembly leaders on 12
and 13 November to discuss revisions in the tax
increase and announced the changes the following
day. The government apparently acted quickly in
order to forestall additional requests for rate
reductions from the legislators. It is estimated
that the revisions will result in a loss of roughly
6 percent of projected 1970 total revenues from
imports--by far the most important source of all
government revenues.
2. Among the major imports for which tax
rates were reduced are wheat flour, gasoline,
kerosene, diesel oil, corrugated iron roofing sheets,
and three-wheeled commercial vehicles. Bicycle
parts and accessories and small gasoline engines
for use in agriculture and fishing were shifted in-
to categories with lower tax rates. Along with the
tax rate changes the government revised the offi-
cial prices in the Saigon area for these goods, as
shown below.
Official Saigon Retail Prices
Piasters per unit
Unit of
Measure
Prior to
23 Oct
After Austerity Revised
Tax Increase on 14 Nov
Wheat Flour
8% protein
kg
34
51 45
Regular Gas
liter
9.6
20 18
Kerosene
liter
7.58
12 10
Industrial
Diesel Oil
liter
5.8
12 9
Tri-Lambrettas
each
NA
410,000 240,000
4 h.p. Gasoline
Engine
27,360 16,690
-2-
SSA. , l
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it is estimated that 5 to 6 million piasters ($42 to
51 million) in revenue will be lost as a result of
the tax rate reductions. Two-thirds of this amount
is accounted for by the reductions on small engines,
kerosene, diesel oil, and the gas-oil mixture used
in.small engines.
Prices
3. Retail prices in Saigon remained stable
during the first half of November following the in-
creases in late October resulting from the higher
austerity taxes on most imports. On 17 November the
USAID index was about 12 percent above the pre-
austerity tax level with prices of both food and
nonfood items registering increases of about the
same magnitude. Compared with the level prevailing
at the beginning of the year the price index for
all items had increased 35 percent by 17 November.
Food prices led the way with an increase of 42 per-
cent, while prices of nonfood items were up 17 per-
cent,
(1 January 1965
2
Jan
1968
308
344
241
6
Jan
1969
400
443
319
6
Oct
1969
470
547
329
3-7 Nov 1969 aver. 541
631
374
10-14 Nov 1969 aver, 538
627
373
17 Nov 1969 539
628
373
4. The USAID price index for imported commodities
rose about 45 percent during the week following the
enactment of the higher tax rates, but remained rela-
tively stable during the first half of November. All
items sampled for the index except 'rice, fertilizer,
pharmaceuticals, and sugar were subject to the higher
taxes. As of 18 November the index was 73 percent
above the level of 7 January.
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5. According to Vietnamese officials in Da
Nang, the increases and wide fluctuations in prices
that occurred in Saigon following the austerity tax
increase were not so serious in the I Corps area.
One reason for the greater price stability ap-
parently has been the activity of an unofficial
price control board composed of key military,
police, and civilian officials who have sufficient
influence to compel local merchants to keep prices
in line. The board, which has been active for two
months, was originally formed to check on increasing
rice prices and reports of rice shortages in I Corps.
I Corps officials believe that similar unofficial
price control measures are in effect in the other
Corps areas, but they acknowledged that for many
reasons, including unfavorable press reaction,'the
same methods would not be workable in Saigon.
Currency and
6. Free market dollar prices increased steadily
during the three weeks ending 25 November reaching
a new high of 288 piasters per dollar, almost two
and a half times the official exchange rate. The
rate for MPC (scrip) rose 20 piasters to 150 piasters
per dollar. The price of a dollar's worth of gold
leaf registered the smallest increase--from 362
piasters on 6 November to 367 piasters on 25 November.
(A graph on monthly and weekly currency and gold
prices is included in the Annex.)
sEcREJ?
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Saigon Free Market Gold and Currency Prices
1965 1966 1967
GOLD Basis gold leaf worth $35 per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates (scrip)
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Sect lw~
Secret
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