ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500140021-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 21, 2016
• Document Release Date: February 7, 2008
• Sequence Number: 21
• Publication Date: July 5, 1973
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Z- '7,3 1 0 7. c75
Secret
L 6 0 COPY
irn to BSI
H 11079 Hq.
Economic Intelligence Weekly
On file Department of Agriculture
release instructions apply.
State Dept. review
completed
Secret
CIA No. 7706/73
5 July 1973
Copy No.
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CONTENTS
China Reaches Agreement with US Bank
China Signs New Air Pacts
Czechs Seek Talks with the United States I
West Germany to Form National Oil Company
Worldwide Grain Developments 1
Pakistan: The Economy Under Bhutto The country has experienced
some impressive economic gains, but serious problems persist. 4
Soviet-Japanese Development of Siberian Coal Reserves Japanese
credit for development of the southern Yakutsk Basin hinges on the
grade of coal available.
Japan Seeks New Agricultural Suppliers Japan is accelerating its
search for agricultural imports in the wake of recent US controls. 7
International Monetary Developments Despite the mark's
revaluation, it may still be a target for speculation.
Comparative Indicators
Recent Data Concerning Domestic and External
Econc- nic Activity
Inside Back Cover
Note: Comments and queries on the contents blicatio:: are w 1cnmad. They may be directed
i
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between the two countries, which are presently funneled through
third-country banks; this subject may be discussed later this year when a
ECONOMIC INTELLIGENCE WEEKLY
Notes
China Reaches Agreement with US Bank
The Bank of China has agreed to establish a correspondent relationship
with the Chase Manhattan Bank of New York. This is the first formal
banking agreement reached between the PRC and a US-owned bank. Initial
dealings will be limited to personal letters of credit, remittances, and
travelers checks. No agreement was reached on handling trade transactions
senior Chase official is scheduled to visit China.
China Signs New Air Pacts
During the past two months, the PRC has signed bilateral civil aviation
agreements with Norway, Sweden, Denmark, Canada, and Greece and has
initialed one with the United Kingdom. This brings to 19 the number signed
with non-Communist countries since 1955. As in the past, none of the
agreements is expected to result in service immediately, although Canada
and the United Kingdom are likely to begin flights to China later this year.
For its part, China apparently is waiting for delivery of its Boeing 707s
before expanding international air services.
Czechoslovakia has proposed a meeting between its Minister of Foreign
Affairs, Bohuslav Chnoupek, and Secretary of State Rogers in Helsinki to
discuss settlement of claims on property and gold. The United States holds
18.4 tons of Czech gold (present market value about $70 million) pending
compensation for US property seized by Czechoslovakia after World War II.
The Czechs have of;ered to pay 40% of the $72 million value of the
property; a similar formula was used in settlements with Poland, Romania,
and Hungary. Prague also wants compensation for a $17 million US steel
mill paid for by Czechoslovakia but never delivered. Chnoupek now may
have a formal package to offer Rogers on all outstanding claims.
West Germany to Form National Oil Company
Bonn, concerned with the rapid erosion of the position of the major
international oil companies, plans to create a national oil company. The
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company would control about 30% of the nation's refining capacity and
service stations and, most importantly, would import directly from
oil-producing countries.
2
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Worldwide Grain Developments
A 28 June meeting of the International Wheat Council ended on the
pessimistic note that the 1973/74 wheat export availabilities will fall
"substantially short of presently projected requirements." There was
disagreement among delegates, however, on the projections used for both
production and import requirements for key countries, such as Canada and
India.
New Delhi's needs for grain imports may be even more urgent than
officially stated in mid-June - 1 million tons by this September with a
total of 4 million tons of grain needed by March 1974. In late June, a
two-week lull in the monsoon rain killed seed in about a quarter of the
cultivated land in India's severe drought area. Replanting may be impossible
because of a seed shortage. Demonstrations and minor food riots are again
occurring.
A frica
The population in the drought ai ?as on the southern fringe of the
Sahara needs 1 million tons of grain before the end of 1973. Only about
half of this amount has been pledged by potential suppliers.
Southeast Asia
The Philippines and Indonesia claim they have an urgent need for
foodgrains to tide them over until their rice crops come in. Since rice is
not available, they are seeking wheat.
Bangladesh
US officials estimate that Bangladesh needs 800,000.850,000 tons of
US wheat in the next 12 months - Bangladesh officials put the need at
1.2 million tons.
Prime Minister Sirimavo Bandaranaike said last week that her country's
foodgrain stocks will last only through early November. Drought has caused
a shortfall in the spring rice harvest, and government rice procurement for
the ration shops has fallen behind. Having failed to obtain US PL-480 wheat
flour for shipment before October, Sri Lanka may ask China for advanced
hi
'
s
pment of rice on next year
s rubber-rice trade deal.
3
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Pakistan: The Economy Under Bhutto
President Bhutto a:tnost certainly will raise the subject of increased
US economic assistance during his visit to Washington in mid-July. Since
Bb'rtto assumed the presidency, Pakistan has chalked up some impressive
economic gains, although serious problems persist. Among the gains:
? A substantial rupee devaluation and increased world
demand for cotton, textiles, and rice - Pakistan's
traditional exports - have combined to raise export
earnings above those of the formerly united Pakistan.
? At the same time, the resumption of foreign aid and the
short-term debt relief by the consortium of Western
creditors* have allowed Pakistan to boost imports and to
more than double its foreign exchange reserves, to nearly
$500 million.
? Islamabad claims it will achieve self-sufficiency in
foodgrains starting in 1974.
? Industrial production has turned around in the first half
of 1973, following a two-year industrial recession.
The generally favorable situation is, however, clouded by some serious
economic problems:
? Private investment, both domestic ai. ' foreign, continues
to lag because of price and profit controls and because
of industrial reform measures. The government now
exercises management control in key heavy industries and
utilities. Public investment has been held down by
budgetary constraints.
? Rising foodgrain prices, and a desire to maintain per capita
consumption, have prompted Islamabad to request one
million tons of foodgrains from the United States under
PL-480 for delivery in 1973/74 (July to June).
e The burden of defense spending has increased since the
loss of East Pakistan - to about 8% of gross domestic
product.
* The i ,t`ted Stateg, the United Kingdom, West Germany, Japan, Canada, Italy, France, the
Netherlands, Belgium, Sweden, Norway, the Asian Dcvelcpment Bank, and the World Bank and
its affiliates (IDA and IFC).
4
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? Pakistan will require a long-term rescheduling of its foreign
debts to avert an increa;;e in debt service liabilities. The
final division of its foreign debt obligations with
Bangladesh is yet to be resolved, complicating Pakistan's
relations with its creditors.
Net economic aid received by Pakistan in 1972/73 was an estimated
$325 million, compared with $290 million a year earlier. The Western
consortium has been providing close to 90% of this aid. The United States
alone has been providing 23% - mainly PL-480 wheat and other food -
not counting US assistance channeled through multilateral agencies and US
technical assistance.
5
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Soviet-Japanese Development of Siberian Coal Reserves
Negotiations for a Japanese credit to develop coking coal deposits in
the southern Yakutsk Basin will resume at the July sessions of the
Soviet-Japanese Economic Committee. Major differences that still separate
the two sides should eventually be resolved, especially if Yakutsk coal proves
equal in quality to US coking coal.
In April 1973 the USSR requested a $585 million credit to construct
an open pit mine and coal cleaning facility near Chulman, as well as a
270-mile rail link to the Trans-Siberian Railroad. This is substantially more
than the $350 million proposal made in February 1972, and the Japanese
are reluctant to advance the larger sum.
The Soviets would repay the loan with coal after the railway is
completed about 1977. Initial shipments would be steam coal, which lies
atop the coking coal, coupled with increased shipments of coking coal from
the Kuznetsk Basin, 2,000 miles to the west. Deiiveries of coking coal from
Chulman would begin some time in the 1980s and would rise to at least
5 million tons per year, worth nearly $100 million at current prices.
In 1972 the Japanese steel industry consumed 54 million tons of
coking coal, and 49 million tons were imported. Australia supplied
21 million tons; the United States, 17 million; Canada, 8 million; the
USSR, 2 million; and Poland, I million.
The Japanese would be particularly interested in premium grade coking
coall now available in large amounts only from the United States. The quality
of Chulman coking coal has yet to be determined.
E
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Japan reeks New Agricultural Suppliers
Japan will probably accelerate its search for additional suppliers of
agricultural imports following the imposition of US controls on soybean
exports. Except for rice, Japan depends almost totally on imports of grains
and soybeans. The United States is by far the leading source, supplying
nearly 60% of 18 million tons of grains and soybeans imported last year.
Government missions will visit all major producing countries this
summer to check on production and export prospects. Brazil already may
have been lined up as a ma,or new source of soybeans in 1974, F
For the longer term, the Japanese have begun investing in
agricultural production overseas - for exan pie, corn in Indonesia and
sorghum in Australia - and in recent weeks the timetable for these projects
has been accelerated. Indonesia will begin shipping small amounts of corn
to Japan next spring.
While lining up new suppliers, Tokyo will continue pressing Washington
to ship grain and soybeans on existing contracts. For the third quarter of
the year, the Japanese had con'.racted for delivery of 660,000 tons of
soybeans, or about two months' consumption, but this amount will be cut
in half as a result of the US export controls announced on 2 July. Japan
has assured supply of soybeans only through mid-October. As a result,
Tokyo almost certainly will move to increase stocks of other key agricultural
imports.
To secure supplies, Japan already has altered its agricultural buying
practices. In the past, Tokyo purchased wheat in small amounts for shipment
within 30 to 60 days and kept minii;,um stocks. Recent!y, however, Japan
has been signing larger contracts for six months' delivery and apparently
plans to increase markedly its wheat stockpiles. In June, for example, Tokyo
received a commitment from Australia for 1974 deliveries of 730,000 tons -
about half of normal annual wheat imports from that country.
7
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THE EUROPEAN CURRENCY BAND, 1973
PERCENT (CHANGE FROM CENTRAI. RATE
14 r----------__
MARK
19 26 2 9 16 23 30 7 I'i 21 28 i II 18 25 2
MAR A1)R MAY JUN .JUL
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International Monetary Developments
The latest mark revaluation did not halt the dollar's depreciation, and,
as of 3 July, the dollar was well below its pre-mark revaluation exchange
rates against other European currencies. Austria is the only nation to have
revalued following the German move.
Bonn's revaluation decision was taken in the face of renewed large-scale
currency inflows. In the past crises, the inflows consisted predominantly
of dollars, but this time, with the mark floating against the dollar, European
currencies predominated. On 28 June, the day before revaluation, the
Bundesbank had to buy about $900 million worth of European currencies,
raising its total currency purchases to some $1.6 billion during a less than
two-week period. These purchases were threatening Bonn's new
anti-inflation program.
Revaluation will increase the price of German goods, reduce import
prices, and lower the. trade surplus, but only in the long run. Indeed, Minister
of Finance Helmut Schmidt cast doubt on prospects for any near-term
reduction of the massive and growing trade surplus. Citing the present
worldwide economic boom, he holds little hope for lower import prices
or for a reduction in demand for German goods. May trade results -
withheld until after the revaluation announcement for fear of setting off
new speculation - support recent estimates that the 1973 German trade
surplus might reach an unprecaa dented $10 billion to $11 billion. The
initial perverse effects of the revaluation may send the surplus even higher.
Schmidt was publicly critical of both US and European econom;c
policies. He said that international monetary stability was not possible
without US involvement and claimed that if Germany's partners in the joint
float had pursued stability as intensively as Bonn, Germany would not have
been forced to revalue.
The revaluation will keep the joint float intact for at least a while
longer. It already has brought the mark from the top to the bottom of
the European band, at.least temporarily (see the chart), and relieved pressures
on the band created by the mark's rapid climb. The revaluation, howeve -,
represents another windfall for money managers and speculators who bet
on a mark revaluation. It may encourage them to try their hand again;
thereby keeping the international currency markets unsettled.
Japanese officials claim that Tokyo will maintain the present value
of the floating yen. Although they admit that the mark's revaluation has
reduced the relat;.c appr:'ciation of the yen, they point to the turnaround
in Japan's balance of payments. Tokyo announced a record
balance-of-payments deficit of $1.185 billion in May, up from
$1.163 billion in April and in contrast to a small surplus in May 1972.
Nevertheless, European pressures for a yen revahistinp are likely to mount.
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DOMESTH; ECONOMIC INDICATORS
Ant rage Annual
Growth Role Since
Average Annual
Growth Rate Sin
Percent Change
ce
Latest Iron Previous I Year 3 Months
Period Period 1970 Earlier Earlier
Latest from Previous 1 Year ' 3 Months
Period Period 1970 Earlier Earlier
GNP'
C
WH
OLCSA
LE PRICES
(
onstant Market Prices
United States
)
Iluarter
73 I
5.3
7.9
Previous
Gunner
7.9
(Indu
Unit
strial)
ed States
May 73 1.1
7
0 15
7
Japan
731
9.4
16.0
15.2
Japa
n
May 73
0.9
.
12
3
.
14
1
West Germany
73 I
4.7
5.8
23.6
Wes
t German
y
May 73
0.6
.
6
'
.
1
7
France
72 IV
5.3
4.3
7.4
Fran
ce
Apr 73
0.8
.
12
0
.
2
20
United Kingdom
73 1
3.2
7.1
6.2
Unit
eu Kingdo
m
May 73
1.n
.
5.3
.
0
Italy
72 IV
3.1
2.7
6.8
Italy
Apr 73
i.1
12.1
7
18
Canada
73 I
6.,
8.0
12.1
Cana
da
Mar 73
2.3
12.3
.
27.3
United States
May 73
0.7
5.8 9.7
10.4
Unite
d States
May 73 0.6 5
3
5 9
Japan
May 73
2.7
9.4 19.4
23.3
Japa
n
Apr 73
1.9
.
9
4
.
5
23
West Germany
Apr 73
0
4.1
7.9
2.3
West
German
y
Mal 73
1.3
.
7
8
.
3
8
France
Apr 73
-2.6
6.6
7.9
-6.0
Franc
e
May 73
0.9
.
7
2
.
8
9
United Kingdom
Apr 73
0.7
4.7
10.1
22.4
Unite
d Kingdo
m
May 73
0
7
.
9
5
.
13
6
Italy
Feb 73
-3.0
-0.8
-1.0
-21.2
Italy
May 73
.
1.5
.
11
0
.
5
15
Canada
Mar 73
1 0.4
6.8
9.8
13.4
Cana
da
May 73
0.7
.
7.3
.
8.8
RETAIL SALES'
(Current Prices)
United States
May 73
1.5
11.6
11.8
14.7
Unite
d States
May 73 1.0 7
6 6
7 5
6
Japan
Mar 73
3.9
12.8
24.8
45.0
Japa
n
Mar 73
9
2
.
18
9
.
27
5
.
29
9
West Germany
Mar 73
-5.7
9.1
5.9
14.2
West
Germany
Apr 73
.
-0
6
.
12
2
.
9
5
.
6n
France
Mar 73
4.1
6.3
7.0
6.7
Franc
e
Mar 73
.
0.8
.
12
5
.
9
9
-3
4
United Kingdom
Mar 73
3.0
12.9
19.8
26.8
Unite
d Kingdo
m
Apr 73
2
2
.
12
2
.
13
1
.
19
1
Italy
Jan 73
-8.3
8.1
11.9
3.3
Italy
Dec 72
.
7
0
.
22
5
.
24
5
.
52
3
Canada
Apr 73
2.5
12.1
14.6
30.6
Canad
a
May 73
.
-2.0
.
13.8
.
8.6
.
0
Percent Rate of Interest
12 Months 3 Months 1 Month
Representative Rates Latest Earlier Earlier Earlier
United States
Prime finance paper
J-!n 29 7.63 4.63 1
6.63 7
25
Japan
Call money
Jun 23
6.83
4.75
5.50
.
6
00
West Germany
Interbank loans (3 months)
Jun 29
13.75
4
50
N
A
.
12
63
France
Call money
Jun 22
7.63
.
3.75
.
.
7
50
.
7
44
United Kingdom
Local authority deposits
Jun 8
7.90
3
79
.
7
38
.
7
52
Canada
Finance paper
Jun 29
7.00
.
5.25
.
5.13
.
6
63
25
X1
Euro-Dollars
Three-month deposits
Jun 29
9.06
5.25
8.63
.
8.69 'Se
asonally Adjusted
.5 July 1973
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EXTERNAL ECONOMIC INDICATORS
Av
Gro
erage Annual
wth Rate Sl'ca
Percent Change
Latest from Previous
Period Period 1970
EXPORT PRICES
I Year 3 Mantle
Earlier Earlier
EXPORTS"
(us $)
United States
Apr 73
1.3
5.6
10.0
(f.o.b.)
19.0 United States
NMay 73
5.803
Jon-Ma
28
,511
19,015
Japan
May 73
1.5
12.1
20.7
63.8 Japan
May 73
2,845
Jan-May
13
,757
11,011
West Germany
Mar 73
7.4
11.0
12.4
52.5 West Germany
May 73
5,740
Jan-Ma
24
,827
18,721
France
Dec 72
4.9
8.4
7.1
16.0 France
May 73
3,202
Jan-May
13
,848
10,408
United I'ingdom
Apr 73
1.8
9.9
4.2
40.4 United Kingdom
May 73
2,303
Jan-May
11
.125
9,675
Italy
Feb 73
3.8
8.2
8.9
26.9 Italy
Apr 73
1,491
Jan-Apr
5
,176
5,909
Canada Feb 73 2.0
4.7
8.6 12.6 Canada Apr 73 1,983 Jan-Apr 7
,780 8,280
IMPORTS`
United States
Apr 73
1.3
5.6
10.0
(f.o.b.)
19.0 United States
May 73
5,781
Jan-Ma
27
,306
20,647
Japan
May 73
1.3
0.9
4.8
13.5 Japan
May 73
2,574
Jan-May
11
,014
7,389
West Germany
Mar 73
1.1
1.0
0.5
-5.1 West Germany
May 73
4,362
Jan-Ma
19
,370
15,246
France
Dec 72
4.7
4.3
0.5
18.8 France
May 73
3,215
Jan-May
13
,328
10,153
United Kingdom
Apr 73
1.8
8.5
9.0
15.4 United Kingdom
May 73
2,032
Jan-May
12
,651
10,226
Italy
Feb 73
2.7
4.8
8.6
19.8 Italy
Apr 73
1,700
Jan-Apr
6
,390
5.322
Canada Feb 73 1.9
3.0
7.9 16.5 Canada Apr 73 1,747 Jan-Apr 7
,219 5.968
TRADE BALANCE"
United States
Apr 73
5.5
9.9
18.3
(f.o.b./f.o.b.)
40.4 United States
May 73
-158
Jan-May
-
795
-1,632
Japan
Me,, 73
2.5
2.8
14.3
13.2 Japan
May 73
271
Jan-May
2,
743
3,842
West Germany
Mar 73
-0.8
-0.2
3.2
5.0 West Germany
May 73
1,378
Jan-May
5,
457
3,475
France
Dec 72
8.1
4.7
0.2
17.2 France
May 73
-13
Jan-May
520
255
United Kingdom
Apr 73
2.4
10.2
22.9
36.9 United Kingdom
May 73
-529
,Ian-May
-1,
526
-551
Italy
Feb 73
3.5
6.5
9.3
23.2 Italy
Apr 73
-209
Jan-Apr
-
614
587
Canada Feb 73 0
2.9
2.7 9.0 Canada Apr 73 236 Jan-Apr
541 292
OFFICIAL R
ESERVES
_
t,,pu, ?u,u,
Latest Period
I Year 3 Months us $ -
End of
June 1970
Earlier Earlier
United States
May 73 14.0
16.3
13.3
14.0 Japan(Yen)
0.0038
36.84
18.08
-
0.89
-0.19
Japan
West Germany
May 73
May 73
15.9
32.2
4.1
8.8
16.0
19.9
19.1 West Germanyl0eursC11P
Mark) 29.5 Francelrroacl 1P
d
0.4124
0.2415
64.04
19.61
32.90
22.65
1
6.46
9.57
5.28
1.68
Franca
May 73
11.0
4.4
8.5
aan
10.6 United k.ngdomsrerling
2.5800
-7.55
-0.98
4.84
0.19
United Kingdom
May 73
6.7
2.8
7.9
5.9 Italy Viral
0.0017
7.12
-0.29
-3
.11
1.90
Italy
Apr 73
6.4
4.7
4.3
5.8 Canada loallarl 1.0017 8.60 0.39
0.40 -0.02
Canada
May 73
5.9
4.3
6.0 6.1
Percent Change from
Dec Sr, 18 Dec 71 19 Mar 73 22 Jun 73
United States
-19.93
-10.36 ~
-3.56
-1.05
Japan
23 03
9.06
-2.96
-0.83
West Germany
30.89
13.93
8.90
2.C2
France
-9.36
3.82
1.38
-1.26
United Kingdom
-29.42
-15.44
-1.12
-1.79
Italy
-20.71
-19.47
-12.80
-1.02
'Seasonally Adjusted
Canada
4.08
-2.44
-0.78
-0.34
5 July 1973
25X1
Approved For Release 2008/02/07: CIA-RDP85T00875RO01500140021-4