INTELLIGENCE MEMORANDUM NORTH VIETNAM'S ECONOMY IN 1971 AND PROSPECTS FOR 1972

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700030040-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: November 1, 2010
• Sequence Number: 40
• Publication Date: March 1, 1972
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
North Vietnam's Economy in 1971 and Prospects for 1972
Secret
ER IM 72-40
March 1972
Copy No. g 9
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Its transmission or revelation of its contents to or re-
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GROUP 1
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
March 1972
INTELLIGENCE MEMORANDUM
NORTH VIETNAM'S ECONOMY IN 1971
AND PROSPECTS FOR 1972
Summary and Conclusions
1. North Vietnam's economy was dealt a serious setback by the
floods of late summer 1971. Agricultural output dropped to almost the
lowest level recorded under Communist rule, causing gross national product
(GNP) to fall by about 10%. Although the floods retarded industrial growth,
industry scored significant advances, and production was nearly up to the
prebombing level. The reconstruction program was equally impressive as
several years of effort culminated in the restoration of most of the
bomb-damaged industry. Another sign of economic upturn was reflected
in growing export volumes, but the country still depends heavily on imports
from Communist countries for a wide variety of needs.
2. Further economic gains are in the offing for industry in 1972,
but agriculture probably will continue to suffer from lingering effects of
the floods. Food deficits during the first half of the year will be covered,
for the most part, by increased food shipments from the USSR and the
People's Republic of China.
Discussion
Introduction
3. North Vietnam's economic !ecovery since the 1968 bombing halt
has been slow, owing to lingering disruptions caused by the war -- severe
bomb damage in transportation and heavy industry, manpower strains from
cumulative military inductions, shortage of skilled labor, and low labor
productivity. However, the economy at the end of 1970 had recovered to
about 95% of prebombing levels of output. Hanoi at that point embarked
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate ef Intelligence.
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on a new three-year state plan (1971-73) designed to complete the job
of rehabilitating the economy and to promote agricultural production. This
memorandum discusses achievements and setbacks during the first year of
the plan as they relate to short-term prospects.
Economic Overview: 1971
4. Hanoi's account of 1971 state plan fulfillment was an optimistic
one. However, industrial growth - claimed to be 14% -- was not sufficient
to counter heavy losses in agriculture, where production was about 20%
below the 1970 level. Thus, GNP dropped to roughly 90% of the 1970
level, or about 15% below the 1965 prewar peak.
5. Despite the economic difficulties faced by North Vietnam this
past year, the regime held fast to the basic war orientation of its economic
priorities. The first priority continued to be the satisfying of demands for
"human and material resources for the frontline," a commitment involving
predominantly manpower for military service and maintenance of the
logistics pipeline. Military conscription for the year as a whole may have
been at the highest level since 1968, and substantial recruitment took place
during August and September - the flood months. The second priority,
economic development, was given some attention, but improved living
standards for the populace ran a poor third. The latter was evidenced early
in the year when the consumer was reminded by Deputy Premier Do Muoi
of the need for "belt tightening" to further the cause of "capital
accumulation." A visible step in this direction was a reduction in the rice
rations for state employees by about 2 pounds per month - a cut of about
7%.
Agriculture
6. Unprecedented late-summer floods changed agriculture's prospect
in 1971 from one of the most promising ever to one of the worst. The
spring rice harvest apparently was the largest ever achieved and was
accompanied by the largest industrial crop in five years -- made up of
peanuts, soybeans, cotton, and jute - plus a substantial increase in livestock
breeding. Abuit midway into final transplanting of the large autumn rice
crop, extensive floods struck the rich delta region, inundating close to
one-half of the autumn rice and destroying an estimated 35% to 45% of
the crop. In terms of milled rice, the loss amounted to 700,000 to 900,000
metric tons. Total rice production for the year dropped to about 2.4 million
tons of milled rice, some 20% below the previous yc: r and the lowest since
1955. Including secondary crops, total production of food crops fell to
a record low of about 3 million tons (see Table 1).
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Table 1
Production of Food Crops in North Vietnam
Million Metric Tons
Year
Total
Rice 1
Secondary
Crops b/
1964
3.7
3.0
0.7
1965
3.8
3.1
0.7
1966
3.5
2.8
0.7
1967
3.6
2.8
0.8
1968
3.3
2.6
0.7
1569
3.4
2.7
0.7
1970
3.6
3.0
0.6
1971
3.0-3.1
2.4-2.5
0.6
a.. Milled or polished rice.
b. Corn, sweet potatoes, and manioc expressed
in milled rice equivalents.
7. Apart from rice losses, the floods caused widespread erosion of
farmland, breaches in long stretches of irrigation canals, and destruction
of many irrigation pumping stations. The press indicated considerable
destruction of stored goods, tools, and machinery and the loss of some
state grain reserves. Livestock losses apparently nullified the gains made
during the spring.
Industry
8. Some sold gains in industrial production emerged in 1971.
Announced plan fulfillment showed a growth of 14% in total industrial
output, with the centrally controlled sector (basically the heavy industrial
sector) increasing 17.5% and the cooperative sector (largely handicrafts) by
8.5%. The locally controlled sector of state industry, in which large sums
were invested during the bombing years to increase regional self-sufficiency,
also grew substantially, as indicated in Table 2. The output of the heavily
damaged central sector was still only about three-fourths of the 1965 peak.
9. A dramatic improvement in fuels and power took place last year.
After nearly three years of relative stagnation, production of coal reportedly
increased by 24%, largely because of improved mining operations. Electric
power production went up an estimated 10%. By year's end,
power-generating capacity had increased 30% as the first generator of the
large Thac Ba hydroelectric powerplant, built with Soviet assistance, went
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Index of Industrial Production
in North Vietnam A/
Year
Total
Central
Local
Cooperative
1964
1GO c/
51
19
30
1965
108
56
22
30
1966
103
50
23
30
1967
90
39
24
28
1.968
90
40
24
26
1969
90
37
26
28
1970
92
37
28
28
1971
105
43
32
30
a. Based on fragmentary data from Nort Vietna-
mese newspapers and radio broadcasts.
b. Because of rounding, data may not add to the
totats shown.
c. In absolute terms the value is estimated to be
rough Zy $400 mi ZZion.
into service, along with a new diesel 1 owerplant in Haiphong. Capacity
available for service, which is almost back to the prebombing level, has
eliminated the severe power shortage experienced throughout 1970.
10. In other branches of industry, the reconstruction effort has begun
to bear fruit. Repair of bomb damage at the Haiphong Cement Plant was
basically completed in 1971 after almost four years of work. North
Vietnam's capacity to produce chemical fertilizer is being enhanced by a
nearly completed expansion of the Phu Tho Superphosphate Plant and
renovation of two smaller fertilizer plants at Van Dien and Hai Duong.
Reconstruction, as well as expansion, of the country's only nitrogen
fertilizer plant at Bac Giang got under way in the fall. At Lao Cai,
production facilities for . processing apatite (the raw material for
superphosphate) also were expanded. Photography shows that the Nam Dinh
textile plant was essentially restored during 1971, although machinery may
not yet have been installed. In Hanoi a major expansion of the country's
largest machine building facility was well under way in 1971, further
increasing the country's capacity to produce metalworking machinery and
such items as hydraulic pumps for agriculture. At the Thai Nguyen Iron
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and Steel Combine, two of the three blast furnaces are in operation, but
thus far production has been sporadic.
Transportation
11. The transportation sector continued to receive a high priority
during 1971. Progress basic to logistical support for the war and to the
economy included steady expansion of new berthing facilities and loading
cranes at the port of Haiphong, opening of the rail-highway bridge at Hai
Duong on the Hanoi-Haiphong rail line, and the first confirmed use of the
realigned segments of the Hanoi - Dong Dang railroad, the principal rail
artery from China (see the map). In the southern part of the country,
construction continued on the rail link between Vinh and Duc Tho to join
a light-capacity rail line in the panhandle with the Hanoi-Vinh railroad.
Between October 1970 and November 1971, work on the light-capacity
line included rebuilding of your original and five bypass bridges and
construction of three entirely new bridges. Only a small amount of
construction remains before through rail traffic will be possible from Hanoi
to storage areas in the panhandle that serve logistics routes into southern
Laos. Significant headway also was made on integrating two petroleum
pipeline systems, an east-west line from Bai Chai (near Hon Gai) to Hanoi
and a north-south line from Hanoi to Laos. This pipeline network now
as gaps totaling 40-50 miles. When they are closed, North Vietnam will
able to distribute petroleum from the port of entry at Bai Chai into
the Laotian panhandle. This will eliminate the shipment of petroleum by
crtasrai vessels currently shuttling between Haiphong and Vinh.
12. Despite these signs of progress, it is clear that the regime was
not satisfied with performance of the transportation industry. Unusually
stern press criticism charged the sector with widespread failure to deliver
goods n;'ct's%1ry for construction, agriculture, and industry, and,
consequently, transportation bore the onus for resultant disruptions in
economic de,,clopment. Some of the shortfall probably stems from the
floods when n.ain transportation arteries in the delta region were interdicted
for upwards of two months, but poor management and low productivity
were undoubtedly also important impediments. These, in turn, almost
certainly reflect the strain of military logistics demands, which, by their
nature of one-~' ay shipment of goods, fundamentally make inefficient use
of transport equipment
Foreign. Trade and Aid
13. North Vietnam's seaborne exports during 1971 increased
considerably (nearly 20%) compared with 1970, although the export volume
was still less than half the 1965 level. Seaborne exports increased from
580,000 tons in 1970 to about 690,000 tons in 1971 (see Table 3). The
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North Vietnam:
Seaborne Imports and Exports 1
Thousand Metric Tons
Cargo
1965
1968
1969
1970
1971
Total imports
847
1,967
1,890
1, 888.
2,232
Foodstuffs
119
798
755
660
616
Fertilizer
162
155
154
202
329
Petroleum
170
388
375
361
390
General and
miscellaneous
396
627
607
665
897
Unidentified
N.A.
268
209
287
547
Total exports
1,713
694
573
580
692
Apatite
318
--
13
95
35
Cement
78
--
23
15
17
Coal
1,150
629
461
372
484
Pig iron
48
--
--
--
General and
miscellaneous
120
66
76
98
156
Unidentified
N.A.
30
18
33
85
a. Because of rounding, components may not add to
the totals shown.
most striking development was an increase in coal exports of 30% and a
shift in the coal market from China to Japan brought about by an apparent
accommodation on the part of China to augment North Vietnam's
hard-currency foreign exchange earnings. No coal was delivered to China
for ten months, and total deliveries dropped to one-seventh the level of
the preceding year. In contrast, coal deliveries to Japan increased nearly
75% (to 410,000 tons), and represented some 85% of total coal exports.
Exports of general and miscellaneous cargo rose by 60%, to 156,000 tons.
Light industrial goods and handicrafts showed a healthy upturn. For
example, export of processed foods and industrial crops doubled, from
15,000 to 30,000 tons, reflecting the emphasis placed on such exports for
increasing hard-currency earnings. Increasing domestic needs probably
prevented a significant expansion of cement exports and also may have
accounted, in part, for the sharp decline in apatite sales. For the fourth
consecutive year, no pig iron was exported, although tentative offers to
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several countries suggested that an exportable surplus is now becoming
available.
14. Seaborne imports also rose about 20% in volume to more than
2.2 million tons in 1971. Deliveries from China nearly doubled and, as
a share of total, increased from about 20% to 30'1v (660,000 tons). Deliveries
from the USSR also increased to a total of more than 1.3 million tons,
but the Soviet share of total tonnage slipped from two-thirds to less than
60%. The relative shares from Eastern Europe and other Communist
countries declined by negligible amounts.
15. Identified imports were highlighted by an upsurge in shipments
of chemical fertilizer, which exceeded the previous high in 1966 by almost
45%. Increased fertilizer imports coincided with greatly expanded cultivation
of high yield rice strains in the spring and continued at a high level in
the fall as efforts were made to recover from flood losses by more intensive
cultivation. Both the USSR and China became increasingly important as
suppliers of fertilizer in 1971, while imports from Japan declined in both
relative and absolute terms, with concomitant savings of hard currency.
Identified imports of machinery and transportation equipment fell, while
imports of metals and metal products rose moderately, from 130,000 tons
to about 145,000 tons. The decline in identified imports of capital goods,
coupled with the rise in deliveries of bulk commodities, led to a drop in
the estimated total value of seaborne imports from $560 million in 1970
to $515 million in 1971.
16. Communist countries continued to underwrite Hanoi's military
and economic requirements during 1971 (see Table 4). Military assistance
increased somewhat, enabling North Vietnam to replace ground equipment
lost during Lam Son 719 operations and to improve its air defense
capability. The higher level of military assistance included increased
deliveries of defensive missiles and related equipment, antiaircraft weapons,
ground-force equipment, and ammunition. Total economic aid remained
about the same as in 1970, although the share from the USSR declined
and that from China increased sharply. Part of this shift probably can be
attributed to accelerated construction on a number of Chinese industrial
projects.
Prospects for 1972
17. Prospects for further industrial recovery in 1972 are good, and
announced targets are the most ambitious since 1965. The planned increase
in coal production (25%) probably can be achieved readily in view of the
progress made during 1971. Similarly, the planned increase in electric power
production (24%) seems feasible. The second and third generators of the
Thac Ba plant are scheduled to be put into service during the spring of
1972. Moreover, reconstruction continues on six to eight damaged
powerplants about the country. At the largest of these, the Uong Bi
powerplant, work is in progress that probably will double the size of the
original facility. The planned increase for engineering and metallurgy
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Table 4
Estimated Communist Aid to North Vietnam
Million US $
1965
1966
1967
1968
1969
1970
1971
Economic aid
135
290
475
615
685
810
600
USSR
95
160
235
305
385
345
315
China
35
70
120
120
90
60
100
Eastern Europe
and other
5
60
120
190
210
205
185
Military aid
270
455
650
390
225
155
175
USSR
210
360
505
290
120
70
100
China
60
95
145
100
105
85
75
Eastern Europe
and other
Negl. Negl. Negl.
Negl. Negl. Negl. Negl.
USSR
305
520
740
595
505
415
415
China
95
165
265
220
195
145
175
Eastern Europe
and other
5
60
120
190
210
205
185
(54.6%) seems a reasonable target in view of the expansion now under way
at the Hanoi Machine Tool Plant and the potential for increased production
at the Thai Nguyen Iron and Steel Combine. A major portion of the increase
for chemicals (36%), which includes ferti:izer (69%), will come from the
restored Haiphong Cement Plant and expansion of the Phu Tho
Superphosphate Plant; the unusually high figure for fertilizer probably
implies start-up of the Bac Giang Nitrogen Fertilizer Plant as well.
18. Agriculture's prospects are somewhat more bleak. Currently,
North Vietnam faces a vastly greater food deficit than at any time in recent
years. Efforts to expand an interim winter crop of secondary foods will
do little to offset losses, and unrepaired flood damage to irrigation facilities
probably will limit output from the 1972 spring harvest. The regime
presumably would be reluctant to draw on state grain reserves, and, while
some belt tightening is possible, the food ration is already near the
subsistence level. It seems likely, then, that heavy dependence on foreign
assistance will be required, at least until the next major harvest in June.
Food grain imports for the period July 1971 to June 1972 could reach
1 million tons, or double the total for the previous 12-month period. There
is no reason to doubt that Hanoi's allies will be willing to meet these needs.
The principal Communist countries have all now concluded aid agreements
for 1972 under circumstances that suggest continued endorsement of
Hanoi's policies.
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