THE EFFECTS OF THE TET OFFENSIVE ON THE ECONOMY OF SOUTH VIETNAM AS OF 15 FEBRUARY 1968

• Document Type: SPECIALCOLLECTION
• Collection: Tet Declassified
• Document Number (FOIA) /ESDN (CREST): 02952760
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 13
• Document Creation Date: April 27, 2019
• Document Release Date: April 30, 2019
• Publication Date: February 1, 1968

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DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
The Effects of the Tet Offensive
on the Economy of South Vietnam
as of 15 February 1968
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3.5(c)
Secret
Copy No. 1j 5;
ER IM 68-20
February 1968
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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 re-
ceipt by an unauthorized person is prohibited by law.
_ UGROUP 1
EXCLUDED FROM ATOMATIC
DOW NOli ADING AND
DECLASSIFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
16 February 1968
INTELLIGENCE MEMORANDUM
The Effects of the Tet Offensive on the Economy
of South Vietnam as of 15 February 1968
Summary
The ability of most Vietnamese cities to resume
relatively normal economic activity at a quick
pace reflects the relatively small amount of last-
ing economic damage resulting from the Tet offen-
sive. It seems clear that the Viet Cong chose
deliberately not to undertake any systematic
attack on economic facilities. This policy in
part stems from a desire to avoid alienation of
the public. It also shows a preference by the
Viet Cong to keep intact an economic system on
which they rely for support and which they may
have had some hopes to control if the offensive
were more successful. The speed of recovery, at
least in the short-term, was also facilitated
because food stocks are generally adequate, public
utilities are operating in most cities, and local
government officials have been reasonably effec-
tive in organizing relief programs.
Although most of the indicators of short-term
recovery look good, the Tet offensive has caused
other problems that cannot be overcome so easily.
Movement between cities is recovering more slowly,
and little is known about conditions in the
countryside. An estimated 460,000 persons became
refugees as a result of the offensive. Even
though many will eventually return home, a suf-
ficient number will remain to pose a strong test
Note: This memorandum was produced by CIA. It
was prepared by the Office of Economic Intelligence
and was coordinated with the Office of Current
Intelligence.
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--en2,v)ix_r_., i.
of the ability of the government to house and feed
them. Moreover, highway interdictions -- particu-
larly bridges -- and losses resulting from harvest-
ing delays could reduce the availability of rice
in the cities. The South Vietnamese will un-
doubtedly require increased levels of economic
assistance as their own reserves are diverted to
solving the problems created by the Tet offensive.
Although the economy should weather the Tet
offensive without extreme disruptions, a future
offensive that included a concerted attack against
the economy would almost certainly result in
severe and prolonged economic disruption in the
urban areas.
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I.
General
1. As of 15 February, economic activity in
most South Vietnamese cities was recovering
rapidly from the effects of the Tet offensive.
Some cities suffered severe damage, many people
were made homeless, and there were shortages of
food and medicine. Nevertheless, the Tet offen-
sive did not create the chaos that might have
been expected, and much of the disruption was
short lived. Some cities, such as Hue and Ban Me
Thuot in the north and My Tho, Vinh Long, and
Ben Tre in the Delta, will take a longer time to
recover because the intensive fighting in these
areas caused heavy destruction.
2. The economy's relatively quick recovery
is explained partly by the fact that the people's
needs are simple, government rice stocks were
large, and most people had stocked up on food
supplies in preparation for the Tet holiday. It
is probably more significant, however, that the
enemy did not target and probably deliberately
avoided damaging the economic infrastructure in
order to minimize popular resentment or to keep
the economy intact in anticipation of a greater
military success.
3. Over the long term, the offensive may have
more disruptive effects on rice production, allo-
cation of manpower, and economic policy. It is
clear that South Vietnam's rice needs for 1968
will have to be re-evaluated. Early estimates
of the 1967-68 crop indicated a slight increase
in output this year, but the harvest now under way
probably will be adversely affected by the current
disruptions. As a result, imports may have to be
significantly higher than the planned 850,000 tons.
4. In addition to providing more rice, the
United States may have to assume a larger financial
burden for economic and pacification programs.
The relief and recovery efforts by the South Viet-
namese government will require reallocation of funds
and manpower. Revolutionary Development (RD) cadres
are already being assigned to assist in the care
of refugees. The government has announced that
$5 million has been allotted to the GVN/US task
force headed by Vice President Ky for relief and
reconstruction. Although some of this money
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STET
reportedly will come from US aid funds, most of
it will come from Vietnamese government funds
allotted to the pacification program.
5. As a result of the offensive, President
Thieu on 9 February asked the National Assembly
to give him the power to make economic decisions
by decree for one year. Thieu reportedly would
use this power to increase excise and sales taxes
and close dance halls and bars. The power of
decree may also be used to crack down on profiteer-
ing and to set price controls.
Food Supplies
6. Reports of food shortages have come
mainly from Quang Tri and Hue in the I Corps area,
Nha Trang in the II Corps area, and from the
Delta city of Vinh Long. Thus far, no food
shortage of any consequence has been reported in
the III Corps area. US officials report that
sufficient food is available in Saigon, but
distribution is difficult. Fortunately, most
people had stocked up on food supplies in prepara-
tion for the Tet holiday. On 9 February, rice
stocks in Saigon-Cholon warehouses totaled 104,000
tons with another 35,000 tons on ships in the port.
One of the warehouses has been reported damaged
and another containing 5,000 tons was reportedly
looted with some Viet Cong assistance. The rice
available, however, is sufficient to meet the
needs of Saigon and the rice-deficit areas in the
north for more than a month. If this rice cannot
be transported, however, shortages could develop,
particularly in the I and II Corps areas. There
is no current information on stocks in central
Vietnam. At the beginning of January, this area
reportedly had on hand about 37,000 tons, or almost
one month's supply. Moreover, a ship carrying rice
arrived in Qui Nhon on 25 January, another arrived
in Nha Trang on 30 January, and another in Da Nang
on 31 January.
Prices
7. Food prices soared during the early days
of the offensive, but as more shops and market-
places opened, prices began to decline somewhat.
In Bien Hoa city, for example, prices of most
foods on 4 February were said to be three to five
times higher than those just before Tet, and no
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chicken, meat, or vegetables were available. By
7 February, however, the food supply situation in
Bien Hoa was said to be near normal, although
prices were still up 50 to 75 percent. USAID
officials in Saigon did not take their regular
comprehensive weekly survey of prices. They have
reported, however, that spot checks on 13 February
showed the prices of domestically grown rice
running 50 to 65 percent above the pre-offensive
level and the price of fish about double. Prices
of sugar and condensed milk, however, were not
significantly higher than pre-Tet levels. Free
rice is being distributed at 75 refugee centers,
and imported US rice is being sold at pre-Tet
prices to other civilians from distribution points
and trucks in various parts of the city. Moreover,
Vice-President Ky has ordered 2,000 tons of rice,
instead of the previous 200 tons, to be distributed
daily in Saigon as well as 1,300 tons of frozen
pork. These measures are designed to prepare
Saigon residents in case of another attack. The
distribution of food through normal commercial
markets was to have resumed by 14 February.
Public Service and Private Production
8. The fighting has interrupted power and
water supplies in many cities, but damage to
utilities generally has been slight. It seems
clear that the enemy chose not to target these
and other economic installations. Apparently no
attempts were made to destroy any port facilities
in the country. The large POL depot at Nha Be
near Saigon was also untouched, and Esso began
running convoys of trucks carrying gasoline and
kerosene into Saigon by 4 February. Shortages
of POL, however, are reported in some Delta
provinces. Scenes of heavy fighting, such as
Hue and Ban Me Thuot, reported a lack of both
power and water. In Saigon, US officials stated
on 9 February that power facilities were operating
at 70 percent of capacity, which was ample because
of reduced industrial demand. The Saigon water
supply was cut on 4 February, but only for a few
hours. Garbage piling up in city streets is a
major health hazard, but collection and disposal
have been started.
9. The worst report of damage to production
facilities occurred near Saigon, where about 60
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percent of the buildings and 80 percent of the
equipment of the two largest textile firms in
South Vietnam were destroyed. The logistics
command post for the Viet Cong attack reportedly
was located near these plants. The general
manager of the two sister companies estimated
that repairs would take many months. These plants
are reported to be the two largest employers of
workers in the private sector of the economy.
They account for about one-half of the output of
the textile industry and about 5 percent of total
industrial output.
Transportation
10. The interdiction of roads, the chief
transportation network in South Vietnam, was
confined mostly to the Delta, the Saigon area,
and the northernmost part of South Vietnam (see
the map). These interdictions presumably were
intended to prevent movement of Allied military
forces rather than to disrupt the economy.
Officials in the IV Corps area have stated that
as of 10 February, Route 4, the main route for
carrying food products from the Delta to Saigon,
is open from My Tho to Saigon and partially open
between My Tho and My Thuan. The My Thuan ferry
across the Mekong River was due to resume
operation soon. Police checkpoints along the
road, however, reportedly were restricting move-
ment of goods as well as refugees. There is
evidence that as of 8 February, some food was
moving into Saigon from the Delta. Merchants
and farmers in the Delta undoubtedly are willing
to put up with checkpoints and to risk traveling
in order to get rice and other produce to Saigon
to take advantage of the current high prices.
Other highways are less secure than Route 4. Early
in the offensive, for example, 51 Viet Cong check-
points were reported along Route 1 between Xuan
Loc and Bien Hoa. Officials report that Route 15
from Saigon to Vung Tau is open sporadically, and
some fresh fish is believed to be arriving in
Saigon. Route 20 is said to be open in Long Khanh
Province, but impassable in Lam Dong Province, and
no vegetables are moving from Da Lat to Saigon.
Blown bridges on Route 11 have made through traffic
between Da Lat and Phan Rang impossible. Route 1
in the I Corps area interdicted in several places.
s:E:c7RET
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568-7-3-9-6-7- 58434 2-68 CIA
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s
11. Commercial flights, both domestic and
international, had been resumed at Tan Son Nhut
airport by 14 February. Embassy officials indi-
cated that the delay in restoring service was
due to employees' difficulties in getting to work
and to curfew restrictions.
Refugees
12. According to incomplete reporting, there
are at present, as a direct result of the Tet
offensive, an estimated 460,000 refugees through-
out South Vietnam. These are in addition to the
700,000 South Vietnamese who were living in
refugee camps at the outbreak of the Tet offensive.
More than 170,000 of the new refugees are re-
portedly located in the Saigon - Gia Dinh area
and another 42,000 are in the surrounding III Corps
area. Estimates of the number of refugees by
Corps area as of 14 February are shown in the
following tabulation:
Area
I Corps
II Corps
III Corps
IV Corps
Saigon-Gia Dinh
Total
Refugees
65,000
66,000
42,000
114,000
173,000
460,000
13. Cities in the IV Corps area reporting
large numbers of refugees are the provincial
capitals of Ben Tre, My Tho, Can Tho, and Chau
Phu. These large numbers of homeless South
Vietnamese could, for the first time, pose a
refugee problem for the Delta area. Some easing
of the problems is expected as these refugees
reach the homes of relatives or return to their
homes. It has been observed that some reversal
has occurred in the flow of refugees from the
country to the city as urban residents fled
provincial capitals to avoid the fighting.
14. Ban Me Thuot and Da Lat, two of the
hardest hit provincial capitals in the II Corps
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area, reported more than 20,000 and 13,000 refugees,
respectively. Da Lat has reported that no major
problems are expected in handling the refugees.
But the situation in Ban Me Thuot is reported to
be serious, as the water supply is running low
and South Vietnamese officials are having a
difficult time coping with the large number of
refugees.
15. In Hue, where fighting has been particu-
larly harsh, an estimated 30,000 persons account
for almost one-half of the refugees in the I Corps
area. Although no estimates are available, it is
apparent that Quang Tri Province has a sizable
number of refugees resulting from Viet Cong sweeps
in RD areas. The problem has been intensified by
the ineptness of Quang Tri officials in administer-
ing relief to the refugees from these villages.
Housing
16. Widespread street-to-street and house-to-
house fighting as well as Allied shelling and
bombing of Viet Cong strongpoints did severe
damage to civilian housing in several cities. As
of 11 February, an estimated total of about 37,000
homes had been destroyed throughout South Vietnam.
Damage to housing thus far appears to have been
heaviest in the IV Corps area, where an estimated
10,600 homes were destroyed. Several other cities
in the IV Corps area reported heavy damage: 30
percent of the city of Vinh Long (the capital of
Vinh Long Province), one-third of My Tho (the
capital of Dinh Tuong Province), and one-half of
the buildings in Ben Tre (capital of Kien Hoa
Province) reportedly have been destroyed. The
only reports thus far of efforts at repair have
come from My Tho. Otherwise, the homeless have
moved in with relatives and friends. Destruction
to housing, although heavy, was far smaller than
the flow of refugees, which suggests that many of
the refugees will return home when the fighting
subsides and curfews are lifted.
Civilian Casualties
17. There are few reports from the I, II, and
III Corps areas on the estimated number of South
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Vietnamese civilians killed during the Tet offen-
sive. As with the number of refugees and houses
destroyed, civilian casualties, according to the
most recent reports, seem to be concentrated in
the IV Corps area. By the end of the second week
of the Tet offensive, more than 3,000 civilians
were reported killed and more than 19,000 wounded
throughout the country. These are rough, pre-
liminary estimates, and it is doubtful that the
extent of injuries to civilians will ever be
known. In any case, the number of casualties
probably will be only a small share of the labor
force and will not have any widespread impact on
economic recovery programs.
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