Economy of the Republic of Vietnam

Republic of Vietnam (South Vietnam had a market, developing and open economy. The economy of this country was highly free from 1963 to 1973. Nevertheless, the economic development based largely on five-year economic plan or four-year economic plan. Its economy stayed stable in about 10 first years, then it faced difficulties due to the escalation of the war which led to unsteady economic growth, high state budge deficits, high inflation and trade deficits. The South Vietnamese government had to conduct land reforms twice. The United States played an important role to this economy through economic and technical aids.

Growth stages

Before 1965

Pre-1965 period saw a rather rapid GDP growth rate of the South Vietnam's economy, accompanied by a reasonable CPI rise. The state budget of the Republic of Vietnam enjoyed a surplus in the early stage but soon turned into deficit from 1961. Investment remained strong, industry and agriculture generally retained a high growth rate.In 1955, the government of Ngô Đình Diệm founded the National Bank, Foreign Exchange Bureau, issued new currency replacing French Indochinese piastre and defined the exchange rate of dong against USD at 35:1. Land reform was conducted and lasted until 1960. Unused lands was seized and redistributed to the farmers. Land ownership was limited to 1 square kilometre per person, the left area of this ownership limit was to sell to the government, and the government in turn would resell to the needed peasants. Peasants and land owners had to sign land use contract, according to which land rent was a mandatory article. The series of land forms led to the ownership of two-thirds land in the South Vietnam to the wealthy land owners.. [ Lâm Quang Huyên (1997), "Cách mạng ruộng đất ở miền Nam Việt Nam" (Land reforms in South Vietnam), Social Sciences Publishing House, Hanoi, page 39.] Therefore, the government of Nguyễn Văn Thiệu reimplemented land reform to change this situation.In 1956, the Republic of Vietnam passed a constitution in which the establishment and roles of the National Economic Council was specified. This council is chaired by the Vice President of the Republic of Vietnam. In the same year, this country joined the International Monetary Fund (IMF). [Membership to IMF of the Socialist Republic of Vietnam later, though this country was not a market economy, was a succession of the Republic of Vietnam.] In March 1957, Ngô Đình Diệm proclaimed Declaration of the President of the 1st Republic ("Tuyên ngôn của Tổng thống Đệ nhất Cộng hòa"), calling upon foreign and domestic private investment and committing the governmental protection of the investors’ benefits as well as investment encourange policies (preferrable tax rates, land rent, income tax…).

The government of Ngô Đình Điệm carried out a policy of export-oriented industrialization to replace imported goods and set up trade protectionism, tariff and non-tariff barriers were created to protect light industrial businesses. The result of this policy brought about the first paper factory of Vietnam, An Hao Paper Factory (1961) in Bien Hoa which supplied 30-40% domestic paper demand. ["Nhà Máy Giấy An Hảo", "Thế Giới Tự Do", số 3 Tập X, trang 9.] Imports of machinries, equipment, metals – the input factors of the protected industries were given priority, at the same time, export enjoyed ecourage measures with several exported good received governmental susidiary. The exchange rate got adjustment in favor of export. Export of this country gained smooth achievement in 1955-1965.The government implemented its roles in the economic development through five-year economic plans from 1957 to 1962.

Economy of the Republic of Vietnam in this period proved to be progressive, however, political conflicts and unrests (armed conflicts between factions, continuous coup d’etat, emergence of National Front for the Liberation of South Vietnam) confined the efficiency of those policies.

1965–1969 stage

In this period, the underground economy was booming, the budget deficit soared, hyperinflation afflicted the economy and the currency was repeatedly devalued, resulting in an economic depression. The warfare caused negative impact on economic growth, especially the large scale Tet Offensive in 1968.

In 1965, South Vietnam went from being a rice exporter to an importer. Rice imports continued until the dissolution of the state in 1975. This was caused by declines in crop harvests from 1965 to 1968. The production levels began to rise from 1968 onwards due to the expansion of ricelands and increased productivity. This was caused by the increasing use of chemical fertilizers, mechanization and new high-yield crop varieties. The right reason for rice import until 1975 was that the rice demand in NFL-controlled zones incereased, a demand accompanied by more and more intrusion of North Vietnamese troops to the South Vietnam. [According to Đặng Phong (2004), page 230, National Front for the Liberation of South Vietnam purchased rice from the South Vietnam-controled zones.]

From 1965, export-oriented industrialization policy had to suspense, this led to difficulties to many newly-established sectors like textile, cane sugar while some other sectors gained the favorable to development. Industry continued to grow, except in 1968 and 1972 when industry came to a standstill in the context of the soaring war (Tet Offensive and aerial raids of North Vietnam).

A notable event incurred in this period, known by its code name as Campaign of Bong Lan ("Chiến dịch Bông Lan"). This was a currency reform conducted by Nguyễn Văn Thiệu’s administration from June 18, 1966 in which new bank notes were issued and commonly known as “bank notes of the second Republic.

1969–1975 Period

The economy of South Vietnam faced difficulties caused by sudden decrease of demand when the US Army and its allies withdrew from South Vietnam. Budget dificit roared regardless of the fact that domestic budget revenues and the US aids increased while the government had to take responsible for military actions on its own. Hyperinflation inccurred in this period. In 1970, the inflation rate (based on CPI in in ordinary people Saigonese people) reached up to 36.8%, in 1973, this rate got 44.5%. In last years of the Republic of Vietnam’s existence, the government went on its adaptation of policies of import limit, export incentive, domestic consumption encouragement. This led to the rise of export, simulteneuously rise of import.

ee also

*Economic history of Vietnam

References

*Đặng Phong (2004), "Kinh tế Miền Nam Việt nam thời kỳ 1955 - 1975", Nhà xuất bản Khoa học xã hội, Hà Nội, tháng 12.
*Douglas C. Dacy (1986), "Foreign aid, war, and economic development: South Vietnam, 1955-1975," Cambridge University Press.
*Trần Văn Thọ chủ biên (2000), "Kinh tế Việt Nam 1955 - 2000: Tính toán mới, phân tích mới", Nhà xuất bản Thống kê, Hà Nội, tháng 12.
*Ngân hàng Quốc gia Việt Nam (1974), "Kinh tế niên báo", Sài Gòn.