Foreign Relations of the United States, 1969–1976, Volume X, Vietnam, January 1973–July 1975

157. Interagency Intelligence Memorandum¹

Washington, January 7, 1975.

DCI/NIO 25–75

SUBJECT

• Supplemental Response to Part I of NSSM 213: The South Vietnamese Economy and US Aid

The Key Points

• —South Vietnam has adjusted well to a variety of unsettling changes over the past decade and is likely to avoid substantial political unrest from economic factors alone in the near future. Nevertheless, real incomes of the military, public servants and most city-dwellers have been cut sharply and much of existing industry is severely depressed.
• —A marked deterioration of security conditions would obviously create a situation requiring more US economic (as well as military) aid. Even assuming no significant decline in security through 1980, however, major US economic support will be necessary at least until then to assure the political survival of the Government of Vietnam (GVN).²
• —A gradual phase-down of US economic aid to $100 million or less by 1980 would place the survival of the GVN in serious jeopardy, though the government would not necessarily collapse quickly.
• —Should US support drop sharply to an annual level of $100 million or less much before 1980, it is doubtful that the GVN’s present political and economic structure would survive.
• —There are different views among observers on precisely what amounts of US aid are needed to permit at least a slow rate of economic progress. Since the South Vietnamese population grows at about 3 percent a year, a 3 to 4 percent rate of growth in GNP would be necessary to allow even a small (less than 1 percent) increase in per capita incomes.
• —The Central Intelligence Agency believes, assuming no further decline in security conditions, that this objective would require average US economic aid of some $700 million annually.
• —The Department of the Treasury believes that per capita incomes could at least be maintained roughly at the 1974 level from now through 1980 with average annual US economic aid on the order of $500 million.
• —The Department of State/INR and the Defense Intelligence Agency believe that security conditions will deteriorate further and preclude any early economic recovery or sustained growth, and that substantially more than $700 million per annum in US economic aid will be required for the foreseeable future.
• —All agencies of the intelligence community agree that the GVN over the next 5 to 6 years can best cope with reduced aid levels by giving priority to expanding agricultural output in order to replace food imports and develop exports.
• —The Department of the Treasury sees 1974 as an important turning point in achieving rice and sugar self-sufficiency and believes this strong performance can be repeated without substantial additional growth in imports if security conditions are no worse than in 1974.
• —The Central Intelligence Agency and the Department of State/INR believe that the circumstances surrounding the 1974 crops were exceptional, and that higher imports of fertilizer and other producers’ goods will be necessary to assure continuing agricultural expansion.
• —Regardless of how much aid is pumped into South Vietnam from 1975 to 1980, security conditions, large-scale relocations of population, and a greater degree of integration into the world economy have permanently changed key features of Vietnamese society. Any program designed to return South Vietnam to the peasant economy of the early 1960s in the interest of reducing the country’s dependence on US aid would have little prospect of success.

[Omitted here is the Discussion section.]

1. Source: Ford Library, NSC Files, NSC Institutional Files (H–Files), Box 33, NSSM 213. Secret; Sensitive. The intelligence community generated this report in response to NSSM 213, Document 150. It supplements the November 18 response, Document 152.
2. US economic assistance in FY 1974 amounted to some $650 million, including appropriations of some $350 million in aid grants, a $50 million development loan, and $250 million in PL–480 shipments of agricultural products from the US. For FY 1975, non-PL–480 economic aid will be limited by Congress to $450 million, and PL–480 shipments are unlikely to exceed $100 million because of South Vietnam’s advances in agricultural production. Here and throughout this memorandum all values are in 1974 dollars. [Footnote in the original.]