Economy of South Vietnam

until 1965

This period is characterized by a fairly rapid GDP growth, accompanied by a reasonable increase in the consumer price index . At first, the country's budget was in surplus , but since 1961 it has become scarce. Investment inflows were still significant, with industry and agriculture growing rapidly. In 1955, the government of Ngo Dinh Diem founded the National Bank, the Foreign Exchange Bureau, issued a new currency instead of the piastres of French Indochina, and set the exchange rate for the new dong currency at 35: 1 against the US dollar . Agrarian reform was announced, its implementation continued until 1960 . Unused land was seized and redistributed between farmers. Ownership of land was limited to 1 square kilometer per person, all the rest of the land had to be sold to the state for subsequent redistribution among the needy peasants. Peasants and landowners had to conclude a land use agreement, the mandatory article of which was rent. Ultimately, 2/3 of the land passed into the hands of wealthy landowners ^[1] , and the government of Nguyen Van Thieu carried out a second reform to turn the tide. In 1956, a constitution was adopted which defined the role of the National Economic Council. The Council was chaired by the Vice President of the Republic of Vietnam. In the same year, the country joined the International Monetary Fund . In March 1957, Ngo Dinh Zieh, in his Declaration of the President of the 1st Republic, called on foreign and domestic private investments into the country, promising state protection of investors' interests and investment promotion policies (special rates of taxation, rents, etc.).

The government of Ngo Dinh Diem pursued an export-oriented policy aimed at import substitution and trade protectionism ; tariff and non-tariff barriers were created to protect light industry. The result of this policy was the construction of the first paper mill in Vietnam in 1961, covering 30-40% of domestic demand ^[2] . The exchange rate was also aimed at stimulating exports.

The country's economy during this period was progressive, but political unrest and conflicts (armed clashes of groups, constant coups, the emergence of the National Liberation Front of South Vietnam ) partially offset economic successes.

1965-1969

This period was the heyday of the shadow economy , the budget deficit grew, the economy suffered from hyperinflation and repeated devaluations , which ultimately led to economic depression. The war, and especially the large-scale Tet offensive of 1968 , negatively affected economic growth.

In 1965, South Vietnam turned from an exporter of rice into its importer. Rice imports continued until the state collapsed in 1975. The reason for this was a decrease in yields in 1965-1968. Harvests began to grow in 1968 after expanding sown areas and increasing yields from the use of chemical fertilizers, mechanization and sowing of new high-yielding varieties. The remaining need for import was explained by the war and the continued offensive of the North Vietnamese troops.

Since 1965, problems with export began, which in turn caused problems in industries such as textiles and cane sugar, while other industries began to grow. Industry growth continued, except in 1968 and 1972.

Another significant event happened during this period: on June 18, 1966, the government of Nguyen Van Thieu launched a currency reform by issuing a new currency, nicknamed the “Banknotes of the 2nd Republic”.

1969-1975

The economy of South Vietnam is faced with the difficulties of sharply declining demand associated with the withdrawal of US troops and allies from the country. Despite the growth of domestic income and US assistance, the budget had to face big problems associated with the need for independent military operations. Hyperinflation began. In 1970, inflation (based on the calculation of the CPI for ordinary residents of the country) reached 36.8%, in 1973 - 44.5%. The government has moved to a policy of restricting imports, promoting exports and domestic demand. This led to an increase in exports, but also to a simultaneous increase in imports.

• 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.