170:, and the aid continued as the US wanted to build a strong and stable anti-communist state in Southeast Asia. When the program was first introduced, it generated turbulence for merchant importers in Vietnam. As a large proportion of the imports up to that point had been from France, traders who were dependent on selling French products found themselves in difficulties as their wares would now be more expensive than those of import license holders who now had access to cheaper American alternatives. The suppliers of French goods threatened to organize a strike, but this never materialized. At the time, South Vietnam was also suffering from a lack of foreign currency reserves and the CIP was seen as an urgent mechanism of remedying this. The introduction of the CIP brought an unprecedented new level of economic liberalism and capitalism, and at first, the entrepreneurial class struggled to meet the challenges of a deregulated market, leading to a series of significant shortages and surpluses of various goods due to their inexperience in judging market forces and resultant imbalances in the economy. Initially 25,000 applications for import licenses were received, many from speculators. In the early years of the initiative, a proportion of the US funding for the CIP came through the proceeds of the sale of surplus American agricultural products to France.
217:
refrigerators, radios, music systems and other similar goods, which were luxuries at the time. The program was thus effective in expanding the size of the urban middle class, but it did not generate much economic investment. In 1957, it was estimated that at least 75% of the good imported were consumer goods or materials used to produce them. Only a minority of the purchases were of capital goods such as manufacturing equipment and supplies for factory production. As a result, not much of the subsidies created more economic production. In 1959, the amount of clothing imported (24 million USD) was only marginally lower than the amount of machinery imported (28 million USD). The government funds generated from selling importing licenses also became a problem, with corruption and explicit theft dogging its effectiveness as a means of bankrolling the military and civil service. In addition, some government officials would not sell the coveted licenses to the businessmen until a bribe was paid. Another criticism of the CIP was that the funds collected by the government were not used for any significant amount of government-sector economic investment but mainly to fund the army. Diem defended this by stating that national security was paramount.
93:
224:, who were worried about the lack of industrialization. The corruption that permeated the initiative remained a problem. The rural peasants of Vietnam, who comprised more than 80% of the population, were unaffected by the aid package except for the resentment that it instilled in them when they observed the relative affluence of their city counterparts compared to their own impoverished state. It was estimated that 1961 that unemployment was running at 25% and that private investment in the economy was less than 10%. However, the program was credited with transforming the textile industry, as 25,000 sewing machines were imported in the first year of its operation.
260:
the fixed exchange rate meant that
Americans were heavily funding the South Vietnamese economy and that the importing firms could obtain more goods for their money, the rate also meant that South Vietnam goods would not be economically competitive on the export market. Diem was reluctant to cut the currency rate, which was fixed at 35 piasters to the US dollar, arguing that it would diminish the value of US aid to South Vietnam and undermine the urban middle class support for his regime as they would resent the loss of their cheap consumer and luxury goods. During a meeting in Washington during his
247:
economy where the market situation changed rapidly. In particular, any investment in capital goods by importers that cost more than USD500,000 needed a formal
American review before approval. Nhu also publicly criticized the review policy on several occasions, citing several private infrastructure investments that were blocked by American administrators. Nhu and Diem felt that the regulations that the Americans put on the use of the piaster fund obtained from Vietnamese importers were stifling their ability to accelerate development, especially as the planning and approval reviews took a long time.
230:, an anti-communist opposition politician who was Diem's most prominent opponent, and one of only two dissidents to win a seat at the 1959 legislative election but was imprisoned by Diem and barred from taking up his position, said that "The U.S. Commercial Import Program—which costs us nothing—brings in on a massive scale luxury goods of all kinds, which give us an artificial society—enhanced material conditions that don't amount to anything, and no sacrifice; it brings luxury to our ruling group and middle class, and luxury means corruption."
239:
yielding substantial gains in economic development, and noted this in their reports, but said that the program should be continued regardless, as it was effective in enriching the urban middle class and ensuring their political support, thereby gaining loyalty from military officers, business leaders and public servants. A 1959 report concluded that if the CIP was absent or diluted to equilibrium economic levels, the resulting fall in living standards would create "serious political problems" due to erosion of the government's support among the urban minority.
234:
used under the CIP; these funds were also part of normal revenue, and were not subject to
American oversight, unlike the proceeds of the counterpart fund. As a result of the proceeds of the import duty, income tax was very low, and without the progressive income tax rate in most countries, the upper-class were not affected by taxation as much as their peers in other nations, and thus supported Diem strongly. The effective income taxation rate was no more than 5%, and the South Vietnamese president privately told an adviser from the
314:. One of the reasons for the CIP suspension was to give military officers a signal that Washington was unhappy with Diem and therefore increase the prospects of a coup, as well as to try and foster urban resentment towards Diem among those that had previously benefited from the CIP. Another was that Diem might change his policy direction in accordance with US wishes, although they considered this to be unlikely. Funding was restored in early November 1963, about a month later, after the
329:. Kahin said that "together with other elements of U.S. economic support...substantially expanded South Vietnam's middle class and helped purchase its political loyalty to both the Saigon regime and its American sponsor" and that it "provided the means for a way of life that was as artificial as the economy upon which it rested". Kahin said that the initiative had the opposite effect of its stated aims, in that it promoted increasing economic dependency.
251:
particularly opposed to the clause in the importation regulations that restricted the purchase of capital goods to businesses that were entirely private. This proved to be a large hindrance in several areas, as the South
Vietnamese government had a policy of having majority ownership of any industry deemed to be of vital national importance, as well as banning foreigners from having a stake in such ventures. South Vietnam's Ambassador to the US,
243:
selling their license to other willing businessmen, especially as demand far outstripped supply. A 1966 US Government report concluded that it was possible to guarantee a 100% domestic profit on piasters, and that a 50% profit could be safely achieved by using black market exchange rates and depositing one's money in an
American bank. Officials also levied another 18 piasters per dollar on customs duties on goods imported into the country.
174:
as such a pressing concern that there were very few limitations on what could be imported, the most notable restrictions being alcohol and jewelry. It was reasoned that more restrictions on imports would cause a lack of supply of goods, causing price increases. However, restrictions were increased in the next three years to an average of 75.
182:
given. In 1958 and 1959, the CIP accounted for around 80% of economic assistance. By 1960, Diem had accumulated USD216.4 million in reserves. During the Diem era, around 43% of the CIP revenue went into military spending. The amount of CIP aid peaked at USD398 million in 1966 and began dropping thereafter, reaching USD233 million by 1973.
238:
that he was happy that the CIP had allowed him to build a large support base among the newly created middle and upper class. American economic aid administrators were also aware of the effects of the CIP on urban political support for Diem and his successors. They were aware that the CIP had not been
203:
During the rule of Diem, the majority of the cost of military, police and public service was paid by the US through the CIP. As the extra money was not actually circulating in the South
Vietnamese economy and competing for the same supply of goods and services, inflation was not stimulated. A similar
181:
calculated that 87% of this came through the CIP. From the end of 1955, when Diem took full control of the country after ousting Bảo Đại and declaring himself president, until 1961, the US provided Saigon with USD1.447 billion in aid, mostly through the CIP. In addition, USD95.6 million of loans were
173:
Upon the inception of the program in 1955, around 20,000 CIP licenses were granted, but it was determined that the progress was too unwieldy to manage, so the number of licenses was decreased and people were obliged to assemble into conglomerates to access the scheme. At first, inflation was regarded
255:
protested to the
Americans about this clause, without success. Chuong wrote that the American restriction on the importation of capital goods "perpetuates dependence on this aid", and that "American aid would be most valuable if it were partly devoted to promoting country's industrial capacities".
233:
One of the political impacts of the massive infusion into the South
Vietnamese economy was to expand the urban middle-class and ease the pressure on the government to collect taxes. This was because the government had set high import duties, which were effectively 50% of the cut-price exchange rate
259:
Over time, the economists in the
Eisenhower administration became frustrated with Diem's refusal to devaluate the piaster once the Republic of Vietnam had become a stable nation. Diem refused to make the CIP exchange rate equivalent to the free market exchange rate for the two currencies. Although
216:
Although the plan was theoretically sound, it was ineffective in stimulating economic growth. During Diem's time, there was little meaningful economic investment or development of infrastructure. The businessmen mostly used the import subsidies to purchase consumer goods such as boats, motorbikes,
195:
at half the official exchange rate; they then used this cheaply acquired
American currency to import US goods. This meant that American manufacturers would still get the same amount of US currency they would have received for selling their goods on the free market, while South Vietnamese importers
62:
The importers then used their American currency to buy US goods, while the Saigon government kept the South Vietnamese currency paid by the businessmen to fund the military and public service. The objective of the mechanism was to inject large amounts of money into the economy in an indirect way,
250:
Despite the fact the CIP had the effect of building an urban middle class base for his regime through the proliferation of consumer goods, Diem was unhappy with the situation, fearing the long-term detrimental effects that the lack of investment in capital goods would have on his country. He was
242:
As the CIP allowed licensees to import goods at half price, it was regarded as a virtual guarantee of business success, regardless of entrepreneurial skill. As a result, the licenses were highly prized. For those who were not confident in their sales ability, a healthy profit was usually made by
246:
Despite its shorter term political benefits, the South Vietnamese government also had complaints about the way the Americans set up the CIP. Diem and Nhu claimed that the paperwork involved in the applications for imports made the process was too slow and hindered the development of an emerging
69:
The main effect of the aid package was a rapid expansion in the urban middle and upper class, while life remained mostly unchanged for South Vietnam's rural majority. This served to increase anti-government resentment among peasants, while solidifying urban support for the Saigon government. US
196:
could get twice as much goods for the same money. The piasters that the Saigon government collected from selling the US aid dollars were to be placed in a fund held by the National Bank of Vietnam, which was to be used to fund the expansion and training of the
58:
The CIP was a scheme whereby US dollars were given to the South Vietnamese government treasury. Selected businesspeople were given import licenses that allowed them to purchase US dollars with South Vietnamese currency at a rate far below the market value.
190:
The program used import subsidies to pump US dollars into the South Vietnamese treasury. The regimes sold these dollars to business people who held licenses to import American goods. The businessmen bought the US dollars from the Saigon treasury with their
70:
officials were aware of the failure of the program to propel economic development, but did not try and divert the spending to investment as they regarded the solidification of urban support for the government to be very important.
50:
The initiative was a trading plan that was designed to inject large amounts of American capital into the South Vietnamese economy to help fuel its industrialization, growth and self-sufficiency, without incurring the high levels of
151:. The Geneva agreements, which the State of Vietnam did not sign, called for reunification elections to be held in 1956. The State of Vietnam received support from the US and other anti-communist countries in the midst of the
166:. The Americans and Diem feared a communist electoral victory and national polls never took place. In October, Diem proclaimed himself the president of the newly formed Republic of Vietnam after he won a
276:
and his economic advisers exhorted Diem to spend more of the CIP funds on rural development in an attempt to shore up peasant support in the face of increasing communist pressure, but were rebuffed.
80:
after the alliance began to falter, they cut off funding as a gesture to the urban civil servant and military officer class that they disapproved of Diem. Following the South Vietnamese leader's
158:
The Commercial Import Program was created in January 1955, immediately upon the transfer of France's remaining direct influence over the State of Vietnam to the chief of state, former Emperor
208:
aid package for the rebuilding of Western Europe following the destruction caused during World War II. One American economist described the CIP as the "greatest invention since the wheel".
325:
The CIP continued until the dissolution of South Vietnam in April 1975 when the communists overran South Vietnam following the withdrawal of US forces following the
261:
319:
272:
that devaluation would set off panic, and that such a move was not possible in a country with low production such as Vietnam. In 1963, the US Ambassador
880:
885:
302:
insurgency. The report concluded that Diem was not concentrating on fighting the insurrection but was instead preoccupied with quelling
890:
674:
66:
However, the initiative failed to generate much economic development, as license holders spent most of their funds on consumer goods.
81:
736:
291:
311:
343:
895:
338:
284:
875:
845:
823:
797:
778:
755:
167:
235:
197:
123:
fought for Vietnamese independence, while the French attempted to regain control of their colony by creating the
148:
73:
They also used the dependence of the urban class on the CIP to achieve political changes in South Vietnam.
192:
315:
307:
221:
140:
770:
280:
136:
112:
807:
767:
Cold War Mandarin: Ngo Dinh Diem and the Origins of America's War in Vietnam, 1950–1963
178:
688:
279:
On October 5, 1963, the CIP was briefly suspended by the United States in the wake of the
8:
326:
143:
was held to determine the future of French Indochina. The Vietminh were given control of
132:
92:
44:
16:
Economic aid arrangement between South Vietnam and its main supporter, the United States
790:
Death of a Generation: how the assassinations of Diem and JFK prolonged the Vietnam War
265:
159:
841:
819:
793:
774:
751:
732:
295:
273:
269:
128:
108:
177:
In 1955, Washington pumped USD322.4 million into South Vietnam, and the historian
812:
684:
680:
303:
287:
252:
35:
and its main supporter, the United States. It lasted from January 1955 until the
833:
227:
104:
36:
869:
205:
163:
144:
97:
77:
40:
32:
124:
120:
857:
The politics of foreign aid : American experience in Southeast Asia
155:, which saw it as a partner in a fight against the spread of communism.
39:
in 1975 and the dissolution of South Vietnam following the invasion by
52:
299:
152:
147:, while the State of Vietnam controlled the territory south of the
116:
729:
Inventing Vietnam: The United States and State Building, 1954-1968
111:
and wrested control from France, but when they were defeated by
55:
that would normally occur in such a drastic injection of money.
298:
to investigate the progress of the fight against the communist
220:
In time, the ineffectiveness of the CIP began to concern the
63:
through material goods, so that inflation would be avoided.
814:
Intervention : how America became involved in Vietnam
283:, a fact-finding expedition to South Vietnam conducted by
115:
in 1945, a power vacuum resulted. The communist-dominated
76:
In 1963, when the US sought to pressure the government of
43:
after US forces had withdrawn from the country due to the
748:
Diem's final failure: prelude to America's War in Vietnam
854:
811:
806:
676:The Overthrow of Ngo Dinh Diem, May–November, 1963
867:
750:. Lawrence, Kansas: University Press of Kansas.
31:), was an economic aid arrangement between
731:. Cambridge: Cambridge University Press.
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434:
91:
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832:
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544:
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84:in a US-backed coup, the CIP resumed.
881:South Vietnam–United States relations
792:. New York: Oxford University Press.
787:
459:
457:
455:
431:
292:Chairman of the Joint Chiefs of Staff
200:, national police and civil service.
886:1955 establishments in South Vietnam
551:
379:
135:raged. In 1954, the French lost the
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13:
687:. pp. 201–276. Archived from
667:
452:
339:Economy of the Republic of Vietnam
204:fiscal device was employed in the
185:
14:
907:
891:1975 disestablishments in Vietnam
356:
306:for religious equality, such as
859:. New York: Praeger Publishers.
658:
649:
475:
344:United States–Vietnam relations
264:, Diem told Secretary of State
236:Michigan State University Group
198:Army of the Republic of Vietnam
443:
422:
413:
404:
395:
386:
1:
720:
312:firing on Buddhist dissidents
855:Montgomery, John D. (1962).
481:Montgomery, pp. 87–88.
211:
7:
840:. New York: Penguin Books.
332:
82:overthrow and assassination
10:
912:
746:Catton, Philip E. (2002).
87:
896:United States foreign aid
727:Carter, James M. (2008).
383:Jacobs, pp. 99–100.
327:1973 cease-fire agreement
222:Eisenhower administration
193:South Vietnamese piasters
45:1973 cease-fire agreement
23:, sometimes known as the
21:Commercial Import Program
876:Foreign trade of Vietnam
771:Rowman & Littlefield
349:
25:Commodity Import Program
281:McNamara Taylor mission
162:and his Prime Minister
137:Battle of Dien Bien Phu
788:Jones, Howard (2003).
100:
765:Jacobs, Seth (2006).
320:assassination of Diem
179:George McTurnan Kahin
168:fraudulent referendum
131:. Up until 1954, the
103:During World War II,
95:
769:. Lanham, Maryland:
655:Kahin, pp. 144, 479.
322:in a military coup.
285:Secretary of Defense
818:. New York: Knopf.
262:state visit in 1957
133:First Indochina War
838:Vietnam: A history
808:Kahin, George McT.
616:Montgomery, p. 91.
590:Montgomery, p. 89.
520:Montgomery, p. 90.
495:Montgomery, p. 88.
472:Montgomery, p. 85.
463:Montgomery, p. 86.
449:Jacobs, pp. 98–99.
419:Jacobs, pp. 40–42.
266:John Foster Dulles
101:
738:978-0-521-88865-3
304:Buddhist protests
296:Maxwell D. Taylor
274:Frederick Nolting
141:Geneva Conference
903:
860:
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829:
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270:Elbridge Durbrow
129:State of Vietnam
911:
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834:Karnow, Stanley
826:
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694:
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685:Daniel Ellsberg
681:Pentagon Papers
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440:Karnow, p. 239.
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428:Karnow, p. 235.
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409:
405:
400:
396:
391:
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357:
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308:raiding pagodas
288:Robert McNamara
268:and Ambassador
253:Tran Van Chuong
214:
188:
186:Economic method
90:
17:
12:
11:
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664:Jones, p. 378.
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646:Catton, p. 31.
630:
628:Catton, p. 30.
618:
606:
592:
580:
578:Carter, p. 78.
564:
562:Kahin, p. 460.
550:
548:Carter, p. 77.
538:
522:
513:
497:
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474:
465:
451:
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430:
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412:
410:Jacobs, p. 37.
403:
401:Jacobs, p. 23.
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392:Jacobs, p. 22.
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354:
353:
351:
348:
347:
346:
341:
334:
331:
228:Phan Quang Dan
213:
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187:
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105:Imperial Japan
89:
86:
37:Fall of Saigon
15:
9:
6:
4:
3:
2:
908:
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847:0-670-84218-4
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825:0-394-54367-X
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801:
799:0-19-505286-2
795:
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780:0-7425-4447-8
776:
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757:0-7006-1220-3
753:
749:
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734:
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724:
713:Kahin, p. 88.
710:
708:
706:
691:on 2008-04-24
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604:Kahin, p. 87.
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559:
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545:
543:
536:Kahin, p. 85.
533:
531:
529:
527:
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511:Kahin, p. 86.
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206:Marshall Plan
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164:Ngo Dinh Diem
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149:17th parallel
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145:North Vietnam
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98:Ngo Dinh Diem
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78:Ngo Dinh Diem
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41:North Vietnam
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34:
33:South Vietnam
30:
26:
22:
863:
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728:
693:. Retrieved
689:the original
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324:
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125:French Union
102:
75:
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49:
28:
24:
20:
18:
121:Ho Chi Minh
870:Categories
721:References
695:2008-05-29
113:the Allies
96:President
212:Operation
109:Indochina
107:attacked
53:inflation
836:(1997).
810:(1986).
333:See also
300:Vietcong
294:General
153:Cold War
139:and the
127:-allied
117:Vietminh
316:deposal
160:Bảo Đại
88:History
844:
822:
796:
777:
754:
735:
350:Notes
842:ISBN
820:ISBN
794:ISBN
775:ISBN
752:ISBN
733:ISBN
318:and
310:and
290:and
19:The
119:of
29:CIP
872::
773:.
704:^
683:.
679:.
633:^
621:^
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541:^
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47:.
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698:.
27:(
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