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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011  4) by sales of goods derived from additional external resources, to the amount compatible with a sound policy on the balance of payments; 5) by borrowing as necessary from the National Bank, limited only by the danger of rises in price which should be kept within manageable limits, fixed temporarily at 5 per cent per year.

With respect to the realization of additional piasters from sale of CAP imports, the following observations are made:

1. There is complete agreement in the joint groups on the desirability of simplifying and unifying the Vietnamese system of exchange. In other terms, the principle of a single and realistic exchange rate instead of the present multiple rate system is recommended.

2. The Vietnamese experts esteem that an open exchange reform cannot take place in present circumstances, but that the same results may be obtained through a revised form of taxation, especially taxation of imports.

3. The American experts, agreeing with their Vietnamese colleagues on the objectives, are of the opinion that it would be more desirable to have a clearcut operation that would set a defensible rate of exchange, produce immediately a larger supply of piasters, avoid the necessity of a complicated system of subsidies on exports and taxes on imports, encourage new investment, and remove incentives to capital flight or speculation against the piaster by removing the fear that still further adjustments in the value of the piaster would be forced in the future. However, they recognize that political and psychological factors which they are not in a position to evaluate must influence any decision of the Government of Viet Nam, and they agree with their Vietnamese colleagues in urging a quick step as far as seems possible in the direction above indicated. Rh