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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011

Having passed the period when emergency section was required to meet critical economic problems, the South Vietnamese government has since about 1959 given greeter attention to future economic development. Progress in this direction has been tangible despite the continuing priority given to defense and security needs, the effects of Communist insurgency in the countryside, and the precarious political situation. The economy, with about 80% of the people employed in agriculture, is self-sufficient in food, the population-land ratio is still relatively favorable, and cultivable lands are still available. Approximately 7 million acres (about 6 million acres in rice), 17% the national area, are under permanent cultivation, perhaps as much as an additional 20% of the country is potentially productive, and the average peasant land-holding is about five acres.

Although the government's outlook is influenced by a felt need to compete in economic as well as political terms with North Vietnam, it has not been disposed to grant priority to long-range programs of modernization, industrialization, and economic growth. Instead it continues to regard economic improvements as feasible and desirable only to the extent that they contribute to or at least do not detract from current defense strength. The maintenance of the military and security establishment continues therefore to be accorded overriding importance in current economic programming followed by what is regarded as a political essential — the maintenance of the consumption standards of the people at large. All other programs requiring the expenditure of funds tend to be ranged in order of their pertinence to immediate defense and security needs.

The economy of South Vietnam was severely weakened by the years of recurrent warfare after 1940, particularly during the Indochina hostilities and by the subsequent loss through partition of the mines and manufacturing industry of North Vietnam. Sources of supply and markets were disrupted and the economic balance of the region destroyed, In the countryside, vital water control works were damaged or neglected, large areas of rice land were abandoned, and the livestock population was seriously depleted as farmers moved to urban areas in search of security. The influx of about 900,000 refugees from North Vietnam in 1954–55 further burdened the economy.

Supported by heavy US assistance after 1955, South Vietnam was able by 1959 to make several notable economic achievements. Besides building up a modern military force and absorbing the refugees from the North (activities which themselves accounted for about 85 percent of the aid furnished by the US), South Vietnam made progress in repairing its heavily damaged transportation network, in restoring the productivity of its agriculture in providing land to its landless peasants (including the Rh