Commercial Import Program

The Commercial Import Program, sometimes known as the Commodity Import Program (CIP), was an economic aid arrangement between South Vietnam and its main supporter, the United States. It lasted from January 1955 until the Fall of Saigon in 1975 and the dissolution of South Vietnam following the invasion by North Vietnam after US forces had withdrawn from the country after the 1973 cease-fire agreement. 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 industrialisation, growth and self-sufficiency, without incurring the high levels of inflation that would normally occur in such a drastic injection of money.

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. 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, through material goods, so that inflation would be avoided. However, the initiative failed to generate much economic development, as licenseholders spent most of their funds on consumer goods.

The main effect of the aid package was to fuel 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 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. They also used the dependence of the urban class on the CIP to achieve political changes in South Vietnam. In 1963, when the US sought to pressure the government of Ngo Dinh Diem 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 overthrow and assassination in a US-backed coup, the CIP resumed.

Read more about Commercial Import Program:  History, Economic Method, Operation

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