Commercial Import Program - History

History

During World War II, Imperial Japan attacked Indochina and wrested control from France, but when they were defeated by the Allies in 1945, a power vacuum resulted. The communist-dominated Vietminh of Ho Chi Minh fought for Vietnamese independence, while the French attempted to regain control of their colony by creating the French Union-allied State of Vietnam. Up until 1954, the First Indochina War raged. In 1954, the French lost the Battle of Dien Bien Phu and the Geneva Conference was held to determine the future of French Indochina. The Vietminh were given control of North Vietnam, while the State of Vietnam controlled the territory south of the 17th parallel. 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 Cold War, which saw it as a partner in a fight against the spread of communism.

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 Bao Dai and his Prime Minister Ngo Dinh Diem. 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 fraudulent referendum, 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 licenseholders 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.

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 as such a pressing concern that there were very few limitations on what could be imported, the most notable restrictions being alcohol and jewellery. 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.

In 1955, Washington pumped USD322.4 million into South Vietnam, and the historian George McTurnan Kahin calculated that 87% of this came through the CIP. From the end of 1955, when Diem took full control of the country after ousting Bao Dai 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 given. In 1958 and 1959, the CIP accounted for around 80% of economic assistance. By 1960, Diem had accumulated USD216.4 million in reserves. The amount of CIP aid peaked at USD398 million in 1966 and began dropping thereafter, reaching USD233 million by 1973.