Political & Economical issues

Vietnamization has political and economic dimensions in addition to military ones. They will become increasingly important as the war winds down.

Political development in any newly independent country is a challenging task. When that country is under fire from a determined enemy, the difficulties are multiplied. The government sees its first priority in granting security. Military considerations are likely to Dominate the time of officials, the content of programs and the freedom of political life.

Nevertheless, political development in a paramilitary conflict is a crucial ingredient of a government's effort. It is increasingly import ant in Vietnam as the military struggle subsides. Ultimately, the fate of Vietnam will turn on political factors-the motivation of the people during the conflict; the cohesion of non-Communist political forces in the possible electoral competition with the Communists; the solidity of the political institutions during and after the war.

There has been a steady political evolution in South Vietnam beginning with the election of a Constitutional Assembly in 1966 and of the president and National Assembly in 1967. In 1970 there were continued signs of a growing commitment to the political institutions established by the 1967 constitution. Elections for hamlet chiefs and for village, municipal and provincial councils took place throughout the country. There were also elections for half the seats in the Upper House, which attracted a wide spectrum of non-Communist political forces.

1970 saw enactment of land-to-the-tiller legislation, a sweeping and reform program which will give land to tenant farmers and could have significant political impact. It has our full support.

The Presidential and Lower House elections this year will further test the fabric of the constitutional system, the strengths of the various political factions and the allegiance of the people. 1971 will show the extent of political development in South Vietnam. Vietnamese people of all factions will judge the responsiveness of the political process and register their verdicts. The enemy will seek to exploit the political currents of an election year. But it will also be watching-and perhaps drawing conclusions from-the stability of the system.

The maintenance of a sound South Vietnamese economy is crucial for Vietnamization. This problem was of great concern in 1970, but the government moved on it with some encouraging results. Our extensive review of the economic situation in July 1970 made it abundantly clear that the key Vietnamization goals of constructive political change and increased South Vietnamese military perfor- mance were intimately linked to the goal of a sound economy.

Prices rose by over fifty percent in the twelve months up to mid- 1970. These increases were eroding the purchasing power of the already near-subsistence pay received by many soldiers and civil servants at the very time they were being tasked with the growing burdens of Vietnamization. Moreover, if inflation had continued, the economic security of other major groups, such as farmers, veterans, and urban workers, could have been jeopardized.

In the fall of 1970 the South Vietnamese government took strong fiscal and monetary actions, including an important reform of the exchange rate. These difficult steps, supplemented by a slight increase in our assistance to offset the increased budgetary costs of Vietnamization, dramatically arrested an accelerating inflation. The price level rose by only about four percent in the last half of the year, setting the stage for policies that can lead to more enduring economic stability.

There are two lessons to be drawn from these developments:

First, Vietnamization of the economy and the war cannot be accomplished at the same time without our economic assistance. As the South Vietnamese take on more of the fighting they divert more resources from internal production. Our assistance, by providing the external resources to help maintain internal levels of consumption for soldiers, farmers and workers, is a vital aspect of Vietnamization. We will provide external support commensurate with the military burden borne by the economy and people in this difficult period of transition.

Second, we can do no more for the Vietnamese economy than it does for itself. The enterprise and resourcefulness of the Vietnamese people are widely acknowledged. Thus, as demonstrated in 1970, the vital link between our assistance and a sound economy is the Vietnamese government's economic policy. We will continue to expect the government to take all reasonable self-help measures.

While we provide assistance to support Vietnamization, we are looking towards the time when the economy can become self-sufficient. The date depends not only on the course of the war but on the pace of economic development. The country's potential is great. For example, even as the war has continued, increasing domestic rice production will cause rice imports to decline from over 700,000 annual tons in the late 1960s to about 100,000 tons in 1971 and zero in 972. Together with the South Vietnamese we are analyzing the devellopment prospects and plan to begin discussions this year on measures, to include additional funding, that can be taken to hasten the process. We believe other countries will want to participate in this effort.

We look forward to the day when the peoples of Vietnam, South and North, can turn from the waste of war to the constructive tasks of peace.