of gasoline, petroleum products, sugar, and other general imports of the kind that Vietnam needs to support its economy. Mr. LLOYD. On page 12 of your report you have said, "In the field of public works, we will continue," and you are speaking about the economic support fund Mr. NOOTER. No, sir; that reference is to our project program not the economic support fund. Mr. LLOYD. Well, that is all right. I will surrender that point. In the field of public works, you state "We will continue to provide help in developing water supplies, improving provincial roads, telecommunications, electric power and for construction and provincial and village self-help programs." Mr. NOOTER. Yes, sir. Mr. LLOYD. Et cetera. Mr. NOOTER. We will be glad to furnish for the record the break down. Mr. LLOYD. Will you do that, please? Mr. NOOTER. Yes, sir. (The information follows:) A.I.D.'S PUBLIC WORKS PROGRAM IN VIETNAM A.I.D.'s public works program in Vietnam in FY 1972 will cover the following basic areas of activity: (1) telecommunications; (2) rural and municipal water development; (3) provincial roads and quarries; (4) dredging; (5) electric power and (6) an urban development program in Saigon. The following is a brief description of each of these activities and the proposed funding: Telecommunications.-A.I.D. is assisting the Vietnamese government in improving and unifying the national telecommunications network including the development of a government organization to operate the network. In FY 72 A.I.D. is proposing $130,000 to fund the services of four direct-hire communications advisers. Rural Water Development.-A.I.D. expects to assist the Director of Water Supply to provide 100 new or improve potable water systems to small rural communities in 1972. The amount of $673,000 proposed in FY 72 will pay four U.S. direct-hire advisors, partial funding of four Army engineer teams, and for certain critical commodities necessary for the construction of wells and small water systems. Municipal Water Development.-The objectives of this project are: (1) to develop a capability on the part of the government of Vietnam to examine and evaluate the feasibility of loan applications from cities and towns for the construction of potable water systems, and (2) to place improvements in urban water and sewerage systems throughout South Vietnam on a financially sound and self-sustaining basis. Two million dollars has been allocated in previous years to a national Water Loan Fund established under this project and an additional $1,000,000 is proposed for FY 1972. These funds are utilized under a loan program for the acquisition of American equipment such as pipe, treatment plants, pumps, etc. Provincial Roads and Quarries.-A.I.D. is continuing to assist the government of Vietnam to improve its highway network and strengthen its organization responsible for highway planning and construction. Funding in FY 1972 is proposed at $3,128,000 for U.S. contract advisers to the Director General of Highways, for the training of 17 Vietnamese in the U.S. and third countries and includes approximately $2,612,000 worth of commodities and heavy equipment for a provincial road program. Dredging. In the past A.I.D. assistance consisted of providing a contractor who performed the dredging operations for the Vietnamese government. A.I.D. will now supply assistance to the Vietnamese government for the formation of a Vietnamese self-supporting agency to meet their civil dredging requirements. The FY 1972 budget projection for this assistance is $850,000, which will fund 60-973-71-19 a management consultant contract of $150,000 and dredging commodities such as pipe-fittings and spare parts $700,000. Electric Power.-This project has been in progress for several years. It is directed at providing the city of Saigon with adequate electric power. The present 33 megawatt power station is being increased by the addition of 66 megawatts of additional power. In FY 72 we are proposing $145,000 to provide four directhire electrical engineering advisers. Urban Development, Saigon.-This program consists largely of technical assistance and advice to the city of Saigon for the improvement of municipal operations and facilities. FY 72 budget projection is $93,000 to provide a director and one area development officer for a civil assistance office. Over-all Supervision.—In addition to the specific projects listed above A.I.D. will contribute the services of 50 U.S. and third country engineers who will help the Ministry of Public Works supervise its many projects across the country. A.I.D. also will contract to undertake a national power survey. The total cost of this assistance is $2,047,000. The total of proposed funds for public works in FY 1972 is $8,066,000. Mr. ZABLOCKI. The gentleman's time has expired. The Chair will now recognize Mr. Fraser. We have now completed with the members who were present when the gavel dropped. Mr. Monagan passes temporarily. Mr. Fraser. Mr. FRASER. Thank you, Mr. Chairman. Mr. Nooter, I was unable to be here during the early questioning. However, I read your testimony last night. What would the impact on your economic assistance programs be if this committee adopted an amendment, indicating that after the first of January 1972, none of this money would be available for expenditure in Vietnam, unless the American Armed Forces had been withdrawn from Vietnam? In other words, the amendment would make continued expenditures of economic assistance in Vietnam dependent upon the withdrawal of United States forces from Vietnam by the end of this year? Mr. FULTON. A question: Did you say 1972 to begin with, or 1971? Mr. FRASER. I think I said January 1972, but I changed it to December 31, 1971. Mr. NOOTER. Mr. Fraser, that would depend in the first instance on the President's decision regarding troop presence. But I assume that you are asking what would happen if these funds were not available. Do I understand you correctly? Mr. FRASER. We should look at both contingencies. Mr. NOOTER. In the event that economic funds were not available on the basis of our present proposals, I suppose you could describe the results in two ways. On the one hand, the flow of resources to Vietnam, which now supports a portion of their standard of living, would be cut off. The result of this would be felt in monetary terms. That is, price inflation, speculation, and a good bit of economic and consequently political instability. In the other instance, if our troops were withdrawn entirely by the time you suggest it would mean that the entire flow of DOD Defense Department piaster purchases would be reduced, and we would probably be coming back to this committee with a request for a supplemental appropriation to make up the difference. Mr. FRASER. Let's discuss that question, since one of the questions of interest to some of us is what the effect a termination of the U.S. military presence might have on the South Vietnamese economy. I would like to raise one aspect of that impact. It is my understanding that the funds paid to American personnel and those funds generated by related activities adds to the inflationary pressures in the economy. Is this so? With the withdrawal of American troops would there be a reduction in the inflationary pressures within South Vietnam? sures, Mr. NOOTER. There would be some reduction in the inflationary presbut not commensurate with the loss in the dollar flow which now goes to Vietnam. In some cases the Vietnamese pickup the operation of military bases, and so on, which we have been running. Also the expenditures that relate to our troops personal spending would, of course, be reduced. Mr. FRASER. In the first part of your answer, you say the Vietnamese are now paying some of the cost of running the bases. Mr. NOOTER. Well, I meant they would have to pickup the cost of running some of the bases which our military now operate. Therefore, their expenditures, and consequently the inflationary impact of these expenditures, would continue. Mr. FRASER. Well, what is the cost of running the bases? The South Vietnamese Armed Forces already exist. Mr. NOOTER. Yes, sir. Mr. FRASER. The South Vietnamese forces are being paid, fed, and, from time to time, housed. Now if we vacate a base and turn it over to the South Vietnamese, how does that action add to their costs in the operation of their military? Mr. NOOTER. They are taking over, for example, the operation of an airfield, the operation and maintenance of airplanes, which our military has been doing previously. The process, of course, has been going on, and it will continue to go on, but it would accelerate under the conditions you put forward. Mr. FRASER. What you are saying is that the South Vietnamese would have to take over some of the military activity? Mr. NOOTER. That is correct, military activity which we are now still continuing to provide. Mr. FRASER. Which we are presently providing. They would take over this military activity using the existing manpower in their armed forces. Mr. NOOTER. Their military forces are still going up slightly, although they are near what they consider to be their optimum level of 1.1 million paid troops, but they are not quite up to that level yet. They are still expanding. Mr. FRASER. Let us assume that some day our forces are out, without for the moment, setting a date. Mr. NOOTER. Yes, sir. Mr. FRASER. Whenever that happens, some cost shifting will occur. Therefore, now we are really discussing the timing. Mr. NOOTER. That is correct. Mr. FRASER. I Would like to go back to the economy and relate the shift in cost to it. Mr. NOOTER. Right. Mr. FRASER. In terms of the economy, wouldn't there be a reduction in inflationary pressures? You said there would be some, but I am trying to find out why you qualify this. Mr. NOOTER. Well, our best calculations are that the additional increase in military costs which the Vietnamese meet as they take over and run these operations, is about commensurate with the reduction on our side, as our troops withdraw. Therefore, the total level of import demand, which has been running in the neighborhood of $700 million a year or a little higher than that, $725 million a year, which is now financed partly from the AID program, partly from Public Law 480, and partly from the Defense Department piaster purchases, would remain about the same. As a matter of fact, it will require some increased domestic tax collections on their part, and some extra measures, to be able to take over the whole military burden and keep the import level the same. Mr. FRASER. It may be that it is impossible to get a full answer in the brief time we have here. I did want to get some insight into the nature of the problems that might arise with American withdrawal. In your forward planning, do you have a 5- or 10-year plan for continued economic assistance to South Vietnam? Mr. NOOTER. It would be erroneous to say that we have a specific plan as such. We have made some calculations, and what you might call interim projections of how things might go, in order to give us some idea of AID levels and to guide us in our policy decisions on this matter. That was the basis, really, for my previous answer, as to a possible reduction in economic assistance after the next year or two. In other words, there still would be a year or two in which our aid would increase, depending on the speed at which Defense Department piaster purchases declined, after which time economic assistance should top out and eventually decline over a period of time. Mr. FRASER. Let us assume that all American troops are out of South Vietnam at the end of this year, and the South Vietnamese are responsible for all military activity. Let's say that the United States continues to underwrite whatever additional economic and financial support is needed. How large a figure would that be in total? Do you know? Mr. NOOTER. The total import level, as I have said, is around $700 million, let's say $750 million. The Vietnamese now finance only a very small amount of that, perhaps $20 million with their own exports. Mr. FRASER. Is that all we are doing, is supporting a commodity import program? Mr. NOOTER. Please understand that the commercial import program includes not just consumables, it includes raw materials for their own production, it includes capital investment goods, and so on. About half, of the CIP program falls in those latter categories. Their total import requirement of, say $750 million would represent the outside level of this kind of assistance we would foresee. We would hope that other countries will begin coming in, principally in project development aid, but possibly in support of import needs because there will be some requirement for an expanded level of capital investment. Mr. FRASER. Would it be fair to assume that the present level of support might be required for the next 5 years, if the military activity remains at approximately the same levels as presently? Mr. NOOTER. I have found it dangerous in the past to give total figures that far ahead, because these tend to get taken far more literally than is proper when we don't know exactly what the conditions will be in the years ahead. I have tried to forecast for perhaps 1 year ahead, but I think I would rather stay away from a longer range forecast. Too many things can happen in the meantime. Mr. FRASER. You see, even if we were to reduce the $10 or $12 billion of U.S. Government expenditures for Vietnam, to something under $1 billion, which is the approximate amount you are suggesting for a residual economic assistance program, we would still be obligating to that country of 14 million people about 50 percent of the total bilateral development assistance available. Mr. NOOTER. I think we all must consider this point when that time comes. Our request this year is for $565 million-which, incidentally, is not the highest amount of economic aid that has been put into Vietnam. In one previous year, I think 1966, the level was $585 million. Mr. FRASER. Thank you. Mr. ZABLOCKI. The time of the gentleman has expired. Mr. WHALLEY. Thank you, Mr. Chairman. Mr. Nooter, your report shows considerable improvement in the economy of Vietnam. We have heard quite a lot about exploration of oil in and off the coast. Is that going on at the moment? Mr. NOOTER. There has been some preliminary work done, in two ways: One, the United Nations ECAFE group did some very preliminary work, looking into this a couple of years ago throughout Asia, not just in reference to Vietnam, but around Korea, Japan, and Taiwan, as well as down in the Bay of Siam. Second, I understand that some of the oil companies have done some preliminary explorations, but there has not been any actual drilling. In the case of Vietnam, there have not been any concessions let for further explorations up to this time. Mr. WHALLEY. What opportunities do the people of Vietnam, particularly those in rural areas, have to participate in shaping events that most directly affect their own situation? Mr. NOOTER. During the last several years, the Government of Vietnam has established procedures for the popular election of all village and hamlet officials. They have also established elected provincial and metropolitan councils. There are elected officials now in something like 98 percent of all the villages and hamlets. This process is on the second time around in some places. That is, they are going through the process of second elections in villages and hamlets, and many incumbents aren't being returned to office. I think only about 50 percent are being re-elected, which shows that the people definately are expressing their views. We think this is an encouraging development, and which shows that people are exercising some influence over their own futures. Mr. WHALLEY. You talk about giving 500,000 acres of land to a million and a half people. Could a family raise whatever they need on such a small piece of ground? Mr. NOOTER. Yes; these are rice lands, and of course rice production is an extremely intensive form of agriculture. One hectare, which is about two and a half acres, of good paddy land is considered not by any means luxurious, but it is adequate for a family to support itself on. Mr. WHALLEY. Page 5, you speak of the elections held last year in Vietnam. Would you describe the scope of the election to be held this year? |