Survey of the Agency for International Development's Management and Operation of the Commercial Import Program for Vietnam

B-159451: Published: Aug 1, 1967. Publicly Released: Aug 1, 1967.

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GAO reviewed the administration of the commercial import program for Viet Nam by the Agency for International Development (AID). Under the commercial import program, the United States finances the dollar costs of commodities procured abroad by Vietnamese importers. The principal purpose of the program is to combat inflation in Viet Nam by financing purchases of imports to be sold commercially in Viet Nam and thereby absorb excess currency. During calendar years 1968 and 1966, the money supply increased 77 percent and 37 percent, respectively, principally because of increased budgetary deficits by the Government of Viet Nam and large expenditures by United States elements. During these same periods, living costs rose 40 percent and 68 percent, respectively. In the first 5 months of 1967, living costs rose another 13 percent. The program also helps to meet Viet Nam's foreign exchange needs and provides, through the sale of the imported commodities, budget assistance for the Government of Viet Nam.

The 1966 obligations of the program--$397 million--represented about 15 percent of the worldwide obligations of the Agency for International Development. We found that the commercial import program in Viet Nam is particularly subject to abuse because of its nature and the situation in Viet Nam. We also found that AID, to reduce abuses, has taken a number of basic steps to tighten management control of the program. The Agency's success will depend both upon the extent to which its controls can be enforced and upon the cooperation of the Government of Viet Nam. Without such controls and cooperation, few substantive improvements can be expected. The Agency initiated numerous steps for improvement: commodity analysts have been assigned to prepare studies of Vietnamese requirements and capabilities; more effort has been given to screening Vietnamese import licenses, to minimize hoarding and speculation; competition between Vietnamese importers is being stimulated; and the procuring of certain bulk commodities, such as fertilizer, is being done by the United States to minimize collusion between importers and suppliers and to achieve economies through consolidated purchasing and shipping. AID does not specify the types and quantities of commodities being imported, although some commodities are declared ineligible for United States financing and AID commodity analyses are expected to influence the decisions of Vietnamese businessmen as to what they will import. Thus, the basic decision as to what will be imported under the program is determined by the Vietnamese importers and is based presumably on the interplay of market forces. In countries other than Viet Nam AID's import programs are based on detailed reviews and justifications of just what amounts of what commodities will be financed. AID officials have indicated that their conventional program practices are not practical in Viet Nam because these practices are not practical in Viet Nam because these practices are too slow, in view of the rapid changes in economic factors, and because they do not have sufficient program data for forecasting. AID in consultation with the Government of Viet Nam also has declared a number of commodities ineligible for further financing on the grounds that their needs can be met with Vietnamese foreign exchange. Further efforts are being made in this direction, particularly in financing relatively small transactions that are difficult for the United States to monitor effectively. Improvements had been made by the end of June 1967 regarding congestion in the commercial sector of the port of Saigon. Some improvements were also noted in the time taken to discharge commercial cargoes from vessels. As the result of excessive delays in discharging AID-financed cargoes, AID estimates that it will either incur or finance about $15.5 million in demurrage and congestion charges for fiscal year 1967.AID has installed an automated system to account for incoming cargoes. The system is in operation, but in our opinion much remains to be done to make it fully effective. Additional data is needed to identify and locate, more precisely, incoming cargoes.

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