090/1
S T Nash Esq
SEAD
FCO
RECEIV
?
139
BRITISH EMBASSY HANOI
243/3
HKK 243/3
12 AUG 1986
RY
taken
17 July 1986
New Bath
Not encoun
encouraging
CR 29/7
ёв
Dear Stepha
VIETNAM: BOAT PEOPLE: THE ECONOMY
1. Thank you for your letter of 25 June.
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2. I think the answer to this apparent paradox lies in the different perspectives. To the IMF (and our own Economic Advisers no doubt) the regular rise in GDP - at around 5% for the last 3 years certainly looks encouraging. And so it is. It is also true, as the IMF (Evers) said in 1985, that much of this GDP increase has gone to the local market. The IMF see this as bad news since it does not help the balance of trade, particularly to the hard currency area. One assumes that some of this does go to CMEA countries.
>
3. So then, if more is being produced and some if not all of this increase is going to the local market, why should people be leaving because the economic situation is deteriorating? Well, as David Woodward said in his minute, inflation is high. The IMF figures I believe were for 1983 100%, 1984 50%, 1985 150%. But the IMF figures are approximate and based on Vietnamese statistics, unreliable at best and the 1985 figure is of course taken over a year. From mid September 1985 to February 1986 inflation was much higher than this, probably as high as 450% for the worst months, December to February And though some food prices rise seasonally around Tet (the lunar New Year) and again now in the summer and often fall in Spring and Autumn, particularly vegetables, many others do not. They may cease to rise but they do not fall. Thus many arriving in Hong Kong over the winter and into the spring will have been influenced by those first traumatic months after the currency change.
•
Whether
4. There is a further, general, point here too. the authorities like it or not, the desire for consumer durables exists and a consumer society is on the way. Western goods, such as TVs, radios, clothing, etc, find their way into both free market and State shops but the State cannot afford many such luxury items and local production capacity cannot keep up with demand.
The
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