Created: 11/27/1970

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Economic negotiations between theodians and the Southrewithout agreement on >evefai major issues when the Saigon cabinet-"wTthheld approval o! agreements coverjng-Trade relations. ThefqWheTr part, balked over Saigon's re-

quest (ormillion "contribution" from Phngm-Penh to help defray costs ol Southmilitary operations in Cambodia.South Vietnamese intransigence may beargaining ploy for the next unscheduled series of talks in Phnom Penh, such apparent bad faith likely did not si! well with some Cambodian leadt's who are already hypercritical of theirallies. (SECRETNO FOREIGN DISSEM}

prospects improve

insurgent movement in northeastis continuing to rebound from the setbacks suffered duringeriod. During the post rainy season, the insurgents concentrated on improving their organization and village support network in traditional operating areas rather than significantly expanding their armedwhich remains aroundattempting to move into new operational sectors. There ishowever, that lor the first time In the northeast the insurgents haveecure base, in the Ouong Luang area of Nakhon Phanom Province. This region has been the most active insurgent area since the movement in the northeast began

In addition to supporting the training and indoctrination of insurgents and the filling out of quasimiiitary village units, the bate has facilitatedncrease in external support for the insurgency. Chineseifles reportedly have beeninto the region from Laos in increasing numbers, and there are indications that more Thai cadre who have been training in China and North Vietnam are returning to the area. There is also limited evidence suggesting an increase in the links between insurgents and Iheir sympathizers i" urban areas.

Despite their improved capabilities, thehave avoided large-scale or highly visible actions. Increased terrorism and harassment of the government's fledgling village defense forces are designed to gain the initiative withoutajor government counteroffensive, Such tactics are effectively playing on bothbelief that [he insurgency in the northeast is well in hand and the Thai Army's desire to turn over its counter insurgency role to police andagencies.

With the deteriorating situations inand Laos providing the pretext, the 2nd Army has since midsummer reduced its counter-insurgency force commitment in the northeast by two thirds. Or to lessroops.the army now is under orders to engage kl suppression operations only in response tosituations.v flfhctijm us-

the sou th ern campaign begins

Communist forces overran several"nmeoi positions on theof closelyheaptured two main irregular

5orthwest of A'.topeu as well as four other outposts in the same generoiwo other sites, aboutndiles north of Attopcu, were also captured



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