CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence
TEE SITUATION IN SOUTH VIETNAM1
CONTENTS
POLITICAL SITUATION
Constituent Assembly member assassinated; Other Constituent Assembly developments; Directorate rejects assembly proposals; Several ambassadorial changes likely
REVOLUTIONARY DEVELOPMENT
Refugees flee Viet Cong areas in Kien Giang; Revolutionary Development in An Giang; Land reform; Hamlet security; Viet Cong defectors (Chieu Hoi)
ion I
II
SITUATION
Prices; Currency and gold; Provincial prices; Joint US-GVN economic meeting; GVN views on rice policy; Credit policy.
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ANNEX: Weekly Retail Prices in Saigon (
I. POLITICAL SITUATION
Official developments on thescene in South Vietnam last week were overshadowed by the assassinationrominent member of the Constituent Assembly. The killer has admitted Viet Congand there Is no evidence to suggest that he Is anything other than an enemy terrorist. The assembly postponed further substantive sessions because of the Earlier in the week, the ruling Directorate had met and decided to reject an assembly proposal which would have limited the Directorate's power to amend the draft constitution. The decision, however, has not yet been formally In other developments, oneersonal assistants told the US Embassy that several Vietnamesewill be replaced or moved to other posts.
Constituent Assembly Member Assassinated
in the Constituent Assembly came tolast week following the assassination ofVan, one of the assembly's most prominentthe Ky government. Van was en route to anon the morningecember when two men on
a motorcycle fired the fatal pistol shots Into his car. One of the killers was captured shortlyby the Vietnamese police; the other man escaped.
ietnamese source, theat first deniedember of the Under subsequent police interrogation,admitted belongingection of the Vietfor the Liberation of the Capital. Hehave been forcibly recruited for thethree months ago, trainedase camp inProvince, and sent intoeek priorkilling. Although the terrorist denied firingshots, the police reportedly found that histraces of gunpowder and that bis pistola bullet retrieved from Van's automobile.
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If the killing waslot of the Viet Cong, as seems likely, the choice of Van as the target wouldood one from their point of view. Be was ono of the leading southern activists In the assemblyhorn in the side of the northern-oriented Ky regime during the recent cabinet crisis. The Communists may have calculated that tho murderajor critic of the Kywould draw suspicion to the regime itself and further sharpen the conflict between northerners and southerners.
A day after Van's death. Radio Hanoi and the Viet Cong radio in South Vietnam accused Ky and Thieu of "sending their agents into the streets" to murder hin. The broadcasts cited Western pressspeculating that southern antipathies toward the government might be aroused and bring political turmoil. US officials in Saigon, however, haveinternal political implications in the killing and there has been no reported adverse reaction from southern assemblymen. The Viet Cong had threatened publicly, prior to theeptember elections, that they would assassinate candidates for the assembly.
Other Constituent Assembly Developments
The assembly will hold its next substantive session early in the week ofecember. Before adjourn log because of Van's murder, it did hear some recommendations on the organization of the future government put forth by the constitution-drafting committee. Those recommendations were similar to the ones presented earlier by other committeesfour independent government branches: an electedicameraludiciary, and an inspectorate. Although the deputies are generally in agreement, they are still divided about equally on whether torime minister lo the system. They also appear to be in favor of providing for elected province chiefs and mayors uDder the new constitution.
Several committee members who were assigned to study selected aspectsuture constitution argued that the present administrative system is not responsive to regional and local needs. ai;:iaine
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that too much power has been vested In the hands of the corps commanders to the detriment of the province, village, and city officials. Moreover, they characterize the presently appointed government officials at the province level and lower as generally ineffective either because they are military officers with little administrative experience or because they are under* paid.
7. The committees also recommendedtrong system of checks and balances on thethrough the following provisions. The legislature should have the right to vote on tho national budget, to approve high-level appointments, and to question the executive. The inspectorate and the judiciary should be allowed to check on the abuses of power, The people and the pross should have the right to criticize openly the execution of nationalegal oppositionystem of political parties should be formalized. The head of state should be limited to one four-year term in office. Neither the executive head of state nor the national assembly should have the constitutional right to dissolve the
other.
Directorate Rejects Assembly Proposals
8. The Directorate has decided to rejectwhich would have changed seven articles in the basic charter of the Constituent Assembly. Thewere submitted to the Directorateman delegation of assembly leaders - One of the most controversial clauses in the charter,mpowers the Directorate to amend the draft constitution before it becomes According to reliable clandestine sources, the decision to reject the proposals was madeeeting in early December, attended by the ten military members and eight of the civilians onmember Directorate, but has not yet been officially conveyed to the assembly. Many of the deputies reportedly know that the decision has been made, according to the US Embassy, but several of them have said that the Directorate's Inflexible stand is not likely to disrupt the
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Several Ambassadorial Changes Likely
9. Prime Minister Ky has officially requested that the Ministry of Foreign Affairs replace Vu Van Thai, the present ambassador to the United States, with Bui Diem, one of Ky's close civilian advisers. The United States has accepted the nomination. Thai now is ln Saigon, but no date has been set for Diera's departure for Washington.
According to another of Ky's assistants, Dinh Trinh Chinh, several other Vietnamesewill be replaced or shuffled in the near future. Chinh himself is slated for theto Thailand. Othor posts affected include Laos, Japan, South Korea, Australia, Tunisia, Malaysia, and the United Nations observer. Chinh states that some of tho new ambassadors will be generals who do not presently have significant positions in the military.
Recent reports have indicated that the ruling generals have beeD pressuring the Foreign Affairs Ministry to assign persons whom they favor toposts. Tran Van Do, the ministry head, has registered several complaints to Ky about the alleged military interference.
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II. REVOLUTIONARY DEVELOPMENT
efugees andefectors returned to GVN control in Kien Giangafter an intensive psychologicalcampaign, backed up with air strikes. Although Revolutionary Development continues to progress favorably in An Giang Province, many problems remain; the principal one is the Hoa Hao political structure whichthe province and is resistant to change. Land reform efforts may receive new Impetusew program to allocate fundsour-pronged approach to improving land tenure conditions for the farmers, Although impressive gains were reported by the GVN ln the number of hamlets secured in October, the embassy notes that many of those may represent only paper gains.
Refugees Flee Viet Cong Areas in Kien Giang
In Decemberefugees haveietontrolled area in the Hon Chong Mountain area, someiles northwest of the province capital of Rach Gia, Kien Giang Province. The refugees left the Viet Cong base area, accordingACV largely as the result of the combined pressures of air attacks and an intensive, carefully coordinated allied psychological warfare campaign. The refugee group includedhildren.
Although the refugees expressedwith Viet Cong control techniques, they are anxious to return to their home areas to begin harvesting their rice. An exodus of this magnitude demonstrates that Viet Cong control of the population may be effectively challengedarefully prepared and exocuted psywarollow-up psychological operation isbeing planned to exploit this situation more
fully.
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3. In addition to the refugees,iet Cong defectors came under government control in Kien Giang. Included in the defector group were one noncommissionedax collector, and several cadre.
Revolutionary Development in An Giang
An Giang Province, according0 November embassy report, is today clearly the most prosperous province in the delta region, but much work remains to be done to implement fully all aspects of theDevelopment program. The principal reason for this somewhat dark view of tho situation in the province Is ight hold maintained by the Hoa Hao power structure on the affairs of the province and apparent Hoa Hao reluctancehange in the status quo.
Koa Hao power in the province Is not monolithic, but rather fractionalized among several elements. While mutually competitive, these factions will unite in the face of any challenge by US advisers, the GVN, the Viet Cong, or any other outside intruders. In An Giang,
the throe principal factions are: the Central/Hoa Hao Churchocal group headed by thechief, Lt. Col. Ly Ba Pham; and another element led by "Colonel" Nguyen Van Hue, the chairman of the Province Council.
One of the chief failings of the RD program in the province, according to this report, has been in efforts to implement tho GVN land reform policy. This program, it seems, will be very difficult to initiate here. For example, although extensive aerial photography has been conducted to determine the province'sstructure, the province chief, Lt. Colonel Pham, has "refused to discuss" the uses to which thismay be put. Although recent decisions may have largely negated information relating to the land reform program contained In this embassy report (see Land Reformoncentrated GVN effort may founder in the shoals of regionalism and factionalism.
Another aspect of RD in which progress is apt to be slow is public health. ew and woll-equipped dispensary exists, but is headed by an inadequately
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trained former practitioner of oriental medicine whom the people, because of their mistrust, will not patronize. esident medical assistant and two nurses remain idle. The main source of medical care at the present tine is US and third-countrysuch as tbe MEDCAP and MILPKAP teams which havearge impact on the population. Improvement in public health facilities ln An Giang and the entire delta region wouldignificant contribution to the well-being of the peasants who in other respects are relatively well off. The GVN would stand to gain an easy and impressive psychological warfare victory byell-founded medical program for Anservice which the Viet Cong are wholly ill equipped to provide.
The seven Revolutionary Development Cadres (RDCs) teams are working rather rapidly and well in An Giang, spending only two or three weeks in each hamlet. This rapid pace is possible because the securityis generally good in An Giang. Paradoxically, this situation gives rise to anotherof the greater part of theman RDC teams. Two-thirds of each team's members carry arms and are responsible for providing security for remaining team members fulfilling census-grievance and other duties. These armed elements are now largely Ldle, although they have been employed In flood relief work.
Several criticisms have been voiced about the RDC teams in An Giang, as in other parts of the country. Specifically, they have been called "cowboys" from urban areas not adapted to work in the countryside. Also,they are not recruited from the areas in which they are to work; they are often poorly motivated, trained, and led, and Indifferent to local village traditions or to village elders. Furthermore--and this may be the reason for much of tbe criticism of the RDCs--vlllage and hamlet officials are not paid as well as the RDCs.
10. Although the over-all situation in An Giang is good, there has been no radical departure from the ways of the past. The people do not appear toany greater loyalty to or love for the GVN, and the traditional Hoa Hao power structure which commands loyalties remains intact.
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Land Reform
11- Priority emphasis is reportedly being given by the GVN and the US to the implementation of all existing GVN land tenure policies in An Giang Province, according to the recent embassy reporting. Other selected areas will also receive increased attention. In order to assist the program in getting undor way, someillion in counterpart funds has beenfor the following projects:
a. Distribution, with full titles, of
former French-held, expropriated, and squatter lands:
updating, andtenant-landlord contracts;
ositions ofofficer/registrarcommittees;
assistance to An Giang bycounterpart funding and use offor preparation of land use andand an Integratedplan- totract.
12. During the past year there have been severalby greatland title: were presentod to these tilling the soil, but these seemed to be mainly for propaganda purposes. The new program appears toerious, concerted effort to solve one of the most difficult problems facing anyineffective redistribution of land to peasants who have spent many years cultivating It without anything tangible to show for their efforts. An effectlvo land reform program couldong way toward undercutting Viet Cong support among the peasants and winning them over to the GVN cause.
Hamlet Securlt'
13. According to statistics received from the GVN thereet increaseecured hamlets throughout the country during October. Although this figure is an impressive one, the embassyit should be accepted only with caution. There are indications that some of these hamlets are secured on paper only, and that the GVN statistics represent an effort by local officials to meet previously established goals. Thereorresponding increaseercent in thepopulation, raising the totalfiving in secured areas.
Viet Cong Defectors (Chleu Hoi)
14. The total of returnees to6 rose0 asecember. the weekecember thereeturnees, according to GVN statistics. reakdown of this week's returnees by Corps Tactical Zone follows:
I
II Corps
III
IV
464
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III. ECONOMIC SITUATION
The weekecemberharp rise in Saigon retail prices, partly because of lower deliveries of rice and protein foods to Saigon. esult of this Increase, retail prices are now at their highest level of the year with the exception of the peak that was reached during the September elections. Prices of imported commodities, on the other hand, declined slightly, and free market gold and currency prices showed only small variations. An embassy analysis of provincial prices during July-October shows that these prices are generally well above those in Saigon, but the degree by which the two sets of prices vary has diminished.
US and GVN officials held their sixth Joint economic meeting at which Minister of Finance Kien reported that the GVN hadto permit importers to postponeof customs duties in an attempt to ease the importers' need for credit. The US prefers an expansion of the commercial banks' capacity to extend credit toproposal which Governor Hanh has approved. S-GVN subcommittee on pork has recommended removal of theprice ceiling on pork, provided cold storage facilities are constructed to hold reserves of pork. Discussions with senior GVN economic officials indicate general agreement with the US-suggested increase in tbe government price of rice butwith the US proposal for estab*-lishing GVN rice buying stations.
Prices
n Saigon rose sharply durine
'. Partl* becauseof lower* deliveries of rice and protein foods to Saigon.
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Both food and non-food items were higher, resultingain of seven percent in the over-all USAID re tall price index. This index is now at its highest level of the year with the exception of the peak reachod at tho time of the September elections. The food index rose eight percent, largely because of soaring rice and pork prices. ecember the price of the type of rice used by the working class6 highiastersilograms, orercent above the level prevailing just prior to the June devaluation. The price of pork bellies roseiasters perincrease of more thanercent above the previousbecause demand for pork increased whilo deliveries to Saigon wore lower. Beef, fish, and chicken also were higher. The non-food index was three percent above the previous week, largely because of higher prices for charcoal and calico. Heavy pre-Tet purchases of calico causedncrease in the price of this commodity. able of weekly retail prices In Saigon is included In the Annex).
of imported commodities, onhand, were slightly lower as measured byprice Index for selected US-financedmilk and wheat flour were lower ascontinued to be well supplied, and sugar Fertilizers, chemicals, and rayonup slightly. imilar alight upwardwas recorded by construction materialsof increased demand occasioned by thethe new construction season.
Currency and Gold
market prices for dollars andmoved up slightly during the weekDecember. Gold, on the other hand,reportedly because of an expectation ofreduction ln the official sale priceand the continuation of tight cashprice quotationsecember havebeen reported.
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Provincial Prices
4. The embassy has justeries of price indexes for each of the four regions of South Vietnam based od price reports received for tbe period16 from selectedwithin each region. Although these indexes are relatively crude and in some cases based onreporting, they show three rather significant trends: (a) with the exception of Region IV,prices generally are well above those In Saigon; (b) after the Initial post-devaluationin prices, provincial prices have generally not increased significantly and in some cases have declined; and (c) the degree by which provincial prices exceed those of Saigon has diminished during the period studied.
Joint US-GVN Economic Meeting
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US and GVN officials recently held their sixth Joint economic meeting, which was co-chaired by Acting Minister of Industry Ton and USAIDMacDonald. On the question of credit toMinister of Finance Kien reporteduite apart from the issue of bank credit, the GVN had decided to give authority to the Director of GVN Customs to permit importers to postpone payment of their customs duties. Importers will put up real estate as collateral. Kien and Ton believe that this liberalization will be sufficient to satisfy the importers' complalotack of customs credit and will assist in speeding up the flow of goods through the port.
Kien also proposed that port congestion be relieved by using importers' declarations as the basis for the assessment of duties instead ofall Imported goods. Spot checks would be made to encourage honest declaration. Ton and Kien again expressed the view that the advent of the dry season will induce importers to clear construction materials through the port.
The pork subcommittee sot up at the fifth US-GVN economic meeting submitted recommendations on
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pork policy. This subcommittee, which is composed of US and GVN economic officials, agreed that the present ceiling price on hOgg ir, Saigon doest and cannot effectively control pork prices. the group recommended that this ceiling price be eliminated in order to increase deliveries of hogs from the delta and lower pork prices in Sai gon. The subcommittee felt, however, that controls should Dot be removed until means of Indirect suppl can be set up. For this purpose, the groupthe constructionon capacity freezing plant to hold frozen stocks for use in stabilizing prices and providing emergency supplies in case of acute shortages. Among other measures recommended by the pork subcommittee were: importa tion of live hogs from Thailand to meet Tet require ments, importationons of frozen pork, measures to reduce losses from hog cholera, importa tion of pure-bred swine for breeding, and the estab lishment of new feed mills. The US promised topromptly whether USAID couldold storage plant.
GVN Views on Rice Policy
Separate discussions on rice policy with several senior GVN economicNational Bank of Vietnam Governor Hanh, Minister of Commerce Thien An, and Acting Minister ofa general agreement with the US-suggested Increase ln the government price of rice and the necessity ofew higher rice price promptly. At the same time, however, these GVN officials do not agree with the USfor establishing GVN rice buying stations. Moreover, they all expressed the opinionew GVN rice policy will depend largely on Premier Ky's approval In view ofadverse political reactions from the urban consumer.
Governor Hanh feels that there shouldharp increase in the rice price paid to the farmer in order to increase production andGVN concern for the farmers' welfare. Hanh stated that although the GVN would bo running
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certain political risks in the urban areas, the new rice policy shouldlear break with the present policy of trying to conciliate noisy urban consumers at the expense of the silent peasant. With regard to the US suggestion for GVN rice buying stations, Hanh stated emphatically that the GVN is Incapable of conducting buying operations because such awould be too enticing for those who wish to make personal gains. As an alternative, Hanh suggested the extensive use of information leaflets to inform the farmersow government price. He also feltiberal credit policy' should be established to finance rice purchasesewprice. According to Hanh, the greatestwill be ensuring the security of the rice moving from the delta to Saigon.
of Commerce Tblen An and hisagree with Haoh's views, especiallythat the GVN is unable to operate Thien An stated that the low pay ofof discipline among GVN officialsan operation. In spite of the possiblerepercussions of higher rice prices,Commerce officials feel that they should makeand economically sound proposalhigher prices for producers. In theirquestions to be considered are: (a) whetherwhat level prices should be raised, arket In domestic rice should be liberalized
or new higher prices should be set, and (c) if the market is liberalized, what would be the best way to avoid excessive price increases and supply Thien An evidently feelsreewithout price or otherbe tho best solution.
a result of these GVN views, theis examining the possibility ofthe GVN buying station aspect of the USGVN proposal to Increase credit to financealso will have to be examined in termsimpact of this credit on the inflationary gapprice level.
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Credit Policy
US Embassy reports that failure toto expand the capacity ofto provide credit for imports could wellserious financial crisis and result into the proposed stabilization Vietnamese commercial banksfully loaned up and cannot obtain funds toImports as they arrive. Unless thesecredit available immediately, importers will
be forced to go to the money lenders or simply leave their goods in the port, thus adding to the already critical port congestion. Moreover, until additional credit is available, all current income of thewill be needed to move goods already in the port. Consequently, importers will be unable to cover advance deposits and taxes on new import licenses with the result that serious shortages of commodities will develop by next spring.
appears that it was possible for thebanks to finance the heavy commitmentsin July and August at the encouragement ofBank of Vietnam (NBVN) only because ofbottleneck which resulted in thefour months behind in its billing of.banks. This mix-up, however, hascleared up, and the banks need funds. Thebeen hampered inroperbecause of the incorrect assumption thatof credit outstanding on the day oflast June had only to be increased tofor the change in the exchange rate plusincrease in imports. The IMF alsomethod to arrive at its estimates oflimits. Both the NBVN and the IMF,overlooked the fact that as rapidmanifested itselfholesalers beganover financing of high profit imports in anto corner supply. Since the devaluation,blackewdim, and wholesalers no longercash to continue financing importers. As athe amount of credit to be made availableshould make allowance for the volume ofpreviously financed outside the banking system.
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14. According to embassyinimum of roughlyillion piasters of additional credit must be made available before mid-January. Such an expansion of credit to the importing sector will notignificant inflationary impact because credit to Importers involves payments to the NBVN rather than creation of demand deposits. Moreover, aboutercent of all credit currently supplied by the banks in Vietnam is for financingmajor anti-inflationary weapon. efinition of credit by end-use is somewhat tenuous, tho Vietnamese banking and business community seems to concur in thisercent estimate. In addition, US officials feel that an expansion of bank credituch moreand direct approach to combating the shortage of funds for Imports than other plans such as the GVN deferred customs duties scheme, which will only satisfy part of the Importers' need for creditwhile temporarily reducing GVN revenues.
15. ecember, the US economic counselor met with Governor Hanh of the NBVN, who agreed that steps must be taken to expand credit. Hanh thought, however, that an additionalillion piasters of credit was probably too much. Nevertheless,ecember Hanheeting of commercial bankers and informed them he was prepared to make more credit available for imports. Specific details on Hanh's announcement are not yet available.
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ANNEX
WEEKLY RETAIL PRICES IN SAIGON a/
Jan
Nov
Nov
Nov
Dec
for All Items b/
for Food Items b/
c/
Which:
Piasters)
0 kg.)
Belliesg.)
Treg.)
Mam (jar)
for Non-Food Items b/
CJ
Which:
Piasters)
g.)
(pack)
Calico (meter)
Soapg.)
0
are from USAID sources.
all.
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