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December
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TEIXlGENCE REPORT i;
Martdaioryocnmeni ft
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
approved pop
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CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence
THE SITUATION IN SOUTHovember
CONTENTS
POLITICAL SITUATION
Constituent assembly developments; Government attitudes toward theReaction to new TV Corps commander; Nationalist party squabblesorps.
REVOLUTIONARY DEVELOPMENT
Effect of7 mission on morale; Viet Cong defectors (Chieuiet Conghieu Hoi program; National Police target of subversion in Quang Nam; Refugee situation ln Tay Ninh.
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ECONOMIC SITUATION
Prices; Currency and gold; PorkDiscussions with Ton; Secretary of State for Commerce Thien An on rice policy; Situation at tbe Saigon port.
ANNEX: Weekly Retail Prices in Saigon (ta Weekly/Monthly Saigon Free Market and Currency Prices (graph)
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I. POLITICAL SITUATION
South Vietnam's Constituent Assembly, having approved wording on rights and duties of individual citizens for the draft constitution, is now discussing the form of the future government. Leaders of the present government, meanwhile, are considering proposals by tho assembly for changes in the body's founding law, but are notto give up their quasi-veto power over the final version of the
Among other developments, III Corps commander General Khang and several other unnamed senior officershave misgivings about the recent appointment of General Manh as IV Corps commander. Friction among political party leadersorps could develop into serious trouble for importantprograms in the area.
Constituent Assembly Developments
ovember the Constituenta debate on the general principles itscommittee will follow in writing the Thus far, the assembly has concludedrights and duties of individualbe specified in the constitution, and hasdiscuss the form of the future government. committee has proposedpresidential form of executive,within the assemblyossible return todictatorship could result in the adoption
odified system,rime minister responsible to the legislature In addition to an elected.
subsequent meetings,icameral legislature,judiciary, and an inspectorate into the executive branch of government. The
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Government Attitudes Toward the Assembly
provision also could have someeffect on the current thinking of theregarding proposed modifications offounding law, which inter aliathe government's authority to makethe draft constitution reversible only by aassembly vote. An assembly committeethe government with this and otherof the founding law onovember, andreply is expected sometime thisseveral assembly delegates arethe government will agree to relinquishpower, there is do evidence fromthat the military leaders are willing to
do so. However, compromises on other changesby the assembly are possible.
general, the military rulers aremaking no concerted effort at presentthe constitution. According to agovernment functionary, theno organized plan to influence thethe assembly in this regard. Althoughof the inner government circle continuedevelopments in the assembly, theirallegedly reported to Premier Ky and ChiefThieu only on an ad hoc basis. Thethat government"Teaders believe thecould prove to be tooocument to
form the basis of any kind of viable government.
Reaction to New IV Corps Commander
According to two reliable high-rankingsources, several senior ARVN officers haveabout the assignment of General Nguyen Van Hanh as IV Corps commander. They reportedly feel that Hanh will not be any improvement over General Quang because Manh and his wife are as guilty of corrupt practices as are Quang and his wife,
Rumors of Manh's corruption, however, appear to beart of the problem. outherner, was apparently Chief of State Thieu's choice for the
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IV Corps assignment rather than Premier Ky's. Most ol Manh's critics remain unnamed, but III Corps commander Generallose associate ofnortherner Premier Ky, is one of them. Khang ispokesman for the "Babyoose association of field-grade officers who, among other things, have been pressing for the removal of southern generals Quang and Co. Most of thecritics of Manh also may fall into the "Baby Turk" grouping, or may otherwise be characterized as supporters of Premier Ky.
9. In this respect, the reports ofover Manh's appointment serve mainly as evidence of the continued factionalism within the military leadership. No action against Manh was intimated in any of the reports, although General Khangreiterated histhat of Premiertake action against Deputy Premier General Co at some suitable time.
Nationalist Party Squabblesorps
Friction between the Dai Viet and VNQDD parties ln Quang Tri and Thua Thien provincesurrent subject of major interest amongVietnameseorps. In general, Dai Viet supporters predominate in the two northernof Quang Tri and Thua Thien, while VNQDDare stronger in the otherorpsof Quang Nam, Quang. Tin, and Quang Ngai. At present, the focal point of the friction appears to be in Thua Thien, where six VNQDD-oriented district chiefs have complained toorps commander of alleged discrimination by Dai Viet members among police and Revolutionary Development groups. Other, somewhat unrelated friction among VNQDO factions has also been reported in Quang Ngai and Quang Nam provinces.
The Interparty squabbling has Involvedspeculation about the politicalof major government officialsorps,orps commander General Lam. General Lam himself claims that he favors neither party, although there have been numerous allegations that
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heecret Dal Viet party member. Generally, however, Lam is forced to deal with both parties depending upon their local strength in each General Lara has stated that his majoris to keep party differences within reasonable limits, and toerious shooting incident which would almost certainly involve US/GVN cadre teams.
12. Thus far, DaiNQDD differences have taken the form of extensive maneuvering by party leaders for control of local governmentand various government programs reaching into the countryside. These leaders appear to realize that an outbreak of violence would only be costly for all involved. Nevertheless, an assassination or other violent Incidentossibility which could touchajor conflict between the parties, with serious effects on Revolutionary Development and other government programs in the area.
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II. REVOLUTIONARY DEVELOPMENT
Accordingecent report from the US Embassy, the mission of tho ARVN7 toecurity screen forDevelopment activities may cause some serious morale problems In the officer corps. otaliet Cong defectors came under government control duringan all-time high for any month since the inception of the Chieu Hoi program. Meanwhile, the Viet Cong are reported to haverogram in Blen Hoato sabotage the Chieu Hoi effort. In Quang Nam Province, the National Police are reported to be the targetew and intensified program of subversion by tho Viet Cong. 0 persons haverefugees in Tay Ninh Province sinceugust, largelyesult of recent allied operations.
Effect of7 Mission on Morale
General Do Cao Tri, who is presently un-assigned but maintains many good connections among the military, believes there is apt to be bitterness in the officer corps over the plan for the ARVN to concentrate on providing the security screen for Revolutionary Development (RD) According to Tri, morale is already very bad because offavoritism inituation which often results in the exclusion of combat officers. Tri also alleged that corruption and reluctance to fight on the part of many general officers are other factors eroding the spirit of the officer corps.
Leaving the primary task of combating the Communist main forces to Americans and Koreans will, Tri feels, give many ARVN officers the feeling that they are being relegatedole which is beneath their dignity. Only proper preparation by the Joint General Staff for the ARVN's new role may, in his opinion, be able to avert further unrest among the officer corps.
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Trl's observations may bepart by his own anomalous status, there arothat some high ranking members ofshare his reservations about thefuture state of ARVN and the morale of its The feeling is that ARVN officers willbe re-oriented to make them thinkthemselves, their jobs, and tho importancepacification mission.
Viet Cong Defectors (Chieu Hoi)
total of returnees to6 rose6 as ofovember. the weekovember, thereaccording to GVN statistics. This ishighest weekly total Thehigh occurred in late Februarywere tallied. The extremely high returnwas attributed largely to an intensiveChieu Hoi campaign mounted by the GVN. Aof this week's returnees by Corps Tactical Zone
follows:
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IV
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November, thereall-time high.
Viet Cong Counter-Chieu Hoi Program
to information received from the Viet Cong have established aHoi training center In Bien Hoa Province. to this source, selected individualsat this school to rally to the GVN sideattempt to obtain jobs at Chieu Hoiin placo. these agents are supposed toincite ralllers against the government and
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persuade them not to serve in the Vietnamese armed forces. Furthermore they are to work to exploit the complaints of the railiers.
National Police Target of Subversion in Quang Sam
The Viet Cong Quang Pa Provincial Planning Committee (responsible for what is approximately the GVN province of Quang Nam and Da Nang City)has directed its security sections to mount an intensive subversion effort against the National Police in their zones of responsibility. The plan is to be carried out in three phases: of individual mombers of the force, their families, and ideological and politicalntensive subversion effort through every means of contact; iscrediting, abduction, orof police who do not agree to cooperate*
This new Viet Cong effort, according to the source, is not unusual for its target, but for the fact that Viet Cong security sections have been assigned the mission. Thiseasure of thewhich the leadership attaches to the effort. An intensive effort to undermine the police in Quang Nam may be partountrywide effort of theto reduce the effectiveness of the National Police force, which is an important asset to the over-all Revolutionary Development program,
Refugee Situation in Tay Ninh
reports from Tay Ninhthat as of mid-November, there wereliving in temporary shelters. Thisan increase of0 in the numberin temporary shelter in this provinceAugust whenefugees were listedin temporary shelters. The increaseresult in large part from the disruptionOperationmassive allied sweepprovince.
10. Tay Ninh Province has had the reputation of being able to absorb most of the refugees which have come from tho province. Many refugees, for
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instance, re-establish themselves individually rather than in government sponsored projects. This newwill probably prove more difficult to deal with.
11. Current plans for the resettlement ofcall for the construction of two model hamlets toefugee families. These hamlets were to be constructed Considering the magnitude of the current flood of refugees, present plans for resettling refugees will have to undergo serious revision.
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III. ECONOMIC SITUATION
Price movements were generallyduring the week endingovember. Retail prices of domestic and imported commodities dropped slightly from levels of the previous meek. Free market gold prices fell significantly and currency prices declined also. The prices offood led the decline in food prices and, significantly, the prices of pork and rico were at or below the levels reached last week.
The pork situation was discussed by US and GVN officialsentative agreement that official price ceilings on pork should be removed. This would depend,n establishing anreserve stock ofons of frozen pork. Present facilities can accommodate onlyons. Thefavors construction of additional cold storage facilities to permit the holding of necessary reserve stocks of pork.
Discussions by embassy officers with GVN economic officials ranged over aof topics. Although Secretary of State for Industry Ton did not attach much urgency toew rico policy, Secretary of State for Commerce Thien An shared embassy feelings of the urgency to do so. Thien An recognized, however, that political considerations will exert considerable influence on the rice policy adopted by the GVN.
Although problems have continued since the US took on an advisory and action role at the Saigon port, the embassy, feelsontinuation of current efforts in tho line of confiscating cargos left inimproving cargo accountability,orrect credit policy will have some salutary effects on port operations.
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Prices
1, Retail prices in Saigon during the week endingovember declined slightly with theUSA ID retail price index down three percent from the previous week. Food prices declined threeprimarily because prices for protein foods fell or remained steady. The price of pork heldecond week at the relatively low level ofiaster: per kilogram, while the prices of beefsteak and fish declined. Rice prices hold steady. Non-food items were mixed,with prices for charcoal and soap register ing increases and other items holding steady. The USAID non-food Index declined one percent below the level of the previous week. able of selected weekly retail prices in Saigon is included in the
Annex).
2. Prices of imported commodities wereunchanged: the USAID price index for selected US-financed Imports declined only slightly from the level of tho preceding week. Prices of condensed milk and flour weroittle lower than the level of the previous week as stocks continued ample. Chemicals remained relatively unchanged as fresh supplies reached the Saigon market. Despite the resumption of construction activity with the onset of the dry season, prices of construction materials, except cement, fell Slightly with the arrival of new shipments.
The free money market remainedS dollars and MPC (scrip)
Currency and Gold
The price ,
was down slightlylasters per dollar respectively. The price of gold fell significantly during the weekiasters por dollar as the recent reduction in the official sale price of gold continued to affect market psychology. (Graphics on monthly and weekly free market gold and currency prices arc included in the Annex).
Pork Situation
and GVN officials met onovemberthe over-all pork situation, particularly
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increasing or removing official ceiling prices on live hogs and constructing new storage facilities for frozen pork. Although no substantive decisions were made at this meeting, the discussion wasfrank andlear picture of GVN thinking on pork.
issue of GVN price ceilingsmost lively discussion. US officialsthese price ceilings, which werelast December, have served no usefuland indeed, have suppressed productionarrivals of live hogs in Saigon. the US feels that current and plannedsuch as disease control, mixed feedimportation of improved stock, will not leadproduction at current officialrepresentatives conceded that about one third
of Saigon's pork supply currently comes through the black market and that because the official price applies only to live hogs at the slaughterhouse, the market price usually is well above the official level. Nevertheless, GVN officials were reluctant to reach the conclusion that official prices should be abandoned or at least greatly increased. Finally, however, tbey appeared willing to remove priceprovided an adequate reserve stock ofons of frozen pork could be established to regulate the market.
The US urged importation of both live hogs, at least through Tet, and frozen pork. In replyVN inquiry about US financing for pork imports, It was pointed out that past pork imports had been financed by the GVN. The question of imports quicklyuestion of cold storage facilities since present cold storage capacity isons and the continued availability of this capacity Is It was agreedold storage facilityonone month'sinbe sufficient to supplement domestic supplies as required. US officials agreed to ascertain the cost and time required forofacility.
The embassy reports that the proper use of frozen pork could stabilize the market withoutdomestic production or lowering the return
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to the producerair market level. Moreover, in view of the importance of pork in the consumer pricetable pork market would contribute significantly to economic stabilization. For these reasons and because the GYN appears willing toprice ceilings upon tbe establishment of an adequate reserve of pork, the embassy feels that there is merit in erecting a large cold storage warehouse.
Discussions with Ton
a meeting with USAID Directorovember, Acting Secretary of State forTon said that Premier Ky had announcedGVN7 budget ceilinghich would be in line with USthe budget. Ky did not, however, indicateof the civilian and military portions. to Ton, Ky also expressed an intentionthe various ministerial budgets.
again confirmed that the GVN wasofen percent wage increase foremployees in early January or just afterof concern about the impact of such aon prices, however, the GVN ispossibility of disguising this proposedin the form of increased allowancesthe board step increases.
With regard to the recent reorganization of the Ministry of Economy, Ton said that Ky had announced the appointment of Ton as chairman of tbe Economic and Finance Committee. This economic policy committee had formerly been chaired by the Minister of Economy. It is interesting that, while Governor Hanh was away at the Asian Development Bank meeting lr. Tokyo, Ky chose to reject Hanh'sthat Ky chair the committee with Hanh ns vice-chairman.
Ton's comments on rice policy indicated that he does not attach much urgency toew rice policy. Ho reported that the province chiefs were reluctant to become responsible for establishing rice buying stations because they did
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not have adequate warehouses and were afraid of losses. Moreover, Ton felt that there were real dangers in getting ARVN too involved in rice The USAID Director outlined sons of the considerations involved in the Mission's proposed rice policy and indicatedew rice price policy must be enunciated quickly by the GVN if the benefitrice Increase is to accrue to the farmers instead of the merchants. Ton asked that this matter be discussed againery restricted circle and not at the next meeting of the Joint US-GVN economic committee. The US plans to commence discussions on rice with GVN officials and press them to move forward quickly.
Secretary of State for Commerce Thien An on Rice Policy
of State for Commerce Thien Anrice policy with embassy officers gaveimpression that he would support anthe price for rice but that because ofrepercussions it might not be acceptable
to Premier Ky at this time. He confirmed, theby Acting Secretary of State for Industry Ton that the GVN would not be capable of mounting aoperation in the provinces. He agreed with the embassy, however, that the rice policy should besoon, by IS Docember at the latest. This would mean that it would be discussedairly final stage at the next cabinet meeting. This sense of urgency contrasts with that expressed by Ton.
Situation at the Saigon Port
US Embassy feels that In placing thein an advisory and action role at theport last summer, the US adopted the bestaction to increase cargo movements throughwith the least disruption to Vietnameseof the port. To date, the followingbeen taken to relieve port congestion: of the port; approvalewsharply increases warehouseargo accountability system;in warehouse management; completion ofbarge landing sites; and Ky's approvalof theuly confiscation decree.
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spite of these measures, however,portunwillingness of importerstheir cargo from portnotsolved. Although US officials, includingLodge, have pressed Ky onleft in warehouses for moren confiscation has beenselective confiscation will take placo
in the near future. There remains, however, the problen of making available to importers adequate credit in order that they can pick up their goods on arrival. Overdue cargo roports are now being supplied weekly to commercial banks to allow them to bring pressure on consignees to remove their cargo. In addition, the GVN has recently proposed that credit for customs charges be extended toin an attempt to get them to move their goods out of the port more rapidly.
embassy feels that the onlycomplete US takeover of thenot solve the problem of importers'to remove their goods. Moreover, thebo confrontedost of difficultincluding liability for losses of goods, of certain GVN services such asof title for all portomplicated bookkeeping andsystem for port operations. Moreis tho fact that It is unlikely thatwould ever accept outright US operation of For these reasons, the embassy feelsbest course of actionontinuation ofcargoa correct creditget Importerstheir goods.
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annex
WEEKLY RETAIL PRICES IN SAIGON a/
Jan
Nov
Nov
Nov
Nov
for All Itoms b/
for Food Items b/
c/
Which:
Piasters)
0 Kg.)
Belliesg.)
85
Tre g.)
Ham (jar)
for Non-Food Items b/
c/
c /
Which:
Plasters)
g.)
(pack)
Calico (meter)
Soapg.)
are from USAID sources.
all.
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