THE IMPACT OF COMMUNIST MILITARY PRESSURE ON SAIGON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78T02095R000900070014-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 25
• Document Creation Date: December 20, 2016
• Document Release Date: January 23, 2006
• Sequence Number: 14
• Publication Date: July 5, 1968
• Content Type: IM

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Ton Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
The Impact of Communist Military Pressure on Saigon
ARMY review(s) completed.
Top Secret
ER IM 68-83
JULY 1968
COPY NO. 220
MflRUrf P
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
5 July 1968
The Impact
of Communist Military Pressure on Saigon
Summary
The most recent Communist offensive against
Saigon was part of a general strategy combining
military, political, and subversive tactics in an
effort to undermine the South Vietnamese Govern-
ment and to influence the Paris talks. To attain
these objectives, the enemy has committed nearly
one-fourth of his Main and Local Forces to the III
Corps area in support of the Saigon battle. Per-
haps 15,000 of these troops are in the immediate
Saigon area. Arrayed against the enemy's forces
in the III Corps area are some 150,000 Allied
infantry and combat support troops. An increasing
share of the B-52 effort has been directed to the
Saigon area.
The fighting in Saigon has had a significant
impact on the city's economic life. The toll in
terms of physical destruction, human casualties,
and personal upheaval has been as severe as that of
the Tet offensive. With some 5,400 civilian cas-
ualties through mid-June, nearly 180,000 refugees,
and about 19,000 destroyed residences, the city's
limited administrative facilities are being heavily
taxed. Production and business activity in the
city have declined, and shortages of skilled labor --
the result of mobilization -- have become serious.
Ample supplies of basic commodities are available,
and the price level has remained remarkably stable.
Note: This memorandum was produced solely by CIA.
It was prepared jointly by the Office of Economic
Research and the Office of Current Intelligence and
was coordinated with the Office of National Esti-
mates and the Director's Special Assistant for Viet-
namese Affairs.
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Although the enemy's offensive against Saigon
has tapered off and still has not yielded any
significant dividends, there are indications that
these attacks may be resumed. Thus far, most of
the city's inhabitants have pursued their normal
daily routines and have not displayed any panic.
But strains are developing, and a resumption of
the seige could lead to a serious deterioration of
morale, as well as of the city's economy.
Given the magnitude of its problems, the South
Vietnamese Government has made considerable prog-
ress in coping with the effects of the attacks.
Refugees have been fed and shelter has been pro-
vided, but housing reconstruction has been slow.
The cumulative effects of the housing and refugee
situations could become serious, however, if there
is a new round of fighting and construction activity
does not pick up.
Despite the heavy personnel losses by the Com-
munists, they can probably continue to get replace-
ments from current levels of infiltration and re-
cruitment for some months to come and maintain the
offensive on at least current levels.
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Objectives of the Current Attacks
1. The objectives of the current Communist
offensive in South Vietnam were to bring about a
fundamental change in the balance of military/
political forces in the country, to undermine the
position of the South Vietnamese Government, to
weaken US resolve to continue the fight, and thus
to enhance significantly the bargaining position
of the North Vietnamese in Paris. The present
strategy probably results from a decision in mid-
1967 to forgo protracted warfare and to expand the
level of combat in 1968 in the hope of bringing
the Allies to the conference table under circum-
stances favorable to the Communists. Such military
pressure was to be coordinated with political and
subversive activities designed to broaden the base
of the National Liberation Front while eroding the
position of the government of South Vietnam. The
launching of the Tet offensive, the recent prolife-
ration of front organizations (highlighted by the
creation of the Vietnam Alliance of National,
Democratic, and Peace Forces), and the agreement
to talk without a complete cessation of bombing
have all been tactical maneuvers directed toward
these objectives.
2. The attacks against Saigon, which began on
5 May and continued with decreased intensity through
the third week in June, represent a continuation of
this grand strategy. While the US military command
in Saigon does not consider such attacks to have
great military significance, the high casualties
suffered by the Communists indicate that they con-
sider the attacks vital to their present fight-talk
strategy. Through the employment of a twofold
strategy of economy of force and urban guerrilla war-
fare with concurrent standoff bombardment, they
seek to maintain constant military pressure and
inflict maximum damage to the city at a minimum
cost to themselves. This type of combat generally
precipitates an Allied response which causes further
considerable damage to residential and commercial
property. By demonstrating their capability con-
tinually to penetrate the capital in force and in-
discriminately to shell its greater metropolitan
area almost daily, the Communists seek to undermine
the confidence of Saigon's inhabitants in the ability
of their government to provide security.
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3. The Communists have not overlooked the
psychological impact of these attacks. By dis-
crediting the Saigon regime at the very seat of its
power, the Communists hope to legitimatize their
demands for a share of power in the South and
smooth the way for the establishment of a coalition
government. Indeed, the specter of armed entry at
will into the capital of the government that claims
sovereignty and authority over South Vietnam is a
powerful weapon in Communist international maneuver-
ing for the role of chief spokesman for the South
Vietnamese people. By imposing heavy strains on
the South Vietnamese Government and disrupting the
city's life, the Communists appear to be trying to
create conditions for a general uprising in the
belief that if they can break the will of the people
in the city, the government will have no real base
of support left. Enemy strategists also apparently
believe that by exerting constant military pressure
on Saigon and other urban areas, a large share of
the Allied forces will continue to be committed to
the defense of populated areas, thereby enabling
the Communists to assume greater control of the
surrounding countryside by default.
The Communist Commitment
Force Structure Deployed Around Saigon
4. The Communists have committed a sizable
number of troops to the battle around Saigon. An
estimated 37,000 men (nearly one-fourth of the total
Viet Cong and North Vietnamese Main and Local Forces
in South Vietnam) were in the III Corps area at the
start of the Saigon attacks early in May, most of
whom have been directly or indirectly involved in
the Saigon offensive.* Perhaps 15,000 of these
troops were in the Saigon area participating in or
providing direct support for the attacks on the city.
(For locations of Communist units around Saigon, see
Figure 1.) In addition, nearly 6,500 Communist
guerrillas are estimated to be operating in the
provinces adjacent to Saigon.
In addition to these troops, it is estimated that
about 30,000 to 40,000 Rear Services troops are
located in the III Corps area and adjacent areas of
Cambodia.
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5. Although the enemy launched coordinated
attacks against military bases and province and
district capitals throughout South Vietnam on 5 May,
the principal action has taken place in and around
Saigon. The heaviest fighting in Saigon was concen-
trated in the 5th, 6th, and 8th Precincts in the
Cholon sector of the city (see Figure 2). In these
precincts, battalion-size Viet Cong units staged
raids against police stations and public and service
facilities. Particularly heavy fighting in the 8th
Precinct occurred south of the Saigon River near
the "Y-Bridge" area, involving an enemy force iden-
tified as the Phu Loi Battalion. This fighting later
spread to Saigon's 4th Precinct. Sizable clashes with
the enemy also occurred near the Phu Tho race track
in the 5th Precinct, where prisoner interrogations
identified the enemy force as elements of the 271st
and 272nd Viet Cong Regiments. This fighting repre-
sents the strongest and deepest penetration into
Saigon by a Viet Cong Main Force unit. Other areas
of heavy fighting in the Saigon area occurred at the
Saigon Golf Course, the Bien Loi and Gia Dinh Bridges,
and the French cemetery adjacent to Tan Son Nhut air-
base.
6. Viet Cong and North Vietnamese Main Force
units appear to be deployed in an outer ring around
Saigon that enables them to protect the Communists'
major lines of communication and base areas and to
provide support to an inner ring of independent Main
and Local Force units operating against Saigon proper.
The units in the outer ring are primarily concerned
with protecting the three major routes used for in-
filtrating men and supplies to the Saigon area. The
northern route, extending from the Phuoc Long Province
border with Cambodia southward into War Zone D, is
used primarily for the movement of troops and is pro-
tected by elements of the 7th North Vietnamese Divi-
sion. Movement along this route has been expedited
this year by the construction of a north-south road
in Phuoc Long Province. Elements of the 88th North
Vietnamese Regiment and the 275th Viet Cong Regiment
sit astride the second major route which extends
southward from War Zone C in northern Tay Ninh Prov-
ince toward Saigon. The third route, which runs
from the Parrot's Beak point where Cambodian terri-
tory projects into the country directly west of Saigon,
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splits in two; the upper portion extends through Hau
Nghia and is protected by units of the 9th Viet Cong
Division and three Viet Cong battalions. The southern
route extends into Long An Province and is defended
by six Main and Local Force battalions. The 5th
Viet Cong Division is deployed along a lesser line of
communication which runs across Long Khanh Province
east of Saigon.
7. The outer ring, comprised mostly of units of
regiment and division size, thus is enabling the
food, supplies, and replacements to reach the smaller
battalion-sized units in the inner ring that are
engaged in the harassment and probing of Saigon.
The enemy's ability to rotate units between the outer
and inner rings and in and out of Saigon in this
manner has proved to be a successful tactic for main-
taining military presence despite heavy casualties
and Allied interdiction of their lines of communica-
tion.
Casualties Incurred
8. The Communists, however, have been paying a
high price in casualties for their attacks on Saigon.
During the month of May, the reported number killed
in action (KIA) in the Saigon area totaled nearly 11,000
men -- nearly half of the reported killed in action
countrywide.* In February, during the Tet offensive,
enemy KIA's in all of the III Corps represented less
than one-third of total Communist KIA's. During 5-13
May -- the period of the first phase of the May-June
Saigon offensive and of the heaviest fighting.--
enemy KIA's were reported at about 6,200, or nearly
700 per day. During the remainder of the month, some
4,700 enemy KIA's were reported, or about 260 per
day. Enemy dead through the third week of June, when
the current campaign appeared to phase out, probably
were at about the daily rate for the last half of
May.
* These are preliminary MACV figures and are subject
to change as additional information becomes available.
MACV reduced the reported number of enemy troops
killed in action in February -- when a similar type
of fighting took place -- to compensate for possible
inflation and inclusion of civilians and laborers.
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Major Areas of bround Fighting in and Around Saigon: 5 May-IS June I' b
GG~ F-GTl1 RSE
Police precinct
Cholon district
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Ong oil]
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9. It is likely that those responsible for
coordinating the current offensive anticipated heavy
losses and included in their plans a steady flow of
replacements necessary to maintain the combat effec-
tiveness of participating units. Analysis of recent
infiltration group designators indicates that this
may well be the case. Of at least 150,000 infiltra-
tors scheduled to arrive in South Vietnam during the
first eight months of 1968, 37 percent, or about
55,000 men, were allocated to the COSVN or III Corps
area as filler and replacement personnel. The large
allocation of men to this area reflects enemy efforts
to deploy such troops to the areas where he has sus-
tained the heaviest casualties.
10. In addition to infiltrating personnel into
the III Corps area, the Viet Cong and North Vietnamese
force structure also is being maintained by upgrad-
ing local guerrillas, recruitment, and impressment.
The enemy also may be moving Main and Local Force
units into the III Corps area from the II and IV
Corps areas. There is evidence that at least three
battalions have moved from the Delta to the Saigon
area and that two regiments are moving down from the
II Corps area.
Logistical Requirements
11. While Communist casualties resulting from the
Saigon offensive have been high, logistical costs
have been relatively low. Even the highly dramatic
shelling of the city has not required a large expendi-
ture of ammunition. During the period 5 May through
15 June, approximately 265 shells -- an average of
only about 6 per day -- impacted in Saigon, in adja-
cent Gia Dinh city, and around the Tan Son Nhut air-
base (see Figure 3) . Heavy attacks with 122-mm
rockets occurred on 5 May with 31 rockets and from
9 to 11 June with 45 rockets. Twelve 107-mm rockets
were reported from 6 to 15 June. The balance of the
reported impacted shells were 82-mm and 60-mm mortar
shells and 75-mm recoilless rifle shells. The maxi-
mum effective range of heavy weapons used against
Saigon is shown in the following tabulation:
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Range
Weapon Meters Mi les
60-mm mortar 1,530 1.0
82-mm mortar 3,040 1.9
75-mm recoilless rifle 6,675 4.1
10 7-mm rocket 8,800 5.5
122-mm rocket 11,000 6.8
Nearly 95 shells fell in and around Tan Son Nhut.
About 115 impacted in the 1st, 2nd, and 8th Precincts,
where most of the city's diplomatic and a large part
of its commercial and industrial facilities are
located. Because of the concentration of government
buildings in the 1st Precinct, the Viet Cong have
declared its eastern half (and possibly a portion of
the 2nd Precinct) to be a "free firing zone" into
which shells and rockets may be fired at will.
12. It is estimated that enemy heavy weapons
expenditures and losses resulting from discoveries
of caches in the Saigon area from 1 May to 15 June
averaged less than one short ton per day. The expen-
ditures of small arms ammunition in the same areas
have been estimated at a little more than one short
ton per day, bringing enemy resupply requirements up
to about two short tons per day. This daily expendi-
ture represents only about 10 percent of the current
Communist requirements for Class V munitions in South
Vietnam. Moreover, the total reported expenditure
of heavy weapons ammunition was less than 15 percent
of the total reported in the III Corps area during
the Tet offensive.
13. The sustained nature of the May-June attacks
against Saigon presented the enemy with a different
logistics problem than in previous attacks, notably
the Tet offensive. In the Tet attacks, units were
sent into the city with several days' supply of food
and ammunition, expecting further needs to be supplied
by the people after a general uprising. Ammunition
was also pre-positioned in certain caches within the
city to be used by the infiltrated units. This method
of logistical support subsequently proved inadequate
because the people failed to rally to the side of the
Viet Cong. In the current offensive, the enemy appears
to be reducing his dependence on a logistical resupply
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Major Impact Areas or Lummunlst zmelllnq: a iv-ay- i June +Yuo
Tan Son Nhut
Air Base
eriBpnh
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4, .50-10G
- Police precinct
Cholon district
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10-:'5'S e is
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Ar Tae Ch #tJt Z5-50
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system by rotating units between the inner and outer
rings around the city. Thus the units in combat in
the inner circle are not reequipped as such, but,
rather, are replaced by fresh units from the outer
circle.
14. The origin of the supplies moving into the
Saigon area is not clear. Most of the food probably
is obtained within South Vietnam, although some may
be procured in Cambodia. There are indications that
some arms and ammunition are brought in over Cambo-
dian roads and waterways. It is possible that this
material was merely stored in Cambodian border areas
after transit over roads and trails in Laos and South
Vietnam. On the other hand, it may have been infil-
trated to Cambodia by sea, or small arms and ammuni-
tion may have been smuggled from Cambodian army stocks.
It is also possible that arms and ammunition may have
been broght directly to the Saigon area over the
Communist road network through Laos and South Vietnam.
Sea infiltration directly into South Vietnam has
probably not been utilized to any extent.
15. Current Communist requirements for supplies
in the Saigon area do not appear to be of a magnitude
that would tax the capabilities of their local logis-
tic system under more normal circumstances. Regard-
less of the low level of expenditures, however, the
aggressive posture of Allied maneuver units and
their supporting arms appears to be seriously affect-
ing supplies of heavy weapons, ammunition, and the
positioning of heavy weapons units in close-in areas.
Rocket and mortar barrages continue to be lighter than
expected, and prisoners consistently report supply
difficulties. Allied forces recently have also been
successful in uncovering enemy caches of munitions
that could have supported Communist attacks on
Saigon.
Allied Response
16. Arrayed against the Communist forces in the
III Corps area at the onset of the offensive early in
May were nearly 150,000 maneuver forces (infantry
and combat support personnel) , of which two-thirds
were South Vietnamese (ARVN) forces and most of the
remainder, American troops (see Table 1 and Figure 4) . *
'F Total Allied strength in the III Corps area, in-
cluding all kinds and types of units, amounted to
nearly 418,000 on 1 May.
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An estimated 13,800 ARVN marine and infantry and
combat support troops reportedly were located in Gia
Dinh Province, of which about 11,000 were assigned
to the Saigon area. Comparable figures for other
Allied forces deployed around Saigon are not available.
Allied Military Strength in the III Corps Area
as of 1 May 1968
Maneuver and Combat
Support Personnel
South Vietnamese forces 93,500
ARVN regular forces 47,000
ARVN marines 4,500
Territorial units 42,000
US ground forces 50 , 300
Other Free World forces 5,600
Australia 4 , 200
Thailand 900
New Zealand 500
Total 149,400
17. Allied forces also have incurred relatively
high casualties as a result of the Communist attacks
on Saigon. Preliminary figures released by MACV
for III Corps indicate that during May the US
forces suffered 2,500 casualties and ARVN about
3,200. Of these totals,.346 US and 683 ARVN troops
were killed. While the rate of casualties for the
United States appears to have fallen off sharply
during 1-16 June, ARVN casualties reportedly are
running at about the same rate as during May.
18. Allied efforts to secure the Saigon area
actually were initiated early in April, when reports
indicated a Communist buildup for a new Saigon offen-
sive. On 7 April an Allied sweep operation labeled
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Deployment of Allied,---,Ground Units in III Corps
tiINti LUNG
915
i3Rg.. 43118
,42s~ I~FFV ~~9O 54618
June 1968
CORPS HQ.
Infantry
Division
Brigade
Regiment
Figure 4
Subordinate unit Parent unit
designations designation
CAG Civil Affairs Group
BINH DUONG fBIr t1 TUY
25 18 5 I
5 48a18
4925 `~'s~1199 ^ 1T9 Th,i
/ 3ORg,. > RIFN HC)4
HAU NUHIA
I I5Rgr.t 22 Mar(
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Toan Thang (Complete Victory) was launched through-
out the III Corps area. The operation, which is
still continuing, involved 55 ARVN, 41 US, and about
six other Free World battalions. Toan Thang was
designed to eliminate all enemy units in the Capital
Military District while concurrently developing the
capability of South Vietnamese territorial forces
to defend and maintain the security of the rural
areas. As of 10 June, this operation had resulted
in nearly 8,100 Communists reported killed and
about 625 Allied dead and nearly 4,500 wounded.
In Gia Dinh Province alone, about 2,190 enemy and
170 Allied troops were killed. Captured enemy
troops and documents indicate that the Communists
had planned to mount strong ground operations
against Saigon during the past few weeks, but that
Allied sweeps and heavy bombing caught some of
their forces and inflicted heavy casualties and
compounded their logistics problems before any
major assaults could be launched. In an effort to
cut Communist lines of communication into Saigon
and impair Viet Cong infiltration and shelling,
thousands of additional US troops recently have been
deployed for sweep operations in the Saigon area.
19. A total of 2,637 B-52 sorties were flown
in the South Vietnam area from 4 May through 16 June,
of which 15 percent were directed at the Saigon
area. Two-thirds of the latter were flown in June
as the share of the B-52 effort against the enemy
forces concentrated around Saigon increased. The
effect of this bombing effort together with the
extensive tactical air bombing cannot be fully
evaluated, but it has undoubtedly caused some dete-
rioration in morale, destroyed valuable supplies,
and disrupted orderly military operations. There
were several reports in late June which indicated
that some B-52 strikes caused significant casualties
and disruptions.
Economic Impact
20. The present fighting in Saigon also is
having a deep impact on the city's economic life.
Still not fully recovered from the Tet offensive,
the city's limited administrative facilities are
once again being taxed by the growing civilian
casualties, the rising tide of refugees, and the
mounting physical destruction which, by mid-June,
had almost reached the scale of the February attacks
(see Table 2).
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Comparative Disruption
Generated by the Tet Offensive
and the May-June 1968 Fighting Around Saigon a/
31 Jan - 2 Ma
r 5 May - 15 Jun
Refugees
173,000
178,000
Civilian casualties
Killed
300
280
Wounded
5,700
5,100
Ho
d
using dest
amaged
royed or
18,500
18,800
a. The numbers of refugees are the peak numbers
registered with the government at any one time during
the periods' shown.
21. At the present time, some progress is being
made in the reconstruction of homes for Tet refugees,
either by the government or by the refugees them-
selves with.go.vernment allowances. The government
currently is engaged in the construction of more
than 9,000 housing units which either will be sold
to the occupants at roughly the cost of construction
or will be rented. At the almost completed Petrus
Ky housing project, which will contain 1,090 units,
633 families (of an average size of 6.5 persons)
already have moved in, with the remainder scheduled
to arrive by 22 June. A housing project at Saigon's
Lam Son Stadium has been completed and 463 families
are in place. ARVN engineers are at work on 200
planned units in the 6th Precinct, and in the 8th
Precinct US military personnel are participating in
the construction of 500 prefab units, 98 of which
were completed by 22 June. US military personnel also
are engaged in work on 800 housing units in Gia Dinh.
In the 5th Precinct the Ministry of Public Works is
nearing completion of 468 more units. Work also
is under way on a 2,000-unit project which is to
receive up to $4 million in USAID funds.
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22. Refugees from the May offensive still are
in camps. The care of these refugees originally
was assigned to the Ministry of Social Welfare and
Refugees in the Loc cabinet, but, as the number
increased, it became clear that the ministry was
unable to handle the task. Thus, in mid-May at the
suggestion of US officials, the joint US and South
Vietnamese central recovery committee, formed after
the Tet offensive, took over the work of establish-
ing and supplying refugee centers and overseeing the
distribution of money and building materials to
those whose homes had been destroyed. Refugees
from the May offensive qualify for the Tet refugee
allowance which includes ten bags of cement,. ten
roofing sheets, and 10 , 000 piasters per family.
Possibly half of the new refugees still have homes
to which they can return once security is restored.
23. Notwithstanding the cost involved and the
need to cope with several administrative prob-
lems -- such as the establishment of a central
authority to assume responsibility for care of
refugees and decisions on locations for new refugee
housing and eligibility for occupancy -- the
government has made considerable progress in aiding
the vast number of refugees in Saigon. Despite this
sizable effort, however, there still were in
mid-June some 10,000 Tet refugees in camps and an
unknown number living with friends and relatives,
to say nothing of the large number of new refugees
who still must be housed. Moreover, it is clear
that as long as the fighting and shelling continue,
the number of refugees and the strain on the govern-
ment's financial resources will continue to grow.
As evidenced by the number of refugees in camps
four months after the Tet offensive, the refugee
problem in Saigon will remain long after the
military action ceases.
24. Except for short-term price rises, primarily
resulting from interruptions to deliveries of
perishable foodstuffs from the countryside, the
Saigon price level has remained remarkably steady
during 1968. Despite a sharp increase in the rate
of growth of the money supply this year and
increased economic dislocation, the overall
increase in the price level during the first six
months of 1968 was about the same as for the same
period of 1967.
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25. The fighting in and around the city was
reflected in price levels in the Saigon market.
During the first half of February, at the height
of the Tet offensive, food prices in Saigon rose
about 80 percent as deliveries slowed to a trickle.
However, the price level dropped dramatically as
the fighting in and around Saigon waned. During
April, food prices began rising again because of
continued interdictions of traffic on Route 4
from the Delta and as a result of consumer hoarding
in anticipation of renewed Communist attacks.
Prices of locally manufactured nonfood items also
increased as production failed to return to pre-Tet
levels. Prices continued their upward movement
with the onset of the 5 May attacks, rising 14 per-
cent between 29 April and 3 June. The one major
exception has been the price of rice, which has
been steady or lower because of the ample stocks of
imported rice. Higher prices for food and items
such as charcoal and firewood can be traced directly
to interruptions in deliveries caused by the fighting
in the 5th and 6th Precincts of Saigon. Produce
trucks traveling on the country's major commercial
artery -- Route 4 from the Delta -- pass through
these precincts.
26. The decline in production of goods manu-
factured in Saigon has resulted from the war-related
absenteeism, plant damage, and lower demand. Almost
all firms in the Saigon area experienced absenteeism
during the Tet offensive and again after the fighting
began in May. At the height of the attacks in May,
it was estimated that 10 to 15 percent of the
roughly 335,000-man industrial and commercial labor
force in the metropolitan area did not report for
work. Moreover, with reduced incomes and the
prospect of continued insecurity, there has been
a general decline in demand. Plant damage -- most
of it from the Tet offensive -- also has reduced
industrial output. Little other damage to property,
except for housing, has been reported during the
present fighting, and the major utilities are intact.
Early in the offensive, the Cho Quan powerplant in
Cholon was shelled repeatedly, but damage was slight.
Rocket fire hit the area of the Thu Duc water
treatment plant on 4 and 23 May, the latter attack
causing a 50-percent reduction in Saigon's water
production for 24 hours.
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27. There currently is no general manpower
shortage in Saigon, and, in fact, there still are
some local pools of unemployment created by the
destruction of plants during the Tet and May-June
offensives and by the curfew. There are, however,
shortages of skilled labor. In response to the
February offensive, all reservists who had completed
less than five years of active duty were called
back to service. This measure dealt a blow to
many private firms and government organizations,
especially those that had chosen veterans for key
positions in order to avoid losses via the draft.
The recent general mobilization measures will have
the same effect. These shortages cannot be relieved
by the large number of new refugees and war-generated
unemployed. At the beginning of June, for example,
the Director of the Saigon Metropolitan Water
Office advised the Ministry of Public Works that
unless his critical. operating personnel were
deferred from the draft, he would be forced to close
the water treatment plant. In addition, a resumption
of fighting in Saigon could cause an exodus of
civilians from Saigon to more secure areas in the
provinces and contribute further to the shortage
of skilled workers. Such an exodus did not occur
during the Tet offensive or in the May-June
campaign.
28. Food shortages, physical damage, and man-
power problems are by no means the only measure
of the adverse effects of the recent attacks on
the economy of Saigon. As a result of the current
Communist attacks, the economy has slipped back
into the stagnant and depressed state which
followed the February offensive. Economic
activity in the private sector had just started
to show some signs of recovery from the Tet
offensive when the May attacks were launched. The
whole private sector is suffering from a traumatic
shock to its confidence in its ability to operate
normally. Businessmen have cut inventories and
are scrambling to achieve liquidity. Import
activity has been greatly reduced as importers
adopt a wait-and-see attitude. Consumers have
restricted their spending, preferring to hoard
their money. Moreover, the remarkable stability
of black market currency and gold prices during
the recent period indicates that, for the time
being, most people are content to hold their cash
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in the form of piasters. These developments
have had a deflationary impact, a surprising
development in view of the substantial amount
of new money created (up 5 billion piasters
during 1-25 May alone, compared with 11 billion
piasters during 31 January-30 April) as a result
of lower government revenues and increased govern-
ment expenditures for mobilization and reconstruc-
tion.
Impact and Outlook
29. As a military campaign, the recent
Communist pressure on Saigon has not achieved any
notable success. Communist casualties have been
extremely high -- perhaps ten times as high as
Allied casualties. No military objectives have
been taken, and destruction to Allied military
facilities has been light. The much feared rocket
and mortar attacks could not be sustained.
30. At the same time, Allied capability to
react has probably improved. At US urging, the
South Vietnamese have set up a separate and unified
military command for the Saigon Military District
which includes the police and military arms.
More controls have been placed on the use of Allied
firepower -- which has caused most of the destruc-
tion -- within the city. Allied aggressiveness
in the countryside surrounding Saigon has made it
costly for the Communists to keep their lines of
communication protected. Future attacks are not
likely to be significantly more effective.
31. Furthermore, despite widespread destruction,
apprehension, and dislocation, the city -- its
economy and people -- may be able to recover and
cope with future attacks unless they prove to be
more intense and of longer duration. The population
has borne up well. Except for areas where ground
fighting took place, a general business-as-usual
attitude prevailed. Although there is hostility
toward the Allies resulting from the use of heavy
firepower during clearing operations, there is also
considerable evidence that Communist attacks have
provoked a hostile public reaction against the
Communists.
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32. Strains began to show during the May-June
attacks, and if the siege were to be reinstituted
and to continue long enough, there could be a
serious deterioration in morale and a demand for
an end to the fighting. A number of prominent
Vietnamese, including religious and business
leaders, have expressed fear that prolonged
harassment at the levels of early May or the rate
of shelling of 11 and 15 June could well produce
widespread sentiment for peace at any price. On
the other hand, the city may be learning to live
with sporadic ground attacks and light shelling.
So far, a public demand for peace has been
manifested only in Buddhist circles and by leftist
students at Saigon University.
33. There also has been criticism (for example,
in the National Assembly) of the government's
inability to stop the shelling, of the destruction
caused by Allied counteraction, and of the acci-
dental killing of seven officials by a US heli-
copter. Other factions have demanded retaliation
against Hanoi and called for an end to the talks
in Paris. Nevertheless, there still are no visible
signs of favorable popular or troop response to
Communist appeals for support, defection, or a
general uprising.
34. All indications point to a continuation,
and possibly a heightening, of the attacks against
Saigon, which will increase the city's burdens,
suffering, and hardship. A prolongation of these
attacks is likely to cause a serious deterioration
of the city's economic life. Economic activity
will decline further and food prices will rise
again, particularly if the major access routes
are interdicted. Serious disruption of the city's
economy also would pose a major threat to the
economic stability of much of the rest of the
country. This is particularly true of the III
Corps and IV Corps areas because of their economic
interdependence with Saigon. These two areas
depend heavily on Saigon as their largest agri-
cultural market and primary source of manufactured
goods.
35. The Communists would appear to have the
capability to maintain recurrent military pressure
against the Saigon area over the next few months.
Logistical requirements for this type of warfare
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are relatively small. Despite heavy personnel
losses -- 7,000 to 10,000 men per month in the
Saigon area -- current levels of infiltration
and recruitment are adequate to maintain force
levels.
36. Allied military sources believe that
the enemy is preparing for further coordinated
attacks against Saigon. On the basis of captured
documents and prisoner interrogations, it appears
that the next attack was scheduled for the end
of June or early July, but that it has been post-
poned and possibly canceled. This was to be the
culmination of the second general offensive (the
summer campaign). The third general offensive
reportedly is to take place after the rainy season
ends in late October or early November.
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Top secret
Top Secret
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