CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001700020001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 42
• Document Creation Date: December 20, 2016
• Document Release Date: December 2, 2005
• Sequence Number: 1
• Publication Date: March 20, 1958
• Content Type: SUMMARY

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CONFIDENTIAL, 'I
III
C
URRENT
INTELLIGENCE
WEEKLY
SUMMARY
NEXT REVIEW DATE
DECLASuIF1ED
CLASS. CHANGED TO:
NO CHANGE IN CLASS.
COPY NO. 14
OCI NO. 0037/58
20 March 1958
DOCUMENT
AUTH: _ HR 70-2
DAT
REVIF-WER:
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
State Department review completed
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Awe
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CONFIDENTIAL
OF IMMEDIATE INTEREST
Central government troops
are established in and around
the Caltex oil center of Pak-
anbaru, but apparently are
still engaged in clearing op-
erations in Stanvac areas to
the south near Rengat. The
government has opened the Pak-
anbaru airfield to company planes
of both Caltex and Stanvac, but
Pipeline
i i Railroad Road
I.." .MO
BURMA CAM.
IIETNAM
the Stanvac airfield near Rengat
is damaged. The Siak River is
clear, and the military has in-
formed Caltex that full-scale
operations, including the use
of tankers, may be resumed.
Army battalions, using
an overland route from Dumai,
are now arriving in Pakanbaru
IV .A _L A,Y A
MALAYA WU .OWMfa
WAW AW'
SUMATRA PaWf B""'?
$iNGAPORE N.K.)
,BTandjung Pinang
RIAU ISLANDS
CONFIDENTIAL
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CURRENT INTELLIGENCE WEEKLY SUMMARY
to replace air force paratroop-
ers who captured the town.
These forces are probably part
of a build-up for an overland
advance on the dissident strong-
holds of Padang and Bukittinggi
which may already be under way.
Six Javanese battalions are
also said to be available in
Java for an attack on Padang
and have been alerted for an
air move to Central Sumatra.
Two dissident battalions
from Tapanuli are attempting
to rendezvous with the troops
of Major Nainggolan, which num-
ber apps ximately three com-
panies and seized Medan on 16
March but withdrew southward
the following day. Nainggolan's
forces are already being har-
assed from the air and, accord-
ing to several reports, some
of his vehicles have been de-
MIDDLE EAST DEVELOPMENTS
Nasir-Saud Relations
UAR President Nasir re-
turned to Cairo on 17 March
from his three-week visit to
Damascus. A high-level Egyp-
tian emissary has gone to Yemen
with Crown Prince Badr in order
to explain Nasir's stand on
Saud to the Imam. This step
appears to indicate an unyield-
ing attitude on Nasir's part.
The 25X6
Cairo press is spreading reports
of disagreement and dispute
among Saud's councilors, es-
pecially the ex-Palestinians
Jamal Husseini and Yusuf Yassin.
It has pointed to the official
Saudi seizure of the records
of the Arab Bank in Riyadh as
an attempt to destroy the evi-
dence of the Saudi conspiracy
against Nasir.
Saud is seeking to counter
this Egyptian propaganda while
taking maximum security pre-
cautions. Mecca radio is broad-
casting detailed'statements of
his activities and whereabouts,
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stroyed. Colonel Simbolon,
the over-all dissident military
commander in Padang, is report-
edly taking one company into
Tapanuli and then will person-
ally join the Nainggolan forces.
A showdown fight between these
two forces for control of North
Sumatra may develop around
Siantar.
Some of the ten merchant
ships ordered from the USSR have
arrived in Djakarta. Apparently,
the ships cannot be placed im-
mediately into service since ar-
rangements are being made for
their alteration in the Sura-
baya dockyard for service in
Indonesian waters. The ships
were purchased under the terms
of the $100,000,000 Soviet loan
agreement which was ratified
by Indonesia in early February.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
there are no signs that e
King is losing control over the
sources of power in the army
and security forces. Saud, in
addition to moving what appear
to be younger, pro-American of-
ficers into key army staff
positions and increasing the
authority of his son, Prince
Fahad, the defense minister,
has asked the United States
military mission and the Iraqis
to undertake the training tasks
abandoned by the Egyptians
last week.
The alignment of Yemen with
the United Arab Republic (UAR)
in a new organization called
the United Arab State (UAS)
probably marks the opening of
a now phase rather than the
closing of the clandestine
struggle between Saud and the
Egyptians for control of Yemeni
policy.
UAR Developments
Nasir's three-week stay in
Syria and 30 speeches produced
a wave of popular enthusiasm
for the United Arab Republic
and resulted in the emergence
of ex-Syrian G-2 chief Sarraj
as Nasir's proconsul for the
Syrian region. Officially miL--
ister of interior for the Syrian
region, Sarraj now occupies the
office space traditionally re-
served for the prime minister
and for the first time his pic-
ture is being prominently dis-
played throughout Damascus.
Nasir has placed all security
forces, with the exception of
the army, under Sarraj's In-
terior Ministry.
The radical nationalists
and masses view the UAR as a
great step forward toward the
long-desired Arab unity. Con-
servative elements, while re-
garding Egyptian ascendancy as
distasteful but essential:med-
icine for Syria's economic and
political ailments, welcome
the suppression of the Commu-
nists and transfer of army pol-
iticians to civilian jobs.
The public enthusiasm for
the "new order" and the osten-
tatious manifestations of vig-
orous leadership in Syria are
reminiscent of the era follow-
ing Syria's first military coup
in 1949, when Col. Zaim seized
the reins of government. With-
in two months, the public grew
weary of the regime's incom-
petency and the lack of real
progress, As at that time,
civilian politicians such as
Akram Hawrani--Zaim's accom-
plice--and President Quwatli
have been irked by many of the
new political appointments and
the downgrading of their friends
from real power.
Gaza Strip
Increased reconnaissance
by Israel over its borders, plus
current spring maneuvers in
southern and central Israel, have
aroused Arab apprehensions, par-
ticularly in Syria and Jordan.
In the Gaza strip a new
legislative council was estab-
lished on 15 March accompanied
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
by celebrations reflecting hope
among the refugees that the
council was the first step to-
ward establishment of an effec-
tive Arab Palestine government,
No moves have yet been made to
recognize the Gaza council as
such a government or to affil-
iate it formally with the UAR.
Nasir may visit the str._,_ in
person in the near future.
SUMMIT CONFERENCE MOVES
Soviet Maneuvers
Soviet leaders now are try-
ing to further the impression
that the USSR and the West are
moving toward agreement oa at
least some key issues, thus
making substantive preparations
for summit talks as demanded
by the West unnecessary. So-
viet diplomats are privately
hinting that the Kremlin is
ready to modify its position
on some issues after talks at
the summit get under way, and
is prepared to forego neutral-
ist participation at summit
talks as well as at a foreign
ministers' meeting.
On 17 March the counselor
of the Soviet Embassy in Paris,
after reiterating Soviet objec-
tions to substantive prepara-
tions, told American officials
that the best way to determine
the possibility of East-West
agreement would be for the
heads of government themselves
to discuss substantive questions.
He argued that the USSR--"just
like" the United States--might
be holding back compromise
solutions for bargaining pur-
poses, and stated that "Bul-
ganin might be able to agree on
things to which Gromyko could
not."
The Soviet diplomat assert-
ed that, while it "was agreed
of course" to have equal East-
West representation at a heads-
of-government meeting, Moscow
no longer considers neutralist
participation in summit talks
essential. In his view, the
United States, Britain, France,
and Italy would represent the
West, and the USSR, Poland,
Czechoslovakia, and Rumania
would participate on the Commu-
nist side. In early March, So-
viet officials indicated in
private conversations that the
USSR would be prepared to forego
neutralist representation at a
foreign ministers' session and
that such a meeting could even
be held on a four-power basis.
The Soviet Foreign Ministry,
in a statement of 15 March, re-
peated the proposal mentioned
briefly in Bulganin's 6 March
letter to President Eisenhower
to link a ban on military uses
of outer space with liquidation
of military bases on foreign
territory. The suggestion to
guarantee implementation of such
an agreement with "due interna-
tional control" under UN auspices
and to set up a UN agency to
facilitate international coop-
eration in outer-space research
is apparently intended to give
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CURRENT INTELLIGENCE WEEKLY SUMMARY
the impression that East-West
differences are narrowing.
The formal inscription by
the USSR of this proposal on
the provisional agenda of the
next General Assembly--sched-
uled to open in September--
specified that, after agree-
ment "at least in principle"
had been achieved at a summit
meeting, the General Assembly
could work out a general in-
ternational agreement.
Moscow probably expects
this move to still criticism
arising from its denunciation
on 14 March of the American
proposal to hold a procedural
meeting of the UN Security Coun-
cil in order to discuss means
for resuming disarmament talks.
Despite the public denunciation,
Soviet diplomats continue to
hint privately that the USSR
may yet agree to action, such
as the United States proposes,
provided it does not detract
from the prospects for a summit
meeting.
Bulganin's letter of 17
March to Prime Minister Mac-
millan contained no concessions
on the agenda for a summit meet-
ing. Bulganin charged that Brit-
ain and the United States were
delaying a high-level conference
while "hastening the implementa-
tion of practical steps in the
sphere of war preparations."
Western European Attitudes
Public pressure on the
British Government for quick
agreement on summit talks has
eased somewhat, as more com-
mentators question whether Mos-
cow really wants talks. Brit-
ish and European public opinion
still appears to want and ex-
pect talks to be held, however.
Preliminary governmental studies
on European security plans re-
flect different approaches to
substantive issues and have
brought out French suspicions
of British intentions.
While the Macmillan govern-
ment remains under heavy attack
on foreign policy, the first
substantial signs of a counter-
attack and reaction have ap-
peared. In an evident attempt,
to offset the extreme leftists'
and pacifists' demands for uni-
lateral British disarmament, a
group of 175 MP's, including
17 Conservatives, on 13 March
introduced a motion in the
House of Commons containing
the relatively modest demand
for establishment of a UN au-
thority to administer limita-
tions and an eventual ban on
both nuclear and conventional
armaments. A motion by 100
Tory MP's directly opposed any
unilateral British disarmament
moves. Most interpretations
placed on the results of widely
publicized polls of university
students conclude that youth,
however affected by desires
for disarmament, is not yet
overwhelmed by pacifism as in
the 1930's,
British press comment be-
fore receipt of Bulganin's 17
March letter to Macmillan
showed pronounced irritation
with the latest Soviet diplo-
matic-propaganda moves, espe-
cially tying control of outer
space with the dismantling of
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JLCLtCL 1
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
all American bases abroad.
There was an increasing dis-
position to blame the USSR for
delaying progress toward summit
talks and even to question
whether Moscow genuinely desires
them. Elsewhere in Europe, pub-
lic opinion shows little change,
although the American Embassy
in Brussels reports a growing
appreciation there of the merits
of the Western position on sum-
mit preparations.
The direction of the Brit-
ish Foreign Office's "disengage-
ment" study reflects the heavy
pressure on the Macmillan gov-
ernment to offer positive pro-
posa.ls for easing cold war ten-
sions. The Foreign Office is
now studying a plan for a small
demilitarized area on each side
of the present East-West border
in Germany, in advance of agree-
ment on reunification. Foreign
Secretary Lloyd may sympathize
with such a plan, but the Min-
istry of Defense considers pres-
ent Foreign Office proposals
for modified forms of disen-
gagement as too dangerous,
French Foreign Ministry
officials express alarm at such
British sentiments, and assert
that the generally "soft" Brit-
ish attitude threatens to up-
set the political balance in
France and disturb the whole
structure of Western defense.
The French approvingly report
that, in contrast, the German
disengagement study is focus-
ing on establishing a demili-
tarized area in the pres-
ent Soviet zone of Germany
and in adjoining satellite
territory only after reuni-
fication, which would accord
with the Western position
at the 1955 Geneva foreign
ministers' conference.
FRENCH POLITICAL SITUATION
The government's 282-to-
196 victory in the 18 March
confidence vote merely post-
poned a final decision on con-
stitutional reform and leaves
unresolved the basic differences
within the coalition, which is
increasingly split over the
Algerian question.
A wide range of respon-
sible opinion in France is
speculating on the possibility
of a return to power of General
de Gaulle. He still insists
on assurances that the assembly
would give him a free hand to
effect a complete reform of
French political institutions,
and the deputies still appear
reluctant to give up their
prerogatives. Nevertheless,
some political leaders profess
to see a growing trend in the
assembly and in the Council of
the Republic for his investiture
as premier. While some of this
scare reporting is probably
aimed at getting firmer Amer-
ican support on North Africa,
the continuing impasse in
France's North African problems
does foster a political atmos-
phere conducive to a "strong-
man" solution.
The Independents have taken
a strong anti-Tunisian stand
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25X1
25X1
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Nome SECRET V"EW
CURRENT INTELLIGENCE WEEKLY SUMMARY
and their ministers have threat-
ened to resign from the cabinet
despite -their support of the
government in the 18 March con-
fidence vote. This may be a
matter of tactics, but with the
Socialists considering a less
rigid policy toward Algeria,
the cleavage within the govern-
ment may be deepening at a time
when public opinion is becoming
mono polarized and more frus-
trated.
In the meantime, Gaillard
faces further debate on his
controversial proposals for
constitutional and electoral
reform. He has postponed a
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new airing of the veterans'
pensions issue until 28 .'March
in the hope that the prospect
of the spring recess scheduled
to start at the end of that
day's session will discourage
rebellious deputies who might
be willing to have a showdown
on this explosive issue. Gail-
lard seems intent on holding
on as premier, at least until
the assembly quits for the
cantonal and senatorial elec-
tions. However, he has given
no indication of any willing-
ness to assert the leadership 25X1
necessary to restore confidence,
in the parliamentary regime in
France.
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nge NINON;
CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
MIKOYAN REVIEWS SOVIET ECONOMIC POLICIES
Anastas I. Mikoyan, in a
pre-election speech to his Ar-
menian constituency on 11 March,
took an approach reminiscent of
Khrushchev's in its theoretical
innovations and disregard for
dogma. He reviewed the domestic
policy innovations of the post-
Stalin period and strongly
linked increased personal con-
sumption by the Soviet people
to the goal of catching up withi
the United States. He set forth
the goal of catching up with
the West in retail trade turn-
over as one attainable in the
"historically near future."
Alluding to policy disputes
in the presidium, he pointed up
the absurdity of the belief of
some "famous old party leaders"
that, because the means of pro-
duction are the base of the So-
viet economy, the USSR should
overtake the United States in
steel production before over-
taking it in production of meat,
milk, and butter, Mikoyan
stated that there is no reason
to delay catching up in agricul-
steel is achieved. He gave as
his reasons the great hidden
potentialities in agriculture,
the fact that agricultural goals
are being gained without elimi-
nating capital investments in
metallurgy, and the fact that
food is produced for the labor
force, "which is after all the
basic production force in the
society." Earlier disputes, such
as the differences in the presid-
ium over the new lands program,
were also discussed by Mikoyan.
Mikoyan appeared to go out
of his way to praise Khrushchev
for his initiative and keenness
in developing the new lands pro-
gram. He also endorsed Khru-
shchev's machine tractor station
reorganization as the "greatest
event in the life of our country-
side since collectivization."
Establishing a goal of
catching up with the West in re-
tail trade turnover per capita
in the "historically near future"
indicates that the present policy
of significantly improving the
consumer's lot--seen in the agri-
culture and housing programs
particularly--is continuing un-
abated, and may be stepped up
further. Catching up in this
field is a tremendous task and
has not been stressed previously.
Mikoyan holds that such a course
does not involve abandonment of
the traditional emphasis on in-
vestment and heavy industrial
growth, although attainment of
this goal implies a growing im-
portance of consumption relative
to investment.
The Soviet leadership appar-
ently intends to push a consumer
program while maintaining high
industrial growth rates rather
than pursuing maximum industrial
tural products until parity at all costs. Such a
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JCI.I'cfr 1
%Now
policy is seen in
Khrushchev's rather
modest 15-year in-
dustrial forecasts
and Mikoyan's state-
ment last year that
Soviet industry
would be growing at
the rate of about 7
percent annually.
Former rates were
much higher.
:a dealing with
intl..- Y.%tional af-
fair:, ; Mikoyan, quot-
ing lioerally from
US News and World
Report, Walter Lipp-
man; and Fortune,
made well-stated
CONSUMPTION AND RETAIL SALES US - USSR
( 1956 DOLLARS
CONSUMPTION PER CAPITA
- RETAIL SALES PER CAPITA*
1950 1520 1956
USSR us USSR us
* The comparison of retail sales is necessarily approximate.
20 MARCH 1958 80319 4
pitch to the whole non-Commu-
aist world for increased trade.
He noted American concern over
the domestic economic situation,
Western European fears over the
effect of an American recession,
the continuing growth of Commu-
nist international trade, and
;.he actual advantages--like the
low interest rates for bloc
credit--of Communist bloc -
Afro-Asian trade and aid. "Am-
erican monopolists and war prof-
iteers" received'the propaganda
treatment usually accorded them.,
by Soviet leaders in such a
speech. (Pre-
pared by ORR
published program for
the seventh congress of the
League of Yugoslav Communists
in April shows that the Yugo-
slavs will reaffirm the views
which in the fall of 1956 re-
vived their ideological con-
flict with the USSR. To avoid
provoking Moscow unnecessarily,
however, Tito is making public
efforts to minimize his dif-
ferences with the USSR. The Yu-
goslavs hope that continuing
active support for Soviet
foreign policy will go far to
counter Moscow's anticipated
irritation over the aggressive
presentation next month of the
Yugoslav "road to socialism."
The party program published
on 13 March implies strong
criticism of the Soviet bloc
for failing to recognize
changes in the contemporary
world, and it emphatically re-
jects the ideological superior-
ity accorded the USSR by the
other Communist states. Con-
trary to current Soviet dogma,
it denounces those who regard
as "revisionism" every ef-
fort toward further develop-
ment of Marxist thought and it
declares as harmful the view
that only Communist parties
have a monopoly on forms
of progress toward social-
ism.
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JI/l,l C/ 1
,"moo .
CURRENT INTELLIGENCE WEEKLY SUMMARY
Remarks preparatory to the
party congress have left little
doubt that next month Yugoslavia
will again present its "road
to socialism" as the most pro-
gressive and up to date in the
Communist world. In a speech
on 7 March, Vice President
Kardelj, Yugoslavia's leading
ideologist, highlighted dif-
ferences with Soviet bloc
theoreticians when he attacked
"persons" in Eastern Europe who
are "enclosed within narrow
dogmatic schemes and ideological
conservatism" for saying that
Yugoslavia should not have
developed its system of workers'
self-management so quickly.
Kardelj in effect replied that
the Yugoslav workers' council
system had been strengthened
rather than weakened through
its rapid development.
Possibly in an attempt to
soften the impact on the Soviet
bloc of both the party program
and recent public statements
extolling'-the Yugoslav "road
to socialism," Tito told-Cyrus
Sulzberger of the New York Times
on 28 February that here ware
no ideological differences be-
tween Belgrade and Moscow, but
only differences in methods,
Khrushchev, however, as recent-
ly as 21 December recognized
the existence of "ideological
differences" with Belgrade.
Tito's refusal to discuss the
issue of Stalinism in the USSR
with Sulzberger was probably
influenced by his desire to
avoid provoking a sharp Soviet
reaction.
On 16 March, moreover,
Tito linked himself unreserved-
ly with the Soviet position on
summit talks. Abandoning the
view Belgrade had been adopting
recently with regard to the
attitudes of East and West on
the talks, Tito publicly accused
the West of "sabotaging" and
evading the preparatory talks
agreed to by the USSR. While
this new anti-West stand may
partially reflect Belgrade's
frustration over receiving
little Western support for
participation in summit talks,
Tito no doubt hopes that his
demonstration of affinity with
Soviet foreign policy at this
time will mollify Moscow's
anticipated displeasure over
Yugoslavia's projected party
program.
Tito alluded to "certain
things" that "are casting a
shadow" on Yugoslav-Soviet
relations, and added that the
Yugoslavs do not approve of
the virtual blackout the Soviet
press has adopted this winter
regarding Yugoslav developments.
Delegates of more than 30
Communist parties meeting in
Prague announced on 11 March
that a number of parties will
publish a "theoretical and in-
formative" monthly periodical
as an international organ for
world Communism. A compromise
has apparently been reached
between such parties as the
Czech, East German, and British,
which have demanded some cen-
tral international Communist
guidance, and those "independ-
ent" parties, such as the Polish
and Italian, which fear any
international publication might
be used by the USSR to impose
conformity.
The terms of reference of
the new journal suggest that
it will not publish "directives"
but is to be a clearinghouse of
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ideas. Unlike its predecessor,
the Cominform journal, the new
publication is not the mouth-
piece of an international
Communist organization. It
appears to require simply an
editorial board with a number
of sponsoring parties for the
publication as a whole. The
brief announcement from Prague
invited parties not attending
the founders' meeting to "join
on a footing of equality or
take part in the publication
and work of the journal in any
other form that suits them,"
indicating approval of a loose
association of parties not sub-
ject to strict discipline.
British, French, Indian,
Argentine, Polish, and Chinese
Communists reportedly were also
among those participating at
Prague.
The USSR probably believes
the new publication can be
effectively used to stress
agreement on Marxist-Leninist
fundamentals. For the purposes
of the journal, Moscow may
moderate its strident attacks
on international Communist re-
visionism which tend to alienate
Polish Communists and to height-
en Yugoslav antipathies.
The establishment of the
journal implements an accord
reportedly reached among most
of the Communist parties which
attended the 40th anniversary
celebrations in Moscow. Strong
Polish and Italian objections
at that time to the establish-
ment of a "directive" publi-
cation like the Cominform journal
may have been assuaged by Soviet
assurances that the new period-
ical would be purely informative.
The Polish and Italian parties
will probably remain skeptical
and sensitive to any Stalinist
tendencies evident in the jour-
nal. The visit of high-level
Soviet party officials to Italy
in late February and early
March may have been for the pur-
pose of overcoming Italian res-
ervations.
While the Yugoslav press
has noted the establishment of
the new journal, Tito's party
has apparently avoided mention-
ing it. The Yugoslav ambassador
told American Minister Wharton
in Bucharest on 12 March that
he doubted that the Yugoslav
party would either contribute
to or participate in the new
journal. Tito will probably
refrain from participation at
least until the new journal has
proved to be a truly independent
forum.
In past discussions con-
cerning a "socialist" publi-
cation, Belgrade has advocated,
as the best insurance against
Moscow's domination, that it be
a medium for the world's
socialist parties as well as
for the Communists. Although
the USSR has emphasized the
need for socialist-Communist
international contacts in the
past, there is as yet no indi-
cation that the new publication
will go that far.
The atmosphere in East
German party and government
circles differs markedly from
that of postpurge periods in
the past. A strong undercurrent
of sentiment against Stalinist
party First Secretary Ulbricht
remains, despite his apparent
victory over dissident elements
at the Socialist Unity (Commu-
nist) party (SED) plenum in
early February. There is a
tendency among party and govern-
ment officials to avoid taking
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CURRENT INTELLIGENCE WEEKLY SUMMARY
an unequivocal position which
would identify them as strong
Ulbricht adherents, and sym-
pathetic treatment accorded
individuals recently attacked
by the party is in sharp con-
trast to the ostracism accorded
those critical of the party in
the past.
The fact that men who have
been under attack still main-
tain their contacts with the
Russians--former Deputy Premier
Oelssner, one of the purgees,
retains some of his preroga-
tives--suggests that the Krem-
lin may not have reached a final
decision on the East German
leadership question.
Selbmann, one of East Ger-
many's leading economic experts,
was attacked during and after
the 35th plenum for "managerial-
ism" and opposition to Ulbricht.
He spoke out boldly at the
planning commission conference
and denied all the accusations
made against him. Selbmann's
defense was apparently accepted
at face value,as no one rose to.
challenge the contradictions be-
tween his statements and the
widely publicized charges a-
gainst him. Failure by the con-
ference to espouse the Ulbricht
line appears to reflect the
attitude of many party and gov-
ernment officials.
Selbmann has substantial
support within the managerial
class and among practical econo-
mists; he is regarded by them
as the logical successor to
Ulbricht if the Kremlin should
decide that a change in the East
German leadership would best
serve Soviet interests. He is
rumored to have his own chan-
nels to the Kremlin and is
said to be close to Mikhail
Pervukhin, the new Soviet am-
bassador to East Germany, who
also is an economic expert.
There is a belief among
party functionaries that Selb-
mann obtained assurances of
Soviet support during his stay
in Moscow in mid-February. In
support of this belief, they
cite the cessation of press
attacks on him following his
return to East Germany. There
is a possibility that Selbmann,
with Pervukhin's assistance,
may be able to convince the
Kremlin that Ulbricht's economic
policies could lead to political 25X1
disaster and that only a change
in leadership can avert a
catastrophe.
PIPING PUSHES USE OF LATIN ALPHABET
Peiping is promoting its
newly adopted plan to Latinize
Cbina's written language in the
face of considerable antagonism
from Chinese intellectuals. A
Ministry of Education directive
requires that instruction in
the alphabet begin in all
primary and middle schools this
fall. The new system is al-
ready being used in the mast-
heads of major newspapers and
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 CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
for brand names of products.
Textbooks and popular reading
materials are being printed
with alphabetic annotations.
Out of deference to die-
hard opponents, Peiping is
giving assurance that the new
ern European countries
and USSR union repub-
lics use the Latin
alphabet. The pro-
ponents of Latiniza-
tion also claimed
that the Latin alpha-
bet had a long tradi-
tion in China and was
more readily adapt-
able to Chinese than
the Cyrillic.
Peiping's cau-
tious and rational
approach to the many
problems of Chinese
language reform, sug-
gests that the pro-
gram will succeed to
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Jl/t,t{C 1 ~~
ENMIN R AO
DA GONG BAO
Present mastheads of Peiping People's Daily, top, andTa Kung Pao, bottom, a, considerable de-
using both Chinese characters and Latin letters. g r e e. Increased
alphabet will not supersede
the old characters in the near
future. According to the
Communists, its use will be
restricted for the present to
popularizing standard spoken
(_:hinese, reforming minority
languages, assisting foreign-
ers in learning Chinese, and
transliterating foreign names
and technical terms.
Opposition to the plan
from some quarters apparently
derived from the fact that the
Latin rather than the Cyrillic
alphabet had been used. Premier
Chou En-lai last January de-
fended the use of Latin letters
and pointed out that some East-
literacy and ease of
communication among
various parts of mainland China
resulting from such success
would aid Peiping in exercis-
ing its control over the coun-
try. General familiarity with
the Latin alphabet would also
assist the regime in spreading
the knowledge of Western
science and technology which
is essential its moderniza-
tion program.
CHINESE COMMUNIST WITHDRAWAL FROM NORTH KOREA
The Chinese Communists
have announced the arrival in
Antung, Manchuria, on 16 March
of the first group of troops
departing North Korea. The
entire withdrawal is to be
accomplished in three stages
by the end of 1958. The first
stage involves six divisions
comprising approximately 80,-
000 troops, and is to be com-
pleted by 30 A ril according
to Peiping.
25X1
25X1
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..- SECRET.
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
.some
of the Chinese Com-
munist troops with-
drawn from Korea
will be demobilized
and established on
state farms in north-
eastern Manchuria.
Chinese forces
in Korea reached a
maximum of 19 armies,
over 800,000 troops,
shortly after the
truce talks began in
July 1951. In 1953
the Chinese began to
withdraw their for-
ces, and by October
1955 the "People's
Volunteers" consist-
ed of the five ar-
mies--approximately
300,000 troops--now
in Korea which have
begun to withdraw.
Completion of
the withdrawal will
reduce the total
Communist troop
strength in North
Korea by about 50
North Korean Army shown in brown
Chinese Communist Army shown in red
"People's Volunteers- shown in green
percent. The North 124938
Korean Army of 334,-
000 men will be
greatly outnumbered by the UN
forces, consisting of 613,000
South Korean and 61,000 Ameri-
can and UN troops. On the
other hand, the North Korean
Army is superior to the South
Korean Army in firepower and
heavy weapons capabilities and
can rely on its far superior
airforce--450- jet fighters
and 75 jet light bombers as
compared with South Korea's
poorly equipped force of only
80:---tactical jet fighters.
The repositioning of North
Korean army units necessitated
by the withdrawal of Chinese
units will result in a loss of
defensive depth and a corre-
sponding decrease in North
Korean defensive capabilities,
particularly in coastal areas.
As a remedial measure, the
North Korean Army will report-
edly strengthen its units by
increasing from 60 to 90 the
number of men in its infantry
companies. Front-line units
will get top priority. New
recruits are to supply the in-
crease, but manpower shortages
in North Korea are critical,
and the scheduled increase will
be very difficult to achieve
and can be accomplished only
by taking men from rear-echelon
units and internal security
troops.
The withdrawal of the Chi-
nese forces will not. affect the
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%ftwol SECRET l....W
CURRENT INTELLIGENCE WEEKLY SUMMARY
over-all capability of Commu-
nist military power in the
area, however, because the
Chinese Communists retain a
strong reinforcement capabil-
ity with their forces deployed
in Manchuria, only 250 miles
from the demarcation line. In
CHINESE NATIONALISTS THREATEN TO BREAK WITH JAPAN
Chiang Kai-shek has threat-
ened to break relations with
Japan if the Chinese Communists
are allowed to fly their nation-
al flag over their proposed
trade mission premises in Tokyo
as a consequence of the trade
agreement recently negotiated
with Peiping by private Japa-
nese interests. Chiang was
"most uncompromising" on the
flag issue, according to Ambas-
sador Drumright, although will-
ing to gloss over trade and
other concessions stipulated in
the agreement.
The Nationalist Govern-
ment reacted to word of the
Japanese agreement by suspend-
ing negotiations with Tokyo
for the annual barter trade
agreement, and five days later
it forbade the signing of con-
tracts with Japanese suppliers.
Banning of contracts with Japa-
nese suppliers may induce Japan
to curtail its purchase of
sugar and rice from Taiwan,
which constitutes the major
source of Taiwan's foreign
exchange.
The Japanese Government
has not yet indicated the ex-
tent to which it will cooper-
ate in fulfilling the terms of
the private trade agreement
with Peiping. Prime Minister
Kishi has publicly opposed the
flag provision. The govern-
ment, however, is under strong
domestic pressure to accept a
Communist trade delegation, and
the Foreign Ministry has in-
formed Taipei that Tokyo might
have no alternative to granting
privileges to the Chinese Com-
munists, including the right
to fly the-flag.
This right was written
into the agreement at Peiping's
insistence. Peiping is prob-
ably interested more in the po-
litical than in the economic
aspects of the agreement, and
almost certainly would not
agree to any new effort to
modify it. Counting on the
rising pressure in Japan for
mainland trade, the Communists
probably believe Kishi will
have to accept the present ac-
cord.
Foreign Minister Yeh is
aware of the consequences for
Nationalist China if it
breaks relations with Japan.
He is known to be counseling
moderation in government cir-
cles. Chiang Kai-shek, how-
ever, obviously feels very
strongly in this matter and has
previously shown a willingness
to act regardless of the conse-
quences--as in the Outer Mongo-
lian issue in the UN in late
1955.
SECRET
addition to the units now in
Korea which may remain in Man-
churia after withdrawal, Com-
munist China could move into
Korea within eight to ten days
some 250,000 troops now located
in North and Northeast China.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
MODERATES CONTROL RYUKYUAN LEGISLATURE
The success of moderate
political elements in winning
control of the 29-seat unicam-
eral Ryukyuan legislature in
the 16 March election will make
possible continuation of a rel-
atively harmonious relation-
ship between the legislature
and the American administration
on the islands. Since none of
the moderate parties commands
a majority by itself, legisla-?
tive action will require coop-
eration among them. The absence
of an absolute majority will
impede the operation of the
legislature and might stimulate
party mergers which could re-
sult in a two-party system.
The new legislature will
include nine delegates from the
Okinawa Socialist Masses party
(OSMP), seven from the Ryukyus
Democratic party (RDP), five
from the extreme leftist Liai-.
son Council for the Protection
of Democracy (LCPD), and eight
independents. The victory of
the moderates has been inter-
preted as a protest against the
program of the anti-American
LCPD rather than an endorsement
of American policies. Popular
feeling on the issues of rever-
sion to Japan, opposition to
the requisition of land for
military use, and,lump-sum com-
pensation rather than rent for
this land remains high and will
hinder full cooperation between
the legislature and American
authorities,
The leftists increased
their seats from one to five.
The LCPD received an estimated
28 percent of the popular vote,
slightly more than any other
competing bloc. The election
results are nevertheless re-
garded as a setback for them,
since they failed to make an-
ticipated gains. It is note-
worthy that in the capital city
of Naha, which was believed an
LCPD stronghold, only one of
the party's six candidates was
elected, In Koza, which was
considered anti-LCPD, however,
two of three leftists won. The
new legislature also will have
its first woman member, Hatsuko
Miyazato of the OSMP.
The creation of minor par-
ties and splitting of former
major parties have been impor-
tant features of Ryukyuan poli-
tics over the past year. The
present US-appointed Ryukyuan
chief executive, Jugo Thoma,
an independent, intervened
strongly in the election cam-
paign in opposition to the LCPD,:
and several independents and
OSMP candidates he supported
were elected. He desires the
formation of a new conservative
party, and new political align-
ments may very well emerge now
that the election is over, Naha
Mayor Saichi Kaneshi's newly
organized Okinawa Socialist par-
ty could provide the nucleus
for leftist elements in opposi-
tion to a conservative party
under Thoma.
Japanese interest in Ryu-
kyuan affairs probably will re-
main high, and the Japanese So-
cialists will continue to press
the Kishi government to make
stronger demands for the return
to Japan of administrative re-
sponsiblity for the islands.
While Kishi is aware of the
sensitivity of the Ryukyuan is-
sue in Japanese-American rela-
tions, he is likely to request
publicly a, greater role for Japan
on the islands since he faces a
lower house election within the
next year.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
ISRAEL'S POLITICAL AND ECONOMIC OFFENSIVE IN AFRICA
The present visit to West
Africa by Israeli Foreign Min-
ister Golda Meir is part of a
political and economic offensive
Israel is waging among African
states. Israel is trying to win
allies who will give it support,
particularly in the United Na-
tions, and to limit the influ-
ence of UAR President Nasir.
Africa, with its raw materials
and potential market for manu-
factured goods, is also regarded
in Tel Aviv as an area which
must be penetrated commercially
if Israel is to approach eco-
nomic viability and rectify its
present three-to-one excess of
commodity imports over exports.
The immediate Israeli economic
objective is to compensate for
the Arab boycott.
The Israelis so far have
been most successful in estab-
lishing ties with Ghana. Mrs.
Meir attended the first anniver-
sary celebrations of Ghana's
independence on 6 March, and
the Israeli ambassador in Accra
is a man of higher political
stature than Israel normally ac-
credits to so small a state.
Since Nasir is also cultivating
the new state's friendship, Is-
raeli-Egyptian rivalry in Ghana
is likely to tie fairly keen.
Ghana, an important source
of raw diamonds, especially in-
terests Israel, whose second
most valuable export is polished
diamonds. The two countries
have initialed a draft trade
agreement, and Israel has said
it will extend credits to Ghana.
Last September a joint Israel-
ment to train merchant marine
personnel for Ghana over a pe-
riod of several years. A Ghan-
aian trade union mission has
studied the structure and meth-
ods of the Histadrut, Israel's
labor organization.
Mrs. Meir's tour also in-
cludes Nigeria, Liberia, and
French territories in West Af-
rica. A Nigerian official has
referred to the possible par-
ticipation of Israel, through
technical assistance, in a Ni-
gerian development program, and
Israel's two tire companies are
said to be considering the es-
tablishment of rubber planta-
tions in western Nigeria and
possibly in Ghana.
The Liberian Government,
hoping to thwart the creation
of a pro-Nasir bloc within the
emerging pan-African movement,
has recognized the state of Is-
rael. Liberia and Ethiopia are
the only African countries with
representatives in Israel; the
Israelis have representation in
six African states.
In East Africa, Israel
hopes to promote trade which
will move to Eilat through the
disputed Gulf of Aqaba, in which
the Israelis are attempting to
establish their "rights" to free
transit in the face of Arab
claims to sovereignty. Israel's
plans to resume its former com-
mercial air flights to South Af-
rica over Aqaba will add the is-
sue of air space sovereignty to
the dispute.
Ghana shipping line was estab- An Israeli-controlled meat-
lished with Ghana having a 60- packing firm has operated at a
percent interest. Israel, whose I loss in Ethiopia and Eritrea
many European immigrants have since 1953. Tel Aviv now may
provided it with an abundance be subsidizing it, perhaps to
of technicians, also has ini-
tiated a "miniature Point-Four
program" involving assistance
on a water survey and an agree-
assure continued shipment of
its kosher products to Eilat.
One Israeli-owned fishing ves-
sel flying the Ethiopian flag
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based at Massaua periodically
carries its catch directly to
Eilat. Discussions have been
held concerning an extension of
Israel's technical assistance
to Ethiopia.
Israel has also estab-
lished a new commercial bureau
in Nairobi, Kenya, and signed
a commercial agreement with Rho-
desia and Nyasaland in Decem-
ber. An East African shipping
line has been formed by an Is-
raeli company for trips between
Eclat and Portuguese Mozambique,
while in Madagascar the Israelis
propose to set up a 75,000-acre 25X1
agricultural enterprise to pro-
duce animal feed and other crops
for Israel.
French Premier Gaillard
may have serious difficulties
obtaining support for the
Tunisian Government's latest
proposals. Tunis is marking
time pending the French reac-
tion, but much public discour-
agement has been expressed over
the failure of the proposals to
include a specific reference to
Algeria.
Tunisian President Bour-
guiba's insistence that the
French-controlled airfields
be put under a "mission of
observation" runs counter to
French rightists' public demands
that the airfields not be aban-
doned. , Since the =publication of
Tunisian terms in the Paris
daily, Le Monde, many independ-
ents, Socia`I Republicans, and
Dissident Radicals have publicly
repudiated the concessions their
ministers agreed to in the cabi-
net last week.
The Independent party con-
gress last weel end demanded
"neutralization" of all Tunisia
as the price of any agreement
by France to relinquish control
of its airfields in Tunisia.
Although party spokesmen have
privately intimated they could
accept a package deal provided
the airfield question was "well
camouflaged," Independent cabi-
net ministers have threatened
to resign and the party congress
may have gone too far toward an
extreme position to permit any
backtracking.
The Social Republicans
have urged Defense Minister Cha-
ban-Delmas to express to the
cabinet their "uneasiness" over
prolongation of the good offices
mission and over Gaillard's Med-
iterranean pact proposal. They
maintain they are absolutely
opposed to any concession on
Bizerte, and their party has
proclaimed itself in a "state
of alert" pending outcome of.
the Tunisian negotiations.
In Tunisia, popular dis-
appointment has been expressed
regarding the prolongation of
the crisis. The public also
fears that the Algerian nation-
alists will feel themselves be-
trayed because President Bour-
guiba has not yet succeeded in
enlarging the scope of the good
offices mission to include a
settlement of the Algerian re-
bellion. Nevertheless, the
Tunisians are hopeful that the
United States' involvement in
North African problems through
the good offices mission may 25X1
French negotiations.
lead indirectly to Algerian-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
GROWING WEST AFRICAN PRESSURE FOR REVISION OF FRENCH UNION
Growing African pressure
for a revision of political re-
lations, between West Africa
and France has been shown re-
cently,by the decision of the
political leaders of French West
Africa to agree on a joint
course of action to win great-
er political autonomy from
Paris. The basic reform law
of 1956, which provided a large
measure of internal autonomy
for the Africans, has spurred
their demand for a further po-
litical advance instead of
satisfying their ambitions. In
late February, a leading African
politician who is also a secre-
tary of state in the Paris gov-
ernment warned the minis-
ter of overseas France that
"the time had come for France
to do something more than talk
about this French-African com-
munity."
Representatives of the
three leading African parties
agreed in Paris in mid-February
to present a single political
platform defining precisely
what the federation demands
as the next step in its politi-
l ~_Y A) FRENC. HA
"' NICE I CAM_ c EQUATORIAQ
(,Monrovia
TOGO [ ~...,..,.~
Fernando Poo ` ^??~??
Yaound J
RIO-??-??~?+?-.
.MUNL..-~ j BELGIAN
CONGO
Brazzaville
:;~Leopoldville
SECRET
cal advancement. The proposed
platform calls for total intern-
al autonomy for the federations
of French West Africa and French
Equatorial Africa and for any
other grouping of French ter-
ritory; for the creation of a
federal republic uniting these
federations with France on the
basis of absolute equality and
the right to independence; and
for a central government within
each federation having all the
attributes of internal sovereign-
ty except direct control of for-
eign affairs, defense, finance,
higher education, and justice.
These powers would be reserved
to the federal republic.
This program would strength-
en the government at Dakar at
the expense of the eight con-
stituent territories of French
West Africa and reverse the
present policy of Balkaniza-
tion.
The Africans' toughening
attitude is also shown by an
agreement of the principal po-
litical parties in the key ter-
ritory of Senegal to create a
20 MARCH 1958
24941
single African na-
tionalist party, Such
a party would even-
tually become the
Senegalese section
of a federation-wide
African party, in
place of the present
m nulitiplicity of na-
tionalist parties.
Officials in the
Ministry of Overseas
France are sympathetic
to these African de-
mands and are consider-
ing the future rela-
tionship between
France and its coloni-
al possessions in
tropical Africa. A
French parliamentary
committee is now
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JZ1.1'GtSI
drafting a law which would re-
vise the French constitution
to permit a federal type, of
union, but this concept will
probably be unacceptable to
right-wing French politicians
who fear its effect on Algeria.
Paris is also planning to create
a separate African civil serv-
ice and to offer French of-
ficials employment guarantees
to assure a continuity of French
civil service aid to Africa.
Meanwhile the former
trust territory of Togo,now
known as the Republic of Togo
and the leader in the process
.of political evolution in French
tropical Africa, took a further
political step forward recently
when it was accorded full in-
ternal autonomy except for for-
eign affairs, finance, and de-
fense, which remain under the
control of Paris. The Togolese
were given control of the ad-
ministration of justice, and
the power of the local premier
was increased at the expense
of the French high-commissioner.
25X1
The opposition Moslem
League on 18 March apparently
attempted to overthrow the Re-
publican party government in
West Pakistan in the'hope of
weakening and eventually caus-
ing the downfall of the national
government, which is also led
by the Republican party. Prompt
Republican countermeasures, in-
cluding the appointment of a
new provincial chief minister,
seem to have foiled the attempt.
The intent of the Moslem
League apparently was to induce
defections from Republican ranks
in the West Pakistan provincial
assembly, now meeting in Lahore
to consider the provincial budg-
et for fiscal 1959. The league
hoped, with the support of these
defectors and of elements of
the leftist National Awami par-
ty, to supplant the Republican
government with one led by the
Moslem League.
President Mirza was rumored
as supporting the Moslem League's
effort. Although Mirza had
helped to found the Republican
party, he had been antagonized
by it last December when it re-
volted against his authority
and caused the fall of Prime
Minister Chundrigar's short-
lived Republican party - Moslem
League coalition government.
Since then, Mirza is said to
have tried to replace the new
coalition between Prime Minis-
ter Noon's Republican party and
H. S..Suhrawardy's Awami League
with a coalition more amenable
to his control.
On 18 March, several Re-
publican.deputies in the West
Pakistan assembly led the move
by defecting to the opposition.
Interior Minister Talpur, a Re-
publican personally loyal to
Mirza, supported the maneuver
at the national level by re-
signing from Noon's cabinet.
Once begun, these defections
were expected to produce about
30 others--enough
to
shift the
balance of power
in
the West
Pakistan assembly
of
300-odd
members in favor
of
the Moslem
League. The leftist
National
Awami party is reported to have
agreed to throw eight or more
of its members behind the
league.
The Republican party coun-
tered rapidly, however. It ob-
tained the resignation of un-
popular West Pakistan Chief
Minister Rashid, and thereby
probably assured the continued
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allegiance of elements who op-
posed Rashid's desire to break
up West Pakistan into several
smaller provinces. It also
probably prevented the defec-
tion of an important Republican,
M. A. Qizilbash, by making him
the new chief minister. The
Moslem League apparently has
.failed to win the support it
expected. No further Republican
defections have yet been re-
ported, and potential defectors
are reconsidering the advisabil-
ity of taking such a step.
The Republican party's ef-
fort to stay in power may be
materially aided by the growing
feeling in Pakistan that changes
of government at this time,
either at the provincial or na-
tional level, would indefinitely
postpone the national elections
now scheduled for November 1958
and possibly lead to an unwanted
dictatorial rule by President
Mirza. This feeling may have
helped Noon to survive the re-
cently concluded budget session
of the National Assembly, de-
spite widespread opposition to
his new tax proposals. If his
party retains its hold on West
Pakistan, the likelihood of its
remaining in power until elec-
tion time would be increased.
Simultaneously, a second victory
by the Republican party over
President Mirza would further
lower the President's restige.
Following a 225-to-60
vote of confidence on 13 March,
the Greek caretaker government
of Premier Georgakopoulos im-
mediately submitted a draft
electoral law, based on "rein-
forced proportional representa-
tion," to parliament, where it
is under heated debate. Follow-
ing the vote on the law, the
premier plans to dissolve par-
liament and call for national
elections within 45 days, prob-
ably in early May.
Leaders of the two largest
parties in Greece, the right-
wing National Radical Union
(ERE) of former Premier Kara-
manlis and the centrist Liberal
party, jointly holding over two
thirds of the seats in the Cham-
ber of Deputies, agreed on the
terms of the draft electoral
law prior to the resignation
of Karamanlis on 2 March. De-
spite heavy political pressure
against the proposed law and
some dissatisfaction within
the Liberal party over the man-
ner in which the issue was
handled by leaders of that party,
eventual passage of the measure
in approximately its present
form is probable, as the alterna-
tive would be elections under
the present electoral law,
which would be highly unfavor-
able to the Liberals.
Both the proposed and pres-
ent laws are favorable to the
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..; SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
ERE, and Karamanlis continues
to believe his party would do
well in the elections. Even
if the ERE fails to gain a
majority in the forthcoming
elections, he believes it will
have the strength to determine
the length of tenure of the
resulting government and to be
the decisive force in eventual-
ly pushing through still another
electoral law.
All leaders of the smaller
Greek parties have denounced
the proposed legislation. Mod-
erate and rightist leaders have
castigated the Liberal leaders
for joining with Karamanlis in.
what they regard as an attempt
to eliminate the rest of the
non-Communist opposition to
the ERE. The creation of new
parties, encompassing members
of several present parties, or
the building of temporary elec-
toral coalitions is probable,
as both the present and pro-
posed laws make futile the
participation in an election of
small parties acting alone. The
political orientation these
new parties or coalitions may
assume is uncertain, but the
Communist-front United Demo-
cratic Left (EDA).
is trying to
create a large electoral group-
ing in which it can participate.
Such participation with center
and right-wing parties would
give the EDA additional re-
spectability in Greece and an
opportunity for wide dissemina-
tion of its anti-American propa-
ganda.
law.
coming vote on the electoral
Present confusion in Greek
politics, resulting from debate
on the draft law and maneuvers
in preparation for the impending
elections, will probably be some-
what clarified after the forth-
25X1
25X1
25X1
ITALIAN NATIONAL ELECTIONS
In the elections for the
Italian Chamber of Deputies and
Senate, now scheduled for 25
May, the basic issues will be
the traditional ones of econom-
ic and social reform, church-
state relations, and foreign
policy. Most political ob-
servers at present give the
parties, including the Commu-
nists, approximately the same
voting strength they had in
the 1953 elections, but a re-
vised electoral law may pro-
duce some shifts in representa-
tion among the deputies.
The Communists continue
to stand on their traditional
positions. Their campaign is
stressing the church-state con-
flict and opposition to Ameri-
can missile bases in Italy, but
the chief source of Communist
strength will be the protest
voters, who continue to believe
that they are the victims of
economic and social injustice.
The Communists are generally
expected to receive approxi-
mately six million votes as they
did in 1953, but they may ob-
tain seven or eight fewer seats
in the lower house because of
the changes in the electoral
law.
The Christian Democrats,
who have ruled Italy as a
minority government for the
past nine months, will also be
handicapped by the electoral
law. Some proclericals in
their right wing may vote for
Achille Lauro's Popular Mon-
archist party because of Pre-
mier Zoli's endorsement of the
recent judicial decision against
the bishop of Prato. A further
factor which may hurt the
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 ITALIAN CHAMBER OF DEPUTIES
11953 POPULAR VOTE IN PERCENT)
CURRENT INTELLIGENCE WEEKLY SUMMARY
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DEMOCRATS
0 SO NCI
2.ALISTS CHRISTIAN CD
PSI (14.7% %) (40.7%)
\\\\"
COMMUNIST
PCI
144.7%)
Christian Democrats is the pos-
sibility of a recession stem-
ming from a slowdown in steel
production, housing, and ship
construction.
With the small parties
generally expected to make cor-
responding gains from the
changed electoral law, the
Christian Democrats
apparently do not ex-
pect to have a work-
ing majority by them-
selves. Because some
factions among pos-
sible allies of the
Christian Democrats
oppose collabora-
tion with them, the
electoral showings of
these factions are
likely to be as impor-
tant a determinant of
the postelection situa-
tion as the party
showings.
The electoral law for the
selection of senators has not
been changed, but since it still
favors large parties, the Nenni
Socialists may be impelled to
run joint senatorial lists with
the Communists In some areas.
25X1
Prime Minister Diefenbaker's
Conservative party is seeking
an absolute parliamentary ma-
jority in Canada's 31 March
elections. It continues to
advocate more independence in
Canada's economic and defense
relations with the United States
but is campaigning principally
on domestic economic issues.
The Liberal party is still dis-
organized by its fall from
power in last June's election
and is fighting an uphill
battle.
The Conservative party is
concentrating on persuading
the electorate that its nine
months as a minority government
have been too little for full
implementation of its domestic
program of extending social
welfare benefits and starting
a public works program to coun-
ter the recession. This tactic
appears to be effective, and
the American Embassy in Ottawa
believes the Conservatives will
probably gain their absolute
majority of 133 seats and that
a landslide is possible.
Diefenbaker holds to his
goal of diverting some of
Canada's trade from the United
States to the Commonwealth and
claims that the Canadian eco-
nomic mission to Britain last
December has led to the sched-
uling of a full-scale Common-
wealth trade conference in
Canada next September. Con-
servative candidates also point
to the fact that this year marks
the first time the United States
Congress is giving individual
attention to Canadian relations
in its annual foreign policy re-
view, citing this as an indica-
tion that under a Conservative
government Canada is no longer
taken for granted.
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BRAZIL'S FOREIGN EXCHANGE SITUATION
Brazil's foreign exchange
position is so critical, despite
drastic new import restrictions,
that Finance Minister Alkmim
fears it may be impossible with-
in a few weeks to meet current
bills. A solution of the basic
problem would call for scrapping
large parts of Brazil's complex
subsidy, revenue, and economic
development schemes--measures
politically difficult in an
election year.
At the end of December,
Brazil's estimated payments def-
icit for the year was $129,000,-
000 compared with a surplus of
nearly twice that much in 1956.
M 'ap E L DOLLAR AVAILABILITIES
IRm:
CREDIT BAIANCE-
r MAY JUN...JUL AUGSEP OCT NOV DEC JAN FEE MAR APR MAY JUN
1957 1958
The deficit, which is contin-
uing to mount, was caused by
increased imports, payments of
$170,000,000 on foreign loans,
and a serious drop in coffee
prices and sales.
Thus far, the government
has refused to consider revis-
ing its exchange structure,
fearing the effects such a move
would have in an election year,
and has reitera-'?ed its deter-
SECRET
At the same
time, Brazil's ef-
803198 forts to diversify
its exports by
development of its iron ore
and manganese production have
been undercut by the recent de-
cline in world demand for these
products. The payments outlook
is further dimmed by the sched-
ule of repayments due this year
on fixed foreign obligations.
The amount due is about $200,-
000,000 or approximately 15
percent of the country's total
export earnings last year. In
addition, domestic inflation,
PART II NOTES AND COMMENTS Page 17 of 18
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mination to continue support-
ing the world price of coffee,
even though other countries
have been selling at prices be-
low the floor Brazil is trying
to establish. Since the start
of the Present crop year last
July, Brazil has spent the
equivalent of over $100,000,000
on withholding stocks from the
market and additional amounts
on support purchases in the
New York market.
Although coffee accounts
for only 5 percent of Brazil's
gross national product, it nor-
mally provides up to 85 percent
of the country's dollars and
70 percent of its to-
tal foreign exchange
earnings. With in-
creasing production
in both Latin America
and Africa, the coffee
outlook for the next
few years is poor,
despite the adoption
this year of market-
ing quotas for the
major Latin American
producers. Brazil
produces about half
the world supply and
is committed this year
to withholding at
least 20 percent of
this from the market.
T 1 I F r
*A first drawing of $37,500,000 was obtained from
f I the International Monetary Fund in October.
Note: Uncommited gold holdings worth about
$119,000,000 have also been available during
the entire period.
I N
CASH BALANCE
i
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JCL,hfG 1 *%ft
which was slowed dur-
ing 1957, threatens
to spurt ahead again
as a result of the
government's price
support buying and o
curtailed imports.
This situation
has led to renewed
agitation within the
past few weeks for
new and expanded
trade ties with the
Soviet bloc. This
died out during Feb-
~.a
ruary
but, following
statements by the fi-
nance minister that he was at-
tempting to sell coffee to Mos-
cow through Western European
intermediaries, a Senate com-
mittee presented a new demand
to the foreign minister in early
March for an "explanation" of
why the government has not re-
newed either diplomatic or com-
mercial relations with the USSR.
vg g
TOTAL IMPORTS
TOTAL EXPORTS
~{
--~ COFFEE EXPORTS ---
- - -------_---
10
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Nftmwf:
CONFIDENTIAL
20 March 1958
PATTERNS AND PERSPECTIVES
BULGARIA READY FOR NEW PHASE OF COMMUNIST DEVELOPMENT
Bulgaria may become the
first Sino-Soviet bloc satellite
to complete "the transition
from capitalism" to socialism
and enter into the final r,Sxase
of Communist development--"the
transition from socialism to
Communism." The Bulgarians
have apparently met all the con-
ditions which the Soviet Union
used to justify the same step
in 1936. Entry into the W
phase could thus be ared
whenever the move would best
serve Soviet interests and at
the same time be reconciled with
the problems that would be
created within the bloc--partic-
ularly over Czechoslovakia's
progress toward socialism. It
could be used to refute the
arguments of Poland's Gomulka
and others who advocate a right-
ist course as the only correct
way to "build socialism," to il-
lustrate to the uncommitted na-
tions of Africa and Asia the
material progress Bulgaria had
achieved by attaining this stage,
and to counter Yugoslav ideo-
logical propaganda.
Bulgarian Claims
The Bulgarians claim they
have met all the conditions
which authoritative Soviet for-
iulations cite as prerequisite
to advancement from the stage
of the transition from capital-
ism to socialism to the stage
of transition from socialism to
Communism. While they have not
yet claimed to have embarked on
the new stage, important figures
in the hierarchy clearly con-
sider Bulgaria ready to emerge
from the first phase.
Bulgarian party First
Secretary Zhivkov stated on 20
January that "in fact, we have
already created the material
basis of socialism in our coun-
tr?y,...(the people) have already
tasted the fruits of socialism
BULGARIA'S VIEW OF ITS "ADVANCE TOWARD COMMUNISM"
CONDITIONS FOR ENTERING STAGE TWO STATEMENTS OF WLGARIAN COMPLIANCE
Voluntary observance by the "Our greatest success in the
people Of the elementary condi- past years has been the change in
it one c) socialist life. the minds of the people... the fact
that our people have changed and
become more disciplined and united
and more politically farseeing."--
Vulho Chervenkov, 18 December 1957
Public ownership of the "We have socialized the means
means of production. of production and have built a
socialist economy, not only in the
towns but in the villages."--Todor
Zhtvkov, 20 January 1958
Absence of exploitation "In the process of our victo-
of man by man. rious socialist construction, we
have liquidated the capitalist
order and the exploitation of man
by an in our country."--Resolution
of , the Bulgarian party central com-
mittee, 18 February 1958
Comradely collaboration 'Proletarian tnternationaltsm
in relations with other Com- and fraternal solidarity with all
m ntst parties and states. Commuist and workers{ parties,
with the international workers'
movement, and with the great Soviet
Union became one of the main forces
in the development of the Bulgarian
People's Republic." Zhtvkov, 20
January 1958
An uninterrupted upsurge in "We have succeeded in sub-
the material and cultural level stantially improving the material
of the working people. and cultural situation of the
workers and we can definitely say
now that for the workers in towns
and villages, socialism is no
longer mere propaganda and a dis-
tant target."--Zhtvkov, 20 January
1958
The practice of criticism
and self-criticism as the moti-
vating force of socialist de-
velopment.
Virtual completion of
agricultural. collectivization.
"Criticism and self-criticism
are a moving force in party life.
and development, as well as in our
eomminity." -- Bulgarian press, 2
January 1958
"The socialist reorganization
of our agriculture is one of the
greatest achievements of our peo-
ple'a democratic state." "Social-
ism has attained a final and Irrev-
ocable victory in our villages." --
Appeal issued by a conference of
collective farm members, 6 December
1957. (Some 87 percent of Bulger-
We land has been collectivized,
a percentage larger than that in
any other satellite.)
Complete accord between
the means of production and.
"Productive relations" (i.e.,
the workers' place in society
and Industry)
CONFIDENTIAL
3
"Our working class, toiling
peasants, and people's tntelli-
gentsta, liberated from capitalist
oppression, are the sole creators
and owners of all material and
cultural goods in their socialist
motherland." -- Resolution of the
Bulgarian party central comnittee,
18 February 1958
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
itself." Politburo member and
Deputy Premier Vulko Chervenkov
stated on 18 December,. ""Our
nation J_~3 already a socialist
nation..-The foundations of
socialism wer., laid during the
First Five-Year Plan and the
Second Five-Year Plan ending
this year (1957)." No other
top satellite leaders are mak-
ing such claims for their coun-
tries.
The Qualifications
The conditions which must
be met for entry into the new
stage are sufficiently intangi-
ble that full compliance is both
difficult to achieve and to
prove. In terms of Marxian
analysis, however, the key fac-
tor is that of achieving state
ownership of the means of L'roduc-
tion, after which most of the
other conditions theoretically
follow. Bulgaria is the only
satellite which can present a
just claim that it has met this
qualification.
A second condition is that
of a planned economy which knows
no crises or unemployment. The
Bulgarians can point to have
completed their Second Five-Year
Plan to prove existence of a
planned economy. Further, Bul-
garians claim--without grounds--
that unemployment does not exist
in their country. (See chart
for further qualifications.)
Possible Motivations
By crediting Bulgaria with
moving to a more advanced stage
of socialist development, Mos-
cow would have a weapon to use
against "revisionism" in the
bloc. The Bulgarians have de-
veloped what they consider to
be "unique" forms of socialism
by having adapted Soviet experi-
ence to their own local condi-
tions,, Although these forms
actually differ little from
those in the USSR, they never-
theless could be alluded to
by Moscow to point up the degree
of "creative application" that
is desirable in a satellite,
thereby providing an example
of the "correct interpretation"
of the concept of separate roads
to socialism.
Thus one of the chief argu-
ments of Polish party chief Go-
mulka and other proponents of
a rightist, pragmatic course--
that doctrinaire, Soviet-orient-
ed tactics actually obstruct
"socialist" development--could
be refuted by showing that the
Bulgarians were able to com-
plete the transition from capi-
talism to socialism through a
rigid Soviet-oriented policy
without major setbacks or erup-
tions and at the same time were
able to exercise a degree of
internal independence.
Bulgarian advancement to
the new stage would also serve
to further Soviet foreign policy
objectives, particularly in re-
spect to the uncommitted na-
tions of Asia and Africa. Bul-
garia in the past had one of
the lowest standards of living
in prewar Eastern Europe,
Since the war, agricultural pro-
duction has increased, and now
the industrial and agricultural
sectors of the economy contrib-
ute approximately equally to
the gross national product,
whereas before the war Bulgarian.
industry's contribution was ap-
proximately 20 percent.
The fact that a backward
country could achieve signifi-
cant material advances while
moving rapidly toward socialism
would be useful ammunition for
bloc propaganda asserting the
superiority of the Communist
system. The assertion that all
this had been accomplished
with the help of the Soviet
Union would also show the ad-
vantages the "uncommitted"
countries could gain through
establishing an intimate as-
soc %tion with the USSR.
The Yugoslavs will be
holding a party congress in
April, where ideological
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CURRENT INTELLIGENCE WEEKLY SUMMARY
pronouncements with regard-to
socialist gains in Yugoslavia
can be expected to give Moscow
cause for concern. In prepara-
tion for the congress, Yugoslav
ideologists have been discuss-
ing the withering away of the
Yugoslav state, and have boasted
that Yugoslav forms of worker
management (workers' councils)
constitute the most advanced
form of socialist development
in existence.
Moscow considers these
claims to be heresy. Since
,the Hungarian rebellion, and
especially in connection with
the 40th anniversary of the So-
viet revolution in November,
the Soviet Union has been at-
tempting to recover its stance
as the only country qualified
to lead the socialist camp.
The Soviet leaders therefore
cannot allow any Yugoslav pre-
tensions of Marxian superiority
to go unanswered. An announce-
ment by Bulgaria that it had
progressed so far along the
road to Communism would serve
as an indirect Soviet answer
to the Yugoslav position and
a defense of the supremacy of
Soviet ideology.
A declaration of Bulgarian
advancement would, however,
pose certain problems within
the bloc. It could cause morale
problems for party members in
the other "orthodox" satellites,
especially highly industrialized
Czechoslovakia, which has little
respect for "backward" Bulgaria
and has ambitions of its own.
Pronouncements made by the
Czechoslovak party's central
committee, preparing for a par-
ty congress, suggest that Czech-
oslovakia too is on the "thresh-
hold of socialist society."
The Czechs, however, do
not expect to meet several of
the qualifications until the
end of their Second Five-Year
Plan in 1960. Thus these
claims are not so extensive as
the Bulgarians', although a
Czech political commentator
recently predicted that Czech-
oslovakia would "be the second
country in.the world, after
the Soviet Union, to complete
the building of a socialist
economy, of a socialist order
of life." The animosity which
would probably be generated in
the Czechoslovak party by such
a Bulgarian advance might con-
vince the Russians that they
should delay their authoriza-
tion of such a move until it
can be coordinated with a sim-
ilar move by the Czechs.
The position of Communist
China also. comes into question.
The Chinese,'.however, do not
meet thequalifications, and
do not seem to be in any hurry
to pass into the new stage.
They describe their regime as
having "essentially" completed
the tasks of the transition to
socialism, a formula which will
probably hold them at least to
the end of their present five-
year plan in 1962. China thus
appears to be in a position
similar. to, but behind, that
of Czechoslovakia.
Internal Consequences
Formal advancement on the
socialist ladder would presum-
ably require internal changes.
Bulgaria would have to adopt
a new constitution, as was the
case in the USSR, and would
probably have to merge the
Agrarian Union into the Commu-
nist party and dissolve the
Fatherland Front mass organi-
zation, since these organiza-
tions would be considered
superfluous in the new phase.
Although constituting a sizable
task, these alterations could
probably be accomplished with-
out causing excessive difficulty
for the regime.
Of a more serious nature
would be. the relationship of
the new Bulgarian Socialist Re-
public with the USSR. Incorpo-
ration into the USSR is an
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CURRENT INTELLIGENCE WEEKLY SUMMARY
extremely unlikely consequence,
since such a move would have
an adverse psychological effect
on the peoples of Eastern
Europe and would destroy the
propaganda effect the announce-
ment presumably would be
intended to create. It seems
more likely that Bulgaria would
be allowed to become a proto-
type of a bloc country
outside the USSR arriving
at a new stage of socialist de-
velopment while retaining an
approved degree of autonomy.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
The increasing political
use which the USSR and its sat-
ellites have made of the United
Nations Educational, Scientif-
ic, and Cultural Organization
(UNESCO)--a specialized agency
intended at its inception to
engage only in nonpolitical
activities--has put the organ-
ization under a cloud.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
UNESCO's vulnerability to
Soviet exploitation results
primarily from the nature of
the agency itself and the dif-
fering views of its members re-
garding its functions. Where-
as Western European countries
seem to regard UNESCO only as
a means for promoting coopera-
tion and contact among intel-
ligentsia, the less developed
countries look on the agency
as a neutral source of aid and
assistance and as a possible
bridge between the free world
and the Communist bloc.
The USSR has, on occasion,
been able to turn the interest
in UNESCO as an East-
West bridge into prop-
aganda for "peaceful
coexistence." It has
also benefited from
the way UNESCO's or-
ganizational struc-
ture has permitted
it to be dominated
by a voting majority
of countries which
contribute little to
its support.
Organization
Final authority
over the 79-member
organization rests
with the General Con-
Lerence of country
representatives which
meets every two years
MORE THAN
5.0%
Board, which meets periodically
and is composed of 24 representa-
tives elected by the General Con.
f erenc e.
A basic concept of UNESCO
since its establishment in 1946
has been maximum. reliance on
member countries, nongovernment-
al organizations, and individual
citizens for the achievement of
its objectives.
The present director gen-
eral, Luther`' 1. Evaps an ti. .
Ame,rican~ : is.m, up .:for re-elect
t oa,' at.-:1. the ndxt ,:General
Conference.
_ MEBER OF _U NIL" 0
BY PERCENTAGE OF CONTRIBUTION TO BUDGET
Represented on UNESCO Executive Board
United States
(31.30%)
Argentina
Australia
.50-5.0% Belgium
Brazil
Canada
China
Czechoslovakia Japan
Spain
...~..~-
Denmark Mexico Sweden
?_J?,
Germany Netherlands Switzerland
India Pakistan Turkey Italy Poland Ulkraine._
Soviet Union
(13. 11%)
United Kingdom
(7.33%)
France
(5.35%)
Belorussia
Ceylon
Chile
Colombia
Cuba
Egypt
LESS THAN
.10%
Afghanistan
Bolivia
Burma
Cambodia
Costa Rica
Dominican
_.-Repabiic
to pass on UNESCO pro-
grams and other policy matters
by a simple majority vote. Its
membership differs in a number
of respects from that of the UN
itself. West Germany and South
Korea, not in the UN, have been
members since 1951, while the
USSR did not join until 1954,
Admission of Communist China in
place of Nationalist China has
been proposed at each conference
and is expected to arise again
at the next General Conference
in Paris in November.
Regular administrative mat-
ters are handled by the 1,000-
man Secretariat and the Executive
Members:', Differing Attitudes
The international reputa-
tion of UNESCO in Western Europe
and much of the Western world
depends to a large extent on
its standing as a meeting place
for scholars. Delegations to
UNESCO meetings and appoint-
ments to the Executive Board
have been recruited primarily
from the ranks of intellectuals
who are not necessarily polit-
ically minded. Governments of
these countries have usually
left the administration of
UNESCO affairs to their min-
istries of education and culture.
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Ethiopia
Finland
Greece
Hungary
Indonesia
Iran
Iraq
Israel Rumania
Korea Sudan
Peru Vietnam
Philippines _ n. Ygoslagia ~,.
Haiti _ Libya Paraguay
Honduras Luxembourg Saudi Arabia
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CURRENT CJ~"x ;S.I,z ,l,td 'fly ;'r'.{,EKLY SUMMARY
Many of.the non-European
countries, on the other hand,
see UNESCO largely as a source
Of neutral aid for aspects of
their national development pro-
';rains--such as efforts to abolish
illiteracy, standardize text-
books, or provide teacher train-
Lug. They have not hesitated
to use their majority position
in the General Conference to
push through favorite projects.
At the 1956 General Conference
in New Delhi, the budget recom-
Dmended by the director general
was increased by $1,000,000 in
a vote of 27 for, 20 against,
and 19 abstentions. The 27
votes to increase the budget
came from countries that con-
tribute only 15 percent of the
total budget.
As an initial measure, the
West will attempt to amend the
rules to require a two-thirds
majority vote on budget matters
at this fall's General Con-
ference. A number of Western
countries are also planning
changes which will result in
closer government control over
,their representatives at UNESCO,
There has been a tendency
for UNESCO to become increas-
ingly involved in international
political issues, often in a
way that Soviet propaganda can
readily exploit.
The 1954 and the 1956 Gen-
eral Conferences called on
UNESCO members to make increased
use of the social sciences to
develop "peaceful cooperation."
At both of these conferences,
the United States and other
Western countries successfully
defeated attempts to have the
conference call for "peaceful
coexistence." However, it has
since become apparent that a
number of members regard the
revised version of the phrase
as simply one of terminology
and still believe the resolu-
tion to be applicable primarily
to the differences between the
Communist and non-Communist
systems. The UNESCO Secretariat
has chosen to interpret the
resolution in the same manner.
In conjunction with several in-
ternational nongovernmental so-
cial science organizations, the
Secretariat has promoted a series
of professional meetings in
which emphasis has been placed
on having equal numbers of rep-
resentatives from the Soviet
bloc and the West, regardless
of the qualifications of indi-
vidual representatives..
When the USSR joined
UNESCO in April 1954 after an
eight-year boycott, its early
activity was devoted primarily
to trying to make a favorable
impression. A definite change
in the Soviet attitude was
noted in early 1956 with the
assignment of V. A.. Kemenov,
a deputy minister of culture,
as permanent representative
to UNESCO and the USSR's mem-
ber of the Executive Board.
Kemenov immediately adopted a
more aggressive line than his
predecessor and has continued
to slow down the work of the
board with frequent and verbose
interventions.
Soviet interventions have
been directed primarily to the
thesis that UNESCO should take
the lead in promoting "peaceful
coexistence" and East-West con-
tacts. Although the Executive
Board often rejects Soviet pro-
posals, the American representa-
tive has pointed out that the
USSR by its :interventions
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
successfully gets its viewpoint
on the record and, by sheer
length of presentation, dwarfs
-those advanced by other members.
Soviet tactics have considerably
more success at the General
Con:ference,where the large
nupiber of neutralist countries
are enamored of the idea of
UNESCO, A British official has
stated that, at the 1956 con-
ference in New Delhi, "there
was more emphasis on Suez,
Hungary, and Cyprus than on
education, science, and culture.
In accord with the present
Soviet line, Hungary hopes to
step up its activities in
UNESCO, in an effort to regain
a measure of acceptance in
international affairs. Such in-
creased activity probably would
be directed toward whitewashing
the present regime and blaming,
the revolution on intervention
by "Western imperialists."
The Soviet bloc can be
expected to continue its present
obstructionist tactics in UNESCO
and to capitalize on the voting
majority in the General Confer-
ence held by the underdeveloped
countries. Continued introduc-
tion of critical political
issues at future conferences
could lead to serious reversals
for the West on such
issues as Chinese representa-
tion,:
THE SITUATION IN THE PHILIPPINES
Economic drift and polit-
ical irresponsibility are
becoming increasingly evident
in the Philippines. Although
President Carlos Garcia has
made numerous forthright pro-
nouncements regarding the coun-
try's economic difficulties
and the need for austerity, his
administration has so far been
uninspired and there has been
no vigorous follow-through in
implementing corrective meas-
ures,
Garcia's announced auster-
ity program is aimed primarily
at building up Philippine for-
eign exchange reserves, which
declined rapidly during 1957.
;With $200,000,000 considered a
safe minimum, Philippine re-
serves stood at about $138,000,-
000 in late December, and much
of this was committed for ex-
penditure, An increase to
$150,000,000 by the first week
of March is believed to reflect
SECR
principally seasonal returns
on sugar exports rather than the
effects of~ ~auet,erity?; and some
responsible Philippine officials
are predicting a new foreign
exchange crisis by June.
The government has contin-
ued to yield to pressure to
grant exceptions to the tight-
ened exchange and credit re-
strictions imposed last December.
Recently, it has eased cutbacks
in foreign exchange allocations
for luxury imports and relaxed
a ban on bank credit for pur-?
chase of real estate and other
nonproductive undertakings.
The 1959 budget also casts
doubt on the Garcia administra-
tion's det:erininati.on to enforce
austerity. The proposed level
of expenditures is slightly
above that proposed for the pres-
ent fiscal year and well above
the level of actual expenditures
so far., The government i
ET
ILLEGIB
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
relying heavily on questionable
sources of revenue, including
proposed foreign bond financing
of $50, 000, 000..
The longer range economic
policies of the government have
not yet'been spelled out, but
there appears to be virtual una-
nimity among Philippine offi-
cials that some form of peso
devaluation will soon be neces-
sary. A presidential committee
investigating ways to increase
export production has recommend-
ed the lifting of all economic
controls over a two-year period,
while permitting the peso--now
pegged at two to the dollar--to
seek a free rate, Even Central
Bank Governor Miguel Cuaderno,
previously the stanchest advo-
cate of a hard-money policy, has
declared himself in favor of
devaluation if: it is accompanied
by adequate safeguards.
President Garcia's hesita-
tion to take a stand on the is-
sue, however, creates consider-
able danger that devaluation may
be introduced as a sudden dra-
matic gesture, or through poorly
prepared congressional legisla-
tion. Without adequate prepara-
tion and controls, devaluation
could bring windfall profits to
certain export interests, while
imposing a new inflationary bur-
den on the already hard-pressed
population.
In recent weeks, reports
reaching the American Embassy
in Manila have indicated gener-
ally deteriorating conditions
in many rural areas. Shortages
of consumer goods are apparent,
particularly rice supplies,
which have been reduced by
drought and by the maneuvers of
speculators. Prices have been
rising and there are reports of
widespread unemployment, Con-
stabulary authorities are cit-
ing an increase in crime in many
provinces, and further economic
decline could lead to serious
social unrest.
The prospect for firm leg-
islative action is not promis-
ing in the light of Garcia's re-
lations with Congress to date.
Control of committee chairman-
ships by Garcia's followers has
provoked considerable discon-
tent, even among members of his
own Nacionalista party. One
disappointed Nacionalista con-
gressman has attacked the Presi-
dent for failing to carry out
Philippine law, and there have
been the usual threats of im-
peachment by the weak Liberal
party opposition. The present
congressional session appears
to be drifting toward the cus-
tomary last-minute passage of
ill-considered legislation.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
President Garcia has made
known his desire to visit the
United States and his hope of
obtaining American economic as-
sistance during such a visit.
He is under considerable pres-
sure to revive long-standing
Philippine war claims against
the United States totaling
$800,000,000 or to obtain a
large foreign exchange stabili-
zation loan. The Philippines
has already taken steps to in-
crease its borrowing quota with
the International Monetary Fund,
and has applied for an Export-
Import Bank loan to finance
construction of a. steel mill.
The country is also seeking sub-
stantial rice imports under US
Public Law 480.
On specific foreign policy
issues, the uncertainty sur-
rounding Garcia's intention was
aggravated by his long delay
in confirming the appointment
of Foreign Affairs Secretary
Felixberto Serrano. The Presi-
SUDAN FACING NEW ECONOMIC PROBLEMS
The Sudan faces a need for
au terity in its economic policy
this year as a result of an ex-
tremely small 1
crop.
the 1957-58 crop
w 1A,, total only 256,230 bales
covpared with a record 560,150
bales the previous season, The
Sudan's short-staple (America.n-
type) cotton crop is double last
year's, but is still not a. major
foreign exchange earner,
The management of the
Gezira Development Board--the
country's major cotton-growing
agency--is largely responsible
for the present crop shortfall.
The insect infestation which
damaged the crop could have
been averted had the board taken
effective preventive measures
early in the season. By the
time the board decided to use
insecticides on a large scale,
SECRET
25X1
dent's appointment as secretary
of justice of the anti-Americ
Jesus Barerr
y
ores a ow considerable d ma
iffi-
culty on the issue of American
bases..
On several occasions,
Garcia has affirmed his opposi-
tion to recurring suggestions
that trade relations be opened
ough he has in the past en-
dorsed an Asia-for-the-Asians
foreign policy, Garcia is ex-
pected to maintain the basic
Philippine Western orientation.
Within this framework, however,
he may endeavor to bring about
a more independent attitude to-
ward the United States and
closer ties with non-Communist
Asian countries
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25X1
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,SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
LONG-STAPLE TYPES
THOUSANDS OF BALES: I BALE :480 L BS.
- DAN: COTTON PRODUCTION
195-4 1954-5 1955-6
'~ INARCH 1958
1957-8(EST)
The carry-over 25X1
will help substantial-
ly to make up for
this year's shortfall,
since total Sudanese
long-staple cotton
available for this
sales season will
be only 17 percent
below last year.. Even
if all the available
cotton is sold, how-
ever, receipts will
be $25,000,000 to
$30,000,000 less than
the 1956-57 figure
of almost $59,000,-
000.
Although the
present cotton prob-
lem is far from the
"national disaster"
claimed by Prime Min-
ister Khalil, it will
out a crimp in the
the bulk of the damage already
had been done,
The board's managing di-
rector, Mekki Abbas, was also
the architect of the cotton-
marketing fiasco last year. He
thought his country could'force
world cotton buyers to pay a
high price for Sudanese long-
staple since the Communist world
had taken the bulk
of long-staple Egyp-
tian cotton. His re-
fusal to recognize
the basic fallacy of
his position--a world
oversupply of cotton
--resulted in such a
loss of sales that
the Sudan was forced
last fall to reduce
the price of its cot-
ton drastically in
order to make it com-
petitive. Since the
move came late in the
1956-57 marketing
season, the country
entered the 1957-58
marketing year on
1 March with, the
largest carry-over
stock in its.his-
tor y o.
Sudan's modest development plans
and probably further reduce the
country's dwindling foreign ex-
change reserves. The Sudan,
almost completely dependent on
cotton for its economic well-
being, must maintain relatively
large foregin exchange reserves
to weather the vicissitudes of
the international cotton market
as well as local natural
SUDAN : COTTON SUPPLY POSITION
(THOUSANDS OF BALES ; 1 BALE= 480 Les.)
STOCK CARRY-OVER
SECRET
1956 7
1957-8
ESTIMATED
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SUDAN : VALUE OF LONG - STAPLE COTTON EXPORTS
CURRENT INTELLIGENCE WEEKLY SUMMARY
20 March 1958
hazards which affect
the cotton supply,
In recent years,
the declining value
of sterling securi-
ties--the major form
of Sudanese financial
reserves--and the
shortfall in cotton
sales have placed
major strains on the
country's finances,
In 1957, for example,
the total net foreign
exchange loss amount-
ed to about $72,087,-
200--a major deterio-
ration in the foreign
exchange reserves.
The value of long-
staple cotton exports
last year was only
$58,876,000 compared
SECRET
(MILLIONS OF DOLLARS)
125
100
75
s0
4
25
EST.
0
19
50 5
1 52
5
3 54
55
5
6 5
7 58
with about $119,931,848 in 1956.
Because of the cyclical
pattern of export receipts from
long-staple cotton exports, the
country faces serious recurrent
problems. Failure to market the
bulk of this year's salable cot-
ton could cause an economic
crisis. The foreign exchange
windfall of 1957 resulting from
the currency agreement between
Egypt and Britain on the one
hand and the Sudan on the other
will not recur this year. This
agreement establishing the Su-
dan's own currency gave the
country about $51,121,600 in
foreign exchange.
Although sales of Sudanese
cotton mounted toward the end
of 1957 as a result of the gov-
ernment's reduction of the price
of cotton, competition from
Egypt may place increasing pres-
sures on prices and slow down
SECRET
future sales. Egypt?s new cur-
rency regulation, for example,
probably will reduce the price
of Egyptian cotton to Western
buyers by as much as 30 percent.
These factors and the general
oversupply of cotton on the
world markets will probably in-
crease the Sudan's problems in
disposing of its present crop,
relatively small though it is,
Serious economic difficul-
ties arising from the cotton
problem could be the occasion
for a. Soviet offer of aid, as
occurred in 1957. The pressure
for acceptance would probably
exceed that which Khalil suc-
cessfully resisted last year,
and could undermine the
pro-Western orientation
the Sudanese Government.
0"R
(Concurred in y
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