INTELLIGENCE HIGHLIGHTS WEEK OF 20 JANUARY - 26 JANUARY 1948

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100010036-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 21, 2016
• Sequence Number: 36
• Content Type: PERRPT

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office of Reports and Estimates, Cllr
Far East/P=acific Branch
DOCUMENT NO.
Il DECLP, S;FEED
NEXT REV!EW DATE:
AUITH: HR 70-2
pA7e 44iCViEWER:
r,~E! OF e-1, iauAJtY - e6 Jt Nt1r:RY 19148
State Dept. review completed
PACOM Review
Completed
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ration "Crank-up" a s ar+antl to be launched. The US member of the Y M has
male a statement to that x y L? a ? Me s ,piunnin6 measures to rake Japan
"self-support; n;; at the ourti-est possible t= ma". In this connection, the
Ram is to ask Congress for .lands :'or the fiscal year begin n= ng 2 July not
only to sup;,)ly necessities Cor the Japanese :people but also raw rwtortals,
spare parts, and other UL m required for the expansi.on of peaceful production.
This may be the first o 0 fi ei al announcement of "Operation Crankk-up", a
plan variously runored tla;oughout the latter half of 1947. Under "Operation
Crank-up", the US, it has been said, ou1d lend Japan up to a billion and one-
half 4 US for the rehabf 1 tatl.on of the Japanese economy,
At the least, the I statement to t h e FEC i s a recoLn tion that Japan will
continue to be a drain iii -on US resources until it can be put upon a self-
support-ing level. This coal, hover, cannot be attai.nod until J.a; an is able to enter
actively into the export r rket; Japan's economy Is l;earei to tore! Cn trade. In
the past, Japan customarily imported raw materials or semi-riarufaetured articles
and processed then for ex port. Thence, it needs >rimarily external aid for the
proc irerront of irn )orts for prooessi n ' This the US Congress !:3 a :amarently about
to be asked to take undor a lv= serr..ent.
Zaibatsu banks escape -issoiution.. It is reported that the Zaibatsu basic;ng
interests rrs_ 1 not be subjected to d4 ssolution. neasures to the are extant as
other Zaibatsu interests. The reason for the exemnt,_on is said to bo the
importance of credit fuel l I ti es In the rehabt l to ti on of the Ja,pamie se economy.
Before the wur, the Zaibatsu controlled the banking structure of Japan and
thereby were enabled to extend t eir active business trusts. Apparently, the
need for strong un-h pera d credit i aci. l _t:.as in time crucial months ahead has
led to at least a post?ono ont of the break-up In "excessive economic concentra-
tion" so far as the banks are concerned. Vihether Zai.batsu i r terests r.-ill
continue to control the bank4_n~; structure Is extre-':ely doubtful, however.
Inflation in JJaapan. Further analysis of the in"l.at4 onary tendencies in Japan
=1wws that the fears of a runaway inflation lea-._1. to econonia arialm In
immediate future are exa,erated
'he }March 1946 figure of 12 billion yen note issue anuears to have been an
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abnor:udl one; the oLf teial fi u re of noto ; sous as of 31 i arch 194C was 23
billion yen. Hence note issue had nnilt :j 1'ed a;,proxir..ately 10 times from
31 March I D40 to the end of 1947. This compares with a 30 times I ncrouse In
CN dollars during the sane ?er:iod.
For the year 1947 throiu h ,,W ust, increase in note issue, effective price
index and wages of raini?rg workers (undergr?ou.nd) ?d.uoar to have ';e pt apace
(a'aroxirat,ly 2 1/2 Vines). i;enco, the i.n1Tat1on-a;_))ears to have boon kept
within bounds. Nonetle less, labor does have cause to (-or,':)1a1n. Average wages
of other workers during; the same per`od i 11,
crt used 0-11-r about twice; underground
miners are favored. Governmental employees who cannot barg.d n collectively and
are kopt to a fairly r -Lid .zage base are hurt. Furthcr, wai es
customarily lag. So lort :zs the industrial loyal remains fairly constant, labor
will be squeezed by the incr .caci~7~ prices. Nevert.eless, the situation continues
critical. Increasing; note issue to ;ether i to a low industr ^ a.1 level must ban
serious economic consequences. Operation Crank-up is intended to obviate these.
KOR-11.A
Future Soviet capab l i.ties. The recent Soviet refusal to --:err:.i t the U11
Commission to oiler t' Nxl North Korea should not be taken as an i ~.di cation of
lack of Soviet confidence in the survival-,-power of its )u-.pet North Korean
People's Committee. Soviet bo~cott was quite} clearly indicated from the time
the subject was ?laced on the UN agenda; and the failure of the USSR to execute
a diversionary maneuver .for the :purpose of camouflaging its defiance of a tiN
resolution can in no sense be attributed to a lack of political resources
occasioned '.r%r loss of the diplomatic initiative to the US.
The USSR is in continuous process of stripping; down its armed forces in
Korea to a point where unilateral withdrawal is an imminent capability, and of
increasing Korean participation in the North Korean People's Committee to the
point where it is capable of energing full-blown as an "autonomous" state. The
Kremlin is clearly eonau-0 tied to the policy of eventual domination of all of
Korea and has a_p arently decided to utilize the Peo )le's Co-:nnitteee as a base for
this ex2an .ion. Its recent actions indicate that it has discounted the UN
Commission, together with ";Vor~d opinion`' :':f1:ch the Cor: isoion re`trc ents,
for -,,j',-tat they are worth. It is ".)robtlble ';hat the Kremlin will continue for the
prosent its poi. i.c;y- of ivit the" US "e:; a ;h roe" even to the )o-3 nit of suffering.
the US to establish an independent South Cor::an Government, since it probably
believes that US forces would then be withdrawn ,, leaving; the infant South Korean
regime defenseless. At such a Junct?ire U?SE t'iould be found lui to 3ro cored to
carry out its self-irnosed conrftmont of "si:?';:ltaneo';s ::1 ',''tc3r s'hice it could
then let n_ Lure, in the form o-,,' the North Korean People's :.rriy,take its course.
Such action =mould be based on. V e as ,unn:at _on tfhai; the only possible US counter-
move would be that of a formal ':srotcst in the lP'T. On the other `.`;and, the present
Soviet pol i-cy -possess,-3o the Pstinat virtue of aty-oidi.ni; any weakenin o f the
US. R's position in North Korea, thus leaving L'110 Kremlin _ repared to counter any
move to strengthen the US position in the South.
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There was no rata joy rzilitary activity in Manchuria during the
j.e st week. The Cor munists :acre apparently building up rear area stock-
piles in preparation for another c:ai j sign and the Nationalists r:er'e ini-
tiating a now coo:n:rand setup, once again separating the military and the
political leadership. The military portion of the Nationalist 1!anchurian
eow nd will be vested in ' ei Li-huang, who is highly regarded in US cir-
cles as a result of his successes during the Latter phases of the Chinese
csi+4.ai ns in Burn. Ile is said to have a very strong position in Arr
polit&ec and to be "acceptable" to the .1 uapoa Clique.
:3litary activity in I:orth China was centered around Paoting,
with both sides reportedly sustaining heavy casualties and in Shantung,
where the Corracauiists continue to return to those base areas from which
they ::ere uriva:ri "it year. Communist units in Shansi countered the move-
ments of Yen lisi-shun by penetrating to :4thin ten :ales of Yen's capital
at Taiyuan.
the Cc ciunists 25X1
in' the Tai ?~ng region ?, Shansi) openly state their primary military
target for 1948 is to carry the civil war into, rand south of, the Yangtze
River valley. he 4reat nu jority of the Cow:;unitt regulars front the Tai-
, area have :.ire ady moved into IIupe;h, ,here Liu Fo-cheng is presently
engaged in trying to cut river cor inications fron Szechrrun to the east
coast.
Internal t olitical
The control of the Chinese Ilationwl Govern ant continues in the
hands of the ri;;ht-airing extremists. LegisI tive Yuan elections appoar as
completely prearranged and controlled b; - the Govern: ent as were the
National . aser.bly elections, 4th popular cynicisu aria lack of interest
even more in eviuenco. The r.iost noteworthy difference is that rinile the
previous elections were almost entirely run by the CC Clique -- which took
a r3:. jority of seats and dictated the disposition of the remainder to other
Government factions as well as minority parties -- the present elections
reveal that this time more control will lac shared by other rightist groups.
The San :'in Chu I Youth Corps, Hsuan Tieh-wu' s Shanghai Garrison Headquarters,
the Iiuruau of Investigation and Statistics' secret police, have built up
their election ruchines and assured themselves, in Shanghai at least, of a
larger share of the spoils than previously. lreliminary information from
the provinces, however, indie:.-tes that in Kiangsu and Chekiang the CC Clique
will a, yin dominate completely. - -
The Chinese press, hungry for news fit to print, found a : elcome
outlet in the Kowloon incident thich ended in violence in Canton and demon-
strations in Shanghai. The offerrte to Chinese sensibilities found express-
ion not only in the volume of the news coverage but in editorial coniient
in. ne .s .apers of all shades of opinion. On every side warning rk.s liven
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the British that unless the "brutal insult" t,e righted popular sentiment
might be more forcibly expressed. The uproar extended even to Ta Kung Pao
influential Chinese ner.sl.aper tfiich normally ruintsins rs rel:ativ ration-
al and die assionate attitude. In general, the untoward amount of attention
given this minor incident ms a diversionary tactic to keep public attention
focussed on a foreign issue, chile internal Lutters became increasingly
beef (see also "External f olitical" below),
iixteri'ial 1- olitical
Canton-Shanghai disorders. 3ritain has dersa.nded full co;npen-
sation for losses at Canton and full encuiry into the identity of organ-
izers and l articipunts in the attack. China has c]tsiraed full co;4.ensa-
tion for the eviction of the itov;loon squatters. Both Governia nts re-
frained from mentioning the counterincident.
The Lrnbr;.ssy reported on 23 January that Chinese authorities were
reluctant to adopt strong measures to suppress the Canton--Shanghai dis-
orders because of the viideeproad anti-British and anti US feeling, which
hzci been infl i u by "Governuaent dominated" pro Banda. Thus strong
measures ,.-oulc expose the 'Gove^rn:.ient to charge of failure to resist im-
perialist a,grosaion. ILlso despite expressed Government intention to safe-
guard foreign lives and property, anti-British proju nua continues una-
buted with implied inclusion of the US as likewise ir4,eriali.st. The Consul..
General at Canton has exchanged corunieations with Governor T.Y. Soong on
necessary protective rtieasurco to US and other foreign lives and property,
and is dissatisfied with the Governor's assurances, since the latter lacks
the :support of x ny high level ,leaders in South China.
A Nanking United Press story of 19 January reports Chinese sources
as saying that the Canton outbreak was intended inter alia as a reprisal
for the sanctuary afforded by the Hong Kong u.uthorities to Marshal Li
Chi-shen and other dissidents. In this connection it nrry 6e noted that
the Hong Kong Gowernraent last year gave Li Chi-'hen several mornings that
he would be ousted from the colony if he continued to violate the terms of
his admission there which included-abstention from "caustic criticism of a
friendly goverra.wnt".
i ossible Sino-Soviet ra ochenent. The tanking Embassy reports
that on 23 January General Cheng Kai-min ,hose general reliability is
questioned) states nonbers of the Political Science Group now strongly
favor rapprochement writh the USSR as means of insuring China's neutrality
in an anticipated US-US,2 tsar and desire that Chiang Kai-ehek go abroad so
that he w.-ill not be an obstacle to such a rapprochement. The Lahlssy further
reports that Soviet Lilitary Attache, General Roschin, allegedly had sug-
gested aoviet good offices in ending the civil t:ar. Coupling these to
reprints, the mossy believes that it is possible a Soviet mediation offer
has been made and that the deteriorating military position has disposed cer-
tain elements in the 2iational Govern::rent to accept.
Travel Permits. Boll ington Tong, of Government Inform Lion Office,
E- T
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states that possession of a resident (entrance) permit gill enable a
r tianal of a foreign state t hich has as treaty with China to travel in that
country. Isar-treaty nationals and stateless. persons must ul l ly to local
police stations for travel permits.
Atomic ::near Camedesion. In an attetal:t to break the de aulock
between the U3.11 and the C . fission majority in the UN Atomic Energy Com-
mission 'arking CormAttee, Lr. :cei Iisieh-jen, adviser to the Chinese de-
legation, on 22 January offered a compromise l.roposal. The USSlt has in-
sisted on sepa ra;.te international conventions, one to outlaw atonic v uapone
ana :another to establish a system of Yorld controls, ?-bile the US and the
Commission majority have sull.orted a single combined pleat. Dr. "ei pro-
posed separate conventions with co-ordinated enforcement, so that the im-
plementation of the terms will be co-ordinated.
Chinese Technical Mission to US. Since the arrival in :':aehirtgton
on 16 January of the Chinese Technical I. ission, Ioi Tau-yi, who heads the
::;fission, and his associates have been in daily conference with State Le-
purtment officials on the aid plan to China, ::Bich, it is anticipated, will
provide safeguards for the US outlay, and stil:ulate an appropriate measure
of self-help. The ;.`,fission will be shown a copy of the proposed US plan
before it is presented to Congress (see also "Lconocaic" below).
Economic
Currency. Shanghai ru-rkets were unusually quiet during the past
week. The US blackmarrket selling rate receded from CM 10,000 on
17 January to CIi .?160,000 an 23 January 1948. flo change is noted in the
official "open" rate of Cii ;;115,000 nhich tias established on 12 January.
It is retorted that the issuance of large denoninntion notes has been sus-
pended.(Customs Gold Units notes af'1,000, 2,000 and 5,000 equivalent to
CI1 .Z),U00, 40,000 and 100,000 respectively, introduced last month, have
been the l:.:r?est denominations to appear to date); also that ser:ciing cur-
rency by air is banned. Iolice controls and loan restrictions have caused
the flight of soma idle capital to Canton. :. ey remains relatively tight,
forcing interest rates ul to near 30,s' per month.
bernunei appears to be gro4ng in up-country areas for silver
dollars that are still in circul~:.tion. The Corrneunists are also sharing, less
interest in CU currency.
The Chinese press reports that lei Tau-yi, nova in 1.ashington as
head of the Chinese technical mission., r,ould l.reoent to the US Goverrnont
Chiang Kai-shek's two alternative currency reform plans for ::itieh iarc;e
cash or credits .,oulu be requested. One plan calls for a net: paper cur-
rency i:+aseci on the fold standard and linked to the US dollar at the pre-
::r rate of 3.33 to US a. The second plan is a mewl currency supplemented
by japer no-es and based on the silver at,_ndard. T$e, f ationaal Goverment
estimtos that US .300 million .rill be requires to Iin nce the currency re-
form project. The Goverrn:ent does not plan to introduce the new currency
until economic stability ha:. been achieved. Shanghai foreign economic
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'itera regard the currency roforrm talk as an "eye.. 8hn even with US aid.
Prices. Steady arrivals of rice stocks at Shanghai have kept
the retail price at CII y. 1,400,000 a picul, the same price as reported on
16 January 1948.
Shipping. The Chinese merchant fleet is nou reported 31.6;'
larger than it ra..s a year aggo. During 1947, 1,039 vessels t,-ere added,
bringing; the total to 3,317 vessels -dth gross tonnage of 951,826. The in-
crease is attributed to the purchase of surf: qua from the US and other
countries, and recoveries of vessels from Japan.
The port of TsinLrtao is still closed to foreign shipping.
t1 entsin ms cut off from the sea following Corramiet capture of
several points along the Rai Hivc r on 9 January 1948. withdrawals after
ho days permitted w vi ation under military- escort.
Railroads. The Peiping-Suiyuan railroad from Ljangsh an to Tamil
ms destroyed 3 December 1947, presumbly from tsar operations.
iassenger service is open on the Feiping-IIankou line as far south
as Chosien. From Chosien southward the line is badly damaged but service
was reported restored as fur as Sunglintien by 6 January 1948.
The Changchun railroad operations are reportedly reduced to 87
kilometers operating from Suchiatun, south of 1 ukden, to Tiehling, to the
north. (tail service from L'ukden to ienhsi ryas reopened on 3 January 1948.
Highways. Changchun hig1iv ay comrmmic utione were recently re-
ported closed ETU directions.
Traffic lass resumed on 30 January 1948 on the highway from Chuh.
sien to Changchun (Z) miles) in Chekiang Irovince after completion of
reconstruction work.
Teleccnam nications. Radiophone service between Canton and Hong
Kong has been inaugurated t th tolls of IM U2.00 for the first 3 minutes
and HK w4.00 for each additional minute. Rates from Shanghai to the US
are based on US ;12.00 for the first'3 minutes converted at GN $89,000 to
us 'vl.
Coal. Comrmunist interruption of I orth China railxz ys may force
China to seek Canadian, I hilippine, Siberian or Indian. coal for Shanghai.
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i? iCH hDOCIUIrl4
Do.-ionstratiorip for Lao it= t.'s return. Orly in Deconher 1947 to
neetincs took place; in the I3aio d'Alon- botneen .Tench IYi;-h CO iseioner
soila?r: and forrier? Annanito - eror Pao Dai at rsich the political basis
for Bao Dai's rotv.f z has aettlod. Followint- these i tins ng ' olit ical
roupinc'e r*raduall-,, m erred in both north and south t'i.otnarz, 'allies
t:ere hold in the c ?:ief cities of Indoeh5' n, e'onenred by the "ietnxe se
rationalists riho are opposed to :o Chi ::inli and his Fiat Mint,, In Order
to express confidence in the x of er errner-or's ability to lay the foundt3-
tiors for "indepon4l-nce and unity."
:ith these rallies as a f k-:umdation, Vic " iotna- m oo in Tar ^OEM"
or "fassernblerient :'ational Vietnar7ien" ever od in Sair'nn, its air: being
to ^rour all rolitical turd resistance el-ront:n in a more effective strrnh1e
for unity and indarendonce. The outco-ie of contacts Trith si^-ilar vroune,
such as the I ational _',ally "c>vorent in -nnoi, vaos the Por"':ation of the
"ruoc Gia Lien Itiep", ri?~ich united such eterx3r_rs in one bloc behind "no Pal
in an effort to roeliza .ietnaioso asnirations anurt fro-t the ntr!n--'ln of
Hio Chi : inh's Vietnun "ernblic.
.ueh dissension n; .one !'no T I sn'"'ortor; 'gas been mridnrt recently,
particularly in the dissolution end re-creation of mrieroeun c o aitt es in
north Vietnam, tor' r 1 "resident Le-van-"each of the Cochin C'Mina Govern rent
ryas criticized by cone of the north Vietnam rrours for his close collaboration
r'ith the French, but his faction countered vrith a new eotre-iittee of its mm.
These ae::onstratio. ? hrivc been s ~onsorcd by the -bench so that Bao Dai
may appear to be recalled to Irydocl?ina at the "Poo-nlo's dernnd." The
schism amonr? the .:co Dai supporters, attributed by rany to personal stru--les
for political positions and leadership of the pro-fao ra.i movenent in the
north, is a clear indication that dosnite Trench efforts to build a firer
foundation for the formr enperor's return, they have failed to create the
cooperation enonr- the enti--diet ! inh Ptionalists requisite to the success
of any fovernment which plans to exclude Ho Chi '::inh.
Current Siamese politics. The provisional 'overnrnont headed by
Premier Mmanr- Ap fnorng is planning to hold national elections on the
29th of Tanuary. Docause the upper house of i'arlinnent, the Senrito, can
re-created as an an-ointive body following the November coup, those elections
will determine the conrosition of only the House of I?eprouontativos vhich
vas dissolved in r:ovenber. By those olections the rovernT~ent viii becorie
legalized and porn. ;vent within the provisions of the new constitution.
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Premier Aphair:ong and his Democratic party are expected to win a
majority of the House seats, but because or the stren'th of other verttes
in Parliament a few opposition leaders may be included in the now cabinet
to fora a coalition "-overnnent. In eXrosinr' itself to a ?~,eneral election,
the provisional novernment is attempting to demonstrate its atabliltyt and
to. prove to forei{n zovernments that reco *nition should be accorded to the
post-election Covernraent.
A growinrsnplit between the Aphairaonr C-overnmsnt and Marshal Thibul
'and his :' supporters is rapidly assuming or .nous proportions, primarily
because the provisional and basically civilian goverment is attempting, to
administer Sian regardless of the wishes of the military. There are many
indications that the military may discard .Aphaiwonr, even if he is duly
returned to office by the elections, in the event that his "ovornwnt con-
tinues its independent course of action. If the rilitary believe that
overt seizure of control is necessary, another coup d'etat will have to he
staged since the emergency powers recently held by the military have boon
returned to the civil authorities.
ICDO~:ESL1
Significance of crisis in Dutch-Indonesian ne"ot iations. Thmlementat i on
of the recently signed Dutch-Indonesian truce will be corrsiieated by Dutch
suspicions of '?epublican sincerity regarding a political settlement and. by
the 2epuhiic 's failure to understand the implications of the terms of the
documents which ware sir-ned on 17 January. 'The effect of these obstacles
on Dutch-Indonesian relations were illustrated by the crisis which developed
after the truce was sinned and which nearly led to the collapse of, the r-OC-
sponsored negotiations. The crisis arose from the belief of the Dutch dele-
Cation that the rtonttblic had only conditionally accepted the "GC's Six Prin-
ciples for political settlement which the Dutch had already accepted un-
conditionally, The interpretation of the '.'ewubliean renreseuutatives regarding
the COC's Six Principles apparently led them to believe that the Republic
could continue to conduct its own foroir'n affairs 'and exercise other soverei.-n
perquisites, despite the clear statement in the Six Principles that such
sovereign rights will remain with the :kingdori of the Netherlands until the
transfer of soverointy to a United States of Indonesia. :;hiie the crisis
was later averted by President Sukarno's unconditional acceptance of the
Six Principles, the incident has reinforced the Dutch belief that the
Republic would attempt to evade fulfillment of its cittTnents in any
eventual political agreement. The tendency of both the Netherlands and the
Republic to derive vastly different interpretations from the sane sit-nod
oor:nittment, and the habit of each party to rognrd its interpretation as the
only one possible may readily lead to repeated breakdowns of nenotiations
and finally to a resumption of Dutch "police action" on the grounds that
dealings with the Republic are patently impossible. Iraryinn interpretations
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of the Linggadjsti Agreement and refusals by both sides to give way finally
led after four months of increasingly involved negotiations to the "police
action" of 20 July 1947.
FFllILIEI'INIAS
~ st s, r yh al 'US. President Roxa s has proposed
that Secretary of -National Defense Kaizglcon he~,J a miszl on to Washington to
press passage of -ending US legislation benefi'i.ng Phsl?-op1.n?r vct'rwna.
"vile Roxas prefers that Kengleon, wer 'time guerrilla lead:-. is Leyte , =lead
the veterans' mission as a nrivate citizen, Nanpleon believos that his assign
rent to a mission which would be required to register as a lobby would be un-
dignified. The Defense Secretary, now in Tokyo conferring with General blac-
Arthur, prefers to come to the US in his official capacity in order to discuss
ITS policy concerning Philippine defense and to determine the extent of US
assistance "in nrenarmtion for and during next emergency."
Rotes ealls for armed c wdo h ?a3:g1h2. President Roxaa, in a
two-hour extemporaneous speech at the annual meeting of -'rovincial officials
on 22 January, called for an armed showdown "as quickly as possible" rith the
dissident -easants (Hukbalahap), whom he labeled Communists. Reviewing his
administration since May, 1946, the 'resident declared that the policy of
''appeasement"--including legislation providing larger rice crop shares for
farmers and a land resettlement program, was a 11mistake" ands failure because
the dissidents did not believe either in 'rivate property or individual rights.
T'arning the provincial governors and mayors to have no contact with the dis-
sidents without the knowledge of the Constabulary, and stating he believed
that the armed peasants were determined to overthrow the Government by liqui-
dating its le'dership, Roxas, according to an AP renort, said: "Thank God
this Government has physical strength ard rower to control this situation."
Roxap" speech came less than a week after the most recent Philippine
Constabulary offensive, begun 12 January and aimed at canture of dissident
leaders and the breakup of armed elements, ended--as most reviour campaigns--
in failure. This drive, first termed "Operation Mystery" and finally "Oper-
ation Carefree," involved approximately 2000 Constabulary men in a nianned
15-day Centia11Luaon offensive against an estimated 3000 Hukhalahap. The
ConetPbulery task force commander admitted the helplessness of his troons to
cope with the strategy of the Huks who disperse ranidly in the face of large
Constabulary troop concentrrtions.and then re-form their units when the
Governmert forces move on.
The Roxas speech is not expected to result in any immediate settlement
of the law and order nroblem. The speech,which was doubtless designed as a
political maneuver to bolster the courage and gain the su-port of hardpressed
provincial officials and for ovular consumption,, nevrrtheless reveals to
some extent the sense of frustration the chief Executive feels at midpoint
in his term of o'fice when he finds the most serious immediate problem still
remains the establishment of law and order.
PnP ConeresQ fac5 s rn. The Philippine Congress, which
convened on 26 January after an adjournment of eight months, is confronted
with legislative proposals on two serious and recurrently embarrassing problems--
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establishment of law and order in Southern and Central Luzon and settlement
of the collaboration question. It is expected that measures designed to
grant amnesty to political collaborators will receive support from Congress-
men of both =-arties. The Congress will be divided, however, on the law aid
order problem with members of Roxns' Liberal 'Party unwilling to make con-
cessions to the militant dissidents and the minority inclined tovard further
attempts to mediate. Nile President Roxas undoubtedly stated the Adminis-
tration's stand on one or both of these r'roblems in his State of the Nation
message it is likely that he stressed pore firmly issues which require add.:
tional US financial asristance--veterene benefits, developmental loans, and
additional war damage.
The current seesion of Congress will be in all likelihood a stormy one.
Minority strength is "resently on the increase, and party feeling is intensi-
fying. Before Congress opened both Liberals and the minority had taker well
defined stands along lines which will nr obahly become more si.arnly drawn as
the session continues. Moreover, d evel?pmer during t aj s session of Congress
should definitely shape the presidential. caFl al.gn. of 1949-50. The uncompro-
mising stand of the Roxes Government toward the Luzon dissidents has given the
oppositiort an issue iron which to make noliticel cn ital, and anr_esty, if
granted, will release from the stigma of collaboration a highly capable group
of men whose political ambitions hill become well-defined.
AU. TRALIA
The margin between Australian exports to and imports from the US was
unfavorable to Australia in the amount of b 125,000,000 for the first five
months of the current fiscal year. toile this figure might seem to belie
the effectiveness of the import r-etrictions and the concurrent export drive
initiated in November, it is believed that the full effects of these policies
will not be felt for several months. Australian Government officials are
looking; to the European Recovery Program for the increased rurchasing 'over
in Europe which would increase their ex'-orts.
NEta ND
Representatives of the French are consulting with the New Zealand
National Airways on French aviation in the Pacific. The French are planning
an extension of their air services from Noumea to Papeete and Tahiti via the
Fiji and Cook Islands.
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