INTELLIGENCE HIGHLIGHTS NO. 44 16 March - 22 March 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020017-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 16, 2016
• Document Release Date: April 13, 2005
• Sequence Number: 17
• Publication Date: March 22, 1949
• Content Type: PERRPT

FAR EAST/PACIFIC BRANCH
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
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NOTICES This document is a working papers NOT
an official CIA issuance, and has not necessarily
been coordinated with other ORE producing oomm
ponents, It represents current thinking by one
group of specialists in CIA, and is designed for
use by others engared on similar or overlapping
studies, The opinions expressed herein may be
revised before final and official publication?
It is intended solely for the information of the
addressee and not for further dissemination,
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CFF`ICE OF VMS AND. ESTINASS, CIA
FAR SASTfACIPIC BRANCII
L LLIG#t1CE IIIGRLIOflTS VO, 44
16 March -- 22 March 1948
8ECTION I. S21hARY OF FAR PAST TRENDS AND W-nLOPMSTS
The WSR is apparently obtaining., strategic materials frost Southeast
Asia throu& clandestine channels of trade (p. 2).
Although YOSHIDA can be expected to comply with occupation wishes in
fiscal Ratters', it appears that the Japanese Government will attempt to
increase xecutive Branch authority at the expense of the SCAP-Paced
Diet (p. 2).
The Republic: of Korea will continue 'to press for Increased U5
military aid, possibly with offensive action in mind (p. 4).
Although Acting President LI has been able to bring further major
Nationalist figures into his camp, there has been no real improvement in
the prospects for_ peace in China (p. 5). Meamihile, the Communists have
shown increased interest in the future of Taiwan, while. Nationalist elements
there continue to work at cross-purposes and Taiwanese disgruntlement
increases (p. 6).
French and Vietnamese observers in Indochina express cautious optimism
regarding Sao Dai's prospects for success in tho face of severe problems (p. 7).
Continued degeneration of'governmental authority in Burma increases
the possibility of a major shakeup or even collapse (p. 8).
Republican officials' control over their guerrilla forces is being
weakened by Dutch delaying tactics in Indonesia (p. 9).
The Australian Labor Party appears to be able to survive opposition
sniping and everge victorious in the autumn elections (p. 10).
NOTEI A study of "Point Four" in Southeast Asia appears in Section III.
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SI CT1Q]I? II. DRVIUM -BUTS IN SPRCIFIED AR] 3
ab'1~1t11i.
Clan',stins env sments of strategic raw s *terials to t1SSR. It is believed
that Mash ly acquiring tine nee quanties of Southeast Asian
tin, antiaony, w*lfrcust, rubber. palm oil and other products. The Soviet
L.0atioes in Sia t is reportedly active in arranging the purchase of tin
cone trabes v ith 10 dollars through saa11 dd.nese tirms. Shiptentss of
raw materials are mde through southern Siamese and northern Malayan ports
and probably include not only materials from these oauntries but also
products muggled in from, Java, Staaatra and western Borneo. Falsified
shipping documents and export permits can be supplied by bribed port
officials and cargos are often shipped under misleading labels By adding
small amount of lead to tin concentrate, for example, the shipment may be
listed as lead-tin solder. The shipping pattern for Siamese material
probably follows that reportedly used for oladestine shipments of rubber
from Singapore-forwarding to long Bong or Shanghai and transshipment
from there to other ports, possibly including Vladivos3tok0
ABU
"Do
General TIacArthur's recent "a
etateaoOnt that he vouX remain at his post until the signing of a peace
treaty unless assig elsewhere and that roports of civilien control for
Japan are rumors, a Voars to be a SCAP attempt to reassure the Japanese
public which is still perturbod aver 'krithdrami-from..Japan"reports and
is eager for ats r comforting statanont. The Japanese proes headlined
UneArthur's convents, while a Government spokesman i n f'opted "utnost joy"
ovor a continuation of SCAP's "enlightened guidance." Since the possibil-
faction of conservative interests and f ulfil]xnt of Y Ih1)A's porsonal
ambitions have- dominatod the administration'. attempts to develop a
legislative program., In its outlined form, the administration's program
contained measures objectionable both to'the opposition parties and to
SOAP, Opening of the Diet nos delayed to permit modification of the
budget, certain features of which are reported to be contrary to the nevi
economjc'rohabilitation directive. Despite the government's desire to
that the US may leave Japan defenseless will still remain and Japanese
Communists may be expected to play on this lingoring fear.
t 12g. Despite its favorable majority position in
the Diet, ttm Y05KTItiovarnment is not finding the going smooth. Sa.ti.s-
ity of an early peace treaty has been largely discounted in the Japanese
mind, VscArthm" s statement has been interpreted as indicating that he
will somain inndefinitely. In view of its respected origin, MacArthur'e
statement will help quiet current rrithdranal fears, but the suspicion
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Communists denounce Atlantic Pact, TJe Chinese Communist Party
(CCP) responded as anticipated to the announcement of the provisions of
the Atlantic Pact, denouncing the pact as another "plot of the war
provcateurs" led by "the American imperialist go"ernment." The Com-
munists used the occasion to endorse, for the first time, the Sino-
Soviet Treaty of August 1945, and to reaffirm the unity of the CCP
with the USSR.
The lengthy CCP broadcast also condemns the US for refusing to
recognize the sincerity of Stalin's "peace" overtures, and for rejecting
the proposals of the Soviet Union regarding disarmament,, atomic weapons,
and control of atomic energy. The broadcast attributes this recalcitrance,
as always, to the "economic and political crisis (which)... grows ever
grLver...within the entire imperialist camp," compelling "the inter-
nai,ional reactionariea...to find a way out of this crisis through war."
Tho broadcast finds hope,however, in "the organized strength to win
peace; the nucleus of this strength lies in the Soviet Union," rein-
forced by Soviet satellites, Communist parties, pro-Soviet and Com-
munist front groups everywhere-
The broadcast notes approvingly the statements of the leaders of
14 other Communist parties, "responding to the call of Thorez and
Togliatti," and states that "we, the Chinese people, will surely, with-
out question... support this call." China is especially impelled to do
so, the broadcast alleges, as China has suffered directly from armed
invasion and from, foreign support of the Kuomintang in the civil con-
flicto In short, "the Chinese people...cannot but regard...the American
-imperialist elements as their mortal foe,...and the leaders of the w orld
anti-imperialist front--the great socialist state, the Soviet Union?
as their comrades in arm" from first to last."
The above remarks wore not ascribed, as have been important state-
ments of policy in the past, to MAO''Tee-tung, or to any other Party
leader, or even to the Central Corrinittee, but merely to a Communist
news agency "editorial," a vehicle which the.CCP has sometimes employed
for positions which were subsequently reversed. There is little chance.
however, that this particular position will be reversed in the foreseeable
future; until the USSR's aggression in China becomes manifest to the
CCP, or even thereafter (as in Yugoslavia), the CCP can be expected to
continue to support the Soviet position on international affairs.
Bao Dai's chances of success. Reaction from certain prominent
Vietnamese an respons a rench officials in Saigon, following the
Pao Dai-Auriol agreement, indicates their belief that ex-emperor Bao
Dai upon his return to Incrschina may be successful in. establishing an
effective government. This attitude apparently is based upon signs of
public interest in the Bao Dai agreement, a belief that non-Communist
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TNDCC HTNAA (continued)
resistance elements will cooperate with T3ao Dai under certain cono1tions
(i.e. a face-saving arrangement to avoid surrender of arms to the French),
and an apparent confidence in Bao Dai's ability to pacify the country.
On the other hand, these observers acknowledge the deep mutual suspicion
which may prevent a practical solution as long as the French remain in
Indochina
'7hile the actions of the non-Communist resistance element in Indochina
are hard to predict, it is improbable that rapid shifts to support of
Pao Dai will occur. Only if it becomes apparent that'a reasonably is'ide-
pendent regime may succeed will there be any significant realignment which
would add strength to a government headed b'r Bao Dai. Further, it is quite
doubtful that a Vietnamese army under Rao Dai would be successful wh re
the French have found a program of military suppression infeasible.
Although the Bao Dai agreement grants wider concessions to the ex-
emperor than were offered to Ito Chi "inh, the partly successful Viet "Snh
effort to drive France from Indochina will encourage the non-Communists to
continue their present opposition to the French, Also, a campaign has
already been launched by die-hard French colonial officials and residents
to undermine the new experiment at the working level,
T% or governmental shaken possible. The present Burmese Government "H
may undergo a major revision or even collapse in the near future as the
multi-faction civil war continues to weaken its already tenuous authority.
Karen forces in central Burma have captured several important towns, con-
siderable amounts of money and supplies and have liberated large numbers
of Karen military personnel from Government internment, Furthermore,
Xachin and Chin Government troops are showing little enthusiasm for fight-
,ing Karens and are reported to be deserting or remaining neutral, If the
Karen forces move southward as expected, they will be augmented by in-
creasing numbers of irregulars and will probably overrun the weak Govern-
ment forces defending the approaches to Rangoon. Under these favorable
circumstances, the Karens have ignored a recent Government offer of
amnesty, which was largely without substance, and are probably more deter-
mined than ever to press their demands for an autonomous or independent
state G
To avert military defeat at the hands of the Karens, the Government
is apparently seeking an accommodation with the insurgent Peoples' Volun-
teer Organization (PVn), Although there has been no official confirmation,
it has been reliably reported that Prime ''inister Thakin Nu has agreed to
give the PM three seats in the cabinet and accept 13 P70 demands. Among
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BITRfcA (continued)
other things, these demands include a general amnesty for FVOs, recogni-
tion of PVO authority over'the areas it controls, and the inclusion of
all Ms now bearing arms against the Government into the regular ArnV.
A Government-PVr settlement is not likely to alter the existing military
situation materially in the near future, or establish a more stable and
popular regime. Such a coalition would inherit the unsolved problems
of its predecessor, and probably be confronted by many new ones. The
redistribution of political and military patronage could, be a particular-
ly thorn issue. Furthermore, there are those in the Government who
would vigorously oppose cooperating with the PVO, while on the other
hand many FV0s, possibly with the support of Supreme Commander Ne ''Mn,,
desire to form a purely W+)--appointed cabinet. Therefore, although a
superficial agreement may endure temporarily, personal feuds, factional-
M("VESIA
Dutch delay weakens Republican control over guerrillas. The few
Republican leaders now at liberty Indonesia are concerned over the
absence of a centralized leadership over Republican adherents, They
feel that while the Dutch hold the moderate leaders as political prison-
ers,, more radical military leaders will assume effective authority:.
This development is a strong probability in view of the fact that mill
tart' units operating in pockets in isolated areas will be forced to rely
more and more on their own initiative,,- Aside from the growing independence
of regular TNI (Republican Army) units, Tan 7falakka (often characterized
as a Trotskyite) is suprorted by militaristic groups of the extreme left
wing and will undoubtedly make a bid for leadership. Tan 'talakka's forces
may find a possible source of added strength in remnants of the former
Communist Party (Pri) army which took refuge in the hills of Central and
East Java, when its ~cou,,2 against the Republic failed last September. Dutch
forces have recently launched a drive against certain pro--Tan ?Jalakka
groups located in Central Java, but initial airdrops failed to make con-
,tact with, these guerrilla forces.
Regular Republican and independent guerrilla resistance to the Dutch
has accelerated to such an extent in recent months that even a centralized
government at Jogjakarta would encounter difficulties in enforcing a cease-
flre order. :'yell-informed Republican officials have Vstimated that if
President Soekarno were to be restored immediately to authority at Jog-
jakarta (this is a crucial point in Dutch-Indonesian relations), his commands
to military units would be only 60 per cent effective. It is believed that
the longer he remains in detention, the less effective would be his in-
fluence when restored to power, a'fact which the Dutch may well be exploiting
in)their present delaying tactics.
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Debora Partyee election prospects bright. Although the Australian
political scene will be confused by political maneuvering as the fall
elections approach, the Labor Party will probably emerge victorious
The Labor Government has regained a large measure of popular favor in
recent months and the failure of a nationwide Liberal--Country Party
coalition to materialize has further brightened its prospects. The
opnositiori parties moreover, has nbt yet produced positive platforms
and hold little appeal for the powerful trade unionist group. Prin-
cipal issues in the general election will be: (1) inflation; (2) con
trinism; (3) internal security,
The Labor Government believes. that it is not likely to be dis-
lodged on the issues of wages, prices, and current high living coete?
while money is plentiful and there is full employment. Nevertheless.,
the opposition will indict Labor for its failure to maintain price
subsidies and price control. Ccii inism will be a major issue and one
on which the Government has been vulnerable,, Prime Minister Chifley
has refused to outlaw the'Ccmnnunist Party on the grounds that no
minority should be denied the right of free speech and that there are
ample legal penalties for Communist violations of the law. The Labor
Government, on the other hand, has recently stiffened its policy and
is now nrnmeetntina the rrpnnntiaf Party Sf~rrref:amr t3~.raai+al Pr s marl i+i sin
was
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 SECTION III. B,4FE ESTIMATE
"Point Four" in Southeast Asia
President Truman's inaugural address contained the declaration that
"we must embark on a bold new program for making the benefits of our
scientific advances and Industrial progress available for the improvement
and growth of undeveloped-areas." In explanation of this fourth point in
the President's foreign policy statement, Truman said that while US
material resources were limited, US technical knowledge was not and was
therefore exportable without restriction. The President stated that the
export of technical proficiency was not intended to be a US monopoly but
should include other nations and international organizations as partners.
Private enterprise in both the US and other nations, in the President's
opinion, should be encouraged to invest capital in undeveloped countries
under guarantees both to the investor and to the indigenous peoples.
Since technological aid is being given to many nations by a number of
US departments and agencies. by speoial UN commissions and by FCA, while
private capital is active in colonial areas as well, the originality of
"Point Four" lies less in the granting of a new sort of assistance to
undeveloped foreign countries than in a new concept of implementation. It
is planned that "Point Four" aid will be better coordinated both on a'
national and. international level; that the various categories of exported
skills will be expanded; that the quantity of help will be considerably
augmented; that the number of participating countries will be increased
and finally that the program will be sustained on a long-range basis.
Designed as a measure to raise living standards of the depressed
millions in undeveloped areas, "Point Four" will serve to promote US
security interests and blunt the spearheads of Soviet propaganda by so
doings Further, American technical, mechanical and organizational talents.
exhibited abroad, should increase US prestige and influence. In all,
"Point Four" may well develop into a major instrument for the advancement
of US foreign policy,
On 3 March 1949, the State Department requested specific overseas
missions to report on local reactions to "Point Four", including comments
on local interest manifested,, cooperation that might be expected and such
recommendations 'as could be offered immediately as to kinds of activities
needed and channels or agencies best suited for conducting them. Replies
from all State Department addressees in Southeast Asia have now been
received and are analyzed, below, country by eountry0
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IInaettled political, military and economic conditions here make
prediction of the degree of cooperation to be expected difficult and even
raise the question of with whom negotiations may be conducted, A 23ao Dai
government will unquestionably desire and request all possible US or other
friendly foreign aids The French will in all likelihood only agree if the
program is conducted solely under their auspices and integrated with their
own unrealistic "ten year" plane A Viet Minh-controlled government would
probably oppose US assistance as a "threat to sovereignty",
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Although for many years the most politically stable area in Southeast
Asia, Siam 13 not superior to her neighbors in economic development and
may even lag behind some of them. Historically, Siam has evinced a serious
interest indeveloping her resources but the government has been handicapped
by a lack of qualified technical personnel to direct or execute planso
Siam, therefore, would welcome "Point Four".,
US embassy, Bangkok,, suggested the following courses of actions
(1) Comprehensive economic surv'ey$to determine definitely Siam's
mineral, agricultural, industrial, and financial assets to
proceed selection and assignment of advisers.
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(2)
(3) Organization of an effective public health program and training
in the prevention and cure of human and animal diseases.
(4) Encouragement of private financing for.hydroelectrio prol!eats?
both to improve irrigation and to provide power for railways and
industry,
MALAYA
Siam's economy being largely based on rice export, aid in
rehabilitating railways, highways, waterways and harbors should
be given high priority
The XJK is presently implementing its own economic and social
rehabilitation program in Malaya. The effort is being handioanped, however,
by widespread banditry under Communist direction. This handicap, as well
as a limited reserve of funds, makes it probable that British authorities
would be well disposed toward "Point Four" technical aid and financial
investment patterned to fit their undertakings?
U6 Consul General, Singapore, suggests that such assistance could best
be implemented as follows.
(1)
Expansion of food production through increased acreage,, improved
irrigation and mechanized cultivation of rice as well as develop-
ment of offshore and river fisheries,
(2) Institution of mass elementary education, including adult classes.
(3) Broad revision of Malaya's present economy, including introduction
of more household industries, development and introduction of
disease-resistant rubber plants, more diversification of crops,
more effective utilization of labor, surveying of geological
and forest resources prior to development of mining, sawing and
milling, operations and the expansion of electric power for
processing exports and local goods.
(4) Institution of a health program both to teach methods of combat-
ing the many virulent local diseases and to increase local
production of medicines,
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(5)
Establishment of a US training program for some 20 Siamese
annually in the fields of medicine, public health, engineering,
agriculture, transportation, mining, geology, land conservation,
forestry and general economics. In each of these fields, one
American should come to teach and train pupils in Siam as~well,
Exchange of students and professors in non-technical fields is
also desirable,
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Current conditions of near anarchy in Burma (see p. 8) will probably
prohibit any early application of "Point Four" chereo The Burmese,, -more-
over, are almost pathologically suspicious of any form of foreign aid at
present, believing all such ants to be attempts at "imperialist" control.
Eventually, however, Burma will need considerable technical advice and
foreign capital*
US Charge, Rangoon, reports that a program of assistance to Burma
might include :
(1) Possible development of light industry and assistance in
production of minerals, oil, and hardwoodso
(2) Establishment of resident advisory r*roups for improvement of
agriculture and health.
(3) Increased fellowships to Burmese graduate students in the t1S.
INDOIIES IA
Netherlands officials have implied that, in general, the Dutch them-
selves possess all the skills necessary to direct the rehabilitation of
Indonesia and therefore do not need outside advice,, Republican represent-
atives, on the other hand, have exhibited much enthusiasm for "Point
Four". US Consul General, Batavia, reports that opportunities for develop-
ment are unlimited in the fields of conservation, forestation, transporta-
tion, communications, electrification, agriculture, public health, govern-
ment administration and education. Recent and current warfare in Indonesia,
in his opinion, will intensify Indonesia's needs.
In accordance with the April 1946 Philippine Rehabilitation Act,
reconstruction aid is now being given by the US in a wide variety of fields.
Since this program is scheduled to end on June 30, 1950, the Philippines
may be expected to welcome "Point Four" in the future.
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