THE CURRENT SITUATION IN LAOS

Document Type: 
Collection: 
Document Number (FOIA) /ESDN (CREST): 
CIA-RDP79R00904A000400030013-3
Release Decision: 
RIFPUB
Original Classification: 
S
Document Page Count: 
7
Document Creation Date: 
December 23, 2016
Document Release Date: 
June 13, 2013
Sequence Number: 
13
Case Number: 
Publication Date: 
October 24, 1958
Content Type: 
MEMO
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PDF icon CIA-RDP79R00904A000400030013-3.pdf270.86 KB
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,~_ ~ Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 ~..r ~ C E N T $. A L INTELLIGENCE A G E N C Y 2!~ October 2958 MEMOR.'1NDUM ~'OR UI~.~TE'0 ST~TE.S INTELLIGENCE $Oi~RD SUB~~CTs The CtArront Situation in Laos Fi:rsuant to the Lirectar's request at the JSIB rae : ;i._^.~ of 21 Octcber 1958, the at~tachc:t is circulated to members of i;ha USIB for infcrm~:.ticn. SHEFtN~~N KELP?' .< Assistant Directcr "y' National Estimates Distribution t'21'I aT~ NC C~dC~GE E6V CL~,SS. ^ CECLf~3SE~tED CLASSe C6a:~~'t~~D ~'C: 'rS S C ~EK"Y REV~~:`~ ~~t'S;~: GU'~~&: i~a~ a~?Z ~k~E:A~R 1980 REYi'ddsR: Qt364S Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 ~. ~ ,,~- C E N T R A L I N T E L L I G E N C E A G E N C Y 2~ October 1958 MEMORANDUM FOR THE DIRECTOR SU$JECTs The Current Outlook in Laos 1. The investiture of the cabinet of Prime Minister Phoui has not as yet brought political stability to Laos or assured a halt in the growth of Communist influence throughout the country. Phoui has succeeded in promulgating monetary reform' in avoiding a no confidence motions and in developing at least temporarily a surprising degree of unity within the old guard p~xty~ the Rally of the Lao People (RLP)e The basic problem of meeting the communist threat still lies ahead however ands unless a sense of urgency and p~.rty unity are ma.intained~ there is a less than even chance that this government will be able to implement a sufficiently energet~e program to win the next general electionsf 2? The monetary reform program was designed to eliminate much of the graft and corruption within the Lao government and to contribute Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 I~ i ~ Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 ~_ `. to a more effective US aid program. The decree issued on 9 October- .provided for the elimination of licensing for all foreign exchange transactions the establishment of single rates of exchanges and the adoption of free convertibility for all kinds of foreign exchange, In additions the Lao National Bank was authorized "to sell and buy for kip I~merican dollars at a stabilization rate of $0 kip to one dollar." To support this actions the US government through CINCPiLC has transferred one half million dollars in the form of c~ sh to the Lao National Bank. 3. In some measures the promulgation of monetary reform is a symbolic victory for Phoui~ and a demonstration of his intention and ability to implement a reform program: the monetary reform measure was opposed nat only by the leftist Santiphab party and by the Communist controlled NLHX but up until the final vote by several factions within his own RLP? A-iowever~ his victory in this ease was a narrow one and came only after the Santiphab motion of no confidence on the substantive issue of monetary reform was treated by the RLP as a procedural question. Subseque:~tly~ the i-ssembl.y halted dobate on monetary reform by a 20 to 17 vote. Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 ~__, ,__, ~~ Since Phoui~s success in maintaining an unprecendented degree of party unity on the monetary reform test was made possible in part by the threat of continued suspension of US aid, there is still no assurance of continued unity on the general range of problems facing the government. Phoui~ who offendeC~ his party by defaulting on a promise to keep the members informed ?t each stage of the monetary negotiati~ns~ will face a continuing threat on censure from opposition paarties and from minority groups within his own party until the closure of the assembly now scheduled for 31 Octobers 1'~.fter that ho may have to overcome some adverse economic and political effects arising from devaluation and free eomrertibility. The two most imj~ort~nt dangers arc: in 'lation! which could be used by the NLHX and Santiphab parties to discredit the government and a "dollar shortage" which could result from a channeling of dollars to Communist China by leftist groups or from hoarding of dollars by speculators who might hope to profit from subsequent depreciation of the kip on the freo market. Neither of these problems h?s appeared in the first two weeks since the promulgation of monetary reform on 10 Gctober~ but in the absence of adequate co~.nter- measures they are likely to a pear radually as the RLG attempts to live under free convertibility and the reduced dollar aid which apparently is implied in the devaluation. ~- 3 - Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 ~~ ~. 5. Ifs under the most adverse circumstances foreseeable Phoui or a successor were compelled to negate the monetary reforms and subsequently suffered a loss or major reduction in US aids there would be a chance that the Laotian government would feel compelled to seek economic assistance from the Bloc The Longer Term Outlook 6. t~~hether ~r not the Phoui government survives, the basic problem of meeting the Communist threat thx~ughcut the country lies ahead. RLG efforts to prcvicie the kind of political organization and civil administration r~ eded to prevent an NLHX victory in the general elections now scheduled for 1959 or 1960 will continue to be hampered, althaugh to a lesser Extent, by the conflict between the old guard conservatives who hold to their positions of privilege and the young CDAJI leaders who are morn inclined to reform the government. :although the present Phoui cabinet excludes the Communist NLHX and includes four able civilian members of the CDNI who have been given considerable leeway to date, the old board retains the capability for dominating the cabinet at any time. The old guard commands some 38 deputies in the 59 man National l~ssembl.,y, but has made little or no progress in developing organizational and popular support to maintain its position. The CD~FI~ which apparently commands the support of the army leadership: has made some limited progress toward establishing a grass roots organization. But these efforts Declassified and Approved For Release 2013/06/13: CIA-RDP79R00904A000400030013-3 Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 ~~ ~; are as yet no match for the NLHX which c 3~itinues t o make inroads in the lower ranks of the army to organize the cot~.ntryside~ and even in some cases to talcs over village a- ~~nista~c~7~s_~ne '. If i;hs CUB?l's efforts to implement re._?~ ~iri 'ten oc ;peration with the old guard or to displace the old.guard f:x_l, the OUIuI~ if it is not to lose what influence it n^w has ~ w;..]. li,~.-;?e to ass?~une greater rlSitis and atLe*ript 'co mount ~ ti1~r nl.;.~.:i.'G~:'_~~T C7iA~,' :ir tC form an emergency cab~.net ?c i tl. tze ~.icl. of the; c~?owi.~ T+~ is t~ncert:~in whether either the young conservative group or the cro*an, especially the latter, has the :rcefu?ness to carter out these c[rastic actions. In eithor case there would be a ~cssibility of ^ors~?ed P?L%~ insurgency supported by the Dn"t~? l.nd even if the ;.Young con5er~rat~_ves do achieve power without provolcirg renewed insurgency, they will ':Je lZard pressed to implement a popular l:?ro.t;ram ral%idly en~ug'i t o r, o,et the A;LHY threat in tY~.e com~~.ng ge~leral Bleution, Fa~11_n thl_s9 tht~vr would probabl~Y be forced into strng repressive measures against the NLH% wlxi.ch again raises the questian :?f Z~TLHX insurgency$ 8. In shart~ although the recent successes of Phoui reflect an improvement in the situ~tion~ the prosects for Laos are still not good. If the general elections axe held in December 1959 -5- Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3 or 1960 and if present conditions continue, an NLHX victory seems almost certain. If the governments come in time to recognize the NL~ threat and attempt to take forceful action against the corrmiunists, renewed NLIik insurgency with the support :~f the Di~V may result. 1\lthour;h Fhoui has semnstrated same ability to hold. his party together on critical votes the best hope for a free Laos probably continues to lie in the emergence :f a CDNI-dominates ~;overnm?nt of s?~me kind, But this is only a hope, with sack a goveri~~nent ~ s prospects ;,f success uncertain and with time meanwhile running out. FOR THE BOARD OF NATIONAL ESTTt%t~TES SHE Fu~;AN K~dT Assistant :Director Natior_al Estimates # Articles 2 anti 2 of the present Lao constitution set the term of office of :.leputies at five years, implying BLcember 19~. However, the constitution in effect at the time of the ,general elections in 1955 set the de~?uties ~ tern of office at four years, implying December 1959. There is consi~3erable evidence that an attempt will be made to delay the e~.ections until 1960 with the expectation that the canservatives can mare better use ~~f the adsitional time than can the NLHXe -b- S Declassified and Approved For Release 2013/06/13 :CIA-RDP79R00904A000400030013-3