THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00472A001800060005-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: December 9, 2016
• Document Release Date: April 27, 2001
• Sequence Number: 5
• Publication Date: December 29, 1965
• Content Type: REPORT

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OCI No.0652/65
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Presentation Staff
WEEKLY REPORT
THE SITUATION IN SOUTH VIETNAM
29 December 1965
h
INTELLIGENCE AND REPORTING SUBCOMMITTEE OF THE INTERAGENCY
VIETNAM COORDINATING COMMITTEE
DIA, DOS Declassification/Release Instructions on File
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
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WITHIN THE MEANING OF THE ESPIONAGE LAWS,
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SION OR REVELATION OF WHICH IN ANY MANNER TO
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OCI No. 0652/65
Published by the Directorate of Intelligence
Central Intelligence Agency
THE SITUATION IN SOUTH VIETNAM
(23 December - 29 December 1965)
C O N T E N T S
THE WEEK IN PERSPECTIVE
Map, South Vietnam, facing page
1. THE SITUATION IN SOUTH VIETNAM
A. POLITICAL SITUATION
GVN implements tough policy on tribal
autonomy movement FULRO and its sup-
porters (p. 1); Some members of Gov-
ernment are counseling restraint toward
FULRO members in detention (p. 1); Fur-
?ther reports of dissatisfaction with
Ky as premier noted in Saigon (p. 2);
Plans for advisory council are reported
(p. 3); Liberation Front to cease attacks
on GVN troops during lunar new year holi-
days (p. 4); Government leaders discuss
ceasefire and negotiations (p. 4); Re-
tail prices in Saigon slightly under
those prevailing last month (p0 5); Red
as well as white rice to be purchased
(p. 5); Conditions in Port of Saigon
may improve in January (p. 5).
B. MILITARY SITUATION
One-sided Christmas cease-fire was high-
light of past week (p. 6); Kill. ratio
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still favors government but to a
lesser degree (p. 6); Significant
and successful government action in
Chuong Thien-Phong Dinh border area
reported (p. 6); End of 'Viet Cong
cease-fire brings increase in tempo
and intensity of Communist activity
(p. 8); Current status major trans-
portation routes is given (p. 9)e
Map, Transportation Routes, facing page 9
Number of Chieu Hoi returnees drops
sharply this week (p. 10); Rural con-
struction cadre policy under review
(p. 10); For first time all provinces
will have approved rural construction
budgets in 1966 (p. 10), Major psycho-
logical warfare effort: planned for
lunar new year holidays (p. 11); Two
examples of successful psychological
warfare operations against the Com-
munists are discussed (p. 11); Paci-
fication effort near Da :Nang stalled
(p. 12); Security conditions in area
close to Da Nang are bleak (p. 12)9
Map, North Vietnam, facing page 13
Hanoi claims hostile US air activity
over 'the DRV is continuing (p. 13);
Moscow to send Shelepi.n 'to Hanoi to
make Russian influence felt with the
North Vietnamese (p. 1.3); Hungary
grants North. Vietnam a new loan and,
a moratorium on repayment of past
loans (p. 14); Eleven MIG-21/Fishbed
fighters introduced into DR'V (p. 14);
Nine new SAM sites identified (p. 15)0
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III. THIRD COUNTRY DEVELOPMENTS 16
British Conservative Party leader
Heath interested in visiting Saigon
in January (p. 16); Directorate to
consider a number of diplomatic
appointments (p. 16); Television
service to begin in Vietnam in Janu-
ary (p. 16); Prince Sihanouk reacts
to allied announcement of intention
to take self-defense action across
Cambodian border (p. 16); Interna-
tional Red Cross begins :inspecting
South Vietnamese POW camps (p. 17).
ANNEXES: Economic Annex--Inflationary
Pressures Expected in South
Vietnam in 1966
South Vietnam Battle Statistics (Weekly)
US Combat Casualties in Vietnam (Weekly)
(The Weekly Report on the Situation in South Vietnam
is based on contributions from CIA, DIA, and INR; it
is edited and published by CIA without final coordina-
tion.)
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THE WEEK IN PERSPECTIVE
Little heavy fighting took place in South Vietnam
last week, but the incident rate remained high. The
seven-day period was highlighted by a Christmas truce,
more fastidiously observed by the allies than by the
Viet Cong.
The South Vietnamese Government has begun to
initiate a policy of reprisals against supporters of the
dissident tribal autonomy movement, FULRO, although
some officials are still urging moderation. Meanwhile,
there are continuing reports of dissatisfaction within
the military over the present Ky-Thieu leadership,
including rumors of coup plotting.
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I, THE SITUATION IN SOUTH VIETNAM
A. POLITICAL SITUATION
1. The South Vietnamese Government has begun to
implement a tougher policy toward members and sym-
pathizers of the tribal autonomy movement FULRO,
which staged an abortive uprising in the central
highlands ten days ago. A military tribunal in II
Corps began holding trials on 27 and 28 December
for nearly 40 persons accused of complicity in the
revolt, about half of them tribesmen from a rebel-
lious government paramilitary company in Phu, Bon
Province. The remainder are officials, schoolteachers,
and students arrested in Pleiku Province for complic-
ity with FULRO. Four of the troops were sentenced
to death; two of them have already been publicly exe-
cuted in Pleiku, and the other two, unless granted
clemency, are scheduled for execution in Phu Bon.
Some 30 montagnards have received sentences ranging
from life imprisonment, in one c:as;e, to oneyear,
with the majority sentenced to 10-20 years of com-
bined prison terms and exile. Only four men were
acquitted,
2. Additionally, II Corps commander General
Vinh Loc issued two decrees aimed at crushing the
FULRO movement. The first orders the populace to
refrain from any cooperation with FULRO on penalty
of execution. The second decree, apparently not yet
published but presumably dating from 20 December,
grants members of FULRO a grace period of 20 days
in which to surrender, after which they will face
"the severest punishment."
3. Some members of the government in Saigon,
including vice premier and defense minister General
Co, reportedly are counseling restraint toward the
majority of some 300 FULRO members in government
hands, lest there be an adverse reaction among the
montagnard tribes in general. General Loc himself,
a strong proponent of a tough line toward the FULRO
rebels, included programs of assistance to the
montagnards in a recent planning session on pacifi-
cation in II Corps. However, Loc and other military
officers in II Corps have reportedly agreed to keep
another 300 former FULRO troops, who pledged allegiance
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to the government late last summer, on extended train-
ing detail in coastal Khanh Hoa Province, rather than
return them to active combat against the Viet Cong in
the highlands.
4. In Saigon, meanwhile, there are further
reports of dissatisfaction within the military over
the performance of General Ky as premier, and of pos-
sible coup plotting to overthrow K and chief of
state General Thieu. 25X1C
police director o one Ram Van Lieu, in
complicity with I Corps commander General Nguyen
Chanh Thi, is plotting a coup to take place at the
een ppro c e on e a o unname a o is
generals seeking his support for a move to oust Ky
and Thieu; Quang, who has made no secret of his dis-
taste for Thieu, a Catholic with Dai Viet Party con-
nections, was alleged to feel that a change in gov-
ernment would open up little prospect for the Buddhists
until they have successfully launched a Buddhist po-
litical party.
5. Although there continues to be no firm evi-
dence of any imminent coup, criticisms of Ky-and his
government's alleged failings continue to be re-
ported from various circles. General Thi has fre-
quently been quoted as critical of the regime's lack
of progress and as expecting eventually to be called
upon to take over the government and rid it of cor-
ruption. He has been reported closely associated
with Lieu since their mutual paratroop service. Lieu
himself appears independently ambitious He has in-
dicated that he desires a broader cabinet assignment
in the intelligence-security field. He is also
associated with several members of Ky's original
civilian "braintrust," some of whom Ky reportedly
desires to remove from positions of influence.
6. Earlier this month, Colonel Lieu reportedly
observed that differences among South Vietnam's
ruling generals were increasing, but that no faction
appeared capable of mustering enough support to mount
a coup. Lieu indicated in particular that southern-
oriented generals, including Defense Minister Co,
were dissatisfied, and that retired General Tran Van
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Don and his southern supporters were a threat to
stability. Lieu commented, however, that he felt
the only likely means by which Ky might be replaced
would be by decision of the ruling military Directorate.
7. Premier Ky continues both publicly and pri-
vately to discount the likelihood of a successful
coup attempt. In comments to the press on 29 De-
cember, he implied, however, that other means might
be tried to remove him. He cited, as an example,
attempts to bribe him with up to US $1,000,000 to
accept a post abroad.
8. Indicative of the type of charge to which Ky
may prove vulnerable was the recent exoneration by
a military tribunal of General Tran Tu Oai--a prom-
inent officer during the Diem regime--and 12 associ-
ates accused of embezzlement. No explanation for the
acquittal of Oai, who was tried in absentia, has
been offered, despite the fact that the case against
him was allegedly "air-tight," and expected to be-
come a major example of the government's anticorrup-
tion policies.
9. The secretary-general of the Directorate,
General Phan Xuan Chieu, recently outlined to a
US Embassy officer government plans for establishing
an advisory council early in 1966. Chieu stated
that the Directorate had decided, with only Premier
Ky in opposition, to grant the council more concrete
responsibility than originally proposed. He said
that the council would probably have about 60 mem-
bers, who would be formally presented to the public
following the convocation of another armed forces
congress, probably about the time of the lunar new
year, or Tet, from 21-23 January. Chieu volunteered
no information on the identity of the council mem-
bers, implying some difficulty in finding qualified
persons willing to serve. He noted, moreover, that
earlier plans to establish a "national front" of
political parties to support the military regime had
been deferred, presumably because prominent civilian
politicians were more interested in opposition
activity.
10. In connection with the projected advisory
council, Buddhist monk Tri cuang has on more than
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one occasion emphasized to US Embassy officers his
dissatisfaction with the Directorate's plans. Quang's
objections appear to stem from a belief that the coun-
cil will have virtually no representation from exist-
ing provincial and municipal councils, currently the
only democratically elected bodies in South Vietnam.
In the background of Quang's position is his apparent
suspicion that the advisory council may be a vehicle
for Directorate chairman General Thieu to further
the prospects of the Dai Viet Party and various
Catholic elements.
11. The Viet Cong Liberation radio on 28 Decem-
ber broadcast a "decision" of the Liberation Front
to cease attacks on government troops during the
Tet festivals, for the four-day period from 20
through 23 January. The broadcast, stressing the
national character of the Tet holiday, did not spe-
cify a cessation of attacks on US and third country
troops during the lunar new year period, but implied
that attacks by the latter during the Tet would incur
the opposition of all Vietnamese forces--the Commu-
nist as well as the government. In previous years,
the Viet Cong have sharply reduced activity during
the new year period, but last year the Tet was
followed by a sharply intensified Communist military
campaign.
12. South Vietnamese officials, who last year
proclaimed no open cease-fire posture during the Tet
but generally held operational activity to a minimum,
have indicated that they may also observe a cease-fire
this year. However, possibly to curb speculation of
a bid to initiate negotiations, South Vietnath's For-
eign Minister Tran Van Do told an American reporter
on 28 December that South Vietnam opposes any formal
cease-fire or unconditional negotiations with the
Communists. Do characterized the Saigon government
as willing to entertain "corridor" discussions, but
"dead set" against peace negotiations at present.
He claimed that the Communists would never negotiate
in good faith, as long as they felt they stood a
chance of winning on the battlefield. Do added that
he did not think there was any contradiction between
his government's position and the US willingness to
engage in "unconditional discussions."
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13. Both Premier Ky and Chief of State Thieu
have also reiterated to the press in recent days
their belief that the Communists were not prepared
to undertake serious negotiations at present. Ky
rejected the four points proposed by North Vietnam
as a basis for negotiations as tantamount to asking
"unconditional surrender". General Thieu declared
that any possibility of talks depended on the Com-
munists, but indicated that he felt that, because
of Chinese Communist. pressure on North Vietnam, the
outlook was for further escalation of the war.
Economic Situation
14. During the week ending 23 December retail
prices in the Saigon area generally remained at
levels slightly under those prevailing a month earlier.
Prices of imported commodities continued to rise
moderately except for certain commodities such as
cement, the price of which has risen 129% over the
past month.
15. As a result of meetings with rice merchants,
the GVN Ministry of National Economy has now agreed
to government purchases of red rice as well as
*hite rice. While this will partially ease the over-
all rice problem, private banks on the other hand,
may adopt a more restrictive rice credit policy.
The US mission is encouraging easing of these credit
restrictions.
16. Congestion in the Port of Saigon is expected
to be improved to a limited degree when the (French)
Messageries Maritimes complex, which was recently
purchased by the GVN, is turned over to the US.Army
on 1 January for exclusive use of US military cargo.
However, ports in central and northern South Viet-
nam are experiencing off-loading delays due to the
onset of-the northeast monsoon.
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B. MILITARY SITUATION
1. Combat activity remained at a generally low
level throughout the week, with no significant con-
frontations occurring. Only two of the eight Viet
Cong attacks were estimated at battalion or larger
size. The highlight of the period was a relatively
one-sided Christmas cease-fire.
2. During the period 19-25 December, 861 inci-
dents were reported, comparable to 866 the previous
week. The kill ratio favored the government to a
lesser degree, 3.7 to 1 as against 4.3 to 1 last
week. Viet Cong casualties included 937 killed and
137 captured, about the same as last week's 952 and
130. The government lost 227 killed, 499 wounded,
and 104 missing or captured, an improvement over the
previous week's 359, 555, and 257.respectively. US
casualties were 21 killed, 95 wounded, and 11 missing
or captured. No allied casualties were reported.
Weapons losses slightly favored the government forces,
who lost 226 and captured 246. A marked decline of
Chieu Hoi response also occurred, with
35
military
defectors compared to 214 last week and
returnees as against 101.
11
political
GVN/Allied Activities
3. Government and Allied military activity con-
tinued, until Christmas, at the same level as in the
previous week, with one highly successful operation
reported. Of 70 battalion or larger operations during
the 19-25 December period, 42 made enemy contact,
whereas last week's 69 achieved only 31. A total of
23,661 small unit operations, including 2,726 US, re-
sulted in 163 contacts, with 78 of these by American
troops.
4. The most significant government action of the
week was an ARVN 21st Division operation on 22 Decem-
ber. More than seven ARVN battalions boxed in an
estimated Viet Cong battalion in the Chuong Thien-
Phong Dinh border area of IV Corps Tactical Zone.
Maximum use was made of artillery and tactical air
support, and Viet Cong positions in a canal-cut paddy
area were then assaulted, resulting in 282 Viet Cong
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killed and 12 captured, along with numerous weapons.
ARVN losses were 21 killed and 51 wounded.
5. Friendly military activities were halted
abruptly during a GVN-ordered Christmas cease-fire
which began at 6 PM on 24 December. Following a
series of incidents and small attacks by the Viet
Cong, friendly operations were resumed after the
cease-fire period. No significant major engagements
have developed, although ARVN reports of a three-
battalion search-and-destroy effort in Long An Prov-
ince indicate contact with a substantial Viet Cong
force on 27 December; initial casualty figures show
100 Viet Cong killed, with ARVN losses of two killed
and nine wounded.
6. US and Allied forces ended a relatively quiet
week by moving back to base areas for the Christmas
holiday, and terminating several operations. Three
US and one Korean operations of battalion or
size are now in progress, in addition to six beingger
conducted by ARVN forces.
7. Sea, River, and Coastal Force operations de-
clined during the 19-25 December period, with 3,035
junks and 11,834 persons searched, compared to 3,655
and 15,078 of the previous week. Of the 106 detainees,
none was confirmed Viet Cong.
8. B-52 raids were concentrated against target
areas in Bien Hoa and Vinh Binh provinces during the
pre-Christmas period. The first B-52 Stratofortress
strike since the holiday was conducted on 28 December
against a suspected Viet Cong complex in Quang Tri
Province. The total number of B-52 missions over
South Vietnam to date is 133.
Communist Activities
9. Viet Cong activity continued at the same high
level throughout the week of 19-25 December, but its
intensity decreased. Partial observance by the Viet
Cong of their announced Christmas Eve 12-hour cease-
fire, with disregard for a 30-hour Allied cease-fire,
highlighted the end of the week. A total of 65 in-
cidents occurred during the 30-hour period, with 18
during the Viet Cong 12-hour lull. The same incident
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distribution pattern with respect to Corps Tactical
Zones prevailed during the Christmas period as through-
out the week. Since the official end of the Viet Cong
cease-fire at 7 AM on 25 December, the tempo and in-
tensity of Communist activity have increased.
10. Incident levels remained high all week in I
Corps (CTZ), where six attacks, including two of bat-
talion or larger scale, were mounted. A multibattalion
attack against an outpost in western Quang Tri seemed
indicative of a renewed Viet Cong effort to re-occupy
the Route 9-Ba Long Valley infiltration corridor. An
estimated Viet Cong battalion attacked a Regional Force
company about seven miles north of Quang Ngg City.
Elsewhere in I CTZ, the usual variety of harassment
and interdiction was in evidence.
11. No attacks were reported in II CTZ, and in-
cident levels were low there for the eighth consecutive
week. The continued inactivity of Viet Cong/PAVN units
in this region is believed indicative of a regroupment,
replacement, and retraining phase. Continued infiltra-
tion and other movements are reported, and PAVN forces
involved at Plei Me and Chu Pong during October and
November are expected to be capable of large-scale
attacks in the highlands within two weeks.
12. In III CTZ, a one or two-company attack was
reported in Hau Nghia Province, involving the Trung
Lap Training Center. The 101st Regiment, 325th Divi-
sion (PAVN), has reportedly moved from Quang Duc Prov-
ince of II CTZ into northern Bien Hoa Province of III
CTZ, with the alleged mission of attacking Bien Hoa
Air Base. There are low-level indications that a
battalion of the Dong Thap Regiment has moved from IV
CTZ into Long An Province in III CTZ. These reloca-
tions are unconfirmed, but the threat of isolation of
the capital area appears to be increasing.
13. In the Capital Military Region, a series of
grenade incidents marked the continuation of the Viet
Cong's anti-American and anti-police terroristic
campaign. Two assassinations of hamlet chiefs in the
Capital Military Region brought the total of such in-
cidents to five during December. There have been 11
assassinations of local government officials in 'three
months in the Hop Tac area. Since mid-December four
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CURRENT OPERATIONAL STATUS OF MAJOR TRANSPORTATION ROUTES AND COASTAL RAILROAD
?t Section of operable railroad
Section of inoperable road
Note: Routes are inoperable primarily
because of Viet Cong sabotage/
SECRET
Provincial
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Information as of 25 December 1965
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bridges have been sabotaged in the Nha Be district,
leaving only one road open between the Nha Be fuel
storage complex and Saigon. A recent low-level re-
port says a reinforced battalion has the mission of
attacking Binh Chanh district town, in the Capital
Military Region.
14. One attack occurred in IV CTZ, involving
two Viet Cong companies against a Special Forces
camp in Kien Tuong Province. Of the incidents per-
petrated by the Viet Cong during the Christmas cease-
fire period, almost twice as many occurred in IV CTZ
as in any other zone.
15. National Route 1 is closed in Quang Ngai,
Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan, Binh Thuan,
and Binh Tuy provinces. Route 9 is closed in Quang
Tri Province. Route 14 is closed in Kontum, Pleiku,
Quang Duc, Phuoc Long, and Binh Long provinces. Route
20 is closed in Long Khanh Province. Route 19 is
closed west of Pleiku town. Route 7 is closed in Phu
Yen Province. Route 11 is closed.inTuyen Duc Province.
Interprovincial Route 1 is closed in Binh Duong and
Phuoc Long provinces. Provincial Route.10 is closed
in Hau Nghia Province. The National Railroad is open
between Saigon and Gia Ray, Long Khanh Province; be-
tween Ca Na, in Ninh Thuan Province and Ninh Hoa, in
Khanh Hoa Province; and between Hue, Thua Thien Prov-
ince and Quang Tri, in Quang Tri Province.
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1. There was a sharp drop during the past week
in the total number of Chieu Hoi returnees. Accord-
ing to the official GVN tally only 120 persons
rallied to the government during the period. This
contrasts quite unfavorably with the previous week's
total of 499 persons. Civilian returnees constituted
more than one-half of the current week's total, with
74 listed in this category. There were also 35
military defectors, and 11 political officials.
Totals for the previous week were 214 military defec-
tors, 101 political officials, 18-2 civilians, and
two draft dodgers/deserters.
2. The US Cadre Liaison Group in Saigon,i.s now
working closely with the new chief of the rural con-
struction cadres, Lieutenant Colonel Tran Ngoc Chau
General Lansdale's Senior Liaison Office is also
maintaining close contact with both the US Cadre
Liaison Group as well as the Ministry of Rural Con-
struction. Colonel Chau has prepared and distributed
a draft statement of basic policy for the recruitment,
training, and employment of rural construction cadres.
The policy statement is to be reviewed and commented
on by provincial authorities, after which a final
policy directive will be issued. Colonel Chau and
his American advisor also are continuing their survey
of cadre resources in order to match assets at hand
against projected requirements for 1966 provincial
pacification plans. Based upon this survey, a priority
system will be established for training and deploying
rural construction cadres.
3. For the first time, all provinces have or will
have approved rural construction budgets before the
beginning of 1966. Hopefully, provincial budgets will
also be strengthened during the year by certain re-
visions such as improved fiscal and accounting pro-
cedures, the details of which are now being worked
out.
4. In order to insure the timely and effective
implementation of the 1966 rural construction pro-
grams, the minister of Rural Construction, General Nguyen
Duc Thang, plans to create a 120-man inspection corps.
This group of inspectors will be responsible for making
field checks to insure that the programs are being
conducted as planned.
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5. Although the Viet Cong have already proposed
a four-day truce period during the lunar new year
holiday (20-23 January), government plans for a major
effort, starting early in January, apparently will
not be affected. South Vietnamese and US officials
are in the midst of a joint planning effort for an
all-out holiday psychological warfare effort. Plan-
ning is broad in scope and is intended to reach all
segments of the South Vietnamese population as well
as the Communist armed forces. Objectives of the
program include encouragement of a maximum response
to the Chieu Hoi effort, enhancement of the confidence
of the Vietnamese people in their government,, belief
in the invincibility of the GVN cause, and erosion
of confidence of Viet Cong/PAVN confidence in their
leadership and cause. Intensive efforts will be
made to cause desertions among the ranks of the Com-
munist military forces as well as to sway the civilian
population in Viet Cong-controlled and contested areas.
Full advantage will be taken of the sentimental aspects
of the holiday season--especially the "return to home"
theme.
6. Part of the psychological campaign will be
the introduction of television into South Vietnam,
hopefully by the time of the Tet celebration. Public
announcement of the TV plan. was made on 24 December
by the Saigon government.
7. A recent report by USIS in Saigon points up
two notable examples of the slowly evolving impact
of psychological warfare operations against the Com-
munists. In the IV Corps Tactical Zone, it was noted
that, during the period 25 October-14 November, 62
of a total of 86 Chieu Hoi returnees came in bearing
specially prepared surrender leaflets. These leaflets
were part of an intense government effort conducted
throughout IV Corps area on 24 October. The Viet
Cong were reported to have reacted to this campaign
by killing several GVN cadres and two children of
other GVN officials, as well as by threatening Viet-
namese Information Service personnel. During the
Plei Me campaign in Pleiku Province, most of the 14
PAVN defectors were reported to have been carrying
surrender leaflets. Surrender leaflets were found
on many of the bodies of the Communist dead. In view
of the prevalence of these leaflets among the PAVN
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dead, USIS comments that ways should be developed to
provide an opportunity to surrender to those who desire
to do so.
8. According to a 26 November report from the
US consul at Hue, a pacification effort, launched in
mid-October to recover those areas of Hoa Vang district
which lie close to Da Nang city and the vital US air-
base, has made little tangible progress. The plan,
originally presented in late September by the province
chief, actually did not get underway until 18 October
when the first search-and-destroy operations were
launched. The operation was the outgrowth of an agree-
ment by Major General L.W. Walt, III Marine Amphibious
Force Commander and the I Corps Tactical Zone commander
General Nguyen Chanh Thi to cooperate in a joint effort
to pacify certain areas hear the Da Nang airbase.
9. The concept of operations visualized a two-phase
program to pacify nine'villages and 38 hamlets..'Five
villages, with 21 hamlets were to be pacified during
the period 1-30 November, with the remaining villages
and their hamlets completed in December. However, no
significant progress had been reported by 26 November.
10. GVN statistics relating to the security con-
ditions in this area close to Da Nang .are_remarkab;ly
candid, and present a bleak picture. Of the 15,845
families in the area, over 1,000 are known to have
relatives with the Viet Cong. Over 450 identified
Communist officials and guerrillas are from this region.
Twenty of the 48 hamlets in the area are acknowledged
to be under Viet Cong control, nine are considered
secured, and nine contested. Only 83 Popular Forces
and 50 village and hamlet officials are present in
the area.
11. The operational force which was to operate
in this thoroughly penetrated area initially consisted
of one Regional Force battalion, five People's Action
Teams (PAT), 344 Mobile Action Cadres, psychological
warfare teams, and the small number of government
personnel already present. Two 'US Marine battalions
were detailed to ring the area in order to prevent
penetration by outside Viet Cong forces.
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IN
(i. e
Dien Bien Phu
`'.Thai Nguyen
sKep
'Bac Giang
I'P?'huc Yen - ? Q_ac Ninh
Son Tay?
Ha Dongs HANOI -Qsang Yen
H oa Binh. DuH a'
on g Haiphong
Hong yen Ken An
Phu Lye,
_-.Thai Binh
Ndm Dinh
Ninh Binh(
(,(Luang Prabang,
Vang Viengi
VIFNTIAN
Muong Nakhon Phano ~ - '
rRKhammouane
Muang Sakon Nakhoru
NORTH VIETNAM
Thanh Hoa
-~Dong Hoi
Morig Cai
Hon Gai
Vmh Linh
\??. }z DEMARCATION LINE
~'- Dong Ha
B~HOSu W
_SEppf1~l.Quang Tri
Phu Qul:',
N VIETNAM
Muong Nong"%
LAOS
1
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II. DEVELOPMENTS IN THE BLOC
A. POLITICAL
1. Hanoi propaganda has attempted to discredit
the current 'US cessation of the air attacks against
North Vietnam by claiming that hostile US air activ-
ity over the DRV :is continuing. The DRV has protested
to the ICC charging that "many formations of US jet
fighters repeatedly overflew the DRV and carried out
reconnaissance and provocative activities" on 25, 26,
27, and 28 December. Th:i.s is the same line that Hanoi
took toward the first :five-day cessation of the bomb-
ings last May. Neither Peking nor the Liberation
Front has yet commented on the current standdown.
2. Moscow's decision to send one of its top
leaders--party secretary Shelepin--to Hanoi indicates
a clear intention to make its influence felt with the
North Vietnamese. The visit, announced on 28 December,
will mark the first trip to Hanoi by a high-level. So-
viet leader since the Kosygin mission last February.
The Soviets probably feel that the current pause in
US bombing raids against North Vietnam provides a good
opportunity to encourage Hanoi to seek political al-
ternatives to the war. The announcement of the
Shelepin visit coincides -with increased Russian ma-
terial and political support for the DRV and renewed
expressions of Hanoi's gratitude for Moscow's "great
assistance,"
3, The Soviet mission represents a direct chal-
lenge to China's influence in Hanoi, however. In
what may have been an effort to placate the Chinese,
the North Vietnamese party daily on 28 December
published a lengthy article praising the "broad and
tremendous support" which Peking has provided North
Vietnam. The article cited numerous examples of
Chinese pledges of support, including statements by
Mao Tse-tung and Chou En-lai. There was, however,
an undertone in the article suggesting that Hanoi
feels Chinese aid has been more in the form of talk
rather than action. Although Peking has insisted that
it will "stand shoulder to shoulder" with its Vietnam-
ese comrades, Hanoi may feel that Peking should pro-
vide additional assistance and cooperate more fully
with Soviet efforts to aid the DRV.
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4. Hungary granted North Vietnam a new long-term
interest-free loan as well as a moratorium on repay-
ment of past loans on 28 December, In addition, a
separate agreement on Hungarian "economic assistance
of a different nature" was also signed in Budapest by
North Vietnamese Deputy Premier Le Thanh Nghi and
Hungarian Vice Premier Fock. The vague terminology
used to describe the second agreement may indicate an
attempt by the Hungarians to supply minimum support
for Hanoi's war effort without publicly committing
itself to any specific military assistance, The an-
nouncements indicated, however, that the assistance
offered is more generous than Le Thanh Nghi was able
to arrange when he was in Budapest early last summer,
The DRV deputy premier has gone on to East Germany.
B. MILITARY
1. Eleven MIG-21/FISHBED fighters have been in-
troduced into the North 'Vietnamese fighter inventory,
but apparently there is no appreciable change in the
composition of their MIG-15/17 force.
Detailed analysis of 23 December high altitude
photography revealed the following tactical aircraft
at the airfields indicated:
49 MIG-15/17s 9 MIG-l5/17s
5 possible MIG-15/l7s
5 IL-28/BEAGLES
7 MIG-21/FISHBEDs
4 probable MIG-21s
The detailed photographic analysis could not
determine if the confirmed MIG-21s were clear air mass
or all-weather models. In either case, these newer
generation fighters at Phuc Yen pose an increased
threat to US air operations over North Vietnam.
It is possible that a number of MIG-15/17s and
several IL-28 aircraft were airborne during the period
the high altitude aircraft overflew Phuc Yen and Kep
airfields, however, it is believed that the inventory
remains at about 63-66 MIG-15/17s.
Y-Pb A 80060005-2
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2. The identification of nine more SAM sites in
North Vietnam raised the total in that country to 61.
The addition of sites 53 thru 61 adds depth to the
North Vietnamese SAM system but does not extend its
coverage for example, to the critical area just east
and northeast of Hanoi.
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III o THIRD COUNTRY DEVELOPMENTS
1, Edward Heath, leader of the Conservative Party
opposition in the United Kingdom, has indicated an in-
terest in visiting Saigon 9-11 January as the last stage
B. DIPLOMATIC APPOINTMENTS
2, On. 26 December the GVN semi.-official. news
agency Viet Nam Press reported that, the British Govern-
ment haTgrante agreement for the appointment of for-
mer deputy premier Tran Van Tuyen as GVN ambassador in
London. However, approval by the ruling military Direc-
torate has not yet been offi.cial:ly announced, and the
appointment could be delayed or blocked, as has happened
before in the case of GVN' diplomatic appointments,
ister Tran Van o has formally submitted, to Premier
Nguyen Cao Ky and Directorate Chairman Nguyen Van Thieu
the following proposed diplomatic appointments; Ngo
Ton Dat, charge d'affaires in Seoul, to be raised to
ambassador; Colonel Nguyen Van An, chief of the Viet-
namese delegation to the I:CC, to become consul general
in New Delhi, and former chief of the Joint General
Staff General Tran Van "Little" Minh to be ambassador
to Italy.
C. TELEVISION AGREEMENT
4. Radio Saigon announced on 24 December that
the US and GVN had reached preliminary agreement to intro-
duce television into Vietnam. Limited service reportedly
may begin during Tet, (2l.23 January). US Armed Forces
television will also be inaugurated at about the same
time,
5o Prince Sihanouk has responded with predictable
heat to announcements that allied forces in South Vietnam
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in exercising the right of self-defense might take
action across the Cambodian borderr^. Accusing the United
States of seeking excuses for military intervention in
Cambodia, Phnom Penh has called upon the 1954 Geneva
signatories to make clear their intentions should the
US violate Cambodian borders, reserved the right to ap-
peal to the UN, and declared that all border incursions
will be repulsed. Meanwhile, Cambodia's invitation to
the ICC to control the part of Sihanoukvilie and in-
spect':arms shipments to Cambodia?s military forces
remains under consideration.
6. The GVN intercepted two Cambodian motorized
launches towing five junks each near Phu Quoc Island on
25 December. The launches escaped, but a GVN patrol-
craft captured some of the junks and nine Cambodians.
The junks were carrying only shovels and baskets and no
gunfire was exchanged during the interception, suggesting
that Viet Cong were not aboard, Subsequently, on 27 De-
cember, a GVN patrol craft reported it was being ap-
proached by a Cambodian patrol craft and requested US
assistance. Embassy Saigon, however, directed that under
no conditions were US units to engage Cambodian units,
even if South Vietnamese units or territory were to be
attacked. The 'US mission has requested clarification of
the rules of engagement and. recommended that US naval
units not become involved in fighting between Vietnamese
and Cambodians.
E. ICRC
7. On 22 December, a four-man International Red
Cross Mission began inspecting South Vietnamese prisoner
of war camps by visiting a camp in Bien Hoa 'Province,
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INFLATIONARY PRESSURES EXPECTED IN
SOUTH VIETNAM IN 1966
1. The GVN economy will face growing inflation-
ary pressures during 1966. The large and mounting
deficit in the GVN budget, the increase in US.
forces, and the planned US increase of i:n-country.
spending for military and civilian construction will
place new demands on an economy which has little un-
used capacity. Transportation bottlenecks, a short-
age of labor, and possible decreases in agricultural
output will exacerbate supply problems. The result-
ing imbalance between demand and supply may result
in price rises as great or greater than the 35 to
40 percent experienced in 1965. The inflationary
impact would be particularly severe in Saigon and
other areas where VC.activity and-the US,forc'e
build-up have been intensified.
2. Before 1965, the inflationary impact of GVN
budget deficits had been contained by the increasing
use of money, instead of barter, in the rural economy,
the import of commodities under the AID commercial
import program and PL-480, and the willingness of the
Vietnamese public to hold larger cash balances. During
1965, however, major inflationary pressures were un-
leashed by the conjunction of shortages of goods, the
increase in foreign personnel demands for in-country
goods and services, and the accelerating increase in
wages resulting from price rises and declining manpower
reserves.
3. During 1966, the GVN budget deficit, even if
expenditures are limited to the proposed level of 55
billion piasters, could rise above the 15-18 billion
piasters estimated for 1965 to 20 billion piasters or
more. US and other foreign troop spending and the
piaster component of military construction may jump
from about 10 billion piasters in 1965 to an estimated
30 billion piasters. The total of 50-55 billion piasters
for budget deficit and foreign spending (compared to
about 29 billion piasters in 1.965) is equivalent to over
one-third of all goods and services available in Vietnam
in 1965, and is substantially more than the total of the
present money supply of 42 billion piasters. Since in-
flationary pressures will be working against a far
E-1
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smaller level of idle resources in the economy, their
impact will be more severe and more difficult to comet
tain than during 1965. Table 1 shows percentage in-
creases, as reported by the Dunkerly mission, in the
cost of living and in money supply during the years
1962-64 and the first three quarters of 1965,
Percentage Increase in: Cost of Living and Money Supply
1965 (at annual rates)
First Second T ird
1962 1963 1964 Quarter Quarter Quarter October
Cost of
Living 2.8 7.3 3.4 4.4 13,4 56.8 62.4
(for workers excluding housing)
Money
Sup-
ply 13.1 14.5 23.1 73.6* 28.8 79.2 55.2
Ref Ie s seasonal move men for T e t Ho ay.
4. The major factor restraining inflation has been
the supply of AID-financed commercial. imports and PL-480
commodities. Although the generation of counterpart
funds from US-financed imports will be increased sub-
stantially during 1966, the GVN budget deficit will prob-
ably increase despite this assistance. A second factor
restraining inflation in the past has been the tradi-m
tional tendency of the Vietnamese to hold a part of
additional income in the form of money. If prices ac-
celerate, money holdings are discouraged. and the demand
for goods is increased as a consequence.
5. The increase of domestic and import commodities
adequate to satisfy increased demands will be critical
to maintenance of a measure of economic stability during
1966. Inadequate port and transport facilities have
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created serious bottlenecks in the operations of the
domestic economy. There have been major increases in
internal transport, warehousing, and stevedoring costs.
The major threat from inadequate port; and transport
facilities is the danger that these will. be unable to
handle the vol.ume of commercial and military imports es-
sential to rel.i.eve the burden. on domestic supplies and
to meet the anticipated demand.
6. Specific material resources are expected to be
in short supply during 1966, Prices for construction
materials have increased markedly in 1965, For example,
in the past three months, gravel prices have doubled;
the price of sand has doubled during the last year;
brick prices are up 75 percent; and lumber prices have
also increased substantially, In general, any increase
in demand for construction materials brings about an
immediate and pronounced response in price with only a
belated and small response in quantity. Prices of
luxury consumer goods and the more expensive food items
are expected to continue their sharp increases as the
result of Local spending by US and other foreign per.-
sonnel. These items include meat, seafood, fresh
vegetables, beer, cigarettes, an.d.high-priced textiles.
In contrast, the prices of rice, fish sauce, and low-
priced textiles, which are basic necessities for the
poorer elements of the Vietnamese population, have main-
tained relative price stability; this trend is expected
to continue during 1966,
7. Anticipated increases in 1966 US expenditures
for construction in. Vietnam will have additional reper-
cussions in the manpower sector of the economy. Wage
rates for most categories of skilled construction workers
have doubl.ed during the last year, Wages for unskilled
labor have not increased as sharply but; are estimated
to have increased by at least; 50 percent in Saigon.
With the exception of rural labor in isolated areas,
Vietnamese manpower resources are now fully empl.oyed,
8. Control of the -inflationary threat to economic
(and hence political) stability during 1966 is clearly
dependent on US and GVN countermeasures. For example,
the US could meet the bulk. of the requirements for
skilled labor and. critical. commodities needed to expand
port facilities and for military const;ruc'tion, from
sources outside of South Vietnam. Additional. measures
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to control in-country spending by foreign personnel
are possible. Similarly, new GVN fiscal measures, such
as sharply increased taxes, are effective tools in
soaking up excess purchasing power. But even under the
best of circumstances, the problem is to limit inflation
to manageable levels in 1966, not to aim for price
stability.
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SOUTH VIETNAM BATTLE STATISTICS, 1965
SECRET WEEKLY REPORT
18-25 DECEMBER
PERSONNEL LOSSES (KILLED IN ACTION, MISSING IN ACTION,
2
GVN/US/other Free World
--- Viet Cong/PAVN
01 Jan I Feb I Mar I Apr I May I Junel July I Aug I Sept I Oct I Nov I Dec I
Wounded not included Such figures unavailable on Viet Cong.
WEAPONS LOSSES
1,500
GOVERNMENT
-VIET CONG
Jan; Feb ['Mar
150
7.5
MA M"
:rrs..
250:
iii?sii
it
:i
....................
.
iiii
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n i ..~ ...,.. ? :511111::" _ .....:::: L..._:: i :i: :....::~ . .t::ait:c:ci.;~s? iit
I Jan I Feb I Mar Apr I May I June I July I Aug I Sept! Oct I Nov I
SECRET
Apr I May I June I July Aug I Sept I Oct I Nov` ec8jj
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Nur
II r 1
I
r
US COMBAT CASUALTIES IN VIETNAM
INCLUDING NORTH VIETNAM
Company and battalion-sized attacks
-- Fottalion -sized (and larger)attacks only
JUL AUG SEPT. I OCT NOV I DEC
T 7~
~,x
~Q Ail
Non- fat
al
Nan
- fata
l Woun
ds
Fatalitie
s
Wounds
_
__
-
Fata
litie
s
1961. 196
Cumulative
4 255 1524
,
Cumulative, 1965 to date 1241 5339
fatal 1496 6863
(Figures do not include 120carried as missing
or 25corried as captured.)
-
- -
- -
-
-
- -
-
- -
-
- - -
-
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1
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BACKGROUND USE ONLY
BACKGROUND USE ONLY
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