THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001400010071-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 12, 2016
• Document Release Date: January 14, 2002
• Sequence Number: 71
• Publication Date: November 28, 1966
• Content Type: IR

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148
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
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No. 0401/66
Copy No.
GROUP I
Excluded from automatic
downgrading and
declassification
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This document contains information affecting the
national defense of the United States, within the
meaning of Title 18, sections 793 and 794, of the US
Code, as amended. Its transmission or revelation
of its contents to or receipt by an unauthorized
person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(21 November - 27 November 1966)
General Manh installed as IV Corps
commander; Constituent assembly;
Economy Ministry problems.
Plans firm for ARVN role in Revolu-
tionary Development; Viet Cong ter-
rorism; Viet Cong defectors (Chieu
Hoi).
Prices; Currency and gold; Discussions
with Hanh and Ton; Fifth US-GVN joint
economic meeting; Reorganization of
the Ministry of Economy; Rice situa-
tion.
ANNEX: Weekly Retail Prices in Saigon (table)
Weekly/Monthly Saigon Free Market Gold and
Currency prices (graph)
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General Nguyen Van Manh was installed
as IV Corps commander on 23 November, with
no hostility evident over the removal of
ex-commander Dang Van Quang. In the con-
stituent assembly, committee preparatory
work on basic principles of the constitu-
tion is nearly completed, but it has not
been decided whether to propose a presi-
dential or parliamentary form of government.
Chief of State Thieu is studying committee
proposals to amend the assembly's founding
law which now gives the ruling Directorate
veto power over a draft constitution. The
same committee is also seeking an assembly
role in policy making between promulgation
of the constitution and seating of an
elected legislature. The three secretariats
which replaced the Economy Ministry are
still facing problems of leadership and
division of labor.
General Manh Installed as IV Corps Commander
1. General Nguyen Van Manh was officially in-
stalled as the commander of IV Corps in a simple
ceremony at the corps headquarters in the delta city
of Can Tho on the morning of 23 November. Ex-corps
commander Dang Van Quang, now minister of planning
and development, was expected to move to Saigon over
the week end. Public reaction in the delta to the
reassignments is reportedly one of apathy, except
for those lesser officials who fear that they may
lose their jobs as a result of Quang's departure.
2. If the disaffected southerners still harbor
any hostilities toward the military members of the
Directorate over the removal of General Quang, they
have not let it be known. It appears that the at-
tempt by the southern civilian ex-ministers to
capitalize on the regional loyalties was not popular
enough to warrant continued opposition in the face of
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the increasing power of the Ky oligarchy. The ap-
pointment of four southerners to the ministries
vacated during the cabinet crisis helped assuage
complaints of northern. dominance. However, the
dominant role of police director'Loan. over'.matters
of internal security has not been. watered down in.
spite of the fact that the cabinet crisis was
25X6 triggered by his detaining a southern.
subcabinet official. Loan. S s a us, and that of
Dinh Trin.h Chinhand Bui Diem, two more of Premier
Ky's con.fidan.ts, seems. secure, for the time being,
although the latter is reportedly maneuvering for
an. ambassadorial assignment,
25X1X
Constituent Assembly
3. Formal sessions of the con.stituen.t assembly
were deferred last week to allow the constitution.
drafting committee time to prepare for assembly de-
bate on the "basic principles" of the constitution..
That preparatory work is nearly completed, according
to one of the members of the committee's research
subsection which is compiling the basic outline. He
.said that the committee's recommendations call for
a bicameral legislature and a judicial system with
a supreme court. The.. provision. for a presidential
as opposed to a parliamentary executive system,
however, has not yet been resolved. The chairman.
of the assembly, Phan Khac Suu, reportedly favors
the parliamentary system.
4. In. an. effort to formulate a constitution.
that is as representative as possible, the people's
aspirations committee is soliciting the opinions of
Vietnamese in. the provinces on. what their constitu-
tion should contain. Through the use of a question.-
n.aire, views on. the form of the future executive,
legislative, and judicial bodies will be requested.
The committee will also try to ascertain a public
stance on. whether the executive and legislative
bodies should be empowered to dissolve each other,
possibly through a "no-confidence" vote.
5. In. the meantime, Chief of State Thieu is
studying the proposals to amend the assembly's
25X1X
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founding law which were submitted to him by a 12-man
assembly committee on 18 November. Of the seven
changes that the committee is seeking, the most
crucial one would require the Directorate to submit
its proposed amendments to the assembly before the
final vote on. the draft constitution is taken.
Essentially, this would reverse the situation that
exists now and would lessen. the governmen.t's chances
of making its revisions stick.
6. The assembly committee is also soliciting
an amendment which would give the assembly a role
in policy making between the time the constitution
is promulgated and an elected legislature takes
office. The assembly's mandate now reads that its
work is finished when the constitution becomes law.
The Directorate's reply to the recommendations is
expected by the end of this week. Although they
doubt that the government will agree to such exten-
sive changes in the original assembly mandate, US
Embassy officers point out that several compromise
solutions are possible. Several prominent assembly-
men are optimistic that the government will agree
to some form of alteration of the decree law which
would limit the GVN's revisionary powers. The cur-
rent position. of the government on. the proposed
amendments, however, has been reported only by the
assembly delegates themselves, and they might not be
aware of Directorate opposition to their proposals.
Economy Ministry Problems
7. The work of the Economy Ministry, which was
divided into three separate state secretariats fol-
lowing the recent cabinet revisions, had reportedly
bogged down after the resignation of Au Truon.g Thanh.
Although appointments to the two newly created posts
of Commerce an.d,Industry have filled the vacuum,
the US Embassy fears that the new personalities are
possibly too weak and the division. of labor too dif-
fuse to carry on the dynamism of the previous economy
ministry. In. Thanh's absence, the status of the
economic and finance committee, the economic policy-
making body, is unclear. The governor of the National
Bank, Nguyen. Huu Hanh, has proposed that Premier Ky
chair the committee with Hanh as his deputy. Hanh
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has tried to force his own candidates for the economy
posts upon the government and, in so doing, has
alienated many responsible persons who have an
interest in economic policy.
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II. REVOLUTIONARY DEVELOPMENT
Planning continues in Saigon in prep-
aration for the assumption by ARVN combat
units of a screening role for Revolution-
ary Development activities in 1967. Mean-
while, Viet Cong terrorism continues to
escalate in South Vietnam, with the effort
apparently being concentrated on GVN ad-
ministrators and officials in the rural
areas. Chieu Hoi returnees numbered 556
for the 17-23 November reporting period,
boosting the 1966 total to 16,954.
Plans Firm for ARVN Role in Revolutionary Development
1. Current planning sessions in Saigon for the
pacification role of South Vietnam's armed forces
(ARVN) in 1967 have produced a set of detailed pro-
posals. The plans agreed on between South Vietnamese
Chairman of the Joint General Staff General Cao Van
Vien and COMUSMACV, spell out what ARVN must do to
support Revolutionary Development, as well as the
roles of the Regional Forces, Popular Forces, police,
and Revolutionary Development Cadres.
2. General Vien has shown a high degree of in-
terest in the 1967 mission of ARVN to support RD ac-
tivities, calling it "the most important mission of
the armed forces of the government." He has issued
a command message to all senior commanders to this
effect.
3. Plans are now under way for one mobile train-
ing team from each of the 10 ARVN divisions to attend
a two-week training course in Saigon on the new mis-
sion of ARVN. These teams will, in turn, conduct a
similar course for each of the maneuver battalions
in their respective divisions to be committed in sup-
f5ort of RD.
4. Preliminary commitments to the new mission
of ARVN have been received from field commanders in
both I and IV Corps. In I Corps, the 1st Division
has indicated that two battalions in each province
will be used to support RD--that is, at least four
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of the division's 12 manuever battalions. fin IV
Corps, five of the 7th Division's maneuver bat-
talions have been earmarked for screening RD ac-
tivity.
Viet Cong Terrorism.
5. The Viet Cong continue to mount a wave of
terrorism against the civilian populace in general
and against GVN officials in particular. According
to the latest report from the US Embassy, covering
the period 26 September-25 October, a total of 189
persons were assassinated and 489 abducted. This
is an increase of 54 and 190 in each category, re-
spectively, over the preceding reporting period.
6. In spite of the growing rate of terrorism,
local government has been affected only to a limited
extent, according to the embassy comment. Only in
isolated instances has the threat of Viet Cong re-
prisal prevented citizens from assuming leadership
positions in the hamlet councils.
7. During the current reporting period, there
was a total of 91 selective assassinations, 18 of
which were village and hamlet officials, 23 national
police (not on combat operations), eight Revolu-
tionary Development Cadre (RDC), and three civil
servants. Although the total number of selective
assassinations was five less than that of the
previous month, the number of government officials
and employees slain. was almost double that of
the Previous ,month'. The number of, assassi:na-
tions of officials is possibly the best indicator
of the importance which the Communists place on
eliminating the GVN administrative and security
presence from the rural areas.
8. Twenty-nine other GVN officials were
abducted during the reporting period, again the re-
sult of selective targeting on the part of the Viet
Cong. This is nine fewer than in the previous re-
porting period. There is, however, a rise in the
over-all number of kidnapings.being carried out by
the Communists. Mass kidnapings may be on the
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upswing. Two instances of whole hamlets being
marched off by the Viet Cong occurred early this
month in the -delta area. These tactics are prob-
ably designed to intimidate whole areas so that
they will not cooperate in GVN Revolutionary Devel-
opment activities. Such tactics may become more
common as the government's drive to pacify larger
areas of the countryside become intensified.
Viet Cong Defectors (Chieu Hoi)
9. Although the rate of Chieu Hoi returnees
dropped somewhat from the previous week?s 611, a
total of 556 returned to government control during
the 17-23 November period. Of the total number,
some 314 were listed as military returnees. The
1966 total of returnees to date is 16,954, more
than half again as many as the 1965 total of 11,124.
10. The Viet Cong late in the week attacked
the provincial Chieu Hoi center in. Vinh Binh Prov-
ince, killing one child and wounding seven other
persons. This attack was apparently another in
the series of Viet Con.g terror raids against Chieu
Hoi centers which are aimed at discouraging further
defections from the Communists.
11. In. Binh Dinh Province, with the conclusion
of Operation. IRVING, the flow of returnees has
stabilized, but the returnee center facilities are
strained. Some 1,200 individuals are now crowded
into a center designed to handle 600. Relief
efforts include obtaining tents, additional blankets
and food.
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Price movements were generally en-
couraging during the week ending 21 No-
vember. Retail prices of both domestic
and imported commodities in Saigon held
fairly stable at the levels of the pre-
ceding week. Free market gold and cur-
rency prices also were unchanged. Most
encouraging, however, was a decline in
the prices of rice and pork, which had
been increasing steadily in recent weeks.
In spite of the welcome decline in
the price of rice, however, the rice sit-
uation remains critical. Deliveries from
the delta to Saigon during the first half
of November fell sharply. Moreover, the
US Mission,'s new program to raise the in-
come of the rice farmer may be jeopardized
if the GVN does not act rapidly. It ap-
pears that merchants already are trying
to buy the new crop of paddy from the
peasants at low prices.
The US held meetings with various GVN
officials on a wide variety of topics such
as GVN financing of CIP goods, the GVN
budget for 1967, port congestion, and the
port situation. No important decisions re-
sulted, however, primarily because of the
unsettled state of the GVN economic ap-
paratus. The recently reorganized Ministry
of Economy has not yet started functioning
effectively, and there are doubts about the
new appointments as well as the new organi-
zational structure.
1. Retail prices in Saigon were generally stable
during the week ending 21 November with the over-all
USAID retail price index showing a gain of less than
one percent. Food prices increased one percent,
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primarily because of higher prices for fish and vege-
tables. The price of pork, however, fell back to 85
piasters per kilogram--the price prevailing on 24 Oc-
tober just before the recent upsurge in pork prices--
as improved transportation conditions in the delta
evidently resulted in increased arrivals of hogs in
Saigon. Rice prices also declined somewhat as the
early rice crop began to arrive on the market. Non-
food items were stable or lower: the USAID non-food
index declined two percent below the previous week.
(A table of weekly retail prices in Saigon is in-
cluded in the Annex.)
2. The prices of imported commodities were
generally unchanged: the USAID price index for
selected US-financed imports held steady at the
level of the preceding week. Prices of condensed
milk, flour and sugar were slightly lower as stocks
continued to be ample. Chemical products also were
slightly lower reportedly because of fresh arrivals
of these items. Construction materials--such as
cement and iron and steel products--rose, however,
coincident with the onset of the dry season and re-
sumption of construction activity.
Currency and Gold
3. Stability also was evident in the free money
market. Gold and dollars were unchanged on 21 No-
vember at 239 and 1.72 piasters per dollar, respec-.
tively. MPC (scrip) rose one piaster to 114 piasters
per dollar. (Graphics on monthly and weekly free
market gold and currency prices are included in the
Annex.)
Discussions with Hanh and Ton
4. US officials met with Governor Hanh of the
National Bank of Vietnam and acting Minister of In-
dustry Ton to discuss GVN financing of various com-
mercial import program (CIP) commodities during 1967.
It would appear from these discussions that the GVN
may transfer only $100 million to CIP goods. Since
US estimates of total GVN foreign exchange earnings
during; 1967 are higher than those suggested by
Hanh's statements, US officials asked that both
sides review their figures and meet again to discuss
GVN financing of CIP goods.
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5. The US also presented Hanh and Ton with an
illustrative list of those CIP commodities that
might be switched to GVN financing. Among these
commodities are items which the GVN is now procur-
ing in third countries with AID funds. Hanh and Ton
indicated that they would study the list. No further
progress on the CIP transfer is expected until Hanh
returns from Tokyo at the end of November.
6. Discussions on the GVN budget for 1967 in-
dicated that the GVN is attempting to hold down its
expenditures, with the exception of a 10 percent
wage increase for GVN employees. It appears that
the budget probably will be around 80 billion
piasters. The US agreed with Ton that Premier Ky
should set the budget ceiling soon.
7. The series of US-GVN joint economic meet-
ings, which had been suspended during the unsettled
period within the Ministry of Economy, was resumed
on 16 November with a meeting co-chaired by the then
acting Minister of Economy Ton and Deputy Ambassador
Porter. Most of the discussion centered on the prob-
lems of port congestion and pork prices.
8. Although the GVN had promised in early Oc-
tober to determine the validity of importers' com-
plaints of insufficient credit to finance removal
of their goods from the port, Secretary of State for
Finance Kien reported that the study of this question
is not yet complete. Kien did say, however, that
the GVN would consider a "customs credit" system
which would permit importers to remove their goods
from the port and pay their duties later. Although
US officials are reluctant to delay customs collec-
tions, they feel that this system might constitute
a useful step in speeding up the flow of goods
through the port.
9. Colonel Truc, deputy director of the Saigon
Port Authority, reported that the rate of arrivals
of general cargo is still increasing, whereas the
rate of removals is decreasing. Truc introduced a
new reason--the rainy season--for the reluctance of
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some importers to remove their goods, especially con-
struction materials. According to Truc, once dry
season construction. begins, removals will accelerate.
Truc also felt that the adoption of a "customs credit"
system would assist in getting goods through the port.
10. Although GVN officials did not have a pre-
pared position on the pork situation, a useful dis-
cussion took place among the Vietnamese representa-
tives, confirming the embassy's opinion that these
joint economic meetings serve the useful function of
getting Vietnamese officials from various ministries
to consult with one another. These officials noted
that official slaughterings at controlled prices had
fallen well below the daily needs of the Saigon area,
possibly because of the difficulty and cost of trans-
portation from the delta, the high cost of feed and
wages, and the lack of credit for pig farmers. It
also was acknowledged that large numbers of pigs are
slaughtered unofficially and sold on the black market
at prices above those that would prevail'.if pig
farmers could sell their product at uncontrolled
prices. The US position is that the ceiling on pork
prices must be -.lifted, and the market should be al-
lowed to find its own level. It was finally agreed
that an action subcommittee would be formed to recom-
mend measures to solve the pork problem.
Reorganization of the Ministry of Economy
11. Because the GVN apparently was unable to
find a man of adequate ability and stature to take
over the complex tasks of the Ministry of Economy,
this ministry was split into its three major parts--
finance, industry, and commerce. Tran Van Kien will
continue as secretary of state for finance. The
GVN, however, named two new secretaries of state
for the commerce and industry departments, both of
which had been personally directed by the former
Minister of Economy Thanh. These new secretaries
are Nguyen Kien Thien An for Commerce and Truong
Thai Ton for Industry. An, reportedly a protege of
Governor Hanh of the National Bank of Vietnam (NBV),
has been manager of the Cholon branch of the Com-
mercial Credit Bank, an organ of the NBV. Ton will
continue to function as economic advisor to Premier
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Ky since his appointment to the industry position
is temporary. It is expected that Ton will be re-
placed as secretary of state for industry by La
Thanh Nghe, a member of the Constituent Assembly
and former chairman. of the Saigon Municipal Council.
12. Responsible Vietnamese in both government
and business view these new appointments as weak.
Acting Secretary of State for Industry Ton'has told
US officials that he feels it was a mistake to split
up the Ministry of Economy. Ton thinks that the
present arrangement; will not work out and that Ky
may have to make further changes soon. According
to Ton, the reason Ky was. unable to find a new Min-
ister of Economy was that Hanh tried to choose the
replacement and no one wanted to be a front man for
Hanh. Moreover, although the Economic and Finance
Committee--a GVN economic policy making group--has
normally been chaired by the Minister of Economy,
Hanh has proposed that it be chaired by Ky with Hanh
as Vice Chairman. According to Ton, several GVN
economic officials, including Ton and Kien, have
objected to this arrangement and Ky has now asked
Ton to be chairman.
13. The US Embassy reports that it is not yet
clear how this entire issue will be worked out. It
is obvious that Ton is perturbed at the manner in
which Hanh has tried to place his own people in the
various economic ministries. The embassy feels that
while the recent appointments are better than the
vacuum that has existed since Thanh's resignation,
the diffusion of authority and the weakness of the
personalities involved may cause problems in formu-
lating and implementing economic policies.
14. Deliveries of rice from the delta to Saigon,
which amounted to only 15,000 tons in both September
and October, continue to decline. During 1-14 No-
vember these deliveries totaled only 5,420 tons. If
this rate continues during the second half of Novem-
ber, the monthly total will be the lowest for any
month during the past decade.
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15. Meanwhile, rice prices remain high. In
spite of some decline in the retail price of rice
during the week ending 21 November, the price of
the type of rice used by the working class still
was almost 30 percent above the level prevailing
just prior to the devaluation last June and double
the price at the beginning of the year. The only
recent response by the Ministry of Economy to this
situation was an announcement that hoarding of im-
ported rice is forbidden.
16. The most important work being done on the
critical rice situation is that being carried on by
the US. The Mission is proceeding with the organiza-
tion of its new modified rice program for the forth-
coming year. Basically, this program involves giving
the farmer a higher paddy price in order to provide
an incentive to increase production. The Mission
plans to make the program effective with the harvest
of the new crop which begins in early December. Un-
til recently, however, the US has been unable to
discuss the proposed program in detail with'-the GVN
because of the vacuum in the high levels of the Min-
istry of Economy. The recent appointment of Nguyen
Kien Thien An as secretary of state for commerce
now gives the Mission a GVN official with whom to
discuss the program.
17. Speedy implementation is essential because
it appears that delta merchants already are looking
forward to their usual type of dealings with the
peasants. The situation in Rach Gia is illustrative.
At present, the paddy price in this city is 600
piasters per picual of 68 kilograms for old paddy.
The merchants expect this price to drop to 400 to
450 piasters for new paddy, explaining to the peas-
ant that a decline is traditional at this time of
the season and that the lower price still is 50 per-
cent higher than a year ago. Since the peasant is
unable to forecast price movements as well as the
merchant and also is financially unable to hold out
for higher prices,it might well be that the merchants
can buy a large proportion of the new paddy at this
low price, thus repeating the speculative killing
they made in 1966.
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WEEKLY RETAIL PRICES IN SAIGON a/
3 Jan
31 Oct
7 Nov
14 Nov
21 Nov
1966
1966
1966
1966
1966
Index for All Items b/
160
225
222
224
227
Index for Food Items b/
169
231
228
N.A.
237 c/
Of, Which:
(In Piasters)
Rice-Soc Nau (100 kg.)
800
1,550
1,600
1,650
1,600
Pork Bellies (1 kg.)
70
130
170
N.A.
85
Fish-Ca Tre (1 kg.)
110
150
130
150
180
Nuoc Mam (jar)
50
85
85
85
85
Index for Non-Food
Items b/
124
203
202
202 c/
191 c/
Of Which:
(In Piasters)
Charcoal (60 kg.)
440
650
650
650
620
Cigarettes (pack)
10
14
14
14
14
White Calico (meter)
27
37
36
35
35
Laundry Soap (1 kg.)
30
45
45
45
32
a. Data are from USAID sources.
b. For all:'.indexes, 1 January 1965 = 100.
c. Preliminary.
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{ 239
172
.................. 114
GOLD Basis: cold leaf worth $35 per troy ounce
US $10 GREEN
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64939
11-66 CIA
Saigon Free Market Gold and Currency Prices
PIASTERS PER
US DOLLAR
30
I
246
SEPTEMBER
168
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