THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001700010066-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 20, 2016
• Document Release Date: June 25, 2001
• Sequence Number: 66
• Publication Date: March 20, 1967
• Content Type: IR

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Secret
No Foreign Dissem
Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Situation j Vietnam
Secret
1.45
20 March 1967
No. 0342/67
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Secret
Background Use On/v
WARNING
This document contains information ,affecting the national defense of the
United States, within the meaning of Title 18, sEetions 793 and 794, of the
U'S Code, as amended. Its transmission or revelation of its contents to or
receipt by an unauthorized person is prohibited by law.
S%G4UDED PNO'u Ar,roMA'nc
AN[)
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(13 March - 19 March 1967)
Section
Assembly and Directorate agree on
constitution; Thieu-Ky rivalry;
Political developments in I Corps;
"False peace" demonstrations.
Developments in Revolutionary De-
velopment in Quang Ngai Province;
Urban and rural water projects;
Chieu Hoi statistics.
Prices; Currency and gold; Pro-
vincial prices; Rice situation;
Foreign trade.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
Saigon Cost of Living Index (graph)
South Vietnam Money Supply (graph)
South Vietnam Foreign Exchange Reserves (graph)
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I. POLITICAL SITUATION
Premier Ky was able to secure the ap-
proval of the constitution from both the
Constituent Assembly and the Directorate
in time for the Guam conference by person-
ally taking on the task of compromising the
extreme positions of the Directorate and
the assembly. In the process, however, Ky
may have posed strains on future Directorate
unity.
Now that the foundation for the presi-
dential elections has been prepared, the
competition between Ky and Chief of State
Thieu for the leading executive office
should soon surface in concrete actions.
In the meantime, efforts to revive anti-
government activities in I Corps are under
way, but they have not resulted in much pub-
lic support so far.
Assembly and Directorate Agree on Constitution
1. The entire constitution was approved by the
Constituent Assembly on 18 March and accepted without
amendment by the Directorate and the cabinet on the
19th. Although the final version is a compromise be-
tween the extreme positions of both the assembly and
the Directorate, it was the assembly that was granted
most of the concessions in the final hours.
2. The compromise is the direct result of Pre-
mier Ky's private parleys with selected assemblymen
in a series of nightly meetings last week, which were
apparently not attended by the rest of the Directorate.
The acceptable formula was achieved on the evening of
the 16th, and Ky and the assembly delegation then pro-
ceeded to sell the compromise package to the Director-
ate and to the rest of the assembly. In the meantime,
the other Directorate members had drafted a final list
of recommended changes that were actually read to the
assembly deputies on 17 March. However, Ky was able
to inform the secretary general of the assembly shortly
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thereafter that he had received the approval of Thieu
and the rest of the Directorate for the compromise he
had arranged.
3. In the final meeting between Ky and the as-
sembly delegation, the main point of disagreement was
the specific status of the Directorate pending the
election of a president. Once the deputies bought Ky's
formula to keep the Directorate in power until the
election, Ky granted the assembly practically every
other concession it had desired, including the election
of province chiefs, and the authority to vote "no-con-
fidence" in the cabinet.
4. The compromise version specifies, in addition,
that the assembly will draft and approve the laws for
the presidential and assembly elections, the laws or-
ganizing the supreme court and the inspectorate, and
the laws governing political party and press regula-
tions. It will also have the power to ratify treaties.
Following the election of the national executive of-
ficers, the assembly will assume full legislative pow-
ers until the first regular national assembly is con-
vened. Elections for the regular assembly must be held
within 12 months after the president takes office.
5. In his personal bid to arrange a quick, final
agreement on the constitution, it appears that Ky risked
future Directorate unity for the sake of presenting a
finished document to the US at the Guam conference. The
reaction in the Directorate, at least from Thieu and
the civilians who had pursued a less lenient policy with
the assembly, was one of irritation, according to the
US Embassy. In approving the document, the Directorate
has set aside private differences at least until after
the Guam conference. According to Tran Van An, however,
the civilians on the Directorate are considering re-
signing after the constitution is promulgated, possibly
in protest over their lack of influence on the final
decision.
6. Ky is certainly not unaware of the effect his
deal with the assembly will have on his presidential
potential. He may have calculated that the rise in his
stock among the nonmilitary organizations that will
provide future support to the government would more than
offset the risk of his losing the confidence of the civil-
ian Directorate members and Thieu's supporters.
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7. It is possible that some further disagree-
ment over the exact terms of the constitution could
still be voiced by the Directorate after the Guam
meeting. Reportedly, the document will now be sub-
mitted to the Congress of the Armed Forces, the
theoretical locus of final authority under the pres-
ent governmental charter. Although action by this
body is usually only a formality, it could be used
to overturn the compromise as it now stands.
Thieu-Ky Rivalry
8. The counterproposals offered the assembly
by Thieu and Ky may well reflect the growing rivalry
between the two men in terms of their undeclared
presidential candidacies. Premier Ky reportedly
criticized Thieu in a talk with newsmen last week,
and labeled him "unpopular." Chief of State Thieu,
meanwhile, publicly declared that he would not vol-
unteer as a presidential candidate, but would con-
sider the nomination if the people or the armed forces
proposed it.
9. Strictly within the military establishment,
there were some indications that Thieu might hold the
balance of power in a showdown with Ky over the pres-
idential nomination. One such assessment came from
Bui Diem, one of Ky's most knowledgeable confidents,
who further declared that Ky should quickly form a
civilian political front and announce his candidacy
through it before Thieu had a chance to arrange a
military meeting to decide on a candidate.
10. There have been previous reports that both
Thieu and Ky have quietly been lining up civilian sup-
port, but there is no firm evidence that Ky has ac-
tually decided to pursue the presidency independently
of the military establishment. However, Ky's apparent
differences with Thieu--and presumably with other
Directorate members--over dealing with the assembly
may lead them to believe that Ky is playing an inde-
pendent role for personal benefit.
Political Developments in I Corps
11. Efforts to revive the Buddhist."struggle"
movement are under way in Hue and elsewhere in Thua
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Thien Province, but have not drawn much public sup-
port thus far. Most of last; year's "struggle" par-
ticipants are apparently not taking part now for
fear of being arrested or of incurring government
economic sanctions. Local authorities have gener-
ally acted forcefully to stop any attempted "strug-
gle" activity, and continue to believe that they
can handle the situation provided they receive sup-
port from Saigon.
12. The attitudes of the "struggle" leaders
.themselves, however, may be another significant
reason for the lack of more overt action at present.
Although some of the more militant leaders are at-'
tempting to inspire strikes or demonstrations, Tri
Quang remains the most influential figure in the
movement, and he has apparently not yet favored the
resumption of a public "struggle." Police reports
from Hue state that Quang, who has been residing in
Saigon under close police scrutiny, has sent word to
Hue that the time is not right for such action. Other
influential "struggle" leaders reportedly also are
refraining from involvement in "struggle" efforts at
present.
13. This situation could become somewhat com-
plicated by the current province-wide conflict be-
tween the Dai Viet Nationalist Party and one faction
of the VNQDD Nationalist Party, which contains many
supporters of former I Corps commander General Nguyen
Chanh Thi. The VNQDD faction fears that the Dai Viets
are becoming too strong in the province, and may also
believe that a Buddhist victory could hasten General
Thi's return to Vietnam. Both of these factors could
lead to increasing cooperation between the VNQDD fac-
tion and the Buddhists.
14. The general means that the Buddhists may
employ to reassert their political strength have not
become clear. A new full-scale "struggle" movement
is always possible, although it is rather doubtful--
in view of last year's failure--unless preceded by
major political changes in Saigon. On the other hand,
Tri Quang and his allies may decide to sponsor or sup-
port candidates for the upcoming presidential and leg-
islative elections. Should the Buddhists adopt the
latter--and more legal--course of action, local authorities
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may find themselves hard pressed to prevent the elec-
tion of a significant number of Buddhist-backed rep-
resentatives.
"False Peace" Demonstrations
15. Government-inspired demonstrations against
"false peace"--or negotiations that would lead to a
coalition government--have recently been spreading
from Saigon, where they began on 25 February, into
various Vietnamese towns and cities. In a recent as-
sessment, the US Embassy commented that the primary
reason for the demonstrations is a fear that the US
Government might be tempted to make concessions to
the Communists in unilateral, negotiations. In view
of the continuing demonstrations, the embassy has
concluded that this fear is apparently deeper than
previously realized. A secondary consideration be-
hind the demonstrations continues to be a desire to
create a domestic political environment favorable to
the presidential candidacy of a military officer
later this year.
16. It is not clear how much longer the demon- 25X1
strations will continue. On 10 March, Premier Ky
indicated to US officials that the demonstrations
would be "damped down."
however, has reported th remier y was recently
.advised by Bui Diem, his ambassador to the US, that
opposition to the Vietnamese war is strong in the US.
Ky may feel, therefore, that he is under pressure to
continue the "anti - false peace" movement in some
form or other. Last week, plans were continuing for
a mammoth demonstration by civil servants in Saigon
on 18 March, but it was apparently postponed at the
last moment.
17. Should the demonstrations continue much
longer, they could result in an unhealthy climate of
suspicion and mistrust regarding US policy in Vietnam.
For example, by stimulating apprehension that the US
might negotiate without the consent of the South Viet-
namese Government, the demonstrations have already
worked a few Vietnamese into such a suspicious state of
mind that they believe a current rumor that the US is
delaying rice shipments from abroad in order to extract
concessions from the government.
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II. REVOLUTIONARY DEVELOPMENT
In Quang Ngai Province, provincial
officials are shifting the RD teams from
a military role to their primary task of
development. The provision and distribu-
tion of potable water for urban and rural
residents is an effort to open new land
for settlement and improve living condi
tions. The number of returnees as of
11 March was 7,555 and if the trend con-
tinues, the 1967 response to the govern-
ment's "Open Arms" (Chieu Hoi) program
could double the 1966totIa of 20,242.
Developments in Revolutionary Development in Quang
Ngai Province `-
1. During the past two months, provincial
officials in Quang Ngai Province have been en-
gaged in reassessing and bolstering the Revolu-
tionary Development (RD) program, which for some-
time has been vulnerable to allegations that the
province's RD teams are "fighting, but not pacify-
ing." When the teams were first formed in 1965,
the local security situation had decayed to such
an extent that the original teams devoted them-
selves primarily to armed action against the Viet
Cong.
2. Since 30 December 1966, however, all RD
teams have reportedly been used in other than strictly
combat roles. In the last two months several teams
have been transferred to more secure areas along
the coast where they can engage in their primary
task of development.
3. There are 43 Vietnamese RD teams in the
province. Most of these are in the heavily pop-
ulated areas around Quang Ngai city. There are
also six Montagnard teams located in the island
districts of the province. These teams appear to
operate around the Special Forces camps.
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SOUTH VIETNAM: PPR% OR
Urban andRural Water-Projects Completed or Being Constructed
NORTH ?Qong Hai
VIETNAM
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4. The Quang Ngai Province chief and the pro-
vincial chief of RD both have considerable interest
and experience in RD programs. In 1965 the two
officials, acting independently, trained cadres
and initiated a campaign which had some success in
pacifying areas of Song Tinh, Nghia Thanh, Mo Duc
and Tu Nghia Districts, around Quang Ngai city,
and accounted for the resettlement of 50,000 ref-
ugees.
5. On 20 February 1967 the province chief
made an inspection trip to Due Quang village of
Mo Duc District, where he conversed at length with
the RD team at work there, explained concepts of
Revolutionary Development in concrete terms, dis-
cussed the need to form youth, sport, social, and
cooperative groups, and promoted esprit de corps
among the RD workers. This visit was undertaken
partly to counter the general laxity which followed
the Tet holidays.
6. In recent months, the RD teams in Quang
Ngai have established a rapport with local civil-
ians which has led the latter to volunteer infor-
mation on the enemy, even though intelligence col-
lection is not the primary mission of the teams.
Some 90 air strikes and five allied military opera-
tions in February were based on such volunteered
information. For example, RD teams contributed
substantially to information leading to ARVN Op-
eration Lien Ket 81, from 16 to 22 February, in
which approximately 500 Viet Cong were killed.
Urban and Rural Water Projects
7. The provision and distribution of potable
water in both Saigon and the provinces under USAID
and RD programs mark a significant step forward in
eradicating a major source of illness and disease
in Vietnam. This water resources program is part
of an effort to open new land for settlement and to
improve living conditions for both rural and urban
residents. The program encompasses 50 urban pro-
jects and the drilling of wells in rural areas,
particularly south of Saigon in the delta, which
suffers from natural contamination of surface water
sources.
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8. One of the largest projects--the Saigon/
Cholon Metropolitan water treatment facility--was
completed in late 1966 and is now functioning rel-
atively smoothly. This system. includes facilities
for pumping, water treatment, and distribution to
almost three million people. In addition, in at
least a dozen provincial capitals the construction
of water treatment plants and distribution facilities
is being carried on. Recently, work has slowed on
some projects because of a lack of GVN piaster funds,
but this should be alleviated as funds are made
available from the 1967 budget.
9. The provision of water to rural residents
depends on the security which can be provided for the
movement of drilling rigs. The security problem has
been acute in the highlands area and little work has
been completed there. The GVN, because of its low
wage scale, has been unable to hire enough drill crews
to use all the drilling rigs available. This may be
partly alleviated if employment is accepted by those
workers who will be laid off as the RMK-BRJ construc-
tion consortium reduces its labor force. In spite of
obstacles, an estimated 235,000 rural residents have
been provided with wells and/or distribution systems
in the last six months.
Chieu Hoi Statistics
10. For the period 5-11 March the number of
returnees (Hoi Chanh) in response to the government's
"Open Arms" (Chieu Hoi) program was 1,198. As of
11 March, total ralliers for 1967 numbered 7,555,
compared with 4,276 for the same period in 1966. If
the 1967 weekly average of 700 continues, as many as
36,700 may rally, almost doubling the 1966 figure.
11. Although it is GVN policy to encourage as
many Viet Cong defectors as possible, it is possible
that the government's administrative apparatus could
become overburdened by a large influx. Chieu Hoi
centers in Binh Dinh, Phu Yen, Long An, Hau Nghia,
Binh Duong, and Gia Dinh provinces are already over-
crowded, and returnees in these provinces are being
housed in standby quarters provided by the US Mission's
Office of Civilian Operations.
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12. An analysis of 6,348 Chieu Hoi returnees,
who constituted a third of all the returnees in the
period July 1965-September 1966, shows that 71 per-
cent were military and 29 percent were civilian mem-
bers of the Viet Cong apparatus. The survey, con-
ducted by the Rand Corporation and J2, MACV, in-
d:icates that approximately 18 percent of the re-
turnees were civilian or military cadre, the groups
likely to be most knowledgeable on the Communistg'
organization. Almost three quarters of the ralliers
were low level Viet Cong--members of the irregular
forces, of rank and file organizations, and of pro-
duction/labor groups.,
13. Previous surveys, although based on smaller
and more random samplings, indicated that approximately
60 percent of ralliers were military. The increased
percentage of military Hoi Chanh in the latest survey
appears to represent mostly irregulars from provinces
where Viet Cong provincial and regional forces have
been hard pressed and where the government has been
able to follow up with RD activities.
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III. ECONOMIC SITUATION
Retail prices in Saigon rose about
six percent during the week ending 6 March,
primarily because of a rapid increase in
the price of rice, By 11 March, however,
rice prices began to decline slightly as
the GVN.began to distribute imported rice
which is arriving on schedule. Moreover,
deliveries of rice from the delta are be-
ginning to increase. Prices of imported
commodities continued to decline during the
week ending 7 March. Free market currency
and gold prices remained relatively stable.
Provincial prices have increased sharply
since mid-December, especially in Regions I
and IV. With the exception of the latter
region, provincial prices remain well above
those of Saigon. During 1966 South Vietnam's
foreign trade continued to follow the trend
of the past few years--a decline in exports
accompanied by a rapid increase in imports.
1. The USAID weekly index of retail prices in
Saigon jumped by about six percent on 6 March compared
with 27 February, led by an increase of-39 percent in
the price of rice. Soaring rice prices accounted for
the entire 9.5 percent increase in the index for food
items. Most other food prices remained stable and in
some cases declined. Rice prices surged upward as a
result of speculation and hoarding touched off by the
reports of low deliveries from the delta and dwindling
stocks in Saigon. Since 6 March, however, the situation
reportedly has eased somewhat (see paragraphs 5-7). The
prices of nonfood items rose slightly as the result of
increases in the prices for charcoal, firewood, and
certain services.
2. Prices of US-financed imported commodities
continued to decline as fresh stocks arrived, and con-
densed milk prices declined as stocks remained adequate
despite a limited liberalization of distribution. The
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price of wheat flour rose slightly, probably because
of the increase in rice prices. (A table of weekly
retail prices in Saigon is included in the Annex.)
Currency and Gold
3. Free market currency and gold prices remained
stable in the week ending 6 March compared with the
previous week. The price of dollars remained steady at
172 piasters per dollar, while the price of gold rose
by one piaster to 226. The rate for MPC (scrip) de-
clined by one piaster to 120 piasters per dollar. The
price of MPC is still high compared with the rate
prevalent during the past several months, but the em-
bassy states that it has found no substantiation for
the reported rumors of leaks in the control of currency
exchange and PX supplies. (A graphic on monthly and
weekly free market gold and currency prices is included
in the Annex.)
4. Regional consumer price indexes based on
incomplete province reporting show that provincial
prices rose by an unweighted average of 17 percent dur-
ing mid-December through mid-February compared with an
average increase of only three percent from the end of
October through mid-December. Price increases were
greatest in Regions I and IV where the indexes showed
gains of 23 and 21 percent, respectively. In Region II
prices rose seven percent whereas prices in Region III
increased 14 percent, or about the same increase noted
in the Saigon consumer price index during this period.
Although the approach of Tet was a major factor in
these price rises, the reasons for the relatively greater
price increases in Regions I and IV are not yet clear.
In spite Of the sharp increase in prices in Region IV,
these prices still were below those of Saigon. Prices
in the other three regions, however, continued to be
well above those of Saigon.
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Rice Situation
5. GVN officials, led by National Bank Governor
Hanh, appear to be taking firm hold of the current rice
situation. On 13 March the GVN began to distribute im-
ported rice through 279 retail outlets in Saigon, and
sales reportedly proceeded in an orderly fashion at the
officially fixed retail price of 16 piasters per kilo-
gram. Imports are arriving as scheduled, deliveries
of rice from the delta to Saigon have begun to increase,
and prices have started to fall. The latest informa-
tion available on the price of domestic rice used by
the working class shows that the price per kilogram rose
from 32 piasters on 6 March to 37 piasters on 10 March
and then dropped to 34 piasters on 11 March. The em-
bassy feels that the peak may have been pa:ssed,. At the
beginning of 1967, the price of this type of rice was
17 piasters per kilogram.
6. Hanh, who has just taken over the Ministry
of Economy and Finance, stepped into the rice situation
when stocks were at an all-time low and prices at an all-
time high. With the cooperation of US officials and
various GVN agencies, he launched a program of govern-
ment sales of imported rice on the largest scale per-
mitted by the level of stocks and the current arrivals
of imports. ARVN claims on Saigon rice stocks were
canceled. The minister of labor apparently persuaded
the stevedores to work more than one shift in order to
unload imports at the rate of 1,000 tons per day. The
embassy reports that security at the warehouses, provided
by the National Police, appears adequate. Special bank
accounts for the rice retailers have been set up in all
Saigon banks, and the retailers are required to make a
cash deposit before they may receive a delivery of rice.
7. Meanwhile, deliveries of rice from the delta
to Saigon have picked up momentum. Deliveries totaled
16,000 tons during the first 11 days in March, compared
with 17,500 tons during the whole of February. Delta
rice merchants presumably have decided to take advantage
of the current high prices in Saigon.
Foreign Trade
8. GVN customs statistics for the first five months
of 1966 show a continuation of the trend evident in the
III
-3
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past few years--a decline in exports accompanied by a
rapid increase in imports. Exports during January-May
amounted to $9 million and imports totaled $158 million.
The corresponding figures for the first five months of
1965 were $15 and $130 million, respectively. Data on
export and import licensing for the entire year 1966
indicate that this trend continued throughout the year.
Export licenses issued by the GVN during 1966 were
valued at $25 million compared with $39 million in
1965 and actual 1965 export shipments of $36 million.
Import licenses issued during 1966 amounted to $660
million compared with $407 million in 1965 and.actual 1965
import arrivals of $357 million.
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Weekly Retail Prices in Saigon
a/
0
13 June
1
16 Aug.
13 Feb.
20 Feb.
27 Feb.
6 Mar.
t
tj
Index for All Items
173
211
276
261
255
273
trJ
Index for Food Items
190
216
311
290
285
312
I
z
Fi
Of Which:
d
0C
(In Piasters)
Rice-Soc Nau (100 kg.)
G~
Pork Bellies (1 kg~)
1, 250
90
1,450
100
2,100
250
2, 200
170
2, 300
150
3200
150
C
Fish-Ca Tre (i Kg.
130
170
190
170
170
180
E..~
O
Nuoc Ham (jar)
70
85
120
120
120
120
C-4
zz
0
C-4
Index for Nonfood Items
1)0
190
210
206
201
203
c/
M
Of Which:
(In Piasters)
0
Charcoal (60 kg.)
460
boo
680
660
650
670
0
Cigarettes (pack)
10
14
14
14+
14+
l4
r
White Calico (meter)
27
37
30
30
31
31
'i
Electricity (kwh)
4.2
N.A.
5.2
5.2
5.3
5.2~
a. Data are from USAID sources.
For all indexes 1 January 1965 = 100.
b. Price levels just prior to and two months after the 18 June devaluation.
c. Preliminary.
Approved For Release 2006/10/20: CIA-RDP79T00826A001700010066-4
 Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010066-4
Iwo, *0110
300f
" l l . , " i
*Official GVN-index
MILLIONS OF US DOLLARS
CONFIDENTIAL
DECEMBER
315.9
Saigon Cost of Living Index*
(For Working Class Family)
JANUARY
283
South Vietnam Money Supply
South Vietnam Foreign Exchange Reserves
Approved For Release 2006/10/20: CIA-RDP79T00826A001700010066-4
 Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010066-4
N=140 Now
Saigon, Free Market Gold and Currency Prices
500
4
00
PIASTERS PER
US DOLLAR
6
28 FEBRUARY
- 225
-
226
0
-
172
172
120
0
-
20
GOLD* Basis gold leaf worth $35
per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates (scrip).
FEB MAR
1967
ARCH
Approved For Release 2006/10/20: CIA-RDP79T00826A001700010066-4
 Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010066-4
Secret Nmo~
Secret
Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010066-4