THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A002100010018-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 20, 2016
• Document Release Date: August 28, 2006
• Sequence Number: 18
• Publication Date: June 12, 1967
• Content Type: IR

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Secret
IS
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
State Dept. review completed
ARMY review(s) completed.
USAID review completed
Secrf; 4
12 June 1967
149. 0354/67
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WARNING
This document contains intormation affecting the national
defense of the United States, within the meaning of 'T'itle
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law,
GROUP I
EXCLUS)FI) !'ROM AUTOMATIC
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SECRET
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(5 June - 11 June 1967)
Section
POLITICAL SITUATION I
Ky's political plans move forward;
Provisional National Assembly e-
velopments; Directorate activities.
REVOLUTIONARY DEVELOPMENT II
Free World assistance; "New Life
Development" activities; Refugees;
L n egra ion of civilian and
mi itary resources for RD.
POLITICAL SITUATION III
Prices; Currency and gold; Indus-
trial development; Provincial
prices.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
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I. POLITICAL SITUATION
Premier Ky continues to increase his
efforts to build a popular political base
and has apparently made some gains among
organized labor. He has also taken some
steps to establish a front-type political
party whose objective will be to gain
votes among the ethnic minority peoples.
Other moves to aid his presidential bid
include easing police pressure on the Viet-
namese Confederation of Labor (CVT)
and granting GVN
approval of a revise c arter for the
United Buddhist Association. Ky has also
decided not to allow retired General Duong
Van Minh (Big Minh) to return to Saigon
until after the elections.
In the Provisional National Assembly
(PNA), the progovernment Democratic Al-
liance Bloc, which early last week boy-
cotted that body in protest over the hold-
ing of a secret vote on the Directorate's
recommendation to reschedule upper house
elections, reportedly decided on 8 June
to take its place in the assembly.
The Directorate, for its part, has
sent the PNA another list of recommenda-
tions that it wishes to see incorporated
into the upper house's electoral law. Mean-
while, the Directorate has also decided to
promulgate the presidential electoral law
without the controversial provision re-
quiring 30 elected officials to "introduce"
a presidential candidate.
Ky's Political Plans Move Forward
1. Premier Ky has increased his efforts to
create a broad base of political support for his
presidential bid. As a result, he appears to have
made certain gains among organized labor and to have
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sparked the establishment of a new political party
which will attempt to draw support from among the
minority peoples of South Vietnam,
2. It now appears that Ky has given an order
to improve relations with organized labor in order
to receive its support. Presumably toward this end,
General Nguyen Ngoc Loan, Director General of the
National Police, recently made an effort to effect
a personal rapproachement with Tran Quoc Buu, head
of the largest labor organization in South Vietnam,
the Vietnam Confederation of Labor (CVT).
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Provisional National Assembly Developments
13. The progovernment Democratic Alliance Bloc
continued to boycott the Provisional National Assem-
bly (PNA) early last week. Members of the bloc had
walked out of the assembly on 3 June when it was de-
cided that a Directorate recommendation to reschedule
upper house elections should be voted on by secret
ballot. Bloc leaders, who supported the recommenda-
tion, apparently believed they could not assure the
votes of other members if balloting were not done
openly.
14. Bloc members did not return to the sessions
on 5 and 6 June and announced that they had "temporar-
ily withdrawn" to protest the assembly's method of
voting. This announcement was made on 6 June by the
bloc's leader, Le Phuoc Sang. Eight bloc members, in
their turn, then withdrew from the bloc, saying they
could not accept its actions.
15. Although two bloc-supported proposals were
defeated in the assembly after the group walked out,
the bloc may have felt that its boycott would create
an impression of widespread dissatisfaction with the
assembly's decisions, and thereby justify any amend-
ments the Directorate might make in the assembly's
versions of the electoral laws. An unconfirmed Sai-
gon press report claims, however, that the bloc has
now ended its walkout and revised its position on the
election dates for the sake of "assembly unity."
16. According to a local Vietnamese press re-
port, the assembly, at a closed door session on 6
June, discussed the question of disciplinary action
against its first vice chairman, Nguyen Huu Thong,
who at a recent press conference, declared that the
presidential election law drafted by the assembly'
violated the constitution. Following lengthy de-
bate, the assembly decided to set the issue aside
temporarily, pending open debate on a date to be de-
cided later. The press story declares, however, that
Thong may be relieved of his post.
17. At an earlier closed door session, on 5
June, the assembly met to discuss its public image
as portrayed in the local press. The PNA has been
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severely attacked editorially for various shortcom-
ings in the past few weeks. Reportorial coverage
on the other hand, has been extensive and accurate.
The main concern of the assembly was, however, the
manner in which GVN-controlled radio and television
have been broadcasting editorial commentaries which
have been critical of the assembly on a regular and
frequent schedule. The decision of the assembly
was to approach the GVN bureaucracy about remedying
the matter and, if this course fails, to dispatch a
letter of complaint to the Directorate.
18. According to a report from the US Embassy
in Saigon, the Military Directorate, following a 9
June meeting, has decided to promulgate the presi-
dential electoral law without the controversial pro-
vision which requires that a candidate be "intro-
duced" by at least 30 elected officials. By this
action, the Directorate will, in effect, override
the Provisional National Assembly's (PNA) previous
vote in favor of this measure, and may, as a result,
cause further strains to develop between the two
bodies.
19. Also as a result of the 9 June meeting,
the Directorate in a strongly worded message formally
asked the PNA to make several changes in the upper
house electoral law which is currently under consid-
eration in that body. Chief among the Directorate's
recommendations to the PNA was that the upper house
elections be held concurrently with the presidential
election now set for 3 September and not in Decem-
ber as now scheduled. A second change recommended
in the law was that voters be allowed to cast a
ballot for all six lists of candidates rather than
onl one. This recommendation
went against
Premier Ky's strong argument in favor of allowing
voters to cast their ballots for two lists of can-
didates.
20. The Directorate's third recommendation to
the PNA called for the revision of the amendment
which deals with the elimination of upper house can-
didates who are either Communists or pro-Communist
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neutralists. As the amendment now stands, only
candidates who are adjudged to belong to either
of the two categories will be striken from the
list while their running mates and qualified al-
ternates will be allowed to run. The Director-
ate's request calls for the elimination of the en-
tire slate if any member is found to be a Commu-
nist or pro-Communist neutralist. Premier Ky re-
portedly took the lead in calling for this change
in the amendment. The Directorate's message to
the assembly also included the suggestion, but not
the formal request, that the size of the upper
house be reduced from its present proposed member-
ship of 60 to 40.
21. In order to provide sufficient time for
the establishment of the machinery for the upper
house election, the assembly will have to move
quickly in passing the upper chamber electoral law,
especially if it incorporates the Directorate's
recommendations.
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The bulk of the 2,200-man regimental
combat team from Thailand is scheduled
to arrive in Vietnam in early September.
The Government of Japan is trying to de-
velop closer relations with the GVN, and
appears willing to expand its economic
assistance. A Quaker volunteer organiza-
tion, the American Friends Service Commit-
tee, has received the approval of the
Ministry of Health (MOH) to build and
staff a rehabilitation center for civilian
war casualties in Quang Ngai Province.
An emergency plague-control mobile team--
a recent innovation of USAID and the MOH--
has apparently brought under control an
outbreak of plague in Phuoc Long Province.
On the US side, activities
should suffer only a minimum amount of
disruption as the integration of civilian
and military resources for RD takes place
under MACV.
1. Between 1 and 15 September the main body
of approximately 2,200 Thai soldiers is scheduled
to arrive in Vietnam; Thailand will thus become the
sixth nation to provide combat forces to assist
the Republic of Vietnam. (The Philippine Civic
Action Group is included in this six-nation total
since its force is a self contained unit, able to
provide its own security and possessing an offen-
sive capability.) The Thai army regiment--named
the "Queen's Cobras"--will be attached to the US
9th Infantry Division, elements of which are
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deployed in the southern III Corps and northern IV
Corps areas. US military officials in Thailand
have been monitoring the Thai unit's 16-week pre-
deployment training course and consider the train-
ing to be satisfactory. Morale of the soldiers is
reportedly high; 94 percent of them are volunteers
from the regular army.
2. The Government of Japan is apparently
acting to develop closer relations with South Viet-
nam. The Japanese are planning to invite a GVN
economic delegation to come to Japan during June
.for three days of discussions on a variety of topips
including Japanese economic assistance. Japan has
been giving fairly substantial aid to Vietnam--
including the Da Nhim electric power facility--
under terms agreed upon as part of World War II re-
parations.
3. Besides projects funded under war repara-
tions, Japan has assisted the US and GVN in many
unpublicized ways--providing rest and recreation
centers for US servicemen, hospital facilities,
repair facilities, and material procurement. Two
Japanese medical teams are in Vietnam. Japan has
recently concluded an agreement whereby Japanese
companies will construct a new neurological suite
at the large Cho Ray hospital in Saigon, and plans
are also being prepared for the Japanese to de-
velop irrigation facilities in the Phan Rang area
of coastal Ninh Thuan Province.
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"New Life Development" Activities
Health
5. The American Friends Service Committee, a
Quaker volunteer organization, has received the
approval of the GVN's Ministry of Health (MOH) to
build and staff a rehabilitation center for civil,,
Ian war casualties at the Quang Ngai provincial
hospital. When operative, the center will be
equipped to work with amputees as well as patients
with other types of injuries.
6. An outbreak of plague in Phuoc Long
Province was apparently quickly brought under con-
trol by an emergency plague-control mobile team.
This team concept--a recent innovation of USAID
and the MOH--is designed to provide a quick reac-
tion capability to isolate plague-type diseases
before they assume epidemic proportions.
7. Plans have been formulated by the GVN to
produce youth programs which will be implemented
at the village and hamlet level in Vietnam. The
programs entail summer activities, year-round
sports programs, and expanded, nationwide boy scour
operations.
Refugees
8. Approximately 3,337 families--comprising
an estimated 12,000 people--have been evacuated
from areas near the demilitarized zone (DMZ) and
moved to the Cam Lo resettlement site. In addition
to commodity support, all families have reportedly
received a 5,000-piaster resettlement allowance
and a 30-day temporary cash allowance. The re-
settlement area has been surveyed and many refugees
are already constructing new, permanent homes.
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Integration of Civilian and Military Resources for RD
14. In accordance with National Security Coun-
cil Action Memorandum (NASAM) 362, which transferred
responsibility for support of RD to COMUS MACV
under the over-all authority of Ambassador Bunker,
General Westmoreland has issued an order setting
forth the organization for civil operations and RD
support in Vietnam.
15. At the Saigon level Ambassador Komer--
General Westmoreland's Deputy for Civil Operations
and Revolutionary Development Support (CORDS), will
supervise the formulation and execution of all
plans, policies, and programs--military and civil-
ian--which support the GVN's RD effort and related
programs. Ambassador Komer's responsibilities in-
elude the authority to advise appropriate GVN
agencies concerning the provision of local security
and destruction of the Communist infastructure in
the country side. The former director of the Office
of Civilian Operations (OCO) has assumed the posi-
tion of the Assistant Chief of Staff, CORDS, and the
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former director of MACV's Revolutionary Development
Support Directorate (RDSD) has become the latter's
deputy.
16. At corps level, the OCO Regional. Director
has become the Deputy CORDS to the US force com-
mander/senior advisor and assumes the responsibility
for civic action performed by US units. Moreover,
the deputy force commander/senior advisor in the
corps will operate under the supervision of the
deputy CORDS on all matters relating to RVNAF su.p-
port to RD. The military staffs engaged primarily
in RD support--except for intelligence and psycho-
logical operations--will be integrated into the
CORDS organization at corps level.
17. At province level, a single team chief
will be chosen, and may be either military or civil-
ian, depending on the security in the province, the
civil/military balance in the RD effort, and the
qualifications and experience of the current senior
QCO provincial advisor and the MACV sector advisor.
The provincial team chief will receive operational
direction from and report, through the deputy for
CORDS, to the force commander/senior advisor. The
military element of the provincial team will receive
logistical and administrative support from the
division advisory team, where RVNAF units are at-
tached to the province chief for the direct support
of RD, advisors to these units will come under the
operational control of the provincial-advisory team
chief.
18. The new organization provides a single,
integrated US chain-of-command, permitting logis-
tical and administrative economics through consoli-
dation and cross-servicing. The majority of US
civilian and military personnel, however will still
be doing the same job and reporting to the same
senior officials as before, and, therefore, continp-
ing activities should suffer only minimum disruption,
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Retail prices in Saigon rose slightly
during the week ending 29 May, reaching a
level 26 percent higher than at the begin-
ning of January. The price of gold was
unchanged on 29 May, while currency
prices rose slightly for the second con-
secutive week. The continued low rate of
licensing for imports of industrial ma-
chinery and equipment indicates that the
Vietnamese business community is still re-
luctant to invest in Vietnam's industrial
development. Consumer prices in the prov-
inces declined slightly from mid-March
through the end of April, but are still
an average of 16 percent higher than in
mid-January.
Prices
1. Retail prices in Saigon rose slightly dur-
ing the week ending 29 May, reaching a level 26
percent higher than at the beginning of January.
The index for food prices increased as declines in
the prices of rice and chicken failed to offset
increases for pork, shrimp, and several vegetables.
Pork prices rose for the second consecutive week
as wholesale prices at the Saigon slaughterhouse
remained high. The increases in vegetable prices
reportedly reflected shortages of out-of-season
crops. Prices of some nonfood items, such as
firewood, calico, and soap, declined slightly
while all others used in the index were unchanged.
(A table of weekly retail prices in Saigon is in-
cluded in the Annex.)
2. Prices of selected US-financed imports
also rose slightly during the week ending 29 May
for the second week in succession and now are at a
level about eight percent higher than at the begin-
ning of the year. Prices of all goods used in the
index, except for cement and condensed milk, in-
creased. Fertilizer prices registered the largest
gains because demand is increasing with the
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beginning of the main rice growing season. The
fertilizer prices used in the USA.ID index are those
for old stocks still in the hands of private dea l-
ers. There have been no new private imports of
fertilizer since last summer. Most fertilizer now
is held by the Agricultural Development Bank, the
sole GVN importer, and the groups dealing with it.
Their selling prices are lower than those used in
the index.
Currency and Gold
3. Gold and currency prices were again mixed
on 29 May compared with the previous week. The
price of gold was unchanged at 198 piasters per
dollar. The price of dollars rose by three piasters
to 158 piasters per dollar, and the rate for MPC
(scrip) rose by two piasters to 113 piasters, still
five piasters below the official rate. (A, graph on
monthly and weekly currency and gold rates is in-
cluded in the Annex.)
Industrial Development
4. During the last few months there has been
a continued decline in the number of license ap-
plications for US-financed imports of machinery
and equipment for new projects, replacements, and
the expansion of existing plants. Vietnamese
businessmen seem to be still reluctant to invest
in new equipment or new enterprises, which are nec-
essary to improve the rate of industrial growth
and lessen the country's dependence on imports.
The slowdown began in mid-1966 with the devaluation
of the piaster, which in effect doubled the cost
of imported raw materials and equipment. During
1966, USA.ID approvals for imports of industrial
equipment amounted to $13.8 million, of which only
$4.7 million was approved during the last half of
the year. No data are available for license ap-
provals in 1967, but the number of license applica-
tions submitted reportedly has declined further,
and presumably this is true for the same type of
imports financed by the GVN.
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5. In addition to the devaluation, US offi-
cials attribute the low licensing rate to special
taxes on GVN-financed imports of industrial supplies
and equipment, imports of finished products that
compete with locally made goods, tight bank credit
for importers, and the disinterest and lack of know-
ledge among the Vietnamese business community con-
cerning opportunities for new small and medium-
sized industrial plants.
6. The GVN has taken steps to alleviate the
problems posed by taxes, foreign competition, and
tight credit, but the basic problem of instilling
confidence in the economy in order to stimulate
private investment is a much more difficult one.
On 12 May the government eliminated the so-called
perequation tax, levied only on GVN-financed goods
for imports of industrial machinery and parts. At
the same time taxes on imports of all kinds of
fabrics were almost tripled in order to relieve
the pressure on domestic manufacturers, who re-
portedly have had to cut back operations because
of competition from imports. In addition, the
National Bank of Vietnam has made further redis-
counting facilities available to commercial banks
and reduce the down payment required of importers
when getting their import licenses.
7. Both the US and the GVN are studying the
problems faced by businessmen in undertaking invest-
ment in industry. Their recommendations probably
will include revising the investment laws and
streamlining procedures for securing government ap-
prov'al for new projects and procurement of equip-
ment for the modernization or expansion of existing
plants. GVN officials also have been discussing
the possibility of setting up new credit institu-
tions to channel development funds to the private
sector of the economy. US officials feel, however,
that little hard thinking has been focused on this
subject and that possibly more can be done in the
meantime through existing institutions such as the
Industrial Development Center and the Financial
Company for Industrial Development in Vietnam
(SOFIDIV).
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8. Regional consumer prices declined by an
unweighted average of one percent from mid-March
through the end of April, but remained an average
of 16 percent higher than in mid-January, according
to incomplete reporting from the provinces. Prices
declined in III and IV Corps by four and three per-
cent, respectively, from mid-March through the end
of April. In I and II Corps, however, prices rose
by two and three percent, respectively. In the
last half of March, prices in I Corps jumped by
12 percent because of higher prices for shrimp and
rice, but then declined 'throughout April. As of
the end of April, prices in I and III Corps remained
considerably above those in Saigon. In II Corps,
prices were about five percent higher than those in
Saigon after having been lower in mid-March. As
usual, prices in IV Corps were well below the Saigon
level.
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25X1 TABLE 25X1
Weekly Retail Prices in Saigon a
13 June 3 Jan. 8 May 15 May 22 May 29 May
1966 / 1967 1967 1967 1967 1967
Index for All Items 173 225 260 266 276 278
Index for Food Items 190 24+2 289 297 310 316 /
Of Which:
(In Piasters)
Rice-Soc Nau (100 kg.) 1,250 1,700 2,700 2,700 2,750 2,650
Pork Bellies (1 kg.) 90 130 130 130 150 160
Fish-Ca Tre (1 kg.) 130 150 150 170 170 170
Nuoc Mam (jar) 70 90 150 150 150 150
Index for Nonfood Items 14+0 195 207 207 214 210 cf
Of Which :
(In Piasters)
Firewood (cu. meter) 360 560 500 520 550 530
Cigarettes (pack) 10 l4+ 14 14 14 14
White Calico (meter) 27 33 31 30 33 32
Kerosene (liter) 7.8 10.5 10 10 10 10
a. Data are from USAID sources. For all indexes 1 January 1965 = 100-
b. Price level just prior to the 18 June devaluation.
c. Preliminary.
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Saigon Free hat et Gold and Currency Prices
t 'z
500
PIASTERS PER US DOLLAR
400
300
200
0
1964 1966 1967
GOLD 8as3_ gold leaf worth $35 per troy ounce
zi,
US $10 GREEN
(JS $10 MPC Military Payment Certificates (scrip
,..~
an
APR MAY JUNA
'1967
29
30 APRIL
_
201
198
157
158
113
d
5~
MAY
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Secret
Secret
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