THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A002900290001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 16, 2016
• Document Release Date: July 25, 2005
• Sequence Number: 1
• Publication Date: November 20, 1967
• Content Type: IR

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Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Situation in South Vietnam
(Weekly )
Secret
150
20 November 1967
No. 0377/67
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0900290001-3
ARNING
contains information affecting the naional defense of the
within the meaning of Title IS, section 793 and 794, of the
by an unauthorized person is prolifloited by
s amended. its transmission or revelation of its contents to or
4 Ati'i 3M t 11,
IN6 AND
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(13 November - 19 November 1967)
Status of prisoners in South Vietnam;
Security in Quang Ngai and Quang Nam
provinces; Revolutionary Development
cadre; Vietnamese armed forces in
Revolutionary Development.
Section
Prices; Currency and gold; New economic
administration; Import situation; Infestation
of stored US rice; Inflation - the cost of
more piasters.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency
Prices (graph)
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Lower House Activities
9. Lower house plenary sessions during the
period 13-16 November have been largely concerned
with validating the election of its membership and
a debate over the resolution put forward by 30 mem-
bers regarding the 17 students drafted as a result
of their anti-election demonstration activity. So
far, the sessions of the lower house have been more
disorganized and livelier than those of the upper
house, due largely to the ineffectiveness of the
temporary chairman, Nguyen Ba Luong, and the unfa-
miliarity with parliamentary procedures of its mem-
bers. It also appears that opposition elements will
have an influential voice in this assembly judging
by their performance on the student resolution issue.
10. As of 16 November, the lower house had vali-
dated the election of some 100 of its 137 members,
Validation is a continuing process carried on by the
validation committee, with each case discussed indi-
vidually on its own merits and presented to the as-
sembly for its vote. To date, the committee has
recommended validation in each case and the assembly
voted to accept its recommendations. Remaining cases
will probably be disposed of in the next few days.
11. A rather lengthly debate was centered on
resolutions to intervene with the government in some
way on behalf of the 17 students who were arrested
and drafted for anti-election demonstration activity.
The issue was finally settled by deciding to appoint
a ten-man committee composed of two representatives
from each of the corps areas and Saigon and Gia Dinh
to "intervene for return to civilian life" of the
student demonstrators. The committee reportedly
will look into the whole matter of "illegal detainees."
Three of the committee members, Nguyen Trong Nho,
Nguyen Dai Bang, and Truc Vien, were strong supporters
of the original resolutions and are expected to play
a major role in the new committee. These three men
may be generally characterized as opponents of the
present government.
Senate Rules Drafting Continues
12. During its continuing consideration of draft
rules submitted by the rules committee, the Senate on
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9 November approved the establishment of 12 standing
committees and decided against having a secretary
general on its board of presiding officers. At sub-
sequent sessions on 11 and 14 November, nine articles
dealing with the duties of these standing committees
were approved.
13. The 12 committees are agriculture; educa-
tion, culture, and youth affairs; communications
and public works; economics; labor and social wel-
fare; budget, finance, and taxes; information and
foreign affairs; interior; defense; judiciary;
health; and internal affairs and rules. Each will
include between five and ten members, with the excep-
tion of the budget and finance committee, which may
have as many as 15. Each committee may form subcom-
cittees.
14. In discussing its presiding officers, the
Senate voted to forgo election of a secretary general
and establish instead the internal affairs and rules
committee, The position of secretary general was
one of considerable power in the Provisional National
Assembly, and the senators were apparently reluctant
to vest so much power in one man again. The committee
will probably be responsible for such tasks as con-
trolling the agenda and ruling on legislative pro-
cedures.
15~ A major point of contention arose during
the debate on 11 and 14 November on articles dealing
with the standing committees' duties. Several sen-
ators attempted to have responsibility for defining
the status of allied forces assigned to either the
information and foreign affairs committee or the
national defense committee. In both cases, the move
was disapproved, although a provision was included
as an "annotation" to the defense committee article
by which the committee "examines and reports to the
upper house on regulations for allied military forces
on the territory of the Republic of Vietnam, when
such forces are here." Senator Tran Van Lam later
told an embassy officer that he expects the status
of forces question to rank high on the Senate's list
of priorities.
16. Work on the rules has begun to slow after
the Senate's energetic start earlier in the month.
Some 59 articles of the more than 200 have been ap-
proved thus far. The rules drafting process will
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probably continue well into December, contrary to
some earlier optimistic predictions that it could
be completed by mid- or late November.
17. There was a lively debate on 15 November
over the rules governing the establishment of blocs
within the Senate. The rules drafting committee
had proposed that the minimum number to constitute
a bloc should be 21--which would have insured the
creation of no more than two blocs in the 60-member
upper house. This course, according to the committee,
would facilitate the movement toward a two-party
system and would be in the spirit of Article 100 of
the constitution which states, "The Nation encourages
progress toward a two-party system." The committee
also argued that in its opinion any rules which do
not foster such progress'would in a sense be uncon-
stitutional. Only ten senators, however, voted
for the committee's proposal.
18. The Senate than went on to approve its
own measure from the floor to set the minimum bloc
membership at 15, which will allow as many as four
blocs to be organized. The argument from the floor
against the committee recommendation was that while
the constitution commits the nation to "encourage"
progress toward a two-party system, it says nothing
about forcing such movement.
New Political Party Developing
19. Senator Tran Van Don announced in early
November that a group composed largely of retired
generals and formed originally in July as a veterans'
association intends to become a political party.
During a subseqent conversation with an embassy of-
ficer, Don, who is the provisional chairman of the
group, known as the Freedom Fighters' Association,
clarified the association's objectives and plans.
20. He does not expect that the group can be
organized as a political party--a process which he
says requires the establishment of national, provin-
cial, and village structures throughout a large part
of the country--for at least a year and possibly two.
Don has already begun establishing contacts in some
areas with persons who will probably agree to or-
ganize local chapters, but little beyond this has
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yet been accomplished. He foresees a mass organiza-
tion which can successfully compete with the Communists'
mass appeal, but no platform or program outlining this
concept has yet been drawn up for the association.
Among those on the association's executive committee
are retired generals Ton That Dinh, Tran Tu Oai, Le
Van Nghiem, Mai Huu Xuan, Nguyen Van Chuan, and Thai
Quang Hoang. Former General Pham Van Dong is also
an association member, serving as chairman of the
group's Saigon chapter.
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A recent decree of the Vietnamese
government provides for clemency or a
reduction in the sentences of 6,327
prisoners. Another government decree
directs the destruction of a number of
criminal records; however, the number
of persons affected is unknown.
Security in Quang Ngai and Quang Nam
provinces sharply decreased in September,
and in Quang Nam, security continued to
decrease in October. The number of
Vietnamese RD teams continues to grow,
but the strength per team is declining.
The number of Vietnamese army battalions
in direct support to Revolutionary
Development remains around 53. US Army
battalions in RD have increased to six.
As of 3 November 25,329 persons. had
rallied to the government under the
Chieu Hoi or "Open Arms" program. On
the same date last year only 15,220
persons had rallied; however, recently
the weekly returnee rate has been below
that of last year. Thus far, only III
Corps has been able to double the
number of last year's ralliers.
Status of Prisoners in South Vietnam
1. In conjunction with the recent National
Day celebration and the presidential inauguration,
the government of Vietnam (GVN) reportedly released
or reduced the sentences of approximately 6,327
prisoners. In addition, the GVN issued a decree
on 30 October which grants complete freedom and
erasure from all records of charges or convictions
of people detained under specific categories of
criminal acts. US officials in Saigon are uncertain
as to how many persons will be affected by the
latter decree. GVN officials have made only vague
statements, publicly or privately, concerning both
the decree and prisoner release.
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2. An official in the Vietnamese Ministry
of Justice recently informed US officials that the
prisoner release and sentence reduction was a
direct act of clemency from President N
3. The semi-official Vietnam Press on
31 October reported that, of the 6,327 prisoners
who received clemency, 5,482 were released--1,167
political detainees and 4,320 suspects--and 509
civilian and 336 military prisoners had their
sentences reduced.
4. Since the specific selection of persons
to be released was apparently left in the lands
of the local authorities, US officials feel that
it was possible that a number of Viet Cong were
included among the suspects and political detainees
released. This belief is somewhat substantiated
by a Vietnam Press report of 3 November which
stated that political detainees were released in
Thua Thien, Pleiku, Phu Yen, Dinh Tuong, and
Kien Hoa provinces after they had taken an oath
of loyalty to the government and promised to fight
against the Viet Cong.
5. The civilian prison population now totals
32,385. Of this figure almost 15,000 have been
sentenced and over 17,000 are still awaiting trial.
A breakdown by the category of offender shows
20,535 political prisoners (the largest number of
whom are probably Viet Cong or Viet Cong suspects),
5,793 criminal prisoners, 1,002 armed rebels (ethnic
minority group dissidents such as the Khmer Kamputier
Krom and FULRO), and 5,055 military prisoners. In
addition, there are approximately 1,000 prisoners
at any given time in interrogation centers throughout
the country.
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6. US military officials have reported that
as of the end of October approximately 8,260
military prisoners of war (POW) were in the custody
of the government of Vietnam. This total
included about 1,485 ethnic North Vietnamese,
224 regroupees, 5,938 southerners and about 612
persons whose origins are still unidentified.
All but about 385 of these prisoners have been
captured since January 1966 and about half of
the total number--some 4,981--have been captured
by US forces. There are an estimated 340 additional
POWs in allied medical facilities who are not
included in the prisoner total.
7. To house these POWs, US and GVN forces
have constructed five major detention centers,
one in each corps area and one on Phu Quoc Island.
Under normal conditions these centers have a POW
capacity of only 11,000; however, with minor
internal alterations, they can quarter about
14,000 POWs.
Security in Quang Ngai and Quang Nam Provinces
pacificatii
i
on
n South
Viet em er substantiates earlier
information which suggested a declining security
situation 1 provinces.
here was a decided
eptemb
i
-
-
n Quail( ivgai
and Quang Nam provinces.
9. Quang Ngai's pacification effort suffered
a severe setback when the enemy occupied eastern
Tu Nghia District for 10 days following the 29-30
August attack on the provincial capital. Eastern
Tu Nghia is the most important of the five RD
canpaign areas in the province. The intensity of
the enemy offensive drove the Regional and Popular
Force (RF/PF) soldiers and the RD cadres from a
number of hamlets. The Vietnamese Army (ARVN)
reaction was delayed and cautious, even after their
forces were augmented by two battalions from
Quang Tin Province. ARVN forces, however, appear
to have been successful in at least temporarily
clearing the area, and the RF/PF and the cadres
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have reportedly returned to the hamlets. The
ARVN supporting units have been withdrawn from
Quang Ngai, and Vietnamese forces in the province
have returned to the security status prior to
September. US officials are skeptical of the
local forces' ability to preserve security and
feel that enemy forces could, and indeed may,
repeat their seizure of eastern Tu Nghia?
10. During September, Quang Nam Province
experienced a reversal similar to that of Quang
Ngai Enemy pressure caused a least a temporary
loss of security in coastal Hieu Nhon District
which includes the provincial capital of Hoi An.
At one point five RD teams had to be temporarily
withdrawn from their hamlets because of a lack
of security, During October the enemy continued
its offensive in Quang Nam and directed much of
its effort against the districts of Dai Loc
and Hieu Duc, Enemy forces seem to be attempting
to force government forces into enclaves in Hoi
An, Da Nang, and the district towns,
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Retail prices in Saigon declined
one percent during the week ending
6 November because of lower prices for
domestic rice and other foods. Free market
currency and gold prices increased. Most
economic posts in the new cabinet are
occupied by relative unknowns, and Minister
of Economy Ton's record during his previous
terms in the position was undistinguished.
Import orders during the first nine months
of 1967 were smaller than anticipated as
the result of existing large inventories of
goods in the hands of importers. USAID
personnel recently found substantial insect
infestation in PL-480 rice stored by the
South Vietnamese Government. The relation-
ship between the price level and the in-
creasing supply of piasters has tightened
since 1965, and future additions to that
supply will place greater pressure on
prices.
1. Retail prices in Saigon declined 1 percent
during the week ending 6 November after having risen
sharply the previous week. The food price index
dropped 3 percent as prices of most varieties of
domestic rice as well as of pork, fish, and chicken
declined. The price of the type of rice used in
calculating the USAID index declined to 22.5 piasters
per kilogram, the lowest since mid-February, as de-
liveries of new crop rice continued to arrive in
Saigon. Prices of nonfood items increased slightly
as the price of laundry soap rose again as a result
of the high cost of coconut oil. Firewood and
charcoal prices also rose, the latter for the first
time since early September. (A table of weekly re-
tail prices in Saigon is included in the Annex.)
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2. The USAID index for wholesale prices of
US-financed imports also declined slightly because
new arrivals of wheat flour and galvanized iron
sheet resulted in lower prices for these items.
The price of wire rods, however, rose sharply be-
cause of low stocks and lack of new deliveries.
Currency and Gold
3. Free market currency and gold prices in-
creased on 6 November. The prices of green dollars
and MPC (scrip) rose two piasters to 155 and 115
piasters per dollar, respectively. The price of
gold leaf increased four piasters to 201 piasters
per dollar, the highest rate since mid-August. (A
graph on monthly and weekly currency and gold
prices is included in the Annex.)
New Economic Administration
4. The key portfolio of minister of economy
in the new cabinet has once again gone to Truong
Thai Ton, while most of the related ministries will
be headed by less well known figures. Ton, an
agricultural engineer, previously served as minister
of economy from June 1965 to February 1966 and from
February 1967 to mid-March 1967, but his record was
undistinguished. He has had wide experience in
government and at the time of his appointment was
serving as an economic adviser in the prime minister's
office. US officials consider him capable and hard
working, but lacking in administrative ability.
Judging by past experience, they do not expect any
strong leadership on economic matters to come from
his office.
5. The scope of Ton's post apparently will be
smaller than it was under his predecessor, Nguyen
Huu Hanh, who at present retains his position as
governor of the National Bank of Vietnam from which
he could still wield considerable influence. Under
Hanh the ministry, called the Ministry of Economy
and Finance, had direct supervisory responsibility
for commerce, industry, finance, and transport and
communications, but the latter two have now become
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separate ministries. The departments of commerce
and industry are now headed by under secretaries--
Nguyen Chanh Ly for commerce and Vo Van Nhung for
industry. Ly has been a junior official in the
commercial credit section of the National Bank and
Nhung is an electrical engineer.
6. As minister of finance, Luu Van Tinh will
continue in the general field in which he has been
working for many years. He served as minister of
finance under Tran Van Huong and in Ky's government
as director of the budget and foreign aid as well
as an assistant to Hanh on tax policy. The new
minister of transport and communications is Luong
The Sieu, who has been technical'director of the
government-owned Nong Son coal mine near Da Nang,
where his predecessor as minister also worked before
serving in the cabinet. The other major economic
ministries, agriculture and labor, are headed by
Ton That Trinh, who worked with Ton as an advisers
to the prime minister, and by Pho Ba Long, a de-
feated senatorial candidate who has been teaching
political science and business administration at the
University of Da Lat while on leave from Esso where
he worked in public and employee relations.
Import Situation
7. Orders for imports this year have been
smaller than anticipated as the result of existing
large inventories of goods in the hands of importers.
The monthly value of goods ordered by commercial
importers in Vietnam during the first nine months
of 1967 (measured by letters of credit opened) was
20 to 25 percent below the
The level in 1966 was quite
moval of import quotas and
monthly average
for
1966.
high because of
restrictions and
the
the
re-
entry of new firms into the importing business. Ac-
cording to a joint Embassy/USAID study, the main
concern now is the size of inventories and the effect
it will have on the market for imported goods next
year. By the end of June 1967 both bank and nonbank
financing of importers' inventories was estimated to
total roughly 25 billion piasters, or about 60 per-
cent of the expected value of orders for all of 1967.
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The large inventories have allowed consumers access
to ready supplies of imported goods at stable prices
thus providing a dampening effect on domestic price
increases. The danger, however, is that importers
may be wary of placing large new orders until in-
ventories have run down and prices start moving up.
Then a big increase in orders would not only have an
unsettling effect on prices but also on port opera-
tions and bank liquidity, such as was experienced
in 1966.
8. US officials in Saigon expect that the
large inventories will discourage any increase in
new import orders through the end of this year, but
anticipate that orders will pick up early in 1968
as stocks approach more reasonable levels. They see
two major problems confronting the import sector of
the economy--how to reduce the lag between the time
orders are placed and the time the goods arrive and
are paid for by the importers and how to get importers
to maintain adequate stocks of imported goods and
rapidly replace them. There is currently a lag of
about seven months between orders and arrivals, down
from about nine months early this year. Importers
should be able and willing to react quickly before
shortages Of goods appear. In order to make this
possible, the time lag must be reduced somewhat and
sufficient credit must be available to finance the
arrival of goods that are running short. US officials
hope to tackle the former by streamlining licensing
procedures, particularly for the gooc?s financed by
the US. Credit conditions will be continually re-
viewed with South Vietnamese officials in the hope
of easing current bank pressure on importers to repay
outstanding loans.
Infestation of Stored US Rice
9. tJSAID personnel recently found substantial
rodent and insect infestation in PL-480 rice stored
in warehouses rented by the Vietnamese Government.
The condition apparently exists in warehouses both
in Cholon and Thu Duc, which have a combined capacity
of 108,000 metric tons, or about two-thirds of the
government's stock of imported rice in the Saigon
area at the end of September. The infestation
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reportedly is worst in the Cholon warehouses, and
.plans are under way to move these stocks into USAID-
controlled storage space. USAID, on an emergency
basis, has already hired a private firm to fumigate
and protect the rice in the Thu Duc warehouses until
the government can contract for such services. AID
officials reported about 1,500 tons of spoiled rice
as of 10 October, but said future losses would be
considerably greater and much more costly than
fumigation. The survey team also recommended that,
if feasible, future contracts for shipment of PL-480
rice and other foods to Vietnam include provisions
for improved inspection of ships prior to and dur-
ing loading and dusting of foods with insecticides
during loading to inhibit or eliminate insect
growth during voyages.
10. This recent survey is reminiscent of a
similar study made in August by USDA technicians
and private American rice millers. At that time
they recommended a different system of piling to
allow for good ventilation and urged frequent fumi-
gation.
Inflation - The Cost of More Piasters
11. Under certain circumstances changes in a
country's money supply (currency plus checking
accounts) can have a direct and substantial impact
on the prices of goods and services available in
that country. If the supply of money increases at
a more rapid pace than the available supply of goods
then the price of those goods is very likely to
rise as buyers are forced to bid more vigorously
against each other. Suppliers rather quickly per-
ceive the situation and accommodate the buyers by
raising prices. Further, as the purchasing power
of money falls (because of the rising price level)
no one is particularly anxious to hold money for
very long as its purchasing power will decline even
further. Consequently, most individuals attempt to
spend their money income as soon as they receive
it thus further increasing the pressure on prices.
This process seems to best explain the severe in-
flation that began in South Vietnam in 1965. In
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any event, mid-1965 marked the end of the ability
of the South Vietnamese economy to absorb substantial
increases in the money supply while maintaining
relative price stability. During that year the money
supply increased by 54 percent while prices responded
by rising 30 percent. In 1966 the money supply in-
creased by 28 percent and the price level jumped by
44 percent.
12. By contrast, during the previous decade
South Vietnam demonstrated a capacity to absorb
large annual increases in the money stock while
maintaining a modest 1.4 percent average annual rise
in prices. In this respect South Vietnam seems to
have outperformed several other developing nations
in the Far East. As shown in the table below, be-
tween 1956 and 1965 the increase in the price index
for South Vietnam was closer to that of Ceylon,
Pakistan, and the Philippines while the percentage
increase in the money supply was nearer to that of
Taiwan and Korea, both of which experienced fairly
severe inflation.
Money Supply and Price Indexes for
Selected Countries, 19 = 100
Money Index Price Index
1960 1965 1960 a
Ceylon 107 152 104 113
India 122 193 119 159
Pakistan 126 195 116 129
Philippines 126 204 108 137
South Vietnam 138 391 95 134
Taiwan 189 460 149 167
South Korea 181 468 133 271
13. Until 1965 price stability and a rapidly
increasing money supply were compatible largely be-
cause of the US Commercial Import Program and ac-
companying imports from the US under the Food for
Peace Agreements. Goods imported by South Vietnam
under these agreements were, in large part, enough
to absorb the large annual increases in money, i.e.,
the increase in the available supply of goods kept
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pace with the money supply. A second but significant
factor was the absorption of piasters by the agricul-
tural sector of the South Vietnamese economy. This
sector had traditionally relied on barter, i.e.,
goods exchanged for goods, instead of currency.
Thirdly, and apart from the first two factors, more
money is normally required in the course of a country's
growth and development. As South Vietnam's national
income increased, more piasters and piaster checking
accounts were required-to facilitate the greater
number of transactions and the larger piaster amount
of these transactions.
14. In 1965, when the US began sending large
numbers of troops to South Vietnam, it quickly be-
came evident that there was little slack left in the
economy which would allow substantial additions to
the money stock without inflation. The remainder of
the subsistence sector became rather quickly mone-
tized. And the additions to the money supply were
of such magnitude that additional piasters required
because of economic growth were even of lesser im-
portance than they were before 1965. Consequently,
the commercial import and Food for Peace Programs
were left with almost all of the burden of prevent-
ing inflation in South Vietnam. To a lesser extent
the growing black market in currency and gold acted,
and still acts, as a deterrent to further inflation
by providing South Vietnamese with a source of con-
stant value currency to hold as idle balances. If
piasters were used, then holding idle cash balances
for purposes of future transactions would be costly
because the purchasing power of the piaster is con-
stantly declining.
15. The South Vietnamese budget deficit is
largely responsible for the growing money supply and,
consequently, for the upward spiral in prices. Print-
ing more piasters appears to be the method employed
by the government to raise necessary revenue as tax
collections are wholly inadequate. According to re-
cent estimates the prospects for price stability in
1968 are not good. Estimates of price increases,
based on the possible budget deficit (which provides
the net addition to the money supply less borrowing
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from the National Bank), go as high as 75 percent
for 1968. Former minister of economy and finance
Hanh, however, is conservatively predicting about
a 35-percent increase.
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Weekly Retail Prices in Saigon a/
13 Jun 3 Jan 16 Oct 23 Oct 30 Oct 6 Nov
1966 b/ 1967 1967 1967 1967 1967
s
ll It
173
225
291
290
304
300
em
Index for a
d It
F
190
242
326
324-
345
336
ems
oo
Index for
Of Which:
(In Piasters)
Rice-Soc Nau (100 k.)
1,250
1,700
2,300
2,300
2,300
2,250
Pork Bellies (1 kg.
90
130
200
200
230
220
6
Fish -Ca Tre (1 kg.)
130
150
220
220
270
2
0
Nuoc Mam (jar)
70
90
150
150
150
150
I
140
195
227
228
2-0
233
tems
Index for Nonfood
Of Which:
(In Piasters)
Firewcod (cu. meter) 360 56o 500 500
520
530
4
arettes (pack) 10 14 14 14
Ci
14
1
g
White Calico (meter) 27 33 45 45
46
16
9
Kerosene (liter) 7.8 10.5 9 9
9
1
6
= 100
Data are from USAID sources.
a
9
For all indexes 1 January
-
5
.
b.
Price level just prior to the 18 June devaluation.
Approved For Release 2005/08/01 : CIA-RDP79T00826AO02900290001-3
 Approved FocRelease 2005/08/01 : CIA-RDP79T008r x4002900290001-3
Saigon Free Market Gold and Currency Prices
PIASTERS PER US DOLLAR
100
GOLD: Basis gold leaf worth $35 per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates
AUG SEP OCT NOV
1967
Approved For Release 2005/08/01 : CIA-RDP79T00826AO02900290001-3
 Secrefpproved For Rise 2005/08/01 : CIA-RDP79T00826A900290001-3
Secret
Approved For Release 2005/08/01 : CIA-RDP79T00826AO02900290001-3