MIDDLE EAST AFRICA SOUTH ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00865A000800320002-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 12, 2016
• Document Release Date: May 31, 2001
• Sequence Number: 2
• Publication Date: April 29, 1975
• Content Type: NOTES

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Secret
No Foreign Dissem
LrLTAEE K
Middle East
Africa
South Asia
Secret
123
No. 0663/75
April 29, 1975
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0
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No Foreign Dissem
Warning Notice
Sensitive Intelligence Sources and Methods Involved
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
Classified by 005827
Exempt from general declassification schedule
of E. 0. 11652, exemption category:
? 5B (1), (2), and (3)
Automatically declassified
on: Date Impossible to Determine
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This publication is prepared for regional specialists in the Washington com-
munity by the Middle East - Africa Division, Office of Current Intelligence,
with occasional contributions from other offices within the Directorate of
Intelligence. Comments and queries are welcome. They should be directed to
the authors of the individual articles.
Egypt: Economic Overview . . . . . . . . . 1
Egypt: Preparing the Canal . . . . . . . . . . 3
Liberia: "Steve" Tolbert Dies in Plane Crash . 4
India: Gujarat Election an Important Test . . 5
Sri Lanka: May Day Precautions . . . . . . . . 8
Apr 29, 1975
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Egypt
Egypt's long-term economic prospects are look-
ing up, but Cairo is plagued by economic difficulties,
few of which will be ameliorated by the recent changes
in government.
For a brief period after the war in October 1973,
an improved financial situation permitted progress in
selected areas. Infusions of cash aid from other Arab
countries and a sharp upsurge in cotton prices-permitted
the government to replenish stockpiles of food and other
essential commodities and to mount a reconstruction pro-
gram in the Suez Canal area. A spurt in private investment
in real estate and tourist facilities heightened econo-
mic activity in the major cities. Under a revitalized
petroleum ministry, exploration and development expen-
ditures mounted. Promises of other private investment
appeared to augur a continuation of the postwar boom.
Since early 1974, Egypt's financial fortunes have
deteriorated. The steep rise in import prices has sub-
stantially offset the increase in Arab aid. At the same
time, recession and balance-of-payments problems in
Western Europe have reduced demand for Egyptian goods
and may well reduce Egypt's foreign exchange income by
$400 million in 1975.
The financial picture has also been darkened by
the death of King Faysal of Saudi Arabia, who provided
Egypt with about $500 million in cash grants annually
since 1972, frequently overruling skeptical subordinates.
With an untested leadership now in control of Saudi
Arabia, future levels of Arab aid to Egypt are uncertain.
Even if the financial situation improves, the fol-
lowing factors will hamper the growth rate for some time.
-- Congestion throughout the transportation and
distribution system will limit the volume of pro-
ducer and consumer goods available to Egypt's economy,
which depends on imports.
Apr 29, 1975
(Continued)
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-- Failure to anticipate hydroelectric produc-
tion problems at Aswan has begun to pinch power
supplies and threatens shortages that could
impede industrial output.
-- Lack of hotel capacity has dampened growth
in the tourist industry, an important source of
foreign exchange.
Progress also is apt to be slowed, as in the past,
by bureaucratic ineptitude. Presid`nt Sadat did not
streamline government operations during the recent
ministerial shakeup, but left 33 agencies with over-
lapping responsibilities in charge of, state affairs.
The caliber of the administration does not appear to
have been much improved by the new appointees, so pub-
lic management will still be inept.
Sadat will be hard-pressed to satisfy-consumer
demands for a higher standard of living. Recent minor
improvements will be insufficient for those who
remember higher levels of consumption prior to 1967
and who resent the living standards of the new elite--
foreigners and a few Egyptian businessmen. A recur-
rence of strident consumer complaints may tempt
Sadat to favor consumption over state investment.
If the Sadat government can placate consumers and
at the same time avoid jeopardizing foreign investment,
substantial relief ought to be available by 1977 or
1978. Reopening of the Suez Canal, completion of the
first phase of the Sumed pipeline, construction of
several new luxury hotels, and development of promising
new oil and gas fields could redress unfavorable trade
trends and reduce dependence on Arab grants.
Moreover, expansion of the port of Alexandria,
scheduled, for completion late in 1977, will eliminate
the principal physical obstacle to the importation of
goods. Improvements under way in the public production
and distribution systems could also be completed.
(CONFIDENTIAL)
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Egypt
Preparing the Canal
The Suez Canal authority in Egypt has arranged
for the removal by mid-May of all but one of the 15
foreign merchant ships stranded in the canal since
June 1967.
The 14 ships anchored in Lake Timsah and the
Great Bitter Lake will be towed north to Port Said
and turned over to their owners. A US freighter,
sunk during the, Middle East war of 1973, is beached
in the Great Bitter Lake. The rest of the preparatory'
work for the reopening of the canal, set-for June 5,
'V appears to be on schedule. Additional British mine-
clearing vessels arrived in Port Said on April 19 to
make a final sweep of the canal.
Some Egyptian spokesmen contend that the canal
will be able to take fully loaded ships at the pre-
closure maximum of 50,000 deadweight tons. Others,
however, hint that no loaded ships of more than
35,000 tons will be able to transit the waterway
after it opens. (UNCLASSIFIED)
Apr 29, 1975
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Liberia
in e governmen s Curren e or o revise o i s
t
t
t
L. t
advantage economic concession agreements- with foreign
companies.
Finance Minister Stephen Tolbert, President-Tolbert's
younger brother, was killed Monday in. a -domestic plane
crash along with five other persons. Steve's death
is a serious blow for the President-who has been displaying
growing anxiety over undercurrents of domestic opposition
and Liberia's worsening economic situation. President
Tolbert depended heavily on his brother for-advice on a
wide range of matters and used him as his chief negotiator
t 4
h
'
ff
In the long run, Steve's passing may ease some of
the specific complaints being voiced agains-t the Tolbert
administration by students and other critics.
Steve unscrupulously used his status and
office to promote his personal business ventures and to
ride.roughshod over fellow cabinet ministers-and other
prominent Liberians. Steve's name-had been-publicly
linked with several scandals in the-past year, and his
unsavory activities stood in clear contradiction to the
reformist image that President Tolbert has tried to pro-
ject since succeeding constitutionally to office in 1971
on the death of President Tubman. (CONFIDENTIAL)
Apr 29, 1975
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India I
Gujarat Election an Important Test
4,
i
The outcome of the election for the state
legislature to be held in Gujarat in early June
could have a major impact on the strategies India's
political parties will pursue in the national elec-
tions due by the spring of 1976. If the numerous
small opposition parties can implement tentative
plans to limit the number of candidates they gield
in Gujarat, they will enhance their chances of
winning, or at least of preventing Prime Minister
Gandhi's Congress Party from obtaining another
massive majority in the state legislature. Either
outcome would encourage the opposition to cooperate
on a similar basis in the coming national poll.
A poor opposition showing in Gujarat, on the
other hand, would be a serious setback for the
national anti-Congress movement led by J. P. Narayan.
Narayan is unwilling to act as a campaign chairman
in the state election because he does not want to
get enmeshed in Gujarat's political infighting. In-
stead, he plans to spend the first half of May in
South India trying to enlist support for his idealistic
"total revolution" of Indian society.
Congress' preeminence on both the national and
local levels since independence has been made possible
in large part by the splitting of non-Congress votes
among local, regional, and several narrowly focused
national parties. In the last state election in Gujarat,
which was held in 1972, Congress won 80 percent of the
168 seats in the legislature with 50 percent of the
popular vote. No other single party was able to win
even the necessary ten percent of the seats needed to
qualify as a recognized opposition party. Nevertheless,
the Congress government that was installed was brought
(Continued)
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down only two years later by a student-led revolt
against high prices and the state administration's
handling of food shortages. The central government
has exercised direct control over the state since
February, 1974.
Congress' image nationwide has been tarnished
in the past year by continued economic mismanagement
and by allegations of corruption. In Gujarat there
is no popular Congress boss capable of restoring
public confidence in the party. Chimanbhai Patel,
who was chief minister of the state when the Congress
government fell in 1974, was subsequently expelled
from the party. Congress should benefit, however,
from a relief program that is under way in parts of
the state that have been severely affected by drought.
Moreover, predictions of a good--and possibly a record--
spring harvest in north India next month should relieve
concern about food shortages in Gujarat, a state that
does not grow enough to feed itself.
The main opposition to Mrs. Gandhi's party in
Gujarat comes from center-right parties; the communists
have never gained-a secure foothold in this relatively
prosperous and normally peaceful state. At this early
stage in the campaign, the indications are that these
opposition parties are having difficulty getting together
on whose candidate should represent the proposed joint
opposition in each constituency. The conservative
Organization Congress, whicn split with Mrs. Gandi's
ruling Congress Party in 1969, probably has the largest
following among the,opposition parties. As a result,
the senior leader of the Organization Congress, Morarji
Desai, opposes full participation in the single-candidate
strategy, and says he is willing to support candidates
from other parties only in special cases. Other Organi-
zation Congress leaders, however, appear ready to make
concessions to obtain an alliance with former chief
minister Patel. Patel now heads a new party that is
gaining popularity with the landed gentry, which comprises
(Continued)
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weeks will be filled with hard bargaining over
-candidate selection. (CONFIDENTIAL)
opposition coalition government. The next several
20 percent of the state's population. For his part,
Patel is acting like Desai; he has announced he will
run candidates in most constituencies, withdrawing
only where another Apposition nominee appears a
sure winner. Only the Hindu-chauvinist Jana Sangh
Patty has promised full support for the unity strategy
and its pledge has aroused misgivings in the other
parties; they are concerned that the highly organized
and disciplined Jana Sangh might dominate any future
Apr 29, 1975
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Sri Lanka
May Day Precautions
Prime Minister Bandaranaike has placed security.
forces on alert and has ordered them to crack down
\Iy hard on any group defying a ban on May Day demonstra-
tions. She is aware that there is widespread popular
discontent over food shortages and massive unemploy
ment. More than anything, however, the ban reflects;
government concern that political strains within the,.
~fruling coalition could spark violent clashes.
Mrs. Bandaranaike has held power for five years
as leader of a coalition of her moderate-leftist Sri
Lanka Freedom Party and two small far-left parties--
the Trotskyite Lanka Sama Samaja Party and the Communist
Party/Moscow. Her party by itself controls a majority
of parliamentary seats, but is badly divided between
moderate and left-wing factions.
The Prime Minister is particularly worried that
a violent confrontation could take place between members
of the Trotskyite group and moderates of her party.
Leaders of the two far-left parties have assured her
that their personal activities will be restrained and
that their followers will not cause trouble. Militant
elements within these parties, however may try to test
3 the determination of the security forces, possibly
with the tacit approval of party leaders.
In any event, the May Day activities of the two
parties will aim at reminding the Prime Minister that
their presence in the government forestalls major
disruptions, especially by the powerful labor unions
and student groups under their control. Additionally,
5 leaders of the two parties, along with the left-wing
faction of the Freedom Party, have recently registered
concern that Mrs. Bandaranaike may be considering an
alliance with the major right of center opposition
party.
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The leftists have also been dismayed in recent
months by the moderate economic policies the Prime
Minister has adopted, despite her continuing espousal
of socialist goals. At the same time, she has
resisted left-wing pressures for early nationalization
of banks and textile mills and for imposition of
controls over foreign-owned tea companies.
Apr 29, 1975
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