MIDDLE EAST AFRICA SOUTH ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00865A001700130002-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 10
• Document Creation Date: December 12, 2016
• Document Release Date: July 30, 2002
• Sequence Number: 2
• Publication Date: September 5, 1975
• Content Type: NOTES

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MIDDLE EAST - AFRICA - SOUTH ASIA
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Iran: Economic Measures . . . . . . . . . .
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Kenya: Press Attacks on Kenyatta Family
Cause Stir . . . . . . . . . . . . . . . .
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Bangladesh: A Balanced Foreign Policy . . .
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Recent measures by the Shah to lower prices,
widen industrial ownership through sale of stock to
workers, and improve income distribution by tax
reform are calculated to appeal to Iran's low and
middle income urban populace. The price rollbacks
on hundreds of items in the last few weeks appeal
particularly to middle income urban workers con-
fronted with inflation rates exceeding the current
national average of about 25 percent a year.
At the same time, the Shah risks alienating the
business and well-to-do classes, which will bear the
brunt of the new programs. Tehran's business com-
munity already is upset as a result of the harsh
anti-inflation actions taken by the government.
Thousands of shopkeepers and businessmen--including
several prominent industrialists--have been detained
or jailed on charges of "profiteering."
In the wake of the often arbitrary price roll-
backs, more and more shops and firms face the prospect
of operating at a loss. Several have closed their
doors, and Iranian importers reportedly have begun
~J canceling orders. These actions undoubtedly will
result in further shortages and higher inflation,
raising the prospect of even stronger counteraction
by the government.
Industrialists also are confronted with a weak-
ening of their ownership position. In attacking what
he termed a growing "industrial feudalism," the Shah
has indicated that some 320 large manufacturing units
must sell 49 percent of their shares over the course
of the next three years.
The tax reform package will take a larger bite
from business and higher income groups. While many com-
panies and most individuals previously escaped taxation
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because of laxity or loopholes in enforcement, the
Shah now has strengthened the tax enforcement
machinery and probably will deal harshly with those
caught violating the new tax laws.
The altered profit-tax-ownership position prob-
ably will give the investing class some second
thoughts about pouring new money into the economy.
Some private foreign firms already have indicated
concern about investing in Iranian joint ventures.
Considering the profit potential of Iran's
burgeoning economy and the unwillingness or inability
of the business groups to challenge the Shah, these
Iranians will undoubtedly adjust and make the best
of the situation. The new programs, however, will
place new strains on an economy already having dif-
ficulty adjusting to the vast new spending of oil
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Kenya
Press Attacks on Kenyatta Family Cause Stir
The US embassy in Nairobi reports that a large
number of politically aware Kenyans have read a
series of articles strongly critical of President
Kenyatta and his family that appeared recently in the
Sunday Times of London--despite a ban on the sale of
the paper.
The three-part series reviews again the murder
of regime critic J. M. Kariuki last March, asserting
that Kenyatta gave the go-ahead for the murder be-
cause Kariuki was on the verge of publishing an
expose of the Kenyatta family and other wealthy
enyans. The major focus of the series, however,
is a detailed review of land acquisitions and other
usiness dealings by various members of what the
paper calls the "Royal Family"--especially Kenyatta's
wife Mama Ngina. Some Kenyans knew of or suspected
some of these shady practices, but the careful research
and systematic presentation of the articles appears
to have had a considerable impact.
The long range significance of the Sunday Times
articles is difficult to gauge, however. Kenyatta's
tough tactics against the opposition will probably
be sufficient to keep most local critics at bay, but
dissident backbenchers may attempt to take advantage
of the revelations when parliament reconvenes on
September 30. The Sunday Times series will probably
intensify opposition to former Foreign Minister
Njoroge Mungai, a Kenyatta family member whose attempt
to make a political comeback is reportedly being aided
by the President. Moreover, the series may make it
difficult for Kenyatta's relatives to retain their
entrenched economic position after his de arture from
the political scene.
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Bangladesh
A Balanced Foreign Policy
The new government continues to pursue the
balanced foreign policy launched after last
month's coup, when President Mushtaque called for
"friendship with all nations," especially with
Bangladesh's closest neighbors. Dacca has been
following a cautious and pragmatic course of
courting Pakistan and China, which had limited
contact with former president Mujib's regime,
while trying not to antagonize India and the Soviet
Union, which had close ties with Mujib. So far,
this approach seems to be meeting with some success.
The coup last month set the stage for better
relations between Bangladesh and Pakistan. A
drive to improve relations had been stalemated in
part by Mujib's unwillingness to compromise on
his differences with Islamabad. Shortly after the
coup, Mushtaque wrote to Prime Minister Bhutto
saying that he looked forward to a "new chapter"
in relations between the two countries.
Dacca considers Pakistani friendship necessary
if it is to obtain good will and economic aid from
China and additional assistance from other Islamic
states. Dacca also recognizes it needs Bhutto's
cooperation if there is to be progress toward
resolving issues remaining from the division of
Pakistan in 1971, such as the allocation of
undivided Pakistan's assets and liabilities.
The Pakistanis, for their part, have been
sympathetic to the new Dacca regime. Islamabad,
at least at first, viewed the new government--with
its early emphasis on the Islamic nature of the
state--as a departure from L4ujib's secular, pro-
Indian regime. Pakistan was the first country
to recognize the Iushtaque government and pressed
other countries, especially the Islamic states and
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China, to follow its lead. Islamabad continues to
view the coup as a favorable development even
though the new government has backed away from
its early indications that it would officially
designate Bangladesh an "Islamic republic."
The Indians were clearly shaken by the events
in Dacca. Despite the growth of economic and
political problems between Dacca and New Delhi
since India secured the independence of Bangladesh
in 1971, Mujib continued to regard India as his
closest ally, and New Delhi was assured of
considerable leverage in Dacca.
Mushtaque and the military officers who back
him are keenly aware of the need to retain
Indian good will, and the government has made
clear moves in that direction. Dacca realizes
that India may still be tempted to intervene in
Bangladesh if Prime Minister Gandhi decides
India's interests require such a move. Bangladesh
is also aware of Indian suspicions that the new
regime's policy will be less favorable to New
Delhi. It was with India in mind that the Dacca
government backed away from its initial move to
designate Bangladesh an Islamic republic. Since
then Mushtaque has sent friendly and reassuring
messages to Prime Minister Gandhi, including
specific confirmation that the bilateral treaty
of friendship is still a cornerstone of
Bangladesh's foreign relations. The Indians,
for their part, will continue to scrutinize the
new government's moves closely but appear to be
trying to retain good relations with Dacca for the
present.
The n2w Bangladesh regime has been striving
harder than its predecessor to improve relations with
Peking. China, which had not recognized the
Mujib government, extended recognition to the
new regime this week. The Bengalees are hoping
for Chinese aid and more trade, and they see
closer ties to the Chinese as a way to achieve
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more balanced relations with New Delhi and Moscow.
They have also emphasized their desire for
continued warm ties to the US.
Dacca's relations with the Soviets declined
slightly during the last year or so of the Mujib
government, and they are likely to grow cooler
under the new regime, especially in view of the
prospect of closer Chinese-Bengalee ties. Never-
theless, the Bengalees undoubtedly hope they can
keep on relatively good terms with the Soviets
and will probably make efforts to reassure them.
Moscow probably sees the coup in Dacca and Peking's
recognition of the new government as a setback
to Soviet and Indian interests. Moscow, however,
has made clear its willingness to continue to deal
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