CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A019600080001-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: December 15, 2016
• Document Release Date: February 19, 2004
• Sequence Number: 1
• Publication Date: July 29, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
N2 42
State Department review completed 29 July 19 71
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No. 0180/71
29 July 1971
Central Intelligence Bulletin
CONTENTS
JAPAN: Discount rate lowered. (Page 1)
EAST PAKISTAN: Economy remains depressed. (Page 2)
ARAB STATES: Arab summit. (Page 3)
EGYPT: Sadat maintains control. (Page 4)
ARMS CONTROL: Scant. prospects. for disarmament con-
ference. (Page 5)
CARIBBEAN: Political union. (Page 7)
URUGUAY: Opposition capitalizes on student's death.
(Page 9)
JAPAN - COMMUNIST CHINA: Import rules eased
(Page 10)
USSR: Solomentsev moved up (Page 10)
MALAWI - SOUTH AFRICA: Embassy-level relations
(Page 11)
PHILIPPINES: Ford Motor Company investment.. (Page 11)
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JAPAN: The Japanese central bank, in an effort
to overcome. the current economic slump, yesterday
lowered the official discount rate to 5.25 percent,
the lowest in 15 years.
Tokyo had earlier hoped that economic growth
would rebound this spring but now believes that re-
covery will not take place until late this year.
Preliminary estimates indicate that the rate of
growth in the first half of 1971 was about 6.5 per-
cent--just about half the rate of recent years. The
industrial sector has been hardest hit with produc-
tion increasing at only about 40 percent of the "nor-
mal" 16.5-percent annual rate of the last five years.
The existence of excess capacity has resulted in re-
duced investment on the part of Japanese business--
orders for machinery in May were down 35 percent from
the level of May 19 70 .
The discount rate cut is the fourth since last
October and Japanese monetary authorities hope that
by stimulating economic activity Japan's huge balance-
of-payments surplus will be reduced, thus lessening
pressure for revaluation of the yen. Tokyo's foreign
exchange reserves increased by over $3 billion in the
first half of 1971. This was partly because of the
domestic slump, which stimulated Japanese manufac-
turers to push exports while the growth of Japanese
imports slowed to less than half the rate established
F_ 1
in the period 1965-70.
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EAST PAKISTAN: Industrial and commercial ac-
tivity remains depressed.
Industrial recovery continues to be hampered
by labor shortages. According to Pakistani statis-
tics, only 50 percent of the labor force in Dacca is
present and in Khulna, another important industrial,
center, only 40 percent is available. Exports of
jute manufactures are being held back by production
problems--output is less than a third of normal-.-and
by inability to move the output to the ports.
The sad state of commercial activity in Dacca
may be representative of that elsewhere in East Pak-
istan. Although the city's population may now be
back up to 70 percent of normal,, and almost all shops
have reopened under threat of military confiscation,
nonfood retail sales are only one quarter of the pre-
March levels. No imports are arriving from either
West Pakistan or abroad. The low sales, reflecting
a lack of both buyers and purchasing power, have
kept most prices at fairly reasonable levels, how-
ever. The low industrial and commercial activity
has also reduced demands on fuel. and power, but guer-
rilla operations against transport and power systems
are causing concern about future supplies.
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ARAB STATES: Preparations are going forward
for an Arab summit conference, in Tripoli today,
although the Libyan Government has issued no offi-
cial statement.
Cairo is apparently trying to ensure the pres-
ence of all those who signed earlier agreements with
the fedayeen. This would include King Husayn, who
was pointedly not invited by Qadhafi, although he
has announced his willingness to attend. On 19
July, Libyan Prime Minister Qadhafi had called for
a meeting of Arab heads of state to discuss possible
action against Jordan in retaliation for King Husayn's
"liquidation" of the fedayeen. President Sadat will
almost certainly attempt to rein in Qadhafi, who
sees himself as the hero of the Sudanese countercoup
and is hoping to assume a leading role in Arab coun-
cils.
The outcome of the conference--which may well
range beyond the problem of Jordan--will depend very
much on who shows up.
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EGYPT: The newly completed restructuring of the
Arab Soc alist Union (ASU) underscores President
Sadat's determination to maintain control of the lev-
ers of power.
Sadat pledged in mid-May to reform Egypt's only
legal political organization, the ASU, through free
elections. The result has been an affirmation of
regime control over that body. Although there was
little evidence of overt government interference in
the elections, the process was nevertheless subtly
directed.
At the lower level of the ASU, most voters were
not informed of the names of the candidates until a
day or two before the elections began, and most were
not known by the individual voters. Additionally,
there were no issues to stimulate either voters or
candidates, and consequently, the elections consti-
tuted little more than a perfunctory re-establishment
of party machinery.
At the national level, the restructured 230-mem-
ber AS_U Central Committee is composed almost entirely
of new members, 30 of whom were appointed by the re-
gime. The appointment of these 30--prominent govern-
ment officials and other citizens who owe fealty to
no one but Sadat--underscores his lack of faith in
even a largely predetermined election. It thus a -
ears that the new ASU is Sadat's own creation. II
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ARMS CONTROL: Communist China's negative at-
titude toward Moscow's proposal for a five-power nu-
clear disarmament conference has virtually killed
prospects for such a meeting.
The leader of a French parliamentary delegation
now visiting China reports that Chou En-lai spoke
out strongly against the Soviet proposal in a pri-
vate conversation. Chou said the USSR was trying
to "lasso" the PRC and that Peking would not attend
such a conference.
Although Peking is not likely to take such an
abrupt position in its public response, Chou's re-
marks are the strongest indication to date that the
Chinese answer will be negative. Mindful of the
propaganda element in the Soviet proposal, the Chi-
nese may present some sort of counterproposal in
line with their long-standing advocacy of a meeting
of all countries on the abolition of nuclear weapons.
The French position meanwhile is that, although
they approve the Soviet idea in principle, they will
not attend unless Peking does. The French Foreign
Ministry official who relayed Chou's remarks to a US
Embassy officer reaffirmed this position, indicating
that so far as Paris was concerned, the Chinese re-
sponse was negative and this meant that there would
be no conference.
The UK has been skeptical of the idea from the
beginning, feeling that there is little to be dis-
cussed profitably in such a forum. With France now
believing that Chinese opposition is clear, there
may be little enthusiasm for the Soviet proposal at
the current North Atlantic Council meeting. This
sub'ect is scheduled for discussion today.
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Commonwealth Caribbean
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CARIBBEAN: Although agreement reportedly has
been reached on procedures for the establishment of
a new political union of Commonwealth Caribbean
states, there is little likelihood that the plans
will reach fruition.
The agreement, described as the "Declaration
of Grenada," resulted from a meeting of representa-
tives of several Commonwealth Caribbean countries
in Grenada on 25-26.July. The declaration will not
be made public until 1 November; in the meantime,
it will be passed to those regional governments not
represented at the conference. Another meeting then
will be held to "tie up the ends."
The conference in Grenada was an outgrowth of
a meeting held in Saint Lucia on 26 June, ostensibly
to debate Colombian and Venezuelan applications to
join the Caribbean Development Bank and to discuss
Britain's decision to resume the administration of
the island of Anguilla. Prime Minister Burnham of
Guyana, however, used the occasion to promote the
concept of a federation of states of the West Indies.
Burnham also took the lead in pressing the federation
issue at Grenada.
Both conferences, like earlier ones convoked to
consider federation, lacked regional cohesiveness and
area-wide participation. The prime ministers of Ja-
maica, Barbados, and Trinidad and Tobago, three of
the four independent states of the Commonwealth Carib-
bean, did not attend either meeting and apparently do
not intend to participate actively in the latest ef-
fort. Although a genuine desire exists on the part
of the minuscule states to establish a union within
which they can achieve some degree of political and
economic equality, the reluctance of the larger states
to become involved negates any initiatives the smaller
ones undertake, Guyana's sponsorship notwithstanding.
In addition, insular attitudes and petty jealousies,
combined with a failure to prepare the people of the
area for federation, constitute, as they have in the
past, major stumbling blocks. (continued)
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Talks on federation may be held from time to
time, but it is doubtful that any concrete develop-
ments will take place so long as the political lead-
ers involved continue to ignore the errors of the
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URUGUAY: Opposition forces were able to make
politica pital from the death last weekend of a
student during a clash, with police.
The funeral on 26 July was directed primarily
by Communist-dominated organizations and the leftist
Frente Amplio political coalition. It attracted some
15,000-30,000 participants, but the organizers, in
,line. with their contention that it is the government
that begets violence, successfully kept the demonstra-
tion peaceful. The Frente also is supporting the ef-
fort under way in the Senate to impeach President
Pacheco for overstepping his constitutional authority
in combating terrorism.
Last year, Pacheco closed down the schools after
violent outbreaks. Extremists may hope to encourage
further outbursts in the hope of exacerbating rela-
tions between the President and the legislature, which
lifted the President's control of the schools in June.
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JAPAN - COMMUNIST CHINA: Tokyo announced on
26 July that prior of icra approval is no longer
required on imports of 40 items from Communist China
and other Communist countries. Although these items
account for about one third of Japanese imports from
China, the effect on bilateral trade is expected to
be limited inasmuch as the original intent of the
regulations was to monitor import channels rather
than to restrict the actual trade. The principal
objective of the move is to ease popular criticism
of Prime Minister Sato's cautious olicy on im roving
relations with China.
USSR: Mikhail Solomentsev, a party secretary
with no clear ties to any top Soviet leaders, was
appointed premier of the Russian Federation yester-
day. He replaces politburo member Gennady Voronov,
who was demoted to chairman of the People's Control
Committee last week. An industrial specialist with
some background in agriculture, Solomentsev became
chief of the Central Committee's heavy industry de-
partment and a party secretary in 1966. The change
in RSFSR leadership should eventually be reflected
in the politburo. Voronov stands-.to lose his posi-
tion and Solomentsev will probably gain politburo
status in exchange for the loss of his secretariat
post.
(continued)
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MALAWI SOUTH AFRICA: The agreement between
the two countries to raise their diplomatic missions
to embassy level became effective on Tuesday. Malawi
named its high commissioner to Kenya, Joe Kachingwe,
as the first black African ambassador to South Af-
rica and Pretoria promoted its resident charge' to
ambassador. Both countries regard raising the level
of diplomatic relations as an important contribution
to dialogue between black and white Africa. Malawi's
President Banda believes that such a policy must
eventually replace open hostility if the white-
minority governments of southern Africa are to be
persuaded to modify their racial policies. Kach-
ingwe's first task will be to prepare for President
Banda's visit to South Afric scheduled for next
month.
PHILIPPINES: A major investment in the Philip-
pines-is planned by the Ford Motor Company if appro-
priate assurances are obtained from Manila. Ford
wants to invest some $42-$50 million--rather than
the $100 million figure reported in recent press re-
leases--in auto assembly and related plants. These
expenditures would be spread over at least a five-
year period. The firm is especially interested in
setting up operations at the planned Mariveles Free
Trade Zone, which would allow Ford to maintain 100-
percent equity ownership. If the project does go
through it will be the largest new US investment in
the Philippines in years.
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