WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000030001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 37
• Document Creation Date: December 21, 2016
• Document Release Date: April 21, 2009
• Sequence Number: 1
• Publication Date: February 1, 1974
• Content Type: REPORT

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Top Secret
Weekly Review
State Dept. review completed
DIA review
completed.
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...l11d1079 Hq,
i op aecrlet
1 February 1974
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425
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The WEEKLY REVIEW, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes signif-
icant developments of the week through noon on Thursday.
It frequently includes material coordinated with or prepared
by the Office of Economic Research, the Office or 5irategic
Research, and the Directorate of Science and Technology.
Topics requiring more comprehensive treatment and there-
fore published separately as Special Reports are listed in the
contents.
CONTENTS (February 1, 1974)
1 The Middle East
5 China in the Paracels
8 EC: From Floating to Drifting
9 International Mono
25X1
11 Bel ium: Revolving Governments 25X6
EAST ASIA
PACIFIC
14 Cambodia: The Guns of January
16 Indonesia: Political Aftershocks
WESTERN
25X6
25X6
19 Bolivia: Peasant Protest Crushed
20 Grenada: An Inauspicious Beginning
22 Nicaragua: The Economy Recoups 25X6
AFRICA
23 The Saudi Hand in Yemeni Politics
23 United Arab Emirates: No Panacea
24 Cyprus: A Factor Removed
25 Turkey: The New Cabinet
SPECIAL
REPORT (Published Separately)
Malaysia-Singapore: Neighbors with
Different Perspectives
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THE MIDDLE EAST
Kilometer 101this week became once again a
mere marker on the Cairo-Sue; road. The historic
negotiating spot was returned to Egyptian control
on January 28 as Israeli forces completed the first
phase of their withdrawal from the Suez Canal's
west bank. The Cairo-Suez road and the city of
Suez were officially opened by the Egyptians on
January 29, thus lifting the three-month siege of
the city and of the encircled Egyptian Third
Army on the east bank.
The withdrawal process formally began on
January 25 after the two sides had initialed a
detailed implementation agreement outlining the
timing of the several phases of disengagement
Page 1
Under the implementation accord, Israel's
withdrawal from the west bank will be completed
in stages by February 21, rather than February 12
as Israeli sources had originally announced. A
further pullback to the designated disengagement
line inside the Sinai Peninsula will occur by March
5. The Egyptians have carefully avoided public
mention of arrangements for a reciprocal thinning
of Egyptian forces, but the Israelis announced in
mid-week that the Egyptian Second Army had
begun moving some of its troops from the north-
ern sector of the east bank.
Among problems probably dealt with and
apparently satisfactorily resolved before disen-
gagement began was the construction, within the
last three weeks, of five Egyptian surface-to-air
missile sites in the Second Army area. The sites,
capable of housing either SA-2 or SA-3 units, had
not been occupied, but construction work had
continued after the disengagement agreement was
signed on January 18. The Israelis complained to
the US defense attache in Tel Aviv last week
about the Egyptian action, but the fact that they
later agreed to terms for the implementation of
the disengagement accord indicates that they
obtained some satisfaction from the Egyptians on
the issue.
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Both the Egyptian and the Syrian fronts
have been relatively quiet since disengagement
was agreed upon. The cease-fire on the Suez front
was reaffirmed as part of the accord, and viola-
tions dropped off markedly after it was signed. A
two-hour exchange of artillery fire occurred on
January 27, but in general, both sides have
refrained from provocations. No clashes were
reported on the Syrian front until last weekend,
January 26-27, when the Syrians initiated minor
artillery duels with Israeli forces that continued
for five successive days.
Egyptian Foreign Minister Fahmi and the
Soviet leaders sought to resolve differences during
Fahmi's visit to Moscow on January 21-24, but
probably did not achieve any lasting easing of
strains.
Page 2
The Soviets were primarily interested in
reasserting Moscow's ascendancy as the super-
power champion of the Arab cause during nego-
tiations and in registering their displeasure with
Egypt's failure to permit them this role during
disengagement talks. Fahmi was chiefly interested
in mollifying the Soviets enough to avoid en-
dangering their support when Egypt needs it, but
without forfeiting Cairo's freedom to conduct its
affairs, particularly the negotiations, in its own
way.
Although the communique issued at the con-
clusion of the visit speaks almost exclusively of
the benefits of past Egyptian.-Soviet cooperation
and the desirability of future coordination in
negotiations, the words were an inexpensive
gesture for the Egyptians. They are satisfied with
the role the US played during the disengagement
talks and are hopeful of constructive US efforts in
future negotiations, thus seeing no need at pres-
ent for Moscow's direct aid. Therefore, while the
communique calls for Egyptian-Soviet coordina-
tion at "all stages" of the Geneva conference, it
also emphasizes that this cooperation "cannot
inflict damage on anyone"-a clear reference to
the US and its role at Geneva.
The Soviets take some satisfaction from the
image of closer coordination that the com-
munique presents, and they probably intend to
take advantage of Egyptian reassurances by
pressing for a greater role in planning Egyptian
strategy at Geneva. They are undoubtedly under
no illusions, however, that their fundamental dif-
ferences with Egypt have been resolved, and they
apparently made no concessions in the area of
military aid, where Egypt is most anxious for
Soviet assistance.
It is likely that Fahmi did not let the
opportunity pass without putting in the usual bid
for more advanced weaponry, but he clearly did
not get a favorable response. Military aid is one of
the few areas in which the Soviets retain any
leverage, however limited, over Cairo.
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All Is njeli IefCes to be
withdrawn to thu oast
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Vacated ; Suez,
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the next premier. If Khalifawi is in fact named to
head a new cabinet, this could bolster Asad's
standing among Syrian Army officers, a prime
source of opposition to a negotiated settlement
with Israel.
Syria's mmirnum conditions for participating
in the Geneva conference are still unclear. Asad
will probably not commit his government until a
Syrian-Israeli disengagement agreement has been
worked out and the related Israeli POW issue has
been resolved. Tel Aviv has insisted that the
Syrians must at least hand over a list of their
Israeli prisoners of war before disengagement or
any other talks can begin.
The Syrians, still determined to use the
prisoners as a bargaining chip, have at times
linked the transmittal of a list to the return of
Syrian refugees to their homes in areas occupied
by Israel during the October fighting. At other
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There were more signs from Damascus this
week that President Asad is preparing the ground
for Syria's eventual attendance at the Geneva
peace conference. In a conversation with a US
official, claimed he had
learned that Asad plans shortly to hold a congress
of the National Progressive Front-an umbrella
organization encompassing all of Syria's major
political parties. At this meeting, Asad reportedly
intends to announce a long-awaited cabinet
change and to obtain approval for Syria's partic-
ipation in the peace talks.
There have been rumors recently that For-
eign Minister Khaddam, who is strongly opposed
to negotiations with Israel, is slated to be dropped
from the cabinet. In addition, Major General
Khalifawi, a respected army officer and close con-
fidant of Asad, has been mentioned as possibly
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times, Damascus has taken a much tougher posi-
tion, insisting that, before it will yield on the
prisoner issue and engage in any talks with the
Israelis, Tel Aviv must first agree in principle to
negotiate a total withdrawal from the Golan
Heights.
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The Chinese continue to maintain a high
level of military activity in the Paracel Islands and
are clearly determined to remain there. No clashes
have occurred with the South Vietnamese since
January 18-20, when Saigon's forces were ex-
pelled from the islands. Chinese fighters and
bombers are regularly flying over or near the
Paracels making as many as 90 flights in a single
day. Most of the flights are for reconnaissance,
area familiarization, and training, but some are
combat patrols over the South China S,-.,a. The
continuing high level of air activity suggests that
the Chinese are taking precautions against any
South Vietnamese return to the a?ea. Saigon has
threatened to retaliate with hit-and-run raids but
has not yet followed through. Chinese co?nmuni-
cations, however, continue to reflect concern over
possible South Vietnamese military moves against
the islands.
The Chinese were able to carry out the in-
vasion of the Paracels without any great diffi-
culty. The islands-only about 150 nautical miles
from Hainan-were within easy range of Chinese
fighter and bomber aircraft as well as naval units
from the South Sea Fleet. This permitted the
Chinese to land troops on the islands under con-
tinuous n;,,;al and air protection and also facili-
tated supply, maintenance, and reinforcement.
In addition to the Paracels, the Chinese also
claim the Spratly Islands-some 400 nautical
miles south of the Paracels-and o--her islands in
the South China Sea. In recent days, Chinese
Page 5
Paracol
(Islands
S 0 1J T 11
C II I N A
S Ii J
~.,,ai pratly
"' slands
officials have referred to the Spratlys as an in-
tegral part of China, but there is no Chinese
presence in the Spratlys nor any indication that
Peking intends to move there.
In apparent reaction to their expulsion from
the Paracels, the South Vietnamese have rein-
forced their small military presence in the Spratly
Islands. Saigon's claim to the Spratlys had been
reiterated last September in a ministerial decree
incorporating several of the islands into a village
in Phuoc Tuy Province, and about that time 64
troops were sent to one island. According to US
officials in Saigon, a South Vietnamese Navy task
force has set out this week to land about a pla-
toon each on five other unoccupied islands, rais-
ing the South Vietnamese complement to about
200. If the Chinese attempt to seize the Spratlys,
they will find the going much tougher than in the
Paracels operation. These islands, about 600 nau-
tical miles from Hainan, are well beyond the
effective radius of Chinese fighters and most of
their bombers. Chinese naval units would be able
to reach the Spratlys, but probably could not
operate there for any length of time. Further, the
Chinese do not have a port facility in the Spratlys
as they do in the Paracels. They would encounter
serious problems in supporting naval operations in
transport and maintain ground forces.
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Most of the NATO allies have reacted favor-
ably to Secretary Schle!inger's recent public re-
marks on retargeting the US strategic nuclear de-
terrent to include Soviet missile sites and major
military bases as well as cities. Adverse comment
has focused on the lack of US consultation with
the NATO allies prior to the public statements.
Defense officials in Bonn view the change as
adding a highly useful flexibility to NATO's re-
sponse to a Soviet attack, according to briefing
papers prepared for Foreign Minister Scheel and
Defense Minister Leber. Bonn is using the US
action to emphasize the need for European con-
sideration of defense cooperation. West Ger-
many's disarmament commissioner has noted that
the move highlights a serious deficiency in the
NATO allies' consideration of strategic, security,
and arms control questions and their implications
for Europe. He has recommended to the French
that the EC political committee step up consider-
ation of these issues, but as yet has not received a
reply.
British officials regard the Secretary's re-
targeting remarks as being sound and persuasive.
The French permanent representative, in remarks
tj the US NATO ambassador, stated that in his
report to Paris on Secretary Schlesinger's state-
ment, he had taken the position that US retarget-
ing was excellent for Europe and the alliance. The
Italian representative echoed these sentiments
when he told members of the Nuclear Planning
Group's staff that the US action might be helpful
to Europe because additional Soviet missiles and
aircraft currently aimed e+ West European targets
could now be covered.
The smaller NATO allies have confined their
official remarks largely to NATO forums. The
most critical comments were made by the Belgian
representative, who noted the failure of the US in
the past to consult adequately with the allies on
strategic nuclear planning. He was supported by
the UK, Italian, Canadian, and Turkish represen-
Page 6
tatives, who strongly recommended a fuller airing
of the subject in future meetings of the Defense
Planning Committee or Nuclear Planning Group.
These NATO discussions of the retargeting
issue highlight the chronic sense of frustration,
especially among the smaller non-nuclear NATO
members, over their lack of an effective voice in 25X1
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EC: FROM FLOATING TO DRIFTING
France's decision to set the franc free from
the joint float of EC currencies continues to send
shock waves through the community. The deci-
sion of the Benelux countries and-outside the
EC-of Norway and Sweden to remain in a float
with Germany, has resulted in a Deutschemark
zone, symbolizing Germany's growing strength in
West European affairs.
France, through its monetary action and its
recalcitrant attitude toward the contentious re-
gional development fund, has become increasingly
isolated. Bonn has been willing to increase its
contribution to the fund, which would principally
benefit the UK, Italy, and Ireland, and has there-
by succeeded in putting Paris on the spot.
Through bilateral approaches on the oil-supply
question, the British, like the French, seem bent
on giving priority to their national needs, how-
ever, and the G-,rmans and Italians are now mov-
ing along the same path.
The community in consequence seems to be
drifting and directionless, a situation that disturbs
the smaller countries that look to the community
to protect their interests. The Germans are the
best candidates to provide some leadership, but
they still exhibit hesitancy about using their in-
fluence, and their generally parsimonious ap-
proach is in sharp contrast with their ambitions
for the community. Nevertheless, in agreeing to
double its contribution to the regional fund, Ger-
many again stressed the need for closer economic
co( p3ration among the EC members. It will al-
rnust certainly make greater policy harmonization
a condition for resurrecting a common float or
changing its opposition to a pooling of commu-
nity monetary reserves.
The present monetary disarray within the
EC contrasts with the members' awareness that
solidarity may now be more necessary than ever
in order to cope with the effect of incre: ing oil
costs on their balances of payments and their
widely varying debt ar4 reserve position,. There
are calls from many quarters to revive monetary
cooperation by increasing the price of gold used
in intra-EC transactions. The general idea is that
this would make Germany's large foreign-
currency reserves available to the other countries
for settling their payments with oil producers.
The EC Commission, France, Italy, and Belgium
have all expresser! interest in exchanging gold
between national banks within the community,
and the British may also be interested.
The gold-price question may be discussed by
the EC monetary committee next week, but reso-
lution of the problem is likely to depend on
developments at such inernational forums as
those on monetary reform and the energy crisis-
where the relationship between oil prices and
compensating monetary action by the consuming
nations will be discussed. The US, for example,
has been opposed to anything that would seem to
give gold a longer lease on life within the inter-
national monetary system, and this-or, at least,
the uncertainty of gold's future role-could be an
important factor in determining Bonn's attitude
toward the use of gold within the commu-
nity.
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The appreciation of the dollar since th;'
French decided to float the franc independently
has now been reversed in most European mar,.ets.
Only the franc and the lira remain below their
levels of January 18. Sterling has rallied, reaching
its highest point since January 4. The pound's
strength is due primarily to high domestic interest
rates rather than any significant improvement in
Britain's economic outlook.
The recent easing of controls on capital in
West Germany, Belgium, Switzerland, Canada,
Luxembourg, and the US is the major factor in
reversing the dollar's rise. Other European coun-
tries are likely to follow. Consequently, the dollar
should continue to weaken somewhat. Neverthe-
less, market reaction has probably been excessive
because underlying economic conditions should
contribute to the dollar's long-term strength.
In Tokyo, the dollar has also drifted down-
ward, allowing the central bank to remain out of
the market for the fifth comacutive day. Discipli-
nary action last week against three of Japan's
biggest banks for speculating against the yen
helped ease the situation. Hints of oil price cuts, a
slightly more optimistic outlook for the Japanese
economy, and the removal of restraints on the
flow of capital out of the US have also played a
role. Heavy dollar sales by the Bank of Japan
earlier in the month probably left trading com-
panies and others with sufficient dollar hold-
ings.
Percent Change In the Value of the US Dollar
Relative to Sehcted Foreign Currencies'
Compared With January 2, 1973
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King Baudouin dissolved the Belgian Parlia-
ment on January 29 following the failure of Leo
Tindemans, leader of the Flemish wing of the
Social Christian Party, to form a new coalition.
Negotiations to form a new government-Bel-
gium's 22nd since World War II-will follow na-
tional elect?&i.; now set for March 10.
Spurned by the Socialists, Belgium's second
largest party, Tindemans attempted to form a
transitional government composed of his own
Social Christians, the Liberals, and three minor
ethnic parties. The primary purpose of this shaky
coalition would have been to empower Parliament
to enact reforms hastening the development of
regional autonomy originally provided for by the
constitutional revision of 1971. These reforms are
opposed by the Socialists and by the French-
speaking wing of the Social Christians, who
believe they might encourage further separatist
demands by extremists in the ethnic parties.
Tindemans' failure to overcome the French-
speaking opposition in his own party constitutes a
defeat for the acceleration of regional autonomy.
Furthermore, this internal division of the Social
Christians, compounded by a further schism
within the Flemish wing, bodes ill for the party's
prospects in the coming election.
The Socialists hope to win enough additional
seats in Parliament to allow formation of a two-
party coalition with the Social Christians. They
will doubtless try to capitalize on their champion-
ship of an ill-fated Belgian-Iranian refinery ven-
ture, which was intended to bring economic
revival to the coal and steel area of eastern
Wallonia. By appealing to Wallonian dissatisfac-
tion with the pace of industrial expansion, the
Socialists hope to strengthen their position in the
government while laying the groundwork for state
intervention in the energy sector.
The Liberals, the third member of the out-
going coalition government, are badly split on
regional and linguistic issues and seem incapable
of presenting a united front in Parliament. Their
conservative views are unpopular-with the Social-
ists, and they. will be less . important in a new
coalition, if, indeed, they are, included..
The minor ethnic parties are the most im-
portant opposition bloc, and they will probably
continue to gain strength by appealing to Flemish
and French-speaking ethnic sentiments. They will
not, however, be in a position to shoulder their
way into a coalition where their presence would
be strongly opposed by Socialists and Wallonian
Social Christians.
The political turmoil in Belgium does not
appear to threaten US interests significantly, at 25X1
least in the short term. Belgian positions on
NATO and the EC are unlikely to be affected by
election results. In the meantime, Leburton's
caretaker government will send Minister of For- 25X1
eign Affairs Van Elslande to the Washington
energy conference in February as planned.
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BULGARIAN TRAWLER IN US PORT
Sofia's decision to play down the US seizure of a Bulgarian fishing boat off the New Jersey
coast on January 26 reflects its recent efforts to improve relations with Washington. Foreign
Ministry officials have told the US Embassy in Sofia that their government does not consider the
incident particularly serious, hopes it will be brought to a speedy conclusion, and does not intend to
publicize the matter. The 80-man Bulgarian vessel was seized by the US Coast Guard for fishing
illegally within the nine-mile fisheries zone beyond US territorial waters.
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right to work toward socialism "in complete in-
dependence" and in accord with its national con-
ditions and traditions. Although the Soviets can
live with this formulation, it may make thorn
uncomfortable since the statement underlines the
fact that certain Western parties will not routinely
accept Soviet guidance.
During preparatory sessions, the Italian and
French parties had tried to secure agreement on a
common document that recognized the "reality"
of the EC but made specific recommendations for
changes in community structure and policy. Some
parties-the British and Scandinavian in particu-
lar-objected to this because they felt that domes-
tic political considerations prevented them from
supporting any document that implied acceptance
of the EC.
The Italian Communists-the main organi-
zers of the Brussels parlay-were probably disap-
pointed by the Western parties' reluctance to put
more distance between themselves and Moscow.
They can take some comfort from the declara-
tion's endorsement of closer cooperation among
Communists, Socialists, and "Christian" forces.
The Italians have consistently maintained that
such a strategy hold out the promise of increasing
leftist influence in Western Europe. Acceptance
of this view at the regional level should help
Italian Communist chief Enrico Berlinguer in his
efforts to deal with party members who question
the wisdom of his policy of rapprochement with
Italy's largest party-the Christian Democrats.
The call for broadered cooperation with the
non-communist left may, in the long run, be the
most significant stop taken at Brussels. Endorse-
ment of this concept may foreshadow adoption
by other Communist parties of the pragmatic
tactics used by the Italian and French Com-
munists to enhance their influence at the national
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WEST EUROPEAN COMMUNISTS CONFER
The West European Communist parties con-
cluded their three-day conference in Brussels car-
liar this weak with a 20-page political declaration
that carefully skirts issues particularly sensitive to
Moscow. It repeats the usual communist formula.
tions on current political and economic problems
facing Europa. Portions of the final declarations
published in the communist press indicate that
the representatives of the 10 parties participating
in the conference placed particular emphasis on
the desirability of closer cooperation among com-
munists, the loft-of-center parties, and "Chris-
tian" parties. In addition, the declaration acknow-
ledged that differing domestic situations com-
pelled the individual parties to devise their own
tactics in dealing with the European Commu-
nities.
There is evidence of lively debate on touchy
issues such as the Solzhenitsyn affair and China's
position in the international movement. However,
no statements on those topics have appeared in
preliminary summaries of the declaration indicat-
ing that the parties were unable to zgroc on a
common position.
The absence of references to "cultural free-
dom" and the Solzhenitsyn affair should please
the Soviets, who reportedly feared that this issue
would generate adverse publicity in Brussels. The
last preparatory session in Genova was followed
by cautiously critical comments on Moscow's
handling of the Solzhenitsyn affair by the Italian,
French, Swiss, and Spanish parties.
One of the few provocative notes in the
declaration is a statement affirming each party's
Page 13
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CAMUODIA: THE GUNS OF JANUARY
Ground combat around Phnom Penh to-
rtt,ined relatively fight this week, but Khmer
Communist gunners south of the city launched
the heaviest artillery attacks of the war on the
capital, Over 300 howitzer and rocket rounds fell
on the city, causing nearly 350 casualties. Pochen-
tong airport stained minor damage, but the
most intense shelling lilt the refugee crowded
southwesteirt section of the capital. In the en-
suing panic, thousands of civilians temporarily
fled this area seeking safety in the heart of the
city: most of Phnom Penh's war-weary inhabi-
tants bore up relatively well.
The Communists were able to moire within
artillery range of Phnom Penh last week after
government units withdrew to the north bank of
the Prek Thnaot River, An attempted army coun-
terattack south of the river quickly faltered in the
face of stiff resistance. Late in the week, Commu-
nist cominantier s-apparently worried about being
outflanked-began to pull back thole artillery.
E=lsewhere in the capital region, small in-
surgent elements have gained a foothold on the
east bank of the Uassac Rivef within mortar range
of Phnom Penh's southern suburb of Takhmau.
On the northwestern approaches to thr, city, eov-
C tubodlart nrrny troop fire northwcct Of ['11110111 I'c.111.
ernment units continue to hold the initiative, but
a Communist buildup near Route 5 points to a
renewal of pressure on this front soon.
Sihanouk in Han01
The Khmer Communists' nominal corn-
ma itder, Prince Sihanouk, concluded a brief visit
to Hanoi on January 26. The trip was Sihanor:rk's
first outside China since last September. t3esidns
observing the Tot holidays with his North Viet-
namese ,fillies, Sihanouk undoubtedly used his
time with Hanoi's leaders to discuss the in-
surgents' dry season campaign The tenor of his
parting remarks indicates that a major shift in the
Khmer Communists' present hard line is unlikely.
Sihanouk again vetoed any negotiations with
the Lon Not government and the formation of a
coalition regime. He also reiterated that dip-
lomatic relations between his "governrnfnt" and
the US could be established once Washington
ceases to "interfere" in Cambodian affairs and
ends all forms of 'tid to Phnom Penh. Finally,
Sihanouk thanked his hosts effusively for their
aid to the insurgents-a probable reference to the
substantial amount of military equipment that
Hanoi recently sent to the Khmer Commu-
nists.
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INDONESIA: POLITICAL AFTERSHOCKS
Growing tensions and rivalries within the
military leadership are behind the major govern-
mont reshuffle this week, Matters were brought to
a head by charges of negligence on ilia part of
security and Intelligence officials in dealing with
the urban riots In Jakarta that erupted during
Japanese Prime Minister Tanaka's visit last month.
On January 28, President Suharto announced that
he was taking over personal control of the na-
tional security command from General Sumitro.
Ho also fired the head of state intelligence and
abolished the post of personal aide to the presi-
dent.
tion.
In the past few weeks. Jakarta has been
buzzing with speculation about serious rivalry
between Sumitro, long considered the second
most powerful general, and General All Murtopo,
Suharto's eminence grise. Sumitro had used the
power of his office to oxtrnd his influence Into
other spooros, and his austoi- is an obvious move
to circumscribe his political activities. He remains
deputy commander In chief of the armed forces,
however, and thus continues to be an important
figure in Jakarta politics.
As part of the reorganization, General
Murtopo and three others lest their titles of per-
sonal aide to Suharto. Suharto probably hopes
that publicly downgrading Murtopo will help
mollify Sumitro. Suharto's ,,ides have recently
been the target of much criticism from other
officials as well as from student and intollectk?'al
leaders. General Murtopo in particular is resented
for his wide-ranging interforenca in national polit-
ical and economic policy. M irtopo's influence
with S""harto, which stems from their long-stand-
ing persc"al relationship, does not appear to have
been affec ted.
Mur;opo 1 robably lot less than Sumitro
thror' JiI the changes. Murtopo retains hi position
as read oi` special operations within the state
it celligonce organization. The intelligence chief,
General Sutopo who had often clashed with
Murtopo, is being replaced by one of `Aurtopo's
close associates. Murtopo and others disliked
Sutopo's broad investigations into official corruo-
Murtopo will probably now be free to run his
bureau as a private f iofdom,
If Murtopo has managed to retain his former
influence with the President, Sumitro and other
top military man may not accept Suharto's now
changes gracefully. In addition, some generals
may not agree with the rationale that the
reshuffle was needed because the armed forces
ware unable to copy with the recent urban dis-
order. Those officers believe that the riots stein
from deep social and economic tensions, and that
they cannot be written off as a military or intel-
ligence failur. Their ultimata reaction to
Suharto's reorganization, however, will probably
depend on whether he carries out his promises of
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SOUTH KOREA: ECONOMY FACES SLOWDOWN
Although South Korea has been promised a
normal supply of oil by Kuwait and Saudi Arabia,
real growth In the gross national product is likely
to slow to about tS percent this year, compared
with 17 percent last year. Weakened foreign de-
mand for Kreream exports of light consumer
goods, shortages of raw material imports, and
rising costs of oil will be major factors in the
slowdown.
Export expansion, which sparked growth
last year, will be much less Impressive this year
because of energy problems In Japan, Korea's
major market. Japan, wnich purchased 39 percent
of Korea's oxpoYts last year, accounted for almost
"w
t,w-
.e Lo t g
s7i-I rr-. .~aP'
ill :: t: "~!"/erhK
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two thirds of Seoul's export growth. Sales to the
US market will rise, but not enough to increase
total exports as rapidly is in recent years. In fact,
exports lie expected to grow only 39 percent this
year compared with 92 percent last year,
At the same time, import costs will rise
sharply because of higher prices. South Korea's
oil bill will triple this year to about $1 billion,
an;, there will also be increases in the cost of
other imports, especially foodstuffs. The value of
Korea's Imports in 1974 will rise by an estimated
44 percent, The trade deficit will increase to
about $1 billion compared with last year's $680
million as a result of the slowing export growth,
and a substantial current account deficit is likely.
Korea should be able to finance a $1 billion
current account deficit without seriously straining
its international financial position. Seoul enjoys
relatively large foreign aid commitmernls--about
$1 billion at the beginning of 1973. If the coun-
try can continue to attract private capital it
should have only a modest over-all balance-of-
payments deficit this year. Foreign-exchange
reserves are now at a record $1.1 billion, com-
pared with $740 million at the end of 1972.
The domestic economy (aces more serious
problems. Wholesale prices rose 15 percent in
1973. with almost half the increase coming in the
last two months of the year. Inflation will got
worse, largely because of higher oil costs, and
wholesale prices are expected to rise 25 percent
for the year. Moreover, because business ex-
pansion has been export-or-ented and business
firms have relied heavily on borrowing to finance
their operations, many bankruptcies could result
from a sharp drop in demand.
Because of the decline in Japanese interest in
Korean investments, Seoul is attempting to
attract more US and European investment. Unless
Korea is successful in attracting US and European
capital, however, its long-term plans for devel-
oping heavy and chemical industries may have to
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BOLIVIA: PEASANT PROTEST CRUSHED
president Uanzer has crushed the four?day?
old demonstration by peasants in Cochabarnba--
but it may cost Will vitally needed political sup-
port. Although Uanzer had Indicated earlier that
he would not use force, he sent In troops after the
angry farm workers allegedly seized a general dis-
patched by the government to negotiate with
thorn.
At least eight demonstrators were killed by
government forces on January 30, according to
press reports, as troops and armored cars cleared
roads blockaded by several thousand protesters
demonstrating against recent price Increases. Mili?
tary aircraft also were used, perhaps to frighten
the peasants as much as for reconnaissance. Even
though Banzer had admonished the troops to
keep violence to a minimum, the use of the armed
forces could alienate some of his supporters in the
military who have long tried to maintain good
relations with the peasants.
The government seems uncertain just whom
to blame for inciting the peasants, In the past,
Uanzer has fabricated conspiracies--with both in-
ternational and domestic connections--to justify
action against his opponents, There may be some
truth in his Charges of a conspiracy this tinte_,
although it appears to be a home-grown variety.
Each of the groups ostensibly supporting the
regime--the military, the rightist Socialist ra?
lange, and the National fZevolutionary Move?
went-is split internally, and all three are con?
cerned over the country's worsening economic
situation. Middle', eking officers contend that
the government is unwilling or unable to solve the
country's worsening economic problems,
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GUICNADA: AN INAUSPICIOUS BEGINNING
Will, itltlepenttence less than a week away,
rrenatla is on the brink of civil war as Premier
Lric Gaily and his supporters battle a broatl?based
coalitrtarl of forces opposed to nationhood under
tree authoritarian Premier. If the situation deteri?
grates further, the I3ritish may decide to postpone
independent-C, now scheduled for rebtuary 7.
Gaily, who has had a number of Chances
durimq the past few months to calm the atrnos?
phere, continues instead to tide roughshod over
any real or imagined opposition. Although his
more radical opponents demand his resignation,
moderates-by far the most nurnerous--wOUtd
have settled lot the disbanding of his secret
police. They made this demand following the
brutal beating of three leaders of the radical
group; Gaily promised to comply but later rc?
negetl, precipitating a general strike. now in its
fourth week. The strikers stiffened their deter-
mination when Gaily, in an effort to break up the
protest, pushed legislation through the assembly
making it illegal for businesses to close during
s,orrnal working hours.
The strike his pa'alyzcd and isolated the
island, as telecommunications, transportation,
[kmonstntors in St. George's
Eric Gairy
25X1
ant' practically all economic activities have
ground to ,i halt. Duck workers in neighboring
Barbados and -I tinidad?Tobarol have refused to
handle C1renatta?bourttl cargo, d fuel and food
supplies are neatly exhaust !d. Looting, much of it
done by the secret po'ice in iotal4,tiue-, against
merchants who supported the strike, has left the
capital city of St. George's and two other priori
pal towns a shambles.
There have already been three deaths and
numerous injuries. In an effort to avoid further
bloodshed, the Caribbean Council of Churches
has offered to mediate, taking as a starting point
the original demands of the rnouerate Opposition.
Gairy has accepted the offer, claiming=
incorrectly-that he has already complied with
these demands. The opposition has not replied.
1110 council's effort has apparently conga too late,
since the moderates, realizing that Gairy's word
COMM nbe trusted, have been driven to collabora?
lion with the radical opponents and now demand
his resignation.
The majority of Grenadians, even many who
a few mcrlths ago supported Gaily, feel they
cannot face independence under such a regime.
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they also tear that Gauy's lack of planning will
lead to aconomic collapse of the island.
there ate two roads out of the impasse. One
is G,aily's resignation, which he has refu',Od to
submit. The other is postponement of ' depend-
ence by the Uritish, which is not plane ~ at the
moment. tile t3ritish have, however, canceled
plans to be represented at the independeiiCO cere-
rno&es by a member of the royal family, leaving
that honor to the newly appoint-ad acting gov-
ernor,
Even if the opposition shoulri succeed in
obtaining Gairy's removal--either through resigna-
tion or assassination---it would be unable to fort"
a viable government-at least until a strong leader
emerges. Th,' diverse coalition is united in only
the one no;tative aim, and lack of ideological
agreement would be a serious obstacle to the
economic planning GrenmIa will need.F
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million. Foreign exchange reserves, already at a
record high of $55.5 million just after the earth-
quake, probably reached nearly $100 million oy
the and of December 1973 because the trade
surplus was supplemented both by private and
public capital inflows and by large earthquake
reinsurance payments.
The government's fiscal situation is highly
favorable. Revenues in 1973 were 40 percent
ahead of 1972, mainly because of a 10-percent
emergency export tax imposed after the earth-
quake, but also because normal revenues rose.
The government had some $25 million available
to cover about one third of its planned 1973
capital expenditures and had access to loans on
favorable terms from international lending insti-
tutions.
Some problem areas remain, however. Un-
employment, estimated at 11 percent before the
earthquake and the 1972 drought, is at best no
lower now than in 1972. The inflation rate last
year was well above 20 percent, perhaps closer to
30 percort.
Area in downtown Managua devastated by earthquake
Despite its problems, Managua ap-
pears to be in a favorable position to
minimize the effects of the energy
crisis on its economy, at least through
this year, because Nicaragua is not
highly dependent on oil. Nicaragua's
foreign exchange reserves should per-
mit an import volume adequate to sus-
tain the construction boom even if
trade results fall short of the govern-
ment's optimistic estimates. Demand
for Nicaragua's cnief export crop, cot-
ton, probably will remain strong be-
cause of the world scarcity of oil-
derived synthetic fibers; the outlook
for Nicaragua's 1974 cotton harvest is
particular;y good. If demand for Nica-
ragua's other exports slackens and if oil
import prices triple, the $20-million
trade surplus the government is fore-
casting for 1974 could easily be wip d
out, putting the trade balance in the
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NICARAGUA: TIME ECONOMY RECOUPS
Contrary to the government's expectations,
the Nicaraguan economy did not decline during
the year following the disastrous earthquake of
December 1972, but registered a respectable gain.
Although the estimated 1973 growth of about 3
percent In Gross Domestic Product is below the
rates of preceding years, It contrasts markedly
with earlier estimates of a possible 4-percent
drop. The government forecasts a 9-percent
growth In 1974, as construction activity in Mana-
gua picks up and as industry, clmmorco, and
agriculture recover more fully from the earth-
quake and the serious drought that preceded it.
Foreign trade increased substantial;y in
1973, with exports up 25 percent and imports up
28 percent. Thanks to a 6.5-percent growth in
agricultural production, traditional exports of
agilcultural products-led by cotton, coffee, and
moat-rose some $28 million to an estimated
$205 million, accounting for two thirds of total
exports. Purchases of reconstruction goods and
replacement of merchandise stocks caused im-
ports to rise more rapidly than exports, but the
trade balance remained positive by about $20
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THE SAUDI HAND IN YEMENI POLITICS
An attempt by North Yemeni President
Iryani to install a left-of-cantor cabinet headed by
former r.rime minister Muhsin al-Ayni has
foundered on Saudi Arabia's strong objectiui;s.
Iryani's failure to replace conservative, pro-Saudi
Prime Minister Abd al-Hajari could stifle Sana's
recent efforts toward rapprochement with South
Yemen.
Iryani believes that the Marxist-oriented
regime in Aden will not work seriously toward
resolving differences between the two Yemens
while Hajarl, whom Adenis regard as a reaction-
ary, continues to head North Yemen's govern-
ment. Iryani looked upon al-Ayni, an early
advocate of Yemen unity, as the man to dcdelop
further contacts with South Yemeni leaders.
Iryani has met three times since last September
with South Yemen's President Ali to discuss ways
to reduce the risk of heavy fighting, such as
occurred on the border in the fall of 1972.
Recurring rumors in Sana of the imminent
formation of a new government proliferated again
when aI-Ayni, who has headed four cabinets since
the overthrow of the imam's regime in 1962,
returned home in early January from his ambas-
sadorial post in London.
Sana cannot afford to lose the Saudi dole,
and Iryani is therefore unwilling to override Saudi
objections. Iryani could not have been surprised
at Faysal's stand, however; Saudi intervention was
Iran .
-_/r^Ad.n
5 2-74
Yomon
(Aden)
the key factor in al-Ayni's removal from the
premiership in late 1972. AI-Ayni returned to his
ambassadorial ost las"ee~.
UNITED ARAB EMIRATES: NO PANACEA
A recent reorganization of the government
of the United Arab Emirates has strengthened on
pal er the central authority of the two-year-old
Persian Gulf federation. The union continues to
be troubled, however, by leadership rivalries and
organizational problems.
In late December, following six months of
haggling, Sheikh Zayid, president of the federa-
tion and ruler of Abu Dhabi, was able to push
through a plan for expanding the powers of the
central government. The plan also eliminated Abu
Dhabi's separate ministries and incorporated its
bureaucracy into the rudimentary federal struc-
ture. Abu Dhabi was the only sheikhdom among
the seven making up the UAE that had a modern
governmental apparatus.
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The ambitious Zayid is eager for the federa-
tion to succeed, and his goal is to establish con-
trol over it. To accomplish this, he is prepared to
expend sizable amounts of Abu Dhabi's great
wealth-estimated oil revenue for 1974 will be
more than $3 billion. Under the policy Zayid is
following, the more the other rulers are prepared
to sacrifice their authority to the federation, the
more he is willing to contribute to its treasury.
The central government has no income of its own,
depending on the contributions of the member
sheikhdoms, of which on;y Abu Dhabi has ful-
filled its obligations.
Nevertheless, Sheikh Zayid faces a variety of
obstacles to establishing his authority. His fellow
rulers have conflicting ambitions, and several of
them have enough wealth-or expectations of oil
money-to maintain an independent course. In
addition, separatist tendencies are still strong. The
central government's Ministry of Defense, for ex-
ample, has not been able to merge the independ-
ent armed forces of the sheikhdoms with the
union's army. In fact, the sheikhdoms continue tc
make plans to upgrade and expand their respec-
tive military units.
Sheikh Rashid, vice president of the union
and ruler of Dubai, is Zayid's main rival and an
influential force against speedy amalgamation.
Rashid is anxious to preserve the identity of
Dubai. He fears that swarms of federal officials
and a proliferation of federal laws would en-
danger his sheikhdom's traditional autonomy and
threaten the laissez-faire economics on which it
has thrived. Within the Supreme Council of
Rulers, Rashid-like Zayid-has a veto over pol-.
icies of the central government and this gives him
some check on Zayid. Rashid's ability to counter
Zayid's influence is less than it might be, how-
ever. Dubai, even with a good oil income, has yet
to make a contribution to the central treas-,
ury.
The death of General George Grivas on Janu-
ary 27, reportedly of a heart attack, is likely to
deal a severe if not fatal blow to his Greek
Cypriot guerrilla organization. The guerrillas have
been waging a terrorist campaign against the gov-
ernment of Archbishop Makarios since early 1972.
Grivas and Makarios were once co-leaders of
the underground movement that fought the
British in Cyprus in the 1950s with the aim of
uniting Cyprus with Greece (enosis), but split
when Makarios accepted the arrangement that led
to Cyprus' independence in 1960. Three years
later, Grivas was recalled from Greece to head the
Greek and Greek Cypriot forces following the
outbreak of fighting between the majority Greek
and minority Turkish communities. In 1967, Tur-
key insisted that he be banished from the island
for his role in raising the level of intercommunal
violence to the threshold of war between Greece
and Turkey. Grivas returned clandestinely to
Cyprus in 1971 to renew his efforts to gain
enosis, using violence to deter Makarios from
reaching an accord with the Turkish Cypriots that
might forever separate Cyprus from Greece.
Grivas' terrorist campaign has raised tensions
and caused some bloodshed over the past two
years but has failed to arouse the majority of
Greek Cypriots, who have become lukewarm to-
ward enosis. Now, with Grivas gone, the future of
his organization has been thrown in doubt al-
though his followers have expressed their determi-
nation to fight on. A struggle among rival claim-
ants to the vacant leadership is probable and may
hasten the disintegration of the movement. The
organization's announcement early this week that
it would suspend operations for the time being
was probably prompted as much by the urgency
of the leadership question as by the trauma of
Grivas' death.
Magnanimous gestures by President Makarios
in honoring Grivas' contributions to Cyprus may
further hasten the dissolution of the general's
military organization. On January 28, the govern-
ment freed 123 Grivas men from prison and of-
fered amnesty to some 70 wanted terrorists. The
setback to the eno.;is movement should
strengthen Makarios' hand in his dealings with the
Greek Government, and will also enable Makarios
to. concentrate his attention on the Turkish Cyp-
riots.
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TURKEY: THE NEW CABINET
Prime Minister Bulent Ecevit has named a
coalition cabinet composed of 17 members of his
left-of-center Republican Peoples Party and six
members of the Islam-oriented National Salvation
Party. Ecevit will present his proposed cabinet
and legislative program to parliament this week
for a vote of confidence that is expected finally
to end the political stalemate that has persisted
since the indecisive elections last October.
The social-democratic views of Ecevit's party
clearly predominate in the new government's
program, but its conservative junior partner has
been given a substantial voice in economic affairs
and six ministries: interior, agriculture, com-
merce, industry, justice, and one of the ministries
of state. The leader of the National Salvation
Party is deputy prime minister.
The coalition partners had a difficult time
agreeing on a cabinet, with the National Salvation
Party reportedly accepting a compromise one day
and reneging on it the next. At one point the
negotiations almost broke down, suggesting that
the future course of this coalition will not be an
easy one.
The cabinet is made up of relatively young
technocrats, only two of whom have had minis-
terial experience. Professor Turan Gunes, who has
been associated with the Republican Peoples
Party for a long time, will head foreign affairs,
while Hasan Isik, a career diplomat, will be in
charge of defense. Two of the ministers are re-
tired army officers.
The protocol of cooperation agreed upon by
the two parties gives high priority to promoting
"social justice" and to amnesty for political
prisoners, including those sentenced by martial
law courts during the past three years. Ecevit has,
however, publicly reassured "influential quar-
ters"-an allusion to the military-that the am-
nesty will not be sweeping and will exclude in-
dividuals convicted of terrorist activities.
The protocol is equivocal on repeal of the
ban on opium-poppy cultivation, promising only
changes that will provide for "humanitarian con-
cerns" while ending the "unfair treatment" of
~ Ilmdl~dl~!~~~ n11 1 ~ ' 11f?ii~h~l I ~ ;, i III' i'
NYM.4J~lo~llll~i~1 ~ Inllll~~l~ll',~fllill 1 i Ini Jnl I , ~ ~ I IN 1 .'i
poppy farmers. The US Embassy believes that the
matter is still negotiable, and that Ecevit will first
approach the US for additional funds and aid in
expediting the development of substitute crops.
Since last summer, farmers have been increasing
pressure for an easing of the ban becau:;e com-
pensation arrangements have not offset their
economic losses.
The new government's program is equally
equivocal on petroleum resources, calling for
revision of the petroleum law but not for outright
nationalization. US companies have over $100
million invested in the petroleum industry in
Turkey.
Turkish membership in Western security
systems will continue under Ecevit's program, but
Ankara plans to develop its own national defense
policies and not rely exclusively on mutual
arrangements. The protocol notes that common
defense bases in Turkey must be under Turkish
control. Within the leadership of Ecevit's party,
there is some questioning of Turkey's long-
standing international relationships, as well as
concern over the implications of US-Soviet
detente. The embassy believes that US military
and military-related operations in Turkey will
probably be given close scrutiny by the new gov-
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Weekly ]review
Special Report
G/IOci C. 25X1
Secret
Neighbors With Different Perspectives
Ltd E1U
Return to DS?
101107, Hq,
Secret
N? 426
February 1, 1974
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SECRET
MALAYSIA-SINGAPORE
NEIGHBORS WITH DIFFERENT PERSPECTIVES
Summary
In the eight years since Singapore was expelled from the Federation of
Malaysia, relations between the two states have resembled more a running feud than
a diplomatic dialogue. The severing of many of the formal economic ties binding the
two countries during the past year will go far toward ending the excessive intimacy
of the past, even though a large measure of informal economic interdependence will
persist. Many people in both countries view this as a healthy development, but a
bedrock of mistrust persists, based largely on racial antagonism between an ethni-
cally Chinese Singapore and a Malay-dominated Malaysia.
This political fact of life is primarily responsible for the many divergencies on
regional issues and defense policies. Although Singapore and Malaysia aic nominal
allies in the Five Power Defense Arrangement with the UK, Australia, and New
Zealand, each regards the other as the greatest threat to its own national security.
Singapore is reluctant to see an end to a Western military presence in the region,
believing it serves as a counterweight to the relative power of its ethnic Malay
neighbors, Malaysia and Indonesia. Malaysia, by contrast, is committed to the
neutralization of Southeast Asia. Singapore is also disturbed over Kuala Lumpur's
interest in recognizing Peking, believing that a Chinese diplomatic presence on the
Malaysian Peninsula will increase Singapore's vulnerability to Communist subversion.
For its part, Malaysia resents Singapore's lack of support for recognition of the
Strait of Malacca as an internal waterway.
Such conflicting political outlooks ensure that any improvement in bilateral
relations will be gradual and fragile. But as long as racial antagonism-either within
Malaysia and Singapore or in the region at large-can be contained, there will be a
good chance that a more mature relationship will develop. The alternative is a revival
of tit-for-tat bickering which in the future could take a highly destructive form, a
gloomy prospect that in itself offers a compelling reason for both sides to get along.
Special Report . 1 -
SECRET
February ), 1974
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SECRET
-. JeR ,g.nrau __ .
IJA)~i4-
W6oJI ndi ?c.41wMy -,
Malaysia
and
Singapore
Special Report
InIPI~Arr,lMgr /~ nl)II
'KnnpelHgrbovr`
SECRET
% SEA
February 1, 1974
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SECRET
Severing Cconornlc Ties
In many Instances, bad feelings have been
Caustd not only by policy decisions but by the
way decisions are translated into action, This was
true of a series of steps that Kuala Lumpur took
last spring to sever many of the economic ties
binding the two countries. Abruptly and with
little consultation, Malaysia end the inter-
changeability r the currencies of the two coun-
tries, split their fornlerly joint stock markets and
rubber exchanges, and erected other barriers be-
tween the closely interwoven economies.
For a time those "shocks" tempted Singa-
pore t overreact and engage in a now round of
the bickering that has almost always characterized
Singaporean-Malaysian relations. In the stock
market and currency action last May, the Singa-
pore Government was mrst upset because Kuala
Lumpur gave it only 30 n.inutes advance warning.
Although publicly Singapore showed unusual re-
straint, privately tempers boiled.
Singapore quickly began to relax,
owever, when it became obvious that Malaysia's
actions did not pose a direct, critical threat to
Singapore's economy and that established pat-
terns of trade would be altered only gradually.
Despite the split in the rubber market, for exam-
ple, 55 percent of Malaysia's rubber production
continues to be re-exported through Singapore,
and it will take time to reduce this ratio substan-
tially. Similarly, it will also take time to alter the
existing pattern whereby more than 88 percent of
Malaysian pepper is exported from Sarawak via
Singapore.
3- February 1, 1974
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most acute in Malaysia where Malaysians .110 not
even a majority in their own Malay land, This
racial uneasiness affects almost all other ,aspects
of relations between the two states,
The distrust and dishatmorny that wars the
Sinyapore?Malaysian relationship stems basically
from racial antagonisms, It has been fed by the
inth,;acy and interdependence of the past and the
relative insecurity of both governments, Although
Lee Kuan Yew's Peoples Action forty exercises
tight one-party control in Singapore and Malay-
sia's government "consensus" Is imposed from the
top, neither govornmart is self-confident enough
to tolerate serious criticism or opposition, either
internally or externally.
Despite Lee Kuan Yew's occasional cham-
pioning of the "domino theory," fear of Commu-
nist subversion is not a root cause of this insecu-
rity. The once-powerful Communist movement in
Singapore is virtually moribund. The Communist
terrorists in Malaysia (no more than 3,000 alto-
gether) are generally isolated in romotu areas
(mainly In the jungles of the Thai-Malaysian bor-
der region and of Sarawa'<
In this part of thv world, fear of racial con-
flict is the central fact of political life, and it is
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Some Malaysian moves to reduce Singapore's
rttiddlertlan rule in Malaysia's trade have been
more da-tlaging economically to Malaysia than to
Sirlgapore, forcing rtlerchants, manufacturers and
shippers in the southern part of the peninsula into
a variety of uneconomic practices. Malaysia is
taking steps, however, to reduce the adverse eco?
nornic impact. Malaysia, for example, is building it
port, with timber processing and other Industrial
facilities, on the northern coast of the Strait of
Johore and Is constructing a now airport in south-
ern Johore. A major shipyard Is also being plan.
tied for the %t(ait.
Almost all of those changes are the result of
Malaysia's efforts to reduce Its economic depend-
ence on Singapore. Kuala Lumpur rightfully views
the , iterdopendonce that has long existed be-
tween the two economies as a carryover from the
British colonial system arid, as such, not noces-
sarily to Malaysia's advantage, although Malaysia
has benefited from a variety of Singapore services.
Accepting the Now Relationship
Some of Malaysia's actions, of course, have
adversely affected certain economic interests in
Singapore, A number of individual Singaporeans
stand to lose money as a result of some of these
changes. Nonetheless, if these measures add to
Malaysian economic self-confidence, they will
have the effect of casing one of the major irritants
in Malaysian-Singapriroao relations. The feeling is
now growing on both siL. that the recent sovor-
ing of many of the ties that have bound the two
countries economically is a necessary and healthy
development that had to come sometime-per-
haps better now than later.
The growing desire of both governments to
put their sometimes testy relationship on a more
businesslike basis appears to have been advanced
by the two-day visit of Malaysian Prime Minister
Razak to Singapore in November. Official state-
ments and press commentary on the visit reflect a
belief on both sides that differences should not be
allowed to obscure basic common interests, and
each now seems more comfortable over the future
prospect of an even greater degree of independ-
Special Report
once Intl separate.
ness, L=ee and Ratak
apparently had a
frank but easy ex-
change of ideas,
(facial differences
and differences in
style of leadership
will keep some dis-
tance In the rolation-
ship between their
countries, but the
greater disposition of
the two leaders to
address basic issues
may improve cow di.
nation at the work-
ing level.
Remaining Interdependence
There are obvious limits to the extent to
which a reduction of the economic interdepend-
ence between Malaysia and Singapore is desirable
at this time: Singapore's $50 million investment
in Malaysia, mainly in southern Johore, cannot be
easily erased. Neither can Singapore's dependence
on at least 120,000 Malaysian day workers. For
its part, Malaysia could not provide alternative
employment to the workers. Malaysia's major
naval base is on the northern coast of Singapore
Island, and alternate facilities are not available on
the Malaysian side of the strait.
Long-standing patterns of trade cannot be
altered quickly without damage to both coun-
tries, and Singapore's dependence on Johore for
75.80 percent of its daily water supply is poten-
tially the most explosive issue dividing the two
countries. Singapore is expanding its existing res-
ervoir facilities on Singapore Island in order to
reduce its dependence on Johore. Even with the
completion of the new facilities, however. Singa-
pore's continually expanding daily requirements
will increase its dependence on sources on the
Malaysian side of the causeway.
That Beleaguered Feeling
Singapore, a tiny Western-oriented state sur-
rounded by numerically s'iperior Muslim
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neighbors, tends to view its relationship with
Malaysia and Indonesia as having some parallels to
that of Israel in the Arab Middle Last. Not sui-
prisingly, Singapore has adopted an Israeli-typo
military strategy and posture, and Israeli advisers
play a key role In awning, Leaching, and training
the burgeoning Singaporean armed forces.
Singapore's strategic planners think of them-
selves as hard-headed and practical, They do not
assume that the Western members of the Five
Power Defense Arrangement or anyone Cse will
bail Singapore out of trouble, and they are deter-
mined to develop sufficient military capability to
deter Malaysia and Indonesia, either together or
separately, from aggression. Lee Kuan Yaw do-
scribes It as a "poison shrimp strategy." He has in
mind a combined air/ground attack force that, If
necessary, could secure Singapore's , ator supply
from southern Johoro, and e tablish clear-cut air
superiority in the region.
This objective could be obtained within the
next two or three years. Singapore already has
numerical air superiority over Malaysia and Indo-
nesia in fighter/ground-attack aircraft, and this
will be greatly enhanced when the first squadron
of A-4 Skyhawks purchased from the US becomes
fully operational by the and of 1974. A second
squadron will be formed by mid-1975. Singapore
is seriously interested in buying F-4 Phantom jets
and a Hawk missile system.
Singapore also has developed a small ar-
mored force that presumably is sufficient to blow
up the causeway and then to bridge the Strait of
Johore at poin,s of its own choosing. Singapore
hopes to improve on this capability by buying
about 60 M-48 tanks.
Sophisticated modern weaponry alone can-
not ensure the success of Singapore's military
program. More fundamental is the molding of its
largely conscript army into a tightly knit, disci-
plined fighting force. The armed forces suffer
from tremendous organizational, command, logis-
tic, and personnel problems. Middle-level manage-
ment, training facilities, and skilled technicians
(particularli, pilots and mechanics) are especially
critical.
Special Report
The government is taking steps to ease at
least some of those problems, It has hired experl.
anted Taiwanese pilots to make up for the short-
age of qualified Singaporean pilot trainees and to
reduce its heavy reliamtco on British expatriate
pilots. The army is using training facilities In
Brunei. Thailand, and Taiwan, and a small mili-
tary/Industrial complex in Singapore Is being
developed to include the repair and production of
small arms and ammunition and ship and aircraft
assembly.
Malaysian Confidor?ce
The Malaysians, by con+,rast, are more re-
laxed about strategic planning-perhaps In part
because they are unaware of all the measures
Singapore is taking. Kuala Lumpur sees little rea-
son to build up a signifir.ant military machine; it
already has the means to contain its limited com-
munist insurgent throat, and war with Thailand or
the Philippines over the Muslim minorities in
those countries is not considered a serious possi-
bility. The principal reason for its self-confidence,
however, is a belief that it could overwhelm the
Singaporeans with sheer numbers and that, in case
of real trouble, Indonesia, its ethnic Malay "big
brother," would bail Malaysia out. But it is also
true that Malaysia has a disciplined and well-
organized army and a background of military
experience as a component of the British armed
forces-an advantage Singapore lacks. The Malay-
sians are also building up an inventory of sophisti-
cated military equipment-from 105-mm. howit-
zers to the squadron of F-5 Freedom Fighters
that are scheduled to arrive in 1975.
Diverging Foreign Policies
Regionalism The foreign policies of Malaysia and
Singapore diverge sharply as a consequence of
these fundamentally different military outlooks
and differences on economic issues, Differing
views on regional topics tend to divide the two
even further. Malaysia is a more enthusiastic advo-
cate of regionalism than is the more independent-
minded Singapore. Kuala Lumpur places consider-
able value on its membership in the Association
of Southeast Asian Nations (ASEAN)-Indonesia,
Malaysia, the Philippines, Singapore, and
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1hailand--an o-gall ization that dates back to
1!367 and was the first serious attempt at cooper-
ation in the region. Conceived as .1 point of con-
tact between neighbors of diverse outlooks, its
deliberations were for some years purposely Ibti?
iterl to non-contrbvrrsiat topics. Its development
into a serious forum for consideration of regional
problems has been slow and halting, but as the
members became inure at ease in working with
one another, It tackled political subjects and has
become an important forum for discussing foreign
affairs. Malaysia sees it as a handy vehicle, for
pron-oting its pet foreign policy project, the crea-
tion of a Southeast Asian neutral zone. Singapore,
although it actively participates, does so only to
accommodate the other four members in the or-
ganization.
Despite their differing views on the impor-
tance of ASEAN, both Singapore and Malaysia
agree that it is a sufficiently ambitious effort at
regional cooperation for the present. Both have
made clear their disinterest in the kind of broad
forum encompassing all the nations of East Asia
pushed by Australian Prime Minister Whitlam.
Neutralization Malaysia and Singapore are also at
odds over the practicality of Kuala Lumpur's neu-
tralization scheme. Malaysia has been vaguely ad-
vocating the neutralization of Southeast Asia for
the post six years without ever clearly laying out
specific objectives. Malaysia calls, for example,
for Great Power guarantees, but has never ap-
proached the major countries on the subject.
Kuala Lumpur glosses over such knotty problems
as the proposal's compatibility with the US mili-
tary presence in two ASEAN member states-
Thailand and the Philippines as well as its own
participation in the Five Power Defense Arrange-
ment. The other ASEHi I members have unenthu-
siastically endorsed neutralization as a distant ob-
jective, but have resisted any joint efforts to make
it an early reality. This lack of enthusiasm has
caused Malaysia to ease up on its campaign in the
past year.
Even though it accepts its colleagues' reser-
vations, Kuala Lumpur is nettled by what it sees
as Lee Kuan Yew's unnecessary sarcasm in ex-
pressing contempt for the concept. At the Com-
Special Report
mortwealth hearts of state conference in Ottawa
last Augusi, Lee declared that ASEAN members
were "whistling ill the dark" and creating a
" ShangrI-L-a In their minds" if they think that the,
major powers are about to guarantee Southeast
Asian neutralization.
Big Power Presence The two Countries' differing
attitudes toward regional cooperation and neu-
tralization are reflected in the variance in their
views toward a Great Power presence in Southeast
Asia. Singapore, as an extremely small, predomi-
nantly Chinese country that long relied on British
protection against the Malay majority in the ra-
gion, sees a continuing Great Power Involvement
in Southeast Asia 's a counterweight to the rela-
tive power of its Malay neighbors. Malaysia's
visions of a Southeast Asia free of Groat Power
rivalries, on the other hand, reflects its belief that
it has little need of protection from its neighbors.
The Razak government in Kuala Lumpur, while
basically pro-West, prefers to keep all the major
powers at arm's length. Tho Lee government
would like to develop a closer relationship with
the US.
The US connection is becoming increasingly
evident in Singapore. American investment has
grown to 45 percent of all foreign investment and
is approaching a total of about $500 million.
Singapore provides important services for US mili-
tary forces in the region, including ship repairs for
the US Seventh Fleet at the government-owned
Sembawang shipyard and aircraft repairs at Lock-
heed Air Services Singapore. The government has
stopped bunkering US naval vessels or servicing
US military aircraft to avoid inclusion in the Arab
oil embargo, but has turned a blind eye to contin-
ued provision of the services at British acilities
on the island. Moreover, Singapore is becoming
increasingly reliant on the US as a source for
sophisticated military equipment and training.
The Prime Minister is an outspoken advocate of a
continui- 7 US military presence in Southeast
Asia, a reflection of his inclination to draw the
US into the kind of protector role that the British
formerly performed.
Soviet Presence Although they differ on the de-
sirability of a continuing Western Great Power
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presence in the area, neither Lee nor the f Uaiak
gove'rmncnt wants the Soviet Union to play a
major tale in Southeast Asia, flazak is wary of the
potential threat of Soviet subversion but is illttr-
estetI ill Soviet arid Last European technical anti
economic assistance. Kriala Lumpur is also look-
ing Into the possibility of buying oillItaty equip-
rllent (toll the Soviets and the Yugoslavs, in patt
to avoid exclusive dependence oil the West, 'The
Malaysi-n5 know that support of the major mili-
tary powers (the US, China, and USSR) will be
necessary if their neutralization scheme is to be
realized.
Singapore, for its part, welcomes Soviet
commercial Vessels and occasional naval atlXll-
iariesr at the government-owned Koppel shipyard-
a policy calculated more to make money and to
maintain some semblance of a nonaligned image
than to maintain a truly even-handed policy to-
ward the super powers.
The China Question Relations with China are a
sensitive issue for both Malaysia and Singapore
because of their largo ethnic Chinese population.
Indeed, Peking's refusal to disavow all ties to the
Overseas Chinese in Malaysia has been the main
stumbling bloc in negotiations over recognition
that have been going or, for months between
Peking and Kuala Lumpur. Some compromise on
both sides, however, plus Kuala Lumpur's eager-
ness to establish contacts with Poking, may result
in recognition this spring. The prospect of Malay-
sian recognition has put some pressure on a reluc-
tant Singapore to follow suit. But Singapore con-
tinues to develop close ties with the Nationalist
Government on Taiwan, welcoming Taiwanese
ship visits in exchange for Taiwanese military
assistance in the form of pilots, aircraft mechan-
ics, and artillery training facilities-the kind of
action most apt to alienate Poking.
Strait of Malacca On another regional issue, Sing-
apore and Malaysia differ sharply over the desira-
bility of recognizing the Strait of Malacca as an
internal waterway. The strait is less than 24 miles
wide at two points and comes within the 12-mile
territorial limits claimed by Jakarta and Kuala
Lumpur. Both have pressed for international ac-
Special Report
ceptallca of their claim to at least some cotltrol
over international shipping through the strait, f=ur
Its part, Singapore, because of its status as a major
port and because of its dependence on the ontre?
pot trade, sides with the major naval and eco-
11omic powers In advocating unhindered free
transit through the strait. The lssue has been
dnwnplayed by both sides for the past year, but it
will be raised at the Law of (lie Sea Conference In
1974.
Other Area Relations t3oth government-, agree on
the importance of building closer ties with Indo-
nesia. Singapore dots so largely for economic
reasons. Malaysia, with deeper, more lasting links
of blood culture, has more permanent zonnec?
tions. Malaysia and Indonesia are already cooper-
ating-in joint military patrols of the Malacca
Strait, in countering the communist terrorists in
Sarawak, and in planning for common air defense.
Singapore pays more ,attention to improving
tir;s with the non-Malay ASEAN states, Thailand
arid the Philippines. It has arranged for guerrilla
training in Thailand for its elite special forces and
has tried to sell its fast patrol boats to Bangkok
and Manila. Singapore's gestures toward Bangkok
and Manila are in part attempts to offset Indo-
nesian/Malaysian strength within ASEAN and, as
such, arouse some Malaysian suspicion.
Middle East Complications Middle East tensions
have put some strain on the foreign policies of
both governments. Singapore's close ties with
Israel have been a liability ;n the current world
scramble for oil. Singapore's refineries-upon
which its ship bunkering services ars dependent-
obtain the bulk of their crude oil from the Persian
Gulf. In view of this, the government has re-
luctantly joined its ASEAN partners in deploring
Israeli occupation of Arab territory. The Razak
government, on the other hand, has spoken out
forthrightly in support of the Arab cause, both
out of conviction and because politically Razak
cannot afford to lose the support of his sub-
stantial Muslim constituency on the emotional
and potentially volatile issue.
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 future than it has been in the pest, If Singapore
continues to built) up Its military strength, Ma?
laysla tnay feel compelled to follow suit, perhaps
looking increasingly to the Soviet Union and
other East Luropean states for sophisticated
weaponry, The revival of any tit-for-tit bickering
between a better armed Malaysia and a militant
Singapore could be highly destructive, Arid this
spector alone provides the most compelling reason
for both sides to make A determined of fort to get
Along,
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Prospects
So long as racial antagonism betwecoo Malay?
sin ant) Singapore=or in the region at large -can
be kept to a minimum, it should be possible for
relations between the two states to Improve.
There will obviously continue to be many issues
and problems on which their intorests will con-
tlict, but-with give?and?tika on each side-
comproml.es can be, reachctl and workable solu-
1ion5 found. The alternative to amicable relations
would be more, damaging and far-reaching in the