SOUTH VIETNAM IN 1965: NON-MILITARY ASPECTS POLITICAL DYNAMICS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A000100010023-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 20, 2016
• Document Release Date: October 2, 2006
• Sequence Number: 23
• Publication Date: January 6, 1966
• Content Type: IM

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6 January 1966
OCI No. 0753/66
Copy No.
INTELLIGENCE MEMORANDUM
SOUTH VIETNAM IN 1965:
NON-MILITARY ASPECTS
DIRECTORATE OF INTELLIGENCE
Office of Current Intelligence
SECRET
GROUP 1
Excluded from automatic
downgrading and
declassification
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his Document contains information affectinz the Na-
,,ionai Defense of the United States, within the mean-
ing of Title 18, Sections 793 and 794, of the U 3. Code, as
Llnended. Its transmission or revelation of is contents
ii-) or receipt by an unauthorized person is prohibited
=;y tau. The reproduction of this form is ')rohibited.
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I I
OCI No. 0753/66
CENTRAL INTELLIGENCE AGENCY
Office of Current Intelligence
6 January 1966
INTELLIGENCE MEMORANDUM
South Vietnam in 1965: Non-Military Aspects
Political Dynamics
1. South Vietnam, under the rule of a ten-man
military Directorate, for almost seven months has ex-
perienced greater political stability than at any time
since early 1963. However, the political rivalries
and conflicts within the Vietnamese social fabric
have not been resolved nor eliminated. Rather, the
absence of serious political turmoil appears in large
part a result of the assumption of authority by the
one element currently strong enough to wield it--the
leaders of the armed forces. Additionally, political
improvement is the result of the more concrete US mili-
tary and political commitment of the past year, which
has checked the previous prospect of accelerating in-
ternal collapse and Communist takeover.
2. The two civilian governments which fell dur-
ing 1965--that of Premier Tran Van Huong and that of
Premier Phan Huy Quat--were essentially vested with
power by the military and were removed by the mili-
tary when political chaos threatened. The military,
after voiding the civilian base of Huong's regime--
the High National Council--in December 1964, withdrew
Huong's mandate in January when Buddhist attacks on
the premier threatened renewed religious and civil
disorders, They intervened to remove Quat when his
government coalition of politicians foundered on po-
litical intrigue, openly abetted by militant Catholics
and southern regionalists.
3. The present military regime's surface display
of unity to date is largely the result of a diffusion
of real power among four or five generals. None of
these key generals--Chief of State Nguyen Van Thieu,
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Premier Nguyen Cao Ky, Deputy Premier and Defense
Minister Nguyen Huu Co, I Corps Commander Nguyen
Chanh Thi, and, potentially, Directorate Secretary-
General Pham Xuan Chieu--seems so far to have suf-
ficient personal strength or motive to upset the
balance.
4. This alliance among senior officers, however,
clearly remains tenuous, General Thi, ostensibly in
collaboration with National Police Director Pham Van
Lieu, is known to be politically ambitious. General
Thieu, subject to some political restraint because of
Buddhist suspicions that he was associated with recent
Dai Viet-Catholic-military coup attempts, may never-
theless exert increasing influence behind the scenes.
Premier Ky is a target of increasing cri-
ticism from within the military, including some of
his close associates, for alleged failures in the
premiership, including charges of laziness and pro-
crastination.
5. These strains among the ruling generals have
resulted, in recent weeks, in renewed rumors of cou
plotting.
is generally felt by officials in Saigon that Ky
would step down if so requested by a consensus of the
Directorate, but he shows no obvious signs of dis-
couragement so far and voices no concern over the
possibility of a coup attempt.
6. The Ky government has been notably unsuccess-
ful so far in developing any significant popular en-
thusiasm or positive political su,p,port. Ky shows a
considerable grasp of the country's problems in gen-
eral, but his government has so far accomplished little
in the way of carrying out its ambitious programs of
political, social, and economic reform, and it has
not brought increased security or government presence
to any significant new portion of the rural population.
On the other hand, conditions have not deteriorated.
Ky has demonstrated considerable adroitness in balancing
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the competing pressures from Buddhists and Catholics,
as well as from various political factions. Both the
Buddhists and the Catholics have registered their es-
sential displeasure with the military regime, but Ky
has so far avoided giving either group a popular issue
with which to challenge the government or divide the
military. Civilian groups for the present appear re-
luctant to rock the boat without adequate power to
assure the outcome. However, a greater test of the
government may come as the war intensifies and demands
on it increase, particularly in the economic and
pacification fields.
7, Already, the government is under growing
pressure from religious and political groups to
broaden the area of civilian participation and to
provide some legal framework toward the eventual
restoration of civilian control. Although some gen-
erals, particularly Ky, are reluctant to open up any
official channel for disruptive civilian tactics, the
Directorate intends to establish early this year a
council with some advisory authority, The advisory
council will be tasked with drafting a permanent
constitution.
8. The advisory council, under the tutelage of
General Chieu, is expected to have about 60 members,
probably politicians and professional men rather than
religious figures, but there are already suggestions
of civilian reluctance to participate. Buddhist
leader Tri. Quang has already expressed dissatisfaction
with the Directorate's council formula, arguing that
postponement of a draft constitution until some form
of election can be held is preferable to a hand-picked
council responsive only to the military, Government
officials have indicated that the security situation
precludes any prospect of genuinely representative
elections before late 1.967.
9. General Chieu has also indicated 25X1
that some form of national political "front"
is nee ed to give the government a popular base, and
provide a stimulus for eventual development of a two-
or three-party system. His soundings so far among exist-
ing political parties appear to have failed to budge
Vietnamese politicans from their traditional fence-
sitting, and such efforts apparently have been shelved
for the present,
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10. Although US Embassy surveys have so far un-
covered little adverse popular reaction to the US
military role--including airstrikes--in intensifying
the war, the Embassy has reported considerable public
apprehension over growing civilian casualties. There
is some danger that prolonged and more intensive
fighting will generate resentment against the US or
the Saigon government, and pressure for peace-at-any-
price by pacifistic elements such as the Buddhists.
Currently, Saigon's ruling generals continue to ex-
press opposition to any negotiations under conditions
of near-stalemate, or to any settlement in which the
South Vietnamese would be forced to compete politically
with the Viet Cong.
11. The economy of South Vietnam operated under
considerable inflationary pressure during 1965, and
this pressure is expected to intensify during 1966.
A large deficit in the GVN budget, the increase in
US .,forces, and the increase of local spending for
military and civilian construction placed new demands
on the economy during 1965. Supply problems were ex-
acerbated by port bottlenecks, Viet Cong interdiction
of transportation routes, and a shortage of labor.
The resulting imbalance between demand and supply
generated price rises of at least 35 to 40 percent in
Saigon and in areas where Viet Cong activity and the
US force buildup was intensified.
12. During 1966, the GVN budget deficit could
rise from the 15-1.8 billion piasters estimated for
1965 to 20 billion piasters or more. US and other
foreign troop spending and local purchases for con-
struction may jump from about 10 billion piasters in
1965 to an estimated 30 billion piasters in 1966. The
total of 50-55 billion piasters for budget deficit
and foreign spending (compared to about 29 billion
piasters in 1965) is equivalent to about one-third
of all goods and services available in Vietnam in
1965 and is substantially more than the present money
supply of 42 billion piasters. Since these infla-
tionary pressures will be working against a far
smaller stock of idle resources in the economy, their
impact will be more severe and more difficlut to con-
tain than. during 1965.
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13. The major factor restraining inflation has
been the supply of AID-financed commercial imports
and PL-480 commodities. For example, a mid-1965
shortage of rice was successfully overcome by rice
imports largely supplied or financed by the US. Dur-
ing 1966 US-financed imports of rice and other com-
modities are expected to increase substantially to
relieve the burden on domestic supplies and to meet
the anticipated demand. Inadequate port and trans-
port facilities created serious bottlenecks during
1965, and there is a constant danger that these fa-
cilities will be unable to handle the volume of im-
ports essential to the maintenance of a measure of
economic stability during 1966.
14. A second factor restraining inflation in
the past has been the willingness of the Vietnamese
to hold a part of additional income in the form of
money. During 1965, there was some evidence that
price rises have begun to discourage money holdings,
and to increase the demand for goods. This trend
poses an added threat during 1966.
15. Shortages of construction materials and
luxury items resulted in sharp price increases dur-
ing 1965, and specific material resources will con-
tinue to be in short supply during 1966. For ex-
ample, in the past three months, gravel prices have
doubled; the price of sand has doubled during the
last year; brick prices are up 75 percent; and
lumber prices have also increased substantially.
In general., any increase in demand for construction
materials brings about an immediate and pronounced
response in price with only a belated and small re-
sponse in quantity. Prices of luxury consumer goods
and the more expensive food items are expected to
continue their sharp increases as the result of local
spending by US and other foreign personnel. These
items include meat, seafood, fresh vegetables, beer,
cigarettes, and high-priced textiles. In contrast,
the prices of rice, fish sauce, and low-priced tex-
tiles, which are basic necessities for the poorer
elements of the Vietnamese population, have main-
tained relative price stability; this trend is ex-
pected to continue during 1966.
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16. Anticipated increases in. 1966 US expenditures
for construction in Vietnam will have additional re-
percussions in the manpower sector of the economy.
Wage rates for most categories of skilled construction
workers have doubled during the last year. Wages for
unskilled labor have not increased as sharply but are
estimated to have increased by at least 50 percent in
Saigon. With the exception of rural labor in isolated
areas, Vietnamese manpower resources are now fully
employed.
17. Control. of the inflationary threat to economic
(and hence political) stability during 1966 is clearly
dependent on US and GVN countermeasures. For example,
the US could meet the bulk of the requirements for
skilled labor and critical commodities needed to expand
port facilities and for military construction, from
sources outside of South Vietnam. Additional measures
to control in-country spending by foreign personnel
are possible. Similarly, new GVN fiscal measures,
such as increased taxes, are under consideration to
soak up excess purchasing power. But even-under the
best of circumstances, the problem is to limit infla-
tion to manageable levels in 1966, not to aim for
price stability.
18. The Ky government is giving renewed emphasis to
the land reform program begun under the Diem regime in
1955, and is making limited progress. The present
program is still plagued by the dissatisfaction of
expropriated landlords, numbering only about 2,000,
and their political backers. The major obstacles
to a psychologically and politically productive pro-
gram, however, continue to be the lack of security
in the countryside, which inhibits the work of sur-
veyors and investigators, the slow trickle of funds
from Saigon to the provinces, and a shortage of man-
power resulting from the stepped-up military draft.
19. Although land reform efforts have tended to
bog down during the course of the program's ten-year
existence, some 457,000 hectares of rice-land were
expropriated from landowners--usually absentee, and
248,000 hectares were distributed to about 116,000
new owners. Under the initial program, these new
owners received provisional titles, while making
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payments for the land over a maximum period of six
years. Most of these payments have been delinquent,
with only about 26 percent of the total amount due
yet paid up.
20. Under the new government policy, permanent
titles are being granted to farmers who purchased land
under the old ordinance, and the period of payment
has been extended to 12 years. Additionally, former
French lands, totaling 225,000 hectares, are being
subdivided and sold to the farmers who till them.
State-owned lands, totaling some 300,000 hectares,
are also to be distributed to 180,000 farmers now
occupying them as squatters. Changes have been made
in the terms governing rental of farm lands, with all
leases being extended to five-year contracts, and col-
lection of back rentals has been eliminated in newly
secured areas. Finally, competitive bidding for the
rental of communal land--a procedure devised by the
Diem regime to raise national and local taxes--has
been eliminated, but new procedures for making this
land available to landless farmers have not yet been
worked out.
21. In view of the security problem, it appears
that land reform work can presently be carried out
with only about 50 percent of the desired efficiency.
A considerable portion of the former French land is
now in Viet Cong-controlled areas or is now unsuit-
able for cultivation. In many areas, payments are
still lagging despite more lenient terms. Informa-
tion available on government land occupied by squatters
is still incomplete., In addition, the government has
not yet effectively attacked such problems as rural
credit, marketing, and enforcement of rental con-
tracts, all integral parts of any successful agrarian
program.
22. The General Directorate of Land Affairs,
which administers the agrarian reform program under
the ministry of agriculture .has a considerable degree
of technical competence in its three'sub-directorates
--cadastry, land registration and legislation, and
land reform. However, many of the Directorate's
technicians have been drafted, and, although training
has just begun for 130 new surveyors, an increase of
personnel is needed. The proposed South Vietnamese
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budget for 1966 provides support for such activities
as mapping, land registration and surveying, but the
Director of Land Reform anticipates trouble getting
funds for the full program through regular governmental
channels.
23. The recent changes in the land reform program
are designed as short-term measures. A long-term pro-
gram contemplates reduced retention of land by land-
lords, further extension of tenancy contracts, and
further distribution of public land. A major unre-
solved problem is that of conflicting ownership rights
resulting from land distribution activities by the
Viet Minh during the Indochina War and by the Viet
Cong more recently in areas under their control. The
problem is under study, but the government program,
with its provisions for farmer payments for the pur-
chase of expropriated land and its collection of land
rentals, has long been at some disadvantage vis-a-vis
the Viet Cong program. Increasingly harsh Viet Cong
taxation policies of the past two years, and in-
creased Communist requisition of rice from the peas-
ants, will probably help the government in this prob-
lem area.
The Refugee Problem
24. The refugee problem in South Vietnam has
expanded to tremendous proportions during the past
year, particularly since July. At latest report, a
cumulative total of 745,800 persons has been processed
by the government. More than. half of the present
refugee population--463,000--is still living in tem-
porary refugee shelter areas at what is little more
than a subsistance level of existence.
25. The large influx of refugees has been caused
by a combination of circumstances: natural disaster,
a decline in security which has resulted in mass move-
ment of people to safer areas, and the increased level
of large-scale friendly operations. At the present
time over ninety percent of the current refugee popu-
lation is concentrated in the coastal lowlands area
of I, II, and III'Corps zones and is a serious strain
on the refugee relief machinery.
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26. Although the refugee situation remains serious,
it has not reached the proportions by the end of 1965
that GVN and US officials had anticipated. However,
most of the effort that would have been devoted to
pacifying and developing the countryside has had to
be diverted to care for refugees. This situation
will prevail until refugees can either be relocated
to permanent settlements or returned to their home
areas. Moreover, the large refugee population re-
maining in temporary shelters is a fertile ground
for the Viet Cong to sow discord. It may be expected
that the refugee problem will intensify if the tempo
of military operations, particularly in the central
coastal lowlands, continues to increase.
Pacification
27. Pacification on a nationwide basis made very
little tangible progress during the past year. The
pacification program in the Hop Tac area around Saigon,
which was fairly active until May 1965, was one excep-
tion. Over-all, however, much of the military man-
power necessary to provide security as well as to
clear areas in the initial phases of pacification op-
erations was diverted to replace battle losses in-
flicted by the stepped up pace of Viet Cong military
action. Moreover, assets devoted to pacification
have been largely diverted to handling the large
flow of refugees.
28. With the general deterioration of the se-
curity situation, in many parts of I, II,and III Corps,
pacification has largely been confined to areas im-
mediately adjacent to centers of government control,
such as major urban areas and provincial or district
capitals. At best, pacification efforts in these
three Corps areas can only be termed minimal. In
the IV'Corps area, government control expanded some-
what. In this region, however, the Viet Cong still
control large amounts of territory which have not
experienced any government influence or presence for
several years.
29. The pacification effort has also suffered
from the successive changes of government that occurred
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in 1965. Varying approaches by each of the new gov-
ernments caused the pacification machinery to operate
erratically and ineffectively. The present govern-
ment also has instituted its own changes of programs
and priorities. However, Prime Minister Ky has from
the beginning recognized the importance of the paci-
fication program, and has taken a direct hand. He
has named a capable officer, General Nguyen Duc Thang,
to head the program as Minister of Rural Construction.
30. So far, the advances of the present govern-
ment have been difficult to measure, However, plans
have been made and initiated which could have a
beneficial effect on the pacification effort. The
new government has decided to institute three high
priority programs which will point the way for a
greater over-all effort in years to come. These
areas are the Qui Nhon area of Binh Dinh Province,
Quang Nam Province, and a showcase area near Saigon--
located in the now dormant Hop Tac area.
31. Other planned improvements in the pacifica-
tion effort include reorganization to effect more
direct civilian control down to the province level,
and the reorganization and consolidation of the
various cadres now in existence into a single na-
tional pacification cadre corps. It is visualized
that pacification units will be created around the
core of the People's Action Team. They will,'in
theory, be balanced to operate independently in
their areas of responsibility. The cadre program
will be under another highly regarded officer,
Colonel Tran Ngoc Chau,
32. The thoughts of the present-. government
regarding pacification, are in many respects still
in the formulative stage, and it remains to be
seen whether they can be translated into effective
action. Some laudable steps have been taken to get
the 1966 program underway on time, but many prob-
lems remain to be solved before an effective paci-
fication program can be effected.
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The Chieu Hoi Program
33. The South Vietnamese Chieu Hoi program is
designed to entice away from the Viet Cong both mil-
itary and civilian followers. The program which is
currently administered by the Ministry of Psycho-
logical Warfare, has enjoyed a substantial amount
of success during the past year despite the shunting
about of the administrative responsibility for the
conduct of this important program.
34. During 1965, according to government re-
ports, a total of 42,552 persons returned to the
government side, Although the majority were civil-
ians, there were a total of 10,391 military per-
sonnel who also "rallied" to the government cause.
In 1964, there was a total of 14,465 returnees,
of whom only 1,903 were military defectors.
35. The Chieu Ho.i program has shown signs of
improvement in techniques of exploitation and pro-
gramming in the past several months with several
significant and successful psychological warfare
operations being mounted against the Viet Cong.
This has been especially true in rapid follow-up
action to ground operations. However, the pro-
gram still has several glaring weaknesses, espe-
cially in processing and providing for the Chieu
Hoi returnee. Crowded returnee centers, a shortage
of administrative personnel, and a lack of fa-
cilities to rehabilitate the returnee have hampered
the total effectiveness of the effort. Some first
steps have been taken by the government to correct
these inadequacies, but much work remains to be
done.
The Montagnards
36. Although an uprising by dissident tribes-
men in the central. highlands area in mid-December
was promptly quashed, there is little prospect of
an early resolution of the problem of tribal unrest
and loyalty. Mutual antipathy and distrust between
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ethnic Vietnamese and the approximately 500,000 ethnic
Malayan tribesmen inhabiting the highlands has deep
historic roots.
37. FULRO, the tribal autonomy movement which
developed from a revolt in several government Special
Forces camps in September 1964, has been estimated to
have only a few understrength battalions. FULRO has
apparently received sanctuary, but little concrete
support, from Cambodia. During the past year, while
FULRO leaders issued vain appeals for foreign support
and then, in late summer, actively engaged in nego-
tiations toward a reconciliation with the government,
FULRO troops apparently conducted a proselytizing effort
among the government's paramilitary units and the
montagnard tribes. FULRO appears to have had con-
siderable success in drawing new sympathy and support
from the Jarai tribe as well as the originally af-
fected Rhade tribe.
38. FULRO's appeal among the montagnards is due
not only to long-standing tribal aspirations for
autonomy and preservation of tribal customs, but
to a series of grievances with the Vietnamese gov-
ernments of the past 10 years. These grievances
range from ethnic Vietnamese encroachment on their
communal lands during the Diem regime, to lack of
fulfillment by Diem's successors of promises of in-
creased aid and political representation in Saigon..
Although the current Saigon officials apparently
plan to deal leniently with most of the rank-and-
file FULRO sympathizers, the execution of four FULRO
leaders, and the sentencing of about 30 others, have
probably stirred new tribal resentment and antici-
pation of harsh government treatment. There is evi-
dence that montagnard leaders previously supporting
the government are increasingly sympathetic to FULRO.
39, There is no evidence to date that FULRO
leader Y-Bham Enoul or his top lieutenants are co-
operating with the Viet Cong. On the contrary,
propaganda attacks, and a
few minor clashes, have occurred between FULRO
and the Communists, who have long sponsored their
own tribal autonomy movemento 25X1
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40. At the present time, even a renewed govern-
ment determination to carry out reforms and aid pro-
grams for the montagnards seems likely to have little
prospect of banishing tribal suspicions--or Vietnamese
snobbery--in the early future. The reliability and
effectiveness of the numerous tribal paramilitary
units will thus probably remain uncertain for the
next year or so, and the opportunities for the Viet
Cong to exploit the situation, or to win increas-
ing cooperation from the tribes, may be enhanced.
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CLASSIFICATION
OFFICE OF CURRENT INTELLIGENCE
MEMO NO.: I No. 0753/60
SUBJECT: TR Vim` IN 1965s NolINILITART AsprCTS
REQUESTED OR ORIGINATED BY: Requested by White Rouse
staff
DISSEMINATION: Il I
ADDITIONAL COMMENTS:
5 copies sent $tOO AN Courier
to White Rouse. .Attentions
CLASS IFICATION
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 SECRET
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MEMORANDUM FOR: OCI
SUBJECT . Ropa Request for Vietnam Paper
1. This confirms our conversation earlier today.
2, The White House (D. Ropa) has requested a paper
this week on non-military aspects of the S. Vietnam situation,
a survey of where we stand and where we are heading, looking
back in general over 1965 and looking at directional trends
as we enter 1966. The paper is due to Ropa (who said a package
is to be forwarded upward on Thursday) by COB on Wednesday,
5 January; hence copies (at least five) should be in O/DDI
for forwarding as early as possible on Thusd y, and in any
event before 1700 on Thur-aday.
3. Ropa said the survey need not be exhaustive, but
should be fairly comprehensive in coverage and outlook. As
for length and specific subjects, he suggested about one page
each (some subjects might warrant more than a page) on the
following:
a. Pacification effort
b. Internal political dynamics (how the situation
looks internally; military rivalries and what
they mean; stability; advisory council plans;
etc.)
c. Inflation problem
d. Montagnard problem
e. Land reform
f. Chie1L Hoi program
g. Refugee situation
Assistant to the
Deputy Director for Intelligence
SECRET
3 January 1966
E GROUP 1
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