CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001200080001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 47
• Document Creation Date: December 16, 2016
• Document Release Date: February 3, 2005
• Sequence Number: 1
• Publication Date: May 9, 1957
• Content Type: SUMMARY

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CONFIDENTIAL
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
cz2
1-2
COPY NO. 17
OCI NO- 2687/57
REVIEWER: 25X1
CENTRAL INTELLIGENCE AGENCY
III OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
25X1
9 May 1957
DOCUMENT NO.
NO CHANGE IN CLASS. 0
0 DECLASSIFIED
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AUTH- HA 7n_0 0-C -
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The. Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
SUPREME SOVIET HEARS KHRUSHCHEV'S.REPORT . . . . . . . . Page 1
The USSR Supreme Soviet on 7 May heard Khrushchev's
report on the planned reorganization of Soviet industrial
administration. Khrushchev's recommendations generally
followed his "theses" published last March. He called for
abolition of fewer of the central industrial ministries
than he had previously proposed, however, and recommended
pushing the reorganization through to completion in two
months. In personnel shifts associated with the reorgani-
zation, Mikhail Pervukhin has been appointed head of the
Ministry of Medium Machine Building--responsible for nu-
clear production--and Iosef Kuzmin, a relatively unknown
central party apparatus worker, chief of the new State
Planning Commission, the main instrument of central con-
trol of the economy.
MIDDLE EAST DEVELOPMENTS . . . . . . . . . . . . . . . . . Page 4
Jordan: Deputy Prime Minister Rifa,i, the actual
leader of the cabinet, is confident of ;his government's
abilit
Aqaba: A test passage of an Israeli-flag vessel
through the Gulf of Aqaba to Eilat will probably take
place at the end of May or early in June. The reinforce-
ment of French naval units in Somaliland may indicate
that France intends to assist Israel if Egypt or Saudi
Arabia attempts to prevent passage.
Israel: UN Secretary General Hammarskjold went to
Israel fortalks despite Prime Minister Ben-Gurion's re-
fusal in advance to discuss the topics 11ammarskjold wanted
to take up.
Suez: Britain is evidently prepared to accept Egypt's
conditions for operation of the Suez Canal. France still
opposes any settlement implying acceptance of Egypt's
terms, but there are indications that a compromise is under
consideration.
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9 May 1957
THE ITALIAN GOVERNMENT CRISIS . . . . . . . . . . . . . . Page 8
The most likely successor to the Segni cabinet, which
resigned on 6 May after Vice Premier Saragat had with-
drawn his Democratic Socialist Party, is an exclusively
Christian Democratic government. This would probably be
in effect a caretaker government pending elections which
are now scheduled for next spring but may be held this
THE HONDURAN-NICARAGUAN DISPUTE . . . . . . . . . . . . . Page 9
Public opinion remains inflamed in both Honduras
and Nicaragua, despite the temporary cease-fire agreement
negotiated by a special OAS committee on 5 May. Charges
and countercharges of violations of the agreement are
aggravating the situation and hampering the committee's
efforts to work out a plan for troo withdrawals accept-
able to both sides.
NOTES AND COMMENTS
EGYPT'S FINANCIAL SITUATION REMAINS PRECARIOUS . . . . . . Page 1
Egypt's failure since last August to market a large
part of its cotton and a decrease in foreign trade gen-
erally have caused a further deterioration in the country's
precarious financial situation. There is growing infla-
tion, a shortage of some goods--particularly imported
items--and a lack of foreign exchange. Trade with the
Soviet bloc reached 56 percent of Egypt's total exports
and 35 percent of its imports in January and February,
and Egypt is becoming increasingly dependent on the bloc.
DISTURBANCES IN POLAND . . . . . . . . . . . . . . . . . Page 2
Strikes and demonstrations have recently occurred in
scattered areas of Poland; a major riot at Jaroslaw involved
troops and townspeople. , Black-marketeering and other
illegal financial activities have become widespread since
October. The regime'may be compelled by these circum-
stances to reconsider some of its liberal policies, as it
cannot afford serious deterioration of its control without
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NUCLEAR CONTROVERSY STIRS BONN GOVERNMENT . . . . . . . . Page 4
The rapid development of the nuclear arms question
as a major issue in the impending West German national
election has produced a split in the Adenauer cabinet.
Defense Minister Strauss reportedly is insisting that
immediate steps be taken to acquire nuclear weapons,
while the government generally has chosen to back down
on its public demands for weapons parity within NATO,
placing emphasis on the need for nuclear disarmament.
Moscow has been adding fuel to the fire by diplomatic
notes and propaganda warnings of grave consequences if
West Germany acquires nuclear arms. 25X1
BRITAIN AND THE "FOURTH COUNTRY" NUCLEAR WEAPONS PROBLEM Page 5
In order to preserve its position as the only pro-
ducer of nuclear weapons in Western Europe, Britain is
looking for ways to prevent additional countries, espe-
cially West Germany, from making such armaments. Skep-
tical that any disarmament agreement would achieve this,
Britain may support a nuclear weapons pool under NATO,
and British officials have urged that the United States
consider supplying nuclear warheads to "other countries"
on condition that the recipients forswear programs of
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CYPRUS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
The Greek government now seems confident that Arch-
bishop Makarios will co-operate in a policy aimed at
independence for Cyprus under some form of trusteeship--
probably NATO. Turkey might ultimately accept such a
settlement, but only if treaty guarantees against union
with Greece--enosis--were included. Meanwhile, Britain
is proceeding with a reassessment of the island's stra-
tegic importance in the light of London's plans for mil-
25X1 itary retrenchment.
COLOMBIAN POLITICAL CRISIS . . . . . . . , . .. . Page
Colombian president Rojas' authoritarian policies, and
particularly his 8 May "re-election" for the 1958-1962
term, have provoked opposition in various parts of Colom-
bia and may result in his being replaced shortly by a
military junta. Serious discontent is increasingly evi-
dent among students, church officials, and some business
groups, and is reportedly spreading to the military, the
principal prop of Rojas' "Government of the Armed Forces."
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"GUIDED DEMOCRACY" IN INDONESIA . . . . . . . . . . . . . Page 8
President Sukarno has imposed his concept of "guided
democracy" on Indonesia by an emergency decree establish-
ing his much-heralded national advisory council. Commu-
nists and pro-Sukarno left-wingers and extreme nationalists
probably will predominate in its membership. In the prov-
inces, sentiment against Sukarno and the central govern-
ment will probably intensify. The arrest in Djakarta of
the South Sumatran "commissioner" and JLO members of the
South Sumatran governing council will further stimulate a
desire for a final break with Djakarta.
OVERSEAS CHINESE RIOT IN SOUTH VIETNAM . . . . . . . . . . Page
The rising resentment among Overseas Chinese in South
Vietnam against Taipei's inability to protect them from
the mandatory naturalization decreed by the Vietnamese
government recently led to rioting at the Chinese Nation-
alist legation in Saigon. With its prestige at stake,
the Chinese Nationalist government is attempting desper-
ately to intercede with Saigon, but without success to
date.
POSSIBLE POLITICAL CRISIS IN LAOS . . . . . . . . . . . . Page 9
Laotian prime minister Souvanna Phouma's handling
of the Pathet Lao negotiations reportedly has aroused
widespread dissatisfaction in the National Assembly.
Official circles in Vientiane believe Souvanna' may re-
sign or be overthrown after the assembly opens on 11
May. Formation of a new cabinet would probably require
prolonged negotiations, which would impair the effective-
ness of government operations and would. facilitate sub-
versive maneuvering by the Pathet Lao.
DUAL CITIZENSHIP PROBLEM IN MALAYA INDEPENDENCE TALKS . . Page 10
Chief Minister Abdul Rahman's main difficulty in
negotiating final details for Malaya's constitution in
London, beginning on 13 May, will center on the critical
question of dual citizenship. This proviso is being de-
manded by Britain for the many non-Malay residents--most-
ly Chinese--who are British citizens of other colonies or
of Commonwealth countries. This issue is tied to the
larger problem of racial ants onisms in the federation.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
JAPANESE PRIME MINISTER'S SOUTHEAST ASIAN TRIP . . . . . Page 11
Prime Minister Kishi--the first Japanese government
head to visit Southeast and South Asia since World War
II--will probably be received cordially since no sensi-
tive issues remain between Japan and the nations he will
visit. He probably feels that first-hand knowledge of
the area will be useful in negotiating with the United
States on Southeast Asian economic development when he
visits Washington in June.
INCREASING THAI CONTACTS WITH COMMUNIST CHINA . . . . . . Page 12
The recent acceleration of "unofficial" Thai con-
tacts with Communist China has been tacitly encouraged,
if not actively promoted, by the Bangkok government.
Although Thai leaders still insist that formal recog-
nition must await Peiping's admission to the UN, these
contacts indicate a desire for some "normalization" of
relations with Communist China. Peiping is already
seeking to exploit this opening in the hope of expand-
ing its influence.
CHINESE: COMMUNISTS REAFFIRM LIBERALIZATION POLICY . . . . Page 13
The Chinese Communists have given new impetus to
the liberalization campaign initiated a. year ago, em-
phasizing persuasion rather than coercion in carrying
out Peiping's programs, and this policy is being fol-
lowed in trying to resolve present "contradictions" be-
tween the people and the leadership. Peiping declares
that its policy to "let all flowers bloom and all schools
of thought contend" is proving successful and will not be
reversed.
SOUTH KOREA PREPARES FOR NEW POLITICAL REPRESSION . . . . Page 14
The plan of the South Korean government to revital-
ize "neighborhood associations" foreshadows increasing
reliance on coercion and intimidation to assure the con-
tinued supremacy of the Liberal Party in preparation for
1958 assembly elections. Despite official assurances to
the contrary, the strengthened associations probably will
work with the police to harass opposition sympathizers.
BULGANIN SAYS SOVIET ECONOMY CAN OVERTAKE AMERICAN
IN 40 YEARS . . . . . . . . . . . . . . . . . . . . . . Page 15
Premier Bulganin told a group of American women visit-
ors on 5 May that the Soviet "economy could overtake" that
of the United States "within 40 years." Heretofore, the
usual formulation has been the vague "shortest possible his-
torical time period."
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CURRENT INTELLIGENCE WEE]LY,SUMMARY
9 May 1957
PATTERNS AND PERSPECTIVES
SOCIALIZATION IN COMMUNIST CHINA . . . . . . . . . . . . . Page 1
The Chinese Communists, having moved slowly for sev-
eral years toward complete socializtion of the economy,
ordered a forced march toward this goal. in mid-1955. By
the end of 1956, over 96 percent of they nation's peasants
were enrolled in co-operatives, and industrial and com-
mercial business was transacted largely through socialist
organizations. While the economic results have not been
entirely satisfactory to Peiping, the Chinese Communists
are boasting that their method of "peacefully" trans- .
forming capitalists into wage earners is uniaue contri-
bution to Marxist theory and practice. 25X1
WEST GERMAN ACTIVITIES IN THE MIDDLE EAST AND SOUTH ASIA . Page 4
The past few months have seen an acceleration in the
continuing effort by West German government leaders and
businessmen to expand the Federal Republic's commercial
and diplomatic influence in the Middle East and South
Asia. Total trade between West Germany and the area
amounted to $1.30 billion in 1956,representing 9 percent
of Germany's world trade. The level of prewar German
trade with these countries has been surpassed, and siz-
able long-term financial investments and technical aid
programs have been launched.
MEETINGS OF HIGH-LEVEL SINO-SOVIET BLOC.LEADERS. . . . . .
A program of visits among top-level Sino-Soviet bloc
leaders, begun after the crises in Hungary and Poland last
fall, is apparently scheduled to continue on an intensive
basis during the coming months. Moscow initiated the ex-
change of visits probably with the aim of reinforcing So-
viet ideological and political influence over the Satel-
lites. Chinese Communist participation in the program,
however, has given much encouragement -to the Gomulka re-k
gime in Poland, thG least ort~odox and most independent
of the European Satellites.
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9 May 1957
THE NAGA REBELLION ON INDIA'S NORTHEASTERN FRONTIER . . . Page 8
A concerted military effort by the Indian govern-
ment during the past year to suppress the armed revolt
of the Naga tribes along India's northeastern frontier has
not succeeded in bringing an end to in;gurgent activities
which have been in progress since 1952. The Indian gov-
ernment and the Naga leaders last month opened negotia-
tions which may lead to a compromise increasing the
tribes' autonomy within the framework Of the Indian con-
stitution.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
OF IMMEDIATE INTEREST
SUPREME SOVIET HEARS KHRUSHCHEV'S REPORT
The USSR Supreme Soviet on
7 May heard Khrushchev's report
on the planned reorganization
of the administration of Soviet
industrial :and. construction
activity., Khrushchev's recom-
mendations generally followed
his theses,. published last March,
but he called for abolition of
fewer of the central industrial
ministries than he had previous-
ly proposed;... The Supreme, Soviet
will formally approve the plan,
possibly with minor amendments;,,
at the current session, probably
early next week. The only other
item on the agenda is the rou-
tine approval of decrees pr.'om-
ulgatedr since the last meeting
of the Supreme Soviet in Febru-
ary. .
Under the plan proposed by
Khrushchev, about 20 industrial
ministries are to be abolished,
and others are to be drastically
modified.. The planning, statis-
tical and control organs are to
be revamped and strengthened,
and 92 regional, councils of na-
tional economy established to
assume operational control of
the USSR's industrial enter-
prises.
Khrushchev urged that the
reorganization be pushed through
to completion during May and
June. Deputy Premier Lazar
Kaganovich had told newsmen on
19 April that the reorganization
"will be completed by next
winter,"
The speed with which Khru-
shchev wants the project carried
out will temporarily intensify
the confusion and dislocations
which the change is bound to
evoke, but the retention of
important ministries for the
"leading links" of production--
at least for a transition
period--may help to alleviate
some of these difficulties. The
dislocations apparently are seen
as less of an evil than per-
mitting the uncertainty sur-
rounding the ministries, and
other organs scheduled to be
abolished or reorganized, to
continue. Soviet sources have
aaready noted "how much the
leadership of industry by the
ministries which are awaiting
dissolution has been weakened
in recent days."
The Soviet leaders did not
wait for formal approval before
starting to carry out personnel
shifts associated with the re-
organization. Presidium member
Mikhail Pervukhin was appointed
on 2 May as minister of medium
machine building, the ministry
currently operating the Soviet
atomic energy program. The
short-range planning committee
which he headed after December
is scheduled to be abolished.
Pervukhin's appointment to a
single, though important, minis-
try may reflect dissatisfaction
with his performance in drawing
up the modest 1957 plan which
scheduled the rate of growth
at a level below that estimated
by many observers to be required
to meet the 1960 Five-Year Plan
goals.
. The biggest plum in the re-
organization has fallen to an
obscure behind-the-scenes party
administrator, Iosif Kuzmin,
Kuzmin was appointed on 4 May
as chairman of the USSR State
Planning `'Commission .(Gos-
plan) which is to have wide
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
responsibilities and powers, not
only.in national planning but
also in co-ordinating and super-
vising the activities of the
councils. of national economy.
There may have been disagree-
ment among the top leaders over
this. appointment, with Kuzmin
a compromise choice for the job.
However, the fact that he was
brought in from the party ap-
paratus--the administrative or-
ganization within the central
committee secretariat under
Khrushchev--suggests that Khru-
shchev has put a trusted lieu-
tenant in this key post in order
to strengthen his Influence over"
the reorganized economic system.
Kusmin's predecessor,.N..K.,
Baibakov, was appointed head of "
RSFSR Gosplan, a job-of-major
--
importance since the RSFSR has
68 of the proposed 92 economic
regions.
In his report to the Su-.
preme Soviet, Khrushchev pro-
posed retaining in Moscow those
ministries producing military
end items and chemicals,:operat-
ing the atomic energy program,
To &d,RE `A N PA T ~15SR LEVEL
Aviation Industry
Chemical Industry
Defense Industry
(including General Machine Building)
Electric Power Stations
(including Construction of Electric
Power Stations)
Medium Machine Building
Radiotechnical Industry - - -
Shipbuilding
Transport Construction
TO"BE RETAINED AT.REPUBLIC LEVEL
Coal Industry
Construction
Ferrous Metallurgy
Lumber Industry
Nonferrous Metallurgy
Oil Industry
Paper & Wood Processing Industry
maintain central
operational, as well
as planning, control
over defense produc-
tion and the atomic
energy program.
Khrushchev does
not appear really
convinced that any
industrial ministries
should.be retained
at the republic level
but he is certain
that if they are re-
tained they should
be located in cities
nearest the principal
centers of their
activity. He empha-.,
sizes `:that., the
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constructing and operating
electric power stations, and
constructing transport facili-
ties--jurisdiction over some
others,, principally extractive,
being transferred to appropriate
union republics. This appears
to be a qualification of the
theses in which he had suggested
that all industrial ministries
be abolished. However, the
full extent of this apparent
alteration of the plan is not
yet clear.
Khrushchev argues that
these ministries should be di-
vested of responsibility for
direct management of their en-
terprises,and that the councils
of national economy of the eco-
nomic administrative districts
should assume that responsibili-
ty. The retained ministries
should concern themselves with
planning functions and general
technical control, apparently
acting as co-ordinating inter-
mediaries between Gosplan and
their former enterprises. Con-
trary to Khrushchev's report,
however, the Soviet leaders may
-TO-BE ABOLISHED-
Automobile Industry
Building Materials Industry
Construction & Road Construction
Construction of Coal Industry Enterprises
Construction of Metallurgical & Chemical
Industry Enterprises
Construction of Oil Industry Enterprises
Electrotechnical Industry
Fish Industry
Food Products Industry
Grain Products
Heavy Machine Building
Instrument Making & Means of Automation
Light Industry
Machine Building
Machine Tool & Tool Industry
Meat & Dairy Products Industry
Tractor & Agricultural Machine Building
TransportMachine Building
Urban & Rural Construction
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
question is one for
the Supreme Soviet
to decide.
In addition to
the 68 economic re-
gions proposed for
the RSFSR, there are
to be 11 in the U-
kraine, and one each
in the other repub-
lies--a total of 92.
Their boundaries will
correspond for the
most part to exist-
ing administrative
units, thus enabling
the Soviet leaders
to secure maximum
use of the already
existing party and
local government
structures. The cre-
ation of a large
number of small units
will bring the "cen-
ter of gravity" of
administration close
to, operations, and
is intended to pro-
PROPOSED ORGANIZATION OF SOVIET INDUSTRY
COMMAND
PLANNING
mote specialization and
local initiative--at the
of burdening Moscow with
problems and increasing
complexity of regulating
Khrushchev strongly empha-
sized long-term planning tasks,
hinting that the specter of
long-term growth "dispropor-
tions," especially in construc-
tion and raw material supply,
was a major reason for the re-
orgaanization.
Council of Ministers
of Republics
DUAL
SUBORDINATION
Republic Ministries
(in some Republics)
Combines,
Trusts
National Economic
Councils
Combines,
Trusts
tions between economic districts.
It would at the same time make
the councils of national econ-
omy more responsive to loQa:1
pressures,
Khrushchev repeated his
warning against permitting local
regional interests from becoming
paramount to national "state
interests," cautioning especial-
ly against any attempt to fos-
ter self-sufficiency and isola-
tion within regions. The pri-
macy of state interests is to
be safeguarded by carefully
drawing up "the single state
economic plan," and by improving
the monitoring of its implemen-
tation by statistical and con-
trol organs. Molotov's Minis-
try of State Control came in
to be reduced significantly.
Gosplan
of Republic
Executive Committees
of Oblasts,Krais,Cities
Combines,
Trusts
(Prepared joint,
ly with ORR and concurred in
by OSI)
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The themes of the primacy
of heavy industry, the impor-
tance of the decisions of the
20th party congress., and the
goal. of catching up with the
West were all emphasized by
Khrushchev. He did not mention
revision of Sixth Plan goals,
which are apparently unlikely
REPORT -
He--SUGGEST
Combines,
Trusts
(Enterprises of National Significance) r (Enterprises of
Local Significance)
foster
for
es
pecially sharp criticism
cost
in
the
report, which also chided
new
the
pl
anning organs for spas-
the
modic
and "irresponsible" work.
rela-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
MIDDLE EAST DEVELOPMENTS
Deputy Premier and Foreign
Minister Samir Rifai, who is
the actual leader of the pres-
ent cabinet, has expressed
confidence that for the moment
the situation in Jordan is well
under control.
Rifai has informed Ambassador
Mallory that, having decided on
an anti-Communist line, Jordan
was prepared to take necessary
steps, including acceptance of
training missions, to qualify
for American aid.
(Cairo has stepped
up radio attacks on King Hussain,
H1 1a.1 told Ambassador Mallory
that removal of the Syrian force
would be one of the first steps
to bireaji up Syrian intrialle. in
Jordan.
note has
been handed the Syrian chargd
in Damascus protesting some of
the activities of
force
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
A test passage of an Israe-
li-.Ulag vessel, the Atlit,
through the Gulf of Aqaba to
Eilat will probably take place
at the end of May or in early
June. Although the Atlit,
which is now en route around
Africa, could reach Eilat as
early as 19 May, it is reported
scheduled to leave Djibouti in
French Somaliland on the last
stage of the trip to Eilat about
28 May, reaching Eilat about 3
June. The Israelis reportedly
intend to escort the Atlit from
Djibouti through the Red Sea
and the Gulf of Aqaba. Israel
now has two patrol escorts
available for this purpose at
Eilat, together with at least
two armed launches and two new
motor torpedo boats. Israel
reportedly expects that the
transit will be opposed and in-
tends to fight if attacked.
The recent arrival of two
newly built French destroyers
and an LST at Djibouti to "test
hot weather capabilities" has
significantly increased French
naval strength there, which
normally consists of a. patrol
escort, a coastal mine sweeper
and a seaplane tender. The
reinforcement in French naval
units may indicate that France
intends to assist Israel if
Egypt or Saudi Arabia attempts
to prevent use of the Gulf of
Aqaba by Israeli shipping.
Egypt has at least two
fleet mine sweepers and four
to eight motor torpedo boats in
the southern Suez Canal area,
and could reinforce rapidly from
Port Said.
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9 May 1957
Suez Cana
Britain is evidently pre-
pared to accept Egypt's condi-
tions for operation of the Suez
Canal, and France is showing
some signs of willingness to
compromise.
London now says it may re-
quest a UN Security Council
meeting on the Egyptian canal
declaration, but only if there
are assurances that Egypt will.
promise at this meeting not to
modify its declaration unilater-
ally--an unlikely possibility.
UN Secretary General'!- Hammar-
skjold, who has been asked by
the British to query Nasr on
this subject, believes Cairo
probably does not intend to
make a unilateral modification,
but would react vigorously if
the Security Council asked for
public assurances to this effect.
Britain still hopes to get
the Suez Canal Users' Associa-
tion (SCUA) to go on record with
a statement which would help
the British bargaining position
in any future negotiations with
Egypt both on the canal and on
unblocking Egyptian sterling
assets. The 8 May SCUA meeting
discussed the Dutch proposal for
a statement that use of the
canal does not mean acceptance
of the unsatisfactory Egyptian
declaration as.a permanent
settlement, but was unable to
agree on a c:ominunque: and sched-
uled a further meeting.
Negotiations began in Basel
on 5 May between Egyptian and
British banking representatives
seeking to arrange payment of
tolls in transferable sterling.
The British Are evidently will-
ing"in return to release the
$80,000,000 in Egyptian trans-
ferable sterling assests blocked
after the canal seizure last
Au;gust,_but the American embassy
in Cairo has gained the impres-
sion from a Bank of Egypt of
ficial that Egypt will demand
the unblocking of all other
Egyptian sterling assets, now
estimated at about $200,000,000.
British shipowners, probably
expecting that their government
will soon sanction use of the
canal, are now scheduling numer-
ous transits.
Paris still opposes any
move in the Security Council
or elsewhere which might con-
firm the Egyptian stand. The
French argue that if Cairo made
a minor concession to soften
the unilateral character of its
memorandum, an unsatisfactory
document would gain prestige,
while an Egyptian refusal would
damage the prestige of those who
have to use the canal anyway.
The French representative to
SCUA stated on 2 May that France
is willing to allow Egypt an
opportunity to comment on the
Suez issue in the Security
Council itself. In order to
keep the door open to negotia-
tions, France proposed that
further negotiations with Egypt
should be handled through a
"negotiating committee" of the
council.
Paris continues to refuse
permission for French vessels
to transit the canal. There
are some signs, however, that
its stand is becoming less
intransigent as other countries
permit their vessels to pass
through the canal, paying tolls
to Egypt under protest. A For-
eign Ministry spokesman indite---
cated on 2 May that, at least
on the working level, consider-
ation was being given to the
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9 May 1957
method of protest to be employed
when France itself authorizes
its shippers'to use the Suez
route. The continuing stub-
bornness in the government's
formal position reflects Premier
Mollet's and Foreign Minister
Pineau's reluctance to swallow
anything that implies a French
defeat in Egypt, and their hope
that delay will weaken,Nasr's
position.
onstrate that the UNEF is in-
effective in controlling the
Gaza strip border.
25X1
Israel and the UN
UN Secretary General Ham-
marskjold went to Israel on 9
May despite his belief that the
visit would not have any benefi-
The Israeli leader insists
that any talks on these subjects
must be preceded by assurances
that Egypt will carry out "its
obligations under the charter
of the UN and the decisions of
the Security Council." Hammar-
skjold nonetheless decided to
make the trip because he felt
he must maintain a record which
will counter Israel's attempts
to get the UN to assume the onus
of failing to negotiate.
Ben-Gurion's attitude prob-
ably stems not only from Isra-
el's unwillingness even to talk
about the possibility of sta-
tioning UNEF units on the Isra-
eli side of the armistice line,
but also from a resumption of
Tel Aviv's campaign to demon-
strate the impotence of the UN
as an instrument for maintaining
peace in the Near East. The
Israeli government in the last
few weeks has indicated on
several occasions its desire
to ignore the UN truce machinery
(UNTSO), and has sought to dem-
machiner
Syria
Communist-supported govern-
ment candidates won three out
of the four seats in the parlia-
mentary by-elections held on
4 and 5 May. The fourth seat
was filled by a conservative
tribal deputy. The government's
victory appears to have been
brought about primarily by ma-
nipulation of the electoral
Among the tactics employed by.
the government to thwart right-
ist-inclined voters was that of
turning them away from their
usual polling places, claiming
that they were not "registered"
there. The voters were shunted
from one poll to another until
they gave up trying to cast 25X1
their ballots.
a
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THE ITALIAN GOVERNMENT CRISIS
The most likely successor
to the Segni cabinet, which
resigned on 6 May after Vice
Premier Saragat had withdrawn
his Democratic Socialist Party,
is an exclusively Christian
Democratic government. This
would probably be in effect a
caretaker government. Pending
elections which are now sched-
uled for next spring but may
be held this fall.
Saragat has been under
strong party pressure in recent
months to leave the government.
This stems partly from a general
belief that the Segni govern-
ment has been proceeding too
slowly with important economic
and social reforms and partly
from a conviction of many Demo-
cratic Socialists that with-
drawal would expedite reunion
with the Nenni Socialists. On
18 April, when the party di-
rectorate reaffirmed by a 14-
7 vote its earlier stiff con-
ditions for a merger, the left-
wing minority reportedly
threatened to pull out of the
party if its mid-June congress
endorsed these conditions and
the party's continuance in the
government.
Saragat told his party
caucus on 5 May that the next
step would be to try once more
for:. Socialist: reunification. His
present position is at least
a tactical. reversal of his
previous stand, which he had
reaffirmed publicly on 14 April.
He probably wants to avoid be-
ing isolated within the party
now that its center, including
former party secretary Matteotti
and the Democratic Socialist-
oriented labor confederation,
has joined with the left in
support of a merger.
Withdrawal from the govern-
ment--a principal precondition
laid down by the Nenni Socialists
for reunification--will enable
the Democratic Socialists to
demand that Nenni fulfill an
important precondition they
themselves had set--namely,
a break with the Communists
in the trade union field and
in all front organizations.
With Democratic Socialist
adherence to any new government
thus made improbable for the
immediate future, the Christian
Democrats seem likely to at-
tempt a single-party government,
as certain elements in the party
have long advocated. Party
secretary Fanfani, who reported-
ly favors this approach, is a
likely candidate for premier,
as is former premier Pella.
Since such a government
would have only 265 seats in
the, 590-man chamber, it would
have to rely on the left for
.parliamentary support on some
issues, and on other occasions
on the 14 Liberals and most of
the 40 Monarchist deputies.
This would probably occasion no
special difficulties on foreign
policy and defense questions,
but reliance on the right would
antagonize the reform-minded
Christian Democratic left wing
.and might cause it to break
away. Important reform measures
would be blocked and the gov-
ernment would have to confine
its activities to the conduct
of routine affairs.
Failure of protracted nego-
tiations to produce a new govern-
ment, or the early fall of a new
government, ;night possibly lead
to national elections before the
leg-illy mandatory date of June
1953. Administrative technical-
ities and a standing disinclina-
tion to hold elections during
the harvest season virtually
rule them out before next fall.
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9 May 1957
THE HONDURAN-NICARAGUAN DISPUTE
25X1
Public opinion remains in-
flamed in both Honduras and
Nicaragua, despite the temporary
cease-fire agreement negotiated
by the special committee of the
Organization of American States
(OAS) on 5 May. Charges and
countercharges of violations of
the cease-fire by both sides
are aggravating the situation
and hampering the committee's
efforts to work out a plan for
troop withdrawals acceptable
to both sides.
Fighting was limited to
minor skirmishes and some air
action in the difficult jungle
and ; swampland of the disputed
area. Most of''it occurred near
the village of.Mocoron, captured
.by a Honduran force on 1 May
and reoccupied by Nicaraguans
the next day. The 4,300-man
Nicaraguan national guard is
considered superior in equipment
and training to the 3,000-man
Honduran army. The slight ad-
vantage of the Honduran over
the Nicaraguan air force has
been neutralized by the absence
of Honduran airfields near the
fighting area.
r P9J '~
Maximum boundary
claimed by Nicaragua
HONDURAS
ELALLVr~ADOR Boundary by the arbitral '` pa~ sawaaor _ award of the King of Spain, 1906.
MAY 1957
MI'...
24475
L.g4
`A `v'~.4ra944
The Honduran military junta,
which apparently provoked the
current renewal of the old bor-
der dispute primarily for domes-
tic political reasons, succeeded
in arousing public opinion to a
warlike pitch. Junta members
now fear that they may lose
control of the situation and,
after signing the cease-fire
on 5 May with great reluctance,
informed the American ambassa-
dor they feared public reaction
might lead to an upheaval and
possibly their overthrow,
Nicaraguan leaders, though
highly incensed at the Honduran
moves, generally acted with
restraint and attempted to calm
an aroused public. They deter-
mined to limit, if possible,
military action to ousting the
Hondurans from Mocoron but at
the same time prepared for the
possibility of "total war" with
Honduras.
The special committee named
by the OAS in emergency session
on 2 May, arrived in Honduras
early on 4 May and succeeded
in concluding cease-fire agree-
ments with each side
control since 193i
0 Area in dispute
? Area of new Department
created by Honduras
-Road
-limit of Segovia Roar
watershed
by late the next
night. The agreements
gave the committee
four days to work out
a mutually acceptable
plan for the withdraw-
al of troops of both
sides from a zone in
the disputed area.
By 6 May, the first
elements of a special
military team of bor-
der observers, com-
posed of officers from
the five countries
represented on the
special OAS committee,
had arrived in Honduras.
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9 May 1957
Guatemala, El Salvador,
and Costa Rica have publicly
proclaimed their neutrality
and are sending their foreign
ministers to Honduras and
Nicaragua to offer their
assistance in settling the
dispute.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
NOTES AND COMMENTS
EGYPT'S FINANCIAL SITUATION REMAINS PRECARIOUS
Egypt's failure in the last
year to market a large part of
its cotton crop and a decrease
in foreign trade generally have
caused a further deterioration
in the government's precarious
financial structure. There is
growing inflation, a shortage
of some goods--particularly
imported items--and an acute
lack of foreign exchange. The
bulk of Egypt's primarily rural
population has not yet been
affected, while population of
the urban .areas is aware of the
state of the economy.
Cairo is seriously con-
cerned over the recent decline
in the price of Egyptian cotton
which had been rising almost
steadily for over a year. A
major reason for the earlier
increase had been the artificial-
ly high price paid by the Com-
munist countries. This has had
the effect of pricing Egyptian
cotton out of the world market.
However, the bloc has never
taken all of Egypt's cotton
crop, and Egypt has constantly
been faced with the problem of
marketing the remainder in the
West.
In an effort to move this
surplus, Cairo has instituted
a series of discounts ranging
from 20. percent for sales against
dollars and 15 percent for West
German marks to 7 percent for
sales against Indian rupees.
Despite the discounts, however,
foreign buyers are still wait-
ing for a better deal and sales
continue to be extremely slow.
A high-level Egyptian delegation
which recently toured West Ger-
many apparently failed to make
a single sale.
Egypt is become increas-
ingly dependent on the Sino-
Soviet bloc. For example, So-
viet bloc trade for
January
and February reached
56
percent
of E gypt's total exports
and
35 percent of its imports. This
compares with 25 percent and'll
percent respectively for the
same period in 1956.
While the bloc's share of
trade grew sharply, Egypt's
total trade decreased substan-
tially. Imports of $74,000,000
this January and February were
almost 21 percent lower than
during the same period last
year. Exports of $67,000,000
during these months were almost
16 percent lower than in 1956.
The concomitant fall in customs
receipts--an important source
of government revenue--exacer7
bates the problem. It is esti-
mated that customs receipts by
mid--April were down almost $26,-
000,000 below the same period
of 1.956.
Egypt's net balances in
international clearing accounts
have also fallen substantially
since last fall. Its net cred-
it balance against the Sino-
Soviet bloc fell from about
$23,000,000 just before hostil-
ities to about $10,000,000 by
mid--March. During the same
period,"Egypt rolled up large
deficits with Western countries.
The Egyptian pound, for-
merly one of the most stable
currencies in the Middle East,
has substantially weakened,
Lack of confidence in the eco-
nomic policies of the present
government has been partly re-
sponsible. Small lots of Egyp-
tian pounds are selling for an
average of $1.80 as compared
with about $2,87 before the
closing of the canal.
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9 May 1957
Egypt has obtained $47,-
OOQ,000 worth of aid from Saudi
Arabia since the Suez crisis
began. This has not halted the
decline of business activity
in Egypt, however, and Saudi
aid may well diminish if King
Saud's relations with Nasr
become further strained.
25X1
Strikes and demonstrations
have recently occurred in scat-
tered areas of Poland; a major
riot at Jaroslaw involved troops
and townspeople. Black-market-
eering and other illegal finan-
cial activities, always a prob-
lem in the Satellites, have
become widespread since October.
The regime may be compelled by
these circumstances to recon-
sider some of its liberal
policies.
Unrest continues among
workers at the Cegisiski loco-
motive works in Poznan, where
?Stalowc. Wola
Rzeszow O O
Jaroslaw
0 Reported serious labor discontent or strikes
O Reported clashes between populace and authorities
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OStargard
Bydgoszcz
the June 1956 riots started,and
workers reportedlyhave threatened
to demonstrate during the Poznan
fair in June. Gomulka received
a grievance committee from the
plant in early April, and re-
portedly may visit it personally
in an effort to gain worker co-
operation. Polish newspapers
have reported that a major
strike was narrowly averted in
the huge Nowa Huta steel plant
in southern Poland, while
strikes have taken place in
factories in Warsaw and the
textile center of Lodz. A
serious strike at the railway
Unrest In Poland
25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
repair works at Bydgoszc 3.in
April was apparently connected
with unemployment poblems.
Workers. in the Stalowh" Wola
region in southeastern Poland,
which heretofore has been quiet,
are reportedly demanding higher
wages.
Denied pay increases and
payment of back'b onuses, indus-
trial workers see their situate--
tion deteriorating through con-
tinued scarcities and rising
prices. The American embassy
in Warsaw has reported that
worker "dissatisfaction and im-
patience" have been expressed
in "stormy factory meetings
about difficult living condi=
tions."
In the Jaroslaw incident
last week, townspeople and
troops clashed with authorities
attempting to arrest a young
soldier. The rioters were dis-
persed only after more than
1,000 police and troops inter-
vened and drove off the demon-
strators with tear gas. Simi-
larly last month in Stargard in
northwestern Poland, demonstra-
tors protesting an eviction
beat up the mayor and battled
with the militia.
The expanding ranks of
private traders and craftsmen
are finding it virtually im-
possible to earn a living hon-
estly and are resorting to black
marketeer1ng on a big scale.
According to the press and,
qualified observers, government
and party officials, insecure
in their jobs under existing
circumstances, are more than
usually susceptible to collusion
and bribery. Farmers are sell-
ing greater amounts of food to
free markets and into extralegal
channels; they see no reason
for fulfilling their compulsory
delivery quotas in view of
promises that these. will even=--
tuall,y be abolished.; The 'in-
crease in prices and uneven dis-
tribution resulting from the
serious lag in compulsory de-
liveries has hit the urban
worker the hardest.
An early solution to these
problems is not in view. The
regime hopes to acquire enough
grain abroad to meet normal re-
quirements and to put on the
market from time to time to
counteract price rises. If it
does not succeed in controlling
prices in this fashion, it must
either abandon compulsory pro-
duce deliveries and let prices
find their true level, or en-
force the collection of crop
quotas, thereby alienating the
peasant:.-and decreasing his
productivity.
Furthermore the government
may have to reappraise the
policy of encouraging private
trade and restrict its growth
by denying licenses or imposing
other rigid controls. Com-
missions already established to
curb black-marketeering and
speculation have admittedly
proved ineffective to date.
Sterner government action
would risk the disillusionment
of those who pinned their hopes
on further liberalization.
The government has sought
to discourage rebellious tend-
encies through warnings, visits
by high officials to disturbed
areas, and press and radio cov-
erage of a trial of participants
in last winter's Szczecin riots.
Alleged popular demands for
stricter enforcement of laws
against "hooliganism and bandit-
ry," referred to in an article
by the minister of justice on
3 May, may be the prelude to
vigorous measures to strengthen
control over the populace. .
Serious deterioration of this
control would invite Soviet
25X1
intervention.
(Prepared jointly with ORR)
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9 May 1957
NUCLEAR CONTROVERSY STIRS BONN GOVERNMENT
The rapid development of
the nuclear weapons question
as one of the major issues in
the campaign for the West Ger-
man Bundestag elections in
September has produced a split
in the Adenauer cabinet over
the policy to be adopted. De-
fense Minister Strauss reported-
ly is insisting that immediate
steps be taken to acquire nu-
clear weapons, while the gov-
ernment generally has chosen
to back down on its public de-
mands for weapons parity with-
in NATO, placing greater em-
phasis instead on the need for
over-all nuclear disarmament.
In a debate scheduled
for the Bundestag on 10 May,
the opposition parties will
attempt to embarrass the gov-
ernment by forcing it into an
unpopular stand in support of
an atomic-equipped army.
Nevertheless, there are indica-
tions that even in the ranks
of the opposition Social Demo-
cratic Party (SPD) there is
a wide division of opinion
over tactics to be employed
on this issue, since many SPD
leaders do not want to have
any future SPD-led government
limited in its build-up of a
modern army.
In the face of favorable
public reaction to Albert
Schweitzer's call for an end
to nuclear testing, as well as
to the renunciation of atomic
bomb work by 18 prominent West
German scientists on 12 April,
the Bonn government has recent-
ly stressed its own efforts to
bring about controlled nuclear
disarmament. The Soviet Union,
eager to influence political
developments in West Germany,
has helped to keep the issue
alive by a propaganda barrage
concentrating on the theme
that the NATO council meeting
in Bonn had focused its atten-
tion on "plans for the atomic
armament of NATO members, above
all the Federal Republic of
Germany."
The Soviet Union's letter
to l3onn on 27 April warning of
the "extreme danger" of West
Germany's alleged intention
to arm its forces with atomic
weapons was attacked by Foreign
Minister Brentano as "a method
of interference unparalleled in
international relations," and
provoked a further bitter ex-
change of notes between Chan-
cellor Adenauer and Soviet
ambassador Smirnov.
The Soviet leaders prob-
ably believe that a public
debate on the issue of nuclear
weapons for Germany is likely
to arouse fear and suspicion
of Bonn's intentions among
West Germany's neighbors and to
disrupt plans for modernizing
NATO's defense forces. Mos-
cow's 27 April warning was ad-
dressed as much to France and
other West European countries
as to West Germany. It cited
the "alarm" felt by West Ger-
mans and "the peoples of
Europe" caused by Bonn's al-
leged plans to arm with atomic
weapons, and recalled that
West Germany is "the only
European state whose govern-
ment demands a revision of the
present frontiers in Europe."
Other leaders cited a re-
cent unpublished opinion poll
showing 57 percent of the
West German public opposed to
equipping the German army with
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9 May 19 57
atomic arms and the stationing
of atomic warheads on West
German soil, Adenauer and
Brentano, apparently motivated
also by the adverse reaction
to their weapons parity demands,
BRITAIN AND THE "FOURTH COUNTRY" NUCLEAR WEAPONS PROBLEM
In order to preserve Brit-
ain's unique position as the
only producer of nuclear weap-
ons in Western Europe, Britain
is looking for ways to prevent
additional countries, especial-
ly West Germany, from making
such armaments. British of-
ficials have urged that the
United States consider supply-
ing nuclear warheads to "other
countries" on condition that
they forswear. programs of their
own.
On 26 April, Foreign Secre-
tary Lloyd told American dis-
armament delegate Stassen that
he thought a French decision to
fabricate nuclear weapons might
be only a f ew months.away, and
that if France went ahead, West
Germany would be quite certain
to do so.. Some British officials
believe that French-German col-
laboration cannot be ruled out.
For well over a year, Brit-
ish officials.have cited the
"fourth country" problem as one
of the most impelling reasons
for seeking an international
disarmament agreement, Presum-
ably they have used the same
reportedly insisted that in
the Bundestag debate the gov-
ernment must stick to its line
than it will take no intiative
to acquire atomic weapons.
argument on the USSR, espe-
cially in playing on Moscow's
f ear of a resurgent Germany.
It is the general impres-
sion among most Western dele-
gates to the current UN Dis-
armament Subcommittee meetings
in London that the Soviet Union
has been making a more serious
effort than ever before to reach
a limited agreement to meet
the "fourth country" problem.
Foreign Office assistant under
secretary Dean told the Ameri-
can embassy, however, that the
Soviet proposals show that
Moscow was not interested in
specific steps to meet the
""f of rth country" problem.
Dean suggested it might
therefore be advisable for the
United States, or "even" Brit-
ain, to supply nuclear weapons,
including warheads, to other
countries if they would for-
swear undertaking their own
weapons program. Other British
officials had suggested earlier
that the United States consider
such, a move. Any distribution
of British nuclear weapons
would seriously reduce Britain's
own capability.
25X1
If this move does not
materialize, Britain might then
consider using some device under
the Western European Union to
supply nuclear weapons to
France or Germany, if convinced 25X1
that only such a move would
keep them from producing weap-
ons themselves.
(Concurred in by OSI)
25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 19 57
CYPRUS
Athens now seems confident
that Makarios will co-operate
in a policy aimed at independ-
ence for Cyprus under some form
of trusteeship--probably NATO--
with self-determination re-
served for reconsideration at
some later specified date.
Makarios is continuing his dis-
cussions with Greek leaders;
however, he has already stayed
longer in Athens than he origi-
nally believed prudent. The
impact of his tumultuous wel-
come three weeks ago is dis-
sipating. He is probably con-
cerned over the lack of progress
on the Cyprus issue, which he
hopes to discuss with British
officials in London. If the
British do not indicate a will-
ingness to receive him soon,
he is likely to begin agitat-
ing to return to Cyprus.
British governor Harding
told the American consul in
Nicosia on 6 May that London
is ;reasse.ssing the strategic
value of Cyprus in the light
of Britain's planned military
retrenchment. He said there
is a limit--"say, two years"--
on the time Britain can con-
tinue to rule. Cyprus. directly
in the face of local and Greek
opposition. Although Harding
would prefer a "Radcliffe-
typo" solution of limited self-
government for the island, he
apparently believes partition,
"which conceivably could be
carried out," is more likely.
Harding considers guaran-
teed independence, although
preferable to partition, "at
least at present" to be im-
practicable because of its
unacceptability to Turkey.
The consul believes Harding
imp]Lied throughout his conversa-
tion that Britain has seriously
considered simply withdrawing
from Cyprus "if all else fails."
Turkish leaders continue
pub]Licly and privately to con-
demn independence and insist on
partition. They might, how-
ever, eventually feel forced to
accept a compromise granting
Cyprus independence with treaty
guarantees against enosis--
union with Greece. If the Brit-
ish should withdraw--as in
Palestine--without providing
for an administrative transition,
the Turks would.probably move to
occupy the island.
Colombian president Rojas'
authoritarian policies, partic-
ularly his 8 May "re-electron"
for the 1958-1962 term, have
provoked opposition in various
parts of Colombia and may re-
sult in his being replaced
shortly by a military junta.
Serious discontent'is increas-
ingly evident among students,
church officials, and some
business groups, and is reported-
ly spreading to the military,
the principal prop of Rojas'
"Government of the Armed Forces."
Rojas launched his re-
election campaign in early 1957
with an announcement by the.
minister of war that the mili-
tary had decided that Rojas
should continue in office for
another term. The secretary
general of the War Ministry and
other high-ranking officers
subsequently told the American
embassy, however, that the
armed forces wanted to be non-
pollLtical and were critical of
Rojas' dictatorial. methods.
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In April, Rojas reconsti-
tuted the National Constituent
Assembly--the sole legal basis
of his regime--and packed it
with his supporters as the
In response to these steps, the
two major parties nominated a
joint presidential candidate,
Conservative Guillermo Valen-
cia, and demanded free elec-
tions in their joint platform.
Reported military opposition
to Rojas' continued dictatorial
rule at a 30 April conference
apparently caused the postpone-
ment of his scheduled "legisla-
tive re-election" from 1 May
until late in the afternoon of
8 May.
The Catholic Church of
Colombia, the most powerful
politically in Latin America,
has taken a stand against Ro-
jas after almost a year in
which an ill-concealed rift in
church-state relations had been
widening. The hierarchy has
displayed sympathy for the op-
position parties and their can-
didate; has attacked Rojas'
governmental policies in ser-
mons and pastoral letters; and
has refused support to his re-
election scheme.
The cardinal primate, ap-
parently with the full backing
of Colombia's bishops, has de-
nied the legitimacy of Rojas'
hand-picked assembly. Damage
to a church in Bogota caused
by police quelling a protest
demonstration on 5 May will
probably further alienate the
hierarchy. Moreover, Colambia.'s'
leading 'labor 'confederation,
closely associated with the
church, has consistently fol-
lowed a policy of non-co-oper_-
ation with the regime.
Rojas' problems are com-
pounded by a difficult balance-
of-payments situation which led
to the adoption last fall of an
austerity program pinching the
interests of the business com-
munity. Important banking,
commercial, and industrial
groups have translated their
economic grievances into polit-
ical._ demands for a return to
constitutional government.
Business establishments are
totally or partially closed
downL in the major cities, para-
lyzing the economic life of the
country. Management may thus
be co-operating in a general
strike planned by the opposi-
tion, to protest Rojas' re-elec-
tion,.
Probably to conciliate the
growing opposition, Rojas re-
portedly has announced his in-
tention to resign sometime dur-
ing the 1958-1962 term in favor
of a substitute acceptable to
the armed forces. Such an in-
tention, however, will probably
be regarded by the opposition
as only temporizing by Rojas
to give him time to rebuild his
support, especially since he
indicated his determination to
stand firm and grant no conces-
sions in his 6 May speech to
the nation.
Meanwhile popular unrest
and violence continue to grow,
despite the release from house
arrest of the opposition presi-
dential candidate. The opposi-
tion may be expected to invoke
demonstrations, a general strike,
and ;passive resistance to win
military sympathy and provoke
Rojas' ouster. There has been,
however, no known participation
of Communists in opposition
activities to date.
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9 May 1957
President Sukarno has taken
the final formal step in im-
posing his concept of "guided
democracy" by promulgating on
8 May an emergency decree es-
tablishing his much-heralded na-
tional advisory council. Sukar-
nowill head the council, ap-
point its members and outline
its duties. Communists and
pro-Sukarno left-wingers and
extreme nationalists probably
will predominate among the
council's membership. The
council will advise the cabinet
"both at the request of the
government as well as on the
council's own initiative."
Control of the council and
a pliable cabinet will give
Sukarno a direct policy role in
Indonesian affairs. He can be
expected to take action to speed
national economic development
and to restore Djakarta's con-
trol over the disaffected non-
Javanese areas. Sukarno prob-
ably hopes to use development
projects in the provinces to
buy back their loyalty and at
the same time also probably
plans to follow a program of
political and military pressure
to undercut provincial leaders.
Sukarno will leave the de-
tails of policy implementation
largely to his most loyal polit-
ical followers--extreme nation-
alist youth and army veteran
leaders, left-wingers, and Com-
munists--thereby creating ex-
cellent opportunities for rapid
Communist infiltration.
In the provinces, however,
reaction to the establishment
of the council--which involves
both increasing government cen-
tralization and Communist in-
fluence--will be the intensifi-
cation of anti-Sukarno and anti-
central government sentiment.
In Sumatra, the desire for a
final break with the central
government may be further
stimulated by the government's
arrest in Djakarta of the South
Sumatran "commissioner" and ten
members of the South Sumatran
governing council. Any indica-
tion of the government's in-
tention to use armed force to
restore central control could
precipitate regional conflict.
F__ I
The rising resentment among
Overseas Chinese in South Viet-
nam against Taipei's inability
to protect them from mandatory
naturalization. decreed by the
Diem government recently led
to rioting at the Chinese Na-
tionalist legation in Saigon.
On 6 May, following two earlier
demonstrations at the legation
which resulted in extensive
property damage, some 300 Chi-
nese students battled their
way through a police cordon
and occupied the building for
many hours. Several of the
demonstrators and police were
seriously injured in the melee.
Chinese resentment centers
on President Diem's determination
to integrate into the Vietnamese
community the nearly 1,000,000
Chinese whose privileged econom-
ic and political status dates
from the period of French co-
lonial rule. President Diem
views the citizenship bestowed
on locally born Chinese--num-
bering perhaps as many as
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9 May 1957
400,000--as a privilege. The
Chinese, however, in addition
to their reluctance to sever
traditional ties, are fearful
of becoming "second-class
citizens" and are almost uni-
versally opposing the national-
ity decree.
Although many officials
in the government recognize
the danger of a serious dis-
location to Vietnam's strug-
gling economy and the possi-
bility of racial strife if the
anti-Chinese drive is pushed
too hard, Diem has thus far
been adamant in his opposition
to any compromise. There are
indications, however, that the
Vietnamese government is anxious
to prevent the situation from
deteriorating further during the
president's visit to the United
States. The issue is one which
lends itself to Communist ex-
ploitation, and Diem has al-
ready blamed a "handful" of
Communists for instigating the
riots. Some of the demonstra-
tors reportedly expressed pro-
POSSIBLE POLITICAL
Speculation is widespread
in Laotian political circles
that Prime Minister Souvanna
Phouma will resign or be over-
thrown after the National As-
sembly opens on 11 May. Sou-
vanna's handling of the Pathet
Lao negotiations has reportedly
aroused considerable dissatis-
faction among assembly deputies.
If he remains in office., the
deputies desire to establish
definite terms as well as a
terminal date for the negotia-
tions. Meanwhile, possibly re-
flecting a shift in the politi-
cal climate, the Pathet Lao
delegation in Vientiane is're-
ceiving cooler treatment at
social affairs and in the press.
Peiping sentiment and criticized
the United States for backing
the Saigon regime in its anti-
Chinese actions. The American
embassy in Saigon has also re-
ported that the crowd-handling
techniques of leaders of these
purportedly spontaneous demon-
striations appear to show Com-
munist training.
With the broader implica-
tions to its prestige among
Overseas Chinese communities
throughout Southeast Asia made
all too evident by the develop-
ments in Vietnam, the Taipei
government has been desperately
attempting to intercede with
Saigon. It has announced that
aid will be extended to those
Chinese born in Vietnam who
desire to come to Taiwan.
Chiang Kai-shek has also in-
dicated that the next step
"might well be" to break off
dip]Lomatic relations with
Vietnam, although Foreign Min-
ister Yeh has indicated this
resort.
I
In view of the present
alignment of Laotian political
parties, the formation of a new
government would probably re-
quire prolonged negotiations.
Any prime minister would have
to include in his cabinet rep-
resentatives. , of several
factions outside his own party
in order to get the necessary
two-thirds approval in the
39-seat National Assembly.
The situation is further
complicated by the new constitu-
tional provision that prohibits
deputies who are candidates for
cabinet posts from voting for
the formation of a government in
which they would serve. Under
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9 May 1957
these circumstances, the minor-
ity parties--the Democrats and
the pro-Pathet Lao National
Union Party of Bong Souvanna-
vong--will probably have an
influence on the formation of
a government which is out of
proportion to their numbers.
Bong, who controls approximate-
ly one quarter of the assembly
on foreign policy issues, would
be in a good position to press
for a policy of neutrality
favoring the Communist bloc.
In the event of a government
crisis, the Souvanna Phouma
cabinet would presumably remain
in a caretaker status. However,
the lack of direction that would
very likely attend a prolonged
period of political uncertainty
would probably weaken the func-
tioning of the government and
facilitate the subversive
maneuvering of the Pathet Lao.
DUAL CITIZENSHIP PROBLEM IN
Chief Minister Abdul Rah-
man's main difficulty in nego-
tiating final details for Ma-
laya's constitution in London
beginning 13 May will center
on the critical question of
dual citizenship. This pro-
viso is being demanded by
Britain for the many non-Malay
residents who are British
citizens of other colonies or
of Commonwealth countries.
Since this issue is tied to
the larger problem of racial
antagonism in the federation,
it has assumed major propor-
tions in Malay minds.
Rahman's United Malay Na-
tionalist Organization (UMNO)
has agreed to fairly liberal
citizenship provisions for the
large Chinese minority now res-
ident.. in Malaya. At this
stage, UMNO leaders feel they
cannot afford further conces-
sions which might encourage
immigration by many Chinese
who are already Commonwealth
citizens through residence in
Hong Kong and Singapore. These
leaders are already under
criticism from irresponsible,
ultranationalist Malay politi-
cians for agreements made to
date. Further concessions
would open UMNO to political
MALAYA INDEPENDENCE TALKS
attack among the conservative
Malay villagers who constitute
the bulk of its support.
A further Malay argument
is that the granting of dual
citizenship to Commonwealth
citizens might, at some future
date, make it difficult to re-
fuse to formalize the same
privilege for those Chinese
who would want to claim con-
current Chinese Communist or
Chinese Nationalist citizen-
ship.
A special working committee
in Kuala Lumpur apparently has
worked out compromises on most
other outstanding issues: a
satisfactory arrangement has
been achieved on the question
of state versus federal rights;
Islam is to be the national re-
ligion; Malay and English the
official languages; and preser-
vation of the special rights of
the indigenous Malays is promised.
The British Colonial Office
believes that the Malayan dele-
gation will compromise and allow
British colonial and Commonwealth
citizens, under certain condi-
tions, to obtain Malayan citizen-
ship without giving up their orig-
inal citizenship. This might be
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9 May 1957
accomplished by British accept-
ance of an understanding that
Malaya would negotiate recip-
rocal bilateral citizenship
agreements with various Common-
wealth countries following the
achievement of Malayan inde-
pendence. In this connection,
the British are aware that the
present federation government
offers the best hope for the
development of a.viable, moder-
ate, pro-Western regime in
Malaya. They would wish to
make the solution as politi-
cally palatable as possible to
the Rahman delegation.
For their part, the
Malays are anxious not to
jeopardize their amicable
achievement of sovereignty
in August and might, in the
face of British insistence,
give some ground for the sake
of an early agreement. In such
an event, they could be ex-
pected to revive the question
later, regarding any compromise
now as subject to Malayan re-
view and change after sover-
eignty is achieved.
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JAPANESE PRIME MINISTER'S SOUTHEAST ASIAN TRIP
Prime Minister Kishi will
be the first Japanese govern-
ment head to visit Southeast
and South Asian countries since
World War II. He is under-
taking this trip prior to his
visit to Washington in June to
demonstrate his "independent
diplomacy," to enhance his
personal political prestige,
and to initiate a campaign to
win the confidence and ultimate
leadership of the Asian nations.
Kishi also probably believes
that first-hand knowledge of the
area bill be useful in negoti-
ating with the United States
on Japanese-American co-
operation in Southeast Asian
economic developments.
Between 20 May and 4 June,
Kishi will make approximately
three-day visits to Burma,
India, Pakistan, Ceylon, Thai-
land and Taiwan. He might in-
clude Indonesia in his itinerary
if a reparations agreement with
Japan appears imminent. Japa-
nese opposition to the latest
proposals for a settlement,
however, suggest that a visit
to Djakarta will be postponed
until fall when Kishi plans to
visit the remaining Southeast
Asian countries.
Kishi's trip will emphasize
his policy of "personal diplo-
macy," and probably will seek
to overcome old animosities and.
create a climate of mutual
trust by persuading his hosts
that Japan poses no threat.
His government is making more
effective attempts than its
predecessors to deal with the
practical problems of economic
co-operation with Southeast
Asia, and the prime minister
will stress offers of economic
collaboration.
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Kishi also is likely to
seek support for the Japanese
proposal to ban nuclear weap-
ons tests, to stress Japan's
desire for closer ties with
the Asian-African bloc, and to
invite the leaders he visits to
come to Tokyo. He can be ex-
pected to sound out his hosts
on policy toward Communist China
and attitudes toward the Commu-
nist bloc. He probably will
seek to assess local sentiment
toward American activities in
the area.
The prime minister will
probably receive a cordial re-
ception since no sensitive
issues exist between Japan and
the countries he will visit. He
is likely to receive encourage-
ment on banning nuclear weapons
tests, particularly in India.
His visit to Taiwan will be the
most difficult because the Na-
tionalists can be expected to
press him on the issue of re-
lations with Peiping.
Leaders of Kishi's Liberal-
Democratic Party originally
urged him to make the trip to
push an "Asian first" policy for
economic and domestic political
reasons, including a desire to
undercut the Socialist Party.
His absence from Japan will also
alleviate pressure ;for a cabinet
reorganizat~on, a matter which
Kishi prefers to postpone until
he establishes his pre-eminence
in party affairs.
INCREASING THAI CONTACTS WITH COMMUNIST CHINA
The recent acceleration
of "unofficial" Thai contacts
with Communist China has been
tacitly encouraged, if not
actively promoted, by the Bang-
kok government. Although Thai
leaders still insist that for-
mal recognition must await Pei-
ping's admission to the UN,
these contacts indicate a de-
sire for some "normalization"
of relations with Communist
China. Peiping is already
seeking to exploit this opening
in the hope of expanding its
influence.
While there have been
previous "good-will" and busi-
ness visits to Peiping by in-
dividual Thais in the past
months, a record number of
Thais are now on such missions
in Communist China. These
include a 48-member cultural
troupe--composed of Thailand's
best artists--a labor delega-
tion, and possibly a few jour-
nalists.
None of these groups could
have traveled to Peiping with-
out at least the tacit consent
of Bangkok authorities as their
members all had passports valid
for Hong Kong, the usual point
of entry into Communist China.
Government collusion was partic-
ularly suggested in the depar-
ture of the cultural troupe.
The size of this group., its
composition, the great secrecy
surrounding the preparations
for its departure, and the
absence of the usual "warnings"
against the consequences of
visiting Communist China all
point to official involvement.
The troupe is scheduled to
visit several major Chinese
cities and is reportedly "con-
sidering" traveling on to the
USSR and Poland.
Bangkok's approval of such
contacts with Communist China
is probably motivated primarily
by local political considera-
tions. Some Thai leaders, such
as Minister of Interior Phao,
reportedly believe the govern-
ment must attract leftist sup-
port if it is to remain strong.
They may believe the recent
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postelection demonstrations
support their position. This
attitude may. be a factor be-
hind the maneuvering which is
said to be going on in the in-
terest of facilitating the re-
turn of former premier Pridi
from China.
The Thais may also desire
to hedge against their strong-
ly pro-Western orientation.
Thai leaders are acutely con-
scious of Communist China's
military and subversive capa-
bilities. There is also some
popular sentiment that Thailand
is losing its share of the
Chinese market and therefore
that trade relations should be
promoted.
Although the stepped-up
contacts with Communist China
do not portend an early or
drastic revision of Thailand's
foreign policies, they provide
Peiping with an opportunity to
enhance its influence in an
area from which it has here-
tofore been effectively ex-
cluded. Rebuffed in earlier
attempts to establish closer
economic ties with Bangkok
through offers of trade and
aid, the Chinese Communists
are now putting increased em-
phasis on propaganda and "peo-
ple's diplomacy."
Relaxation of Thai restric-
tions on the importation and
screening of Chinese Communist
motion pictures last December
was immediately exploited by
Peiping. Since then 12 films
produced in China have had suc-
cessful runs in Thailand. The
American embassy in. Bangkok
recently reported that the
Chinese Communists were holding
what amounted to a "film festi-
val" in the. Thai capital. Pei-
ping; will almost certainly at-
tempt to use the present Thai
visits to press for Bangkok's
acceptance of return visits by
Chinese Communist "cultural"
groups.
CHINESE COMMUNISTS REAFFIRM LIBERALIZATION POLICY
The Chinese Communists.
have given new impetus to the
liberalization campaign initi-
ated a year ago, emphasizing
persuasion rather than coercion
in carrying out Peiping's pro-
grams, and this policy is being
followed in trying to resolve
present "contradictions" between
the people and the leadership.
Peiping declares that its policy
to "let all flowers bloom and
all schools of thought contend"
is proving successful and will
not be reversed.
es ern-educated
nese now feel less hesitant
about visiting Europeans and
entertaining them in their homes.
Foreign diplomats,
The Chinese Communist posi-
tion on liberalization, elabo-
rated in some detail in 1956,
is that intellectuals can be
conceded freedom of thought "in-
side the camp of the people."
A period of caution followed
last fall's disorders in East
Europe, but Mao Tse-tung's ad-
dress on "contradictions" to
the Supreme State Conference in
February sparked a general re-
affirmation of Peiping's libera-
lization promises. While Mao's
speech has not been released,
Communist commentaries on the
text; indicate that he called
for all to speak out on matters
of common concern and rejected
the use of force.
can travel to most then new' atmos
parts o? the country with rela- ere a to''-the'.ipublica
tively little surveillance. tiori of more academic works
last; year than in all the
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previous years of Communist
hegemony in China. This claim
is supported by observers in
Hong Kong, who note a large
increase in the number of main-
land publications appearing in
the colony.
There appears to have been
an appreciable upsurge of in-
tellectual debate, but so far
mostly on.issues in the arts
and letters. A short novel,
entitled Young Newcomer to
the Organization Department,
by a 22-year-old Chinese author,
is indicative of the freer ex-
pression the regime is prepared
to tolerate. The story revolves
around a young man assigned to
his first post in the party or-
ganization in Peiping. Start-
ing out with high ideals, he
becomes gradually disillusioned
by his encounters with party
bureaucracy and with the cyni-
cism of party leaders.
The author writes as a
Communist condemning departures
from the Communist ideal and
does not challenge the funda-
mentals of Communist belief.
His descriptions of party life
have been considered inflamma-
tory by many readers, however,
SOUTH KOREA PREPARES FOR NEW
The plan of the South Ko-
rean government to revitalize
neighborhood associations,
usually comprising between 10
and 15 households, foreshadows
increasing reliance on coercion
and intimidation to assure the
tenure of the governing Liberal
Party. Such associations, uti-
lized by the Japanese as the
lowest level of Korean local
government, served as an in-
forming and coercing device to
keep the native population sub-
jugated.
The associations have con-
tinued to function as community
and like the Soviet writer
Dudintsev's Not By Bread Alone,
the novel has become the object
of acrimonious debate.
The limits of'Peiping's
liberalization program have
not been clearly defined, but
Peiping has indicated that the
guiding formula is to be "unity-
criticism-unity"--that is,
criticism will be tolerated only
from friendly persons desiring
unity in China and writing with
the purpose of bringing the
masses and the present leader-
ship closer together, In prac-
tice the formula leaves to the
regime the judgment as to when
criticism becomes "counter-
revolutionary" and designed to
alienate the masses from the
leadership.
Apparently confident of its
continuing ability to keep criti-
cism within proper bounds, the
regime condemns doctrinaire
opponents of liberalization with-
in the party as anti-Marxist and
sectarian, and promises that
liberalization is to serve as a
guiding principle of party policy
over the long term, not as a
short-run measure of expediency.
F__ I
POLITICAL REPRESSION
organizations but have had no
official status and not much
popular support. The announce-
ment of the government's deci-
sion, to strengthen them has
provoked opposition allegations
that the administration intends
to revive Japanese police prac-
tices.
An opposition attempt to
block such a move by outlawing
the associations was defeated
on 26 April in the National
Assembly. The home minister,
defending the administration's
policy, claimed that the
strengthened associations would
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facilitate "better understand-
ing" between the people and
their government and be "bass
a].]y different" from those of
the Japanese.
While denying they would
be controlled by the national
police, the minister did admit
that the strengthened associa-
tions would assist the police
against the "fifth column" and
aid in exposing corrupt offi-
cials. Government plans re-
portedly also call for the
establishment of police offices
to maintain liaison with these
groups. Thus organized, all
local political activity would
be exposed to the scrutiny of
Liberal Party supporters, who
would need only report to the
police to assure pressure
against any administration
opponent.
Opposition apprehensions
have been further heightened by
proposed legislation, possibly
to be revived when the assembly
reconvenes in September, which
would ensure the Liberal Party's
supremacy. Amendments to the
assembly law, which include
elimination of the secret bal-
lot on certain issues, would
facilitate passage of a consti-
tutional amendment to remove
opposition Vice President Chang
Myon from the line of presi-
dential succession. Such a
constitutional amendment, com-
bined with proposed revisions
in the election law which would
handicap opposition candidates
in the 1958 assembly election,
would remove the only two im-
mediate avenues available to
the opposition for gaining po-
litical power. .
crisis.
Opposition fears of in-
creased administration harass-
ment and coercion appear well
founded. The government's ac-
tions tend to confirm reports
that Liberal Party leader Yi
Ki-pung has given up hope of
winning a free election and
will rely on repressive meas-
ures to assure an administra-
tion victory. A recent refer-
ence by the home minister to
the "will of the people" is
ominously reminiscent of Presi-
dent Rhee''s use of this term to
justify his heavy-handed tactics 25X1
during the 1952 constitutional
Premier Bulganin on 5 May
in an interview with American
women radio and TV representa-
tives said that up until the
socialist revolution "the
country was very backward, im-
poverished. Then we could not
develop like the United States.
Now our country is second in
the world. You are ahead of
us and we follow. In another
40 years we can overtake you."
This is the first statement by
a top Soviet leader in recent
years of the time required to
"catch up with the West." The
usual formulation has been the
vague "shortest possible his-
torical time period."
If Bulganin is referring
to the volume of over-all pro-
duction, according to current
estimates the Soviet gross na-.
tional product (GNP) would
have to grow at an average rate
of 6 to 6.5 percent between now
and 1997 to. realize Bulganin's
prediction. This contrasts with
an average annual rate of about
7 percent achieved between 1950
and 1955. The USSR, however,
probably would not be able to
maintain growth of the required
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9 May 1957
magnitude-over the entire 40-
year plan.
Western'economies in the
process of industrialization
have experienced a deceleration
of`growth rates at stages of
development comparable to that
the USSR is now reaching, and
there is no reason to expect
that the USSR can avoid this
deceleration. On the contrary,
the Soviet Union is entering a
period when it will no?longer
enjoy" such advantages of the
Stalinist period as a surplus
of agricultural labor and the
ability to defer replacement
costs, and will be increasingly
unable to give to heavy in-
dustry the same high priority
as in the past.
If the United States is
able to maintain its recent
growth rate for the next 40
years, the USSR would probably
be unable to close'the gap with-
in the stated time.
SECRET
If Bulganin was referring
to per capita production, then
the chances of catching up
with the United States in 40
years are even less likely,
since Soviet population ex-
ceeds the American population
and both have been growing at
about the same rate.
The 40-year figure has not
been publicized Within the USSR,
and since the 40th anniversary
of Communist rule is being cele-
brated in the USSR this year,
Bulganin might merely have been
making an off-the-cuff obser-
vation that in "another 40
years" the USSR could overtake
the Unit?d'States. It probably
represents, however, a rough
approximation of the Soviet
leaders' thinking about the
country's economic potential
in the context of the present
economic re-examination.
(Prepared by
ORR
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Shortly before the new
Chinese'Communist state was
established in 1949, Mao Tse-
tung declared that one of its
principal tasks would be to
transform China from an "agri-
cultural to an industrial state
and from a new democratic to a
socialist society." Since then,
Communist China has been in
what its party theorists de-
scribe as the "transition pe-
riod" to socialism.
Although Chinese writers
now claim that the transition
was a peaceful one, there was
considerable violence and blood-
shed in the early stages, par-
ticularly during the land re-
form movement in the country-
side and the campaign against
"vices" in the cities. The
populace was thoroughly cowed
by these developments, and Mao
Tse-tung personally ordered in
July 1955. that the transfor-
mation process be greatly ac-
celerated. By the beginning
of 1957, over 96 percent of the
nation's peasant households
were enrolled in co-operatives,
industrial and commercial busi-
ness was transacted largely
through some form of socialist
organization, and the Communists
could claim that socialist re-
form had been "basically com-
pleted."
Agriculture
Land reform, which forced
out the landlord and rich peas-
ant, was the first step toward
socialism in agriculture, fol
lowed by the production of
seasonal mutual-aid teams which
were gradually transformed into
permanent, year-round teams.
The next step was the organi-
zation of a number of low-level
agricultural producer co-opera-
tives in which income continued
to be derived from individual
investments of land and equip-
ment. The final stage has been
the high-level co-operatives,
virtually indistinguishable
from the Soviet collective
farm. The percentage of farm
households enrolled in co-
operatives jumped from only 15
percent in mid-1955 to 96 per-
cent at the end of 1956, and
fully four fifths of the co-
operative farmers are now in
collectives.
Peiping is conscious of
the hazards of overdirection
in :regard to the collectives.
A recent decision by the Min-
istry of Agriculture provides
that in 1957 state production
quotas will be imposed on only
nine instead of 25 crops, "to
encourage peasants to run the
co-operatives independently."
One of the most difficult
problems facing the regime,
however, is how to divide a
co-operative's harvest. Grain
and cotton procurement programs
for the current crop year are
lagging; and, while this may
result in part, from overesti-
mates of the harvest, Peiping
clearly suspects the peasants
of holding back on the state's
share of the crop and has urged
local cadres to greater collec-
tion efforts.
Although there was little
resistance in the beginning,
there have been recent indica-
tions that the peasant is be-
ginning to grumble about his
hard life as compared to the
life enjoyed by city workers.
Morale on many of the collec-
tives is reportedly low. The
peasant apparently does not
work as effectively or enthusi-
astically for the collective
as he did for himself. He
neglects the collectively owned
animals and equipment, and
resents the chair-borne cadres
who eat but do not work. The
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9 May 1957
official People's Daily has
remarked that ie peasants fail
to grasp the idea that the best
way to help themselves is to
help the collective.
against "vices" in 1952, which
broke the will and ability of
China's capitalists to resist
state encroachment further.
The second landmark was in late
1955 and early 1956 when private
The regime has indicated
businessmen were swept up, amid
to
the peasants that in three
the ringing of
gongs and parad-
to
five years' time their aver-
ing of banners
proclaiming
age
income will reach the level
"double joy,"
in Mao's acceler-
of
today's upper middle level
ated drive to
socialiam.
peasant. The authorities
doubtless recognize, however,
that collectives are not the
panacea for all the nation's
agricultural ills. The col-
lectives will probably be
measured by Peiping chiefly in
terms of how well they meet.
the delivery quotas laid on
them by the economic planners,
and increased investment in
agriculture will be required
in order to achieve steady in-
creases in production.
Industry and Commerce
When the Chinese Commu-
nists came to power in 1949, they
immediately nationalized enter-
prises which had been in the
hands of the Chinese National-
ist government, as well as the
property of individuals closely
identified with it. This in-
cluded practically all heavy
industry and railroads.
A number of private busi-
nessmen in both industrial and
commercial pursuits, however,
were encouraged by the new re-
gime to continue operating.
While it did not hide the fact
that the eventual goal was the
extinction of all capitalists,
Peiping indicated that a pro-
longed period of capitalist-
socialist coexistence was
possible.
By restrictive taxation,
by encouraging labor excesses,
and by taking over sources of
supply and markets, the state
gradually moved to curtail the
ability of private businessmen
to "exploit" the people. The
first landmark in the transi-
tion process was the campaign
When the gongs were stilled,
approximately 96 percent of
the nation's onetime private
industrialists and 67 percent
of ]privately owned commercial
undertakings had taken the step
to Joint state-private owner-
ship. These joint enterprises,
in which theoretically both the
state and private interests
have invested money, have been
more accurately described as
governed, used, and managed
exclusively by the state. They
constitute the last step in
the transition process before
socialism is attained. Former
capitalists are now receiving
fixed payments, amounting to
a liquidation dividend, on the
value of their private share,
The Communists promised late
last year that this rate of
return, usually around 5 per-
cent, would be continued for
about seven years, after which
the firms would presumably be
completely socialized.
Peiping acknowledges that
many former capitalists, after
accepting joint status, indulge
in "improper behavior" and fail
to "align their individual
interests with state interests."
As it result, a special "college
of socialism" has been estab-
lished in which, by intensive
study of Marxism-Leninism,, the
former capitalist can raise
his "socialist consciousness."
Several drawbacks to the
socialization of the industrial
and commercial economy became
conspicuous during 1956, espe-
cially in regard to retail
trade. Peiping admitted that
the stultifying hand of state
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9 May 1957
commercial departments had
inhibited production and led
to maladjustments of the dis-
tribution pattern. Inflation-
ary pressures built up, and,
because prices were rigidly
fixed, the quality of goods was
reduced. Sales dropped and so
did state revenues. Clearly
an adjustment was in order.
Last September, Chen Yun,
China's top economic policy
maker, stated that it would be
preferable if a "very large
section of industrial, handi-
craft trade, rural sideline
production and commerce be
carried on under individual
management," 'Handicraft co-
operatives should be split up.
Limited price rises should be
permitted as an incentive to
improving quality. "Free
markets, duly supervised and
limited in scope;" should be
permitted to encourage the
local interchange of specified
commodities.
Chen insisted that these
steps, most of which have been
put into practice, did not rep-
resent a return to capitalism,
and pointed out that state
supervision would ensure against
any capitalist-style profit
taking. He also noted that the
state retained its monopoly in
the trade of essential commodi-
ties like grain, cotton, edible
oils and export goods.
It is unlikely that these
measures will solve the under-
lying problems in this field,
and for some time Peiping will
have to work toward achieving
a satisfactory compromise be-
tween the demands of the state
for the greatest possible re-
turn from its commercial activ-
ities and the requirement for
more freedom and greater mone-
tary incentives for individual
traders.
Claims to Originality
In expounding their philos-
ophy of socialization, the Chi-
nese advanced certain doctrines
which diverged from Soviet
views. Avoiding direct comment
on Moscow's insistence that the
"dictatorship of the proletar-
iat" was the necessary state
form for building socialism,
Peiping's theorists asserted
in :1953 that the "people's
democratic dictatorship" was
the political structure under
which China would advance to
socialism. The issue was
largely one of semantics, pur-
sued by Peiping primarily to
glorify Mao Tse-tung with an
eye to the Communist movements
in "backward, noncapitalist"
countries.
In 1956, Peiping conceded
that the people's democratic
dictatorship was a variant
"form" of the Soviet proletar-
ian dictatorship. It neverthe-
less insisted on retaining the
distinctive formula of people's
democratic dictatorship, a
formula used by no other Com-
munist country until Hanoi
borrowed it recently to describe
North Vietnam's state structure.
Peiping also claims that
China's "peaceful" transforma-
tion of capitalists into wage
earners is unprecedented in
Communist theory and practice.
Chinese theorists credit Mao
with having "discovered" a new
way for socializing capitalists,
who in China are being "bought
out" rather than "smashed."
Describing this method as "some-
thing that has appeared for the
first time in the world," they
have asserted that the theory
of the peaceful transformation
of capitalism in China "is still
another brilliant contribution
of Comrade Mao Tse-tung to the
.storehouse of Marxism,"
Since the death of Stalin,
Moscow has gradually moved
closer to Peiping's view of the
Chinese transition to socialism.
At the Soviet 20th party con-
gress, Shepilov applauded the
"'masterful application" of
Marxist dialectics made by the
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9 May 1957
Chinese under existing condi-
tions in China. Khrushchev's
attack, in his secret speech,
on Stalin's theory of intensi-
fication of the class struggle
during the building of social-
ism, as well as the congress
line on different forms of
transition to socialism, indi-
cated general acceptance by Mos-
cow of the Chinese position.
Mikoyan told the Chinese
party congress in September of
the same year that "each coun-
try has its distinctive features
and contributes something spe -
cifically its own in effecting
the transition to socialism."
He stated that the bourgeoisie
in China had "found it more
convenient not to clash with
the people's state, but to
work under its control," and
that, as compared with the set-
ting of the Russian revolution,
there had been in China "new
WEST GERMAN ACTIVITIES IN THE MIDDLE EAST AND SOUTH ASIA
.The past few months have
seen an acceleration in the
steady effort by West German
government leaders and business-
men to expand the Federal Re-
public's commercial and diplo-
matic influence in the Middle
East and South Asia. There are
particular reasons for'such an
effort in the Middle
East and South Asia
at this time. The
extensive economic
development programs
being undertaken by
a number of the coun-
tries in the area
offer unusual oppor-
tunities to the Ger-
mans, with their rep-
utation as plant
builders, road makers,
and dam constructors.
SECRET
historical conditions, a more
favorable situation." This
fact explained differences in
Soviet and Chinese "experience,"
and left room for certain in-
novations.
While accepting the Chinese
position on "peaceful" trans-
formation, Moscow has praised
the Chinese, who, according to
a 23 November Pravda editorial,
"always make it clear that
their methods, though perfectly
correct in their own country,
are not necessarily of universal
application." The Chinese Com-
munists have deferred to the
USSR and have criticized those
party members who had denied
the significance of the Soviet
Union's "fundamental experience"
and "underestimated the impor-
tance of learning from the Soviet
Union." (Pre-
pared jointly with ORR)
Over the past six months, more-
over, the feeling in the Arab
world against Britain and France
has given German exporters a
special opportunity.
Since the beginning of the
year, West German government
officials and businessmen have
West German trade with the Middle East
and South Asia in 1956
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9 May 1957
been making good-will visits
to various Middle Eastern and
South Asian countries. Chan-
cellor Adenauer's visit to
Iran in March was followed by
that of Defense Minister
Strauss and President Heuss.
Foreign Minister Brentano con-
cluded his trip around the
world with a visit to India in
March; Vice Chancellor Bluecher
returned from Pakistan in
March; and a commercial com-
mission, composed of represent-
atives from the Ministries of
Foreign Affairs, Agriculture,
and Economics, and from bank-
ing circles, made a six-week
tour of Pakistan, Ceylon, Burma
and India.
Political Aims
Besides its interest in
markets and investment oppor-
tunities, Bonn is anxious to
increase its diplomatic influ-
ence in the Asian countries.
Its immediate aim is to prevent
recognition of the East German
regime by non-Communist states.
Bonn's long-standing position
is that it will not maintain
diplomatic relations with any
state--other than-the USSR--
recognizing East Germany, but
it has recently been consider-
ing establishing diplomatic
relations with the Eastern
European Satellites and evi-
dently feels in need of assur-
ances that such a move would
not be followed by extensive
Asian recognition of East Ger-
many.
Looking somewhat further
ahead, Bonn is seeking to line
up maximum support in the UN
for its views. In particular,
it intends to get the German
unification question brought
before the General Assembly
and is highly conscious of the
important role played by India
and other Asian members in that
body. Bonn has also indicated
its concern over Communist in-
filtration of the underdevel-
oped Asian countries and its
belief that this requires a
strong Western countereffort,
chiefly in the economic field.
West German diplomatic
endeavors in the area have so
far met with moderate success.
Brentano succeeded in getting
Indian prime minister Nehru
to issue a statement on the
need for a peaceful settlement
of German unification but did
not obtain the commitment he
sought of firm Indian support
for the West German position
on this issue. Bonn has suc-
ceeded in maintaining good re-
lations with the Arab states,
despite the anti-European feel-
ing generated by Suez and its
own continuing reparations
shipments to Israel. The Ger-
mans have carefully refrained
from establishing diplomatic
relations with Israel, and the
Arab states have refrained
from recognizing the East Ger-
man regime.
Trade Drive
The level of prewar Ger-
many's trade has been surpassed,
and sizable long-term financial
investments and technical aid
programs have been launched.
Total trade between West Ger-
many and the Middle East and
South Asia amounted to $1.30
billion in 1956, representing
9 percent of Germany's world
trade.
A technical commission was
formed in Bonn last winter to
advise the Foreign Ministry on
problems of co-operation with
the underdeveloped countries.
It will probably call for an in-
crease of the government's tech-
nicaal assistance fund and press
for cheaper credits for exports
on a long-term basis.
Egypt: The most striking
illustrat on of West Germany's
trade drive is provided by
the industrial fair it held
in Cairo in early April. Of-
ficially described by Bonn as
directed against Soviet bloc
efforts at infiltrating Egyptian
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9 May 1957
economic life, the fair was
highly successful in promoting
German trade, and the 400 par-
ticipating firms will probably
profit financially. West Ger-
man business firms already have
an investment of more than
$100,000,000 in various indus-.
trial and technical projects
in Egypt; the most recent, a
telephone factory to be financed
and equipped by a West German
firm and later to be turned
over to the Egyptian government.
Last year's trade between the
two countries totaled slightly
more than $81,400,000.
Turkey: Turkey is an even
more important German trading
1956
IMPORTS EXFORTS
WEST GERMAN EXPORTS TO,AND IMPORTS
FROM, THE MIDDLE EAST AND SOUTH ASIA
1936
IMPORTS EXPORTS
ADEN
AFGHANISTAN Under 800,000 Under 2,000,000
CEYLON 3,213,000 1,198,000
CYPRUS
ETHIOPIA
JORDAN Under 800,000 Under 2,000,000
LEBANON 800,000 2,000,000
SUDAN
SYRIA
? INCLUDED UNDER INDIA IN 1936
9 MAY 1957
Iran: Trade between Iran
and West Germany last year
amounted to $70,900,000 and, as
a result of Chancellor Adenauer's
visit in March, a further rise
seems likely. In response to
the Shah's suggestion that Ger-
man capital should come to Iran,
it was agreed that a German
economic mission would be set
up to survey the possibilities
for future economic expansion.
West Germany is already giving
agricultural training to Iran
and is to set up and finance
700,000 3,000,000
3,700,000 8,400,000
12,600,000 8,(100,000
25,300,000 7,1100,000
1,100,000 5,100,000
200,000 4,T00,000
2,900,000 20,100,000
17,800,000 4,800,000
12,200,000 19,5:00,000
two vocational schools.
German industrialist
Alfried Krupp is con-
sidering initiating his
"Point 4 -1/2" program
for the aid of under-
developed countries
with the construction
of a railway link, from
Iran to Turkey.
India: India has
consistently been
West Germany's leading
trading partner in
the area, with 1956
imports of $195,318,-
000 and exports of
$45,110,000. After
difficult financial
negotiations a new
quota agreement cover-
ing Indian-German
trade was signed last
partner. In 1956, it imported
goods valued at $93,300,000
and sent to Germany goods worth
$67,100,000. After the recent
visits of Adenauer and Strauss
to Turkey, West Germany agreed
to extend financial aid and
technical assistance to expand
Turkey's munitions manufacturing
capabilities. West Germany had
already concluded munitions
contracts with Turkey in 1956
totaling $175,000,000, and other
investments amounted to $42,-
240,000 at the end of the year.
montth. In December of last
year, German investments in
India amounted to $34,120,000,
and Alfried Krupp, who heads a
consortium engaged in construct-
ing a steel mill, is reported
to be negotiating for participa-
tion in a number of additional
Indian industrial projects.
The Germans are to set up and
equip a ':'Footwear Technology
and Training Institute" in
Madras.
Pakistan: Bluecher agreed
in March while in Karachi to
establish a model German district
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9 May 1957
for agricultural development
and experimentation. This will,
extend over a period of about
5 to 6 years and will cost
about $720,000. A joint state-
ment on the desirability of
intensified economic co-opera-
tion between the two countries
was issued at the close of
Bluecher's visit, and a Paki.-.
stani delegation is to study
general economic and financial
questions in Germany.
Afghanistan: The West Ger-
mans have been actively combat-
ing Soviet economic efforts.in
Afghanistan, competition being
particularly keen on credit
and favorable payments terms.
MEETINGS OF
A planned expansion of West
German technical assistance to
Afghanistan will reportedly
reach $12,000,000 in the next
several years. West German
investors, however, are proceed-
ing cautiously in view of re-
cent payments difficulties
with Afghanistan.
Surveying the scene general-
ly, the West German Association
for Middle East Trade has ex-
pressed hope for a further ex-
pansion of West German trade in
1957.
in by ORR)
HIGH-LEVEL SINO-SOVIET BLOC LEADERS
A program of top-level
visits among Sino-Soviet bloc
leaders begun after the crises
in Poland and Hungary last
fall is apparently scheduled
to continue on an intensive
basis during the coming months
to reinforce the bonds of
"proletarian internationalism."
The current series is much
more extensive than the high-
level bilateral contacts with-
in the bloc after the death of
Stalin. Since October, for
example, all of the European
Satellite regimes have sent
delegations to Moscow. With
the exception of the Poles,
all of these groups have paid
homage to the Soviet Union
and to the heroic action of its
troops in Hungary. Satellite
leaders have also exchanged
visits among themselves and
have issued communiques which,
while paying respect to one
another's socialist virtues
and dealing with matters of
mutual interest, have empha-
sized the USSR's leadership
of the socialist camp.
The exchange program was
presumably instituted by Mos-
cow as an inoffensive way of
publicly reasserting the form
of control and ideological
guidance it sought to exert for
a time through the Cominform.
Both the French and Italian
Communist Parties, the only
nonbloc Cominform members, have,
in fact, been active in the cur-
rent program. The bilateral
contacts presumably offer the
Satellites some measure of
prestige and sovereignty in
harmony with the Soviet declara-
tion of 30 October reaffirming
Satellite "sovereignty."
Chinese Communist participa-
tion in the program, however--
although undoubtedly considered
a necessity by the Soviet leaders
--may have had unwelcome con-
sequences in Moscow's eyes.
The regime in Poland has taken
considerable heart from ..the
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encouragement extended
by the Chinese Commu-
nists. Chou En-lai's
visit to Warsaw last
winter, Polish pre-
mier Cyrankiewicz's
trip to China-:this
spring and the forth
coming--according to
the Poles--visit of
Mao Tse-tung and Chou
En-lai to Warsaw ap-
pear in part to rep-
resent Chinese en-
dorsement of the Go-
mulka regime and its
moderate course, as
well as Peiping's ef-
fort to strengthen
Warsaw's ties with
the bloc.
Least traveled
of all major bloc
leaders during the
past six months are
the Soviet leaders
themselves., Voro-
shilov's current cere-
monial tour of China
and Indonesia is the
first excursion by a
party presidium mem-
ber since January,
when Khrushchev and
Malenkov went to Buda-
pest for an emergency
Soviet-Satellite
MAJOR SINO-SOVIET BLOC MEETINGS
SINCE 1 NOVEMBER 1956
EUROPEAN SATELLITE DELEGATIONS
TO MOSCOW
APPROXIMATE
Polish
Rumanian
East German
Czechoslovak
Bulgarian
Hungarian
Albanian
DATE
mid-November
early December
early January
late January
mid-February
late March
mid-April
Hungary-Czechoslovakia
Czechoslovakia-East Germany
Hungary-Czechoslovakia.
Rumania-Bulgaria-(and USSR)
Albania-Bulgaria
Bulgaria-Rumania
East Germany-Rumania
Czechoslovakia-Poland
MEETING
PLACE
Budapest
Prague
Budapest
Tirana
Sofia
Berlin
Prague
USSR
Poland
Hungary
Poland
Czechoslovakia
Poland ?
25X1 meeting.
25X1
Moscow
Warsaw
Budapest
Peiping
Peiping
Warsaw?
Recent developments in
India's strategic northeastern
frontier region indicate that
Prime Minister Nehru now is
willing to compromise with
leaders of the hostile Naga
tribesmen who have been in
armed revolt against the In-
dian government since 1952.
Top-level negotiations held
in Assam during April between
the Indian authorities and the
Naga leaders may prepare the
way for cessation of guerrilla
activities which have threatened
the vital rail link with upper
Assam and cut off much of In-
dia's frontier with northern
Burma.
SECRET
APPROXIMATE
DATE
mid-November
early December
early January
late January
early April
late April
early May
CHINA
APPROXIMATE
DATE
early January
mid-January
mid-January
mid-April
late March
possibly scheduled
for late summer.
25X1
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 19 57
The apparent lack of suc-
cess of the army and police in
? suppressing the resistance
25X1
9 MAY 1957 24520
one on the northeastern frontier
where organized political ac-
tivity has developed. The
traditional animosity of the
Mongoloid tribesmen toward
people of the plains has been
shaped by shrewd leadership
into a militant demand for an
independent "Nagaland." The
surprising strength and persist-
ence of the agitation probably
results from the personal ambi-
tions of such semieducated
Naga leaders as Zapu Phizo,
"su.premo" of the separatist
movement and veteran- of the
British Indian army. Of the
estimated 300,000?to 400,000
Nagas living on the Indian side
- .. : . of-- the.bprder, only
SECRET
appears to have caused
New Delhi to redouble its ef-
forts to solve the problem be-
fore another monsoon season.
Separatist Movement
The separatist movement,
spearheaded by certain elements
of the Naga tribes, has long
been the most serious of In-
dia's frontier tribal problems.
The Naga region is the only
Brv`4PUtrq
PAKISTAN
about 2,000 appear
to be actively hos-
tile. Many of the
peaceful Nagas, how-
ever, seem to sympa-
thize with the aims
of the separatist
leaders.
Since disturb-
ances broke out in
1952, the movement
has developed into
a resourceful ter-
rorist operation.
The pattern in the
Naga Hills has been
one of intermittent
"incidents" which
range from head-hunt-
.ing and hit-and-run
attacks on govern-
ment police posts to
.pitched battles with
combined police and
army forces. The
raiders have been
well supplied with
small arms, most of
which apparently have
come from abandoned
Japanese and Allied
war dumps in the area.
Their familiarity with
the wild terrain gives
them a great advantage
over the government
forces. Like the ter-
rorists of Malaya,
they fade into the
jungle or mix unnoticed
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SECRET
9 May 19 57
25X1
with the peaceful tribesmen
during the day and launch sur-
prise attacks under cover of
night.
Possible Foreign Support
The Naga movement is be-
lieved to be nationalist-in-
spired. Its leadership, which
is largely Christian, reported-
ly rejects Communism. There
has been no evidence that it
has received any large-scale
assistance from Communist
sources.
Previous reports of con-
tact with the Chinese Commu-
nists have never been confirmed,
although a few Chinese of un-
determined origin have been ar-
rested in the area. Some Indian
officials reportedly suspect
that Communist China is provid-
ing the Nagas with clandestine
financial support. While Pei-
ping would probably regard the
maintenance of such a potential
base only a short distance from
Chinese territory as in its
long-ra'ige interests, the Chi-
nese would be unlikely to jeop-
ardize. their present relations
with New Delhi by furnishing
the Nagas with substantial as-
sistance.
Government Measures
The frontier uprising ap-
parently has caused great con-
cern in the inner councils of
the Indian government. When
the insurgent activity rose
to an alarming point early in
1956, the government sent
regular army troops to the
scene with instructions to
eliminate the resistance once
and for all. After a year of
concerted campaigning with a
force of about division strength,
however, the authorities have
not met with notable success.
In recent weeks disturbances
have flared up again, this time
in areas where the rebels had
not previously operated. This
expansion of their operations
to the Assam plains and to
Manipur, however, may result
from the fact that the army
and police have flushed some
of the hostile tribesmen from
their native hills.
Nehru has often dismissed
the Naga movement's demands
for independence as "absurd"
and not to be considered in
any event. While New Delhi
did indicate recently a will-
ingness to consider measures
for increasing tribal autonomy
within the constitutional frame-
work, it refused to negotiate
whi:Le the rebels continued their
lawless activities.
Negotiations
Relations between the gov-
ernment and the Naga leaders now
appear to have taken a new turn,
General K. S. Thimayya, former
leader of the Indian truce team
in Korea and presently army
chief of staff, was sent to As-
sam in order to negotiate with
leaders of various Naga groups,
A conference in Shillong on 20-
22 April was attended by two
SECRET
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
9 May 1957
other ranking generals, the
governor and chief minister of
Assam and 30 Naga leaders, most
of whom belong to the separatist
organization. The tribes rep-
resented, however, apparently
were-:limited to those in the
northern Naga Hills, and the
leaders of the more belligerent
elements in the south evidently
did not participate. Consequent-
ly, the assurances of the tribal
chiefs who were present that
their areas would remain peace-
ful in return for government
promises of relief and rehabili-
tation, dom. not appear to signify,.
a settlement of the rebellion.
Despite recent signs of
vitality, the die-hard Naga
elements face several acute
problems--the most important
relate to food shortages, mili-
tary supplies and recruiting.
The movement has also suffered
recently from factionalism:
Phizo's leadership has been
SECRET
openly challenged, a tendency
which is likely to be accentu-
ated by the authorities' recent
overtures.
The government, on its part,
is faced with a military cam-
paign which seems to offer less
prospect of success with each
season, while at the same time
the problem grows more embar-
rassing politically and more
demanding financially. In ad-
dition, New Delhi's urgent pro-
grain for developing and securing
adjoining areas of the isolated
and vulnerable Northeast Fron-
tier Agency must be sharply cur-
tailed while such a concentrated
effort is necessary in the Naga
sector.
These problems and the
pattern
of recent developments
suggest
that both sides in the
con:Flict
now may be ready to
work out
a compromise settle-
ment.
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