FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INGELLIGENCE AGENCY WEEKLY INTELLIGENCE HIGHLIGHTS NO. 103

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500040005-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: May 15, 2006
• Sequence Number: 5
• Publication Date: June 6, 1950
• Content Type: PERRPT

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F AR. EAST/PACIFIC DIV'S ION
OFF ICE OF REPORTS AND ESTIMATES
CFXRAL INTELLIGENCE AGENCY
WEEKLY INTELLIGENCE HIGHLIGHTS
NO. /
DATE: JUN 6 1950
DOCUMa:T NO.
NC) CHANaE IN CLAS;.
DECLA'33;i:!T..Z.)
CLASS. CHANC,.., TO: T-..;
NEXTRE !V/ DAT E?
AUT R lopt
DATE. 25)(1
COPY NO. 8
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NOTICE ? elalKING PAPER
This document is a working paper, not an official issuance, since
it has not necessarily been coordinated with and reviewed by other
components of ORE. It represents the formalative thinking of one
group of analysts in ORE and is designed to provide the medium
for transmitting their informal views to other intelligence analysts
of the US Government who are working on similar or overlapping
problems. It is intended" for the use of the addressee alone, ani
not for further dissemination.
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FAR EAST/PACIFIC DIVISION
INTELLIGENCE HIGHLIGHTS NO, 103
1 JUNE to 6 JUNE 1950
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
The orderly Korean elections have demonstrated a lack of much popular
support for either of the Republic's major political factions and have
left the balance of power in the hands of independents (p. 2).
The Peiping regime has reiterated its promises of fair treatment for
capitalists, while continuing policies which make the business community
despair (p. 3).
The military situation in North Vietnam appears to be increasingly
favorable for the French, according to US eye-witnesses (p. 4).
Burma's Prime Minister has indicated a desire to resign his office
in July, in order to devote himself to religious activities (p. 5).
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The OS may be gravely embarrassed by proposed Indonesian actions in
support of the insurgent Ho Chi Minh regime in Indochina (p. 6).
Although the military picture in the Philippines is somewhat brighter,
political and economic affairs continue to cause gloom (p. 7).
NEWS NOTES
Peiping seeks equipment from West. ..Chinese troops arrive on Burma's
border...Soviet Minister to Thailand called home.
The marginal notations used in succeeding sections of this Weekly
("A", "B", or "Co) indicate the importance of the items in D/FE opinion
with olio representing the most important.
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SECTION IIL, DEVELOPENTS IN SPECIFIED AREAS
KOREA
Election results--The 30 May elections in southern Korea: while not pro-
ductive of a victory for either of the major political factions, consti-
tuted a significant demonstration Ofthe fact that democratic procedures
have not been entirely set aside in the Rhee administration's program of
eliminating subversive Communist elements within the Republic. Some 90
percent of registered voters participated in the generally quiet and or-
derly elections which independent observers, including the members of the
UN Commission on Korea, agreed were held in a free and fair atmosphere.
Pressure by the police and government undoubtedly was exerted in favor
of selected candidates in local areas but, significantly, several adminis-
tration favorites were defeated, while several umoderate" candidates,
charged by the Government with pro-Communist views or secret Communist
support, were elected.
? In general, the electorate appeared more concerned with important lo-
cal issues such as food and inflation than with the issue of Communism:
they expressed this concern by failing to support incumbents as well as
some well-known government officials who were candidates. Results from
206 of the 210 electoral districts ahow that only 31 of the 164 incumbent
assemblymen retained their aeata. Indeed, 127 of the newly elected can-
didates are not formally committed to any political group. The opposition
Democratic Nationalist Party (DNP) dropped from 67 to 25 seats, while the
pro-administration Great Korean Nationalist Party (GKNP) retained only
25 of its previous 70. In addition to general voter antipathy toward the
old Assembly, the unexpectedly heavy losses suffered by the opposition
DNP may be attributed to the stigma still attached to the Party as repre-
sentative of the conservative land-owning interests. GKNP losses, in
turn, probably are not attributable so much to that Party's support of
President Rhea as to its lack of grassroots organization.
Although the new Assembly will remain predominantly rightist, the
alignment of the 127 successful "independents', who constitute an unorgan-
ized majority, will not be clear until some months after the Assembly's
first meeting in mid-June. It is probable that the situation will parallel
that which followed the 1948 elections, when a large number of independents,
generally critical of the administration, gathered in a loose coalition
and held the balance of power between anti-Rhee and pro-Rhee forces. In
the short term, the election's most significant result is the large turn,.
over in Assembly membership and the consequent loss of experienced legis-
lators. Althouell the general calibre of the new Assembly probably is higher
than the previous group, there will be coaaiderable inefficiency and delay
in the legislative process until the new members find their feet.
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CHINA
Communists plug "private enterprise"?Although most destern observers
take a dim view of the prospects for private business under the Peiping
regime, the Communists are once more endeavoring to reassure private
capitalists regarding their future in China. At a recent Ministry of
Labor conference, labor boss LI Li-aan declared, "to advance industrial
progress at present, it is necessary to make use of the private capital-
istic enterprises of the country for a time. Al]. private capital that
can be used will not only be protected by the government, but will be
aided." Subsequently, MAO Tse-tung, discussing measures to Clarify the
relationship between State-run and private companies, asserted that "the
Government has no intention...to compete with private enterprise."
Such declarations are reiterations of previous Communist statements
concerning the role of private capital in China. In the "Common Program"
adopted last September, the Communists declared that "the People's Gov-
ernment shall encourage the active operation of all private economic
enterprises beneficial to the national welfare and people's livelihood,
and foster their development." Recent evidence, however, has indicated
that such statements are mere lip service to the principles of the "New
Democracy." Advertisements appearing in the Shanghai press during the
past few weeks for example, have urged factory managers, who abandoned
their plants in despair at the difficulties of doing business under the
Communists, to return to their jobs. Meanwhile, high business taxes, con-
fiscatory exactions of Victory Bond pledges and competition from a growing
number of State trading enterprises have continued to force many business-
men, who at first believed that business could continue profitable under
the Communist regime, to seek only the salvage of what little remains of
their investments.
Despite this seeming contradiction between Communist promise and pane.
formance, it appears probable that private enterprise will continue to
occupy a large motor of the Chinese economy for the next several years.
Many of the difficulties besetting private firma have not resulted al-
together from deliberate Communist designs. The stagnation of trade, in
large part a result of the Nationalist blockade, has militated against
profitable operations by private concerns and induced Communist harass-
ment of business --such as refusal of permission to close shop or dis-
charge workers-- which would not have been necessary under more favorable
circumstances. A return to higher levels of economic activity in the
second half of 1.950 should ease some of these difficulties, and it is
noteworthy that in Manchuria and north China, where economic conditions
have been more favorable than in the south, recent reports indicate an
increase in the number of private factories in operation.
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Although the Communiats consider it expedient to avoid fladventuris-
tier! measures toward commerce and industry at present and private enter-
prise is allowed in such important sectors of the economy as textile
manufacture and other light indastries, the trend is unmistakable.
Thus, businessmen are buying raw materials from government oarporations,
are looking to gpvernment banks for much of their credit requirement,
and are dependent in large part on government enterprises as customers of
their finished products. Moreover, in the field of foreign trade and in
domestic trade to a lesser extent, private firms are being supplanted
by state trading corporations, while operat JOAO by private capitalists
are subject to very restrictive limitations.
INDOCHINA
/ailttary situation in Tonkin..-On the basis of first-hand survey of rural
areas in the Red River delta, US officials have reported that French
military action has largely cleared the delta and that tens of thousands
of Vietnamese have been streaming into the cleared area during the past
two months. Among these persons, antipathy toward the Ho regime is
strong and the US observers believe that the refugees may form the first
real peasant support for Bao Dai, particularly if US economic and medical
assiatencr is judiciously given, North Vietnam's Governor, Nguyen Huu Trio
an able, efficient, and intensely nationalistic official who has estab-
lished a corps of provincial administrators in his own image, is believed
tr offer first-class material for the implementation of ouch a US aid pro-
w,. am, although the unpopularity of Premier Tran Van Hull --whose own ball.*
w.ck of South Vietnam presents almost reverse conditions-- together with
the exaggerated suspicions of the French regarding US aid, are expected
to present something of an obstacle.
Emphasis on food conservation in recent broadcasts by the Ho radio
indicates that the French strategy of keeping Ho's forces out of the
rice-rich Red River delta may be showing results. It has been noted, how-
ever, that the majority of the refugees entering the French-held areas
are old men, women and children, a fact which suggests that the Ho regime
AWL, be deliberately encouraging the movement in order to increase the
French burden, while the Resistance concentrates on the development of
its army and speeds the influx of arms from China. A spectacular rebel
attack, featuring four 105mm howitzers, was recently launched against the
French post at Dongkhe, some ten miles from the Sino-Vietnamese frontier,
and near the headwaters of one of the branches of the Sikiang. Although
eventually repulsed, the attack showed bath augmented Resistance materiel
and a determination on the part of Ho 'a forces to weaken French defenses
along the China border.
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BURMA
Possible Change of Prime giniatere--The Burmese Prime Minister, Thakin Nu,
has reiterated his Intention of relinquishing public office at the earli-
est opoortunitv in order to devote himself to re1i5riona moditation4
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/ Nu has indicated a desire to resign on 19 July 1950
when he hopes that the "Peace Within One Year Plan" will have been suc-
cessfully fulfilled.
The lolical successor to Thakin Nu is Lt. Gen. Bo Na Win, the Deputy
Prime Linister and Commander-in-Chief, who is considered to be already
de facto head of the Government. It is possible, however, that Na Win
will prefer someone else to hold the office of Prime Minister, but it will
be someone who would be amenable to his direction. Besides his control
over Burma's armed forces, No Win is supported by an important segment of
the influential Socialist Party. Furthermore, his prestige has been
greatly enhanced by recent military victories over Karen and Communist
Insurgents and for the part he played in negotiating the "surrender" of
the rebellious People's Volunteer Organization. Filially, there is some
indication of friction between the worldly Ne Win and the ascetic Nu.
Therefore, should Nu tender his resignation, as he has done in the pasts
there is a good possibility that it will be accepted this time.
The only group which could conceivably prevent No Win from dominating
the Government is the Socialist Party, but such a development is unlikely
in view of Na kilnoo comparatively strong political and military position,
the existence of a personal following within the Party, and the Party's
difficulties with factionalism over whether Burma should accept Western
aid or seek closer alignment with the Communist world. In any case, it
is unlikely that a Na Win-dominated Government would effect any immediate
or drastic modification of present Burmese policies. Such a Government,
however, would probably tend to be opportunistic and dictatorial, and re-
flect Na din's personal principles and prejudices. Ne ain, who has always
been bitterly anti-British and will probably continue to regard them with
deep suspicion, is presently friendly to the US. This attitude is un-
doubtedly motivated, in part, by the general's desire for US military and
economic assistance, but also denotes hie awareness of the threat to
Burma's independence posed by Communist China. No din, therefore, whether
or not he actually assumes the office of Prime Minister, appears to be in
a position to give Burma greater stability than it has enjoyed in the past
two years -- at least over the short run. In doing so, however, he is
likely to make dangerous enemies, including many Socialists, whose party
he has used to rise to power, and to incur the displeasure of Communist
China, which heretofore has refrained from openly denouncing the Burmese
Government.
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INDONESIA
USI views on Indochina problem?Public and parliamentary pressure in Indo- "A"
nesia has reached a point where the USI may either follow the suggestion
of a vocal leftist minority in the USI House of Representatives and ex-
tend recognition to the insurgent Ho Chi Ninh regime in Vietnam, or, more
probably, call for a conference of Asian nations to discuss the Indochina
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SE Ettil:
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question. While actual recognition of the Ho regime appears to have been
postponed for the present as a result of parliamentary maneovering, even
the calling of a conference by the USI could be expected to be embaras-
sing to the US,
AO early as 28 March 1950, a notion cialing for immediate recognition
of the "Democratic Republic of Vietnam", together with the "People's Re-
public of China", was submitted by a group of fifteen pro-Communist mem-
bers of the House. Although the matter was not discussed at that time,
due to the press of more urgent business, a quite substantial body of
Indonesian opinion continues to view the Ho regime as genuinely national-
istic and worthy of support. This view has been furthered by the activi-
ties of two of Hole publicity men, Tran Mai and Oang Chan Lieu, who arri-
ved in Djakarta on 8 May and have been busy in the hustings ever since.
The recognition motion me reintroduced in the House in. late May, at
which time a substitute motion, ceiling for a further study of the recog-
nition question and preparations for. an intra-Asian conference to seek a
solution of the Indochina conflict, was Introduced by a conservative leader,
Nateir. The Nateir motion was adopted on 3 June, in a close vote, 49 to
38.
While immediate USI recognition of Ho thus appears to have been post-
poned, the possibility that such action may occur in the future cannot be
dismissed. Such an action would have a considerably adverse impact upon
the US position in Indochina and throughout Southeast Asia, might well
precipitate similar action by Burma and India, and would make it virt1Le:11y
impossible to arouse that widespread popular confidence in the French-
sponsored Bao Dai regime which 13 believed essential to the success of
current joint French-US efforts to establish an effective, independent
and non-Communist Vietnamese state.
Initiation of an intra-Asian conference on Indochina, in turn, would
make it well-nigh impossible for either the US or France to continue to
view the Indochina conflict as purely a domestic problem, of concern only
to France and the three Indochinese states., If such a conference is cal-
led, Burma and the Philippines probably would participate, and Nehru, who
is due to arrive in Indonesia shortly, probably mould not hesitate to as-
sume a prominent role.
PHILIPPINES_
Deterioration continues -Although prospects for the Philippine Government's s"I
anti-Huk operations are currently somewhat brighter, the political scene
continues to be dominated by Chn wideninti breach between Vice President
Lopez and President Quirinol
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There is now
eome indication that Lopez' position may be substantially strengthened
by support from Jose Laurel's opposition Nacionalista Party. Quirino,
in turn, is also seeking Nacionalieta support\
I The Lopez-
Quirino contest demoralized the recent session of Congress and prevented
the pasease of important legislation including expanded tax measures. 25X1
25X1
In addition to political difficulties, the Philippine Government is
faced with ever-worsening financial problems. The Government has exhaus-
ted its legal credit with the Central Bank, has drawn heavily from a Gov-
ernment-owned trading bank and has utilized sinking and trust funds. Giusti
balances are practically all spent and even the new tax measures whinh the
administration is considering will be insufficient to cover the budgetary
deficit. Moreover, commodity shortages induced by import controls, com-
bined with deficit-financing, are causing constant price rises, The US
has agreed to send a mission to the Philippines in order to survey the
Republic's economic structure and to recommend joint US-Philippine mea-
sures designed to strengthen it, but an early solution to present econo-
mic problems is not in prospect.
In some respects, the military situation is bri51ht4r. The Government's
newly-organized Ground Force combat battalions are replacing the Constabu-
lary in anti-Huk operations with some success. Field training is achiev-
ing good results and troop discipline and morale are reportedly high.
Quirino has announced that the Government would be lenient with surrender-
ing Huks who have no criminal records and this policy, plus better troop
behavior3 has induced some link defections in southern Luzon.\
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NEWS lagEs
USSR shosteggle in aseistanee to Peipirst. are irinically demon-
strated by recent Communist approaches to aesten firriv Lor replacement
equipment to be used in Manchurian power planta einoe :lost of the mis-
sing equipment was looted by the USSR in 19100 The etw3-tage of electric
generating capacity is ganchuria'a Nohl deficieacy, and lresent realiz-
able power capacity la probably only one fifth oi that at:elned by the
japaneee in 1944 (300,00.) kwoas against 1,5005,000.0)0 In contrast,
coal production and railroad: operation have bwel nwriy resto-ed to
!will the 1944 rate., 'The Communt;t inquiries suggesir: that the ,'oviet
loot wan either irreparably danaged in traneit and sOuegient s'prage
or has been. Installed in hydroelectric peojecte in eaberrl ereae cf the
U3SR?.
A Shan sawbwa (chieftain) who recently arrived in LhiToon feok Yunnan
has informed the US Embassy that an estimated 53000 r.trChinei,e
mist army troops have moved up along the Burma Road in wetern YunieNt. end
have reached Burma' u northeast border., The Sawhwa reporte that theeN
troops have garrisoned the principal villages near the borLer and ,havt-
initiatod patrols whia are enforcing eavere trevei regulat!ons and *1.4-
nating the transborder Alovement of pereons and goods.
The 4iolotet Minieter to Thailand is Ifteving Bangkok on Junk,
departure may be connected with the denarture of DerevyanAo Ina :stet
25)0 from Tokyo, The US1 in Bangkok opnour 'hat nlelot
Lhe -Imminence of Lacreaalrk: anti-orrolunist. efforts in ,o,atleast
the USit may be annotating urgently in order to-determine Luracli.its
to coboteract the 4eetern strengthening of the region.
?
IIAL
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