FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INGELLIGENCE AGENCY WEEKLY INTELLIGENCE HIGHLIGHTS NO. 106

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500040008-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: May 31, 2006
• Sequence Number: 8
• Publication Date: June 27, 1950
• Content Type: PERRPT

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COPY NO. 7-8
FAR EAST/PACIFIC DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WEEKLY INTELLIGENCE HIGHLIGHTS
NO. /c
DATE: JUN 2 7 1950
AUTH
DATi
NEXT REVIEW DATE:
CLASS. CHANGED TO: TS S
NO CHANGE IN CLASS, U
1 ~ D':i;LASO+FIED
NOTICE 4 WORKING 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 formlative thinking of one
groan 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 in intended for the use of the addressee alone, and
not for further dissemination.
State Dept. review completed
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AD/031
.Others:
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S E C R E T
OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/PACIFIC DIVISION
INTELLIGENCE HIGHLIGHTS NO. 106
21 JUNE to 27 JUNE 1950
SECTION I. SUMMARY OF FAR EAST TRE14DS AND DEVELOPMENTS
All other Far Eastern developments this week paled in comparison
to the gpect Communist invasion of southern Korea. At this
writing, doubtful whether cohesive southern Korean resistance
will continue beyond the next 24 hours (see map and repot, pp. 1-2).
In the context of this climactic event, Indian Prime Minister Nehru
has completed a tour of Southeast Asia, during the course of which
he departed from his usual anti-imperialist theme and outspokenly
denounced Communism in the area (p. 1)m Meanwhile, it is estimated
that., while the Chinese Communist probably will not take an active
role in the Korean war, the strength or weakness of US efforts to
assist the southern Korean regime may well govern the future Chinese
attitude toward Taiwan and Indochina (p. 3).
Elsewhere, 0 US observers complained of French stalling in
Indochina (p. 5), and the Burmese Socialist Party's impending split
over East---Vest orientation may be affected by the Korean attack (p0 6).
LE 4
Japan cabinet to resign...UK--run mines in China make export sale...
Picture from Peiping shows Party ranks ...USSR trade in Thailand suffers.,,.
Communist actions mount in Singapore "Turk" Weeterling up for deporta--
tion...Auetralian Senate Labor bloc stalls legislation.
(NOTE: Section III is devoted to a summary of the develop-
ments leading to a unitary state in Indonesia.)
The marginal notations used in succeeding sections of this weekly
("A", "B", or "C") indicate the importance of the items in D/FE opinion
with "An representing the most important.
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GENERAL
Nehru ends successful tour of Southeast Asia India's Prime Minister,
Pandit Nehru, has completed a highly successful tour of Indonesia,
Malaya and Burma, during which he was enthusiastically welcomed by all
except the local Chinese and Co-=unists. Although many observers feared
that Nehru would take this opportunity to denounce Western colonialism
in Southeast Asia, he instead advocated cooperation between Asia and
the iVest and launched a totally unexpected and surprisingly violent
attack upon Conn nism? 4hile he continued to maintain that the strongest
force in Asia was nationalism and that colonial imperialism would soon
disappear, Nehru warned that imperialism survives "in other foams" even
though it might speak in terms of freedom and social change.
Nehru advised the Indonesians not to sever all their ties with the
Netherlands, admitted the necessity for continued British suzerainty over
Malaya for the present, and tried to point out the advantages of foreign
investments to the Burmese. Specifically regarding Communism, Nehru
indicated his belief that Communism was losing ground because it had
"not only parted company with nationalism, but opposed its" He charac-
terized Communist activity in Malaya as "excessively harmful" and not
to be tolerated and, in Rangoon, denounced the Burmese Communists for
killing "innocent women and children in their beds,"
The large crouds which turned out to hear the Indian leader and the
obvious respect with which he was treated by his official hosts are clear
evidence that Nehru made a strong and favorable impression throughout the
area,, not only enhancing his o'vn personal prestige in Southeast Asia, but
also that of India. By strengthening popular understanding between India
and the countries of Southeast Asia, Nehru has probably bolstered India's
prospects for spiritual, if not de facto, leadership of non-Communist
Asians, Finally, Nehru may have lent encouragement to the moderates who
now control the Governments of Burma and Indonesia, as well as the inci-
pient Malay nationalist movement, to stiffen their resistance to Communist
encroachments and thus indirectly strengthened the Western position in
Southeast Asia at this critical times
KOREA
Pub ec t invaders continue advance-On the fourth day of the surprise
northern Korean invasion of southern Korea, the puppet People's Army is
continuing to make progress in what appears to be the primary mission of
capturing the southern capital of Seoul (see map). Thusfar, 4 divisions
of the People's Army and 2 brigades of puppet Border Constabulary have
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been identified in action, Armor, with estimates running as high as 70
medium and light tanks, is in use and the northern Korean air force has
been involved in limited action.
Reports just before midnight of 26 June indicate that the capture
of Seoul is imminent and all available southern troops have been commit-
ted to the defense of the city. No concerted attempt is being made by
southern forces to withdraw for continued resistance south of the capital
and at least one of the four divisions in the Seoul area has been demora-
lized and cut up. Meanwhile, critical ammunition shortages are developing
and it appears that the evident demoralization of the high command is
affecting southern troops.
President tthee and his Cabinet are reported officially to have left
Seoul for an unknown southern destination and the Republic's Premier,
British Merchant Marino-trained Shin Sungmo, reportedly despairing of
"saving anything", has handed over full authority to Army Chief of Staff
Chao Byongduk. In Chairs opinion, resistance is useless after the fall
of Seoul. In the light of these multiple circumstances and the estimated
ability of the invading People's Army to launch further large-scale of-
fensives all alon the line, it is problematical whether cohesive southern
Korean resistance will continue beyond the next 24 hours.
CHINA
Co et China's role in Korean conflict-.Although the Chinese Communists
are not expected to play a major role in the Korean invasion, Chinese Com-
munist leaders may regard Korea as a testing-ground for determining the
intentions of the West, and Western policy toward the support of South
Korea may be reflected in Peiping's policy toward both Taiwan and Indo-
china.
The Peiping regime has had a continuing interest in strengthening north-
ern Korean forces for eventual military action against the southern
Republic. While the Chinese Communists probably exert no independent
influence on the northern Korean regime and have no voice in the formula-
tion of northern Korean policy, a possible total of 20-30,000 Korean
troops from Manchurian units of the People's Liberation Army have been
transferred to northern Korea over the past few years, together with
unknown amounts of materiel? While it is not anticipated that regular
Chinese Communist forces will appear in the Korean conflict,, some
sixty to seventy thousand additional troops of Korean extraction are
available in Manchuria for transfer to the North Korean forces, should
this prove necessary,
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4_
There is no necessary connection between events in Korea and
Peiping's intentions toward Taiwan. If tiestern action in support of
the Republic of Korea is ineffectual, however, the Peiping regime might
be encouraged to proceed rapidly with the invasion of Taiwan? Effective
Western action in Korea, In turn, might delay the invasion of Taiwan
indefinitely: on the other hard, if a Korean operation were to in-
volve the bulk of estern resources available in Asia, it might well
inspire a Chinese Communist glow against Taiwan at an early date.
The Invasion of Indochina by regular Chinese Communist forces has
been regarded as improbable in 19500 The invasion of South Korea by
North Korean forces does not necessarily imply any change in interna-
tional Communist strategy as regards the employment of the armed forces
of Communist regimes against non-Communist states. Korea is an inde-
pendent country where the northern puppet's aggression can be uniquely
disguised as a civil conflict, and the hands of the USSR and Communist
China are technically clean. Regardless of developments in Korea, a
Chinese Communist invasion of Indochina continues to be unlikely so
long as French capabilitiestdo not improve. However, the past disin-
clination of Moscow and Peiping to commit Chinese Communist forces to
action in Indochina is believed to have derived in part from the risk
of provoking a third * rld warp If the North Korean adventure does
not evoke any strong Western response, the USSR and Communist China might
reformulate their strategy for Southeast Asia in this light.
High 1950 goal set for Manchurian steel industry--The 1950 production "Gil
plan for heavy industry in Manchuria, presented by Kao Kang, Chairman
of the Northeast People's Government in March 1950, has now been re-
leased in full. The established goals will require the full-time
operation of nearly all Manchurian plants which remain, following
wartime demolitions and Soviet removals. The 1950 quotas for the iron
and steel industry are 720,000 tons of pig iron, 540,000 tons of steel
ingots and 340,000 tons of rolled steel, in contrast to estimates for
existing Manchurian capacity of 540,000, 500,000 and 500,000 tons
respectively J,/ The ambitious scope of the Communist plan emphasizes
the fact thah the Northeast is the only sizable industrial area in
China which also possesses a heavy industrial base, with ferrous re-
sources surpassing those. of any other area in quantity,,
The 1950 iron and steel goals correspond closely to the estimated
capacity of the two Northeast iron and steel centers,. Anshan and
Penchihu. The Communists, however, will be faced with several diffi-
culties in attaining near-capacity output. Chief among these is the
1946 Pauley report figures: the Communists have repaired two more
blast furnaces than the Pauley investigators counted on, a fact which
explains the apparent discrepancy in pig iron figures.
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problem of iron ore supply. In contrast to last year's goal of 100,000
tons of ore, the 1950 output wculd have to exceed a million tons,
Owing to the almost complete destruction and removal of ore-concentra-
ting equipments moreover, only high-grade ore, which is harder to mine,
is processable in the blast furnaces, Other production problems will
arise from the lack of key machinerg and the inadequacies of adjunct
industries such as electric power and cement. It is noteworthy that
the Japanese in Manchuria never attained more than 70% of capacity.
The lack of diversification in Manchuria's steel-finishing plant
poses an additional problem. Finishing mills, whose industrial sse-
timated at 300,000 tons, are able to produce only small
shapes, such as concrete reinforcing bars. An increased output would
therefore be one-sided in character, and its satisfactory utilization
in any reconstruction program would require the concurrent importation
of larger shapes from abroad.
The physical difficulties of attaining capacity production and the
necessity of imports may compel the Communists to lower their sights
in 1950. Nevertheless, in view of the high priority assigned to the
iron and steel industry in Manchuria, the extent to which the Communists
attain their 1950 plan will be a good measure of their all-round econo-
mic capabilities. Even if they attain only half the declared 1950
goal, the Chinese Communists will have succeeded in more than doubling
their 1949 Manchurian production..
INDOCHINA
US Legation Saigon, in turn, has surveyed the local scene and re-
ports that the emergence of Vietnam from colonialism
from theresodaadd-
vanced nor so assured as it would appear on paper
clarations. It is difficult to determine just how much authority has
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actually been transferred and where the locus of authority lies in
services supposedly handed over, in process of transfer, or to be
transferred by a decision of the Interstate Conference. In the case
of services already "transferred", parallel services continue to
exist,. Control of finances, foreign trade and customs, and armed
forces is still firmly in the hands of the French,
The French contend that their withdrawal from a position of auth-
ority would create a dangerous political vacuum in view of the Bao Dal
Government's failure to establish a competent administration resting
on a solid popular foundation, It is nonetheless evident that the
French themselves are largely responsible for this state of affairs,
The tenacity of French office-holders in the Indochina civil service,
their general refusal to assume subordinate positions with respect to
Vietnamese administrators, the stickiness of the French in relinquish-
ing to the Vietnamese certain administrative facilities (the palace at
Saigon is the most conspicuous example ),, and the insistence by the
French Government that no foreign technicians shall be employed by the
State of Vietnam, all have rendered Bao Dai's task of assembling a
competent administration, responsible to him, an almost insuperable
one. The few Vietnamese possessing the technical skills essential to
modern government are not attracted to a regime which the French them-
selves seem often not to take seriously. Thus, lacking the capacity
to attract able Vietnamese and the right to hire foreign experts, the
State of Vietnam finds itself incapable of establishing the type of
self-reliant goverment on which mass support and psychological vic-
tory over the Communist-led Resistance ultimately depends.
I3R1QA
South Korea issue and Socialist Burmese authorities and
moderate Sonzialists have stated that the smoldering conflict between
moderates and pro-Communists is about to be climaxed by the expulsion
of the left wing both from the Government and from the influential
Burma Socialist Party (BSP), with the Party simultaneously throwing
its full support behind Prime Minister Thakin Nu, The split in the
BSP will probably develop within the next few weeks and may be hastened
by the leftists' withdrawing before being formally read out of the
party.
There are no indications that the pro-Communists are preparing to
go underground. Instead, it seems likely that they will seek to form
a new political organization which would openly support international
Communism, in opposition to the present Burmese Goverment and its
Socialist supporters,; Such a development would clear the befogged
political atmosphere in Rangoon, considerably, and would seem to oDn mit
the BSP to a policy of increasing cooperation with the West.
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Since the friction within the BSP is primarily a matter of Burma's
orientation as between East and west, however, the implication of the
invasion of southern Korea -while it may cause an initial hardening
of the moderate Socialists' attitude- could bring the themselves moderates a anti-
Communist and cause them to reconsider before committing
Communist position from which It would be difficult to retreat. On
balance, the removal of the pro-Communist fraction from the BSP presently
appears to be a better than 50-x50 chance.
Ali Japanese Cabinet stem, except the Premier, are to tender
their resignations, thus paving the way for the formation of a new
YOSHIDA Cabinet. The Liberal Party decision to broaden the bases of responsibility for whatever future commitments Japan and the West may
mutually agree upon has been strengthened by recent events and the
Government plans to present a unified non-Commuist policy on foreign
affairs through the medium of a coalition cabinet. If a coalition
cabinet cannot be formed, the ILiberals will at least be in a position
to justify their future conduct on the basis of being the Party which
could not escape responsibility for what the Japanese Government may
consider unhappy but necessary decisions. Meanwhile, a lack of "impar-
tiality" in the coverage of the present
CAP by tQA,
rasul resulted situation
official Japanese Communist daily, has
suspend publication for 30 days.
The UK's lamest active China investment, the Kailan Mining Adninis--
tration, may have prolonged its life considerably by a reported sale of
a million tons of coking coal to Japan. A recently signed one-year agree-
ment with the state-owned coal company returned to KMA the exclusive
right to export its own coal, although the state company will continue
a
to handle most domestic sales. The
dntlagt the asupesriore the
coal industry eventually, but they evidently recognize l ork
ability of KMA's management to operate the mines and exp coal appear willing for the time beirg to let the British retain their interest
in the Kailan mines.
A Ma3~ Dam photo ph f Pei may shad some light on relations
between GCP Chairman MAO Tse-tung and Party theoretician LIU Shao-chi,
commonly cited as the leading contender for MAO's job. MW eis demonstrators,,
with upraised arm, returning the salute of the acclaiming emont a oa? ,
while four other leaders of the Peiping regime are grouped
with folded arms. LIU, the sixth man, has been halted, either by the
camera or by himself, in the act of starting or completing a gesture
of acknowledgement like MAO's. The expression on LIU's face, that of
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one apprehended while stealing cookies or profaning a shrine, suggests
that LIU is conscious of committing or narrowly averting an act of
outrageous lee e m oat ? Never:Lheless, while LIU is still some distance
ese Communist
Chi
n
from challenging MAO's position as Number One, the
press consistently places LM Umnedia.tely behind MAt) in its lists of
Party leaders, and it seems likely that LIU, who is standing on MAO's
right in the picture, is in fact the CCP'S Number Two.
Soviet rodncta cannot compete with lower -priced Japanese wares in
Thailand
r erase e
l
ti
cu
a
the USSR is not par
can make
vessel
f alls at Ch but
regular The market
ina
a
o
market potential o
en interest in the
Increased subversive ?~ctivitp in Sinxae2re, particularly among
labor organizations, oomprtsing employees of the Government and of the
Armed Forces, indicates more aggressiveness and improved technicliea on
the part of the Commn.Lst4 A number of veil-executed acts of sabotage
have taken place in which squads of 4 or 5 "shook troops" have been used
to cover the flight of arsonists. In one of these, a rubber warehouse
with a stock valued at 4S $250y000 was destroyed. Authorities in Singa-
pore now predict continuing and possibly increasing sabotage and sum
version within the city-,
"Turk" Yea terlin , the ex-KNIT. officer whose rebel forces brie flay
hold the ci by of Bandung last January, will appear at a Singapore court
on 5 July for a hearing on the question of his extradition to Indonesia
(under provisions of a British-Netherlands extradition treaty),, Delay
in the prodeedings, which were requested by the Indonesians following
Westerling'e arrest foie illegal entry into Singapore in February was
caused originally by faulty preparation of the Indonesian case and later
by the unearthing of new evider: ce purporting to show rdesterling's crir-
minal involvement in the allegod massacre of 40,000 people in South Celebes
in 1946. Since Westai.-ling was at that time an officer in the giL, his
defense may now officially involve the Dutch goverment m d may result
in a further strain cn Netherlands-Indonesian relations;,
The Labor-conlleedd Atmalian Sena' * has delayed or rejected all
important government legislatx,ony except an appropriation bill and the
child endowment bill, In the session of Parliament which is about to
end,. A second cession will reconvene late in September, at which time
the Labor Party will have to decide whether or not to continue its ob-
structionist tactics to the point possibly of for ding, a dia3solation of
Parliament and the calling of new elections. Meanwhile, state elections
during the past three months dc not indicate any increase in Labor's
strength; rather, they have demonstrated either a continuance of the
status uo or a moderate decl ina in Labor.' a popularity.
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f 9 e.
SECTION Ill. The Unitary State in Indonesia
Two distinct and often opposing groups of Indorrsians participated
in the creation of the USI: Republicans -who represented the 1947
Republic of Indonesia (including only Java, Sumatra and Madura); and
Federalists -who represented other parts of the Indonesian archipelago,
and were willing to work with the Dutch toward eventual independence.
Although Federalist influence was actually strongest in the scattered
islands of East Indonesia, the Dutch had extended military control over
former Republican areas and had sponsored the creation of separate
states in such areas, both in Java and Sumatra. By November of 1949,
the 1947 .Republic had been reduced to a small area in central Java and
some relatively undeveloped parts of Sumatra, while the proposed federal
structure of the USX included 16 areas with differing degrees of autonomy.
The three most important states, or "Negaraste, in the proposed structure
were (1) the reduced version of the Republic of Indonesia, (2) East Indo-
nesia, and (3) East Sumatra.
The Indonesian government, which was granted sovereignty in December
1949, was composed largely of leaders of the former Republic. Sukarno,
the new President, and Hatta, the new Prime Minister, had held the same
positions in the Jogjakarta government. Federalists, in turn, headed
the Ministries of 'I terior and Information, as well as two ministries
without portfolio.:/ In general, the first USI cabinet was moderate in
character.
within a few weeks, the trend toward a unitary state had become ap-
parent. Pro-Republican sentiment was strong in nearly all of the areas
which had once been under Republican control and, while the majority of
the 15 Dutch-sponsored states appeared too artificial to endure, the
move for a unitary state was furthered by the vigorous actions of the
aggressive nationalists who had gained control of the Jogjakarta Govern-
ment after the more moderate Republican had become USI officials.
Jogja propagandists and elements of the former TNI accelerated the
dissolution of the Dutch-sponsored Negara governments in areas adjacent
to the Republic and, although most Indoneai ns probably fared a more
simplified form of government than the federal structure, the USI differed
with Jogja over the method of achieving this end. The USI wished, to
achieve a unitary state by means of deliberate and formal methods: the
Jogjakarta Republic cared little about the methods used.,
At present) this conflict in views is being settled by compromise
between the two elements. On 19 May, the USI, acting in behalf of the
One of these latter, Sultan Hamid of lest Borneo, has been removed
and is currently under arrest for masterminding a plot to overthrow
the USI by force.
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states of East Sumatra and East Indonesia, reached an agreement with the
Jogja Republic which will abolish the federated USI and form a unitary
state? The new governmental structure, which is e3gaected to become ef-
fective by August, will have a constitution combining features of the
USI's provisional constitution with essentials of the earlier Jogjakarta
constitution. Under the agreement, the UST senate will be dissolved
and the new provisional parliament will combine the former USI House of
Representatives with the Jogja Parliament's working Committee, and addi-
tional members of parliament will be appointed by President Sukarno.
There are several aooarent disadvantages to the elimination of the
federated structure. From the US viewpoint, one of the more serious is
the decision to Incorporate much of the socialistic language of the old
Jogja constitution into the new constitution, and action which may well
diminish opportunity and incentive for investment by private US interests.
The new structure may also enhance the opportunities of pro-Communist
and ultra-nationalist elements who are strong in the Jogja regime. There
is also. a possibility that the provisions in the Hamie agreements con-
cerning "self-determination" or free expression of the desires of the
population regarding the ultimate status of territories in Indonesia will
tend to be ignored.
A more optimistic view considers the unitary state inevitable and
more suited than a federated structure to a new government which is
short of capable administrators and unable to support & multiplicity of
expansive local governments. There .is also the hope that a centralized
authority will suppress friction between local military and civil unite.
Prime Minister Hatta has assured the Indonesian people that formation of
a single state will not affect the Round Table agreements and that the
state would assume only a temporary character until a constituent assembly
has been set up and steps toward self-determination taken.
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