FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WORKING PAPER WEEKLY INTELLIGENCE HIGHLIGHTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500040022-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 21, 2016
• Document Release Date: February 27, 2008
• Sequence Number: 22
• Publication Date: February 14, 1950
• Content Type: PERRPT

Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
COEar NO.._.... a.~ ..
FAR EAST/PACIFIC DIVISI
OFFICE OF REPORTS AND ETIIATES
CENTRAL INTELLIGENCE AGENCY
NEEKLY INTELLIGENCE HIGHLIGHTS
E T
PACOM review(s) completed.
State Dept. review completed
NO. 87
DATE: 14 February 1950
DOCUMENT Np, OQ ;L
NO
bAr
CLAS _J
G.- IANC31ED
NEXT , 7: 7-3 S A REVIEW DATE:
l C.t-1ANGE IN CLASS,
I7ECLAScIF'
NOTICE: This document is a working paper, riot an official CIA
document. It has been coordinated within ORE, but not
with the IA.C agencies. It represents current thinking
by specialists in CIA, and is designed for use by
others engaged in similar or overlapping studies. The
opinions expressed herein may be revised before final
and official publication. It is intended solely for
the information of the addressee and not for further
dissemination.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
SECR ET
OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/ PACIFIC DIVISION
INTELLIGENCE HIGHLIGHTS NO. 87
8 FEBRUARY to 14 FEBRUARY 1950
aECTION I. SU. +,RY OF FAR EAST TRENDS AND DMIELQp?4ENTS
The Korean Defense Ministry has overspent its budget and the
police are expected to follow suit, thus worsening the dangerous
inflationary trend in the economically unstable young Republic (p. 2).
Meanwhile., a recently-introduced bill to reduce the power of the
Executive appears to have a chance of passing the Assembly, despite
Rhea's opposition (p. 2).
In China, wide publicity given to US charges of Soviet imperial-
ism, coupled with vehement but confused Chinese Connuniet denials,
may well contribute to public discontent (p. 3). The Communists are
taring strong measures to rid their economy of dependence on US im-
ports (p. 4) and there are some indications that the Shantung port
of Tsingta.o will come to have a special "extraterritorial" status
under the USSR sp. 5).
East and West having "chosen sides" in Indochina, local propa-
ganda efforts by both teams in Vietnam are intensifying. Thustar4
Ho 4 s line appears to be a more likely recruit-gatherer than Bao
Dai's (p. 6).
Five of the Dutch-erected "states" in Indonesia have voted to
cede their powers to the new federal government and other states are
expected to follow suit In a trend which may mean eventual unifica-
tion of the whole United States of Indonesia under a single adminis-
tration (p. 6).
NEWS NOTES
Japan buys Burmese rice,,,.NOZAKA speaks again...Chinese Comma
nists welcome US departure... Macao government under pressure...
Bangkok conference insets, ..Stranded Soros in Saudi Arambia,
The marginal notations used in succeeding sections of this Weekly
( aeAil, "Be, or "C") indicate the importance of the items in D/FE opinion
with "All representing the most important.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
W
SECTION II. DEVELOPMTS III SPECIFIED AREAS
KO IZA
Deficit defense sperdW threatens Rhee regime--Uncontrolled and oxcee-
sive spending by the Ministry of National Defense is contributing to
the Korean Republic's mounting deficit. Apparently unconcerned over
the serious implications of deficit spending, the Ministry of National
Defense has already exceeded its FY 1950 appropriation by more than
5 billion on (equivalent to US $5j million at the official rate),
while the police, under the Ministry of Home Affairs, have managed
to stay within their annual appropriation so far, an additional
allocation will have to be made to maintain present levels of police
activity.
Present National Defense expenditures are complicated by political
log-rolling and maladministration which contribute little to actual
defense. The Army is particularly guilty as the largest spender.,
Although funds have been appropriated for an authorized strength of
only 100,000 men, rations are issued to 3.20,000, and other direct
monetary benefits are extended to almost 200,000 members of various
"reserves" and para-military organizations. Expenditures are often
made by individual unit commander without adequate accounting or prior
approval of Finance Officers"
Strong representations from the US Military Advisory Group in
Korea have resulted in the Ministry of Defense's reluctantly agreeing
to reduce defense allocations in the coming quarter from some B billion
Won to 4.3 billion Won. This reduction, which is to be affected by
eliminating essentially political expenditures for "reserves" and by
cutting the high man-per-day ration allowance, has not as yet been
approved by the State Council or the President. There is ample reason
to suspect that the recommendation will meet strong opposition in that
quarter, since responsible Korean officials apparently consider the
exceedingly grave economic consequences of continued deficit spending
of less importance than the internal and external Comxiunist threat.
Amendment to reduce executive Dower--President Rhee has formally "Bit
announced the introduction in the National Assembly of a bill pro-
posing to amend the constitution by reducing the power of the execu-
tive and making the Prime Minister and Cabinet responsible to the
Assembly. The proposed amendment must be considered for at least
thirty days before coming to vote, and will require a two-thirds
majority of 133 Assembly votes to become law_.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
SO
8 ;C RET
-3-
The issue of the "strong executive" as opposed to the "respon-
sible cabinet" system of government first developed during the writing
of the Korean Constitution in the summer of 1948.. At that time,
the conservative and influential Hankook Democratic Party (now the
Democratic--Nationalist Party) favored a "responsible cabinet" system,
primarily because the party had no hope of preventing the election
of Rhea as President. Rhea has always felt very strongly that, under
the unsettled conditions in Korea, the Republic could survive only
with a strong executive and has expressed fear that factionalism and
an unstable government, impotent in a time of internal crises, would
result from application of the "responsible cabinet" principle., In
voicing his present opposition to the proposed amendment, Rhea has
attempted to prove his personal disinterest in the power of the
executive by stating that he fully intended to retire at the and of
his four-year tem.
The conservative Demoncratic--Nationaliste are leading the
present campaign to emend the consti ution, partly because of dis-
satisfaction with their share of cabinet and government influence.
The move is. supported by elements of all factions in the Assembly,,
however, because of the Assemblymen's desire to exert more direct
influence on government policy, operation and administration. The
Assembly is aroused by government inefficiency and police brutality,
but has been intimidated or ignored by the executive when presenting
demands for reform in the. past.
Pro-administration opponents of the amendment in the Assembly
now admit that the proposal has a chance of passing. It still.
appears, however, that Rhea will be able to exert sufficient pressure
to prevent the passage of any amendment that significantly reduceet
the power of the executive this spring.
CHINA
Peiping reaction to US chi Soviet k2ari.al.sr -For the past
month, the Chinese Communist and Soviet press and radio have given
wide publicity to US charges of Soviet imperialism in China. Rather
than rLationalizing the Soviet position in terms of Sino-Soviet .
"friendship" and the obligations of "proletarian internationalism,"
recent Communist comment on the US charges has tended instead to
minimize and even to deny Soviet privileges in China, specifically
in Manchuria and Sinkiang.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
W kwl
-4-
A Chinese Communist industrial-commercial mission which toured
Manchuria last fall and was quoted at length at that time on the
blessings of Soviet friendship and the value of Soviet assistance,
has been re-interviewed in order to refute the "foolish, shameless
and mean" allegations by the US. . In all of Manchuria, they report,
there is "absolutely no sign of interference with China's internal
administration," and "every important policy" is referred to Peiping
for approval. "Soviet experts concern themselves only with technii-
cal issues," and the "immense contributions" of the USSR have been
confined to "recommendations." Further, Manchurian communications
are "100%" controlled by the Chinese, there are no Soviet military
forces outside the Port Arthur naval base area, and in the entire
Northeast there are only three enterprises under "Joint operation"
Peiping has not found It difficult to dismiss Western Journal-
ists' 'k'eports" of a "Harbin pact" and a "Moscow pact" as fabrica-
tions,, which they apparently are, and thus to discredit the official
US charges to some degree. However, the furious tons of Chinese
Communist response to the Acheson statement on Soviet encroachment
indicates that the bulk of the charges struck home in Chine. The
Peiping regime apparently hopes to pacify Chinese public opinion by
proclaiming alternately or simultaneously (a) that Soviet privileges
are entirely consonant with Sino.-Soviet friendship, and (b) that no
such privileges exist in any case. The publicity given the US
charges and the vehemence and confusion of the Communist rebuttal,,
however, will probably contribute to the discontent of the Chinese
public over USSR encroachment.
Communists reduc dee~ndence on US trade-Strenuous efforts to
shake off dependence on the US as an export outlet, and source of
supply have been initiated by the Chinese Communists, Government
import and export organizations, which dominate the foreign trade
field in Communist China, have been ordered to cut their trade with
the US and give high priority to the development of commerce with
other areas, such as the UK and Western Europe. Although the Commu-
nists realize that the US is the only feasible source of some items
of supply, they apparently hope to minimize direct dependence on the
US, even in these cases, by developing indirect channels for pro-
c:trement through Hong Kong or South American intermediaries..
In the past, the US has been the principal source of China's
imports and, with the exception of Hong Kong, her main export out-
let., Some 40% of China's recorded import trade and over 25% of her
export trade were directly with the US in 19466-4& even after the
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
S E C RE T
Communist takeover of mainland ports, the US maintained its pro-
minent position in the China trade. Chinese Communist efforts to
out this commerce with the US will be reinforced by other develop-
ments, such as the imminent exit of American business men and con-
sular officials from the mainland, a shortage of dollar exchiange,
and the conclusion of barter agreements with other countries,
Success in developing new channels for foreign commerce gill
reduce one of the Chinese Communists' major vulnerabilities in the
cold war -- the adverse effect of export controls and other measures
of economic warfare on the part of the US. To attain the announced
object of industrial rehabilitation, the Communists depend heavily
on imports of items such as railway equipment, pumping machinery,
copper wire, and machine tools, which US export controls threaten
to cut off unless other sources of supply are found. With the de-
monstrated reluctance of other countries to go along with
the US in restricting the export of such items to China, the Commu-
nist effort to find alternates to US sources of supply probably will
achieve some success.
Status of Tsintao--There are indications that the Shantung port
of Tsingtao may be marked for a unique status among China's major
cities as an area of s ecial Soviet influence and ar controls
The potential value of Tsingtao as a Pacific naval base may
well be making the fate of that city one of the subjects under dis-
cussion at Moscow. The aforementioned straws in the wind suggest
a strong possibility that the forthcoming Sino-Soviet treaty will
contain some provision for special Soviet status in the city, such
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
S E C R E T
-6-
as the establishment of a mission for training the Chinese Commu-
nist navy. Any reference of Tsingtao in the treaty, it included,
certainly will not be presented as an abridgement of Chinese
sovereignty, but may well indicate the city's possible future de-
tachment from purely Chinese control,
IND-.-~.OC_RINA
Proms inter tied-me sudden concentration of international
interest on Vietnam, as a result of the formal designation of
Ho Chi Minh and Bao Dai as the respective champions of Soviet and
Western interests in that area, has brought a concurrent stiffen-
ing in the propaganda line of each champion. For the first time
since its appearance in 1945, the Ho Chi Minh Government has praised
the USSR, while spokesmen for Bao Dai have pledged themselves to
fight against a movement "which serves foreign Interests."
Despite Bao Dai's achievement of US and UK recognition, there
has been no new tendency on the part of the Vietnamese to accept
the Emperor as the symbol of Vietnamese nationalism. jr, terms of
the struggle for the loyalties of the local population, in contrast,
Hole establishment of diplomatic relations with the Communist
regime in China has provided him with a now advantage. The fear,
respect and hostility which the Vietnamese feel toward China, Com-
munist or otherwise, constitute a strong political current. A
g+overnmant which is able, as Hoes apparently has been, both to con-
ciliate the Chinese, to obtain an Implied promise of material support,
and at the same time to promise that any invading troops (including
those of Coeneauni,s t China) would be attacked, is not likely to suffer
from comparison with the Bao Dai Government in the eyes of an
average Vietnamese who is applying the "tool of-a--foreign-paraerte
yardstick,
Meanwhile, some indication that strengthened morale and possibly
material aid have resulted from the new Ho-MAO entente has appeared
in increasingly vigorous Resistance activity throughout Vietnam.
Under these circumstances, the Vietnamese, wary of endless promises
but mindful of concrete developments, may well be less apt than ever
to swing toward support of Bao Dai, emphtically Bona non vats
to the Peiping Goverrusient,
IMO.... N ESIA
Unification trends- .Less than two months after, the birth of the United
States of Indonesia, five of the sixteen member "states" have voted
to surrender their powers to the federal government and a similar
move is being considered by at least four others? The five areas
HR ET
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
V +w.~
-7-
which have voted their own liquidation were originally parts of the
old Republic of Indonesia, established by the Linggadjati Agreement
of March 1947. These territories (West Java, East Java, Central
Java, Madura and South Suaaetra)were established by the Dutch as
autonomous areas following their seizure during the two "police
actions" against the Republic. Since West Java, East Java,, and
Central Java, together with the remaining Republican area near the
south-central coast of Java, administered from Jogjakarta, consti-
tute the whole of the island, it appears possible that all of Java
will be joined in a unitary state dominated by Jogjakarta. Alter-
natively, these autonomous areas may choose to become provinces
under direct authority of the new federal government. Until such
time as the question is decided by some sort of plebiscite, however,
the self-liquidated areas will be administered by a federal commis.-
signor.
Indonesian leaders, feel that this trend toward centralisation
is politically wholesome and will result in more efficient adminis-
tration. They characterize this eradication of the vestiges of
Dutch control as true expressions of the people's will in attempt-
ing to rid themselves of abnormally-imposed political structures.
The movement has not been entirely a voluntary expression of popu-
lar will, however; a number of Indonesian leaders, including Presi-
dent Sukarno, have pressured the local regimes.
Should a single administrative structure for the whole of the
USI emerge, it will possess several obvious advantages over the
federal system conceived at the recent Hague conference. The
limited number of trained administrators in Indonesia could be
more efficiently utilized and the reduction of numerous large and
expensive local staffs would lessen the Government's financial
burden. In addition, such a system would help to eliminate the
rivalries among local administrators which have created some poli-
tical instability and could diminish the feeling of Indone an
national consciousness which USI leaders are now endeavoring to
foster.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-01090A000500040022-9
W
NVIS NOTES
The Japanese will b 1`0 000 tons of rice from Burma during
February and march at L 40 sterling per ton. This sale will
stiffen Burma's resistance to Commonwealth efforts to force a
price reduction to i; 3$. Burma's most immediate benefits are ex-
pected to derive from: (1) the creation of a new market for accumu-
lated rice stocks, thus reducing the strain on extremely limited
storage facilities, and (2) receipt of badly-needed cash with which
to resume the purchase of paddy from local cultivators.
In response to Javanese Communist, leader NOZAKA Sanwp's published
"self-criticism" last week, Democratic Liberal. Party members in the
Diet promptly queried the Government on its intentions toward the
Japan Communist Party, in view of its openly international character
and violent revolutionary aims. NOZAKA as promptly denied that he
had ever advocated revolution in Japan.
The YOSHIDA Government is pressme'd to be awaiting a suffi-
ciently flagrant Communist violation of Japanese law to serve as an
excuse for suppressing the Party either completely or in part. The
Communists, in turn, are very much aware of the conservative t1hreat
facing them in the event of Party-incited violence, NOZAKA's moat
recent statement lends added weight to the contention that Japanese
Communists will not willingly and without great USSR pressure, over-
step the fine line which separates vociferous criticism from the
employment of overt force.
Approved For Release 2008/02/27: CIA-RDP79-01090A000500040022-9
 Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9
NOW
Tha withdrawals of US officials from China appears to have been
expedited by the Peiping regime's recent announcement that it will
welcome such officials' departure, and the sooner the better. There
is still a chance, however, that certain US representatives will be
held for display in "espionage" trials, or will be the victims of
retaliation for Nationalist air raids.
The, Port se administration of Macao has been cited by Kwang-
tung Gvernor Yoh Chien-ying for aiding Nationalist naval vessels
and violating Chinese territorial waters near the colony. Simultane?-
ouely, the Chinese Nationalist press claims that Macao is being used
by the "Cominform Far Eastern Branch" for transshipment of smuggled
military supplies destined for Communists in China, Indochina, and
Thailand,
The Bangkok Conference of US chiefs of mission in the Far East
is currently in session. The purpose of the meeting is to exchange
information and opinions on the several major problems facing the
US in Asia. Among the topics under consideration are plans for a
Japanese peace treaty, the question of recognition of Communist China,
the dilemma posed by the situation in Indochina and the overall US
objective of containing Communism in the area.
Repatriation of 1,800 Philippine Moslems, who arrived in Saudi
Arabia on 26 September 1949 on route to Mecca, continues to be de-
layed pending a Philippine Government guarantee to pay approximately
$124,000 in pilgrim dues to the Saudi Arabian Government. At least
some of the pilgrims' plight is apparently the fault of a leading
Philippine More, former Senator Pendatun, and the manner in which he
handled arrangements for the pilgrims which has been described as
reflecting "much discredit upon his character". After being warned
that the US would cease representing Philippine interests in Saudi
Arabia unless some control is established over next year's pilgri-
mage, the Philippine Government has promised to take all necessary
steps to prevent a recurrence of the infortunate incident.
Approved For Release 2008/02/27: CIA-RDP79-0109OA000500040022-9