THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A000900010001-5
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 9, 2016
• Document Release Date: March 15, 2001
• Sequence Number: 1
• Publication Date: June 15, 1966
• Content Type: IR

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OCI No. 0378/66
Copy No. . 137
INTELLIGENCE REPORT
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
BACKGROUND USE ONLY
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ST
GROUP I
Excluded from automatic
downgrading and
declassification
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This Document contains information affecting the Na-
tional Defense of the United States, within the mean-
ing of Title 18, Sections 793 and 794, of the U.S. Code, as
amended. Its transmission or revelation of its contents
to or receipt by an unauthorized person is prohibited
by law. The reproduction of this form is prohibited.
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GN DI EM BACK GROUNDOUSONLY-5
In the future, the weekly Intelligence Report
on The Situation in South Vietnam will be produced
by the Directorate of Intelligence so as to permit
dissemination on Monday of each week. This change
is intended to facilitate timely incorporation of
material from the reports of US agencies in South
Vietnam. The next edition of The Situation in South
Vietnam will be disseminated on Monday, 27 June 1966.
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No. 0378/66
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(9 June - 15 June 1966)
C O N T E N T S
The GVN-Buddhist confrontation;
Election law changes; Other gov-
ernment developments; Military
unity; Students; Catholic rally.
Implementation of the over-all
pacification program; 1966 pacifi-
cation goals; Monthly progress re-
port by corps area; Chieu Hoi.
Prices; Currency and gold; Civil
aviation; Banking; Taxes; Recent
trends in industrial production.
ANNEX: Weekly Retail Prices in Saigon (table)
-i-
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Long
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Pleiku,
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`2;u)ital Mititary Region
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This week, the re-emergence of a strong
militant element among Buddhist, leaders,
in Saigon resulted in new attempts to stage
demonstrations in the capital. Despite a
continuing impasse between the government
and dissident elements in Hue, Premier Ky
reportedly feels that he has the Buddhists
well in hand, however, and he is planning
several major events on 19 June, his first
anniversary as premier. It is possible that
some further changes in major military com-
mands may be announced in the near future.
The GVN-Buddhist Confrontation
1. Buddhist Institute chairman Tam Chau again
departed the capital for a coastal resort on 13 June,
after his appeals for moderation apparently gained
little support from most other ranking institute monks.
Demonstrations began hours later, and the number of
altars in the streets around the Buddhist Institute
also increased considerably after Chau's appeal for
their removal was countermanded by other Buddhist
leaders. Thus far, police have dispersed all crowds
attempting to reach the downtown area, and have begun
checking the identities of a large number of demon-
strators for eligible draftees and persons wanted by
the police.
2. There were indications earlier in the week of
the cleavage existing between militant and moderate
Buddhists over tactics to be used in the struggle against
the government. This could be seen in the appearance
of conflicting communiques from the Buddhist Institute.
Moderate monk Tam Chau was apparently behind the issu-
ance of a 15-point communique that contained strong
anti-Communist and antineutralist statements. He re-
portedly also expressed a willingness to cooperate with
police in the apprehension of Viet Cong and Other ex-
tremists masquerading as Buddhist monks. At the same
time, however, an unsigned institute communique sup-
ported militant Tri Quang in his call for a boycott;
of the September elections.
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3. An uneasy coexistence between government
forces and dissident elements continued in Hue through-
out the past week,. A large number of Buddhist altars
remained in the streets and commercial activity has
been well below normal. Although Tri Quang continues
his hunger strike., he is reported in a seriously
weakened state and may soon find it expedient to heed
the appeals of his religious superiors and peers to
desist. National police director Loan, a strong force
behind the government"s efforts to restore control in
I Corps, arrived. on 13 June, but thus far has exercised
restraint in directing the activities of his police
field forces, However, US observers tend to feel that
psychological pressures alone will not be sufficient,
and Loan may take more direct action. before 19 June,
the first anniversary of the Ky government.
Election Law Changes
4. In reviewing the September election law draft,
the enlarged cvi!lian-m-I;i_tary Directorate decided to
strike the provision that allowed the constituent as-
sembly to assume a legislative function in addition
to its constitution drafting duties. Other major
changes made by the Directorate included a reduction
in the number of elected deputies from about 159 to
approximately 120, and the substitution of a modified
list method of voting in place of candidacies by
single individuals.
5. Although the functions of the constituent
assembly had previously been a major issue, the
changes brought little immediate response from the
Buddhists, who have announced their intention to boy-
cott the September elections. However, the Buddhists
may seize upon the Directorate's decision to limit
the function of the assembly in order to justify their
boycott and; urge other groups to do likewise.
Other Government Developments
6, The government is planning a number of events
on its 19 June anniversary, which has been proclaimed
Armed Forces Day, The final election law draft and
the creation of the 80-man military-civilian advisory
council will be officially promulgated. Also Premier
Ky is planning to make a major address reviewing the
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accomplishments of his regime and outlining the fu-
ture plans of his government.
7. Continued negotiations between government
representatives and FULRO; the dissident tribal au-
tonomy movement, are apparently making headway. A
special statute satisfying most of FULRO's grievances
has been drafted, and the Commissioner for Montagnard
Affairs reportedly hopes to get Premier Ky's agree-
ment to it "in principle" within the next few days.
The commissioner believes that this step would lead
to the return of several hundred FULRO adherents to
the government. The details of a final statute could
then be worked out at a conference with the new re-
turnees.
Military Unity
8, Reports of various conversations and in-
trigues among military elements in the government sug-
gest that a new equilibrium among military factions
has not yet been reached. Premier Ky, who relied
heavily upon the militant faction of "young turks" in
his move on Da Nang, reportedly has not yet decided
whether to promote various members within this fac-
tion, or to cut down their influence by reassigning
them to dispersed areas.
9. In addition, no final decision has yet been
reached on the question of what to do with senior of-
ficers.--such as Generals Thi, Dinh, Chuan, Nhuan, and
Cao--who were involved in the antigovernment movement.
It is possible, for example, that General Thi might
be given a position within the Saigon area. Such a
move would probably necessitate the removal of Thi's
adversary, Deputy Premier Co, who is a member of a
faction `urg.ifag ;a complete break with the former dissi-
dent generals.
10. The recent resignation of the Saigon Uni-
versity Student Union president has apparently ne-
cessitated the holding of new student union elections
sometime soon. The US Embassy has commented that
"struggle force" proponents have been making inroads
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in associated student executive committees since the
government applied force in Da Nang on 15 May. Other
student leaders still refusing to commit themselves to
an antigovernment campaign have been subjected to con-
siderable pressure and intimidation, and continued
control by moderates is in some doubt, However, pro-
"struggle" students at Saigon University's School of
Medicine who held antigovernment rallies this week
were threatened by police with a loss of their draft
exemptions and more than 100 of them were arrested.
Catholic Rally
11. Catholics in Saigon showed impressive strength
in a large, well-organized, weekend demonstration that
stressed anti-Communism, pro-Americanism, and support
for the South Vietnamese military establishment. The
rally was designed to demonstrate that the Catholics
are a force to be reckoned with in any future political
structure. The success of the demonstration also
served to establish the strength of the recently re-
vised leadership of the Catholic Citizens Bloc, and to
downgrade the influence of individual Catholics--such
as northern refugee leader Father Hoang Quynh--who
have expressed some sympathy with the antigovernment
stand of the Buddhist Institute.
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II. REVOLUTIONARY DEVELOPMENT
The field of revolutionary develop-
ment is highlighted this week by the re-
ceipt of the US Mission report on progress
in the program during May. Other infor-
mation is reported on how the 1966 funds
for pacification and civic development
will be spent. As expected, the political
unrest has caused a continued setback in
the implementation of civic action pro-
grams in some areas, but there are some
bright spots, particularly in the provision
of security to elements engaged in the pro-
gram outside the I Corps area.
Implementation of the Over-all Pacification Program
1. The allocation of funds within the over-all
pacification effort provides a partial indication of
which aspects of the program are currently receiving
the strongest emphasis.
2. Of the 14 categories in the program used
for budget purposes, three areas are earmarked to
get 57 percent of the total 1966 funds: refugee
resettlement, rural education, and the construction
of bridges and roads. The program to improve rural
education facilities includes the hiring and train-
ing of 2;,604 hamlet-level teachers and the construc-
tion of 2,251 hamlet classrooms. Each hamlet is al-
lowed up to three classrooms; each of the classrooms
can accommodate 60 students. To enhance interpro-
vincial communication and the delivery of agricultural
goods to market centers, over 500 miles of roads and
148 bridges, ferries, and markets are scheduled for
construction using 1966 funds.
3. Part of the remaining 43 percent of the
budget covers programs such as the training and
funding of revolutionary development cadre groups,
and the accommodation and processing of the Chieu
Hoi defectors. The remainder of the funds are
utilized for assistance programs that receive little
publicity abroad, but are popular among the rural
population. These include programs for the improvement
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of agriculture, pisciculture, and animal husbandry,
for canal and dam construction, and for the con-
struction of storage facilities for agricultural
products.
4. The implementation of revolutionary de-
velopment plans involves coordination among several
Vietnamese . niiniist?ri.ess, all of which are heavily en-
gaged in the total program to speed the social:evo-
lution.ary process in South Vietnam.
1966 Pacification Goals
5. According to a Central Revolutionary De-
velopment Board planning paper, the 43 provinces of
South Vietnam have obligated themselves to realize
at least 75 percent of their total pacification
goals programmed for 1966. This includes the in-
corporation of over one million people into 969 new
hamlets. Another million will be consolidated into
1,083 existing hamlets. In these hamlets, the cadre
groups will organize the inhabitants to defend them-
selves,salf-governing units will be elected, and
members will be appointed to the next highest village
administrative council. The 1966 plan also calls for
the continuing development of 3,260 newly pacified
hamlets and urban centers with an estimated popula-
tion of 7,842,000. There is presently a total of
13,211 hamlets in South Vietnam.
Monthly Progress Report
6. According to the special report by the US
Mission on revolutionary development progress for
May, only 16 of the 43 provinces and three autonomous
cities are either keeping up with or are ahead of
their monthly development schedules. Although de-
lays in the distribution of construction materials
remained a problem in most provinces, essential items
such as cement and materials for building defensive
fort fic,atio.ns:have. become more readily available.in
the past eight weeks.
7. Some provinces report that the GVN officials
who administer the pacification projects have been
accepting unsatisfactory construction work in order
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to meet the revolutionary development goals that
were programmed for 31 May. This tendency, which
was typical in reporting on civilian programs under
the Diem regime, has been taken into account by US
officials who advise on implementation of the proj-
ects in the provinces.
8. Difficulties in recruiting manpower for
security forces were still reported as severe dur-
ing May.
9. I Corps. Several months of political
turbulence in the northern provinces has resulted
in considerable inertia in the pacification effort
there during May. Security for the pacification
cadre was provided largely by allied forces inas-
much as most of the I Corps units have been inactive
in military patrol duties. There are still serious
shortages of construction materials and selected con-
sumer items due largely to transportation strikes.
The high rate of official personnel changes at all
levels has also had an adverse effect on the program.
In addition, officials cite an increase in assassina-
tions, kidnappings, and proselyting of villagers by
the Viet Cong.
10. II Corps. The over-all revolutionary de-
velopment program moved ahead significantly in this
area, recouping some losses from previous months.
The general security situation for the improvised
cadre teams improved as a result of ARVN and allied
combat; operations. Despite some price increases,
consumer goods were in adequate supply and com-
merce was reported to be flourishing in all prov-
inces. Only two II Corps provinces reported a lack
of adequate regional and popular force elements,
who are used to provide security for the pacifica-
tion workers in the villages outside the provincial
capitals.
11. III Corps. An improvement in the morale
and effectiv ne ess7of security forces in the provinces
around. Saigon was reported in the III Corps pacifi-
cation effort. Viet Cong incidents decreased in both
number and intensity. No particular problems were
noted in III Corps in the supply of consumer goods
or of construction materials for self-help projeets..
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12. IV Corps. Of 14 provinces in the area,
five are reported behind in the implementation of
their provincial plans through May, due largely to
problems associated with insufficient security
forces, inadequate transportation, and construction
material shortages. The high cost of living con-
tinues to trouble wage earners, especially govern-
ment employees, who have not had wage increases
sufficient to offset the rising prices.
Returnees (Chieu Hoi)
13. As a result of greater military contacts, the
Communist defector tally for the week ending 10 June
increased slightly to 354, of whom 238 were military
personnel. Among the more noteworthy defectors were
the deputy chief of a Viet Cong southern base area,
a local force platoon leader, two main force squad
leaders, and three main force assistant squad leaders.
The cumulative returnee total since the beginning of
1966 is 8,879, an average of approximately 55 persons
per day.
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III. ECONOMIC SITUATION
Retail prices in Saigon declined
slightly in the week ending 6 June, as
did the prices of $10 bills and $10 MPC
(scrip). Talks began between the US and
GVN on civil aviation matters, and the
GVN approved investment guarantees for
Chase Manhattan and Bank of America. Re-
cent data suggest a continuation of the
upward trend in industrial production.
I. As supplies became more plentiful, retail
prices in Saigon declined slightly in the week end-
ing 6 June. Among imported commodities, the prices
of condensed milk, wheat flour, sugar, and cement
declined as additional supplies arrived on the market.
Princes of iron and steel products, however, con-
tinued the rise that began two weeks ago in response
to new arrangements made by the Ministry of Economy
for the direct supply of end-users. Over-all, the
USAID retail price index was four percent above a
month ago and two percent above the monthly average
for May. (A table of retail prices in Saigon is
included in the annex.)
2. Wholesale rice prices in Saigon have con-
tinued to rise in spite of somewhat improved de-
liveries. By 7 June the price of the cheapest type
of rice, which includes 25 percent brokens, was
more than 1,000 piasters per 100 kilograms com-
pared with roughly 700 piasters at the beginning
of the year. In response to this situation,':the
GVN has agreed to begin sales of imported rice on
13 June in Saigon at a price of about 900 piasters
per 100 kilograms.
Currency and Gold
3. On the Saigon free market, the price of
$10 bills fell from its all-time high of 189 to 186
piasters per dollar. Similarly, the price of $10
MPC (scrip) fell to 123 from its previous high of
134 piasters per dollar. MPC, therefore, has now
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largely lost the premium over the official rate
which it had acquired with the onset of civil dis-
turbances. In spite of the decline in the price
of $10 bills and $10 MPC, gold remained unchanged
at its all-time high of 289 piasters per dollar,
probably indicating continued uncertainty in-the
commercial community. In Hong Kong, the piaster-
dollar cross rate, which customarily lags behind
movements in Saigon, rose to 166.
Civil Aviation
4. Talks between GVN and US officials on Pan
American's scheduled traffic rights in South Viet-
nam began in an atmosphere of tension. An order by
the Vietnamese Directorate of Civil Aviation, dis-
continuing Pan American's rights on the Saigon -
Hong Kong and Saigon-Singapore sectors as of 6 June,
was temporarily suspended after personal representa-
tion by Ambassador Lodge to Premier Ky. The US Em-
bassy has proposed a -two-year unilateral permit for
Pan American, with the understanding that the GVN
might limit Pan American's carriage of local traffic
on the Singapore route to two of the present three
weekly, flights. The GVN agreed to study the pro-
posal but reiterated its desire to negotiate a bi-
lateral civil air agreement.
5. The US Embassy has indicated that since
Air Vietnam does not fly to the US, the mutual in-
terest and reciprocity that underlie most bilateral
agreements are lacking in this case. At a meeting
on 10 June, Dui Diem, adviser to Premier Ky, stated
that he thought the GVN should first attack the prob-
lem of Asir Vietnam's competitive position on routes
where it competes with Pan American and only later
move on to the question of prestige associated with
having a bilateral agreement with the US.
Banking
6. After rejecting a request from Chase Man-
hattan Bank for approval of an AID investment
guaranty, the GVN reversed itself and approved in-
vestment guarantees for both Chase Manhattan and
Bank of America, the two US banks that have re-
ceived GVN approval to open branches in Saigon.
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Last month, the GVN passed a new tax law, which
would tax these banks 1.2 percent of capital in-
vested in South Vietnam instead of 1.2 percent of
total corporation capital as has been the case.
7. An Internal Revenue Service team, which
arrived in South Vietnam in mid-May at the request
of the GVN,. has been well received by the secretary
of state for finance and officials of his depart-
ment. The team has concluded that the GVN cooper-
ated to the fullest extent with the IRS group, and
that the Ministry of Finance desires assistance from
the US to improve its revenue administration and
organization.. The team feels that with continued
Vietnamese cooperation and reasonable political
stability, the collection of revenues could be sub-
stantially increased even under existing Vietnamese
laws.
Recent Trends in Industrial Production
8. According to an official GVN index, in-
dustrial output has continued to rise steadily since
1962, the base year of the index. In 1965, this
over-all index showed a gain of 20 percent above
1964 and 36 percent above 1963.
9. Although industrial production index figures
are not yet available for the first quarter of 1966,
recently available data on, the physical output of in-
dividual commodities during this period suggest a
continuation of the upward trend evident since 1962.
Output of several of the products most heavily
weighted in the composite index was well above that
recorded during the corresponding period of 1965.
Gains ranging from 12 to 36 percent were recorded
for paper, cement., beer, soft drinks, refined sugar,
cotton yarn, oxygen, and acetylene.
10. Production of cotton yarn, however, probably
will suffer a setback in the second quarter as a re-
sult of the VC attack in April on the Sicovina tex-
tile mill, a major cotton spinning mill located at
Thu Duc. The extensive damage inflicted on this
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mill has been estimated as high as $1 million.
Data on the output of electricity, available only
for January and February, show that electricity
output increased 20 percent over the first two
months of 1965, and also exceeded the 1965 monthly
average.
L1. Production of glass was slightly below
that of the first three months of 1965, but on a
monthly basis was still running well above the 1965
average. Processed tobacco, which weighs heavily
in the over-all index, also was down slightly. The
most notable decline, however, was in woven cotton
fabric, the output of which was 13 percent below
the first quarter of 1965 and 20 percent below the
1965 monthly average.
12. No new data are available this week for
the South Vietnam Economic Indicator graphics.
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ANNEX
Weekly Retail Prices in Saigon
(In Piasters)
3 Jan
1966
Index for all Items hJ
160
Index for Food Items bJ
169
Of which:
Rice/Soc Nau (100 kg,)
800
Pork Bellies (1 kg.)
70
Fish/Ca Tre (l kg.)
110
Nuoc Magi (jar)
50
Index for Non-Food Items J
124
Charcoal (60 kg.)
440
Cigarettes (pack)
10
White Calico (meter)
27
Laundry Soap (1 kg.)
30
9 May 16 May 23 May 31 May
1966 1966 1966 1966
156 158 161 164
164 166 171 174
1,100 1,100 1., 150 1,150
70 70 70 70
110 110 105 110
65 70 70 70
126 126 126 129
450 450
10 10
27 27
32 32
450 480
10 10
26 26
32 32
Percent
Percent
Change
Change
from
from
Mo. Ago
Yr. Ago
+ 9
+ 59
+12
+ 72
+ 7
+ 26
0
+ 40
0
+175
+17
+ 56
- 1
+ 16
_3
+ 12
0
+ 25
4
+ 8
0
+ 26
a/ Data are from USAID sources.
b/ For all indexes, 1 January 1965 = 100.
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