THE SITUATION IN VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001000010037-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 20, 2016
• Document Release Date: September 20, 2006
• Sequence Number: 37
• Publication Date: July 18, 1966
• Content Type: IR

ARMY review(s) completed.
USAID review completed
State Dept. review completed
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
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01000010037
18 July 1966
No. 0382/66
Copy No.
INTELLIGENCE REPORT
138
GROUP I
Excluded from automatic
-4 downgrading and
declauificatio.
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This docum
national d
meaning of
Code, as a
of its con
person is
Approved For F
nt contains information affecting the
fense of the United States, within the
Title 18, sections 793 and 794, of the US
ended. Its transmission or revelation
ents to or receipt by an unauthorized
rohibited by law.
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No. 0382/66
CENTRAL INTELLIGENCE AGENCY
Directorate of In.telligen.ce
THE SITUATION IN SOUTH VIETNAM
(11 - 17 July 1966)
New cabinet announced; General Thi
to depart for the US; Policy and
leadership problems continue in the
Buddhist Institute; Election progress;
FULRO negotiations may be running into
trouble.
Ministry of Revolutionary Develop-
ment upgraded from state secretariat;
Education. and Health Secretariats;
Training of village and hamlet offi-
cials; Viet Cong defectors (Chieu Hoi).
Prices; GVN decisions on pork; Cur-
rency and gold; Rice deliveries; Pos-
sible transfer of rubber plantation;
Port operations; End of strikes.
ANNEX: Weekly Retail Prices in Saigon. (table)
Free Market Gold and Currency Prices (graphs)
(Monthly and Weekly)
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Premier Ky's new cabinet, announced
last week, added important southern po-
litical elements to the government at the
expense of central Vietnam and the Buddhist
Institute. At the same time, the military
tightened its control over the security,
information, and administrative arms of the
government. There was also some evidence
of a last minute compromise which adjusted
the influence of military factions within
the cabinet.
Among other developments, former I
Corps commander General Thi apparently has
agreed to accept a government offer which
would allow him to depart for the United
States in the very near future. Policy and
leadership problems within the Buddhist In-
stitute were compounded last week by the
"withdrawal" of moderate Institute chairman
Tam,Chau from an active role in the Institute
for the next two months. The current domi-
nance of the militants within the Institute
make unlikely any early settlement of dif-
ferences between the Institute and the gov-
ernment in the near future. A sufficient
number of persons initially filed last week
as candidates for the constitutional assembly
elections in September, but their names and
affiliations were not immediately available.
In the central highlands, negotiations be-
tween the government and the dissident tribal
autonomy movement FULRO reportedly were in
danger of breaking down because of a recent
change in Premier Ky's attitude.
Premier Ky's New Cabinet Finally Announced
1. After several delays, Premier Ky's new cabinet
was announced on 13 July. In terms of regional balance,
southern influence was increased by the appointment of
several former ministers from the Huong government, in-
cluding one as a new civilian deputy premier in charge
of health, education, and social welfare. This increase
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of southern influence in the cabinet, while perhaps
in part a reaction to the recent "struggle" movement
in central Vietnam, also represents a significant
bid :by Ky for southern support during the forth-
coming constitutional assembly elections. Some 71
of the 108 assembly seats to be contested are in
III Corps, IV Corps, and the Saigon area. The addi-
tion of a civilian deputy premier could also be
interpreted as another step by Ky to increase the
civilian image of his government.
2. Catholic representation in the cabinet was
maintained by the appointment of General Nguyen Bao
Tri as Information/Chieu Hoi Minister. The replace-
ment of a civilian information minister by General
Tri, who is concurrently the armed forces' political
warfare director, also served to increase military
control over government propaganda and censorship.
Finally, the only two cabinet members who were dropped
entirely were close to the Buddhist Institute, and
one of these was the only regional representative from
central Vietnam.
3. Although official South Vietnamese Govern-
ment announcements of the cabinet change did not dwell
upon internal organizational realignments, there were
some significant shifts in responsibilities at the
supra minister level. According to a US Embassy re-
port, the ministries of agriculture, public works,
and the civilian administrative part of the former
interior ministry now will report to Revolutionary
Development minister General Thang. Deputy Premier
and War minister Co, meanwhile, lost the responsibility
for three of the six ministries he formerly supervised,
but gained responsibility for one other ministry. The
net loss in the administrative authority of General Co
had earlier been reported as probable, and the repeated
delays in the announcement of the cabinet were widely
rumored to have been caused by Co's objections to such
a change. However, some compromise apparently was
worked out, since prior evidence suggested that Ky had
intended to increase the responsibilities of General
Thang and to decrease General Co's responsibilities
even more than the final cabinet alignment indicates.
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General Thi to Depart for the US
4. Following discussions with Premier Ky and
Deputy Premier Co on 13 and 14 July, former I Corps
commander General Thi apparently agreed to accept
their offer to leave for the United States in the
very near future.
pu i.c announcement on 15 July s that the
specially appointed military council of 20 generals,
which had sentenced Thi and four other generals on
9 July, might "reconsider" its decision sometime dur-
ing the coming week.
5. These developments apparently are satis-'
factory to General Thi and his remaining supporters
within the armed forces, and will most likely serve
to eliminate one potential source of trouble in re-
gard to military unity. Although Thi's visit to the
United States will be for an indefinite period, US
observers have commented that there seems to be little
question that both Thi and his associates contemplate
Thi's eventual return to Vietnam to occupy a position
of political or military importance.
Policy and Leadership Problems Continue Within the
Buddhist Institute
6. Prospects for a settlement of differences
within the Buddhist Institute and for a subsequent
Institute agreement with the government grew dimmer
last week, as moderate Institute chairman Tam Chau
apparently failed to gain control over the militant
faction. Following an ultimatum from the Institute
council that he attend council meetings and take a
stand on unresolved issues, Tam Chau announced that
he would withdraw from Institute affairs until after
the September election for the constitutional assembly.
Chau said that he would not be responsible for the
actions of the council during his absence, but he also
declared that he would not resign as Institute chair-
man. Institute council meetings following Tam Chau's
announcement apparently dealt with the questions of
interim leadership and a policy towards the forth-
coming elections, but no decisions had been announced
by the end of the week.
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7. The withdrawal of Tam Chau clearly signifies
the dominance of the militant followers of Tri Quang
on the Institute council and the apparently unbridge-
able gap presently existing between them and the
moderates. The current depth of feelings between ele-
ments of the two factions is illustrated by reports
that Tam Chau now fears assassination, possibly by
some of the militants whose release from government
detention was recently arranged by Chau. The US
Embassy has commented that a permanent split in the
Institute is possible but not probable, since both
factions seem to realize the loss of political in-
fluence that would result for both sides.
8. Although no firm decision has evidently been
reached, the militants may be preparing to make a
strong effort to boycott the September elections.
Thus far, the militant deputy chairman of the In-
stitute, Thich Phap Tri, has been cooperating with
Father Hoang Quynh's Religious Citizens Bloc, which
continued to publicize its antigovernment stand and
its criticism of the elections at a press conference
on 12 July. Militant leader Tri Quang, who last week
continued his fast at a Saigon clinic, also reportedly
had a long conversation with Father Quynh on 14 July.
By the end of the week, there were contradictory re-
ports on when Tri Quang would end his fast, although
he may soon make his first public appearance in more
than a month at a reception to be given by Father
Quynh.
Election Progress
9. The 11 July deadline for candidates to file
.for the September constitutional assembly elections
stimulated interest last week. The government modi-
fied its original deadline by requiring that only
the candidate heading each slate had to file by 11
July. The remaining candidates on each slate had un-
til 13 July. A projection of those who filed on 11
July indicated that approximately 700 individuals
would contest the 108 assembly seats at stake through-
out the country. This number will undoubtedly de-
crease because of the failure of some candidates to
fill out their slates, and later, because of the local
and central election boards' screening processes. In
the Saigon area, the failure to present full slates
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by 13 July reduced the number of candidates from
about 200 to 135. Initial reports from the prov-
inces, including those in central Vietnam, in-
dicated a plentiful number of candidates, although
fewer than in urban areas. Their names and af-
filiations, however, were not immediately available.
FULRO Negotiations May be Running into Trouble
10. Negotiations between the government and
the dissident tribal autonomy movement, FULRO,
have been continuing for several months following
a montagnard uprising last fall, but now may be in
danger of breaking down.
remier y recently refused to agree to two key de-
mands made by FULRO representatives--the rights of
the montagnards to form separate paramilitary units
and to fly their own pennant with the Vietnamese
flag. Earlier, Premier Ky reportedly had agreed in
principle to these demands. in return for a pledge
of loyalty to the government by FULRO leaders.
FULRO representatives who have been meeting with
government negotiators in Ban Me Thuot have not yet
been told of Premier Ky's latest attitude for fear
that they would break off the negotiations,
probably attempt to persuade Premier Ky to reverse
his decision.
The government's special
commissioner or montagnard affairs, Paul Nur, will
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II. REVOLUTIONARY DEVELOPMENT
In the 13 July cabinet revision., the
Ministry of Revolutionary Development,
under the direction of General Nguyen. Duc
Thang, was elevated from a secretariat and
expanded to include the State Secretariats
for Public Works and Agriculture and a new
Special Commission for Administration.. The
State Secretariats for Education. and Pub-
lic Health were apparently also upgraded
in. stature, with their over-all director
in. charge of social and cultural affairs
designated a deputy premier on a level
with General Co, the general-commissioner
for war. The training program designed to
increase the effectiveness of village and
hamlet officials was to begin., reportedly
on 15 July. Defectors from the Viet Cong
numbered 339 during the week ending 8 July.
Ministry of Revolutionary Development Upgraded from
State Secretariat
1. Part of the rationale for the 13 July re-
visions of Premier Ky's cabinet was to incorporate
some of the functions bearing on. pacification under
a more centralized and administratively efficient
control mechanism. This was primarily accomplished
by removing General Than.g's State Secretariat for
Revolutionary Development from General Co's over-all
"war" authority and elevating it to the level of a
separate ministry. Subordinate to the new Ministry
of Revolutionary Development will be the State Secre-
tariat for Agriculture, the State Secretariat for
Public Works, and a new organization entitled the
Special Commission for Administration. The Adminis-
trative Commission embodies part of the dissolved
Ministry of Interior, the remainder being incorporated
into a new separate Ministry of Security which will
also have, among its functions, the responsibility
for administering the National Police.
2. The removal of the Public Works Secretariat
from the Economy and Finance Ministry is significant
because the majority of funds expended on pacification
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are utilized for construction projects, such as the
building and repair of roads, bridges, dams, produce
markets, and irrigation, sites. These projects are
helpful in. providing tangible evidence to the rural
population. that the government is providing them with
meaningful services. The movement, storage, and dis-
tribution of basic construction commodities has been
a constant thorn in the side of US and GVN officials
who have been pressing provincial pacification ad-
ministrators to release funds and meet: the monthly
construction goals designated after the February
Honolulu conference. General Thang should have more
authority now to implement priority construction.
projects vital to the over-all rural development
process.
3. The movement of the Agriculture Secretariat
to General Thang's ministry should help to coordinate
more effectively assistance to the 85 percent within
the total' development program of the population con-
cerned with agriculture.
4. According to USAID officials, the temporary
assignment of 20 US military officers with the neces-
sary technical background as provincial agricultural
advisers has already begun. to prove its worth. In,
general, the performance of the MACV officers has-
been reported as outstan.din.g. Their Vietnamese
counterparts from the local agricultural and animal
husbandry offices are reportedly more eager now to
travel to outlying villages where such projects as
agricultural fairs, poultry improvement, and crop
marketing are being established.
5. Another of the cabinet revisions which bears
on pacification is the appointment of a civilian to
the post of deputy premier in charge of social and
cultural affairs. This office, which encompasses
the State Secretariats for Education, Public Health,
and Social Affairs, was upgraded, in part because of
the necessity for a more serious effort to extend
educational and medical facilities to South Vietn.am's
80-percent rural population. Designating the head of
social and cultural affairs as a deputy premier is
probably also a political maneuver by the military
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leaders to give a respected civilian, who is also a
southern Buddhist, a status equal to that of the other
deputy premier, General Co.
6. During a conversation, with Ambassador Lodge
early in. July, Premier Ky, commenting on his proposed
cabinet changes, described the country's educational
system as a "terrible mess," still committed to the
French system and language. Ky poin.ted to the large
corps of youthful agitators who, he said, could just
as well be trained in technical schools and employed
as plumbers, electricians, and mechanics. Ky's con-
clusions were that the French educational influence
would gradually be dropped in favor of an Anglo-
Saxon, system and that separate departments would be
established to deal with the universities, the
technical schools, and the primary and high schools.
Training of Village and Hamlet Officials
7. Experience shows that a particularly key
element within. the revolutionary development cadre
group is the six-man civil affairs team. These
teams have been developed primarily in response to
the need for a more well-trained and responsible
corps of village and hamlet chiefs and functionaries.
At the Honolulu conference in. February, General
Thang listed the training of village and hamlet
officials as one of six major areas of needed im-
provement in rural development. On. 18 April, Gen-
eral Thang authorized the funding of the training
program to be implemented by local officials in. co-
operation. with the cadre groups and the Ministry of
Interior. The teams initially devoted their efforts
to bettering the performance of the village chiefs
and their administrative committees. Since the In-
terior Ministry administrative responsibility was
granted on 13 July to the Ministry of Revolutionary
Development, the civil affairs program should be
greatly facilitated.
8. Ineffective village and hamlet leadership
has been consistently reported as thwarting attempts
to bridge the gap between. the peasantry and the gov-
ernment.:'Villagers, it is clear, will identify with
the GVN and the nation largely in. proportion to the
effectiveness of the officials with whom they must
deal.
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9. Since the cadre groups and their six-man
civil affairs teams were deployed to their respective
provinces for the first time in mid-June, it is ex-
pected that the training of local officials this
summer will be undertaken by joint working groups
consisting of the civil affairs teams, other Viet-
namese train.in.g personnel now in. the provinces, and
US advisers where available.
Viet Cong Defectors (Chieu Hoi)
10. The weekly total of defectors during the
2-8 July reporting period rose slightly to 339;
those in the military category numbered 229. One
company commander and five platoon leaders were
among the-defectors. Returnees are listed by corps
areas as follows:
I Corps 22
II Corps 111
III Corps 68
IV Corps 138
11. In his 13 July cabinet revision, Premier
Ky also appointed Major General Nguyen. Bao Tri, the
former III Corps commander, as the minister of in-
formation. and Chieu Hoi to replace the former
civilian chief. The ministry has been. upgraded in.
importance from a state secretariat. The appoin.t-
men.t of a key military officer represents in part
the continuing joint GVN/US emphasis on the defector
program. The primary purpose of the designation of
a military head of the ministry, however, is probably
the desire of Premier Ky and Chief of State Thieu to
have one of their own loyal officers in. a position
to monitor and influence the electoral process lead-
ing up to the September constitutional assembly elections.
12. The assignment of Tri should help alleviate.the
declining morale of lower level Chieu Hoi functionaries
which was allegedly the result of a conflict between
the ex-secretary of state for information and his dep-
uty for Chieu Hoi affairs.
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The prices of domestic and imported
commodities continue to rise, but the
rate of increase for domestic commodities
has slowed considerably. Pork continues
to be scarce and the GVN has decided to
raise the official price for live hogs
and sell pork at official prices to GVN
employees. In the Saigon free market the
prices of gold and dollars were relatively
stable in the week ending 12 July.
Total deliveries of rice from the
delta to Saigon during the first half of
1966 were about 45 percent below the Jan-
uary-June average during 1961-65. Nego-
tiations are under way for the transfer of
Michelin's Dau Tieng plantation to the
Plantation. Workers Federation. A gradual
ARVN/MACV takeover of the Saigon. port is
under way. It appears that the strikes by
the Vietnamese construction workers and em-
ployees of Caltex have ended.
1. According to the USAID retail price index
on 12 July, retail prices in Saigon, had risen about
17 percent since the 18 June devaluation. The in-
crease for the week ending 12 July, however, was only
two percent above the previous week. A major reason
for the increase'in prices is the soaring price of
pork, which has indirectly caused sharp increases in
the prices of other meats and fish. Price increases
for rice, charcoal, and firewood have been more
moderate, and with the exception of cabbage, the
price of vegetables is relatively stable. (A table
of retail prices in Saigon. is included in the an.n.ex.)
2. The prices of imported commodities also con-
tinue to rise. The most notable increases have been
in. iron and steel products, cement, and calcium car-
bide. On. 8 July the price of cement rose to 300
piasters per 50-kilogram bag compared with 180
piasters just before devaluation.. Although the
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reasons for these increases are not entirely clear,
the market may have been jolted upward by the fact
that the rather unclear GVN announcement on customs
duties may have led importers to believe that they
would have to pay higher duties than is actually
the case.
GVN Decisions on Pork
3. Although Minister of Economy Thanh still re-
fuses to import hogs to solve the pork crisis, he re-
portedly has decided to raise the official price of
live hogs on 1 August. Suppliers seem to be aware
of this decision., and consequently, deliveries of
hogs to Saigon undoubtedly will be low during the re-
mainder of July. The GVN also has decided that com-
mencing 15 July, it will sell pork at official prices
through commissaries to GVN and certain other employees.
The Office of Supply will purchase hog carcasses in.
An Xuyen Province and ship them by air to Saigon..
Although this project was contemplated a few months
ago as a method to help offset low GVN wages, the
current pork crisis evidently has given. it additional
impetus. The US Embassy reports that while there is
merit in assisting GVN employees, who remain a dis-
advantaged group in spite of recent wage increases,
the air transport of hogs will entail a sizable sub-
sidy from the GVN.
Currency and Gold
4. The prices of gold and dollars were rela-
tively stable in the week ending 12 July. Gold
fluctuated around 305 piasters per dollar and dol-
lars hovered close to 205 piasters per dollar. The
price of MPC (scrip) ranged between 120 to 123
piasters per dollar. These prices compare with pre-
devaluation peaks of 462, 270, and 155 piasters per
dollar for gold, dollars, and MPC, respectively.
During the first five months of 1966, the average
prices for gold, dollars, and MPC were 240, 172,
and 120, respectively. The US Embassy reports that
although the GVN is still selling gold through the
commercial banks, dealers may not be buying as much
gold as expected because they prefer to avoid regis-
tration requirements and taxes connected with the
purchase of gold. (Graphics on monthly and weekly
free market gold and currency prices are included
in the annex.)
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5. Deliveries of rice from the delta to Saigon
in June amounted to slightly more than 30,000 metric
tons, or roughly 75 percent of the 1961-65 average
for June. The US Embassy reports that while de-
liveries from the delta are not good, they are better
on a seasonally adjusted basis than during the first
four months of this year. There evidently is some
indication that provincial traders are beginning to
unload their stocks because they no longer expect
further substantial price increases. Total deliveries
during the first half of 1966 amounted to 194,000
metric tons, or about 45 percent below the January-
June average during 1961-65.
6. Adequate stocks of about 80,000 metric tons
remain in Saigon primarily because of continuing im-
ports. Price increases for rice have been somewhat
more restrained than for other commodities because
of continuing sales of US rice at 9 to 9.5 piasters
per kilogram. During the month of June the whole-
sale price of the cheapest type of rice rose only
three percent, from 1,005 to 1,035 piasters per 100
kilograms. On. 12 July this price was 1,200 piasters
per 100 kilograms, or roughly 15 percent above the
June peak.
Possible Transfer of Rubber Plantation
7. In late June an exchange of letters between
the Plantation Workers Federation (PWF), a small
organization of South Vietnamese rubber workers, and
the Ste. des Plantations et Pn.eumatiques Michelin.
confirmed in principle the transfer of Michelin's
Dau Tieng plantation in Binh Duong Province to the
PWF. Details of the transfer are being negotiated,
and according to the assistant manager of Michelin
in Saigon, the transfer probably will be approved
shortly by the Michelin home office in Paris. One
proposal already discussed was payment by the PWF
for the plantation and equipment on an installment
basis with the amount to be fixed as a percentage
of profits. The Dau Tieng plantation has an estk-
mated total area of roughly 23,000 acres; it employed
about 1,500 permanent workers and produced roughly
6,000 metric tons of rubber in 1963.
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8. According to the assistant manager, Michelin
is interested in liquidating its holding in South
Vietnam because of losses caused by exorbitant fees
paid to the Viet Cong and high taxes imposed by the
GVN. The US Embassy reports that the transfer of
Dau Tieng to the PWF could serve as a welcome prece-
dent for resolving problems faced by Michelin in a
manner that would serve an objective of the Revolu-
tionary Development program--a gradual widening of
popular participation in the economic development of
South Vietnam. It is possible that new security
measures being implemented in the area around this
plantation will prevent the Viet Cong from exercising
substantial influence within. the PWF in its opera-
tion of the plantation.
Port Operations
9. The GVN has issued a decree naming ARVN
Brig. Gen. Lam new director general of the Saigon
port. This is the first step in the gradual ARVN/
MACV takeover of the port. During Phase I of the
new plan, MACV will assume responsibility for the
discharge and movement of all tax-free cargo (i.e.,
goods for the counterinsurgency program and US Mis-
sion agencies) to its first destination. Although
the Commercial Import Program will not be affected
during Phase I, it will be closely observed to locate
bottlenecks and determine the type of corrective
action needed to eliminate them.
10. Lighterage control remains a problem in
the Saigon port. According to the latest estimates
available, there are roughly 450 loaded lighters in.
the harbor, of which 50 to 60 are being discharged
weekly. After the first week of operation of a new
control system, it has become obvious that a method
must be devised to ensure that assigned lighters are
not overstaying their allotted time.
11. It appears that the strike by the Viet-
namese construction workers has ended. On. 11 July,
Raymond-Morrison-Knudsen. announced their wage offer,
and workers returned to their jobs on the following
day. The strike called on 1 July by 250 workers at
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Caltex, one of three oil distribution companies in.
South Vietnam, ended 13 July on the brink of a
sympathy strike to be called by 2,500 more workers
at Shell and Esso. The strike at Caltex was trig-
gered by the firing of a union secretary and was
unrelated to wage demands. Caltex has now agreed
to take back the union official pending the decision
of a labor-management conciliation commission at
Caltex.
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ANNEX
Weekly Retail Prices in Saigon J
(In Piasters)
Percent Percent
Change Change
3 Jan 6 June 13 June 20 June 27 June from from
1966 1966 1966 1966 1966 Mo. Ago Yr. Ago
Index for all Items 160 164 173 185 193 + 17 + 88
Index for Food Items bJ 169 171 184 196 206 + 19 + 94
Of which:
Rice/Soc Nau (100 kg.) 800 1,120 1,250 1,350 1,350 + 17 + 45
Pork Bellies (l.kg..) 70 70 90 90 110 + 57 +120
Fish/Ca Tre (1 kg.) 110 3-15 130 130 140 + 27 +169
Nuoc Mara (jar) 50 70 70 80 85 + 21 + 70
Index for Non-Food Items J 124 139 134 145 147 + 11 + 63
Of which:
Charcoal (60 kg.)
440
Cigarettes (pack)
10
White Calico (meter)
27
Laundry Soap (1 kg.)
30
490
-10
26
33
J Data are from USAID sources.
~. For-all indexes, 1 January 1965 = 100.
460
500
500
+ 4
+ 79
10
10
10
0
+ 25
27
32
36
+ 38
+ 57
34
35
37
+ 16
+ 76
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Monthly Free Market Gold and Currency Prices
JANUARY 1964 - MAY 1966
Weekly Free Market Gold and Currency Prices
3 JANUARY 1966 - 27 JUNE 1966
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GOLD (Saigon) - Piaster price per US dollar of gold calculated on
the basis of gold leaf as worth $35 per troy ounce.
US $10 GREEN (Saigon)
PIASTER-DOLLAR CROSS RATE - Piaster-dollar exchange rate in Hong
(Hong Kong) Kong calculated by reference to the
exchange rates of these two currencies
to the Hong Kong dollar.
??? e US $10 MPC (Saigon) - Military Payment Certificates (scrip).
Approved For Release 2007/03/06 : CIA-RDP79T00826AO01000010037-4