THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001200010036-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: January 12, 2006
• Sequence Number: 36
• Publication Date: September 12, 1966
• Content Type: IR

Re '`se 2006/03/17 CIA-RD,P79TA0 C 20 010036-3
INTELLIGENCE REPORT
State, USAID reviews completed
Approved Eon Release 2006/03117':: CIA- 036-
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This document contains information affecting the
national defense of the United States, within the
meaning of Title 18, sections 793 and 794, of the US
Code, as amended. Its transmission or revelation
of its contents to or receipt by an unauthorized
person is prohibited by law.
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 Approved For ReIade 2006/03/1SEI W0826AOQ00010036-3
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(5 September - 11 September 1966)
Section
POLITICAL SITUATION I
The voting; The elected assembly; Viet
Cong antielection activity; Buddhist
boycott largely ineffectual; Reorgani-
zation of the Regional and Popular
Forces; Two French businessmen arrested
for antielection activities; Ky's in-
formal press conference; Coup rumors.
REVOLUTIONARY DEVELOPMENT
Land tenure and agriculture.
ECONOMIC SITUATION
Prices; Currency and gold; Regional
economic situation; Commercial import
program difficulties; Improvement in
labor situation.
ANNEX: Weekly Retail Prices in Saigon (table)
South Vietnam Economic Indicators (graphs):
-Free Market Gold and Currency Prices
(monthly and weekly)
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CURRENT SITUATION
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I. POLITICAL SITUATION
The large turnout of voters in the 11
September election of a constitutional as-
sembly demonstrated the government's admin-
istrative ability and dealt a sharp blow to
Viet Cong prestige. Despite open and intense
Communist opposition and a boycott led by
militant Buddhists, four fifths of the coun-
try's registered voters went to the. polls.
The constitutional assembly selected by the
voters can thus claim a relatively signifi-
cant popular mandate in discharging its con-
stitutional drafting duties.
Among other developments, the govern-
ment plans to begin integrating the command
structures of the Regional and Popular forces
into the regular armed force chain of command
on 15 September. Two prominent members of
the French business community were arrested
on 6 September, allegedly for financing anti=.
government groups. Other pre-election events
included a wide-ranging discussion between
Premier Ky and the press, and a flurry of
coup rumors.
The Voting
1. Of 5,288,512 registered voters, 4,274,812
cast ballots for constitutional delegates on 11 Sep-
tember, greatly exceeding pre-election estimates. Ac-
cording to available information, less than two per-
cent of these ballots were invalid, indicating the
failure of both Buddhist Institute and Viet Cong in-
structions to voters to deface their ballots inten-
tionally. In Saigon, slightly more than 66 percent of
registered voters cast ballots, with provincial voting
running at about 85 percent of registration totals.
2. By all accounts thus far, the election was con-
ducted fairly in the Saigon area, with no evidence of
government pressure on the voters or of favoritism to-
ward.`specific candidates. Despite extremely high voting
percentages reported in some provinces, there has been
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no evidence of significant irregularities. Several
minor charges of fraud have been reported, however. Of-
ficial US observers uniformly reported large turnouts in
the provinces, and most reports from the 500-man press
corps now in the country confirmed this trend.
The Elected Assembly
3. The complete list of winning candidates has not
yet been announced. On the basis of information now
available, 18 military and 18 civil-servant candidates
have been elected. Teachers and businessmen, however,
head the list of successful candidates in terms of oc-
cupational background. Most delegates range in age from
25 to 44, while southerners and Buddhists form plurali-
ties in terms of regional and religious orientation.
Nationally known politicians-elected in the Saigon area
include Dr. Phan Quang Dan, Tran Van Van, Dang Van Sung,
and La Thanh Nghe. Two of three candidates sponsored by
the dissident montagnard autonomy organization, FULRO,
were elected in the central highlands. The assembly is
scheduled to convene on 26 September.
Viet Cong Antielection Activity
4. The countrywide level of Viet Cong terrorism
and harassment was considerably above normal on 10 Sep-
tember, and continued at a significantly high level during
the actual polling period. A government spokesman
announced that 19 persons were killed and 120-wounded
--both military and civilian--in connection with the
election during the 24-hour period ending on the
evening of 11 September. Nevertheless, there were no
spectacular Viet Cong incidents and the over-all level
was not as high as could have been expected.
5. The intense Viet Cong antielection campaign,
including extensive propaganda and coercion as well as
terrorism and sabotage, clearly failed to keep the voters
away from the polls. Although the Viet Cong will un-
doubtedly describe the election totals as fraudulent
and meaningless, they cannot hope to avoid a sharp loss
of face.
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Buddhist Boycott Largely Ineffectual
6. The call for a boycott by militant members
of the Buddhist Institute also failed. In accordance
with an Institute communique of 6 September, hunger
strikes were conducted in pagodas in Saigon, Hue,
Da Nang, Ban Me Thuot, and Nha Trang, but these at-
tracted little public attention. Other than one at-
tempted march by 80 Buddhist monks in Saigon, which
police quickly dispersed, no serious efforts were
made to disrupt the voting. In strong Buddhist areas
of Saigon, voting was brisk and even included some
monks from the Institute, while the Buddhist strong-
hold of Hue in central Vietnam reported a voter turn-
out of 86 percent. Thich Tam Chau, leader of the
moderate Institute Buddhists, broadcast an election
day appeal urging the Buddhist faithful to vote.
7. On 10 September, the Saigon press carried
Buddhist Institute communiques which, among other
things, called on the people to halt the "struggle."
Institute officials later denied the validity of the
documents, and the US Embassy believes that they
represent an effort of last-minute deception propa-
ganda by the government. On the 11th, the press
printed a conciliatory statement by Premier Ky on
the differences between the government and the Bud-
dhist Institute. Ky made no real concessions, how-
ever.
Reorganization of the Regional and Popular Forces
8. US military authorities in Saigon have re-
ported that a reorganization of the Regional and Popu-
lar forces will begin on 15 September. The changes
basically involve the integration of the Regional and
Popular Force headquarters into the corresponding reg-
ular armed force headquarters at the general staff,
corps, division, sector, and subsector levels. I
Two French Businessmen Arrested for Antielection
Activities
9. On 6 September, the government arrested
Phillipe Grandjean and Abel Goxe, two of the most
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prominent members of the French business community
in Saigon. Premier Ky later declared that the two
men were being charged with having given US $500,000
to an organization that was attempting to sabotage
the election on 11 September.
press speculation that the arrests had been touched
off in response to President de Gaulle's Vietnam
speech in Cambodia several days before.
Ky's Informal Press Conference
10. Premier Ky's 36th birthday on 8 September
was the occasion for his holding a wide-ranging dis-
cussion with the press corps. Ky created a mild
sensation by qualifying his unavailability as a
presidential candidate for next year's elected
government. On the 11th, however, Ky told re-
porters that he had changed his mind again, and
would not be a candidate. On 8 September, Ky also
reiterated his earlier remarks on the necessity of
invading North Vietnam, although he stated that
no such plan had yet been drawn up. He also an-
nounced his acceptance of an invitation to visit a
US press association conference in southern Cali-
fornia in mid-November.
Coup Rumors
11. Perhaps due in part to pre-election ten-
sion, coup rumors were reported circulating in Sai-
gon late last week.
police director Loan declared on
9 September that the government had the situation
"well in hand." Loan admitted that there had been
a "disturbance" on 8 September when four tanks and
some army troops were on the road near Saigon with-
out specific orders, but that it was not really a
coup attempt. There has been no recent evidence
of serious coup plotting, although some restless-
ness in the armed forces--possibly among followers
of Deputy Premier Co and IV Corps commander Quang--
may have been caused by reports of high-level com-
mand changes in the near future.
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The US Mission has devised a series
of programs which have been or will be
recommended to the GVN in. an effort to
increase agricultural productivity and
enhance the distribution of land to the
peasantry. The rationale for the pro-
gram is that the most meaningful forms
of assistance to the people of South Viet-
nam are those which affect their standard
of living and the piece of land which they
till.
Land Tenure and Agriculture
1. The US Mission in Saigon has offered new
guidelines to be used as a policy framework for pro-
viding assistance to the GVN in the planning and
execution of its land reform program. For the pur-
poses of broadening the terms of reference and deal-
ing with the GVN, the Mission has proposed that the
land reform program will be referred to in the fu-
ture as "land tenure development." The goals of the
program will be fourfold: to improve the living
standards of farmers (South Vietnam is 85 percent
agricultural); to strengthen the institutions which
influence relationships between the government and
the rural populace; to abolish traditional land
abuses; and to develop a base for increased agri-
cultural productivity.
2. According to the Mission plan, the program
would be developed within the framework of Revolu-
tionary Development (RD) and in consonance with RD
progress. The following basic areas of interest will
be stressed by the Mission:
a. Administration of Existing Statutes.
In the opinion of the Mission, the most effective
initial land reform step would be the judicious en-
forcement of existing legislation. This legislation
includes Ordinance 57, which governs the administra-
tion of formerly French-owned land, and Ordinance 2,
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which governs rental contracts and controls. Al-
though the Mission considers the laws to be in-
trinisically sound, revisions are planned in order
to correct certain aspects which have proved inade-
quate in the past. Current planning calls for an
increase in the size, authority, and capabilities
of the GVN land administration staffs at the pro-
vincial, district, and village government levels.
It is possible that RD cadres will be used as an
executive arm of the program in areas newly con-
trolled by the GVN.
b. Income Level of Farmers. Plans to in-
crease the standard o living o armers emphasize
the expansion of secondary cropping. Other measures
include the increased use of simple farm machinery,
the development of irrigation systems, and the pro-
vision of adequate supplies of inexpensive improved
seed, fertilizer, insecticide, and fungicide. The
availability of equipment and supplies would be
facilitated by introducing incentive price policies
and improving credit marketing facilities. The
limited evidence available from studying the effects
of experimental measures taken in An Giang Province
indicates that peasant incomes can be rapidly in-
creased by employing the above measures.
c. Institutional Development. The Mission
is emphasizing the nee for the institutions to re-
inforce improvements in land distribution and agri-
cultural productivity. One of the institutional
measures required will be rural credit and banking
facilities. Field offices of the National Agri-
cultural Credit Organization are in the process of
reorganization. Initial steps have already been
taken to provide intensive training overseas for
senior members of existing credit establishments.
Additionally, the Mission hopes that drastic renova-
tion of the government's ineffective Directorate
General for Land Affairs within the Ministry of
Agriculture-will be undertaken. The Mission intends
to recommend that a small commission be attached to
the office of the Prime Minister with responsibili-
ties for planning and preparing land reform legis-
lation. Subsequent policy changes would be imple-
mented by the Minister of Revolutionary Development.
Another planned step is the merger of existing agri-
cultural cooperatives and farmers' associations into
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a unified government-sponsored system. This would
be accomplished in. the context of a similar con-
solidation of government offices which supervise
the cooperatives and associations. Emphasis will
also be placed on the development of nongover.n
mental institutions, such as the Tenants and Agri-
cultural Workers Union.
d, Training. The effective implementa-
tion of a land is ri ution program will rest largely
on an efficient staff of land reform cadres and pro-
vincial administrators. Training.in South Vietnam,
in the United States, and elsewhere overseas is
under consideration for the various functionaries,
depending on the level of their office and the tech-
nical ability required. Efforts to expand courses
on land reform at the national RD cadre training
center and to add land tenure specialists to the RD
cadre groups are under consideration.
e. Land Titles. The outlook for the issu-
ance of land titles in a near future based on the
country's conventional surveying techniques is bleak.
The possible use of improved photogrammetric tech-
niques, however, would provide the necessary means
for reducing the time and cost of the surveys. In
An. Gian.g Province, aerial photography on which sub-
sequent surveys will be based is nearly completed.
f. Expropriation of Land. Mission planners
are emphasizing to e a progress in pacifica-
tion must be accompanied by progressive and equitable
land tenure measures. Specific recommendations in-
clude the abolition of previously unfair landlord-
tenant relations and just compensation for expro-
priated land. Already this year the GVN has made
payments totaling nearly 10 million Vietnamese
piasters to landlords whose land has been expropriated.
g. Public Information Support. The last
policy recommendation or The improvement of the
farmers' standard of living is that an effective pub-
lic information campaign be undertaken to provide
accurate facts and dramatic emphasis whenever land
reform measures are taken.
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Higher prices for a few food items
accounted for a 3-percent increase in the
USAID retail price index in the week end-
ing 29 August. Nevertheless, the economy
continued to display signs of stability.
Rice prices declined for the second con-
secutive we6k and pork held steady. The
nonfood price index also was unchanged.
Prices of almost all imported commodities
continued to decline or hold steady.
Free market rates for dollars and gold
rose slightly but are still well below
the rates reached in June and July. The
possibility of labor trouble with RMK-BRJ
(the American. construction consortium) has
faded as this company decided to slow down
its program for discharging employees.
Recently available regional economic
data for July suggest that the effects of
devaluation. have been felt throughout the
country. Prices continued to rise in all
four corps areas mainly because of the-de-
valuation and Viet Cong economic activi-
ties. Governor Hanh of the National Bank
of Vietnam is concerned that new AID pro-
cedures for the use of commercial import
program funds are having an unfavorable
effect on. the economic stabilization pro-
gram. USAID feels that the Vietnamese
business community needs to be educated
on. these procedures.
1. Retail prices in Saigon. edged up slightly
in the week ending 29 August when the USAID retail
price index showed a gain of 3 percent above the
previous week. This increase was due entirely to
higher food prices; the nonfood index was unchanged.
Higher food prices stemmed primarily from a sharp
rise in the price of chicken--the result of in-
creased holiday purchases. Deliveries of pork con-
tinued to be satisfactory, and the price of pork
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77 1
bellies held steady at 85 piasters per kilogram com-
pared with 150 piasters three weeks ago. Rice prices
continued to decline and are now back to the levels
prevailing in late June and early July. (A table of
weekly retail prices in Saigon is included in the
An.nex.)
2. Prices of almost all imported commodities
continued to decline or hold steady. The only ex-
ceptions were calcium carbide and tricalcium phos-
phate, both of which increased slightly. The prices
of condensed milk, wheat flour, sugar, iron and steel
products, rayon yarn, and cement all declined. On the
basis of wholesale prices of selected US-finan.oed im-
ports, it appears that prices of imported commodities
have increased an average of 35 percent above the
levels prevailing just prior to the 50-percent de-
valuation in June. The greatest increases have been
recorded by condensed milk and fertilizers. As of
30 August, the prices of five out of the 21 imported
commodities sampled were at or below mid-June levels.
Currency and Gold
3. Free market rates for dollars and gold rose
slightly in the week ending 29 August. Dollars were
up 7 piasters to 167 piasters per dollar and gold rose
12 piasters to 237--still below the official price of
242 piasters. These rates compare with a June-July
average of 200 piasters for dollars and 304 piasters
for gold. MPC (scrip) fell 3 piasters on 29 August to
115 piasters per dollar compared with an official rate
of 118 piasters. The market for MPCs, which was rather
active following devaluation, appears to be getting thin
with quotations ranging between 112 and 118 since mid-
August. In Hong Kong the piaster-dollar cross rate,
which has been fluctuating around 180 since mid-July,
fell 27 piasters to 157 on 22 August, but rose 19
piasters to 176 on 29 August. (Graphics on monthly
and weekly free market gold and currency prices are in-
cluded in the Annex.)
Regional Economic Situation
4. During the month of July, prices continued to
rise in all four corps areas primarily because of the
devaluation in mid-June and Viet Cong economic activities.
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Other factors, such as increased transportation costs,
unfavorable weather conditions, and the presence of
American troops, also contributed to higher prices in
some areas. In contrast to June, when price increases
associated with devaluation. were greatest in III and IV
Corps, such increases were most marked in I and II Corps
in July. This development suggests that the effects of
devaluation were felt throughout the country but with
a time lag in the latter two corps. All four corps
also experienced a general shortage of construction
materials for commercial purposes.
5. Food prices were generally higher throughout
I Corps partly as a result of devaluation and partly be-
cause of normal dry-season shortages of vegetables and
meat. Price rises in some areas also stemmed from
shortages of supplies caused by Viet Cong interference
with commercial truck traffic along Highway 1. Wide-
spread price increases--ranging from 5 to 100 percent--
also occurred throughout II Corps. Basic commodities
rose about 25 percent in Pleiku Province, 37 percent in
Phu Yen Province, and roughly 50 percent in Tuyen Duc
Province. In Ninh Thuan Province the price of imported
goods during July increased about 50 percent above mid-
June levels. Although the upward trend of prices in
II Corps stemmed largely from the devaluation, other
factors also were involved. In Tuyen Duc Province, for
example, higher prices stemmed in part from heavy sea-
sonal rains which spoiled a large part of the vegetable
crop. Supply difficulties resulting from Viet Cong
interference with transportation also contributed to
price rises in some areas.
6. In III Corps seven provinces reported that
food prices had stabilized or declined slightly. Prices
rose sharply, however, in Binh Long Province largely
because of transportation difficulties which also con-
tributed to higher prices in Phuoc Long and Long An.
Provinces. In Binh Tuy P.rov'ince'prices continued to
rise, and additional price increases are expected as a
result of a recent flood. The cost of living continued
to rise in IV Corps with increases varying widely among
individual provinces. In An Gian.g Province prices rose
80 percent above their pre-devaluation level, whereas
prices of food items increased only 10 to 15 percent in
Ba Xuyen Province, Higher prices in IV Corps were a
result of the devaluation, Viet Cong taxation, and
interference with transportation.
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Commercial Import Program Difficulties
7. In order to accelerate imports and create
a responsible and competitive importing community, the
GVN agreed in early July to several new procedures for
the use of commercial import program (CIP) funds.
Governor Hanh of the National Bank of Vietnam now feels
that these new procedures are having an unfavorable ef-
fect on South Vietnam's economic stabilization program.
According to Hanh, there has been a deceleration in
the CIP, which he attributes to the abrupt application
of new and rigorous AID requirements and the consequent
reluctance or inability of most firms to use AID funds
at a time when more goods should be entering the market.
As evidence of this deceleration, Hanh pointed out that
during the period 1 July
funded by the GVN totaled
licenses amounted to only
he notes, are unlikely to
to 27
August
import licenses
$89
million,
whereas CIP
$79
million.
Such levels,
have
the salutory effect en-
visioned by the projected large-scale CIP effect.
8. USAID considers Hanh's distress to be genuine
and feels that the Vietnamese business community, which
is unfamiliar with American specifications and practices,
needs to be educated on AID regulations and on how to
deal with American suppliers. Further, USAID feels that
insufficient attention has been given to the relatively
small size of many Vietnamese business firms and their
lack of business-sophistication. Although some of the
problems that have arisen can be attributed to the
penchant of some Vietnamese firms for graft and corrup-
tion, USAID considers such an explanation too simple
for all of the difficulties.
Improvement in Labor Situation
9. The possibility of labor trouble with RMK-BRJ,
the American construction consortium in South Vietnam,
faded last week as the consortium decided to slow down
its program for discharging employees and issued a well-
received public statement on the problem. According to
this statement, American employees will be discharged
first, followed by third-country nationals and, if neces-
sary, by Vietnamese. In addition, the company stated
that efforts will be made to find employment with other
US firms for any Vietnamese laid off by RMK-BRJ.
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Weekly Retail Prices in Saigon a/
(In Piasters)
Change % Change
3 Jan 1 Aug 8 Aug 16 Aug 22 Aug from from
1966 1966 1966 1966 1966 Month Ago Year Ago
Index for All Items b/
160
219
228
211
206
-
2
+ 85
Index for Food Items b/
116
228
237
216
211
-
8
+ 84
Of Which:
Rice-Soc Nau. (100 kg.)
800
1,500
1,450
1,450
1,400
-
7
+ 65
Pork Bellies (1 kg.)
70
14o
150
100
85
-
43
+ 70
Fish-Ca Tre (1 kg.)
110
160
190
170
160
0
+ 146
Nuoc Mam (jar)
50
85
85
85
85
0
+ 55
Ind.ex for Non-Food Items b/
124
185
194
1900
189
+
17
+ 91
Charcoal (60 kg.)
440
600
620
600
590
-
2
+ 59
Cigarettes (pack)
10
12
14
14
14
+
17
+ 40
White Calico (meter
) 27
40
38
37
36
-
10
+ 60
Laundry Soap (1 kg<
) 30
44
44
43
43
-
2
+ 95
a/ Data are from USAID sources.
b/ For all indexes, 1 January 1965 = 100.
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VIETNAM ECONOMIC INDICATORS
Monthly Free Market Gold and Currency Prices
JANUARY 1964 - JULY 1966
-M #4
M __.._.jJ- 11__L I_ i_ I _I I I I ! I I ! I ! ! ! ! I I ! I ! I E t
r u 3 _ A i i j j AONDJ F nx -A rA i 11 A e r
;r -sfers per US Dollar of End of Week
? ? ? ? ? ?
000 ... . ? .... SS' .... I .... .
Weekly Free Market Gold and Currency Prices
3 JANUARY 1966 - 29 AUGUST 1966
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.
US $10 MPC (Saigon) - Military Payment Certificates (scrip).
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