THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001500010046-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: May 25, 2006
• Sequence Number: 46
• Publication Date: December 27, 1966
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
USAID, State reviews completed
Secret
149
27 December 1966
No. 0405/66
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Secret
WARNING
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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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(19 December - 26 December 1966)
CONTENTS
Section
POLITICAL SITUATION
Progress in the Constituent Assembly;
'Little recent
progress in GAIN-FULRO relations; Gov-
ernment to move against corruption.
REVOLUTIONARY DEVELOPMENT II
Viet Cong defectors (Chieu Hol); Third
country Chieu Hol advisers; Deficiencies
in Chieu Hoi centers.
ECONOMIC SITUATION III
Prices; Currency and gold; Negotiations
continue on GVN rice policy; Income tax
Withholding; Port. labor Situation
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
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I. POLITICAL SITUATION
The Constituent Assembly has nearly
completed its outline of the basic concept
of government to be followed in actually
writing the constitution. Most recently,
the Assembly has adopted the principles of
a bicameral legislature, an independent
judiciary, and elected rather than appointed
government officials at the province level
and below. A specific proposal to hold elec-
tions for province chiefs has been approved
in principle, but will probably undergo
change since there is so much opposition to
it outside the assembly.
The moderate Buddhist wing, under Thich
Tam Chau, is trying to organize a "reformed"
church out of the continued rift in the Uni-
fied Buddhist Association, while there are
reports of further efforts by the militants
to strengthen their political position. Fol-
lowers of the dissident tribal group, FULRO,
are dissatisfied with the government for not
living up to its promises following the re-
turn of some FULRO members to the government.
A renewed government attack on corrupt of-
ficials is reportedly planned.
Progress in the Constituent Assembly
1, The Constituent Assembly is still defining the
fundamental concept of government around which the ac-
tual constitution will be written, but that part of its
work is nearly completed. The latest principles adopted
by the deputies include provisions for a bicameral leg-
islature, an independent judiciary, an advisory "body or
bodies" on economic and social matters, and the eventual
election of the government officials in the 44 provinces
and six autonomous cities.
2. There was widespread approval in the assembly
of the need for a national legislature with an upper and
a lower house. However, attempts to define the method of
electing members to the upper house provoked diverse sug-
gestions and the matter was left to be decided later.
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3. The principle of having an independent
judiciary co-equal with the executive and legis-
lative branches was approved during the assembly
debate on 22 December. The deputies discussed
what powers of review the supreme court should
be accorded, especially relative to the constitu-
tionality of legislative acts. Debate was incon-
clusive on this and a number of other judicial is-
sues, including the establishment of special courts
for ethnic groups and the status of the administra-
tive courts. The specific functions and internal
organization of the judiciary will therefore be
stipulated at a later date when the assembly dis-
cusses the draft of the constitution.
4. At its 23 December session, the assembly
failed to approve incorporating an independent in-
spectorate as a separate branch of the government
equal to the executive, legislative, and judicial
branches. Most deputies agreed, however, on the
need for some anticorruption body, but its status
was left undetermined. On 26 December, the deputies
approved a constitutional provision for an advisory
"body or bodies" to the executive and legislature
on economic and social affairs. No vote was taken
on whether there should be one such council or two
separate ones, or on the selection of council mem-
bers.
5. On 20 December, the assembly approved a
constitutional provision for the direct election of
mayors, and province chiefs in contrast to the pres-
ent appointive system. The provision was passed
with a surprisingly wide margin in view of the con-
toversy it had aroused among the deputies during
debate on 19 December. However, many of the dele-
gates who voted in favor of the principle apparently
recognize that it cannot be implemented immediately
on a country-wide basis.
6. The province chief in the present system is
almost always a military officer and has become an
extremely powerful political figure in the govern-
ment, responsible only to the military commanders in
his respective corps area or to the Saigon authorities.
Several arguments against the election of province
chiefs in time of war are still being advanced privately
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by various sources both inside and outside the
assembly. The government is not in favor of
elected province chiefs, and thus might use its
revisionary power to delete a provision for such
elections if it is actually drafted into the con-
stitution. One deputy has told US Embassy officers
that he believes the assembly will drop the issue
if the government makes a strong enough case against
it. At this stage, it appears that too many vested
interests, coupled with fears of chaos at the prov-
ince level, are involved in the issue of electing
province chiefs to warrant changing the present
system in the next year or so.
7. Other principles of local government ap-
proved by the assembly on 20 December included the
election of village chiefs, and of councils with
"wide powers" at the village, city, and province
levels. In the interest of ensuring continuity at
all local levels, the assembly also recommended that
the government appoint civil servants and military
officers to assist elected officials as deputies for
administration and security.
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Little Recent Progress in GVN-FULRO Relations
11. US officials have reported increasing res-
tiveness within FULRO--the dissident tribal autonomy
organization which has significant influence among
the montagnards in the central highlands. The US of-
ficials believe that the major cause of this trend
is an almost complete lack of government follow-
through since October in regard to a general GVN-
FULRO agreement which was reached after many months
of negotiations.
12. All US officials involved agree that II
Corps commander General Vinh Loc exercises real con-
trol over government policy toward FULRO. Although
Loc has at times exhibited a hard line toward FULRO,
and the montagnards in general, US officials have
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reported that in a discussion on 14 December General
Loc appeared receptive to various suggestions de-
signed to improve the employment and resettlement of
FULRO members who have agreed to return to government
control. US officials also reported that they intend
to work with appropriate government officials to
speed up the implementation of programs upon which
agreement has already been reached.
Government to Move Against Corruption
Corruption among Vietnamese officials in
Kien Giang has been an important issue in the prov-
ince for several months and was the subject of some
Saigon press commentary even before General Quang's
removal. The IV Corps chief of staff reportedly be-
lieves that Quang did not have a direct hand in the
provincial administration, but that his failure to
take corrective action damaged his reputation. The
replacement of the Phong Dinh Province chief has been
widely expected ever since Quang's departure,
because the incumbent
province chief is a weak official who had depended
upon his personal friendship with General Quang.
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II. REVOLUTIONARY DEVELOPMENT
Viet Cong defectors for the period 8 to
21 December numbered 1,033, raising the 1966
total to 19,223. Filipino advisers to the
Chieu Hoi program have proven to be valuable
assets. Various deficiencies in the Chieu
Hoi reception centers have been highlighted
by the Ministry of Information and Chieu Hoi
in a recent letter and remedies suggested for
them.
Viet Cong Defectors (Chieu Hoi)
1. Defectors to the government during the period
8 to 21 December numbered 1,033. Broken down by weekly
increments, the flow of returnees was 448 for 8 to 14
December, and 585 for 15 to 21 December. A total of
19,223 returnees have been counted since the beginning
of the year--8,099 more than the whole of last year.
A breakdown of defectors by Corps areas for the two
periods follows:
8-14 December 15-21 December
I Corps: 43 51
II Corps: 165 362
III Corps: 63 47
IV Corps: '177 125
?
448 (283 585 (318
military) military)
2. The large increase in the number of defectors
in II Corps during the week of 15 to 21 December is par-
tially accounted for by increased defections (199) in
Binh Dinh Province where a large-scale allied operation,
THAYER II, is in progress. Most of the other returnees
during this period in II Corps were from Phu Yen Prov-
ince--139--where there are no major operations in
progress.
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Third Country Chieu Hoi Advisers
3. The 45 Filipino advisers who commenced
their activities late in October have proven to be
an extremely valuable asset to the Chieu Hoi defector
program. These advisers now are working at all levels;
national, regional, and provincial. In some prov-
inces where they are working the Chieu Hoi program
is characterized as showing "really remarkable pro-
gress" for the short period that they have been on
duty.
4. The Filipino advisory group was handpicked
in the Philippines and carefully briefed on their
dutiek; there and in South Vietnam before being re-
leased to work with the South Vietnamese. So far,
they have been able to carry out their assignments
without antagonizing the South Vietnamese and without
"taking over" or displacing them. The point about the
Filipinos being advisers has been reiterated contin-
ually and their activities apparently are being care-
fully monitored by USAID.
Deficiencies in Chieu Hoi Centers
5. The Ministry of Information and Chieu Hoi
has recognized several shortcomings connected with ad-
ministering the Chieu Hoi program and has issued a
list of deficiencies along with recommendations to
remedy them. The letter, addressed to responsible of-
ficials associated with the "Open Arms" program, was
distributed in September and was probably instrumental
in bringing about recently reported improvements in
Chieu Hoi reception centers.
6. Crowded conditions at centers were high on
the list of deficiencies noted in the management of
the Chieu Hoi program. The reason for these condi-
tions was alleged to be poor planning by responsible
officials. Other criticisms leveled at the handling
of the returnees included: inadequate treatment of
sick defectors; poor and monotonous training (rein-
doctrination) courses; non-payment of rewards for arms
turned in by defectors and of other specified allow-
ances due to the Hoi Chanh. Another major shortcoming
noted in the handTrEg of defectors is the delay in is-
suing them identification papers--often two or three
months after they leave the center.
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III. ECONOMIC SITUATION
Retail prices in Saigon. during the week
ending 19 December remained steady at the
high level reached the previous week. In-
creased deliveries of pork and the receipt
in Saigon of deliveries of new crop rice
lowered food prices slightly. The cur-
rency and gold market also remained steady.
Negotiations are continuing between the US
Mission and the GVN over the major issues
in the new GVN rice policy.
Prices
1. Prices in Saigon for the week ending 19 De-
cember generally held steady at the high level
reached the previous week. The over-all price in-
dex remained unchanged with the index for food de-
clining slightly and that for non-food items in-
creasing by a small margin. The decline in food
prices was a result of lower prices for rice and
pork. Rice prices were steady or declined because
of receipt in Saigon of larger quantities of the
cheaper new crop rice. The price of pork bellies
declined 14 percent because of increased shipments
of hogs to Saigon from the provinces. On the other
hand, prices of vegetables, increased, reportedly
because of increased purchases by the US Army.
Prices other than for food remained unchanged except
for charcoal and firewood, both of whiciiincreased.
(A table of weekly retail prices in Saigon is in-
cluded in the Annex.)
2. Prices in Saigon for all imported commodi-
ties registered increases ranging up to nine percent.
Increased prices of imported food stuffs were at-
tributed to purchases for Tet. Although there were
significant arrivals of construction materials, the
increase in construction activity continued to push
up prices for these materials.
Currency and Gold
3. The currency and gold market remained gen-
erally steady at approximately the levels maintained
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since August. During the week ending 19 December,
gold prices declined slightly, reportedly because
of increased arrivals of gold in Saigon. Prices for
dollars and MPC (scrip) increased slightly. Cur-
rency price quotations for 19 December have not yet
been reported. (Graphics on monthly free market gold
and currency prices are included in the Annex.)
Negotiations Continue on GVN Rice Policy
4. The provisions of the GVN rice policy an-
nounced by Governor Hanh of the National Bank of
Vietnam after the 13 December GVN cabinet meeting
apparently did not represent firm GVN policy, and
subsequent developments have invalidated much of
what has been reported previously. . Negotiations on
the new rice policy are continuing between officials
to the US Mission and the GVN.
5. On 18 December, Secretary of State for Com-
merce An and Secretary of State for Industry Ton
met with USAID Director MacDonald, and the differ-
ences over basic issues in what the US Mission
thought was a new GVN rice policy became apparent.
The GVN-preferred policy, as stated on .18 Decem-
ber, proposed a 7.5 piaster per kilogram price to
the farmer for paddy; a wholesale price in Saigon
of 12 piasters for the cheapest type of domestic
rice; and a retail price of 14 piasters, compared
to the present retail price of about 16 piasters.
In addition, the GVN would place on imported rice
a wholesale price of 11 piasters and a retail price
of 12 piasters, about the same as at present.
6. US proposals on the rice policy are de-
signed to achieve maximum GVN encouragement for in-
creased domestic production, to increase deliveries
to Saigon, and to lessen dependence on imported
rice. Principal US objections to the GVN pro-
posals were that the rollback of the rice prices
in Saigon and the 7.5 piaster price to the farmer
would not provide the needed incentive to encourage
increased domestic production. On the contrary,
they would encourage dependence on imported rice,
and would make more difficult an effective fer-
tilizer program designed to increase the use of
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fertilizers on rice production. The US favors a
retail price for imported rice of 14 piasters per
kilogram, which under normal supply conditions and
price spread would result in a retail price in Sai-
gon for Vietnamese rice of 16 piasters.
7. In addition to the price issue, the matter
of current purchases of foreign rice to insure ade-
quate stocks during 1967 has not been resolved.
There is some apparent misunderstanding by GVN of-
ficials on the size of the US commitment of PL 480
rice for calendar year 1967. GVN officials have
not revealed their plan for buying rice with for-
eign exchange. These rice purchases, however,
should be completed soon to avoid a serious draw-
down of imported rice stocks in the spring.
8. Secretary of State for Commerce An, in
meetings with US officials on 21 and 22 December,
indicated that he has been under pressure by his
government and by rice merchants to reach an agreed
policy with the US and to make price announcements
immediately. Although the US Mission continues to
share this anxiety for an early solution, there is
little inclination to accept the latest GVN pro-
posals which would, in US opinion, be inadequate.
Income Tax Withholding
9. As of 1 January 1967, the GVN will initiate
withholding of income tax on salaries and wages
earned in both the public and private sectors of the
economy. This progressive GVN decision was made
partly in response to the recommendations of the
US Internal Revenue Service team that surveyed the
GVN tax system last summer. Because the US is the
second largest employer of Vietnamese nationals, the
embassy feels that the success of the new withhold-
ing system may depend heavily on US participation.
Consequently, the embassy has recommended that the
US facilitate collection of its employees' taxes in
accordance with the new GVN law, provided that the
GVN law will be strictly enforced with respect to
other empoyers and that US participation will be in
accord with US law.
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Port Labor Situation
10. A power struggle within the Vietnamese Con-
federation of Labor (CVT) and the apparent collusion
of some CVT elements with stevedore companies have
resulted in a waterfront strike in Saigon. The strike,
initiated early on 26 December, so far affects only
the main port of Saigon although it grew out of a
labor dispute at New Port, serving the US military a
few miles upriver.
11. The initial point at issue was an agreement
signed on 7 December by CVT President Tran Quoc Buu on
behalf of his organization. The agreement permitted
the US to lay off several hundred Vietnamese dock
workers who had been temporarily hired to work at New
Port until a US Army Terminal Service battalion arrived.
Buu signed the agreement on the ground that New Port is
a completely military installation and that the US Army
is within its rights to terminate the use of Vietnamese
stevedoring services. The termination, delayed for two
weeks from the date of the agreement, became effective
21 December. For the next several days, groups of
workers picketed New Port, but created no disturbances.
On 24 December the Dockworkers' Union called for a
sympathy strike by military cargo handlers at Saigon's
main port.
12. Buu contends that, with the port situation
booming, the displacedworkers can find new employment,
although he intends to press certain other complaints
of exploitation of workers at New Port. His rivals,
however, are using the issue not only to discredit Buu
and his protestations of defending dockworker interests,
but to bring pressure on the US Army to grant long-term
renewal of contracts with stevedore companies now handl-
ing military cargo at the main port. These contracts
expire on 31 December, and so far the companies have
been offered extensions of from one to three months
only.
13. Vietnamese Minister of Labor Nguyen Huu Hung,
who has been supporting Buu's position with regard to
the dock workers, has been attempting to get the
stevedore companies and the US Army to resolve the
contract issue in the belief that this is the key to
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a quick settlement of the strike. Should Buu's
rivals, however, persist in their agitation over
the situation at New Port--where military cargo
unloading by US troops is so far unaffected, the
strike at the main port could be prolonged. The
US Army's contingency plans call for US troops to
move military cargo at the Saigon port.
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ANNEX
WEEKLY RETAIL PRICES IN SAIGON a/
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3 Jan
21 Nov
28 Nov
5 Dec
12 Dec 19 Dec
1966
1966
1966
1966
1966
1966
Index for All Items /
......
160
227
217
231
243
243
c/
Index for Food Items b/
.....
169
236
224
239
256
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c/ 254
c/
Of Which:
(In Piasters)
Rice-Soc Nau (100 kg.)
800
1,600
1,600
1,700
1,750
1,750
Pork Bellies (1 kg.)
70
85
85
130
140
120
Fish-Ca Tre (1 Kg.)
110
180
140
150
170
170
Nuoc Nam (jar)
50
85
85
90
90
90
Index for Non-Food Items b/
124
197
195
200
206
c/ 208
c/
Of Which:
(In Piasters)
Charcoal (60 kg.)
440
620
630
650
680
690
Cigarettes (pack)
10
14
14
14
14
14
White Calico (meter)
27
35
34
40
40
40
Laundry Soap (1 kg.)
30
32
40
40
40
40
a. Data are from USAID sources.
b. For all indexes, 1 January 1965 = 100.
c. Preliminary.
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Saigon Free Market Gold and Currency Prices
PIASTERS PER US DOLLAR
30 NOVEMBER
lr"\
227
1170
1 3 1 1367
GOLD Basis:gold leaf worth $35 per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates (scrip)
1 LI 1 111 1_1_1
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