THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001500010059-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 20, 2016
• Document Release Date: December 29, 2005
• Sequence Number: 59
• Publication Date: January 2, 1967
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
USAID, ARMY, State reviews completed
Secret
148
2 January 1967
No. 0331/67
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WARNING
document contains information affecting the national defense of the
d States, within the meaning of Title 18, sections 793 and 794, of the
Ie, as amended, Its transmission or revelation of its contents to or
receipt by an unauthorized person is prohibited by law.
_ --
MtOUP I
EXOLUDFD FROM AUTOMATIC
,)RW.NORAOINO AND
I)IT LASRITICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(27 December 1966 - 2 January 1967)
Strike at Saigon Port; Attempt made on
life of Constituent Assembly member;
Constituent Assembly activities; Direc-
torate officially rejects assembly's re-
quest to amend its charter; GVN moving
cautiously in eleminating French-run
schools; GVN-FULRO negotiations; Recent
GVN decrees on local government.
Viet Cong defectors (Chieu Hoi); The
Chieu Hoi picture in I Corps; Psycho-
logical operations in the I Corps zone;
Improvement in educational assets.
ECONOMIC SITUATION III
Prices; Gold and currency; Rice policy
and rice stocks; Frozen pork imports;
Joint economic development study; Pre-
mier against luxury imports; US military
banking facilities threatened.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
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I. POLITICAL SITUATION
The five-day dockworker strike at
Saigon ended late on the afternoon of 30
December. A general strike called by the
rebel union leaders for Saigon was, for
the most part, a flop. Earlier in the
week, an attempt to assassinate a prom-
inent member of the Constituent Assembly
was unsuccessful. The Directorate's of-
ficial reply that it could not accept
the recommendations for changes in the
assembly charter was not well received by
the assembly deputies. According to the
US Embassy, the government is handling
with considerable care the issue of how to
gradually eliminate the French-run schools.
:Phase two of the return of the FULRO high-
lander forces to the government is in the
planning stage.
Strike at Saigon Port
1. An agreement between rebel union leaders and
GVN and US officials was reached on 30 December to
end the five-day walkout by some 5,000 stevedores at
the Saigon port. An attempt earlier that day by the
leader of the Saigon council of the Vietnamese Con-
federation of Labor (CVT) to widen the strike in
Saigon was apparently not very successful. As a re-
sult, the leaders of the strike went to the bargaining
table later in the day without the support of the na-
tional CVT representatives and other key union groups
in Saigon. The dockworkers were reported to be return-
ing to work at 8:00 PM on the 30th.
2. The strike began on the morning of 26 December
allegedly in protest of the scheduled dismissal of 600
dockworkers from the new US military offloading facility,
called New Port, upriver from the main port. However,
the strike actually represented an effort by the Saigon
Dockworkers' Union to apply pressure on the US Army for
the long-term extension of contracts with six stevedore
companies at the main port. The contracts were due to
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expire on 31 December, and renewal had been offered
for periods of only one to three months.
3. Congestion at the port, which has been a
thorny problem for some time, did not become critical
during the strike because US troops were moved into
the military sector to offload essential war cargo.
The use of US troops to move cargo prompted claims
that "strikebreaker" tactics were being used, but the
charges did not generate enough sympathy from the
other unions to enable the rebel leaders to press
their demands. The president of the CVT, Tran Quoc
Buu, probably regained some of his lagging prestige
with the Saigon unions and with the government as a
result of the peaceful settlement of the strike.
Attempt Made on Life on Constituent Assembly Member
4. An unsuccessful attempt to kill influential
Saigon politician, Dr. Phan Quang Dan, was made late
in the afternoon of 27 December. Shortly after Dan
started his automobile, an explosive charge went off
blowing a hole through the bottom of it. Two pedes-
trians died from injuries from the blast, but Dan suf-
fered, only superficial wounds to his-legs. A suspect
was supposedly apprehended, but there have been no
subsequent reports from the Vietnamese police to sug-
gest that he is the terrorist. Curiously, the clan-
destine Viet Cong radio in South Vietnam broadcast a
story denouncing the Thieu-Ky clique as the perpetra-
tors of the crime only six hours after it occurred.
5. The assassination attempt came only 20 days
after prominent assembly member Tran Van Van was shot
to death on his way to an assembly session. Dan has
been one of the most outspoken independent deputies
in the assembly and has spearheaded many floor dis-
cussions of controversial subjects. He has been es-
pecially critical of the Directorate's power to re-
vise the draft constitution. Dan was the former
chairman of the Gia Dinh Province council before win-
ning a seat in the assembly.
Constituent Assembly Activities
6. During the 27 December session, the Constit-
uent Assembly voted broad approval of a future council
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to advise the government on cultural and educational
policies. Provision for the council will be made in
the constitution.
7. In its morning session on 29 December, the
assembly again discussed the question of providing
for an inspectorate in the constitution, finally ap-
proving of it in principle. However, it still de-
ferred a vote on whether the inspectorate would be.a
separate branch of the new government. The deputies
also debated the subject of the role of political
parties, and adopted three general constitutional
principles: that parties play an essential role in a
democratic regime, and that a two-party system should
be encouraged by the state as should the formalization
of a political opposition.
Directorate Officially Rejects Assembly Request to
Amend Its Charter
8. Chief of State Nguyen Van Thieu officially
advised the assembly that its appeal for amendments
in its basic charter could not be honored. The amend-
ments, if accepted by the Directorate, would have
limited the Directorate's powers of revision over the
draft copy of the constitution before it became law.
The Directorate will retain its right to amend the
draft constitution under Article 20 of the assembly's
founding charter.
9. On 29 December, the assembly discussed the
Directorate's reply. The deputies took no formal
action on the reply other than to approve a proposal
that the constitution be protected after its final
assembly approval. The discussions clearly indicated
that the assembly is not yet satisfied with the
Directorate's position on the issue, and that the
possibility of a showdown between the assembly and
the government is not eliminated, but merely postponed.
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Phan Khac Suu is still working on a compromise formula
that he hopes to clear with the Directorate.
GVN Moving Cautiously in Eliminating French-run Schools
10. Commenting upon the recent recommendation of
the advisory People's Army Council (PAC) for a gradual
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elimination of the French-run school system in South
Vietnam, the US Embassy believes that the GVN is
carefully handling this potentially explosive issue.
The government appears to be investigating ramifica-
tions of taking over the French schools and to be
avoiding precipitant action by such steps as consult-
ing the PAC. The PAC has recommended renegotiation
of the cultural agreement which permits France to
operate the schools leading to closure of French
primary schools by 1967-68 and a gradual transition
in secondary schools. More than 26,000 pupils are
involved, and hasty expulsion of French teachers and
school administrators could result in a severe short-
age of teaching personnel.
GVN -- FULRO Negotiations
11. General Vinh Loc, the commander of II Corps,
and several ethnic highland officials met recently to
plan the future integration of troops still loyal to
the FULRO organization, a dissident montagnard auton-
omy movement, into the GVN force structure. As an
act of good faith, General Loc has agreed to furnish
arms to 250 FULRO troops who have already rallied to
the government and to include them in one of the high-
land paramilitary units. In return, the chief FULRO
negotiator will arrange for the return of over 2,000
other FULRO troops to the government in late January.
The GVN also plans to release about 100 FULRO prisoners
from jail at that time. This phase of the GVN/FULRO
accord, if successful, would then prepare the way for
the return of the FULRO leader; his return is also re-
portedly dependent, however, on the inclusion of
articles in the constitution benefiting the highlanders.
Recent GVN Decrees on Local Government
. 12. On 24 December, the government issued decrees
authorizing the reorganization of village and hamlet
governments. The election of the local officials,
usually the chief and the council, are expected to take
place in mid-1967. The governmental administrative units
at these levels have been traditionally unresponsive to
the central government as well as to their own local in-
habitants. The reorganization is aimed in part at creat-
ing a popular base within which the people can identify
with their nation.
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During the period 22-28 December,
602 Communist defectors came over to the gov-
ernment, raising the total thus far in 1.966
to 19,825? An embassy analysis of the Chieu
Hoi program in I Corps area reveals several
difficulties which have impeded that program.
Psychological operations activities in I
Corps have shown. marked improvements in
several respects. During 1966, 2,217 new
classrooms were built; this represents about
91 percent of the year's goal of 2,4030
Viet Cong Defectors (Chieu Hoi)
1. Defectors from the ranks of the Communists
during the period 22-28 December totaled 602, a slight
increase over the previous week's tally of 585, The
number of returnees to the GVN for 1966 now stands
at 19,825, or 8,701 more than for the whole of 19650
Some 47,614 Communists have rallied to the GVN since
the inception of the Chieu Hoi program in mid-1963,
2. The II Corps Zone continues to generate a
steady and significant flow of defectors, Within this
Corps, two provinces, Binh Dinh and Phu Yen have yielded
the bulk of returnees. During the current reporting
period, Binh Dinh and Phu Yen together received 362
defectors--267 and 95, respectively. This phenomenon
has been observed for several weeks and the embassy
has called for an evaluation of the reasons for the
continuing high returnee flow from these two provinces.
3. A breakdown of returnees by Corps zones
follows:
I Corps 49
II Corps 409
III Corps 50
IV Corps 94
602 (368 military)
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The Chieu Hoi Picture in I Corps
4. A recent report compiled by MACV reveals
that the I Corps area, which has approximately 16.6
percent of the country's population and 23.4 percent
of the Viet Cong/North Vietnamese Army strength
located there, produces only about 9.7 percent of
the total of Chieu Hoi returnees. This percentage
of Chieu Hoi returnees is well below that of the
other Corps areas.
5. A follow-up report from the embassy points
up some reasons for the poor performance of the de-
fector program in this Corps. The principal reason,
according to the embassy, seems to be that a greater
number of North Vietnamese troops are located in this
area and they almost literally have no place to which
to defect. The individual NVA soldier may, instead,
prefer to become a prisoner of war rather than a Hoi
Chanh since he has no family in the South and he may
fear reprisals against his family in the North if he
defects.
6. Another reason cited for the apparent failure
of the Chieu Hoi effort in this Corps is the idea, a
holdover from the Thi era, that the best Communist is
a dead one. Also, this region has had a long.tradition
of hard core Viet Cong support among the population.
7. The Chieu Hoi program in I Corps also suf-
fers from some inherent weaknesses, the result of
poor cadre assigned to administer it. Both the
regional director and the Chieu Hoi chief in vital
Quang Nam Province have proven to be unfit for their
jobs. The latter has only recently been removed and
the former reportedly is on his way out.
8. The program may now be on the upswing, in
part because of the introduction of third country na-
tionals as Chieu Hoi advisers throughout the Corps
area. Specifically, there is reported to be progress
in the Chieu Hoi effort in Quang Ngai Province.
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Psychological
Operations
Corps
9. There has been a significant contribution
made to the psychological operations activities in I
Corps by JUSPAO representatives by the development
of composite information teams to assist US Marines
in their operational activity in four districts of
Quang Nam Province. These teams, which are used
extensively by the USMC, are the result of a coopera
tive effort in both men and resources from ARVN,
the Chieu Hoi organization, the Vietnam Information
Service (VIS), and JUSPAO.
10. Also of some importance has been the re-
habilitation of the Quang Nam VIS organization working
out of the province capital of Hoi An. This team
was shattered as an effective voice of the GVN during
the period of the Buddhist "struggle" this past
spring, Rehabilitation has been a slow process of
education and morale building.
1.1. There has been a development of newspapers
in the I Corps area during the year. In Quang Tri
Province, the circulation of a bi-weekly publication
has reached 7,500, while in more populous Thua Thien
Province, a weekly paper produced there now has an
average circulation of 8,500. In Da Nang there has
been what is described as "an excellent reader ac-
ceptance" of a newly established weekly paper--average
circulation, about 5,000. The Quang Nam provincial
paper, published in Hoi An, has an average circulation
of 7,500, every two weeks. Quang Ngai and Quang Tin
provinces both maintain bi-weekly papers with cir-
culations averaging 6,000 and 3,000, respectively.
Improvement in Educational Assets
1.2. i t
now appears that the 1966 goal of 2,403 classrooms to
be built will be about 91 percent accomplished?(2,217
units). This will be the largest number of classrooms
completed in any year since the inception of this pro-
gram. The second highest number, slightly over 1,400
units, was completed in 1964.
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13. Also, almost 3,400 persons went through the
90-day teacher training course in 1966. This was also
a record; the next best year was 1965 when 2,522
teachers were trained.
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III. ECONOMIC SITUATION
Retail prices in Saigon during the
week ending 27 December fell significantly
from the level of the previous week. Rice
and pork prices declined for the second
week. The retail price indexes dropped to
the levels of late November 1966. Prices
of imported commodities increased, but
moderately, despite the adverse port situ-
ation.
Prices,,
1. Retail prices in Saigon for the week ending
27 December fell significantly. Rice and pork led
the general decline of food prices and apparently in-
fluenced the price of other food items. Rice prices
declined with the arrival of new crop rice although
the relatively high moisture content of the new rice
makes it a second choice. The cost of Pork fell fol-
lowing the announcement of the sale of the 500 tons
of frozen pork remaining from the September import of
frozen pork. Sales of this pork began 24 December,
continuing through 2 January. Prices of fish and
shrimp reflected the lower prices for pork but also
were influenced by relatively large arrivals in
Saigon. Vegetable prices dropped because of more
favorable weather conditions in the growing areas.
Non-food prices also declined generally. Retail
price indexes had dropped back approximately to the
levels of late November 1966. (A table of weekly
retail prices in Saigon is included in the Annex.)
2. Prices for imported commodities rose some-
what in Saigon during the week ending 27 December but
less than might have been expected in view of the port
difficulties during the week and purchases for the Tet
season.
Gold and Currency
3. Prices for gold and currency for the week
ending 27 December eased slightly. Gold-leaf cost 224
piasters compared with 226 for the previous week.
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Prices for dollars and MPC (scrip) dropped slightly
to 172 piasters and 112 piasters, respectively, compared
with prices a week ago of 173 and 114. The tightness
of credit and need for liquidity at this season re-
portedly accounted for the minor price changes.
(Graphics on free market gold and currency prices are
included in the Annex.)
Rice Policy and Rice Stocks
4. Although no general agreement on rice policy
had been concluded between-the US Mission and the GVN,
on Monday, 26 December, Secretary of State for Com-
merce Ton reportedly announced to a meeting of Saigon
rice merchants that the official government purchase
price for paddy is to be 7.5 piasters per kilo of
average grade. National bank financing was promised
as were fair prices for government rice purchase con-
tracts which will be opened early in February. The
immediate reaction has been an increase in the price
for new paddy at Soc Trang in Ba Xuyen Province from
6.5 piasters per kilo to 7.95 piasters as of 28 De-
cember.
5. Stocks of :rice in Saigon on 12 December
were reported to be approximately 18,000 metric
tons while those in the delta were about 19,700 metric
tons on 5 December. In rice deficit provinces, stocks
totaled 22,800 tons on 15 December. In Saigon and in
the delta rice stocks are roughly comparable to the
level of 37,200 metric tons that prevailed in Decem-
ber last year. The over-all low level of rice stocks,
less than one month's supply, reflects the seasonal
draw-downs just before receipt of deliveries from
the new rice crop.
Frozen Pork Imports
6. The GVN has announced plans to import 1,500
tons of frozen pork to meet increased demands during
Tet. According to information from the US mission,
the pork is scheduled to arrive in two shipments: 800
tons on 25 January and the remaining 700 tons in early
February. Emarel of Tel Aviv won the contract, bidding
through the local firm that was agent for the previous
shipment. The pork reportedly will come from Argentina
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or Uruguay. The 500 tons of frozen pork remaining
in storage from the shipment that arrived in Saigon
in September is to be sold off before the new ship-
ments arrive.
Joint Economic Development Study
7. On 17 December the GVN announced that it
will undertake jointly with the US government a
study of the long-range economic development of
Vietnam. The GVN team will be headed by Professor
Vu Quoc Thuc, an economist. Professor Thuc is a
member of the Saigon University Faculty of Law and
is one of the most eminent scholars and economists
in Vietnam. He has worked with distinction in nu-
merous governmental posts and is highly respected in
government and academic circles in his country.
Professor Thuc has been busily recruiting other mem-
bers of the team and is ready to move ahead. The
US team will be organized and directed by David
Lilienthal, former chairman of the US Atomic Energy
Commission and presently Chairman of Development and
Resources Corporation.
Premier Against Luxury Imports
8. Governor Hanh of the National Bank of Viet-
nam told the US economic counselor that Premier Ky
feels that there has been too much high living in
Saigon and that luxury imports should be sharply re-
duced. The Premier gave instructions to Governor
Hanh and Secretary of State for Commerce Ton to cut
back on these imports.
9. The US Mission is also strongly in favor of
austerity but seeks it by means of high taxes on the
rich, including increased taxes on luxury goods, and
vigorous enforcement of tax collections. Governor
Hanh supports this US view. Unfortunately, stopping
the flow of imports of consumer goods would mean a
re-emergence of the lucrative black market in these
goods. In addition, stopping the flow of consumer
imports would be counter to the agreement with the
GVN on open general licensing that was one of the
stabilization measures adopted in June 1966.
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US Military Banking Facilities Threatened
10. Operations of US Military Banking Facilities
(MBF) in the Saigon Branches of Bank of America and
the Chase Manhattan Bank, are apparently threatened by
new National Bank of Vietnam (NBVN) instructions issued
in mid-December. These instructions would prohibit MPC
accounts of the MBF from being transferable into US
dollars outside Vietnam. This strikes at the heart of
current operating procedures and, if implemented, would
require drastic changes.
11. Military Banking Facilities, according to
arrangements between the US Mission and the GVN, were
established in September 1966 to permit maintenance of
MPC checking accounts for in-country use, dollar check-
ing accounts for out-of-country use, and piaster accounts
for US official and quasi-official activities. The
facilities were worked out by MACV and the US Treasury
to provide added incentive for troops to hold deposits,
thus reducing the inflationary impact of US troop spend-
ing. Governor Hanh of the National Bank of Vietnam
welcomed the establishment of the MBF in September but
indicated that he might later issue detailed operating
instructions so that the facilities would be in con-
formance with the Vietnamese law. The chief operation
of the MBF consists of maintaining MPC checking accounts
for US troops and other authorized personnel. The MPC
accounts can be drawn upon by checks which are cashable
in MPC using areas, but are also redeemable at par in US
dollars by the parent banks in the US. MPC deposited
in MBF are counted in parent bank total deposits and
thus add to loanable funds. If this exchange feature is
prohibited by law, the profitability to the US banks of
MBF operations would be nullified.
12. The convertibility of these accounts makes it
necessary to control them to prevent illegal use. Con-
trols are operated by MACV on the basis of information
provided by the banks--daily reports of large transac-
tions and monthly reports of unusual activity. MACV
believes that controls are adequate to prevent any ma-
jor illegal operations.
13. The US Mission has advised the US branch banks
to continue operations. The US position as indicated to
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the National Bank of Vietnam is that Military Banking
Facilities are US Government installations operated
by the two American banks on instructions provided to
them by the US Treasury. The American banks cannot
alter MBF procedures without US Government approval.
If operations of these facilities require different
procedures, or additional regulations, these would
have to be negotiated by the US Embassy.
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Weekly Retail Prices in Saigon a/
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3 Jan
28 Nov
5 Dec
12 Dec 1
9
Dec
27 Dec
1966
1966
:1966
1966
1
966
1966
Index for All Items b/
160
217
231
243
2
43 c/
218 c/
Index for Food Items b/
169
224
239
253
2
54 c/
225 c/
Of Which:
(In Piasters)
Rice-Soc Nau (100 Kg.)
800
1,600
1,700
1,750 1
,7
50
1,650
Pork Bellies (1 Kg.)
70
85
130
140
120
100
Fish-Ca Tre (1 Kg.)
110
140
150
170
1
70
130
Nuoc Nam (jar)
50
85
90
90
90
90
Index for Non-Food Items b/
124
195
200
207
2
08 c/
198 c/!
Of Which:
(In Piasters)
Charcoal (60 Kg.)
440
630
650
680
6
90
640
Cigarettes (pack)
10
14
14
14
14
14
White Calico (meter)
27
34
40
40
40
35
Laundry Soap (1 Kg.)
30
40
40
40
40
40
a.` Data are from USAID sources.
b. For all indexes, 1 January 1965
= 100.
c... Preliminary.
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PIASTERS PER US DOLLAR
30 NOVEMBER
~
227
170
.......
......
.....
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1964 1965 1961 1967 15,
US $10 GREEN
..... US $10 MPC Military Payment Certificates
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GOLD Basis: gold leaf worth $35 per troy ounce
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Secret
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