THE SITUATION IN SOUTH VIETNAM (WEEKLY)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001600010031-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: December 20, 2006
• Sequence Number: 31
• Publication Date: January 30, 1967
• Content Type: IR

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
State Dept. review completed
USAID review completed
Secret
148
30 January 1967
No. 0335/67
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WARNING
This document contains information affecting the national defense of the
United States, ithin the meaning of Title 18, sections 793 and 794, of the
US Code, as a'ended. Its transmission or revelation of its contents to or
receipt by an unauthorized person is prohibited by law.
GROUP 1
EXCLUDED FROM AUTOMATIC
DOWNGRADING AND
DECLASSIFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(23 January - 29 January 1967)
POLITICAL SITUATION I
Minimal reaction to dismissal of
General Co; Constituent Assembly
developments; Premier Ky and Chief
of State Thieu continue their un-
declared electioneering.
Status of National Police Field
Forces; Large scale Chieu Hoi prop-
aganda inaugurated for Tet; Recent
developments in Revolutionary Devel-
opment.
ECONOMIC SITUATION III
Prices; Currency and gold; Commodity
situation and Tet; Rumors of devalua-
tion; New Saigon port director.
ANNEX: Weekly Retail Prices in Saigon (table)
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1. POLITICAL SITUATION
General Co's dismissal as deputy pre-
mier and defense minister, although widely
known for nearly a week, has caused no
significant backlash. The Constituent As-
sembly continued to make progress in draft-
ing the constitution, despite indications
that its relations with military leaders
had hit at least a temporary snag. Mean-
while, both Premier Ky and Chief of State
Thieu conducted some undeclared campaigning
with an eye on forthcoming elections.
Minimal Reaction to Dismissal of General Co
1. The military leaders' private decision on 17
January to strip General Co of his duties as deputy
premier and defense minister became publicly known by
25 January, but has caused no significant adverse re-
action thus far,
3. After Premier Ky's return from a tour of
Australia and New Zealand, the ruling Directorate met
in Saigon on 27 January and decided to appoint General
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Cao Van Vien, chairman of the Joint General Staff,
as defense minister. General Vien, generally known
as an apolitical officer, will retain his position
on the Joint General Staff. General Co's former
position as deputy premier was.filled by Nguyen Luu
Vien in.a cabinet reorganization on 29 January.
Constituent Assembly Developments
4. The Constituent Assembly continued its de-
bate on the draft constitution without interruption
last week. It has now completed its work on the
constitution's second chapter entitled "Rights and
Duties of Citizens." Many of the provisions in this
section are rather general principles concerning in-
dividual rights, such institutional rights as freedom
of religion and the press, and state welfare policies.
At least some sections will require more specific
definition in future legislation. Debate on the
significant third chapter of the constitution, which
deals with the legislative branch of the government,
will begin this week.
5. Meanwhile, relations between the assembly
and the government's military leaders have hit at
least a temporary snag. Assembly officials have in-
terpreted criticism of the assembly's work at a re-
cent Saigon labor meeting and in various press arti-
cles as undue public pressure on the assembly and as
having been generated by Directorate members and
police director Loan. They are especially resentful
of such criticism in view of their earlier agreement
with the Directorate to work out differences over
the constitution in private. In view of continuing
progress on the draft constitution, however, US of-
ficials in Saigon believe that this resentment will
not reach serious proportions, and that assembly-GVN
relations will continue to be subject to fits and
starts as the constitution is formulated.
Premier Ky and Chief of State Thieu Continue Their
Undeclared Electioneering
6. By all accounts, Premier Ky's recent ten-
day tour of Australia and New Zealand was a success.
Ky favorably impressed most Australian and New Zea-
land officials, and received increasingly favorable
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coverage from the local press, which initially had
registered reservations about his tour. While Ky
was enhancing his reputation, both domestically and
internationally, as a representative of South Viet-
nam, Chief of State Thieu was on a four-day trip in
the delta, visiting military installations, schools,
hospitals, and pagodas. General Thieu's remarks
and activities on the trip received prominent cov-
erage in the Vietnamese press, thus balancing re-
ports of Ky's success abroad. From these concurrent
trips and from other recent actions, it is clear
that both Thieu and Ky are, at least provisionally,
on the presidential campaign trail.
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Utilization of Nation Police Field Force F9T0rovin l ompanles
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II, REVOLUTIONARY DEVELOPMENT
The National Police Field Forces
(PFF), designed to support and defend the
National Police in their duties and to as-
sist in the security function of pacifica-
tion, are suffering many growing pains,
but in the light of their relative infancy
and of general GVN weaknesses in administra-
tion and leadership, the PFF appear to be
progressing as well as can be expected. A
large-scale Cheiu Hoi program is now under
way in an effort to capitalize on the up-
coming Lunar New Year or Tet. Recent steps
in the over-all Revolutionary Development
effort include a reclassification of ham-
lets in accordance with newly adopted paci-
fication criteria, completion by the prov-
inces of 1967 RD plans, which are considered
inadequate, and authorization for the forma-
tion of "People's Self Defense Forces" in
Ap Doi Moi, or "real New Life Hamlets."
Status of the National Police Field Forces
1. The National Police Field Forces (NFF), a
fairly recent innovation, are designed to provide an
armed force to deal with insurgent groups with which
the uniformed National Police (NP) lack the capability
to cope. In addition, the PFF have the responsibility
for security in areas cleared by ARVN and third country
forces, and it has been anticipated that they will play
an important role in the pacification task. In addi-
tion, the PFF can provide the basis for a national con-
stabulary force should, in the future, the military
situation deescalate, or an agreement be reached for a
general reduction of standing military forces in the
Southeast Asia region,
2. Prior to service in the PFF, all members must
complete basic police training. PFF training, primarily
para-military, is given at Da Lat and Phu Bai, Members
of the PFF receive a slightly higher salary than their
counterparts in the NP and higher family allowances. The
law granting draft exemption to all members of the Na-
tional Police expired on 1 January 1967 and has not yet
been renewed.
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3, Under present plans, the PFF operate in
company-size units assigned to provinces, There
are also three Order Police Battalions, under con-
trol of the Director General of the National Police.
Their mission is to control civil disturbances and
to provide security for sensitive installations, and
they normally operate in company-size units,
4. At the end of 1966, 20 provincial PFF com-
panies and 18 companies of the Order Police Battal-
ions were in existence, and 26 more provincial com-
panies were in the process of being organized. In
the 1967 calendar year, ft-.-is anticipated that 36
more provincial companies will be formed. Total
strength of the PFF at the end of October 1966 was
5,500; during 1967 it is anticipated that an addi-
tional 10,000 men will be recruited,
5. Although the PFF concept is considered sound
by US officials, this project, like all other pacifica-
tion plans, requires that the Vietnamese believe in
the concept and implement it accordingly. At present,
however, most of the provincial companies now in place
are either untrained, understrength, or improperly
deployed. The lack in almost all areas of anything
close to adequate facilities for the PFF and their
dependents could have a critical effect on unit morale
and effectiveness. The traditional animosities and
rivalries between units or organizations of the GVN
also appear in the National Police, In several recent
instances, the uniformed National Police have made
obvious their disdain for the Field Force police,
6. In an effort to alleviate improper deployment,
the PFF advisory branch of the USAID's Public Safety
Division started in December 1966 to furnish Brigadier
General Nguyen Ngoc Loan, the National Police Director
General, written reports about twice a month which
point up weaknesses such as faulty deployment of pro-
vincial units.
7e In spite of the problems being encountered
by the PFF and the rest of the National Police, several
pacification successes to date--notable in Tien Can
District of Phong Dinh Province, and in certain areas
of Long An Province--have resulted in no small way from
well-motivated, well-led, and thus effective police
forces.
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Large-Scale Chieu Hoi Program Inaugurated for Tet
8. During the week of 8 January, a joint GVN-US
task force initiated a program with the purpose of
inducing large-scale defections from the Viet Cong
during Tet, the Lunar New Year. As usual, the GVN
was slow to develop its own plans, but it appears pre-
pared to give full support to the campaign and has
already directed the Vietnam Information Service to
support the Ministry of Information and Chieu Hoi
(MICH).
9. The scope of the 1967 campaign is nearly
double the magnitude of that undertaken at Tet last
year. The first phase of the 1967 campaign, from 1
January - 4 February, is directed primarily at Viet
Cong-controlled areas and consists of leaflet drops
and loudspeaker missions. In support of this effort,
JUSPAO is printing nearly 300 million leaflets and
safe conduct passes, or an average of 20 leaflets per
person in the Republic of Vietnam. This first phase
of the campaign will emphasize such "softening-up"'
themes as "the GVN is winning," the Viet Cong offer
only broken promises," "you will have a warm welcome,"
and "the people are right and the Viet Cong are wrong
--as they were on the election."
10. The second phase, 5-9 February, will emphasize
family and other emotional appeals. In the third phase,
the actual Tet holidays from 10 to 13 February, prop-
aganda will be limited to Tet greetings. In the final
phase, 14-28 February, emphasis will be on explaining
how to defect. Many provinces have developed their
own locally-oriented material which will be distributed
in their areas along with the nationally produced
leaflets and pamphlets, At both the province and na-
tional levels, there will be concerted efforts to dis-
seminate Chieu Hoi appeals by means ranging from
posters to press, radio, and television.
11. In the 1967 Tet campaign, JUSPAO and MICH are
concentrating on more realistic propaganda themes which
have been proven to have some effectiveness with the
Viet Cong, based on experience with ralliers. The most
effective leaflets appear to be those presenting factual
material, and telling the Viet Cong how to achieve their
personal goals, how and where to rally, and providing
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surrender passes. Ralliers have indicated that
propaganda which depicts the Viet Cong movement
as totally cruel and evil, or which, out of ig-
norance, distorts conditions experienced by Viet
Cong troops, tends to be ineffective.
Recent Developments in Revolutionary Development
12. In late 1966, the GVN Ministry of Revo-
lutionary Development amplified previously pub-
lished 1967 Revolutionary Development (RD) guide-
lines by defining the types of hamlets included in
the program. In the future, all hamlets will be
classified as follows:
a) Ap Doi Moi. These are the "real new
life hamlets"--those which have already met or are
being established under the new eleven-point paci-
fication criteria adopted by the GVN and USMACV.
b) Ap Binh Dinh. These are pacification
hamlets--those stillun ergoing pacification, but
from which the Communist infrastructure and "cor-
rupted elements" have been eliminated. The next
step for these hamlets is to be brought under gov-
ernment control. It is anticipated that the paci-
fication of this category of hamlets will be com-
pleted by Revolutionary Development Cadre teams
from nearby areas where Ap Doi Moi are being es-
tablished when the RD teams have the capability to
do so.
c) Ap Cung Co. In this category are con-
solidation hamlets--hamlets which had been previously
declared "secured," but no longer meet the criteria.
The procedure for the completion of pacification in
these hamlets will be the same as for Ap Binh Dinh.
13. The Ap Tan Sinh, or the New Life Hamlets
established under the former six-point criteria, will
be incorporated into whichever of the three new
categories for which they qualify. In areas primarily
inhabited by ethnic minorities, the construction of
Ap Doi Moi will be initiated; however, the criteria
will be more flexible because of the differences in
cultural patters. It is also planned that the RD
Council in each Corps area will set aside a number of
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RD teams to act as a mobile force to bring selected
secured hamlets under government control.
14. Almost all provincial RD plans for 1967
have been completed. For the most part, however,
current provincial plans are inadequate in so far as
they contain no annexes on security, police, and RD
cadre. The lack of these annexes detracts from the
desired goal of obtaining explicit commitments of
a province's civilian and military resources in a
combined program.
15. Major General Nguyen Duc Thang, Minister
of Revolutionary Development and now concurrently the
deputy chief of staff for Pacification and Territorial
Affairs on the Joint General Staff (JGS), has now set
up his office in the JGS. His new position and loca-
tion should help to integrate military assets into
combined resources programs, once a meaningful mosaic
of RD plans has been completed.
16. On 24 December 1966, Premier Ky signed a
decree which authorizes the formation of "People's
Self Defense Forces" in Doi Moi hamlets. The RD
cadres have been made responsible for organizing and
training of these groups. All residents, regardless
of sex or age, of hamlets in which Self Defense Forces
are organized will be enlisted into various "cells,"
apparently on the basis of ability to perform such
tasks as liaison, first aid, defense, etc. The goal
of this program is not only to insure a 100 percent
participation in the defense of the hamlet, but to
link as many persons as possible to some government
organization, and thus to develop some degree of
identification with the government.
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Retail prices in Saigon rose another
three percent during the week ending 23
January as the price of rice continued to
soar. An embassy survey of commodities
for which demand normally increases during
Tet concludes that rice gives most cause
for concern. Prices of imported commodities
also increased again. Although rumors of a
possible devaluation are circulating in
Saigon, free market gold and currency rates
continue to hold steady. Regional price in-
dexes for the period 31 October - 15 Decem-
ber show that prices in most provinces continue
to be well above those in Saigon, but the
degree by which the two sets of prices vary
continues to narrow. ARVN Major Chu has re-
placed General Lan as director of the port
of Saigon.
1. Retail prices in Saigon rose another three per-
cent during the week ending 23 January. According to the
USAID retail price index, which is now at a new high,
prices are more than 40 percent above the level prevailing
just prior to the June devaluation and about 12 percent
above the price level at the time of the initial post-de-
valuation increases. Higher prices during the week ending
.23 January were caused partly by increased consumer demand
for such holiday foods as chicken, shrimp, and condensed
milk. In addition, the price of rice increased for the
fourth consecutive week. The price of the type of rice
used by the working class reached a new high of 2,000
piasters per 100 kilograms, or about 20 percent above the
price of a month ago and 120 percent above the price pre-
vailing at this time last year. As a result of GVN re-
laxation of the system of rationing officially priced pork
to retailers, the price of pork bellies rose to 150
piasters per kilogram on 23 January, compared with 130
piasters during the previous three weeks. With the vege-
table harvest season now at its peak, prices of vegetables
were generally steady or slightly lower. Although charcoal
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and firewood rose slightly, the prices of most non-
food items held steady. (A table of weekly retail
prices in Saigon is included in the Annex).
2. Prices of imported commodities continued
to rise for the seventh consecutive week. Based on
the USAID price index for selected US-financed im-
ports, prices of imported goods on 24 January were
about two percent above the previous week and 17 per-
cent above the levels of mid-December when the steady
increase in prices of these commodities began. The
most notable increases during the week ending 24 Jan-
uary were recorded by iron and steel products, rayon
yarn and hydrochloric acid. Prices of most other
imported goods were generally steady or only slightly
higher.
Currency and Gold
3. Free market currency and gold rates continue
to hold steady. On 23 January the prices of dollars
and MPC (scrip) were unchanged at 175 and 115 piasters
per dollar, respectively. Gold fell one piaster to
225 piasters per dollar.
Regional Prices
4. Retail price indexes for the four admin-
istrative regions of South Vietnam suggest that,
with the exception of Region IV, regional prices
continued to be well above those of Saigon during
the period 31 October - 15 December. These indexes,
which are based on somewhat incomplete reporting
from the provinces, show that prices in Regions
I-III were, on the average, roughly 15 percent
above those of Saigon. Prices in Region I were
the highest--about 22 percent above Saigon prices.
In Region IV, however, retail prices were seven
percent below those in Saigon during the period
under review.
5. In spite of these higher regional prices,
the indexes show that the gap between prices in
Saigon and the provinces continues to narrow--a
trend apparent since the end of June when computa-
tion of regional price indexes was first under-
taken. Between 31 October and 15 December, regional
prices increased by an average of three percent
compared with an eight percent increase in Saigon
prices, During the period since 30 June, regional
prices have increased by an average of seven per-
cent, whereas Saigon prices have risen 25 percent.
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Commodity Situation and Tet
6. Among those commodities for which demand
normally increases during Tet (8-15 February), rice
gives the most cause for concern. Rice prices con-
tinue to rise as stocks remain at low levels and it
seems clear that the price of this commodity will
continue to rise into the holiday season. Never-
theless, unless there is great slippage in cur-
rently scheduled import arrivals, the US Embassy
does not foresee an absolute shortage of rice or
runaway prices during the next few weeks. If the
GVN does not quickly arrange to import rice, how-
ever, a serious shortage will exist just after Tet
with the result that the normal post-Tet decline
in rice prices will not occur. To date, US prodding
on rice imports has proved fruitless. Secretary
of State for Commerce An feels that rice from Ta.i
wan or the US would be too expensive and, for some
unknown reason, he has not displayed much interest
in Thai rice. The US Embassy has concluded that the
GVN believes it will be rescued by the US if the
rice situation reaches the brink of catastrophe.
7. Although the pork situation is unclear at
the present time, it tentatively appears that Tet
can be weathered without abnormal pork shortages
and price increases. The frozen pork recently or-
dered from Argentina will definitely not arrive in
time for Tet. As a substitute, the GVN has ordered
from Japan about 150 tons of frozen chicken which
should arrive in Saigon by 31 January. Moreover,
during the 11 days preceding 23 January arrivals
of hogs from the delta were relatively high. A
major unknown factor, however, is the effect of the
recent GVN relaxation of official price controls
on pork. The immediate reaction to this move was a
15-percent increase in the price of pork bellies.
Other key holiday commodities include flour, milk
and sugar. Stocks of these appear to be adequate.
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8. During the past three or four weeks, rumors
of a possible devaluation of the piaster have spread
in Saigon. It is being said that the piaster will
be devalued to either 150 or 170 piasters per dol-
lar in late January or at the end of February. The
current official rate is 118 piasters per dollar
and the black market rate hovers around 185 piasters
per dollar. These rumors have gained some credence
in commercial circles, but not among the more so-
phisticated banking community. Although the origin
of the rumors is uncertain, they could be related
to the recent sharp increase in the price of rice
or to the current consultations in Washington be-
tween Governor Hanh of the National Bank of Viet-
nam and officials of the International Monetary
Fund.
US officials in
Saigon have informed the press that there is no
possibility of a devaluation in the foreseeable
future and have pointed out that it would be foolish
for the US to request or the GVN to undertake such
a devaluation.
New Saigon Port Director
9. On 20 January, ARVN Major Chu replaced
General Lan as director of the port of Saigon. Chu
joined the port staff about two months ago as Lan's
deputy. Although Lan, who was named port director
last July, has indicated that he had expected to be
replaced, the full implications of the change are
not yet known, Premier Ky has assigned over--all
responsibility for all of South Vietnam's ports to
the Ministry of Transport and Communications which
is headed by Truong Van Thuan to whom Chu will re-
port. Thuan also has been named chairman of the
board of Air Vietnam.
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Weekly Retail Prices in Saigon a/
13 June
27 Dec.
3 Jan.
1966
1966
1967
Index for All Items b/
173
216
225
Index for Food Items b/
190
226
242
Of Which:
(In Piasters)
Rice-Soc Nau (100 kg
.) 1,250
1,650
1,700
Pork Bellies (1 kg.)
90
100
130
Fish-Ca Tre (1 kg.)
130
130
150
Nuoc Mam (jar)
70
90
90
Index for Non-Food Items
b/ 140
198
195
Of Which:
(In Piasters)
Charcoal (60 kg.)
460
640
640
Cigarettes (pack)
10
14
14
White Calico (meter)
27
35
33
Electricity (kwh)
4.2
5.2
5.2
a".
Data are from USAID
sources.
b.
Revised and expanded
USAID indexes. (1 January
c,
Preliminary.
9 Jan. 16 Jan. 23 Jan.
1967 1967 1967
232 239
247:c/ 257 c/ 268 c/
1,850
130
150
90
204 c/
1,900
130
160
120
204 c/
204 c/
700
700
710
14
14
14
33
32
31
5.2 5.2 5.2
1965 = 100).
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