THE SITUATION IN SOUTH VIETNAM (WEEKLY)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001700010002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 20, 2016
• Document Release Date: June 25, 2001
• Sequence Number: 2
• Publication Date: February 20, 1967
• Content Type: IR

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Secret
No Foreign Dissem
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
Wleekly )
-~ Secret
148
20 February 1967
No. 0338/67
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RNING
This document contains information affecting the national defense of the
N' f eed States, within the meaning of '.title 18, sectio s 7tr3 and 794, of the
J Code, as amended. Its transmission or revelatior, of its contents to or
receipt by an unauthorized person is prohibited by law.
cr t
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(13 February - 19 February 1967)
POLITICAL SITUATION I
Constituent Assembly developments;
GVN-assembly relations; Thieu's re-
marks on civilian-military coopera-
tion; Presidential campaigning.
REVOLUTIONARY DEVELOPMENT II
Developments in the RD program; RD
cadre casualties for 1966; Free world
assistance; Progress in education; Re-
cent developments in the refugee situa-
tion; Chieu Hoi statistics.
ECONOMIC SITUATION III
Prices; Currency and gold; Credit prob-
lems; Rubber production and exports;
Provincial economic developments in
December.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
Areas of Significant Refugee Activity,
December 1966 - January 1967 (map)
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The Constituent Assembly has appar-
ently satisfied some of the military
leaders' major objections by deleting or
modifying controversial legislative pow-
ers in the constitution. Prior to the
assembly's action, one ranking military
official reportedly expressed satisfac-
tion with the status of relations between
the military government and the assembly.
Premier Ky and Chief of State Theiu are
continuing to cause speculation in mili-
tary and civilian circles over their re-
spective presidential ambitions.
Constituent Assembly Developments
1.
The Constituent Assembly reconvened
on
14
February
after a ten-day Tet holiday
break,
and
im-
mediately
began to debate provisions
dealing
with the
powers of the future government's legislature. In
subsequent sessions, the assembly deleted or modified
controversial legislative powers which were proposed
in its working draft.
2. Specifically, the assembly omitted all ref-
erences to the exercise of emergency powers by the
legislature, thus, apparently reserving this function
solely for the executive branch.. In addition, it
stiffened considerably the requirements necessary. for
the legislature to dismiss the prime minister and/or
the cabinet. In this regard, the assembly approved a
provision which states that the legislature can recom-
mend the replacement of all or part of the cabinet and
the prime minister by a two-thirds majority vote of
both houses. If the president fails to act on the
recommendation, then the provision empowers the legis-
lature to pass a binding motion of dismissal by a three-
quarters majority in both houses, a majority which in
practice will undoubtedly prove very difficult to at-
tain. By way of contrast, there had at one time been
some discussion of authorizing the legislature to dis-
miss individual ministers by only an absolute majority,
and to dismiss the entire cabinet by only a two-thirds
majority.
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3, Other powers which were awarded the legisla-
ture include voting legislation, ratifying interna-
tional treaties and agreements, and determining dec-
larations of war and the holding of peace talks. The
future legislature will validate the election of its
representatives and senators, and is also empowered
to request the prime minister or other government of-
ficials to appear before the legislature or legisla-
tive investigating committees to answer questions re-
garding government policy.
4. The assembly completed its adoption of the
chapter dealing with the legislative branch on 16
February, after a final debate on the procedure for
the passage of legislation. Discussion on this sec-
tion, Articles 42 through 44, was somewhat heated,
primarily because of the efforts of some deputies in-
cluding Dai Viet party members to limit the power of
the upper house--which, they felt, would prove more
susceptible than the lower house to executive pres-
sure. As finally approved, the articles reflect a
compromise which gives the lower house a greater voice
in the process subject to some checks by the upper
house.
5. Article 42 permits either house, or the pres-
ident, to introduce bills to the lower house, which
then transmits a bill with its approval or rejection
to the upper house. If the upper house does not vote
concurrence, it resubmits the bill to the lower house,
which must vote final action by a two-thirds majority;
failing such a majority, the action taken by the upper
house stands. Article 43 stipulates that bills are
transmitted to the president for promulgation within
15 days, or seven if certified urgent; if the presi-
dent takes no action in the specified time, the bill
automatically becomes law and is promulgated by the
chairman of the upper house. Although Article 44 gives
the president the right to return bills, or portions
thereof, for reconsideration, the president's power of
veto can be overruled by.an absolute majority of the
total membership of both houses, meeting jointly.
6. Assembly discussion and approval of sections
of the executive chapter have so far been limited to
articles dealing with the terms of office, qualifica-
tions, and procedures for the election of the president
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and vice president. Although some effort was made by
southern deputies to set a minimum age qualification
of 40, an article setting the minimum age at 35 was
approved by a vote of 61 to 22. This article effec-
tively ensures the eligibility for the presidency of
Premier Ky, who is reported by a Dai Viet assemblyman
to. have recently exerted pressure so that he would
not be "defeated in the first round."
7. The assembly now has about 30 working days be-
fore 27 March, its deadline for completing the constitu-
tion.
GVN-Assembly Relations
8. As yet, there have been no reports of a def-
inite response or comments by government leaders re-
garding. the recent compromises struck by the assembly
on legislative powers. However, US officials in Saigon
as well as various assemblymen are inclined to feel that
the. changes made by the assembly should satisfy military
members of the ruling Directorate who had objected to
what they considered the overly powerful legislature out-
lined in the assembly's initial working draft.
9. Before the assembly's action on the provisions
dealing with legislative powers, Information Minister
General Tri reportedly told an assembly official that
the government was pleased with its relations with the
assembly, and that it could now count on the "friendship"
of about 80 of the 117 assemblymen. General Tri report-
edly stated that disagreements remaining between the as-
sembly and the government could be worked out through
mutual cooperation. Tri declared that the government was
willing to see the assembly act as an interim legislature
in the future government if the assembly supported GVN
policies and was "reasonable" in working out remaining
areas of contention in.the constitution. Tri indicated
that, in such circumstances, the presidential and senato-
rial elections could be scheduled at the same time, but
that the election for the lower legislative house could
then be postponed for awhile to allow the constituent as-
sembly to fill this role temporarily.
10. Directorate chairman. and Chief of State General
Thieu is reported to have approached a Dai Viet party
deputy twice in early February to urge assembly coopera-
tion with the Directorate's views. In particular, Thieu
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sought to avoid any rigid constitutional requirement
for the election of province chiefs, but he also sug-
gested the creation of a military advisory board in
the new government. According to the source of this
report, Thieu indicated that he would promulgate the
constitution as approved by the assembly, but warned
that if the proper safeguards for future stability
were not incorporated, the military might be forced
to intervene and assume power if trouble arises.
Thieu's Remarks on Civilian-Military Cooperation
11. During an informal Tet holiday address to
some 500 military men and civilians, General Thieu
also commented on civilian-military cooperation. Thieu
seemed to be implying. that he did not necessarily feel
that a military man had to become president when he de-
clared that the "future government does not have to have
a military president or prime minister before military/
civilian cooperation can be demonstrated." However, it
is more than likely that the army has not yet 'reached a
firm decision on this question, and that General Thieu,
by appearing reasonable and open minded, is in the mean-
time attempting to boost civilian-military relationships.
At the same time, Thieu's remarks seem to make it clear
that the military feel that, in some form, they must
.have a strong voice in the new government.
Presidential Campaigning
12. Premier Ky, meanwhile, is indicating increas-
ing determination to become the candidate of the military
y as replaced is ormer special as
sis an in rin Chinh--appointed ambassador to Thailand
--with Nguyen Huu Chi, former Quang Nam Province chief,
and has further designated Chi as his campaign manager.
Chi reportedly has been asked to scout about for a vice
president and premier for Ky's ticket, and to see what new
province chiefs might be appointed to help Ky's election.
Ky has also let it be known that he would like to,.visit
the US in April, apparently by accepting an invitation to
address a press club meeting in New York; another of Chi's
tasks would be to provide maximum press coverage in Viet-
nam for such a trip.
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13. Although Ky is alleged to have told Chi
that he is confident of enough Directorate support
to persuade Thieu to bow out as the other leading
military presidential hopeful, another source has
cited Information Minister Tri as claiming. that
several ranking officers believe Thieu's desires
should have priority. In conversation with a US
Embassy officer, Vo Long Trieu, a southerner who
left Ky's cabinet and who is supporting former
civilian premier Tran Van Huong for the presidency,
characterized Ky and Thieu as eyeing each other for
the top job in the next government "like a pair of
fighting cocks before combat." Trieu, who made pos-
sibly exaggerated claims of support for Huong's can-
didacy among a variety of groups, indicated that he
hoped Ky would eventually withdraw and team up with
Huong; however, he noted an alleged remark by Thieu
that he would defer to Ky rather than split the mili-
tary over the issue. In this context, Trieu commented
that he felt that no civilian government could. govern
effectively without military support, and that future
stability would require military unity.
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II. REVOLUTIONARY DEVELOPMENT
The established 1966 goals for secur-
ing hamlets and population were not real-
istic and therefore not obtainable; however,
the 1967 goals appear generally attainable
and considerable training and preparation
efforts are under way to ensure greater
progress. Over 600 RD cadres were killed
in action during 1966.
The Australians have decided to in-
crease their civilian financial aid to Viet-
nam by 70 percent during 1967.
Progress in education continues--the
hamlet school program completed its most suc-
cessful year in 1966 and survey teams from
the US are assisting the GVN in educational
development. Although the GVN's 1967 .Voca-
tional Education budget was cut heavily, this
may not affect basic activities.
There has been significant activity in
connection with the refugee situation in at
least eight provinces during late 1966 and
early 1967. (See the map at the end of the
Annex.)
The high rate of Chieu Hoi returnees,
begun in September 1966, continues; the total
reported for 1 January - 11 February is 3,465.
Developments in the RD Program
1. The goals established by the government for
securing hamlets and population in 1966 were overly
ambitious and, therefore, were. unobtainable. As the
Revolutionary Development program was put into prac-
tice, the Ministry of Revolutionary Development (MORD)
found it necessary to make numerous revisions, involv-
ing training, organization, and, in effect, the entire
government structure.
2. During 1966, 552 hamlets were "secured,"
less than a third of the 1966 goals. However, the
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figure appears to reflect fairly honest reporting of
accomplishments'by GVN officials, despite the fact
that, as 1966 came to an end, several provincial of-
ficials, in order to give a better-.than warranted im-
pression, tried prematurely to upgrade to "secured"
status many hamlets in which RD cadres had worked.
3. About one third of all. hamlets in the coun-
try are now "secured" hamlets, but this does not
necessarily mean that the hamlets meet the new eleven-
point criteria for inclusion as Ap Doi Moi or "Real
New Life Hamlets." The aggregate "securce " popula-
tion is approximately 8.7 million out of an esti-
mated 16.5 million population base. The ultimate
RD goal is to secure all hamlets in the country,
currently numbering 11,250, although this total has
been increasing due to the formation of new hamlets
in existing populated areas.
4. The GVN 1967 plan envisions an RD effort in
1,100 hamlets. The population in these hamlets is
approximately 1.4 million. More effective use of
GVN assets in the 1967 program should be aided by
the reorganization in late 1966 of the US mission's
resources to establish an integrated, inter-agency
approach, through the Office of Civil Operations
(OCO).
5. A joint working group has produced a com-
bined MACV/Joint General Staff (JGS/RVNAF,,)directive
that requires the preparation of sector--province-
security plans. The directive, already signed by
General Westmoreland,, is at the JGS for General Vien's
signature, and is expected to be published shortly.
The sector security plans are designed to provide
coordinated military support to provincial RD ac-
tivities.
6. Motivation of RD cadres is a problem re-
quiring continued attention in 1967. Under earlier
cadre programs, it was easier to motivate partici-
pants because of the smaller number of cadres in-
volved and the relative lack of publicity, but
rapid expansion of the RD cadres has brought prob-
lems of quality and indoctrination. If true dedi-
cation to "revolutionary" ideas is to be inculcated
into participants, candidates for the program should
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not include draft dodgers or military deserters and
psychological indoctrination must be geared to dis-
solve the detached, uncommitted attitude of the gen-
eral populace. So far, the GVN has not shown the
skill of the Viet Cong in mobilizing people, chiefly
through indoctrination, to work in their counterpart
of the RD program. On the other hand, the Communists
have been:englged in:indoctr.ination activity far longer
than has the GVN Ministry of Revolutionary Develop-
ment.
7. On 29 December 1966 a seminar was held at
Dalat to discuss the application of the eleven-point
criteria for Ap Doi Moi ("Real New Life Hamlets").
Over 1,254 government personnel, including most
province chiefs and mayors of autonomous cities, at-
tended the seminar, which was presided over by Prime
Minister Ky, Chief of State Thieu, and RD Minister
General Thang. The three senior GVN officials ex-
horted their comrades to put forth a greater effort
to achieve 1967 goals. Several recent innovations
which were explained at the conference were: 1) the
national payroll system--designed to gain tighter
financial control of cadre operations, 2) the RD'Cadre
inspection system--designed to ensure better opera-
tional direction of groups in the field, 3) Peoples
Self Defense Forces--hamlet militia groups to be set
up, trained and equipped by RD cadres where necessary,
and 4) the new eleven-point criteria.
8. To ensure that the RD ministry (MORD) re-
ceives at least two years' service from individuals
recruited into the cadre program, persons of 19 and
20 years of age--who may be subject to the draft
after 1967--will not be recruited. Problems en-
visaged as a result of the army's apparent intent
to draft cadres whose service ineligibility was
about to expire have been temporarily averted by
coordination between MORD, JGS, and OCO.
9. Statistics for 1966 show that 593 RD cadres
were killed and 75 captured, and that at least 86
were discharged, 696 resigned, and 603 deserted.
In the Census Grievance program, seven cadres were
killed, two captured, 59 resigned, and four deserted.
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Free World Assistance
10. The Australian cabinet has reportedly de-
cided to increase civilian aid to Vietnam during the
1967 fiscal year by 70 percent, providing an addi-
tional 1.8 million dollars (US). The funds will be
directed into programs already under way-including
textbook printing, civic action, and road building
machinery and into new projects to include medical
equipment, a water supply system for the city of
Can Tho, and equipment for refugee resettlement
centers.
Progress ii Education
11. The hamlet school program completed its
most successful year in 1966 with the construction
of 2,087 classrooms and the training of 3,428
teachers. The teachers are apparently being re-
tained within the Ministry of Education and dis-
patched to rural schools.
12. In January 1967, ,n agricultural education
survey team from the University of Florida arrived
in South Vietnam to examine existing agricultural
training programs and to assist the GVN in planning
future educational development in this field. Dur-
ing the same period, a higher education survey team
from Wisconsin State University has been evaluating,
and providing guidelines and priorities to_. the
Universities of Saigon, Hue, and Can Tho. A team
from Ohio University has been in Vietnam for sev
eral months and, in conjunction with JUSPAO, has
developed and distributed approximately 20,000 Basic
Food Grouping Charts to elementary and secondary
schools. Joint cooperation between these two groups
has resulted in the development of a Vietnamese-
language general business textbook which is being
used in pilot projects in the Thu Duc demonstration
school and the National Wards School.
13. The GVN 1967 budget request for vocational
education' was reduced by 45 percent, allowing
only 134 million piasters for salaries, operating
expenses, equipment and student allowances. In spite
of cuts in budget requests, all unfurnished Junior
'Technical Schools (formerly Rural Trade ,Schools) are
expected to be completed by 1 July or, in case of
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construction material shortages, no later that the
end of the year. Plans for the new Petrus Ky Technical
School in Saigon envision an 86,000-square-meter com-
plex with school buildings and dormitories. The Ban
Me Thuot Technical School, by utilizing masonry and
carpentry trainees, is completing the construction
of new housing on the school grounds.
14. An interesting sidelight, which reflects
the traditional emphasis by.the Vietnamese.on learning and
the desire for the education of their children, is
the voluntary financial contributions from parents
in Vinh Long Province for the construction of a public
high school.
Recent Developments in the Refugee Situation
15. Dr. Nguyen Phuc Que, the Special Commis-
sioner for Refugees, and General Nguyen Duc Thang,
Commissioner General of Revolutionary Development,
have agreed in principle that refugees who return
to their villages of origin become the responsibility
of the Ministry of Revolutionary Development (MORD)
and not the Special Commissariate for Refugees (SCR).
16. In anticipation of further mass evacua-
tions of persons such as occurred in the CEDAR
FALLS Operation, and to alleviate excessive demands
on SCR supply channels, Dr. Que has directed the
SCR to begin to stockpile commodities which are
normally in short supply--such as rice sacks. Dr.
Que has also been contemplating the establishment
of a refugee resettlement hamlet on the edge of the
Boi Loi forest in Hau Nghia Province. It is antic-
ipated that a well-constructed settlement, adequately
furnished with facilities, would have a significant
psychological impact on the Viet Cong. The Boi Loi
forest, a long-time Viet Cong redoubt, has been sub-
jected to intensive saturation bombing and incursions
by allied forces. The security of the proposed
refugee hamlet would be provided by Popular Forces
and a nearby Ranger Training School.
17. At the request of the Highlanders Affairs
Adviser of the Office of Civil Operations, members
of Dr. Que's staff will provide technical assistance
in the resettlement of montagnard, members of FULRO,
the highland autonomy movement, in Darlac Province.
11-5
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18. There are encouraging signs that refugees are
receiving more opportunities for vocational training.
Three additional Junior Technical Schools (formerly
Rural Trade Schools) functioning under the Ministry of
Education are now offering instruction to refugees; this
brings the total to nine. The SCR is funding approxi-
mately 100 students at each of the three new schools.
The students will take a three-month course in a field
of their choice. The Vietnamese army has promised the
SCR that it will begin to accept refugees for training
in mechanical skills at the ARVN training center in
Saigon. Graduates of this three-month course will be
granted employment at A:RVN's Material Services Division
and will be entitled to all benefits of civil servants.
The Ministry of Labor and the SCR are discussing ways
in which the Labor Ministry can assist in vocational
training.
19. Several international relief agencies have
evidenced interest in establishing or expanding programs
in South Vietnam. The Community Development Foundation,
a voluntary agency based in the United States, has con-
cluded an agreement with the SCR to establish and op-
erate a refugee welfare training program at Qui Nhon,
Binh Dinh Province. Their goal is to train 120 students
in a two-month program and to use these students in
establishing 12 mobile teams of 10 specialists who will
work on a country-wide basis in the refugee program.
Training cadres are expected to come from the US, Greece,
and South Korea.
20. The chairman of the Refugee Commission of the
International Council of Voluntary Agencies and the
legal counsel of the American Joint Distribution Com-
mittee visited Vietnam in January 1967. The purpose of
their visit was to advise the Council of Foreign Volun-
tary Agencies in Vietnam on the establishment of a
salaried executive secretariat and to explore areas of
need relative to further voluntary agency participation.
The League of Red Cross Societies has advised the Red
Cross Society of South Vietnam that it sent an appeal
to 24 national societies asking for supplies for 50,000
refugee families and for teams to work in refugee,centers.
It is not yet known which countries, if any, responded
to the appeal.
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21.' Encouraging progress in establishing a
refugee-operated sawmill in Quang Tri Province has
been made. A management committee has been established
by the SCR to supervise the project, in which refugees
will provide the labor to operate the mill as well as
cut the vast stands of timber available in the province.
The machinery is being provided by USAID. West Germany,
in cooperation with the International Rescue Committee,
will provide a three-man team to instruct in mill op-
eration as well as to organize a local crafts industry
to make use of the wood. To fill the gap until the
arrival of the joint team,,General Tobias, the com-
manding general of the Philippine Civic Action Group,
will furnish six persons to instruct the refugees in
operation and maintenance.
22. In Pleiku Province, an "Edap Enang" Plan--
which calls from the relocation of 2,500 montagnard
families from insecure areas near the Cambodian border
to five resettlement sites--is under way. The new sites
have been selected and construction of schools, dis-
pensaries, wells, and administrative centers is about
to begin. Another montagnard resettlement took place
in Phuoc Long Province when ARVN forces evacuated an
estimated 920 people from Viet Cong control. ARVN also
removed 20 tons of rice belonging to these people.
23. In Tanh Linh district, Binh Tuy Province, a
group of 2,000 Vietnamese who moved to the area from
North Vietnam in 1954 have petitioned the SCR for as-
sistance. Their area, although fertile, is accessible
only by air, and the people are suffering from severe
dietary deficiencies and malaria. Promises of medical
aid have been given by Korean and MEDCAP teams, and
projected area development plans include land clear-
ance, housing improvement, and the locating of a
Special Forces camp in the village to improve security.
24. In Quang Tin and Thua Thien provinces, fewer
refugees were generated in January than in previous
months and resettlement programs showed net gains. These
provinces are attempting to develop a uniform policy
defining the period of time and support given to people
having refugee status.
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25. Serious problems exist in Quang Nam Province
where provincial officials are unable to cope with refugee
problems, especially in outlying districts away from Da
Nang. Most of the support for the 137,000.refugees has
been directly furnished by USAID and the US militar.v, ;
but such support has often been given in quick reaction
to refugee needs without first notifying GVN officials.
The "zealousness" of US officials in this and some
other programs in Quang Nam has caused many Vietnamese
officials to take a passive attitude toward programs
they are supposed to implement.
26. Accidental fires in refugee centers left
159 families homeless in Quang Nam Province and 85 fam-
ilies homeless in Phuoc Long Province. USAID provided
immediate support to the stricken people and plans are
under way to rebuild their homes.
27. The Viet Cong conducted forays against refugee
resettlement areas on 3 and 5 February. On 3 February
the Truc Dua center in Binh Dinh Province was attacked
by a company of Viet Cong, who killed six persons and
destroyed four houses. On 5 February a Viet Cong company
destroyed the 200 houses in the Ca Lui refugee center
in Phu Bon Province when a montagnard hamlet chief
refused to obey a Viet Cong order that he and his people
return to their original hamlet. However, none of the
refugees suffered any casualties. Reports do not in-
dicate whether any GVN security forces were in the area.
Supplies have been provided to these people and the re-
construction of their homes is under way.
28. One of the biggest resettlement projects to
date has been occurring over the past year in Phu Yen
Province. Recently, Republic. of Korea troops uprooted
approximately 16,000 villagers--almost all of whom
were families of Viet Cong soldiers--from about 20 vil-
lages in northern Phu Yen and. consolidated them into
five villages. In so doing, Korean forces opened up
Highway #1.along the coast allowing truck traffic to
flow between Tuy Hoa, the province capital, and Qui
Nhon, capital of adjacent Binh Dinh Province.
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Chieu Hoi Statistics
29. The high monthly rate of Chieu Hoi returnees,
a trend which began in September 1966, continues. The
total input into the centers for the period 1 January -
11 February was 3,465, as compared with 1,822 for the
same period in 1966. If this trend of 2,000 a month
keeps up, approximately 30,000 persons can be expected
to rally in 1967.
30. A breakdown of the returnees for the week
29 January - 4 February follows:
I Corps
II Corps
III Corps
IV Corps
Total
177
581 (364 military)
31. South Vietnam's Ministry of Information and
Chieu Hoi has reported that 612 Viet Cong rallied in the
period 5 - 11 February. Of the week's total, 388 were
listed as military returnees. Although it is not yet
known how many rallied in direct response to the major
psychological campaign in connection with Tet, there were
no significant military contacts last week which could
have accounted for the continuing high rate of defections.
The breakdown for the week follows:
I Corps 64
II Corps 200
III Corps 181
IV Corps 167
Total 612 (388 military)
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III. ECONOMIC SITUATION
Prices of both domestic and imported
commodities in Saigon were generally un-
changed during the week ending 6 February
as pre-Tet buying was largely completed.
The major exception was rice, the price
of which continued to rise for the sixth
consecutive week. No significant fluctua-
tions were noted in free market gold and
currency prices.
As a result of a recent action by
the National Bank of Vietnam (NBVN), the
liquidity of the commercial banks has been
sharply reduced and they have appealed to
the NBVN to liberalize credit.
During December provincial prices
were relatively steady in three of the
four regions of South Vietnam. In Region
I transportation difficulties caused by
the monsoon rains resulted in generally
higher prices.
The production and export of rubber
declined sharply in 1966,
1. Retail prices in Saigon were generally un-
changed during the week ending 6 February as pre-Tet
buying was largely completed. According to the
USAID price index, prices were about one percent
above the previous week with both food and non-food
items sharing in the gain. The prices of pork, veg-
etables, shrimp, milk and sugar were either un-
changed or lower. Rice prices, however, continued
to increase. On 6 February the price of the type
of rice used by the working class was 21.5 piasters
per kilogram--another new high. In view of this
situation, the GVN finally dispatched a delegation
to Bangkok to arrange for the purchase of Thai rice.
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The price of certain services, such as haircuts
and cyclofares, also rose in response to last-min-
ute preparations for the holidays. (A table of
weekly retail prices is included in the Annex),
2. For the first time in nine weeks, the prices
of imported commodities were unchanged as measured
by the USAID price index for selected US-financed
imports. The most significant price movements were
recorded by cement and condensed milk. The price
of the former continued to rise because of low
stocks, whereas the price of the latter declined as
a result of abundant supply? Prices of most other
imported goods were generally unchanged.
Currency and Gold
3. On 6 February the free market rates for
dollars and MPC (scrip) were 173 and 111 piasters
per dollar, respectively--each one piaster below
the previous week. The slight decline in the price
of dollars was attributed to the normal increased
Tet demand for piasters. Gold moved up one piaster
to 224 piasters per dollar. (A graphic on monthly
and weekly free market gold and currency prices is
included in the Annex).
Credit Problems
4. On 25 January the National Bank of Vietnam
(NBVN) began debiting the commercial banks for over-
due payments on US-financed imports, Since the
devaluation last June, commercial banks have been
able to delay these payments beyond normal terms
with the result that a float of about three billion
piasters in favor of the banks had accumulated.
This situation resulted from delayed billing by the
NBVN,which had been receiving letters of payment
on US-financed goods several months late because
of a mix-up in paperwork. The commercial banks, on
the other hand, had been receiving letters of pay-
ment immediately and had extended credit to the im-
porters when the goods arrived, Moreover, in many
cases, the banks had been repaid by the importers.
Normally, the banks would have made payment to the
NBVN,which would have drawn down the loanable funds
of the bank. The mix-up has now been corrected,
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however, and letters of payment are being forwarded
by air to the NBVN,which has begun to demand pay-
ment from the commercial banks. The action in Jan-
uary by the NBVN drew down the float by about one
billion piasters and the NBVN has said that it may
continue reducing the float after Tet. As a result,
their
tlliquidity
the commerical banks have found
o
sharply reduced and have appealed
authorize liberalization of credit through changes
in reserve requirements and other measures.
Rubber Production and Exports
5. The production and export of rubber con-
tinued to decline in 1966. During the first 11
months of 1966, production amounted to about 40,000
metric tons, or roughly 30 percent below the level
produced during the corresponding period
and 33 percent below the January-November average
during 1961-64. Exports during 1966 totaled 44,000
metric tons compared with 62,000 tons in 1965 and
an annual average of 75,000 tons during the pre-
vious four years. This decline in exports results
not only from lower production but also from diffi-
culties in transporting the rubber to Saigon from
the plantations. The average monthy level of stocks
at the large plantations during the first nine
months of 1966 was more than 55 percent about the
level during the corresponding period of 1965.
Provincial Economic Developments in December
6. In Region I, transportation difficulties
caused by the monsoon rains resulted in diminished
supplies of commodities and generally higher prices
during December. Prices of staple foods in Q.-rig
Nam Province, for example, rose 10 to 15 percea.t:
as a result of the rains and floods. Prices of
foodstuffs also increased significantly in Quang
Tri Province. Flood damage in Thua Thien Province
destroyed vegetable crops, resulting in a s:,,^tage
of fresh vegetables in local markets. In some
areas, such as Da Nang and Quang Ngai Province,
higher prices were occasioned by increased holiday
buying.
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7. Prices in Region II remained relatively
stable except in Pleiku and Ninh Thuan provinces
where prices rose sharply. Higher prices in Ninh
Thuan Province stemmed from road deterioration,
insecurity on routes south of the provincial capital,
and Viet Cong taxation of truck traffic. The in-
flationary trend in Cam Ranh city showed no sign of
abating during December as demand continued to ex-
ceed supply because of the full exployment situation.
As in Region I, unfavorable weather conditions also
had an adverse effect on economic activities in some
parts of Region II. In Darlac Province, for ex-
ample, an estimated 60 percent of the rice crop
was lost because of a lack of rain during the past
growing season. Turbulent weather conditions in
Khanh Hoa Province at the beginning of December
resulted in a reduced supply of fish and higher
prices for this commodity. Prices in Quang Due
Province declined as a result of the opening of
Route 14 from Darlac Province.
8. With the exception of Long Khanh Province,
prices in Region III also remained relatively stable.
The inflationary trend observed in Long Khanh Prov-
ince in November continued during December as suc-
cessful harvests and nearly full employment put more
piasters in the hands of consumers. These inflationary
pressures were expected to intensify with the dis-
tribution of nine million piasters of resettlement
allowances to refugees in two provincial districts.
In Binh Duong Province higher prices and improved
access to markets have provided incentives to farmers
to increase production of hogs, poultry and other
cash crops. An apparent drifting of defoliant in
Tay Ninh Province has resulted in crop damage that
will have an adverse effect on prices of foodstuffs
which are already high in this province.
9. Economic activity throughout Region IV was
spurred by the combined effects of the harvest,
the holiday season and,in some provinces, by antic-
ipation of the arrival of US troops. Prices of
foodstuffs, however, leveled off in most delta prov-
,.inces.. The only unfavorable trend noted in the
economic situation was a continuation of increas-
ing prices for construction materials. In Ba
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Xuyen Province, for example, the prices of sand,
gravel and lumber were ten to 15 percent above those
of the previous month. Prices of building materials
also increased in An Xuyen and Chuong Thien prov-
inces where local merchants and contractors ap-
peared to be hoarding supplies in order to make
a gain from the US troop buildup.
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%00 %0
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Weekly Retail Prices in Saigon a/
13 June 16 Aug. 16 Jan. 23 Jan. 30 Jan. 6 Feb.
1966 / 1966 j/ 1967 1967 1967 1967
Index for All Items 173
Index for Food Items 190
Of Which:
(In Piasters)
211 239 247 254 259
216 257 269 281 282 J
Rice-Soc Nau (100 kg.) 1,250 1,450 1,900 2,000 2,,100 2,150
Pork Bellies 1 kg.) 90 100 130 150 150 150
Fish-Ca Tre (1 kg.) 130 170 160 160 180 180
Nuoc Mam (jar) 70 85 120 120 120 120
Index for Non-Food Items 140 190 204 205 204 N.A.
Of Which :
(In Piasters)
Charcoal (60 kg. 460 600 700 710 680 700
Cigarettes (pack) 10 14 14 14 14 14
White Calico (meter) 27 37 32 31 31 30
Electricity (kwh) 4.2 N.A. 5.2 5.2 5.2 5.2
a. Data are from USAID sources. For all indexes 1 January 1965-= 100.
b. Price levels just prior to and two months after the 18 June devaluation.
C. Preliminary.
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 Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010002-4
A~ %10
Saigon, Free Market Gold and Currency Prices
GOLD: Basis gold leaf worth $35 per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates (scrip).
65775 2-67
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 Approved For Release 2006/10/20: CIA-RDP79T00826AO01700010002-4
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,
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Secret
Secret
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