THE SITUATION IN SOUTH VIETNAM
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Document Creation Date:
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Document Release Date:
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Publication Date:
September 26, 1966
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/'C`6
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26 September 1966
No. 0392/66
Copy No.
INTELLIGENCE REPORT
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
BACKGROUND USE ONLY
NO FOREIGN DISSEM
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dec s ca on
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This document contains information affecting the
national defense of the United States, within the
meaning of Title 18, sections 793 and 794, of the US
Code, as amended. Its transmission or revelation
of its contents to or receipt by an i.inauthorized
person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(19 September - 25 September 1966)
C O N T E N T S
POLITICAL SITUATION
Problems facing the assembly; Govern-
ment attitudes toward the assembly;
Buddhist Institute leadership remains
deadlocked; Detained French business-
men released; Membership of commission
on political prisoners still indefinite.
REVOLUTIONARY DEVELOPMENT II
Refugees; Viet Cong defectors (Chieu
Hoi); Viet Cong land-tenure policy.
ECONOMIC SITUATION III
Prices; Currency and gold; Inflationary
problems for 1967; US-GVN economic dis-
cussions; Uniform pay scale for Vietnam-
ese hired by US; RMK-BRJ layoffs of
Korean and Philippine nationals.
ANNEX: Weekly Retail Prices in Saigon (table)
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I. POLITICAL SITUATION
Before it even begins drafting a con-
stitution, South Vietnam's newly elected
constituent assembly will face several
significant problems soon after it con-
venes on 27 September. Thus far, military
leaders have generally been careful not to
provoke assembly delegates.
The Buddhist Institute leadership re-
mains deadlocked, raising the possibility
of a formal organizational split between
moderate and militant Buddhists. Two
French businessmen arrested on suspicion
of financing antigovernment activities
were released by the government last week.
The membership of the government committee
which is to study the cases of various
political prisoners is still indefinite.
Problems Facing the Assembly
1. The newly elected constituent assembly will
face several important political problems when it
convenes on 27 September. The delegates may decide
to give early consideration to the question of as-
suming a legislative function in addition to draft-
ing a constitution, and to the issue of the govern-
ment's current veto power over any draft constitution
lacking a two-thirds majority in the assembly. At
least one well-known southern politician, Tran Van Van,
is attempting to capitalize on some delegates' latent
ill feelings toward the military by organizing a bloc
which would ensure that civilian interests prevail in
the assembly's work.
2. Other leading delegates, however, are aware
that an initial plunge by the assembly into these two
delicate issues could seriously mar relations between
the assembly and the military establishment, and that
arriving at a meaningful balance of civilian and mili-
tary interests in the constitution itself could con-
sequently become a major problem. La Thanh Nghe,
former Saigon city council president, and Dang Van
Sung, well-known northern Dai Viet leader and publisher,
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have both indicated that they are advising other
delegates against holding an early discussion of
these two issues.
3. Another item which could exacerbate re-
gional and other differences within the assembly
itself is the election of an assembly president.
Speculation on the likely winner is centering on
five well-known politicians from the Saigon area,
but no clear favorite has yet emerged. Tran Van
Van, former Chief of State Phan Khac Suu, and the
popular Dr. Phan Quang Dan are generally regarded
as actively pursuing the nomination. La Thanh
Nghe and Dang Van Sung are not openly interested
in the post, but Nghe has been mentioned as the
most likely compromise candidate in the event of a
deadlock among the three front-runners.
4. Should a consensus fail to develop, how-
ever, the diverse interests represented by the
delegates--especially regional differences--could
be accentuated, and adversely affect the degree of
harmony in the assembly. Southern influence, which
has increased in Premier Ky's cabinet this year, is
also strong in the assembly, and there are indica_
tions of some organizational efforts among southern
delegates. The US Embassy has commented that it
would be desirable that Tran Van Van not realize
his ambition to become president, since regional
feelings would only be sharpened under his leader-
ship. Bui Diem, one of Premier Ky's closest ad-
visers, has strongly implied that the government
is attempting to influence the choice of either
Phan Khac Suu or Phan Quang Dan as assembly presi-
dent.
Government Attitudes Toward the Assembly
5. Thus far, the leaders of the military gov-
ernment have generally been careful not to alienate
the assembly delegates. In a press conference on
16 September, Premier Ky declared that the govern-
ment was reconsidering the question of the assembly's
assuming a legislative function, but was quite firm
on the necessity of the government's retaining its
veto power.
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6. Chief of State Thieu, on the other hand,
strongly favors a second election for a legisla-
tive lower house rather than extending the duties
of the constituent assembly, according to a civil-
ian member of the ruling Directorate. Thieu is
also thinking in terms of a popularly elected presi-
dent who would not be directly responsible to the
legislature. An appointed prime minister, however,
would be subject to confirmation by a legislative
upper house, which would be elected indirectly and
would represent functional and religious groups.
Thieu plans to send a message to the constituent
assembly sometime after 1 November in which he will
indicate only the general principles which the gov-
ernment feels should be included in the constitution.
7. In the meantime, military leaders apparently
prefer to work quietly with assembly delegates on
more detailed matters. At a recent meeting of mili-
tary members of the Directorate, Secretary General
Chieu and Information Minister General Tri were as-
signed primary responsibility for handling matters
associated with the assembly. It was also under-
stood that Premier Ky and Chief of State Thieu would
be basically concerned with such matters. In addi-
tion, National Police Director Loan recently told
a US observer that he hoped to form "study groups"
among the delegates in order to influence their at-
titudes regarding military interests in the drafting
of the constitution.
Buddhist Institute Leadership Remains Deadlocked
8. According to all reports, moderate uddhist
Institute Chairman Tam Cha
in attempting to reassert his leadership over the
institute council. Although at least a public show
of unity between Tam Chau and the more militant
Buddhists has not yet become impossible, the US Em-
bassy has commented that a continuation of the
present stalemate increases the chances of a formal
organizational split between the two groups.
25X1C 9. Tam 25X1 C
Chau expects police director Loan to approach him 25X10
soon with an offer of support for a new, rival Bud-
dhist organization with Tam Chau as head.
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Chau would refuse such an offer,
but the deputy head of the Buddhist chaplain corps,
Thich Ho Giac, is interested in the idea. hould
he fail in his current efforts, Chau apparently
25X10 would prefer to take several more months of "sick
leave," similar to that from which he just returned,
rather than instigate an open break in the hierarchy.
10. Tri Quang, apparently well recovered from
his three-month hunger strike, issued a communique
on 22 September which urged the convening of an ex-
As-
traordinary congress of the Unified Buddhist church's
sociation. The communique"was backed by
supreme aged patriarch, but it was not immediatelyar
clear whether Tam Chau would heed it. Chau may
that his views would be overridden at such a session.
Detained French Businessmen Released
11. Philippe Grandjean and Abel Goxe, prominent
members of the French business community in Saigon
who had been arrested two weeks earlier on suspicion
of financing antigovernment political groups,
released on 20 September. No charges were filed
against them. According to police director Loan, at
least one of the two was to be released in return for
his pledge to cooperate with the government security
services in the future.
Membership of Commission on Political Prisoners Still
25X1X In e.inite
25X1X
12.
the composition o he government com-
-
mittee w is will study the cases of political poi-
25X1X oners--Catholic officials who have been in custody
since the overthrow of the Diem regime and possibly
some Buddhists jailed during the recent "struggle"
movement--is still indefinite. Directorate Secretary 25X1X
the committee,
General Chieu is in charge of organizing
finance and
Th
e
and will probably act as chairman.
25X1X
25X1X justice ministers and several Director e members,
.[.-r i i t-el v members.
il1-C V V Liv...
w o
the committee would
begin
he did no know when
or
c
C
and knew of no plan to invite prominent
Buddhist leaders to participate.
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II. REVOLUTIONARY DEVELOPMENT
Reports continue to indicate that
the environment for refugees often re-
mains hostile after they are moved to
areas of nominal government protection.
In Quang Tin Province in the past eight
months, 54 refugees have been killed by
the Viet Cong and 363 resettlement homes
have been destroyed. The daily influx of
Chieu Hoi defectors has dropped off con-
siderably in the last three and a half
months even though the conditions that
seem to have generated large numbers of
them in the past continue to exist. Com-
munist Party policy in regard to the re-
distribution and confiscation of land is
outlined in a document obtained in Vinh
Long Province.
Refugees
1. There is little doubt now that the refugee
centers are high on the Viet Cong priority list of
targets, along with Chieu Hoi centers and pacifica-
tion cadres. In Quang Tin Province, for example,
the Viet Cong have exacted reprisals against refu-
gees on five occasions since January of this year.
A total of 54 refugees have been killed, 97 have
been wounded, and another 11 have been abducted.
A hospital, a school, and 363 resettlement homes
have been destroyed. The latest attack took place
within the city limits of the province capital on
7 September. During that attack. 80 homes were de-
stroyed, 565 refugees were left without shelter, and
four of the occupants were killed.
2. Refugees are faced with a multitude of other
difficulties as well. In one of the outlying dis-
tricts in Tay Ninh Province, for instance, a severe
windstorm recently caused the destruction of 21 re-
settlement homes and the death of two children. A
refugee camp in Binh Tuy Province reported an overly
high death rate and officials suspect a high inci-
dence of typhoid as the cause of at least nine deaths
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recently among the camp's 1000 inhabitants. Since
the camp is not secure, a medical team had to be
airlifted there.
3. As a result of a recent military action
initiated by US troops in Long Khanh Province, some
350 peasants, many of them sick and undernourished,
were escorted into one of the secure hamlets. There
they were treated by a Philippine medical team and
given emergency relief goods by GVN officials. They
will be relocated to one of the refugee centers in
the province.
Viet Cong Defectors (Chien Hoi)
4. The returnee totals for the first two weeks
of September are:
1-7 September
8-14 September
I Corps
23
I Corps
36
II Corps
39
II Corps
43
III Corps
57
III Corps
64
IV Corps
85
IV Corps
46
Total 204 189
(142 military) (120 military)
1966 total through 14 September: 12,665
1966 average per day: 49.3
Monthly totals since February and March 1966 have
dwindled to the point where only 29 returnees per
day were registered during the last three weekly re-
porting periods. Although the 1966 average is 49 re-
turnees per day, this figure largely reflects the
massive influx of defectors from February through
April. Despite the continuing emphasis on the Chieu
Hoi program, a relatively encouraging political situa-
tion and a sustained level of military activity, the
number of defectors has decreased steadily for the
last three and a half months.
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Viet Cong Land-Tenure Policy
5. A Viet Cong document recently acquired in
Vinh Long Province and emanating from the "party"
rather than the NFLSV1 sheds some light on enemy
policies toward the distribution of land to the
peasantry in their areas. According to the docu-
ment, which appears to be designed as a standard
guide for countrywide land reform policies, the end
object of agrarian reform is to gain the support of
the peasantry in order to implement the rural struggle.
It lists the poor religious and refugee areas as the
most favorable to infiltrate as a target audience.
6. Four basic principles are suggested: to
decrease the amount of rent paid by the tenants;
to confiscate only land owned by the GVN or by
"cruel" landlords; to honor the land holdings of
landlords who cooperate with the Viet Cong; and to
protect the land holdings of medium-level owners,
churches, and notables. When confiscated or ex-
propriated lands are redistributed, they will be
given to war victims, share-croppers, poor peasants,
and middle-level farmers, in that order. Many
peripheral aspects of land ownership were also dis-
cussed, including the provision of loans, credits,
and agricultural equipment ("buffaloes" and "seeds").
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III. ECONOMIC SITUATION
Saigon retail prices, which had shot
up 1.6 percent over the election weekend
as the Viet Cong disrupted the movement of
food into the capital, started to fall im-
mediately after the elections as shipments
were resumed. By 19 September, the over-
all retail price index was down 6 percent.
Although the prices of rice did not share
in the fluctuations of the election week-
end, there is growing concern about the
reduced volume of rice deliveries to Saigon.
The latest analysis of the impact of
US and GVN economic programs for 1965 in-
dicates that they will be too inflationary;
programs will have to be scaled down or
additional means found to absorb purchas-
ing power. The second US-GVN economic
meeting discussed several topics related
to control of inflation and planning for
1967. The uniform pay and classification
system for Vietnamese employees of US
agencies and contractors has met with an
adverse reaction from the Minister of
Economy. The discharge of Korean and
Philippine nationals as part of the reduc-
tion of work force by the RMK-BRJ construc-
tion consortium created the two-headed prob-
lem of adverse reactions if the workers are
shipped home and a shortage of staff and
funds to care for them until other jobs can
be found in Vietnam.
Prices
1. The sharp climb of Saigon food prices,
resulting from widespread Viet Cong harassment of
movements of food supplies to the capital over
the election weekend, ended this week as expected.
Prices began to fall immediately after the elec-
tion as transportation into the capital improved.
Between 12 and 16 September, the USAID index fell
by five percent, with the food price index de-
clining by six percent. Hog bellies were 140
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piasters per kilogram on 16 September, a 23-percent de-
cline in four days, but the price was still 75 percent
above the 6 September level. Food prices continued to
decline but more slowly in the next few days, and by 19
September the food index was down by seven percent and
the over-all retail price index declined six percent from
the previous week. Prices of meat, fish, and poultry
were still somewhat above the levels preceding the elec-
tions, however. Vegetable prices in particular remained
high or continued to rise because the Viet Cong kept the
road to Da Lat closed. (A table of weekly retail prices
in Saigon is included in the Annex.)
2. The price of rice remained steady over the past
several weeks, in contrast to prices of other foods,
and at a level below that of July and early August.
Rice imports, sales from official stocks, and other ac-
tivities of the Government of Vietnam have been respon:-
sible.for keeping these prices steady. The low price
level, however, has been an important factor in re-
stricting deliveries to Saigon. Large stocks are be-
lieved held by delta speculators who are awaiting a
better price before selling. The minister of economy
met with rice merchants several times during,the 7 to 17
September period in an effort to accelerate the move-
ment of rice to urban consumers. These talks resulted
in sales offers of only 14,000 tons from provincial
rice dealers--at prices nearly ten percent higher than
the current market price; the minister of economy has
not accepted the offers so far. The Government of
Vietnam is thus faced with a dilemma: since rice con-
stitutes a very substantial part of the diet, any in-
crease in its price will be felt by everybody and will
aggravate the pressures for higher wages and compli-
cate inflation control, but if the price of rice re-
mains low, supplies may not be adequate to meet de-
mand. A joint GVN-US rice committee has been estab-
lished, and the US Mission has been conducting its
own rice study (interim findings are expected in a
week or so) to find ways out of the dilemma.
3. Prices of imported commodities remained un-
changed or declined slightly during the week ending
20 September.
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Currency and Gold
4. Rates remained essentially unchanged during
the week. On 19 September, the price for dollars was
169 (down one piaster per dollar), the price for Mili-
tary Payment Certificates (MPC) was 115 (unchanged),.
and the price for gold was 252 (unchanged). The pias-
ter-dollar rate in Hong Kong (essentially a black-
market rate since the Government of Vietnam permits
travelers to bring in or carry out only 500 piasters
in banknotes) had fallen from 172 to 168 piasters per
dollar. If rates for gold and US banknotes are largely
a reflection of efforts of wealthy Vietnamese to con-
vert their wealth into a safe form, as some observers
believe, the election on 10 September had no appreci-
able effect on Vietnamese confidence in the piaster.
inflationary Problems for 1967
5. The latest assessment of GVN and US programs
for calendar year 1967 indicate too great an infla-
tionary push on Vietnam's fragile economy to be con-
sistent with US stabilization objectives. An infla-
tionary gap (the net effect of the GVN budget, US aid,
and other factors affecting the demand for resources
and purchasing power) of about 44 billion piasters
results from the estimates of programs and activities
presently planned for 1967. The estimated inflation-
ary gap for calendar year 1966 is about 35 billion
piasters, and a gap in 1967 of about 10 billion pias-
ters has been considered safe.
6. US and GVN officials are now confronted with
the difficult task of paring down programs and in-
creasing the absorption of purchasing power in South
Vietnam. The measures the US is stressing to Viet-
namese officials include an increase of GVN tax col-
lections, adoption of steps to improve the flow of
imports into the economy, and policies to hold down
the expansion of credit. The US finds it particularly
objectionable that GVN foreign exchange reserves are
tending to enlarge as US-financed imports increase.
Means of reducing the inflationary gap will be dis-
cussed during the current visit to Washington of Min-
ister of Economy and Finance Thanh and Governor of the
National Bank Hanh.
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US-GVN Economic Discussions
7. The second of a series of thrice-monthly
Vietnamese-American economic discussions was held
on 13 September. It was co-chaired by Minister of
Economy and Finance Thanh and US Deputy Ambassador
Porter, and was attended by several high officials
and some of their staffs. The agenda covered a
wide range of topics, some of which were broad with
many subordinate points while others were quite
specific, such as the need to increase shipments
of clinker to Saigon from the Ha Tien cement plant.
Some of the Vietnamese points appeared to reflect
concern about infringement of their sovereignty, an
aspect present in the previous meeting also.
8. Minister Thanh again raised the port prob-
lem, blaming the slow withdrawal of goods by imp
porters from port warehouses on inadequate equip-
ment and poor stevedoring practices and warehouse
management, Mr. Porter, citing examples of im-
porters finding and moving their commodities when
it was in their interest to do so, placed part of
the blame on the practice of importers finding
buyers before locating and withdrawing goods from
the port warehouses. Minister Thanh responded
that a recent decree authorizing the confiscation
of goods left in the port beyond 30 days was being
applied to force importers to remove their goods.
In case of confiscation, these goods would not be
sold but would be turned over to the appropriate
ministries, which the US side thought would create
difficulties in the case of items not easily used
by government offices. Implicit in the discussion
was the concern by both sides to accelerate the
movement of imports into the economy as an integral
part of the anti-inflation program. Port conges-
tion has been one of the bottlenecks to a larger
flow of imports. This part of the discussion ended
with the distribution of a recent MACV study on
means of expediting commercial cargos through the
port of Saigon.
9. The US side presented its preliminary
estimates of GVN tax revenues as part of a dis-
cussion on the need of the GVN for greater revenues
in the fight against inflation. Minister Thanh
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voiced his view that the GVN had to improve collec-
tion rather than create more tax laws. Deputy Am-
.bassador Porter repeated offers of US assistance to
develop a better collection program, and the US
participants were hopeful that Minister Thanh and
Secretary of State for Finance Kien would finally
assign their staffs to developing a practical col-
lection plan. Minister Thanh requested US esti-
mates on the inflationary pressures in 1967, and
the US side agreed to provide the data. The US
suggested that a report on GVN progress toward
liberalization of imports, as part of the anti-
inflation program, be made by the GVN economic
delegation during their visit to Washington. A
number of additional discussion topics concerned
US and GVN efforts to control inflation.
Uniform Pay Scale for Vietnamese Hired by US
10. Implementation of the single pay and
classification system for Vietnamese employees of
US agencies and contractors, recently approved by
the Mission Council, is being held in abeyance
pending further discussion with Minister of Economy
and Finance Thanh. Thahh's initial response was
that while this measure was the US's own business,
he thought that it would stimulate wage demands by
various groups of workers and thus act against US-
GVN stabilization efforts. Further discussions
will be held with Thanh prior to the proposed
adoption date of 1 November.
RMK-BRJ Layoffs of Korean and Philippine Nationals
11. The cutback in the work force by the RMK-
BRJ construction consortium will result in the dis-
charge of a substantial number of thikd-country na-
tionals. The practical problem is the repercussion
expected from the layoff of perhaps 500 Koreans and
500 Filippinos. RMK-BRJ established recruiting
offices in Korea and the Philippines with both the
blessing of the governments involved and widespread
publicity about the opportunities to work in Vietnam.
The unexpected discharge of some-of these workers
presents political problems in Korea and potentially
in the Philippines as well. In order to avoid send-
ing these workers back to their native lands, efforts
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are being made to find other employment in Vietnam.
These efforts so far have not had much success.
One stumbling block is the care of the discharged
workers before their subsequent re-employment.
RMK-BRJ has agreed to administrative leave instead
of immediate repatriation, but apparently the
worker's pay stops with the layoff and provision
for severance pay also appears lacking under the
present circumstances. The Korean and Philippine
embassies do not appear to have the money or staffs
to take care of their nationals while Other jobs
are sought. Discussions to ease the impact from
the layoffs are being conducted in Washington,
Seoul, Manila, and Saigon.
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Weekly Retail Prices in Saigon a/
(In Piasters
Change Change
3 Jan. 22 Aug. 29 Aug. 6 Sept. 12 Sept. from from
1966 1966 1966 1966 1966 Month Ago Year Ago
6
21
211
249
2 102
L1
Index for All Items b/ 160
20
1
222
215
261+
+1 +105
Index for Food Items b/ 16
211
Of Which :
Rice-Soc Nau (100 kg) 800
0
)
1,400
85
1,350
85
1,300
80
1,300
180
-10 + 1+
+80 +177
7
Fish-Ca (1g.
Fish sh-Caa Tre (1 kg.)) 110
160
180
8
170
8
220
85
+29 -175
0 ~ 70
Nuoc Mam (jar) 50
85
5
5
Index for Non-Food Items J
1
1
126
198
r 2 + 93
124
189
2
Of Which:
)
l (60 k
440
590
620
660
660
+10 + 74
1
0
g.
Charcoa
Cigarettes (pack)
10
14
6
11,
3
3
l4
3
3
11+
34
3
0 }
F
8 42
White Calico (meter)
27
3
3
40
0
7 90
Laundry Soap (1 kg.)
30
43
a Data are from USAID sources.
b/ For all indexes, 1 January 1965 = 100.
Approved Fror P 1e &P bO A000400100002-1
SECRET
Approved For Rase 2001/03/04 : RDP79TQ 27A000400100002-1
Approved For Release ~~,: CIA-RDP79T00827A000400100002-1