CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A020800030001-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 24
• Document Creation Date: December 14, 2016
• Document Release Date: June 13, 2003
• Sequence Number: 1
• Publication Date: December 23, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
State Dept. review completed
Secret
N2 042
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No. 0306/71
23 December 1971
Central Intelligence Bulletin
INDIA--PAKISTAN: Efforts to consolidate government
control in Islamabad and Bangla Desh. (Page 1)
INDIA - PAKISTAN - BANGLA DESH: Post-war economic
problems assessed. Page
SOUTH KOREA: President Pak seeks greater powers.
(Page 4 )
LAOS: Souvanna determined to fight on despite set-
backs. (Page 5)
SOUTH VIETNAM: Christmas cease-fire. (Page 9)
YUGOSLAVIA: Croat party leadership tightens its
grip. (Page 10)
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CHILE:. Political action continues during the holi-
days. (Page 14)
VENEZUELA: Foreign oil companies to face profit
squeeze. (Page 15)
BELGIUM: Government crisis deepens. (Page 16)
MALAYSIA: Moves to wrest economic power from local
Chinese. (Page 17)
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WEST GERMANY: Discount rate cut (Page 19)
YUGOSLAVIA-USSR: Credits offered (Page 20)
ZAMBIA: Results of parliamentary by-elections
(Page 20)
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C INDIA-PAKISTAN: Efforts to consolidate govern-
ment control continue in both Bangla Desh and Pakistan.
The Bangla Desh government finally arrived in
Dacca yesterday. Acting President Nazrul Islam told
the large crowd at the airport that Bangla Desh
would never give up its independence, but he warned
that freedom depended on overcoming poverty. He
said the basic objectives of the country should be
"democracy, secularism and socialism and a nonaligned
policy in foreign affairs." A Bangla Desh spokesman
has announced that the Bengali leaders will soon
"settle down" to their "huge task," but the govern-
ment has not yet been officially installed.
In the meantime, the Indian Army still appears
to be the main force for stability in the new coun-
try. Dacca is rapidly returning to normal.
In Pakistan, President Bhutto has ousted more
appointees of former president Yahya. Yesterday, he
dismissed the four provincial governors, the head of
the press trust--which controls most of Pakistan's
major newspapers--and the governor of the State Bank
of Pakistan.
The three new provincial governors announced
so far are all members of Bhutto's Pakistan People's
Party (PPP)--one is Bhutto's cousin--although the
PPP has little following in one of the provinces.
To head the State Esank, Bhutto chose an apparently
apolitical technician, but the press trust is to be
managed by the editor of a left-wing Karachi news
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The full cabinet has yet to be announced, but
Bhutto has added interior and inter-province co-
operation to the defense and foreign affairs port-
folios he will hold himself. The information min-
ister will be a PPP official who has often served
as the party's spokesman.
23 Dec 71 Central Intelligence Bulletin
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INDIA - PAKISTAN - BANGLA DESH: The Indian
economy has suffered only slightly from the war
with Pakistan. Islamabad must face up to many
critical economic problems, but its economy is es-
sentially viable and has suffered relatively little
physical damage. Bangla Desh, an economic disaster
area even before the trouble began, has experienced
continuing devastation throughout the year and re-
quires substantial foreign aid.
New Delhi already has acted to cope with the
economic demands of the war. New taxes, including
a 2.5-percent corporate income tax surcharge, have
been introduced, and the government was empowered
to impose controls on prices and distribution of
essential commodities. India's only major new eco-
nomic problem is the suspension of US and Japanese
foreign aid, and the full impact of this has not
yet been felt.
Islamabad's major economic problems have been
exacerbated. The two-week war resulted in the de-
struction of a substantial part of Pakistan's modern
weapons inventory and heavy damage to its major port
and petroleum facilities at Karachi. The major prob-
lems, however, resulted from the eight-month civil
war and include a sharp step-up in military spending,
alienation of foreign aid donors, and a break in
economic ties with the former East wing.
If political stability can be restored and
substantial new foreign aid commitments obtained,
Pakistan has a good chance of quickly resuming
rapid economic progress. It has a strong modern
agricultural sector and an experienced and sophis-
ticated entrepreneurial class. Islamabad has dem-
onstrated throughout 1971 that, by expanding its
foreign sales, it could withstand the loss of at
least part of its markets in the East.
Bangla Desh will require substantial foreign
aid for reconstruction and rehabilitation before
normal economic activity can resume. The trans-
portation and distribution systems must be restored
23 Dec 71 Central Intelligence Bulletin
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if the population in food-deficit. areas is to be
adequately fed. The food problem will be exacer-
bated as millions of Bengali refugees in India re-
turn to their homeland. Indian and other foreign
administrators and technicians will be needed to
restore a semblance of order to daily economic life.
The small modern industrial and banking sectors
were previously run by West Pakistanis, some of
whom must now be replaced. The one bright spot in
Bang:la Desh's economic future is the restoration
of its natural trade ties with India, which may
more than offset its loss of mark est Paki-
stan.
2 3 Dec 71 Central Intelligence Bulletin 3
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SOUTH KOREA: President Pak is moving force-
fully to tighten his grip on the nation in the wake
of the 6 December declaration of an emergency.
The government has announced that it intends
to push through the legislature a bill which gives
the President extraordinary powers over the economy,
manpower, land use, and the press under emergency
conditions. The bill appears to go beyond the lim-
its of presidential authority set forth in the con-
stitution and to set the stage for greater direct
presidential control.
The government majority in the Assembly will
be able to engineer passage of this bill before the
current session ends on 29 December. Although power-
less to prevent the government's action, the opposi-
tion New Democratic Party (NDP) appears determined
to make the effort as difficult as possible. NDP
assemblymen seized the rostrum at the Assembly on
the 22nd, protesting that the bill would introduce
"supraconstitutional one-man rule." NDP spokesmen
have stated they will press their opposition to the
limit and that NDP representatives in the Assembly
will resign if the bill is passed.
Pak need not move against the opposition to
secure passage of the bill. But his strong response
to recent challenges to his political power suggests
that he may over-react in this instance as well by
taking measures to curb the NDP or abridge the power
of the Assembly.
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C LAOS: Prime Minister Souvanna appears to be
in no mood to make concessions to the Communists
despite the reversals suffered by government forces
on the Plaine des Jarres.
on 21 December Souvanna received another tough
letter from Lao Communist leader Souphanouvong. The
letter allegedly was drafted on 16 December, just
before the North Vietnamese offensive on the Plaine
was launched. Souphanouvong promised bitter defeats
would be forthcoming--both in the Plaine and in
south Laos--if the government did not accept the
Communist demand for a complete bombing halt. The
Soviet ambassador in Vientiane also urged Souvanna
to accede to the demands.
Souvanna firmly rejected any bombing halt with-
out "matching concessions" and adequate guarantees
from the Communist side--both of which are unlikely
while the enemy offensive is in full swing. The
prime minister instead asserted that Laos would
defend itself with all available means, and he re-
peatedly stressed to US Embassy officers the need
for increased US air support.
The Communists probably have little expectation
that Souvanna will capitulate to their demands at
this time. The letter is designed in part to pro-
vide a justification for their present offensive.
Souvanna has never shown himself willing to bow to
Communist military pressure in the past, and this
seems to be the case in this instance. Despite
the military reverses, a tough line by Souvanna
will probably be supported by most of the powerful
political figures in the country. In past years,
battlefield setbacks have led to rightist criticism
of Souvanna's policy of neutrality rather than of
his refusal to be more conciliatory in his dealings
with the Communists.
(continued)
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0 Miles 10
?Government-held location
?Communist-held location
A Highpoint
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C The tactical situation has changed little dur-
ing the past 24 hours. Irregular units retreating
from the Plaine are beginning to regroup along the
proposed defensive :Line between Barn Na and Pha Dong.
Meo civilians have withdrawn from the Long Tieng
Valley and are moving south toward refugee centers.
There is no evidence of panic among the people or
the troops.
It is not clear how far the North Vietnamese
have penetrated south and west of the Plaine. The
Communists may intend to move against Ban Na, which
was the focal point of their offensive last dry sea-
son. Bad weather has hindered aerial reconnaissance,
and the irregular troops are not yet well enough
reorganized for reconnaissance patrolling. The
North Vietnamese may be regrouping and resupplying
their forces, but they appear to have kept at least
two of their eight infantry regiments in reserve
and probably would have fresh troops available if
23 Dec 7l Central Intelligence Bulletin
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,RVP
Christimas Cease-fire 1971.
Communist
S
i
o
o
g
a
n Washingt
n
Begins Dec. 24-0100 Dec. 23-1200
Ends Dec. 27-0100 Dec. 26-1200
Begins Dec. 24-1800 Dec. 24-0500
Ends Dec. 25-1800 Dec. 25-0500
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SOUTH VIETNAM: The Communists' self-imposed
three-day Christmas cease-fire begins at noon today,
Washington time; the allied 24-hour military stand-
down will begin early tomorrow.
As usual the Communists will probably take ad-
vantage of the holiday cease-fire periods to re-
supply their forces within South Vietnam.
Fighting is likely to erupt: in some areas upon
the conclusion of the one-day allied truce period,
largely in response to allied operations. There
are also indications that the enemy will again step
up shellings and other harassment and terrorist ac-
tions between the Christmas and New Year holidays.
Central Intelligence Bulletin
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YUGOSLAVIA: Forced resignations of party and
government officials and tightened police restraints
over the student community in Croatia are designed
to ensure greater control by the republic party
leadership.
Yesterday, Croatian Premier Dragutin Haramija
and three other top republic government leaders
joined the steadily growing list of party officials--
estimated to be at least 75--who have already re-
signed. The delay in Haramija's resignation--eight
days after his failure to support criticism of the
ousted party leaders--is another indication of the
dissension and lack of discipline in Croatia's lead-
ership ranks. In addition, the editor of one of
Croatia's major dailies, V?esnik, has resigned, and
press reports indicate the editor of VVesnik u
Srediju and the director of Zagreb ra i~'o-TV will
follow suit.
Security officials have adopted a no-nonsense
attitude. Tuesday they raided a youth hostel and
detained 352 people after making other arrests at
a street demonstration. Workers returning home
from the West for the holidays are being searched
for arms and propaganda, and at least 20 weapons
were seized at one border station. Midnight Christ-
mas Eve mass has been canceled in Zagreb, presumably
in an attempt to keep crowds from gathering in the
center of the city.
President Tito has boosted Croatia's new lead-
ership by commending it for "resolutely coming to
grips with the class enemy." Speaking in the
Bosnian town of Rudo on Army Day, Tito blistered
regional nationalism and reaffirmed the federal
party's predominance in Yugoslavia's political life.
The purge and Tito's reaffirmation of party
control have met with tempered approval in Moscow.
The Kremlin apparently is taking some pleasure in
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quoting Tito's charges that the Yugoslav party had
become too liberal. Elsewhere in Eastern Europe,
official reactions to the developments in Yugo-
slavia range from Romania's factual excerpts of
Tito's speeches to the critical "we told you so"
of the Czechoslovak press.
23 Dec 71 Central Intelligence Bulletin 11
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CHILE: Both government and opposition forces
are continuing to take political initiatives through
the holidays, a time when political action is vir-
tually unheard of in Latin America.
The Christian Democrats announced yesterday
that they will launch impeachment proceedings against
Minister of the Interior Toha on 24 December. At
the same time, however, they have virtually killed
the effort of the conservative National Party to im-
peach Economy Minister Vuskovic by deciding not to
support it. Some Christian Democrats argue that
further cooperation with the National Party threat-
ens the party's appeal to the center and left.
Meanwhile, hard-line Socialists and their al-
lies are publicly insisting that Allende's Popular
Unity coalition take the offensive against its
"counter-revolutionary" opposition. These extrem-
ists may be the moving force behind plans reported
in the press for a "general assembly" of popular
forces next week and for terrorist attacks in upper-
class residential areas of Santiago. Government
coalition leaders apparently are stung by the mod-
est turnout for their rally on 20 December and re
looking for some way to regain the initiative, pos-
sibly a broadening and strength ning of the coali-
tion into a more cohesive force The more cautious
Communists and Allende himself still hope to avoid
a showdown and continue to make overtures to left-
ist Christian Democrats for a modus vivendi.
23 Dec 71 Central Intelligence Bulletin
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VENEZUELA: Foreign oil companies in Caracas
will face a profit squeeze in 1972 because of new
financial and regulatory actions by the government.
The Caldera government has decided to raise
1972 tax reference values, which are used to cal-
culate company income taxes, by an, average of 26
cents per barrel. It had been considering a much
smaller increase, while opposition political parties
have been pressing for a more demanding policy.
Caldera apparently felt it necessary to yield to
these demands in order to secure congressional pas-
sage of his 1972 budget. At the same time, the
government announced a two-percent, revaluation rel-
ative to the dollar, thereby increasing the dollar
cost of the oil companies' local expenditures.
These actions followed by a few days enactment of
a decree giving the government authority to control
oil production levels, a move the companies fear
may presage imposition of minimum production quotas.
It will be difficult for the oil companies to
offset increased taxes and production costs by raising
export prices at a time when Venezuelan oil already
is encountering stiffer competition because growth
in foreign demand has slowed. Moreover, any attempts
by the companies to shift to alternate sources of
crude oil will be stymied if the government imposes
production quotas.
23 Dec 71 Central Intelligence Bulletin
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BELGIUM: Outgoing Prime Minister Gaston Eyskens
has abandoned his attempt to form a cabinet composed
of Socialists and Social Christians, and the 46-day-
old government crisis has deepened.
Eyskens, faced with a resurgence of old ideo-
logical differences between the two parties on edu-
cational policy, asked King Baudouin on 22 December
to relieve him of his task as government formateur.
It will be difficult to find another Belgian politi-
cian possessing Eyskens' prestige and political
skill. Eyskens' party, the Social Christians, is
apparently prepared to put forward another candidate.
Current speculation centers on the influential Flem-
ish politician Jozef de Saeger.
Eyskens last week drafted a broadly worded com-
promise in an attempt to overcome inter-party quar-
reling. The primary difference, which the compromise
could not bridge, concerns the renewal of the School
Pact of 1958 providing equal funding for public and
free (Catholic) schools. Flemish Social Christians
are seeking substantial increases in subsidies for
Catholic school salaries and construction, while
the Socialists want the same for the public school
system.
The Flemish Social Christians, moreover, want
to give the new French- and Flemish-speaking cul-
tural councils broad powers in the field of educa-
tion. The Socialists, fearing Catholic predominance
in the Flemish council, are resisting this demand.
The two parties still remain the most likely
components of a new government, but the formation
of a cabinet may now be considerably delayed, per-
haps until February.
23 Dec 71 Central Intelligence Bulletin
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MALAYSIA: The government is reportedly con-
templating new steps toward "Malayization" of the
economy, now still largely controlled by local Chi-
nese interests.
The initial move is expected to be the estab-
lishment of state control over the rubber trade,
presently dominated by Chinese middlemen. Malay
small holders feel victimized by the "alien" entre-
preneurs. The government has already designated
Pernas, its state trading corporation, as the ex-
clusive agent for all imports from Communist China
and Chinese purchases of Malaysian rubber. New
plans, if implemented, would establish Pernas as
the government's purchasing authority, buying di-
rectly from the growers at a fixed price.
The government's much-publicized program for
redressing the economic imbalance between the na-
tion's ethnic groups has threatened to create a
widening gap between inflated hopes about increasing
Malay participation and the obvious fact of contin-
ued Chinese dominance. Various encouragements al-
ready offered the Malays have proven insufficient
to overcome the immense advantages which the Chinese
enjoy by virtue of their long-established contacts,
years of experience, and financial power.
The government initially tried to bypass the
Chinese by establishing the state trading corpora-
tion and staffing it with Malay bureaucrats. Pernas,
however, seems unable to lift itself from the bureau-
cratic doldrums and compete with the private dealers
on equal terms. A recent cabinet. reshuffle signals
another effort to upgrade Pernas. A special adviser
to the prime minister has been appointed to coordi-
nate the activities of state agencies, specifically
Pernas.
The government now apparently believes it must
remove some other commercial activities from the
private sector. New steps in this direction will
have a psychological as well as economic impact on
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the Chinese merchants, who have long feared that
the government may decide that nationalization of
commerce and industry is the only way to assure the
Malays an equal share in the economy. If suffi-
ciently alarmed, the Chinese might react by with-
drawing their money and reinvesting it outside
Malaysia, which would be a severe blow to the eco-
nomic health of the country.
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NOTES
WEST GERMANY: The central bank yesterday cut
its discount rate from 4.5 to four percent. It also
reduced the rate for loans secured. by collateral
from 5.5 to five percent and reduced minimum reserve
requirements. These moves are primarily designed to
forestall a sharp decline in domestic bank liquidity
in the wake of an expected large outflow of short-
term foreign funds following the mark revaluation
of 13.6 percent in terms of the US dollar. Cheaper
money should also provide a mild stimulus to the
German economy, which has shown increasing signs of
"stagflation" in recent months and faces the danger
of recession in 1972.
(continued)
23 Dec 71 Central Intelligence Bulletin 19
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YUGOSLAVIA-USSR: The head of the Yugoslav In-
vestment Bank has confirmed that the Soviets have
offered credits for Yugoslav mining, metallurgical,
and power projects. These credits were discussed
in October in Moscow, and Yugoslavia spelled out its
requirements for economic assistance during Soviet
Gosplan director Baybakov's current visit to Yugo-
slavia. Details of the credits now must be arranged,
and final contracts should be concluded early in
1972. The USSR offer includes delivery of raw ma-
terials and semi-finished goods which can be sold in
Yugoslavia to generate funds to finance local con-
struction costs, as well as shipments of Soviet ma-
chinery and equipment. Credit repayment terms are
liberal; they provide a two-year grace period and
repayment in commodities at a two to three-percent
rate of interest over a ten-year period.
ZAMBIA: This week's parliamentary by-elections
resulted in a victory for President Kaunda's United
National Independence Party (UNIP) over the coun-
try's two opposition parties. UNIP took four out
of five seats contested by the new United Progres-
sive Party (UPP), which represents northern tribal
interests. Simon Kapwepwe, head of the UPP and
once Zambia's second most powerful politician, won
his party's lone seat by a small margin. UNIP also
made a strong showing against the African National
Congress (ANC) by recapturing at least two seats in
western Zambia. The government did poorly only in
the ANC traditional area of support in southern
Zambia. Kaunda now must decide whether to follow
through on recent hints that he may declare a one-
party state to protect the government against fu-
ture challenges by parties which are tribally based.
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The United States Intelligence Board on 22 De-
cember 1971 approved the following national intelli-
gence estimate:
NIE 36.1-71 "Egypt: Continuity and
Change"
Central Intelligence Bulletin
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Secret
Secret
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