THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001400010055-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 12, 2016
• Document Release Date: January 14, 2002
• Sequence Number: 55
• Publication Date: November 21, 1966
• Content Type: IR

149
THE SITUATION IN SOUTH VIETNAM
DIRECTORATE OF INTELLIGENCE
BACKGROUND USE ONLY
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21 November 1966,
No. 0400/66
Copy No.
GROUP 1
Excluded from automatic
055dyYngrading and
dassifi coti 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 unauthorized
person is prohibited by law.
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SECRET
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(14 November. - 20 November 1966)
C O N T ENT S
POLITICAL SITUATION I
General Quang reassigned; Cabinet de-
velopments; Constituent Assembly ac-
tivity; Buddhist developments.
REVOLUTIONARY DEVELOPMENT II
Government shifts affecting Revolu-
tionary Development; Future role for
ARVN in RD; National Reconciliation
delayed further; Revolutionary Develop-
ment Cadres, by corps areas; Viet Cong
reactions to RD; Viet Cong defectors
(Chieu Hoi).
ECONOMIC SITUATION III
Prices; Currency and gold; Discussions
with Acting Minister of Economy Ton;
Release of GVN foreign exchange re-
serves; Provincial economic develop-
ments; Possible strike at Saigon port;
Increased output of electricity.
ANNEX: Weekly Retail Prices in Saigon (table)
Weekly/Monthly Saigon Free Market Gold
and Currency Prices (graph)
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1. POLITICAL SITUATION
Changes in military commands an-
nounced on 19 November were highlighted
by the reassignment of the controversial
IV Corps commander, General Dang Van
Quang. On the previous day, the long
awaited replacements for Premier Ky's
dissident southern cabinet ministers were
also named.
Meanwhile, the Constituent Assembly's
subcommittees and one specially appointed
delegation are working on assigned tasks.
Militant Buddhist leader Tri Quang may be
considering playing a more active role in
the established political framework.
General Quang Reassigned
1. After Directorate meetings and informal dis-
cussions among military leaders late last week, IV
Corps commander General Dang Van Quang was officially
reassigned on 19 November. According to a Directorate
decree, Quang has been recommended to serve as the
Minister of Planning and Development, a new cabinet
post which will deal mainly with long-term postwar
planning and economic development. Thus far, there
have been no reports of any adverse reaction to Quang's
reassignment among southern elements. Quang himself
is at IV. Corps headquarters in Can Tho awaitin a
formal change of command ceremony.
Quang has declared that he
will not resist the Directorate's decision, and has
given his word to this effect to both Deputy Premier
General Co and Chief of State Thieu.
2. General Nguyen Van Manh, 23rd Division com-
mander, has been appointed the new IV Corps commander.
Manh, a southerner, apparently was Chief of State
Thieu's choice for this major command. General Manh
acted briefly last week as II Corps commander while
General Vinh Loc was undergoing medical treatment in
.Saigon. Loc has since resumed command in II Corps,
after his status was also apparently reviewed by the
25
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military leadership. In addition to the assignments
of Generals Quang and Manh, six other lesser changes
in military commands were announced, including a new
chief of staff, a 23rd Division commander, a political
warfare director, and a reshuffling of some military
training commands.
3. Quang's removal as IV Corps commander has
been rumored since last March, when General Thi was
dismissed as I Corps commander. During this inter-
vening period, Quang has been a target for some of
the spokesmen for the "Baby Turks," including III
Corps commander General Khang and police director
Loan. In this respect, his reassignment reflects
their continued influence with Premier Ky, who ap-
parently led the move against Quang among the senior
military leaders. As a cabinet minister in Saigon,
however, Quang will presumably continue to have some
influence in the government, and his reassignment
rather than dismissal bears the general character-
istics of a compromise.
Cabinet Developments
4. The government officially accepted on 18
November the resignations of four of the seven south-
ern-oriented cabinet ministers which have been pend-
ing since mid October. New secretaries of state for
education, youth, and social welfare were appointed.
Rather than name a replacement for Economy Minister
Thanh, the ministry was broken down into its three
component parts--finance, industry, and commerce.
Since Thanh had personally directed the commerce and
industry departments, two new secretaries of state
for these functions were named. A council system
will coordinate the overall economic arrangement,
with Premier Ky as chairman and national bank governor
Hanh as secretary general.
5. All the cabinet appointees have been identi-
fied as southerners; an obvious concession to southern
regional interests. Moreover, Deputy Premier Vien,
one of three southern dissidents remaining in the cab-
inet, was assigned the additional function of head-
ing the newly created department of culture. Despite
these changes, however, there are some indications
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that north-south regional squabbling emanating from
the cabinet is continuing. Cong Chung, a newspaper
reportedly owned by police director Loan, has be-
gun a series of articles castigating former economy
minister Thanh for dishonesty and corruption, and
for instituting policies which have only benefited
the Communists. On the southern side, leaflets
praising the work of 'Thank are being distributed in
Saigon. Deputy Premier Vien also apparently remains
Constituent Assembly Activity
7. Last week, the Constituent Assembly met in
plenary session only briefly on 17 November to vote
on the assembly's budget for the last quarter of 1966.
Meanwhile, permanent assembly subcommittees and the
special 12-man delegation--appointed by the assembly
to arrive at a compromise with the government con-
cerning its veto power--were working on assigned
tasks. According to the chairman of the constitu-
tion drafting committee, Dinh Thanh Chau, committee
work:.on the basic principles of the constitution will
have progressed sufficiently to begin debate in a
plenary assembly session by 28 November. Chau does
not. believe that the government will propose changes
to the draft constitution while the assembly's work
is in progress but will defer all amendments until
the draft has been completed.
8. Chau and several other delegates have re-
marked that Chief of State Thieu is prepared to amend
Article 20 of Decree Law 21 to permit an absolute
majority of the assembly--rather than the two thirds
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majority now required--to override government amend-
ments to the constitution. Such a change would more
than likely satisfy assembly delegates, but govern-
ment sources have not confirmed Thieu's willingness
in this respect. The assembly's amendment committee
presented its suggested changes for Decree Law 21
to the government on 18 November. A government
reply is expected in about two weeks.
Buddhist Developments
constructively in the p at
political Process if a is-
factory constitution is adopted. said 25X1
that Quang and other militant Buddhists object to
Article 20 of Decree Law 21, and feel it should be
revoked.
10. With an assembly committee working towards
a compromise with the government regarding Article 20,
Tri Quang's message may have been intended as a form
of indirect pressure supporting the assembly's posi-
tion. However, it is quite possible that Quang is
sincere in his willingness to participate in the
political process given a satisfactory constitution.
In view of Quang's political activism, it does not
seem likely that he would prefer to remain out of
the mainstream of political activity for long. In
this respect, his remarks may be taken as general
evidence of a growing recognition of the importance
of the established political transition to a constitu-
tional government. Because of the emnity existing
between him and the Ky government, however, it is more
than likely that Quang would throw his considerable
political influence in central Vietnam to the "govern-
ment opposition" candidate in next year's presidential
election. At present, retired southern general Tran
Van Don and his political front group appear to be
the nucleus of such an opposition. It is worthy of
note that Thich Phap T:ri, a supporter of Tri Quang,
was present at the front's initial reception on 30
October.
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II. REVOLUTIONARY DEVELOPMENT
The recent shuffle in cabinet posts
may be expected to affect the Revolution-
ary Development program. According to re-
cently announced plans, the ARVN will be
used exclusively to support the vital Revo-
lutionary Development program in 1967, a
course of action that has the fullest sup-
port of Chief of State Thieu. The begin-
ning of the National Reconciliation program
is now due to start early in February, a
delay of almost three months from its
original kick-off date of 1 November. Al-
though in general progress has been noted
in the Revolutionary Development Cadre pro-
gram for September, many problems remain
to be solved, particularly at the village
and hamlet levels. The Communists re-
portedly have started a counter - Revolu-
tionary Development program in Binh Thuan
Province that is directed largely at the
cadre teams working in two of the districts
of that province.
Government Shifts Affecting Revolutionary Development
1. The shuffle of cabinet posts and functional
responsibilities now under way will affect future
Revolutionary Development (RD) activities. For one
thing, the present minister of information and Chieu
Hoi and director of psychological operations, General
Nguyen Bao Tri, has been relieved of his latter post
so that he may concentrate on his ministerial duties.
Brigadier General Tran 'Van Trung, commander of the
Thu Due Infantry. Training Center, has been named to
the psyops post. Trung will have the advantage of
previous experience in his new post inasmuch as he
was director of psychological operations in 1950.
Since that time he has held a series of responsible
staff and command posts. He is generally held in
high regard by US military observers.
Future Role for ARVN in Revolutionary Development
2. The RD program should receive new impetus
as result of the role recently announced for the
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285,000-man ARVN in 1967. Under the new concept, the
ARVN will provide a security screen that will allow
Revolutionary Development Cadres (RDCs) and other gov-
ernment agencies to carry on the task of winning ham-
let and village dwellers to the side of the govern-
ment. According to Defense Minister Co, the ARVN
will be entirely committed to clear-and-hold opera-
tions designed to root: out local guerrilla forces.
Search-and-destroy operations against regular Viet
Cong and NVA units will be the primary mission of the
US forces. The use of the ARVN as a security screen
for RD operations may help cut down on the current
misuse of the RDCs as general security forces by
local officials. This task cuts into the primary RDC
mission of hamlet pacification.
3. General Thieu recently indicated to US offi-
cials that he intends to take a personal interest in
the reorientation of the ARVN toward pacification.
He indicated that some manner of re-education would
be required for senior officers as well as a program
for the retraining of troops. Thieu also said that
he plans to monitor the progress by corps on a monthly
basis, and that he expects subordinates in the field
to do likewise.
4. The voice of the Viet Cong, Liberation Radio,
has already gone on record as denouncing the new mis-
sion of the ARVN and, as might be expected, has pre-
dicted failure for the program. The enemy maintains
that this new role for the ARVN is "a step backward
for the republican armed forces" and that the ARVN
will be relegated "to carrying the handbags of the US
and ROK troops." Warnings were also issued that the
ARVN troops would not be safe in their new role since
they will be operating in a more exposed position in
strange villages, where they will be easier victims
for the VC. The Communist propaganda line so far
seems aimed mainly at exploiting Vietnamese-US fric-
tions and ARVN fears of the Viet Cong military; both
are old enemy themes.
National Reconciliation Delayed Further
5. The GVN National Reconciliation program is
now due to be initiated about the time of the lunar
new year celebration (Tet) on 8 February. This in-
formation was recently disclosed to US officials by
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Chief of State General Thieu. In effect this is a
three-month delay in initiating a program that was
originally to have started on 1 November, Vietnam's
National Day. Thieu felt, however, that major new
overtures in November to get Communists to rally to
the government side would have been "premature." He
stressed the fact that before a major propaganda pro-
gram is launched more planning must go into giving
the returnees legal status as well as providing them
material benefits and informing them of future op-
portunities.
Revolutionary Development Cadres
6. Although progress was noted during September
in the performance of Revolutionary Development Cadre
(RDC) teams in the majority of provinces of the coun-
try, many problems remain unsolved. The most pre-
valent of these problems is the establishment of in-
province training, at the district, village, and ham-
let level, of Vietnamese officials who are responsible
for managing the RDC programs. These officials need
more instruction as to their exact missions. There
is some evidence that national and provincial offi-
cials are beginning to better comprehend their own
responsibilities and the over-all mission of the RDC.
Recent seminars at the Vung Tau Training Center,
which have been attended by district and provincial
officials and local RDC committee leaders, have
helped to provide a better understanding of concepts,
plans, and objectives of the RDC program in the
various provinces. A breakdown of RDC activities by
corps zone follows.
I Corps
7. Province-level officials involved with the
RDC program are apparently becoming more responsive
to directives from the Ministry of Revolutionary
Development. However, the political alignments and
religious factionalism of lesser officials within
the provinces continue to influence cadre operations.
Progress in this corps was sporadic during: September.
Only one hamlet was secured in Quang Ngai Province,
while in nearby Quang Nam some 67 hamlets were down-
graded from secured status because of re-evaluation
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of the criteria. In Quang Tri Province, RDCs were
effectively used to assist in rice harvest opera-
tions; the teams also utilized this period to explain
GVN policies to the people at the hamlet level. In
Thua Thien Province, RDCs continue to be used as
area security forces, a factor that worked against
other meaningful progress.
II Corps
8. Seven of the 12 provinces reported satis-
factory progress in RIDC operations. Remedial steps
were reportedly taken in several provinces in this
corps to cure defects noted in cadre performance.
Misuse of the RDCs to provide over-all local se-
curity was reported from some areas. In some in-
stances, district officials seem to be reluctant to
monitor teams in the course of their field opera-
tions. One flagrant violation of the principle of
keeping cadres in their home areas occurred in Binh
Thuan with unfortunante results for the RDC effort
there. Three cadre groups were moved from .the
northern part of the province to the southern part--
a distance of 70 kilometers--with the result that
30 individuals refused. to work and returned to their
homes.
III Corps
9. Very limited progress in the activities of
RDCs was noted in this corps zone during the report-
ing period. The outstanding problem is that many
provincial officials continue to use the RDC teams
incorrectly, or are not managing them efficiently.
A serious lack of leadership on the part of the re-
sponsible local officials in Hau Nghia Province has
resulted in RDCs not staying in the hamlets over-
night, despite little or no harassment from the Viet
Cong.
IV Corps
10. During the September reporting period, RDC
activity was generally limited throughout the corps.
Flooding in five of the provinces provided an op-
portunity for the RDC teams to demonstrate their
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ability to act as a disaster relief force. An
Xuyen Province has proved to be an area of par-
ticularly slow progress. Security is particularly
bad and the RDCs can only operate in a few areas.
Viet Cong Reactions to Revolutionary Development
11. The Communists have organized an "Anti-
GVN Rural Pacification Program" in two districts
in the south-central portion of Binh Thuan Province.
The Communist program has been organized for two
months in four villages of the two districts, ac-
cording to a reliable source, and has a total
strength of about 40 men. These men, all over 40
years old, have been divided into three-man cells
and have been gathering information on local RDCs
in order to assassinate or abduct team members.
12. The Viet Cong district committees report-
edly have decided that their counter operations have
been successful so far and are planning to expand
their activities. The RDCs according to the Viet
Cong, are "demoralized." and are working only "pas-
sively." The Communists reportedly plan to recruit
more terrorists in order to carry out their anti-
RDC effort. While there have been no official re-
ports of passivity or loss of morale among RDCs
working in Binh Thuan, no progress was officially
recorded in the Revolutionary Development program
there during September.
Viet Cong Defectors (Chieu Hoi)
13. The upsurge in the rate of Viet Cong de-
fectors con.t.inueddurin?; the week of 10-16 November,
with 611 reporting to Chieu Hoi centers throughout
the country. More than half of the returnees were
received at the Binh Dinh Province center, in the
wake of Operation IRVING. Of the total 611, 343
were military returnees. Thus far this year,
16,398 Viet Cong have returned to government con-
trol through the Chieu Hoi program, as compared to
11,124 returnees through all of 1965.
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III. ECONOMIC SITUATION
On 14 November retail prices in Sai-
gon were one percent above the previous
week because of higher food prices. Al-
though pork prices evidently declined some-
what, rice and vegetables continued to in-
crease. The price of rice used by the
working class is, now 30 percent above the
price prevailing; just prior to the devalua-
tion last June. Free market gold and cur-
rency prices declined, partly because of a
reduction in the official price of gold.
Hopefully, the appointment of new
members to the recently reorganized Min-
istry of Economy will result in solutions
to several outstanding problems, such as
the soaring prices for rice. Governor
Hanh of the National Bank of Vietnam has
announced the release of $150 million in
GVN foreign exchange for imports in Novem-
ber and December, and $350 million for im-
ports during 1967. In addition, Hanh an-
nounced that credit for industrial invest-
ment will be liberalized.
A labor dispute now under way at the
port of Saigon could lead to a strike at
the port if current negotiations do not
produce an agreement.
1. Retail prices in Saigon rose markedly be-
tween 7 and 10 November because of higher prices for
pork, vegetables, and rice. The over-all price level
declined somewhat by 1.4 November, however, as trans-
portation difficulties; in the delta eased and ar-
rivals of hogs in Saigon increased. According to
the USAID retail price index, retail prices on 14 No-
vember were one percent above the previous week:
food prices were up two percent and nonfood prices
declined slightly. Higher food prices resulted from
increased prices for rice and vegetables. Rice prices
continued to rise following the increase in the Saigon
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price of imported rice. On 14 November the price of
rice used by the working class--which has risen
steadily during the past five weeks--was 1,650
piasters per 100 kilograms, or more than 30 percent
above the price prevailing just prior to the devalu-
ation last June. Higher vegetable prices apparently
stem in part from crop damage caused by the recent
floods in the delta. Pork prices apparently were
lower as a result of increased arrivals of hogs in
Saigon. (A table of weekly retail prices is included
in the Annex.)
2. According to the USAID price index for se-
lected US-financed imports, prices of imported goods
on 15 November were less than one percent above the
previous week. Prices held steady for some imported
commodities, such as round bars, wire rods, and ce-
ment, while other sampled commodities showed increases
or decreases of only one to two percent. Once again,
the prices of condensed milk and sugar were stable
or slightly lower.
Currency and Gold
3. Free market gold and currency rates, which
had edged up steadily during the past three weeks,
declined during the week ending 14 November. The
price of dollars on 14 November was 172 piasters per
dollar, or three piasters below the previous week.
MPC (scrip) declined two piasters to 113 piasters
per dollar. Gold fel]L ten piasters to 239 piasters
per dollar as a result of a reduction in the official
price of gold from 230 to 213 piasters per 35th-ounce.
The GVN announced this reduction in the official price
of gold on 9 November in order to build confidence in
the piaster and dispel. recent rumors of another de-
valuation. This is the third time since the June de-
valuation that the official price of gold has been
lowered. The price of gold was set at 249 piasters
per 35th-ounce in June and, subsequently, was lowered
to 242 and then 230 piasters. According to the Viet-
namese press, the National Bank of Vietnam sold 708
million piaster of gold between 18 June and 11 No-
vember as part of its official gold-sales program
initiated last June. (Graphics on monthly and weekly
free market gold and currency prices are included in
the Annex.)
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Discussions with Acting Minister of Economy Ton
4. On 11 November US officials met with Acting
Minister of Economy Ton and recommended continuation
of the joint US-GVN economic meetings that began in
early September. Although Ton agreed to hold a meet-
ing the following week if the US so desired, he pointed
out that he could accomplish nothing because the top
three officers of the Ministry of Economy have re-
signed, and no one was. willing to make decisions pend-
ing the appointment of a new minister of economy.
Nevertheless, US officials stated that they were
anxious to determine GVN thinking on the rice and
pork situation and to discuss the port problem at a
meeting next week.
5. Ton was quite pessimistic about the pork
problem. He said that the cutting of roads in the
delta by the Viet Cong and the recent floods had re-
duced deliveries of hogs to Saigon. Moreover, Ton
felt that it is now too late to order more frozen
pork from Europe and that former minister of economy
Thanh should have done this prior to his resignation.
Although the US argued that it might not be too late
to import frozen pork Ton was disinclined to take ac-
tion although he mentioned the possibility of import-
ing live hogs. The US also noted that the official
price of pork is too low for producers to make a prof-
it, given the rising cost of feed. Although Ton
agreed, he said he could not take any action. The
US Embassy comments that the delay in the appoint-
ment of a new minister of economy--at a time when
several major decision: should be taken--has caused
increasing problems. The appointment of new members
to the recently reorganized Ministry of Economy should
contribute to the solution of these problems.
Release of GVN Foreign Exchange Reserves
6. Governor Hanh of the National Bank of Viet-
anm has announced that he will release $150 million
in GVN foreign exchange for imports in November and
December, and that $350 million in GVN foreign ex-
change will be made available during 1967. Based on
the issuance of import licenses, GVN-financed'.imports
during 1966 amounted to about $165 million by the end
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of August. The funds to be released during the last
two months of this year are to be used primarily for
imports of industrial equipment and raw materials in
order to increase domestic production capabilities.
Hanh also announced liberalized credit for industrial
investment, but gave no details. It is too early to
determine the reaction of import prices to these an-
nouncements. The US Mission, however, plans to meet
with Hahh to discuss -the implications of his announce-
ments for the commercial import program and other US
programs.
Provincial Economic Developments
7. The US: Mission reports that there appears
to be developing in the provinces a feeling that the
resignation of former minister of economy Thanh will
result in renewed inflation. Recent reports indicate
general price increases in the provinces and hoarding
by merchants in anticipation of higher prices at
Christmas and Tet. In Bien Hoa, Binh Duong, and Long
Khanh provinces, for example, the prices of steel and
cement reportedly have doubled. Moreover, in IV Corps
the Viet Cong are expounding the theme that the ex-
pected arrival of US troops in the delta will drive
prices up further.
Possible Strike at Saigon Port
8. A labor dispute at the port of Saigon could
result in a strike if current negotiations do not pro-
duce an agreement. At issue is the need to change
the employment status of 40 surplus warehousemen and
checkers who are now employed in the military section
of the port. Until recently they had been working
several hours of overtime at double pay each week.
Although these workers have been guaranteed jobs in
pother sections of the port, their transfer could re-
sult in a reduction of earnings because the basic
work week in other sections is without a guarantee
of overtime. As a result, these employees and their
union--the CVT-affiliated Union of Dockers and Allied
Workers--are threatening a port strike if their exist-
ing earnings are not protected.
9. Although two meetings have now been held
with officials of the Ministry of Labor, no settlement
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has been reached. The union is adhering to its ini-
tial position that the existing wage level of the
affected workers must be protected. Moreover, the
thorny issue of security clearances was raised dur-
ing these meetings. It appears that, under GVN regu-
lations, the new positions being offered to these
workers require security clearances, including in-
dividual character sponsors. The union maintains
that because these men are well-known dock workers,
a blanket sponsorship by the union should suffice.
The Ministry of Labor has agreed to explore the se-
curity clearance. problem with the head of the se-
curity service, and to hold another meeting with the
union.
Increased Output of Electricity
10. During the first half of 1966, output of
electricity in South 'Vietnam amounted to 287 million
kilowatt hours (kwh), or 18 percent above the level
produced during the corresponding period of 1965, ac-
cording to official GVN data. Roughly 85 percent of
this electricity was generated in the Saigon area.
Total output of electricity in 1965 was 496 million
kwh, or about 30 kwh per capita. The increase in
output of electricity in 1966 results primarily from
the completion last March of a 33 megawatt steam
electric unit just north of Saigon at Thu Duc. The
Thu Duc facility was constructed with US assistance
in order to overcome the Saigon power shortage caused
by Viet Cong sabotage of the Danhim power transmission
line in May 1965.
NO FOREILN DI
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WEEKLY RETAIL PRICES IN SAIGON a/
3 Jan
24 Oct
31 Oct
7 Nov
14 Nov
1966
1966
1966
1966
1966
Index for All Items b/
160
207
225
222
224
Index for Food Items b/
169
211
231
226 c/
N.A.
Of Which:
(In Piasters)
Rice-Soc Nau (100 kg.)
800
1,500
1,550
1,600
1,650
Pork Bellies (1 kg.)
70
85
130
170
N.A.
Fish-Ca Tre (1 kg.)
110
140
150
130
150
Nuoc Mam (jar)
50
85
85
85
85
Index for Non-Food
Items b/
124
196
203
202 c/
202 c/
Of Which:
(In Piasters)
Charcoal (60 kg.)
440
630
650
650
650
Cigarettes (pack)
10
14
14
14
14
White Calico (meter)
27
33
37
36
35
Laundry Soap (1 kg.)
30
40
45
45
45
a. Data are from USAID sources.
b. For all indexes, 1 January 1965 -- 100.
c. Preliminary.
Approve a Pease S
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Saigon Free Market Gold and Currency Prices
PIASTERS PER US DOLLAR
GOLD Basis: sold leaf worth $35 per troy ounce
In Hong Kong-, callated by refe to
PIASTER-US DOLLAR CROSS RATE- t
he exchange rates to the Hong Kong dollar
US $10 MPC Military Payment Certificates (scrip)
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