THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001500010033-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 16, 2016
• Document Release Date: October 26, 2004
• Sequence Number: 33
• Publication Date: December 19, 1966
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
USAID review completed
State Dept. review completed
Secret
19 December 1966
No. 0404/66.149
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Secret
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WARNING
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.
GROUP 1
O! tI !'ROM Aii TOMATIU
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(12 December - 18 December 1966)
POLITICAL SITUATION I
Form of future government taking
shape; New Constituent Assembly
member approved; Official Assembly
political blocs changing;
Ky reaffirms new role of GVN mili-
tary forces; Viet Cong con.cern. about
revolutionary development; Psycho-
logical warfare operations; Revolu-
tionary development progress by corps;
The refugee situation in. I Corps.
Prices; Currency and gold; GVN de-
cision on. rice policy; Provincial
economic developments during October;
Discussion. with Ky on port congestion;
Industrial development in FY 1966.
ANNEX: Weekly Retail Prices in Saigon. (table)
Saigon. Cost of Living Index (graph)
South Vietnam Money Supply (graph)
South Vietnam Foreign. Exchange Reserves (graph)
Saigon. Free Market Gold and Currency Prices (graph)
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The Constituent Assembly voted in favor
of a plan to elect a president and a vice
president by universal, secret ballot under
the constitution it is preparing. The
elected chief executive would, however, ap-
point a prime minister to render him admin-
istrative assistance. The assembly also
chose a new member to fill the seat vacated
by the assassination of Tran. Van. Van..
There have been some shifts in the
alignment of the official political blocs
in. the assembly. The second and third
largest blocs recently merged to form what
is now the largest bloc. Moreover, the
Greater People's Bloc, which was previously
the largest, is reportedly losing some of
its members who claim they want to avoid
the "government" stigma that the bloc has
allegedly acquired.
Form of Future Government Taking Shape
1. The type of government envisioned under the
new.con.stitution is beginning to take shape in the
Constituent Assembly. Last week, the deputies ap-
proved a modified presidential form of executive
branch with a popularly elected president and vice
pres:iden.t, and an. appointed prime minister. Al-
though the exact wording of the assembly proposals
is not clear at this time, it appears that the prime
minister and his appointed cabinet can. be removed
from office by the president acting alone or upon.
the demand of the national assembly (legislature).
The prime minister, however, will merely be an ad-
ministrative functionary in the proposed system in
contrast to the relationship between the chief of
state and the prime minister in. the present govern-
ment.
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New Constituent Assembly Member Approved
2. In. the 14 December session, the deputies
approved a motion that the vacant assembly seat of
assassinated member Tran Van Van be filled by Dr.
Huynh Kim Huu, who had finished behind Van in the
11 September election on the same slate. Dr. Huu
is a southern Catholic.
Official Assembly Political Blocs Changing
official assembly blocs, which were formed during
the election of permanent assembly officers in late
October, are undergoing internal changes involving
mergers and shifts in membership. The formation. of
the Democratic Alliance Bloc was formally announced
in the assembly on 13 December. The new bloc is
an amalgamation of the heavily northern Catholic,
16-member Democratic Bloc and the 25-member Hoa Hao -
Cao Dai - VNQDD Alliance Bloc. With four other
members picked up elsewhere in the assembly, it is
now the largest bloc in the assembly, although it
does not constitute a majority. The US Embassy
has reported that the components of the bloc have
been. considered progovernment, and specifically in
favor of Premier Ky.
3. the
officers were elected an. a policy statement
was drafted by bloc members between 3 and 5 December.
The reported policy statement deals entirely with
constitutional points. This suggests that the mer-
ger was brought about by the change in basic issues
facing the assembly from the election of assembly
officers in. October to the drafting of a constitu-
tion at present. F_ -1
5.1 six mem-
bers of the Greater People's Bloc--heretofore the
assembly?s largest--have withdrawn from bloc disci-
pline and have joined the ranks of independent as-
sembly delegates. Another 14 members of the bloc
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reportedly are considering a similar withdrawal.
One of the chief reasons for such action is that
man.y delegates consider the Greater People's Bloc
--made up primarily of military, Catholic, and Dai
Viet delegates from central and North Vietnam--to
be the "government bloc."
a new bloc to be known. as the Force of the
Peasants, Workers, and Military will soon be in-
troduced in. the assembly. This group, which report-
edly has already obtained the legally required mini-
mum support of 12 assembly delegates, is directly
linked to retired General Tran. Van Don's southern-
based political front group. Both Don and labor
leader Tran. Quoc Buu are to be listed as advisers
to the bloc.
7. The precise status of assembly blocs in
terms of their orientation. and membership is not
clear at present. Various factors, which have been
outlined above and which have apparently played a
part in. the shifts now under way, indicate that
these changes may neither be final nor necessarily
significant in terms of forming political groupings
for next year's national elections.
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II. REVOLUTIONARY DEVELOPMENT
Premier Ky, on 15 December, once again
affirmed that the primary mission of the
ARVN for 1967 will be to provide a security
screen for the revolutionary development. A
recent communique of the Central Committee
of the National Front for the Liberation of
South Vietnam indicates that the committee
views revolutionary development as a major
threat and that a serious campaign probably
will be mounted to reduce the program's ef-
fectiveness. The South Vietnamese budget
for psychological warfare operations will
come to $US 36,568,000, and will support
the efforts of the Ministry of Information
and Chieu Hoi, and the Psychological Warfare
Directorate of the armed forces. Politics,
professional jealousies, and the disinterest
of officials charged with supervising the
cadre at the local level are at the root of
problems still hampering the revolutionary
development cadre program throughout the
country. Since July of this year nearly
44,700 refugees have returned to GVN control
in the I Corps area, often in very large
groups.
Ky Reaffirms New Role of GVN Military Forces
1. Premier Ky, on 15 December, stressed the im-
portance of the military's role in recovering the
rural areas from Communist control. Speaking at the
graduation of the class of officers who will return
to their parent military organizations to teach the
fundamentals of pacification, Ky maintained that ARVN
must demonstrate a spiritual as well as material re-
gard for the people when it commences its primary
task of providing the security screen for the revolu-
tionary development program in 1967. He also restated
his government's determination to press forward simul-
taneously with the policy of defeating the Communists
and reconstructing the rural areas.
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Viet Cong Concern About Revolutionary Development
2. A 5 December communique of the Central Com-
mittee of the Viet Cong's National Liberation Front,
outlining tasks for the coming year, indicates in-
creasing concern among the Communist ranks over the
revolutionary development program. Although the
commun.iqud claims the US/GVN pacification effort
"has in the main been foiled," one of the political
tasks it cites to be accomplished in the coming year
is the "smashing" of GVN rural pacification plans.
Both the claim of victory and the call for new
victories over the revolutionary development effort
suggest that the Communists view it as a major threat.
The Viet Cong may be expected to make an expanded ef-
fort to disrupt the program and to negate any gains
that it has registered.
Psychological Warfare Operations
3. Funds budgeted by the GVN for psychological
warfare activities during its fiscal year, of 1967
(which concides with the calendar year) are reported
to amount to $US 36,568,000. This budget, according
to a 'USIS report, will support the combined activities
of the Ministry of Information and Chieu Hoi (MICH),
and the Psychological Warfare Directorate in the armed
forces. The new budget, which is only slightly larger
than that of 1966, will be divided as follows: for
MICH, $US 32,050,000; for the Psychological Warfare
Directorate, $US 4,518,000.
4. Personnel currently assigned to the psycho-
logical operations and Chieu Hoi activities total
21,773, while the military personnel will total 2,307.
The bulk of the civilian personnel, 12,774, will be
assigned to the field as Vietnam Information Service
(VIS) personnel. The USIS report cautions that there
is a significant amount of payroll padding in the case
of the MICH.
Revolutionary Development Cadre Program
5. Problems rooted in politics, religion, cor-
ruption, insecurity, and professional jealousy con-
tinued to restrict progress in the Revolutionary Devel-
opment (RDC) effort in all corps areas during October.
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In all, only 16 provinces and Cam Ranh City reported
progress in. the program. Sixteen other provinces
reported no significant progress in RDC activities,
and 11 others reported no progress at all. There is
reason to believe, on the basis of individual, pro-
vincial reports that some provinces reporting no
progress may actually have regressed.
6. Both GVN and US advisers are trying to solve
the problems that have arisen. The onus for failure
seems to rest with those provincial and district of-
ficials who are either disinterested or lack an under-
standing of what the objectives of the RDC program
are. The Ministry of. Revolutionary Development (MRD)
has taken steps to replace some of the inept and dis-
interested officials, a move which may improve per-
formance in some areas of the country. A summary of
progress and problems by corps areas follows.
I Corps Zone
7. Reports from this corps indicate erratic
progress mingled with disturbing signs of slippage in
the program. In the northernmost province, Quang Tri,
weak provincial and district leadership has impeded
RD progress in some areas. A mixture of ineffective-
ness by the RD committee chief and inexperience of a
recently appointed district chief has been cited as
the source of difficulty with the RD program .jn this
province. In Qu.an.g Nam and Quang Ngai provinces, 19-
man technical teams (census grievance, civic action,
and New Life Development elements) fresh from the
National Training Center at Vung Tau have been suc-
cessfully melded with the 40-man Peoples Action Teams
(PAT) already in place. Initial results with these
newly combined teams is reportedly very favorable.
Clouding the picture somewhat in Quang Ngai Province,
however, are the activities of the Vietnam Nationalist
Party (VNQDD). This group is endeavoring to place
its members on the RD committees in an. effort to en-
hance their own political positions. In Quang Tin.
Province, lack of organization plus an adverse mili-
tary situation have combined to hamper the RD effort
there.
II Corps Zone
8. The RD effort in this Corps is suffering from
inadequate leadership for the provincial programs,
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Also, lack of security in many areas has forced the
RDC teams to devote most of their time to protecting
themselves, and has given officials charged with su-
pervising the programs an excuse for unproductive
cadre operations. In Quang Duc, for example, prov-
ince officials are reluctant to visit teams in inse-
cure areas and are therefore unable to provide
guidance or observe results. In Binh Thuan Province,
the falsification of pacification results is an even
more alarming tendency. In this province, teams have
been moved arbitrarily from hamlet to hamlet, appar-
ently without consideration for whether they have
been secured or not. The problem may have been par-
tiaTly solved by the replacement of the Deputy Prov-
ince Chief for Internal Security.
9. Montagnard cadre teams in Darlac Province
are reported to be doing an effective job, and are
seeking an expanded role in the RD effort, Although
the dissident montagnard autonomy movement FULRO has
been active in the area, it has not affected the op-
eration of the montagnard cadres. In Kontum Province,
a similar favorable account is given of montagnard
cadre activities. In this province, the Vietnamese
RDCs are also functioning more effectively under the
impact of good leadership and the introduction of
better trained cadre groups from the Vung Tau Na-
tional Training Center.
III Corps Zone
10. A major obstacle to the effective use of
RDCs in this Corps zone is the reluctance of province
officials to allow cadre groups adequate time to ac-
complish their tasks. The controversial commander of
the ARVN 25th Division, General Phan Trong Chinh, has
stepped-up the tempo of hamlet construction to one
month, and consolidation phases to one and one-half
months. Chinh's order has been issued in an apparent
attempt to make the pacification effort in his area
look good. Only in. Long An Province has the province
chief resisted Chinh's order and set a more practical
time :Limit for pacifying a hamlet. In Long Khanh
Province, montagnard cadre groups are proving to be
the strongest element in the civic action program.
Their success is largely the result of the intensive
effort of chief of montagnard services in the province.
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IV Corps Zone
:Ll. The same general problems--lack of leader-
ship and disinterest--prevalent in the other three
corps zones are also present in IV Corps. In three
provinces--Chuong Thien, Vinh Binh, and Vinh Long--
the lack of adequate security to screen the work of
the RDCs in the hamlets has been cited as a major
obstacle to RD progress. The population lacks con-
fidence in the ability of the Regional Force and
Popular Force to protect hamlets after the RDCs
leave the area, and covert Viet Cong penetration of
the hamlets is also a source of concern.
The Refugee Situation in I Corps
:L2. There has been an influx of some 44,700
refugees from Viet Cong-controlled areas of I Corps
into government areas since July of this year. Some
of this influx has been a mass movement of people:
17,000 persons fled from Quang Tri Province to Thua
Thien Province after large US/ARVN forces entered the
area just south of the DMZ during Operations HASTINGS
and PRAIRIE, and 14,000 persons from the Phu Ky area
of south central Quang Nam Province sought GVN refuge
during operations by the Marines. All of these
evacuations from areas of Viet Cong dominance rep-
resent a serious loss to the VC in terms of potential
manpower reserves for their armed forces, agricultural
workers, or other support roles. Additionally, the
Communists suffer a severe propaganda-blow when large
numbers of persons opt to go over to the GVN side.
Details below on two recent evacuations in Quang Tin
and Quang Nam provinces show some of the reasons why
people leave areas under Communist control and some
of the steps that have been taken by the Viet Cong to
prevent the exodus.
Quang Nam Province
13. Some 2,200 persons recently resettled in
the Nong Son coal mining area in south central Quang
Nam relate a familiar story of Viet Cong oppression
which forced them to seek shelter in GVN-controlled
areas. Originating in the village of Son Phuoc in
Duc Duc district, the southernmost of the province,
these people took the first opportunity to flee from
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Communist control. This arose when a US Marine
Corps operation moved into their area early this
month. This refugee group estimates that there
are another 1,000 persons in the Son Phuoc area who
would probably come out if given the opportunity.
14. The Viet Cong made a determined effort to
prevent the Son Phuoc refugees from fleeing 'their
village. During the course of their flight, Commu-
nist snipers gunned down four of the escapees, kill-
ing one. Such a response on the part of the Viet
Cong is apparently almost unprecedented, and was
done at considerable risk to themselves since allied
troops were still operating in the area.
15. Further deterioration of the Communist
popular base may be taking place in this particular
area of Quang Nam Province. Commanders of US units
in the area say that there have been numerous in-
stances of people in remote areas begging US troops
either to stay in the area to protect them, or to
evacuate them when the troops leave. One reason for
the desire of villagers in these northern areas to
leave Viet Cong-controlled zones is that the Commu-
nists are being increasingly denied rice from the
major population centers along the coast; this is
causing the Viet Cong to put more pressure on the
population under their control. While the flow of
rice to the Communists from coastal areas has not
been stopped, there is evidence that the government's
resources control efforts are becoming more effective.
Increased logistical problems, particularly in the
matter of food supplies, could possibly lead to se-
rious political problems for the Communists.
Quang Tin Province
16. On 8 December, 16 kilometers east of the
province capital of Tam Ky, 42 refugees approached
elements of a US Marine unit participating in Opera-
tion CORTEZ, and requested evacuation from the area.
They carried about 1,000 pounds of rice with them.
Among the reasons cited by the group for fleeing their
homes were: constant Communist harassment, heavy Com-
munist taxation, impressment of their young men into
the Viet Cong ranks, and fear of air strikes.
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era i.on ORTEZ have levied a 20-percent tax on rice,
as well as taxes on other agricultural produce, on
boats, and on real estate. Recently, payment of all
these taxes has been demanded in rice--a good indi-
cator of the urgent need(;for this commodity.
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kind has had the effect of taking 50 to 100 percent
of the rice crop. In another area of Quang Tin Prov-
ince, the agricultural tax of the Communists is re-
ported to be 50 percent.
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Retail prices in Saigon reached a new
high during the week ending 12 December as
rice and pork prices continued to increase.
The currency and gold market, however, re-
mained relatively steady. Prices in the
provinces during October were generally un-
changed in spite of increased transportation
difficulties caused mainly by adverse weather
conditions. The GVN decided to raise the
government buying price of rice. Other as-
pects of the new GVN rice policy are not yet
clear, but the US Mission tentatively feels
that the policy is workable. Ambassador
Lodge has urged Premier Ky to take measures
to solve the problem at the Saigon port.
USAID reports that considerable progress was
made in industrial development in South Viet-
nam during FY 1966.
1. For the second consecutive week, retail prices
in Saigon reached another high, second only to the peak
reached at the time of the September 1966 elections.
According to the USAID retail price index, prices dur-
ing the week ending 12 December rose four percent above
the previous week. Food prices were up five percent
and non-food items rose two percent. As during the
previous week, these increases stemmed largely from
soaring prices for rice and pork. On 12 December the
price of the type of rice used by the working class
reached another new 1966 high of 1,750 piasters per 100
kilograms, or 40 percent above the level prevailing just
prior to the June devaluation and almost 120 percent
above the price at the beginning of the year. The price
of pork was 140 piasters per kilogram, or eight percent
above the previous week and 65 percent above the price
during the latter half of November. Lower deliveries of
these commodities to Saigon continue to be the major
factor causing the higher prices. Pork prices, which in
turn influence the prices of other protein food, are also
being affected by an increase in the cost of feed. Prices
of non-food items were generally unchanged with the
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exception of charcoal and firewood, both of which in-
creased because of lower deliveries to Saigon, (A
table of weekly retail prices in Saigon is included
in the Annex).
2. Prices of imported commodities were mixed;
food items held steady and construction materials,
fertilizers and chemicals showed slight increases.
No changes were noted in the prices of condensed milk
and wheat flour. Sugar declined slightly as the
market continued to be well supplied. Iron and steel
products, on the other hand, rose as a result of in-
creased demand caused by the start of the new con-
struction season.. Fertilizers and chemicals also
were higher because importers did not receive any
new shipments.
Currency and Gold
3. Although the cost of living continues to
rise, the currency and gold market remains reasonably
steady. During the week ending 12 December, dollars
and MPC (scrip) moved down to the level of two weeks
ago. Gold, however, rose because of lower arrivals
of gold and increased demand for jewelry for Tet.
Currency price quotations for 12 December have not
yet been reported. (Graphics on monthly and weekly
free market gold and currency prices are included in
the Annex).
Decision on Rice Policy
4. On 13 December the GVN finally decided to
raise the government buying price of rice. The price
to the producer for paddy is to be between 8.5 and
8.9 piasters per kilogram, or roughly double last
year's price. This new GVN price is below that re=
cently recommended by US officials--a target price of
10 piasters per kilogram with government buying sta-
tions offering a support price of 9.5 piasters per
kilogram. It is estimated that the new price for
paddy will result in a retail price in Saigon of
roughly 16 to 16.5 piasters per kilogram for the cheap-
est type of rice as compared with the present price of
16.0 piasters. Thus, the GVN is, in effect, setting a
retail. price which is the same or only slightly above
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the existing price. Imported rice will be sold at
around 13 to 14 piasters per kilogram, as compared
with a recent price of 12.5 to 13.0 piasters.
5? On the controversial, issue of provincial
buying stations, the GVN has decided to ask the Na-
tional Agricultural Credit Office (NACO), working
together with the province chiefs, to act as a buy-
ing agent. The exact role of NACO in the provinces
and its relationship to the Ministries of Agricul-
ture and Commerce is unclear.
6. Premier Ky has requested that there be no
publicity in the cities for the new rice policy.
Moreover, acting on a US recommendation, the GVN
will institute a vigorous program in urban areas of
rice distribution from trucks. The new price policy
will be widely publicized in the rural areas, however,
by means of nationally printed information leaflets in
order to inform delta farmers of the true price situa-
tion and prevent the merchants from again taking ad-
vantage of the farmer.
7. Although the GVN price increase is less than
that proposed by the US, US officials believe that the
new GVN rice policy will work out and intend to give
all possible assistance to get the program launched.
Several aspects of the program, however, remain un-
clear. The question of a credit policy for rice, for
example, has not been determined. Moreover, although
National Bank Governor Hanh and Acting Minister of
Industry Ton apparently intend to play significant
roles in implementing the program, it remains to be
seen who will really be in charge of implementation
and what role the province chiefs will play.
Provincial Economic Developments During October
8. Economic developments in the provinces during
October were highlighted by greatly increased trans-
portation difficulties which resulted from the rainy
season in the northern part of the country and the
flooding of the Mekong in the southern area. Viet Cong
sabotage also contributed to transportation problems.
With the exception of the provinces affected by the floods,
however, provincial prices were generally steady. Rice
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prices and supplies were satisfactory in Region I,
but higher rice prices were noted in both Regions II
and IV, as a direct or indirect result of the floods.
9. Although Region I experienced transportation
difficulties because of the monsoon rains, prices were
generally steady throughout the region, and no shortages
of construction materials were noted, There were,
however, such seasonal price fluctuations as higher
seafood prices because of shortages caused by heavy
rains. Plentiful rice supplies, which stemmed from a
good local harvest and ample imported stocks, resulted
in lower prices for this commodity in almost all prov-
inces of the region. These lower rice prices prevailed
even though Viet Cong rice levies were stepped up in
some provinces, such as Quang Tri and Quang Tin. A
rice protection plan in Quang Tri Province was under-
taken too late to prevent a large quantity of rice from
falling into Viet Cong hands.
10. Prices in most pro) inces of Region II were
also generally steady, although transportation diffi-
culties were caused by the rains and Viet Cong activity.
In Ninh Thuan Province, the Viet Cong destroyed three
bridges on Route 11, temporarily blocking traffic to
Da Lat. Viet Cong interdiction on the Da Lat - Saigon
road in Tuyen Due Province reduced farmers' income
because their crops could not be shipped to Saigon, but
resulted in lower prices for vegetab'es in the province.
Rice prices were higher in some areas of Region II even
though the rice harvest had been completed. These in-
creases apparently resulted partly from the psychological
effect of the flood in the Mekong Delta, partly from lower
rice production caused by farm labor shortages. It was
reported, for example, that a shortage of field workers
in Ninh Thuan Province caused a loss of about ten per-
cent of the recent rice crop. A shortage of farm labor
also is adversely affecting vegetable production in
Tuyen Due Province.
11. In Region III prices were relatively stable
in eight out of the 11 provinces. Prices rose 15 per-
cent, however, in both Bien Hoa and Tay Ninh provinces.
The price rise in the former province apparently stemmed
from anticipation of food shortages caused by the Mekong
floods, whereas the increased presence of troops and
limited movement of goods to and from Saigon explained
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the rise in Tay Ninh. Although there was some easing
of Viet Cong interdiction of roads in Region III, Viet
Cong taxation on commerce increased.
1.2. Flood recovery operations dominated the
economic scene in five provinces Of Region IV. Reports
from the flooded provinces indicated that rice crop
damage, although severe, was less than originally
estimated. In Chau. Doc and Kien Tuong provinces, how-
ever, as much as 80 percent of the rice crop probably
was lost. Kien Giang Province, on the other hand,
lost only 12 percent of its rice crop. Secondary
crops also were hard hit by the floods, with some areas
experiencing a complete loss of crops. The floods
also damaged roads and slowed transportation of com-
modities. As a result of these factors plus Viet Cong
interdiction, prices rose in some provinces of Region
IV. These transportation problems, however, benefited
the consumer in some areas where increased supplies
of goods normally shipped to Saigon resulted in lower
local prices.
Discussion With Ky on Port Congestion
1.3. On 8 December, Ambassador Lodge called on
Premier Ky to discuss the Saigon port problem. The
ambassador pointed out that US officials feel the port
congestion has stemmed from three major factors: (a) lack
of adequate credit for importers to finance removal of
their goods from the port, (b) inability to provide
importers with the location of their cargo in the port
and to clear the goods promptly through customs, and
(c) use of the port as a warehouse by importers. Na-
tional Bank Governor Hanh's recent relaxation of credit
has solved the credit problem, and some progress is be-
ing made in locating and clearing cargo. The major prob-
lem, therefore, is the unwillingness of importers to
move their goods out of the warehouses.
1.4. Ambassador Lodge informed Premier Ky that the
latter's decree of 28 July, which called for confisca-
tion of goods left in the port more than 30 days, has
not yet been implemented, As a result, the port remains
congested, and this congestion is interfering with the
program to halt inflation. Moreover, the large quan-
tity of imports scheduled to arrive in December and
January will further aggravate the problem. To solve
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this problem. Ambassador Lodge presented Ky with a
list of goods that have been in the port much longer
than 30 days and urged Ky to begin confiscation of these
goods. In addition, the ambassador asked Ky to deny
further import licenses to those importers Who do not
withdraw their cargo from port warehouses after 30 days.
US officials believe that a suspension of these importers
for six to nine months will make clear to the Vietnamese
importing community that only those importers who re-
move their goods from the port promptly will be allowed
to import.
15. Although Ky approved of blacklisting importers
who do not remove their goods, he felt that wholesale
confiscation was not the solution to the problem be-
cause the GVN would lose taxes and would not know what
to do with most of the confiscated goods. Ky then said
that the GVN intended to make examples of several big
importers by at least imposing heavy fines on them.
Ambassador Lodge explained that the US was not advocating
wholesale confiscation, but rather selective confisca-
tion based on the US list of gross offenders. Ky finally
said he would take action on these matters promptly. In
closing, Lodge pointed out that if the port congestion
continues, the US would have to consider halting the
shipment of goods to Vietnam.
Industrial Development in FY 1966
16. USAID considers progress in industrial develop-
ment to be one of its five most significant accomplish-
ments in South Vietnam during FY 1966. Other important
accomplishments cited by USAID were: implementation of
the economic reforms of last June, improvement in the
supply of water and electric power, and progress in
overcoming illiteracy. A significant indicator of in-
dustrial progress is the amount of USAID approvals for
imports of industrial machinery--$16 million during
FY 1966, or almost half of the total for the past five
years.
17. The textile industry is one of the most im-
portant industries in the development effort, with
textile machinery accounting for almost half of the
$16 million. USAID estimates that when all the approved
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textile equipment is in full operation, South Vietnam
will be able to satisfy more than four fifths of its
requirement for textiles. Progress also is being made
in the paper industry. Two major paper firms--Cogido
and Cong Ty Giap Vietnam--ordered heavy equipment
valued at about $3 million. This equipment is being
imported to complete a major expansion program, which
will result in a total output of 30,000 metric tons
annually. This amount represents an increase of
70 percent above current output of paper and will satisfy
about three fourths of South Vietnam's requirements
for paper.
18. Another important step toward industrial de-
velopment during FY 1966 was the installation of Viet-
nam's first steel rolling mill. During early 1967,
this mill will begin producing steel ingots from scrap
by the converter process and production of rolled,
products is expected to reach about 15,000 metric tons
annually.
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 25X1
Appr
Weekly Retail Prices in Saigon. a/
3 Jan.
14 Nov.
21 Nov.
28 Nov.
5 Dec. 12 Dec.
1966
1966
1966
1966
1966 1966
Index for All Items b/
160
224
227
231 243
Index for Food Items b/
169
230
236
224
243 c/ 256 c/
Of Which:
(In Piasters)
Rice-Soc Nau (100 kg.)
800
1,650
1,600
1,600
1,700 1,750
Pork Bellies (1 kg.)
70
110
85
85
130 140
Fish-Ca Tre (1, kg.)
110
150
180
140
150 170
Nuoc Nam (jar)
50
85
85
85
90 90
Index for Non-Food Items b/
124
202
197
195
200 c/ 206 c/
Of Which:
(In Piasters)
Charcoal (60 kg.)
440
650
620
630
650 680
Cigarettes (pack)
10
14
14
14
14 14
White Calico (meter)
27
35
35
34
40 40
Laundry Soap (1 kg.)
30
45
32
40
40 40
a. Data are from USAID sources.
b. For all indexes, 1 January 1965 = 100.
cr Preliminary.
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Saigon Cost of Living Index
(For Working Class Family)
300
250
200 i-- --
South Vietnam Money Supply
__'
1001
BILLIONS OF PIASTERS
South Vietnam Foreign Exchange Reserves
MILLIONS OF US DOLLARS 31 AUGUST
276.3 TOTAL
CURRENCY HOLDINGS
,63 1964
1965
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 Approved Fo elease 2005/04/22 : CIA-RDP79TO08M001500010033-3
Saigon Free Market Gold and Currency Prices
PIASTERS PER US DOLLAR
1964 1965 1966 1967 0(-f NOV DEC
GOLD Basis-.gold leaf worth $35 per troy ounce
US $10 GREEN
?""" US $10 MPC Military Payment Certificates (scrip)
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 Approved For 1Iease 2005/04/22 : CIA-RDP79T008267e01500010033-3
Secret
Secret
Approved For Release 2005/04/22 : CIA-RDP79T00826AO01500010033-3