THE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001500010072-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 16, 2016
• Document Release Date: October 26, 2004
• Sequence Number: 72
• Publication Date: January 9, 1967
• Content Type: IR

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DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
State Department review completed
Secret
z
148
9 January 1967
No. 0332/67
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`YARNING
'T'his 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.
c3ROtfP L
CCLODED FItOM AUTOMATIC
~,OWN(.RAI)IUO AND
*(;I A~ISIFICATION
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(3 January - 8 January 1967)
POLITICAL SITUATION I
Ky's views on negotiations; Tet cease-
fire; Constituent Assembly Activities;
Possible future role of the Revolution-
ary Dai Viet party.
Revolutionary Development in Vinh Binh
and Phon.g Dinh; Refugee situation in
Kien Giang Province; Obstacles to Rev-
olutionary Development in Binh Dinh;
Viet Cong defectors (Chieu Hoi).
Rice situation.; Economic stabilization;
Banking and credit developments.
ANNEX: Saigon Free Market Gold and Currency Prices (graph)
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Premier Ky, in off-the-cuff remarks
to newsmen on two separate occasions last
week, suggested that he would be willing
to hold peace talks with North Vietnamese
delegates "anywhere and at any time." Dur-
ing one of the impromptu press queries, Ky
also unofficially rejected the request from
the Viet Cong to lengthen the four-day GVN
Tet cease-fire to seven days.
The first draft of the constitution
has reportedly been prepared by the draft-
ing committee and will be submitted to the
assembly on 11 January. It calls for three
equal branches of government with a separa-
tion of powers, and checks and balances
over each other. The document itself has a
preamble and nine chapters. One of the chap-
ters will outline the future constitutional
guarantees for overt political parties. If
the guarantees are strong enough, some of the
hitherto semi-clandestine national parties,
including the Revolutionary Dai Viets, may
well surface their platforms and membership
for the presidential elections.
Ky's Views on Negotiations
1. In consonance with other world-wide expres-
sions of willingness to work toward a negotiated
settlement with the Vietnamese Communists, Premier
Ky has offered to meet with North Vietnamese Presi-
dent Ho Chi Minh "anywhere and at any time." Ky's
brief comment, upon which he did not elaborate, was
given to newsmen in the city of Hue on 7 January, some
24 hours after he told reporters in Saigon that nego-
tiations are coming nearer every day. Although his
latest remarks appear more flexible than his public
stand on the subject of negotiations in the past, they
were made in the context of predictions that North
Vietnam is moving closer to defeat in the war.
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3. During his impromptu press interview in Hue,
Ky also rejected the National Liberation Front's re-
quest for a seven-day cease-fire over the Lunar New
Year (Tet) holidays, beginning on 8 February. Ky
hinted that the GVN may even withdraw its original
call for a four-day truce in light of the 271 enemy
violations during the Christmas and New Year stand-
offs. Ky's remarks, however, may not represent the
final version of the government's truce plan and an
official announcement will probably be forthcoming.
The National Liberation Front's offer of a Tet cease-
fire was broadcast on 1 January and was accompanied
by a request from the "Liberation Army's" high com-
mand that Viet Cong troops comply with it.
Constituent Assembly Activities
4. The drafting committee of the Constituent
Assembly has prepared the basic constitutional docu-
ment for presentation to the deputies on 11 January.
The process of hammering out the final version on the
floor of the assembly will reportedly begin soon
thereafter. The drafting committee's initial version
of the constitution contains a preamble and nine chap-
ters and this will probably not change before the 11
January session. Six of the chapters, although not
necessarily in this order, will be as follows: basic
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provisions; the bill of rights; advisory councils;
political parties; constitutional amendments; and
transitional provisions.
5. The other three chapters will define the
organization and responsibilities of the executive,
legislative, and judicial branches of the govern-
ment. It was initially envisioned that there would
be four equal branches of government--legislative,
judicial, executive, and an inspectorate. The dep-
uties, however, decided against according an in-
spectorate the same level of authority as the other
three branches. Some type of inspectorate will,
however, possibly be subordinated to the legislature
in the final version of the constitution.
6. Before the assembly finishes its task of
debating the proposed constitution, however, the
government will probably interject its views in one
way or another on articles which it considers par-
ticularly disagreeable. According to an assembly
administrative officer, a delegation from the ruling
Directorate was scheduled to confer with the drafting
committee on 7 January, presumably to set forth some
Directorate views on the constitution before it is
debated.
7. Among the controversial aspects of the draft
constitution, over which the Directorate might try to
exert its influence, are the role of the military in
future elections, the question of elected province
chiefs, and the arrangements for a transition to the
newly elected government following the completion of
the Constituent Assembly's work. According to US Em-
bassy observers, the assembly apparently favors elect-
ing a president as soon as possible after promulgation
of the constitution, whereas the Directorate hopes to
lengthen the interim period as long as possible.
8. If the Directorate fails to deter the assembly
from writing objectionable clauses into the constitu-
tion, it can still rely on its power to revise the
final assembly version of the draft document as stipu-
lated by decree law 21/66. Most of the deputies agree
that, because of their unique mandate from the people
to write the constitution, the assembly should be the
final arbiter of the document's wording. It appears
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that the assembly deputies will keep up pressure on
the government for some form of compromise in its
power of amendment. An assembly group has scheduled
a press conference for 10 January to try once again
to air this issue, according to the US Embassy.
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Possible Future Role of the Revolutionary Dai Viet Party
9. The likelihood that South Vietnam's forthcom-
ing constitution may legitimize the role of political
parties may jolt some of the country's existing politi-
cal factions from their traditionally clandestine
methods of operation.
11. The Revolutionary Dai Viet Party, although
factionalized, has been one of the most dynamic and well-
organized political groups and counts many influential
governmen.t workers and independent politicans among its
members. It is likely that it will be one of the more
prominent organizations in backing candidates for the
presidential and :Legislative elections which will probably
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be held later this year. The Revolutionary Dai
Viets, however, are strongest in central Vietnam,
a factor which will probably hamper their efforts
to establish a popular base outside the Saigon
area and in the southern provinces.
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 In one district of the delta province
of Vinh Binh--Tieu Can District--Revolu-
tionary Development made great strides dur-
ing 1966 as a result of the efforts of five
well-trained, well-equipped Political Action
Teams; little progress was made in other
districts of the province where operations
of seven Revolutionary Development Cadre
groups were hindered by poor training and
insufficient support from Vietnamese of-
ficials and security forces. A thus far
successful "village task force" pacification
project is under way in a key village in
Phong Dinh Province, employing four Revolu-
tionary Development Cadre (RDC) groups under
the centralized direction of a task force
commander who is also in charge of security
forces supporting the RDC groups. A sweep
operation is being conducted to secure a
formerly Viet Cong - controlled area of Kien
Giang Province in order that some 3,000 ref-
ugees, who voluntarily evacuated the area
in early December, may return safely to har-
vest their rice. Corruption in Binh Dinh
Province, apparently rampant even among
high-level provincial officials, is impeding
the progress of RD operations there and tend-
ing to drive the local populace toward the
Viet Cong.
Revolutionary Development in Vinh Binh and Phong Dinh
1. In spite of a relatively poor showing thus
far by the seven 59-man RDC groups in Vinh Binh Prov-
ince, five 40-man PAT teams operating in Tieu Can
District, located in the south central part of the
province, have been instrumental in achieving the
effective pacification of two-thirds of that district.
This success in Tieu Can shows what can be accomp-
lished with proper defensive training and equipment
and a sufficient number of qualified dedicated tech-
nical personnel--advantages which the RDC groups lack.
 App
The Tieu Can PAT teams have not been plagued by the
constant reorganization which has hindered RDC groups
and are not subject to the interference of, or re-
strictions imposed by, provincial and ARVN division
officials. In addition, the Tieu Can district chief
is capable, honest, and dedicated to bringing pacifica-
tion directly to the people.
2. Tieu Can had surpassed its 1966 pacification
goals by early December, despite the fact that there
are no Regional Force or ARVN troops to maintain se-
curity. The PAT cadres are themselves well-trained
militarily and well-armed. After entering a hamlet,
they set up strong defensive positions and recruit
and train a group of "combat youth," aged 16 to 60,
as a hamlet self-defense unit. The security situation
has now reached the point that large Viet Cong units
cannot enter pacified areas without the risk that they
will be immediately reported, and their attempts at
company-size attacks against secured hamlets have been
unsuccessful.
3. The PAT teams work on the oil spot theory, con-
centrating as many as four teams in a single hamlet
adjacent to a hamlet which has already been secured.
The teams provide a number of services to the local
populace; they have cleared areas and built schools
and other buildings. The district chief plans to pro-
vide limited health service to the people. Health
workers will be assigned to hamlet health stations
after a month's training in the province capital.
4. Vinh Binh's only other PAT team is presently
stationed in Long Toan District in the extreme south-
east portion of the province. The district is now al-
most totally controlled by the Viet Cong, but its
prospects for the future are hopeful. A new district
chief, who appears capable, has taken over. There is
a project planned for the defoliation of 90 percent of
the district, which would largely eliminate mangrove
swamps which the Viet Cong use as refuges. Also, a
program may be initiated to bring back natives of the
district who have fled to escape the Viet Cong.
5. RDC groups in the province cannot claim great
success, largely as a result of poor training and non-
support by some district chiefs and technical service
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chiefs. In addition to a lack of well-trained
technical personnel, the teams have insufficient
defensive training and equipment, and many are
operating in areas which do not have enough Re-
gional or Popular Force units to provide security.
6. Greater success has been achieved by RDC
groups in Phong Dinh Province, where a pilot pro-
ject is under way employing a "village task force"
of four RDC groups in Long Tuyen Village, Chau Thanh
District. The task force concept is designed to
effect pacification through a concentration of RDC
cadres in a small area under a centralized command
with an American military adviser and with suf-
ficient Vietnamese military forces to provide se-
curity. Almost all of Phong Dinh's Revolutionary
Development effort is concentrated in three of Long
Tuyen Village's six hamlets. A task force commander
has command of the RDC groups and of the security
forces supporting them. Considerable progress has
been made since the RDC groups were first deployed
to the three hamlets in mid-October. Until then the
hamlets had been considered relatively insecure--as
are the three in which RD teams are not stationed
at present. By early December, two of the hamlets
were reportedly almost ready for certification as
secured according to the six-point criteria, and
progress was evident in a portion of the third ham-
let. The project has apparently been well-received
by the local populace, and the RDC's are alert, well-
motivated, and well aware of their mission. In
areas where the teams have begun operations, small
bridges have been built, fences erected, underbrush
cleared along trails, and a number of other small
projects undertaken.
7. Success of the task force project, however,
is threatened by the attitudes of Vietnamese officials
connected with it. The task force commander is overly
pessimistic, claiming that, because of the number of
Viet Cong in the village, pacification cannot be
achieved unless the Americans move in in force. The
district chief is miffed because he was not informed
of the project until it had already begun. He re-
gards it as a project of the Americans and of the
province chief whom he detests; for these reasons, he
is not giving it his wholehearted support. The province
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chief, on the other hand, appears over anxious to
pronounce the project a success, and is ready to
certify the three hamlets as secured and move the
RDC teams on to the remaining three hamlets in Long
Tuyen. Americans on the scene, however, do not
feel that the hamlets are yet secured and believe
that if the RD teams are removed at this point, the
Viet Cong will move back in and nullify what good
has been done.
Refugee Situation in Kien Giang Province
8, In a follow-up to the voluntary evacuation
in early December of the Viet Cong - controlled Hon
Chong Mountain area of Kien Giang Province by approxi-
mately 3,000 local inhabitants, a multicompany sector
force on 4 January launched a sweep-and-search of the
area, which was the location of a Viet Cong base camp.
The refugees originally left their home area follow-
ing an allied psychological warfare campaign, which
included leaflet drops urging them to leave to avoid
casualties from planned air strikes. The refugees,
however, have been anxious to return to their homes
to begin harvesting their rice, and the current sweep
is designed to reoccupy outposts overrun by the Viet
Cong two years ago and to provide continuing security
for villagers who return. ARVN troops will remain
in the area for this purpose following the conclusion
of the sweep, and have already begun providing pro-
tection for villagers who have been going to the area
to harvest rice in daylight hours. The refugees are
currently being given relief supplies by the GVN and
by USAID.
Obstacles to Revolutionary Development in Binh Dinh
9. What is apparently rampant corruption in Binh
Dinh Province is proving to be a hindrance to the suc-
cessful completion of RD operations in this area. Ac-
cording to a provincial security official in Binh Dinh,
pacification cannot be accomplished unless corrupt of-
ficials in that province and others are eliminated.
He feels that the only way to win the sympathy of the
populace is to provide concrete examples of personal
honesty, but that the widespread profiteering by
national, provincial, and district level officials
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is working to drive the people toward the Viet Cong.
The security official specifically accused the Binh
Dinh Province chief, the deputy province chief for
administration, and the Qui Nhon garrison commander
of corruption and estimated that as many as 500 key
men throughout the country are engaging in graft and
profiteering.
Viet Cong Defectors (Chieu Hoi).
10. The year 1966 was a banner one for the Com-
munist defector program. The final tally of defectors
of all types as compiled my the Ministry of Informa-
tion and Chieu Hoi, is 20,242 for the year, and 82-
percent increase over 1965. The total number of de-
fectors since the program was conceived approximately
four years ago is nearly 50,000. Most of the enemy
who voluntarily fled the Viet Cong and North Vietnam-
ese Army were lower level personnel. However, one of
the most profitable sources of information to date on
the North Vietnamese Army and the Central Office for
South Vietnam (COSVN) was also a defector.
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Price data for the week ending 3 Jan-
uary have not been received. Because com-
mercial banks are taking full advantage of
the credit facilities of the National Bank
of Vietnam, credit for imports is reportedly
available and being used. Talks are con-
tinuing between US and GVN officials on an
economic stabilization agreement for 1967.
Reporting from Ba Xuyen Province indicates
that the price of paddy has continued to
rise as a result of the new GVN paddy pur-
chase price. Although it appears that Ba
Xuyen and three neighboring provinces have
had good rice harvests, there is wide-
spread concern about Viet Cong involve-
ment in the new harvest.
Rice Situation
:L. As a result of the recent GVN announcement
of a 7.5-piaster per kilogram minimum purchase
price for paddy, the free market price of new paddy
at Soc Trang in Ba Xuyen Province rose to 8.3
p.i.ste.rs on 30 December compared with a recent
price of 6.5 piasters. Merchants in this province
reported that prices will continue to rise until
Tet (8-15 February) when they expect a leveling
off. These merchants also stated that although
they are pleased with the GVN decision to double
the amount of credit available last year, they
fear this amount may be insufficient in view of
the doubled paddy purchase price.
2. The major rice producing province of Ba
Xuyen and the neighboring provinces of Bac Lieu,
Chuong Thien and Phong Dinh have had good rice
harvests, according to information gathered in Ba
Xuyen Province on 30 December. It is estimated
that the harvest in Ba Xuyen is about equal to that
of last year. There apparently is widespread con-
cern, however, about Viet Cong involvement in this
year's harvest. It appears that the Viet Cong are
making it known that, unlike last year when they
taxed rice heavily in terms of money, they will take
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taxes in rice this year. Although there are re-
ports indicating that the Viet Cong have announced
a reduction in their rice production tax schedules,
the provincial police adviser stated that there
are indications of higher tax rates. In addition,
the merchants feel that Viet Cong collection will
be pursued more vigorously, resulting in collec-
tion of taxes from mare people.- The mer,cha.nts in Ba
Xuyen Province also are concerned about Viet Cong
control of transportation routes and are urging
the GVN to open canals and clear the way for rice
shipments.
3. On 29 December, Minister of Commerce An
met with US officials to discuss the rice stock
situation. Minister An is extremely worried about
the current low level of stocks and does not ex-
pect large deliveries from the delta in January
when rice merchants are just beginning to operate.
Moreover, in contrast to the reports from Ba Xuyen
Province, An reported that a GVN committee which
recently toured the delta, had a pessimistic im-
pression of the new crop. He also stated that the
GVN had not ma.l:e any arrangements for importing
rice with its own foreign exchange. US officials
made it quite clear that the GVN could not rely
on the US to cover all of its rice requirements
and urged An to start purchasing on the world mar-
ket :immediately.
4. Talks are continuing between US and GVN
officials on an economic stabilization agreement
for 1967 which will cover piaster spending limita-
tions, revenue targets, foreign exchange expendi-
tures by the GVN, and related problems. Governor
Hanh of the National Bank of Vietnam has submitted
a draft agreement which provides for a total GVN
budget of 88 billion piasters, or about- 35 percent
above the 1966 budget. Of the 88 billion piasters,
75 billion is for the regular budget, 9 billion for
rice and fertilizer subsidies, 3 billion for eco-
nomic development and 1 billion for a contribution
to free world forces. Hanh's draft agreement also
proposes a transfer of all US counterpart funds to
the military budget and estimates total GVN-financed
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imports at $350 million, including $120 million
transferred from the commercial import program. A
major point of difference between the US and GVN
is that Hanh's draft agreement does not include
specific steps to assure GVN compliance with its
earlier commitment to maintain a foreign exchange
balance not in excess of $250 million.
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Banking and Credit Developments
4.7 billion piasters on 10 December compared with
a total of 400 million piasters on 24 September.
The increase during the week of 3 December alone
was 1 billion piasters. It appears, therefore,
that the commercial banks are taking full advan-
tage of the credit facilities of the NBVN and
that credit is available and is being used.
rediscounting of import bills With the Na-
tional Bank of Vietnam (NBVN) has been increasing
rapidly. Outstanding rediscount credit rose to
6. The commercial banks also have jointly
agreed to reduce the margin required on opening
letters of credit from 40 to 25 percent cash for
a restricted group of commodities which may become
scarce if the 40 percent margin is retained. Among
these commodities are trucks, spare parts for vehi-
cles, generators and galvanized iron sheets. This
reduction in margin requirements should help to
raise the level of commercial import program li-
censing, which has been very low during the past
three months.
7. Another banking development concerns the
imminent failure of one of South Vietnam's small
banks--Tin Nghia--which reportedly is unable to
meet its clearing with other banks.. As of 2 Jan-
uary, only the other banks knew about Tin Nghia's
real situation. Unless this bank was bailed out
by the NBVN on that day, however, Tin Nghia's dif-
ficult position undoubtedly became common knowledge
in the market as checks drawn against it would not
be accepted by other banks.
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PIASTERS PER US DOLLAR
GOLD Basis:gold leaf worth $35 per troy ounce
US $10 GREEN
........ US $10 MPC Military Payment Certificates (scrip)
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