THE SITUATION IN SOUTH VIETNAM (WEEKLY)

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• Collection: General CIA Records
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• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 9, 2016
• Document Release Date: April 18, 2001
• Sequence Number: 1
• Publication Date: July 3, 1967
• Content Type: IR

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Secret
No Foreign Dissem
Intelligence Report
DIRECTORATE OF
INTELLIGENCE
The Situation in South Vietnam
(Weekly)
.Secret
1.44
3 July 1967
No, 0357/67
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(26 June - 2 July 1967)
Section
The Thieu-Ky ticket; General Minh's
candidacy; Loan removed as security
chief; Lower house election date set;
Tran Van Do to run for upper house.
Intelligence operations against the
Communist infrastructure; Develop-
ments in the Chieu Hai program; Gov-
ernment administrative reforms.
Prices; Currency and gold; import
problems; Pork marketing.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
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Chief of State Thieu and Premier Ky
joined forces on a single presidential
ticket on 30 June, following several days
of intensive meetings of the military mem-
bers of the Directorate and the Armed
Forces Congress. General Duong Van Minh,
despite his continuing exile in Bangkok,
managed to have his running mate, former
Social Welfare Minister Tran Ngoc Lieng
file his presidential candidacy papers for
him. These subsequently were approved by
the Provisional National Assembly. Gen-
eral Nguyen Ngoc Loan has been removed as
chief of the Military Security Service,
but will retain his position as director
general of the National Police.
The Thieu-Ky Ticket
1. Chief of State Thieu and Premier Ky have
joined forces on a single presidential ticket, headed
by Thieu. The official announcement, which was made
by the Directorate's press secretary on 30 June, fol-
lowed four days of intensive, highly charged meetings
of the military members of the Directorate and the ap-
proximately 50-man Armed Forces Congress, the supreme
military authority in South Vietnam. Thieu's and Ky's
official papers have already been submitted to the
Provisional National Assembly for approval, which
should be routine. Both men had already filed their
separate candidacies earlier in the week. Ky's run-
ning mate was to have been Peoples-Army Council Chair-
man Nguyen Van Loc, and Thieu had chosen Hoa Hao leader
Trinh Quoc Khanh.
2. The Directorate started deliberations on 27
June in an effort to reach some consensus on how to
handle the request by Duong Van Minh ("Big Minh") to
be allowed to return from Bangkok and to run for the
presidency. During a subsequent meeting on the 28th,
however, the Ky-Thieu rivalry was brought out into the
open. That session set the stage for the next two days
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of intensive discussions in the Directorate and the
Armed Forces Congress. The "Big Minh" issue gave
way to efforts by Thieu, Ky, and the other generals
on the 29th and 30th to confront the increasingly
serious portent of a split within the military es-
tablishment over the separate candidacies of Thieu
and Ky.
3. As it stands now, Thieu has emerged as the
apparent victor for the moment in the test of strength
that both he and Ky had religiously avoided for months.
Information about the meetings of the Armed Forces
Congress which hammered out the military-sponsored
presidential ticket headed by Thieu with Ky as running
mate suggests now that Thieu may not have scored a
clear-cut victory over Ky. By his uncompromising at-
titude, Thieu may have further alienated himself from
some key members of the armed forces, as well as
actually undercutting his position as president if he
is elected.
4.
at the close of the 29 June meeting of the Armed
o es Congress, it had been agreed that Ky would be
the military candidate and Thieu would withdraw his
candidacy, with the promise that he would be named
defense minister after Ky's election. However, by
the time the congress reconvened the following day,
Thieu had reversed his course and declared that he
would resign from the army and run as a civilian can-
didate--a course which the military apparently felt
would shatter the unity of the armed forces and would
also renege on pledges made to the US.
25X1 C
5. Premier Ky then offered to resign from the
presidential race, thus leaving the way open for
Thieu to become the militar s onsored candidate.
However, - he allowed himself 25X1C
to be lured. acc ~.n o e vice-presidential slot under
an agreement with Thieu which, if fulfilled, would
give Ky the right to name cabinet, appointments in the
new government and to control the armed forces. There
is some indication that Ky's decision to step down
prompted a spontaneous expression of admiration from
at least one key member of the council, and may have
generated even more support for him from among the
generals.
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General Minh's Candidacy
6. General Duong Van Minh officially filed his
candidacy by proxy on 30 June, shortly after the gov-
ernment announced that, for reasons of "national se-
curity," Minh and others in exile would not be per-
mitted to return. Minh's candidacy was filed by his
running mate, Tran Ngoc Lieng, former minister for
social welfare. Lieng, a southern Buddhist, resigned
from the cabinet in the fall of 1966 during the con-
troversy prompted by Police Director General Loan's
harsh tactics against a southern subcabinet official.
7. Minh's action culminated a week of intense
political activity which began when he addressed
cables to Ky, Thieu, and Provisional National Assembly
Chairman Suu requesting permission to return in order
to run for the presidency. On 27 June Minh publicized
his desire to run and the government's delaying tactics
in an interview with the Bangkok Post. That same day
the Directorate held its emergency meeting to discuss
Minh's case. Minister of National Security Vien and
Armed Forces Inspector General La were dispatched im-
mediately to Bangkok to tell Minh that if he returned
he would be arrested as soon as he stepped off the
plane, but Minh refused to accept the Directorate de-
cision, telling Vien and La he was intent on returning.
Following the return of the two generals to Saigon on
28 June, the Directorate held a second meeting and re-
affirmed its decision to keep him out of the country.
8. In the meantime, General Loan, who was in
Bangkok early in the week on official business, had
reportedly interceded on Minh's behalf with the Viet-
namese ambassador to Thailand, instructing the am-
bassador to countersign Minh's candidacy papers. Loan's
intercession, apparently undertaken on orders from the
government, was evidently intended as a means of
mollifying Minh in the hope that the 30 June filing
deadline would pass before Minh had an opportunity to
submit his papers.
9. The Provisional National Assembly on 1 July
approved Minh's slate by a substantial majority. The
government had probably counted on the assembly to re-
fuse to accept a proxy candidacy. However, Chairman
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Suu and other members of the assembly, civilian pres-
idential candidate Tran Van Huong, and, reportedly,
militant Buddhists who support Thich Tri Quang have
seized upon the Minh controversy to criticize the
military Directorate's actions as unconstitutional.
10. The Directorate is now faced once again
with the decision of whether or not to let Minh re-
turn before the election. If he does return to run,
the entire complexion of the presidential contest will
again have been altered.
Loan Removed as Security Chief
11. General-Loan was removed from his position
as chief of the Military Security Service (MSS) on the
night of 27 June, but will apparently remain as director 25X1C
general of the National Police. Loan's deputy for both
the MSS and the National Police, Lt. Col. Tran Van
Thana, was named acting MSS chief.
25X1
cannot be determine
at this point what effect the alteration in the Thieu-
Ky candidacies will have on Loan's considerable powers
as National Police director.
Lower House Election Date Set
12. The Provisional National Assembly has again
challenged the Directorate's wishes and has voted to
hold lower house elections on 5 November. The Direc-
torate had favored 1 October. Before the vote was
taken, several deputies proposed soliciting the Direc-
torate's views, but the suggestion was disregarded.
Tran Van Do to Run for Upper House
13. Foreign Minister Tran Van Do announced on 27
June that he intends to run for the Senate, but he ap-
parently will not resign as foreign minister until
after the elections.
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II. REVOLUTIONARY DEVELOPMENT
Intelligence operations against the
Communist infrastructure in the Saigon
area have resulted in the apprehension of
40 district and regional cadre of the
Communists' Region 4 or Saigon Special
Zone. As of 17 June, 17,134 Communists
had rallied to the government under the
Chieu Hoi or "Open Arms" program. The
number of returnees thus far in 1967 is
approximately 85 percent of the total for
1966. The Vietnamese Government continues
to try to institute reforms to stream-
line its structure and operation and has
recently made efforts to improve over-all
management and modernize its tax structure.
In addition, a proposed government plan
would establish circuit courts for the
31 provinces.
Intelligence Operations Against the Communist
Infrastructure 1. Between October 1966 and May 1967 the
Special Branch of the National Police in conjunction
with the military Security Service (MSS) apprehended
40 district and region Communist cadre in the Com-
munists' Region 4 or Saigon Special Zone. The
"roll-up" of these cadre is believed to be one'of
the severest blows inflicted upon the enemy infra-
structure in any Communist region in recent years
and is apparently the result of efforts by Viet-
namese security services to upgrade their counter-
intelligence investigations and operations.
2. The elimination of these 40 members of the
Communists' Region 4 infrastructure will primarily
affect the enemy's operations in the Saigon area
and particularly weaken their efforts to proselyte
the civilians. Thirty-three of the cadre arrested
held positions-in both the Communist Party and in
the so-called National Liberation Front (NLF) in
Region 4 and, therefore, the loss to the over-all
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Communist effort in the region may be considerable.
It is probable that many of the Region 4 plans for
1967 have had or will have to be postponed or
canceled for--in light of other reports which in-
dicate a serious shortage of cadre in the region--
it may be some time before those apprehended can
be effectively replaced. Moreover, it is not clear
how much of the Communist apparatus in Region 4
remains intact.
3. The Communists' Region 4 or Saigon Special
Zone encompasses the government's Saigon-Cholon
area, the districts--except Can Gio and Quang
Xuyen--within Gia Dinh Province, Cu Chi District
in Hau Nghia Province, Phu Hoa District in Binh
Duong Province and Di An District in Bien Hoa
Province. The population of the area is estimated
at 3.3 million and since this area is the social,
political, and economic center of the country it
has been a prime target for Communist operations,
particularly political and economic.
4. The Region 4 committee sections whose
cadre have been apprehended include Economic-
Finance, Intellectuals' Proselyting, Workers' Prose-
lyting, and the Saigon Market Sections. The NLF
organizations which have reportedly lost allegedly
key cadre include the "Democratic Party," Labor and
Women's Associations, and the High School Teachers'
Union. In addition, several cadre from the Thu Duc
and Di An District Committees were arrested.
Developments in the Chieu Hoi Program
5. As of 17 June, 17,134 Communists had
rallied to the government under the Chieu Hoi or
"Open Arms" program. Approximately 10,847 of the
returnees--called Hoi Chanh--have been classified
as ex-members of Communist military organizations.
The total number of returnees thus far this year
is approximately 85 percent of the total for 1966.
6. For the four-week period prior to 17 June,
however, the weekly totals were about 30 percent
below the yearly average. The reduced rate is
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partly attributable to a decline in allied military
activity and to the government's political activi-
ties during this period. In the past political
events--as in this case the village and hamlet
elections--have been accompanied by a slow down in
the rate of returnees.
7. The large numbers of ralliers so far this
year has resulted in many provincial Chieu Hoi
center's becoming overcrowded and in some cases the
centers have been unable to cope with the influx.
There are adequate 1967 piastre budget funds
available to double the size of every Chieu Hoi
Center in Vietnam; however, these funds have still
not been released to the province chiefs. The
Chieu Hoi planning and funding system available on
the GVN side is not conducive to normal, efficient
functioning and on the US side the system has thus
far shown that it is not able to respond to
emergency conditions. Throughout the GVN a system
for accounting and auditing of Chieu Hoi funds is
apparently nonexistent and in many areas advisors--
primarily third country nationals--are not able to
gain access to documents which indicate the dis-
bursement of funds.
8. After a Hoi Chanh is released from a center,
it is estimated that 60 percent return to their
previous occupations--by and large agriculture--20
percent enter intq some form of government service,
and 20 percent are left without anything to do or
anyplace to go. The Chieu Hoi Center's vocational
training programs are aimed primarily at the latter
and are designed to prevent them from returning to
service with the Viet Cong. Many provinces have
organized Chieu Hoi Employment Committees'to place
the vocational trainees in jobs or'encourage others
to work for the government. The majority who
return to farming either return to their native
villages or move to the Chieu Hoi resettlement
hamlets.
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Government Administrative Reforms:
Public Administration
9. On 12 June Prime Minister Ky issued a
decree which established the Central Management
Office and made it a part of the premier's office.
The new office was created to provide a focal
point for all government agencies in management
improvement efforts and systems analysis services.
The Vietnamese Government anticipates that this
planning group will play a role in the transition
from the military to civilian government which will
occur in September or soon thereafter. The Central
Management Office is currently composed of nine
senior civil servants who--prior to establishing
programs for their own government--are scheduled to
visit several Asian countries and the US to ob-
serve and talk with officials working in the
similar fields.
10. The Committee for Administrative Improve-
ment, which has existed in the premier's office
and has done a commendable job in fostering
administrative reforms, will apparently continue to
function at least until the newly elected govern-
ment takes office. This committee's work will now
be directed towards suggesting improvements in
public administration, especially with regard to
post-Revolutionary Development programs. Some of
the past recommendations of the committee have led
to a 60 percent reduction in the mail flow to the
premier's office and the concurrent abolition of
20 positions, the relocation and increased use of
the central documents library, and the establish-
ment of the position of a press secretary for the
premier. Other concurrent changes recommended by
the committee have enabled the premier's office to
exercise more effective supervision over the
government apparatus and helped to create an
atmosphere in which efficient and effective organ-
izational changes can and have been made.
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Taxation
11. Over the past several months many changes
have been made in the government's taxation policies
and in the administration of the tax system. On
1 June Chief of State Thieu signed into law another
reform which will cause large scale changes in
corporation tax policies. The new law places the
corporations on a quarterly installment "pay as you
go" basis and further provides for an accelerated
schedule for payment of corporation taxes for 1966
and 1967. Earlier in the year, provisions were
made to organize tax audit teams which, where ap-
propriate, will lend assistance to the corporations
in the establishment and maintenance of records
and, in addition, will conduct spot checks of
corporation-tax-records. In addition, a system for
withholding taxes from the pay of all salaried
Vietnamese was established and will probably be in
effect by 3 July.
12. Four large training classes were started
in May to prepare about 300 employees of the
Directorate General of Taxation (DGT) for the
financial clerk examination in July. For those who
pass the exam the way will be open to permanent
status, higher pay, and other benefits. About 800
of the 1,700 employees of the DGT are on daily
wages and are not only ineligible for employee
benefits but receive less pay than the permanent
employees. Classes thus far have been full and
this is indicative of the widespread interest among
employees in this opportunity for advancement. With
the influx of US advisors and assistance--much of
it from the Automatic Data Processing Association?
interest and enthusiasm in their work by employees
of the DGT appears to have increased.
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Justice
13. A reform plan by the Ministry of Justice
to create circuit provincial courts is now under
study. The proposed plan would establish regula-
tions providing for provincial court sites at
various places in the provinces. At a June con-
ference in Saigon, the provincial judges agreed
in principle to the plan, but noted that the main
drawbacks were lack of transportation and in many
areas lack of security. Part of the transporta-
tion problem was resolved, however, when Premier
Ky at the closing of the conference presented keys
for seven jeeps to seven of the judges.
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For the third consecutive week re-
tail prices in Saigon declined slightly.
Currency and gold prices were also down
somewhat during the week ending 19 June.
During the first five months of 1967 im-
port licensing was considerably lower
than during.the same period of 1966. The
GVN deputy minister of economy and finance
has recommended suspension of all regula-
tions restricting free movement of hogs
to Saigon in order to provide relief to
the producers without raising retail prices.
1. For the third consecutive week retail prices
in Saigon declined slightly. Nevertheless, these
prices still are about 19 percent higher than at the begin-
ning of the year. On 19 June the retail price index
for Saigon was one percent below the level of the
preceding week, primarily because of lower prices
for most vegetables. Rice prices were unchanged ex-
cept for the price of the most expensive type, which
continued to decline. The,price of pork bellies,
however, rose for the second consecutive week. The
over-all price level for nonfood items fell slightly
as declines in the prices of firewoor.On.d charcoal
offset an increase in the price of calico. (A
table of weekly retail prices in Saigon is included
in the Annex.)
2. Wholesale prices of selected 'US-financed
imports rose slightly durinq the week ending 20 June.
Condensed milk prices increased in response to an
announcement that the GVN would cease to grant a
subsidy of six piasters per can effective with milk
produced in the first quarter of this year. Pricfas
of most brands rose by only one piaster, reportedjly
because most of this milk had been in stock for
several months. As these old stocks are depleted,
however, milk prices presumably will gradually rise
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further. Higher milk prices more than offset con-
tinued declines in most fertilizer prices, which
fell following the announcement of the GVN's new,
lower official selling prices.
Currency and Gold
3. Currency and gold prices were down some-
what during the week ending 19 June following the
temporary rise caused by the Middle East crisis.
Prices for gold and MPC (scrip) returned to the
level of 5 June, or 197 and 111 piasters per dol-
lar, respectively. The price of dollars declined
one piaster to 156 piasters per dollar, or one
piaster above the price of 5 June. (A graph on
monthly and weekly currency and gold rates is in-
cluded in the Annex.)
Import Problems
4. During the first five months of 1967 im-
port licensing was considerably lower than during
the corresponding period of 1966. This decline has
taken place even though licenses are readily avail-
able, excess purchasing power exists, and the Na-
tional Bank of Vietnam (NBVN) has ample foreign ex-
change reserves. In addition, the USAID Commercial
Import Program (CIP) and the Food for Peace Program
continue to make substantial financing available.
5. According to a joint Embassy/USA.ID report,
this situation has resulted from two major factors:
the character of the goods that can be imported and
the character of the institutions for importing and
distributing these goods. As incomes continue to in-
crease, demand is generated for perishable goods
that are difficult and expensive to import and for
services, such as education and medical treatment,
which cannot be imported. The second limitation
on imports is more complex. Vietnam does not have
highly developed business institutions for handling
foreign trade or for distributing imported goods
once they arrive. When import quotas were removed
in mid-1966 many importers ordered more than they
could afford or market. About 90 percent of all
commercial imports come into the country through
the port of Saigon, and many of these goods do not
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reach markets outside the city. For example, a
farmer in the delta may want an irrigation pump and
have the money to buy it, but may well find that
there is no sales agent in his district or in the
provincial capital, no stock of spare parts, and
no one to service it.
6. In order to encourage importers and keep
goods flowing into Vietnam, the NBVN has made avail-
able new rediscounting facilities to the commercial
banks and substantially reduced the down payment
on nonessential goods, which an importer must pay
when he gets his license. There is no down payment
required on essential goods.
Port Marketing
7. Based on a survey of pork marketing con-
ducted in Phong Dinh Province in the delta, Pham
Kim Ngoc, the GVN deputy minister of economy and
finance, has recommended suspension of all regula-
tions restricting free movement of hogs to Saigon
in order to provide relief to the producers with-
out raising retail prices. He stated that produc-
tion is falling by 20 to 30 percent because the
price that hog producers are getting does not cover
their costs.
8. The movement of hogs from the producers
to the final consumers involves a myriad of people
and checkpoints. The farmer sells to an inter-
mediary, who sells to a local hog dealer, who then
must get certification from the district chief, the
Animal Husbandry Service, the Provincial Economic
Service, and the police before he can ship the
hogs out of the province. The trip from Phong Dinh
to the government slaughterhouse in Saigon in-
volves two ferry crossings and three resources con-
trol checkpoints. Once the hogs arrive in Saigon
they are sold to another dealer who has a yard at
the slaughterhouse. The Saigon dealer then sells
the hogs to a market meat stall or pork shop whose
owner may have the hogs slaughtered upon presenta-
tion of his receipt. This lengthy procedure ap-
parently was designed for three purposes: 1) to
provide health inspection at the starting point;
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2) to provide statistics on hog movements; and 3) to
assure the supply of hogs for Saigon as well as to
channel all shipments to other parts of the country
through Saigon. Ngoc argued that health inspection
at the provincial level exists in name only and
that the final inspection at the slaughterhouse is
sufficient. He also pointed out that statistics on
hog movements can be supplied by the merchants to
the provincial authorities after shipment and sale
have taken place and that the resource control checks
on the road serve no good purpose at all. As for
the third argument, Ngoc saw no reason why the
people of central Vietnam should be denied pork in
favor of Saigon if they are willing to pay for it
at a competitive price. Saigon hog merchants be-
lieve that hogs will tend to go where the prices
are highest, control or no control.
9. The most harmful aspect of the regulations
concerning pork marketing is government price con-
trol. The GVN set new official prices in July 1966
for both the provinces and Saigon. The official
ceiling price on hogs in Saigon was dropped in Jan-
uary 1967, but provincial price ceilings remained
in effect. In Phong Dinh, the official selling price
has been enforced with the result that the farmer's
return covers on the average only about 80 percent
of his costs. The average cost of producing a pig
weighing 100 kilograms, which normally takes eight
to nine months, has more than doubled since 1965,
largely because of higher prices for feed, mainly
rice, bran, and vegetables.
10. Ngoc concluded that all the administrative
procedures have no more than nuisance value and
that, in fact, they depress production, provide op-
portunities for corruption, and thus increase con-
sumer prices. Superfluous controls also cause de-
lays, which reduce shipments through weight loss and
death. Therefore, he recommended the elimination
of official prices, health inspection in the prov-
inces, provincial exit permits, and surveillance by
the resource control checkpoints. Other GVN officials
reportedly agreed with Ngoc's recommendations in
principle, but it is not known whether any action
has been taken.
No Foreign Dissem/Background Use Only
SECRET
Approved For Release 2001/05/17 : CIA-RDP79T00826A002300060001-4
 Approved For Releas001/05/17 : C8@0Rib0826A002360001-4
No Foreign Dissem/Background Use Only
Weekly Retail Prices in Saigon a/
13 June
3 Jan.
29 May
5 June
12 June
19 June
1966 b/
1967
1967
1,967
1967
1967
Index for All Items M
225
276
271
267
Index for Food Items 1900
212
1
1
300
9
293
Of Which:
(In Piasters)
_
Rice-Soc Nau
100 kg.) 1,250
1,700
21650
2,550
2,100
2,100
Pork Bellies
(1 kg.) 90
130
160
150
160
170
Fish-Ca Tre
(1 kg.) 130
150
170
160
160
160
Nuoc Man (jar) 70
90
150
150
150
150
110
195
210
21
221
219
Of Which:
(In Piasters)
Firewood (cu. meter) 360
560
530
550
600
550
Cigarettes (pack) 10
11
11
11
11
11
White Calico (meter) 27
33
32
32
32
31
Kerosene (liter) 7.8
10.5
10
10
10
10
a. Data are frgm USAID soirees. For all indexes 1 January 1965 = 100-
b. Price level just prior to the 18 June devaluation.
No Foreign Dissem/Back round Use Only
SECRET
Approved For Release 2001/05/17 : CIA-RDP79T00826AO02300060001-4
 Approved For Releas*4001/05/17 : CIA-RDP79T00826A0023' 60001-4
Saigon Free Market Gold and Currency Prices
19 JUNE
"KT97
1964
GOLD: Basis gold leaf worth $35 per troy ounce
US $10 GREEN
US $10 MPC Military Payment Certificates (scrip).
Approved For Release 2001/05/17 : CIA-RDP79T00826AO02300060001-4
 Approved For Release 1/05/17 : CIA-RDP79T00826AO0230 0001-4
Secret
Secret
Approved For Release 2001/05/17 : CIA-RDP79T00826AO02300060001-4