EAST ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00865A001600190002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 12, 2016
• Document Release Date: June 5, 2001
• Sequence Number: 2
• Publication Date: August 25, 1975
• Content Type: NOTES

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Secret
No Foreign Dissem
gulf~p 1EYUE
East Asia
Secret
UFO
August 25, 1975
No. 0758/75
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No Di ssern Abroad
'ir-r ckground Use Onlu/Controll d Dissem
Warning Notice
Sensitive Intelligence Sources and Methods Involved
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminsal Sanctions
Classified by 010725
Exempt from general declassification schedule
of E.O. 11652, exemption category:
? 58(1), (2), and (3)
Automatically declassified on:
Date Impossible to Determine
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This publication is prepared for regional specialists in the Washington com-
munity by the East Asia - Pacific Division, Office of Current Intelligence,
with occasional contributions from other offices within the Directorate of
Intelligence. Comments and queries are welcome. They should be directed to
the authors of the individual articles.
August 25, 1975
Cleansing the Army . . . . . . . . . . . . . . 15
VIETNAM
South Vietnam: The First Three Months. . . . 18
ANNEX--The Two Koreas: An Economic Appraisal. . . 26
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Laos: Cleansin the Lao Army
The Lao communists over the past few weeks have
been implementing a careful plan to re-educate Lao
army officers who did not flee the country following
the collapse of the coalition. The officers, par-
ticularly those with past close connections with the
r-~ US, have been humiliated, and many have been trans-
() ported to communist towns deep in the hinterlands
for indoctrination. There is no evidence that any
have been executed or physically abused, but the
conditions in some of these areas resemble concen-
tration camps.
The First Phase: Re-education Seminars
In late June and early July many Lao army offi-
cers 'and some civilian officials were required to
attend training seminars at local military facilities
to learn the new "political realities." The ex-
(J periences of about 250 officers who attended a semi-
nar at Chinaimo Camp near Vientiane seem typical.
-1 The participants spent part of their day digging
/ ditches, learning how to construct grass huts, and
tending vegetable plots. The remainder of the day
was taken up with lectures by Pathet Lao cadre on the
new Lao political situation.
Soviet and Chinese personnel also made presentations.
the
participan s in the Chinaimo seminar were stripped
of all badges of rank and other insignia and each
was given responsibility for a specific garden plot.
All call one another "comrade" and learn to break
into applause on cue from instructors.
described the site as like a concentration camp an
reported that the senior communist political officer
went so far as to ask
for assistance in Tying oarnea wire rences
an installing security lights.
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Movement to the Hinterlands
The communists in late July began moving groups
of officers and others to Sam Neua, the Plaine des
Jarres, or elsewhere deep within parts of Laos long
under communist domination. Particiraants were us-
ually given little notice. The participants at the
Chinaimo seminar were hustled out of Vientiane so
quickly that they were not allowed tD bid farewell
to their families. As a result of these swift moves,
many of the officers' wives believe they will never
see their husbands again. Several officers, who were
warned, managed to slip across the river.
No officer has yet returned from these seminars
in the hinterlands and we have no information on the
fate of the participants. The sessLDns are supposed
to last from two to three months, but most Lao expect
it to be considerably longer.
many will remain for more than
grasp and accept the communist teachings will be al-
lowed to return to Vientiane, but some will remain to
work at posts in the hinterlands.
a year. most of those who fully
This re-education effort probably serves several
communist purposes. One important goal almost cer-
tainly is to keep a close watch on the officers while
1::he remainder of the coalition is demolished. The
movement of most officers far from their homes pre-
cludes their flight and ensures that they will not be
in contact with potentially troublesome elements in
Vientiane or across the Mekong in Thailand.
The communists probably also hone that some of
the officers will demonstrate a willingness to co-
operate in the new order. Technicians and capable
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middle grade officers and civilian personnel are in
short supply in communist ranks. Reformed officers
O could be put to good use either in Vientiane or with
communist units in the back country. (SECRET NO
FOREIGN DISSEM)
August 25, 1975
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Celebrations have begun in Vietnam commemorat-
ing the 30th anniversary of the August revolution
Of 1945 which led to the establishment of North
Vietnam on September 2. The communists took over
in South Vietnam on April 30, but this part of the
country has been under virtual martial law for the
past three months with the military exercising
almost exclusive control over the daily tasks of
administration. It is possible that the communists
will use the September 2nd anniversary celebrations
Lo announce the formation of a civilian government
For the South or provide some indication when that
transition will occur. Beyond this possibility,
~iowever, the communists are not expected to make
many additional commitments on the South's future,
=speciall_y regarding reunification.
What the first 100 or so days cf communist
r:ontrol of Vietnam has most clearly shown is that
the goal of formal reunification will be pursued
gradually and in accordance with no preconceived
timetable. The impatience for some indication of
how soon that will occur seems to be greater out-
side the country than among the Vietnamese them-
selves. For a people who maintain they have been
fighting for centuries to reunify their country,
a few more months or years is of little consequence.
The first three months have also shown that
,the Vietnamese may have underestimated some of the
problems confronting them following the victory.
The rapid collapse of the Saigon government put the
communists in an exposed position administratively.
A recent joint article by Hanoi's defense chief and
his deputy confirms that North Vietnam's objectives
until the latter part of March were considerably
'store limited than total victory. The last minute
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decision to go all out--made on March 25--did not
permit Hanoi to do much political homework before
assuming administrative control of the South.
Many of the initial communist actions were
makeshift and had little resemblance to firm policy
decisions or sound administrative judgment. In the
ensuing weeks, the communists have begun to concede
publicly that the business of putting the country
back into working order would likely be a long and
difficult task and that instilling the proper dedi-
cation to the revolutionary cause among the southern
population as a whole might require lengthier and
harsher forms of persuasion than the communists
probably originally anticipated would be necessary.
Reunification
There is little likelihood that the goals of a
socialist and collectivized south reunited with and
dominated by the North, will be moderated. In their
public commentary, both North and South Vietnamese
l communist officials have made it clear that de facto
reunification occurred with the surrender of Saigon.
These statements, in addition to other indications,
have also clearly established that the North Vietna-
mese are in control and that Hanoi is calling the
shots. For example, in early May a military manage-
ment committee was established in Saigon headed by
a North Vietnamese general, and during celebrations
on May 19 commemorating Ho Chi Minh's birthday,
the fourth-ranking member of the North Vietnamese
Politburo was publicly identified as the individual
in charge of party and military affairs in the South.
It became evident that for the time being Vietnam
would be one country under the umbrella of the
Communist Party, but with "two governments."
The communists probably will decide on formally
reunifying the country when they are satisfied the
bulk of the problems with security and the economy
in the South are under control. The most likely
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format for achieving formal reunifice.tion would be
to hold a plebiscite. Such a forum ..n itself argues
for a deliberate pace since the communists must be
certain that the "free" choice of the': people will
be properly expressed.
quality of_Li.fe
The communists have conceded in the public media
that their most serious problem is sE:!curity. Re-
sistance to the new regime is mostly from former
government soldiers fearing for their lives, reli-
gious groups philosophically opposed to the
communists, ethnic groups which traditionally have
resisted any sort of Vietnamese domination, and
robbers and bandits stealing to survive. None of
this resistance activity appears organized and it
s unlikely to present any long-term threat to com-
;xiunist control. But it is a thorn it. the side of
the communists and unquestionably is an important
factor compounding the other problem. confronting
the new regime.
Second on the list of problems is the economy,
which the communists admit is in sad shape. Actions
taken so far appear to be makeshift--for example,
banks were secretly reopened, but no new money has
been printed. Living conditions in Saigon and
throughout the rest of the country apear to have
deteriorated somewhat, but there are as yet no
indications of mass starvation or widespread epi-
demics. People in the cities are being encouraged
to return to the countryside to resume farming in
the wake of tentative indications that food shortages
may occur later this year. The communists lack the
fertilizers, machinery and spare parts, fuel, and
high yield rice stocks to become self-sufficient in
food and probably will not be able tc offset these
shortcomings by expanding farm acreace.
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The communists appear to have begun efforts to
mobilize non-communist members of the population
to attack these various economic and social prob-
lems. A recent Saigon municipal congress of the
/ National Liberation Front was held in July and is
the best sign to date that attempts are being made
to intensify such efforts on a national scale. The
of National Liberation Front is the Vietnamese Com-
munist vehicle for mobilizing widespread non-com-
munist popular participation to implement party
policy.
The Foreign Scene
Just as the Vietnamese communists have adopted
a deliberate timetable for internal consolidation in
the South, they appear to be in no great hurry to
expand the new regime's diplomatic points of con-
tact with the outside world. From all appearances
to date, Hanoi is unlikely to sanction full ambas-
sadorial representation in Saigon in the near future.
Most nations probably will be invited to send an
ambassador to Hanoi and that ambassador will also be
accredited to the southern regime. Others, espe-
cially Hanoi's communist allies and western nations
such as France, may be permitted to send a charge
d'affaires to Saigon. This would give the appear-
ance of independent diplomatic status for the southern
regime for the near term, and once formal reunifica-
tion is announced, the accreditation could easily
be converted to consular status.
Several countries, especially the two big com-
munist allies, have complained about not being per-
mitted early official access to Saigon. The French
have also been especially irate, feeling that the
Vietnamese falsely led them to believe they would
be the first western country to have relations with
the new regime. So far, however, the communists
have permitted no foreign missions into the South,
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although since assuming power, they have agreed
to exchange ambassadors with over 8C countries.
Hanoi has nonetheless encouraged the southern
regime to expand its diplomatic activity and to be
accepted as a separate member of the: world com-
munity. It certainly had to approve Saigon's ap-
plication for separate admission to the UN and
endorse the Saigon request to be adLitted to the
nonaligned group of nations. The latter move
unquestionably is tied to Hanoi's attempt to assure
as much third-country support for the recent UN
bids as possible--without relying exclusively
on its communist backers. The commt.nists have
reacted with predictable harsh rhetoric about the
US Security Council veto of the bid for dual UN
membership. But in fact, the numerous public state-
ments by Vietnamese communist officials to the
effect that a de facto union of the north and south
has already been accomplished did little to
strenghten the case for two truly independent
Vietnamese states. If the process of reunifica-
tion continues to proceed smoothly, the issue of
dual membership for North and South Vietnam could
become a dead issue before long. (CONFIDENTIAL)
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Authorities in Rangoon have been engaged in a
new get-tough campaign against lawbreakers in recent
weeks. The effort, which began shortly after the
student and labor disturbances last June, has centered
on political dissidents and economic criminals. Last
month, the crackdown was broadened to include hundreds
of "bad characters"--vagrants, squatters, and petty
thieves.
Penalties are also becoming more severe. Stu-
dents and workers found guilty of participating in
the disturbances are now being given stiffer sentences
than those involved in similar disorders last year.
Some students have received eight-year jail terms,
while workers got up to 16 years. Even petty crimi-
nals are summarily sentenced to terms of up to six
years, and traffic laws are being strictly enforced.
Charges of corruption, neglect, and indiscipline
have been levied on several hundred low level govern-
ment officials. Although the regime normally turns a
blind eye to black market operations, raids have been
made on Rangoon warehouses and nearly 100 small
private industries in the capital have been closed for
reselling raw materials purchased from the government.
Hard-line elements in the army apparently are
behind the tough tactics. The military has admin-
istered Rangoon directly since the riots last Decem-
ber, and soldiers, rather than police, are now making
house to house searches in lower class suburban areas.
Army patrols are again stopping long-haired youths on
the streets and giving them free haircuts, as they
did in December.
The authorities had originally acted with con-
siderable restraint in dealing with the most recent
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disturbances in Rangoon. Senior officials met with
student and worker groups to explair the government's
policies. The regime has been unwilling or unable,
however, to come up with new solutions to alleviate
Burma's underlying economic ills, and authorities
apparently have concluded that they must use force
to keep the situation from getting cut of hand.
;CONFIDENTIAL)
August 25, 1975
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The Two Koreas: An Economic Appraisal
The economies of both South anc North Korea
agave been damaged by global recession/inflation
and will be unable to maintain the rapid growth
rates of the early 1970s. The South must counter
rampant domestic inflation, rising unemployment,
and a huge trade deficit. Even though the North
has begun repaying overdue debts, its international
credit rating is in shreds, and its ambitious pro-
gram to buy advanced industrial equipment has been
badly set back.
Economic Comparisons
South Korea and North Korea are bitter eco-
nomic rivals. Both economies have c:rrown rapidly in
recent years and are among the most advanced of less
j developed countries (LDCs). The North has drawn on
hydro-
iron ore
erior natural resources--coal
! su
,
,
p
electric power--to build up a formic:lable heavy in-
dustry. The South has drawn on advanced technology
and equipment from the West and has made marked pro-
gress in shipbuilding, petrochemica:..s, petroleum re-
fining, electronics, and most consurier goods. South
Korea also is developing a multibil_.ion dollar nu-
clear power base while North Korea':;; nuclear program
is still in the talking stage. Neither is self-suf-
i:icient in agricultural production. South Korea an-
nually imports about one fourth of .ts food needs,
while the North periodically enters the international
market for grain following poor crop years.
Industry
North Korea's industrial output--roughly 40 per-
cent of GNP--is claimed to have near-'.y doubled between
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1970 and 1974. Real annual rates of growth prob-
ably have been nearer 10-12 percent than the 17
percent claimed. Much of the increase is due to
the completion of Soviet projects begun in the late
1960s. To date most of the plants purchased from
Western Europe and Japan have yet to come on line.
3 Output consists primarily of heavy industrial goods
such as steel, nonferrous metals, fertilizer, ce-
ment, and heavy machinery. Light industry barely
keeps pace with the subsistence needs of the popu-
lation. North Korea has just begun to develop a
petrochemical industry and generally its industrial
technology is inferior to that of the South.
South Korea's industrialization has been extra-
ordinary, especially so when most of the peninsula's
NORTH and SOUTH KOREA: Industrial Production
Index: 1660=100
10 1 1 1 I a I I I I I I i i i i 1 i
1955 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74
5669048-75
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mineral and electric power resources are in the
North. Adopting the Japanese model of growth through
trade, the South Korean rate of manufacturing pro-
duction. rose during the 1960s at nearly 20 percent
a. year. During the first half of the 1970s, the
tempo increased to 30 percent per annum. As a con-
sequence, industrial output in 1974 represented 30
i
n
percent of GNP, compared to less thann 15 percent
1.962 when President Pak assumed power.~. South Korea
produced much larger amounts of consumer goods than
the North and the technological levej. of much of in-
dustry compares favorably to that of Japan, Western
Europe, and the US from which modern equipment has
been purchased.
South Korea is the third larges-:: petroleum im-
porter among the LDCs and these imports have had a
damaging impact on its balance-of-payments deficit.
i:n 1974 higher prices pushed the fuea_ import bill to
0 about $730 million, up from $186 million in 1973.
The oil price crunch has reinforced the government's
ambitious plans to go to nuclear power to offset
the higher oil costs and also make the country more
:.elf-sufficient in energy resources. Seoul has com-
mitted itself to the acquisition of eight nuclear
plants costing several billion dolla::-s. These plants
are expected to reduce South Korean dependence on
'il for energy generation by :L981 from two thirds to
about one half of total consumption.
North Korea, with abundant hydroelectric and
r:oal resources, has been little affe(.-ted by increased
v) oil prices. Almost all of its petroleum supply of
nearly two million tons in 1974 was obtained from the
USSR and China at favorable prices. Operations have
begun at North Korea's first petroleum refinery and
when it reaches full capacity, this two-million-ton
refinery should make the North nearly self-sufficient
t,n oil products at its low level of consumption.
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Agriculture
Even with South Korea's natural advantage of
greater arable land and superior crop yields, it
has consistently remained a relatively large im-
porter of food grains, stemming in part from neglect
and also from population pressures. The South's
larger and more advanced agriculture sector was
finally surpassed by industry in 1973 as the main
contributor to GNP. By the end of 1974 the agri-
cultural share had slipped to 23 percent, compared
to nearly 40 percent in 1965. Seoul's third and
fourth (1977-81) five-year development plans have
put greater emphasis on self-sufficiency in agri-
culture through greater use of chemical fertilizer
and more intensive farming techniques. Even so,
South Korea probably will continue to import several
million tons of food grains yearly during the rest
of the 1970s--2.7 million metric tons were imported
in 1974 against 7.3 million tons produced domesti-
cally, yielding only a 73 percent self-sufficiency
rate.
Pyongyang has recently claimed that its six-
year plan agricultural goal of seven million tons*
of grain was attained in 1974, two years ahead of
?O schedule. Though this figure is no doubt exag-
gerated, grain output probably did reach a peak
level. Last year the weather was favorable and fer-
tilizer supplies were up. Nevertheless, prospects
for attaining the eight million ton goal set for
/g1975 seem out of the question. Judging from weather
conditions, the grain harvest may fall short of re-
quirements and imports may be needed. Given Pyong-
yang's current poor credit standing, grain imports
on credit may be difficult to arrange.
*The North Korean data are in terms of unprocessed
grain and may include tubers, soybeans, and lentils.
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Recent Problems
The economic race between the two Koreas has
been interrupted by the world economic slump.
South Korean exports have plummeted because of
weak demand in US and Japanese markets, which last
year accounted for 65 percent of for-eign sales.
Meanwhile, imports of capital goods, food, and
petroleum have remained high. Seoul's trade defi-
cit soared from nearly $500 million in 1973 to more
than $2 billion in 1974. An even larger gap is
Forecast for 1975 because of sluggish foreign de-
mand and inflated import prices.
South Korea
Total
Non-Communist
1970 .
803
80
2
1971
1,018
245
5
?972
541
245
75
1973
499
315
165
1974
2,072
655
545
1975 (est.)
2,200-2,400
N.A.
N.A.
At the same time, declining world prices for
b ietals, North Korea's principal exports, contributed
to a sharp deterioration in its trade balance.
Pyongyang overextended itself and attained a credit
rating ranked by one international banker as on a
par with Chile and Upper Volta. Since last fall,
the North has been unable to meet payments on many
of its obligations to the West and is $200 to $300
Million in arrears. This is the first time a commu-
inist country has defaulted on a large scale with non-
communist trading partners. Japan and several coun-
cries in Western Europe have suspended government
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guarantees for shipments to North Korea, and some
firms have delayed exports of equipment until over-
due payments are made.
Last month North Korea made payments of $10
/ million to Japanese companies covering debts more
, than six months in arrears and signed refinancing
agreements with several West European banks. These
cover only a portion of Pyongyang's overdue pay-
ments and simply postpone the settlement day.
Defense Spending
Both Koreas spend a high percentage of their
national budgets on defense. The North Koreans
have an active defense industry and produce much
of their own ground force and naval equipment.
Pyongyang does not produce its own aircraft, how-
ever, and still relies heavily on the USSR and China
for more sophisticated weaponry. The North has done
little military shopping in Western markets.
South Korea is dependent almost entirely on
imports for its military equipment. During the
next five years, Seoul will spend $2.5 to $3 billion
for new weapons systems. Seoul recently imposed a
/off-defense tax to help finance future domestic produc-
tion and co-production efforts. These efforts would
[(p be concentrated on items such as artillery, heli-
copters, and tanks.
The South Koreans have indicated their will-
,! in ness to deal with suppliers other than the US.
I President Pak wants
C to acquire the best available weapons at the best
price, from whatever source. The South Koreans plan
to use short-term loans, repaying them through funds
~(o raised by the defense tax.
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Unit
South
Korea
North
Korea
South
Korea
North
Korea
South
Korea
North
Korea
Population
Million
28.3
12.2
31.3
14.2
33.6
16.0
Industrial pro-
1960 = 100
162
195
441
332
991
622
duction index
Foreign trade
Billion US $
0.5
0.
4
2.9
0.7
11.3
1.8
(two-way)
Grain (polished)
current prices
Million tons
7.0
3.
25
7.5
3.6
7.3
5.0
Electric power
Billion kilowatt
3.2
13.
4
9.2
16.5
16.8
21.0
Anthracite Coal
Hours
Million tons
10.2
12.
8
12.4
21.8
15.3
28.3
Iron ore
Million tons
0.74
5.
0
0.6
6.5
0.5
9.5
Crude steel
Million tons
0.18
1.
2
0.48
2.2
1.9
3.4
Chemical fer-
Thousand tons
N.A.
158
594
320
757
555
ili
t
i
t
t
t)
t
zers
Cement
(nu
r
con
en
en
Million tons
1.6
2.4 5.8
4.0
8.8
5.5
Textiles (exclud-
Million square
218
270
340
400
594
470
ing yarns)
f
R
d
l
meters cloth
Milli
1
3
e
ine
petro
eum
on tons
.
products
Motor vehicles
Thousand
0.85
8.9 17.6
19
32
44-54
(trucks, buses,
autos, tractors)
o(
The South apparently is determined to press
forward with its ambitious defense program, but
any major foreign arms purchases soot;. will only add
loo Seoul's difficulties in financing its growing
trade deficit.
outlook
Since the major part of the expected current
.- .ccount deficit has already been covered, South
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7
l/
)I
Korea probably can stave off serious economic pres-
sures this year. If export earnings do not soon be-
gin to turn up sharply, Seoul will be forced to
look to its largest creditors--the United States and
Japan--for large scale debt relief. Moreover, ris-
ing inventories, high rates of inflation, and in-
creasing hard currency deficits may require the
South to reduce purchases abroad and curb domestic
consumer and producer demand, steps that would ac-
celerate the already rising unemployment rate. In
any case, South Korean growth rates are likely to
decline in 1975 and 1976 from the 8.2 percent real
increase achieved in 1974.
The decline in growth rates in the North may
be smaller than the decline in the South over the
next year because Pyongyang depends less on foreign
trade, and much of its trade still is with the USSR
and China. Nevertheless, North Korea's reputation
as a poor credit risk already is affecting indus-
trial imports, and the North would have severe dif-
ficulties in obtaining large additional credits.
Over the longer term, North Korea's present
credit problems will reduce chances of obtaining
credit to purchase new plants from the West, thus,
delaying the resumption of rapid industrial growth.
On the other hand, the South with superior tech-
nology and growth potential, once Western markets
recover, probably will resume high rates of growth.
(SECRET)
August 25, 1975
Approved For Release 2001/0W U RDP79T00865A001600190002-4
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Approved For Release 2001/08/08 : CIA-RDP79T00865AO01600190002-4
 Approved For Release 2001/08/08 : CIA-RDP79T00865AO01600190002-4
Secret
Secret
Approved For Release 2001/08/08 : CIA-RDP79T00865AO01600190002-4