THE SITUATION IN SOUTH VIETNAM (WEEKLY)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001800010018-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 20, 2016
• Document Release Date: August 1, 2006
• Sequence Number: 18
• Publication Date: April 3, 1967
• Content Type: IR

/P C.
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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Report
The Situation in South Vietnam
(Weekly)
State Dept. review completed
ARMY review(s) completed.
USAID review completed
Secret
1.46
3 April 1967
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Secret
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 _I ._.._`_.
EXCLUDED FROM AUTOMATIC
DOWNGRADING AND
IIECLARSIFICATION
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Secret
 A Release - 010018-7
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
THE SITUATION IN SOUTH VIETNAM
(27 March - 2 April 1967)
C O N T E N T S
POLITICAL SITUATION
Constitution promulgated; Armed Forces
Congress action; Phan Khac Suu formally
announces presidential candidacy; Local
elections.
REVOLUTIONARY DEVELOPMENT II
The RD situation in Quang Tri Province;
Montagnard cadre programs in the high-
land provinces.
ECONOMIC SITUATION III
Prices; Currency and gold; Rice situa-
tion; Economic situation in Da Nang; US
military banking facilities.
ANNEX: Weekly Retail Prices in Saigon (table)
Saigon Free Market Gold and Currency Prices (graph)
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I. POLITICAL SITUATION
The promulgation of South Vietnam's
new constitution occurred on 1 April in
a brief, impressive, and dignified cere-
mony in Saigon. The promulgation cere-
monies followed the grudging ratification
of the constitution by the Armed Forces
Congress earlier in the week.
Elsewhere on the national scene, Phan
Khac Suu formally announced his presiden-
tial candidacy and his choice of Dr. Phan
Quang Dan as a running mate. Locally, vil-
lage council elections began on 2 April.
Constitution Promulgated
1. On 1 April, Chief of State Nguyen Van Thieu
formally promulgated the new constitution at a brief
ceremony in Saigon. The entire Military Directorate
and Constituent Assembly were present, along with the
Peoples Army Council.and representatives of the major
ethnic and religious groups. Catholics, however, boy-
cotted the ceremony to demonstrate their dissatisfac-
tion with the deletion of a reference to a Supreme
Being from the preamble of the constitution.
2. Thieu, as principal speaker, emphasized the
continued need fpr unity and military-civilian coop-
eration and thanked the assembly for its work on the
constitution, but also gave good marks to the Directo-
rate for accepting it without change. He urged the
assembly to complete work on the election laws by the
end of April. Thieu called for the formation of ac-
tive political parties and the emergence of a broad
national front. The latter may pave the way for the
military to field political candidates--a method which
the embassy says is acceptable to both Thieu and Ky.
3. An expected proclamation of a National. Recon-
ciliation program was not made by Thieu at the ceremony.
This appears to be another example of the foot-dragging
that has characterized the GVN approach to the effort
to use the talents of former Viet Cong and integrate
them into the GVN war effort.
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Armed Forces Congress Action
4. Earlier, on 28 March, the Armed Forces Con-
gress ratified the constitution, but not without: first
echoing criticisms voiced by several members of the
ruling Directorate the previous week. According to an
official government press release, a majority of the
congress disapproved the constitution during the morn-
ing session, especially provisions establishing the
powers of the executive, legislative, and judicial
branches, and those alloting the Constituent Assembly
a transitional role. During the afternoon session,
the Congress reconsidered and voted approval, with 35
in favor, eight opposed, and two abstaining. The Con-
gress also scheduled the election of the president,
vice president, and upper house for 1 September, and
of the lower house for 1 October, and expressed its
confidence that the Directorate would maintain stabil-
ity during the transitional period.
5. The grudging manner of the Congress in approv-
ing the constitution--which was emphasized by the un-
usual public disclosure of the details of the meeting--
and its vote of confidence in the Directorate to the
exclusion of the assembly during the transitional pe-
riod constitute a clear warning that the military in-
tend to exercise ultimate political power until the
new government is established. By openly criticizing
the transitional role of the assembly and by fixing
election dates without consulting the assembly-.-which
will legislate electoral regulations--the military
implicitly put assembly members on notice not to take
advantage of the limited powers afforded them. At the
same time, the reservations expressed by members of
the Congress as well as of the Directorate appear to
be genuine, and, as such, illustrate that the military's
long standing suspicions of civilian politicians remain
strong.
Phan Khac Suu Formally Announces Presidential Candidacy
6. In line with previous indications, Constituent
Assembly chairman Phan Khac Suu formally announced his
presidential candidacy last week, and chose Dr. Phan
Quang Dan as his vice presidential running mate. In a
later conversation with US Embassy officials, Suu ex-
pressed confidence that he would win. He implied that
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the military would not be able to unite effectively
behind a single military candidate, and that his own
prestige would offset the military candidate's ad-
vantage in controlling government machinery.
25X1 7. I Iattempts
are already being made to line up support among the
Cao Dai religious sect in the delta for Suu, who is an
elderly Cao Dai southerner. He will probably receive
additional votes in the Saigon area based on the popu-
larity of his running mate among northern refugees.
Embassy reports, however, state that Suu has not yet
put together a national campaign organization, and that
claims of support for Suu among Hoa Hao, Catholic and
VNQDD groups are questionable. Suu's general area of
strength is the delta, but the expected presidential
candidacy of former premier Tran Van Huong may result
in Huong and Suu splitting the southern regionalist
vote.
Local Elections
8. The election of village councils got under way
in South Vietnam on 2 April apparently without serious
incident or interference from the Viet Cong. Prelimi-
nary returns suggest a good turnout but not so high as
that of the September 1966 election of delegates to the
Constituent Assembly. The election will cover in its
initial phase, during April about 1,000 villages. The
village elections will be followed by the election of
some 4,500 hamlet councils in May and early June. There
are an estimated 2,500 villages and 12,000 hamlets in
South Vietnam. The staggered elections system is being
employed as a method to insure the maximum security from
Communist interference.
9. The Viet Cong have threatened these elections
as they did the Constituent Assembly elections, but the
threats are not so numerous as in September. Propaganda,
intimidation, and some terrorism--including the assas-
sination of at least one local candidate--have been em-
ployed by the Viet Cong to keep rural voters from the
polls.
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on Sol Dinh
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II. REVOLUTIONARY DEVELOPMENT
The RD situation in Quang Tri,
Vietnam's northernmost province, is
assessed. The Truong Son (montagnard)
cadre programs, operating under the
Special Commissariat for Montagnard
Affairs (SCMA), are to be reorganized to
bring them into line with the national RD
program. Following is a recapitulation
of returnees for the period 19 to 25
March:
I Corps 28 Military 854
II Corps 252 Political 281
III Corps 343 Other elements 52
IV Corps 564
Total 1,187 Year's total to date 9,746
The RD Situation in Quang Tri Province
1. Communist pressure against allied military
forces, government administrative centers, and RD
teams in northernmost Quang Tri Province has in-
tensified since the beginning of 1967, as part of
a general military offensive involving primarily
North Vietnamese Army (NVA) units. The Commtinist
effort to counter Revolutionary Developmentin
Quang Tri is primarily a military one, and lacks
some of the political propagandizing which has
gone hand in hand with the enemy's anti-RD pro-
gram in other areas of South Vietnam such as the
Delta. To prevent the government from extending
its control: into the Quang Tri countryside, NVA
elements have been conducting forays against ham-
lets and villages where the RD teams have been
operating.
2. In the Communist command structure, Quang Tri
Province, along with adjacent Thua Thien Province,
Ap
 Appr 018-7
is known as the Tri Thien Special Region, and,
may be a
ministered as a part of North Vietnam's Military
Region IV. The principal NVA forces in the Demil-
itarized Zone (DMZ) - Quang Tri Province area at
present are the 324B Division, with three sub-
ordinate regiments, and at least one regiment of
the 341st Division. These units appear to cross
back and forth across the border. In addition, one
independent regiment and three to five separate
battalions normally operate in Quang Tri and Thua
Thien provinces. The total strength of these forces
is approximately 10,300. The strength of the Quang
Tri local forces, irregulars, and political cadre
is estimated to be about 5,000.
3. To provide security for the approximately
270,000 people in Quang Tri Province, the govern-
ment has some 6,400 Regional Forces (RF), Popular
Forces (PF), National Police, and Civilian Irregu-
lar Defense Forces (CIDG). Two regiments of the
ARVN 1st Division are also located in the province.
Under the RD plan, the regiments are to provide
the shield'behind which most of the provincial
forces, except for the CIDG, are to operate. In
western Quang Tri, the Long Vei Special Forces camp
with its CIDG and PF defenders serves as the capital
of Huong Hoa District and is responsible for Viet-
nam-Laos border surveillance. Elements of the US
3rd Marine Division have been operating continually
in the DMZ - Quang Tri area since mid-1966 to pre-
vent enemy infiltration across the DMZ and to de-
stroy enemy troop and logistical concentrations
in the area.
4. Although no part of Quang Tri Province is
a National Priority Area for RD, the entire coastal
plain is classified as a priority area for offen-
sive military operations. In 1967, the RD effort
is to be concentrated in Mai Linh District which
surrounds Quang Tri city--the provincial capital,
and in Trieu Phong District bordering Mai Linh on
the north. Military sweeps, a major RD reorganiza-
tion, and the Tet'celebration delayed the start of
the RD teams' work in the 1967 priority area until
after the Tet (lunar new year) holidays in February.
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5. As of 1 March, there were 15 Vietmanese
RD teams (754 workers) and four montagnard RD teams
(222 workers) operating in the province. While the
Vietnamese RD teams will concentrate in the priority
RD area, the montagnard RD teams will presumably
work in the vicinity of the Long Vei Special Forces
camp in the highland district of Huong Hoa or in
montagnard refugee camps along the coast.
6. The reaction of the RD teams to increased
enemy military pressures against them has, so far,
been satisfactory. Only one report has been re-
ceived of an RD team's abandoning its activities
without attempting to defend itself; this incident
occurred on 17 March when the team faced the pros-
pect of engaging an NVA battalion. In several
other instances RD teams, often paired with PF,
have defended themselves against enemy attacks.
7. In spite of this satisfactory performance,
however, the stepped up pace of enemy activity ap-
pears to have resulted in a lowering of morale among
RD workers. Figures on attrition for February show
that, while only two workers were killed and seven
captured, three workers resigned and 58 deserted.
All of the deserters appear to have been from Viet-
namese teams, making their desertion rate for the
month about seven percent. Since RD workers were
not allowed any time off for the lunar new year,
a number of these deserters may have merely de-
cided to go home for the holidays.
8. Despite Communist harassment, there have
been indications that residents of some hamlets are
identifying with the RD teams and participating in
RD programs. In one hamlet, residents informed
the team of the presence of an armed NVA soldier
who, as a result, was captured by the team. In an-
other hamlet, 78 persons are being trained by the
RD team as hamlet defense personnel, under a re-
cent government directive authorizing the teams
to establish a "People's Self Defense Force." The
Quang Tri Province Chief has agreed to provide
some weapons to the defense force upon the comple-
tion of its training. In this same hamlet, a fe-,
male member of the RD team has organized and is
teaching a kindergarten class for 50 of the hamlet
youngsters.
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9. In Quang Tri Province, two ARVN battalions
are conducting operations in direct support of RD.
The mission of the battalions is to sweep the RD target
areas, cordon them off, and search for remaining guer-
rillas and members of the Communist infrastructure.
The battalions are still under the control of their
parent regiment, but the regimental commander has been
designated Deputy Sector (Province) Commander for RD,
a position which engages him in provincial RD affair
and makes him responsive to the Province Chief. In
addition, the ARVN units have increased their civic
action capability by forming civic action teams at
both the sector (province) and division levels. The
Regional Forces and Popular Forces have reportedly
been assisting local self-help programs.
10. In general, the National Police are limited
to the main towns and are not yet effective in the
rural areas. Because of the large NVA military strength
in the province, the Police Field Forces are being used
to support normal police activities not associated with
the RD plan.
11. The Vietnamese Information Service and the
provincial technical staff are the government agencies
performing least satisfactorily in support of RD in
Quang Tri, as well as on a nationwide basis. Both
groups appear to be lacking in motivation and initia-
tive, and their activities are thus unimpressive.
12. The provincial RD Council, newly reorganized,
is not yet functioning to the degree anticipated. This
is in part due to the fact that the caliber of provin-
cial officials, with some exceptions, is rated as low.
Their effectiveness has been further hampered by polit-
cal jousting between various provincial officials owing
allegiance either to the Revolutionary Dai Viet Party
(RDVP) or the Vietnamese Nationalist Party (VNQDD).
Both parties appear to view the RD teams as an instrument
for gaining local influence, particularly since the
teams play a role of organizing village and hamlet elec-
tions. The RDVP, the stronger and better organized
party in Quang Tri, reportedly gained some influence
over the earlier People's Action Teams (PAT'S) in the
province, but the extent of its influence over the
present RD effort is not known.
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13. The first monthly survey made in accordance
with the new Hamlet Evaluation System (HES)--a uni-
lateral MACV assessment of progress in hamlet develop-
ment and population security--was completed on 20 Feb-
ruary. Although a trial period is necessary before the
statistics compiled can be considered as having some
validity, the initial results of the evaluation in
Quang Tri Province suggest that too many hamlets have
been placed in the "consolidation" category (C) and
should be rated as "under construction" (Category D)
or "contested" (E).
14. Following are the initial statistics:
Category Hamlet
Population
Nu
Ha
mber
of
mlets
A Completed*
Secure
0
B Developing
Secure
15
C Under Consolidation
Under Securing
142
D Under Construction
Under Securing
121
E Contested
Contested
49
VC Control -
-
ill
Total number hamlets assessed
438
* Completed hamlets under an 11-point criteria are
the Ap Doi Moi ("Real New Life Hamlets"), Ap Binh Dinh
(Pacification Hamlets), and Ap Cung Co (Consolidation
Hamlets). The Ap Tan Sinh (New Life Hamlets), under
the old six-point criteria, are also included in the
completed category.
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Montagnard Cadre Programs in the Highland Provinces
15. A prevalent notion that Truong Son cadre
are, at this point, the montagnard equivalent of the
ethnic Vietnamese RD teams is misleading. Truong Son
is the composite name for a variety of montagnard cadre
programs which were developed in the highland prov-
inces over a period of years.
16. In April 1965, the various teams were brought
into a "national cadre" framework and placed under the
over-all direction of the Special Commissariat for
Montagnard Affairs (SCMA). At the same time, a na-
tional Truong Son Cadre Training Center was established
in Pleiku City to provide a more integrated training
program which emphasized security, civic action, voca-
tional training and political training. The political
training portion attempted to inculcate the cadre with
a spirit of nationalism and support for the allied
presence in South Vietnam.
17. Plans are now under way, however, to bring
the Truong Son teams into line with the general re-
quirements of national RD policy and to step up the
tempo of their activities. As at Vung Tau, all cadre
at the Truong Son training center would receive in-
struction on RD policy, 4nd some will receive special
leadership training. Under the proposed reorganization,
the Truong Son program will embrace two types of
.present teams--Psychological Warfare Entertainment and
Provincial Reconnaissance Units--and a new 70-man
Truong Son RD team, to be formed by combining the exist-
ing 50-65-man Political Action Teams (PAT) and six-man
Civic Action Teams (CAT).
18. The requirements for the cadre in the high-
lands have been fundamentally different from those for
the lowland Vietnamese population. The primary role
of the Truong Son cadre has been to provide security
within the hamlet, and secondarily to perform follow-
up work on civic action and social welfare. Viet-
namese RD concepts such as rooting out the Communist
infrastructure and ridding the hamlets of corrupt in-
dividuals and "bullies" are foreign to the require-
ments of most highlander hamlets. In fact, it is
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reportedly rare in the highlands to find a montagnard
Communist infrastructure in hamlets under government
control or even in contested areas.
19. Truong Son PAT and CAT teams approach the
population in a low-key manner and attempt to convey,
over a period of time, the idea that the GVN is not
only a bearable but also a positive alternative to the
Viet Cong. Unlike the ambitious and relatively sophis-
ticated list of tasks to be carried out by the Viet-
namese RD teams in constructing a "Real New Life
Hamlet" (Ap Doi Moi), the work of the Truong Son cadre
members is characterized by a simple, direct attention
to obvious local community problems. Like the Viet-
namese RD teams, however, they attempt to involve the
local population in hamlet projects.
20. The prestige of the Truong Son cadre--who
returns from training with widened views, new clothes,
and a monthly salary--is generally higher in the high-
lander hamlets than is the prestige of the Vietnamese
RD cadre in the lowland hamlets. Generally, the teams
have to date worked under the direction of the local
district chief who controls what they do and how long
they stay in a particular hamlet. Under optimum con-
ditions, after the team has spent three to five months
in a hamlet, the hamlet will be at the "consolidation"
phase (Ap Cung Co), in which continuing government
presence and activities--especially by the technical
services--may bring the hamlet up to Ap Doi Moi status.
21. The SCMA is in the process of revising its
statutes to bring pay, rewards, and other administrative
activities into line with the statutes of the Ministry
of Revolutionary Development (MORD). Decrees have
been issued by the SCMA and MORD in an effort to effect
coordination between the two cadre systems through the
provincial RD and SCMA chiefs.
22. Essentially, however, the success of the
Truong Son program depends on the over-all government
policy toward the highlanders. Serious shortcomings
exist in the government's educational, economic, and
social programs in the highlands, reflecting both the
traditional Vietnamese disdain for.highlariders, and
Appr
 Ap
the present strains on Vietnamese human and ma-
terial resources. Most government officials in
the highlands have shown little interest in the
Truong Son cadre activities, and bureaucratic de-
lays in implementing meaningful programs and diffi-
culties of transportation and communications in the
highlands compound the problem.
23. Under the proposed reorganization, Truong
Son RD teams will operate in 19 provinces. The
Training Center in Pleiku is establishing mobile
training teams which will hold one to two week
training courses in the field with the purpose of
establishing the new teams and bringing their ac-
tivities into harmony with the national RD plan.
24. The US Mission believes that the Truong
Son RD cadre teams should be maintained as a sep-
arate system, at least until MORD's cadre system
becomes more professional and more directed to the
tasks at hand. The morale and performance of the
Truong Son appears to be enhanced by the feeling
that, by working under the SCMA, they are working
for their own people. Similarly, the Mission feels
that coordination between the SCMA and RD repre-
sentatives at corps and province level needs to be
strengthened. As with the Vietnamese RD teams,
the lack of support from provincial technical
services and inadequate security have hindered the
program.
Ap
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III. ECONOMIC SITUATION
Retail prices in Saigon declined six
percent during the week ending 20 March
largely as a result of lower prices for
rice and meat. The price of rice used by
the working class dropped 15 percent but
is still 70 percent higher than at the
beginning of the year. Prices of imported
commodities continued to rise for the sec-
ond consecutive week. The free market
rate for dollars held steady, whereas the
rate for gold fell six piasters and the
MPC (scrip) rose two piasters. The rice
situation has improved considerably since
the beginning of March, but rice prices
appear to be stabilitizing at recent high
levels. According to a US Embassy study,
the economic life of Da Nang--the mili-
tary and administrative capital of Re-
gion I--appears to be recovering after a
year of dislocation. Governor Hanh has
again raised objections to the operations
of the US Military Banking Facilities in
Saigon, claiming there are major leakages
in the system.
Prices
1. The weekly USAID retail price index for
Saigon fell by six percent during the week ending
20 March, returning to about the level of 20 Feb-
ruary. This decline resulted almost entirely from
lower prices for food items, particularly rice and
meat. On 20 March the price of rice used by the
working class was 29 piasters per kilogram com-
pared with 33 piasters a week earlier, and a peak
of 37 piasters on 10 March. The price on 20 March,
however, was still 70 percent higher than it was
at the beginning of the year, and, according to
the latest information, it rose by one piaster to
30 piasters per kilogram on 22 March (see para-
graphs 4-6). 'Pork prices reached their lowest
level since the end of 1966 as imported pork went
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on sale on 20 March. Prices of beef, fish, and
fowl also declined under the influence of falling
prices of pork. Prices of nonfood items remained
generally stable. (A table of weekly retail prices
in Saigon is included in the Annex.)
2. During the week ending 21 March the prices
of almost all imported commodities increased
slightly, for the second consecutive week, and the
index for selected US-financed imports showed a
gain of about two percent above the previous week,
Fertilizer prices, however, rose considerably,
probably because higher official prices were an-
nounced by the Ministry of Agriculture.
Currency and Gold
3. On 20 March in the free market, dollars
were stable at 171. piasters per dollar; gold was
down six piasters from the previous week to 21.9
piasters per dollar--the lowest rate since Dec-
ember 1965. The GVN official selling price for
gold is 213 piasters per dollar. The rate for. MPC
(scrip), however, rose two piasters to 121 piasters
per dollar. Explanations for the changes in the
rates for gold and scrip are not yet available.
(A graphic on monthly and weekly free market ';urT
rency and gold rates is included in the Annex.)
4. The rice situation has improved consider-
ably since the beginning of March, but rice prices
appear to be stabilizing at recent high levels.
Current imports are sizeable, but deliveries from
the Delta decreased somewhat in the last half of
March. Shipments of imported rice to South Viet-
nam are expected to exceed 90,000 tons in March
and to remain at that level in April. The entire
20,500 tons purchased from Taiwan arrived in March.
Deliveries of domestic rice from the Delta to
Saigon totaled 23,332 tons during the first 21. days
in March, but the delivery rate has declined since
15 March. The US Embassy estimates that total
deliveries for March will not exceed 28,000 tons,
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compared with 38,000 tons during March 1966. Ac-
cording to Embassy calculations, GVN security
stocks of rice by the end of May could at best
amount to 126,000 tons, or about six weeks supply.
5. The Embassy reports that the usual con-
sumer preference for domestic rice appears more
marked lately and thus contributes to the high
level of prices for domestic rice. Although the
price of rice consumed by the working class dropped
from 37 piasters per kilogram on 10 March to 29
piasters per kilogram on 20 March, it rose again
by one paister on 22 March. US officials do not
expect another sharp decline soon. The price of
this type of rice was 23 piasters at the end of
February and 17 piasters at the beginning of the
year.
6. The plans of the GVN Ministry of Com-
merce to buy rice from merchants in the Delta ap-
parently have been shelved for the time being be-
cause of objections raised by Governor Hanh, the
new Minister of Economy and Finance. Neverthe-
less, Ministry of Commerce officials, who toured
the Delta in February and made arrangements to
buy rice, continue to favor such purchases. These
officials.-maintain that the Ministry of Commerce
will lose face if the previously announced pur-
chases are not carried through and that it is un-
likely that the price of rice would ever be :Lower
than the 2,000 to 2,100 piasters per 100 kilograms
agreed upon in February. Moreover, they argue
that the 28,000 tons which the merchants promised
for delivery at the end of April would be a use-
ful addition to GVN stocks. According to one rice
merchant, 3,000 tons of rice destined for the GVN
now is being loaded at Bac Lieu and will probably
be sold on the Saigon market if the GVN does not
take the rice.
Economic Situation in Da Nang
7. Da Nang, the military and administrative
capital of Region I, appears to have recovered
from a year of dislocation and found a new and
prosperous level of economic activity. According
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 Approved`f'A'r Release 20,14$Eli'A-RDP79T00826A001800010018-7
to a US Embassy study, four factors account for
this development: (1) the military construction
program begun in 1965 is almost completed: (2)
port development has made possible a sufficient
flow of commodities; (3),US forces have been suc-r
cessful in limiting their participation in the
local economy; and (4) Da Nang and vicinity are
relatively secure.
8. Local officials now estimate the city's
population at 228,000, an increase of 66,000 since
the end of 1964. Many of these were farmers from
the surrounding areas who moved into Da Nang to
take construction jobs. Almost all of Da Nang's
food supply comes from Quang Nam Province or points
south, and the local economic service claims that
supplies of all major commodities except pork and
lumber are adequate. The scarcity of these two
items is traced to the lack of security in the
hinterland.
9. Many citizens apparently feel that the
recent inflationary pressure is over and that in-
come is beginning to keep pace with rising costs.
Various occupational groups were surveyed to de-
termine the percentage of income spent for rice
during the period 1961-1966. At the end of 1966
all groups spent more for rice than in 1961, but
the worst period was during 1964-65 when the per-
centage for almost every group was the highest.
In late 1965 a decline began as income began to
catch up with rice prices.
10. Da Nang has an estimated labor force
of about 120,000. Apparently there is no absolute
labor shortage, although there are shortages of
certain skilled workers. Because Da Nang is ap-
proaching a fuller employment status, wages paid
by local Vietnamese businessmen must be competitive
with US agencies, and available data suggest
that the Vietnamese are successful in bidding for
local talent. On the other hand, GVN employees
are underpaid, resulting in low government morale,
inefficiency, and corruption.
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 Approvedr Release 2001A-RDP79T026A001800010018-7
11. Da Nang is supplied primarily by land
and sea with only small amounts of material being
airshipped. The most important facility by far
is the port of. Da Nang itself. Since 1965 this
has been made into an ocean going port, and large
facilities for handling military cargo have been
built. These military facilities have taken the
strain off the commercial port, which remains al-
most as it was before the buildup. The present
capacity of the commercial port is 40,000 tons per
month, but during 1967 USAID plans to increase this
by 40 percent.
12. The Embassy study reports that the whole
US military establishment in the area, about 70,000
troops, has religiously complied with stringent
policies regarding local wage levels, local pro-
curement, and nonappropriated spending. The total
curfew imposed on US military in the city has been
successful, and most of the bars are closed. The
effect has been economically positive.
US Military Banking Facilities
13. Governor Hanh of the National Bank of
Vietnam (NBVN) has again raised objections to the
operations of the US Military Banking Facilities
(MBFs) which were established in Saigon last Sep-
tember to maintain MPC checking accounts for in-
country use, dollar checking accounts for out-of-
country use, and piaster accounts for US official
and quasi-official activities. Hanh has requested
that MBFs be moved from downtown Saigon to US
military bases by 15 April and that a joint US-
GVN inspection of the MBFs be held immediately.
According to Hanh, there are major leakages in the MBF'
system.'which Is not well monitored. He.claims that
Indian merchants collect MPC from the bars in
Saigon and sell them to US personnel who deposit
them in MBFs and then, through the MPC account,
translate them into dollars in the US at a con-
siderable profit? Moreover, Hanh reports that
non-US personnel are using the system for the same
purpose.
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25X1
 App
14. The US Embassy feels that the entire
question of the operating procedures, locations
and controls of the MBFs and GVN jurisdiction over
them now has been reopened and that there is a
serious possibility that Hanh will close them
completely unless the US acts quickly to satisfy
some of his objections. Basically, Hanh feels
that he should have a voice in this matter be-
cause the MBFs are on Vietnamese soil and the US
does not have a status of forces agreement with
South Vietnam or extraterritorial rights. The
original exchange of letters which established
these facilities did not clearly state that checks
were convertible to dollars outside of Vietnam.
Although Hanh has been repeatedly assured that ef-
fective control procedures have been instituted,
this'is far from true according to US bank and
embassy officials. Accordingly, the US Embassy
currently is drawing up a list of new control
mechanisms in order to gain more control over the
accounts at MBFs and to limit access to these ac-
counts.
Appr
 Approved For Release 2007/02/08 : CIA-RDP79T00826AO01800010018-7
Weekly Retail Prices in Saigon r
13 June
16 Aug.
27 Feb.
6 mar.
13 Mar.
20 Mar.
1966 /
1966 /
1967
1967
1967
1967
Index for All Items
173
211
255
273
284
261
Index for Food Items
190
216
285
311
324
292
c/
Of Which:
,In Piasters)
Rice-Soc Nau (100 kg.)
1,250
1,450
2,300
3,200
3,300
2,900
Pork Bellies (1 kg.)
90
100
150
150
150
120
Fish Ca-Tre (1 kg.)
130
170
170
180
170
16o
Nuoc Man (jar)
70
85
120
120
150
150
140
190
201
203
210
209
c/
Of Which:
(In Piasters)
Charcoal (60 kg.)
460
600
650
670
680
680
Cigarettes (pack)
10
14
14
14
14
14
White Calico (meter)
27
37
31
31
32
34
Electricity (kwh)
4.2
N.A.
5.3
5.2
5.2
5.2 /
a. Data are from USAID sources. For all indexes 1 January 19 5 = 100.
b. Price levels just prior to and two months after the 18 June devaluation.
c. Preliminary.
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 Approved Fwf Release 2007/02/08: CIA-RDP79TO 6AO01800010018-7
Saigon, Free Market Gold and Currency Prices
200
219
64
FEB
1967
US $10 MPC Military Payment Certificates (scrip).
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 Approved Forlease 2007/02/08 : CIA-RDP79T0082001800010018-7
Secret
Secret
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