CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A001400030001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 39
• Document Creation Date: December 20, 2016
• Document Release Date: November 18, 2005
• Sequence Number: 1
• Publication Date: August 22, 1957
• Content Type: SUMMARY

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CONFIDENTIAL
5E ~REfi-'
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
CENTRAL INTELLIGENCE AGENCY
DOCUMENT NQ. ~- -- _
H ANGE IN CL S. fl
V' C
fl DECLASSIFIED
CLASS. CHANGED TO.c
OFFICE OF CURRENT INTELLIGENCE
22 August 1957
CONE IDENTIAL
DIA and DOS review(s) completed.
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central. Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
OF IMMEDIATE INTEREST
THE MIDDLE EAST SITUATION
The purge of neutral and
pro-Western officers from the
Syrian army and the appointment
of Communist Afif Bizri as
chief of staff have profoundly
disturbed pro-Western govern-
ments in the Middle East.
Lebanese officials, al-
ready concerned over Syrian
military reinforcement along
the border, now openly express
alarm over large-scale internal
subversion, and have asked for
a formal American guarantee a-
gainst Syrian aggression. They
state that Sidon and Tripoli,
terminals for the Arabian and
Iraqi oil pipelines in Lebanon,
are overrun with Syrian agents
to the point where the Lebanese
doubt the ability of their se-
curity forces to cope with the
situation.
King Hussain of Jordan
feels the Syrian developments
will lead to a further accelera-
tion of the Egyptian-Syrian cam-
paign to overthrow his pro-
Western government. Jordanian
security forces have taken ex-
traordinary precautions to
prevent sabotage, attacks on
American installations, and
assassination attempts on the
King. Hussain has gone to Is-
tanbul, possibly to confer with
the Turkish government and the
King of Iraq, who is at present
in Istanbul.
be taken in concert with the
West.
King Saud has called home
his ambassadors from Beirut,
Damascus, and Amman, as well as
his royal councilor and con-
fidant Yusuf Yasin, for con-
sultation on the Syrian prob-
lem. One councilor has stated
that Saud is "really worried"
by the Syrian situation. So
far Saud has given no indication
of what line of action he will
pursue.
Even the Egyptians seem to
be not entirely pleased with the
latest developments in Syria.
While continuing efforts to
blacken the United States in
Arab eyes for its alleged con-
spiracy against the Syrian re-
gime, the Egyptians probably
look with disfavor on a close
understanding between Damascus
and Moscow. Such an arrange-
ment would remove Egypt from the
role of intermediary in Arab
relations with the Soviet bloc
and detract from Nasr's position
of Arab leadership.
Israel has adopted an at-
titude of watchful waiting.
Informed Israelis have indicated
that the major impact of the
leftist ascendancy in Syria will
be to undermine the Baghdad pact
and Jordan.
Iraq and Saudi Arabia, less
immediately threatened by the
leftist move in Syria, have not
reacted so sharply. The Iraqi
government, which recently has
been following a policy of rap-
prochement with Syria, believes
that some counteraction should
In Syria, President Quwatli
departed precipitously to Egypt,
ostensibly for health reasons.
It is generally believed that
prior to his departure Quwatli
left a letter of resignation in
Damascus. Should Quwatli not
return to Syria, the presidency
would be filled by another weak
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
politician, probably Khalid al-
Azm, who headed the Syrian mis-
sion to Moscow, and the change
would have no effect on the
military's hold over the govern- 25X1
ment. Quwatli's "medical treat-
ment" in Egypt may include some
stiffening of the spine.
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CONFIDNTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
NOTES AND COMMENTS
USSR SUMMARIZES DISARMAMENT POSITION
Soviet delegate Zorin has
been summarizing various as-
pects of the Soviet position
on disarmament in publicized
statements to the London sub-
committee and in private talks
with the American delegation.
Zorin has made neither new
concessions nor new demands,
but rather has been reiterating
the USSR's prerequisites for an
agreement which he laid down
earlier in the session.
In recent weeks, the Soviet
Union has been trying to con-
centrate attention on its pro-
posal for a suspension of nu-
clear weapons tests as the key
issue of the present negotia-
tions. It may feel that the
impact of the Western aerial
inspection plan has been suf-
ficiently great so that the
emphasis of the Soviet pro-
posals must be broadened. Zorin
has not replied to the Western
plan, beyond remarking that
aerial inspection could not
stand alone without other dis-
armament measures, but Soviet
propaganda has been critical
of the plan.
While Zorin appears merely
to be summing up the Soviet
stand, perhaps in anticipation
of a recess, the possibility
remains of further Soviet con-
cessions, such as a compromise
on the geographical scope of
aerial inspection plans. Such
concessions would be designed
to offset the favorable impact
of Western proposals in this
,field as well as agreement to
a two-year period for the pro-
posed ban on nuclear tests.
The Soviet leaders prob-
ably believe their flat demand
for a suspension of nuclear
tests independent of other as-
pects of a disarmament agree-
ment will have a strong appeal
in any forthcoming debate in
the UN General Assembly. Mos-
cow's efforts to marshal broad
support in the assembly are
reflected in a growing volume
of propaganda devoted to world-
wide appeals for a ban on nu-
clear weapons and tests.
[the Soviet delegate
mug be preparing to pull out
of the London negotiations in
favor of disarmament discus-
sions in the General Assembly,
where the USSR would take the
offensive.
In his recent public and
private statements, Zorin has
reaffirmed the Soviet stand for
a three-stage cut in armed
forces, the partial abandonment
of overseas bases and withdrawal
of troops, and an international
pledge not to use atomic weap-
ons. Seeking to avoid any con-
nection of the German unifica-
tion problem with disarmament,
he opposed the Western plan to
condition the second and third
stages of force cuts on progress
toward political settlements,
25X1
he sought agree-
ment on the principle, rather
than on the specific extent, of
foreign base and troop cutbacks
in the first stage, The pledge
not to use atomic weapons is the
main Soviet condition for the
Western proposal for a ban on
future atomics weapons production,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
UNITED NATIONS ELECTIONS
In the Twelfth UN General
Assembly session, which opens
on 17 September, prospective
contests for the assembly
presidency and three Security
Council seats could have a divi-
sive effect among free world
members and correspondingly
benefit the Soviet bloc.
leading free world powers and
with the support of the Commu-
nist bloc. The situation would
nevertheless afford another op-
portunity for the Soviet bloc
to appear as the champion of
Middle Eastern interests a-
gainst the West.
Assembly Presidency
. The assembly presidency,
which is usually bestowed by a
substantial majority as an ac-
colade for previous UN activi-
ties, is being contested by
Foreign Minister Charles Malik
of Lebanon, despite the sub-
stantial support previously
gained by New Zealand's UN dele-
gate, Sir Leslie Munro, who had
announced his candidacy in Janu-
ary. Malik does not appear to
have the solid African and Asian
support he claims, nor much
backing from the Latin Ameri-
cans.
Malik has been promised
Soviet bloc support, and on 19
August told the American em-
bassy in Beirut he felt he had
an excellent chance of getting
41 votes. He added, however,
that if these 41 votes did not
include those of the United
States, Britain, or France, he
would withdraw because he could
not accept the presidency
against the opposition of the
Security Council Seats
In contests for the three
Security Council seats to be
vacated at the end of 1957,
Canada is expected to succeed
Australia in the "Commonwealth
seat" and Japan seems virtually
assured of following the Philip-
pines in what was formerly con-
sidered the Eastern European
seat.
For the "Latin American
seat" to be filled, Panama seems
to have a slight edge over the
Dominican Republic, partly as a
result of Argentina's withdrawal
in Panama's favor. Because of
the widespread demand for great-
er Asian and African representa-
tion on the council, moreover,
the two seats normally allocated
to the Latin American bloc could
be jeopardized by Latin American
endorsement of a candidate un-
acceptable to the rest of the
General Assembly. The Dominican
Republic has received consider-
able criticism at the UN in con-
nection ndez-Murphy
case. 25X1
LABOR DISTURBANCES IN POLAND
Increased labor unrest is
adding to the problems faced
by the Polish government. In
early August, strikes for higher
wages in the meat processing and
chemical industries required
high-level government interven-
tion, and the city-wide shutdown
of public transportation in Lodz
from 12 to 14 August brought two
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
politburo members to the city
to explain why the country could
not grant wage increases at
this time. The demands of the
workers remained essentially
unsatisfied, and labor unrest
continues to imperil industrial
peace in Poland.
The regime has consistently
maintained that further wage
rises are contingent upon in-
creased industrial productivity.
Labor's reply has been to insist
that, faced with rapidly in-
creasing costs of living, it
cannot, or will not, produce
more until it is guaranteed a
living wage. On 10 August the
government announced a 15-per-
cent tax increase on vodka to
combat alcoholism and provide
about $2,000,000 annually in
extra revenue to distribute
among an estimated 700,000 un-
derpaid workers. The Lodz
strike followed, serving notice
that halfway measures are not
enough.
Lack of labor discipline
has been a key factor in a gen-
eral deterioration of public
order and a decline of indus-
trial productivity. "Unjusti-
fied" absenteeism is at an all-
time high. In the first six
months of the year, absenteeism
shot up 136 percent, depriving
the economy of a total of some
26,000,000 man-hours.
On 18 August the deputy
minister of labor and social
welfare announced new "get-tough"
measures. Chiefs of enterprises
have been made personally re-
sponsible for the discipline of
employees. Absentees and "slack-
ers" are subject to "admonitions,
warnings, fines, transfer to
lower paid, jobs, dismissal with
notice, and finally summary
dismissal without notice."
Alcoholism has also become
a major factor affecting labor
productivity. In addition,
pilfering from factories has in-
creased, standards of workman-
ship have declined, and "hooli-
ganism" continues to be a na-
tional phenomenon.
Gomulka's regime is caught
between two fires. A rise in
the wage level would probably
pacify the workers temporarily
but might induce runaway infla-
tion in an already strained
economy. Failure to raise wages
would mean continued industrial
unrest. Party conservatives,
although weakened by the July
shake-up in the Soviet presid-
ium, may use the economic issue
as a lever to turn the Polish
party congress, scheduled for
next December, into a showdown
fight for contr the coun-
try. (Con-
curred n y
UNREST IN RUMANIA
A wave of arrests and the
meting out of heavy sentences
for minor offenses in Rumania
have been accompanied by rumors
that further political changes,
such as the imminent fall of
party leader Gheorghiu-Dej,may
be imminent. The Rumanian peo-
pie have been tense and restive
since the local party shake-up
in July and the recent Tito-
Khrushchev meeting in Rumania.
The American legation in
Bucharest believes the rumors
are a reflection of Rumanian
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
restiveness and desire for al-
most any change that will alter
conditions, rather than an in-
dicator of actual political
change. The party has failed
to combat these rumors effec-
tively. .In consequence of the
July shake-up and resultant gov-
ernment disorganization,and with
many; leaders on vacation, there
is still no party line for fu-
ture policy.
In this situation, Ruma-
nians are increasingly turning
to foreign radios for informa-
tion and interpretation of what
is in store for them. A lega-
tion source stated, "We expect
changes, especially in the cul-
tural-intellectual area and
probably in the direction of
liberalization." There has been
no indication thus far, however,
of such liberalization.
In an attempt to reimpose
discipline on the populace fol-
lowing a period of relative re-
laxation, the regime is arrest -
ing "hooligans," persons com-
mitting minor economic offenses,
and those whose lax conduct or
pro-Western manner marks them
as potential enemies. Probably
a major objective of the arrests
is to eliminate petty thievery
and graft which result from low
living standards and continuing
economic dislocation. The wide-
spread arrests and heavy sen-
tences have given rise to the
rumor that thousands of persons
are being sent to forced labor
camps.
Possibly forecasting an
eventual new line, the official
party newspaper on 8 August
sharply criticized all major
ideological publications for
superficiality, failure to pro-
vide ideological guidance, dis-
semination of obsolete opinions,
and defense of bourgeois meth-
ods. This criticism and the
installation of a new minister
of culture in July may fore-
shadow ideological changes.
STATUS OF THE SOVIET INDUSTRIAL REORGANIZATION
Some confusion and uncer-
tainty in the operation of the
new regional system of Soviet
industrial management have be-
come evident during the initial
seven weeks and will probably
continue until the new system
has become fully operative.
The regime has directed its ef-
forts toward minimizing the
scope and seriousness of the
problems arising during the
transitional period and has
sharply attacked any tendency
to satisfy local interests at
the expense of national require-
ments.
In an attempt to minimize
disruption of supply to indus-
trial enterprises while they are
negotiating new supply contracts
directly with each other, supply
organs of the ministries abol-
ished in the reorganization
have been attached to the en-
larged State Planning Commission
(Gosplan) as a stopgap measure,
Nevertheless, problems of supply
and distribution will persist
until these new supply relation-
ships are established and the
respective responsibilities of
Gosplan and the regional Coun-
cils of National Economy (sovnar-
khozy) are clearly defined.
Some local officials have
taken advantage of the initial
confusion resulting from the re-
organization to build up back-
logs of materials in order to
ride out the transition. The
most common forms of this
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
practice are apparently to hold
back on deliveries called for
by contracts concluded prior to
the reorganization, or to cancel
deliveries on the seemingly
flimsy excuse of "irrational
transportation." The central
press has warned that those
guilty of such manifestations
of "localist tendencies" will
be severely punished, and has.
cited at least one example of
a plant manager who was fined
several thousand rubles. Soviet
propaganda, to date, suggests
that "localism" may be blamed
for most future supply problems.
The apparatuses of the
Councils of National Economy
vary in size from several hun-
dred persons in the smaller re-
publics to 3,000 in the Moscow
city sovnarkhoz. It was planned
that a large portion of these
jobs would be filled by persons
drawn from the abolished USSR
ministries in Moscow. Some
sovnarkhozy have already com-
plained, however, that the spe-
cialists promised from Moscow
had not arrived at their new
posts. In one instance, only
18 of 83 had arrived, perhaps
indicating a delay in liquida-
tion of the former ministries
and continued reluctance to
leave Moscow for the provinces.
So far most of the prob-
lems mentioned in the Soviet
press have related to the period
of transition to the new system
and many will probably disappear
or be sharply reduced when the
change-over is completed. It is
not yet possible to determine
the effect these difficulties
will have on industrial output
in the USSR, but if they persist
or if new difficulties arise,
Soviet industrial growth might
well suffer.
The reorganization has been
accompanied by an enhancement
of the party's role, which sug-
gests that the influence on top
economic policy of the techni-
cally trained industrial admin-
istrator has been curtailed. At
the highest level, the June cen-
tral committee plenum replaced
government administrators on
the party presidium with party
careerists, and the former USSR
ministers, many of whom have
been assigned to work in the
sovnarkhozy, certainly do not
now exercise the influence on
policy they did while ministers
in Moscow.
Sovnarkhoz chairmen, more-
over, may be faced with increas-
ing intervention in their work
by local party organizations.
Khrushchev has already made it
clear that the party will con-
tinue to exercise its preroga-
tives in the selection of per-
sonnel for top positions in the
sovnarkhozy, and at least one
item in the press has exhorted
party organizations to "take the
problem of ensuring deliveries
under control." In addition,
one sovnarkhoz chairman has al-
ready been replaced by a party
official. The move may presage
further incursions of party
functionaries into the in-
dustrial management field.
Prepared jointly
This year's grain harvest
in the USSR apparently will be
considerably smaller than last
year's excellent harvest.despite
an increase of 3,700,000 acres
in the area sown in grain.
Weather data and trip re-
ports by American embassy offi-
cials indicate that the grain
crop has been affected by
drought in varying degrees.
Between 4 and 15 August, embassy
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
officers observed drought con-
ditions in the eastern Ukraine
and parts of the North Caucasus
and reported near failures of
the crops in parts of the lower
and middle Volga regions.
Drought conditions had been re-
ported previously in the south-
ern Ukraine and portions of the
New Lands area.
The Soviet press has made
few claims of high yields for
this harvest. Instead it has
urged an early harvest and a
rapid completion, and has lauded
the extent to which the two-
stage method of harvesting has
been used.
It is very tentatively esti-
mated that the 1957 harvest--
not yet completed--will be 10
to 15 percent smaller than the
1956 harvest of an estimated
115,000,000 tons and more like
the 1955 harvest of an estimated
103,000,000 tons.
A grain crop substantially
smaller than last year's would
make Khrushchev's unrealistic
schedule of catching up with the
United States in per capita milk
and meat production even less
attainable. Reserves are be-
lieved to be sufficient, how-
ever, so that a harvest reduced
by 15,000,000 tons this year.
need not alter present consump-
tion levels.
sugar beet areas.
(Prepared by ORR)
It is not clear what effect
the drought may have on late
food crops such as potatoes and
sugar beets. The grain areas
hardest hit by the drought are
not the primary potato and
GRAIN HARVEST PROSPECTS
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
COMMUNIST CHINA RESTRICTS JAPANESE FISHING
The decree issued last
week by Communist China placing
new restrictions on the opera-
tions of fishing trawlers in
the East China Sea may have
been designed to persuade Tokyo
to enter into formal negotia-
tions with Peiping on the issue.
the motorized trawler is the
vessel most commonly used by
the Japanese fishing fleet
operating in East China waters.
The fishing issue is one
on which Peiping has long count-
ed to win official contacts be-
tween Japan and Communist China.
An unofficial agree-
ment, signed in 1955
with a private Jap-
anese fishing group,
established a line
some 40 to 70 miles
off the China coast
running from Man-
churia down to the
29th parallel, west
of which fishing by
motorized trawlers
was forbidden. Pei-
ping has expressed
the hope that this
agreement would be
followed by govern-
ment-to-government
negotiations.
Communist Chi-
na's recent action
extends this line
down to the 27th
parallel and coin-
cides with the open-
ing of a fisheries
conference in Mos-
cow. The conference
was scheduled under
the terms of a 1956
convention signed by
the USSR, Communist
China, North Korea,
4~ ?~ ? Nipjn,
and North Vietnam, which pro-
vides for membership by Japan
and other Pacific fishing
countries through application
to Communist China.
The Chinese decree seems
unrelated to considerations of
military security, such as prob-
ably governed Moscow's closing
of Peter the Great Bay. The
Chinese restriction applies to
no shipping other than motor-
ized trawlers. Peiping recent-
ly eased restrictions on Japa-
nese commercial vessels calling
at four Chinese ports.
1 YELLOW
SFA
Demarcation line for
fishing operations
according to the 195.
Sino-Japanese agreement
/Demarcation line for fishing
operations decreed by Peiping
on 16 August 1957
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22 August 1957
The Japanese Foreign Min-
istry has reacted to Peiping's
decree with a statement that
Japan cannot recognize any
unilateral imposition by another
nation of restrictions on high
seas fishing. The Foreign
Ministry statement appears
designed to uphold Japan's offi-
cial position on freedom of the
high seas, and this probably
will be the extent of Tokyo's
official action.
Japanese fishing in the
affected area reportedly is now
relatively minor, although
these grounds were important in
the pre-World War II period.
Peiping's move, however, could
increase pressure by fishing
interests in Japan on the gov-
ernment to conclude an official
fishing agreement with Commu-
nist China.
(Concurred inky ORR)
CABINET CRISIS IN THAILAND
A political crisis may be
developing in Thailand as a
result of the resignations from
the cabinet of Defense Minister
Sarit and several of his closest
followers? The resignations
were followed by orders issued
by Sarit and Police Director
General Phao placing the army
and police res ectivel on
alert
This latest flare-up of
political tension in Bangkok
was apparently set off by Pre-
mier Phibun's recent order to
cabinet ministers to sever their
lucrative connections with
government and commercial cor-
porations or resign. Some re-
ports have suggested that Phi-
bun's move was directed pri-
marily against the Sarit clique,
which has become increasingly
aggressive since the postelec-
toral crisis last March. This
contention may have some va-
lidity in view of the fact that
Phao, in contrast to the resign-
ing ministers, has announced
he will divest himself of his
commercial interests rather
than give up his portfolio as
minister of interior.
The army alert, however,
suggests that Sarit may be at-
tempting to turn the tables on
Phibun. In this connection,
the American army attache has
been informed by a source he
considers reliable that the
Sarit clique hoped by its with-
drawal from the cabinet to force
Phibun to dismiss Phao from his
government post. Phao's pres-
ence in the cabinet has report-
edly been a source of extreme
irritation to Sarit, ever since
Phibun allegedly assured him
last March that Phao would be
permitted to retain only his
post as police chief.
Despite the present tense
situation, there remains a good
chance it will be resolved
peacefully. This may be achieved
through an arrangement in exist-
ence prior to the February elec-
tions under which Phibun him-
self held the defense and in-
terior portfolios, with Sarit
and Phao acting as deputy min-
isters. Phibun, in fact, has
stated that he may take over
the Ministry of Defense.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
In a new effort to solve
the problem of provincial de-
fiance, Indonesian Prime Minis-
ter Djuanda is making plans for
a national round-table confer-
ence which would include the
disaffected commanders and would
be held early in September.
According to Djuanda, the dis-
affected commanders will be in-
vited to Djakarta for private
talks prior to the formal ses-
sions. As an added inducement
for provincial cooperation,
both Sukarno and former vice
president Hatta reportedly will
act as advisers to the con-
ference.
Djuanda is particularly
anxious to hold the conference
soon to assure Hatta's presence,
since the latter leaves for a
tour of Communist China on 12
September. Hatta is a strong
anti-Communist and is popular
in the non-Javanese provinces.
His acceptance of the Chinese
invitation presumably was
prompted by a genuine desire to
observe Chinese economic de-
velopment himself, particularly
since President Sukarno ap-
parently was so impressed by
his visit to China in 1956.
Sukarno, in his 17 August
independence day speech, re-
iterated his conviction that
"political democracy" is not' fea-
sible for ' Indonesia but that the
country must strive instead for
"social and economic democracy.
He said his new social democracy
will place-the interests of the
state before group or individual
interests, and that to achieve
this objective a "disciplined
guided democracy" is necessary.
Sukarno claimed that the
economic basis for his new de-
mocracy must be provided by the
return of Netherlands New
Guinea and the complete abroga-
tion of the 1949 agreements with
the Dutch. In fact, however,
these issues are essentially
political and their solution in
Indonesia's favor would not make
for national economic gains.
The references to remaining
Dutch influence are a restate-
ment of Sukarno's consistent
contention that the Indonesian
revolution is still incomplete,
The president devoted the
latter part of his address to
the "new life movement," ap-
parently a vehicle to introduce
a concept of discipline to
Indonesian life. The final form
of his projected political sys-
tem is not clear from the speech,
but something close to Communism
or national socialism is in-
dicated.
Sukarno can be expected to
continue to rely on the Commu-
nists for support and advice and
to permit their increased in-
fluence in the government.
The Communists, for their
part, apparently are making an
effort to prevent the formation
of an effective anti-Communist
or non-Communist front by offer-
ing top local posts to the Na-
tional Party and the Nahdlatul
Ulama even in areas where the
Communists won clear majorities.
They would reserve lower posts
for themselves. By this maneuver
they apparently hope to consoli-
date their gains at grass-roots
levels without interference, let
two of the non-Communist parties
take the blame for the expected
continued lack of economic prog-
ress,, and at the same time con-
tinue the political isolation
of the anti-Communist Masjumi.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
With the election of a
successor to the late president
Castillo Armas reportedly set
for 20 October, maneuvering for
control of the Guatemalan gov-
ernment among politicians and
army men in and outside the
present interim government is
intensifying. The greatest
threat to stability appears to
be the developing split in the
administration between a slight-
ly right-of-center group, which
has the support of Defense Min-
ister Col. Juan Francisco Oliva,
and a faction which is further
to the right led by Col. Enrique
T. Oliva, the defense minister's
half-brother who is the govern-
ment's coordinator of intelli-
gence.
Defense Minister Oliva has
thrown his influence on the side
of constitutional succession and
in favor of the presidential
candidacy of the able and the
pro-US president of the supreme
court, Miguel Ortiz Passarelli.
The defense minister is the
acknowledged leader of the po-
litically important army and
probably enjoys the personal
loyalty of most key officers.
The group supporting Ortiz'
candidacy includes those who
were closest to the late presi-
dent in the government and in
the powerful administration
IN GUATEMALA
political machine, the National
Democratic Movement (MDN). How-
ever, this group might be less'
able and possibly less inclined
than was Castillo to resist
pressure from extreme rightists
against the middle-of-the-road
policies developed during the
last several years.
The extreme rightists, in-
cluding, some who were exiled for
subversive activity by Castillo,
are believed receiving organi-
zational and financial support
from Dominican dictator Truiillo
Elections in October would
be at least two months earlier
than had been expected. Early
elections minimize the chance
that any new party, possibly
leftist or pro-Communist, might
develop at the expense of the
now-dominant MDN. If the MDN
remains united, it is virtually
certain of victorv in the Octn
ber elections,
THE OUTLOOK IN BRITISH GUIANA
Following the electoral
victory in British Guiana of his
Communist-dominated faction of
the People's Progressive Party
(PPP), Dr. Cheddi Jagan reiter-
ated his intention to pursue
his aims constitutionally. In
view of this, Governor Renison
will shortly select the new gov-
ernment in close consultation
with Jagan, and opening of the
new Legislative, Council by
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
12 September is unlikely to in-
volve the British in any immedi-
ate political crisis.
Jagan has made every effort
to appear cooperative and r ,soap-.
able. After winning 9 of'the'14
elective seats in the 12 August
election, he told the American
consulate in Georgetown that,
while holding to his 1953 ob-
jective of an independent, "so-
cialistic" state, he plans no
radical attempts at implemen-
tation. He informed the press
on 16 August that his party has
ousted both its right-wing and
left-wing extremists.
Under present constitution-
al safeguards and the effective
police organization, it will be
extremely difficult for Jagan
to pursue Communist aims overt-
ly,. Rather, the recent series
of defections from his faction
of the People's Progressive
Party suggest that he may have
to concentrate on mending his
political fences.
Jagan says he
does not favor na-
tionalizing estab-
lished industries--
principally sugar
and bauxite--but
wants some form of
cooperation between
the government and
private enterprise
in establishing much-
needed new indus-
tries. In consul-
tations with Gover-
nor Renison on 16
August, he sought
maximum governmen-
tal responsibility
for his party by re-
questing an effec-
tive majority in the
10-member Executive
Council--or minis-
terial group--as
well as in the Leg-
islative Council.
Governor Renison told the
American consulate he was will-
ing to have Jagan lead a major-
ity party, and will presumably
closely consider Jagan's views
in selecting members of the
councils. Of the 11 members
he may appoint to the Legis-
lative Council, two will also
sit in the Executive Council
and five additional Executive
Council members will be picked
from the elected legislators.
One of these is sure to be
Jagan, but the governor is not
bound to act on the advice of
the Executive Council.
When in office, Jagan is
expected to strive for the time
being to be constructive and to
seek foreign capital for eco-
nomic improvement. The $62,-
000,000 five-year development
plan inaugurated last year has
apparently been inefficiently
implemented so far, and Jagan
campaigned on the question of
Britain's "exploitation" of the
colony., Disputes with the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
governor are likely to arise
when the PPP attempts to in-
troduce legislation on the
most pressing economic issues,
such as social welfare, land
resettlement, and foreign aid.
Meanwhile, Governor Renison
continues to hope that Jagan's
PPP rival, Lyndon Burnham, will
CYPRUS ,
Greek Prime Minister Kara-
manlis remains opposed to Brit-
ain's plan for a tripartite
conference on Cyprus next month
in London. He believes that
acceptance of such an invita-
tion would subject him to im-
mediate attack by the entire
Greek press and by Archbishop
Makarios, as well as by all op-
position parties. Foreign Min-
ister Averoff says he has been
trying to "soften Makarios up"
on the subject of a tripartite
conference but states that a
special meeting of the North
Atlantic Council to consider
Cyprus would be more acceptable
to Greece. Karamanlis would
accept an invitation to such a
council meeting even over Ma-
karios' opposition, since he
could publicly defy Makarios
on the issue of Greek loyalty
to NATO.
security officials believe it
is steadily gaining ground,
Andreas Ziartides, leader
of the Communist-dominated
Old Trade Unions, which claims
30,000 members, made a recent
widely publicized trip to Athens
to consult Makarios. Although
primarily a gesture to persuade
Greek Cypriots of Nationalist-
Communist solidarity on the is-
sue of self-determination,
Ziartides also was believed to
be prepared to threaten Ma-
karios'with the destruction of
the underground EOKA if the
archbishop continues to re-
ject AKEL's cooperation.
The American consul in Nicosia
recently reported a rumor that
AKEL had threatened to ruin
EOKA if it renewed violence.
He believes AKEL could carry
out such a threat.
Turkey favors a new tri-
partite conference but prefers
that it be postponed until after
the Turkish national elections,
probably late in October, The
British would presumably be
amenable to such a postponement.
On Cyprus, the Nationalists
are reported concerned over the
increasing political strength
of the outlawed Communist-front
Reform Party of the Working
People (AKEL), AKEL leaders
claim their membership has
grown from 3,000 to 6,000 in
the last six months, and British
head a combined opposition,
but London believes this may
further stimulate bitterness
between East Indians and Ne-
groes. London also believes
that ambition may cause Jagan
and Burnham to join forces, and
that demands would then be
focused on constitutional change.
A resumption of terror-
ist activity by EOKA con-
tinues therefore to be un-
likely in the near future,
particularly inasmuch as Ma-
karios and the Greek govern-
ment apparently desire to
avoid further violence. In the
absence of progress toward
settlement of the Cyprus is-
sue, or the formulation of an
alternative course of action
by the Nationalist leadership,
however, more Greek Cypriots
are likely to drift toward
sunDort of jEL.
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22 August 1957
TURKISH ELECTIONS
National elections probably
will be held in Turkey in the
latter part of October. Prime
Minister Menderes so informed
two American newspapermen, and
his recent activity, including
a tour of smaller cities, has
been interpreted as the opening
of the political campaign.
Leaders of Turkey's major op-
position parties are holding
strategy meetings and warning
their adherents to be sure that
their-names are on the voting
lists.
The present Grand National
Assembly was elected in May 1954
and its term would normally end
in May 1958. However, the as-
sembly may enact a law by a
simple majority providing for
new elections prior to expira-
tion of the term. According to
the present electoral law, elec-
tion day is the first Sunday 45
days following promulgation of
the special law calling for new
elections. As the assembly is
scheduled to reconvene on 2 Sep-
tember, elections probably will
not take place prior to 20 Oc-
tober barring a last-minute
change in the electoral law.
More than 80 percent of the
members of the 541-member Grand
National Assembly belong to the
Democratic Party. The three
major opposition parties are the
Republican Peoples Party, the
Freedom Party, and the Republican
Nation Party.
The Democratic Party has
several factors favoring it
in an election held this fall.
The harvests for 1957 are
expected to be larger than those
of recent years, the government
subsidy on wheat has been
increased, many large-scale eco-
nomic projects are being ini-
tiated, extensive urban rede-
velopment projects are in
progress, the conservative
element in the population ap-
proves the tolerant attitude of
the Democratic Party toward
active observance of the Moslem
religion, the government's posi-
tion on the Cyprus problem has
met with widespread popular sup-
port, and foreign governments,
particularly West Germany, are
making large-scale investments
in Turkey.
The three opposition par-
ties will probably strive to
make the rapidly rising cost of
living the major issue in the
campaign. They can also be ex-
pected to concentrate on so-
called undemocratic acts of the
government, such as the recent
jailing of the leader of the
Republican Nation Party. All
parties favor continued close
cooperation with the United
States.
The opposition will enter
the campaign under handicaps im-
posed by the present electoral
law. Opposition leaders at-
tended a meeting in mid-August
during which cooperation against
the Democratic Party was dis-
cussed and reportedly received
considerable support. The per-
sonal rivalry of party leaders
has made effective cooperation
impossible in the past.
SUHRAWARDY FAILS TO GAIN NEEDED SUPPORT IN PAKISTAN
Pakistani Prime Minister
Suhrawardy failed to gain addi-
tional political support for his
weakened Awami League during the
intensive negotiations which
began immediately after his re-
turn from the United States on
5 August. His tenure as prime
minister remains largely de-
pendent on President Mirza,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
who apparently intends to con-
tinue supporting him while at
the same time keeping his power
within manageable limits.
After nearly a week of
negotiations in Karachi, Mirza
and Suhrawardy visited East
Pakistan from 9 to 13 August in
an effort, which turned out to
be unsuccessful, to reach an
agreement with leaders of the
Krishak Sramik Party for the
latter's adherence to both the
national and provincial govern-
ment coalitions. Such an agree-
ment would have bolstered
Suhrawardy's position in Karachi
and offset the losses his party
suffered in East Pakistan from
defections to Maulana Bhashani's
new leftist opposition party.
Without additional support
in the East Pakistan assembly,
the Awami League government ap-
parently will be dependent on
the Hindu minority groups in its
coalition to maintain a majority.
While these groups are likely to
side with the opposition in the
elections tentatively scheduled
for next year, they probably
will seek to avoid a renewal of
political instability in the
province at this time because of
the possible consequences it
might have for the minority seg-
ment of the population. In addi-
tion, opposition parties seem
reluctant to assume the respon-
sibilities of government prior to
the elections and therefore may
make no effort to precipitate
the fall of the provincial
government.
The erosion of Suhrawardy's
political base in East Pakistan
has prompted Mirza's Republican
Party, major component of the
national coalition, to put in-
creasing pressure on the prime
minister to stop intervening in
West Pakistan politics and to
grant the Republicans additional
posts in the central cabinet.
Republican leaders who accom-
panied Mirza and Suhrawardy to
East Pakistan reportedly stayed
behind to negotiate an agreement
between their party and the
Krishak Sramik Party, possibly
with the intention of forming a
new national coalition excluding 25X1
Suhrawardy and the Awami League.
is little indication, however,
that Mirza plans now to oust
Suhrawardy. He probably con-
tinues to feel that Suhrawardy
is the best hope for effective
leadership a.t tk present time.
COMMUNISTS ASSUME VIRTUAL CONTROL OF INFLUENTIAL SINGAPORE PARTY
The replacement of the two
"moderate" leaders of the Peo-
ple's Action Party (PAP) by pro-
Communists puts what is probably
the largest and best organized
party in Singapore under virtual
Communist control. The victory
is not without liabilities for
the Communists, however, for it
discards two of the PAP's most
effective spokesmen and, by
clearly identifying the party
as pro-Communist, will facili-
tate any new antisubversive cam-
paign against the party by the
Labor Front government.
The party's move to the
left eliminates the possibility
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22 August 1957
of its cooperation with Chief
Minister.Lim Yew Hock's Labor
Front in the forthcoming city
council and Legislative As-
sembly elections. Within the
next few,,months, it may drive
moderate elements away from
the PAP and induce them to
unite with most of the present
Labor Front in a new political
organization.
A Labor Front source has
told the American consulate
general that Lee Kuan Yew may
remain with the PAP temporarily
in order to use his faction on
the party executive committee
to create confusion among the
leadershi
Failure to regain his authority,
which appears likely because
of his present weakened posi-
tion,. may lead to his resigna-
tion at an opportune moment to
help the Labor Front form a
new party.
Since the April talks in
London on internal self-govern-
ment for Singapore, Lim and
Lee have cooperated closely in
the Legislative Assembly and
in the June by-elections. With
Lee's loss of influence in the
PAP and Lim's need for a stronger
political organization than the
weak and divided Labor Front,
cooperation between the two in
establishing a new party would
be a logical development. Lim
knows that in order to maintain
his position, he must build a
party capable of competing with
the financial resources of the
conservative Liberal Socialists
and the organizational ability
and mass appeal of the PAP.
',dime is becoming an increas-
ingly important factor in Lim's
plans to retain a strongly anti-
Communist government in Singa-
pore. It is probably already
too late to build a party
which could successfully con-
test the city council elec-
tions in December; there
still may be time to create
an organization which would
be effective in the crucial
Legislative Assembly elections
late next summer.
which-will probably be held
ITALIAN OIL COMPANY'S MIDDLE EAST ACTIVITIES
Enrico Mattes, president
of the Italian goverfinent's
National-Petroleum Company (ENI),
is reported negotiating with
Saudi Arabia and Morocco for
extensive oil exploitation
rights, and.has stated he al-
ready has an agreement, with
Libya. In Iran, the lower house
of parliament on 15 August ap-
proved the agreement he reached
in March with the National Ira-
nian Oil Company (NIOC). There
is some question that Mattes
has the technical means to ex-
ploit all of his concessions,
but his terms, compared with
the usual 50-50 profit-sharing
patterns, are very attractive.
Mattes said on 6 August he
expects to receive oil explora-
tion rights covering approxi-
mately 210,000 square miles in
Saudi Arabia. He indicated, how-
ever, that he is "ready to play
ball" with Aramco, and the Ameri-
can. embassy in Rome considers
his negotiations a blackmail at-
tempt to gain participation in
Aramco.
He also claims that ENI has
concluded an agreement with
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22 August 1957
Libya for an 18,000-square-
mile concession in the Fezzan,
contiguous to the French Sahara
oil development. Libya would
receive 62.5 percent of the
profits from this venture,
would put in 25 percent of the
capital, but would not be re-
quired to pay its share until
a commercial deposit is found.
ENI's agreement with the
National Iranian Oil Company
in March has been strongly
backed by the Shah. This agree-
ment calls for formation of a
joint Italo-Iranian company to
develop oil deposits outside
the area controlled by the in-
ternational consortium. The
Italian company would initially
put up all capital for explora-
tion; after the discovery of
oil, the Iranian government
would start paying half of fur-
ther development costs. Under
the agreement, the Iranian gov-
ernment would receive 75 per-
cent of all profits--50 percent
as royalties and tax and also
half of the remaining profit
made by the joint company.
Italian President Gronchi and
Foreign Minister Pella are
scheduled to begin a state
visit to Iran on 7 September,
presumably to honor the new
partnership.
by OR
Mattes appears to be try-
ing to work his way into profit-
able foreign operations partly
to compensate for ENI's failure
to find crude oil deposits in
Italy and partly to make a deal
detrimental to American oil
interests for opposing the oil
bill in the Italian parliament
which he favored. Even if he
musters adequate capital, he
will be dependent on foreign
technicians and equipment in
order to carry out all of his
foreign undertakings. His suc-
cess in obtaining formal agree-
ments may jeopardize other West-
ern oil agreements in the Middle
East by breaking down the estab-
lished 50-50 rofit-sharing pat-
tern. (Concurred in 25X1
POSSIBLE REPLACEMENT OF ITALIAN COMMUNIST CHIEF
Speculation on the possi-
ble ouster of Italian Communist
Party leader Togliatti has been
revived by an implied rebuke
in a communique issued by a
recent party delegation to Mos-
cow, Intraparty friction is
reportedly limiting his in-
fluence, and there have been
rumors that he will be replaced
after the 1958 Italian national
elections.
and see a further reprimand in
the acknowledgment that efforts
to make recent Soviet
The communique issued on
11 August included an appeal.
"to consolidate the unity of
the socialist camp, of which
the Soviet Union is the center
and greatest force." Italian
observers see in this a rebuke
by Khrushchev for Togliatti's
past advocacy of "polycentrism,"
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CURRENT INTELLIGENCE WEEKLY SUIIARY
22 August 1957
accomplishments better known
to the Italian people have been
"insufficient." The criticism
is sharpened by the fact that
a long-standing Togliatti ad-
versary, Communist Party Vice
Secretary General Longo, headed
the delegation and reportedly
stayed on in Moscow.
Giuseppe Di Vittorio, head
of the Communist-dominated
Italian labor confederation,
also visited Moscow in early
August in what Togliatti re-
portedly feared was an effort
to have him removed on the
grounds of age and inept lead-
ership. A report that Togliatti
would be replaced after the 1958
national elections is attributed
to Velio Spano, a member of the
party directorate who also has
ambitions to succeed Togliatti.
The American embassy in Rome,
though doubting that Togliatti
will be removed from the party's
helm other than for reasons of
health, believes the communique
and the Spano report indicate
that "some decision adverse to
Togliatti's policy" was recent-
ly taken within the Soviet bloc.
Togliatti is reported also
finding his control of the party
seriously threatened by "sec-
tarian" leaders who are us-
ing the central control com-
mission to ensure that
all policy decisions con-
form to Communist theory
and practice. These lead-
ers have compelled Togliatti 25X1
to acquiesce in a purge
of "revisionists."
FURTHER DETERIORATION OF SPAIN'S ECONOMY
The Spanish government's
recent relaxation of price con-
trols increases the likelihood
of new wage agitation early in
the fall.
With practically all com-
modities in continuing short
supply, the Franco regime has
apparently given up hope of
controlling prices. Price in-
creases decreed by the govern-
ment within the past month in-
clude a 20-percent boost on
some types of bread, a 50-per-
cent rise in Madrid's surface
transportation fares, and a
substantial hike on beer, wines,
and cigarettes. In addition,
cotton, wool, and silk textiles
have been freed from price con-
trols,which suggests that the
government is relying only on
"rationing by the purse" to
achieve the reduction in con-
sumption which the commerce
minister announced last June
as a primary goal.
The economy-minded ministers
of commerce and finance have
made some progress in their pro-
gram for economic stabilization
by reducing government borrowing,
instituting some credit restric-
tions, encouraging exports, and
safeguarding the country's gold
and dollar reserves. Neverthe-
less, they are facing a tough
battle with cabinet members and
other proponents of "big spend-
ing," one of whom has just
ordered construction begun on
a vast irrigation and hydro-
electric power project on the
Ebro River in northeastern Spain.
The American embassy sees
considerable political danger in
the relaxation of price controls,
particularly during the coming
months when seasonal shortages
of basic food items will cause
further sharp price increases.
The workers have already lost
a large share of their gains
from last year's two large pay
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
boosts as the result of the
steady rise in the cost of
living, and they certainly will
demand new wage increases,
which the government is likely
to grant in order to avert
widespread strikes,
SECRET
The accelerated wage-
price spiral will not only
weaken Franco's political posi-
tion, but may also be reflected
in popular resentment toward
the United States for not giving
more economic aid and in reduced
government cooperation on the
base program,
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22 August 1957
PATTERNS AND PERSPECTIVES
JAVA'S-ECONOMIC DEPENDENCE ON OUTER ISLANDS OF INDONESIA
The dissatisfaction of
Indonesia's outlying islands
with a system of economic con-
trol centered in Java is a major
factor behind the dissident
movements in Indonesia. Al-
though these areas produce over
three fourths of Indonesia's
exports, Java releases to them
less than one fourth of the im-
ports. While Djakarta's loss.
of control over the outlying
provinces has caused economic
difficulties on Java, the ef-
fects have been cushioned be-
cause the major exporters--
mostly Western companies--still
turn their foreign exchange
earnings over to the central
government in return for rupiahs.
If the non-Javanese areas were
to declare themselves independ-
ent, however, the loss of for-
eign exchange earnings would
soon cause economic chaos in
Java.
Structure of the Economy
Indonesia's. basically-
agrar-ian economy is virtually stag-
nant at subsistence levels.
While near self-sufficiency in
food production has been achieved
and minimum consumer goods im-
port needs have been met through-
out most of the postwar period,
Indonesian living standards are
probably below pre-World War II
levels. The government's eco-
nomic development program has
resulted in gross investment,
both public and private, of
only about 5 percent of the na-
tional income. The increase in
output generated by such a low
level of investment is at best
barely sufficient to keep up
with population growth.
The only dynamic elements
in the Indonesian economy are
the Western oil companies and
REPUBLIC OF INDONESIA
D Disaffected provinces
Provinces under central government
Mixed loyalties
24474
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
ORIGIN OF INDONESIA'S
CHIEF EXPORTS
the large, efficient agricul-
tural estates, which are the
major sources of government rev-
enues, domestic savings, and ex-
port earnings. These enter-
prises are almost entirely West-
ern-owned and have been subject-
ed to strong political attacks,
especially from leftist and
strongly nationalist groups.
As a result they have been un-
willing to expand their produc-
tion to full potential, although
the oil companies have been less
restricted than the plantations
by the government.
Foreign Trade
Indonesia's total exports
have remained relatively stable
in the last five years, ranging
from a low of $819,633,000 in
1953 to a high of $931,415,000
in 1955. Over 95 percent of
the total-is with the free world,
although trade with the Sino-
Soviet bloc--particularly Com-
munist China--has grown in re-
cent years. Despite a favorable
balance of tradd of $633,309,000
during the last five years,
large annual payments for in-
visibles caused Indonesia's
gold and foreign exchange hold-
ings to fall from $592,000,000
at the end of 1951 to $213,140,-
000 at the end of 1956.
Indonesia's principal ex-
port commodities are rubber,
petroleum, tin,.and copra.
These generally-comprise over
70 percent of exports, with
tea, tobacco, palm oil, sugar,
and coffee accounting for an-
other 15 to 20 percent.
Rubber is the most important
export, over 40 percent of the
total in normal years. About
40 percent, in terms of value,
of the rubber is produced on
the large, foreign-owned planta-
tions, the remaining 60 percent
on small, private plots, most
of only a few acres. Sumatra
accounts for over two thirds of
the total rubber output; Java,
while producing about one third
of the estate rubber, accounts
for only about 15 percent of
the total output.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
Petroleum products, between]
20 and 25 percent of Indonesia's
total, exports-, =are -second
in importance. Sumatra produces
approximately 85 percent of
Indonesia's petroleum, Borneo
nearly 10 percent, and Java less
than 5 percent.
Tin accounts for from 7 to
10 percent of exports. All of
the tin is mined on the islands
of Bangka, Belitung, and Singkep,
which lie off the east coast of
Sumatra. Copra, which accounts
for 4 to 6 percent of the total
exports, is produced almost en-
tirely in Celebes, the Moluccas
and the Lesser Sundas. In addi-
tion to these four major export
commodities, the dissident areas
also produce approximately two
thirds of the remainder of In-
donesia's exports.
Government Finance
A major com-
plaint of the prov-
inces is that they
provide a higher per-
centage of government
revenues than they:
receive in the way of
economic development
funds. Although no
accurate figures are
available on the
amount of taxes levied
directly on the outer
islands, approximate-
FOODSTUFFS
limited expenditures for eco-
homic development on Java.
While it would be normal for
Java to receive more funds since
it contains two thirds of the
population and has serious un-
employment, past governments
have overdone this and virtually
no economic development has
taken place in the outer islands.
The present government is at-
tempting to remedy this situa-
tion, and has announced that
the new budget will allocate
additional funds for them. It
is:severely handicapped, however,
by the deteriorating economic
situation, particularly on Java.
Economic Conditions
Despite its loss of polit-
ical control over outlying prov-
1951
1952
1953
1954
1955
1956
36585
25365
23 421
39825
31135
23616
21319
19570
30088
40000
15 958
28506
20530
18525
24035
32106
27748
NA
33163
27740
27544
25526
22246
NA
2106
1520
10 526
23070
20088
17308
627206
464765
270528
265441
429 913
303913
163 710
177245
181580
189212
169882
NA
81066
93195
80790
59474
59488
NA
128442
55100
56930
50946
35328
38766
COFFEE
PALM:. OIL
SUGAR .
RAW MATERIALS.
RUBBER
POL PRODUCTS?
TIN ORE 8 SLAG
COPRA
ly half of the central govern-
ment's tax revenues are derived
from duties on imports, and an
additional 12 to 14 percent of
its tax revenues come from the
company tax, a large portion of
which comes from foreign-owned
companies operating outside
Java. While most of the imports
are destined for Java, which
thus pays the import taxes,
residents of the outer islands
feel that only through their
exports are such imports possi-
ble, and that they should there-
fore share in the expenditures
made possible by such taxes.
The central government has
long concentrated most of its
inces,,, the central government
has not been deprived of all of
the foreign exchange earned by
the export commodities produced
in these regions. The oil com-
panies, rubber plantations, and
tin mines are owned by`West-
erners--or the Indonesian govern-
ment--and have continued to turn
their foreign exchange earnings
over to the central government,
in return for rupiahs. The
separatist authorities have not
forbidden this, accepting the
companies' argument that since
their rights came from the cen-
tral government, they must obey
its laws.
Some of the provincial au-
thorities have tried to obtain
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22 August 1957
tax payments from the compa-
nies, but have not insisted
on such payments when the com-
panies have resisted. There
have been numerous reports that
the central government is los-
ing a large part of the foreign
INDONESIA: TOTAL EXPORTS
THOUSANDS OF DOLLARS 931,415
33,898
000
0 TOTAL WORLD
00 TOTAL SING-SOVIET BLOC
SOVIET BLOC
Q CHINA
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105?
907,531
9,817
856;064
9,082
6,73
notes in circulation rose by
22.6 percent and cash advances
to the government increased
61.5 percent.
Increasing quantities of
exports, particularly rubber
- 4,502 2
1951
22 AUGUST 1957
exchange earned from the sale
of copra and rubber from na-
tive-owned plots.
Indonesia's economic situa-
tion, which had improved in
1955 with a favorable balance
of payments, was deteriorating
during 1956 before the revolts
began in late December. A
sharp drop in the gold and for-
eign exchange holdings resulted
chiefly from a sharp
rise in imports,
which accounted for
the large supply of
goods in stock and
which in turn pre-
vented inflation dur-
ing the early months
of the revolts.
The provinces'
revolts, coming on
top of an already
unfavorable economic
situation, have re-
sulted in a steady
000 TOTAL WORLD
000 TOTAL SINO-SOVIET
SOVIET BLOC
CHINA
deterioration in the central
government's economic position.
The Indonesian rupiah, although
officially pegged at 11.4 to
the dollar, fell in value from
31 to 48 to the dollar between
January and mid-August 1957.
The holdings of gold and foreign
exchange fell from $213,140,-
000 to $159,386,000 from Janu-
ary to the end of June 1957.
During the same period, bank-
it has also considerably in-
creased their costs. These
costs, plus the increased level
of deficit financing in recent
months as the government has
granted more funds to the prov-
inces while its tax revenues
have been reduced by the re-
volts, have resulted in severe
inflationary pressure.
Many imported items have
increased by 50 to 100 percent
SECRET
1956
70819
and copra, began to
be bartered by the
provinces without
central government
control. An official
of the Bank of Indo-
nesia stated in early
June that the value
of export permits is-
sued during April
and May was 40 and
50 percent, respec-
tively, below the
past averages for
those-months, although actual
exports probably had not fallen
this sharply.
' Faced with this situation,
the government on 20 June an-
nounced new foreign exchange
regulations which in effect
amount to a freely fluctuating
exchange rate for foreign trade
purposes. Although this has
resulted in increased exports,
INDONESIA: TOTAL IMPORTS
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
in price, and in some areas
rises of this magnitude in the
price of rice have occurred.
This in turn has caused workers
to demand substantial wage in-
creases which, if granted, may
set off an inflationary spiral
that could easily get out of
control.
The fact that economic
conditions on Java have so rap-
idly deteriorated to the pres-
ent extent, despite the cen-
tral government's retention of
most of the foreign exchange
earned by the outer islands,
is a clear indication that eco-
nomic chaos on Java would re-
sult if the outer islands be-
came independent. Although
about 85 percent of the people
of Java are engaged in subsist-
ence farming, and thus would
feel little immediate effect of
the loss of foreign exchange
earnings, most of the remain-
ing 15 percent are directly or
indirectly dependent on foreign
exchange earnings. Since most
of these people live in the
cities and are the politically
conscious segment of the popula-
tion, the political effects
would.be sharp and immediate.
The economic effect would-
also be immediate, as many of
viable economy.
these people would lose their
jobs, thus adding to Java's al-
ready serious unemployment prob-
lem. Eventually the burden of
providing for them would fall
on the remaining 85 percent of
the people, thus forcing the
standard of living below the
subsistence level and making
it impossible for the govern-
ment of Java to increase na-
tional income as rapidly as
Java's population, which is now
growing by nearly a million a
year.
As the Indonesian situa-
tion is today, limited inter-
dependence of Java and the outer
islands continues. The outer
islands are receiving from the
central government funds, food-
stuffs, and to some extent
technical advice. The salaries
of army personnel and civil ad-
ministrators still come from
Djakarta.
Should Indonesian fragmen-
tation develop to the point of
outright or de facto separatism,
however, the major disaffected
provinces undoubtedly could
develop new sources of food-
stuffs and technical knowledge.
If they could make arrangements
with the Western companies and
formalize existing barter trade,
they could probably develop a
ECONOMIC REGIONS OF COMMUNIST CHINA
Motivated primarily by
strategic considerations, Com-
munist China's planners hope to
effect a more balanced distri-
bution of economic activity
within a 15-year period ending
in 1967. Peiping also considers
it necessary to build new in-
dustry closer to sources of raw
materials and potential markets
in the interior. This area pro-
duced but 20 percent of China's
total industrial output in
1949, as against 80 percent in
the seven coastal provinces.
The impact of this redistri-
bution program will not begin to
be felt until the nation is well
into its Second Five-Year Plan
(1958-1962). In the course of
its First Five-Year Plan, Pei-
ping has concentrated on re-
building 3. and expanding the
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xfiECRET..,.,. .
22 August 1957
existing industry in order to
gain quick production increases,
supply current needs, and provide
capital equipment for its fu-
ture. plans. Any significant
expansion of industry in the
remote hinterland must await
the development of transporta-
tion facilities and sources of
energy as well as the proving
of mineral resources. Material
shortages and financial strin-
gencies have recently caused
setbacks in this program.
The Chinese Communists took
over an industrial structure
that was concentrated in south-
ern Manchuria, in. North China
around Tientsin, and in East
China around Shanghai. These
three regions still dominate
China's economy, producing
about 60 percent of the nation's
output. The Northeast region
contributes 20 percent of the
gross national product and
ranks first in industry. The
North China region contributes
25 percent and ranks first in
agriculture and services (e.g.,
government, military, education),
and second in industry, and the
East China region produces about
17 percent of the national out-
put, ranks first in trade and in
light industry, and is a major
agricultural area.
During the First Five-Year
Plan, the area north of the Yel-
low River gained further promi-
nence in the national economy.
The Northeast and North China
regions received over 70 percent
of total industrial investment
from 1953 to 1955. Half of the
156 key industrial projects re-
ceiving Soviet aid are located
in the Northeast, among them
China's first motor vehicle
plant at Changchun, adozen
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`"'` SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
major installations at the
big iron and steel combine at
Anshan, several machine build-
ing plants in Mukden and Harbin,
and an aluminum plant at Fushun.
The area around Mukden, Anshan,
Fushun and Penchi has been es-
pecially favored and has re-
ceived nearly one fifth of all
Soviet aid projects.
Shanghai, China's largest
industrial city, criticized
by the regime for its over-con-
centration and "colonialist"
industrial development, will
continue to be built up after
COMMUNIST CHINA
Soviet Aid Projects
Machine building X Light industry '0 Nonferrous metals
A Electric power Q Chemical plan) Shipbuilding
* Coal S Iron and steel NB Petroleum
TMs mop i, me-de"Co iod;mre he evpes of S.ore-id p,oiects and hen, !Dour;Dos
It does not show the exact oumb, of p,oiecrs involved.
This trend toward even
greater concentration of in-
dustry will continue well into
the Second Five-Year Plan when
the new industrial bases in
,the hinterland will be coming
into production.
By that time the new iron
and steel combines in Inner
Mongolia (Paotou) and Central
China (Wuhan) and the rebuilt
iron and steel combine in the
Southwest (Chungking) will be
operating, and the gigantic
hydroelectric developments at
Sanmen in North China and at
having been bypassed for a
brief period. Peiping has
found it cannot afford to over-
look the advantages of Shanghai's
large skilled labor force and
rich legacy of buildings and
equipment.
Liuchia in the Northwest will be
nearing completion. Northeast
China will still produce about
40 percent of the nation's elec-
tric power in 1962, the same as
in 1957, but will account for
only half of crude steel
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
production in 1962 as compared
with 70 percent at the close
of the First Five-Year Plan.
The trend since 1952 in
the distribution of light in-
dustry, probably to be contin-
ued through the Second Five-
Year Plan, has been away from
East China, especially Shanghai.
This has resulted mainly from
development of cotton textile
production, which accounts for
about 40 percent of light in-
dustrial output, in the cotton-
producing areas of inland China.
Great new textile centers have
been built at Peiping and Shih-
chiachuang in North China, at
Chengchou in Central China, and
at Sian in the Northwest.
Transportation
The plans for dispersal
are most clearly reflected to
COMMUNIST CHINA
Regional Distribution of Manufacturing Production
195Z 1954 aad 1957
OR peiat of total pradretioa)
I SECRET
date in the developments. in
transportation, particularly
in regard to railroads, New
line construction has been di-
rected toward creation of a
network connecting all of China's
regions and provinces, addi-
tional rail links with the So-
viet Union, increasing Chinese
logistic capabilities in the
Taiwan Strait area, and making
available the petroleum and
nonferrous minerals located in
the Southwest, Northwest, and
Sinkiang.
Between 1950 and 1957, some
4,000 miles of new lines will
have been added to the rail
net, Major achievements have
been the line giving access to
Yumen, China's largest petrole-
um producer, in Kansu Province,
completion of the trans-Mon-
golian line to the Soviet Union,
and the linking of the Northwest
PART III PATTERNS AND PERSPECTIVES ' Page 8 of 16
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22 August 1957
and Southwest by means of the
Paochi-Chengtu line.
Proposals have been made
to build 5,000 to 5,600 miles
of new line during the Second
Five-Year Plan. By 1962 the
rail network will connect all
of China's provinces, with
the possible exception of Tibet.;
14 ~L 1.4 V NORThAST
INNER MONGOLIA ~
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COMMUNIST CHINA
Gross National Product and Population by Region
1952,1954 and 1957
(in percent of national totals)
branch lines will be extended
to'the oil deposits in the
Tsaidam and Dzungarian basins;
and the trans-Sinkiang line
will be completed as a fourth
link with the Soviet Union.
Also by that time, a north-
south trunk system 600 miles
inland, extending from Outer
Mongolia to the Indochina bor-
der via Paotou, Lanchou, Chengtu,
and Kunming, is scheduled for
completion.
will remain relatively stable
at least through the Second
Five-Year Plan, with the major
producing areas--North, Central,
and South China--probably even
increasing their proportion of
total output by means of inten-
sive farming techniques.
The new lands scheduled
to be opened to cultivation dur-
ing the period of the Second-
Five Year Plan should add no
SECRET
PART III PATTERNS AND PERSPECTIVES
Agriculture
The regime has shown no
disposition to allocate to
agriculture the enormous funds
required to open enough new
land to alter significantly the
existing pattern of agricultural
production. Thus the distribu-
tion of agricultural output
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
more than 5 percent to exist-
ing acreage, and over half of
this will be in the northern
part of Heilungkiang Province.
Problems for New Areas
Faced with the tremendous
cost of establishing new in-
dustrial bases and with finan-
cial problems, material short-
ages,and transportation conges-
tion connected with existing
industrial areas, Peiping has
slackened the rate of develop-
ment of,the new areas.
New rail line construction
in 1957 in the new areas has
been drastically reduced and
greater emphasis placed on im-
proving the capacity of older
lines. Investment in such key
projects as the Paotou and Wuhan
iron and steel plants is appar-
ently going to be stretched out
over a somewhat longer period
than originally planned.
Peiping has complained of
the expense of building cities
in the new areas, particularly
"nonproductive" facilities.
Standards and appropriations
for this type of construction
have been sharply reduced for
1957 and 1958. Considerable
discontent over living condi-
tions in the new centers exists,
and there have been a number of
long-winded explanations of why
municipal facilities must wait
on basic "socialist" construc-
tion.
. One facet of this retrench-
ment and austerity has been an
emphasis on development of small
facilities featuring simple
technology.. Small- and medium-
sized metallurgical plants are
to be emphasized, and local gov-
ernments are being encouraged
to develop their own coal mines.
This will have a modest effect
on the distribution of industry,
particularly iron and steel
production.
The stretched-out invest-
ment program and emphasis on
existing facilities do not
mean that China's planners have
changed their ultimate goals,
but do underscore the great
amount of time and resources
that will be required to give
China a balanced distribu-
tion of economic activity.
Prepared by ORR)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
FRENCH COMMUNIST PARTY PROSPECTS
The French Communist Party,
as a result of its rigid ad-
herence to the Soviet line, is
politically more isolated than
at any-time since World War II.
Nevertheless, it is still the
largest, richest, and best
organized political group in
France, and exploitation of the
several potentially explosive
major foreign and domestic is-
sues facing France could im-
prove its position materially.
Political Isolation
The party had bright hopes
of forming a popular front when
it endorsed the Mollet govern-
ment following the January 1956
election. With Mollet's adop-
tion.of the "pacification" pro-
gram for Algeria, however, it
was forced increasingly into
opposition and has found itself.
at odds with the National As-
sembly ever since. A series of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
shocks, including de-Staliniza-
tion and the Hungarian revolt,
and culminating in the party's
opposition to the French-British
Suez venture, have further iso-
lated the party.
The extent to which the
party is out of tune with pop-
ular sentiment is illustrated
by the failure of the most re-
POPULAR VOTE FOR COMMUNIST CANDIDATES
IN FRENCH NATIONAL ELECTIONS
1951
FRENCH COMMUNIST PARTY MEMBERSHIP
0,000
1946
22 AUGUST 1957
300,000
cent party campaign against
German rearmament. Virulent
propaganda against the nomina-
tion of West German General Hans
Speidel to a high NATO command
position met with little success,
and the anti-German line against
the European treaties also
failed to arouse any appreciable
support.
There is some evidence that
Communist Party efforts to cap-
italize on Socialist bickering
over official. Socialist Party
policy on Algeria is causing
dissension in Communist ranks.
The recent softer party line on
the possibility of a continued
political bond between France
and. Algeria has aroused criti-
cism from some party members.
Their views are being aired in
an anonymous opposition publica-
tion, L'Etincelle, which has
been at o 3d9 w t the party
leadership on several issues.
party's major source of politi-
cal power has not been -dis-
turbed: approximately one
quarter of the French electorate
still believes its interests
lie in voting for the'leftmost
political party. Although
French by-elections are normally
determined by local factors
which do not reflect national
trends,, little change was ap-
parent in the Communists' elec-
toral strength in the first half
of 1957 from their record in the
1956 national elections.
The drop in Communist Party
membership since the Hungarian
revolt, estimated at 50,000,
apparently is a continuation of
a decade-long trend. Card-
carrying members are now esti-
mated at not more than 300,000,
as compared with 900,000 in
1947. Party leaders betray no
special concern over membership
totals, but may be worried over
signs of waning militancy in
the ranks. Except in the im-
mediate postwar period, the
party has not aimed at build-
ing a real mass party.
Party Leadership Intact
The loss of party unity
threatened by changes in the
GENERAL LABOR CONFEDERATION
6,000,000 MEMBERSHIP
VOTE IN SOCIAL SECURITY ELECTIONS
FOR GENERAL LABOR CONFEDERATION
1947
22 AUGUST 1957
CANDIDATES
9.3% /-__1103.6% /742.9%
Soviet Union never materialized
in the French Communist Party,
Electoral Stability which has been the most Stalinist
of the nonbloc parties. Pierre
Despite its parliamentary I Herve, an editor on the party's
.isolation and popular indif- Paris daily L'Humanitd, pushed
ference to its propaganda, the the Soviet 20th party congress
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rr SECRET
CURRENT INTELLIGENCE WEEKLY STJMMARY
22 August 1957
line prematurely and was ex-
pelled as a deviationist. The
party continued to be openly
Stalinist, condemning severely
the repercussions of de-Stalin-
ization in the East European
satellites. Secretary General
Maurice Thorez and his lieu-
tenant Jacques Duclos have
thus far maintained firm con-
trol of the party leadership,
and their position has apparent-
THOREZ
ly been further strengthened
by the Kremlin shake-up in June.
Thorez immediately endorsed
Khrushchev's moves and denounced
"revisionists" as well as "dog-
matists."
The impact of the Hun-
garian insurrection on the
party appeared initially to be
severe. Nevertheless, despite
.widespread public revulsion
against the party's position at
that time, neither the party
leadership apparatus; nor mem-
bership was permanently impaired.
No party functionaries on either
.national or local levels are
known to have resigned or to
have been expelled over the Hun-
garian issue, and the party
hierarchy has actually increased
its control by tightening its
hold over internal elections.
The most publicized damage
over Hungary was the open re-
jection of the party line by
such prominent members or fellow
travelers as Pablo Picasso and
Jean-Paul Sartre. With rare
exceptions, however, the de-
fiant intellectuals failed to
make a complete break, and many
have reportedly been drifting
back. Publication of the UN
report on Hungary in June and
the Kadar government's sentenc-
ing of two Hungarian intellec-
tuals that month caused only
a brief revival of indignation,
The party seems to have success-
fully diverted this indignation
by having its chief Stalinist
intellectual, Louis Aragon, make
.a single protest to Kadar, thus
averting the confusion and ex-
tended discussion which prevailed
last November among members of
the National Writers' Committee
front.
Front Organizations
Although most party front
organizations have reportedly
suffered substantial drops in
formal membership recently,
many had in fact long been
dormant. There are now indica-.
tions that the party is reacti-
vating at least two--one to
take advantage of any discontent
among Hungarian refugees and
non-Moslems quitting North
Africa, and another to mobilize
technicians who could hamstring
implementation of the recently
approved European treaties.
SECRET
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SECRET W
CURRENT INTELLIGENCE WEEKLY SUMMARY
22 August 1957
The party's strongest
front, the General Labor Con-
federation (CGT), was initial-
ly shaken up by events in Hun-
gary and suffered sizable losses
in shop steward elections. The
union leadership conceded its
difficulties but managed to
smother a movement to dissociate
the CGT from the party. In the
Renault automobile factory
shops steward elections in May,
it still polled 69 percent of
the votes, only slightly less
than the year before.
On a national scale, the
same phenomenon of steadily
declining membership being off-
set by relative stability of
the worker "electorate" is in-
dicated in the trend of elec-
tions to social security boards
during the past decade. The
boards, which administer social
security in France, are popular-
ly elected and individual candi-
dates are backed by such or-
ganizations as the CGT. In
retrospect, a large part of the
disaffection of last fall may
be ascribed less to political
events than to CGT bullheaded-
ness in its refusal to admit
that labor had obtained some
obvious benefits from manage-
ment.
Future Opportunities
Despite the failure of
Communist efforts to prepare
the ground for a popular front
on the Algerian issue, this
question continues to offer the
party a potential escape from,
its parliamentary isolation.
Moreover, other tried rallying
cries continue to be potential-
ly useful. The party can be
SECRET
expected to keep alive the theme
of the fascist threat to the
Fourth Republic, currently ex-
ploitable in regard to the army,
the European elements in Algeria,
and rightists in France.
At the same time, party
resources will probably be em-
ployed in all-out support of
Khrushchev's "coexistence"
policy through agitation for
a relaxation of international
tension on terms desired by
the USSR. A major campaign can
be expected against any hint
that the government is serious-
ly contemplating producing
atomic weapons, and pressure
will continue for a ban on nu-
clear tests and the use of nu-
clear weapons. The party is
using a front organization, the
National Peace Council, to at-
tract Socialist support in this
sphere.
French financial difficul-
ties, particularly the govern-
ment's efforts to block wage
increases this fall, may be the
party's most profitable area
of exploitation in the immediate
future. Worker restraint was
markedly high under the Socialist
government of Guy Mollet, de-'
spite mounting inflation, but
Socialist- and Catholic-oriented
unions have been increasingly
disposed to align themselves
with the CGT in promoting strikes
for higher wages. Widespread
labor demands for wage increases
in the next few months would not
only severely hamper Finance
Minister Gaillard's economy pro-
gram, but would also advance, at
least temporarily, the Communist
Party's drive for unity on the
left. 25X1
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