CURRENT INTELLIGENCE WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A002200020001-6
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• Document Page Count: 37
• Document Creation Date: December 20, 2016
• Document Release Date: August 17, 2005
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• Publication Date: October 18, 1999
• Content Type: SUMMARY

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CONFIDENTIAS
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. 54
OCI NO. 1116/59
19 March 1959
DOCUMENT NO.
NO CHANGE IN CLASS. ^
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CLASS. CHANGED TO; T
NEXT REVIEW DATE:
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CENTRAL INTELLIGENCE AGENCY
III OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
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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. 1JSC. SECTIONS 793 AND 794, TIIE 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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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
OF IMMEDIATE INTEREST
EAST-WEST NEGOTIATIONS
In the wake of the Soviet
note of 2 March and Khrushchev's
speeches in East Germany, Mos-
cow is continuing its efforts
to give the appearance of flex-
ibility and reasonableness.
Public and private Soviet state-
ments have stressed the USSR's
desire for a negotiated settle-
ment of the Berlin issue and
criticized as warlike recent
speeches by American military
and political leaders. None of
these Soviet statements, however,
indicate any important deviation
from established positions.
Khrushchev, in a move de-
signed to retain the initiative
on the German question after
President Eisenhower's 16 March
speech, held a press conference
in Moscow on 19 March. He as-
serted that'the Soviet proposals
have received wide support and
referred to the President's re-
marks to show the increasing
sentiment in favor of negotiations.
He further stated that the USSR,,,al-
though preferring a summit meeting,
has accepted the Western propos-
al for a foreign minister's-.con-
ference and is now awaiting a
reply from the Western powers.
He indicated willingness to meet
on 11 May if that date is pro-
posed.
Khrushchev again denied
that his Berlin proposal was
intended as an ultimatum and
stated that the 27 May deadline
could be postponed. However,
he evaded a direct reply when
asked if the USSR would refrain
from any specific political ac-
tions regarding Berlin until
the summer, in view of President
Eisenhower's qualified agree-
ment to a summit meeting this
summer.
The counselor of the Soviet
Embassy in Paris told an Ameri-
can official on 16 March that
the USSR takes it for granted
that a foreign ministers' con-
ference will take place in May
in Geneva. Stating that agree-
ment to hold a summi',, meeting
later would not be a precondi-
tion for foreign ministers' meet-
ing but',merely would follow log-
ically, he seemed to indicate
a Soviet conviction that once
a foreign ministers' meeting is
held, pressure on the Western
powers to go on to the summit
would be irresistible,
While Soviet official in-
dicated that the question of
German reunification should not
be included on the agenda, he
said the USSR would not object
if the West raised the subject.
He repeated Khrushchev's 5 March
statement that the 27 May dead-
line would be postponed if a
foreign ministers' meeting were
in progress that offered a chance
for agreement,
On 16 March the chief of
the political section of the
Soviet Embassy in East Berlin
declared that he and his dol-
.leagues are "deeply disturbed"
by the tenor of speeches in the
last few weeks by American lead-
ers. Saying the situation is
too dangerous for such talks,
he insisted "our objective is
negotiation, not tension" and
added,"War is out of the ques-
tion for both of us. We can
have disagreements but they must
and will be negotiated."
In a talk with a Swiss cor-
respondent a few days earlier,
Soviet diplomats in East Berlin
suggested, as a "compromise
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
solution" of the Berlin issue,
that a four-power guarantee of
the free-city status could in-
clude the stationing of Soviet
soldiers at Western checkpoints
along with Allied troops. This,
they said, would enable Soviet
soldiers to ease the way and
minimize necessary procedures
by East German representatives.
speech was devoted to "extolling
American military might." But
it quoted in entirety the Pres-
ident's expressions of willing-
ness to negotiate under any cir-
cumstances which offer prospects
of worthwhile results. Other
commentators welcomed the Pre-
ident's "qualified acceptance"
of summit talks.
East German Developments
Soviet propaganda contin-
ues to point to US officials'
"belligerent" actions and state-
ments and the American public's
alleged opposition to theme A
TASS commentary on President
Eisenhower's 16 March speech was
moderate in tone, however. It
asserted that the United States
Government desires to continue
the occupation of Berlin for
an indefinite period and stated
that the second part of the
The East Germans are re-
iterating demands for Western
withdrawal from Berlin, but re-
cent high-level statements have
soft-pedaled references to sign-
ing a separate peace treaty with
the USSR. In an effort to dem-
onstrate East German reasonable-
ness, party boss Ulbricht, in
an interview with a correspond-
ent of the London Daily Express
published on 17 March, repeated
the offer of an East German
guarantee of the "free city's"
unhampered communications and
economic and cultural links with
the outside world, provided
East German sovereignty and
laws are respected. He declared,
however, that any peace treaty
would not permit Bonn to main-
tain certain offices in West
Berlin nor to hold Bundestag
meetings in the city.
under which the East Germans
In response to a question
concerning the circumstances
would conclude a separate treaty
with the USSR or other Warsaw
bloc countries, Ulbricht de-
clared he did not know the
words "separate peace."
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
Western Positions
In the four-power discus-
sions.in Paris to prepare pro-
posals for the 31 March Western
foreign ministers' meeting in
Washington, Bonn has introduced
a new plan for a phased unifi-
cation process which would post-
pone free elections for three
years. An all-German committee
of East and West Germans would
draw up plans for and supervise
elections for a German council,
which in turn would prepare for
elections to a German National
Assembly. The draft election
law and a law establishing pro-
visional central authority would
be submitted to a referendum in
both Germanys.
The elections to the Na-
tional Assembly would be super-
vised by the four powers and
the council. Following these
elections a provisional govern-
ment would negotiate:a peace
treaty. Bonn's plan, a depar-
ture from its previous approach
to free elections, is an effort
to forestall a separate Soviet
peace treaty with East Germany
by accepting some elements of
the Soviet demand for a German
confederation.
Both the French and Germans
are reluctant to submit a West-
ern peace treaty draft at an
East-West meeting, fearing it
would provide Moscow with the
opportunity to focus the meet-
ing on negotiation; of the mili-
tary and boundary clauses in a
German peace settlement. The
British, however, feel that
such issues will be raised in
any event.
Despite the appearance of
complete unanimity in the 12-13
March Macmillan-Adenauer talks,
the subject of reducing troops
PART I
in Central Europe continues to
strain German-British relations.
On 16 March, Adenauer rejected
outright all such plans and
stressed that any military solu-
tions must be accompanied by
political solutions.
American observers report
that although Macmillan's visit
to Bonn helped to alleviate Ger-
man anxiety on British "soft-
ness," a deep suspicion persists
in Bonn and will continue to
play an important role in Ade=
nauer?''s estimate of reliability
of the "Anglo-Saxon" position
on Berlin.
on the problem of maintain-
ing land and air access to Ber-
lin, Paris continues to stand
by its position that access
routes must be kept open at all
costs.
The French also oppose any
prior Western concessions to
Moscow as only encouraging fur-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
CAIRO-BAGHDAD DEVELOPMENTS
Iraq
Anti-Qasim elements in Iraq
appear thoroughly discouraged.
A number of reports confirm that
a large-scale purge of antire-
gime and anti-Communist elements
is taking place. Qasim has not,
however, acceded to the demands
of the Communists that he exe-
cute leaders of the former re-
gime, arm the Communist-con-
trolled Popular Resistance Force
(PRF), or publicly withdraw from
the Baghdad Pact.
Some statements of Iraqi
officials suggest that attempts
are being made to limit the
PRF's activities; arrests in
Basra, for example, are report-
ed to have been made by army
officers armed with submachine
guns, while PRF members, armed
only with sticks, acted as
guides.
Anyone associated with
the UAR is liable to physical
attack. While spokesmen of
the Qasim regime have said
they do not intend to reply of-
ficially to the barrage of in-
vective hurled against them
by Nasir, the Baghdad press is
replying effectively in kind,
and the mere possession of a
picture of Nasir, once the sym-
bol of Arab nationalist feel-
ing, is now cause for a mob at-
tack.
Cairo evidently intends
to continue propaganda and other
types of pressure on Iraq. The
UAR has given extensive play
to frontier incidents which ap-
parently occurred in the course
of the Iraqi Army's effort to
pacify the Shammar and other
tribesmen along the Syrian-,
Iraqi border.
Nasir's bitter attacks on
Qasim and Arab Communists as h
"agents of the foreigner," at
first ignored by Moscow, led to
a reply by Khrushchev on 16 March
and a further exchange of radio
and press recriminations which
have brought relations between
Moscow and Cairo to their low-
est ;point since Nasir accepted
bloc arms in late 1955.
Khrushchev,
blamed Nasir's "in-
sistence" on unifying Iraq with
the 1JAR "against the will of the
Iraq:L people" as the cause of the
dispute, and upbraided the
UAR President for using the
"language of imperialists" in
attacking Arab Communists.
Khrushchev's remarks that
the USSR is not indifferent to
the situation and that Na-
sir's anti-Communist campaign,
if continued, will inevitably
fail point to possible Soviet
retaliatory moves against
the UAR.
Pravda, foreshadowing So-
viet a ors to build up Qasim
in the radical Arab national-
ist movement as a counterweight
to Nasir, declared on 13 March
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CURRENT INTELLIGENCE WEEKLY SUMMARY
that Baghdad is more and more
becoming an important center of
the ."liberation movement" in
the Near and Middle East. Khru-
shchev also praised the "pro-
gressive" reforms of the Qasim
regime--contrasting them to at-
tempts by the UAR to ignore the
"interests of the working peo-
ple"--and asserted that Iraq
has a "more progressive system
.,.than neighboring countries
of the Arab world."
Nasir's speedy reply on 16
March Ito Khrushchev declared
that the Soviet premier's state-
ment regarding Nasir's "insist-
ence" on unity was a distortion
of facts and that his defense
of Arab Communists was "a mat-
ter which the Arab people can-
not accept."
Israel
Tel Aviv may be taking ad-
vantage of both the UAR-Iraq
and the Jordanian situations
to apply new pressures to se-
cure long-sought objectives.
The Israelis have complained
that cargoes of Israeli origin
on foreign-flag vessels have
been seized by Egyptian author-
ities, This is in effect a
revival of an Israeli complaint
last voiced in 1957 over Egyp-
tian activity enforcing the
Arab League's economic boycott
of Israel and Egypt's policy
on restricting Israeli use of
the Suez Canal. Nasir presuma-
bly would not wish to become
involved with Israel at a time
when he is heavily engaged
elsewhere, and the Israelis
may be playing on this proba-
bility,
The Israelis are reported
to have moved some armor--13
or 14 tanks, according to a
UN truce team count--into the
Jerusalem area in violation
of the Israeli-Jordanian armi-
stice agreement. The tanks are
said to have been moved in at
night over a two-week period.
An Israeli official has laugh-
ingly denied any intention to
"invade Amman," but the tank
movement may be part of precau-
tions the Israelis are taking
against any upheaval in Jordan 25X1
Israeli of-
ficials have long claimed that
it is vital to their country's
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security that West Jordan be
kept out of UAR hands, al-
though they have also recognized
the serious problems involved
in.taking over the mass Arab
refugees there.
Sudan
Thus far the Ansar sect,
which formed the principal sup-
port of the more pro-Western
officers who have already been
removed from the Supreme Army
Council and from the cabinet,
has not seriously resisted the
demands of the dissidents. Al-
though a substantial number of
Ansar tribesmen were reported
to have moved into the Khartoum
area in anticipation of force-
ful action, their leader, Say-
yid Abdul Rahman al-Mahdi, sent
them back home to avoid blood-
shed.
Should Al-Mahdi feel, how-
ever, that a new coup threatened
the complete eclipse of his
influence, he might well call
on the tribesmen, and violence
would almost certainly ensue.
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VtJ{11 1UL111 iril..
CURRENT INTELLIGENCE W981CLY SUMMA Y
1.9'.rch 195: :.
PAi r I I
NOTES AYE? COMMENTS
NEW SOVIET ECONOMIC PACT V i IT T #JIIAQ
The Soviet Union granted
Iraq a $137,500,000 credit un-
der an economic and technical
cooperation agreement concluded
in Moscow on 16 March. The
long-term, low-interest credit
will be used to finance Soviet
participation in about half the
50-odd projects called for under
the new Iraqi development pro-
gram. Moscow will provide
technical assistance for con-
structing a number of indus-
trial enterprises, including
heavy engineering, chemical, and
food-processing projects.
Soviet specialists will conduct
surveys designed to lead to an
expansion of the Iraqi irriga-
tion systems and development of
road networks. They will also
m-,gage in geological prospect-
ing for developing Iraq's min-
eral resources.
The talks in Moscow pre-
ceding the announcement of the
Soviet credit apparently pro-
gressed a..,:)otily and rapidly,
suggesting the USSR was ex-
tremely willing to accommodate
Iraqi requests for aid. Mos-
cow, however, was not acting
precipitously, since a Soviet
delegation had an opportunity
earlier this year to study most
of the projects. In an effort
to underscore its support
of Qasim, Moscow will probably
speedily dispatch Soviet tech-
nicians to Iraq to conduct sur-
veys which are necessary before
work can actually begin on the
projects. Work on the projects
themselves, however, will prob-
ably not begin for some time.
In addition to aid, the
bloc continues to exploit other
opportunities to develop closer
economic relations with Iraq.
Talks between Soviet Embassy
officials and the Iraqi Ministry
of Communications concerning the
establishment of air routes were
held in Baghdad earlier this
month. The discussions may have
included a preliminary Soviet
offer to re-equip the Iraqi
airline with modern Soviet
civil aircraft. Iraqi officials
reportedly are also studying
drafts of proposed civil air
agreements submitted by Czech-
oslovakia and Hungary. The
Hungarian minister of transport,
who visited Baghdad in January
for talks with the Iraqi minis-
ter of communications, an-
nounced at that time that his
business dealt with "the open-
ing of an air service between
Iraq and Hungary."
Military support of the
Iraqi. Government by Moscow also
is cantinuing~
Thus far, arms
deliveries under the $170,000,000
agreement have been limited to
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land armaments and military trans-
port vehicles, but Iraq is sched-
uled to receive jet fighters
and bombers as well as motor
torpedo boats from the Soviet
Union . Prepared 25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
SOVIET-IRANIAN RELA'.C IONS
Apparently in response to
the signing of the US-Iran de-
fense agreement on 5 March,
Soviet Ambassador Pegov is
leaving Tehran in the near fu-
ture. This move would be in
line with remarks by a Soviet
official in Tehran in late Feb-
ruary that once the bilateral
treaty was signed, every form
of political, economic, and
progaganda pressure would be
used against Iran, including
an economic boycott. Iran for
its part has postponed the de-
parture of its ambassador-des-
ignate to the USSR "until re-
lations improve."
Soviet radiobroadcasts to
Iranian listeners have renewed
explicit personal attacks on
the Shah. A 12 March broad-
cast, which described the Shah
as a "lackey" of the United
States, alleged that his "anti-
national" economic policy had
turned Iran into a market for
foreign goods and subjugated
the country to foreign monop-
olies.
Moscow could cause Iran
considerable internal difficul-
ties by refusing to trade.
Trade with the bloc accounts
for about 15 percent of Iran's
total, excluding oil; about 25
percent of Iran's exports and
10 percent of its imports in-
volve bloc sources, principally
the 1JSSR. Soviet economic re-
prisals will not seriously dis-
turb Iran's foreign-exchange
earnings, however, most of which
are derived f rom oil royalties and oil-
consortium purchases of local currencies --
$245;,000,000 and $75,000,000
respectively in 1958.
The USSR and its satellites
account for a large percentage
of Iran.'s foreign sales of wool,
cotton, and minerals other than
oil, and substitutes for these
markets would be difficult to
develop elsewhere. Iran's econ-
omy could also be disturbed by
Soviet failure to deliver a
wide variety of construction
materials, consumer goods, and
light industrial goods which it
f ind;s convenient to import from
the bloc for use in the north-
ern part of the country. In
several cases, more than one
third of Iran's imports of such
materials comes.from the bloc.
Tehran, with funds from its oil
earnings, can find alternate
sources of supply in Western
Europe, but Soviet cancellation
of deliveries would be disrupt-
ing, at least temporarily.
with ORR)
(Prepared jointly 25X1
BRITAIN'S DILEMMA IN EAST AND CENTRAL AFRICA
The continuing unrest in
Nyasaland and potential trouble
in Kenya have forced Britain to
hasten planning of constitution-
al evolution of its East and
Central African territories, and.
a new general policy statement
is expected shortly. Lord
Perth, the government's second
in command on colonial affairs,
will report to Parliament on
his present fact-finding tour,
As the white-settler minor-
ity is hardening in its deter-
mination to maintain political
dominance, London find its
ability to influence this
group decreasing. The settler-
contrrolled Federation of Rho-
desia, and Nyasaland is already
partly self-governing and will
be considered for full independ-
ence in.. 1960. African nation-
alisin's turn toward violence,
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CURRENT INTELLIGENCE WEEKLY S
however, is putting Britain un-
der heavy pressure to provide
the Africans a political role
commensurate with their numeri-
cal majority.
With a British general
election likely this year, the
Labor party's strong pro-Afri-
Lake
Tanganyika
SOUTH-WEST
AFRICA
RHODESIA 1
ya 12'. /2ND
can views iurther complicate
the current policy review. Re-
cent events and Labor's stand
may force the government to
consider separating the Nyasa-
land protectorate from the fed-
eration. Disorders such as
Belgium's political reform
program for the Congo, announced
on 13 January, is winning Afri-
can support but provoking op-
position among conservative
elements in Brussels and Euro-
pean settlers in the Congo.
Conservative settler groups
have begun to organize political
parties and to issue manifestoes
against the allegedly pro-Afri-
can efforts of Minister of the
Congo and Ruanda-Urundi van
Hemelrijck. They demand recog-
airfield sabotage continue in
Nyasaland, and isolated violence
has erupted in Northern Rhodesia.
A meeting of the All-Afri-
can People's Conference secre-
tariat reportedly has been called
for April in Accra to plan a
campaign of action in Nyasaland.
The British hope moderate Nyasa
leader Chirwa will discuss the
new constitution they have been
devising, but even Chirwa wants
self-government outside t1e fed-
eration.
In Kenya,
new program may not go far
enough to prevent the faction
favoring violence from gaining
control of the African national-
ist movement. At the same time,
it may provoke European extrem-
ists.
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In Tanganyika, where there
is no large entrenched settler
minority, current progress to-
ward a self-governing African
state provides a relatively
bright spot for London, but does 25X1
not help mitigate the fundamen-
tal conflicts in the surrounding
nition of white cultural superi-
ority and call for a division
of the Congo into three sectors
to permit a coexistence of
races on the general principle
of South African apartheid.
When Van Hemelrijck arrived in
Leopoldville on 11 March, the
settlers showed their dissatis-
faction by staging a hostile
demonstration. Several large
mining and industrial com-
panies are pressing Premier
Eyskens to dismiss Van
Hemelrijck.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
Van Hemelrijck. has visited
the Congo twice since January
and has promised to spend four
months a year in the area. As
part of a policy of decentraliz-
ing administrative functions
from Brussels, he plans to ap-
point a deputy minister to act
locally. He has already re-
placed several top officials
for their conduct during the
January riots. Draft legisla-
tion has been prepared to set
up legislative and consultative
councils, to extend Belgian
civil liberties to the Congo,
to permit legal parties, and
to end racial discrimination.
Already 459 Congolese have been
admitted'to civil service jobs
formerly reserved for Europeans,
Among African circles there
is an increasingly favorable re-
sponse to the reform program,
and Van Hemelrijck reportedly
has won the support of nation-
alist leader Joseph Kasavubu.
Kasavubu, now in Brussels,prob-
ably will not be brought to
trial for his part in the Jan-
uary riots, and another jailed
leader, Arthur Pinzi, is to be
restored as mayor of an African
suburb of Leopoldville. How-
ever, the National Congolese
Movement is demanding that Bel-
gium prove its good will by
abolishing restrictions on free
political activities, by creating
a commission--including Congo-
lese representatives--to over-
see the development of politi-
cal institutions, and by fixing
dates for the establishment of
government councils.
Belgium's determination to
remain in the Congo is shown
by its plans to contribute at
least $20,000,000 to the lo-
cal budget this year and to
make expenditures totaling
about $1 billion over a ten-
year period from 1960 for
the next development plan.
Results of the municipal
elections held in France on 8
and 15 March showed a swing
back toward Fourth Republic
voting patterns, following the
pro-Gaullist landslide in the
November 1958 National Assembly
elections.
Although total figures for
the new municipal councils show
a slight over-all shift to the
right since the last local elec-
tions in 1953, the pro-Gaullist
Union for the New Republic
failed to establish the strong
grass-roots position necessary
for its long-term development
as a major political force..
The greatest change was a dou -
blingof the already large number
of successful "nonparty" candi-
dates, most of them apparently
drawn from the Radicals or
other centrist groups.
The Communists regained
about half the popular votes
they lost in 1958, but these
gains were concentrated in the
largest cities. Fewer Commu-
nists, however, were actually
elected to municipal posts than
in 1953, because proportional
representation has been abol-
ished in all but the very large
cities. In Paris, they won two
additional seats for a total of
29 on the 90-member municipal
council. Despite the working
of the new electoral law which
awards all the council seats
to the party or list winning a
plurality in the runoff, the
Communists won control over
some municipalities, particu-
larly in the southwest, which
they had not previously held.
Mayors are elected sepa-
rately by the new town councils.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
In Le Havre, the only major
city which previously had a
Communist-dominated administra-
tion, violence broke out on 17
March when Mayor Canoe was de-
feated for re-election by one
vote in the council. This oc-
curred against a background of
rising labor unrest over the
government's austerity program.
Le Havre port workers affiliat-
ed with both Communist and non-
Communist labor unions tied up
the harbor briefly last week,
and may respond to the call for
nationwide protest "action"
this week.
The new municipal councils,
together with the cantonal coun-
cils, form the electoral college
fox the Senate, Reflecting the
results of the 8-15 March elec-
tions, the new Senate to be cho-
sen on 26 April is expected to
be somewhat more center oriented
than the predominantly rightist
National Assembly chosen by the
pro-Gaullist rightist landslide
in November. This shift may
assist President de Gaulle in
keeping the assembly in line,
especially since the new con-
stitution accords the Senate a
greatly strengthened role.
NUCLEAR TEST TALKS
Moscow has attempted this
week to keep discussion at Ge-
neva focused primarily on the
American draft article on dura-
tion. It probably believes that
the Soviet position favoring a
"permanent" and unconditional
cessation of nuclear tests con-
trasts favorably with Western
insistence on an escape clause
based on the effectiveness of
the control, system.
Soviet chief delegate
Tsarapkin has charged that the
American draft proposal is "ab-
surd," since it would make the
entire fate of the treaty de-
pendent on each party's uni-
lateral determination of the
effectiveness of controls. He
said that one could possibly
understand the Western position
if withdrawal were made depend-
ent on a nuclear explosion in
violation of the treaty, but not
where the treaty could be ab-
rogated by a party even if there
had been no illegal explosion.
On 19 March'Soviet dele-
gate Tsarapkin approved the
PART II
Western suggestion made pri-
vately on 16 March to adjourn
the talks from 20 March until
13 April. The Soviet delegate
himself-?had earlier suggested
the meetings be cut down to
one or two per week.
Soviet propaganda has also
focused on the American draft
duration article. Claiming
that, if translated into "plain
and simple language," the Ameri-
can formula is "an empty decla-.
ration intended to deceive pub-
lic opinion," Moscow has attempt-
ed `to portray the escape clause
as evidence of a Western desire
to "guarantee" the legal right
to resume testing at any time.
A 15 March commentary relates
this "attempt to impose on the
Geneva conference the adoption
of a false declaration" to Ame.r-
icar.n interest in preparing a
nuclear war. Soviet propagan-
dists earlier called the intro-
duction of the proposal "an-
other maneuver aimed at prevent-
ing at any cost a totaluncondi-
tional and permanent cessation of
tests," Con- 25X1
curred in by OSI)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
MOSCOW REMOVING INEFFECTIVE AND CORRUPT REGIONAL OFFICIALS
Khrushchev apparently has
launched a campaign to strength-
en the second-level leadership
of the Soviet Union by replac-
ing some of the more corrupt
and inefficient party and gov-
ernment officials. Shake-ups
have taken place in the Uzbek
Republic and Moscow Oblast, with-
in the past two weeks, follow-
ing similar action in Turkmeni-
stan. Party chiefs in a number
of other areas, including the
Chechen-Ingush Autonomous Re-
public, Novosibirsk Oblast, and
Jewish Autonomous Oblast, have
also been removed, and there
are some indications that a
similar house cleaning may soon
extend to other republics.
On 14 March both party
First Secretary Sabir Kamalov
and Premier Mirza Akhmedov of
Uzbekistan were ousted for "se-
rious mistakes" in their work.
A similar move had taken place
in Moscow Oblast on 2 March,
when First Secretary Ivan Kapi-
tonov and oblast government
chief Nikolay F. Ignatov were
fired at a meeting attended by
some of the Kremlin's top per-
sonnel specialists, including
party presidium members Aristov
and Kirichenko. No details have
been published on the charges
against the two
The principal victims of
the Turkmen affair last Decem-
ber were party First Secretary
Sukhan Babayev and another sec-
retary, both of whom were ac-
cused of "gross mistakes in
their work," including national-
ism;, nepotism, and malfeasance.
These charges were sufficiently
NOVOSIBIRSK OBLAST
7 IA
Localities where
recent leadership
changes have occurred
SECRET
STALING
OBLAST
MOSCOW
OBLAS V
CHECHEN-INGUSH
I OBLAST
URKMEN
JEWISH
(YEVREYSK)
AUTONOMOUS OBLAS
o -~
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serious to warrant Babayev's
removal from the all-union par-
ty central committee and to
raise the question of his con-
tinued membership in the Commu-
nist party.
Further changes in the com-
position of the party's central
organs could result from the
current purge. Kapitonov, Igna-
tov, and former Novosibirsk
party chief Boris Kobelev are
full members of the central com-
mittee; Kamalov and former
Chechen-Ingush party chief A.
I.. Yakovlev are members of the
Central Auditing Commission.
The shake-up in Turkmen-
istan has extended to lower
echelons in that republic's
leadership, where several offi-
cials have been fired for prac-
ticing Babayev's methods. A
similar widening of the purge
may follow the changes in Moscow
Oblast and Uzbekistan, and the
leadership in at least two other
areas has been warned to improve
or suffer the consequences. In-
efficiencies in the work of the
Minsk Oblast government came
under heavy fire at the Belo-
russian party congress in Jan-
uary, and on 14 March a Pravda
editorial called for the elimina-
tion of "serious deficiencies"
in mass political work being
carried out in Stalino Oblast
in the Ukraine.
not be tolerated.
Khrushchev has recently
stressed the availability of de-
serving and qualified younger
men capable of providing vigor-
ous leadership for his programs,
and he has warned party and gov- 25X1
ernment functionaries that short-
comin;s in their leadership will
FURTHER REORGANIZATION OF SOVIET AGRICULTURAL ADMINISTRATION
Soviet agriculture may soon
undergo further reorganization
which could involve the weaken-
ing if not the outright aboli-
tion of the Ministry of Agri-
culture.
Just prior to the opening
of the 21st party congress,
Agriculture Minister Matskevich
and his ministry were sharply
criticized in an Izvestia edi-
torial for mismanagement of the
forestry program. Furthermore,
Matskevich did not speak at the
congress, although government
spokesmen for most of the other
priority sectors of the economy
were heard. The Third All-Union
Collective Farmers' Congress,
which had been scheduled for
the "beginning of 1959," has
apparently been postponed, prob-
ably to provide the regime more
time to resolve questions of
agricultural organization.
In recent months, the So-
viet press has carried several
articles discussing the advan-
tage of transferring from the
ministry its jurisdiction over
the Repair and Technical Sta-
tions (RTS) and over forestry,
and of reducing its role in ad-
ministering state farms. These
articles suggest that "kolkhoz
unions" should be established
and that the RTS should be ab-
sorbed either by them or by in-
terkolkhoz construction organiza-
tions. The latter organizations,
which have been in existence
for several years, are coopera-
tive agencies engaged in rural
construction, and are financed
by member collective farms.
These articles further sug-
gest that state farm trusts of
the ministry be eliminated and
rayon executive committees be
strengthened as the main link
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CURRENT INTELLIGENCE WEEKLY SUMMARY
l
15 March
in administering both state
and collective farms, and that
either USSR Gosplan or the USSR
Council of Ministers assume
responsibility for forest con-
servation,
The Yerevan Kommunist on
8 December suggested in an
article that kolkhoz unions re-
place the Ministry of Agricul-
ture in administering collective
farms. The article called for
the abolition of the ministry
and proposed that kolkhoz un-
ions be established at the ray-
on, oblast, and republic levels,
with rayon kolkhoz unions as
the main administrative link?
In administering state farms,
grealter agricultural decentrali-
zation has been requested in
Kazakhstan, the stronghold of
the state-farm system, I.
Slazlnnev, deputy chairman of the
Kazakh Council of Ministers,
writing in the 25 January issue
of Izvestia, called for aboli-
tion of ssTate-farm trusts and
the transfer of certain plan-
ning, financing, and sup-
ply functions from the
Kazakh Ministry of Agricul-
ture to the rayon and ob-
last executive committees.
by ORR)
The Yugoslav economy in
1958 exhibited a considerable
degree of stability as infla-
tionary pressures particularly
evident during the first half
of the year were brought under
control, Real wages of indus-
trial workers, which had been
13 percent below the 1957 level
in the first half of 1958, in-
creased by October to 13 per-
cent above that level, Further-
more, current indications of
stability and vigor augur favor-
ably for 1959,
Industrial and mining pro-
duction rose 11 percent in 1958
over 1957, and production levels
stood 7 percent above the level
called for in Yugoslavia's Five-
Year Plan (1957-61), A drought
in the south caused agricultural
production to fall 10 percent
below the 1958 planned levels,
but this was still 11 percent
above the original Five-Year
Plan goal,
According to Belgrade,
trade with the bloc fell 15 to
20 percent short of agreed lev-
(Prepared 25X1
els, In addition, planning
was further disrupted when the
USSR delayed delivery of 200,-
000 tons of wheat and 800,000
tons of coking coal? Thdyear's
export plan fell 6 percent be-
low expectations, but Yugosla-
via's chronic import surplus
was decreased 9,2 percents.
Yugoslavia has signed 1959
trade protocols with all bloc
members except Rumania, If the
planned levels of these agree-
ments are reached, which is
doubtful, trade would be raised
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above
above the amounts actually ex-
changed in 1958. Most of the
negotiations were lengthy and
were accompanied by angry ex-
changes over who was to blame
for the decrease in trade and
cancellation of Sino-Soviet bloc
credits. Belgrade has further
charged that the bloc is unwill-
ing to supply many of the prod-
ucts Yugoslavia wants or to ac-
cept some goods for which it
has no alternative market. In-
creases in trade with the West
are expected to reduce the bloc
share of Yugoslav trade to be-
low 30 percent.
The greatest upset to Yugo-
slavia's plans was the "post-
ponement" by the USSR and East
Germany of $244,000,000 and by
Czechoslovakia of $57,000,000
in credits. The damage of these
measures was offset somewhat
by a $23,500,000 loan from the
US Development Loan Fund for
the Pancevo fertilizer plant,
another $5,000,000 Development
Fund loan for purchase of diesel
locomotives, and a $8,430,000
loan from the United Kingdom
for agricultural and other equip"
merit. Nevertheless, the $175,-
175, -
000,000 Montenegrin aluminum
combine project apparently had
to be shelved for lack of
f unds. (Con-
curred in by ORR)
TAIWAN ECONOMY SHOWS CONTINUED SHORT-TERM
A boom in textile produc-
tion and exports now under way
highlighted the year 1958 in
which the Taiwan economy in
some respects made better prog-
ress than had been anticipated,
despite the serious military
crisis over the offshore islands.
Gross national product increased
6 percent in 1958 as compared
with 5 percent in 1957, while
prices rose only about 4 per-
cent. A record rice crop was
produced during 1958. In ad-
dition, a $14,600,000 favorable
balance of payments on current
account, exclusive of American
aid goods, was recorded despite
a drop in exports of sugar, the
main dollar-earning product.
The Chinese Nationalists'
most pressing problem involves
a prospective increase of up-to
$28,000,000 in proposed spend-
ing for fiscal 1960 ending on
1 July 1960; this will serious-
ly unbalance the budget. This
prospect, together with a sharp
increase in the money supply,
raises prospects of ser4,--,s in-
flation.
n GE ICLILTURAL 120 (INDEX .-52-54-ID0)
1
A/ 00-
//
~
,/
910
80
INDUSTRIAL
PRODUCTION
GROSS
NATIONAL
200 ---
175 -
150
125
(MILLION DOLLARS)
-(IP-1 957 PRICES)
POPULATION 11o (MILLION)
9
tffif
WHOLESALE
PRICIIS
Unless inflation gets out
of hand, the prospects are good
SECRET
7
6i
5
1938 '54 '55 '56 '57 '58
(ESTIMATE)
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CURRENT INTELLIGENCE WEEKLY SUMMARY
for a further growth of the Tai-
wan economy in 1959. The re-
"ision of the exchange rate last
November should stimulate ex-
ports and rationalize the price
structure. Exports of sugar,
however, are expected to de-
cline further in view of a re-
Lt cut of 56,250 tons in Tai-
wan's 1959 international sugar
quota. Total production in
1958 was approximately 930,000
tons, not all of which was mar-
keted.
A number of basic economic
problems remain for which no
solution is in sight. The pop-
ulation continues to increase
at a rate, which, if unimpeded,
will approximately double the
10,500,000 inhabitants in a
generation. This will provide
a serious problem for a pre-
dominantly agricultural coun-
try, with per-capita arable
land already only one fifth of
an acre. Investment of about
16 percent of gross national
product per year is estimated
to be necessary to avert a de-
cline in poor-capita gross na-
tional product. It is question-
able whether adequate capital
grovit can be maintained in the
Maintenance of a large
standing army constitutes the
second tajor basic problem. A
Chiang Kai-shek government is
not likely to undertake a dras-
tic reduction of the armed
forces, now some 670,000 men, since
this would virtually necessitate
abandonment of the present pol-
icy of maintaining large forces 25X1
in readiness to exploit any
"Hungarian-type" uprising on the
China mainland.
The Japanese Socialist par-
ty is shifting from its "neu-
tralist" policy and moving to-
ward a pro-Communist foreign
policy. In the absence of most
of the party's right-wing lead-
ers, party executives pushed
through a decision to form a
joint front with the Communist
party, the leftist Sohyo labor
federation, and other leftists
in an all-out attack on the US-
Japan security treaty. Mean-
while, a Socialist mission to
Peiping has identified itself
with the Communist position on
Asian questions and termed the
United States the "common enemy"
of Japan and China.
The decision to form a
joint front with the Communists
was a marked triumph for the
Socialist left wing and assured
that the campaign against the
security treaty will be under
pro-Communist leadership. The
right wing, however, does not
fully share the left wing's de-
sire to abolish the security
treaty or its willingness to
sever relations with Taiwan.
Neither does it fully support
the policy of cooperating with
the Japanese Communists. Fac-
tionalism in the party ranks
thus will probably continue, and
a reversal of the Socialist de-
cisions is unlikely.
Socialist Secretary General
Inejiro Asanuma, who is heading
the party mission to Peiping,
on 17 March issued a joint
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CURRENT INTELLIGENCE WEEKLY SUMMARI
19 March 1959
communique with Chinese Commu-
nist leaders in which he agreed
that Japan must sever relations
with Nationalist China and sign
a peace treaty with Peiping.
He also subscribed to Peiping's
denunciation of the Kishi gov-
ernment, its call for a nuclear-
free zone in Asia, the "liber-
ation" of Taiwan, and to Pei-
ping's linking of political
questions to that of trade with
Japan.
Asanuma's actions are an
apparent effort to induce Pei-
ping to ?-nd its trade embargo
against Japan and to give the
Socialists credit for an achieve-
ment which could be exploited in
the forthcoming local and upper-
house elections. However, there
have been no indications of any
such concession.
The Japanese press has been
strongly critical of the Social-
ist party's new policies and has
accused it of "slavish servility"
to Peiping. The governing Lib-
eral-Democratic party is seek-
ing to drive a wedge in Social-
ists ranks by publicly charging
Asanuma with irresponsibility.
It also apparently intends to
fight the forthcoming election
campaign on the issue of conserv-
ative advocacy of close cooper- 25X1
ation with the United States
versus Socialist anti-American-
ism.
NEW STRAINS ON PAKISTAN'S MILITARY GOVERNMENT
Pakistan's military leaders
are encountering new tensions as
the regime nears the end of its
first six months in power. Their
growing impatience with the per-
formance of the civilian admin-
istrators, coupled with the
first signs of popular dissatis-
faction, apparently is forcing
President Ayub and the army to
assume a firmer and more direct
command of the government.
The top military leaders
recently have stepped up their
pressure on senior officials of
the civil service, on whom they
have relied heavily since Octo-
ber to provide the specialized
knowledge and administrative
techniques necessary to carry
out the regime's extensive re-
forms. Ayub and his army col-
leagues are reported increas-
ingly critical of the effective-
ness of some civilian officials.
At the same time, there have
been growing indications of pop-
ular dissatisfaction over the
army's reliance on discredited
officials to run the government
instead of retaining full
martial in-law administration.
These reactions among sec-
tions of the army and the public
apparently were responsible for
Ayub's order of 10 March provid-
ing for summary dismissal or re-
tirement of civil servants with-
out appeal if they are found to
be corrupt or inefficient. No-
tice has already been served on
a number of high-ranking govern-
ment officers. The morale of
the civil service, long one of
the most stable and protected
career organizations in Paki
4an, is reported to be extremely
low following Ayub's action.
Since the army is neither
desirous nor capable of adminis-
tering the country solely at all
levels, the regime will remain
dependent on civil officials.
The growing strain between the
two groups is likely to make it
more difficult for the army lead-
ers to implement their complex
political and economic programs.
The martial-law administra-
tion in East Pakistan demon-
strated its concern over the
first serious challenge to its
authority by recently imposing
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CURL RENT INTELLIGENCE S EXLY SUMMARY
19 March 1959
severe sentences on leaders of
a strike by jute mill worko:;s
in February. Despite their con-
cern for popular good will, the
military leaders apparently
felt this first indication of
unrest had to be met with a
show of government firmness.
The stiff penalties may
result, however, in serious dis-
affection among working groups
in East 1-:: istan, where there
is traditioA.:ial sensitivity to
outside authority. A current
unseasonal price rise in East
Pakistan towns may promote
additional dissatisfaction
among the working classes. A
conference of all top govern-
ment leaders will be held
in East Pakistan next month
to take stock of internal
conditions.
CUBA'S CAMPAIGN AGAINST DICTATORSHIPS
Fidel Castro's campaign
against dictatorships places
him in the same camp with such
liberal leaders as Venezuelan
President Romulo Betancourt and
former Costa Rican President
Jose Figueres, but his predi-
lection for revolutionary meth-
ods and his recent tendency to
deal with Communist-influenced
exile groups have prevented
concerted efforts by these three
leaders.
Although Castro has denied
any intention to intervene mili-
tarily, he has publicly declared
his intention to assist anti-
dictator revolutionary groups,
and Cuba has become a meeting
place for revolutionaries seek-
ing material or financial sup-
port. Castro has authorized
:Ernesto "Che" Guevara, the con-
troversial leftist Argentine
revolutionary, who worked close-
ly with Castro during the rev-
olution, to deal with such
groups.
Revolutionary plotting in
Cuba. is directed primarily a-
gainst the governments of Haiti,
the Dominican Republic, and Nic-
aragua.. Activities against
Haitian President Duvalier--al-
ready weakened by internal dif-
ficulties--have progressed the
farthest. Haitian exiles have
been permitted to broadcast in-
flammatory propaganda and to
operate freely, but there is
no firm evidence that a Haitian
invasion force is training in
Cuba.
Castro's interest in Haiti
is primarily as a potential base
of operations against Dominican
dictator Trujillo. Anti-Trujillo
groups have become active in
several countries other than
Cuba, notably in Venezuela, but
so far have failed to achieve
unity, Castro's apparent sup-
port for the Communist-influenced
Dominican Patriotic Union has
met with opposition from Betan-.
court and Figueres. Despite
a great deal of Dominican exile
activity in Cuba, including
radio propaganda and possibly
some recruitment, preparations
for an attack can Trujillo are
not believed to have progressed
beyond the planning stage. The
Dominican foreign minister has
stated that an attack on Haiti
would be considered an attack
on the Dominican Republic.
Activities against Nicara-
gua, which is of less immediate
Interest to Cuba, have also been
hampered by lack of unity among
the opposition groups involved;
Castro is believed to support
the pro-Communist Nicaraguan
:Patriotic Union,
Castro's efforts to exclude
"dictatorships" from the Organi-
zation of American States--a
proposal originally made by
3etancourt--will probably be
limited by the reluctance of
many :Latin American countries
to intervene in the inter-
nal affairs of member na-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
HONDURAN-NICARAGUAN TENSIONS
Long-standing tensions be-
tween Honduras and Nicaragua
have flared again despite the
signature in Washington on 26
February of an agreement between
the two countries designed to
control revolutionary exile ac-
tivities. Honduras has public-
ly charged Nicaragua with vio-
lating the agreement by arming
the rebel band that clashed
with a Honduran patrol near the
border on 11 March, Nicaraguan
officials look with suspicion
on the Honduran delay in ratify-
ing the agreement and-'fear that
the exiles now at-
tempting to secure
Cuban and Venezuelan
support for an inva-
sion of Nicaragua
may be permitted to
use Honduran terri-
tory,
Shortly after
signing the 26 Feb-
ruary agreement, Nic-
aragua deported Hon-
duran rebel leader
Armando Velasquez to
Costa Rica, Velas-
quez had stimulated
several small out-
breaks in Honduras
by broadcasts over
a clandestine radio
failed on 12 March when, despite
official Honduran assurances
that they could return peacefully,
they were fired on by unidenti-
fied civilian groups a few miles
inside Honduras, About 600 of
them then came back to Nicaragua.
There is some danger of a
serious border incident between
the armed forces of the two
countries. Nicaraguan officials
told the US Embassy on 15 March
that the presence of a large
Honduran Army force near the
border caused them to withdraw
0. SALVA&SR)Y
'--. NICAAAOUA
COS- A.
'14 !
CAN. It' LQ
Nicaraguan troops to a prudent
distance.
station announcing an "imminent
uprising" in Honduras.
Other immediate effects of
the agreement were to be an end
to the clandestine radiobroad-
casts and the repatriation of
the several hundred Hondurans
who had taken refuge across the
Nicaraguan border. The radio,
however, continued sporadic
broadcasting at least until 15
March from its as-still-undis-
closed location. An attempt
to repatriate the refugees
Meanwhile, the Nicaraguan
Government has called for in-
vestigation of the refugee prob-
lem by the mixed Honduran-Nicara-
guan military commission, a group
set up under the auspices of the
Organization of American States
(OAS) after earlier border trou
tiles, Honduran President Villeda 25X1
has authorized his ambassador in
Washington to take the case to
the OAS if other means fail.
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1WF
CURRE'NT' INnELLTO:ENCE' WEEKLY SUMMARY
THE BOLIVIAN CRI,3IS
The Bolivian crisis, which
caused the US Embassy to start
sending American dependents out
of the country on 13 March,
eased at least temporarily on
16 March when tin miners sus-
pended their strike. The Sales
government appeared initially
to have won a showdown with dis-
sident government party members
headed by the key leftist labor
leader Juan Lechin.
Postponement to 1 April of
the controversial unfreezing of
mine commissary prices, however,
suggests that this key issue
may not be definitively settled
and that a new contest between
the Sales and Lechin factions
may break out. Sales usually
can count on a minority of the
miners and of the central labor
organization, while the majority
tend to back Lechin. Siles in-
creased his support from the
militia in the recent crisis by
appointing ;Quechua Indian lead-
er Josd Rojas to the cabinet.
Rojas is widely feared in Bolivia
for brutality and wields dic-
tatorial power over a key seg-
ment of the rural population.
The Bolivian Government's
avowed adherence to the Interna-
tional Monetary Fund's require-
ment on wage policy permitted
the US Government on 16 March to
release ICA funds of $500,000 to
Bolivia, but the Bolivian Cen-
tral Bank still has a deficit
of approximately $2,000,000.
The bank was able to operate at
a deficit in part by making use
of $1,400,000 in guarantee de-
posits of foreign oil companies.
The :remaining deficit is ex-
plaixned by a time lag. between
the bank's writing of dollar
drafts and their being presented
for payment; these dollar drafts
may "bounce" whenever the bank's
deficit is much over $1,400,000.
External factors may facil-
itate the implementation of Bo-
livia's economic program over
the next year. Tin prices are
showing unexpected strength and
reached $1,035 per pound on 16
March, while Bolivia's 1959 budg-
et predicated a price of $0.95.
Furthermore, a foreign oil com-
pany operating in a field with
proved reserves is expected to.
begin producing shortly, while
other foreign oil companies plan
to spend $12,000,000 in Bolivia
this year, and the new pipeline
to Chile may increase oil ex-
ports. Bolivia achieved a 15-
percent decrease in the cost-
of-living between January
1957 and September 1958, thus
suggesting that the Bolivian
Government has a fair chance
of carrying out its economic
stabilization program.
OUTLOOK IN THE NETHERLANDS FOLLOWING ELECTIONS
The indecisive results of
the Netherlands' national elec-
tions on 12 March will make for-
mation of the next cabinet dif-
ficult and may leave the country
without an effective government
for months.
The slight trend to the
right--seen mainly in gains by
the Liberal party--reflects the
gradual postwar improvement in
the Netherlands' economy and a
protest against the "rigidity"
of the successive postwar four-
party coalition cabinets. The
Labor party, which suffered con-
sider-able losses in last year's
provincial and municipal elec-
tions, held its loss to only two
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
seats, while the conservative
Protestant parties suffered
just enough losses to eliminate
the possibility of Catholic re-
liance on them for a "denomina-
tional majority" alliance.
Largely because of a split in
the party, Communist represen-
tation was cut in half.
As the largest party in
the chamber, the Catholics are
being asked to make
the first effort to
form the new govern-
ment, and they prefer
a coalition with the
Labor party, Labor,
however, may feel it
will do better as an
opposition party for
the next few years.
In this case, there
will be no alterna-
tive to forming a
right-wing coalition,
but even this would
for years because of inter-
party bickering. If the Labor
party--which pressed during
the campaign for an "interna-
tional" solution in West New
Guinea, possibly under UN aus-
pices--makes an issue of it by
going into opposition or making
it a necessary compromise to
jointing the government, the
deadlock may be broken. The
inte:rim government of Catholic
12 MARCH 1959 ELECTION
(0) FROM 1936 FltCTION
PEOPLE'ffol 21_T.V . _;
150 SEATS
CHRISTIAN
HISTORICAL
12(-1) UN%
PACIFIST
SOCIALIST
PARTY 2(+2)
call for protracted negotia-
tions, since the parties seem
more conscious than ever of
differences in their domestic
political objectives,
No fundamental change in
Dutch foreign policy is expect-
ed,except possibly on the
Netherlands New Guinea question,
where there has been a deadlock
AFETI - .
REVOLUTIONARY
PARTY
POLITICAL
REFORMED PARTY
Premier Beel, however, is
still taking a strong line
on 'West New Guinea and has
threatened to divert NATO-
committed equipment to its
defense if American aid is
not forthcoming and if
NATO countries continue
to sell arms to Indonesia,
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CONFIDENTIAL
CURRENT INTELLIGENCE WEEKLY SUMMARY
PATTERNS AND PERSPECTIVES
Since the end of the block-
ade in May 1949 West Berlin's
economy has expanded steadily
but remains vulnerable in its
complete dependence on West Ger-
many. The Communists could at
any time cut the 110-mile life-
line which carries over one bil-
lion dollars in goods each way,
West Berlin is one of Eu-
rope's major industrial pro-
ducers, Including such world-
famous firms as Telefunken and
Siemens-Halske, Berlin indus-
tries produced goods valued at
$1.66 billion in 1958, a 6-per-
cent increase over 1957 produc-
tion, of some 880,000 now em-
ployed, about 300,000 are
industrial workers mainly pro-
ducing electrical equipment,
chemicals, and metal products.
The clothing industry has made
the city a major fashion center
for West Germany.
Berlin's prosperity is also
reflected in rising incomes and
increased production of consumer
goods. Wages and salaries in-
creased by 7 percent in 1958.
Per-capita production of con-
sumer goods surpassed the pre-
war level in 1955 and now is
over 38 percent above .the prewar
level.. Prices have remained
relatively stable, and the cost
of some major items such as
clothing has declined gradually.
As the Berlin economy has
regained its prewar position,
the high level of unemployment--
20 percent of the labor force
in 1954--has been brought down
to only 8 percent in 1958. Un-
employment still fluctuates be-
tween 60,000 and 100,000 because
of seasonal factors. Some
14,000 West Berliners still
work in the Soviet sector and
almost 40,000 East Berlin res-
idents work in the western part.
Average wages 'lave moved up
from about $,30 an hour in 1950
to almost $.50 in 1957, for an
average workweek of 45 hours..
The over-all economy has
certain weaknesses, however.
Its rate of growth has begun
begun to fall off. Industrial
production, in particular, while
still expanding, is doing so at
a decreasing rate., Large num-
bers of older persons are with-
drawing from the labor force,
thereby increasing the city's
WEST BERLIN'S ECONOMY
GROSS
PRODUCT
(BILLIO'V DOLLARS)
EMPLOYMENT
(THOUSANDS)
INDUSTRIAL
PRODUCTION
11935-100)
800
749
700
120
EXPORTS- 1.0
MDSH. ONLY
i6Y
pension payments. Skilled in-
dustrial workers, many of whom
are refugees from East Germany,
are gradually moving the West
Germany.
Dependence on the West
The major weakness in the
economy is the city's physical
isolation from its main markets
and sources of supply in West
Germany. During 1958`about one
billion dollars in goods were
shipped to West Germany, almost
all of which traveled over sc.x?-
face routes subject to East
A L
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
TRAFFIC BETWEEN
WEST GERMANY AND WEST BERLIN
(in thousands of tons)
COMMUNICATION ROUTES BETWEEN
WEST GERMANY AND BERLIN
IN OUT L5ENMARK1
LAND 2,633.6 789.5 O
RAIL 2,265.6 191.2
WATER 2,385.1 280.3
KieL
AIR 1.1 11.9 Y ,
oP
9C V
Neuruppin
-- ' EA S T
Lk emerge Liebenwalde
Railroad - Autobahn - Road
Canal Air Corridor.
West German East German
A rail checkpoints i
50 100
STATUTE MILES
0 50 100
KILOMETERS
German control. West Berlin
also imported almost $1.4 bil-
lion in goods from West Germany
over these same routes. Ber-
lin's complete dependence on
the West is reflected by the
small amount of trade with East
Germany and the other bloc coun-
tries, amounting to only about
2 to 3 percent of the total.
Berlin industry exports
about 65 percent of its pro-
duction to West Germany, The
electrical equipment industry,
Berlin's most important man-
ufacturer, produces almost
$500,000,000 worth of equip-
ment, and exports 73 percent
of its output to West Germany.
The clothing industry exports
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CURRENT 'INTELLIGENCE WEEKLY SUMMARY
over 70 percent of its output
to the West. If deliveries to
the West were to decline by 50
percent, it is estimated that
80,000 to 90,000 workers would
be added to the 90,000 already
unemployed.
Even more important to the
city's existence than the West
German market is its dependence
on the West for vital supplies
of raw materials, food, and
agricultural products, Although
East Germany supplies some
fresh food, the total food ship-
ments from West Germany to Ber-
lin are far greater in both
volume and value. In 1957 only
17,000 tons of foodstuffs came
from East Germany while 600,000
tons of food were imported from
West Germany. West Berlin in-
dustries import over $300,000,?-
000 annually in iron, steel, and
metal products. West Germany
even supplies over 1,000,000
tons of stone and earth, mostly
by canal barge, for the con-
struction industry,
East Germany supplies the
major proportion--1,300,000 tons
--of West Berlin's vital supply
of brown coal briquettes, used
extensively for heating private
dwellings. Technical factors
as well as cost rule out any
large-scale conversion to other
forms of fuels for heating.
However, a stockpile of brown
coal of about 780,000 tons, or
about four to six months' sup-
ply, is maintained.
The Federal Republic's fi-
nancial aid has also been neces-
sary to maintain the economy.
Thus far Bonn has extended al-
most $600,000,000 in grant aid.
In the city's budget for 1958-
59, more than one half of the
receipts are from Bonn. In ad-
dition, American aid, $5,500,000
in 1958, has amounted to approx-
imately $600,000,000, Thus, the
present prosperity has been
achieved with the help of well
over a billion dollars of ex-
ternal aids
Much of this external aid
went into creating the early
FREE WORLD
11%
WEST GERMANY
86%
momentum for the present indus-
trial prosperity. The city's
continuing need for assistance
today: arises from factors at-
tributable to geographical iso-
lation, such as the cost of sup-
porting refugees until they can
be absorbed or resettled, and
the high transportation costs
of imports and exports. An at-
tempt to recover any signifi-
cant portion of these costs
from Berlin's booming industry
would run counter to the need
for keeping taxation sufficiently
comparable to that in West Ger-
many so that industrial enter-
prises will not move to the Fed-
eral Republic and thus compound
Berlin's unemployment.
Present Economic Stability
Mayor Willy Brandt has
often stressed that one of Mos-
cow's objectives in the present
crisis is to undermine the econ-
omy and create conditions of po-
litical unrest. In an effort to
bolster the economy, both the
West Berlin and Bonn governments
have taken steps to ensure new
orders and investment for Ber-
lin's industrial plants. At a
meeting between Brandt and West
Germany's leading industrialists
in December, German industry
pledged all-out support for the
Berlin economy. Bonn now allows
increased depreciation for tax
purposes on new capital goods
installed in Berlin, and has
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extended government-guaranteed
insurance coverage against non-
delivery of Berlin exports be-
cause of East German or Soviet
interference with access. Spe-
cial construction projects, such
as the rebuilding of the Reich-
stag, are also being accelerated.
Despite these measures,
political uncertainty seems to
be slowly producing some eco-
nomic soft spots. The direc-
tor of a leading bank believes
this.'uncertainty-is holding?up
new . investment ;... Most',iarge ,
firms are filling orders placed
before the present crisis, and
new orders have fallen off. One
prominent industrialist has com-
plained that West German cus-
tomers are now placing orders
in West Germany rather than in
Berlin.
The Berlin stock market
remains 18.3 percent below the
level prior to Khrushchev's
10 November speech, while West
German stocks have declined
only 1 percent. Private bank
deposits also are slowly drift-
ing downward. Private savings
have decreased $2,000,000
(1 percent), time deposits are
down $14,000,000 (17 percent)
and checking accounts have de-
clined $13,000,000 (6 percent)
since 31 October 1958. A fur-
ther reflection of the political
uncertainty is the increasing
value of the Eastmark in terms
of the Westmark. The Eastmark
is now 21 percent more valuable
than in November.
Current Outlook
Despite the signs of ap-
prehension, which some Berlin
observers feel is natural, the
fear of any major panic has
abated at least for the pres-
ent,. Having withstood Soviet
occupation in 1945, industrial
dismantling, and the blockade,
most Berliners remain calm in
the face of Khrushchev's threats,
Signs of panic in November were
only temporary. Mayor Brandt
has pointed to his meeting with
German industrialists and the
NATO meeting, both in December,
as the major turning points for
the Berlin economy.
As the 27 May deadline
approaches? however, increased
anxiety may become apparent.
Any sign of lack of confi-
dence from Western Europe could
lead to reduced orders for Ber-
lin's industry and flights of
capital, goods, and persons.
Total tonnage of the
world's oil-tanker fleet
climbed to a record of 55,716,-
000 dead-weight tons by the
end of 1958 despite a sharp
decline in tanker charter rates.
Some 5,291,000 tons were added
during the year, even though as
much as 6,000,000 tons were
laid up for lack of business
during the year--including
800,000 tons of American-flag
tankers. The increase in new
tankers was distributed un-
evenly among various countries.
Liberia, the major flag-of-
convenience country, moved
substantially ahead of second-
place Britain by registering
a 27.-percent gain.
The trend toward construc-
tion of supertankers--24,000
dead-weight tons and over--con-
tinued, Sand !the world ; tanker fleet
boasted 18,214,000 tons of
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25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
THE JAPANESE-BUILT,
GREEK-OWNED
UNIVERSE APOLLO
these giants on 1 January 1959.
The largest of these--the 104,-
500-ton Universe Apollo, built
by the Japanese and owned by
Greek interests--was launched
in December 1958. The Universe
Apollo, like most very large
supertankers, is unable to
transit either the Suez or the
Panama canal,: apd will be used
principally to carry Kuwaiti
crude oil to Japan. Three more
such ships are on order; two
are to be built in the United
States. Major interest,however,
appears to be in supertankers
ranging between 45,000 and 50,-
000 tons; 154 of the 525 super-
tankers now on order are in
this category.
Declining Charter Rates
Tanker charter rates,which
have fluctuated widely since
the end of World War II, now
have dropped to near record
lows. Record highs were regis-
tered during the Korean war and
the Suez crisis in July 1956.
At the height of the Suez crisis,
rates were more than four times
their present level. This year,
they should be somewhat higher
than last year, but may ships
still will be operating at a loss;
the loss, however, probably will be
less than if they were laid up.
SEC
The low charter rates also
are seriously affecting the com-
petitive position of various
sections of the international
petroleum industry. Middle
Eastern crude oil now may be
sold competitively in areas
which normally have purchased
Venezuelan oil. With profits
of oil operations in Venezuela
reduced because of tax rises
there and with oil prices cut
more sharply in the Middle East
than in Venezuela, more Arab oil
may be sold in Latin America and
Europe. For Middle Eastern oil
to be competitive with Venezuelan
crude at present prices, charter
rates for tankers need be only 7
to 25 percent below the United
States Maritime Commission scale;
present rates are from 50 to 70
percent below scale.
Fiagyof-Convenience,Dispute
A bitter controversy over
the flag-of-convenience issue
came into focus at the meeting
of the Intergovernmental Mari-
time Consultative Organization
held in London between 6 and
21 January. Most European mari-
time countries, led by Britain,
joined in a successful fight
against seating flags-of-con-
venience countries--chiefly
ET
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
Liberia and Panama--on important
committees.
European maritime countries
for years have opposed the grow-
ing practice of registering in
Liberia and Panama tankers o''ned
by nationals of other countries.
These nations claim these proce-
dures merely.-create "tax havens"
which enable "runaway" vessels
to compete unfairly with the
traditional maritime powers.
More recently these powers have
had the active support of the
International Transport Workers'
Federation, which boycotted a
number of "tax-dodging ships"
in late 1958. The boycott was
successful only in American
ports. The USSR has sided with
other European countries and
has imposed penalties on "con-
venience" shipping using Soviet
ports.
American and Greek owners
are the chief targets of this
campaign because they own most
of the tonnage registered under
Liberian and Panamanian flags.
The bulk of this tonnage con-
sists of oil tankers, especially
supertankers. Liberian-;flag
tankers on the average are five
years old, have a speed of 15.5
knots, and weigh 24,800 tons,
By comparison, British-flag
tankers on the average are almost
(18.9%)
1 0,531
8%1
(14
8,376
'
8
262
,
(20%)
479
7
z
0
,
(18%)
X
295
6
Uj 6,000
,
(15%)
3
C
C
4,000
4,104
(10%)
~P
X
V
~
1
~
* ~P 5 04 . QP~P~P
(6.6%)
r 3,691
3,169
(8%)
~~F
10
1P~ -
P1p~
1h~
SECRET
DEADWEIGHT
TONS
3,231 I NUMBER
OF SHIPS
(4.7%)
2,602 (4.1%)
1
2,299
(3.3%) (31%1
,
15
1707-.
1
552
,
(2.0'6)
1,OE3
(1.4%) (1.2%)
(0
6%)
5%)
0
'
.
.
(
(0.5%)
437 4ig
333 267 259
1141,
IP'
Pte. \y`2'
011
\\P~ MVP?
F~l-
~1~~ .\\~F'
-
J
R
PP aP 5
-F. 5
4P 11 ~~~ O
\
Q
-4~ V
QP
PQ'V
F?~J
1
.`
~5
~
~
~
P 1~
12 years old, have a speed of
only 13.5 knots, and weigh only
15,500 tons,
Ownership of Liberian,
Panamanian, and Honduran tankers
is roughly divided between Amer-
icans and Greeks. About 44 per-
cent of Liberian-flag tankers
are controlled by American firms,
while Greek interests control
about 53 percent. In Panama,
the percentages are probably
reversed.
American oil companies,
which own about 10,000,000
tons of the world oil-tanker
fleet, have most of their` ton-
nage under traditional flags,
although 1,340,000 tons were
registered in Liberia and an
additional 1,826,000 tons flew
the Panamanian flag on 1 January
1958. The great bulk of "con-
venience flag" shipping--about
70 percent--is controlled by
American or Greek "tramp com-
panies"--those which hire out
their vessels as opposed 'to
owners who use their ships in
their own trade.
Suez Canal Limitations
At present only super-
tankers up to 40,000 tons can
transit the Suez Canal fully
loaded, although larger tankers--,
WORLD TANKER FLEET BY FLAG OF REGISTRY
VESSELS OF 2,000 DEAD-WEIGHT TONS AND OVER
1 JAN 1959 I TOTAL WORLD I I JAN 1956
TANKER FLEET
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
DRAFT: 30 FT LENGTH: 503 FT
THE WARTIME 'T-2'
DRAFT: 35-36 FT LENGTH: 660-685 FT
LARGEST TANKER THAT CAN PASS
THROUGH SUEZ CANAL FULLY LOADED
COMPARATIVE TANKIER SIZES
85,000
DRAFT: 39 FT LENGTH: 808 FT
CAN PASS THROUGH SUEZ CANAL
PARTLY LOADED OR IN BALLAST
DRAFT: 48 FT LENGTH: 950 FT
CANNOT USE SUEZ CANAL
perhaps up to 65,000 tons--can
transit in ballast or partially
loaded, Of the existing super-
tanker, fleet, over 3,300,000
tons cannot use the canal or
can use it only when partially
loaded. In coming years, how-
ever, the number of ships unable
to use the canal will probably
rise sharply despite Egypt?s ef-
forts to deepen it, Of the 22,-
000,000 tons of supertankers now
on order, more than 60 percent--
13,841,000 tons--will be unable
to transit the canal fully
loaded, if at all.
While the increasing size
of tankers will lessen the im-
portance of Suez as a major oil.
transport route, the amount of
oil passing through the canal
will continue to rise. In the
six months before Egypt national-
1zed" the canal in July 1956,
about 1,4009000"barrels a day
(b/d) passed the canal to the
West. This amount had already
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
risen to an average of 1,881,000
b/d for the first eight months
of 1958, but the actual capacity
of the canal at present is over
3,000,000 b/d. Tankers carry
through the canal almost 82.6
percent of Middle East oil des-
tined for: Western markets.
New Flag Vessels
Despite the surplus of tank-
ers, several major oil-producing
states are planning to develop
their own tanker fleets. Plans
to set up an Arab Navigation
Company, largely to ;operate.
tankers, may be completed by
early spring. The United Arab
Republic, hoping to provide the
nucleus of the fleet, is seeking
a deal with Japan for the con-
struction of two 20,000-ton tank-
ers. The Kuwaiti Government re-
portedly has approved the tanker
plan, and the privately owned
Kuwaiti Tanker Company will par-
ticipate. The rest of the pro-
posed Arab fleet probably will
be government--owned.
CEYLON'S DETERIORATING.'ECONOMIC SITUATION
Economic conditions in Cey-
lon have deteriorated steadily
since the Bandaranaike govern-
ment came to power in April 1956.
The standard of living has de-
clined, unemployment has in-
creased, and numerous strikes
have disrupted the economy.
While some of the causes~of the
economic deterioration are be-
yond the government's control,
Colombo's weak administration
and lack of an economic develop-
ment program to reverse the
trend have been major factors
in the government's loss of pop-
ular support.
When Bandaranaike took of-
fice, economic conditions were
generally good, The economic
policies of the United National
party (UNP) government, plus
the improvement in export prices,
had enabled Ceylon to recover
K on-Arab Iran also plans
to carry a. part of its oil pro-
duction in Iranian-flag vessels.
The first 33,500-t6n supertank-
er for, Iran was commissioned on
21 January; another of the same
tonnage is to be commissioned
in about six months, Five other
supertankers of 50,000 tons are
being built in Swedish yards and
will be delivered to Iran at the
rate of one each year beginning
in 1960.
Venezuela also has plans to
build a government-owned tanker
fleet, On 1 January, 33 tankers
totaling 207,146 tons were under
Venezuelan registry, one tanker
of 46,550 tons flew the Saudi
Arabian flag, and four ships
totaling 42,560 tons flew
the Egyptian flag. Other oil-
producing countries had their
own flag tankers, but their
numbe:r and tonnage were re-
latively insignificant,
(Concurred in by ORR)
from the collapse of commodity
prices which followed the Korean
war. Per-capita gross national
product had been rising for sev-
eral years, the cost of living
was relatively stable, and un-
employment was not yet too se-
rious a problem. The'high for-
eign-exchange reserves reflected
the favorable prices Ceylon was
receiving for its principal ex-
port crops, tea and rubber.
Bandaranaike's Program
The Sri Lanka Freedom par-
ty, led by Bandaranaike, called
during its campaign for national-
ization of tea, rubber, and co-
conut plantations and other im-
portant businesses, most of
which are foreign-owned, and an
economic development program
providing for higher employment
and rising living standards.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
G N P*
POPULATION
PER CAPITA
GNP
1953
$ 928,000,000
8,290,000
$112
1954
986,000,000
8,520,000
116
1955
1,108,000,000
8,723,000
127
1956
1,049,000,000
8,929,000
117
1957
1,035,000,000
9,179,000
(estimate)
113
1958
1 ,000,00 , 0
estimate
9,445,000
estimate
106
On taking office, however,
the party soon was faced with
declining prices for Ceylon's
major export crops and with the
realization that the costs in-
volved in nationalization would
be considerably greater than
anticipated. The government
therefore postponed most of its
plans for nationalization, but
has reiterated its intention to
nationalize eventually, thereby
discouraging private investment.
Economic Deterioration
The government's assurances
that it would expand economic
development as soon as a plan
could be formulated apparently
satisfied the people until late
1957. At that time, however,
Bandaranaike began to lose much
of his populat support, largely
because of the steady decline
in living standards. Per-capita
gross national product dropped
about 11 percent between 1955
and 1957, and probably fell fur-
ther during 1958 despite good
rice and tea crops. Although
the official price index shows
only a small increase, there is
general agreement that the cost
of living has actually risen
about 5 percent a year.
Unemployment has increased
steadily and Ceylon now is esti-
mated to be adding 70,000 to
80,000 a year to its pool of an
estimated 500,000 unemployed
out of a labor force of about
3,700,000. Exports have de-
creased and imports increased,
causing Ceylon's holdings of
gold and foreign exchange to
decline from $254,000,000 in
April 1956 to $193,000,000 at
the end of November 1958.
The government's prestige
has also been severely shaken
by its inability to halt the
repeated strikes since late 1957.
The government, as a self-styled
socialist regime, has generally
urged employers to yield to the
strikers, despite the fact that
most strikes have been staged
by the politically oriented un-
ion leaders to build up their
political strength rather than
to improve labor conditions.
Man-hours lost by strikes in
1958 were over 30 percent great-
er than in 1957, and the strikes
disrupted business activities,
raised prices, and antagonized
Ceylon's rural population.
The situation in Colombo
port has been the most serious
problem. Conditions there be-
came so bad during 1958 that
even increased use of such minor
ports as Jaffna, Galle, and
Trincomalee did not eliminate
long delays at Colombo. This
led some shippers to bypass Co-
lombo and others to raise ship-
ping :rates for products originat-
ing at or destined for Colombo.
The government claims that its
port-modernization program,
formulated since the port of
Colombo was nationalized in Au-
gust :1958, will eliminate future
bottlenecks. This seems un-
likely, however, unless labor
discipline is enforced. This
would require a more forceful
policy than the government seems
likely to adopt.
CEYLON
GOLD AND FOREIGN EXCHANGE RESERVES
MILLION DOLLARS
2I0 1
SECRET
798
1958
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CURRENT. INTELLIGENCE WEEKLY SUMMARY
19 March 1959
The formulation of a well-
conceived economic development
plan would be only the first
step in dealing with such prob-
lems as growing unemployment
and diversification of the econ-
omy. This would, however, en-
able the government to focus
the people's attention on eco-
nomic development and hold out
CEYLON: EXPORTS AND IMPORTS
(THOUSAND DOLLARS)
EXPORTS
IMPORTS
TOTAL
TEXTILES
MACHINERY
TEA
CRUDE
RUBBER
COCONUT
PRODUCTS
OTHER
TOTAL
FOODSTUFFS
(RICE)
PETROLEUM
PRODUCTS
AND
RELATED
AND
TRANSPORT
OTHER
TOTAL
PRODUCTS
EQUIPMENT
1953
173,269
70,892
51,781
33,345
329,287
25,151
33,919
37,041
78,821
337,646
1954
235,788
59,913
45,143
39,108
379,952
r
21,585
30,862
26,667
78,755
293,424
1955
250,788
73,573
47,929
35,134
407,424
27,716
28,356
32,825
90,788
306,546
1956
219,208
61,436
45,328
38,287
364,259
14292
,
25,208
33,684
39,450
100,899
342,162
1957
214,483
63,063
33,390
42,180
353,116
149,569 (53,632)
43,113
34,396
42.492
109,283
378,853
1958
200,935
42,386
22,582
32,139
298,042
117,667
(37,399)
21,362
28,808
38,792
75,811
282,440
uaR OCT)
While some of
the factors causing
the economic deteri-
oration, such as the
decline of export
prices and the severe
floods in late 1957,
have been beyond the
government's control,
at least part of the
deterioration results
from the government's
habit of placing po-
litical ahead of eco-
nomic considerations.
It has a consistent
EUROPEAN
SATELLITES
USSR
COMMUNIST
CHINA
TOTAL
SINO-SOVIET
BLOC
TOTAL
WORLD
IMPORTS
EXPORTS
IMPORTS
EXPORTS
IMPORTS
EXPORTS
IMPORTS
EXPORTS
IMPORTS
EXPORTS
1952
863
2,445
263
501
6,898
25,950
8,042
28,896
357,513
315,478
1953
1,574
665
14
-
43,899
50,865
45,487
51,530
337,846
329,287
1954
858
349
402
-
33,252
48,529
34,312
46,878
293,424
379,952
1955
1,484
333
128
-
16,785
25,479
18,397
25,812
308,546
407,424
1956
1,418
275
184
-
28,102
38,270
29,704
38,545
342,252
364,259
1957
1,781
1,242
298
137
17,597
35,151
19,874
36,530
378,854
353,116
1958
1,342
948
187
2,833
26,858
11,331
38,387
15,112
282,440
298,042
often proclaimed belief in a
planned economy, the government
has failed to formulate an eco-
nomic development program. When
the government took office, it
discarded the development pro-
gram, of the former UNP govern-
ment as too conservative and
established the National Plan-
ning Council in September 1956
to formulate a socialist plan,
This council has sought, the ad-
vice of foreign economists and
is working on a plan, but prog-
ress. has been slow, chiefly
because of Bandaranaike?s pre-
occupation with political ma-
euvering.
record of being amenable to the
demands of pressure groups. The
prime minister as well as the
other ministers interfere in
all organs of the government at
all levels, disregarding the
recommendations of the officials
involved.
This is 'particularly
true in the labor field, in
which the government, to achieve
temporary political gains by
granting labor demands, has con-
sistently overruled the deci-
sions of the wage boards and
industrial courts. In addition,
the communal violence which
erupted in May 1958 severely
disrupted economic activities,
and can be attributed at least
in part to the government's ap-
peasement of Singhalese extrem-
ists,
Lack of Economic Planning
Despite Ceylon's growing
economic difficulties and its
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CURRENT INTELLIGENCE WEEKLY SUMMARY
19 March 1959
the hope that living conditions
would improve in the future.
Government leaders appear
confused about what is needed
to stimulate Ceylon's economic
development. They have in-
creased expenditures for social
services, partly to win polit-
ical support and partly in the
belief that such projects con-
stitute economic development.
The Soviet and free world eco-
nomic aid that is available is
being utilized very slowly, for
the government has few income-
generating projects ready for
execution.
While the government may
succeed in producing a general-
ized ;plan during the coming
year, it is unlikely that any
plan will be vigorously imple-
mented in view of Bandaranaike's
past performance. Under these
circumstances it seems likely that
economic conditions will con-
tinue to deteriorate unless
there is a sharp and unexpected
rise in the prices of Ceylonese
exports. Even such a develop-
ment, while strengthening the
country's financial position,
would have little effect on the
rapid growth of unemployment.
.fir
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