Document type: PAPER-TEXTUAL DOCUMENT

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176-10037-10445

JFK ASSASSINATION SYSTEM

IDENTIFICATION FORM

• AGENCY: NARA

RECORD NUMBER : 176-10037-10445

RECORD SERIES : National Security Files

AGENCY FILE NUMBER :

ORIGINATOR : DOS

FROM :

TO :

TITLE : Report Current Situation in South Vietnam

DATE : 5/16/1962

PAGES : 841

SUBJECTS :

DOCUMENT TYPE :

CLASSIFICATION :

RESTRICTIONS :

CURRENT STATUS :

DATE OF LAST REVIEW : 9/10/2000

OPENING CRITERIA :

COMMENTS : National Security Files, Box 196: Countries, Vietnam, General

10/29/63-10/31/63. CIA Reports. Box 6.

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CENTRAL INTELLIGENCE AGENCY

Memorandum

THE CURRENT. SITUATION IN SOUTH VIETNAM

30 October 1963

•DIRECTORATE OF INTELLIGENCE

THIS DOCUMENT CONTAINS CODE WORD MATERIAL

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This document contains classified information affecting the national

security of the United States within the meaning of the espionage

laws, US Code Title 18, Sections 793, 794, and 798. The law prohibits

its transmission or the revelation of its contents in any manner to

an unauthorized person, as well as its use in any manner prejudicial

to the safety or interest of the United States or for the benefit of any

foreign government to the detriment of the United States.

It is to be seen only by US personnel especially indoctrinated

and authorized to receive COMMUNICATIONS INTELLIGENCE

information;its security must be maintained in accordance with

COMMUNICATIONS INTELLIGENCE REGULATIONS.

No action is to be taken on any COMMUNICATIONS INTELLI-

GENCE which may be contained herein, regardless of the advantages

to be gained, unless such action is first approved by the Director

of Central Intelligence.

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SC No. 11704/63

30 October 1963

CENTRAL INTELLIGENCE AGENCY

MEMORANDUM:

SUMMARY

There continues to be no indication that the Government

of South Vietnam (GVN) is making any major mores to accommodate

Us views, although it has reopened the university at Hue, trans-

ferred additional military units to the delta, and consolidated

certain strategic hamlets. Diem talked with Ambassador Lodge

over the weekend at Dalat, their first contact in weeks, but showed

no sign of yielding on any GVN positions. Diem and Nhu mean-

while continue to appear fully prepared to face prolonged and

significant cutbacks in American aid.

The uncertainties created by the current impasse in US-GVN

relations are beginning to have depressant effects on the South

Vietnamese economy. Serious inflationary pressures are beginning

to develop. For example, the piaster black-market rate, which

until recent weeks had remained at about 80-100 to the dollar for

several years, now is fluctuating between 130 and 180, an all-time

high. The prices of perishable domestic foodstuffs are holding

fairly steady, but there are marked rises in the price of nonper-

ishable basic commodities (e.g., soap, charcoal, nuoc mam fish

sauce) and in a wide variety of imports. Awkward poobtems, i-

cluding possible shorifalls, are beginning to appear in the financing

of the joint US-GVN counterinsurgency effort.

There has been no dramatic change in the basic military

situation over the past few weeks.

Certain statistical trends, how-

ever--weapons losses, Viet Cong activity, and GVN casualties,

especially "missing in action"--are becoming disturbing, and var-

ious indicators suggest a lowering of morale in the Vietnamese

armed forces.

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THE CURRENT SITUATION IN

SOUTH VIETNAM

A. Political Developments

1.

There continue to be no indications that

the Diem government is making any major moves to

accommodate US views, although it has reopened the

university at Hue, transferred additional military

units to the delta, and consolidated certain stra-

tegic hamlets.

Diem has made an approach to Ambas-

sador Lodge, under the guise of a social weekend

in Dalat,

but his position on issues raised so far

is unyielding.

2.

Diem and Nbu continue to appear fully pre-

pared to face prolonged and significant cutbacks in

American aid. Diem, in his 26 October National Day

address,

stressed the need for Vietnamese self-suf

ficiency and self-reliance.

During the past week-

end, he casually questioned Ambassador Lodge as to

whether the US was going to suspend or stop commer-

cial import payments, as if it were a matter of in-

difference, and made no response to Lodge's sugges-

tions of

what might be done by South Vietnam to make

such aid acceptable to US public opinion.

3. Although there have continued to be some

US contacts, largely formal, with Presidential Secre-

tary Thuan, Acting Minister Cuu and some lower level

officials,

the invitation to Ambassador Lodge last

weekend was the only direct communication with. Diem

in many weeks.

Nhu

remains entirely out of contact

with US officials, and has shown no sign of initiat-

ing any overtures.

Diem's conversations with Lodge

during the weekend, including a remark that "we" must

get on with the war effort, tend to support. the view

that be and Nhu feel confident that the US will ulti-

mately be forced to cooperate with them on their terms.

At the same time, however, Diem raised some Charges

of antiregime activity by various US officials. In

Short, both sides remain in a state of mutual uncer-

tainty as to respective attitudes and intentions.

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4.

During the past several weeks, strident at-

tacks have continued in the Times of Vietnam, and

to some extent in the vernacular press as well, charg-

ing the involvement of US newsmen and officials in

subversive activity. Nhu publicly reiterated these

themes in his 17 October press conference, and the

fact that they have been raised both by Acting Foreign

Minister Cuu and Diem may

foreshadow moves to expel

some US personnel. One of the newsmen--David Halberstam

of the New York Times-has just had his visa renewed

for a month (until 16 November) instead of the usual

three- to. Six-month period. In addition, renewed

harassment has been reported against some Vietnamese

employees of US agencies, and some US officials are

under surveillance.

There continue to be rumors, pos-

sibly indicative of a "war if nerves" campaign against

the US, that anti-American demonstrations will be

staged

in front of the US Embassy or the USIS head-

quarters.

A reliable Vietnamese Air Force source reports

that the

Special Forces are recruiting illiterate peas-

ants, ati unusually high pay, and he speculates they

are to be used for GVN "dirty work."

5. At the same time, a number of reports

assert

that anti-American sentiment is increasing in non-Com-

munist opposition circles, which view official US

statements as evidence of

capitulation to Diem and Nhu.

Some sources have even claimed that various opposition

groups are considering the use of terrorism against

Americans to convince the US that the situation is

grave.

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6. Although the government has announced the re-

opening of all schools in fue, including the university,

and claims that only 152 prisoners remain in custody,

it has made almost no effort to regain support of key

urban elements.

There has been, in fact, substantial

evidence in recent weeks that searches and arrests

have continued among students

and other potentially

disaffected elements, and that tighter controls are

being exerted on the

military, civil service, and or-

ganized labor.

The regime's obvious attempts to stage-

manage the visit of the UN observer group have caused

the UN representatives to abandon their government-

arranged schedule, but clandestine sources report

their contacts are still being controlled.

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Although Diem continues to declare the Bud-

ahist issue resolved, an official of the new National

Assembly has stated that the Assembly probably will

not resume discussions on amending Decree 10--the

statute which discriminates against Buddhist organiza-

tions and which was one of the five specific Buddhist

grievances.

Diem, when pressed on the matter by Am-

bassador Lodge, merely stated that the decree issue was

"complicated" and outside his authority.

8. Despite persistent rumors that some "reforms"

might be announced in connection with National Day

last week, this has not happened and there continues

to be no sign that the government intends any liber-

alizing measures. Reports that changes in the mili-

tary command, and perhaps the cabinet, are imminent

seem more likely to be designed to neutralize dis-

affected elements.

9.

The effect of Madame Nhu's visit on US-GVN

relations and on US leverage and maneuverability in

Saigon is difficult to assess.

If the regime con-

cludes that it has more popular Us support than It

realized, and if Madame Nbu returns to Saigon deeply

embittered by the lack of any official US attention,

it is likely that Diem and Nhu will become even more

intransigent in the face of US demands.

B. Economic Developments

10.

The uncertainties created by the current

impasse in US/GVN relations are beginning to have

depressant effects on the South Vietnamese economy.

The economic situation is becoming unstable and there

are signs that serious inflationary pressures are be-

ginning to develop.

11. In response to US suspension of the Commercial

(CIP), the GVN appears to be tightening

its belt in anticipation of an appreciable reduction

and/or prolonged suspension of US economic aid. The

GVN has begun to earmark some of its own foreign ex-

change for the import of commodities previously

financed under the CIP (e.g, wood pulp, tin plate,

chemicals, coke; and perhaps

sweetened condensed milk)..

accept a "voluntary" cut in salary, and there are in-

lications that, in at least some ministries", this cut

nas already come into effect. Diem has publicly hinted

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that a "time of austerity" lies ahead. Saigon press

by causing "controlled inflation," and agent sources

have reported that the GN has printed a large number

of piasters (more than equal to the number presently

in circulation) for issuance as circumstances dictate.

It is hard to tell, however, how much of this represents

GN bluff and how much represents serious GVN planning

to go it alone.

One report to the ambassador (from

Thuan suggests that the GVN has made a serious canvass

of its independent economic capabilities but reluctantly

decided that, after all, it cannot continue without

us aid.

There are signs that the GVN is casting about

for non-US sources of foreign assistance. A $10-mil-

lion commercial aid agreement with the French was

signed by the GVN on 9 October.

The GVN has also just

made its first expenditure under a $14-million French

industrial loan, extended in 1959.

Perhaps

of even

more significance was the reported recent precipitate

departure for Paris of Huynh van Diem, GVN Director

General of Plan. The GVN has been making overtures to

Australia regarding wheat flour imports (normally

financed under PL 480), and to West Germany regarding

the German aid program.

13.

The slowdown of CIP and PL-480 licensing is

already beginning to pose problems for financing the

war effort.

A US/GVN project agreement signed on 5

September

for the calendar 1963 GVN military budget

included more

than 7.5 billion piasters for joint sup-

port, to be financed by CIP-generated counterpart plus

local currency derived from PL-480 sales.

However,

after discussion with the GVN, the USON has deter-

mined that only 7 billion piasters will be available,

leaving a projected shortfall of more than 500 million

piasters (roughly, US $8 million). Similarly, MAAG

bas advised that less than 2 billion piasters

cash

are available for release in the Fourth Quarter 1963

against a requested project agreement balance of more

than 2.5 billion. Since the necessary counterpart

piasters obviously cannot be generated without CIP

and PL-480 licensed imports, funding of the joint

US/GVN counterinsurgency effort may soon present

some

awkward problems.

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14.

The effects of US suspension of CIP licensing

are just beginning to make themselves felt. During

the week of 13-19 October, key import prices began

to rise (e.g.

sweetened condensed milk up 10 per cent,

wheat flour 33 per cent, cement 30 per cent) with more

modest rises reflected in chemical products, some

scarce iron and steel products, and miscellaneous

manufactured imports.

This trend continued during

the week of 20-26 October; condensed milk went up

by as much as. 5' per cent, wheat flour up an additional

2 per cent, iron and steel products up 10 to 15 per

cent, chemicals up

5 per cent, sugar up 6 per cent.

Fertilizers, cement, cotton and rayon yarn were ui-

changed.

15. Prices of domestic items have also been

rising.

Although the price of perishable food items

has remained fairly steady or has shown only a modest.

decline, the prices of several basic nonperishable:

consumer items, such as soap, charcoal, and huoc mam,

the fish sauce

which is an essential part of the

ordinary Vietnamese diet, were up by an average 20

per cent since the end of September.

16. There has been no appreciable capital flight

from Vietnam, but there has been marked internal

activity which strongly suggests a flight from the

piaster.

The black-market rate, which until recent

weeks had remained at about 80 to 100 piasters to

the dollar for several years, now is fluctuating

between 130 and 180, an all-time high.

There is

also evidence of considerable speculative activity

in gold.

As of mid-October, gold was reported no

longer available,

following a rise in the black-

market price from 5,400 piasters per ounce in June

to 6,800 piasters in early October. A 26 October

Embassy report states that the price for gold and

gold jewelry has risen an additional 30 per cent,

and gold is now hard to find, even for dentists.

Rumors

of devaluation abound an there are signs of hoarding

and artificial shortages (particularly in the case of

wheat flour and condensed milk): Over-all bank liquidity

has been maintained because of the increases in traders'

accounts; but banks report some withdrawals from snall

accounts

and there are reports of runs on banks in

Cholon, where the influential Chinese business 'community

is concentrated.

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C. Military Developments

17. There has been no dramatic change in the

military situation over the past few weeks, although

significant actions continue to occur, most recently

the 29 October firefight in An Xuyen Province, in

which three Americans were reported captured by the

Viet Cong: The Us army, navy, and air attaches have

all reported this past week,

however, that there are

tentative signs of lowering morale among Vietnamese

army, navy; and

air units in the Saigon area.

over, the leveling out and in some respects reversal

of favorable statistical trends that obtained in the

counterinsurgency effort six months ago is continuing.

18. Although these statistics are not completely

reliable or satisfactory as criteria for measuring

the course of the counterinsurgency effort,

they do

reflect general orders of magnitude of various per-

tinent factors.

19. While the statistics generally reflected

steady decline in Viet Cong activity from mid-1962

to early 1963,

they show a gradual increase in the

number of incidents since this spring. Moreover,

this activity has assumed a more aggressive character,

with the proportion of armed attacks increasing some-

what and emphasis in the category of "terrorist" acts

shifting from "kidnapings"

to "harassing fires!"!

Most of this armed activity, as well as the bulk of

propaganda incidents, now appears to be directed at

the strategic hamlet

program.

20. Despite this increased activity, Viet Cong

casualties since July have been somewhat below the

levels of the comparable period last year. There is

no ready explanation for this phenomenon, unless it

reflects greater circumspection by the Viet Cong in

engaging government regular forces, and improvements

in Communist combat techniques.

21. Government casualties, on the other hand;

are running substantially higher than last year. Ac-

cordingly, the ratio between Viet Cong and

government

casualties has dropped from two to one last year to

about seven to six over the past three months.

The

higher government losses can be attributed in part to

an Increased level of offensive activity by government

forces. It may also reflect, however, more effective

Viet Cong operations.

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22 .

The trend in weapons losses, which had

turned in the government's favor in the latter part

of 1962, now is again running in favor of the Viet

Cong. Government weapons losses have risen sharply

since. June, and have exceeded Viet Cong losses by..

two to one since July. The net gain of weapons which

may have accrued to the Viet Cong from July through'

September would be enough to arm perhaps as many as

five new main force battalions, or 60 new local guer-

rilla platoons.

23. Viet Cong military defections had risen

steadily in the first half of 1963 to a total of 426

In June. Since then, however, they have dropped off

steadily to 114 in September.

This shift may re-

flect some improvement in Communist morale.

Con-

versely, the number of government troops

"missing in

action"

or "captured" by the Viet Cong has quadrupled

from an average of less than 100 a month in 1962 and

early 1963 to an average of more than 400 a month

since July.

24. Two conclusions may be drawn from these

statistical trends. First, the Viet Cong appear to

have recovered from the initial uncertainty of their

reaction to the stepped-up counterinsurgency effort

in 1962, and to have embarked on a new phase of their:

"protracted struggle!"

This new phase appears to be

characterized by intensified, small scale activity aimed

primarily at disrupting and defeating the strategic

hamlet program.

By modifying their combat techniques,

striking at "softer targets!" and improving their de-

fensive capabilities, they have been able to regain

momentum while reducing their combat losses, with a

resultant gain in morale.

25.

Secondly, the government's stepped-up coun-

terinsurgency effort has. thus far failed to produce

decisive results.

This, coupled with the government's

faltering political posture, has resulted in lowered

government morale as reflected in the higher weapons

losses and the increase in the number of "missing" per-

sonnel.

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Total

Incidents

1768

Armed

Attacks

503

407

448

378

391

419

421

384

STATISTICS ON THE WAR IN VIETNAM

VIET CONG

Total

Casualties

2623

2520

Defectors

120*

Weapons

Lost

412

382

353

378

462

446

414

484

GOVERNMENT

Total

• Missing &.

Weapons

Casualties

Captured

Lost:

83

• 518

88

402

212

63.

59

64

92

78

252

195

344

383

Sep

1763

357

410

407

362

503

683

399

367

468

564

394

374

428

539

* Indicates average; actual figures not available for each month.

102

82

66

96

94

90

457

358

574

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