230. Status Report on Southeast Asia, Prepared by the Southeast Asia Task Force1
[Here follow sections on Thailand, Laos, Burma, and Cambodia.]
VIET-NAM
General Situation Evaluation
The GVN is making progress against the VC, but it is still too early to predict assured success in the counterinsurgency effort. The strategic hamlet program and the two clear-and-hold operations now under way are moving forward well and seem to promise good results. With US assistance, the RVNAF has significantly reduced its reaction time in recent months and appears to have upset the VC timetable.
Government efficiency is slowly improving. By patient pressure, the mission has been able to eliminate or shortcut some of the bureaucratic delays, to speed supplies and funds to the clear-and-hold operations and to the Montagnard refugees. The present mass movement of the Montagnards out of VC controlled areas may represent a major victory for the GVN if it can provide prompt relief measures and train the Montagnard irregulars.
On the negative side, GVN control of the rural areas is probably still being eroded faster than it is being reinforced. The VC are attacking steadily and frequently and retain the capacity to strike in battalion strength at several points simultaneously. In spite of heavy losses, they seem not to have been seriously hurt. Perhaps most important, the VC apparently retain the aura of invincibility, while the GVN is making only very slow progress in gaining the sympathy of the rural population in some areas.
A major unsolved problem is the generation of piasters for the local costs of the counterinsurgency programs. The GVN, and President Diem in particular, are fiscally very conservative and fear further [Page 479] deficit financing to the point of cutting back on essential war measures to avoid further deficits. If Ambassador Nolting is able to keep the momentum of the counterinsurgency effort going with the emergency measures we authorized last week, we must then engage in serious talks with the GVN on the long term financing of the program.
The GVN scored an important psychological and political victory on the international scene with the June 25 publication of the long awaited ICC report on DRV subversion and aggression.
Progress on Action Program
1. VC Activity.
Viet Cong attacks continue to be concentrated in the III Corps area. Principal targets are still outposts, strategic hamlets, communication routes, and agrovilles. During the first five months of the year, armed attacks averaged 124 per week. In the period 5-11 June, armed attacks dropped to 101, 73 less than the previous all-time high of the preceding week. There were 91 armed attacks June 12-18. VC casualties for the year now stand at 11,925, including 8,100 killed. GVN losses for the year stand at 1,933 killed in action.
2. Clear and Hold Operations.
Operations Hai Yen (in Central Viet Nam) and Binh Minh or Sunrise (northwest of Saigon in Binh Duong province) continue as planned. As of June 15, military operations in the Hai Yen area were 30 days ahead of schedule and 84 of the planned 270 strategic hamlets had been set up. Financial bottlenecks which had hampered the Hai Yen operation in earlier stages appear to be solved. The Province Chief now has Saigonʼs assurances of funds to carry the operation through June 30 and a local GVN-US committee has been set up on the ground to approve expenditures. Resettlement of 12,000-16,000 people will be underway before the end of the month. The VC are reacting by increased activities in the area.
In Operation Binh Minh, a fourth strategic hamlet will probably be set up this month. The population in the first two hamlets to be established are now receiving simple basic self-defense training but have not been armed. Indemnities for relocation losses have been paid to all eligible families in these hamlets.
3. Australian Trainers.
The GVN has agreed to integration of the Australian military training group into US programs. The Australians will bear all costs of their mission, which may be on the ground by the end of August.
[Page 480]4. Piaster Problem.
In an effort to prevent delay in the counterinsurgency program Ambassador Nolting has been authorized to purchase 10 million dollars worth of piasters from the Viet Nam National Bank to be used in counterinsurgency programs and to set up a special counterinsurgency stockpile of about 10 million dollars worth of materiel. Waivers on counterinsurgency imports for this stockpile will be granted where the time factor is vital or where essential goods cannot be procured from an eligible source. This waiver authority is to be used only in rare instances, with a suggested ceiling of three million dollars.
While we understand Diemʼs fear of further deficit financing, the consensus here is that the GVN can undertake a much larger measure of deficit spending without serious danger of inflation. The US position is that the GVN must face up to the problem and we intend to initiate talks with the GVN to this end.
5. Montagnard Program.
On June 23 a joint GVN-US interagency team was despatched to several provinces to gather information on the Montagnard problem and lay the groundwork for fast joint action. USOM is studying the possibility of a 50 million piaster interim project agreement, with specific amounts to be released as information and plans are developed.
6. Communications Programs.
As of June 15, 670 of the planned 2,500 village radios had been installed. On June 12 a contract was signed with Philco for the construction of the telecommunications system between Saigon and Bangkok. Paving on the new runway at the Saigon airport is expected to be complete by the end of the month.
7. Identity Cards.
More than 2 million of the planned 7 million identity cards have been issued. The program has already resulted in the capture of a number of VC agents and ARVN deserters.
8. ICC Report.
The ICC report charging the DRV with a deliberate campaign aimed at the violent overthrow of the GVN and citing the GVN for importing military equipment and personnel above the limits imposed by the Geneva Accords was made public June 25. The Department, the GVN and the Canadians made statements on the release of the report, pointing out its significance and the cause and effect nature of the DRV attack and the increased US assistance to Viet-Nam.
[Page 481]All of our diplomatic posts outside the Bloc have been issued discretionary authority to bring the report to the attention of their host government, and USIA is seeking to maximize the impact of the report through its programming.
- Source: Department of State, S/S-NSC Files: Lot 70 D 264, Followup. Secret.↩