Roger Hilsman, "The Situation and Short-Term Prospects in South Vietnam," DEPARTMENT OF STATE, Bureau of Intelligence and Research, Research Memorandum, RFE-59, December 3, 1962


Source: The Pentagon Papers, Gravel Edition, Volume 2, pp. 690-716


DEPARTMENT OF STATE
Bureau of Intelligence and Research

Research Memorandum
RFE-59, December 3, 1962

TO: The Secretary

THROUGH: S/S

FROM: INR-Roger Hilsman

SUBJECT: The Situation and Short-Term Prospects in South Vietnam*


* This report is based on information available through November 12, 1962.


This appraisal covers the Communist insurgency and the internal political situation in South Vietnam during the past year and focusses particularly on the direction and effectiveness of the Vietnamese-US counterinsurgency effort. It was prepared as a contribution to the forthcoming NIE 53-62, Prospects in South Vietnam.

ABSTRACT

President Ngo Dinh Diem and other leading Vietnamese as well as many US officials in South Vietnam apparently believe that the tide is now turning in the struggle against Vietnamese Communist (Viet Cong) insurgency and subversion. This degree of optimism is premature. At best, it appears that the rate of deterioration has decelerated with improvement, principally in the security sector, reflecting substantially increased US assistance and GVN implementation of a broad counterinsurgency program.

The GVN has given priority to implementing a basic strategic concept featuring the strategic hamlet and systematic pacification programs. It has paid more attention to political, economic, and social counterinsurgency measures and their coordination with purely military measures. Vietnamese military and security forces--now enlarged and of higher quality--are significantly more offensive-minded and their counterguerrilla tactical capabilities are greatly improved. Effective GVN control of the countryside has been extended slightly. In some areas where security has improved peasant attitudes toward the government appear also to have improved.

As a result, the Viet Cong has had to modify its tactics and perhaps set back its timetable. But the "national liberation war" has not abated nor has the Viet Cong been weakened. On the contrary, the Viet Cong has expanded the size and enhanced the capability and organization of its guerrilla force--now estimated at about 23,000 in elite fighting personnel, plus some 100,000 irregulars and sympathizers. It still controls about 20 percent of the villages and about 9 percent of the rural population, and has varying degrees of influence among an additional 47 percent of the villages. Viet Cong control and communication lines to the peasant have not been seriously weakened and the guerrillas have thus been able to maintain good intelligence and a high degree of initiative, mobility, and striking power. Viet Cong influence has almost certainly improved in urban areas not only through subversion and terrorism but also because of its propaganda appeal to the increasingly frustrated non-Communist anti-Diem elements.

The internal political situation is considerably more difficult to assess. Diem has strengthened his control of the bureaucracy and the military establishment. He has delegated a little more authority than in the past, and has become increasingly aware of the importance of the peasantry to the counterinsurgency effort. Nevertheless, although there are fewer reports of discontent with Diem's leadership within official circles and the civilian elite, there are still many indications of continuing serious concern, particularly with Diem's direction of the counterinsurgency effort. There are also reports that important military and civil officials continue to participate in coup plots. Oppositionists, critics, and dissenters outside the government appear to be increasingly susceptible to neutralist, pro-Communist, and possibly anti-US sentiments. They are apparently placing increased reliance on clandestine activities.

The Viet Cong is obviously prepared for a long struggle and can be expected to maintain the present pace and diversity of its insurgent-subversive effort. During the next month or so, it may step up its military effort in reaction to the growing GVN-US response. Hanoi can also be expected to increase its efforts to legitimatize its "National Front for the Liberation of South Vietnam" (NFLSV) and to prepare further groundwork for a "liberation government" in South Vietnam. On present evidence, the Communists are not actively moving toward neutralization of South Vietnam in the Laos pattern, although they could seek to do so later. Elimination, even significant reduction, of the Communist insurgency will almost certainly require several years. In either case, a considerably greater effort by the GVN, as well as continuing US assistance, is crucial. If there is continuing improvement in security conditions, Diem should be able to alleviate concern and boost morale within the bureaucracy and the military establishment. But the GVN will not be able to consolidate its military successes into permanent political gains and to evoke the positive support of the peasantry unless it gives more emphasis to non-military aspects of the counterinsurgency program, integrates the strategic hamlet program with an expanded systematic pacification program, and appreciably modifies military tactics (particularly those relating to large-unit actions and tactical use of airpower and artillery). Failure to do so might increase militant opposition among the peasants and their positive identification with the Viet Cong.

A coup could occur at any time, but would be more likely if the fight against the Communists goes badly, if the Viet Cong launches a series of successful and dramatic military operations, or if Vietnamese army casualties increase appreciably over a protracted period. The coup most likely to succeed would be one with non-Communist leadership and support, involving middle and top echelon military and civilian officials. For a time at least, the serious disruption of government leadership resulting from a coup would probably halt and possibly reverse the momentum of the government's counterinsurgency effort. The role of the US can be extremely important in restoring this momentum and in averting widespread fighting and a serious internal power struggle.

TABLE OF CONTENTS

I. The Nature of the Communist Threat to South Vietnam

A. Strategy and Objectives
B. Viet Cong Organization and Capabilities

1. General
2. Military Strength and Effectiveness
3. Viet Cong Logistic Support

a. Local Support
b. External Support

4. Political Capabilities

a. The Communist Position in the Countryside b. The Urban Sector

II. The Vietnam Government's Counterinsurgency Effort

A. Background: Gradual Response
B. Formulation and Implementation of Basic Strategic Concept

1. Strategic Hamlet Program
2. Systematic Military-Political Pacification Operations

C. Military Operations and Effectiveness

III. The Political Situation

A. Background: Rapid Deterioration B. The Current Situation

1. Political Attitudes of Diem and His Family
2. Diem and the Bureaucracy
3. Diem's Position in the Countryside
4. Diem's Position in Urban Centers

IV. Economic Trends

V. Outlook

A. Communist Actions
B. GVN Counterinsurgency Effort
C. The US Role
D. Political Situation

I. THE NATURE OF THE COMMUNIST THREAT TO SOUTH VIETNAM

The Communist threat to the Republic of Vietnam (South Vietnam) consists of three interrelated elements. Within South Vietnam, but under the direction of the Democratic Republic of Vietnam (DRV), an expanding campaign of guerrilla warfare and terrorism and an intensive political psychological subversion effort are carried out by an apparatus commonly known as the Viet Cong, *


* Viet Cong is the popular term used by the South Vietnamese to refer to Vietnamese Communists, singularly or collectively. For all practical purposes, the Viet Cong apparatus is an extension of the North Vietnamese Communist Party (Dang Lao Dong Viet Nam or merely Lao Dong), which also operates in Laos, Cambodia, and other countries with important Vietnamese minority groups.


left behind by the DRV after it withdrew most of its military forces to the north in 1954 and since reinforced by local recruitment and infiltration from the DRy. Externally, the DRV holds over South Vietnam the tacit threat of invasion by the numerically superior North Vietnamese military forces.

In part because the Government of the Republic of Vietnam (GVN) focussed its defense efforts too much upon the implicit external threat and too little upon the internal threat, not only was it unable to counter effectively the developing Communist movement but also its authority and internal stability in the period from late 1959 until early 1962 were increasingly weakened by Viet Cong insurgent and subversive activities. Since the early part of 1962 however, the rate of deterioration appears to have decelerated as a result of substantially increased US assistance to South Vietnam and expanding GVN implementation of its broad military-political counterinsurgency program. The apparent improvement is principally in the security sector, but with some resultant effects on the political situation. Many US advisers in South Vietnam, as well as President Ngo Dinh Diem and other top GVN officials, are more optimistic and believe that the deteriorating trends in effect have been checked and that the tide is now being turned in favor of the GVN. Whether this optimism is justified may well be determined by developments during the next few months.

A. STRATEGY AND OBJECTIVES

In South Vietnam, the Communists are clearly embarked on a "national liberation war" of insurgency and subversion from within rather on overt aggression. It is probably the Communist view that this strategy greatly reduces the risk of direct US military intervention and, at the same time, provides good prospects of success at relatively little cost. In addition, it permits the Communist Bloc to claim continued adherence to the 1954 Geneva Agreements. This strategy was most recently reaffirmed by the Third National Congress of the North Vietnamese Communist Party in Hanoi in September 1960 and the Moscow conference of all Communist parties held the following November and December.

The immediate Communist objectives are to demoralize the South Vietnamese public and the military and security forces, weaken and eventually supplant government authority in the countryside, and discredit and ultimately precipitate the overthrow of President Diem's government. Simultaneously, the Communists are attempting to gain broad popular support for their effort, including the creation of a "united front" with non-Communist elements, and gradually to strengthen and transform their guerrilla forces into regular forces capable of undertaking a general offensive.

The DRV is the implementing agency for Communist activity in South Vietnam. It exercises close control over the Viet Cong guerrillas and over the "National Front for the Liberation of South Vietnam" (NFLSV), the political instrument of the Viet Cong. However, while Hanoi is probably allowed considerable freedom of action, Moscow and Peiping probably would have overriding influence over any major decision critically affecting the situation in South Vietnam, as for example, international negotiations on South Vietnam, cessation of Communist guerrilla operations, and escalation to conventional warfare or overt introduction of North Vietnamese army units. In any event, important Communist policies for South Vietnam are probably coordinated with Moscow and Peiping and the latter scrutinize developments in South Vietnam carefully with an eye to their own interests. Both Moscow and Peiping also furnish strong propaganda support for the Communist effort in South Vietnam and, in addition, the USSR carries on supporting diplomacy, largely in its capacity as a Geneva Conference Co-chairman. There is little evidence of material support of the Viet Cong guerrillas by Moscow or Peiping.

There are no apparent major policy differences between Hanoi, Moscow, and Peiping regarding South Vietnam. During the first six months of 1962, it appeared that Moscow differed somewhat with Peiping's and Hanoi's propaganda for an international conference to settle the South Vietnam situation; this difference presumably continues to exist although little has been said by the Bloc on a conference since mid-1962. There also may be underlying intra-Bloc differences on the subject of neutralization of South Vietnam or reunification. In any event, even though Moscow might prefer neutralization, all would work to communize a neutral South Vietnam if one were established. Moscow has also generally exerted a restraining influence over Communist willingness to take risks.

The sharp increase of the US military presence in South Vietnam and the events of recent months in Laos apparently have not weakened Communist resolve to take over South Vietnam. However, these events have clearly caused some modification of Viet Cong guerrilla tactics and may have caused the Communists to revise their timetable. Nevertheless, the Communists probably continue to look primarily to the long run in South Vietnam and to remain confident of eventual victory.

B. VIET CONG ORGANIZATION AND CAPABILITIES

1. General. Available intelligence indicates that two parallel structures, military and political, exist at all organizational levels of the Viet Cong apparatus in South Vietnam. At the top of the organization are two bodies, the Nambo Regional Committee (NRC) and the Interzone V Regional Committee (IVRC), equal in status and each apparently responsible directly to Hanoi. The NRC directs and is responsible for all operations in the southern provinces, or roughly the former Cochinchina region, while the IVRC directs and is responsible for all operations in the central and northern provinces. These committees consist of several staffs responsible for military and political activities. The organization of the two regional committees appears to be duplicated among intermediate and lower level committees responsible for operations at the interprovincial (i.e., area covering more than one province), provincial, district, and village levels. Information is not available on the size of the political component of the Viet Cong apparatus, but it must be assumed that the regular and irregular guerrilla forces also serve as penetration, espionage, sabotage, propaganda, and terrorist agents.

Viet Cong capabilities have increased considerably during the past three years. In 1959 a relatively small but effective military-political apparatus operating largely in the Mekong River delta provinces, the Viet Cong has since grown into a formidable force operating throughout the countryside and even in many urban centers, including Saigon, the capital. In addition to increasing its numerical strength, the Viet Cong has significantly improved its military and political organization and its tactical, weapons, and subversive capabilities.

2. Military Strength and Effectiveness. Communist assets for guerrilla action in South Vietnam are considerable. In spite of an apparently increasing casualty rate, Viet Cong hard-core personnel has grown from an estimated 4,000 in April 1960 to about 23,000 in October 1962. These forces are distributed principally in the southern provinces, the former Cochinchina region which includes the Mekong River delta area and where most of the fighting occurs. They are well-trained and well-armed (utilizing such weapons as light machine-guns and mortars and even 57 mm. recoilless rifles). The units into which these forces are organized range up to battalion and include the key personnel infiltrated from North Vietnam. These units in effect constitute the elite fighting elements of the Viet Cong force and operate at the interprovincial, provincial, and district levels. There has been no hard evidence that the Viet Cong has yet formed regimental-size units or that they have an anti-aircraft capability, other than the small arms which they are using with increasing effectiveness against helicopters.

In addition to this elite force, the Viet Cong has an auxiliary armed force roughly estimated at 100,000 and distributed throughout the country. This force operates essentially at the village and hamlet levels and consists largely of part-time or full-time armed cadres and sympathizers. Its functions are probably varied, but there is considerable evidence that it serves as a local defense force, provides logistic support (food and intelligence, for example), and constitutes the reserve from which personnel are drawn as replacements for the elite force or to help activate new units. The auxiliaries appear to be partially trained and partially armed, frequently utilizing nothing more than spears, scimitars, and a variety of small weapons manufactured in home workshops or "arms factories." However, these limited capabilities apparently are partly offset by the ability of the auxiliaries, many of whom cannot easily be identified by the GVN, to pass themselves off as innocent peasants.

By relying on small-unit actions and tactics of surprise, constant movement, concentration for attack, and dispersal upon withdrawal, the Viet Cong guerrillas have achieved considerable effectiveness. They ambush, carry out company-size attacks against army and security units, and have the capability to strike in battalion force against several targets simultaneously. According to official GVN statistics, the Viet Cong since 1960 has killed more than 9,500 and wounded at least 13,300 military and security personnel. In addition, the GVN estimates that at least 8,700 local officials and civilians have been assassinated or kidnapped since 1960.*


* The statistics on Viet Cong and GVN casualties are incomplete and not entirely reliable partly because the GVN probably understates its own casualties and overstates those of the Viet Cong. Since the latter part of 1961, casualty estimates have improved largely because of the increased US presence in South Vietnam. Despite reservations regarding their accuracy, these figures are helpful as one indicator of the magnitude of the fighting in South Vietnam.


The Viet Cong appears to be well-informed particularly on the plans and movements of government forces sent on large counterguerrilla operations. Morale is probably also good and desertions or defections to the GVN forces, although reportedly increasing, are relatively few. In recent months, however, shortages of food and the increased aggressiveness of GVN forces are believed to have adversely affected the morale and capability of some Viet Cong forces in the central provinces.

3. Viet Cong Logistic Support

a. Local Support. The Viet Cong relies principally on local resources to sustain its operations. Both the character of this support and the means by which it is acquired vary considerably. It is obtained voluntarily, by propaganda and promises of material or political benefit, by threats and intimidation, and finally by outright force. It includes, among other things, personnel, arms, food, funds, and intelligence.

Most of the Viet Cong guerrillas and agents are recruited locally, with a large percentage coming from the youth. Most of their weapons are either captured or stolen from GVN military and security forces, are manufactured in home workshops or "arm factories" in Viet Cong concentration areas, or are activated from stocks cached since the end of the Indochina war. A considerable portion of Viet Cong funds apparently comes from fees levied on buses and other means of transportation, from taxes on the wealthy and on business enterprises (such as rubber plantations), and from ransoms paid for persons kidnapped. The Viet Cong is entirely dependent upon the local populace and the countryside for food which is obtained through purchase, pilferage, capture of stocks, taxation (in the form of rice), and even actual cultivation of crops by sympathizers and part-time guerrillas. Finally, the ability of Viet Cong guerrillas and agents to disperse, regroup, and indeed retain their presence intact, even after GVN military clearing operations have been completed, is considerably enhanced by the concealment afforded them, voluntarily or otherwise, by the local population.

In addition, the Viet Cong guerrillas and subversive agents rely heavily on the villagers for information and supplementation of intelligence gained from espionage and from penetration of GVN military and civilian services. Intelligence supplied by the villagers is largely of a tactical nature and deals, for example, with the location and movement of local GVN military and security forces and the defenses of individual army and security posts, villages, and hamlets.

b. External Support. The Viet Cong insurgent-subversive movement in South Vietnam is directed, inspired, and organized by the DRV. Logistical support from North Vietnam, however, appears to be limited, and existing evidence indicates that there is no large-scale infiltration of men and equipment. On the other hand, infiltration almost certainly occurs on a sporadic if not continuing basis and apparently increases from time to time, as was probably the case during May and June 1962.

Infiltrators are believed to consist largely of well-trained cadres (military personnel, key political and subversive agents, technicians, and couriers) rather than units. However, in recent months there have been two reliable reports confirming the infiltration of two Viet Cong groups (200 and 400 men respectively) from southern Laos. There is considerable evidence that infiltrators in general are largely South Vietnamese (Cochinchinese and Annamites), regrouped and retrained in North Vietnam since the end of the Indochina war and familiar with the people and terrain of South Vietnam. They carry in their own weapons and, in some instances, a limited amount of additional small and even large weapons, technical equipment, medical supplies, and funds. The infiltrators apparently are distributed among existing Viet Cong units, thus increasing the number of hard-core personnel and thereby the capability of these units, or become the nuclei of new units.

Since the latter part of 1960, the principal infiltration routes have been through the corridor of southern Laos controlled by Laotian and North Vietnamese Communist forces. However, infiltration continues through eastern Cambodia, across the Demilitarized Zone at the 17th parallel, and by junk landings along South Vietnam's long coastline. In addition, Viet Cong guerrillas are believed to use the border areas of both southern Laos and eastern Cambodia to a limited extent for safe haven purposes during their hit-and-run attacks or when pursued by GVN forces.

4. Political Capabilities

a. The Communist Position in the Countryside. There have long been major gaps in our knowledge of rural conditions in South Vietnam. In view of the overriding importance that the Viet Cong attaches to the countryside in its strategy, these gaps have now assumed critical proportions. Although our knowledge of rural conditions is improving, principally because of the substantially increased US presence in South Vietnam, any assessment of Communist political strength outside urban areas remains questionable and at best tentative.

The Viet Cong appears to have had considerable success in reducing or supplanting government authority in the countryside. By the latter part of 1961, US officials estimated that probably more than one half of the entire rural region south and southwest of Saigon, as well as several areas just to the north and in the central and northern provinces, were under effective Viet Cong control by / night, with the government generally capable of maintaining its authority only by day. Many other areas were under varying degrees of Viet Cong influence.

According to a more recent and apparently more refined study, US officials estimated in mid-1962 that of South Vietnam's some 2,500 villages, which contain around 85 percent of the total population, 20 percent were effectively controlled by the Viet Cong. Although the Viet Cong-controlled villages were inhabited by an estimated 9 percent of the rural population, the total area represented by these villages encompassed a much larger proportion of the countryside. In contrast, the GVN effectively controlled about 47 percent of the village population, and 33 percent of the villages, largely located, however, in the environs of major towns and provincial capitals and in the more heavily populated areas along main lines of communication. In the remaining 47 percent of the villages and 44 percent of the village population, neither the GVN nor the Viet Cong exercised effective control, even though GVN influence seemed greater in most of these villages.

The accelerated GVN counterinsurgency effort, principally the strategic hamlet program and the increasing aggressiveness of the military and security forces, reportedly has enlarged somewhat the number of villages and peasants under effective GVN control. However, this improvement has presumably occurred principally in areas formerly contacted by the GVN and the Viet Cong since the rural area and populace estimated as under effective Viet Cong control has been reduced by only 17 villages with a population of 150,000.

Partly by the sheer strength of its presence and partly because of the prolonged absence of strong government military and security forces, the Viet Cong has been able to transform some rural areas--such as portions of the Ca Mau peninsula, the swampy Plaine des Janos, and the highlands in the north--into major concentration or base areas which are dangerously close to becoming "liberated" areas. Here, the Viet Cong has virtually a free hand in levying and collecting taxes, directing the cultivation of rice and other farm products, and controlling their distribution, propagandizing the populace, conscripting cadres, and even setting up overt political organizations and provisional local government units.

The political capability and strength of the Viet Cong in the countryside is inextricably associated with and strongly dependent upon its military presence and power. The threat or the use of force, as demonstrated by the high rate of assassinations and kidnappings of local officials and even ordinary peasants, is a continual reminder of the penalty of noncooperation with the local Viet Cong. Moreover, by successful military operations against the GVN, the Viet Cong is able to demonstrate its superiority and its determination and ability to remain. In turn, the political apathy of the peasant-i.e., his traditional and overriding sensitivity and attachment to local, village, and indeed family matters and his minimal awareness of national or even regional issues and developments-has made him prone to seek an accommodation with whatever force seems for the moment capable of exercising authority.

The Viet Cong also uses non-violent, positive means to appeal to the peasantry. Although their tactics vary and depend partly on prevailing local conditions, they have, for example, purchased rather than seized rice and food stuffs in many cases, have taxed the wealthy with effective publicity, and reportedly even distributed land to landless peasants. Even their terrorist acts from time to time have been against harsh, disliked, or corrupt officials. These acts are held out as proof of the Viet Cong's ability to improve the peasant's economic and political lot. Their appeal is enhanced by the peasant's basic distrust of government officials engendered partly by their excessive and harsh implementation of government programs and by the average Vietnamese bureaucrat's belief that he does not serve but is to be served by the people.

Viet Cong propaganda to the peasant, therefore, is both positive and negative. It extols Viet Cong achievements and power, credits the Communist forces under Ho Chi Minh with expelling the French from Vietnam and keeping the north free of "foreign control," holds out economic and political inducements, derides GVN capabilities, and points to the excessive, oppressive, and corrupt character of GVN demands and practices, as for example, military conscription and forced labor in the creation of strategic hamlets. Viet Cong propaganda also exploits the Vietnamese peasant's credulity and animistic beliefs, spreading bizarre stories intended to limit popular participation in government programs.

Viet Cong penetration efforts have been directed largely against local government services and Army, Civil Guard, and Self Defense Corps field units. While the extent of this penetration is difficult to determine accurately, there have been increasing reports in recent months of successful Viet Cong penetration of Self Defense Corps units and strategic hamlets. Moreover, the apparent advance knowledge of some GVN military operations and the generally high rate of Army desertions is probably partly due to Viet Cong penetration of Army field posts and training centers.

b. The Urban Sector. Communist activities in urban areas are limited largely to propaganda, penetration, and terrorism. The immediate objective of these activities is to encourage dissent and opposition to President Diem and the US presence in South Vietnam and to foment neutralist sentiments among intellectuals, professionals, disgruntled politicians and government officials, and labor and youth groups. In this manner, the Viet Cong hopes to create a common ground with actual and potential non-Communist opposition elements, legitimatize its insurgent-subversive effort, and ultimately precipitate Diem's overthrow. The Viet Cong has stepped up this effort since 1961, particularly with the creation of its "National Front for the Liberation of South Vietnam" (NFLSV) which also seeks to gain international support for the Communist position.

As reflected by Radio Hanoi which also relays NFLSV statements, the paramount Viet Cong propaganda theme is the dictatorial family rule imposed by the Diem government and its subservience to US "foreign imperialist intervention" which are combining to "oppress" and "murder" the South Vietnamese people and block reunification. This Viet Cong propaganda campaign, coupled with recent political developments in Laos (which some Communist propaganda has implied provides an acceptable model for "settlement" of the South Vietnamese conflict) and with Diem's persistent reluctance to tolerate any appreciable non-Communist opposition, has already contributed to an increase in neutralist sentiment among urban circles. Moreover, some oppositionists, including a few leaders of the once-powerful Gao Dai and Hoa Hao religious sects, are reportedly cooperating with the Viet Cong to the point of being committed to participating in an eventual Communist-led anti-Diem coup attempt.

Viet Cong capabilities for leading a successful coup are limited, however. Its own forces, even if combined with any remnant armed bands of the Cao Dai and Hoa Hao religious sects, do not appear strong enough to overthrow the government by military means. Nor is there any evidence that the Viet Cong has any support in the middle or top levels of the GVN bureaucracy or its military and security establishments. Although the Viet Cong might well be able to exploit the confusion and instability resulting from Diem's overthrow, it does not yet have the ties with the non-Communist opposition to Diem that would enable it to lead a successful coup.
There is no reliable evidence of Viet Cong penetration of the middle or top echelons of the GVN bureaucracy and defense establishment. There is believed to be penetration of the lower echelons, and it is clear that the GVN security and intelligence services do not now have the capability to prevent such penetration. A GVN police interrogation report in early 1962 revealed that there was a large Viet Cong subversive network in the Saigon post office and that an employee of the post office was possibly using the telegraphic system for clandestine communication with North Vietnam.

The Viet Cong has also progressively improved its terrorist capability in Saigon and other urban centers. There have been increasing reports that the Viet Cong has enlarged its terrorist corps in Saigon and that the principal targets of these attacks are to be Americans. Evidence of this capability is the increasing number of grenade bombings in Saigon. For example, there were three bombing incidents against Americans in May 1962 and three bombing incidents in connection with Independence Day celebrations on October 26, 1962.

II. THE VIETNAM GOVERNMENT'S COUNTERINSURGENCY EFFORT

A. BACKGROUND: GRADUAL RESPONSE

In contrast to the rapid acceleration of the Communist insurgent and subversive effort, the GVN response until this year was gradual and relatively uncoordinated and generally did not reflect the sense of urgency acknowledged by Vietnamese officials themselves. It was not until the early part of 1961 that a comprehensive counterinsurgency plan was drawn up, with the help of US officials, and several months elapsed before general implementation began. Moreover, the GVN leadership continued to view the situation as one created and supported largely by external forces with little popular appeal and saw their problem as essentially a military one requiring overriding emphasis on purely military measures.

Even these military measures, however, were weakened principally by the GVN leadership's reluctance to abandon static defense concepts and permit more offensive actions, for which it had sufficient forces--a reluctance that reflected both fear of overt DRV aggression and internal political considerations. In addition, the GVN military and security forces themselves, despite their experience in combatting guerrillas during the Indochina war and thereafter, were inadequately trained, equipped, and organized to wage a sustained and large-scale counterguerrilla effort.

The turning period in the GVN response occurred in late 1961 and early 1962 and resulted largely from substantially increased US aid, repeated US reaffirmations of political support for President Diem, and persistent US recommendations, including those developed by special US missions to South Vietnam. Accordingly the GVN has diversified its response by giving increasing emphasis to political counterinsurgency measures. It has improved the coordination of these measures with purely military operations, given priority to implementing a basic strategic concept for eliminating the insurgents, significantly increased the counter-guerrilla tactical capability of its military and security services, and departed appreciably from static defense concepts, thereby greatly aiding the development of increasingly offensive-minded and aggressive military and security forces. By the early part of 1962, the GVN had begun to act upon the recognition that the crisis situation in South Vietnam was an internal and political problem, requiring largely political measures to eliminate Communist appeal, support, and control among the peasants.

B. FORMULATION AND IMPLEMENTATION OF BASIC STRATEGIC CONCEPT

As a result of persistent US recommendations, the GVN has developed a basic strategic concept for the implementation of its diverse counterinsurgency measures. The two principal features of this concept are the strategic hamlet program and a closely integrated and coordinated military-political approach directed toward isolating the Viet Cong and regaining control of the countryside on a systematic, area-by-area basis.

1. Strategic Hamlet Program. The strategic hamlet program embodies principally the recommendations of the British Advisory Mission, headed by R. G. K. Thompson, a key figure in the campaign against Communist insurgency in Malaya. It also reflects US innovations and the experience and concepts developed by the GVN in similar earlier projects. Briefly, the program involves regrouping hamlets into fortified and more readily defendable settlements and undertaking in these settlements political, social, and economic measures designed to weed out Viet Cong agents and sympathizers, reestablish and improve local government administration, improve the general popular image of the GVN, and increase the peasantry's identification with the government's fight against the Viet Cong. The program is initiated in relatively secure areas and is then expanded into less secure areas. The majority of the hamlets provide most of their own resources, although the US is supplying some of the equipment and necessary construction materials and it is expected that this aid will increase substantially.

The strategic hamlet program is now priority national policy. President Diem has created a special interministerial committee to implement and coordinate the program on a countrywide basis. The committee is headed by Diem's brother, Ngo Dinh Nhu, and delegates its responsibilities to regional committees under each of the army division commanders. Increasing efforts have been made to regularize the procedure for implementing the program, educate the responsible local officials and the peasants on procedures and objectives, speed up the distribution of US material assistance, and train the necessary specialized personnel. The GVN has reported that, as of mid-October 1962, more than 3,000 strategic hamlets had been completed and more than another 2,000 were under construction; more than one-half of these are in the southern provinces, including the Mekong River delta area.

The completed strategic hamlets vary widely in the quality of their physical defenses, the effectiveness of the defense, internal security, and administrative systems and the degree to which necessary political, social, and economic measures have been implemented. Among the most effectively organized hamlets are those in areas where integrated and systematic military-political pacification operations have been undertaken, such as "Operation Sunrise" in Binh Duong province and "Operation Sea Swallow" in Phu Yen province. In these and other hamlets, fortifications and the defense forces are adequate for repulsing guerrilla attacks, radio communication has been provided, hamlet administrative officials have been elected or selected by the inhabitants rather than appointed by the village or district chiefs, and Civic Action teams have been active in improving the health, educational, and general living standards of the people. In many other hamlets, however, fortifications are extremely inadequate or virtually non-existent, defense forces are greatly under-strength and inadequately armed, there are no radio communications or Civic Action teams, and hamlet officials continue to be appointed. Moreover, despite improving peasant morale in many hamlets, particularly as the benefits of security against Viet Cong intimidation and taxation become evident, there are continuing reports that GVN officials have exacted too heavily from local resources and have not compensated the peasants for the material and labor required to build the hamlets, that the peasant's ability to earn a living has declined because of the time he is required to spend on construction, and that the government has been more concerned with controlling the hamlet population than with providing services and improving living conditions.

It is still too early for accurate evaluation of the strategic hamlet program. On balance, the program appears successful and probably has contributed to the reported slight increase in the number of persons and villages that have come under effective government control. The fact that the strategic hamlets have become a major target for Viet Cong armed attacks is in itself an indicator of the importance of the program to the GVN's counterinsurgency effort, if not a measure of its success. Most of the deficiencies of the strategic hamlet program appear to be the result of implementation and, to some extent, are to be expected during the early stages. Many provinces and district chiefs continue to be relatively uninformed or confused as to procedure and objectives or are overzealous in their attempt to impress their superiors and thus have established unrealistic goals. Moreover, some GVN leaders, including President Diem and Ngo Dinh Nhu, tend to place exaggerated importance on the program, viewing it almost as a universal panacea to the Communist insurgency rather than as merely a measure for cutting off the Viet Cong from the peasantry. Accordingly, the strategic hamlet program has not been effectively integrated with the basic military-political pacification effort to eliminate the Viet Cong gradually and systematically, principally because of the much more rapid implementation of the strategic hamlet program. As a result, the necessary basis for the continuing defense of the strategic hamlets does not exist in many of the areas where they have been established.

2. Systematic Military-Political Pacification Operations. After considerable delay, and with the advice of the British Advisory Mission and U.S. officials, the GVN has developed the general outlines of an integrated military-political approach for pacifying the country on a systematic, gradual, and province-by-province basis. The approach involves large-scale and continuing military operations to clear and hold a given province. As the province is cleared, strategic hamlets are established with Civic Action teams moving into the hamlets to direct construction and help establish administrative, informational, health, educational, security, and other services. In March 1962, President Diem approved a "Delta Pacification Plan," calling for the pacification of 11 provinces around Saigon and in the Mekong River delta area and embodying most of the recommendations of the British Advisory Mission and other security concepts developed by the US. In August 1962, the GVN divided the country into four priority areas for purposes of pacification.

Implementation of the integrated pacification approach began in March 1962, and since then four operations have been initiated: "Operation Sunrise" in Binh Duong province (and portions of surrounding provinces), "Operation Sea Swallow" in Phu Yen province, "Operation Let's Go" in Binh Dinh province, and "Operation Royal Phoenix" in Quang Ngai province. Plans for another operation in Vinh Long province, "Operation West Wind," are being drawn up. In addition to continuing military operations, over 160 strategic hamlets, the great majority in Phu Yen province, have already been constructed and more than an additional 1,000 hamlets are planned for completion by mid-1963 or shortly thereafter.

The results of the systematic, integrated military-political pacification approach are encouraging. However, its limited application to relatively few provinces has not yet appreciably altered the balance between the government and the Viet Cong in the countryside. Moreover, there is evidence that the GVN has some doubt as to the feasibility of this approach as the principal basis of its counterinsurgency effort. For example, in addition to the heavy reliance on the strategic hamlet program, there are reports that President Diem feels that his military forces now have sufficient strength and capability to make quick, large-scale military strikes simultaneously in and behind various areas of Viet Cong concentration with the hope of dispersing and ultimately isolating the guerrilla forces into small and easily eliminated pockets.

C. MILITARY OPERATiONS AND EFFECTIVENESS

The GVN military and security forces have significantly stepped up their offensive operations against the Viet Cong insurgents, particularly since the early part of 1962. In large measure, this has been the direct result of US agreement to support a substantial increase in the size of the GVN military and security establishments. Since the latter part of 1961, the GVN has increased its military forces from about 160,000 to around 200,000 and its security forces, the Civil Guard and Self Defense Corps, from just over 90,000 to almost 155,000. This has enabled the GVN to satisfy its requirements for defending transportation facilities and what it considers key areas, including the 17th parallel, while it attempts to seek out and eliminate the Viet Cong. During the period October 1-25, for example, the GVN military and security forces launched 19 large offensive operations, involving units with equivalent strengths ranging from two battalions to several regiments, in addition to small-unit offensive actions and defensive engagements.

The general effectiveness of GVN military operations has also improved as a result of President Diem's apparent increasing awareness that he must rely on his military establishment to formulate the execute military strategy and plans. In close cooperation with US military advisers, GVN army division commanders and their subordinates are participating increasingly in formulating and executing offensive missions against the Viet Cong. However, it appears that Diem's willingness to delegate this responsibility is due partly to his appointment of division commanders whom he believes to be loyal to him and his family. This reliance essentially on colonels to direct the fighting reinforces continuing reports that Diem and Ngo Dinh Nhu still mistrust most of the generals and even have doubts as to their military competence. In any event, Diem and Nhu continue to play dominant roles in the development of general military strategy and must approve plans for major operations and frequently will initiate or modify them.

As a result of the substantial increase in US military assistance and accelerated training programs by US military personnel in South Vietnam, who now number almost 11,000, the GVN military and security forces have rapidly developed considerable counterguerrilla capability. These forces are substantially better armed with weapons and equipment suitable to counterguerrilla war fare. They are now ambushing and patrolling more than ever before, are engaging the Viet Cong increasingly in small unit actions, and are following through their attacks in order to keep the Viet Cong from disengaging. Probably of greater importance, however, is the considerably improved tactical mobility of the GVN forces. These forces are now able to strike more quickly and in greater strength than ever before during defensive, relief, or offensive operations. The single most important reason for this accelerated tactical mobility is the increasing utilization of air power, principally US helicopter support. Although better intelligence and communications, particularly the installation of radios in most villages, and improvements in the tactical organization of the
GVN military establishment, have also contributed significantly.

The improvement in GVN tactical intelligence is due partly to administrative and organizational reforms but principally to the success of US officials in impressing the South Vietnamese with the necessity for more effective interrogation of Viet Cong prisoners and to the apparent increase in the willingness of the peasants, at least in areas where security has improved, to inform on the Viet Cong. On balance, however, GVN intelligence continues to be seriously weakened by the shortage of trained personnel, ineffective prisoner interrogation techniques, overlapping responsibilities among several agencies and interagency rivalries, and the continuing reluctance of the peasantry to inform on the Viet Cong for fear of reprisal, particularly in insecure areas or where the GVN presence is regarded as temporary.

Despite this improvement in counterguerrilla tactics, GVN military forces continue to rely more on large operations or clearing sweeps than on small-unit actions, employ Civil Guard and Self Defense Corps units excessively in independent offensive missions, and, during large operations, deploy combat units, particularly artillery and airforce, according to conventional tactical methods. As a result, the Civil Guard and Self Defense Corps are incurring heavy casualties and Viet Cong guerrillas generally have advance knowledge of major GVN operations, especially when artillery or air power is used to "soften up" the enemy, and are able to disperse or avoid engagement.

The increased US support and presence, the greater role played by GVN military officials in formulating and directing military operations, and more successes against the Viet Cong than ever before have apparently improved morale among members of the middle and upper echelons of the GVN military establishment. The state of morale at the lower level, however, is more difficult to determine. Desertions, particularly among recruits and recalled reservists, appear to be running very high for a wide variety of reasons, and some GVN officials continue to claim serious difficulty in meeting conscription quotas. During the first seven months of 1962, for example, a total of 17,287 personnel were dropped from the rosters of the Army, Navy, Airforce, Civil Guard, and Self Defense Corps as deserters or as personnel absent without official leave. On the other hand, some GVN officials have recently claimed that voluntary candidates have for the first time oversubscribed the quota at the army officers' training school at Thu Duc.

III. THE POLITICAL SITUATION

A. BACKGROUND: RAPID DETERIORATION

During 1960 and 1961, the internal political situation in South Vietnam deteriorated rapidly, breaking the relative stability and general surface calm that had prevailed since President Diem consolidated his authority in 1955-56. Criticism of Diem increased substantially throughout all sectors of Vietnamese society but was more urgently articulated within the government and bureaucracy, including the armed forces. A wide range of civilian and military officials, including Vice President Nguyen Ngoc Tho and other members of the cabinet, privately questioned Diems handling of the internal security problem and his ability to rally and lead the people against the Viet Cong during what they regarded as the most critical period since the end of the Indochina war. Their concern with the Communist threat, however, was almost inseparably entwined with an accumulation of grievances principally over Diem's failure to delegate responsibility, the excessive power exercised by Diem's family, and the use of secret security services and semicovert political organizations to scrutinize the attitudes of the bureaucracy.

Open deprecation of Diem also increased sharply among intellectuals, professionals, and disgruntled ex-politicians in urban areas, particularly in Saigon, the focal point of non-Communist political opposition to Diem since 1956, and to a lesser extent among labor and business elements. They repeatedly and, on occasion, vociferously demanded that Diem liberalize and reform his government, lift restrictions on civil liberties, eliminate corruption in government, and permit an opposition to operate. These demands were supported, as in the past, by a disparate group of anti-Diem Vietnamese expatriates in Paris who have long advocated Diem's removal.

Unrest also increased among the peasantry principally because of the government's inability to assure adequate protection from the Viet Cong but partly because of the cumulative reaction to the excessively arbitrary and severe behavior of local security and administrative officials. Possibly underlying this unrest also was the character of the GVN's economic development activities which, however limited, were oriented more toward developing an urban industrial base than toward improving the economic lot of the peasant.

Vietnamese confidence in the Diem government was obviously seriously shaken and morale within the bureaucracy, particularly the military establishment, declined greatly. In November 1960 a small group of middle level paratroop officers staged a near-successful coup in Saigon. Although the abortive coup obviously made Diem take serious stock of the prospects for political survival, it also strengthened his confidence in the correctness of his political views and increased his suspicion of many of his subordinates and the oppositionists outside the government.

During this period also, Diem's view of US policies toward South Vietnam underwent considerable change. For the first time since he consolidated his position, Diem appeared to question seriously US political support of his leadership and US commitments to defend South Vietnam from Communist encroachment. His apparent concern, although partly reflecting his disagreement with US actions in Laos, was due largely to earlier persistent US representations on internal issues which he regarded as pressing him unduly to reform and liberalize his regime. This concern was further aggravated by his belief, partly instilled by members of his family, that the US was in some way involved in the abortive coup.

During the immediate post-coup period, Diem took a number of measures to strengthen his controls over the bureaucracy. He and Ngo Dinh Nhu made it publicly and privately clear that future coup attempts or even public criticism of the government would be dealt with severely. The Can Lao, the government's semicovert political control organization, and the secret police were ordered to maintain close surveillance over critics within the bureaucracy and the military establishment and over the oppositionists outside the government, and officials were apparently instructed that passing information to or even having social relations with Americans would lead to serious consequences. As a result, there was a sharp decline in the heretofore large number of reports on coup plotting and criticism of Diem and his family. In the meantime, Diem reportedly organized a countercoup group from emong the most loyal members of the Can Lao, the bureaucracy, and the military and security services. Ostensibly to impress the US with his willingness to reform the government, he later reorganized his cabinet, taking the opportunity to remove cabinet officials he believed to be critical of his leadership.

During the last half of 1961, the political situation became somewhat less disturbed, despite the continuing rapid deterioration of security conditions. The predominant factor in this development was external: strong US public manifestations of support for Diem, including the visits of Vice President Johnson and General Maxwell Taylor, and the substantial increase in US assistance to South Vietnam. Other contributing factors were the slightly greater participation that Diem now appeared to permit his military advisers in the conduct of the fighting, the favorable psychological effect on the middle and lower military echelons of a few large offensive operations, and Diem's initiation of some modest political reforms. However, there was no conclusive reversal of deteriorating trends as was made clearly evident when Diem's palace was bombed by two GVN airforce pilots in February 1962.

B. THE CURRENT SITUATION

The political situation in South Vietnam is now probably more complex and more difficult to analyze than at any time since 1954. On the one hand, the sense that political reform is urgently needed appears to have subsided significantly, at least on the surface, and indeed a relative calm seems again to have descended over the bureaucracy. There has been a significant decline in reports of serious discontent, and of criticism by GVN officials of Diem's leadership and his family. Reports of the concern of officials with inefficiency, corruption, and morale in the government have likewise declined significantly since the early part of 1962, as have reports on coup plotting. Some US officials believe that morale within the bureaucracy and the military services has improved appreciably, largely because of the improved capabilities of the armed forces and several large successful operations against the Viet Cong; that some heretofore strong oppositionists are now seeking to identify themselves with the government and contribute positively to the war effort; and that peasant loyalty is shifting toward the government, particularly in areas where the government is making its presence increasingly felt. Finally, Diem and his principal lieutenants have very recently shown considerable confidence and optimism that the tide has been turned against the Viet Cong and have even stated that a general offensive is about to be launched.

On the other hand, the indicators of serious internal political instability remain, however diminished in apparent intensity, and are as varied as the indicators of political stability. There are reports from officials from various levels of the administration, including Vice President Tho and Generals Duong Van Minh and Le Van Kim, that Diem continues to run the war himself or through his inner circle of confidants, that corruption within the government continues unabated (as evident in the recent national lottery scandal), that there is no political consolidation of military successes against the Viet Cong in the countryside, that indiscriminate bombing in the countryside is forcing innocent or wavering peasants toward the Viet Cong, and that coup plotting persists and only the fear of Communist exploitation and the belief that the US would not tolerate a coup keep it from materializing. As recently as late October 1962, Gen. Ton That Dinh, commander of Army Corps II and generally considered one of the most loyal although opportunistic of Diem's generals, stated that he was highly dissatisfied with the regime, that Diem and Nhu tolerate corruption in high places, and that he was planning to precipitate a coup in early February 1963.

1. Political Attitudes of Diem and His Family. Diem and his family remain firmly convinced of the wisdom of their political outlook and of their method of governing their country. They are basically impatient with democratic processes. They consider democracy a useful goal but its methods they regard as wasteful and as dangerous to political stability and public safety in a country such as South Vietnam. They contend therefore that the Vietnamese people, with their national survival at stake, must submit to a collective discipline until they develop a greater national consciousness and a better sense of civic responsibility. While willing to rule within the framework of constitutional and representative government, they are firm in their convictions that government is effective and dynamic only when its power is closely held and exercised by a small, highly dedicated, and uncompromising element at the very top through a machinery founded more on personal relationships and loyalty than on formal or institutional chains of command. Where representative government and civil liberties come in conflict with the highly centralized authority, the latter generally prevails. Finally, Diem and his family continue to believe strongly, almost fanatically, that their leadership is crucial if not indispensable to the survival of their country in the present crisis.

Some slight modifications have slowly appeared in these attitudes during the past year, partly because Diem and his family are increasingly aware that the Communist threat to South Vietnam is largely internal, and partly because of the magnitude and complexity of the US assistance program and its increasing orientation toward the needs of the countryside. More than ever before, they have been made aware that government must not only be served but must also serve, that the peasant and his active participation rather than his passive obedience may well be crucial for final victory over the Viet Cong, and that a little more sharing of power at the top would probably improve administrative efficiency rather than lead to their ouster.

At the same time, however, Diem and especially Nhu have gone to great lengths to convince US officials that this has always been their basic approach to government and to elaborate on what it means for the peasant. Nhu has repeatedly stated that the strategic hamlet program, for example, will create a social, economic, and political revolution in the countryside, which will uproot vested economic interests, implant democracy and efficient and benevolent administration at the local level, and raise the peasant to a new social status. There is no evidence, however, either in recent developments or in the records of past performance, particularly Nhu's, that such are their real objectives and expectations.

Probably the most significant change is in Diem's attitude toward the US. He has apparently become substantially persuaded that US defense commitments to South Vietnam are firm, despite his continued disagreement with the US on the Laotian problem. His earlier suspicions that the US was looking for a successor in South Vietnam and that the US was implicated in the abortive 1960 coup have been considerably relieved. On the other hand, Diem has remained firm against any US pressure on matters that he interprets as vital to his own and his government's best interests and is convinced that in the final analysis he can have absolute confidence only in himself and in his family.

2. Diem and the Bureaucracy. Diem probably has somewhat strengthened his control of the administration. For example, he has reorganized a number of his agencies, has removed a number of critical and potentially disloyal officials and by various means neutralized the influence of some others, such as Vice President Tho and Gen. Duong Van Minh, and has improved his means of surveillance of the bureaucracy through such techniques as the creation in the military establishment of a system of "political commissars" known as the Political Welfare Division. He has attempted to reinforce further his control of the military establishment by the appointment of personally loyal colonels as division commanders, some of whom have demonstrated from time to time that they regard their responsibility as principally to Diem rather than to their corps commanders.

On balance, however, it appears that the general efficiency of the administration has improved slightly, partly because of the appointment of more competent officials to several key positions, partly because of some increase in the authority delegated by Diem, and partly because of the enlarged US presence in South Vietnam. For example, Secretary of State for the Presidency Nguyen Dinh Thuan appears to be exercising greater authority than before, as is Secretary of State for Interior Bui Van Luong who, like the head of the new Central Intelligence Organization, Cot. Nguyen Van Y, and Secretary of State for Public Health Tran Dinh Do, is among the newly-appointed and more competent members of Diem's entourage in Saigon. At Diem's initiative, the National Assembly recently passed an amendment to the constitution enabling it to call upon members of Diem's cabinet to give testimony on pending legislation.

Diem also has become increasingly aware of the need to revive and accelerate training programs for his civil service and has been somewhat more selective in his appointment of middle echelon officials and province chiefs. As a result of the increased number of US advisers, particularly at this level of the government, some of these officials have also shown a somewhat greater willingness to act on their own initiative and to attempt to improve their general effectiveness in such matters as military planning and operations, information and propaganda, intelligence, and Civic Action. Finally, there has been greater consultation and coordination of activities between GVN and US officials in Saigon which in turn has tended to reduce delays in the formulation and implementation of policies.

Nevertheless, participation by the central elements of the administration in Saigon in the formulation and direction of policies, as well as initiative and constructive criticism upward from its middle and lower echelons, continue to be restricted seriously. Diem and his family continue to operate the government largely on the basis of personal relationships rather than through the regular or formal channels of command. They have remained steadfast against any US pressure to broaden government participation at the top, and have been keenly alert and highly sensitive to the possibility that the role of US advisers in the field or at the middle and lower echelons of the administration may weaken their authority outside Saigon.

3. Diem's Position in the Countryside. Diem has never had widespread popular appeal and support, even during his period of greatest achievement, 1955-58. An austere and disciplined introvert, he is incapable of demagoguery and has never made a great effort--to the extent that Prince Sihanouk of Cambodia and Ho Chi Minh of North Vietnam, for example, have done so--to inspire among the South Vietnamese people a national consciousness centered and moulded around him personally. While he has enacted measures that have helped the peasants, he has not attempted to identify himself intimately with the peasants. Relatively few peasants have ever seen Diem or heard him speak, and there are probably many others who are not aware that he is head of the government. For the great majority of peasants, the district chief is probably the highest government official with whom there has been any notable degree of contact.

Diem undoubtedly has become increasingly aware of the serious need to improve the public image of himself, his family, and his government. He now travels extensively in the countryside, and his manner of talking with the peasant has become more relaxed and sympathetic than before; during the last half of 1961, for example, Diem made 18 known trips outside Saigon and visited 19 provinces, 9 in the central and northern parts of the country and 10 in the south. Both Diem and Nhu have from time to time attended the inauguration of relatively small rural projects. With US assistance, the GVN is expanding its information and Civic Action programs at the village level and has become more conscious of the need to conduct these activities along lines understood and appreciated by the peasant. Finally, there are reports that a number of the villages and hamlets which have been given arms have resisted the Viet Cong, instead of surrendering their weapons as some GVN officials had expected they would do.

There seems to be some feeling among GVN and US officials operating at the local level that the popular appeal of and support for Diem and his government in the countryside is improving, particularly in areas where security has improved and the government's power is increasing. However, they warn against any undue optimism, particularly since they believe social and economic advances are still not keeping pace with military successes, and that the positive identification of the peasantry with the government is still a long way off. While over a 100,000 Montagnard or mountain tribespeople have fled Viet Congcontrolled areas and are being temporarily housed and fed by the GVN, their ifight apparently was due principally to Viet Cong excesses and the general intensification of the fighting in the highlands rather than to any positive measures taken by the GVN to appeal to the tribespeople. The extensive use of artillery and aerial bombardment and other apparently excessive and indiscriminate measures by GVN military and security forces in attempting to eliminate the Viet Cong have undoubtedly killed many innocent peasants and made many others more willing than before to cooperate with the Viet Cong, particularly in areas where the government has conducted extensive military operations, but has failed to follow up by providing the means for permanent security.

4. Diem's Position in Urban Centers. Diem's legitimacy as South Vietnam's national leader may be, at best, a vague and impersonal concept in the countryside. It is seriously questioned, however, among many elements of the urban society, principally among professionals, intellectuals, and former politicians in Saigon. As in the recent past, this questioning largely continues to take the form of dissent and private criticism rather than openly organized opposition. Within this educated and politically sensitive sector of the Vietnamese society, there is a wide variety of political sentiments, including varying degrees of Vietnamese nationalism, neutralism, communism, pro-US and anti-US, and pro-French and anti-French. The common themes among these critics and active opponents of Diem continue to be related to his system and manner of rule.

Reports of open criticism and opposition to Diem among the Saigon civilian elite, already on the decline by early 1961, have decreased further during this year. Little has been heard, for example, of Dr. Pham Quang Dan's Republican Party of Vietnam (Dan himself has been in prison since the 1960 coup attempt), of GVN-created or GVN-controlled "opposition" groups, or of the once vociferous critics of Diem, such as the 18 intellectuals and ex-politicians who signed a public protest petition to Diem in 1960. The probable causes for this decline in reports are varied: GVN repression and increased fear of repression; the increased realization that there is little the oppositionists can do legally to change conditions, particularly in view of reaffirmed US support for Diem; and increased concern over the possibility of Communist exploitation of any coup attempt.

This relative surface silence might be regarded as an indicator of improvement in Diem's position with the urban public if it were not for the increasing number of reports of clandestine activities by his non-Communist critics and opponents. Factional leaders of such old and once important political groups as the Dai Viets and the Nationalist Party of Vietnam (VNQDD) reportedly are seeking ways to get their members secretly installed in the government. (There is evidence of some collusion between elements of one of these groups and the two pilots who bombed Diem's palace in February 1962.) Other opposition elements, including factions of the Cao Dai religious sect and the Hoa Hao Social Democratic Party, are reportedly preparing plans for a future coup, either in cooperation with other non-Communist groups or with the Viet Cong. It also appears that expatriate groups in France, such as the Democratic Party of Vietnam, are attempting to expand their covert activities in Saigon.

While it appears that Diem has not improved his standing among urban groups, there is no evidence that the anti-Diem intellectual-elite elements in Saigon have been able to overcome their chronic disunity and sectarianism or to increase their very small followings. On the other hand, Diem's persisting disdain of most of these oppositionists and his refusal to bring into the government even some of their least reprehensible members have contributed to a growing neutralist sentiment among them and, by forcing many of them undercover, have made it extremely difficult to estimate their real strength and disruptive potential. In addition to the growing appeal of neutralism among them, their pro-US orientation may also be rapidly declining.

IV. ECONOMIC TRENDS

There has been little inflationary pressure in South Vietnam as yet. Prices have been stable and the money supply has been nearly constant for over a year. For example, in August 1962, total money supply, made up of demand deposits in the banks and currency in circulation, was only fractionally above what it had been in March 1961. Further, prices have been generally stable and the cost of living in the cities has risen only very slowly.

The stability in money supply and prices that has been such a marked feature of the Vietnamese economy has been the direct result of very conservative GVN policies with respect to prices, wages, and fiscal management. So long as the immediate problem in South Vietnam was reconstruction, i.e., the restoration of production to pre-World War II levels, it was possible to obtain substantial increases in output at relatively small cost, and conservative price-wage and fiscal policies were not only useful but also to some extent necessary. Although GVN policies have been more conservative in nature than was really required (for example, budget surpluses from 1954 to 1959 amounted to a total of 2.7 billion piasters), they have kept the specter of inflation from adding yet another element of instability to the scene.

Since the reconstruction phase ended in about 1959, GVN economic policy has preserved the status quo in the countryside, including the traditional disparity between rural and urban living standards, and has not stimulated economic development. There are some indications, in fact, that there has recently been net disinvestment in agriculture. Given the security situation in the countryside and the current depressed state of trade there, revised policies directed toward increasing rural income and production would be an essential element in persuading the peasants to cast their lot with the government and not with the Viet Cong.

Two encouraging developments have occurred in the economic field in South Vietnam in the last several months. First, the Second Five-Year Plan was endorsed by the National Assembly in June and approved by President Diem. The Plan calls for the investment of 45 billion piasters over the period 1962-1966 and emphasizes the development of agriculture, public works, and industry. On June 30 the National Assembly appropriated an initial 1.2 billion piasters to finance the piaster costs of several projects, none of them in the agricultural sector.

Second, President Diem, in his state of the nation message to the National Assembly on October 1, emphasized that agriculture is the economic base of South Vietnam and must have priority in development. He also said that private investment must be encouraged and provided the rationale for deficit financing by pointing out that a developing nation normally experiences a budgetary deficit. Diem referred to the necessity of raising the living standards of the rural population and said that the present guaranteed minimum wage would be reexamined because of the rise in the cost of living. Although measures to implement new economic policies may not be presented to the National Assembly until its next regular session in April 1963, Diem's statements indicate a new awareness that the trend of declining income among the lowest income groups must be reversed. This awareness is encouraging but, unless the additional income generated by deficit financing is largely directed to the countryside and to the lower income urban groups, the price rises resulting from deficit financing will merely widen the income gap which already exists and further alienate the peasants from the GVN. Moreover, the additional income must be directed to the rural areas in such a way as to encourage agricultural production. Stable
and attractive prices for farm products are the best and perhaps only means to accomplish this.

Viet Cong activities in South Vietnam can be expected to have a depressing effect on agricultural production, although the major determinants will continue to be price, the weather, and agricultural techniques, including the use of fertilizer, and improved seed. These latter factors however, are less important with respect to rubber production, which provides South Vietnam's largest single export. For the eight months through August 1962, rubber production on major plantations declined by some 2,500 metric tons as compared to 1961. A fungus disease affecting the rubber trees was partially responsible for the decline, but an important additional cause was clandestine tapping by the Viet Cong and general insecurity which interfered with legitimate tapping on the estates and extension of the planted area. Also, the government's urgent financial needs arising from the emergency have prevented it since 1960 from making anything more than token payments in support of its rubber replanting program. Given the vulnerability of the estates, there is little prospect for an improvement in the rubber situation until security improves generally.

It can also be expected that Viet Cong harassment will continue to interfere with the transport system, especially the railroads. The resumption of night passenger operations between Saigon and Hue on September 15 was apparently not based on any improvement in security but on the hope that the Viet Cong would not sabotage trains carrying passengers. The resumption may have also been due to the fact that additional revenues are urgently needed in view of the 10 million piaster monthly deficit on railway operations.

If President Diem's statements on October 1 are followed by the necessary measures to stimulate development of the agricultural sector in South Vietnam, which accounts for the employment of 80% of the population, important steps will have been taken not only to provide the peasantry with the motivation to side with the government but also to direct economic development along the lines most promising for the economic future of South Vietnam. This will be particularly the case if the GVN's economic development program also emphasizes industries utilizing domestically produced raw materials, particularly agricultural ones, as well as those that provide import substitutes but are based solely on imported raw materials.

In short, the GVN is showing a new awareness of the necessity of directing its attention to programs which will directly benefit the rural population. It has not as yet put into effect any concrete measures to carry out its program. Its actions in the next six months to a year will indicate how deep its new-found conviction is.

V. OUTLOOK

A. COMMUNIST ACTIONS

There seems little prospect that the Viet Cong will be able to achieve a takeover of South Vietnam by armed force during the next year. The Communists are obviously prepared for a long struggle. Even though the strengthened GVN response and increased US assistance have apparently necessitated some modification of plans, it is not likely that the Communists will diminish there diversified campaign of guerrilla warfare, terrorism, and subversion. They can be expected to make every effort to maintain, consolidate, and expand their control of the countryside; increase their overall armed strength, the number of organized fighting units, and the percentage of hard-core personnel in those units; improve their weapons capability particularly against helicopters; and increase their attacks against strategic hamlets. Acts of terrorism, particularly against Americans, and sabotage, particularly of trains and important installations, may well increase to unprecedented proportions in an effort to tie down more GVN military and security forces and thus relieve the pressure against the Viet Cong.

Hanoi can also be expected to continue to infiltrate personnel and material into South Vietnam and has the capability to step up infiltration, as the situation warrants, with relatively little danger of detection and no great difficulty. The DRY's capability is further enhanced by the nature of the border terrain and the limited border-control capabilities of the South Vietnamese, Lao, and Cambodian governments. However, because of tactical and strategic military and political considerations, Hanoi will probably continue to infiltrate elements primarily from the pooi of regrouped South Vietnamese rather than from the Vietnamese Communist forces in Laos most of whom are believed to be North Vietnamese or Tonkinese.

It is entirely possible that the Viet Cong will step up its armed operations during the next month or so with the advent of the dry season, in the belief that further military escalation is necessary in order to counter the growing response and effectiveness of the GVN forces and US support. There are a number of indicators that support this expectation: numberous earlier intelligence reports of Viet Cong regroupment and consolidation of forces; a slight increase in the number of armed incidents during roughly the last week of October; and two Viet Cong battalion-size attacks in the Mekong River delta area in late October and early November 1962, the first since July 1962. Further military escalation during the next several months might involve the formation of regimental-size units, including the transformation of some guerrilla units into conventional units with heavier weapons; selected and simultaneous large attacks against one or more targets, including military installations and towns; establishment of "liberated areas" in South Vietnam; the creation of reserve bases in Communist-held areas in southern Laos; and increased infiltration, particularly if Communist forces in southern Laos can provide adequate protection along infiltration routes. (It does not appear likely that inspection by the International Control Commission in Laos will seriously impede Communist infiltration.) However, Hanoi will probably not resort to overt military invasion.

The Viet Cong and Hanoi probably will step up significantly their political and propaganda activities. Inside South Vietnam, the Viet Cong will make increased efforts to penetrate the strategic hamlets and army and security units, recoup its psychological losses with the Montagnards, and in general subvert the GVN's effort to win the support of the peasants. In urban areas, the Viet Cong will rely on terrorism to demoralize the citizenry and on increased propaganda and subversion to inspire anti-Diem demonstrations and coup plots, encourage neutralist sentiment, and, in general, gain support for its "united front" tactics among non-Communist oppositionists and youth and labor groups.

Outside South Vietnam, Hanoi will probably increase its diplomatic and propaganda efforts to gain support particularly among neutral nations for the "National Front for the Liberation of South Vietnam" (NFLSV). It may have some success in establishing "unofficial" relations between the NFLSV and Laotian and Cambodian leaders, in gaining support for the NFLSV among Vietnamese minorities in Laos, Cambodia, and Thailand, and in persuading prominent Vietnamese expatriates in France to support a change of government in South Vietnam. In addition to advocating the reunification of Vietnam, Hanoi and the NFLSV can be expected to continue propaganda support for the neutralization of South Vietnam. However, the extent to which neutralization is emphasized will depend on the course of the war in South Vietnam and the degree to which the concept is found to appeal to the elements in and outside South Vietnam, as well as on developments in the Bloc itself.

The pattern of events relating to the creation and development of the NFLSV, as well as the pattern of Communist political tactics and strategy in similar situations in other countries in the past, indicates that Hanoi and the Viet Cong are preparing the groundwork for transformation of the NFLSV into a shadow or "liberation government" in South Vietnam. However, it is extremely difficult to predict when, whether, or under what conditions this will occur. Hanoi might find it politically advantageous to create a shadow government under any one of the following circumstances: during a period of internal political crisis in South Vietnam following a successful or near-successful coup attempt; during a period when there has been a series of major and dramatic Viet Cong military successes; during a period of serious military or diplomatic reverses for the US in the Far East; or at a time when several neutralist countries had given assurances of diplomatic recognition of a new 'government" in South Vietnam. Under any circumstances, however, the decision would be considerably influenced by Moscow and Peiping and their estimate of the general international situation.

B. GVN COUNTERINSURGENCY EFFORT

The elimination and even the significant reduction of the Communist insurgency in South Vietnam will almost certainly require several years. However, in addition to continuing US assistance, a considerably greater effort by the GVN is crucial. An effective strategic military-political concept for implementing the GVN counterinsurgency plan has been developed and is now being acted upon, and the armed and security forces have been enlarged and improved. GVN success will in large measure depend on the manner and speed with which it continues to implement this concept. Ultimately, however, the effectiveness of its implementation will depend on the willingness of Diem and his family to utilize fully the basic resources available to the GVN. The GVN military leaders are among the best in Southeast Asia and the rank and file have the spirit and willingness to fight; the civilian bureaucratic leadership is strongly anti-Communist, even though its effectiveness continues to be impeded by inadequate delegation of authority; there are as yet no serious trends toward neutralism or toward a political accommodation with Hanoi; and finally, the Vietnamese peasants, however politically apathetic and discontented with the government, are by no means ready to surrender themselves to the Viet Cong, given greater effort by the government to protect them from Communist intimidation and improve their economic and political status.

During the next year, the GVN probably will not be able to halt completely the deteriorating security trends, let alone reverse the tide against the Viet Cong, unless Saigon significantly accelerates and improves its response to the insurgency. Among other things, the government leadership must give much greater emphasis to political, social, and economic measures in support of its military operations, make a substantially greater effort to integrate the strategic hamlet program into a continuing systematic pacification effort, and appreciably improve its counterguerrilla tactics and capabilities, including increased reliance on small-unit actions and restriction of the tactical use of airpower and artillery. Failure to do this will seriously weaken the strategic hamlet program, particularly since the Viet Cong can be expected to step up its efforts against the program during the next year. Such failure will also greatly restrict the ability of the GVN to weaken Viet Cong capabilities, to consolidate its own military successes into permanent political gains, and to evoke, particularly among the peasants, the needed greater sense of stake in the government's fortunes. Indeed, the continuation of such tactical measures as extensive use of airpower and crop destruction, however carefully controlled, may well contribute to the development of militant opposition among the peasants and positive identification with the Viet Cong.

Progress against the insurgents will probably remain difficult to evaluate accurately. There are many indicators on the basis of which progress can be judged; the more meaningful would appear to be the peasants' willingness to inform on the Viet Cong and to defend themselves against Viet Cong attacks, and Viet Cong weapons losses, shortages of food and medicine, and defections. In this respect, a national program by the GVN to encourage Viet Cong defections, with the promise of fair treatment of the defectors is long overdue and could be extremely effective in improving GVN intelligence and weakening Viet Cong morale. GVN statistics on casualties, while helpful as an indicator of the magnitude of the fighting, should continue to be treated with extreme caution partly because they undoubtedly include many casualties among innocent peasants or wavering supporters of the Viet Cong.

C. THE US ROLE

The course of US-GVN relations will be an important element in the struggle against the Viet Cong and in sustaining South Vietnamese morale. The fact that the US is South Vietnam's only source of significant support and assistance is the controlling factor in GVN relations and attitudes toward the US. Despite considerable improvement in relations between the US and the GVN during the past year or so, disagreements and frustrations can be expected to continue over a number of issues, including the implementation of the counterinsurgency plan and GVN relations with Laos and Cambodia.

Diem will almost certainly continue to press for increased aid and remain adamant against any US pressures upon him to delegate appreciably more authority to his cabinet and military advisors or to expand the political base of his government to any significant extent. Moreover, while he has welcomed the increased US presence in South Vietnam and generally approved of the activities of US advisers in the countryside, Diem and his family will continue to maintain a close watch over those activities in the interests of protecting their authority at the local level. Diem and particularly Nhu may also remain extremely reluctant to accept possible US proposals directed toward further integration of the strategic hamlet and systematic pacification programs or directed toward substantially altering the present balance between emphasis on purely military measures to defeat the Viet Cong and emphasis on political, social, and economic measures.

Diem probably still has some lingering suspicion of the extent of US confidence in and support of his leadership. In the event of another coup attempt, Diem would expect quick and strong manifestations of US support and would regard the absence of such manifestations as demonstrating lack of US confidence.

There is considerable evidence that the substantial increase in the US presence in South Vietnam has improved morale at all levels of the GVN administration. Relations between individual US advisers and their GVN counterparts especially at the local level have generally been good and, despite Viet Cong propaganda efforts, have not resulted in any noticeable degree of association of the US presence with the former French presence. Among the probable major considerations are the fact that US personnel, unlike the French in the past, are acting as advisers rather than as directors and implementers of GVN policy, and the apparent willingness of US military personnel to live and operate closely with their GVN counterparts, assisting more by example rather than by persuasion. There is, therefore, cause for optimism over the effectiveness of the US presence in South Vietnam, even though it will come under increasing strain as the counterinsurgency effort develops and as Communist propaganda is increasingly focussed on it.

D. POLITICAL SITUATION

The stability of the government during the next year will continue to depend principally on Diem's handling of the internal security situation. If Diem can demonstrate a continuing improvement in security conditions, he should be able to alleviate concern and boost morale within his bureauracy and military establishment. However, if the fight against the Viet Cong goes badly, if the Viet Cong launches a series of successful and dramatic military operations, or if South Vietnamese army casualties increase appreciably over a protracted period, the chances of a coup attempt against Diem could increase substantially. Moreover, the possibility of a coup attempt at any time cannot be excluded. Many officials and oppositionists feel that, despite the government's military victories and improved military capabilities and initiative, the GVN is not winning the war principally because of Diem's virtual one-man rule and his failure to follow through with the political and economic measures necessary to gain the support of the peasants.

It is more difficult now than at any time since the crisis in South Vietnam began in late 1959 to estimate reliably the elements that would be most likely to precipitate a coup attempt, the prospects for the success of a coup attempt, or the effects of such an attempt on internal stability and on the counterinsurgency effort itself. During the past year or so, the Viet Cong presumably has improved its ability to initiate a coup and might attempt to do so. However, the Viet Cong probably would not be able to carry out a successful coup, and the odds that it could gain control of a successful coup, although somewhat better than last year, appear to be less than even.

The coup most likely to succeed would be one with non-Communist leadership and support, principally involving South Vietnamese military elements and civilian officials and perhaps some oppositionists outside the government. The abortive coup attempt in November 1960 and the palace bombing in February 1962 have undoubtedly demonstrated to coup plotters the necessity for better preparation and broader participation by the military. Any future non-Communist coup group probably would not be as deficient in this respect and its leaders, unlike the leaders of the 1960 coup attempt, can be expected to be better prepared to execute their plan quickly. Although the possibility of a Kong Letype coup, i.e., a coup led by a junior and relatively unknown officer, cannot be completely discounted, it is more likely that the coup leadership would include some middle and top echelon military officials. While their role is by no means certain, a major polarization of the GVN military leadership into coup and anti-coup groups does not appear likely. Most of them would probably elect to remain uncommitted at the outset of the coup, as they apparently did in November 1960, and would then give their tacit or active support to whatever side appeared to have the best chance of winning. Under these circumstances, a military coup appears to have a better than even chance of succeeding.

Diem's removal--whether by a military coup, assassination, or death from accidental or natural causes--would probably considerably strengthen the power of the military. The odds appear about even between a government led by a military junta or by Vice President Tho, with the army, in the latter case, playing a major if not the predominant role behind the scenes. On the one hand, the military might conclude that a military-led government would be better able to maintain national unity and internal political cohesion and, more importantly, to conduct a determined and effective campaign against the Viet Cong. On the other hand, they might conclude that Tho, who apparently has been on good terms with some of the present top military leaders, would not disagree with their views on the manner of conducting the fight against the Communists and that his constitutional succession would legalize the change in government and possibly avert a serious power struggle. (Although Diem's brothers, Nhu and Can, would probably also be removed by a coup, if Diem left the scene for other reasons his brothers might attempt to retain real political power.) In any event, a government led by the military, by Tho, or by any other civilian approved by the military would probably maintain South Vietnam's pro-US orientation.

If there is a serious disruption of government leadership as a result of a military coup or as a result of Diem's death, any momentum the government's counterinsurgency efforts had achieved would probably be halted and possibly reversed, at least for a time. Moreover, the confusion and suspicion attending the disruption would provide the Viet Cong guerrillas an opportunity to strengthen their position in the countryside and attack some installations in large force, but they would probably fail if they attempted to seize control of the government.

Under most of the foreseeable circumstances involving a coup, the role of the US would be extremely important. Although this is by no means certain, US military and intelligence officials might well have advance notice of an impending coup and might be able to restrain the coup plotters from precipitous action. Even if unable to restrain such action, however, US officials might have greater success in averting widespread fighting and a serious power struggle which would lead to excessive bloodshed and weaken the front against the Viet Cong. The US could also be helpful in achieving agreement among the coup leaders as to who should head the government and in restoring the momentum of the government's counterinsurgency effort.


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