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Rh successful in infiltrating remaining Hoa Hao groups --- chiefly Ba Cut's organization. The latter's increasingly effective defensive tactics have made recent VNA operations relatively costly.

In addition to the continuing presence of these guerrilla elements, the Communists have presumably tried to penetrate all branches of the government. The most frequent reports suggest heavy penetration of the Information Ministry. The absence of reliable information does not disprove some probable penetration of police and military services, particularly at lower levels. The Communists have a surviving capability to disrupt governmental operations, and perhaps to immobilize the regime, through a coordinated campaign of terror and assassination -- a capability they have thus far chosen not to exercise.

The March 4 election will, in all probability, produce a national assembly that will overwhelmingly support Diem and approve the constitution that a pro-Diem commission has prepared. The constitution will establish a presidential system with separation of powers. Balloting will not indicate accurately the extent of anti-Diem sentiment, for a number of nationalist leaders, particularly refugees from the north, appear disinclined to risk censure or repression by contesting the election as opposition candidates.

It will be essential, in the immediate future, that Diem have effective control over the administration and the national assembly. He has the support of the National Revolutionary Movement (NRM), which has become, in effect his political party. There is some question, nevertheless, whether at present Diem is unnecessarily antagonizing elements which might add strength to the future government. He remains almost pathologically sensitive to criticism and potential opposition, with the result that the regime is becoming increasingly autocratic despite his democratic principles. In view of Diem's skill in dealing with dissident elements over the past year, it will perhaps be wise to give him the benefit of the doubt during the pre-election period.

There has been little recent change in the economic picture in South Vietnam. Rice prices, which rose precipitously during the summer and fall due largely to poor distribution, have now returned to normal. A major program for resettlement in southwest Vietnam of up to 100,000 of the refugees from the north is now developing, with US and other foreign support. If successful, it would simultaneously reduce the problems of 1) the refugees, 2) increased agricultural production, and 3) internal security in rural areas. Rh Rh