129. Memorandum of a Conversation, Department of State, Washington, April 4, 1960, 3:25–4:55 p.m.1
SUBJECT
- Military and Economic Aid to Viet-Nam
PARTICIPANTS
- Participants listed on last page.
Mr. Peterson opened the meeting at 3:25 in his office, 3178 New State, by saying that he welcomed the opportunity to exchange views on measures to combat the threat to internal security, settle outstanding problems on projects, and arrive at better utilization of joint resources. Mr. Thuan was asked to give a summary of the topics which he wished to take up with various Washington agencies.
Mr. Thuan began by reviewing the lists of equipment which the Vietnamese armed forces need to augment the GVN’s capacity to maintain internal security. This presentation (following closely the outline in Embtel 2784, March 272) covered the following categories:
- a)
- The 2–3 year delivery period on MAP-supplied communications equipment needed to fill out the TO/E ought to be telescoped. Increases over the present TO/E would be necessary after immediate requirements were satisfied.
- b)
- The VN Air Force needs C–123 transports which have greater carrying capacity and are easy to handle and maintain, but will be satisfied for the time being with ten more C–47’s, enough to move a whole battalion by air. Ten H–34 helicopters were needed. He realized that these aircraft were not currently available under MAP but urged the US to consider exceptions in view of the wartime conditions in Viet-Nam.
- c)
- The ten year replacement period for naval vessels is too long. The Vietnamese would like partial conversion telescoped to 1–1/2 years, although the total number of vessels remains the same. Special air propellor boats which do not get fouled on swamp vegetation are needed, as are 15 rescue-type craft to patrol the 2000 km coastline to prevent Viet Cong junks from delivering supplies. Some form of amphibious vehicles are also necessary.
Prior to Mr. Thuan’s visit to CINCPAC, no final consolidated list of equipment had been communicated to US authorities. Admiral Felt agreed to accept the list which Mr. Thuan discussed with him as the “formal request”.
Mr. Peterson asked if introduction of any of the equipment requested might conflict with the Geneva Accords. Mr. Thuan and Admiral O’Donnell were satisfied that it would not. Admiral O’Donnell said the final decision would be up to State. The equipment, although improved, is still of the same type used by the French. As for quantity, the GVN received credits from the ICC for outshipment of French equipment. The C–123, if approved, would not be introduced right away.
Military Budget:
Mr. Thuan urged that US accept the GVN’s proposal on funding of the military budget, whereby the US would contribute an additional $4.6 million worth of counterpart piasters. Mr. Roseman said that the approval had already been communicated to the field.
At this point Admiral O’Donnell, General Lampert and Colonel Flesch left to prepare for meetings the next day in DOD. Ambassador Chuong also left.
Economic Issues:
Messrs. Thuan and Thai touched briefly on the progress achieved in certain sectors of the economy. Rice exports doubled over 1958 and hard fiber production is encouraging. Rubber plantings are up and likely to increase greatly as a result of President Diem’s decision to concentrate on this important crop. Several industrial plants would begin producing textiles, glass, tires and pharmaceuticals in 1960, and even larger projects for cement (Ha-Tien—French), sugar, electric power (at Da Nhim under reparations and Saigon under DLF), textiles, fertilizers (3 plants—Urea under reparations, [Page 367] Nong Son area under French loan, and as part of refinery), oil refining (Shell-Stanvac), and rolled steel (under reparations) were being launched in the near future. The reparations agreement with the Japanese, loans from the French, and foreign investment were providing foreign exchange costs. Viet-Nam’s problem is in marshalling the local currency resources necessary to finance local costs at a time when the burden of military and security expenditures is so great. Despite increased taxation, the local currency problem would cause trouble for many years, and Mr. Thai stressed the need for at least as much aid, particularly non-project, in FY 1961 as was made available in 1960 to prevent serious inflation.
Mr. Roseman said that no commitment on the 1961 level is possible but emphasized that the world-wide Defense Support request had already been cut $50 million by the first (and friendliest) of four committees. He said that Congress is impressed by evidence that certain aid recipient countries are engaged in serious long-range planning and are taking steps to reduce the US burden. We are gratified by indications that the GVN is also moving in this direction. The sooner we can give Congress assurance that other countries, like Viet-Nam, are taking well-considered steps toward development, the better the chances are of averting crippling cuts in appropriations. Mr. Thai said that refining of the 7-year “plan” is continuing, but it was still only a projection.
Several specific problems of aid administration were raised:
- a)
- Saigon (Tan Son Nhut) jet runway. Mr. Thuan stressed the urgency of this project and pointed out PanAm was ready to proceed with the GVN on construction of a hotel. He was gratified to hear that problems seemed to be resolved.
- b)
- Viet-Nam Radio Network. Mr. Thuan feared that Mr. Frank McIntosh’s return to Saigon might delay the project even more. Many changes in the original network plan had been made by the GVN with the concurrence of USOM, and Mr. McIntosh might insist on his former plan. Mr. Roseman doubted whether Mr. McIntosh would be inflexible, and assured Mr. Thuan that ICA had every intention of pushing the project forward to completion as rapidly as possible.
- c)
- Thuan urged ICA approval of a loan from the Industrial Development Center (prior year ICA grants constitute most of the capitalization) to a GVN-owned spinning and weaving plant in Tourane. Mr. Roseman acknowledged that ICA had problems with projects of this type because of US policy on government ownership. Mr. Thai then said GVN ownership is a temporary measure to get major projects of this sort started. Later, these enterprises would sell shares to the public.
- d)
- The Vietnamese urged approval of a PL-480 triangular cotton deal, in which Taiwan would process cotton into yarn for use in Viet-Nam. Taiwan would presumably accept part payment in piasters for investment in Viet-Nam.
Internal Security and Economic Development:
Mr. Peterson thought that it would be hard to explain to Congress why the internal security situation was deteriorating at a time when the GVN was paying greater attention to economic development and the welfare of the people. Mr. Thuan pointed out that the Communists want to prevent progress in underdeveloped areas unless it comes from the Communist regimes themselves. The capability of the DRV to obstruct progress and mount terrorism in the South has been enhanced by deterioration of RLG control in Southern Laos. A supply line has been established from the DRV through Laos and Cambodia over the unprotected frontier into South Viet-Nam. Junks are also sailing outside the territorial waters of South Viet-Nam and landing supplies on remote beaches. To support this thesis, Mr. Thuan said that some Viet Cong rebels, who had chosen (or been forced by the Viet-Minh) to go North in 1954, had recently been captured in the South.
Mr. Thai stressed the susceptibility of the peasants in the South to intimidation by the Viet Cong, a result of 14 years of almost uninterrupted terror and, in some cases, many years of Viet-Minh occupation. He alluded to a rural family budget survey conducted by his office, in which the peasants, despite assurances that the information would not be used against them, were afraid of saying anything except what they thought the samplers wanted to hear.
The GVN had studied two successful anti-Communist military efforts and intended to combine the Greek experience of dispersion with the Malayan experience of regroupment. Mr. Thuan said the “agrovilles” in the South and resettlement villages in the Central Highlands, the latter drawing settlers from the overpopulated lowlands of Central VN, would be vigorously pushed. Mr. Roseman expressed the hope that the GVN would not place too much emphasis on the agrovilles to the detriment of other programs and was assured that this was not the case.
Mr. Thai recalled that the standard of living in the South was lower than during the war years when the French Expeditionary Force spent upwards of $600 million per year (comparable, in the economic sense, to tourist expenditures), the income of which went wholly for consumption. Now, foreign aid of only $160 million is being used to supplement far greater GVN outlays for investment, regroupment, and improved administration. Consumption is therefore down drastically from the wartime years.
At the end of the meeting Mr. Thai indicated that he would be visiting DLF to discuss three active projects—Saigon water supply, Saigon thermal power (which he emphasized was of very high priority) [Page 369] and railway equipment. He agreed with Mr. Hutchinson to meet with DLF on the following morning. The meeting ended at 4:55 p.m.
PARTICIPANTS
- His Excellency Nguyen dinh Thuan, Secretary of State for the Presidency, Viet-Nam
- Mr. Vu van Thai, Administrator General of Budget & Foreign Aid, Viet-Nam
- His Excellency Tran van Chuong, Vietnamese Ambassador
- Mr. Nguyen duy Lien, Counselor, Vietnamese Embassy
- Mr. Avery F. Peterson, Deputy Assistant Secretary for Far Eastern Economic Affairs
- Mr. Alvin Roseman, Director, Far East Region, ICA
- Rear Admiral E.J. O’Donnell, Director, Far East Region, DOD/ISA
- Brig. General James B. Lampert, Deputy Chief, Logistics, MAAG/Viet-Nam
- Lt. Col. Joseph M. Flesch, Assistant to the Director, Far East Region, DOD/ISA
- Mr. Edmond C. Hutchinson, Chief, Loan Operations Division, DLF
- Mr. James R. Fowler, Far East Regional Coordinator, U/MSC
- Mr. Richard E. Usher, Acting Director, Office of Southeast Asian Affairs
- Mr. Robert G., Cleveland, Acting Deputy Director, SEA Mr. Chalmers B. Wood, Officer-in-Charge, Viet-Nam Affairs
- Mr. C. Richard Spurgin, SEA/E
- Source: Department of State, Central Files, 033.51K11/4–460. Confidential. Drafted by Spurgin.↩
- Not printed, but see footnote 2, Document 125.↩