Foreign Relations of the United States, 1958–1960, Vietnam, Volume I

63. Telegram From the Ambassador in Vietnam (Durbrow) to the Department of State¹

Saigon, April 11, 1959—7 p.m.

2143. In long conversation with Diem 9th on other subjects² he brought up following points:

(1) Internal situation worsening, which requires him maintain military and security forces maximum efficiency. It therefore essential he have same amount US contribution military budget as FY 1959. As Thuan had done 8th, Diem stated if GVN increased its contribution to the military budget while US devoted more aid for economic development this would slow down necessary progress. He pointed out if GVN did not have to up its contribution to military budget, this money would be used for GVN economic development projects. He claimed that if larger proportion of US aid were used for economic development, over-all progress of country would be slowed down because of survey and other red tape involved all USOM projects. Hence his plea that we maintain level US contribution military budget for FY 1960. I argued it is interest GVN to contribute more to its military budget and allow US to assist country further toward economic independence by contributing larger proportion to economic development.

(2) In obvious effort preclude our pressuring for devaluation in connection with future aid, he went out of way to say we had not prepared ground properly for Lao devaluation; therefore had permitted corruption to increase above and beyond serious corruption which prevailed before devaluation. I replied on contrary I understood monetary reform has worked very well, that while there were some difficulties as anticipated, during early stages of reform, now matters have calmed down, prices have remained stable and Lao economy now on more sound financial basis. Diem then dropped subject.

Comment: In this discussion Diem made it even clearer than heretofore that principal reason he wants major proportion of US aid contributed to military budget is that there are less controls on GVN use of military funds and he can then use his own money for his own pet economy projects without any USOM “interference”. I believe if GVN required contribute more to military budget and not count on us as they have in the past “to pick up increase in tab,” (which must be kept to minimum because of piaster shortage foreseen for 1960) they would draw up more realistic and austere military budget. If we are to help GVN make sound economic progress, we should use as much of our aid as feasible to build solid infrastructure and thus eventually reduce need for US aid.

Durbrow

1. Source: Department of State, Central Files, 751G.5–MSP/4–1159. Secret. Repeated for information to Vientiane, Phnom Penh, Bangkok, and CINCPAC PolAd.
2. General Williams was also at this meeting; notes prepared by Major Ruest of the MAAG, dated April 9, are Ibid., Saigon Embassy Files: Lot 65 F 115, 361.1 Chief Executive Vietnam—Diem. Another copy is in Center of Military History, Williams Papers, Conversations with Diem 5 Jan 59–25 Nov 59 (162). In a letter to Felt, April 11, Williams commented that during the conversation he “got the impression that the President was possibly irritated about something as his tone was often sharp and one of an impatient man who couldn’t understand why his evaluation of the general situation was not understood or accepted. I have seldom, if ever, heard him speak in this manner before.” (Ibid., Official Correspondence January–July 1959 (54))