Foreign Relations of the United States, 1952–1954, Indochina, Volume XIII, Part 1

751G.5 MSP/1–953: Despatch

The Ambassador at Saigon (Heath) to the Department of State¹

secret
No. 256

Saigon, January 9, 1953.

Subject:

• Operation and Status of Programs Under Mutual Security Act of 1951 as of Quarter Ending December 31, 1952.

(a) Adherence to Commitments. The Associated States and France have adhered to commitments made in the course of MSP Aid negotiations.

(b) Political Developments. In Vietnam the political problem remains achievement of a dynamic regime which by conviction, determination, and example will mobilize and unify the country against Viet Minh nationalist pretensions. The greatest single contribution could be made by Bao Dai if he had the will to use his undoubted intelligence to provide real leadership and example. Although Bao Dai has frequently spoken of his willingness to provide such leadership and although the American Embassy and the French authorities have exhorted him to fulfill his role as chief of a state at war it is not likely that he will ever be moved to the real activity that the situation requires. So far, however, he has obtained from the French enough concessions for the country to claim an independent status. He has mediated between conflicting groups and has dismissed Governments which outlived their usefulness and appointed new Governments which have amounted to improvement over their predecessors. Thus the Tam regime which he named last June was an improvement over the Huu administration. But now something more is required. Bao Dai’s prestige is declining as his indulgences and the fact that he is accumulating a fortune abroad become known.

The Tam government in August published a long awaited National Budget for 1952, the first budget to be published since the Vietnamese assumed full financial control in January 1951. In July it instituted a national defense surtax. In December, decrees were issued for village and municipal elections, an important step toward the fulfillment of the Tam commitment to create a National Assembly.

In Cambodia, the King, who took the leadership of the government last July, continued to display the energy which has done much to redress a deteriorating political situation. It remains to be seen whether he can sustain the pace he has set.

Laos, fortunately, was largely free of political problems.

(c) Major Economic Developments. By projecting figures for the first six months of the year, it may be estimated that the 1952 trade deficit of the Indochinese customs union will reach approximately 6 billion piastres, almost doubling the adverse balance registered in 1951. As in previous years, the trade deficit is practically wholly vis-à-vis the franc zone and should counter-balance France’s franc military expenditures in the Associated States. These expenditures were large enough during 1952 to give the Associated States a favorable balance of payments—as was the case in 1950 and 1951, but due to the considerable increase in the trade deficit, the inflationary implications inherent in France’s military expenditures are essentially eliminated under present conditions, and apart from other considerations it is unlikely that the Indochinese external accounts position should have any significant repercussions on the level of U.S. aid.

Given the present ill-conceived and poorly managed fiscal system, we cannot reasonably expect any major improvement in the economic situation of the Associated States. Financial instability, in large part attributable to, and a reflection of, the precarious political structure of the national governments, in turn a consequence of civil war, will probably continue to be an element which must be given due consideration, and which will make deficit financing unavoidable. On the other hand, with the continuation of the sound central banking practices of which the newly established Institute of Issue has shown itself capable during its first year of operation, government borrowing should be kept within reasonable bounds and handled in such a way as to prevent uncontrollable inflationary pressures from arising. In summation it may be fairly stated that the economic and financial outlook, barring changes on the political and war fronts, is not such as to portend a necessity for either an increase or decrease in U.S. aid in the immediate future.

(d) International Developments. The resolution of December 17, 1952 by which the NATO countries recognized that the campaign being waged by the French Union Forces in Indochina “deserves continuing support,”² served to highlight the importance of the Indochina war as a contribution to the security of the free world. It should also serve to dramatize the obstacles which NATO commitments place in the way of the French effort here at a time when more troops are needed in the field, especially technicians and qualified officers and non-commissioned officers for combat duty.

(e) Effect of MSP Aid on Internal Stability and Security. It is clearly apparent that, thanks to United States arms aid, the Franco-Vietnamese forces now have an edge over the Viet Minh. Two years ago, before the aid programs began to operate, the Franco-Vietnamese position was precarious indeed. Although the present condition of internal political stability and security is not satisfactory, conditions have improved in the north and in the south since the aid programs were started and there has been no loss of ground in the center.

There has also been a marked development of governmental structure which was almost non-existent two years ago.

(f) General Progress in Activation Planned Forces.

Army: The activation of units in the Associated States Armies is proceeding as planned but not along the line expected. A large number of units activated in the Vietnamese National Army are units already a part of the French Army and, by a change of designation only, become a part of the Vietnamese National Army. This procedure has not increased the number of troops in Indochina. The failure to increase the combat forces is recognized by MAAG, the French, and Vietnamese. Action has been taken to correct this situation by the French in planning and by activation of additional light Infantry Battalions before the end of the rainy season in 1953.

Air Force: The French Air Force is operating at approved strength level with no current plan for introduction of additional air units.

Navy: French Naval Forces are currently operating at approved strength in both personnel and ships. Certain ships and craft originally brought out to Indochina by the French are in such condition that their continued operation is no longer practicable. These units are being replaced by MDAP delivered ships without effecting a change in the Force Basis. Deliveries in 1953 will replace obsolete equipment, and anticipated losses. An increase in French Navy personnel is not planned. However, plans for a Vietnamese Navy are underway with the training of enlisted men and some petty officers being carried on at Nha Trang. It is anticipated that some 1600 Vietnamese officers and men will be manning smaller ships.

(g) Deliveries of U.S.-Furnished End-Items. The receipt of MDA equipment is on schedule. There are no shortages which would affect either the tactical operation or the activation schedule of units.

(h) Country’s Ability to Utilize Military Aid.

Army: The ability of the country to utilize the MDAP and MSP is based on the assumption that the war in Indochina will continue to be a local war and that there will be no intervention by the Chinese Communists. The French, who have the responsibility for logistical support of both French and Associated States Forces, have adequate supply facilities for the war as now beins fought. It is expected during the first three months of calendar year 1953 there will be a small reserve accumulated. This reserve will be below that authorized for Indochina.

Air Force: The French Air Force is undermanned and this has a negative effect on their ability effectively and efficiently to conduct maintenance and overhaul functions and operate their aircraft at desired rates. Airfields are adequate but the main supply and maintenance depot is poorly situated and inadequately manned to perform an acceptable mission.

Navy: It is believed that there is maximum utilization of MDAP material in Indochina. However, the personnel ceiling on French Naval Forces, and deterioration from weather conditions make it difficult to carry out preventive maintenance in accordance with U.S. Navy standards. Facilities for receipt and stowage of MDAP equipment are adequate at the present time, and efforts along this line are steadily being improved.

(i) Defense Production Planning.

Army: There has been no development for defense production for Indochina. Several plans have been proposed for the production of items which would assist in the war effort. To date, however, neither the French nor the Vietnamese have initiated action with a view to implementing these proposals.

Air Force: The conversion to one type fighter-bomber aircraft (F8F, Bearcat) and the stated inability of the French to support jet

interceptor aircraft are major developments in the defense program for air. The visit of the French Air Secretary, M. Montel, may bring about additional personnel to alleviate the totally inadequate French Air Force personnel strength of approximately 10,000.

Navy: The conversion of MDAP delivered landing craft is being carried out at the Navy Yard in Saigon and at the Amphibious Base. However, the manufacturing of defense items for prosecution of the war against the Viet Minh is non-existent. No future developments are known.

(j) Economic Development Planning. One of the most encouraging steps forward in the field of economic development plans and programs was taken by Laos. In November this country, which has been well in advance of the other two Associated States in economic planning, went one step further when, by a Royal Ordonnance, it created a Commissariat General for Planning and a National Investment Fund to finance the plans. American Economic Aid funds will, though accounted for separately, be incorporated as part of this fund. Thus, with a rough five-year plan previously developed, Laos will become the first Associated State to integrate MSA financing with other sources and to apply its combined resources to the attainment of fairly well presented and coordinated goals.

Cambodia has drafted, but very roughly, uncoordinated functional five-year plans by ministerial fields. STEM’s Chief was recently informed by the National Director of Planning, who is also Chairman of Cambodia’s American Aid Committee, that one of the reasons why the country’s plans had not been further advanced and consolidated to date was that Cambodia lacked any trained personnel to do this. He explained that his government had several months ago asked the UN Committee on Technical Assistance for the loan of an expert “who would be neutral” but that France had influenced the Committee not to act on the request. This serious situation of experts’ acceptability is further discussed below.

The Vietnamese government also has made some advance, for this fall for the first time it programmed the entirety of its MSA funds in advance instead of gradually utilizing them on a series of discoordinated projects. All three governments have already been asked to present their own programs for 1953–1954, not just to accept them ready-made from STEM.

(k) Economic and Social Effects of Point IV Program

Ever since its establishment STEM has been endeavoring to get its technical assistants accepted as true advisors to the governments of the Associated States, but to date the results have not been too encouraging. Under the basic accords with France, each State must give priority to French technicians. Laos has willingly done so, and its government functions relatively smoothly. Cambodia and Vietnam have been fearful of French influence being exerted on behalf of French interests through any strategically placed expert, and they have not dared to risk French displeasure by calling upon STEM. Only a few weeks ago energetic Governor Tri informed the Chief of STEM that he could not take even a junior Relief and Rehabilitation Officer into his Regional Social Action Service for fear of ruffling French feelings, though he would be happy to have him working in the North as part of STEM’s regional office. Under these circumstances STEM has been successful in guiding its own limited program but not in assisting the governments in the administration of their own vastly larger ones. The High Commissariat’s own Financial and Economic Counselor reflected much the same fears in his statement to the STEM Chief of Mission that he was doubtful how effective France’s proposed Social and Economic Mission would be “as long as we, like you, must always work on the fringe of government.”

Nevertheless, some successes in training have recently been registered—notably as a result of a MSA-financed, Ministerially-led educational delegation to the Philippines. We are hopeful that this may have proved to be the starting point of a gradual reorientation of elementary education away from classic techniques and doctrines to a community welfare, grass-roots approach.

(l) Attitude of Government and Public Toward U.S. Aid Program

The French commanders in all three services (and the Vietnamese Civil Government) recognize the importance of the MDA and MS Programs. This aid has made it possible for French to maintain and to improve their position over last year and for the civil government to increase authority. However, it is questionable if either the Vietnamese army or the civilian population realize the amount or the importance of this aid as all items are distributed through normal French supply channels.

MSA’s operations in Public Health and Agriculture have successfully identified the United States with a policy of respect for the individual and human dignity. MSA’s commercial import program has in some measure broken the bottleneck toward economic progress. We have even had an influence on the Viet Minh, who, it has been reported by several sources, have forbidden the destruction of STEM first-aid kits or wells during any temporary occupation of a village enjoying these facilities—presumably because they are so popular with the masses, whether they be peasants on our side or peasants on the other side.

(m) Provisions of Section 511³

STEM’s full report under Section 511, together with detailed data developed by each of the Associated States, was submitted to Washington as Tomus A 236.⁴ This report set forth many weak points open to adverse criticism as to the degree with which the Associated States have fulfilled the criteria of Section 511. Essential weak points are failure resolutely to push land reform in Vietnam, failure to effect large scale mobilization of domestic capital and to prevent the flight of such capital in the form of profits, and lack of any large scale reform of tax legislation and administration.

In short it could possibly be said that the countries have taken some, but not all possible steps to mobilize their industries for mutual defense and gear their fiscal budgetary capital, political and military resources to the objectives of the Mutual Security Act of 1952.

Particularly in the larger cities, “business as usual” has been much more the goal than total mobilization for war. This situation has been reported frequently by the Embassy and to some extent by this Mission. It has also been brought to the attention of MSA officials in person, particularly of Mr. C. Tyler Wood when he recently visited Saigon. Indeed, as first priority in the economic field, the Mission hopes that the United States Government may be able at the highest levels during the coming months to persuade:

1. The French, who have heretofore feared the competitive industrialization of the Associated States, actively to support an all-out war effort which would include, in so far as possible, a program of military and para-military production. In the past it has been easier to receive finished military items on a free basis than to manufacture, where appropriate, some of them with local materials and local manpower,

2. Both the French and the Associated States to accept American experts in the field of public administration or for that matter French experts under the new French economic aid program which we understand the French parliament has just authorized.

On the other hand, there is no doubt whatsoever that soldiers of the Associated States are actively fighting against communism. Vietnamese, Cambodians and Laotians are dying every day to protect the Associated States and therefore Southeast Asia from communist domination. There is also no question but that within the limits of their present capabilities these States are vigorously assisting the French Armies with men and materials. Vietnam, and to a lesser extent Cambodia, are contributing a very substantial part of their budgetary receipts to fighting the war. There is finally no doubt at all also that the Associated States are actively cooperating with France under the terms of their Basic Accords, and among themselves under the Pau Agreements. Thanks to this cooperation which is evidenced by such institutions as the quadripartite Institute of Issue, the tripartite Reunion of Directors of Foreign Commerce and the quadripartite study Committees on Foreign Trade and Tariffs, the three Associated States are operating as a complete monetary and customs union.

Note:MAAG has informed the Embassy that Admiral Radford, Commander in Chief, U.S. Pacific Fleet, has expressed a desire to receive four copies of the Embassy’s Monthly MDAP report which has been superseded by this new Quarterly report. It is requested that the Department determine whether or not copies of this new quarterly report should be provided to Admiral Radford and instruct the Embassy accordingly. If the Department determines that copies of this report should go to Admiral Radford it is requested that 4 copies of this despatch be sent directly to “Commander in Chief, U.S. Pacific Fleet, c/o Fleet Post Office, San Francisco, Calif.”

Donald R. Heath

1. This despatch referred to circular airgram 2139, Nov. 24, 1952, which contained reporting instructions originated by the Director for Mutual Security. The chief of mission in each country where Mutual Security programs were being carried out was asked to submit quarterly reports on the operation and status of those programs. (700.5 MSP/11–2452) For documentation on the Mutual Security Program in general, see volume i.
2. For text of the resolution, see footnote 5, p. 321.
3. Under Section 511 of the Mutual Security Act of 1951, P.L. 165, 82d Cong. (65 Stat. 373), as amended by the Mutual Security Act of 1952, P.L. 400, 82d Cong. (66 Stat. 141), countries receiving aid were required to undertake certain actions designed to promote self-help and mutual cooperation.
4. Not printed.