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

751G.00/3–152: Despatch

The Minister at Saigon (Heath) to the Department of State

secret
No. 427

Saigon, March 1, 1952.

Ref:

• Legtel 1681, February 27, 1952.¹

Subject:

• Interview With General Director of the Bank of Indochina.

Mr. Jean E. P. Laurent^* came to see me on his own initiative February 26 at the end of his recent Indochina inspection tour. He was planning to leave Saigon February 27 to visit the Bank’s Tokyo branch and then to proceed either on to San Francisco and New York, in both of which cities the Bank has branches, or back to Paris through Saigon. The substance of his remarks regarding Indochinese trade arrangements with Metropolitan France and with Japan respectively have been transmitted in my reference telegram.

We were generally impressed with Laurent’s decisiveness, wide interests, and general knowledge of Indochinese conditions. That he is able to take positions which might be considered unorthodox for a metropolitan French businessman is indicated by his comments upon the possibility of reconciling French Union and Indochina–Japan trade developments, as already reported in reference telegram.

General Situation in Indochina

He stated that in his opinion the situation was certainly better than it had been after the Cao-Bang disaster in the fall of 1950. At least this was true from a military point of view. He was not so sure that it was true from a political or public administration point of view.

a) The Huu Cabinet was almost entirely made up of Cochin-chinese. This was bad because it meant that Bao Dai had not been able to utilize the services of men from Tonkin. The Tonkinese had always proved, of all the Indochinese groups, to be the best politicians or men of politics, he did not know which phrase to use. They might be stubborn, arrogant, too suspicious and in general hard to work with, but they were able—much more able than the easier going Cochinchinese.

b) Bao Dai had proved useful and would be much more useful if he could be stimulated to exert more energy, but Laurent was not sure the latter was possible.

c) The Vietnamese Government was lamentably weak in day to day administration. Laurent placed most of the blame for this on the real paucity of trained personnel. He did not in this respect explain why Ho Chi Minh’s government seemed to have able administrators, but merely cited that out of scores of subordinate Annamite personnel which his Bank had at one time or another employed, the Bank had been able to pick only a few for responsible positions: the present Prime Minister Tran-Van-Huu as head of the Credit Fonciere in Cantho and Nguyen De as Assistant Director of the Bank’s Hanoi Branch. His general recommendation was that French Counselors with real power should be placed in the various Ministries. These should not be old-time colonial administrators, but untainted Metropolitan-trained technicians. This would mean a complete change over from the still lingering vestiges of direct administration to the exerting of pressure through advisors with the High Commissariat becoming merely a diplomatic mission. In this respect the Legation notes that Laurent and Economic Counselor Janet are thinking along very much the same lines.

World Situation

Laurent was plainly worried about the capabilities of the Nationalist Chinese Armies in Formosa although he did not explain his preoccupation with this problem. He felt that the Generalissimo still had too many of his old-time grafting generals around him and feared that under such leadership an effective, professional and patriotic fighting force could not be expected. He was also worried about Japan where he felt a potentially “dangerous” situation might develop after the occupation was terminated. Russia, he was convinced, would try to establish close trade relations with Japan in the first instance by buying consumer and some light industrial goods for resale to China. It might even be willing to pay for these in gold. The reason for such a manoeuver would be to permit Russia to provide China for propaganda purposes with goods which it was not presently in a position to spare. In the Legation’s opinion this line of reasoning seems rather specious and is reported merely because it may fit in with other information available to Washington. Possibly Laurent was influenced by the fact that, according to him, Russia recently placed an order totalling one billion francs for Lyons silks. These had been clogging Lyons manufacturers’ shelves for a long time because they were of such an expensive quality that they could not be disposed of even in the American market.

Bank of Indochina Operations

In answer to a direct question Laurent flatly declared that his Bank had not sold out any of its Indochinese holdings except a little under half the shares of the Societe Indochinoise des Plantations d’Heveas to Lazard Freres, which he described as “half-American”. The Bank’s reported decrease in Indochinese holdings during 1950 of from one seventh to one eighth of its total assets was entirely due to the fall in the value of the holdings on the Paris Bourse during that year. On the other hand the Bank in 1945, when it foresaw the trend of rising nationalism throughout the Far East, had decided to invest no new funds in that area and had since then concentrated its expansion in the Near East and Africa.

United States and Japanese Investment in Indochina

Ever since the war the Bank had tried to interest American capital in investing in Indochina, but without success. He had tried to promote, for instance, a merger of the Charbonnages du Dong-Trieu (Tonkin) and the Societe Francaise des Charbonnages du Tonkin, in both of which his Bank was an important stockholder, backed with American capital. He was convinced that these properties with American capital, equipment, and technical management could become one of the Far East’s most important mining centers. So far, unfortunately, he had been unsuccessful in selling his scheme. The Bank itself had not amalgamated the two companies for fear of being accused of monopolistic practices. He would be equally happy to see Japan invest capital in Indochina and heartily approved of discussions now under way to activate the Lake Nga salt properties with Japanese capital. These properties are owned by the Compagnie des Salins du Midi et des Salines du Djibouti in which the Bank has an active interest.

On the other hand Laurent was not particularly interested in seeing Americans simply enter the Indochinese market as sales agents for manufactured American products. In this respect, as in others Laurent was refreshingly frank in his approach. He was, for instance, similarly so when he suggested that the best way to approach the Indochina–Japan trade problem would be by direct discussions between competent French and American officials, as well as when he said that France would naturally wish to keep Indochina markets in large part for its own imports “as a sort of counter payment for the large sums we are expending in defending it”. Just as Laurent and Janot agree on a possible new form which the French “presence” should take in Indochina, so Laurent agrees in substance with what Jean Bourgoin, then Planning Counselor, had to say on American investment vs American imports in Indochina. (See the Legation’s despatch No 544, March 7, 1951, page 20.)²

Inflationary Pressures

As was to be expected Laurent felt that the old system, under which the Bank of Indochina was the currency issuing authority, was better than the new quadripartite one of the Institute of Issue insofar as guiding Indochina’s financial policy was concerned. Strangely enough, however, he was not particularly worried about the inflationary dangers of continued use of the printing press to cover Vietnam’s budgetary deficit. He believed that, should inflationary pressures resulting therefrom become too great, all the French had to do was to relax their piaster-franc transfer controls. Everyone with free piaster funds would be only too happy to convert them into francs. This would mean exporting inflation to Metropolitan France, but could be justified by the fact that in relation to the total economy of France it would have relatively little effect, whereas cumulated inflationary pressures in Indochina might cause a complete disruption of the economy.

Comment: What conclusions can be drawn from Laurent’s statements?

1. Perhaps the most important is that, even if his Bank for purely self-interested reasons would like to see the development of Indochina–Japan trade (and its Deputy Director Gannay has spent the last several months presumably setting up the Bank’s Tokyo branch in anticipation thereof), its support might be useful in persuading the French authorities to permit such development at least under controlled conditions.

2. The Bank has not so far so lost faith in the future of Indochina as to reduce its holdings in the Associated States.

3. The Bank is distinctly worried about Japan’s ability to keep out of the Sino-Russian orbit. It will be interesting to watch whether, instead of Gannay’s being in Tokyo to prepare for increased business, he has actually been there to determine how best the Bank can liquidate its Japanese interests. As indicated above, the Legation has been led to believe the former by statements of both Laurent and of the Director of the Bank’s Saigon Branch, Mr. De Champeau. For this reason, if the reverse were the case, it would be all the more important.

4. As in the case with Vinh, Vietnam’s Finance Minister (Legation despatch no. 414, February 25, 1952)³ and with Letourneau, France’s Minister for Relations with the Associated States (Legation telegram No. 1670, February 23, 1952),³ Laurent complained of bad administration as being one of the cardinal weaknesses of the Government of Vietnam. Like Vinh and Letourneau, Laurent also offered no feasible solution as to how Bao Dai’s government can get out of the cul-de-sac which faces it. This cul-de-sac or vicious circle seems made up of the following elements:

a. A weak and unrespected administration is hampering not only the civil functioning of government, but also the military effort.

b. This administration could be improved if more dedicated and better qualified persons could be induced to help run it.

c. Such persons are claimed to be available, possibly from the North as Laurent has suggested, but so far have always been judged as not willing to compromise themselves by accepting Government responsibilities as long as the Government they would be thus supporting appears to them to be too pro-French.

d. It is, though still not proved, possible that no matter how great a degree of independence were promised Vietnam, these nationalist leaders would still be unwilling to offer their services to the Bao Dai Government. They might, however, be induced to do so if the French could be persuaded definitely to pledge its good faith that France would give Vietnam an opportunity after peace to renegotiate the basic Accords and presently to give other evidences of France’s willingness eventually to relax its hold on the country’s economy and to modify its basic mystique, the maintenance of the French “presence” in Vietnam.

e. France has clearly stated to Bao Dai, on the other hand, that it will not consider renegotiating the Accords except upon minor points and then only if such negotiations are not conducted in public. France through Letourneau has also just told the United States that it hopes the United States will support the continued, discreet “presence” of France in Indochina even after peace.

f. Nor has the United States itself yet adopted the position of urging the French to make any evolutionary statement or of taking other similar liberalizing actions suggested in the Legation’s telegram No. 1347 of January 7.³ It is presumably believed that subsequent French public reaction might force the French Government to withdraw from Indochina. In other words, French public opinion in this respect is more to be feared in its results (possible withdrawal of French troops from Indochina) than Vietnamese nationalist public opinion (probable continued inability to create a strong and effective Vietnamese government).

If this reasoning is correct, it brings the analysis of the problem back to where it started. Laurent’s only suggestion for breaking this vicious circle was the apparently impracticable one of placing qualified Metropolitan trained and indoctrinated experts into the various Vietnamese ministries as “advisors” with the mission of actually running the country. This seems to be inconsonant with realities. It could only be accomplished, one would believe, if France were prepared to take over again as an occupying power and if the United States were prepared to back France in this endeavor.

Action: It is suggested that a copy of this despatch be sent to the American Embassy in Paris and to the Office of the United States Political Adviser to the Supreme Commander for Allied Powers, Tokyo.

Donald R. Heath

1. Telegram 1681 from Saigon, Feb. 27, not printed, also reported on Heath’s conversation with Laurent. (451G.943/2–2752)

2. Annuaire Desfosses gives the following business connections for Mr. Laurent:

   Director General and

   Member of Board of Directors: The Bank of Indochina,

   Vice President: Banque Franco-Chinoise,

   Member of Board of Directors:

   • Societe d’Oxygene et d’Acetylene d’Extreme-Orient,
   • Salines de Djibouti, de Stax, et de Madagascar (which owns the Saline de Cana in Center Vietnam).
   • Les Caoutchoucs de Phuoc-Hoa,
   • Societe Francaise d’Entreprises de Dragages at de Travaux Publics,
   • Societe Indochinoise de Plantations d’ Heveas,
   • Caoutchoucs de Kompong-Thom,
   • Caoutchoucs de l’Indochine,
   • Distilleries de l’Indochine,

   Societe Financiere pour La France et les Pays d’Outre-Mer (which in turn controls several important Indochinese enterprises),

   Societe Indochinoise des Plantations Reunis de Mimot. [Footnote in the source text.]

2. Not printed.
3. Not printed.
3. Not printed.
3. Not printed.