Foreign Relations of the United States, 1952–1954, Indochina, Volume XIII, Part 2

851G.00/8–354: Telegram

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

secret

Saigon, August 3, 1954—noon.

439. Repeated information Paris 160, Hanoi unnumbered. Re Depcirtel 50, July 22.² In Indochina an economic assistance program must be accompanied by development of a strong and effective political and military situation. However, while attempting to assist in creation of necessary political and military strength we must not wait to extend economic aid. As nationalism and anti-colonialism are perhaps two most important motivating factors in Vietnam politics today it is essential for psychological reasons that the American role not be too much advertised. Vietnamese Government must convince its people that it is in a position of leadership rather than that it is being led and influenced too much by US or any other foreign government.

Following is summary reply to specific questions in letter July 20 from Assistant Secretary Robertson.³

a. There is a very real danger that Communists will ultimately take over power in south Vietnam by capitalizing on local social and economic instability and fervent nationalism, accompanied by pressures from Viet Minh in North Vietnam and strong guerrilla action by left-behind forces in South Vietnam. Propaganda would probably stress nationalism more than poverty of people. Danger of Communist takeover in Cambodia is more remote. In Laos danger is almost as present as in Vietnam. In both Cambodia and Laos, however, economic plight of inhabitants would be less important factor in such take-over, since there is little discontent among peasants over their present economic situation.

b. A major effort at social and economic progress is urgently necessary to strengthen Associated States politically and militarily against likelihood of Communist seizure of power.

c. To meet problems such as resettlement of refugees and reorganization of areas previously controlled by Viet Minh, a rapidly expanded rate of social and economic progress is essential and must be sought urgently and immediately in spite of lack of trained and efficient local personnel to administer a program.

d. US assistance would definitely create public and official reaction beneficial to US interest.

e. US aid should be channeled direct and in concentrated way in Indochinese countries. Reaction would be more favorable if this were case.

f. Reaction would be more favorable if US were sole contributor. Associated States are not interested in joint aid agreements. Any provisions of an economic nature included in SEATO should be of general nature.

g. In general throughout Far East, in the long-term, way to economic and social progress must be through industrialization in broadest sense of those countries, with improvement of agriculture a somewhat secondary item. Agricultural output must be improved to extent where it is possible to take care of expanding populations but no agricultural developments in long run will suffice to build up tolerable standard of living in Asia in view of population increases. In case of the states of Indochina, however, development of agriculture will for perhaps many years take priority over industrialization, since in underpopulated Indochina there is room for vast increase both of acreage and yield. Both for agricultural and eventual industrial development in Indochina it would be necessary to have roads and improved inland waterways and there are decided possibilities of hydroelectric development and very likely mining development as well. This is for long term view. Against immediate Communist threat programs of education, public health and in few cities housing projects are more important.

h. At present time there would be no difficulty in conditioning economic aid in three countries on their improvement of their military force. All three countries desire to build up their military strength against Communist (Viet Minh) threat. However, I believe it would be unwise and unnecessary to condition an economic aid program on requirements for defense commitments since such a tie-in could be used against us effectively in Communist propaganda.

i. In their present state of opinion three Indochina countries would prefer aid direct from US. This is so because they have greater trust in our sincerity and ability to provide aid than they do in other countries. They are egotistically, and naturally, more interested in aid to themselves than for their neighbors. In fact, they would fear that the larger the geographic coverage the less aid they would get.

j. If governments do not institute better economic, social, and fiscal policies, an economic aid program would be little effective. In case of three Indochina countries they would not object to stipulations they follow policies conducive to social and economic improvement and they will accept expert assistance.

We realize and these countries realize that private American investment would bring benefits. However, if security for American investment is pushed too hard, these countries will become suspicious for all of them have had experience with private investment which they did not like. Now, while we are attempting to shore up a wobbly political and economic structure, is not the time to make a major issue of pressing for opportunities for private American investment.

k. Aid should be presented and carried out as government-to-government aid. US should stay largely in background, let government get half credit, and gain in strength. Under such conditions favorable publicity we would get would be as great, and unfavorable less. We must “sell” program to Congress and American people, but such “selling” should be done back at home, not over here to government and peoples of these countries.

l. Our rubber policy, or lack of it, has hurt us in this country. However, I do not believe commodity price agreement is answer, for it becomes sort of cartel and inhibits progress. Best we can do on that score is continue to maintain economic stability in US and to revise our tariff policies—in this country, more for psychological than economic benefits.

m. China is traditional enemy of Vietnam and is feared by Laos and Cambodia. This applies to Communist China as well as to any other China. Only a few intellectuals in Indochina believe Communist China has found solution for under-developed countries.

What three states of Indochina want and need for short term to help avert danger of Communism is continuation of direct economic aid from US through FOA with its experience and organization. They also, situated as they are “under the gun” of joint menace of Viet Minh and Communist China, need American armament, budgetary aid for their defense effort which is beyond their capacity and has hitherto been funneled through France, and American military training. France will also give budgetary support and France would like to monopolize training and reorganization of three National Armies. We should coordinate our economic aid and budgetary support with whatever programs France has, and we should also, certainly in case of Vietnam and Cambodia, at least share in military training mission. Our sharing in training is necessary both because on record we have better military method and because in case of Vietnam and Cambodia they will be reluctant to accept an exclusively French training mission because of their dislike of French, their fears of French intention to retain dominance in this area, and because of their disbelief in French military ability.

For long-range, there should doubtless be a multi-national cooperative economic organization devoted principally to industrialization of Asia in the larger sense. It would be well to start such an organization at present time. But it cannot and should not for next years to come replace direct US aid and control of such aid. It certainly should not replace our present FOA and MDAP programs in the immediately menaced countries of Indochina. But it could begin to study longer-term projects which must wait upon development of more stable political conditions. I would figure such an organization being devoted to Asia, not made worldwide. In first place, it would be less effective if it were too large an organization. Secondly, economic problems of overpopulated, under-developed Asia and other continents are distinct.

Heath

1. This telegram was transmitted in two parts.
2. For text of circular telegram 50, which requested the opinions of Far Eastern posts regarding aspects of expanded economic assistance, see volume xii.
3. The letter under reference, which also requested information on economic assistance from various Far Eastern posts, is not printed. (FE files, lot 55 D 480)