Foreign Relations of the United States, 1955–1957, Vietnam, Volume I

277. Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Under Secretary of State (Hoover)¹

Washington, November 22, 1955.

SUBJECT

• U.S. Programs in Cambodia, Laos, and Viet-Nam

Discussion

1. I believe the United States Government should now shift from a short-term crash basis to a more long-range planning, and development where feasible in Cambodia, Laos and Viet-Nam. Internal developments in each of the Associated States have reached the point where some long-term planning may be conceivable on political, economic, military, and informational programs. This would apply to all U.S. agencies operating in these countries. U.S. programs in Cambodia, Laos and Viet-Nam arose during the war with the Viet Minh, and we were not permitted by circumstances to do much more than fill urgent needs by the best means we had. The impetus of wartime programming has resulted in a continuation to a large extent of these past practices. Since the Geneva agreements of 1954 we have been operating on an emergency short-term basis. The Special OCB Committee on these three countries has favorably discussed this proposal in general.²

2. In our long-range planning in Viet-Nam what should be the political targets in terms of political parties and political movements? Should we consider an economic program including investment in capital goods over a two or three year period for Viet-Nam? In Cambodia what should be our thinking on the long-term security and economic development? In Laos, should we gear our plans to recapturing the control of the two provinces through any means including military, or should we gear our plans to holding on to the ten provinces we have? In all three countries what size military and police forces should we plan for after June 1956? In the over-all picture to what extent should we associate Viet-Nam, Cambodia, and Laos with the SEATO organization and regional economic, political and military plans?

3. Senator Mansfield is worried over the size and impact of our aid program. In his letter of September 20 to you,³ the Senator expressed the opinion that the operation of the aid program warrants careful study, and that there are elements in the current operation of the program which inhibit its effectiveness in serving the foreign policy of the United States. A reply to this letter is being sent,⁴ including some of the procedural points included in the attached memo.

4. There is also the question of sending a Bell-type special mission⁵ to Viet-Nam as recommended by Senator Mansfield in his report.⁶ Aside from the fact that this is a recommendation of one of the most influential and knowledgeable Senators with respect to Viet-Nam, I believe there would be considerable merit in sending such a mission to Viet-Nam, provided the personnel were carefully selected and the terms of reference well thought out. Prior to the sending of such a mission, we in the United States Government should have a clearer idea of the scope of the proposed study of the mission. This mission could take the time to work with the operational people in USOM Saigon, who are doing a splendid job, in order to come up with some well-thought-out recommendations. Many of us are so tied down in Saigon and Washington in day to day operations that we cannot do this kind of job. Also, recommendations of this type of mission would carry greater political weight and tend to galvanize both the United States and Vietnamese Governments into more effective action.

Recommendations

1. That you discuss the above informally with Mr. Hollister prior to further informal OCB discussions.

2. That the State Department approve the sending of a Bell-type special economic mission to Viet-Nam, subject to the provisos mentioned above.

3. That after discussions between you and Mr. Hollister, consideration be given to directing the OCB Special Working Group on the Associated States to: (a) prepare a report and recommendations on long-range planning for the Associated States, and (b) draft terms of reference for the U.S. special mission.

4. That this problem also should be considered by the Interagency Committee (Assistant Secretary level) for coordinating military and economic aid.⁷

[Attachment]

U.S. AID PROGRAMS AND PROGRAM PROCEDURES IN CAMBODIA, LAOS, AND VIET-NAM⁸

The high cost system for our military aid programs is a heritage from the days when the French hired locals in Viet-Nam for service in the French Army, and then allowed the Vietnamese to constitute an army at the same rate of pay as these Vietnamese serving in the French Army. The system could not be changed suddenly, without serious damage to the morale of the Vietnamese Army. The probable eventual answer is universal conscription, but the Government of Viet-Nam does not now have the power to institute conscription. An interagency team is shortly going to Saigon to study the costs of the Vietnamese forces, and possible means of reducing our contribution thereto.

The Vietnamese have requested that the aid program include more capital goods for economic development, and less consumer goods. This request by the Vietnamese may arise from a misunderstanding of the program, or may be an indirect method of requesting more aid from the United States. A large part of our aid program has as its principal purpose the generation of local currency to pay the local currency costs of the military, and therefore of necessity must be the type of goods which will sell in Viet-Nam for piastres. In view of the current situation in Viet-Nam, the market demand is for consumer goods, not capital goods, since no one is willing to invest. If Government investment is carried out, this increases the cost of our aid program, for an alternative, the Government could have used these funds to meet part of the cost of the Vietnamese Army. However, it may be time to shift to a program aimed at increased economic development. To the extent that military costs could be reduced, the overall level of our aid program in Viet-Nam might not increase, or might even decline, but there would not be the large reduction that could otherwise be hoped for.

The restudy of our aid program should include a re-examination of aid program commercial import procedures. Much criticism by the Vietnamese and others arises from misunderstanding or an unfamiliarity with such procedures. It is recognized also that the procurement authorization procedure is a means of insuring purchases in the United States using proceeds from our aid programs. However, there is a strong possibility that the procurement authorization procedure may no longer be applicable or necessary for our aid programs in Viet-Nam, or elsewhere. It is time-consuming, the red-tape and paper work involved is intensely disliked by the business and banking community. In some cases, importing under the PA system requires several times as long as ordinary imports.

The procurement authorization procedure is wasteful. Each amendment to a PA requires exchange of correspondence, by cable usually, and much added paper work. More important, dollars are committed long in advance of the receipt of the needed local currency, giving rise to inflated aid pipelines. In some cases, pipelines are necessary, but the larger the pipeline the more waste and inefficiency in handling, since there is a general tendency to make sure that the pipeline is large enough to disgorge sufficient to the largely undetermined needs at some date in the future. There is nothing to overcome this tendency in a pipeline system which converts dollars into goods to be converted into piastres.

We should not allow the otherwise beneficial effects of our aid programs to be dissipated through inapplicable and antiquated procedures. Procedures can probably be worked out to give more protection against wastage of funds than the present PA procedure, without some of the defects of that procedure. If this is impossible, it may be necessary to request of Congress more flexible procedures for these three countries, either in the form of legislative history or request aid for these countries as a special title of the appropriation act not subject to the same procedural requirements as ordinary aid programs.

1. Source: Department of State, Central Files, 790.5–MSP/11–2255. Secret. Drafted by Young and Price.
2. See Document 272.
3. A copy of Mansfield’s letter was attached to a memorandum from MacDonald of ICA to Hollister, December 3. In it, Mansfield observed that none of the posts in Southeast Asia had had financial audits for several years, pointed out that it might not be an overstatement to say that aid was being forced on Southeast Asian countries, noted that pay level and allowances for local armies supported in whole or part by U.S. aid was “astonishingly high”, and questioned whether many underdeveloped countries in the area were able to absorb requested or appropriated U.S. aid funds. (Washington National Records Center, ICA Director’s Files: FRC 61 A 32, Box 313, Vietnam)

4. This reply had actually been sent on November 17, signed by Hoover as Acting Secretary. In it the Department admitted that audit procedures had been deficient and stated that improvements were being actively undertaken. The reply agreed also that it was pointless to force aid upon countries which did not want it, but, citing Cambodia as a possible example, stated that in some cases it had been necessary to endeavor to induce the government concerned to take steps to improve its competence to deal with a Communist threat to its security before it was too late.

   Regarding Vietnam, the Department acknowledged “questions as to the type of program. The Vietnamese, as you know, have wished to increase the amount of dollar aid for capital investment. They place less emphasis on the need for imports of local currency producing consumer goods than the situation seems to require. So far as I have been able to ascertain, since the maintenance of the contemplated armed forces of Viet-Nam will continue to require large amounts of local currency assistance, acceding to the desires of Viet-Nam on this question would result in a still larger and more expensive program than we have been willing to provide.”

   Concerning troop pay, the latter stated that the level of pay among U.S.-supported countries was high for the area, but pointed out that total military costs in Vietnam had recently been reduced from $2,000 to $1,500 per man year.

   The Department agreed that many countries had limited capacity to absorb aid funds. A $40 million aid program to Laos could only be justified “as being one part of an effort to ensure that so strategic an area, vital to the defense of Burma, Thailand, Cambodia and Viet-Nam, does not fall into enemy hands.” (Department of State, FE/SEA Files: Lot 58 D 207, Vietnam: Senator Mansfield)

5. In June 1950, the United States at the request of the Philippine Government sent an Economic Survey Mission, headed by Daniel W. Bell, then President of American Security and Trust Company and former Under Secretary of the Treasury, to the Philippines. The task of the Bell Mission was to survey the Philippine economy, to make recommendations to remedy the immediate deterioration of the economic situation, and to formulate long-range plans for future economic viability and progress. For documentation on the work of the mission, see Foreign Relations, 1950, vol. vi, pp. 1467 ff.
6. See footnote 2, Document 263.
7. The source text contains no indication of approval, but on December 8 Hoover sent Hollister a letter recommending, inter alia, long-range planning in Indochina by the OCB and sending a Bell-type mission to Vietnam. (Department of State, Central Files, 751G.5–MSP/12–855) On January 20, 1956, Hollister responded agreeing that long-term planning and development was advisable but that consideration of a Bell-type mission should be postponed given the fact that there was already a 16-man U.N. Technical Assistance Mission in Vietnam, that ICA was already reevaluating programs in Vietnam, and that the Government of Vietnam, at the urging of the Embassy and USOM, had embarked on a program of agrarian reform. (Ibid., OCB Files: Lot 61 D 385, Southeast Asia, General)
8. Drafted by Price.