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

337. Telegram From the Ambassador in Vietnam (Reinhardt) to the Department of State¹

Saigon, July 9, 1956—8 p.m.

92. Joint Embassy/USOM message. Subject: New GVN land reform program.

1. Tuesday afternoon, July 5, Barrows and I were summoned to presidency to participate in discussions new GVN program for purchase from landowners and distribution to tenants of approximately one million hectares rice land South Vietnam. Present on Vietnamese side in addition to Diem were Chau, Tho and Ladejinsky.²

2. President opened discussion by announcing that after considerable study he had concluded GVN should launch program to buy and sell to tenants on crop credit terms substantial portion agricultural land South Vietnam. He pointed out that South Vietnam, unlike Central Vietnam, is a region dominated by large landholders. Most peasants who actually farm land are tenants so poor and propertyless as to constitute real proletariat. Many landlords on other hand are indifferent to rights and wishes tenants and have in past taken almost feudal attitude. Even today difference in outlook between landholders and tenants has created atmosphere tension and hostility making it virtually impossible to apply terms existing land reform regulations defining landlord–tenant relationships. Landlords generally dissatisfied with regulations giving them only 15 to 25 percent crop. On other hand, in many areas landlords could not personally collect any rent without risking their lives.

Diem’s appraisal this situation, based to considerable degree upon examination problem by bis [?] lead to conclusion that only solution is land purchase and distribution.

3. Diem then asked Tho outline government plan. Tho gave statistics showing that in South Vietnam 45 percent of land, or nearly one million hectares in properties 50 hectares or larger distributed among 6,000 owners. At other extreme 183,000 owners having each 5 hectares or less possess total 262,000 hectares, or 12-1/2 percent. Government proposes set maximum limit for land holdings somewhere between 60 and 200 hectares, final limit to be determined by GVN study commission. All holdings in excess limit will be bought by government under proposed distribution program. Estimate this will make available 750,000 to one million hectares.

4. GVN estimates price from 15,000 to 5,000 piasters per hectare. Average figure 7,000 piasters per hectare used in estimating total cost program 7,000,000,000 piasters or US $200,000,000. Will pay landlords 10 to 15 percent in cash (letter from Tho to Barrows, July 6,³ and Diem’s presentation to Vice President Nixon⁴ raises this to 15 to 20 percent), remainder to be paid in negotiable government securities redeemable ten to fifteen years. Tenants expected pay for land in five years but will be charged no interest. Landlords will be paid interest on outstanding bonds at rate not yet determined.

5. Tho concluded presentation by asking US loan or grant of 10 to 20 million dollars to finance down payments under program. (This figure increased in July 6 letter to Barrows and in letter to Vice President⁵ to 20 to 30 million dollars.) Tho also asked for some form US guarantee of the proposed securities.

6. In response Diem’s introductory statement, I expressed agreement with objectives President seeks achieve and said US has long felt that well-conceived and well-administered land reform program involving the redistribution of land ownership would be desirable politically and economically. In course Tho’s presentation, however, I raised certain questions which plan seems to leave unanswered. I asked, for example, whether price to be paid by farmer expected cover administrative expenses program. Gained impression that it was not. I asked whether government’s calculations showed that farmers who received land would have enough income to pay for it at average cost 7,000 piasters per hectare in five years. Using farmer estimate rice yields, a little arithmetic showed that plan might take 50 percent farmers crop. This problem was disposed of by statement that these details would be worked out by government commission.

7. I then asked what use the GVN would make of the dollars if provided. Tho said at first unable grasp the question. He said that they will support payments to land owners. We then explained that the landlords would receive piasters whereas the aid or loan, if provided, would be in dollars. How would the dollars be used to generate piasters or offset effect their use? Tho said they will be put in bank.

8. We then pointed out it would be hard justify loan dollars in such case and said that under ordinary circumstances dollars would have to be spent for additional commercial imports. Since this seemed inconsistent with GVN recent criticism aid program,⁶ we asked whether GVN willing to link landlords down payments to use for importation capital goods. Ladejinsky objected, evidently on ground would make plan unacceptable most landlords, and recommended use dollars for commercial imports.

9. As discussion progressed, Diem again stated his reasons for feeling the program necessary and talked at length of inequities of feudal land holding system in the south. He recalled number instances harsh and unjust actions by landlords and of the hostilities they had provoked among tenants. Said that as early as 1950, rural proletariat in richer parts Mekong delta had become focus Communist sentiment.

10. In conclusion, Diem indicated would present paper to Vice President outlining plan and requesting financial assistance. I said we could not comment on possibility obtaining additional aid or a loan for this purpose but believe that when a complete and practicable plan had been worked out, it should be possible to resolve monetary and budgetary problems.

11. In conversation with Vice President July 6, Diem made much the same presentation as in meeting reported here. Only significant new idea was that Diem said he wished announce land reform on July 20. Hoped therefore have our answer to request for assistance before that time.

12. Diem also gave Vice President memorandum this subject. Copy being forwarded separately.

Reinhardt

1. Source: Department of State, Central Files, 851G.16/7–956. Confidential.
2. Ladejinsky had resigned as a USOM consultant and was a consultant on land reform to the Republic of Vietnam.
3. Not found.
4. See infra.
5. A text of the memorandum handed Vice President Nixon on July 6 is enclosed with despatch 7 from Saigon, July 12. (Department of State, Central Files, 851G.00/7–1256)

6. The reference is to criticism expressed in an undated memorandum by the Vietnamese Ambassador in Washington which was left with the Department on June 19. Ambassador Chuong criticized the U.S. aid program for its alleged dependence on importation of consumer goods into Vietnam. He suggested a new emphasis on local, Vietnamese-controlled industrialization; specifically he requested two sugar mills, a vegetable oil processing plant, a cotton mill, a fertilizer plant, two paper mills, and a team of experts to survey hydroelectrical power. A text of the memorandum is in telegram 4171 to Saigon, June 27. (Ibid., 751G.5–MSP/6–2756)

   After querying Diem about the memorandum, Reinhardt reported to Washington that it did not represent the clear and considered views of the Government of Vietnam. Reinhardt added, however, that Chuong’s criticism and call for industrialization had wide appeal in South Vietnam. To the American Ambassador’s mind, such a theme was economically dangerous and inconsistent with the main line of action of the economic policy of the Government of Vietnam. (Telegram 45 from Saigon, July 3; ibid., 751G.5–MSP/7–556)