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

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

Saigon, July 21, 1956—8 p.m.

265. Joint Embassy/USOM message. Ref: (a) Deptel 109.² (b) Embtel 92.³ (c) Embtel 95.⁴ (d) Despatch 7, July 12, 1956.⁵

1. Further study land reform proposals presented by Diem to Vice President Nixon demonstrates clearly these proposals poorly conceived and poorly timed. Unfortunately their author failed inform USOM Director or me soon enough beforehand to influence either timing or content. We first heard of them … without being informed they would be presented to Vice President. Author admits GVN has not developed land reform program, yet we are faced with immediate request for $30 million U.S. dollar aid for land redistribution program which at best could not start being implemented in less than one year. Moreover, propriety use U.S. dollar aid to finance transfer land from one Vietnamese to another highly questionable, particularly at this time when joint U.S./Vietnamese program efforts are directed at maximizing economic development. Present proposals would require $30 million extra commercial imports to produce piasters needed to finance down payments to landlords by GVN. Ladejinsky himself opposed such use U.S. aid when employed by USOM.

2. Ministry Agrarian Reform has not been brought into picture and evidently will not be until future present Minister Thoi is decided. Thoi has stated to USOM Assistant Director Lavergne that he does not consider proposed plan adequately thought out, doubts its practicability, and said he would not wish be responsible for its administration. Has even asserted that Tho (his half-brother) does not really believe in program but has assumed responsibility for it out of loyalty to President. While some of Thoi’s criticisms have merit, he is probably motivated in part by strong but heretofore withheld animosity towards Ladejinsky. (Ladejinsky, who worked with Thoi for more than year while serving as land reform advisor on USOM staff, has long criticized and mistrusted Thoi and has recently criticized him openly. Whether this accounts for President’s lack confidence in Thoi, Thoi feels he does not have President’s confidence and that Ladejinsky’s attitude is important factor this respect.)

3. Barrows discussed proposals with Tho calling attention fact that present Ministry Agrarian Reform is supported almost wholly from counterpart funds, but that in program review now underway VN authorities have accorded only second priority to continuation this support. Tho also was asked how GVN intended administer new program, urged that qualified person of ministerial rank, free of all other responsibilities, be assigned task directing program. Services offered of Price Gittinger, land reform specialist on USOM staff, and suggestion made that additional help be obtained from field project staff MSUG which has just completed study land reform organization. Budgetary and financial problem presented by land reform proposal also discussed briefly, with suggestion some financial assistance might be obtained from unprogrammed 1955 counterpart funds. Tho received these suggestions with interest and appreciation, indicated he did not know what permanent arrangements Diem would make for program but assumed that he (Tho) would continue to handle it for time being. Since then Tho has not asked for help either from Mission or from MSUG.

4. USOM representatives have also had several discussions plan with Ladejinsky since Vice President’s visit. These conversations have confirmed fact that Ladejinsky indeed author of plan. He not only wrote letter presented by President Diem to Vice President Nixon, but I am satisfied he also conceived and sold basic idea to Diem first through Bishop Thuc and later directly. Ladejinsky recognizes proposal is only outline and that much additional planning must be done to develop practicable program. In effort persuade GVN develop its ideas further, Ladejinsky recently wrote long memorandum to Tho outlining program of action and has had at least two conversations on subject. Thus far Ladejinsky’s efforts have not been more fruitful than USOM’s. Tho apparently has limited his action to assigning to one staff member of Ministry Economy without previous experience this field task preparing land reform statute based on reading similar laws other countries.

5. Tho confirmed fact GVN request for financial support land reform program is for aid in addition to that provided for regular military and economic purposes. Moreover, VN 1957 proposals now under review include no additional funds for support land reform even in VN economic program totaling $130 million.

6. Have explored tentatively idea linking funds for land reform to program capital imports. This could be done, for example, by depositing landlords’ down payments in blocked accounts from which funds released only to pay for approved capital goods imports. GVN reaction this idea is somewhat vague but favorable according Chau’s statement national aid committee meeting July 19 reported separately.

7. GVN officials have not given serious thought to fact that even with American aid for initial payments to landlords, proposed program will still constitute serious budgetary burden. On basis present sketchy program, it is impossible make firm estimates cost, but following items at least can be identified: (a) administrative expenses; (b) interest on bonds given landlords for amount of purchase price not covered by down payment (present plan seems count on paying interest to landlords but not charging interest to tenants); (c) losses on collection.

8. Notwithstanding all doubts and questions herein expressed, we face fact Diem has come forward with land reform proposals. He has made proposals contingent upon our financial support. If we refuse financial support, he will have good excuse for doing nothing this field. He may also be very much let down, because he very likely feels that in reacting positively to advice he has received from Ladejinsky, he has been doing what U.S. wishes. In circumstances, therefore, I believe we must give very serious consideration this request.

9. Apart from economic and administrative aspects, I am concerned over political implications of premature announcement of land redistribution program which may become only partially effective. I am, therefore, inclined to discuss subject once more with Diem before making definitive recommendations with respect to U.S. financing, but would wish state U.S. Govt’s position more or less as follows:

We are gratified GVN has determined to embark on land redistribution program and wish help in every way to make it both political and economical success. Should be recognized, however, that such program long-range and could only be implemented effectively after considerable preparation. From political standpoint much could be gained in clarifying issues and gaining public acceptance through parliamentary action. In any event we question political desirability premature public announcement.

From economic standpoint dollar aid requested would perforce augment commercial aid program since resulting piasters, not dollars, needed to assist financing land transfers. Moreover, since unlikely program could develop sufficiently as to require financing in less than year, we would prefer consider request from FY 1958 rather than FY 1957 U.S. appropriations. Also, we agree such financing would be more suitable on loan than grant basis and, as recently suggested by GVN, should be used for capital imports to assist in developing industry. Piasters to finance these imports to maximum extent possible should be derived from private investment to minimize inflationary impact on economy. We prepared finance administrative costs and work with GVN toward development such program.

10. Please instruct.⁶

Reinhardt

1. Source: Department of State, Central Files, 851G.20/7–2156. Confidential.

2. This telegram, July 12, reads as follows:

   “State and ICA concur position you have taken re new land reform project including your statements to Diem on timing of announcement, possible role National Assembly this matter, and need for much more exhaustive study.

   “Awaiting receipt GVN memorandum to Vice President and your further comments and recommendations.” (Ibid., 851G.16/7–956)

3. Document 337.
4. Document 338.
5. See footnote 5, Document 337.
6. In telegram 256 to Saigon, July 27, the Department and ICA instructed the Embassy to discuss land reform along the lines suggested in paragraph 9 of telegram 265 “in view possible adverse political repercussions denial” Diem’s request for assistance in a land reform program. “However, you should avoid implying promise funds would be available from FY 1958 for effecting down payment on land transfer since as pointed out reference telegram [265] much more study will be necessary before we can reach definitive conclusion. … Careful attention should be given to not overcapitalizing land values, so that new owners can assure, under appropriate repayment schedules, repayment of loan on a basis that is economically sound. Grants to farmers would not seem appropriate in this context.” (Department of State, Central Files, 851G.20/7–2156)