350. Letter From the Deputy Assistant Secretary of Defense for International Security Affairs (McGuire) to the Director of the International Cooperation Administration (Hollister)1
Dear John: In the fall of 1955, an inter-agency costing mission (the Lawton Team) was sent to Saigon to develop recommendations for reducing the Vietnamese defense budget to the extent possible within national security objectives.2 From the efforts of this mission and the subsequent work of the Country Team, the piastre budget for CY 1956 was reduced from $255 million equivalent (estimated [Page 748] by the Country Team in August 1955) to $203 million, and finally to $198.6 million maximum.
Although the efforts of the last year constitute excellent progress toward solution of a large and complicated problem, the possibilities of additional improvement through further intensive work merit consideration at this time. With this in mind, and at the suggestion of Dr. FitzGerald, members of my staff and I gave this subject special consideration during our recent visit to Saigon.
Salaries and allowances, which constitute 60 per cent of the Vietnamese defense budget, present the largest potential for further analysis. The salary and allowances cost of the Vietnamese soldier averages 2 1/2 times that of each member of the Thai armed forces. For Viet-Nam, the U.S. pays 90 per cent of the costs; in Thailand the Thai national government foots the bill. Of course, it would be impossible to apply the pay structure of one country directly to the economy of another country. Nevertheless, if a formula could be devised to apply in Viet-Nam a military pay system comparable to the one in Thailand, savings to the United States of up to $65 million a year in defense support funds might be realized—savings which could be applied to a net reduction in defense support allotments to Viet-Nam or applied to the procurement of producer goods.
In as much as the problem in Laos and Cambodia is similar to Viet-Nam, savings totaling as much as $20 million a year might be realized in these countries.
As an approach to the solution of the national defense budgetary problems of these three countries, the following courses of action are suggested for your consideration:
- 1.
- The formation of a small team of specialists on military personnel costs to study this problem in Viet-Nam and on their return to Washington recommend appropriate action. Inasmuch as over two-thirds of the total military personnel expenditures for the three countries is required in Viet-Nam, it would appear preferable to complete the project for this country first. If successful in Viet-Nam, similar projects for Laos and Cambodia could then be undertaken.
- 2.
- The development of a longer range technical assistance program to assist the Vietnamese government—especially the military budget staff—in improving the system of budgetary administration.
Within the past month, members of the Washington staff of the International Cooperation Administration have worked on these problems with representatives of the Department of Defense, both in Saigon and in Washington. Representatives of the Office of Philippine and Southeast Asian Affairs, State Department, have also participated in the recent Washington discussions. It is my understanding that they are in general agreement that an approach along these lines is desirable. If you and Assistant Secretary Robertson concur in [Page 749] these views, it would seem useful for our staffs to work further to formulate detailed recommendations on (a) the functions and membership of a military personnel costs team; and (b) the objectives and functions of a technical assistance activity on budgeting in Viet-Nam.
Inasmuch as the new Vietnamese fiscal year is less than three months away, it is suggested that priority might well be given to the military personnel costs problem.
An identical letter is being sent to Assistant Secretary Robertson.3
Sincerely yours,
- Source: Washington National Records Center, OASD/ISA Files: FRC 60 A 1339, 121 Vietnam. Secret.↩
- See Document 288.↩
- Not printed. (Washington National Records Center, OASD/ISA Files: FRC 60 A 1339, 121 Vietnam) Both Robertson and Hollister responded favorably to the suggestions and recommendations in this letter and expressed willingness for their agencies to participate in attacking the problem of the high cost of military assistance to Vietnam. Robertson and Hollister also recommended that the views of the country team should be invited. (Letters from Robertson and Hollister to McGuire, November 6 and 9; ibid.)↩