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

354. Telegram From the Director of the International Cooperation Adminstration (Hollister) to the United States Operations Mission in Vietnam¹

Washington, November 23, 1956—8:15 p.m.

Icato 716. Joint State/ICA message. Subject: Land Reform Ordinance. Reference: (A) Embtel 1372,² (B) Embtel 472.³

1. Country Team should reiterate to Diem US Government’s deep interest sound and successful land reform program Vietnam. If carried out effectively could greatly enhance popular support Diem regime eliminating major grievance which Communists have attempted exploit. Under proper administration, it should also result in increased internal revenues, enabling reduction Vietnam’s dependence on foreign aid.

2. Agree with importance attached to development of adequate administrative plan. Emphasize to Diem again that in absence careful planning administrative details indicated ref (B), entire scheme may fail leading to great disillusionment and bitterness among peasants and severe loss of prestige his regime. Believe weaknesses draft ordinance can be overcome by careful planning and administration.

3. US therefore prepared offer certain forms assistance planning and execution this program. Depending on availability and Vietnamese preference, prepared (a) recruit special team experienced US, Formosan or Japanese technicians assist Government in planning program, developing procedures, and training Vietnamese personnel required to operate program, (b) arrange intensive training and observation Vietnam officials in Taiwan, and (c) approve counterpart financing for all or substantial part of additional administrative costs incurred this program (estimated at $3–5 million).

4. We still question whether cash downpayment is necessary feature land transfers. But if such payment unavoidable, we feel if possible it should be borne by Vietnamese Government through reprogramming own budget or deficit financing. This would permit Diem claim full credit for conceiving and financing popular program. It might also result in more reasonable and prudent assessment land values. Unlikely deficit financing this operation seriously inflationary because land owners represent relatively small group presumably not interested spending funds consumption purposes and might prefer suitable alternative investment opportunities. This source of funds might be tapped through bond issues, proceeds to be devoted to reconstruction projects. Return on these projects either directly or through general increase in production would provide revenue for service on bonds.

5. In this connection you may wish give careful thought desirability and feasibility of scheme whereby landlords could acquire ownership on approved industrial plants or other productive enterprises through purchase of shares therein with funds obtained from commercial or government investment bank on security bonds received in land transfer. Part of capital for government bank might be provided also through counterpart loan. This might be beneficial to economy and contribute US objective encouraging private investment.

6. Suggest you discuss above with Vietnamese and advise.

7. While general statements have been made by US officials of friendly interest in land reform program, Chuong received no assurance from US officials here of US financial support for land reform program. See for example memo conversation July 26, 1956, between Chuong and Robertson⁴ at which Haraldson also present.

Hollister

1. Source: Department of State, Central Files, 851G.20/10–2456. Confidential. Drafted by Milton J. Esman and Frederick H. Bunting of the Office of Far East Operations of ICA and cleared by Raymond T. Moyer, Regional Director of that office, and Dennis A. FitzGerald, Deputy Director for Operations of ICA. Also cleared with FE. See the letter from Price to Haraldson, December 5, infra, for more information on the Department of State’s clearing process.
2. In this telegram, October 24, Reinhardt reported that he and Barrows were briefed by Diem on the Government of Vietnam’s planned land ordinance, which Reinhardt reported still did not meet the Embassy’s and USOM’s objections, especially as to the ambiguity of language and position on the question of U.S. funds for support of the land transfer program. (Ibid., 851G.20/10–2456)
3. In this joint Embassy/USOM telegram, August 8, Reinhardt reported that he and Barrows presented to Diem on August 7 the U.S. position on land reform as instructed in telegram 256 to Saigon, July 27; see footnote 6, Document 340.
4. Not printed. (Department of State, Central Files, 751G.5–MSP/7–2656)