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

366. Memorandum of a Conversation, Department of State, Washington, April 4, 1957¹

Washington, April 4, 1957

SUBJECT

• Economic Aid to Viet-Nam

PARTICIPANTS

• His Excellency Ngo Dinh Nhu, Political Adviser to the President of Viet-Nam
• His Excellency Tran Van Chuong, Ambassador of Viet-Nam
• Mr. John B. Hollister, Director ICA
• Mr. Paul L. Summers, ICA
• Mr. Frederick H. Bunting, ICA
• Mr. Thomas J. Corcoran, SEA

Mr. Hollister opened the conversation by saying he was sorry to have missed Mr. Nhu during his visit to Saigon about a year and a half ago when Mr. Nhu was absent on a special mission in the high plateau region and that he remembered having had the pleasure of meeting Madame Nhu at the President’s palace. Mr. Nhu said that before his departure from Saigon the President had instructed him to discuss with Mr. Hollister various problems concerning American aid. He said that the Vietnamese hoped to make the most efficacious use of American aid so that they could soon reach the point where they would no longer need it. Mr. Hollister replied that he shared this Vietnamese desire. Mr. Nhu said the Vietnamese well realized that if they were not careful American aid could become a sort of opium paralyzing the country.

Mr. Nhu said that Vietnamese Government tried to solve various problems simultaneously rather than individually. In this spirit the Government took a broad view of its problems and tried to link them together when possible. A number of Vietnamese technicians had come here to discuss the details of specific problems with ICA/Washington. With Mr. Hollister’s permission Mr. Nhu would confine himself to a general treatment of questions of aid policy. Mr. Hollister asked Mr. Nhu to speak freely about whatever problems he had in mind, since ICA’s only aim was to do the best it could for Viet-Nam with the funds available.

Mr. Nhu said that the Vietnamese Government felt that the question of triangular franc aid and other triangular currency aid should be discussed in advance with it before decisions were made. Mr. Bunting remarked that it was our impression that this matter had been discussed fully with the Vietnamese Government in Saigon. Mr. Chuong interposed that they had gotten exactly the opposite impression from his government. Mr. Hollister said that since we and the Vietnamese had such divergent understandings of this matter we would check to see just what discussion had taken place between the United States and the Government of Viet-Nam in Saigon. Mr. Nhu said that the Vietnamese Government could assist the United States by putting pressure on the Japanese and on the French in the course of negotiations of triangular currency aid with a view to orienting Japan and France toward our political views. Mr. Hollister said that ICA was not interested in triangular currency aid for its own sake, but was primarily interested in doing what was needed for the well-being of Viet-Nam. Mr. Nhu repeated his earlier observation that the Government of Viet-Nam desired that triangular currency arrangements be discussed with it in advance.

Mr. Nhu next raised the question of highway construction, pointing out that whereas the Government of Viet-Nam desired so-called strategic highways, ICA took the position that coastal, commercial highways were more useful. However, the Vietnamese Government took its usual broad view of the problem of highway construction. For example, the Government desired to settle people in the underpopulated plateau region. The so-called strategic roads would serve these areas and would have not only strategic significance but also social and economic significance, since they would be serving the new population in these areas. If the Vietnamese Government has had some success during the past two years it is due largely to its practice of taking a broad overall view of problems rather than trying to solve individual problems separately.

Mr. Nhu added that the Government took the same approach to the question of land reform. The largest regions of Viet-Nam have in the past been the least populated, due partly to the existence of large absentee land holdings and partly to the French colonial practice of keeping large areas unexploited. The land reform program envisages installing families in these areas and providing each family with a house and two or three hectares of land. These families would cooperate with each other to work their land and would gradually accumulate small savings which could then be invested in the industrialization of the country. Furthermore, being on the land and raising their own crops, they would be able to survive periods of depression, since people who own their own land are not likely to starve in bad times. By their very presence in these areas they would deny the use of them to Communist forces, thus the land reform program had social, economic, and strategic implications.

Mr. Nhu felt that since 1956 Communist strategy in the Far East had changed. Before 1956 the Communists stressed peaceful coexistence and the relaxation of tensions. Since 1956 they stressed aggressive coexistence which they preferred to describe as competitive co-existence. They also devoted much attention to aid given “without conditions”. Mr. Nhu realized that the United States had been giving aid to countries of Europe and Asia since 1945 and therefore foreign aid was an old and rather fatiguing thing for Americans. For the Communists, on the other hand, it was a brand new development. Mr. Hollister said that our studies of some of the Communist aid programs which were described as “without conditions” showed that there were in fact a great many strings attached to these programs. Mr. Nhu replied that he was well aware of this but that the point he wanted to make was that the Communists were new entries in the foreign aid field.

Mr. Nhu next raised the question of complicated U.S. aid procedures which he said should be simplified. Mr. Hollister replied that the Vietnamese were not the only ones to complain about complicated U.S. procedures and that we were making a determined effort to reduce details resulting from these procedures. There was a basic problem, however, which, while not excusing lengthy aid procedures, could to some extent explain them. This basic problem was that he was required to justify to the Congress in detail the expenditure of aid funds. This requirement necessitated the extensive documentation of aid projects. Tomorrow morning, for example, he had to go before a Congressional committee and explain in detail actions taken by his predecessor in a certain country some time ago. A certain delay also arose inevitably from the great distance between Washington and Saigon and the long time needed for correspondence between the two places. Also, although this did not necessarily apply to Viet-Nam, sometimes the host governments were slow in taking necessary action and this slowness caused additional delay. Ambassador Chuong laughed out loud at this point and said this was the counter-attack. He then interrupted the translation to explain to Mr. Nhu that the Government of Viet-Nam had at times been delinquent in this regard.

Mr. Nhu said that being at the very edge of the Communist world, Viet-Nam could never lose sight of the fact that most of its problems assumed a military character. It was with this thought in mind and not with any desire to try to match the extremely large Communist army that President Diem would like to raise the armed forces ceiling by adding 20,000 more men. Mr. Hollister remarked that we were well aware of the military threat posed by Communism and it was for this reason that we were spending large sums in such places as the Far East and it was also for this reason that we urged united action for defense on countries which were so threatened. Mr. Nhu then said Viet-Nam was like a person who had just recovered from a serious illness and was still convalescent. Treatment was still necessary but strong remedies should be avoided since they might have an undesirable effect on the convalescent patient. He then remarked that Viet-Nam hoped to make the most efficacious use of American aid because it was very conscious of its obligation toward the free world and realized that making the best use of American aid would be helping not only itself but the rest of the free world. Viet-Nam would like to be a model of a small country receiving American aid. Mr. Hollister said that we were very proud of the fact that we had helped a fine man like President Ngo Dinh Diem to accomplish so much and that we admired President Ngo Dinh Diem greatly. Mr. Hollister was frequently called upon in special discussions before Congressional committees and elsewhere to cite examples of what the mutual security program had accomplished. His favorite example which he always cited was Viet-Nam. Ambassador Chuong said that President Diem could never have accomplished what he did without American aid, for which the Vietnamese were extremely grateful.

1. Source: Department of State, Central Files, 751G.5–MSP/4–457. Confidential. Drafted by Corcoran.