128. Memorandum of a Conversation, Department of State, Washington, April 4, 19601
SUBJECT
- General Discussion of US Aid to Viet-Nam, Internal Security Situation in Viet-Nam, and Vietnamese Relations with Cambodia
PARTICIPANTS
- H.E. Tran Van Chuong, Ambassador of Viet-Nam
- Mr. Nguyen Dinh Thuan, Secretary of State for the Presidency
- Mr. Vu Van Thai, Director of the Budget and Foreign Aid
- Mr. Nguyen-Duy-Lien, Counselor, Embassy of Viet-Nam
- Mr. J. Graham Parsons, Assistant Secretary of State for Far Eastern Affairs
- Mr. Avery F. Peterson, Deputy Assistant Secretary of State for Far Eastern Economic Affairs
- Mr. Richard E. Usher, Acting Director, Office of Southeast Asian Affairs
- Mr. Chalmers B. Wood, Officer in Charge Viet-Nam Affairs, SEA
Mr. Nguyen Dinh Thuan and Mr. Vu Van Thai called on Mr. Parsons for an initial discussion of their objectives in visiting the United States at this time. Mr. Parsons invited Mr. Thuan to raise any points that he wished to discuss.
Mr. Thuan summarized the various sources of external aid available to Viet-Nam. He said that with this assistance the country has been progressing favorably in terms of its economic development. He went on to say that the Communists, however, have started a major offensive in Viet-Nam the success of which in recent months has been due to the deterioration of the military situation in southern Laos. Mr. Thuan said that the Communist guerrilla forces are infiltrating into Viet-Nam from southern Laos and that some Communists are also being carried into Viet-Nam by sea.
Mr. Thuan explained that the Government of Viet-Nam is taking counter measures against this Communist offensive. He mentioned particularly regroupment of the population, the agroville program and youth movements.
He went on to say that Viet-Nam needs US aid to face this danger. He said he hoped Viet-Nam could get an acceleration in the delivery of programmed MAP items; and more specifically he said that what they need right now is signal equipment, C–47’s, helicopters, and small boats.
Mr. Thuan said it would be very dangerous for the United States to cut out too much of its aid to the Vietnamese military budget. He explained that he could see both sides of the problem; he could see the importance of economic development as well as of the military program. He said he felt that the way the United States is cutting down aid to the Vietnamese military budget is very dangerous. He referred to the fact that there are two parts to the military budget, the US part and the Vietnamese part. The US part has been declining at a dangerous rate and he gave the following figures in illustration of this point:
| 1956—U.S. Contribution | $171,000,000 |
| 1959—U.S. Contribution | 144,300,000 |
| 1960—U.S. Contribution | 124,000,000 |
Thuan said that at the beginning of FY 1960 Ambassador Durbrow had shown him his proposed figure of $130 million as the top limit of the US contribution for this year. Thuan said that he had asked that this figure be increased, explaining that he is now in charge of the budget. Thuan said that next year Viet-Nam will face even greater difficulties than in the past. In the next session of the National Assembly, they intend to increase their budget figures representing their own contribution. He said that meanwhile they asked [Page 362] that the ceiling of our aid be maintained and not be cut down. Thuan said that he wished to stress this.
Turning to a different aspect of his mission, he asked for an accelerated implementation of specific spending programs. Thuan then repeated his earlier request that if possible, aid levels be maintained for the next few years. He added that Viet-Nam has a plan for the next six years. He said that he would go into the details of this plan later. Thuan indicated that this concluded his initial remarks.
Mr. Parsons then said that he would like to make a few general remarks which would give Thuan and Vu Van Thai an idea of the spirit which we bring to these particular talks and then go on to review some general considerations which we have in mind. Mr. Parsons assured the visitors that no one here underestimates the seriousness of the Vietnamese problems. He said that we are full of admiration for the way in which Viet-Nam is handling these problems and we are confident in Viet-Nam’s ability to meet them successfully.
Having said that, Mr. Parsons observed that in connection with the MSP, there is one consideration which is more important than all others. He said that with respect to all of these problems which Viet-Nam and other countries face, we must ask that they make the very best possible use of the resources which they have themselves as well as of the resources which we contribute. The Congress insists that this be so and this is applicable to a number of fields.
First of all, there is the internal security problem. Mr. Parsons said he knew that the situation in Viet-Nam has become more difficult in this respect. This is due to the deterioration of the situation in southern Laos, and we think there are other reasons too. We would like to see the best use made of the existing military forces which Viet-Nam now has available. Mr. Parsons said that rotation of regular Army troops for purposes of special training is important in achieving this best use of the existing forces. We would like to make sure that the whole range of possible answers to this internal security threat have been considered. This would include such matters as the unification and improvement of the intelligence system; the question of whether everything possible is being done to win the sympathy of all elements of the population; the question of whether all possible psychological measures are being taken, as well as military and economic measures.
Mr. Parsons went on to say that there was a second small thing which he knew Ambassador Durbrow had discussed with President Diem, and he thought with Dr. Mau. That was the question of Cambodia. Mr. Parsons said that we Americans do not like to be talking to the Vietnamese about their relations with Cambodia all the time as though the Cambodians were always right and Viet-Nam was always wrong; but the Vietnamese are the bigger people and the [Page 363] more experienced people. Mr. Parsons said that we were upset by the note which the Vietnamese Government had addressed to the Cambodian Government setting forth Viet-Nam’s claim to certain islands. Mr. Parsons said we know the reasons which the Vietnamese had for sending the note, but we also know the consequences. Mr. Parsons said he wished the Vietnamese would make it clear to the Cambodian Government that the dispatch of this note was just for the record. We think it would also contribute to the improvement of the situation in Southeast Asia and to Viet-Nam’s general security if Viet-Nam would try to avoid taking steps such as this note to Cambodia which have such predictably adverse effects.
Mr. Parsons went on to say that the third question he wished to raise was the delicate one relating to the value of the foreign exchange received for Vietnamese currency sold in Viet-Nam. Mr. Parsons said we do not normally talk to people about the value of their currency and added that we hope the Vietnamese will talk with the IMF on this subject. However, Mr. Parsons said that the Mansfield Committee is very much interested in this matter. Whether the Vietnamese agree with the Committee’s reasoning or not, it is nevertheless a fact that we will have to deal with Viet-Nam on this subject of their foreign exchange conversion rate. Mr. Parsons said that we hope the Vietnamese will look to this question in terms of their own broadest interest and in obtaining the best possible utilization of their available resources.
Thuan then said that he would answer briefly with a few points. First, as to the question of rotation of troops and the training problem generally: Thuan said he thought that they were proceeding with the rotation scheme. On the general subject of training, he said he thinks that General Williams has received instructions from Washington to make the Vietnamese Army able to coordinate its activities with other Allied armies. He went on to say that if the Department of Defense directs General Williams to put more emphasis on anti-guerrilla training then surely the General would have to do that.
Referring to the intelligence system, Thuan said that this presents quite a problem. He said it takes time to develop a good intelligence system. Anyway, Thuan said, he would like to inform Mr. Parsons that he had obtained authorization to negotiate regarding a solution of this intelligence matter and to implement the outcome of such negotiations. He said this would constitute a step toward unification of intelligence systems in Viet-Nam.
Going on then to a consideration of the best use of Viet-Nam’s resources, Thuan said that the Senators and Congressmen had come to Viet-Nam to look at the implementation of the program and, generally speaking, they found that it was not too bad. Thuan said sometimes the failures are not due to the Vietnamese and are not due [Page 364] to the Americans, but are due to “reciprocity”. Thuan then observed again that the Congressmen did not find any major problems in the program.
Going on to Cambodia, Thuan said he would like to point out today only one thing—the Vietnamese had been planning to send a delegation to Phnom Penh sometime earlier but they had been compelled to delay this because of President Diem’s trips to Malaya and Taiwan. Thuan said “we want to develop something concrete to propose to the Cambodians”. He said he knew the Vietnamese would soon send a delegation to Phnom Penh. He said he was to have gone himself to Cambodia with Vice President Tho but that apparently would not be possible since he, Thuan, was here in Washington. He went on to say that Prime Minister Sihanouk is very much afraid of Communism. Perhaps he wants to be on the winning side. Thuan said the Vietnamese have tried from their side to do the best they can. On the border problems, Thuan said the Vietnamese get some cooperation from the Cambodians. One form of this cooperation has been the exchange of information between the chiefs of Provinces along the border.
Thuan then said that the rate of exchange is indeed a major concern. He confessed that he was not himself an expert on such matters. He said he agreed that the present rate of exchange is not realistic; but, he said, “what we now call the free rate is not realistic either. We must consider the problem twice, or maybe three times, because of its implications in the social as well as the economic field”. Thuan said that the Vietnamese Government has an agreement with the Ford Foundation to help them study various related aspects of this problem, such as economic planning, fiscal policy, and military policy. He added that what bothers the Vietnamese is that the monetary reform in Laos has not been a successful one.
Mr. Parsons observed that we really want to discuss this matter because, among other reasons, we thought that the monetary reform in Laos was in fact quite successful.
Vu Van Thai said that they had had a good discussion with the World Bank people. Thai said that the World Bank people agree with the Vietnamese that the monetary problem is merely a reflection of Vietnamese internal problems. Thai said that an increase in the rate would raise the cost of living right with it. He said Viet-Nam would have to change its taxes on imports and then they would have no more internal revenue. Thai said they must first develop their domestic industries producing import substitutes. Thai explained that Viet-Nam is building up such industries. He mentioned as examples textile mills, a cement plant, and two paper factories. Thai said that they are also working out a switch of their taxes from imports to other sectors of the economy. He said that they had [Page 365] thought they might have been able to do all this by the end of this year or at the latest by the beginning of next year; but now due to the internal security problem, they have had to postpone these actions. Thai said that we should know how hard it is to start collecting taxes under the best of circumstances from people who have not been paying them. He concluded with the observation that with this new phase in Communist strategy in Viet-Nam, the Vietnamese Government must again delay its effort to reorganize its tax system until the situation becomes more stable.
At this point, Ambassador Tran Van Chuong arose and said that the group must go on to the next meeting in Mr. Peterson’s office2 and thanked Mr. Parsons for having received them.