3. Memorandum of a Conversation, Saigon, January 30, 19581
PARTICIPANTS
- Ambassador Elbridge Durbrow
- Ngo dinh Nhu
- Howard Elting, Jr.
Nhu opened the conversation by mentioning the visit of the Malayan Prime Minister2 which he said is going very well. He mentioned Rahman is thinking about some sort of military cooperation with Viet-Nam. This led to a discussion of the Chinese minority problem in Malaya, and from there to the question of the Chinese in Viet-Nam. Nhu said that around one hundred Chinese a day were now signing up for Vietnamese citizenship, and were even cueing [queuing] up to make their declarations. Moreover, it is not just the ones born in Viet-Nam but a certain number of the older element born abroad who are coming around.
The conversation turned to the proposed new Chinese textile factory and the question of its control. Nhu said that there was basic legislation which permits the GVN, if it so desires in the public interest, to buy 51 percent control in any enterprise, but he added immediately that the Government had neither the money nor the trained personnel to implement full state control. (He was very explicit in saying there was only one Vietnamese businessman in the true sense of the word in this country. This is the man who runs the [Page 6] Lambretta Company. All the rest who have borrowed money to go into business, think only of getting themselves a large villa, an air-conditioned office, a Cadillac, and a wife as quickly as possible, and consequently they promptly go bankrupt.) He added Vietnamese only think in terms of quick turnover and quick profits and will not invest money if they have to wait five years to get a return—hence Government must start enterprises. Moreover, he said there was not a single ministry of the Government who favored the system of state control as such. The 51 percent provision was purely theoretical, unless the company were acting against the public interest; it would certainly never be exercised by the Government in cases where there was already a going enterprise or in cases of an enterprise which was sufficiently attractive to bring into play private capital on a reasonably early return.
On the other hand, he said his own thesis was one which he described as a “mixed economy,” i.e., partly state and partly private control. He said it was necessary to delineate clearly the sectors for each, but he admitted that these sectors have not been identified. Nhu returned to this thesis of a mixed economy two or three times during the course of the conversation and seemed to be firmly convinced that it was “the third way,” i.e., not liberal capitalism nor communism.
The Ambassador raised the question of foreign investment, American investment in particular, and stated we were having difficulty in trying to set up the IDC as an instrument to encourage free enterprise. Nhu replied he did not believe that any American capital would be attracted to Viet-Nam since Americans only liked to invest in big ventures like oil exploitation. When the Ambassador and Mr. Elting pointed out examples of smaller American investments in European countries, Nhu said the same situation did not apply in the Afro-Asian countries. He made it clear that newly-independent countries feared liberal capitalism and the thought of foreigners running their industries so they were searching for something similar to his “third way”. He explained “mixed economy” in this way. Since there are now no entrepreneurs in Viet-Nam and little risk capital, it is necessary for the Government to “launch” those necessary enterprises which do not attract investors now by putting up 51 percent of the initial capital. Once the Government has shown the way by its investment, the other 49 percent would come from the public and the enterprise would start with Government technicians running it. These would train other technicians who in the end would run the plant in a few years, at which time the Government would sell its 51 percent to the public and a fully free enterprise concern would be created. Nhu added one did not have to fear about entrenched bureaucrats [Page 7] refusing to give up their jobs in the company since the Government did not want to be in business, but wanted to pull out as soon as possible. When that time came, the Government would order the bureaucrats to other jobs. Nhu explained that the best way for the Government to exercise its control would be through the National Bank, i.e., all the transactions of the enterprise would be subject to review by the Bank. He said this would enable the Government to watch an operation closely and intervene if necessary if the enterprise appeared to be working against the interests of the state.
Nhu explained the other countries of South and Southeast Asia have all shown great interest in this Vietnamese idea of “third way”. They have discussed it very openly and frankly and with no suspicion such as they might show in discussions with western countries. All of the countries of the area are groping for some way to avoid communism as well as western liberal capitalism, which latter doctrine they associate historically with colonialism.
He said neutralism of the Indian brand is an untenable doctrine on any logical grounds. For example, he said he had told the Indians that they were illogical in considering neutralism a way to gain time vis-à-vis the Soviets, since the latter will always be ahead of them and they would never be able to develop sufficient economic strength to stand up against the Soviets. If this were not the case, he told the Indians, why did they think the Soviets allowed them to go ahead with their gambit of neutralism. Surely the Soviets with their aim of world domination would have gobbled them up by now if they had any fears of the results of a neutralist policy which in the end might permit India, for instance, to become so strong economically they could effectively resist communist domination. Nhu added that the Vietnamese arguments from experience had been so telling that the Indians had been obliged to go on the defensive in trying to defend the concept of neutralism. He added that newly-independent countries could not make progress or resist communism solely by welfare state methods as Burma is trying. They must build a solid economic base by making the people work instead of living on a perpetual dole, which would only soften them for communist domination.
Expanding on the latter ideas, Nhu said that the explanation for the varying communist tactics in this area was that they had strong hopes of internal subversion in most of the countries of South and Southeast Asia and thus it would be in their interest to maintain the fiction of peaceful co-existence. In Vietnam, however, they recognized there was no hope for internal subversion and felt obliged to use force to try and destroy a government which was beginning to [Page 8] exert considerable influence and attraction in the area against the concept of neutralism as well as against communism.
In the context of the above, Nhu repeatedly suggested that the U.S. should adopt a more flexible attitude in the allocation and administration of aid to Viet-Nam because of the help that it can render in interpreting the U.S. to the other countries in the area and because of the special efforts the communists feel they must make to destroy the GVN as a force which is potentially capable of winning uncommitted countries away from both neutralism and communism. He did not suggest that this flexibility need go too far, but should be of such a nature to permit the GVN to take action which it believes best for the country even if a few mistakes are made in the process. In this connection he said that Bourguiba3 had expressed great interest in Viet-Nam and had indicated that Tunisia was taking advantage of Viet-Nam’s example. Bourguiba also expressed concern about the cumbersome procedures required in order to obtain aid from the U.S. Even the Syrian Ambassador in Tunis had made a point of telling the Vietnamese that Syria was not communist and had complained because the Vietnamese were not going to visit Syria.
Turning to the situation in Laos, Nhu said that the GVN had continued to urge the Lao to put up a united slate of the conservatives and “good” liberals in the coming elections.4 He said that Katay5 was the only one who was holding out on the grounds that the candidates could not be controlled and might leave their party and run as individuals or else have to be bought off. Nhu said he had told the Lao that they must have party discipline, and when they protested that they did not have the means to enforce it, he told them, “Of course you do. You have all the means possible at your disposal. Just throw a bomb into the house of one or two candidates and the problem will be solved.” (Nhu returned several times to the necessity of maintaining strict party discipline and made very clear that he favored using the most ruthless means if necessary in order to do so.)
When the Ambassador mentioned that Prince Savang6 did not have confidence in the police but did have in the Lao Army, Nhu said the Lao police are not under the control of the Government since it was set up by Katay with help of his Thai associate, General Phao,7 who had planted a number of his men who control the force. [Page 9] Here again, Nhu said he advised the Lao not to ignore the police, since then they would probably end up helping the communists, but rather to use them by giving them definite instructions, i.e., “Paragraph 1, the communist candidate in your district must be defeated; Paragraph 2, the conservative candidate must win.” If the police are used in this way they will be convinced that they must help the conservatives to win if they want to keep their jobs. If they are ignored, they would fear for their jobs and help the communists.
Nhu was also very specific about how to handle weak candidates he insisted must be forced to retire from the race. He said the Lao should not succumb to demands for a payoff in cash but should rely on intimidation plus the offer of posts to these men after the elections. He said the Lao were most naive about the seriousness of the communist threat. For example, he said they were confident of winning the elections and believed communists would not have adequate funds. At this point, Nhu said that he had information from what he considered to be a reliable source that the Russians had recently transmitted, from Bangkok, eight million kips to Souphanouvong.8 He added that the UK, the US and the GVN must therefore work closely together to make the conservative elements take the situation seriously.
Regarding Cambodia, Nhu said that Sihanouk was worried about Cambodia’s increasing isolation as Vietnamese relations improve with all the other countries of Southeast Asia, and this was the reason for Sihanouk’s recent anti-communist declaration. On the other hand, Nhu pointed out that Sihanouk had subsequently made a speech in the provinces which was favorable to the communists. Nhu remarked that Sihanouk is insane and unpredictable. When asked about the possibility of the GVN reaching an agreement with Cambodia on action against the dissident elements operating across the frontier, Nhu said that an effort had been made to reach an agreement on joint operations but the Cambodians, after first agreeing, raised objections as to who should control such operations. The Cambodians then suggested simultaneous operations, but nothing further has been heard about this. Nhu said he thought the Cambodians preferred to have the situation stay as it is because they think that this gives them a way to exert pressure on Viet-Nam. Nhu thought this was foolish, however, since once the GVN clears up the situation in Viet-Nam, these same elements will turn around and prey on the Cambodians.
- Source: Department of State, Central Files, 751G.00/2–1058. Confidential. Drafted by Durbrow and Elting. Sent to the Department of State under cover of despatch 289, February 10, which summarized the memorandum of conversation.↩
- The Tunku Abdul Rahman.↩
- Habib Bourguiba, President of Tunisia.↩
- Documentation on the Lao elections is scheduled for publication in a forthcoming volume of Foreign Relations.↩
- Katay Don Sasorith, Lao Minister of Interior, Economy and Welfare and former Prime Minister.↩
- Crown Prince Savang Vatthana of Laos.↩
- General Sriyanon Phao, former Thai Director-General of Police and Chief of Police Intelligence.↩
- Prince Souphanouvong, leader of the Pathet Lao and Minister of Plans, Reconstruction and Urban Affairs in the Lao Government.↩