Foreign Relations of the United States, 1958–1960, Vietnam, Volume I

56. Despatch From the Ambassador in Vietnam (Durbrow) to the Department of State¹

No. 279

Saigon, March 2, 1959.

REF

• Paris Despatch 1169 of December 31, 1958² and previous.

[Here follows a table of contents.]

SUBJECT

• The Can Lao

Introduction and Summary

This despatch is an attempt to describe the Can Lao Party of Viet-Nam (also referred to in earlier reports as the Parti Travaillist or Worker’s Party) which is the small semi-covert official party run by President Ngo dinh Diem and his brothers, Nhu and Can. While there is much speculation about the party, most of its activities are covert, especially those which are considered important…. However, it must be emphasized that it is extremely hard to obtain proven information on this jealously guarded organization which is highly nationalistic with the result that inquiries from foreigners immediately arouse suspicion.

The more important aspects of the despatch may be summarized as follows:

The ideology of the Can Lao Nhan–Vi Cach Mang Dang (the Party of the Worker and of Personalism) is called Personalism and is designed to attract mass support through a nationalist philosophy which will offer a positive answer to Communism. Its chief roots, not acknowledged by the leaders, are easily traceable to the French Catholic philosopher, Mounier, who used the same word. It seeks a balance between communist collectivism and old fashioned laissezfaire capitalism by taking the position that while the individual is the highest value in society, a personality can only develop properly in his human and economic context. It is used in the President’s community development program to teach the average Vietnamese the virtues of cooperation and taught to the higher Government functionaries as a means of making them aware of their responsibilities. It has come to have material connotations to the peasant in terms of a plot of his own. Personalism may be a sound, if unoriginal, beginning for an anti-communist philosophy, but it has not been developed sufficiently to offer much appeal to the average Vietnamese worker or to the Can Lao Party member. (See Despatch 213 of December 22, 1958,³ on Personalism.)

The Party was formed about 1950 by Nhu and others and by early 1954 it began to take on some importance as Diem’s return and assumption of power became imminent, an event for which Nhu and his group had worked hard. It was organized on a regional basis and, despite several attempts at unification, this is still its basic pattern. Nhu supervises the South from Saigon and Can dominates the Center from Hue. There are about 16,000 members divided pretty evenly between the two areas. Five out of fifteen Cabinet members and 71 out of 123 National Assembly men are known to be Can Lao members.

Nhu’s area is loosely administered and several factions and groupings are discernible. Probably the most important sub-group under Nhu is the one run by Dr. Tuyen, the head of SEPES, the national intelligence and counterespionage service which can, at Nhu’s direction, conduct clandestine political and propaganda activities for the Can Lao Party.

Can, in the Center, runs a very tight ship. No factions are discernible there.

Can Lao organization is based largely on the model of a Communist party, with cells, cadres, etc., and is also comparable to the Kuomintang. One of the Can Lao’s roles is to control the Government’s mass political party, National Revolutionary Movement (NRM) which Diem is now seeking to revitalize. Recently the Can Lao, acting through its Military Committee, has begun to recruit some key officers in the military establishment probably in order to establish a control mechanism within the only organization strong enough to challenge the Government. Certain tensions have resulted.

In order to obtain funds the Can Lao has increasingly engaged in dubious “business activities” which have injured its prestige and that of the Government. Fortunately, the President’s name is never involved, but gossip often points to Nhu and his wife. It appears that few important business transactions occur in Viet-Nam without some benefit to the Can Lao. Recent evidence which is quite reliable shows Can Lao involvement in the export of cassia (cinnamon bark) and duck feathers, both of which are important for Viet-Nam, in a deal involving a 65 million piaster import license for consumer goods from Hong Kong, in a contract with Aminol (American Independent Oil Company) for the import of petroleum products which, it is planned, will be distributed by a Can Lao controlled company, and in another contract for coastal shipping. None of these have involved the misuse of U.S. funds, but since it appears that the foreign exchange from these transactions does not revert to the national treasury, these transactions are detrimental to the over-all economic development of the country. On the other hand there is evidence of three cases where Can Lao money is being used for the benefit of the average Vietnamese.

The Can Lao’s chief weakness as an organization is that although designed on authoritarian lines, it has no one recognized leader. Nhu and Can act, generally separately, on behalf of the President who is usually more interested in other problems. This arrangement, however, evidently suits the President as a means of maintaining an equilibrium between the two brothers and prevents either from becoming too powerful. There is also evidence of poor organization at the local level even, to some extent, in Central Viet-Nam. This means that the Can Lao is not adequately doing the job of maintaining popular support and enthusiasm. The President has become aware of this and has recently inaugurated several measures to improve the situation. It is too early to judge their effectiveness.

In the future it is likely that the President will continue to maintain Nhu and Can in uneasy equilibrium. As for Diem himself there is no Constitutional reason why he should not stay on as President until the end of 1970 at which time he would be 69. (He was elected for a five year term in 1955 and may hold office for two additional five year terms.) An analysis of the political possibilities shows no group likely to offer a serious threat to his continuance in office except, potentially, the Army. This presupposes that he would not permit the Can Lao to interfere in the running of the military establishment to the point where serious resentment developed among military leaders.

To run an effective administration for such a long time the President will probably need to keep himself better informed from sources outside his own family and even outside the Can Lao. This would permit him to act more effectively in curbing the Can Lao’s growing taste for big money, in balancing the ambitions of his brothers and in permitting the expression of reasonable differences of opinion among Can Lao members while still retaining his own prestige.

The question of what might happen in the event of Diem’s death or incapacity will be treated in a later despatch.⁴

In the present political situation U.S. interests would appear to suggest the following:

1. To tactfully encourage the President to increase his sources of information;

2. To bring to the President’s attention any concrete evidence of the misuse of U.S. aid or of Can Lao activities which seriously weaken the Vietnamese economy;

3. If there is reliable evidence that the Can Lao’s activities are impairing the efficiency of the Vietnamese armed forces, U.S. views should be made known to the GVN authorities.⁵

[Here follows Section A, a 3 1/2-page discussion on the ideology of Personalism, the official dogma of the Can Lao Party. This subject is treated in more detail in Document 45.]

B. Organization and Membership

The origins of the Can Lao party are uncertain. Some early reports indicate the party started in 1950, and was, at that time, linked to the Tinh Than Spirit Group—a group of intellectuals who formed a strongly nationalistic but intellectually tolerant debating society and which claimed as members Dr. Tran Van Do, later Diem’s first foreign minister, Ngo dinh Luyen, Diem’s younger brother, Nguyen thanh Nguyen, a former Minister of Labor, and Ngo dinh Nhu. It was reportedly influenced by Father Parrell, a priest in Dalat. By 1952 Tranquoc Buu (now President of the Vietnamese Confederation of Christian Workers) had joined, a weekly paper Xa Hoi (Socialism) was being published in Saigon and meetings were occasionally being held in Hanoi, Haiphong, Hué, Saigon and Dalat. In 1953 this group founded the Workers and Peasants Party (Cong Nong Chanh Dang). Clearly, as the name implies, Nhu, Buu and their colleagues were interested in getting lower class support. Shortly thereafter Ngo dinh Can, Tran chanh Thanh (now Secretary of State for Information), and Tran trung Dung (now Deputy Secretary of State for Defense) joined the new party. In early 1954, it received its present name, The Party of the Worker and of Personalism. It was not well known at that time but it had a great potential asset in Ngo dinh Diem. The party’s role then was to act as an instrument of the Ngo Dinh family in working for Diem’s return. The atmosphere was potentially favorable since most Vietnamese patriots were discouraged and confused by the poor and often dishonest leadership which was offered them in those difficult times, and the absent Diem’s reputation for integrity and patriotism was well known. (See Embassy Despatch Number 17 of July 16, 1954⁶ for a very interesting contemporary description of the situation.) Although Diem was widely known by reputation, his followers, including his brothers were not. Diem’s return to Saigon as Prime Minister designate on June 25, 1954, marked the party’s first success and its early acquisition of real power under Diem is indicated by the fact that within a few months the competition for influence between the three brothers Nhu, Can and Luyen had commenced. By 1955 some members, notably Tran van Do and Nguyen Thanh Nguyen, became sympathetic to the Binh Xuyen, and were pushed out of the Can Lao. The majority of members, however, continued to support Diem ….

The formal organization of the Can Lao, according to fairly reliable information, dates back to 8 August 1954 at which time the party published a brochure (not now available) for members outlining its objective of organizing a small hard core cadre to support Diem and to control and direct the government and all other organized movements and fronts by infiltration into positions of responsibility. Reports reflect that at that time, the Party was organized into three regions, North, Center and South. A Central Committee composed of the individuals cited above, was envisaged, but never took effective control. The Northern representation was merged with South and the two regions remaining, the Center and South, began their respective recruiting campaigns, setting up their own separate requirements with little reference to the Central Committee. Ngo dinh Can ran the party in the Center, organizing the cells and the sectors as he saw fit—while Ngo dinh Nhu administered the South. By late 1956, a concerted effort was made by the party to achieve national unity. The plan which was drawn up by Nhu and presented to Can was to go into effect in January 1957. The organization called for Nhu as national chairman, with five departments responsible for party activities in a staff capacity (Administration; Information and Security; Organization; Finance; and Propaganda and Training). Subordinate to the National Chairman and his five departments, were six regional sectors, four in South Viet-Nam and two in the Center. The top echelon jobs and the Central Committee itself (composed of the chairman, department heads and the regional secretaries) were to be heavily weighted on the Southern Vietnamese side and Can was to be relegated a comparatively minor position. The plan never went into effect, although on paper, this central organization still stands insofar as the Southern faction is concerned. In late 1957, Ngo dinh Can set forth his proposed structure for a National Can Lao party which proposed Can as Secretary General and Nhu as National Chairman. It is understood that Nhu considered calling a party Congress to work out a central organization but that a sampling of opinion led him to postpone this on the grounds that there were too many party factions many of which opposed him.

Meantime, between proposal and counter-proposal, the two factions headed by the two brothers continue operating on their own. Nhu appears to operate by letting subordinate factions compete while keeping a tight hand on all important government jobs, which he doles out. Can is a detail and organization man who permits no factions. Membership in Can Lao of South Viet-Nam under Nhu does not necessarily bring privileges…; under Can it usually does.

The Can Lao statutes (enclosed⁷) were written in 1955 and although they remain to some extent theoretical, particularly in the South, they show certain important and valid characteristics of the Party as it exists today:

1. The statutes provide that “for the present” the party will be maintained on a regional basis. It begins to look as though this is more than a temporary arrangement.

2. Article 32 states “Secrecy should be observed in order to protect the assets of the Party.” It is known that nine deputies of the National Assembly are overtly Can Lao members and the Administrative Bureau under Pham van Nhu is not hidden; the rest of the organization is supposedly secret. While the Can Lao is primarily a secret organization, the National Revolutionary Movement (NRM) serves as the Can Lao overt popular front organization. Now that the NRM and the Citizens Rally (CR) have joined (Emb Despatches 410 of May 10, 1958 and 38 of August 2, 1958⁸), the NRM is in fact the only important overt political movement in Viet-Nam. There are signs that the President wishes to revitalize it and make it a political party rather than a loose, mass movement. The President told the Ambassador on September 24th that the NRM in the South was to be reorganized so that it could control and improve the organization of the Self Defense Corps. On October 10 Diem expressed gratification that the NRM in the South had recently been most effective in recruiting young men and organizing the Self Defense Corps so that now it is becoming a very effective anti-Communist organization but it is operating on the same lines as the Self Defense Corps in Central Viet-Nam. The Self Defense Corps in the South, Diem continued, is presently seeking out Communist cadres by ambushes and other methods which have brought about improvement in the security situation in the Camau Peninsula. (Embdes 109 of 10/15/58⁹). Also a prominent member of the NRM Mr. Truong Vinh Le, Second Vice President of the National Assembly, has been designated to travel widely in the provinces in order to strengthen the local organization of the party (Embdes No. 49 of August 9, 1958¹⁰). These overt actions by the NRM in the South must reflect some tightening up of the covert Can Lao in the South, since the latter controls the former.

3. The statutes also provide that the Party shall be organized at seven levels running from cells, through sections, village or arrondissement branches, circumscription or district branches, provincial or city branches, and zone branches, up to the Central Organization and that at each level there shall be an Executive Committee. This appears to have been followed under Can’s leadership in the Center, but in the South the Central Organization often deals directly with the cells and there is little real organization between the top and the bottom levels.

4. In addition to the Central Permanent Committee at the top which is to be under a Secretary General, the statutes also call for four Technical Departments: Organization and Supervisory, Economic and Financial, Propaganda and Training, and Study and Planning. There is evidence that Nhu followed this organization pattern at the top level fairly closely (see below); Can’s arrangements appear to be more centralized in his own hands.

I Organization and Membership In Central Viet-Nam

The Embassy has the following information which is believed to be fairly accurate, on Can’s organization, henceforth described as the CVN Can Lao.

The CVN Can Lao is a semi-covert elite group controlled by Can and his Advisory Directorate, a body which in addition to its Can Lao function, maintains direct liaison with all other recognized political groups in this area.

Can’s principal deputy is Ha thuc Luyen, Chief of the Thua Thien Province. Other important members are: Nguyen dinh Can, head of Accounts and Budget Staff of the Ministry of Defense, Father Cao van Luan, Rector of the University of Hue, and Nguyen van Dong, Chief of Quang Tri Province.

The CVN Can Lao organization is broken down into three regions, plus a Special Liaison Bureau dealing with the South. The regional bureaus, the Special Liaison Bureau, as well as the Headquarters for the CVN, are all run by committees which have a Secretary General, a Deputy Secretary General, a Treasurer and four other members. Further down, there are groups at the provincial level (containing seven members), below them groups at the canton level and finally at the lowest level, village and district groups having three members each.

As provided in the statutes, all committee members hold office for one year.

In addition to the above, there are special groups attached directly to Headquarters. Thus Luyen, Can’s No. 2 man, is in charge of Security and Intelligence. He also keeps an eye on Organization. Finance and Economics are under Nguyen van Buu who is himself a businessman (see below “Business Activities”).

It is estimated that there are 8,000 members of the Can Lao in the CVN.

II. Organization and Membership In South Viet-Nam

Can and Nhu agreed in late 1957 to abolish the then existing and rather inefficient structure of the SVN Can Lao in anticipation of Can’s visit to Saigon. The visit never took place and nothing has yet been done. Since then the organization has split into several groups. The SVN Can Lao has been described fairly reliably as “disorganized, uncoordinated and with the exception of a few individuals, without life.”

Due to disorganization in the South, the following breakdown is made on the basis of the individuals involved rather than on their party jobs. It is based primarily on… reports of fair reliability. The interaction of groups and personalities in the South is very complex. This breakdown gives first, personalities and their followers and second, their official jobs.

1. Secretary General Nhu—Since Nhu tends to play other members off to retain his control, it is hard to say specifically which other members are closest to him. In general, the party is run primarily by Nhu for the President.

2. Dr. Tran kirn Tuyen, former private secretary of Nhu, acts largely as Nhu’s executive arm in Can Lao affairs in the South. He is the head of the Service des Etudes Politiques et Sociales (SEPES) which he uses at Nhu’s discretion for party purposes both at home and abroad. Tuyen was recently promoted to be Chief of SEPES though in fact he has run it for Nhu for some time. He is reported to have about 75 close followers and about 350–400 supporters, some of whom are in SEPES and some of whom are in the Police and Sûreté. SEPES as run by Tuyen is a national organization primarily devoted to covert intelligence, which carries on political surveillance both within the Can Lao and outside as requested by Nhu and which conducts and supervises clandestine political and propaganda activities on behalf of the Can Lao and the government. Among its many clandestine activities it provides a certain amount of funds to the leaders of the weak and divided Vietnamese Socialist Party. Overtly SEPES produces political and social studies and sometimes bright young Vietnamese who might drift into the opposition are retained by SEPES for such work. However, SEPES’ overt activities are of relatively little importance. Dr. Tuyen and his group watch the other groups and also devote a good deal of attention to the General Headquarters of the National Police and Sûreté. Dr. Tuyen’s SEPES organization is supposed to have some regional divisions, but there is little evidence of their activities.

Tuyen is also in charge of the Training and Indoctrination Bureau of the party… and reportedly runs the Party’s Intelligence and Security Bureau ostensibly headed by Vo Nhu Nguyen. This indoctrination evidently emphasized the importance of obtaining positive support for government policies and of engendering deep respect for President Diem. The rest of the indoctrination course appears to be somewhat thin.

Dr. Tuyen supervises the official newspaper, Cach Mang Quoc Gia, which had a reputation for being boring and which is now being reorganized. He also reportedly exercises on Nhu’s behalf, considerable influence over the important newspaper Tu Do.

3. The Huynh van Lang group has about 18 active and 200 lukewarm members with headquarters at 140, rue Paul Blanchy (a very modest house). This group is strong in banking and financial circles. According to a report of fair reliability… Huynh van Lang is becoming increasingly critical of the President and Nhu. Lang was originally given the job of organizing the party following in the South and is the type of man who inspires loyalty. In addition to heading his own group Lang is in charge of the SVN Can Lao Finance Bureau and has the overt job of heading the Office des Changes, which controls foreign exchange.

4. The Tran Van Trai—Ha duc Minh group has about 100 followers in the Saigon area with heavy emphasis on businessmen who hope to make a good thing of their Can Lao connections. Trai (see Page 18¹¹) is considered an opportunist strongly opposed to Lang (above) and a rival of Tran kim Tuyen (above).

5. The Le van Dong and Tran Quoc Buu group. The former, whose wife is Madame Nhu’s aunt, is the Secretary of Agriculture and the latter is one of the founders of the party and is now President of the Vietnamese Confederation of Christian Workers (CVTC). Dong and Buu are “Nhu” men. This group has about 700 supporters and comes closest to being a grass-roots organization and having some provincial set-up. It attracts few intellectuals. It is able to obtain some intelligence from labor organizations and is regarded as valuable. Lang (see above) suspects that it is infiltrated by Communists.

Le van Dong also heads the Organization Bureau with Thai manh Tin as assistant. This is considered one of the few components attempting to do its job properly. It is in direct contact with cell leaders, i.e., the lowest level and is trying to set up a card file for each member. As of April 1958 it listed 286 cells but it was only in contact with 126 of which 57 were in the Saigon-Cholon area.

6. Pham van Nhu, President of the National Assembly, is in charge of the Administrative Bureau, one of the only overt parts of the Can Lao. It supposedly has offices at 23 rue Miche (this building is now being constructed). Nhu is not considered to be a strong character and was apparently put in his job by the President’s brother, Ngo dinh Nhu, because he had the confidence of Can and is acceptable to deputies from the South.

7. The Military Committee is under the direction of Colonel Nguyen Van Chau, Director of Psychological Warfare, who also is reported to be involved in clandestine political activities. He is known as a forceful young officer who thinks and acts primarily along political lines. Major Pham thu Duong, Nhu’s Chief of Cabinet, also has a great deal of influence in the Military Committee. The files of military officers which are presented for Nhu’s review by the Vietnamese national army pass through Duong’s hands. Duong is also assigned to liaison with Dr. Tuyen. Another important member of the Military Committee is Major Nguyen than Toai, as Chief of Special Studies and Research of Psychological Warfare, he is also reportedly in charge of a counterespionage unit which conducts security investigations of army officers, and passes on the applications of army officers who wish to become members of the Can Lao.

In general it can still be said that the Can Lao is dominated by civilians and that the military role is secondary. If the Can Lao is not at present dominated by the military, the Embassy… receive indications that the military are increasingly under the influence of the Can Lao. (See below The Military Establishment and the Can Lao p. 24.¹²)

It is estimated that there are 8,000 members of the Can Lao in the South.

Near the top level, Viet-Nam’s fifteen man Cabinet has five members who are also known members of the Can Lao: Nguyen dinh Thuan, Secretary to the Presidency, Tran Le Quang, Secretary of Public Works, Tran trung Dung, Deputy Secretary of Defense, Le van Dong, Secretary of Agriculture, Tran chanh Thanh, Secretary of Information and Youth, and Lam le Trinh, Secretary of the Interior.

Thus membership does not appear to be an absolutely necessary requirement to holding important jobs. However, the jobs held by the five known members are key posts and it is quite possible that there are other Can Lao members in the Cabinet. Aside from the President, his brothers, and Tran quoc Buu, President of the CVTC, Thanh and Dung are the only original Can Lao members who are still prominent in the regime. We do not have much information on the size of Thanh’s personal following but he appears to be popular.¹³ In fact popularity and his ability as an orator have probably caused him to be regarded with some reserve by Can and Nhu. It is understood that he has recently encouraged the newspaper Dan Chung to attack the paper Tu Do which is under the supervision of Nhu’s man, Tuyen. It is believed that Thanh dislikes Nhu, is disliked by Mrs. Nhu and Can, and is kept in his position due to the influence of the President. Dung is married to the President’s niece and the President and Nhu seem to regard him fondly as a junior member of their family. Most members of the Government apparently have respect and affection for him. Trinh was named to the Cabinet on February 26, 1958, and apparently became a Can Lao member in May. He is considered closer to Nhu than to Can. Thuan is young, has a forceful personality and is well thought of by the President.

The National Assembly with a total of 123 deputies has 9 overt Can Lao Members and 62 covert members. Thus a majority (71) of the members are Can Lao.

III. Comment

It will be seen that the Can Lao, like the Kuomintang, has created an authoritarian organization largely modelled on Communist lines.

There are many similarities between the theoretical and actual organization of the Can Lao and of the Kuomintang (KMT). Both are designed to be highly centralized in organization, with the inspiration deriving in both cases largely from Communist principles of “democratic centralization” which gives full powers to the party leaders. This theoretical organizational method and party discipline have been modified in both Nationalist China and in Viet-Nam by personal relationships between leaders, who have ties of family relationship or provinces of common origin. This draws them together in a way which transcends party lines. On the other hand, personal feuds or different local interests break down central control by party leaders. Diem and Chiang do not strongly oppose these family and regional influences and tend to rely on and to tolerate errors by their relatives. Thus, in practice both organizations are far less centralized than they are supposed to be. Also, Ngo dinh Can’s fief in Central Viet-Nam had its predecessors among the regional political bosses who succeeded the war lords in Nationalist China.

In both systems, the parties have been made up in many ways of cliques and factions bound together by personal ties of followers to leaders who reward and discipline members on a highly subjective basis. These leaders, many of whom have opposing interests, are bound together by their loyalty to the party leader-chief of state; and he in turn is forced often to arbitrate their differences to maintain order and achieve progress.

Financial practices of both parties are similar; both use governmental power to grant faithful followers economic privileges in exchange for political support and financial kickbacks to the party treasury, which is closely controlled by top leaders. It is probable that a considerable amount of kickbacks are used for irregular or clandestine political activity.

The intelligence services of both parties are similar; Dr. Tran kim Tuyen combines in one organization the governmental intelligence service, foreign and domestic, and a Can Lao secret police [which?] exerts considerable influence over the Police and the Sûreté. The parallel with the Chinese Nationalist intelligence organization as established by Tai Li is close.

Although the Can Lao leaders, unlike the KMT chiefs, have not formalized as a concept the idea that they are exerting virtually unchecked their power for a period of tutelage of the population, untrained in democratic ways, it is clear that they feel it is their responsibility as an intellectual elite to lead the ignorant masses and to create conditions of stability which will provide the foundation for the eventual establishment of a democratic base for the government.

According to a recent… report, the President is also anxious to copy the KMT method of controlling the rural population on Taiwan by establishing NRM organized farmers associations. (This passage on the KMT was prepared by J. T. Rousseau.)

C. Business Activities

No aspect of the Can Lao’s activities are better centralized than what its statutes describe as “business activities”. Articles 30 and 31 of the statutes say that the policy concerning business activities is to be determined by the Central Financial and Economic Committee and that income from business is to be transferred to the “Central Organization.” This appears to be true.

I. General Considerations and South Viet-Nam

The information submitted below has been obtained by the Embassy… and describes a number of cases each of which was obtained from at least two reliable sources. It is submitted as illustrative of Can Lao activities. Before going into detail, it can be stated generally that the Can Lao apparently has deposits or commercial assets overseas in Brazil, Canada, France and the U.S.

The Consulate in Hue has stated that the Can Lao controls every economic activity of any significance in Central Viet-Nam and… in Saigon doubts if any large scale financial transaction or business activity can be consummated in any part of Viet-Nam without some segment of the Can Lao obtaining a profit. Most of these operations are probably to a considerable degree under the control of Nhu and Can. The Embassy does not have information as to how much of the proceeds are used for the Can Lao as a party and how much for the benefit of individual members. There is, however, little evidence of personal financial ostentation by party members in the South. Probably any such display would come to the unfavorable attention of President Diem. It is also probable that the party spends a good deal of money on its activities and finally that some of it is banked overseas, ostensibly for the party’s benefit and is thus not visible in Viet-Nam. Some of the party funds undoubtedly stick to the fingers of the members, but due to the centralized control of the major “business activities” it is unlikely that the majority of the Can Lao members in the South are making much money out of their affiliation. Presumably the big money is handled at the top. Certainly, Saigon is filled with rumors of the financial activities of Ngo dinh Nhu and especially his wife. True or not, these rumors are harmful to the regime’s prestige.¹⁴

1. The Villahermosa Case

In September 1957 Don Paolo Manca di Villahermosa, an Italian industrialist with good credentials, came to Saigon as a representative of the Union des Banques Suisses to submit an offer to the Vietnamese government to finance the construction and operation of 6 sugar mills with a total capacity of 30,000 tons, to be capitalized at $4 million. Mr. Villahermosa reported to USOM that in his meeting with Ngo dinh Nhu, the latter offered him a 20 year monopoly and suggested that $500,000 be deposited in Switzerland for “a political party.” Villahermosa refused.

2. Export Licenses

A recent case involved the sale by an agent acting for Dr. Tuyen (p. 12¹⁵) of an export license for duck feathers for 10 million piasters. Viet-Nam has in the past exported about 1,000 tons of duck feathers annually. This constitutes the country’s third most valuable export and it could be substantially increased. In early 1958 the world market was high, about a dollar a pound. It was at that time that a Chinese merchant obtained the license in question from Dr. Tuyen’s agent for the export of 400 tons of feathers with no requirement for the deposit of foreign exchange. The Chinese merchant is reported to have stated that the money was needed by Dr. Tuyen for “a special political party” and to pay off “secret police.” Later, Minister of Finance Ha van Vuong, during a conversation with an Embassy Officer laughingly referred to Tuyen as a “feather merchant.” Duck feathers may no longer be a profitable export for the Can Lao if reports of Chicom duck feather dumping in Hong Kong and Europe are substantiated.

If the sale of the 400 tons of duck feathers in question had been handled through the official mechanism it would have resulted in increased foreign exchange resources for the GVN and export tax going to the national treasury.

Recently Can Lao agents apparently offered to sell eight licenses for the export of rubber to Chinese merchants. The Chinese refused since world prices were not unduly high and also because they felt it would be too difficult to hide such a deal in a well known commodity (as opposed to duck feathers), especially considering French interest in and knowledge of the local market.

3. Paracel Islands

It is reliably understood that in late 1957 Nhu authorized Tran van Trai (see p. 13¹⁶) to manage the exploitation of the extensive phosphate deposits on the Paracel Islands (16° 30’–114° E), with the profits to go to the NRM (Can Lao Party front). Although Trai had no capital, he managed to make a profit without selling a pound of Paracel phosphates. He did this by applying for a license to import consumer goods from Hong Kong in anticipation of the profits which would result if the phosphates were exported to Hong Kong. This import license in the amount of 65 million piasters was granted to Trai in response to pressure from Nhu on the grounds that these imports would be paid for by the sale of phosphates and ostensibly to meet demands for consumer goods during the Vietnamese New Year (Tet) holiday season. Thereupon Trai sold shares of the 65 million piaster license to Chinese importers at prices which gave him a 20 piaster commission for each U.S. dollar equivalent. The Chinese importers then went on the black market to obtain U.S. dollars needed to buy the goods from Hong Kong. This drove up the black market dollar rate.

Thus without actually selling any phosphate or himself importing any goods, Trai amassed a tidy sum for the Party. His actions also had the effects of driving up the black market dollar rate contrary to National Bank’s policy of attempting to reduce the gap between the free and black market dollar rates and of causing a glut on the consumer goods market at Tet time which did not help Vietnamese retailers.

4. The Embassy Club

In early 1957 the Embassy learned that … an American citizen with a bad reputation, was planning to open a “private club” to be known as the Embassy Club…. attempted to give the impression that this club had the blessing of this Embassy and that membership would be limited to diplomats in Viet-Nam. The Ambassador made it clear to those concerned that the Embassy was in no way involved with the club. After a brief existence, during which time it was patronized by very few diplomats, it closed its doors. It is understood that Dr. Tuyen, the Party’s and Government’s watchdog for covert intelligence matters, was the man behind this club and that presumably he wished to use it as a place where the Can Lao might operate a profitable establishment and obtain intelligence from diplomats.

5. Vietnamese Oil Company

It was learned late in 1957… that the Can Lao was seeking ways of forming a Vietnamese oil company which would import petroleum products and market them locally. Negotiations with the Gulf Oil Company fell through, but Nguyen van Buu, a wealthy operator from Hue who is Ngo dinh Can’s financial advisor (see following section on Central Viet-Nam) has now signed a contract with representatives of the American Independent Oil Company (Embassy Despatch 119 of September 26, 1958¹⁷). The contract, it is understood, is for five years renewable for five additional years and calls for the delivery of all types of petroleum products to be delivered to tank storage facilities in Saigon.

It is understood that Buu has already leased property on which to construct tanks for storage and that a tank farm costing about $1 million will be constructed. Present plans call for the construction of a $12 million refinery at the end of two years. Aminol’s representative is to supply advisory service for retail operations.¹⁸ In this connection it is also reported that Mr. Buu has bought or rented 40 locations in Saigon suitable for gas stations and hopes to build up within a year or two a volume of business equal to a quarter of the present total demand of about 400,000 metric tons annually. This would be in competition with the present distributors—Caltex, Stanvac and Shell.

There is an unconfirmed rumor that Buu has asked that the oil supplier’s representatives pay him $250,000 per year, such a sum to be deposited in a designated Swiss or U.S. Bank.

Another possible aspect of Can Lao interest in the distribution of oil products in Viet-Nam came to light on October 29 when the local Caltex manager informed the Director of USOM that he had received an offer to buy a 51% interest in the local Caltex operation in return for a Government guarantee that Caltex would have 40% of the local market in 1959, 50% in 1960 and 60% in 1961. The Manager said the offer was unsigned, but it had been given to him by a Vietnamese whose card identified him as advisor on Asian affairs to the President of the Republic. The Caltex Manager, who believed that the offer had been made by Nhu on behalf of “the Party,” said that he did not intend to pursue the matter.

6. The Can Lao Investment Committee

Apparently the Can Lao’s affairs have become so multifarious that a small committee has been formed under the chairmanship of Nguyen van Buu with a capitalization of 100 million piasters for the investments of the Can Lao.

II. Central Viet-Nam

In Central Viet-Nam, as stated above, it is reported that the Can Lao controls every economic activity of any significance, including cassia exports. Can’s private affairs and those of the Can Lao CVN appear to be handled by Nguyen van Buu. In Hue, Mr. Buu is associated with the President’s sister Madame Ca Le and Ton that Huon, a businessman. In Tourane, Mr. Buu is associated with a Mr. Nguyen van Ban, possibly a nephew of Can’s.

1. Cassia (Cinnamon Bark)

Prior to World War II Indochina had a flourishing export trade in cassia. In 1930, for example, 771.3 metric tons were exported, most of which came from the area now within the territorial limits of Free Viet-Nam. This trade has been revived since the war and by 1957 it became evident that it was being used as a source of revenue by Can (Embassy Despatch No. 138 of October 23, 1957¹⁹). It is also clear that Vietnamese exporters under-invoiced their shipments by approximately 40% during the past shipping season. The Embassy understands that the undeclared dollar balances were deposited in American banks and that in addition direct kickbacks were made to Can to the value of about 10 piasters per kilo. Business is carried on mainly by Nguyen van Buu who until recently worked with Nguyen dinh Quat. Mr. Buu has justified his under-invoicing to Embassy officers on the grounds that he needed to keep a reserve fund in America to cover losses on shipments of cassia which arrived in New York in damaged condition. He said that Vice President Tho had complained of the low prices which he was declaring on his invoices. On another occasion in January 1958 Buu informed Consul Barbour in Hue that he had recently opened a checking account with the First National City Bank in New York in his own name with an initial deposit of $2,000 made on December 4, 1957, through his agent at the Marine Clearing House. The Embassy understands that the Marine Clearing House (11 Broadway, New York, 4, N.Y.) has been the principal outlet for Vietnamese cassia exports to the U.S. It is also understood that the Vietnamese cassia exports to the U.S. have been held back in the hope that prices would go higher.

The Embassy… learned from two sources… that as of November 1957 Can’s cassia monopoly had already netted $1.5 million which was on deposit in the First National City Bank of New York … . The Embassy understands that in the two years ending December 1957 Viet-Nam exported about 450 tons of cassia to the U.S.

It is reported that on a recent cassia export Buu was issued a license for 500 tons in the U.S. at $260 per metric ton FOB Saigon. Allowing for freight charges of 15 cents per pound, this price would appear to be less than half the sales price on the New York market.

2. Nguyen van Buu’s Ships

Buu has recently purchased three ships for which the foreign exchange was provided by USOM’s commercial import program, under an arrangement which met all U.S. requirements and which was perfectly legal. Two of these, the former M/SDrava and the former M/SVardar, are sister ships of 607.31 gross tonnage destined for use in the coastal trade between Saigon and Tourane. The third ship, the Nhut-Le,²⁰ a vessel of 1400 dead-weight metric tons which was constructed in Trieste arrived in Saigon recently. The deal was handled through a firm called EURASIA (Icato Circular, A–71, 9 January 1958).²¹ The total cost of the ships was about $1 million. On December 1st Buu held a reception aboard the Nhut-Le. Buu now plans to purchase four small ships for which ICA funds have been provided.

Buu is acting through EURASIA, in which he is reported to have an interest, and on behalf of the Can Lao. The ships have been purchased without any infraction of U.S. laws or regulations under the commercial import program (Icato 876, January 8 and previous).²² USOM has made a routine end-use audit. Evidently the commission obtained by Buu and EURASIA was 10%, amounting to about $100,000, a legitimate broker’s fee in Viet-Nam. The fact that the ships were probably purchased for the Can Lao does not in itself constitute a misuse of U.S. funds.

The three ships now in operation probably have the capacity between them to carry all Viet-Nam’s coastal cargoes (mostly rice). This will be profitable for the Can Lao and it will probably mean that the seven small French and Chinese owned vessels now operating along the Vietnamese coast will be squeezed out. When the four additional ships which Buu has ordered arrive, his company will also be able to carry an increasing share of the trade between Saigon and Singapore, Hong Kong and the Philippines. Buu’s ships are already carrying Dalat vegetables to Singapore.

III. Aid To The Average Vietnamese

There is evidence from our Consulate at Hue that some Can Lao money is being used for the benefit of the ordinary Vietnamese. There are three agricultural development centers in Central Viet-Nam which are said to be partially financed by party funds. One center is at Hoa My, approximately forty kilometers north of Hue and the other at Cua about thirty kilometers northwest of Quang Tri and a few kilometers south of National Route 9 leading to the Laotian border. These two centers are situated on land which was previously undeveloped and which has only during the past two years been opened for settlement with the construction of access roads.

Settlers are recruited from crowded villages nearer the coast and each family is given a house and a plot of ground. Rice is grown in some places, but as the land is generally higher than that which has been traditionally farmed on the coastal plains, other crops such as dry rice, manioc, tea, coffee and fruit trees have also been planted. Although exact figures are not available there are believed to be somewhat less than 5,000 people in each settlement.

Ngo dinh Can is personally very interested in these centers and maintains a house at Hoa My which he is said to visit at regular intervals. The financing comes partly from the provincial budgets of Thua Thien and Quang Tri, peasants “donate” labor by accepting half pay for community development type work in the settlements, and as stated previously, other funds are said to come from the party. Thus, two constructive projects aided by the party have been turned up by our Consul in Hue. There may be more.

It is understood that a third such center at Cua, Quang Tri Province, has recently been opened and that its prospects are better than the other two due to the fine quality of the soil in the area. This information was supplied by an officer of the Consulate at Hue.

D. The Military Establishment and the Can Lao

It is apparently considered desirable for the President and his brothers to establish party control and discipline over some key officers in the armed forces, particularly in the Army which is the only single force potentially powerful enough to overthrow the regime.

As of March 1957… began to receive indications that the Can Lao, presumably acting through its Military Committee (see p. 14²³), was beginning to extend its influence into ARVN. By early 1958 it was reported that Nhu and Can were in agreement on the necessity of keeping a tight, centralized Can Lao apparatus within the Army. However, the composition of the Military Committee shows that Can has more followers on it than Nhu.

Rumors of discontent within the Vietnamese armed forces became current in September and October 1958 … . These rumors have been carefully weighed by the Country Team and the following conclusions can be drawn:

1. There were rumors that officers trained in the United States were being shunted about or passed over. It should be pointed out that about a year ago President Diem decided to send most of his general officers and many field grade officers to schools in the United States. The fact that Diem has sent groups of high ranking officers twice a year to the States (six left on December 7th) has in itself caused many changes in the high command which would be a basis for rumors. Some of the officers have been disappointed when, upon returning from the States, they were not given commands, but training and inspection assignments. However, they have been satisfied when it was explained to them that they were being put in positions where they could pass on what they had learned to other members of the armed forces and that a well rounded senior officer had to serve in many positions during his career. These have generally been cases where MAAG recommended that officers be put in training or inspection jobs upon their return from the States and senior MAAG officers have explained this to the officers involved.

A review of cases involving officers returning from the American training indicates that decisions on their new assignments do not appear to have been primarily based on political considerations involving the Can Lao.

2. There were rumors that General Officers were resigning. One General, Duong van Due, did resign during this period. Various reports have been received purportedly giving the reasons for the Due resignation. While Can Lao meddling may have entered the picture there were other known factors which influenced this decision.

3. There was much talk that officers were discontented because they felt promotions were being made on the basis of party loyalty rather than on seniority or merit.

It is the view of MAAG officers closely associated with the Vietnamese armed forces that the large majority of senior Vietnamese officers recently promoted were promoted because they were competent and that in many cases their promotion had been suggested by MAAG.

It is probably true that some officers do resent the Can Lao’s activities in the armed forces, but it is not believed that the morale or efficiency of the Vietnamese armed forces has been significantly impaired. There is no conclusive evidence that the potential of the GVN armed forces has been affected. There are no known cases of recent promotions being given to clearly incompetent officers with political connections. Recent promotions seem generally to have been deserved. Some of the officers promoted may have been both deserving and members of the Can Lao. Rumors that certain officers have been promoted too rapidly must be weighed against the facts that Viet-Nam is a four year old country which started with very few senior officers and which faces a communist army of at least double its own size on its northern frontier.

Nevertheless, there is certainly a possibility that Can Lao activities may cause increasing resentment among officers of the Vietnamese armed forces. The Embassy will continue to follow the question closely.

E. Present and Future Problems

The Can Lao has no one leader. It is set up to be run as an authoritarian organization, but authority is actually divided between the President, Nhu and Can. Although Diem could exercise full authority, he devotes his chief attention to security and economic problems. However, he is understandably unwilling to grant complete authority to any one else to run the Can Lao. Nhu is best placed to run the party for the President, but does not have complete authority from the President and certainly his writ does not run to Hue which is under the tight hand of Can. Nhu’s administration of the Southern division of the party has not produced a tight organization.

Inefficiency in overall party organization has probably contributed to the fact that the party in the South is not well organized at the local level, has little spirit, and is not an effective vehicle for putting across the party line to the people. The President now seems aware that it is weak at the local level in the South. This probably is the main reason for the unification of the NRM and the Citizens Rally, for the decision to use more of Can’s men and methods in the South, for sending Truong vinh Le, Vice President of the National Assembly, on repeated trips to the provinces and for tightening up the Self-Defense Corps in the South through the NRM.

In Central Viet-Nam Can runs his organization effectively. His prestige is enhanced by his being related to the President and by the fact that he keeps very much to himself and has built up a legend which keeps the Central Vietnamese in awe of him. Persons who know him, even those who are opposed to him, feel that although eccentric and withdrawn, in dealing with party matters he is well informed and decisive. But since the center of political power is in Saigon, Can could not run a nationally organized Can Lao from Hue.

Thus the Can Lao has not been run by one person and this situation seems likely to continue.

The following survey of recent events illustrates the present tensions and frictions within the party, primarily between the Can and Nhu factions.

By February 1958 there was evidence that Can’s agents were becoming more active in Saigon. In March 1958 a local USIS employee who was originally from Hue was arrested in Saigon, apparently by Can’s agents. (See Embtel 1958 of March 24, 1958²⁴ and previous). There were also rumors that Can himself would come to Saigon to reorganize the party. Second-level party and Government leaders in Saigon became worried about Can’s coming and applying his stringent security methods.

These tensions had apparently not died down in April, when it was reported that Can had called in deputies from the Center and told them openly of his differences with his brother, Nhu, namely: 1) Can deplored the fact that the revolutionary spirit was lost in the South; 2) did not agree that a one-party system should exist in Viet-Nam;²⁵ 3) felt that the National Assembly had lost touch with the people; 4) that the government was not handling the youth problem properly; 5) opposed Madame Nhu and the Family Bill; 6) said that Nhu had not organized the party in the South properly, had not shown leadership, had failed to instill discipline and had not taken into consideration the aspirations of the people. Can’s complaints about lack of organization in the South are apparently bearing fruit since, as stated above, the President told Ambassador Durbrow on September 28 and October 10 that the NRM (and presumably the Can Lao) is now being reorganized in the South along lines followed in Central Viet-Nam. Although Can has not come to Saigon, there are current reports that his men are still making arrests of Communists and commie sympathizers in the South.

On January 10 and 11 four French citizens of Vietnamese origin, one a minor employee of the French Embassy and another a minor employee of the French Consulate General, were arrested. The GVN indicated to the French Ambassador that these men had been engaged in espionage. The French officials brought this to the attention of the Saigon Police Chief, the Secretary for Foreign Affairs and the President. An informal investigation by the French revealed that the persons who made the arrests spoke with the accent of Central Viet-Nam and that the persons arrested had all lived in Hue prior to 1955 (Embdes 253 of February 3, 1959²⁶). Prior to 1955 they had worked for the French Sûreté but according to the French, their connections with the French intelligence services had been severed when Viet-Nam became independent.

It is believed that there is an informal arrangement whereby Tuyen allows a certain number of Can’s agents to operate freely in the South, in return for which Tuyen’s agents are permitted to work in the Center for the purpose of obtaining intelligence on North Viet-Nam.

Although the number of Can’s men in the South is thus increasing, and their influence is apparently growing… Can has not, so far as the Embassy can verify, been to Saigon for at least 18 months. However, he is apparently still willing and perhaps anxious to come to South Viet-Nam to help organize the Can Lao here as indicated by a fairly reliable report … of a Can Lao conference held at Hue on November 2nd and 3rd. This conference, the first sizeable Can Lao meeting in three years, was attended by 120 members all chosen by Can, of whom 110 were natives of Central Viet-Nam. The group (which included 4 deputies from the National Assembly, but no Cabinet members) agreed that the Can Lao should be unified under Can and should exercise more leadership in Viet-Nam. However, the basic situation appears unchanged. Can evidently wants certain conditions met before he will come to Saigon. On one of his conditions, the reorganization of the Sûreté, there has been no disagreement and steps are being taken to accomplish it. He evidently also wants certain Cabinet changes. It is not known whether President Diem will agree to this. What is even less clear is whether the President actually desires Can to come to Saigon to unify the Can Lao and change security methods. As time goes on and Can continues in Hue it begins to appear that the President prefers to import some of Can’s men and methods, but not Can. Can’s presence in Saigon would increase the tension between him and Nhu (these tensions between Nhu and Can were very frankly confirmed to an Embassy officer recently by Tran quoc Buu (p. 13²⁷). The President’s life would not be made any easier and in the end he might lose the services of one of the two brothers. He perhaps considers it more important to have Can and Nhu both working for him in different areas than to unify the Can Lao at the cost of possibly losing either Can or Nhu. Also, so long as neither Can nor Nhu win out, there is less risk of a possible challenge to the President’s own position.

On present evidence it seems likely that Diem will maintain Can and Nhu in tense equilibrium for some time. The situation has existed since Diem took power and while it means that the Can Lao will, in fact, continue to be a split party, the danger of serious disunity in Viet-Nam is perhaps prevented by Can’s realization that the ultimate political power lies in Saigon. That is why Can seeks to extend his power in that direction rather than to create his own separate political entity in Central Viet-Nam. But Diem’s great prestige, plus the fact that neither Nhu nor Can are popular public figures, should permit him to maintain this equilibrium. Even if the balance were upset by the removal of Nhu or Can from the scene it seems very unlikely that the remaining brother could openly challenge Diem.

Outside the Ngo dinh family, the armed forces would appear to be the only group that might someday attempt to challenge Diem. The activities of the Can Lao in bringing key officers into the party shows that the family is probably aware of this. Here the ingredients for a successful coup would have to be deep discontent among the senior officers arising from undue political pressure from the Can Lao plus the emergence of a very strong and popular military leader willing to capitalize on such discontent and to risk his life in an attempted coup. In a country where representative government is hardly underway and where the armed forces are powerful, this possibility exists. However, it is believed that no military coup would succeed in Viet-Nam unless the situation were very different than it is now. The President’s prestige is great and one of his main purposes is to strengthen the defense establishments. The future role of the Can Lao in the military establishment will be one of the main factors affecting the balance of political forces in Viet-Nam. The party can play a useful role as a control apparatus for the President, but it will be important for the President to limit this role and prevent Can Lao interference from growing to such an extent that the officer corps becomes dangerously resentful. The President has the power to do this. Also the Nhu–Can rivalry may act as a built-in deterrent to the creation of an overly efficient Can Lao organization among the officers. On the other hand the President and his brothers are unwilling to delegate authority and it would be characteristic for them to want to increase their control of the military by means of the Can Lao apparatus. On balance the relations between the Can Lao and the military are likely to pose a growing problem for the regime.

As to other political groups, the opposition within Viet-Nam now seems of little importance. Although remnants of sects still present security problems, and are subject to continuing commie exploitation, it is believed that GVN security and intelligence groups are sufficiently effective to detect and prevent any serious communist attempt to build up opposition elements into a real political threat.

Within the Can Lao there are certainly several factions. But their differences are limited to struggles for the attainment of secondary positions and are in no way a challenge to Diem’s leadership.

In brief, then, it appears likely that, short of death or incapacity Diem can remain in office until the end of 1970. The effectiveness with which he can administer Viet-Nam during such a long tenure would obviously depend on many factors. So far as the Can Lao is concerned, it would appear necessary for him to keep himself well informed (from sources outside the family) of the activities of Nhu and Can so that he can best use his influence to keep its “business activities” and its role in the armed forces from going too far.

The business activities of the Can Lao present a problem for the future which may become more serious. In the business community there is increasing talk of the Can Lao’s activities. The Embassy believes that the party, having found it impossible to acquire large sums by means of its control of numerous aspects of political and economic life of the country may push ahead fast and ruthlessly unless President Diem takes major and decisive action to control this trend. Even making allowances for comparable practices in other Asian countries, the Can Lao may soon reach a point where because of its irregular business activities, its prestige and that of the Vietnamese Government will suffer considerably.

In the Embassy’s view the risks of serious Can Lao infiltration into the military establishment are somewhat less since the necessity of maintaining an effective defense force is pretty clearly understood. But here again Diem’s supervision will be needed and the President and his brothers will have to restrain their tendency to over control.

In addition to keeping an eye on the business activities of the Can Lao and on the degree to which it penetrates the military, the President will also have to watch the various cliques and groups existing within the southern faction of the Can Lao. The existence of these groups permits the second level leaders who head them to feel that they have at least a limited degree of influence and interest in the party. Competition between them reduces the chances that any one of them might maneuver into a position from which it could limit the President’s authority. Given the somewhat greater political maturity in the South, it would be difficult to suppress them in an attempt to reproduce the monolithic political structure existing in Central Viet-Nam. Thus it will be Diem’s problem to allow some differences to exist among Can Lao leadership in the South while preventing the growth of serious factionalism.

It is unlikely that these negative aspects of the Can Lao will be balanced by the growth of personalism as a popular philosophy. Most probably President Diem will continue to interest himself in personalism and will speak of it in his addresses to the Vietnamese as he did on the occasion of the Vietnamese New Year (Embdespatch 258 of February 7, 1959²⁸), but the abstruse terms in which it is couched seem unlikely to kindle much popular support.

F. U.S. Interests and the Can Lao

In the long run U.S. prestige in Southeast Asia will probably be affected for better or worse by the activities of the Can Lao. To what degree can American influence be used to encourage the Can Lao to develop along constructive lines? Since it is a covert internal political organization run by a family who would certainly resent “outside interference” and since it is in the U.S. interest to avoid seriously antagonizing Diem and his brothers, it would be realistic to assume that American influence will not be a major factor in the development of the Can Lao and that it would be useless and probably harmful to exert major pressure on the leaders of the Can Lao unless the Party should act in clear opposition to U.S. interests in Viet-Nam. In brief, since Viet-Nam is a country with few liberal traditions and since it faces constant security threats from the Communists and is led by a family with authoritarian views, it must be assumed that democratic traditions will develop slowly from within and that their development may not be hastened by gratuitous outside advice.

Given these limitations it would nevertheless seem clearly in the U.S. interest to watch closely for evidence of a) Can Lao business activities involving the misuse of U.S. aid funds, b) Can Lao activities adversely affecting the morale or efficiency of the Vietnamese armed forces. Positive U.S. action to be taken would depend on the facts available and the circumstances existing at that time.

Finally, (without ourselves giving Diem political advice) it would be well to give continuing consideration to how Diem can be encouraged to receive information on the activities of the Can Lao from Vietnamese sources outside his immediate family and even outside the limited circle of top party members. Obviously this is a very sensitive subject. Nevertheless so long as Diem remains the most powerful person in Viet-Nam and so long as his regime is closely associated with the United States, it is desirable that Diem be well informed about the activities of the Can Lao and that the actions he does take in this connection do not damage U.S. interests in Viet-Nam.

Elbridge Durbrow

(The Department is requested to pass copies of this despatch to the American Embassies at Paris, Phnom Penh, Bangkok and Vientiane and to the American Consulate at Hue.)

1. Source: Department of State, Central Files, 751G.00/3–259. Secret; Limited Distribution. Drafted by Chalmers B. Wood, Second Secretary and political officer at the Embassy.
2. Document 46.
3. Document 45.
4. Not further identified.

5. The following marginal note appears at this point on the source text, apparently in Mendenhall’s hand: “What about related action of encouraging liberalization of controls whenever it can be appropriately done?”

   The Department responded to these suggestions in Instruction A–165, March 23, as follows:

   “The Department agrees with the views expressed by the Embassy in its Despatch No. 279, March 2, 1959, that the U.S. potential for influencing the development of the Can Lao party is limited by the extreme sensitivity of the subject. We concur in the three courses of action proposed in this despatch.

   “We believe that the pervasive system of controls exercised by the Vietnamese Government is a closely related aspect of the internal political situation in Viet-Nam. We hope, therefore, that appropriate opportunities will arise for the Embassy to lend discreet encouragement to some liberalization of these controls as a means of reducing opposition to the Government and broadening its base of popular support. In this connection see paragraph 33 of OCB Report on U.S. Policy in Mainland Southeast Asia, dated January 7, 1959. Any approaches of this nature and the reaction of the GVN should be reported to the Department.

   “The Department wishes to inform the Embassy that it regards Despatch No. 279 as outstanding. Mr. Chalmers B. Wood is highly commended for top-quality job of analytical political reporting.” (Department of State, Central Files, 751G.00/3–259)

   Paragraph 33 of the mentioned OCB report reads as follows:

   “Diem’s Internal Political Position. Diem increased his travels throughout the country for the purpose of popularizing his regime. Increasing accomplishments of the government in the economic and social fields should also have beneficial political results. Nevertheless, the failure of the government to fully rally certain elements of the middle class, the intellectuals and former officials to its support, the frustration and restlessness of some of the present officials, and some discontent in the army are sources of political weakness. This dissatisfaction is caused primarily by the authoritarian and pervasive political controls of the Ngo family and its associates.

   “Status of U.S. Actions: The desirability of liberalizing political and administrative controls is brought to the attention of the Vietnamese Government, when considered appropriate by the U.S. Ambassador. Possible lines of U.S. action are greatly limited due to the extreme sensitivity of Vietnamese leaders on this subject.” (Ibid., S/P–NSC Files: Lot 62 D 1, NSC 5809 Series)

6. Not printed. (Ibid., Central Files, 751G.521/7–1654)
7. Attached, but not printed.
8. Neither printed. (Department of State, Central Files, 751G.00/5–1058 and 751G.00/8–258)
9. This reference is in error. It should be to despatch 143 from Saigon, October 15, 1958, the summary of a conversation among Durbrow, Barrows, and Diem of October 10, 1958, concerning Communist activities in Vietnam. (Ibid., 751G.00/10–1558)
10. Not printed. (Ibid., 751G.00/8–958)
11. Reference to section C, “Business Activities,” subsection I, “General Considerations and South Vietnam,” items 1–3.
12. Reference to section D.
13. According to the Australian Minister who is close to Thanh and who recently accompanied the latter on a three day “information trip” to the Rach Gia and Hatien area in October, Thanh is a very effective speaker, seems to have the respect and admiration of the officials, as well as the masses in that area at least. The Minister noted real warmth shown by the many audiences Thanh addressed. On January 17–18 a British Embassy officer was the guest of the Chief of Phong Dinh (formerly Can Tho) Province. All local officials spoke warmly of Thanh. No other official from Saigon was mentioned. Thanh’s picture was almost as much in evidence as President Diem’s. [Footnote in the source text.]
14. For other recent reports on Can Lao business and other activities see Paris despatches 1005 of December 4, 1958 and 1169 of December 31. See also Embassy despatch 236 of January 22, 1959. These reports are interesting and, while some of the details might be disputed, the Embassy has no evidence indicating that they are not generally accurate. [Footnote in the source text. Regarding despatch 1005, see footnote 3, Document 39. Despatch 236 is not printed. (Department of State, Central Files, 851G.00/1–2259)]
15. Reference to section B, “Organization and Membership,” subsection II, “Organization and Membership in South Viet-Nam,” item 2.
16. Reference to section B, subsection II, item 4.
17. Not printed. (Department of State, Central Files, 851G.3932/9–2658)
18. Embassy telegram 1453 of January 23, 1959. [Footnote in the source text. Telegram 1453 is not printed. (Ibid., 851G.2553/1–2359)]
19. Not printed. (Ibid., 411.51G212/10–2357)
20. The Assistant Naval Attaché is reliably informed that the present Captain of the Nhut-Le, a Vietnamese, was formerly employed by the Shell Company. He decided to change jobs when it was made clear to him that if he did not do so, he would lose his license. [Footnote in the source text.]
21. Not found.
22. Foreign exchange for the purchases was provided from GVN–owned direct (cash grant) dollar balances obtained from the sale of piasters to the U.S. Government in FY 1955 and FY 1956. [Footnote in the source text Icato 876 not found.]
23. See paragraph B.II.7 above.
24. Not printed. (Department of State, Central Files, 103.02–USIA/3–2458)
25. He said that he believed there should be two parties and that the people should have a “real choice”. This was to be for appearances, since both parties would have been controlled by the Can Lao. [Footnote in the source text.]
26. Not printed. (Department of State, Central Files, 751G.00/2–359)
27. Reference to section B, “Organization and Membership,” subsection II, “Organization and Membership in South Viet-Nam,” item 4.
28. Not printed. (Department of State, Central Files, 751G.11/2– 1159)