Mr. Nhu was remarkably frank in
discussing the question and gave the Ambassador a plausible story. (See
Memorandum of Conversation enclosed … .)
In the absence of a great deal more information it is impossible to
evaluate Mr. Nhu’s explanation.
However, on the basis of the information we do have the Embassy is
inclined to accept his statements as explaining in part the general
motivations of the Party since many of the business activities in
question are undoubtedly “illegal” by normal business standards. On the
other hand, the opportunism of the Party, if practiced mainly for the
good of the country, could well prove to have been the best course. Thus
the only way to judge the Party’s activities is to watch their
development and remain continuously alert to any indications of serious
diversions of funds into personal holdings. At
this stage in Viet-Nam’s development illegal practices must be judged by
their degree and extent, with frequent backward glances at the state of
affairs pre-Diem, in order to
keep from being distracted by our own moral judgments.
Enclosure
Memorandum of a Conversation Between
the President of Vietnam’s Adviser (Nhu) and the Ambassador in Vietnam (Durbrow), Saigon, July 23,
1959
I opened the conversation by referring to the Colegrove articles, about which
Nhu had heard but as yet
not in detail. I described in general the tenor of the articles,
stating that most of the accusations are fantastic and some of the
statements do not involve United States aid but alleged
irregularities in the GVN. I added
as is always the case in such matters there is a grain of truth to
many things Colegrove wrote
about, although most are twisted out of context. I told Nhu I recalled certain passages
which involved the GVN, himself, his
wife and the President, as well as other GVN officials. I stated, for instance, that Colegrove alleged that at
considerable expense to the United States a radio room was built in
one of the bedrooms of the Palace, so that the President could
broadcast to the nation, but that it had never been used and was now
his (Mr. Nhu’s) office. He
made no comment.
[Page 222]
I then
stated that Colegrove had
alleged that a certain Major Cuu, who until two or three years ago
was the head of Radio Viet-Nam, had absconded with a considerable
amount of funds which Colegrove indicated were United States aid funds. I
described in a few words the allegations about the taxi dancers
hired by Mr. Cuu as entertainers and announcers
for Radio Viet-Nam. I stated that based on my investigations it
appeared that Mr. Colegrove,
although he had not so stated in his articles, had considerable
alleged information about the “illegal” business activities of the
Can Lao Party. I added that unfortunately for a long time there were
many reports and rumors dealing with this same subject which,
whether true or not, would cause a considerable loss of prestige to
the GVN if they should be published.
I continued by stating that these rumors alleged that no one could
start a business here, foreigners or Vietnamese, unless they paid
considerable sums to the Can Lao Party. In other cases it is
contended that if someone tries to start a business here the Party
tries to take over control. I then referred to the cassia shipments
to the United States and outlined in some detail the bad impression
that under-invoicing had caused in official circles in the United
States. I added that unfortunately a large number of businessmen
here and in the States were cognizant of this under-invoicing, and I
pointed out that one of the principal concerns on the part of the
United States officials was that apparently the extra profits gained
from the under-invoicing, as well as the regular profits, did not
revert to the benefit of the Vietnamese national economy as a whole.
On the other hand, it appeared that all the money earned from these
actions went to individuals.
Nhu took up from there and
talked for over half an hour to explain why the Party, with the
government’s concurrence, had been given special benefits to engage
in the export of cassia. This was done solely for the purpose of
building up this trade and inducing people to take the risks
involved, both physical and financial, in order to re-establish the
Vietnamese cassia industry. He pointed out that the cassia trees
were located in the high mountain area, in Central Viet-Nam, where
the Montagnards have been infiltrated by the Viet-Cong. Therefore
the collection of cassia bark is very dangerous and the harvesters
of cassia ran considerable physical risks in entering the area.
Furthermore, since once the cassia bark has been taken off, the tree
dies, it was essential to leave enough profit to the entrepreneurs
to permit them to carry out the government’s orders that for each
cassia tree stripped at least one other tree must be planted. He
stated that for the reasons given it was essential to give special
inducements during the early stages of the development of the
industry, but now that the industry was going it was no longer
necessary to use such inducement to entrepreneurs to get them to
enter
[Page 223]
this trade. He
volunteered that the cassia trade had been given exclusively to the
Can Lao Party and added that because they were a dedicated
nationalistic group they were willing to take the physical and
financial risks involved, while private entrepreneurs would not have
been willing to take these risks. Nhu then went into a long explanation of how profits
from the “commercial section of the Can Lao Party” were used. He
said, for instance, if the Party had not been able to make
considerable profits from the cassia trade and other commercial
ventures which were quite profitable, it would not have been
possible to get and maintain the Yugoslav-built coast wise steamers
particularly needed in Viet-Nam. Not only did these steamers cost a
considerable amount of money, but it was necessary during the
initial stages of their operations here to pay dollar salaries to
the foreign crews operating the boats.
He then explained that unfortunately in newly-developed countries the
people did not understand the long-range advantages of setting up
profitable industries. He stated that the people in these countries
have not been permitted to have any business or managerial training
and were only familiar with quick turn-over operations such as
buying land, building houses and selling them quickly at a profit.
It was for these reasons that the government has to take the lead in
establishing industries and profitable trades by investing money in
such enterprises. Since the government does not have too much
capital, it had to turn to the small but dedicated group of the Can
Lao Party and the members of the NRM, who are willing to take the risks and make the
sacrifices to help build up industry. Since there is very little
free capital in the country, the government is forced to grant
privileges to the Can Lao Party and the NRM members to make fairly high profits initially in
order to get the necessary capital to invest in the new enterprises.
Nhu claimed that now that
it is becoming well-known in Viet-Nam one can invest in profitable
enterprises through the NRM, more
people are joining the Party, even those from the opposition.
Nhu said that this was an
encouraging fact and he added that even many newly-naturalized
Chinese are joining the Party in order to be in a position to invest
in Party-sponsored enterprises. He added that while the government
naturally hoped for some foreign investment, their principal concern
was to develop a Vietnamese entrepreneur class who would understand
the intricacies of capital formation and help to build up the
industrial economy of the country. He reiterated, as he has in the
past, that in those enterprises in which the government has invested
fifty-one percent or more they would, in the not too distant future,
sell their shares to the public once the public became aware that
through such investment they could have steady long-term incomes. In
regard to the Party shares, he contended that more and more of the
capital for
[Page 224]
Party
enterprises was coming from individuals and therefore automatically
these enterprises would be non-government. He stated that in
newly-developed countries it is essential to develop as large a base
as possible of dedicated individuals who are willing to work for and
with the government in order to build up a solid economy for the
future. He pointed out that there are many Vietnamese engineers,
other professionals and technicians who work for comparatively low
salaries for the government when they could earn twice as much or
more by working for Shell, Stanvac or other private concerns. While
the government hopes to raise the salaries of these people as soon
as successful enterprises are making sufficient profits, the
government had to count on the pecuniary sacrifices of these devoted
persons in order to make progress in the economic field.
I told Nhu that his
explanation of the commercial operation of the Party was very
interesting, and I hoped that they would be helpful in building up
the country. I added, however, that unfortunately for a long time we
had been receiving reports that gave quite a different picture of
the Party operations. I reiterated that we had heard—and foreign
correspondents had heard many reports—true or not, that the Party
was trying to monopolize all business and industry in the country. I
pointed out that if this impression persists it would be impossible
to attract any foreign capital to Viet-Nam and the good reputation
already enjoyed by the GVN as a
government trying to gain its economic independence as soon as
possible with American aid would be lost, and not only would
Congress question the advisability of giving additional aid to
Viet-Nam but any prospective investors would bypass Viet-Nam.
Nhu replied that these reports
were put out primarily by the Dai Viet opposition, the Communists
and other opposition elements. According to Nhu, the Dai Viet and other
opposition parties except the Communists are not parties in any
sense of the word. They are composed of a few score of disgruntled
persons who have no appeal to the people, have no backing among the
population and who believe by unobjective criticism of the
government they can gain sympathy primarily from foreign
sources—French, American or others. Nhu is convinced that correspondents such as
Colegrove and others are sought out by the
Dai Viet, Communists and other opposition elements and fed erroneous
information in the hope that they can gain prestige and publicity
from these sources and perhaps eventually gain enough backing to
overthrow the regime and take control.
He then outlined how he had operated himself under the Bao Dai regime
to set up his party, together with its newspaper, which although in
opposition to the government was never suppressed. He claimed that
he was most careful not to criticize the entire regime but to make
only objective criticisms when the government deserved it
[Page 225]
and to praise them when
they were doing something constructive for the country. Nhu claimed he had recently called
in opposition leaders and advised them to operate in the same way.
He pointed out that the Communists had learned this trick in which
they never criticized an entire government or an entire people but
picked and chose among the leaders who are subject to critical
propaganda blasts and praised others in the government who allegedly
do not see eye to eye with the “misguided” leaders.
