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

91. Memorandum of a Conversation, Department of State, Washington, October 2, 1959¹

Washington, October 2, 1959

SUBJECT

• Vietnamese Economy

PARTICIPANTS

• Mr. Nguyen dinh Thuan, Vietnamese Secretary of State for the Presidency²
• Mr. C. Douglas Dillon, Under Secretary of State
• Mr. Robert Cleveland, Officer in Charge, Southeast Asian Economic Affairs
• Mr. Chalmers B. Wood, Officer in Charge, Viet-Nam Affairs

Mr. Thuan outlined Viet-Nam’s economic situation as an underdeveloped country under heavy Communist pressure which must develop quickly. Due to the lack of trained manpower and capital, it had devoted its primary efforts to agriculture. First there had been land distribution, then a large program for agricultural development, fertilizer, etc. The Government was sure their agricultural program would succeed.

Mr. Dillon stated that the U.S. program put Viet-Nam in first place on the basis of aid received per capita and that strong U.S. support would continue.

Mr. Thuan continued that Viet-Nam was also introducing plans for industry and for the development of its road and communications infrastructure. Mr. Dillon replied that the U.S. could help with infrastructure problems through the DLF and was prepared to receive Vietnamese projects.

Mr. Thuan said that as to the DLF, the GVN faced the problem of the exchange rate for repayments. It was understood that the official rate was too low, but to repay at the market rate would be unrealistic. He suggested that the U.S. take into consideration the exports of rice and rubber which sell at the rate of 50 piasters.

Mr. Dillon replied that such a decision was not one he could make alone due to existing laws and regulations and that also it was a question of principle which applied to all countries involved in the DLF. This principle was hard to change. The present figure for Viet-Nam was 73.5, but this would be reexamined at the end of three years. During this three-year period the amount of repayments would be small. At the end of the period the problem could be reexamined to see if the 73.5 rate was just.

Mr. Thuan then asked pointedly if this created a precedent for the aid program.

Mr. Dillon said he did not think so; that it probably would only apply to DLF. He promised to look into the matter.

Mr. Thuan said that although Viet-Nam tried to make progress by every means, there was a heavy military burden concerning which there is no choice. However, the GVN tried to make the Army as productive as possible. The troops make roads, dig canals and build houses. Mr. Dillon commented that this was a good idea.

Mr. Thuan asked Mr. Dillon’s opinion about this year’s military budget.

Mr. Dillon replied that Congressional cuts had been larger than last year. In deciding on Viet-Nam’s share, it was necessary to examine the Vietnamese balance of payments and its economic progress. Also to be considered was the question of Viet-Nam’s taxes. Certainly we did not wish all our assistance to support the military. There should be a balance for economic development. These were the principal factors to be taken into consideration in arriving at the figure for Viet-Nam.

Mr. Thuan pointed out that with the new IBM machines and other technical means Viet-Nam hoped soon to increase its tax collections. Speaking of DLF and private enterprise in Viet-Nam, Thuan pointed out:

Viet-Nam 1) lacked capital, 2) had insufficient technicians, 3) had a small market and 4) the Vietnamese did not have sufficient understanding of industrial enterprises. For these reasons, joint private-government enterprises were necessary. As a paradoxical example, even a U.S. firm, Parsons and Whittemore, had asked for Vietnamese participation. Viet-Nam had offered a contract which provided that after a certain period the Government could be bought out, but Parsons and Whittemore had insisted that the Government and Parsons and Whittemore should retain a majority interest.

Mr. Dillon commented with a smile that this was very interesting and added that while we understood Viet-Nam’s problems, it was necessary to push for free enterprise.

Mr. Thuan said he understood that a recent speech had been made at an economic meeting in Washington by a Mr. Powers of Kaiser who had suggested that the DLF should loan no money to state enterprises. Mr. Thuan asked whether this was the U.S. Government point of view.

Mr. Dillon said it was not, but that we wished to do all we could for private enterprise.

Mr. Thuan stated that in 1958 Viet-Nam had loaned 150 million piasters to the rubber planters of which 142 million went to the French and that in 1960 it would loan 200 million. Most French planters, certainly Michelin and the Terres Rouges, were rich and did not need the Government loans, but since they wanted government participation, they were glad to accept the loans.

Mr. Thuan said thus two points could be deduced: 1) Viet-Nam does not discriminate but only considers productivity (Mr. Dillon interjected smilingly that in this case the GVN seemed to discriminate against the Vietnamese); and 2) private industry in Viet-Nam wished to have the government with them.

Mr. Thuan then cited capital assistance which the Government was beginning to receive from the Chinese, Japanese and French Governments and also mentioned the Chinese-Vietnamese textile plant.

The tone of the conversation, which was carried on in French, was friendly and businesslike.

1. Source: Department of State, Central Files, 751G.5–MSP/10–259. Confidential. Drafted by Wood.
2. Thuan was in Washington as the head of the Vietnamese Delegation to the IBRD and IMF annual meetings at the end of September. On September 30 Thuan talked with Anderson, Cleveland, and Wood at an informal dinner in his honor. Thuan urged that the Kontum–Pakse highway, of which 50 kilometers remained to be constructed, be finished. Anderson and Cleveland countered that funds were scarce, the road was primarily of military significance, and most of the unfinished part was in Laos. There were no funds in the Lao program to pay for construction. (Memorandum of conversation by Wood, September 30; ibid., 851G.2612/9–3059) On October 2,. Thuan also met with Secretary Herter for a brief discussion in which the Secretary expressed American concern about deteriorating Vietnamese-Cambodian relations, asked about the road building program in Laos, and received from Thuan an optimistic report about internal security in the highlands. (Memorandum of conversation by Wood, October 2; ibid., Secretary’s Memoranda of Conversation: Lot 64 D 199)