Foreign Relations of the United States, 1961–1963, Volume I, Vietnam, 1961

126. Telegram From the Embassy in Vietnam to the Department of State¹

Saigon, August 31, 1961.

304. Task Force VN. Re Embtel 277.² On question of level of supporting assistance (commercial aid) to GVN in light of GVN’s decision on piaster yield, I would like to submit following analysis of situation and general recommendation.

It seems to me we are in a fair way now to mount a “breakthrough” program, to finance it, to accelerate momentum and to carry it forward. There are many clouds on the horizon, not the least of which is Laos, but locally the skies are clearing somewhat and both governmental and public morale have been improved by recent military successes and hopes for the future. We will lose a great opportunity if we do not follow this up rapidly. As Task Force Washington knows, GVN is capable of adopting paper plans and then failing to follow through unless and until the money is in hand (CF agreement last spring to augment military forces by 20,000, which was slowed in implementation pending agreement on 1961 budget and means of financing).

It thus seems to me essential to follow through as promptly as possible on tentative aid level for FY 1962, in order to give the assurance to GVN necessary to start carrying out emergency economic and social programs recommended in CIP, presidential program, joint experts report, draft joint communiqué, etc., as well as carry on with build-up of armed forces. I continue to think that we should set relatively high targets for commercial imports under the agreed criteria, leaving it up to the GVN to justify their estimates re absorptive capacity, etc., and on clear understanding that estimates are subject to revision in light of experience. If we do it the other way, and set conservative estimates which can be revised upwards in light of experience, I am of the opinion that some, perhaps many, of the essential breakthrough programs will be delayed by GVN foot-dragging, perhaps beyond the critical period. What is really involved here is a question of earmarking as possible additional aid for Viet Nam approximately $50 million of supporting assistance funds (based on figures cited Deptel 184).³ This relates to a total aid program to Viet Nam of roughly a quarter of a billion dollars. Whether this 50 million can actually be used or not remains to be seen. I am strongly of the opinion that, when this matter comes to decision, presumably following passage of aid legislation, it would be in our national interest to earmark these additional funds and to tell GVN that they are available if they can be used under the agreed criteria. In this way, and I believe only in this way, can we keep up momentum which has been generated.

Foregoing discussed in Task Force Saigon. Task Force agrees with message, subject to following comments from Gardiner, which I am happy to attach for Washington’s consideration:

1. Fully agree that further funding for capital goods meeting criteria should be provided within any reasonable limit, and have always counted on DLF to provide needed reserve.

2. Am skeptical about any substantial increase in commercial market demand for consumables and intermediate type goods such as tractors and trucks, in view very cautious attitude most firms handling such items and 2 years of overstocking already. This could change quickly if GVN continues present progress against VC.

3. Am convinced that govt planning for present conduct commercial aid program calls for forecast now of $140,000,000 new funds for FY 1962, including supporting assistance and PL 480.

4. Am always alert for any further demand for commercial aid funds required under present circumstances.

5. Am dubious about advantages of allotting funds that will accumulate in PA’s unlicensed or in licenses unutilized.⁴

Nolting

1. Source: Department of State, Central Files, 751K.5-MSP/8-3161. Secret; Priority. Repeated to CINCPAC for PolAd.
2. Document 124.
3. Telegram 184, August 12, furnished the Embassy certain suggestions and instructions regarding financial assistance to Vietnam. (Department of State, Central Files, 751K.5-MSP/8-1261)
4. In telegram 321 from Saigon, September 5, the Embassy reported that Ambassador Nolting left for a visit to Bangkok and was embarrassed because he lacked any indication of the U.S. Government’s reaction to the Government of Vietnam’s decision to raise the total piaster yield to 74 per dollar and was therefore unable to transmit a response to Thuan. In telegram 275 to Saigon, September 6, the Department replied that it was “highly impressed and pleased” with the Government of Vietnam’s decision but had delayed comment while it was seeking reaction from other U.S. Government agencies on the questions of counterpart, restrictive procurement policy, and commodity level. (Both telegrams are ibid., 751K.5-MSP/9-561)