21. Memorandum of a Conversation, Embassy Residence1



  • United States
    • The Secretary
    • Ambassador Elbridge Durbrow, American Ambassador to VietNam
  • VietNam
    • Nguyen V. Thuan, Vietnamese Secretary of State for the Presidency and Acting Secretary of State for Defense
    • Mr. Dang Due Khoi, Vietnamese Charge d’Affaires in Bangkok


  • Situation in VietNam

At the request of the Government of VietNam, the Secretary had a talk with Mr. Thuan for 50 minutes in the evening of March 27.

The Secretary opened the discussion by stating he was pleased that Mr. Thuan could take the trouble to come to Bangkok to discuss Vietnamese problems with him, since he unfortunately could not spare the time to visit Saigon. The Secretary asked Mr. Thuan to extend his best wishes to President Diem which Mr. Thuan promised to do.

Thuan then stated he wished to discuss two matters: 1) the situation in VietNam and 2) the Vietnamese Government’s concern regarding Lao developments. Mr. Thuan said it was unfortunate that the world in general did not realize the seriousness of the Viet Cong (VC) activities and threat in VietNam. Often foreign correspondents praised the progress being made in VietNam in the economic and agricultural fields but usually they emphasized the lack of democratic freedoms in his country. These correspondents failed to realize that VietNam is an under-developed country both economically and politically, and they seem to ignore the fact that since the end of 1959 the Viet Cong have changed their tactics from subversion and persuasion to all-out guerilla terrorism. The Viet Cong have increased the number of trained cadre coming from the north and the DRV (North Vietnam) have announced publicly that they are doing all they can to overthrow the GVN (South Vietnam) in order to prevent economic progress and set up a weak Communist front [Page 53] government in order to unify the country under the Viet Cong. For these reasons President Diem cannot put into effect all the democratic freedoms, but as the Viet Cong threat diminishes and the people become educated and more sophisticated democracy can make progress.

To emphasize this point, Thuan reported a conversation that Mr. G. Menon, the Indian Chairman of the International Control Commission (ICC), had had with Gen. Giap, the DRV Chief of Staff. According to Menon, Giap recently told him that the DRV desired to get rid of the Diem regime and replace it with a “friendly” government in order that the latter could carry out the provisions of the Geneva Accords to unite North and South Vietnam. Thuan interpreted Giap’s statement to mean that the latter desired to set up a front government in South Vietnam which in fact would be fully Communist controlled.

Thuan then reminded the Secretary that President Diem and his entire government are 100 percent anti-Communists and have, during the last 7 years, cooperated fully with the free world and done all they could to prevent the Communists from taking over South Vietnam. Thuan added very few in the free world realized that the GVN is actually at war. To point this up, he stated that between two and three hundred South Vietnamese troops were being killed each month and many more civilians were being killed by Viet Cong terrorists. He continued, very few on the outside realized that the Viet Cong occupied practically the entire countryside in South Vietnam for ten years prior to 1954. During this time, they indoctrinated a large part of the population with Communist ideas, kidnapped a lot of South Vietnamese youth when they moved north under the Geneva Accords and many soldiers in the Viet Cong Army are married to South Vietnamese or are the brothers or sons of people from that area. Because of this fact, the Viet Cong are able to bring strong pressure on relatives in the south to collaborate with them. When President Diem took over the government in 1954 from the French, the latter only controlled the main towns and the main highways. For that reason, Diem had to exert a great deal of effort and energy from 1954 to 1956 to regain control of the countryside and generally stabilize the internal security. From 1956 to 1959 considerable progress was made in economic and agricultural development and basically for this reason the Viet Cong in late 1959 changed their tactics and are now trying to prevent further progress.

Thuan then referred to the Counter-Insurgency Plan (CIP) which we presented to the GVN some six weeks ago. Thuan stated that in recent meetings in Saigon, American and Vietnamese experts had come to substantial agreement on the U.S. plan as presented. While the GVN agreed basically with the plan, they were very much [Page 54] concerned by the fact that the plan would require them to meet all the piaster expenses. Thuan continued, that by extraordinary efforts such as putting in new taxes, collecting old taxes more effectively and by making arrangements with local banks to float a government loan, the GVN would be able to meet most of the piaster costs of the CIP for calendar year 1961. He added, however, that although the banks had agreed to try to float the loan, they had insisted that half of the loan should be used for economic development purposes instead of entirely for military counter insurgency expenditures. Thuan then said that the GVN frankly did not know how it could raise sufficient piasters for calendar year 1962 to pay the cost of the CIP. He said one of the reasons for this was that the “Buy American” program and the U.S. insistence that all aid shipments be made in U.S. ships would, in fact, reduce the effective amount of U.S. aid by 30 percent in the future. He backed his arguments about the piaster shortage by quoting from statements made to him by the Brookings-Ford Foundation financial expert team now in Vietnam. According to Thuan, the team experts after several months’ study came to the conclusion that the GVN could not raise more taxes without raising prices or causing a fairly serious inflation. Thuan added the reason prices had so far not gone up more, although heavier taxes had recently been imposed, is that there have been sufficient stocks of consumers goods in the country to meet the basic demands. Once these stocks are exhausted, there is bound to be a shortage and inflation. The financial experts also told Thuan that before an accurate figure could be set for the devaluation of the piaster, it would be necessary to make a careful study of the entire Vietnamese price structure. The experts believed that until this is done it would be wrong to set the new piaster rate at 60 to the dollar since this might cause serious disruption of the economy, stop progress, and might cause further inflation, unless it turned out to be the right rate. The experts said it would take them about 5 months more to complete the price structure study. For this reason, the GVN could not accept the suggestion in the CIP that as a last resort the GVN could devalue in order to obtain sufficient piasters for their counter insurgency needs. He admitted that the GVN had earned comparatively large amounts of foreign exchange in 1960 and had fairly large reserves. However, because of the Buy American policy and their extraordinary expenditures in connection with the fight against the Viet Cong, the GVN had to spend a comparatively large amount of this exchange for necessary imports.

Thuan then thanked the Secretary for approving the force increase of 20,000 men which were [was] urgently needed to give adequate protection to the population now seriously harassed by the VC. In view of the fact that the VC are stepping up their attacks [Page 55] prior to the coming presidential elections in April, he, Minister of Defense, had given firm orders to all security forces to go on and continue on the offensive. While these tactics were effective, they were causing considerable losses on both sides. He added that the despite [sic] the all-out effort that must be made to fight the VC, it is also essential to carry on as much economic and agricultural development as possible under the circumstances.

The Secretary thanked Thuan for his explanation of the situation and assured him that the United States Government would give as much assistance to Vietnam as it can to fight the VC threat and maintain its independence and integrity. He then asked Thuan whether the GVN had any long-range development plans. Thuan replied that they had a three-year plan which is being carried out as best it can be under the present circumstances. He pointed out that one of the main objectives of the plan is to bring about a gradual devaluation of the currency. Despite the efforts made in this field, Thuan stated that he disagreed with the U.S. contention in the CIP that the GVN for various reasons could not usefully absorb any more aid. Thuan admitted that if the present list of goods which can be imported through U.S. aid is maintained and if the Buy American policy remained in effect, the GVN might not be able to use even all the U.S. aid available for FY 61. He contended, however, that if USOM would revise the list of commodities paid for by American aid, the GVN could not only use all the FY 61 aid money but a considerably larger amount. In this connection, he agreed that the present US balance of payments criterion for aid would have merit if the GVN was not confronted by a serious VC threat. Under the circumstances, however, exceptions should be made to the balance of payments approach in order to permit the GVN to obtain enough piasters to implement the CIP. Thuan emphasized that one of the principal needs was to give security protection to the people in the countryside who were being constantly harassed, propagandized and intimidated by the VC. This costs a great deal. He added that this extra aid is needed until the many factories now being built or in production can produce enough goods to meet the consumers’ needs and if these needs are not met, serious inflation will ensue.

The Secretary again thanked Thuan for his full explanation and assured him of continued US support. He added that President Kennedy himself had personally approved the CIP. The new administration, however, has found it necessary to study carefully the methods and results of US aid programs in the past 15 years in order to find out what mistakes had been made and which methods had proved most efficacious. The administration believes that, in the past, there were too many short term plans and projects which, as good as they may have been, were not aimed at long range goals in [Page 56] individual countries. For these reasons, the Administration is asking the Congress to make available funds for longer periods of time. If this is granted, not only can the United States plan ahead but it is essential that each individual country put into effect their own long range plans to attain desired goals ten years hence and then draw up plans to work on projects each year which would lead to these goals.

The Secretary then said that economic and military aid will do no good if efforts are not made simultaneously to explain to the people what the government is doing, the goals they hope to attain and the sacrifices needed. This is particularly essential in countries fighting Communist “promise.” The Secretary then urged that the GVN do all it can to better its international relations, particularly with countries in its own area. He mentioned such countries as India and Burma. He stated unless these countries are aware of Vietnam’s problems, what they are doing about it and how they hope to attain their desired goals and explain to them the seriousness of the VC threat, these countries will neither understand the plight of Vietnam nor do anything to help the GVN. The Secretary stated it is essential also to fill in the foreign press on these same problems.

Reverting to the CIP, the Secretary stated it is essential that the GVN establish as soon as possible an effective chain of military command in order that the security forces may be used as effectively as possible in the battle against the Communists. If the country does not use all its resources, military, political, psychological and economic, to best advantage, it will be difficult if not impossible to overcome the VC threat.

Thuan thanked the Secretary for his explanations of the Administration’s point-of-view and stated that shortly after the elections the GVN expects to have Tunku Abdel Rahman and Gen. Nasution visit Vietnam in order to strengthen relations with these neighbors. The GVN is also endeavoring to build up its prestige in Africa, but this is proving difficult because of what: they term the ChiComs “Operation Checkbook”. Thuan explained that the Chinese National Foreign Minister had explained to the GVN Foreign Minister recently that in connection with GRC efforts to win friends in Africa one of the African leaders asked how much the GRC could give in aid and the GRC Ambassador promised to inquire into the matter. Shortly thereafter, the Chinese Communist Ambassador was asked the same question and when given the answer, he was presented with a check immediately by the Communist representative. Mr. Durbrow interjected, to remind Thuan that part of the CIP called for serious efforts by the GVN to better its relations with Cambodia. Thuan, citing how difficult this is, stated hat the Vice President had had discussions with the Cambodian Foreign Minister just the day [Page 57] before and it was hoped that these talks would lead to good results. In this connection, Thuan particularly commented on the anti-GVN campaign recently mounted in Phnom Penh in connection with the alleged flight of hundreds of Vietnamese of Cambodian origin to Cambodia. He decided it was too bad that this Viet Cong organized incident had caused so much difficulty. He then referred to the Cambodian Assembly resolution of March 24 which was particularly derogatory to the GVN and stated that he was pleased to have been told by Mr. Durbrow that it was quite evident that this resolution had been written and pushed through by the Communist elements. Thuan stated that the GVN is making extraordinary efforts to have better international press relations and reminded the Secretary of the rather sweeping governmental reforms Diem has already announced. He added that most of these reforms would be put into effect by April 15, a few days after the presidential election.

Thuan spoke for only a minute or two about Laos, indicating that the GVN was naturally deeply concerned about the prospects of the country going Communist and stated that the GVN supports the Boun Oum Government. He expressed concern about growing reports that the Viet Cong are coming through the passes from North VietNam into Laos to create bases in the Southeastern part of that country which are being used for attacks into VietNam.

In conclusion, the Secretary thanked Thuan again for his clear expose of the situation in VietNam. The Secretary then said that the Administration is endeavoring to speed up procedures and decisions; therefore, he suggested that Mr. Thuan discuss these problems frankly and fully with Mr. Nolting, the Ambassador-Designate to VietNam, a man of proven ability who will be very understanding. The Secretary again assured Thuan that we appreciate fully the anti-Communist stand of the Diem Government and we will do all we can to help, but our efforts must be mutual.

  1. Source: Department of State, Conference Files: Lot 65 D 366, CF 1823. Confidential. Drafted by Durbrow on March 29 and approved in S on April 4. Rusk and Durbrow were in Bangkok for the SEATO Council meeting, March 27-29.