119. Letter From the Ambassador in Vietnam (Nolting) to Secretary of State at the Presidency and Assistant Secretary of State for National Defense Thuan 1

Dear Mr. Secretary: I refer to President Ngo Dinh Diem’s letter to me of April 232 regarding the funding of counterinsurgency activities and to our discussion the following day concerning the procedures to be followed in the administration of these funds.

As I understand the position, during the calendar year 1963 the Government of Viet-Nam is prepared to supplement the U.S.-owned and counterpart piastre contributions with its own funds up to a limit of 2.3 billion piastres, to carry forward the mutually agreed projects described in broad terms in the attachment to my letter to you of March 18, 1963.3 (As of January 1, 1963 it was predicted that the U.S. owned and counterpart piastres would amount to VN $900,000,000, which would leave a remainder of VN $1,4000,000,000 to be provided by the Government of Viet-Nam.) I understand that the Government of Viet-Nam is not prepared, however, to have its own funds administered under the procedures followed for the “purchased piastres”. Your government nevertheless wishes to maintain the functions of and the existing relationship between the Vietnamese Interministerial Committee for Strategic Hamlets and the U.S. Committee on Province Rehabilitation. It is also the desire of your government that the activities of the Vietnamese authorities in the rural areas continue to be coordinated with those of the American agencies.

To give effect to these principles, it is my understanding that your government proposes that funds to be administered by the provinces (generally funds for those projects enumerated in Section A1 of the attachment to my letter of March 18) shall continue to be paid into a central account at the Treasury, as required, and disbursed from this account directly to the province chief as needed to carry out approved programs.

It is also my understanding that these provincial programs will, as in the past, be reviewed and approved by the Interministerial Committee and by the Committee on Province Rehabilitation. At the province [Page 290] level, however, the power to disburse Government of Viet-Nam funds within the approved programs will rest with the province chief. In view of the U.S. contributions to these programs, the province chief shall nevertheless consult with the U.S. representatives concerning his plans and proposed actions so that related U.S. and Vietnamese programs can be properly developed and executed. The province chief and the U.S. advisors will keep each other informed of all aspects of their respective activities in the execution of the approved programs.

With regard to those programs administered by national agencies (generally those projects enumerated in Sections A2, B, C, and D of the attachment to my letter of March 18) no special fund will be involved. The funds will in general be administered in accordance with customary procedures for the use of counterpart funds, i.e., on the basis of appropriate understandings between the Director General of Budget and Foreign Aid and the U.S. Operations Mission.

Finally, it is my understanding that your government undertakes, as in the past, to provide piastre support for necessary operations of the U.S. Operations Mission. It is estimated that such support will amount to VN $173,000,000 during 1963.

I believe that the undertaking of your government with respect to funding of counterinsurgency activities and the procedures described above will provide a reasonable basis for carrying forward the strategic hamlet program, a program which has already contributed so much to the security and well-being of the rural population and which holds out the promise of final liquidation of the Communist insurgency and of revitalization of rural society in Viet-Nam. I should be obliged if you would confirm that this letter correctly states the position of your government.4

Accept, Mr. Secretary, the renewed assurances of my highest consideration.

Frederick E. Nolting, Jr.
Concur: Nguyen Dinh Thuan 5
  1. Source: Department of State, Central Files, POL 26-1 S VIET. Confidential. Drafted by Nolting and Trueheart and transmitted as enclosure 2 to airgram A-718 from Saigon, May 16.
  2. A copy of the April 23 letter was transmitted as enclosure 1 to airgram A-718. The letter is summarized in Document 101.
  3. Document 61.
  4. The joint communique issued on May 17 announced agreement of funding for counterinsurgency; see Document 127.
  5. Printed from a copy that bears these typed signatures.