12. Report to the Special Group for Counterinsurgency1


Early in 1962 the U.S. undertook to canvass DAC members and certain other Free World nations on increased economic aid to Viet-Nam with emphasis on commercial import which could provide local currency for assisted projects. Preliminary soundings by Ambassador Riddleberger 2 and Tuthill3 in Paris indicated that while most countries agreed on the political importance of Viet-Nam’s struggle, they were somewhat reluctant to come forward with increased aid; especially of the grant commercial import variety.

By mid-year a consensus had been reached that a proposed aid coordinating group for Viet-Nam should be handled outside DAC since at this stage of DAC’s evolution, a group on a hot point in the cold war could compromise DAC’s economic character. We then proposed the formation of an informal Saigon group outside DAC which would have no connection with the OECD body and would for the present receive no publicity.

It was agreed that a coordinating body should meet in Saigon which would serve two main functions. First of all it would serve as a vehicle for reviewing the aid contributions made by the various members and thus expose duplication or areas of neglect. Secondly it would give us a means to get across the financial facts of life to the other western nations that had a more peripheral interest in Viet-Nam. Thirdly, it would provide the necessary spadework for a later meeting of senior officials from capitals that could discuss the policy issue of commercial import aid for Viet-Nam. Australia, France, Germany, Italy, Japan, New Zealand, and the United Kingdom agreed to participate in the Saigon Group.

Beginning August 31 three meetings of the Saigon Group have been held.4 The first was primarily organizational, but included also a [Page 24] review of the U.S. commercial import program and a reiteration of the desirability of similar aid by others.

At the second meeting,5 the Australian and German Ambassadors agreed to draw the attention of their governments to the desirability of paying plaster costs of their project aid. The third meeting6 was more encouraging. The British predicted they would provide more paramilitary aid rather than expanded economic aid. The group unanimously adopted a report7 drawn up by financial experts from each country. This report, while not binding the countries to its conclusions, called for long term loans to cover the local currency costs of sponsored projects.

The meetings in Saigon have shown a certain amount of success within the limits set by the circumstances. One year ago most western countries were probably quite sceptical both of South Viet-Nam’s future and our commitment to it. By now they are probably reassured on both points. This does not mean that they feel an obligation to increase their aid significantly. Continuing efforts in Saigon, Washington, Paris, and the respective capitals are required to capitalize on these earlier soundings.

In October we directed our embassies to approach their host countries on the possibility of financing the local currency costs of projects they assist in. This was to be done without weakening our earlier stand on commercial import aid. So far there has been no reported reaction to this approach.

Viet-Nam was discussed briefly in December at a Far East Regional meeting of DAC in Paris. Germany indicated that it was considering grant commercial import financing. France claimed that Viet-Nam had not made use of previous general import credits (which are not grant in nature). Japan indicated that remaining reparation credits should be used before additional aid is made available.

Since then we have received indications that the Australians are seriously considering adopting a commercial aid program for Viet-Nam including agricultural and dairy products.

In summary there are encouraging signs that Australia, Germany, Japan could be moving toward a commercial import program. This possibility did not exist before our efforts began a year ago. The UK will provide slightly increased paramilitary aid, but is inclined to hold off on anything else because of the demand for Indian aid. Italy has had no experience in this area, but is showing limited interest.

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During his recent visit to the Far East, Assistant Administrator Janow stressed in Saigon the need for prompt utilization of available French and Japanese credits. We propose to press forward in identifying specific projects and segments of the commercial aid program (such as spare parts) which are particularly suitable for financing by other countries.



  • Australia
    • (Estimated $1,000,000 for FY 63)
    • —RR cars, Radio Station, jeeps, barbed wire, mills,
    • —corrugated iron, participants, etc.
  • Belgium
    • —Five Year export credits
    • —Six scholarships
  • China, Republic of
    • —Two geological engineers
    • —Technical advisers
  • Germany
    • —Five additional Medical Professors for Hue
    • —Architectural Engineer
  • Japan
    • —Steel Rolling Mill (under war reparations)
    • —Continuing work on Da Nhim Cam
  • New Zealand
    • —Surgical team for Provincial Hospital
    • —Equipment for Hue Medical Faculty
    • —Participants
  • Canada
    • —$300.000 worth of wheat flour
  • France
    • (FY 63 effort about 4.8 million)
    • —Teachers
    • —Technicians
    • —Participants
    • —Commercial Credits
  1. Source: Department of State, Special Group Counterinsurgency Files: Lot 68 D 451, Special Group (CI) 1/17/63-3/7/63. Confidential. Drafted in the Vietnam Working Group by Edmund H. Kelley. Circulated to the Special Group on January 15 under cover of a memorandum from Maechling, in anticipation of its January 17 meeting; see Dcoument 14.
  2. James W. Riddleberger, Ambassador to Austria.
  3. John W. Tuthill, Ambassador to the European Communities.
  4. Records of this meeting and subsequent meetings of the coordinating committee are in the Washington National Records Center, RG 84, Saigon Post Files: FRC 67 A 667, 500 Economic Matters.
  5. September 14,1962.
  6. September 27,1962.
  7. The report is entitled “Conclusions of the Experts of the Viet-Nam Aid Coordination Group”, undated. (Washington National Records Center, RG 84, Saigon Post Files: FRC 67 A 667, 500 Economic Matters)