Foreign Relations of the United States, 1952–1954, Indochina, Volume XIII, Part 2

751G.5 MSP/8–2254: Telegram

The Ambassador in Vietnam (Heath) to the Department of State¹

secret

Saigon, August 22, 1954—8 a.m.

668. Repeated information Paris 229. Re Department telegram 491, repeated information Paris 486.² Re paragraph 1 reference telegram, the elements of program for most effective use of direct US economic, financial, and military aid to individual Associated States are:

1. US training assistance in behalf of armies of Associated States.

2. Continuation end item assistance.

3. Military budget support.

4. Economic aid.

I. Direct aid

To be most effective in carrying out over-all aspects of US policy, aid should be given directly to governments of Associated States. Over-all US aid is in itself powerful lever, employment of which can and should be utilized to insure adoption of US defined objectives. Our aid should be coordinated with any French programs, but we should no longer be required to look through French glasses in making our aid available here.

II. Training

1. From viewpoint background it will be recalled that both French and free Vietnamese have asked for US training assistance in behalf free Vietnam Army (FVA).

Free Vietnam request made through diplomatic channels; French through General Ely’s 9 June 1954 proposals to General O’Daniel.³ Problem fulfillment these requests decidedly intensified by US personnel ceiling imposed by truce agreement. Of 342 individuals in Indochina 22 July 1954, estimate maximum of 150–200 could be made available for training after program rotation to obtain qualified personnel.

2. Limited US capability makes it imperative our training effort be carefully tailored to provide optimum direct assistance to free Vietnamese in achieving autonomous FVA reflecting US methodology, organizational concepts and doctrine.

3. Utilization of US training capability to influence selected few FVA units and schools can only result in divisive effect by creating two parallel structures: one US, the other French. Use of US personnel as advisors to French training organization prevents direct impact FVA and camouflages our effort. Aim must be to employ US assistance as catalyst to bring French and free Vietnamese together within framework of US military system.

4. Fortunately, situation is favorable to course of action which concentrates US capability on single training undertaking permitting direct and lasting impact on FVA. French have World War II record of achievement under US organization and operational methods. They have taken steps to carry out their training of FVA along US lines developed in Korea. By coupling this leaning toward US mold with keen free Vietnam desire to embrace US system in toto, two goals are within reach: an ultimate FVA in the US image, plus French-free Vietnamese unity in common undertaking. Important political and psychological rewards accompany this approach.

5. To give expression to foregoing concept, considered here that US training effort should be addressed to establishment and operation of command and staff school for FVA officer corps and, to lesser degree, NCO corps. French would be encouraged to attend. Object of school would be creation of strong, enthusiastic, loyal and soundly-indoctrinated FVA “leadership and instructor corps” capable of installing and perpetuating US methodology, organization and doctrine throughout FVA. Through this approach US influence imparted to FVA as whole rather than to segment thereof. French participation would not only assist their own grasp of US system, but would enhance their training of FVA. Above all, this formula joins US, French and free Vietnamese in team dedicated to single purpose. Current situation is exact opposite.

6. FVA transition not possible in short period of time nor by shortcut techniques. Despite desire some free Vietnamese quarters to switch immediately, FVA dependent upon parent French establishment to degree precluding such possibility. In order, however, to provide visible evidence intent create autonomous FVA along US lines, and at same time to establish favorable psychological accompaniment, French might be prevailed upon to announce target date 12–18 months in future by which time autonomy and transformation will have been completed. Prior this date US would concentrate on C and SS, leaving training of FVA to French. Subsequent to transition, US would arrange major program of inspection with FVA.

7. Idea of command and staff school has not yet been discussed with French. Also, previous paragraphs do not discuss Laos and Cambodia. We consider that Laos should be left to French responsibility. Question of US sharing in training of Cambodian army must be decided at governmental level. While offering to share responsibility for training Vietnamese, Ely hopes conserve French monopoly in Cambodia. However, it is our feeling that if we took over training entire Cambodian army on a phased basis of accomplishment, or at least shared in such training along lines set forth for Vietnam, Cambodia would have much better army.

8. Above paragraphs also do not cover question of para-military forces. We believe there should be created, as an integral part of national military establishment, strong militia organized along village and provincial lines, and that suppletifs and confessional military organizations should be phased into national army establishment.

III. End item assistance

1. End item assistance and military budget support should be programmed and administered by one group, preferably civilians employed by Department of Defense, so that all MAAG military personnel here could be used for training purposes. We should give all end item assistance necessary and possible under Geneva truce agreements. For Vietnam this would mean replacements while for Cambodia and Laos build-up of military establishments is permissable. At the moment we are unable to hazard a guess as to dollar cost of such assistance, but it would probably be more than half of the dollar cost of such assistance as programmed for 1954.

2. Job which this group would have to do would be costing of Associated States forces and follow-up of implementation of program as costed. In past this job has been performed by French as part of over-all command functions. As result few individuals in Associated States are ready to take on this job. In addition to costing, this job would involve end-use inspections and auditing of expenditures made by Associated States for which reimbursement would be requested from US. Because of lack of experience of local officials and the well known tendency towards graft, a considerable number of American personnel would be required, and it would be necessary for them to have complete access to records and personnel of Armed Forces of Associated States. At present, as far as we know not even nucleus of such group exists. If Washington accepts idea of direct aid and of group such as this, such group should be constituted immediately and sent out. Please advise your ideas and intentions on this point.

3. As long as French forces of any size remain in Associated States, French should, of course, be consulted on size and composition our end item aid programs to Associated States.

IV. Military budget support

1. In round billions we estimate that the Vietnamese military budget in 1955, excluding end items but including cost of a militia, would be 17,000,000,000 to 20,000,000,000 piasters. The regular civilian budget would approximate 2,500,000,000 piasters and an extraordinary budget for economic reconstruction 5,000,000,000 piasters. The total, therefore, would be 25,000,000,000 to 28,000,000,000 piasters, assuming that Vietnamese Government carried forward programs which we would envisage to be necessary. From its own resources Vietnam could raise approximately 4,000,000,000 piasters through taxation and deficit financing, under existing taxation and institutional arrangements. The balance of 21,000,000,000 to 24,000,000,000 piasters (600,000,000 to 700,000,000 dollars), would have to come from outside aid. Deficits of Cambodia and Laos combined would probably be another 3,500,000,000 piasters or 100,000,000 dollars. These figures illustrate the reason military budget support and economic aid should be considered one program although administered separately.

V. Economic aid

1. Several other agencies and countries have indicated intention of giving economic aid to Associated States. French have proposed substantial aid, and we believe French are only ones who will give aid of any consequence. French have recently proposed here joint program, including joint planning and pooling financial resources, of 13,000,000,000 piasters over two-year period of which they would make available 5,000,000,000 and US 8,000,000,000. We believe it unwise to attempt a joint economic program with French although close coordination will be necessary. Any such joint program would give rise to interpretation, perhaps not wholly unfounded, that French were using American participation as front to maintain control of Vietnam economy. Any French economic aid should be a net addition to total aid not a mere channeling of our aid through France. We do not know if French expect military budget support of their forces in Indochina, but we do not believe such support should be given at same time French are extending economic aid to Associated States, since this in effect would be continuation of system under which we have given aid to Associated States through France. Furthermore, we question wisdom of budget support for French forces in Indochina in any case. There is need for French to remain until sound Vietnamese army is built up to prevent military vacuum which Viet Minh would fill, but we believe French forces will remain here in some strength to try to protect French interests and prestige in Far East.

2. USOM has made preliminary estimate that program costing dollars 150 million could be carried forward FY 1955, as contrasted French proposed program mentioned above which would total 8.5 billion piasters (dollars 240 million). Both estimates represent total requirements believed necessary attain objectives. Neither enters into detail as to which country finances how much. However, both assume that economic aid program will be carried on by both countries. Detailed breakdown of USOM proposal by categories and countries follows by USOM airgram.

3. Size of our Economic Aid Program, therefore, would depend on type and amount of French economic aid if any. General range of total foreign aid as shown above would be 21 to 24 billion piasters equivalent. With an aid program of this magnitude Associated States would have no lack of foreign exchange for needed programs. We would still need to insure a wiser use of these foreign exchange resources than has occurred in past. This should include but not be limited to US observer or member on any foreign exchange allocation board. There is precedent for such system since we now have an observer on quadripartite import committee, and we have been members of exchange allocating boards in other countries.

4. It is almost certain that quadripartite economic system will soon be broken up, that national banks will be created in each of Associated States, and that foreign exchange control will be taken over by governments of Associated States. These states may remain in French franc area or French Union dollar pool. Whether they do or not should make no difference in our giving dollar aid directly to these governments. However, whether they use such dollars themselves or put them in a French Union dollar pool is a matter of concern to us and is related to question of continued French backing currencies Associated States. We should have control over eventual disposition of our dollar aid.

5. With foreign exchange problem solved principal problem becomes securing and using effectively of piasters. Commercial import program as in the past would not generate piasters fast enough for our total aid program. A single system of securing piasters must be instituted so that it will be flexible enough to afford sufficient piasters to carry forward all programs.

VI. Controls and leverage

(1) US program should include (1) personnel for training, planning and controlling financial aid for military establishments of Associated States and (2) advice and control on economic aid programs to be furnished by USOM, which should include but not be limited to projects and end use checks as in past. Governments of these countries must develop positive economic policies. Relative economic stability which has existed in these countries in past has been due more to circumstances than to deliberate policy. It would be dangerous to assume that such favorable circumstances will continue to exist. We should assure at governmental level that our economic and military aid will not be dissipated through unwise economic and military policies. Among other things we should advise on creation and operation of national banks, currency, and credit policies, and land reform.

(2) All of above paragraphs assume that our principal control will be at policy making level in form of advice and assistance. At same time we can not cease auditing and end use checks on our funds and commodities. Latter controls should be considered in nature of spot checks on overall system of controls rather than considered as controls themselves. This system of control assumes more American personnel on the spot.

(3) Outlined program requires governments insure security will be maintained well enough so that program activities can be carried out freely in all regions of Cambodia, Laos and remaining Vietnam. In this connection, nonmilitary security forces, such as police and national gendarmerie, should be developed.

4. Also requires that governments Associated States become strong enough to institute policies and administrative procedures in order to make effective use of aid offered. Hence, high priority is assigned to development of public administration program.

5. In view Communist propaganda successes and stepped up activities, essential governments Associated States be able to tell people what is being done for them and how they can help themselves. Hence, high priority is assigned to provision supplies, equipment, and technical assistance to permit rapid expansion of information services. Outline of USIS program forwarded as enclosure Embassy despatch 59, August 13.⁴

6. If above general lines of program are agreed, further refinement of personnel needs and financial requirements will be necessary. Pending Washington agencies response to foregoing recommendations, we will continue study along these lines.

7. This is country team message.

Heath

1. This telegram was transmitted in four parts. On Aug. 18, 1954, Robert McClintock was appointed U.S. Ambassador to Cambodia and Charles W. Yost Minister to Laos. Henceforth, the U.S. Ambassador at Saigon was accredited only to the State of Vietnam.
2. Dated Aug. 7, p. 1924.
3. See telegram 2712 from Saigon, June 10, p. 1674.
4. Not printed.