112. Memorandum From the President’s Deputy Special Assistant for National Security Affairs (Rostow) to the President1
The staff work in Washington has now been completed on the response to the Report of the Special Financial Group on Viet-Nam (Staley Group)2 and a letter from you to President Diem has been forwarded for your approval by the attached memorandum from the Acting Secretary of State.3 I have a few comments on the report itself and on the response to it.
The staley Report.
Dr. Staley’s group has several achievements to its credit. It contributed to the continuing effort to create a more cooperative atmosphere in our relations; it obtained Diem’s agreement in principle to de facto devaluation and a single exchange rate for imports of U.S. aid; it reached agreement with the Vietnamese on criteria to govern imports under the U.S.-financed commercial import program; it obtained acceptance by Diem of the desirability of short-range economic impact programs; it obtained some acceptance of the fact that U.S. aid is not the solution to VietNam’s local currency financing problems; it laid the basis for continuing consultation on economic matters through parallel committees; and it pressed on Diem the need for long-range economic planning.
But the group was unable to come up with firm estimates or programs and much work remains to be done on the estimates and programs in the report; it did not re-examine the total U.S. aid effort or even the relationship between its own proposals and the existing aid program; it did not get very clear commitments as to the extent and character of the Vietnamese contribution to the total effort. On balance then, the Staley group made an important contribution, but much remains to be done.
The deficiencies of the report have been a source of some difficulty in developing the U.S. response to it. But behind the differences that developed within the Executive Branch over our response was a more basic issue which is a source of continuing debate on various Vietnamese problems. Some agencies (notably [Page 260] State and Defense) are of the view that we can best achieve Vietnamese action on needed political, military and economic reforms, not by specific conditions on our aid, but by creating a general atmosphere of cooperation and confidence. They believe that the application of this approach during the last six months has produced a significant improvement in Vietnamese performance. They recognize the difficulties with the estimates in the Staley Report, but believe that for psychological reasons we should endorse the report as far as we can now and then get on quickly with the refinement of the estimates and programs.
Other agencies (e.g., Budget and ICA staff levels) stress the need for Vietnamese action if the proposed programs are to succeed and believe that such action is much more likely to be forthcoming if our aid is specifically conditioned upon Vietnamese performance with respect to particular needed reforms. On the basis of past experience they are inclined to be skeptical of the prospects for getting action out of Diem on the basis of an approach which places primary emphasis upon developing a spirit of mutual cooperation. The letter to President Diem represents something of a compromise between these two views, but in general tends toward the first and goes about as far as we reasonably can go in endorsing the Staley Report. The success of the compromise will depend notably on the success of the joint committees in making the criteria stick.
The Letter to President Diem.
The most important single commitment in the letter to President Diem is the endorsement of a 30,000 man increase in Vietnamese forces. The Staley Report itself made no recommendation on this subject which was outside its terms of reference. The rationale for this increase is contained on page 4 of the Memorandum from the Acting Secretary of State. (The Ambassador’s case on political grounds for the increase is contained in the attached telegram.)4 Despite persistent efforts we have made, the State Department’s statement of rationale does not cover such important subjects as the extent to which these forces are intended to meet a threat of overt attack from the North as contrasted with the internal threat;5 how they will be deployed; the kind of training that they will receive; and the specific effects of such a buildup on the [Page 261] civilian economy. We lack in Washington the specific information and plans necessary to answer these questions. In particular, we shall need a mutually agreed, geographically-phased strategic plan for dealing with the Viet Cong before we can answer them with assurance. The difficulty in getting this town to answer these questions is one reason I advocate sending the ablest military mission we can muster to the field.
In the light of these ambiguities the letter to Diem suggests the need for a plan and for an understanding on the training and use of the 30,000 additional men before the buildup begins. It was not considered desirable, however, specifically to condition the increase upon such understandings.
The letter contains a general commitment to provide the commercial import program that will be required-provided it can be justified under the seven criteria contained in the report (page 3 of the telegram). The instructions to Ambassador Nolting6 that follow the text of the letter would authorize him to say that the increased generation of piasters under the new effective exchange rate will not serve to reduce the U.S. share of the aid effort (last page of the telegram). Since the FY 1962 Congressional presentation provides less than we provided under the FY 1961 program ($95 million v. $115 million), this statement could involve a minimum commitment of $20 million aid beyond that contained in the Congressional presentation. The cost table in the memorandum from the Secretary (page 2) uses such a $20 million addition as the bottom end of the range for this program. On the other hand, the commitment might be met through PL 480 or by drawing down the pipeline.
The telegram states that you are directing Mr. Labouisse to conduct through the USOM in Viet-Nam a thorough and expeditious review of the short-range economic program contained in the Staley Report and of related existing U.S. aid projects. The parallel committees are to develop specific longer range development projects.
An important part of the letter and the instructions to the Ambassador is the emphasis upon economic development planning and the related emphasis upon seeking to get Diem to use our new joint economic efforts as a means of projecting to VietNam, its friends and its enemies, an image of a nation confident in its long-range future.
Finally, in accordance with your wishes, the instructions to the Ambassador would have him give added emphasis to the importance we attach to Vietnamese adherence to the seven criteria governing imports and to its commitment to a higher piaster rate of exchange.
- Source: Kennedy Library, National Security Files, Viet-Nam Country Series. Secret.↩
- See Document 93.↩
- Neither found attached to the source text. The Acting Secretary’s memorandum is apparently the same described in footnote 2, Document 109. The letter from President Kennedy to President Diem is Document 114.↩
- No telegram was found attached to the source text, but this is apparently a reference to Document 92.↩
- The Staley Report contains a Vietnamese estimate that 90 percent of the existing Vietnamese armed forces are committed to the counter-insurgency effort. It is difficult to evaluate this estimate. The U.S. military are inclined to give it general credence. My view is that it involves a somewhat generous definition of “counter-insurgency effort”; but I am not prepared from this distance to challenge the present disposition of the Vietnamese order of battle. [Footnote in the source text.]↩
- The instructions were transmitted in telegram 140, Document 113.↩