Foreign Relations of the United States, 1961–1963, Volume IV, Vietnam, August–December 1963

241. Telegram From the Embassy in Vietnam to the Department of State¹

Saigon, October 30, 1963—4:45 p.m.

822. Joint Embassy/USOM message. Reference: Deptel 601.²

I. Reftel covers two different classic issues:

a. Methods for removing Can Lao influence and opportunities profit from US aid program, and

b. Procedural changes in economic aid programs not necessarily related a above.

II. Detailed information on first class issues best dealt with by CAS and they will provide separate report. Undoubtedly Can Lao profits from wide range economic concessions not necessarily related aid programs. Special treatment accorded taxes, monopolies, licenses, government loans, contracts, etc. Eligible importers selected back in 1957-1958 with virtually no new members added in interim. According our information, criteria used that time were objective-nevertheless probably Can Lao getting “cut” from those profiting import program expanding list undesirable from standpoint efficiency distribution supplies in country-many believe too many importers now either selling import licenses or unable set up internal distribution channels outside major cities. Furthermore no reason to believe expanding number would necessarily reduce Can Lao capacity project. In summary, we sceptical efficacy suggested remedies or virtually any other remedies so long as Nhu is in power and holds sway over Can Lao, and he or those he controls are able exact kickbacks from importers virtually at will. If his power broken, issue Can Lao support could become irrelevant.

III. With respect to type b issue, our opinion much depends on situation at time we decide resume aid. In present tug of war, two outcomes (with various shadings) possible: (a) favorable change in government or major political concessions by present government; (b) for variety reasons difficult to predict now, we decide resumption aid without any significant improvement our relations. Another dimension to this analysis is an estimate of economic conditions existing at time we resume aid. In any case, it would not be intended permit onset of widespread economic chaos prior to resuming aid.

IV. If aid resumed after significant favorable political changes and in the wake of serious price rises and plaster value decline, we certainly would not press for procedural reforms but would rather expedite to maximum input of those aid commodities essential to economy (including refilling pipeline, but not repaying amount lost by suspension). Furthermore, the generally improved nature of our relationships with the government would argue for “detailed consultations and study” rather than imposition of “conditions”.

V. If we resume aid in fear of loss SVN or in atmosphere accommodation welfare populace without settlement outstanding issues with government there would be little leverage for exacting procedural concessions. The same is true at present under aid suspension–GVN not likely be receptive to demands for procedural improvements when smarting under US pressure.

VI. Given above analysis, we suggest Dept consider, along with suggestions contained Embtel 816,³ specific reforms of CIP and remedies against local abuses (taxes, income distribution, land tenure, etc.) be part broader objective changing institutions and bringing into government people with different motivations as prelude discussion and [garble—start?] specific reform measures. To extent we retain leverage for reforms, political climate permits, we would then concentrate on such things as:

a. Creation of Ministry of Emergency Planning with delegated broad economic powers, under Presidency. This economic czar to have power to impose administrative rulings on all line departments, including National Bank, and to have direct responsibility for only those operations essential to carry out reforms. Areas of concentration would be taxation; exploitation farmers, fishermen and small artisans by middlemen; inefficient government procedure; US foreign aid; joint US-GVN budgeting; marketing policies for rice, fish, fertilizer, etc.

b. Staffing of the top personnel of the Ministry with people of known competence and integrity, e.g. Dean Thuc, Pho Ba Long, Di Kien Thanh, Hanh of SOFIDIV, Vu Van Thai and others.

c. Elimination from top posts of incompetent and corrupt officials.

d. Joint study and consultation on whole range of economic and financial problems.

e. Increase decentralization of responsibility for execution of policies and greater emphasis on local operational initiative in provinces.

VII. Hopefully, if some of above things achieved, appropriate procedural reforms suggested reftel would flow from them.

Lodge

1. Source: Department of State, Central Files, AID (US) S VIET. Secret; Limit Distribution. Received at 6:30 a.m. and passed to the White House at 7:35 a.m.

2. In telegram 601, October 18, the Department of State sent the following request to Saigon:

   “Request Embassy/USOM/CAS study and report on extent to which Ngo Dinh Nhu reinforces his base of political power and influence through the Commercial Import Program (CIP) and the feasibility of modifying the CIP so as to reduce or eliminate its future contribution to Nhu’s influence.” (Ibid.)

3. Document 239.