Office of the Historian

141. Telegram From the Department of State to the Embassy in Vietnam1

Washington, May 19, 1966, 1:46 p.m.

3531. For Porter from Komer. Non-military programs reviewed at highest level with Ambassador Lodge present 16 May.2 The following measures were decided upon:

1.
Make urgent three-pronged attack on inflation.
a.
DOD and AID will each make all-out effort to reduce to minimum inflationary impact of further US buildup. DOD is analyzing possibility of keeping demands on local economy and manpower at FY 1966 rate, despite increase in deployments and construction program—the analysis and a plan for accomplishing an agreed-upon goal will be completed about 1 June (breakdown of FY 66 target ceilings explained in JCS 2227, 17 May, para 1a.).3
b.
US will make all-out effort to eliminate bottlenecks to massive flow of aid commodities, especially port and in-country transport congestion. US military will assist in providing shipping, port aid, and in-country lift as required. US will insist that GVN take essential steps speed flow of goods, if necessary using leverage of suspension aid shipments and/or new aid tranches till bottlenecks removed. DOD will make prompt contingency study of US military takeover Saigon port and deliveries to importers. Instructions are being sent Embassy and MACV (septels)4 for coordinated mission council recommendations by 31 May.
c.
As soon as IMF recommendations available, US will present to GVN revised Honolulu package of maximum realizable fiscal measures designed to sop up at least 10 billion piasters during the last six months of CY 1966.
d.
Negotiating strategy will be planned in light of IMF recommendations as reviewed Saigon and Washington, with appropriate consideration desirable carrots as well as sticks. Possible carrots might include US approval of wage increase, US financial support of new GVN land reform initiative, and help in establishment GVN PX system if current analyses establish their feasibility in time. FYI. Though not discussed, US provision of CIP security stockpile might be an added carrot. End FYI. Sticks to provide leverage might include withholding approval further CIP tranches or other means to be studied promptly.
2.
We will increase annual rate of RD Cadre output from 19,000 to 39,000 as fast as instructors are available to maintain quality. DOD will provide construction resources as needed to construct new training center. Komer will resolve with appropriate agencies issue of how added cost is apportioned.
3.
We will expedite expansion police forces to 72,000 end CY 1966 goal, and promptly study further expansion of police as the preferred longer term internal security instrument.
4.
Aside from RD Cadres, SecDef and Komer will defer approval of any FY 1967 GVN manpower increases until overall agreement is reached on civil/military allocation. This means in effect a temporary freeze on all force ceilings at end FY 1966 approved levels until manpower budget can be worked out.
5.
Foregoing FYI and should be closely held.

Rusk
  1. Source: Department of State, Central Files, AID (US) VIET S. Secret; Immediate; Exdis. Text received from the White House; cleared by Bell, William Bundy, and McNaughton; and approved by Unger. Repeated to CINCPAC.↩
  2. See Document 140.↩
  3. Not found.↩
  4. Not further identified.↩