Foreign Relations of the United States, 1955–1957, Vietnam, Volume I

348. Memorandum From the Deputy Director, Plans, Central Intelligence Agency (Wisner) to the Assistant Secretary of State for Far Eastern Affairs (Robertson)¹

Washington, September 27, 1956.

SUBJECT

• Possible Western Participation In Vietnamese Industry

1. Attached, for your perusal, is a special memorandum from President Diem to General O’Daniel, President of the “American Friends of Vietnam”, who has just returned from a month’s visit to Vietnam as the guest of President Diem. The sidelining is General O’Daniel’s and it highlights those portions of the paper that pertain to the President’s desire to invite private Western investment capital to assist in the development of Vietnamese industry, agriculture, etc. These same passages indicate certain legal and administrative concessions he is prepared to make to induce such participation by “venture” capital.

2. At the very least, it seems to me, we should bring this broad and non-discriminatory invitation to the attention of the French, British, Italian, West German and Japanese embassies here for transmission to their governments. Prior to such action, however, General O’Daniel (who received the memorandum in strict confidence from President Diem) requests that Ambassador Reinhardt in Vietnam be given an opportunity to express his own views on the paper—which General O’Daniel informally showed the Ambassador without President Diem’s knowledge—and to ascertain President Diem’s own views, since the latter has not as yet made any official announcement on the subject of foreign “venture” capital.

3. It is my belief that the action proposed above would benefit the United States in the following ways:

a. Although not personally too sanguine about the willingness of foreign and U.S. “venture” capital to invest in a new and recently disturbed area like Vietnam, possibility remains that there may be some favorable response to President Diem’s invitation. Any such action by private capital may permit the U.S. Government to reduce to some extent the very heavy financial commitments for aid to Vietnam, which otherwise we apparently are going to have to carry for the forseeable future.

b. By our being “forthcoming” in this matter with certain foreign embassies, as suggested above, and particularly if some foreign private capital does venture into Vietnam, we can hope, thereby, to undercut the very popular and successful thesis and propaganda theme that U.S. Government assistance to under-developed countries is merely a cover for Yankee traders to come in and take over these countries, to the great detriment of the countries as well as to the established commercial interests of their erstwhile colonial masters. As you know, this line has been exploited and accepted by non-Communists as well as Communists—witness the French who have levelled the charge against U.S. efforts in Vietnam and elsewhere. In fact, in nearly every European country with colonial possessions, there are perfectly sober citizens who honestly believe and secretly fear that the U.S. is trying to accomplish just such a take-over of their interests abroad.

Frank G. Wisner

[Attachment]

Special Memorandum From the President of the Republic of Vietnam (Diem) to Retired General John W. O’Daniel

When last year, on the occasion of the inauguration of the Dong-Cam Dam, I presented to you the essential economic objectives of my Government, their realization seemed far away and subject to numerous difficulties.

Since then, we have survived victoriously our heavy trials. In the process we have achieved and strengthened our political stability, internal security, and national independence. We have taken active steps to create the political framework for a democratic Government. We are a Republic now. Our popularly-elected National Assembly is another step in that direction. The Constitution which is to govern our way of life will soon see the light of day. We are gradually finding the proper political means for assuring all citizens the right of free development and maximum initiative, responsibility, and spiritual life.

In retrospect, we have come a long way, but we have a much longer and harder way to go. We are confronted with the major problem of how to achieve a measure of industrial development in order to give meaning to the political structure we are in the process of erecting. We can survive as a nation only with a measure of industrial development commensurate with our resources and reasonable requirements. We look to the United States and to the Free World for assistance in this field. But whatever the degree of assistance, we must harness it to our own “will to develop,” and we must mobilize our own means to the same end.

The increase in the national output, the technical equipment of the country, the reduction in the costs of production, and the resulting increase in everyone’s purchasing power, such are, as you know, our principal tasks. Such are indeed the tasks which all the democratic nations are concerned with. Each of them understands that these ends will not be achieved by its own means alone; there is the full realization that international cooperation in this field is the logical and beneficent consequence of the solidarity of ideas and of the economic interdependence of this vast community called the Free World.

If VietNam, which has given proof of its determination and courage, can rightly count on this solidarity we nonetheless should, in return, take the necessary measures welcoming and protecting the legitimate interests of those willing to invest in our future.

We need investments to maintain and develop the economic potential of our country which, after a long period of destruction and disorder, has just recovered its balance. These investments must be encouraged and guided by the Government and appropriate legislation must be enacted.²

I call upon all capital holders, be they Vietnamese or of foreign origin, who are really interested in this country, and I urge them to take the risk of investing their capital in order to develop the productive potential of this country.³ The Government is determined to encourage all investors on the condition that their aim is not merely to exploit the people of VietNam. The measures the Government is ready to adopt will be designed with an eye to stimulate and enlarge investment activities, and to make investments attractive.

I am opposed to nationalization and to any form of economic discrimination. Therefore, I need only refer to the statements I made on this subject last year.

In order to give effective protection to commercial and industrial property rights, the Government of VietNam will adhere to international reciprocal agreements and arrangements for the protection of such rights. The Government of VietNam is ready to negotiate with any country of the Free World reciprocal agreements giving to the citizens of the contracting country the same rights enjoyed by the citizens of VietNam.⁴

To facilitate the formation of investment companies, provisions will be made for the abolition of the incorporation fees, the abolition of the fees for the extension of the life of a company, for the changes in the company name and dissolution of companies, and, finally, exemption of fees in cases of company mergers or a company’s increase of capital.

In order that the invested capital make its maximum contribution to the country’s productivity, the Government will grant income tax reductions or exemptions to industrial, agricultural, and mining enterprises. Favorable conditions will be created for the importation of capital goods or raw materials which are part of the investment effort. Terms governing the importation of goods for processing and their eventual export will be made flexible.⁵ The formalities related to the granting of licenses will be eased in order to speed up the flow of imports. Custom duties will be reduced on the capital goods financed through the foreign exchange reserves of VietNam. They will be abolished if the importation of such goods is financed by the investor. Foreign capital will benefit from certain allocations and conditions for transferring profits, amortization costs, or repatriation of the investment.

On the other hand, in order to avoid the development of parasitic activities or of activities not benefiting the country, the Government will ask those who participate in the economic development and stand to benefit from it to submit their projects to the Planning Directorate which is charged with coordinating all developmental activities. Measures will be taken so that the initiative of the investors is not smothered by administrative procedures which are more concerned with formalities than with efficiency.

Such measures must further the effort already made by the Secretary of State for National Economy to reorganize the distribution system and to reduce the role played by the middlemen. These measures must also help us to protect our currency. Indeed it is not enough to fight against the black market; we must also check the rise in prices which has developed during the past few months. The resulting social claims bringing about a rise in wages again influence the prices, thus starting a race, the effects of which all modern nations dread.

To protect the effectiveness of the purchasing power of the workers, I give preference to a policy of steady wages in an economy where prices are stable rather than a competition between prices and wages of which the workers are invariably the first victims. Our worker organizations must understand this and must help us to lead the country toward a coherent and steady effort of production, while not mistaking social action for social agitation.

1. Source: Department of State, Central Files, 800.05151G/9–2756. Secret.
2. This paragraph was sidelighted by O’Daniel.
3. This sentence was sidelighted and underlined by O’Daniel.
4. This paragraph was sidelighted and the last sentence was underlined by O’Daniel. In the margin he wrote “Investments”, as he did in the margin of the next paragraph.
5. The first two sentences were sidelighted and underlined by O’Daniel and he wrote “Investments” in the margin.