A. VIETNAM II. VIETNAM FOREIGN AID PROGRAM The Republic of South Vietnam was granted approximately $750 million for the entire AID program for fiscal year 1966. The grant for fiscal year 1967 was approximately $515 million, and some $490 million is budgeted for fiscal year 1968. The population of South Vietnam is now estimated at 17 million, an increase in the estimate of 1 million in 1 year. Saigon is now estimated to have 2.5 million persons, with another 1 to 1.5 million living in the city's environs. About 13 million persons are said to live in the rest of the country. The pacification program is headed by Robert Komer in an operation known as civil operations for revolutionary development support (CORDS). That organization recently stated that 67 percent of the South Vietnamese population are under the control of the Government of the Republic of Vietnam, and that this figure represents an increase of 4% percent in 1 year. The realism of this estimate is undoubtedly subject to question, particularly in view of the recent Vietcong insurgency. (a) AGENCY FOR INTERNATIONAL DEVELOPMENT (AID) AID's staff is largely located in Saigon, with a few officials scattered throughout the rest of the country. The exact number of American employees at the time of our visit was represented to us as follows: AID employees, either direct hire or "borrowed" from other Federal agen- Total___ 2, 130 450 2, 580 There are hundreds of dedicated Americans working in the American AID program, but I was dismayed to find in the Saigon AID mission one of the most overblown bureaucracies I have ever seen. A vast complex of over 4,700 American and Vietnamese employees, the Saigon headquarters outnumbers the AID personnel in the field by nearly two to one. More than two-thirds of the Americans working for AID in Vietnam have no knowledge of the Vietnamese language less than half speak French. But these statistics are not surprising in view of the frantic growth of AID in the country. In the past 18 months, the size of our AID mission to Vietnam has more than doubled-and the end is nowhere in sight. This growth reflects, of course, the magnitude of our effort in South Vietnam. But more than that, I am afraid it reflects a misplaced faith in the magic of American dollars and American personnel. As one young American volunteer told me in Saigon: "A little yeast makes the bread rise; too much sours the dough." Our aid effort in South Vietnam lacks both the discipline of the dollar-the effort that is made to assess priorities when funds are tightly controlled-and the discipline of a realistic personnel ceiling. AID officials informed us that they are asking for more personnel, totaling 3,100 people in fiscal year 1968, and 3,600 people in fiscal year 1969. Internal resistance to this plan appears to be justified in view of certain questionable projects which AID is engaged in, which I will discuss subsequently. Many of these AID employees have their families in several “safe haven" countries which the employees are allowed to visit periodically. The number of visits per year varies in inverse ratio to the employee's status and grade within AID. The "safe haven" areas include Bangkok. Thailand; Taipei, Taiwan, and Tokyo, Japan. The housing, commissaries, schools, and medical dispensaries needed by these dependents are being financed with AID funds. AID officials could not provide us with exact cost breakdowns, but stated that the costs were "high." They did not feel that such arrangements were placing much strain upon the host countries, pointing out, for example, that all dependent housing was being built in one place in Taiwan. AID seemingly does not consider the fact that this housing costs a great deal in view of the fact that its anticipated use may be curtailed if the dependents are sent home to the United States or returned to South Vietnam. I would recommend that the subcommittee inquire into alternative ways such as rental housing or transport of AID personnel on home leave through charter flights to the United Statesof resolving this situation. I asked about the number of projects that AID has undertaken in Vietnam, noting that the Director of AID in Thailand had earlier told me he felt he could cut down, and eliminate at a reasonably early date, some 15 of his 35 major programs and projects. My question was met with a great deal of dissent by AID officials in Vietnam. I was told that there are approximately 80 programs involving some 200 projects currently being undertaken, and that this represents a cut from 300 projects in the previous year. When I continued to ask what projects could be eliminated with a resultant decrease in employees, the resistance continued. The AID Director indicated that he had not permitted a few planned programs to materialize. When pressed, he indicated that he had cut the staff of the land reform section within AID from 26 persons down to two. I had been advised by AID officials that the technical assistance programs in Vietnam started in 1952 and that the commodity import program began in 1956. Therefore I asked if some of the early programs were still in existence. I was told they are, because "it is very hard to drop them." I asked that a list of programs and projects be provided the subcommittee, including the dates that they started, the amounts spent on them for each reporting year, the purposes of the programs, and the possibilities of eliminating, decreasing, or redirecting them. This request was subsequently repeated by Messrs. Adlerman and Morgan after my departure. The list has been promised to us but is yet to be delivered. I believe that the subcommittee should study this report carefully and that the staff, if necessary, should "look behind it" to verify the accuracy of information provided. If AID will not streamline their own operations, perhaps the subcommittee should do it. The main purposes of the AID program in Vietnam were explained to us as follows: (1) Long-term development. This includes the installation of an additional port facility in Saigon, known as Newport, which is supposedly a permanent structure to serve the Vietnamese when the emergency is over and when the existing port facilities become antiquated. (2) War relief and support.-We were advised that AID's support to the total war effort amounts to about $60 million annually, principally through local currency (piasters) generated by AID's commodity import program and the AID-administered Public Law 480 (agricultural) program. (3) Revolutionary development.-This is an overall program to secure the hamlets and to root out the Vietcong infrastructure. This program uses 59-man cadre teams of both United States and Vietnamese personnel. (Local criticism is that these civilian cadre teams offer an alternative to military service for sons of influential Vietnamese.) The purpose is to "restore the line" between the farms, villages, and province towns and the national ministries. (4) Commodity import program. This will be detailed in the following section. An example of the overall AID budget can be seen from the proposed budget for fiscal year 1968, which AID officials described as follows: Project programs (including CIP)__. Overhead and technical support in Washington, D.C.. Contingencies for major policy purposes (e.g., Vietnamese road system). Public Law 480 (both title I and title II, but primarily title I; title I includes rice, mainly, also corn for pigs, etc.; titles II and III were combined last year. They include commodities such as bulgar wheat and oil, etc.) Total.. (b) COMMODITY IMPORT PROGRAM $257, 141, 000 17, 859, 000 15, 000, 000 200, 000, 000 490, 000, 000 The commodity import program was the subject of much testimony in both the April and August hearings of last year. Therefore, I will not repeat the mechanics of the program here but, rather, will comment upon some of the observations we made during the recent trip to Vietnam. AID officials' combined reporting to us-in October 1966 and in December 1967-showed that the money we have put into the commodity import program to Vietnam since fiscal year 1962 has been as follows: The manner in which the commodity import program functions was summarized for us, through briefing materials, as follows: The commerical import program (CIP) functions basically as a supplement to the foreign exchange resources of the GVN in financing imports for the private sector of the economy. As such, it contributes to the stability of prices, since commercial imports absorb piasters, that is, they satisfy inflationary demand. The program pays the foreign exchange cost of the commodities which it finances. The goods are paid for by the importer in piasters and these piasters, known as counterpart, are used for support of the GVN budget in projects and programs approved by the United States. The purpose of the program was explained as follows: The CIP in Vietnam was initiated in 1955 following the signing of the Geneva accord. The program was designed to counter inflation resulting from the deficit spending in support of the military establishment required by the emergency conditions prevailing at the time. The economists in the U.S. overseas mission tend to see the commodity import program as a stabilizing influence in meeting peaks of supply and demand by transferring purchasing of various commodities from Vietnamese Government agencies to the AID commodity import program as may be periodically necessary. For example, we were told that the large military buildup in 1965 found the U.S. military "living off of the local economy," so to speak, and that price increases averaged 125 percent between May of 1965 and July of 1966. Devaluation of the local currency therefore became necessary. However, the Vietnamese relaxed import licensing requirements just before the June 1966 devaluation. The relaxation, coupled with the speculative tendencies of Vietnamese importers, resulted in a tremendous oversupply of commodities. These circumstances, linked to chaotic port congestion, resulted in high inventories and tight bank credit. The economists, on the one hand, said that importers then bought such items as motorbikes, refrigerators, air conditioners, TV sets, and radios, to attract consumer dollars. On the other hand, the economists said that as troop spending increased in 1966, the Vietnamese Government accumulated more foreign exchange than it was spending. Therefore, in January and March 1967 such items as petroleum products, sugar, pulp and paper, cement, and nonferrous metals were transferred to Vietnamese Government financing. By the end of November 1967, the financing of petroleum products, sugar, cement, and fertilizer was returned to AID because of some unexplained decreases in the foreign exchange holdings of the Vietnamese Government. While there undoubtedly is a great deal of troop spending by U.S. forces, we know that all soldiers have been encouraged to save their money in the 10-percent interest special savings plan that is in effect for them in Vietnam. We found that the average serviceman spends only less than $15 of his own money monthly for purchases in the local economy. This would amount to a total impact on the |