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April 10, 1967
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Approved For Release 2004/05/05 ? CIA-RDP691300369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS HEARING BEFORE THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE NINETIETH CONGRESS FIRST SESSION ON TRE t NOMINATION OF RUTHERFORD M. ?OATS, TO BE DEPUTY 4.MINISTRATOR, AGENCY FOR INTRUNATIONAL DEVELOPMENT APRIL 10, 1967 Printed for the use of the Committee on Foreign Relations U.S. GOVERNMENT PRINTING OFFICE 77479 WASHINGTON : 167 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05,: IA-RDP69B 0020030-9 COMMITTEk'07S7 J. W. FULBRI JOHN SPAREMA.B, Alabama MIKE MANSFIEL1?), Montana WAYNE MORSE, Oregon ALBERT GORE, Tennegiee FRANK J. LAUSCHE, Ohio FRANK CHURCH, Idaho STUART SYMINGTON, Missouri THOMAS J. DODD, Connecticut JOSEPH S. CLARK Pennsylvania CLAIBORNE PELL, Rhode Island EUGENE J. McCARTHY, Minnesota CARL MARC4 Chief of Staff Anima M. Kum, Chief Clerk REIGN REI.fATIONS Arkansas, Chairman BOURKE B. EggaINLookim, I wa GEORGE D. AIKEN, Veraiont ? FRANk 'CARLS0/7, Kansas ?RAIN 1. WILX,IA.gtS, Delaware KARL E. MIJINpN, South Ditkota CLIFFORD P. CABB? New jersey JOIRT,SECERNLAN COOPER, Kentucky II Approved For Release 2004/05/05: I IA-RDP69600369R0002 0020030-9 Approved For Release 2004/05/05 :CIA-RDP691300369R000200020030-9 CONTENTS Statement of: Page Bayh, Hon. Birch, a U.S. Senator from the State of Indiana_ 30 Poats, Rutherford M., nominee to be Deputy Administrator, Agency for International Development 3 Insertions for the record: Biographic sketch of Mr. Poats 1 Letter from Hon. Strom Thurmond, U.S. Senator from South Caro- lina 2 Letter from Hon. Ernest F. Hollings, U.S. Senator from South Caro- lina 2 Letter from Hon. John E. Moss, U.S. Representative from California_ 3 Telegram from Hon. Clement E. Zablocki, U.S. Representative from Wisconsin 3 Free World Assistance to Vietnam, as of April 1, 1967 13 Article entitled, "Renaming of Foals to AID Expected," from the Washington Post, February 4, 1967. 27 Editorial entitled "AID Appointee," from the Washington Post, February 28, 1967 28 Response by Rutherford M. Poets to the statement of Senator Bayh 47 Ut Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS, TO BE DEPUTY ADMINISTRATOR, AGENCY FOR INTER- NATIONAL DEVELOPMENT MONDAY, APRIL 10, 1967 UNITED COMMITTEE ON The committee met, pursuant to notice, New Senate Office Building, Senator J. presiding. Present: Senators Fulbright, Sparkman, Lausche, Symington, Pell, Carlson, and Williams. The CIIAIRMAN. The committee will come to order. The committee is meeting this morning to consider in open session the nomination of Rutherford M. Poats of Virginia to be Deputy Administrator, Agency for International Development. Mr. Poats, will you come forward, please, sir. (The biographic sketch of Mr. Poats follows:) STATES SENATE, FOREIGN RELATIONS, ashington, D .0 . at 10:05 a.m., in room 4221, W. Fulbright (chairman) RUTIIERFORD M. POATS Present position.?Assistant Administrator for the Far East, Agency for In- ternational Development. Office address.?Agency for International Development, Washington, D.C. Born.?August 8, 1922, South Carolina. Legal residence.?Virginia. Marital status.?Married. Family.?Wife: Esther (Smith) ? Children: Penfield, born August 8, 1949; Huntley, born July 26, 1952; Rutherford S., born January 23, 1954; Grayson born June 9, 1957. Home a4dresa.-6352 Crosswoods Drive, Falls Church, Virginia 22044. Education.?A.B., 1943, Emory University. Experienee.?Non-Government : 1940-41, reporter. Military: 1943-46, U.S. Army, Captain, overseas, Chief, Armed Forces In- formation Section, General Headquarters, Far East Command, U.S. Army. Non-Government: 1947-51, Foreign Correspondent, United Press International, Tokyo, Japan; 1951-57, Bureau Chief, United Press International, Tokyo, Japan; 1957-61, Reporter, Asian Affairs and Assistant Chief, Foreign Department, United Press International, Washington, D.C. Government: 1946-47, Chief, Information Section, TT & E, Far East Com- mand, War Department; 1961, Special Assistant, Bureau of Far East, Agency for International Development; 1963, Deputy Assitant Administrator for Pro- gram, Bureau for Far East, Agency for International Development; November 1963, Acting Assistant Administrator for the Far East, Agency for International Development; 1964 to present, Assistant Administrator for the Far East, Agency for International Development. .4v?"Decision in Korea," 1954. Memberships and clubs.?Phi Beta Kappa. 1 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 1 , Approved For Release 2004/05/05 ,?_01A-RDP69B00369R0002 0020030-9 NOMINATION OF RUTHERFORD IVI. , POATS 1 , The CHAIRMAN. Before I ask Mr. Poats to testify, I woul like to put in the record a letter from the senior Senate]. from Sou h Caro- lina, the Honorable Strom Thu ond; a letter fTom the, juni r Sena- tor, the Honorable Ernest F. Ho lings; and a letter from C ng:ress- man John E. Moss, chairman o the Government Informa ion and poieign Operations Subcommittee of the Committee on Gov rnment Operations of the House; and a telegram from Gangressman lement J. Zablocki, all supporting the nomination of Mr. Poats. 1 (The communications referred t follow:) ; 'LS. SENATE, COMMITTEE LON THE JT,TDICIA Y, April lj, 19117. Senator J. W. PULBRIGHT, Chairman, Senate Foreign Relations Committee, New Senate ?flee Building, Washington, D.C. Dais Ma. CHAIRMAN: Unfortunately a prior' comnaitroent prevents me from being personally in attendance at the hearing on the nontination of Mr Ruther- ford M. Poats to be Deputy Administrator of the Agmcy for Inte national Development. However, I want to take this oppor6nity to express ray support f r Senate confirmation of Mr. Poats' nomination to fill this impOrtant assignme t. Mr. Poats was born and spent his early life in South Carolina. Hel recElved his grade school education in the public schools of SO ith Carolina, aithaugh his college degree was earned at Emory University in Atlanta, deorgi Mr. Poats' experience and proven capabilities make him particularly ell quali- fied to perform the duties required of the Deputy Administrator of AIID. His many achievements since having joined the staff 4 AID reflect cr it upon both himself and the Agency. It is a pleasure for Me ,to recoMmend that the Committee net favorably upon this nomination. 1= With kind regards, Sincerely, STROM PHT4iMOND. ' U.S. , SENA E, WashingtO , D.C., 21;pril 1, 1.967. Hon. J. WILLIAM FULBRIGHT, Chairman of the Foreign Relations Committee, U.S. Senate, Washington, D.C. DEAR Mn. CHAIRMAN It is my pleasure to take this opportunity, to re minuend to the Committee Mr. Rutherford M. poats for confirmation as, Assi 'lit Ad- ministrator, U.S. Department of State, Agency for International Dev lopment. " Mr. Poats has proven through his seivice that he hits an unusual in ight into the complexities of international affairs, government atlininistration, and eco- nomic matters?both foreign and 'domestic. He has proven through hisperform- ance that he is one of our most knowledgeable arid' capable anal sts And administrators in the international field., His eleven years of broad and diverse foreign service ,oxperien2e ,qu lify him uniquely for the position for which he has been recommended. This e perience -Includes four years as an Asian affairs Specialist for United Press Interial ional, and for the past few' years as senior executive charged vith ma ,iaginA.I.D.'s _ ? complex Far East Program. While affiliated with A.I.D., Mr. Poats has compiled an outstandin reCord. He was instrumental in implementing , many of the prpddent's econ nate and social initiatives for southeast Asia, ingluding the recoil eStabllshme t or the Asian Development flank. ' It is a pleasure to be able to recommend such an outstanding South C rolt4lan Per this high pest. Sincerely, Approved For Release 2004/05/05: 1A-RDP69600369R0002 0020030-9 Approved For Release 2004/05/05: CIA-RDP69B00369R00020090030-9 NOMINATION OF RUTHERFORD M. POATS FORDIGN OPERATIONS AND GOVERNMENT INFORMATION STJBCOMMITTEE, OF THE COMMITTEE ON GOVERNMENT OPERATIONS, February 27, 1967. Hon. J. WILLIAM, FULBRIGIIT, Chairman, Committee on Foreign Relations, U.S. Senate, Washington, D.C. '4a, MR. CHAIRMAN: I understand that the confirmation of Rutherford Poats as Deputy Administrator of A.I.D. is currently before the Senate and I would like you to know that I personally consider him well qualified for the job. During the past year, the Subcommittee on Foreign Operations and Govern- ment Information conducted a detailed investigation of AID's Vietnam program. In the course of this investigation, I came to know Mr. Poats well and to have great respect for his abilities. The Subcommittee's final report was critical of the AID Vietnam program in a number of respects and some people have taken these criticisms as a reflection on the competency of Mr. Poats. This is definitely not the case. In my judg- ment he has done a fine job under exceptionally difficult circumstances. The deficiencies we found in AID's Vietnam program are not directly ascribable to Mr. Pouts and do not reflect unfavorably on him. In his appearances before the Subcomnaitte and in numerous personal contacts he has alway's been vvell-in- formed, candid, and responsive to our needs. I believe Mr. Poats to be a man of great ability and integrity and it is my earnest hope that he will be confirmed in the position for which he has been nominated. Sincerely, JOHN E. Moss, Chairman. WASHINGTON, D.C., April 7, 1967. Hon. J. W. FULBRIGHT, Chairman, Senate Foreign Relations Committee, Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: Throughout my tenure as chairman of the House Sub- committee on Asian and Pacific Affairs I have given constant and close study to the economic development of Asia. During that period I have had the oppor- tunity to work with various Deputy Administrators in the Agency for Interna- tional Development. On the basis of that experience I can say unequivocally that none have surpassed in overall competence Mr. Rutherford Poats. His com- prehensive knowledge of Asian development problems, his ability to devise mean- ingful and effective solutions, and his articulation in testifying before Congress on these complex issues has never been surpassed. Against this background may I urge your committe's favorable consideration of Mr. Poats' appointment as Deputy Administrator of the Agency for International Development. CLEMENT J. ZAELOCKL, Chairman, Subcommittee on Asian and Pacific Affairs. The CIIAIR/VIAN Mr. Poats, we are very pleased to have you. Will you give us for the record a short statement of your experience. STATEMENT OF RUTHERFORD M. POATS, NOMINEE TO BE DEPUTY ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT Mr. POATS. Yes, Mr. Chairman. I joined AID 51/2 years ago as Special Assistant on Far Eastern Affairs to the then Assistant Administrator of AID. Prior to that time, I was a United Press reporter, news manager, bureau manager, most recently in Washington in the foreign depart- ment of the TJnited Press, concentrating on Asia. ?'Prior to that time, I was in the Tokyo Bureau of the United Press as bureau chief, and earlier as reporter in a number of countries in the Far East. Prior to that time, I served as the Chief of the Information Section of the Troop Information and Education Office of the Far East Corn- Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 :i1A-RDP69600369R0002 0020030-9 NOMINATION OF RUTHERFORD M! !'OATS mand, and in the military services in the Far East at the end of t I had some service prior to the War with the Internationa Service. I l , My connections with the Far East, therefore,, go back to 195, and have been almost continuous from that time. In the fall of 1963 I was made Acting Assistant Administr AID for the Far East, and was nominated and conarmed, swo this position, almost exactly three years ago. The CHAIRMAN. Thank you, Mr. Poats. e War, News SIGNIFICANCE OF FOREIGN t51.13 , Mr. Poats, I wonder if you WOU d give us your feeling abo eign aid in general and its significance to our interests in the particularly in Asia. Mr. Paws. Yes, Mr. Chairman. will try to resist soundin on this subject, but I am here because I feel a Very keen sense fortunate coincidence of purposes in the aid program. It seems to me that in economic assistance a man as the wpm to both serve the national interests of the United States and se larger interests of the developing world. I cannot think of a ft in which greater satisfaction and a sense of purposeful life found. On the more immediate interest of your question as to aid i I would. like to suggest the diversity of the uses, purposes of cc assistance by looking at a few of the countries that I have been w with during the past five years. ' In the past three years, public attention has been largely foci Vietnam. But during that period I have divided my attention b that problem and the varied tasks of aid elsewhere in the Fa Shortly after I came into office in my present position we accel the timetable for termination of aid to Taiwan because it was p We arranged to endow with local currency derived from count funds of previously committed aid the continued developm Taiwan, which included its pioneer family planning progra its own overseas technical assistance work in agrinilture. Now, the people of Taiwan are engaged with us in a number o cultural development programs in Africa and other places. During the past four years Korea has emerged from the desp prospect of a permanent dole to a model development case. I and 1966 its self-help performance, particularly in taxation, s investment, and family planning, has been, again,- a model for developing countries in other regions. In both Korea and Taiwan we have seen the obligation an cised the opportunity to provide through our policy advice no means for achieving economic development, but also to 13r. about greater opportunities systems for social justice. I concei to be an important element O f the aid task. In southeast Asia, the last two years particularly, we have bee ifig beyond the Vietnam and Laos wars to try to encourage throu use a offers of aid and advice the already existing but limited, outset, Asian interests in establishing a system of regional coope for development which would bring together in several for regional integration the commitment of the countries of :the Approved For Release 2004/05/05 : CIA-RDP69B00369R0002 tor of n into it for- world, corny of the unity ye the ction an be Asia, ncanic rki:ag d on t ween East. rat ed ssib le. rpo rt nt of and iring 19 G5 ings, other exe r- only ging e this look- 'h the t the ation S of egiOn 0020030-9 Approved For Fpaiewer2f104195illatleiXtROFP,69B00:769R0002000/0030-9 without respect to political systems, and other developed countries in a joint effort to produce a better era, abetter prospect for southeast Asia. The end of the Vietnam war, of course_, and conditions for reduc- tion of military expenditures would be the essential prerequisites to achieving that new era in any full sense. But the foundations are being laid today for this system which would provide an answer not just to some development problems but also to some degree to the security problems of that area. So here, again, I see a means of using economic aid to achieve these broad purposes, all consistent with our prime purpose. SRIRIT OF REGIONALISM This spirit of regionalism, as you know, Mr. Chairman, has ignited lately in response to offers of help not only by us but by Japan, the Netherlands, and other countries. Regional organizations of all sorts are springing up?the Asian Development Bank, the Southeast Asian Ministers of Education Council, groups in transportation, agriculture, and the II.N. organizations already existing, which have been stimu- lated to new activity. I think this work with Eugene Black may prove to be the most im- portant of my career in AID, and I hope it will have relevance in other parts of AID activity. Another country which illustrates the diversity of the definition and problems of aid, and the opportunity, is Indonesia. The Indonesians, of course, have returned to a sane approach to their internal problems. They face probably the most crucial as well as difficult, task of eco- nomic recovery that I know about in the world today. I have been engaged very closely with the international agencies, the Asian Development Bank, and with the French-led group on debt rescheduling, and the Dutch-led group on new aid, to help to bring about a joint participation?which has come about?in the solution te the problems the Indonesian Government has inherited. Another example of the variety of our interests and programs are the efforts we have made, working with local leaders in northeast Thailand, Laos, the Philippines, particularly in Luzon, lately in de- vising new methods for comprehensive rural development which have both an economic output and a local political institutional development and purpose. These are efforts at the grassroots, political development, if you will, which may be applicable to other countries and other regions be- cause it is certainly clear that economic development requires local organization, local social mobilization, institutions to carry out this thing called self-help. Mr. Chairman, if you will, I can proceed to other areas, but this gives some of the variety of the tasks that I have been concerned with, apart from Vietnam. And even there, it seems to the that the essential methods and purposes of aid have been applied, are being applied, with the focus on nation-building under the most difficult circumstandes, but nation-building from the village and 'hamlet up, local institutional developments from the hamlet up. But there We have also, to Add an enormous effort to reduce the human suffering and economic and social dislocation of the war and to attemp t-t6 apply our resources to induce 77-579,-87-2 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 App6oved For RemmA2,,q80/ogoku; -m62pq,imrcioo2 0020030-9 and help the Government to reduce the legitimate bases for gri Varee which have been the breeding- ground and the basis for the C mmu- nist-led insurgency. ' OPERATION I* VIETNAM [ . F Now, this operation in Vietnam, of course, is a very special thirg, and it is certainly true that in part our judgments and our d isions have been affected by the sense of , urgency that war require If we can shorten the war or increase the prospects of a more ecure peace by the use of economic assistance, we have done so. e are continuing to do so, even at costs and risks greater than we vould accept in other more normal situations. We simply have not been able to wait for the optimum conditi ns of aid administration before undertaking these programs. We have attempted, of course?I think we have a substantial eCord of success recently?to reduce by further management improvdments the waste that is to some degree ineVitable in this kind of a sit at ion. We do not like it. We are trying to reduce it But when thel chips are down we have often chosen to take a risky course when it seemed possible that by doing so we could shorten the war and improve the prospects for a good settlement. , In all these diverse programs, we have faced dificult mana meat problems. Recently we have recognized the necessity to concentrate more management strength on the Vietnam operation in Washi4igon, so we are splitting the Bureau which I head into two: One sol ly on Vietnam, one on the rest of east Asia? including the regional programs, each to be headed by an assistant administrator who will be nom- inated to the Senate and heard by this committee. The CHAIRMAN. That is. very interesting, Mr. Pmts. BILATERAL AGREEMENTS 'VMS S MULTILATE CIES , . . Do you feel that it is wiser for the United State; to extend id di- rectly through bilateral agreements, or through international ulti- lateral agencies? Mr. Pom-s. I think every time we , have an opportunity, a me ns of , working through the multilateral agencies, and clepmding up-o them to do a development job, we should. There are certain types of Situations, such as Indonesia today, in which, there is no multilateral institution prepared to do the jo ',and there you must take the next best step of organizinix an interna ional consultative arrangement participated in by the multilateral ag neies, advised by them, but depending for the larger part of its res urces on bilateral programs that are coordinated through this mech nisin. 1- ' AMOUNT OF U.S. AID TO TA WAN, KOREA, I MONES A ' I The CHAIRMAN. Mr. Poats, you mentioned Taiwan.. Could yoja give us an estimate of how much aid we lave given Taiwan since th war? Mr. PoNrs. My recollection, Mr. Chairman, was that it wa $r1/2 billion over a 15-year period. - The CHAIRMAN. IS that all? , ? Mr. POATS. That was all the economic assistance. , The CHAIRMAN. The total aid? Approved For Release 2004/05/05: IA-RDP69B00369R0002 0020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS 7 Mr. POATS. Military assistance, I think, was about the same mag- nitude. I am not sure. The CHAIRMAN. Your estimate then of the total economic and mil- itary assistance to Taiwan would be in the neighborhood of $3 billion? Mr. POATS. I believe that is right. The CHAIRMAN. What do you say about Korea? What is our total economic and military aid to Korea? Mr. POATS. I think the figure is about, close to, $3 billion in economic aid, and about $2 in military, as I recall, Mr. Chairman. I would have to check that. It has been larger program. Of course, the country is about twice the size of Taiwan. It has had very large military forces along the truce line, as you know. ? The CHAIRMAN. We have given aid to Indonesia in the past, too. Mr. POATS. That is right. The CHAIRMAN How much would you guess? Mr. POATS. Going back to the period of the Dutch rule before in- dependence, the total was in excess of $800 million. Counting the period of Indonesian independence, I believe $650 million or there- abouts. Then, of that, by far the largest proportion was Public Law 480 sales of rice, cotton, and so on; and, secondly, Export-Import Bank loans, relatively small AID-type aid. The CHAIRMAN. The aid totals mentioned a moment ago concerning economic and military included Public Law 480, did they not? Mr. POATS. Yes. U.S. EXPENDITURES IN ASIA The CHAIRMAN. How about Vietnam? What is your estimate now of how much we are spending in Vietnam? Mr. POATS. I am sorry, these cumulative figures are not in my mind. It has been around a total of $1.8 billion from 1954 through 1963, and then accelerated to the present level of about a half a billion dollars a year. The CHAIRMAN. What I was trying to get at?I wo/A hold you to the precise figures, although this is your area?is that we have made a very substantial, effort in this area. Mr. POATS. Yes, indeed; certainly.. The CHAIRMAN. What is your idea of the justification for this? What do you seek to achieve for the United States, the people of this country, by such a major expenditure of our funds? Mr. POATS. In Vietnam? The CHAIRMAN. Taiwan and Vietnam or Korea. What is the ob- jective? Can you tell us rather briefly? If you were talking to my constituent, how would you justify the diversion of these funds for these purposes? What is the overriding purpOse that justifies the program? Mr. POATS. Well, there are several purposes, Mr. Chairman, as you well know. As I would phrase it, they are these: first, we have been engaged in supporting the defense of northeast Asia through in effect, supplementing the resources of a poor country, Korea, and a poor country, Taiwan' to enable them to maintain military defenses which are in our joint interests. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : IA-RDP69600369R0002 0020030-9 8 NOMINATION OF RUT IERFORD M. FICATS I Certainly all the costs of a new war and all the osts of' the I orcan war itself demonstrate the wisdom of this. Second, we have been engaged in helping nes?. two count les :to acquire the means for their own self-support thrtugh invest ent -in their productive facilities, infrastructure, and human resource, such as educational institutions, and imports to maim-Ain an exp nding pace of domestic production to reach the so-called takeoff p in . . their own development. These are the two principal purposes. There is, of course, a more philosophical purpose of lending hand to people in need and attempting to bring them to, the point th t they are no longer in need. I submit that these two programs we are talking about now Korea and Taiwan, are examples of achievement of all those three obj ctives. DETERMINATIO OF PRIORITI7S The kjITAIRMAN. Just for the record, I have -)e en given a 11 111 of $4.464 billion in total from 1949 td 1065. That is quite a sub tantial I am trying to develop a sense of priority. Hew do we de ermine whether Taiwan, for example, is more important to us than th .egen- eration of our own cities, the dealing -witli pollittion, and the ? ealing with the conditions that cause riots like Watts and Harlem hat we have had in 'recent y-ears. How' do you justify that? This s what bothers me. Mr. POATS. I would say, Mr. Chairman, that I cannot m ke that iudgment because I am obviously a person who is hot broadly ngaged in both. But I would certainly think that Senator LAUSCIIE. You are not broadly engaged, in what? Mr. POATS. In detailed concern with both the domestic s evelop- ment and the overseas program. I would think if we had to acrifice the development of our own underdeveloped areas in order o carry out the foreign aid program that we would be m ing a mist ce However, it seems to me that this country has the economic 'Jacky to do both just as we have the capacity to make a number f other expenditures in many other fields, in addition to domestic J evelop- ment programs. I think it is clearly in our national interests and betide al to us in economic as well as political and security terms to reduce t e kinds of sitnations in the less-developed world which, over a time, wwld create a sharp antagonism between the have-not and. the have nai:ons. I certainly think it is impossible to ignore the appeal to ur own conscience of this disparity. CHARACTERIZATION or AIWAN SOCTI"./ 1' '1, l!lf.2'il The CHAIRMAN. DO you consid r Taiwan to De a MOCIAL YOI a'floeratT and, progressive democratic society ? Pioirrs. No, sir I do not. T think? The CHAIRMAN. You do not ? Mr. POATS. isZO. The CiaAianfA. Then, Why 'do you cite it as a brilliant ex the sucCesS of our policy ?'. How would you char Acterize it? Approved For Release 2004/05/05: 1A-RDP6900369R0002 naple of 0020030-9 Approved For ReRNMA20614/05/CleutrOAAPP6ABM?PRO0020002(3030-9 ME. POATS. Taiwan has a central government, which is not a. model of representative systems, which is still imposed on a province of China, as the government, the Republic of China sees Taiwan, and therefore the national government is not subject to the electoral process in Taiwan. However, beneath that, in the province of Tai- wan itself, through the development, elaboration of local institutions like farmers' associations, three co-ops, local district organizations, there is a remarkable development of local autonomy, local elections, a local responsibility for public affairs which has grown in Taiwan, and this is what I meant by my remark. The CHAIRMAN. Is there freedom of speech in Taiwan? Do they tolerate dissent? Mr. POATS. They tolerate dissent in a wide array of areas, but not in all. I am speaking now of the press. The CHAIRMAN. Is it safe to criticize General Chiang Kai-shek in Taiwan? Mr. POATS. Well, there is certainly no thought police, and that i sort of apparatus, if that is what you mean. There s a limitation on the freedom of press in attacking the leadership of the central gov- ernment; that is correct. The CriAntmAN. Is there an opposition party in Taiwan? Mr. POATS. There are several opposition groups that are in a loose sense contesting for seats in the provincial assembly and provincial local governments. The CHAIRMAN. But national? MT. POATS. Not in the national government because it is not sub- ject to election. U.S. AIMS IN SOUTHEAST ASIA The CHAIRMAN. You cite this as a great example of our accomplish- ments; one of the success stories. I wonder somethimes what it is we are fighting for. We say in southeast Asia, in Vietnam we are fighting for self-determination for the people in South Viet- nam. You cite Taiwan as an outstanding example of success, a coun- try where we have spent over $1 billion, and yet there is no self- determination of the people of Taiwan at all, is there, not in their national government? It is a dictatorship, is it not? Mr. POATS. At the center and on national affairs, but not on the affairs that affect the lives of the people in most respects. I was say- ing there is a great deal of freedom developing there. Take the emergence The CHAIRMAN. Is not this the same kind of freedom that exists in Russia? As long as you do not question the basic philosophy of the central government, you are quite free to express your opinion on the best way to grow wheat, or how to cultivate a field, or such things as that. There is no restriction on that kind of talk in any of these coun- tries, is there? Mr. POATS. Well, it is a little freer than that in Taiwan, Mr. Chairman. But I accept your point, we are obviously not The CHAIRMAN. What I am trying to get is that we -profess that our reason for carrying on the war in Vietnam is the self-determina- tion of South Vietnam, and yet you cite two outstanding and success- ful countries, Taiwan and Korea, neither of which has self-deter- mination. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : CIA-RDP69B00169R000200 20030-9 10 NOMINATION OF RUTHERFORD M. , PATS 1 Mr. POATS. Mr. Chairman, I -would think that JKorea is cer ainly demonstrating remarkable freedom, freedom of the press cer ainly, freedom of political organizations, certainly. They are about t4 have an election this next few months for the National Assembly and President. The CHAIRMAN. Do you think there will be an open and fre eke- tion for the opposition? Mr. POATS. I think there was last time four years ago. The CHAIRMAN. Please understand that I am not myself taki a the position that the only way to run a society is our way. I hav often said Mexico is an example of a one-party state that is suceessfi1kl, and I would not for a moment suggest that they adopt our system of government. What I am trying to get at is what are we really after in soiitheast Asia. I am not saying that Korea should follow our system r any other system. I am trying to clarify what you think we can ach eve by the foreign aid program. Mr. POATS. Mr. Chairman, we are after, in this respect, a co tirroal expanding opportunity for people and freedom for people w ich we think require the complete set of free social institutions. Now we do not impose that standard, of course, and we are not happy so dimes when that standard is not fully met, but there is a trend, a very encouraging trend, in Taiwan, just as there has been in Korea, in this respect. The great wealth that is developing in Taiwan now is amo g Tai- wanese-businessmen, Taiwanese farmers. The great development in Korea is very broadly shared. This is the real payoff of a system, in the economic sense. f MORE ATTENTION TO DOMESTIC PROOIMAMS The CHAIRMAN. I would not question for a moment that this has been economically good for the individuals of each country. What keeps bothering me is that now, as the cold war?except for s utheast Asia?has begun to lessen, the time may come to reevaluate t is pro- gram and to give attention to domestic needs here in the Unite States. You say you see no reason for the curtailment of the progra s here. I recognize this is not your responsibility ; you have foreig aid to be responsible for. But from my point of view the fact is t at they ,are cutting down most severely on the most elemental p ?grams here, such -as water and sewer programs in my State and. I a sure if it is in my State, it is in every other State. I need not tell on that nothing is being done for the conditions of life in our big c ties., the pollution of the air, the nolluton of the water. There is vtry little being done, nothing in this city yet except talk about relic ing the terrible conditions of traffic congestion and transportation or ordi- nary people. That does not concern Government, officials wit chauf- feur-driven automobiles, but it does ordinary people who do ot have chauffeurs. It is very hard to get to and from your job in thi city. You say there is no reason to make a choice, Ti say, as a p there is a, reason because we cannot stretch the money much further. We have a budget now of $135 billion. z Mr. POATS. My response, Mr. Chairman is that the total conomic assistance budget, AID or Public Law 480;has not been Mere ed sub- Approved For Release 2004/05/05 CIA-RDP69600369R000 00020030-9 Approved For INsmA3,994/04/0/5u;raWAREVI399MR0002000?9030-9 stantially at all. In fact, it is a much lower percentage of the budget, much lower percentage of the GNP and it has not increased arithmetically. The CHAIRMAN. The military has taken the greatest amount of it. I hope anybody who wishes to intervene will. Senator LAusouE. I have been prompted very much? The CHAIRMAN. I yield to you. Senator LAUSCHE. Because some of the information you are elicit- ing is in complete conflict with positions you have taken with respect to other nations, but I will let you go on as longas you want and I will sit here suffering and listening to you. [Laughter.] The CHAIRMAN. I do not want you to suffer in any respect. I think this is not the purpose at all. Senator LAUSCHE. I think we ought to have the ten-minute rule. The CHAIRMAN. I just want to carry this on. I would be perfectly willing to yield to you at this moment if you wish, or anyone else who wishes to ask questions. ECONOMIC CONDITIONS TODAY ARE DIFFERENT Here is a man with long experience in this program. I am trying to clarify my views as of the present conditions. I wish to point out that I think the conditions today are entirely different from the time of the Marshall Plan and during the era of Stalin, and when there was a very uncertain stability in Europe. These countries were not able to control even their domestic problems2 aside from any external aggression, if it was threatened, as I think it was from time to time. I would say to the Senator from Ohio that the difference in views, in my point of view, is accounted for by the difference in conditions that have developed over the years. Senator LAITSCHE. Does the Senator from Arkansas feel that the Government was right when we were aiding Chiang Kai-shek in the initial stages of his fight with communism, and that aid went on until now when it has completely terminated? Mr. POATS. ECOnOIMC aid. Senator LAIISCHE. Economic aid. Were we right when we origi- nally said we were going to stop the Communists from moving south- ward into Taiwan, Laos, Indonesia, Vietnam, Cambodia, Burma, Thailand? That was the view of President Truman. It was the view of every Secretary of State, every President, that we could not afford to allow them to move on, and that is why we gave certain countries the aid. Were we wrong then? The Senator from Arkansas voted for it. The CHAIRMAN. You ask a, very broad question. Senator LAITSCEIE. It is broad. The CHAIRMAN. I would be perfectly willing at the proper time to debate that. I think it is very questionable when we look back at the present situation in southeast Asia whether or not it was right?the original intervention in support of Chiang Kai-shek. I think it, is a very big question, just as I think our intervention to keep the French in Vietnam is a very big question. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 :01A-RDP69109369R0002 0020030-9 12 NOMINATION OF RUT ERFORD M. POATS 'BASIS FOR OCR INTa NTION IN IEJ'NAM 131.1t I think that is too far afield or discussion now. I Ny' ant o 2.on- elude my part of this particular matter with one further q stion. The Secretary of State has stated before this committee pre iously that one of the reasons that justifies our present military iaterv ention in Vietnam, has been the aid program. You are' familiar wi h that statement? Mr. POATS. Yes, Sir. The CHAIRMAN. Do you subscribe to that? . Mr. POATS. Mr. Chairman, I have read the record of the, stat ments made by different persons in this controversy, and it has always eemed to me that what the Secretary of State was saying., in sum, w s that the principal basis for intervention ay in our mutual security c mmit- ments that were represented by the SEATO Alliance, and su ely it is clear that we became increasingly interested in Vietnam an I pro- vided military and economic assistance there wt.. ich clearly had a security purpose in substantial part. So that, from 1951 onward, with the beginning. of the indepe dence ., of the Republic of Vietnam, we were interested in helping tha Gov- ' eminent defend itself against the threatened resumption of th mirth, insurgency. The CHAIRMAN. Senator Sparkly' in. Senator SPARK-MAN. I want to as you just two or threi'?. que tions. NATURE OP POSITION OF EPUTY ADMINI TRATOR; Your work has been primarily in Asia, has it not? Mr. POATS. That is correct, Senator Sparkman. Senator SPARKMAN. Will it continue to be in your new job? Mr. POATS. No, sir. The Deputy's position Senator SPARKMAN. When you are Deputy Administrator, y concerned with the whole field, is it not? Mr. POATS. That is correct; yes. PACIFICATION MOO ..43I IN VIETNA ti are Senator SPARKMAN. How much in terms of dollars are rt,her Asian nations contributing to South Vietnamese pacification efforts this year? Mr. POATS. I am afraid I cannot answer that in terms of ll ars, Senator Sparkman, because some of the contributions are an th form of military aid and some are in the form of militry pacificat on.)y the Korean and Australian troops, and so on, Philippine ele ents. We do not have a reliable total, on an annual basis, compar ble to our accounting system. We have, of course, a detailed brfakdown of precisely what he 31 countries, I believe it is, are doing in the way of assistance in South Vietnam, which I would be glad to furnish you. ; Senator SPARKMAN. How many different countri,?.s? Mr. POATS. Thirty-one. Senator SPARKMAN. There are 31 'countries coutrbuting one tray or ? an other to the ffeneral effort in South Vietnam, is that right? Mr. POATS. 1Tiat is correct, yes, sir. Approved For Release 2004/05/05: 1A-RDP69600369R0002 0020030-9 Approved For Releits5v2904/010kzrgAIRIAVP9PPRO0020003g030-9 Senator SPARK1VIAN. You do not. have any line that clearly divides the military and related operations from the pacification program? Mr. POATS. It is very difficult to divide it in Vietnam as you know, Senator Sparkman, because military forces are engaged in civil works, and military forces provide the outer security for the revolutionary development teams. Military forces contribute to medical assistance to civilians. It is a very joint effort. But I will be glad to furnish you the statement of the contributions of each country. (The information referred to follows:) FREE WORLD ASSISTANCE TO VIET-NAM (AS OF APRIL 1, 1907) FREE WORLD ASSISTANCE PROGRAM Thirty-one nations have assisted Viet-Nam under the Free World Assistance Program. Several others have offered help. The contributions of six other countries and of the UN are listed at the end of this paper. A detailed listing by geographic area follows: FAR EAST Australia Australia is providing a wide and substantial range of aid to Viet-Nam under the Colombo Plan and by direct bilateral assistance. Military aid consists of: 1. Approximately 6,300 combat troops including a brigade and support, a guided missile destroyer, and a squadron of 8 Canberra bombers. 2. 100 combat advisors (primarily specialists in jungle warfare). 3. A 73-man air force unit at Vung Tau with six Australian caribou planes which fly daily logistical transport missions in support of Vietnamese mili- tary forces. Economic and technical assistance has totalled nearly $10 million including: 1. Three surgical teams, totalling 37 personnel, in 3 provincial hospitals. These teams, in addition to performing major operations, have established a blood bank and are giving lessons in nursing. 2. A group of civil engineers working on water supply and road construc- tion projects. 3. Three experts in dairy and crop practices and radio techniques. 4. Training of 130 Vietnamese in Australia. 5. In goods and materials: 1,250,000 textbooks in Vietnamese for rural schools; 3,300 tons of corrugated roofing for Vietnamese military dependents' housing; 6 large community windmills; 15,750 sets of hand tools; 400 radio sets and 2,400 loud-speakers, 16,000 blankets and 14,000 cases of condensed milk. 6. A 55 kilowatt broadcasting station at Ban Me Thout. The Australian Government decided on February 1 to increase its nonmilitary aid to Viet-Nam during FY 1967 to $2 million dollars. This will permit substan- tial enlargement of current medical and civic action programs and the undertak- ing of new projects such as providing equipment for refugee resettlement centers. Republic of China The Republic of China has provided: 1. An 80-man agricultural team. 2. An 18-man military psychological warfare team. 3. A 12-man electrical power mission under the leadership of Taipower. 4. A 10-man surgical team,. China has also provided training for more than 200 Vietnamese in Taiwan. In the way of goods and materials, they have provided 26 aluminum prefabri- cated warehouses, agricultural tools, seeds and fertilizers, 500,000 copies of mathematics textbooks and an electrical power substation. Japan Japan has provided over $55 million worth of economic assistance to Viet-Nam, chiefly through reparations. Japan has sent two medical teams, considerable amounts of medical goods (4,544 eases), 20,000 transistor radios and 25 ambu- lances. It has provided technical personnel and funds for the construction of a large power dam across the Da Nhlin River and electrical transmission line and Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Appioved For IWeia?RT2994/45/9151. itwilDR69,6369R0002 0020030-9 agreed to participate in the construction of a bridge over Mekong Rive near Vinh Long. Korea Korea has sent approximately 45,000 troOps including: 1. 2 combat divisions. 2. A 130-man Mobile Army Surgical Hospital (MASH). 3. 10 military instructors in Korean karate for training Vietnames mili- tary in hand-to-hand combat. 4. A 2,200-man Task Force Unit coMposed of the following ,elemeits: 1 Army engineer battalion; 2 Headquarters group; I Army Transpo ation company; 1 Marine Corps Engineer cOmpany ; 1 Infant: 7y battalion; LSP and 2 LSMs ; 1 Composite Support unit (communications., medical su splies, etc. ) . Korean military medical personnel are providing some medical care o the local population in areas where ROK troop? are stationed., In addition, 7 c vilian medical teams totalling 118 doctors, nurses and support pe:?sonner are w rkir,g In provincial health programs. Laos One million kip ($4,167) for flood relief ii February 1965. Malaysia Since 1962, Malaysia has trained about; 2,000 Vietnamese military and police officers. Groups of 30-60 are regularly Sent for about a month's trai 'ng in counterinsurgency with Malaysian Police Special Constabulary. Malay a has previously provided substantial amounts of counterinsurgency materials, pri- marily military and police transport such as. armored vehicles. New Zealand New Zealand has sent a 6-howitzer artillery battery of approximately 1 and provided a 25-man army engineer detachment. On March 8 th Zealand Government announced it will increase its forces to Viet-Nam men by addition of an infantry company and supporting elements. In non-military aid, New Zealand has sent an 8-man surgical team, an fessor in English language for the UniverSity of Saigon. A second 16-ma cal team will be sent shortly to Binh Dinh province. They S re presently t 62 Vietnamese in New Zealand and have provided 7,500L ($21,000) for ment for a technical high school. They are also assisting by providing a mately $600,000 for a science building at the University of Saigon. Philippines 5 men New to 360 a pro- medi- aini ng equip- )proxi- The Philippine Government has sent a 2000-man military engineering ui4it w security support personnel, a station hospital, and rural health and civi action teams. In non-military aid, approximately 60 Philippine civic ac: ton personnel includ- ing military and civilian medical team a have been working in Viet-Nun :or several years. Thailand The Thai Government announced on January 3 that it would send a ground force combat unit to Viet-Nam. It is expected that this will total 2,00-2,500 men. A 200-man Thai naval group manning an LST and PGM patrol c aft ar- rived in Viet-Nam in December 1966. A 35-man air force contingent h s been flying operational transport missions for the Vietnamese forces. Tae Th is have also been providing jet training for Vietnamese pilots in Thailand. In non-military aid, the Thais have prOvided rice for refugees and cement and zinc roofing materials. At the Manila Conference, the Thais offered tjie Viet- namese a $20 million rice credit. The Thais have also ann ounced they sil1 send a medical unit to Viet-Nam. MIDDLE EAST Greece Greece has contributed $15,000 worth of medical supplies. I Iran Iran has contributed 1,000 tons of petroleum products to Viet-Nam despatched a 20-man medical team to Viet-Nam. Approved For Release 2004/05/05: nd has IA-RDP69000369R(1002 0020030-9 Approved For ROMIARAQ04/11:410ithglIMPRRIPM?RRO0020004%030-9 Turkey Turkey has provided medicines and also offered to provide a substantial amount of cement. EUROPE Austria Austria has offered to supply medical supplies, blankets, tents, through the Austrian Red Cross. Belgium Belgium has provided medicines and an ambulance and has given scholarships for 9 Vietnamese to study in Belgium. Denmark Denmark has provided medical supplies and is training Vietnamese nurses in Denmark. Germany Personnel in Viet-Nam: Seven Germans, a director and six instructors, are teaching at the new Vietnamese-German Technical High School at Thu Due near Saigon. At Hue University there are five Germans: three physicians in the Medical School, a professor of music, a professor of German language, and one expert in forestry is working at the Department of Rural Affairs, Saigon. A 3,000-ton hospital ship, the "Helgoland" with 8 doctors, 30 other medical personnel and 145 beds is on duty in Viet-Nam. Vietnamese in Germany: Forty Vietnamese are studying in Germany and the Germans have agreed to accept 30 more primarily for training as future instruc- ors in the technical high school. A considerable number have previously been trained. Goods and materials: The Germans have provided the following credits: (1) DM 15 million ($3.75 million) for import of German products such as machine tools, fertilizer, etc. The piastre funds generated go to the National Office of the Agricultural Credit to aid farmers, particularly with loans; (2) a credit of DM 50 million ($12.5 million) for development of the major industrial complex at An Hoan-Nong Son; (3) a credit for DM 20 million ($5 million) for construction of an abattoir at Saigon-Cholon, and three coastal vessels; (4) a credit of DM 500,000 ($125,000) for equipment at the Vietnamese- German Technical High School at Thu Due. In April 1966, the Germans announced a gift of DM 17.5 million ($4.4 million) worth of pharmaceuticals, the first shipments of which have arrived. Also in the medical field, they have provided two mobile dental clinics and 30 ambulances for the Ministry of Health. On June 29, the Cabinet voted DM 25 million (US$6.25 million) for new aid to Viet-Nam including: (1) sending 25 experts to establish a refugee center; (2) building a home for wayward youths; (3) expansion of 8 social centers and con- struction of a ninth; (4) establishment of a training center for social workers; and (5) the gift of 100 buses and a maintenance and repair facility in Saigon. The Germans have also donated 260 tons of rice for refugee relief programs. Italy The Italians have provided a 10-man surgical team and have offered science scholarships to 10 Vietnamese to study in Italy. Luxembourg Luxembourg has provided plasma and blood transfusion equipment. The Netherlands The Dutch have undertaken to build 5 tuberculosis centers in Saigon; sites for 3 have been selected. In August, the Netherlands announced a contribution of $355,000 for a 4-year UN project in social welfare, part of the $1 million they have earmarked for UN projects in Viet-Nam. In 1964, the Dutch gave antibiotics and 4 scholarships for Vietnamese. They previously provided a dredge. Spain Spain has provided 800 pounds of medicines, medical equipment and blankets and has sent a 12-man medical team to Viet-Nani. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Amoved For .%%11?4RAR4/95/951: United Kingdom The United Kingdom has provided six civilians for the British Advisor Mita- sion and a Professor of English at Hue University. Twenty-one Vietname e ate receiving training in the United Kingdom. A pediatric team of four ritish doctors and six nurses went to Viet-Nam in August, 1006. In 1963-64, the United Kingdom provided, the following goods and mat ials Laboratory equipment for Saigon University ; a typesetting machine fir the Government Printing Office, a cobalt deep-ray therapy unit for the Nationa Can- cer Institute; various equipment for the faculties of Medicine, Scienc and Pharmacy at Saigon University, the Meteorological Service tad the Agric turt1 School at Saigon, and Atomic Research Establishment at ,Dalat and the F culty of Education at Hue. In 1965-66, British eednomic aid totalled ?81,000 ($22 ,800) for roadbuilding equipment, diesel fishing boat engines, and portable ane hetic machines. LATIN AM,RICA Argentina Argentina has contributed 5,000 tons of wheat. Brazil Pft9E4469R0002 ' 0020030-9 Brazil has sent a substantial quantity of medical suppIR4 which was c rriel to Viet-Nam by a Brazilian Air Force plane and has also pi ovided coffee. 1 I Costa Rica Costa Rica has contributed an ambulance for use in Viet-Nam. 1 It Dominican Republic Cement has been offered by the Dominican Republic for nie in Viet-Nam Ecuador Ecuador has sent medical supplies to Viet-Nam. Guatemala Guatemala has sent 15,000 doses of typhoid-paratyphoid serum for use in Viet- _ Honduras Honduras has contributed drugs and dry goods for refugees in Vie -Nam flown there on a Honduras Air Force plane. Uruguay) Uruguay has contributed $21,500 for relief supplies and medicines for Viet Nrnt. t Venezuela I Venezuela has provided 500 tons of rice for refugee relief, and two doc- tors are working in Viet-Nam. AFRICA. Liberia A contribution of $50,000 has been made by Liberia for the purchase of hoS- pital equipment and other medical supplies for Viet-Nam. Tunisia Recently Tunisia has made available a number of scholarships for Vietn mese. NORTH AMMICA Canada Almost $6 million of development assistance to Viet-Nam bas been provided by Canada. 1. Personnel in Viet-Nam: A Canadian Supervisor has been at Quangi Ngti supervising construction of a small TB Clinic which the Car adians are fu ding. The Canadians have sent two doctors and four nurses to st0fi7 the clinic. pro- fessor of orthopedics is working at Cho Ray Hospital, Saigon, and ther is a Canadian teacher at the University of Hue. 2. Vietnamese in Canada: 380 Colombo Plan trainees and a total of 163 tr inecs under all programs, including those sponsored by other agencies and third coun- tries (as well as Colombo Plan), have beep trained in Canada. There ar cur- rently 231 Vietnamese students in Canada. 3. Since 1958, Canada has provided $850,000 worth of food aid for Viet Nam. Funds generated by sales are used for capital construction projects in Viet Nallly F Approved For Release 2004/05/05 : CIA-RDP69B00369R0002 0020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS 17 4. A new science building for the medical faculty at the University of Hue is being built costing about $333,000, drawn from counterpart funds generated by sales of food supplied by 'Canada. Construction has passed the half-way mark. 5. The Canadians have also agreed to construct an auditorium for the Faculty of Sciences at Hue University which will cost about $125,000; 6. Canada has increased its aid to South Viet-Nam allocating $1 million for medical assistance this fiscal year including providing ten 200-bed emergency hos- pital units. The first two units have arrived and have been installed at Phan Tiet and at Phu Tho near Saigon. A Canadian doctor and technician visited Viet-Nam in the fall to inspect potential sites. Canada has sent 650,000 doses of polio vaccine for Vietnamese school children and offered additional vaccines against polio, TB and smallpox. Consideration is being given to establishment of a children's rehabilitation center in Viet-Nam. 7. Canada is printing half a million copies of a social sciences textbook for Vietnamese grade school children. OTHER ASSISTANCE Six other nations whose help does not fall under the Free World Assistance Program have provided valuable assistance to Vietnam in economic and humanitarian fields. Prance Since 1956, France has contributed about $111 million in assistance to South Viet-Nam. France has nearly 500 persons serving in South Viet-Nam. Among them are 05 experts under France's program of economic and technical assistance, includ- ing 32 physicians, professors and other medical personnel. Under its cultural programs, 471 professors (350 French and 121 Vietnamese) are teaching at 9 French-teaching institutions, and 30 French professors are at Vietnamese insti- tutions. France provided in 1965 for Vietnamese to study in France, 55 fellow- ships for technical training, and 85 academic fellowships. France has provided low-interest credits of 100 million francs (20 million dollars) for financing imports of French equipment for Vietnamese industry, a grant of 500,000 francs ($100,000) for equipment for L'Ecole Nationale d'Ingenieurs des Arts Industriels. In 1960 France extended a low-interest credit of 70 million francs ($14 million) to aid construction of the major coal and chemical complex at An Hoa-Nong Son south of Da Nang which is well underway. It also provides a low-interest, five- year credit of 60 million francs ($12 million) for construction of Viet-l\Tam's largest cement-producing complex with plans at Hatien and Thu Duc. In 1964, France provided a 930,000 francs ($186,000) grant for the installation of a training center for electrical technicians and in 1905 a gift of "25 million francs ($250,000) for teaching equipment, primarily in the medical field. Ireland The Irish people have contributed ? 1,000 ($2,800) for Vietnamese flood victims through their Red Cross. Israel Israel made a gift of pharmaceutical supplies for flood victims and will train this year five Vietnamese in irrigation and animal husbandry. Norway Norway sent a contribution through the International Red Cross for flood victims in February 1965. Pakistan Pakistan made a financial contribution for assistance to flood victims and donated clothing for them. Switzerland The Swiss have provided microscopes for the University of Saigon. The Swiss Red Cross has sent an 11-man medical team through the International Committee of the Red Cross to work in a provincial hospital in the Central Highlands of South Viet-Nam. UN System, Aid to Viet-Nant The United Nations and its specialized agencies are also making a significant contribution to the social and economic development of Vietnam. Under the Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 :?CIA-RDP69600369R000200 20030-9 18 NOMINATION OF RUTHERFORD M. POATS Expanded Prograin bf Technical AssistanJe of the UN Developmenit Pro ram; 15 technical assistauce projects are scheduled for 1061 Sine 1068 at a c st ol $724,475. These projects range across such varied fields as maternal and child health, labor administration, educational planning, telecoMmunications, m :tem- ology and civil aviation. Among the participating agencies are ILO. FAO, UNESCO, W110. ICAO, ITU, W1110, and the Department of Economic and 'ociol Affairs of the UN. In aclidtion, UNICEF is lending financial ,iapport to an mber of programs in the health and child care fields. Several major projects financed by the Special Fund of the U.N. Develo met t Program are about to get underway. A National Technical Center total national contribution approximately $1.5 million), with UNESCO is bec ming operational. The Special. Fund in January approved a Fisheries Develo ment Project including exploratory and experimental fishing in the waters if the South China Sea, to be executed by FAO at a cost of $1.3, million. Also beirg negotiated is a Social Welfare Training Center to be executx1 by the Bur au of Social Affairs of the UN. ECAFE is pressing ahead with regional proj ets Of benefit to the nations of the Mekong Basin and has unclertalten surveys of rriga- tion, hydro-electric facilities and bridge construction projects in Viet-Na i. ' AMOUNT ALLOTTED FOR PACIFICATION :PROGRAM 1. Senator SPARKMAN. In the current fiscal year as the United tales is providing Vietnam $525 million in economic ,aid, and also ublic Law 480 assistance, how much of thA will be used for the pacifi al ion program? Mr. POATS. We break down our program into four categorie : eco- nomic stabilization, war support and relief, revo'utionary d clop- ment and pacification, and long-term development. The total that we have in the fiscal year 1967 current progr m for the revolutionary development, which is our general term co ering the civil aspects of this pacification, village level nation buil ing, is $88 million. That does not include some indirect overhead c sts of staff, central staff, in Washington, and in the Saigon mission, an so ,311. I would say roughly $100 million plus about, oh, say, $5 mi Public Law 480 commodities. I have excluded from that such things as medical assistanc We count that in what we call war support and relief. Refugee relief is also excluded from those figures. Senator SPARKMAN. All of this is to civilians? Mr. POATS. That is correct. Senator SPARKMAN. The pacification task there is enormo s, i; it not? Mr. POATS. It certainly is. It is enormous because of its L ensity, We are going down to the hamlet level supporting the Vie namese local government, village councils, revolutionary developmei t cadre and other work assisting the 4,060 or so hamlets in which this Too-ram is operating. Senator SPARKMAN. Well, because of its size and importa cc and intensity, the amount of money that is directed to the pacificat on pro- gram seems small to me; $88 million out of $525 million is nit going to achieve a great success in pacification. Mr. POATS. Senator Sparkman' 'I think Senator SPARKMAN. Will this tend to step Up as you mov along ? Mr. POATS. Yes. It has stepped up from about $50 mil ion hist year, and it is about $101 million;, precisely $101, million in ur fiscal budget for 1968. Let me add, Senator Sparkman, I have excluded, of co rse, the Vietnamese budget expenditures Which are additional to th t. This Approved For Release 2004/05/05 CIA-RDP69B00369R000 00020030-9 Approved For Relme_A0064405/t05,thfilAIRDE/691B09,3W000200022,930-9 budget is made possible by our stabilization program, our commercial import program. Without that they would be unable to maintain the pace of budget expansion to support their own people in this work. So the total expenditure is considerably larger than the direct U.S. aid expenditure for revolutionary development of the dollar sum. That is true of our logistic program which provides general support, and a number of our military programs which I have excluded, which are not included in the aid program but which bear on it. CURRENT AID MISSION DIRECTOR Senator SPARKMAN. Last October before this committee you were asked about the turnover of mission chiefs in Vietnam. In this pres- ent turnover in Vietnam, is the AID mission director affected? Mr. POATS. No, he is not. He is staying on This is Don McDonald. He has been out there since last fall and I hope he will be there a long time. We have, I think, some stability at the top of the mission. We have a number of senior people in it, from a number of our missions around the world, a number of our best people. We have more sta- bility now than we had in the past. Senator SPARKMAN. Thank you, Mr. Chairman. The CHAIRMAN. Senator Carlson. AID PERSONNEL IN VIETNAM Senator CARLSON. Mr. Portts, you have been discussing the pacifica- tion program in our work in Vietnam. How many employees does AID have in Vietnam? Mr. POATS. Senator Carlson., we have at the present moment about 1,400 regular AID direct-hire personnel and approximately another 400 on contract or borrowed from other government agencies, making a total of about 1,800 Americans; then several hundred third country people such as Thais, Filipinos, Taiwanese, so it is a very large staff. Senator CARLSON. Of these 1,800, how many are working in the pacification program? Mr. POATS. About 500 out of these 1,800?no' 500 Americans of the 1,400 are in the pacification or revolutionary development sector of the program and in addition about, nearly 400 are in provincial medi- cal assistance programs which, of course, are supportive, to the revolu- tionary development, psychological human effort in the field. Senator CARLSON. In other words Mr. POATS. Roughly half. Senator CARLSON (continuing). About half of the people are en- gaged in this pacification program, half in other fields of endeavor to improve the economic and social conditions of the people of Vietnam? Mr. POATS. That is correct. A very large number engaged, for ex- ample, in the advisory, training and equipment of the civil police forces; a large number engaged in logistics, internal transportation, port operations, airlift, and so on, which are abnormal to an AID program, but essential in a war theater operation; a large number, increasing number, engaged in audit and inspection and control work because of the tremendous diffusion of commodities throughout this Country in such a program and a limited Vietnamese management staff to control it within the Vietnamese Government. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Ape6oved For isr.,49p4n5Fri1 WIpP9 l8 r6 9RCi002 0020030-9 ? E4PECTED SUCCESS OF PAC FICATION PROGRAM I Senator CARLSON-. Now, of course, t ie pacification program, I ti ink most of us would.gree, is an important program in timt area aft r 1V6 get the military situation cleared up extensive do you e peel; this program to be next year? You say you have i.round 1,800 ein.? ploYees now, probably 500 in the pacification program. What is our estimate for next year? Mr. POATS. We have a request now which we are wicrking On to add: several hundred additional employee by the end Of this year. be lieve the target is approximately 400 additional, of which well ver half, perhaps two-thirds2 would be in what we now a1l the Offi e of Civil Operations, which is the management system, for controllin the AID, USIA, Embassy, :crA..and military personnel working o the civil side of the programs of revolutionary development country l, So there is a further expansion required this year. There expansion of the area of operation and intensity Of it. The R. D. program plans in each province add up to a targetHaf 1,100 addif villages to be secured up to the minimum criteria; for exam*, ha iiig elected or some form of local government established; elections will_ be held, as you know, in most of these hamlets and villages this year. They are now beginning to hold. S,econdly, to reestablish go erh? ment services to the hamlets, to have provided loca. security fir it, to be assured of a screen of outerse curity, andH sc on. i There is a land reform element n the more elaborate; 11- oint: criteria of these programs. There ar 1,100 such hamlets progr, 'ed. this year, in addition to the 4,400 listedby the Vietnamese Govern cut on January 1, 1967, as secure. NO LIMIT TO NUMBER OF AID 1ERSONNEL IN VJTNAM Senator CARLSON. There is no limit on the authoription -we passcd last year as to the number of people you can employ so far as f4inds for paying the costs of Federal employees were concerned. We er- milted the AID agency, without limitation, as I remember it, f4inds to employ people. In other words, we did not try to the nu bet of people you could use. Mr. Poxrs. No, sir, but a limit was imposed on the administr tiye type personnel, a $5 million ceiling on the use of supporting assist$inc. funds to fund administrative operatio s. MILITARY PERSONNEL IN THE ACIFICATION PIIOGRAM Senator CARLSON. The people that you have mentioned working in the pacification program are civilians. What percen of the military is used in this pacification program? Mr. POATS. I think the principal use of the military in the paci ca- tion program in the narrow sense of revolutionary development, s I have used it, would be those at the district level. There are a out, close to, 200 teams composed of four, five, six military perso nel, usually a company grade officer and several enlisted men in ach district town, so that is roughly 1,0002 slightly over 1,000, I bel eve, military personnel working at the district and to a large extent se ing the civil side of the operation. ow age, Approved For Release 2004/05/05 : CIA-RDP69000369R0002 0020030-9 Approved For NelemigROVW5Ticft1A-HDR69X/A69R00020V20030-9 Senator CARLSON. That would be U.S. military people. Mr. POATS. U.S. military. Senator CARLSON. There have been press reports and statements to the effect that the South Korean Army itself Was going to be used principally for pacification. What about that? Mr. POATS. Oh, I see, in that sense the South Vietnamese Army Senator CARLSON. I was thinking of United States also. Mr. POATS. The great problem in achieving a more rapid. pace of pacification, revolutionary development, has am the absence of con- tinuous local security for the villages in which this was undertaken. The relaxation of that security, bringing the Vietcong raiders back into the hamlet, or Vietcong cells back into it, has led to disillusion- ment on the part of those who have sided with the Government and attempted to carry out this program. So there have been repeated cases of a loss of absolute security and of the maintenance of these criteria. It was decided last fall by the Vietnamese and United States Gov- ernments that a much greater effort should be devoted to providing local security for this village-by-village process. The Vietnamese Government agreed to ass* a much larger pro- portion of its regular military forces as well as its regional an popu- lar forces to this task. They have committed 50 maneuver battalions, which is more than a third of the total Vietnamese Army, to provincial level assignment carrying out explicit screening operations to pro- vide an outer shield of security for the revolutionary development cadre teams, police and so on, that would provide the inner security in each of these hamlets. Now, with respect to the U.S. forces and the Korean forces, their principal mission is against the main forces of the North Vietnamese Army and the so-called Vietcong regular units. However, they do, for example in. the Marine area, work a number of special arrangements to team up with local Vietnamese popular forces and regional forces to carry out a program of joint action pro- viding local security. But it is not the best and most efficient use of the foreign troops. It is far more effective that Vietnamese troops, Viet- namese security forces of all sorts, do the job. KOREANS WORKING IN VIETNAM Senator CARLSON. You mentioned Koreans. We also use large ? es numbers of civilians that are Koreans, not just the military. There was an article in the paper earlier this year that said Korea was sending 40,000, I believe, civilians to Vietnam to work in connec- tion with the pacification program. I assume we pay those people? Mr. POATS. Senator, that article was not correct. We have been dis- cussing with the Vietnamese Government and with the Koreans ways in which the Korean civilian talent could be used. For example, we have now four Korean hospital medical-surgical teams in the country. We would like to get more of that kind of talent. Korean nurses, Korean agricultural people, Korean supply and logis- tics people. So there have been some recent discussions between the Korean and the Vietnamese Governments in Seoul, looking to further use of Korean 77-579-67-4 Approved For Release 2004/05/05: CIA-RDP69600369R000200020030-9 Apprcinad For Relimiteigcl9105a5 444%9 0033(92A0 0 0 2 0020030-9 specialists where no Vietnamese Were available for the partic lar. job. But it will be nothing in the order of 40,000 or anything of t at sort. Senator CARLsoN. The only thing I was basing it on was tha article. _ Mr. Po4Ts. Yes,. I saw that. Senator CARLSON. In view of the fact that 40,000 is incorr ct, ]:iow many Koreans would you say we are using in the civilian iapaeity in South Vietnam? Mr. POATS. So far as AID is concerned, we have oantractual rrange- merits to share the costs of these, four medical i.eams, and re ave prospects of several hundred additional, perhaps as many as a ti ousand additional, over the course of this year, Korean civilians in van i us jobs in Vietnam. In addition to that, the U.S. military prime contractor, the RMX- BRJ Consortium, employs Koreans, and I do not know the i umber, but it is in the thousands; and, further, Korean seamen are e played on shipping and maintenance contracts in Vietnam but not ii eluded in the personnel figures that I gave you. Senator CARLSON. In other words, even if the 4,1,000 is not affect, there are thousands. Mr. POATS. Yes, yes; particularly, with the const uction contractors. Senator CARLSON. That is all, Mr. Chairman. The CHAIRMAN. The Senator from Ohio. Senator LAIISCHE. Yes. = U.S. AID TO rUOOSLAVTA Mr. Poats, I do not know whether you are the person who o ght to be questioned on this subject, but do you know when we started giving aid to Yugoslavia? Mr. POATS. No, sir. I am afraid I am completely ignorant on aid to Yugoslavia, except as a newspaper reader. Senator LAuscHE. Do you know how much we have gi en to Yugoslavia? Mr. POATS. Very substantial in Public Law 4800 I am sure, nd of course, we had an aid mission there, in the period of the AI rshall Plan, I believe. Senator LAUSCIIE. I think it began in 1948 when Tito was sup-posed to have severed himself from the Comintern, and it Is my undert-aiid- ing we have given approximately $2.5 billion in the aggregate. What is your understanding about the existence of freedom t vote for candidates of two political parties and the right to attend hur2,h in accordance with your own conspience, and other liberties about which we speak? Do they or do they not exist, in Yugoslavi? ? Mr. POATS. Well, Yugoslavia is certainly a Conalunist societ . It has considerably more personal freedom than some other Com unist societies. Senator LATTSCHE. Did we give aid to Yugoslavia to perpett e the Communist government or because we believed that it was a p rt of our defense system to have Yugoslavia torn away frim Russia? Mr. POATS. I believe the rationale; has been that 'Yugoslavia epre- sented a hopeful tendency toward diversity in the Communist rorli. Yugoslavia's role with respect to the Greek civil war had beei con- , 1 Approved For Release 2004/05/05 : IA-RDP69B00369R0002 0020030-9 Approved For Relocagft-APR4#4495/h)9165M9R9(1)3:6M00020002%30-9 structive from our point of view at a certain moment, and that Yugo- slavia had tendencies internally w,hich represented some relaxation of the harsh system. Senator LAUSCIIE. Was it because it had a relationship to the secu- rity of the United States that we decided to give such liberal aid to that country? Mr. POATS. I believe, Senator Lausche?and I am sure you appreci- ate my lack of qualification on this answer?I believe that that was a consideration of the Presidents who successively made that decision. U.S. ACTION IN KOREA Senator LAUSCIIE. Why did we go into Korea? Mr. POATS. We went into Korea to resist Communist aggression in a very blatant form and to demonstrate the validity of the United Nations proposition that such small countries would not be the victims of external aggression. Senator LAuscHE. Why should we have worried if the Communists took over South Korea back in 1950? Mr. POATS. I think our principal reason for concern was a desire to maintain the whole system for the preservation of peace; that if it were allowed to be .broken in that flagrant way in Korea then the next country and the next opportunity would be easier, and there would be no resistance, and it needed to be- demonstrated that the international organization for peace had meaning and teeth. Senator LAuscm. While we were still in Korea, President Eisen- hower made the statement: Aggression in Korea and in southeast Asia are threats to the whole free community to be met by united action. Is it your understanding that that has been the thinking not only of Eisenhower but also of Kennedy and Johnson? Mr. POATS. I think that is right, Senator Lausche. Senator LAUSCIIE. In 1954 the Geneva accords were signed, frag- mentizing Indochina. Following the signing of the Geneva accords, the SEATO Treaty was executed, which you mentioned a moment ago. COLLECTIVE SECURITY Did the SEATO Treaty contain a provision that an attack upon any one of the members of the SEAT() organization would be deemed to be a challenge to the security of the other signatory nations? Mr. POATS. That is approximately correct, as I understand it, sir. Of course, the countries of Vietnam, which were Indochina, were cov- ered in a protocol and were not members of SEATO, but were offered the protective umbrella of SEATO if required. Senator LAUSCHE. Well now, I will read article 2 of SEATO. [Reading:] In order more effectively to achieve the objectives of this Treaty, the parties separately and jointly, by means of continuous and effective self-help and mutual aid will maintain and develop their individual and collective capacity to re- sist armed attack and to prevent and counter subversive activities directed from without against their territorial integrity and political stability. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Agproved FormNmApootkomiikstehgcw.6g0A4369R0002 0020030-9 . - Do you know whether or not the following treaties Contained pr vi- : sions declaring that a challenge to the Security of a, particular nat on that is a signatory to the treaty would be deemed a challenge to he security of all the signatories, first, the treaty with J'apan ? Are . ou familiar with it? MT. POATS. Yes; I think that is correct. Senator LAUSCHE. The treaty with Australia and New Zeal nd know as ANZUS ? Mr. POATS. The same pattern there. : Senator LAUSCHE. The Korean settlement? Mr. Poxrs. Yes; I believe so. Of Course, there is a wider un standing in the case of Korea with the ITnited Nations.: Senator LAUSCHE. SEATO, of course, we understand it does. , ME. POATS. Yes. , Senator LAUSCHE. There are others. t CHANGES IN COMMUNISM SING THE DEA* STALHNT i Now then, do you recall when Stalin lied? Mr. POATS. March 1953. Senator LAUSCHE. 1953. In your opinion has there been a change since Stalin's death would have justified a change in the ,general attitude of the IT States with respect to threats from southeast Asia.? Mr. POATS. Senator Lausche, you appreciate this is entirely a er- sonal opinion beyond the competence of my present position. It seems to me that there have been; from whatever source, afre ing the local Communist movements, continued pressure for expAnsi of Communist domain throughout the southeast Asian,: area. , Now, this pressure_ has been said to ,be more risk taking on the art of the Chinese leadership, Communist leadership, than on the pa t of the Soviets. I think there is a great deal of evidence to support the view tha the Soviet leadership is more conscious Of the wider lissues and da gers of international war than has been evident on the tart of the Chi ese, but both obviously seek to further these local war S Of liberation. , The Soviets are. capable of greater flexibility and adjuStme lit to particular interests, and particular circumstances as in Laos fo:c example where they, by their action, ,made possible the establish ent of a neutral government there, and on several occasions have se n fit to dampen down what might otherwise have been a greater expl sior.. Senator LAUSCHE. Are you familiar with the fact. that When cm-17 nedy became President we had 600 advisers in South Vietnam, a, d on the day of his death there were 19,000 or 20,000 troops? , Mr. POATS. Yes; that is right. : Senator LAUSCHE. Can that reasonably be interpreted to :meal that he felt an apprehension about South Vietnam being' taken Over b the Communists? Mr. POATS. Well, I think he was quite frequently on the: reco d on this subject, Senator Lausche. He certainly was cencerned a. s it i. I cannot draw any conclusions from that as to What he would have done in particular circumstances. Approved For Release 2004/05/05 : tIA-RDP69800369R0002 0020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS 25 CHARGE OF MISMANAGEMENT OF AID PROGRAM IN VIETNAM Senator LAUSCHE. Now then, there have been stories about mis- management of the aid program in South Korea. What is your posi- tion now? Mr. POATS. Assistant Administrator of Aid for the Far East, which includes the area from Burma around Indonesia, Vietnam, Thailand, Laos, the Philippines, Korea. HW Senator LAUSC E. here is your office, here in Washington? Mr. POATS. In Washington. Senator LAIISCHE. It has been charged that there has been gross mismanagement of the aid program in Vietnam. What answer do you give to that charge? Mr. POATS. I find it difficult to answer a charge that broad, Senator Lausche. There certainly have been instances of wasteful expendi- tures. There have been false starts, there have been projects which were undertaken only to be overwhelmed by political changes in Viet- nam, or by the tide of war. There have been activities undertaken in haste when, as I said initially, we did not or felt we could not, wait for the establishment of an adequate aid administrative structure in Vietnam. There have been problems in recruiting the control and specialized staff for such things as monitoring particular commodities in our commercial import program and guarding against abuses or irregu- larities or frivolous procurement, bearing in mind, if you will, that over 150,000 different commodities are financed by aid for the Vietnam programs. It has been difficult, to get experts in enough fields to properly police the procurement specifications, the shipping schedules, and so on. But we have made an enormous effort to reduce these problems. We are not satisfied with waste. We do not want to hide behind the alibi that there is a war on so that waste is acceptable. We do not take that position. But we have had to make some tough choices from time to time in the need to get the job done. DIVERSION OF GOODS Senator LA:CISME. Mr. Fred S. Hoffman and. Mr. Hugh Mulligan have written columns in which they have stated that indications are that much food, lumber, medicine, and fertilizer never reach the poor, but go to enrich provincial, and district officials. If that has happened, will you describe why, and what is being done to stop it? Mr. POATS. Yes it has happened in several instances that I know of. We have tried to stop it by increasing the strength of our own, and of the Vietnamese Government's commodity management staffs in the provinces by establishing a uniform system of accountability, of documentation for the shipment of goods from, for example, the Saigon warehouse to the regional warehouse, to the provincial .ware- house, to the village. We have worked out arrangements for a sample audit of these transactions so as to minimize diversion. We have put our own people Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 { Appr ed For Re IgtomPAQ9411,9q1P5aiJ iigg:994?Mr0002 1 0020030-9 on the movement of goods right down to riding shotgun, as t were, on some medical supplies, for example. But there have been occasions when a local official would divert cement or other building materials, for example', to a friend, a .ousin, or to a person he sympathized with because his house had ben de- stroyed by the fighting, or whatever. These are, in some cases, under- standable, but not condonable types of corruption. In som cases, they are outrageous. We think that, on the whole the losses from this sort of th ft and diversion were in the order of 5 to 6 percent of the commod ties in the program in the latter part of last year, and that is terribl high. But given the circumstances, it is, When you see the number of hands. the number of movements, the limited control,. the degree to which this is handled by people who are not regular employees if any government, it is at least understandable to those DII the groi nd. We think we are reducing this by a number of measures, th great increase in the security controls in the Saigon port, our poll a acid their police; a great increase in the customs management. Senator LAuscnE. I assume this: subject has been generall ths- cussed with your superiors in the Department of Stat e? Mr. POATS. Yes, indeed, and the Administrator of AID. Senator LAUSCHE. Has it been taken up with the President ? f the United States, as far as you know? Mr. POATS. It has, indeed. The Administrator of AID, Mr. 4aud, submitted a full report on this to the. President in Ja:nuary. Senator LAUSCHE. Were you called into the White House f4r the purpose of discussing it with any of the aides? Mr. POATS. Oh, yes, many times. In fact, the White I1ouse staff has been very interested in the subject and has participated in vorlc- ing out some measures to reduce it. Senator LAUSCHE. You are familiar with these articles that I have just mentioned to you? Mr. POATS. Yes. Those articles had an element of truth i the sense that the particulars they described were in many cases ace rate. I think the sum total, the summary lead sentences a:i cf headline. and so on, from them were a very serious distortion. CRITICISM OF AUDIT PROCEDURES Senator LAUSCHE. The General Accounting Office criticized th ad- ministration in some respects. Has that been discussed wit the White House? Mr. POATS. The General Accounting Office made a brief repo ton the audit procedures, audit staffing, accounting ol our Missio i in Vietnam, and is in the process of preparing a second report o the commercial import program. I do not know whether they have leen discussed with the White House or not Senator LAUSCHE. In the face of criticism that has been dir at the general administration of the program and impliedly or m yhe directly, at you, the President has nominated you for a superior ost Mr. POATS. That is correct. Approved For Release 2004/05/05: 1A-RDP6900369R0002 0020030-9 Approved For Re4gAciANN05/95thjcilAiglapj69,1i3.09MAR000200022930-9 NEWS ARTICLES REGARDING PENDING NOMINATION Senator LAUSCHE. I have here, an editorial in the Washington Post :ommending the nomination. It states, among other things: "Confronted with the possibility of a noisy floor fight, the President could have taken the easy way out by quietly scuttling Poats." Did you read that? Mr. POATS. Yes, sir; I did. I was glad to read on. [Laughter.] Senator LAITSCHE. "To his credit, however, he"?that is, the Presi- dent?"has indicated this week that he will stand by the nomination." I also have here an article written by Mr. John Maffre under the title, "Renaming of Poats to AID Is Expected." ' Mr: Chairman, I ask unanimous consent that both these articles I e printed in the record. The CHAIRMAN. Without objection. (The articles referred to follow:) [From the Washington Post, February 4, 196!T] RENAMING OF POATS To AID Is EXPECTED (By John Maffre) The Administration is testing the Senate ice before it skates forward with a second try at nominating Rutherford M. Poats to be the Deputy Director of the Agency for International Development. Since Congress reconvened, there have been probing phone calls and visits to Sen. Birch Bayh (D-Ind.), whose criticism of how the AID program in Vietnam has been run led him to block Senate confirmation of Poats in the dying hours of the 89th Congress. So far, Bayh has remained adamant in his quarrel with Poats's ability to ad- minister the program, although an aide said he is "not taking lightly" the expres- sions of high regard for Poats that have been beamed to his Senate office. The State Department, AID itself and the White House make it clear that they regard Poats as the man for the job. AID officials have spent the last week scurrying about Senate offices lining up supports for Pants. They are prepared to send a memorandum to the White House recommending the President resubmit Poats' nomination. Poats's nomination was approved by the Foreign Relations Committee last fall, but Bayh insisted on the Senate floor that the nomination be reconsidered in January. Bayh, whose political antennas are sensitive to the steel community in his State, won his campaign last year to reinstate a rule that 90 per cent of AID steel products used in Vietnam come from U.S. sources or from a handful of de- veloping nations designated by Washington. But his staff maintains that he is not carrying on a personal vendetta against Poats. The Senator felt that Poats was lacking in candor last year when Congress wanted details on AID's auditing and inspection of the Vietnam program. He feels that this complaint was supported later by critical reports from the Gen- eral Accounting Office from a House subcommittee headed by Rep. John E. Moss (D-Alaska). Although the hassle over Poats's future has stalled a major reorganization that would set up a separate AVD Vietnam Bureau, the Agency has managed to fill one high level post?that of Information Director?that had been empty since August. Charles E. Bosley, 40, a one-time newsman in California who served as admin- istrative assistant to the late Sen. Clair Engle (D-Calif.), has been named to the $25,890 post. He succeeds Michael Moynihan, who left to become director of public affairs for the Port of New York Authority. For weeks, AID planners have been refining plans to lift the huge Vietnam program from the Bureau for Far East and set it up as a separate operation, the first time the Agency has built a bureau around a program in a single country. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Apygoved For icejamirgo,o469,5/priamphpyg9,g9R0002 0020030-9 The expectation is that the older division would be renaMed Bureau of East Asian and Pacific Affairs to conform with State Department style. The names of most members of the new bureau?upwards' of 75 staff me ibers ?have been selected, but a chief has not been picked, penting a r?lutilon of Director William S. Gaud 's problem in confirming a denutY. Persems el se to Bayh said that he could hardly be agreedbib to PoatS's heading the new Vi tnaro bureau any more than his being the No. 2 man at AID. AID APPOINTEE [From the Washington Ps t, Feb. 28, 196] During the preadjournment rush last November Congress Ilecided 6 del y the confirmation of Rutherford Poats as the new deputy director of the Agen y for International Development. Sen. Birch Bayh (D-Ind.) blocked unanimou con- sent to the nomination and issued a broadside charging that Poats hadl been responsible for the "mismanagement of the aid progTain. in Vietnam" ring his tenure as Far East regional director of AID. Confronted with the poss ility of a noisy floor fight, the President could have taken the eitsY way out by q ietly scuttling Pmts. To his credit, however, he has indicated this week that h will [ stand by the nomination. Although Congress has reason to cast a searching eye at the administrat on of the vast economic aid effort in Vietnam, aS the Moss Colpatnittee deMonst ated., the weaknesses in the program cannot in fairness be attrilioted to a sin e hi- dividual. They reflect problems endemie to a war eraergencY. What is pe haps most relevant in this case is that Poats has responded: construCtivel and promptly to congressional criticisms. He has tightened up the complex com- modity import program by instituting an automated accciunting system fir im- port arrivals, stationing U.S. logistics advisers in provinclal warehouse and doubling the number of AID auditors in Saigon. Senator Bayh has made no secret of the fact that his opposition to Poa is in large part a legacy of their conflict over the recently enactel Bayh amen meat to the aid bill. As a restrictive, "Buy American" provision designed princ pally to counter U.S. procurement in Japan and korea, the amenditent waS vigo ously opposed by AID. But it should be remembered that opposition to the amens meat was hardly the isolated invention of the aid agency. The White House a tho State Department had political, Vietnam-related reasons Of their own for ant- ing to channel aid spending to Korea and Japan. Poats should not be victimized for his role in implementing what was a b adly based Administration pollIcy. His administrative record daring fii,o ye rs at AID is a solid one, and his appointment shotild go forward. ' Mr. POATS. Senator Lausche, may I add along this line of inq dry, the letter which the Chairman submitted for the record, one of hes,3 letters, was from Congressman Moss, chairman of the Foreign 0 ora- tions and Information Subcommittee 6f the House. His committee and staff have been continually aamining th ad- ministration and management of the aid program n Vietnam ince February, 1966, with a series of field (rips by staff and with testi 0:n:7 in Washington. That letter, as the Chairman said, eelcs to make clear thalT., his riti- cism of the aid program is not intended to be a reflection again my particular competence or any suggestion that I should not be given this position. Senator LAUSCHE. We have had trOuble along this line in Viet am, I think, as far back as 1959 when a newspaperman made a vi it to South Vietnam and came back and wrote a series of stories that weithen investigated. Thank you very much, Mr. Chairman, for allowing me to ask these questions. The CHAIRMAN. You are welcome. Approved For Release 2004/05/05 : 01A-RDP691400369R0002 0020030-9 Approved For ReMaRa0R4405/10%ij,SIMplipr69pOREAR00020002,2930-9 ROLE OF CIA IN THE PACIFICATION PROGRAM Mr. Poats, you mentioned one thing in your comments that aroused my interest a bit. You mentioned, I believe, in answer to a question of Senator Carlson, that the CIA performs a function in the. pacification program. Mr. POATS. Yes. The CHAIRMAN. What role do they play? Mr. POATS. The CIA initially helped some province chiefs develop a group called the Political Action Teams, which were the forerunner of the present revolutionary development cadre teams. The CIA continued to provide some staff to assist in the instruction and advice to these revolutionary development cadre teams. They are in that function a part of the Office of Civil Operations of the U.S. Mission in Vietnam reporting to Deputy Ambassador Porter. The CHAIRMAN. How many people do they have in the training of these cadres at present? Mr. POATS. I think all together around 80, counting field advisers. The CHAIRMAN. Do you know how much they are spending on this program in Vietnam? Mr. POATS. It is quite large, Mr. Chairman, because they are pro- viding direct assistance to the RD Cadre. The CHAIIHVIAN. That is in addition to the other items you men- tioned? Mr. POATS. That is correct. The CHAIRMAN. You do not wish to venture an amount? Mr. POATS. I think the figure last year was, perhaps, $20 million, but I am really not sure, Mr. Chairman. SOURCE OF AID MISMANAGEMENT ACCORDING TO MOSS REPORT The CHAIRMAN. With regard to the Moss report, if it does not reflect upon you, whom does it reflect upon? Mr. POATS. Well, I think, of course, any criticism of the manage- ment of the aid program in Vietnam has to be a reflection on me. I simply was citing the statement made by Chairman Moss. The prime responsibility for the management of the aid program in Vietnam flows from the Administrator of AID through me to the AID mission director, and I have been actively concerned with it for three years, and, of course, have considerable responsibility for what happens. The CHAIRMAN. Since it did not reflect upon you, would it be Mr. Gaud who is responsible? Mr. POATS. Well, I think it is a reflection on the work of the agency as a whole. But I have never thought to shirk prime responsibility and have testified before the Moss committee and other investigative groups regularly on this matter, and take it as my function to deal with these problems of poor management, and there have been a number of them. This is regrettable. I think it is understandable to those who have been close to the operation. The CHAIRMAN. I would not, of course, be able to speak about that, but Mr. Moss was very critical. Since the matter was brought up I wondered whom he was criticizing. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Argoved For Release 2004/0RUTI-15/05 RFO ,1A-RDP69800369R0002 0020030-9 NOMINATION OF RD M. POA1S 1 L: f Mr. POATS. Well, the Moss committee dealt primarily with the o- for the goods imported by AID, in the absence. of sufficient audi lim ,, iiimercial import program in Vietnam, and the degree Of accotintab :y its judgment, and took issue with the system of market determi apt in commercial import financing. These questions, they felt, affected the work, the performance o all of us who were responsible, including those who were recrtitin L the personnel, those who were manning the AID missiot ? and those un., fling the audit branch, the comptroller branch of the Mission. The CHAIRMAN. Thank you very much. Mr. POATS. , Thank you. The CHAIRMAN. Senator Birch Bah, of Indiana,- has requeste 1 to , have an opportunity to testify. Senator Bayh, would you come forward, please STATEMENT OF HON. BIRCH BAY }I, A U.S. SENATOR }tom HE STATE OF INDIANA Senator BATH. Thank you, Mr. Chairman. Could _I ask that I be joined by a couple of my staff members, James Muldoon and Mr. Robert Keefe? The CHAIRMAN. Yes. Senator BAYII. Mr. Chairman, it is certainly kind if the committee and you, as Chairman, to ask us to preSent our testimony this mon fitt-1,eg;: I must say that I testify with considerable reluctance, and only , a great deal of soul-searching. The Chairman knows much better har I that quite often before any legislative body reachei; decisions, t mere is a great deal of vigorous dissent over programi. and facts and. philosophy and issues. All of this is dOne without resorting to persma attack or invective. ; But today the nature of this hearing is not to determine the ad Tau.: tages or disadvantages of a particular issue. Unavoidably, w are forced to consider the qualifications of an individual?the merits the qualifications of a nominee. This is my first experience, in my five years in the Senate, and ight years in the Indiana Legislature, that I have ever been cOnfro ANT with making a determination of this nature, where I.:felt compel] d tc, speak out. Frankly, this troubling experience. has been compou .ded by the fact that some individuals Nirhose judgment. I respect ave spoken highly of the nominee. I am well aware of the criticism that has been directed at me by ome members of the press because of My opposition to the nominee. en7-- ator Lausche referred to the Washington Post's editorial. I rec ntly read an article by Carl Rowan., whom, I respect, wlio pointed out that whenever we have real troubles, in an agency or de artment, then is a tendency on the part of Congress to get the scalp o 6:ae. of the bu eau- crats to hang as a trophy, so to speak. OPPOSITION TO N MINATION I do not feel this way, Mr. Chairman. I regret very much avi0. to be here. But after giving this matter much reflection, I have de. eC-r. to appear here to oppose the confirmation of Mr. !POats, and to irge the committee to use its influence in this matter. Approved For Release 2004/05/05: 1A-RDP691$00369R0002 0020030-9 Approved For Re imo,pso go 5RistiA@RDD6 opg,,,T000200029930-9 I want to make it very clear, I am not opposed to Mr. Poats for what he is or who he is. I am willing to concede that he has done his best. I do not question his intentions or his motives. I question only his ability to do the job for which he is recommended today. Some- times, Mr. Chairman, all the good intentions in the world are not enough to accomplish a very difficult task. As I see it, there is only one reason for my being here, and that is my very strong feeling that we can find a better qualified man to do a very difficult job. I have here voluminous materials from which my statement was pre- pared. There is a report that has been prepared on the Saigon port and other facilities; the Moss committee report, which is perhaps the most extensive congressional analysis of the Vietnam aid problem; a report prepared by AID itself; a GAO report; and a number of newspaper articles. I have tried, Mr. Chairman, to take excerpts from those reports to conserve the committee's time. I could spend all day going through these and similar reports, and I would like to ask the committee's indulgence to hearing prepared testimony in full because I do not want to be taken out of context. I have tried to compile the significant facts to simplify the work of the committee. One document is still classified, and it took us some doing to even get access to it, so I would like to maintain control over these reports until the committee asks for them so that I won't violate any ethics with AID. I just want to point out that they are available. The AID report, which is primarily on shipping and the port tieup there, the Moss committee report, and the GAO report all are available for the committee's perusal. There are others. The Herter report is another one that we looked at. I am sure that the Chairman, Senator Lausche, and the committee are familiar with these. OBJECTION BASED ON NOMINEE'S PAST EXPERIENCE The committee is being asked to send to the Senate for its concur- rence, the name of Mr. Poats to become second in command of the 83- billion-a-year aid program. It is being asked to approve this appointment on the basis of the nominee's past experience. Mr. Chairman, it is precisely on this point, namely, the nominee's past performance, that my objection and opposition to this appoint- ment are based. For the past three years, the nominee has held the position of Assist- ant Administrator for the Far East of the Agency for International Development. Chief among his responsibilities during this time has been the conduct of our extensive and crucially vital foreign aid pro- gram to Vietnam?a program costing the people of this nation about $720 million this year, if you include Public Law 480 funds; or, to put it another way, about $2 million each and every day of the year. This committee does not have to be told about the importance of our aid program to the total effort of the United States in Vietnam. Although some of my colleagues on this committee may hold dif- ferent views from my own on the military presence of the United States in that unhappy land, certainly most of us are in general ac- cord on the goals of our aid program there. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 , ,., 1 Apoved For Release 2004/05/05 ,_. CIA-RDP69600369R0002 0020039-9 NOMINATION OF RUTHERFORD M. POTS , [ F , , , Call it aid, rehabilitation, development, pacifieation or *hat yot. will, the fact remains that we are pouring, American dollars into iet. hain for the purpose of developing a lasting, meanin(;ful' and effe tive ! '1 , peace. All of us, I think, are acutely aware that a military victory in ' iet: nam, or successful negotiations to terminate hostilities there, wi 1 bE,, meaningless unless we can secure a Meaningful peace. This i my opinion, can best be achieved by doing our part to strengthen tileiet I/ nainese economy, by helping to provide better educatiOnal opportu I ity_ by encouraging equitable land distribtition, and by !providing the iech_ , nical assistance wherever necessary to bring abut greater go eral abundance. This, then, is our common goal?the goal for whith we are sp mil ing $2 million a day, or one-fourth of our entire foreign aid e ort throughout the world. The nominee has been direetty responsibl for. . obtaining these goals. . Senator LAUSCHE. Mr. Chairman, 4t this point, May I put a ties tion? The CHAIRMAN. Yes. Senator LAUSCHE. Are you subscribing to the geneial principle htiliet,, we should provide aid, but your complaint is directid mainly a maladministration of the program? MALADMINISTRATION OF AID 'ROGRAM IN .1,'16?NA1?1 i , 1 Senator Bikyill.. Yes, sir; that is correct, Senator IL'ausche. , We can debate and argue both sides of what. AJVs respensib lity was in getting in there, and whether, we should have gotten in, and what our military impact is. But I think we are: after more th n a military victory. We are trying to get an economy, :a political st mc- ture that will hold up; one we can look to with some pride, we h pe in the not too distant future. , Hard as it may sound, Mr. Chairman, I submit to this cOmm ttee that whatever progress we have made, toward thee goals has no . re- sulted from ,the nominee's performance, but in spite of it. His efforts, although I admit they are well intentioned, have "een below the standards for the job, and certainly for the job for w ich he has been nominated. ! I submit to this committee that the f'kmerican aid program in I iet- nam, under the jurisdiction of the nominee, has been the most gr ssly_ mismanaged program in the history of American foteign aid. And thisi s not Birch_Bayh, the Senator from Indiana, speaA ng. i These are from reports, from documentation, provid01 by seven, re- porters who have gone out there and who have dug--7--,all of this tib- stantiates what I am saying. You can go through these., and ,time and time again you (rot to the place where I think evenjhe most ca nal observer, even the nominee, even AIR, will recogny,e the ;fact hat they have got real problems on their hands. . . The question is whether they want to blame these!problems.on s one else. , , , I submit to the committee that the administratiOn of this ,proo., ?am, has not only failed to complement and temper the fact. of our, mit.; ary, presence in Vietnam, but may well have aggravated the struggle t ere and made realization of a final and lasting peace *Ore difficult. In my judgment, had the building job of AID laeen ,done properly the [ ! Approved For Release 2004/05/05 : IA-RDP69B00369R0002 0020030-9 , 111e- Approved For ReittaNONVONO?-6,1916-7M6RpOpil6AR00020002M30-9 destruction of war might well have been avoided or greatly lessened if we had attended to some of these problems before becoming the con- flagration we now see. EXAMPLES OF CHAOTIC CONDITIONS IN AID PROGRAM I would like at this time, Mr. Chairman, to cite some specific exam- ples of the chaotic conditions which have existed in our Vietnam aid program in the past three years and, in too many instances, which still exist today. I will confine these examples to conditions over which the nominee had jurisdiction and for which he is directly responsible. To conserve the committee's time, I will submit data here. You may have it, any way you see fit, Mr. Chairman. I certainly do not say, I certainly do not intend to say, that I know more about this than the committee, because you have been working at it long and hard. I just want to try to focus some attention on the problems that may have gone unnoticed. These have not been concocted by me. They are in these reports. One is by a congressional committee; another one is an AID report it- self; a third one had been contracted by AID, which is very critical, and in which AID contends the man was unqualified after he submitted it because of the critique that he leveled on them; and the fourth one is a Government Accounting Office report. To begin with, the House Subcommittee on Foreign Operations and Government Information, which I shall refer to as the Moss commit- tee, reported last October that: The U.S. economic assistance program (in Vietnam) has mushroomed enor- mously in the last year and vast resources have been utilized without the kind of planning that should have been dictated by simple considerations of efficiency and economy. Certain programs, such as commodity imports, have been ex- panded without being carefully thought out in advance and without the setting of clear priorities * * * Unfortunately, AID did not learn from its worldwide experience of the past 20 years in conceiving and executing much of its program for Vietnam. To further support this general finding, I quote from a series of articles by Associated Press staff writers Fred S. Hoffman and Hugh A. Mulligan?a series published widely last November. After an on-the-scene analysis of the Vietnam aid program they write that? The United States probably will never know how much of its goods has been stolen, how much of its supplies, materials, foodstuffs and direct financial aid has been misused in Vietnam. Until recently, record-keeping was haphazard or nonexistent. Audits now getting underway are concerned with the present? As I think they should be? and the future, not the past * * * There are no real American controls, for example, on rice imports paid for in American dollars. There are only occasional spot checks once the bags clear the customs house. Indications are that much food, lumber, medicines and fertilizers never reach the poor, but go to enrich provincial and district officials. Some items reach the Viet Cong * * * At Ba Hao, 50 miles from Saigon, the U.S. 196th Light Infantry Brigade recently cap- tured a Viet Cong camp and uncovered a big hoard of goods mostly stolen or diverted from U.S. economic aid supplies. There were more than a million and a quarter pounds of AID rice, 440 gallons of gasoline, 600 gallons of cooking oil, 88 shovels, 750 pounds of salt. The bags of rice, enough to feed a Viet Gong division for two months, still bore the names of the American exporters? Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 ApRsoved For 1,Tedimimsip169,5Fril4mphpipp.49Ru002 Mr. Chairman, the article continues? ' . Ships go astray. Barges disappear. Trucks never reac4 their destina A school house roof winds up on some minor official's chicken coop * * Th? AID agency has been under the searching eye of the U.S. Government's ougli General Accounting Office. GAO examined U.S. operations and, reporti ig t) Congress in August, quoted officials of the AID mission ,(in Saigon ) as s yin; the South Vietnamese Government lacked "sufficient qualified pe 7sonn 1" t) manage the important commercial import ,program, that t11.9 mission sta was inadequate?and that "controls must be saerificed in order to keep the pr grata running." GAO would not accept this. MOSS COIVIMITTEE RE'ORT CRITICISM1 1 According to the Moss committee, these eons-tuner goods pro hied by the United States under the commercial import program, and oni- prising about 70 percent of our nonmilitary aid to Vietnam, vera bei;:ig pumped into the country, and the Moss committee outline five specific areas of fault, and I enumerate them briefly : "(a) Goods were coming in without any determination as to wh ther the quantities imported were excessive and could he properly a el- ficiently absorbed into the Vietnamese economy," and this AID r )ort, done by the ,agency itself, its official did itself, alb:ides to the prs lem of port facilities, saying that the port facilities should be able to ham die six million tons per year. Yet in the study it points out that liar to the expenditure of all the funds by AID to build up the port f cili- ties and make them efficient, prior to this time, that the capaci y of the port was 2,000 tons per day per ship, but now with the ma age- ment that is presently going on the capacity is 500 tons a da per ship. The second area of criticism of the Moss committee was th the goods are coming in "without any determination as to whethe cer- tain types and grades of commodities were luxurious under cu rent conditions in Vietnam." My staff was looking through some material and .1 ran aeross some Small Business Administration procurement mems, in Which they were asking for bids for this country, and I was t, bit sarpris d as they were, to learn that one of the items one day was for 8 m Ilion pink bathtub stoppers; and the following day another Small U.Si- ness Administration memo asked for 1,000 metric tons of tcicum powder. Perhaps the bathtub stoppers and talcum powder are 'imp tart in Vietnam, but I wonder?the Chairman asked aboi)t, priorities c4n the overall aid program to Vietnam priorities?I think` i it s import nt to look at the goods that come under our aid authorization. The third criticism of the Moss committee was that the ooCis come in, "without, any determination as to whether the commo titles programed were likely to be hoarded, diverted, or used for pu oses incompatible with U.S. objectives." One product coming in was Unicel 100, which was a product being used for the production of rubber. Du Pont, whiCP was sellin this to AID, became increasingly worried because of the quantif es of Unicel 100 that were being ordered, were entirely too great f r tLe amount of rubber production that was going on, Well, incidentally, after three months it finally ot turned 4ff Ey AID because in an investigation that was made they found that T4Inicel Approved For Release 2004/05/05: IA-RDP69B00369R0002 0020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS 35 100 had explosive power equal to or greater than TNT, and we do not know where all the Unicel 100 went. Silver nitrate was another commodity that came into the country in 1965. There was $1.3 million worth of silver nitrate: used for the backs of mirrors and for medication, putting it into baby's eyes, and this sort of thing. It was terminated finally when AID was convinced that the silver nitrate was being put through a, process where the silver was being used as coinage in the black market and the nitrate was being used for explosive power. I could go on and on, with these kinds of examples. But the fourth area of criticism by the Moss committee was that the goods were being brought in "without any determination as to the quantity of stocks on hand and in the supply pipelines, and," the Moss committee points out there has been no auditing since 1961, I think, despite all the pilferage involved. The fifth and last area definitely outlined by the Moss committee said the goods were coming in "without verification and adequate surveillance of the use made of commodities previously delivered under the. (commercial import program)." One commodity we are importing into the country is thin tin, tin stock, the primary purpose for which is to help the canning industry of Vietnam. It is important to keep the foodstuffs from perishing:. Yet a surprisingly large part of this has gotten into the commercial market where fancy tin footlockers are being made by the merchants for sale to GI's. It is incorrect to suggest, Mr. Chairman, that these deplorable conditions were new revelations promptly acted upon once they were discovered. This is the inference that has been made. Mr. Poats may have suggested this in his statement of July 191 1966, which is contained in the Moss committee report when he said, and I quote from the report: No question about it, this program needed a great deal more management?we feel very uncomfortable with the absence a knowledge in trying to run this program. This is a very worthwhile feeling. But, Mr. Chairman, I feel very uncomfortable that corrective steps were begun only after public ex- posure by the Moss committee during their trip to Vietnam in May 1966. For it was in July 1961, almost two years earlier, that the Gen- eral Accounting Office reported on inadequate policies and practices in financing commercial imports and in the administration of other financial elements of our aid program to Vietnam. COMMERCIAL IMPORT PROGRAM The GAO reported on profiteering, overprising, and the import of nonessential commodities under the commercial import program. GAO further reported on the imprudent use of foreign exchange for luxury goods by the Government of Vietnam; and on other problems which had prevailed as far back as 1955. The Moss committee re- ported, and I quote from the Moss report again, "since the GAO study was completed,"?and this was back in 1964, July of 1964, two years before the Poats' statement before the Moss subcommittee?"since the GAO study was completed, other studies have been made by officials Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : CI -RDP69B00309R000200020030-0 36 NOMINATION OF RUM RFORD f.13,10?.4S of AID and the Treasury Department and the same----Mr. Chair air t underlining? , the same deficiencies have been identified repeatedly. As a result, swe ping changes have been recommended on numerous occasions.: It was not ant 1 the subcommittee initiated its investigation, however, that AID took aggr ssivia action to implement Such changes. Reactin 0- to the Moss committee report AID Administrator MI- . Ham S. Gaud was quoted on October 15, 1966, in the Christian Scienc Monitor as saying: This program * * * has had to face many difficult administrative pro leins. But it has accomplished its purpose: to check runawaylinilation which vould have ruined South Vietnam's economy and jeopardized the successful prsu.t of our civilian and military efforts. Certainly, inflation was important, inflation is 5;i11 impoitaiit, in ? the battle of Vietnam. But, Mr. Chairman, pray bill, how couljd the almost total absence of planning control leading to the loss and ver- sion of hundreds of millions of dollars worth of American ai4 con- tribute to the control of inflation? Says the Moss committee in the same area, and I quite: * the underlying philosophy (of 'AID) was to flood the Viet, amese markets with enough AID commodities to "sop up" the excess local cu rency_ In spite of AID's philosophy, inflation soared. Prices almost doubled ' 1985 and increased another 50 percent in 1966. Moreover, the AID mi .ion in Vietnam had neither the management -tools nor the personnel to ad i mister an effective commodity import program * * *. The Sula2ommittee co eluded * that the manner in which the import program was being administ red by the AID mission was contrary to sound management practices in Gove nment operations, and was contributing to, rather than preventing, widespread buses. Again, and again, the AID response to such findings ha been defensive rather than constructive. The Christian Science Ionit or reported in October 1966, that "AID officials"--despite wh t the i nominee said, perhaps he s not aware of this, but certainly others have found it?that "AID officials always maintained one xcuse :- There's a war on, therefore controls are not practical.'" ASSOCIATED PIESS REP0RTS1 The Associated Press reporting team of Hoffinan and $lligan wrote last November: Public administration advisers (in Vietnam) were told in an offiei 1 htnd- out, "Re side losses: graft, payroll padding, wasteful local purehasi g from preferred contractors, favoritism; you must tolerate a etyrtain amount of this. Do not let your morals get in the way of project operations. Reme ber you never can prove It exists so you might as well tolerate it in reasonable a ourds." This self-defeating and, in my judgment, unconscionable ttitude inevitably results in precisely the 'opposite effect on Vietna ese vil- lagers than the effect, the attitude we are spending millions t create, the attitude we have been trying to create in those people. olfinan and Mulligan reported, for example, that half of 400 longs ?f supplied cement?earmarked to build a school in a province orth of Saigon?vanished. The reporters wrote: U.S. officials couldn't pry a plausible' explanation from the Chan T aril dis- trict chief, to whom the 200 missing bags were consigned. So it wa marked' clown as a case of probable illegal sale of U.S. aid goois. The Unit d States was the loser on two counts: (1) The American taxpayer is out the e st of the Approved For Release 2004/05/05 CIA-RDP601300369R000 00020030-9 Approved For Relmq-ApRgRp5 ? citAle691300369R000200020030-9 ICU RD M. POATS 37 lost, strayed or stolen cement. (2) The battle to gain the confidence and support of peasants and villagers has suffered a setback. They reported a similar episode in which fertilizer was delivered to the custody of a district official for distribution to farmers of a small Vietnamese village. The fertilizer never reached the farmers and the district official was left untouched by authorities after he presented 200 signatures?incidentally, all in the same handwriting? of farmers who supposedly received their portions of the fertilizer. Now, a moment ago, I quoted AID officials as saying there could be no practical controls. In fact, they have encouraged public adminis- tration advisers to turn their backs on graft and theft. I think, in good conscience, I should say that I believe the nominee and those around him, above and below, have tried recently to change this philosophy, and although I suggest the earlier philosophy was unrealistic, I would like to keep my remarks in the context of fairness. But when confronted, in the past, with specific examples in which graft and theft can be proved, they have sung a different tune. Here, again, quoting from Hoffman and one ranking AID execu- tive" was quoted as saying: We do not, pretend to have a thoroughly efficient inventory regulation at the district or village levels. We accept integrity of the documents presented to us by the district and village officials. So there could be theft at the village level we don't know about. Thus, AID has constructed excuses for lack of control and efficiency, in the past, again let me say,. to meet almost any eventuality. If you are talking to someone primarily concerned about our military effort, you say: "There's a war on and thus controls are impractical." If you are talking to someone suspicious of Vietnamese villagers, you say: "Graft and corruption are a way of life here and you must expect this kind of thing." If you are talking to someone who is sympathetic to the plight of Vietnamese villagers, you say: "We must assume and accept their integrity." Mr. Chairman, I could go on for hours talking about inadequate auditing?the,last one, as I said a moment ago, was completed in the summer of 1961; about illicit practices affecting our aid program; about the port situation; and many, many other aspects of this almost unbelievable situation. I could fill a book in itself about AID procurement of steel, in which we have demonstrated that sound practices, once forced upon AID, result in huge savings. NOMINEE SHOULD BEAR RESPONSIBILITY FOR MALADMINISTRATION But I think I have said enough, perhaps more than enough, to dem- onstrate that during Mr. Poats' tenure as AID's Assistant Administra- tor for the Far East since April 1964, and for 28 months before that as Special Assistant to the Assistant Administrator for the Far East, he has had ample opportunity to learn of the deficiencies in his pro- gram and to take steps to correct them. Yet, according to the Moss committee and to reports made by a variety of public and private sources?ranging from the General Accounting Office to the Associated Press?action has replaced excuses only in the past few months. In short, corrective action was not taken until investigation by Members Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : CI -RDP69B00369R000200 20030-9 38 NOMINATION OF RUTH RFORD M. r6ATs t of Congress and the white heat of publicity generated by ener etic newsmen forced the whole sordid mess into public view. This Mr. Chairman, is the record, at least excerpts therefrom, of what has been going on in AID in southeast Asia. If our aid program to Vietnam has been badly. rtn?and. I b licve the evidence bears this out beyond reasonable doubt---then the m n i:a charge of administering that program must assume the burd n of responsibility. But, there are those who seek to absolve from any blame fo this debacle the man who had directed our Vietnam aid program fof the last three years. They point out the great difficulty in dealingl with any problem in Vietnam. Even Congressman John Moss, for w am I have the greatest respect, has suggested in the letter which was Pu into the record, that the Chairman of this committee and the co &- tee should not conclude that despite his findings of massive aste brought about by poor organizational and 'management me- tices, Mr. Poats should not be held accountable. In fact, he give very fine testimony, and T want to point that out, on behalf of the no ince. I readily agree that it is frustrating and it must be difficult, o say the least, to administer a program of this size hal f way arou d the world. And, certainly, there are many factors to be considered other than the administrative ability of Mr. Poats in assessing the fail re or success of the program. But can we rightly say that the nominee has no respons bility whatsoever for the Vietnam aid fiasco as Congressman Moss s id in his letter? If not Mr. Posts, then who is responsible? The ao min- istrator ? The Secretary of State? ;The President? Indeed, I think these top officials Cannot escape the ultimate r pon- sibility. But who is actually to blame? Take the example of baak president whose loan officer uses poor judgment in making an unre- coverable loan. The bank president might have to assume ul imate responsibility for the error; but I doubt seriously, Air. Chairma , that the bank president would react by recommending that the erring xecu- tive be promoted to bank vice president in charge of loans. Harsh as it may sound, I believe we must hold the nomi ee ac- countable for America's program Of aid in Vietnam. He as the chief administrator over the Vietnarn aid program. At the ve least, the condition of the Vietnam aid program should be the do imtat factor in considering the nominee's administrative ability. Despite its inherent difficulties, the Vietnam aid program hould not have been permitted to drift aimlessly into a rudderless el aos of collusion, corruption and kickbacks which were spread on the record by all of these reports. It should not, Mr. Chairman, have ben per- mitted to become a maelstrom of misdirected goods, widesprea theft and graft, and inadequately staffed and poorly guided AID issions across Vietnam. INEFFICIENCY SIIOUI;) NOT BE REiVAIIDED L Mr. Chairman, another factor concerns me ' ?ter the pro nomination of Mr. Feats. It goes much deeper than his quali for this particular job or what has happened in Vietnam. F very strongly that to reward such performance with elevatio Approved For Release 2004/05/05 eetive cations 1: feel to the CIA-RDP69900369R000 00020030-9 Approved For Re teatte4004405Miu f3DE1694/1008.69R000200029030-9 second highest position in our aid program?a position from which the nominee could well succeed to the highest office in AID?that such promotion is to invite disaster not only for our aid program in Vietnam, but for our total foreign aid effort as well. I need not tell you, Mr. Chairman, that in the past few years the American people have become increasingly critical of our foreign aid program. With some exceptions in the field of military assist- ance, I want to point out that I have consistently supported foreign aid since I have come to the Senate. I have not been a witch hunter. I do not say anyone who is critical of foreign aid is. I certainly have supported this, with the exception of some of this foreign aid in the military area and I might add that this support has not always repre- sented the popular position among a large number of my constituents. Yet, I firmly believe that foreign aid?well planned and carefully administered?has been and can continue to be one of the Nation's most effective tools in our never-ending search for a world at peace. But I cannot?and my constituents will not?condone bungling, waste, and mismanagement costing us?well, some people estimate as high as a half million dollars a day. None of us can condone and permit such bungling to go unchal- lenged and unchecked. Certainly, we must not reward inefficiency and lack of management capability with even greater authority and increased responsibility. I ask you, Ali.. 'Chairman, how can I justify such a promotion to the people I represent? How can any of us ask them for their continued support of a program in which administrative malfeasance begets not condemnation, but commendation; not rebuke, but reward; not pun- ishment, but promotion? The truth is we cannot expect the continued support of the people of this country if we take such action. They will demand an end to such a program, and, in my opinion, not without justification. EXERCISING THE PREROGATIVE OF THE SENATE Mr. Chairman, I think, in closing, I should confess to you?they say it is always goo ol for the soul?that at one point I had grave reserva- tions about my position, and, frankly, had decided not to oppose this nomination. Quite frankly, the idea of getting involved in a confrontation where you try to shoot out of the water the nomination of an individual to do battle with a person instead of a program or a legislative meas- ure?this kind of thing goes against my grain. I asked myself, "What does the junior Senator from Indiana, pretty low down on the totem pole of seniority in this great body?what right does he have to place himself in opposition to a key appointment rec- ommended by the President, and strongly supported by the Director of the AID Program, Mr. Gaud, who feels Mr. Poats' services are in- dispensable?" Why should I inject myself into that? Very frankly, and I hope without sounding melodramatic because I do not feel that way about it, but just from a very practical stand- point, I finally asked myself. "Did the Founding Fathers really mean anything by giving the Senate the power to advise and consent to ad- Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Apgoved For 1WaaN493.94(45/19?57,4ifivAlp?9EARq?9R0002 0020030-9 I ministration appointees?" If there was wisdom in these actions and history, T think, indicates great wisdom?then any member of this body has not only the right but the solemn obligation to actively o pose nominations believed not to be in the best interests of the count Members of this committee have eloquently exprsed the nee for Congress to assert itself as a separate and distinct branch of Go ern- 'merit. Somewhere, sometime, somehow we must e/tercise that pre oga- five to register our explicit and categorical dissatisfaction with and inefficiency. aste Mr. Chairman, I say that this is the place?and row is the time-- and this is the way to exercise that prerogative. For this issue does not concern Mr. 'Oats alone.. It concern, our 'broader responsibility as Senators to exercise our function of le isla- five oversight?our function to review the administration of programs that Congress has authorized and funded. It seems to me, Mr. Chairman, that those who believe our pro ram of aid for 'Vietnam has been wanting for firm leadership and s illed management; those who believe that inordinately Wasteful pra tices have been permitted to grow and flourish despite repeated wariings to correet and Control these abuses; these who believe that the Sem te of the United States has an obligation to the people to avert furthe and -even broader mismanagement, then I think those of my colle oues who believe this, Mr. Chairman, should join me in opposing Mr. oats' nomination. 'I thank the Chair and the members of the donimittee for heir tolerance. 'I do not like to read statements, as I said. I wanted o try to 'summarize from the various reports and doe-L-1.111'6-as and I v ould not want to have anything I said taken inadvertently out of co ttet 'because Of the very, very difficult position to which I find mys lf in opposing the promotion of an individual. DUTY AND OBLIGATION UNDER CONSTITUTIONAL SYSTM The CHAIRMAN. .Senator Bayh, I completely agree with the re sons that you have given in the last part of your statement. I thin you have rendered a public service in going to the trouble to pr pate a statement and to bring it to the attention of the public as w 11 as to the members of this committee. I realize it is very distasteful to Oppose anything, whether i is a interpret our system of constitutional government correctly, it is yor nomination,' or legislation, or policy- of our government. Bu if I r duty when you feel as you do to come here and to make a stat ment as you did. So I think it is a solemn obliigaton, and if you did not do it, f ling ? as you do, you would be neglecting your duty as a Senator o United States. So I think you have nothing to apologize for. , Certainly I would congratulate you on your courage and determination. The verY. fact that you are a junior Senator, relatively speaking, only evi ences greater courage than would be required of a senior lv[ember whc feels more secure in his position through experience an lmowledge I think you have rendered a very important service, regardl ss of the particular substantive points. I think the points you make, vhich Approved For Release 2004/05/05 : IA-RDP691400369R0002 0020030-9 Approved For RgilsAisigAn94/94/q?jirghtiapipeN9)3900gR00020004Q030-9 have been publicized in the press, we are all more or less familiar with through the Moss report. I personally do not understand either, in view of the severe criticism by the Moss subcommittee, just who the Conaressman does think is responsible for it. Irit is a vague, impersonal organization, that is one point to take, I suppose. It is difficult dealing with, or even discussing, the vague abstraction known as the system. We have to deal with individuals who are responsible for it. RESPONSIBILITY IS COLLECTIVE Senator BAYII. Mr. Chairman, may I make one observation about this business, about who is responsible? The CHAIRMAN. Yes, indeed. Senator BAYII. I must say I find myself partially in sympathy with the nominee on this because none of us really can avoid responsibility for the, situation. , All of us in the Senate have to accept some'respon- sibility for a mistake like this that has been going ?on this long. But I think we can be more specific in this particular case. We have bad some significant dealings in this area with AID and have tried to point out, and this started back in February, was it not, of 1966, this started back before the Moss commitee went out there in May, to point out some of the imperfections. I tried to do it in a letter. I tried to do it by phone without making it public because I would a lot rather clean up this type of very troublesome thing very privately and not get it out into the press, frankly. 'We got very little results in this way, and we had no alterna- tive but to take our case to the public on the floor of the Senate. But, be that as it may, that is over, that is past history, and I only point out that in all of this discussion we invariably'were referred to the man who had to make the final determination on the question of policy?and that was Mr. Poats. So far as AID Washington was concerned it was Mr. Poats. I do not recall anyone in my office ever being referred to a man?indeed if there is one sitting on the Vietna- mese desk down at the State Department or at AID for any decision. Mr. Poats seemed to have the responsibility. LETTER FROM DEPUTY DIRECTOR OF AID MISSION IN SAIGON There are those, you could normally say, well, I think a man in Washington is at the mercy of the administrators in the field. This is really true. But I would like to refer the committee specifically, because the Moss testimony is rather thorough, to page 101, to a letter written to Mr. Rutherford Poats from Mr. J. II. Edwards, who was the Deputy Director for U.S. AID mission Saloon, in which. he ap- parently knows Mr. Poats well enough so that he can call him by his nickname, "Dear Rud," and he says: At least, once a week I have written you a diatribe on the problems created by the misty and emotional approach to assistance to Vietnam, Vortunately, I have recvered enough selicontroI to destroy these private mailings. This was 1on:c1:0,1) No ember of 194. t Suffice it to say I don't like nor approve what we are doing here. It is at the same time both unconscious and unconscionable. Let me only make these com- ments without the lyrics? Approved For Release 2004/05/05 : CIA-RDP69B00369R000200020030-9 Apuoved For Ileolfilma9405/Ali 18,-(119IDA9w2g9Rcioo2 0020030-9 And then he goes on to list 12 specific problem areas,, and then ake ten recommendations. He got no action on this. Filially, in di ust, he resigned. I AO not know whether the quote in the paper was correct, but Mr. Poats WM quoted in one of the newspapers wh he was challenged by Mr. Edwards who was trying to get this info 'ma. tion back from those in Washiniton, to get, those 'results, said, ' ell , he is just a businessman and he is not, very experienced in Go ern- ment service," when in essence, I think he served as long as Mr. Poats, I think four months shorter than Mr. PoatS, in the Fa eign Service area. So I think that when you find out that here is la person who, vith all due respect, was charged with adininistering a very difficult pro- gram, and who had a whole file of critique on how the program could be improved, and yet no improvement's were made until Congress veni, out there, and the press started, lambasting AID here, it seems you begin to lose confidence. It seems to me some place along the1 line we, in the Congress, have the responsibility of zeroing-in, not ge ting somebody scalped, but insisting that an administrator has to lucw what is going on. ' This is how I get into this area, not that I do not sympathize kvith Mr. Poats! difficulty in dealing with a. very difficult problem. The CHAIRMAN. I think you make, a. very persuasive case on that: point. We all know it is a difficult problem. Of course _ we realize that many of the involvements in r min: years are not the responsibility of the AID Agency. But haying undertaken this responsibility, I would think thei . re- action to the criticisms from their o-wn people in, the field short d be ITery much more efTective and much more timely.'th e Seuatpr from Missouri, do you have any questions? , Senator. SYMINGTON. Yes Mr. Chairman. I woUld like to k a couple of questions of my friend from Indiana for -whom I hav the greatest respect, as you well know, :ANOTHER MAN FOR. THE JOB? 1 , You say that you believe a better qualified man can be ioun ? for the job in question. Senator, have you anybody in mi id? Senator BAYII. No, sir. I wish I did. Let me say there are . orne people who have asked me this question, and maybe this was the rea,- son I was standing in the way of Mr. Poats. I wash I did. I would, think that pertOnly we could And such ,a person. Senator SigtwirroN. Loisi. not mean, it in any such sense. Senator 134-n,r. ]( am certain you did not. Senator SymiNaTorr. I can assure you. In the past, I have been involved with administrative departments that could be considered relatively permanent, also with ones con- sidered temporary. I found it is almost as difficult to get peopi e to work in a temporary agency as it is easy to get them to work in say, Justice, or Treasury, or State, or Defense. Mr. Gaud wants this man to help him. If he is, not a good inan, and some of your testimony here certainly is damaging then I was wondering if you had anybody else you thought would be willing- to take the job. Approved For Release 2004/05/05: IA-RDP69B00369R0002 0020030-9 Approved For ReltrasvA2004/0410(ouTQMAPP6RP@OH4R00020003g030-9 Senator BAYLI. Senator Symington, I have not?in May of 1966 I wrote a detailed letter, a "Dear Dave" letter, to Dave Bell, whom I respect, suggesting some improvements, one of them was that we should try to make a search to get some people. Senator SYMINGTON. I know you will be sympathetic with one ap- prehension I have about this sort of localizing the whole problem on one human being who has a life to lead, as do the rest of us. GAO AUDIT PROBLEMS I was in Vietnam last January, and talked with members of the General Accounting Office. They said that of $300 million of con- tracts to a private contractor group $120 million had been lost. It seemed to me that to. lose 40 percent would be par for the course, a 40-percent loss in an organization operating for a profit. I voted .against the foreign aid program last year. Did you vote for or against it? Senator BAYIL I voted for it, sir. I might point out, Senator, that the Senator's great reputation as a businessman is such that I would be quick to point out that we have not had an audit out there since 1961. That is a good place to start. I do not want to zero in on any individual. I am not trying to get at his job or anything. But here is a man who is before us to be promoted. Senator SYMINGTON. Fowler Hamilton was in there, and he left, and David Bell was and he left; also the gentleman before Mr. Hamilton, whose name, to be honest, I do not remember, left. This audit problem has been around for a long time. Until December, 1965, the French controlled most of the Saigon harbor. There also was stealing going on around on the harbor. I imagine there still is. On these items on your page two from the Vietcong, I noticed that last October we finally overcame an impregnable stronghold of the Vietcong "6 miles" from Saigon. I saw air strikes 15 miles from Saigon myself in January. I noticed in the paper this morning we had a pretty good fire fight, many were killed, 20 miles from Saigon. Under those circumstances, don't you think that some of these items captured might in turn have been captured by the Vietcong from the South Vietnamese, after we gave it to the South Vietnamese? Senator BAYIL I think it would be possible?of course, the Senator is a man with a great military record, and I am not. But he is more familiar with battlefield conditions. But it would seem to me that in a military situation where even after there is a victorious battle you do not want to expose yourself to the enemy, you would not take time to haul several hundred bags of rice and several hundred gallons of gasoline, and this type of thing, that has been found still with the labels of U.S. firms from which it came. I am sure some of this is true' and I have not been to Vietnam let me say: I tried, I approached the Leader, with the feeling that I would like to go when this whole situation came to my attention. I have had to rely on people who have been employees of the U.S. Gov- ernment, who have been hired, some of them, to make an analysis of what is going on, and I talked to as many as I could who have been out there, who studied this situation. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Apif4oved For F?NlEd9219/ta69469549fir 1MRDP1691$63t9R0002 0020030-9 I , Senator SYMINGTON. Let me Say to my able iriena:i. am not Cri iciz- ing his statement in any way.- I commend it, and join the ()hal an.. This is a, fine job of detailed analysis. FAULT LIES IN A LARGER FIELD' , The only oint' is, if we decide Mr.' Poats should aof be confirmec., do we stop' t aere? It seems to me the fault lies in a larger field. ' If I were back there in WashinotOn I would like an audit of whEt was going on out there. The average fellow who runs a busines say, in Detroit, with distributors around the country, likes to know what the distributors are doing, and the distributors should like to now. .Let me put it to you this way. We are spending somewhe e be- tween $2 and $2.5 billion a month in Vietnam, fighting out here. 'There does not seem to be any reason why waste in the military s iould be more sacred than waste in the aid program., You would e the first to agree, would you not, there is also waste in the military 1? Senator BAYH. I would imagine there probably is. I de not know of it to the extent that the AID program has been brought o my attention. Senator SYMINGTON, Specifically, f, I understand the Vietcon iie at times off the South Vietnamese materials they have captured. With- out criticizing the courage of the South Vietnamese troops, the cong have shown tremendous courage. When I was out there some 30 of them got. through the wire. They knew they would be either dead or captured. They killed, I believe, 18 of them and captured 12. In effe t, you might say, they were committing suicide for a cause. With that type and character of courage, wouldn't you thiifik. es- pecially as they need the rice and the oil 'and the shovels and the salt, if they win a victory, that they are ging to take it? ? Senator BAyx. I said earlier that I think this has probabl., hap- pened. But I think it would be much more likely that they woUcl pick up weapons and things they could carry with them, then try to carry around hundreds of bags of rice and driur s of gasolinic, and every evidence is they do not have to get these, things on the battle- field. They can get them in any other number of ways. -Senator SYMINGT0.1.c. They could get them on the battlefi ld for nothing. They have to compete with the South Vietnamese to et the rice that comes up from the delta. Sometimes it is a question f who steals the most. Senator BAYII. I personally do not condone either one of t em. Senator SYMINGTON. The CambOdians are in there also, so it gets pretty tricky. , AMOUNT OF WASTE IN THE WAR . -- The 'AID' people are not, you inight say, . the mail, influential Amer- icans,, especially with the South Vietnamese Government. I looked at the black markets myself. You can buy Most a ything if you,*int fi) pay the piice. It is all out in the streets, no si alley or deals' in the backroom. o1vt impresses rrie 'about your report is the tremendous /now, of,Waste. it is going into this war. Approved For Release 2004/05/05 : 1A-RDP69000369RCl002 0020030-9 Approved For ReglisrurrogyoNoRtimacg6ropow R0002000%030-9 I happen to be one who believes it is unfortunate, we are now in a large ground war in Asia. But inasmuch as we are there, I would hope to see us use more of our technological ability to bring whatever suc- cess is possible. I notice you say that despite its inherent difficulties, the Vietnam aid program should not have been permitted to drift aimlessly into a rudderless chaos of collusion, corruption, and kickbacks. There has been a major who was convicted of putting narcotics into Vietnam, and an officer who was bead of the port at Saigon convicted of improper action, bringing things into the country illegally. It seems to me a lot of what is going on out there is pretty much of a mess. Wouldn't you agree with that? Senator BAYPI. Yes, sir. But I think my colleague and good friend from Missouri would realize just by calling it a mess would not make it any better, and I would hope maybe Mr. Pouts has learned in these past few months how to be a better administrator. I give him credit for reasonable intelligence. But I would like to see him put it to work in his present capacity before we promote him to the No. 2 job after seeing this whole debacle. I quote here from page 51 of the Moss report which says that the chief auditor complained that he was not able to carry out his program for audit as originally scheduled for fiscal year 1966 because of frequent requests by the mission director in AID Washington for routine and limited work of an investigative nature, and limited financial audit. I pointed out earlier that the Deputy Director of AID, the AID mission in Vietnam, Mr. Edwards, wrote a rather detailed and per- sonal letter to Mr. Poats outlining certain things going wrong and making specific suggestions. FOREIGN STEEL PRODUCTS USED IN VIETNAM I personally had experience in my office with a program that because of the way AID was administering it, resulted in steel being sold? Senator .SYMINGTON. I think I joined the Senator. Senator BAyx. Yes, you did. Senator SYMINGTON. And spoke in favor of his position. Senator BAYEI. Here they were getting $100 a ton more, $96 a ton more, than the market would bear. There was collusion and graft and kickbacks. The quality of the steel was such that it would last 8, 9, 10, 11 months, whereas, the U.S.-made steel products, which had the proper thickness and right kinds of coating, would last 11 or 12 years. Now, we brought this to the attention of the people down there. They denied that it was going on. In fact, we finally had to get GAO to go in and s-ubpena the files, and we found out that in the files was a report made by a French firm that said what was going on down there was worse than we had even imagined. Now, this kind of thing I just cannot ignore. Senator SYMINGTON. As I understand the Senator's position, he would not object to Mr. Poats' staying in Vietnam but he does not want him to come to Washington and be promoted; is that right? Senator BAYll. I would like to see if he has learned in the past?he is in Washington now over all of southeast Asia, and I would like to see if, perhaps, the man has learned; and if he has, let us see the Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Aprved For Ilejam3824(2,5/207,;Ha-MPA91, ?9R0002 0020030-9 I operation of the program the next year or so. flut certainly the past three years while he has been there as the top man over that hole aid area over there, you just cannot recommend som mme on that jlind of record, so far as I am concerned, for a promotion. Senator ST4n,ioToac. MT. Chairrnap, I am impressed with the osi- tion of our colleague. I would hope we would give Mr. Poats a cl anc B to reply to this long statement, perhaps, Mr. Gaud also. Iles are serious- statements. I know the Senator is completely sincere bout 1 P them. , I , He was absolutely right about the steel. The record later so pr vetodi The American taxpayer is deeply involved in tht se problems r only on the nonmilitary but also on the military side, as to wh t -vn are getting for what we are spending. - ORDER trr V) WEST VIRGINIA 101 . Senator BAH. I might write one final chapter. I dunk the Se at or . S already aware of this, but I would ,like to show :0.S far as 'judg ent is concerned., and the steel business, that is closed. The regrettable thing about this is, because I personally w volved in the steel issue. I found out about it, that there, area hoins; down at AID who have been telling, some of our colleagues he eoeii. the Hill that my opposition to Mr. Poats is a result of a personal p qu I have even heard an implication or two, and I certainly do not a cuse Mr. Poats of this because I do not think that gentleman would do this, but some have indicated that, "Well, you know, this is just a pr vat?. little thing that Bayh has got going with the steel companies.', them on it, andd. I just poi outfo Congress to do it, but we finally licke Well, this is not so. The steel thing is over. It took three time as far as judgment is concerned, that in the argument that was going on, one reason we got so much opposition from Mr. Poats a.nd others down at AID was they said, "Well, no United States steel com a,ny would sell steel products down there of that particular quality, aid if they did they could not compete." Well, the first order that was let, the first contract that was let, rid er the amendment that the Senator from Missouri assised us qln wa for 20,000 tons of corrugated, galvanizea steel products, and in tha one batch, just a small batch, the first time we saved $300,000, and i you want to prorate that a contract which went to Wheeling Steel, W. Va,; not Gary, Ind., or East Chicago, or Hammond, or any place like hat; it went to West Virginia, and if you prorate that? it would m an a savings of $15 or $20 million a year in the purchase of this ty e of product. I. Senator SYMINGTON. As against the purchase in Korea. .. Senator BAV,II. Yes. ,Senator SYMINGTON. I have no fu her questions or comments. POSSIBIX FUTtR HEARINGS r, : , .( n ,1 ? I . T 1 , .1 L ' ' The arApilvIiVq. X NO Sa,y to the enator from 4issoArt I ould Jaave no okection to having Mr. Gaud and Mr. Poats back. 17 for: tunately, today is a very difficult day_to prolong thip any longer, and we do not have a quorum to vote. . Approved For Release 2004/05/05: IA-RDP69p00369R9002 0020030-9 Approved For Relmier~54)5R:uclA-81-8g9H0 4 i Or3046T9sR000200020Q30-9 ? So we will adjourn now and the staff will inquire of Mr. Poets and Mr. Gaud if they wish to come back. I think perhaps they should cer- tainly be given an opportunity to comment upon the Senator from In- diana's statement. ? Again, I wish to commend the Senator from Indiana for taking the responsibility of doing an enormous amount of work, and for taking the criticism, which I know anyone who raises a question of this kind i is exposed to, n coming here. I think you deserve a great deal of credit for cloing that. Senator BA-Yu. Thank you, Mr. Chairman. Senator SYMINGTON. Mr. Chairman, I would associate with that latter remark. Senator BAYH. I want to make one final comment. I am not out to get Mr. Poats. I am not trying to get his job, and if they create this new Vietnam agency he will still have a chance in his present capacity to supervise Vietnam aid and we will see whether, perhaps, he has learned a bit more about the administration, and can go ahead to get someone else to be the No. 2 man. I do not know who that person will be. The CHAIRMAN.i That s for the future. I thank you very much. We will be adjourned until tomorrow morning. (Whereupon, at 12:25 o'clock p.m., the committee adjourned.) (The following statement was subsequently received:) RESPONSE RY RUTHERFORD M. POATS TO THE STATEMENT OF SENATOR BAyEt Mr. Chairman: I appreciate the opportunity you have afforded me to respond to Senator Bayh's criticism. I an not, of course, a proper witness to my own competence. I can, however, offer some factual comments on the evidence on which his case is based. The criticism is confirmed to management of the AID operations in Vietnam. As the committee knows, my responsibilities also have included policy guidance to and Washington support of AID programs with Korea, Taiwan, the Philip- pines, Thailand, Laos, Indonesia, Burma and regional institutions. Many of the comments on Vietnam operations were, I believe, drawn from allegations made in the past which have subsequently been shown to be incorrect or exaggerated. EXAMPLES ? 1. The allegation that "loss and diversion of hundreds of millions of dollars worth of American aid" have occurred, or that waste of American economic aid amounts to "a half million dollars a day." There was no factual basis for these estimates when they were originally made in a series of press dispatches quoting rumors and off-hand guesses. There ls ;TO basis for them today. A series of studies and estimates made by the AID Mission and reported to the President and the Congress by the AID Administra- tor in January indicated losses at that time through theft and diversion were abont 5 to 6 percent, or an annual rate of $20 to $30 million if projected against total commodity aid disbursements in 1966. This is an unacceptable loss rate, although probably not abnormal in a war theater, and we have continued to strengthen measures to reduce it as rapidly as we could obtain qualified staff for these assignments. We already have evidence that Josses in the port of Saigon have been sharply reduced on AID project commodities and Food for Peace supplies. 2. TIT story of the alleged diversion of 400 bags of cement destined for a school constrwt.ion project. In fact, this cement was found to have been misdirected to a U.S. military upit.Yt was located there and sent to the project, where it was properly used. (The Vietnspinese district chief was interviewed by the press reporter at a time when the misdirected cement had not been located) Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved ForicRoeivillegaiROVAAINAA-App9ppga69R000200020030-9 4s 8. The quotation from a press report on disappearance of trucks rind ha ro.es I t carrying aid supplies and discovery of AID or Food for Peace supplies in Vet Gong caches. Such incidents have occurred. However, the report that U.S. rice was f und in the particular cache mentioned was proved to be incorreet; expert exariina. tion showed it to be domestic Vietnamese rice repacked it bags originally tnsed for American rice. This is not to say that the Viet Gang have not acquired some AID-fin need or Food for Peace supplies, most of which was shipped to Vietnam for se e on the open market last year. Long before any congressional or press cri cisni was heard, we helped the Vietnamese police establish "resources control" heck points and patrols to intercept goods being smuggled to Viet Cong military nits, The nature of the war makes it impossible to fully deny locally available oocIE: to the Viet Cong. We could not carry out policy directives to support 'the widely disp village-level "Revolutionary Development" 'program if we insisted on ab lute. assurance that every shipment would reach its proper destination or tha1: Americans would manage and install all the equipment and supplies we fu nish to the Vietnamese local leaders for village projects. We have, howeve , en- larged our logistics staff to provide greater accountability and security of stipply movements. We have stationed auditors in regional headquarters to Uheck reports of diversion. The Vietnamese Government has strengthened its anti- corruption surveillance and removed some major officials accused of c rum; tion. We have obtained military assistance in ground an] air movement of supplies. But we cannot devise absolute guarantees in this situation a hist some theft, highway holdups and corrupt diversion. As I said in my opening remarks to the Committee, "The war does, of c ursE, affect our judgment and decisions. If we can shorten the war or tnerea.e the prospects of a secure peaCe by provision of economic aid, medical assista ce or relief, we do it, often with costs or risks we would not accept in a norm I aid program. We have simply not been able to wait until the optimum eon tions of aid administration existed." 4. The allegation that AID had allowed procurement, with AID fund, of 8 million "pink bathtub stoppers." These stoppers, as the invitation to bid which he di,sPlayed indicated, were for a Vietnamese laboratory supply firm. They were to fit bottles with a touth of approxiinately one-half inch in diameter, and they were one-third of a inch high?clearly not bathtub size. . The Statement that AID stopped financing imports of silver nitrate altEr belatedly discovering that it was being converted in Vietnam into shy r mid explosives. a Considerable investigation has failed to produce evidence that expiosive were being manufactured in this very costly way. Silver, apparently for jewehfy and hoarding, was being obtained. rOLICY cal ICISM I The statement criticizes the rapid expa sion of the A,Ill Commercial mport Program without adequate management Staff in Vietnam to plan and po ice t. We have acknowledged this. It was the considered judgment of all sem officials of the HS. Government concerted at the time that jve had no ace pt tide alternative Refusal to do so, when the U.S. military buildup and ex and led Vietnamese Military spending were creating the threat of i runaway in aticn, could have undermined the entire US-Vietnamese effort, at incomparably renter cost. I r From the moment of that decision, we initiated recruitment of an ex arid,ed commercial import staff and audit staff of the Saigon mission and began irr1rg- ing for assignment Of U.S. Customs Bureau examiners to work in the tort of Saigon. It has been difficult to obtain such specialized staff for duty in Vijetriam. but it has been done. We also obtained agreement of the Government of Vietnam to expand ?ts own financing of commercial imports and increases in Vietnamese taxes. Tijie U.S. military command undertook measures to reduce the inflationary im aet of military construction and to curb private spending of piasters by U.S. forees in Vietnam. Urgent port expansion work was undertaken by both t e U.S. military command and AID. Approved For Release 2004/05/05 : cIA-RDP691500369R0002 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 NOMINATION OF RUTHERFORD M. POATS 49 As soon as the market was assured of increased supplies to meet the greatly increased demand, the Vietnamese Government and the International Monetary Fund agreed on the devaluation of the piaster, which was carried out in June. At about the same time, several significant changes in the procedures of import licensing and financing were put into effect. The statement conveys the impression that this expanded program and related policy measures failed in their purpose of preventing a runaway inflation. The sharp upward trend in prices began in mid-1965 and continued through the first half of 1966, parallel with the intensified Viet Cong interdiction of domestic transportation and the U.S. troop buildup, accompanied by very large- scale military construction. A combination of several measures was required: restraint on piaster spending, increased domestic production and movement of goods, increased tax collections and increased imports. These measures were agreed upon among the U.S. agencies concerned and with the Government a Vietnam in January-February, 1966, but progress in opening internal trans- portation and increasing domestic revenues was disappointing. It was recognized that military piaster spending for local goods and services could not be fully neutralized by imports. The increased volume of AID-financed commercial imports did not have their full anti-inflationary effect until mid-1966, due largely to procurement lead times. The threat of runaway inflation subsided quickly after the devaluation of the piaster in late June and the arrival of increased import flows. Prices remained relatively stable from July 1966 through December 1966. The Saigon cost of living index for working class families, which had risen 73% between June 1965 and June 1966, leveled off after an initial 21% reaction to devaluation and rose only 4% between July and December. Prices of food and certain other goods recently pushed upward again, partly under pressure of the Lunar New Year buying season and partly due to a sharp increase in rice prices stimulated by false fears of shortages. This rice price push now has been checked and appears to be reversed by increased imports. Our aid and joint Vietnamese-American economic policies have spared Vietnam the disastrous inflation which Korea suffered during its war. In the first year of the Korean conflict retail prices in Pusan rose by more than 71/2 times, and before the war was over prices were more than 24 times higher than in early 1950. In disputing these criticisms, I do not wish to imply satisfaction with our performance in all respects or to deny our need for criticism. Mistakes have been made, goods have been stolen, problems inherent in this war theater operation and in the Vietnamese society itself have frustrated many hopes. We have not been able to staff specialized positions in a rapidly expanding mission as promptly as the demands for action sometimes required. There have been times when AID did not or could not adequately assure protection of its man- agement interests because of our role as adviser, rather than manager, or because our interests had to be reconciled with others in the overall U.S. effort. I submit, however, that despite these problems and shortcomings AID had carried out in Vietnam an unprecedented, uniquely difficult assignment in a way that has earned the praise of many observers who have examined the program objectively. Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 STATINTL Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9 Approved For Release 2004/05/05 : CIA-RDP69600369R000200020030-9