U.S. ASSISTANCE PROGRAMS IN VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP74B00415R000200100010-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 79
• Document Creation Date: December 16, 2016
• Document Release Date: July 6, 2005
• Sequence Number: 10
• Publication Date: September 1, 1972
• Content Type: OPEN

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[COMMITTEE PRINT]
Union Calendar No.
- - House Report No. 92---
U.S. ASSISTANCE PROGRAMS IN VIETNAM
REPORT
$X THE
COMMITTEE ON GOVERNMENT
OPERATIONS
E DATE
HOLD UNTIL REL
APP'R'OVED BY FULL COMM.ITTEL
ON GOVERNMENT OPERATIONS
SEPTEMBER -, 1972.-Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1972
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COMMITTEE ON GOVERNMENT OPERATIONS
CIIET HOLIFIELD, California. Chairman
JACK BROOKS, Texas l'!AJRENCII I'. DWYEIt. New Jersey
L. H. FOUNTAIN. North Carolina F RA NK IIOIITON, New York
ROBERT E. JONES, Alabama JOHN N. ERLENBORN, Illinois
EDWARD A. GARIATZ, MarlIaad JOHN W. WYDLER. New York
JOHN E. MOSS, California CLARENCE J. BROWN, Ohio
DANTE B. FA:SCELL. Florida GUY VANDER JAGT, Michigan
IIENIOY S. REUSS. Wisconsin t;II.IIEItTGUDE, Maryland
JOHN I.J. MONAGAN, Connecticut PAUL N. MCCLOSKEY, JR., Caiifurnla
TOR)TERT II. MACDONALD, Massachusetts JOHN H. BUCHANAN, JR., Alabama
WILLIAM S. MOORHEAD, Pennsylvania SAM RTEIGER, Arizona
CORNELIUS E. GALLAGHER, New Jersey GARRY BROWN, Michigan
W.M. I. RANDALL, Missouri BARRY M. GOLDWATER. JR., California
RENJAlMIN S. ROSENTIIAI:, New York CHARLES THONE Nebraska
JIM WRIGHT, Texas 11. JOHN HEINZ III. Pennsylvania
FERNAND J. ST GERMAIN, Rhode Island RICHARD W. MALLARY, Vermont
JOHN C. CITLVER, Iowa
FLOYD V. HICKS, Washington
GEORGE W. COLLINS, Illinois
DON FUQUA, Florida
JOHN CONYERS. JR., Michigan
BILL. ALEXANDER. Arkansas
P.ELLA R. ABZUG, New Yurk.
HIRIERT l(I)RACK, Staff Director
EI,Melt W. Hgsi,ERSGS. Crucial Counsel
Milsa Q. RousEY, Counacl-Admintatrafor
J. I'. CARLSON, Sonority Counsel
WILLIAM H. COraNHAYSR, Minority Professional Staff
FOREIGN t)PERATIO S AND GOVERNMENT INFORMATION SUBCOMMITTEE
WILLIAM S. MOORIIF.AI), I'ennsyhvania, Chairman
JOHN E. MOSS. California JOHN N. ERLF.NItORN. Illinois
TORBER'i' II. MACI)ONALD, Massaeh,FPtts FRANK MORTON. New Yurk
TIM WRIGHT, Texas P.1I'T. N. McCLOSKEY, JR., California
JOHN CONYERS, JR., Michigan GILBERT OI'DE, Maryland
BILL ALEXANDER. Arkansas
EX OFFICIO
CHET HOLIFIELI), California FLORENCE P. DWYER, New Jersey
WILLIAM G. PHILLIPS, Staff Director
NORMAN G. CORSISIt, Deputy Staff Director
HAROLD F. WHITTINGTO:i. Staff Consultant
MARTHA M. DcrrT. Clerk
ALMSDA J. HARLEY, Secretary
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LETTER OF TRANSMITTAL
HOUSE OF REPRESENTATIVES,
Washington, D:C., September '-,1970.
HON. CARL ALBERT,
Speaker o j the House of Representatives,
Washington, D.C.
DEAR MR. SPEAKER: By direction of the Committee on Government
Operations, I submit herewith the committee's
report to the 92d Congress. The committee's report is based on a study
made by its Foreign Operations and Government Information
Subcommittee.
CHET HoLIFIELD, Chairman.
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CONTENTS
Page
1. Introduction - - - ------- -- --------- 1
II. Background-The United States and the Vietnam war ------------ 4
III. Economic assistance review6
IV. Commercial (commodity) import program______________________ 9
Recommendations_______________________________________ 13
V. Agriculture and land reform___________________________________ 15
Background--------------------------------------------- 15
Land reform - - - 15
Land reform progress_____________________________________ 16
Increased crop production_________________________________ 17
Needs and objectives_____________________________________ 18
VI. Public safety program---------------------------------------- 19
Background--------------------------------------------- 19
Con Son Prison19
AID support of GVN public safety program_________________ 20
Correction centers_______________________________________ 22
Alleged brutality----------------------------------------- 25
Political prisoners________________________________________ 29
Thompson study----------------------------------------- 31
VII. Pacification-CORDS program________________________________ 33
Background--------------------------------------------- 33
CORDS structure and funding_____________________________ 36
Executive refusal of access to records_______________________ 43
Phoenix (Phung Iloang) program__________________________ 43
Phoenix operations_______________________________________ 46
Legal proceedings---------------------------------------- -hoenix funding levels____________________________________ 58
Conclusions -__------------------------------------------ Recommendation________________________________________ 59
VIII. Refugee program--------------------------------------------- 61
IX. Public health program________________________________________ 66
X. Public works program ---------------------------------------- 68
XI. Recommendations for program overhaul________________________ 71
Appendix.-Memorandum on the Geneva Conventions and the Phoenix
program-------------------------------------------------------- 73
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Union Calendar No.
92D CONGRESS HOUSE OF REPRESENTATIVES REPORT
2d Session No.'92
U.S. ASSISTANCE PROGRAMS IN .VI ETNAM
SEPTEMBER -, 1972.-Committed to the Committee of the Whole House on the
State of the Union, and ordered to be printed
.Mr. IIOLIFIFLD, from the Conunittee on Government Operations,
submitted the following
REPORT
BASED ON A STUDY BY TILE FOIZEIGN OPERATIONS AND GOVERNMENT
INFORMATION SUBCOMMITTEE
On September -, 1972, the Committee on Government Operations
approved and adopted a report entitled "U.S. Assistance Programs in
Vietnam." The chairman was directed to transmit a copy to the
Speaker of the IIouse. ,
1. INTRODUCTION
This report provides a review of the economy and efficiency of certain
interrelated U.S. assistance programs being carried out in conjunction
with the United States-South Vietnamese economic and military
efforts in Southeast Asia.
Since 1966, the Committee on Government Operations-through
its Foreign Operations and Government Information Subcommittee-
has conducted a. continuing review of the economy and efficiency of
such pr.ograms.I This latest report in that series is based on several fol-
Previous reports hi these general subject areas issued by the committee include:
"An Investigation of the U.S. Economic and Military Assistance Programs in
Vietnam." II. Rept. 89-2257, Oct. 12, 1960.
"Illicit Practices Affecting the U.S. Economic Program in Vietnam (Followup
Investigation)." II. Rept. 90-609 Aug. 25, t967.
,The Commercial (Commodity) Import Program for Vietnam (Followup Investiga-
tion) " H. Rept. 90-010, Aug. 25, 1907.
"The Port Situation in Vietnam (Followup Investigation)," II. Rept. 90--611,
Aug. 25, 1967.
Land Reform in Vietnam." IT. Rept. 90-1142, Dear. 5. 1008.
"Excessive Programing and Procurement of Sweetened Condensed Milk for Vietnam."
H. Rept. 90-1143, Mar, 5, 1908.
"A. Review of the Inequitable Monetary Rate of Exchange in Vietnam." II. Rept.
91-1228, June 25, 1970,
"Communist Strategy and Tactics of Employing Peasant Dissatisfaction Over
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lowup investigative reports by the #Ieneral Accounting Office, on ex-
tensive lieariiigs by the subcmmniticc during July and August 1971,
and on a 1970 field trip by Representative John E. Moss saki staff
of the subcommittee.
Among the joint Government of South Vietnam-united States
aided programs covered by these hearings and dealt with in this report
are: Commercial import program ; agriculture and land reform; public
safety program; pacification (CORDS) program-(civil operations
and rural development, support) ; refugee program: public health
program ; and pull] is works prograr>t.
Other subjects covered by the sulx"ommittee's Southeast Asian
field investigations, studies, and hearings will be examined in separzttlt
reports. They include the inequitable monetary rates of exchange
between piasters and dollars now in effect in South Vietnam; 2 black-
inarket currency manipulation: the activities of the V.S. Information
-Iency''s operational arm in Vietnam, joint U .S. Public Affairs Office
:1;r
(JUSPAO) ; the activities of the Overseas Private Investment (or-
1>0l ation (OPIC) , a review of the economy and efficiency of U.S.
stabilization programs in Lais, and finally, a review of the. economy
and efficiency of I '. assistance programs in Canmbodia 4
This report is based on hearings on the economy and efficiency of
various 1) S. assistance programs in Southeast Asia held in Washing-
ton on duly 15, 1(S, 19. 31 and on At rust `2, 14)71. 't'estimony was pre-
sented by witnesses from the General Accounting, OOice. the Depart-
inent of State, the Agency for Iilternlatiimal Developnwnt. CORDS,
and from several outside witnesses invited by the sitbeonituittee. In
addition to their public testimony, two of the Outside witnesses gave
informal ion in executive session.
t kited States economic assistance through AlT) has been in a period
of transition. Vast changes are taking place in Vietnam that affect the
character of V.S. erononlic and military assistance. American troop
wit}hdrawal continues at an accelerated rate. American casualties have
dropped sharply a more and more of the fighting has shifted to GV`r
forces.
The political split between President Then and Vice President Ky
resulted in Thieu's unopposed victory in the October 3. 1971, presi-
dent ial election.
Although the ehitotic economic situation in Soitth Vietnam has
somewhat stlll}ilized. manruy of the serious 1}roblenns discussed in pre-
vions reports such as corption, profiteering, black-market. eurreiwy
manipulation, refugees, repression, lack of exports and industrial pro-
Con(litions of Lnnd Tenure for Revolutionary Ends in Vietnam." (Committee print.)
Auguai 1970.
"A Review of Steel Purchas=ed for the Commercial Barge Construction Program in
Vietnam." H. Rept_91-1542, Oct. 8,.19711.
"Cnmmereial u'ommodity) Import Program f.sr Vietnam (Followup investigation)."
Ti. rapt. 91-i 58. tiet. 8. 1.1170.
"Civilian %fMtrnl Program for Vietnam (Follon?up Investigation)." 11. Rept. 11-
1:1K#.Oct. 12. 1970. H. Rcpt. 91-1-
Oct. Port Situation in Vietnam (Followul) Inrestigath.n)
Oct. S, 1970.
'tetuam nod the hidden 17.S. Subsidy tiocquitable Currency Exchange Rates].
In. Rent 92-760. Dec. 10. 1971.
= "Vietnam and the Hidden U.S. subsidy" ii. Hept. 92--769, Dec. 113, 1071.
I "'t1.S. Economic .1?clstance for Lana-stahli19ation Programs." B. Rept. 92-718, Dec. 8,
1971. H. Rept. 92-1146"
4 "L`.S. Economic Assistance for the Khmer Republic (Cambodia),"
June 16, 1972.
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duction, and weakness in the pacification program, still appear to be
major problems in South Vietnam.
Each of the major program areas is considered separately. The
report concludes with broad recommendations to improve the econ-
omy and efficiency of the operations of such programs considered to be
important and necessary.
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II. BACKGROUND-THE UNITED STATES AND THE
VIETNAM WAR
The subjects dealt with in this report involving the economy and
efliriencv of our 1'.S. assistance programs in South Vietnam cannot
be properly evaluated without some clear understanding of the stan-
geI'Ilig consequences in Iultuall and econoinIC terirs of our role iii that
struggle. Tim following fact-, and statistics give some of these
dimensions:
:1 total of 2.6 million knierican servicemen have served in South
Vietnam front January 1, 1065 through illarch 31. 1972.
Total 1'.S. casualties during the Vietnam war. as of August 26, 107,,
stand at approximately 330.000, including over 50.000 dead; this is
tw-ice the number of I -S. cat~tlalties sustained during the Korean war.
The budgetary cost of tuilitary personnel, supplies. and equipment,
and other supporting expenditures. for the liscal years 1063 through
1072, in connection with the Vietnam war was $12`( billion, or about.
$600 for every American man, woman, and child.
I ilu?intr this salve 71-year period. the I nited States has provided
another 11t) billion in ntilitai?y a assistance to South Vietnam aittl~ tpil
Gott in ecu1H,iille 555i51alict'.
i total of 1`?;.53 million tons of air. gI-omad. and sea munitions have
been expended it, the Vietnam war from January 1. 1960 through
.1une 30. 1072.
Chenlic;al herbicides have been applied to nearly' one-seventh of
South Vietnant and have destroyed enough food for 600,0(K) people
for one year and enough timber to meet the country`s requirements
for :>1 years at the current level of demand.
Over 5 million (about 10 percent) of the population of South Viet-
11,1111 were in the refugee category during the past 6 years: through
June 1072, over I million South Vietnamese civilians have been war
casa,altie.7 of which an estiniated ,23.0(R) were killed.
These factors do not include such continuing problen's related to the
Vietnarl war as the number of V.S. servicemen who have become
drug addicted, the Veterans' .1idmini tration costs of veterans' hos-
pitalization. treatn,eiit, disability benefits. and survivor payments to
dependents of servicemen. Nor does it treasure the impact of the heavy
U.S. wartime costs on the U.S. economy and the increased interest costs
on the national debt.
But statistical data cannot measure the. human suffering, depriva-
tion. or the psychological damage of such a war to mail.-,- thousands of
returning U.S. survicenlen. nor- measure in precise economic terms the
impact of the wan. on our weakening balance-of-payment; sitli atioll or
on the declining strength of the dollar in foreign markets. Even more
1larlt ut the data axed here Is taken from a sillily by the Foreign Affairs Division, enn-led prttnredrtor imtercl$em,tvie' eignnlf+.latlutx ommittee. Junem3?c21971t1~t'nn,mitt a Rrint.
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difficult to measure are the deep divisions that the Vietnam war have
created between Americans of all walks of life.
All of this occurred at a time when the U.S. economic position abroad
has become increasingly perilous. The U.S. budget deficit for fiscal year
1972 totaled more than $23 billion. Meanwhile, our balance-of-trade
and balance-of-payments situation has been continuously worsening to
a point where the President, in mid-August 1971, imposed wage, price,
and other economic controls on the U.S. economy and took other steps
which, in effect, have devalued the dollar in the world markets and sus-
pended our Government's redemption of dollars with gold.
In a subsequent meeting of foreign ministers of free world nations,
iii Washington, in December 1971, an agreement was announced by
President Nixon that would devalue the dollar by approximately 8
percent by raising the price of gold above the $35-an-ounce level.
Foreign governments agreed to revalue their currencies accordingly.
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III. ECONOMIC ASSISTANCE REVIEW
The T.S. economic assistance effort, in South Vietnam during this
period of military escalation of U.S. involvement in the .+itr has
been marked by severe administrative difficulties, the waste of untold
hundreds of millions of American tax dollars. black-market currency
manipulation, corruption, indecisive planning, and poor exectltion,e
Within the context of overall U.S. objectives in South Vietnam,
AID's currently stated objectives are:
To help Vietnam to develop its economy in a manner which
will lead to eventual economic sea f-sulliciencv;
To facilitate Vietiiamiratifn by helping the Government of
Vietnam to bear the increased costs of the war:
To help prevent runaway inflation and severe economic
dislocations; and
To assist the Government of Vietnam in caring for ref-
ugees, civilian casualties, and other victims.
ATD's economic supporting assistance to South Vietnam Since 19G6
has been as follows
Commercial import programi -
Economic Support fun 3.--,-
Economic Development Fund s
Land reform-- ---------
Project program------------
Program support-- -----.-.. -
Food for Peace-------------
Totals r-------------- 727 569 537 404 aft xrr 515
t Figures on an obligational basis. Fiscal year 1969 amount does not include $7g,000,00ofor commercial import licensing
obligated in fiscat year 1968, but not used tar licensing that year, thus malting the actual total for C1P $205,000,00 in fiscal
year 1969.
s For the unrestricted purchase of imported goods and services g~d
00Oto be used for public sectoor pro, ~ntY generations
being usedt0o0fi0nance medium iufor m the credit to local purchase $25,000, imp%I;d
Does not include reimbursable costs from Department of Defense which amounted to $43,000,000 in fiscal year 1967;
195,0;010 000 40 in f0O an fiscal y 68;t9 5?000.OOD in fiscal ear 1969- .00O0,000y env fiscal year 1970; 567,000.000 in fiscal year
Note: This data was reconstructed from official AID data as presented annuall y to the House Appropriations Subcom-
mittee on Foreign Operations and Related Agencies and from AID's congressional presentation for fiscal year 1973.
a,
,;ee H. Itept? R9-2257 Security
* Congressional prr?w-nratlon, fls rnl sear 1073...Secnrltg Assistance ? IProgram ~ t t Interesting Recur to
rupporting Assistan'"." Agency for lnternattonal Devefopmrnt, P.
note the changes in description hp Alt) of the overall L.S. objectives in Vietnam from
fiscal year 1971. The AID prtxentntton of its proposed fiscal year 1`971 program entitled
U -S. (1) lln: ill lit
to prevent runawayiinf a nu and scv` ecco oom csdisloeations
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
a, 183, , 1970. 1971, 1972. 973,
year 1y967r 19966. 1969
1966,
actual actual actual actual actual actual estimat proposed
$398 1200 $160 $134 $238 $266 $313 137556
----------- 75
15 .- - 15
184 224 159 ?_ 116 96 --- - - -12 69
2 10 14 12 12 10 10 10
143 74 139 99 111 120 120 130
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A more detailed breakdown of expenditures and estimates for the
various AID project programs, in South Vietnam, including land
reform financial support, lumped in the above table is shown below
for the 3 current years :
PROJECT PROGRAM SUMMARY2
In millions of dollars]
Fiscal year-
------ --------
1971 actual
1972 estimate
1973 proposed
Agriculture --------------------------------- -
7.3
4.9
5.2
Education------------------------------------------------
4.6
3.2
2.3
Industry--Labor------------------------------------------
1.8
1.5
1. 1
Logistics
4.0
2.3
1.2
Publicadministration________________________________-______
3.1
3.9
3.6
Public health_._.-------------------------------------------
19.6
12.4
9.4
Public works (engineering)2---------------------------------
8.5
5.5
15.9
Rural development _________________________
2.4
.5
.5
Refugees (war victims) --------------------------------------
3.8
1.7
1. 0
Public safety------------- -----------------------------------------------
9.5
8.8
6.8
Technical support -------------------------------------------
29.8
26.9
22.2
Miscellaneous------------------------------------
1.2
.7
0
------------------------
Total------------------------------------------------
95.6
72.3
69.3
Land reform------------------------------------- -
15.0
---------------
15.0
I AID congressional presentation, fiscal year 1973, p. B-5.
2 Includes projects formerly listed under Urban Development.
The difficulty in carrying out the All) program can be attributed to
the mushrooming demands placed upon AID administrative capability
in South Vietnam during the 196.5-68 period of the rapid U.S. mil-
itary buildup. The amount of U.S. economic assistance virtually
doubled during the first year of this buildup. These administrative
limitations were coupled with even heavier demands on the crippled
South Vietnamese economy.
South Vietnam's domestic productivity was seriously hurt by war-
time demands.
Imports required to make up the domestic production cutbacks
were clogged in inadequate port facilities in Saigon and elsewhere.
Allied troops made increasing demands on alltypes of local goods
and services.
Inflation had gone almost unchecked until recent months; the retail-
price index in Saigon increased by approximately 800 percent since
January 1965.8 Although the South Vietnamese Government has
taken certain fiscal and monetary steps to curb the rate of inflation, it
has repeatedly refused to impose effective price and wage controls.
Importers In South Vietnam (financed almost entirely through.
U.S. tax dollars) continued to bring in luxury goods for sale in the
(2) * * * "to ease the suffering of civilians displaced or injured by the war;
(3) * * * "to assist the Government of South Vietnam to expand its protection
and influence over more of the population-especially in the rural areas ;
(4) * * * "to assist in economic development to the extent possible and feasible
under the constraints of wartime conditions; and
(5) *. * * "to help the Government of South Vietnam to improve its present
range of social and economic services and to prepare a basis for planning its future
developmen t."
AID congressional presentation, fiscal year 1973, table facing p. B-1.
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South Victnaine:4e consumer markets making possible enormous wind-
tall prolits. I,ess that 1t) percent. of the. S0O million in products being
imported by South Vietnam conies from the United States. South Viet-
nam exports only about $1i million of its products abroad-making
its balance-of-trade deficit a staggering $stx) million annually. The
'outlt Vietnamese Government is almost totally dependent on the
United States---directly or indirectly-for almost its entire annual
l?iitlget receipts and, in addition, receives a `'hidden subsidy" of more
than $20t) million a year because of the inequity of the monetary rates
of exehltge. governing transaction lwt keen pilasters and dollars."
1'or a e inprehens1ve examination of the inc.jn1tabie rate of exchange In Vietnam, see
It. heist. U_-7I U : see p. 7 for data on windfall pr..tlis.
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IV. COMMERCIAL (COMMODITY) IMPORT PROGRAM
The commercial (commodity) import program (CIP) has pro-
vided about $3 billion worth of various types of consumer goods and
raw materials for manufacturing to South Vietnam since 1955. Slightly
more than $1 billion of this total has been provided during the past
5 years. It is the largest single component of our U.S. economic assist-
ance pro grain in South Vietnam. 10
Under the CIP, private South Vietnamese importers, licensed by the
South Vietnamese Government, decide what they desire to purchase,
and if it is on the AID "approved list" and they comply with the
established procurement procedures, the United States makes payment
in dollars to the supplier, and the South Vietnamese importer pays the
piaster equivalent of the dollar cost of the product when it arrives in
South Vietnam.
The piasters that the South Vietnamese importer pays for CIP goods
are deposited into a special counterpart account at the National Bank
of Vietnam and are owned conditionally by the Government of South
Vietnam subject to the joint control of the United States. This fund is
used to finance U.S.-GVN programs, general budgetary support, sand
supplementary military budget support.
The CIP program should be distinguished from the concurrent
Food for Peace Program. Under the provision of Public Law 480
(title I), piasters are generated by sales of surplus U.S. agricultural
products to South Vietnam. These piasters are U.S. owned and are
held in a U.S. Treasury account. Substantially all of the piasters
generated by the sale of title I commodities are made available to GVN
for military budget support. The remainder of the Public Law 480-
generated piasters are used by the United States for general expendi-
tures in South Vietnam. The value of funds generated by the sale of
Public Law 480 commodities in South Vietnam is estimated at $120
mill ion in fiscal 1973.
The subcommittee's hearings in July 1971 describe in considerable
detail the status of the CIP and the efforts being made by AID to
further tighten up the economy and efficiency of the program.,'
In fiscal 1972, the cost of the CIP program was estimated at $313
million. For fiscal year 1972, it is estimated at $376 million. It is used
to finance the import of such essential products as fertilizer, industrial
raw materials, capital equipment, cement, wheat flour, chemicals,
petroleum products, etc.
In its October 1966 report," the committee found that consumer
goods financed under the CIP were being pumped into South Vietnam
without any determination as to the real needs of the economy or the
ultimate use of the goods. It further concluded that the flooding of
South Vietnamese markets with commodities at an unrealistic rate
in See p. 6 of this report.
See hearings, pp. 46-60.
'a H. Rept. 89-2257, p. 10.
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of exchange and without effective monetary and fiscal controls en-
cottragetl speculation and various forms of corruption, fed inflation,
and deprived the United States of maximum benefits from its economic
assistanc_ . progr:ettl,
Sonle iniproyements in the All) naana ement. and control of the
('IP, based on the committee's recommendation, were noted in a
followup report issued in 1967 (I1, Dept. 90-610). Continuing ill-
vestigative work by the General Accounting Office, undertaken at
the request of tile' subconunittee, along with prodding of the agency,
through subcommittee field hearings and staff' surveilfince resulted iu
additional implementation of the. committee's recommendations h
Al 1 ). Tltese actions are further described in a second followtrp report
issued in 1970 (11. Rept. 9l-15S3).
Supplementing the C'IP program in providing overall economic
support to (lie tiVN is the piaster-purchase pro-rain of the I)epart-
tuellt of I)etelnse. I)OI) Ittu?cllased piasters from file GoveI'll laaent of
Soul Ii A'ietnauu at the 11S-to-I rate to pay the local costs of operating
toilitary bases and for the purchase of goods and services (local naa-
tioiuals alaiyroll, sand, gravel, fi?('sll cegetabdes, etc.) in support of the
U.S. military forces in South Vietnam, These dollars used to purchase
piasters were, in turn. used by the Goverjiment of South Vietnam to
finance tfac import. of goods necessary to support the economy and
the war effort in addition to_ the goods imported under the U.S. ceo-
uoiaic assistance program, During fiscal l971, the DOD purchases of
lainst-eers amounted to 5.},1.17 million piasters or 5442 million (converted
at tlaeotliciaal 115-to-1 exchange rate).
I)ollals acquired at the 118-to-1 rate by the GCN generate. throurla
the import prtx?ess= about 2t)0 piasters per dollar in Government
revenues. and further illustrates the inequity of the present monetary
rate of exchange for official purcltasc's twat is adversely all'ecting the
United States.
AID estimates that with tIn' continued decline of U.S. militarv
forces in South( Vietna iii in 1972 and the corresponding decline of
piaster purchases by I)OI), it will be necessary to increase the ('I1'
front the fiscal 197-1 level of S??Cf6 Million to S,31 : 6 million ilifiscaal year
107:3,
in its fiscal 1973 budget. AID re,piestcd that an additional $125
million be, appropriated for the establishment of an economic support
fluid all([ an ecoliotnic development fluid designed to provide a level of
foreign exchange adequate to meet Sctutu V iet nun is resources require-
iients.'`'Tliis amount is estimated to be approximately the equivalent
of the drop in I)Ol) piaster htn?chases during fiscal year 1973.
On June 2, 1970. )the General Accounting Office issued a report
based on its continuing surveilhtnee of the ('I1' in
tiouth Vietnam. This (T-AO report served as the basis for the coimltit-
tee's report on October S. 1970 (IC. kept. 31-1'ia):
Much of the additional data on ('I1' operations was Provided through
inlerroration of All)'., Assistant Administrator (Vietnam), Robert
11. Aooter, and William C. Schinviss er, Jr., AID', .'associate Assistant
A(till inistrator for Commodity and Contract Management, at tlae-sub-
ec/nlnllttee hearings in .Iuly.'4
tiI) , ongr, ssioluiI I,resenintion. llsenI Sear 7'.17::, p. Ii -I.
lwarings. pl,, 47-60.
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Mr. Schmeisser provided details about eligible-commodity listings,
the use of automatic data-processing equipment, steps taken to control
import levels, and the use of market surveys to determine proper
licensing levels for specific commodities. He also furnished data con-
cerning the use of end-use audits of CIP-imported commodities, bank
warehouse audits, the solicitation of price verifications on offshore
procurement of commodities imported under the CIP, and procedures
for U.S. AID review of CIP license applications by commodity
analysts in Saigon.
On the basis of the GAO report, continuing subcommittee study
(assisted by additional GAO followup investigations through
December 1970), and information presented by AID witnesses at the
hearings, it is apparent that AID has taken a number of corrective
actions that have helped improve the economy and efficiency of the CIP
in South Vietnam.15
Several of these improvements are particularly noteworthy. AID
now examines some 30 percent of imported goods arriving in South
Vietnam under the CIP and also examines all arrival documents of
such shipments. U.S. customs advisers monitor such shipments and
are greatly responsible for the overall improvement in the GVN
customs collection system.
Until a year ago, the GVN customs operations at Tan Son Nhut
Airport, Saigon, was a cesspool of corruption through which an esti-
mated 1 billion piasters was lost each month in uncollected duties.
Recommendations contained in a detailed report on corruption at
Tan Son Nhut by U.S. customs adviser Joseph R. Kvoriak in Febru-
ary 1971, were presented to the South Vietnamese Director General
of Customs and resulted in a wholesale replacement of corrupt GVN
customs inspectors and in the next few months a corresponding sharp
increase of 1 billion piasters a month in customs collections was noted.",
Previously noted "bugs" in the AID automatic data processing
{ADP) system appear to be eliminated, now permitting detailed
analyses by commodity, by importers, by supplier, and by source, of
every individual license issued under the CIP since July 1968. The
ADP system also provides data for current monitoring license appli-
cations as they move through the Government of South Vietnam and
U.S. AID offices for approval.17 This surveillance, in addition to
tightened procedures in the selection of commodities eligible for AID
financing under the program, and other safeguards dealing with local
production of the proposed import, demand, inventories in bank ware-
houses, reasonableness of price and freight rates are positive steps
in the right direction, even if they have been too long in coming into
However, in several other important aspects of the program there
continue to be some of the same deficiencies previously noted in earlier
investigations. A number of the specific previous committee recom-
mendations mendations to remedy these deficiencies in CIP management have not
yet been.fully implemented. For example: .
15 Ibid., pp. 6-7. For a detailed description of steps taken byAID to iml~rove adminis-
tration of the CIP as recommended in previous committee reports, see also, pp. 84-87.
15 Ibid., pp. 10-11, pp. 115-116. A copy of the Kvoriak report, dated Feb. 3, 1971, is in
the subcommittee files.
17 Ibid.. Pp. 7, 59.
1s See A. Rept.89-2257, p. 24 ; H. Rept. 90-610, pp. 15 and 16; and H. Rept. 91-1583.
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(1) While AID no longer permits dollar commissions to be
pit id to ineligible sales agents (those who are not both citizens and
residents of the United States), it is lag ing in the t)llection of
claims against the Government of Soutla Vietnam for such corn-
missionsllaid in the past and not refunded.
(2) All) still does not. require that CIP commodities being
shipped from third-cotnitry suppliers be inspected immediately
prior to shipment to South Vietnam. "Short-shipments" had pre-
viously been noted as one of the most pervasive of the illicit
activities connected with tlic ('111.
(3) The [ U.S. Ambassador still has not succeeded in the estab-
lishneent-of a Government of South Vietnani escrow account of at
least $10 million for the liaiynient of dollar claim against the
Governmic lit. of South Vietnam, as specifically expressed as the
sense of Congress in the Foreign .Assistance Act of 1961, as
amended by Public Law 90--132.
(4) Alf) verifications of prices oft oll"shore. CIP procurements
have not been svsteinatized in such as way as to assure fullest
economy and eflicienev in such transations. Although "reasona-
bleness of price- is one of A1l)'s stated criteria before approval
of an import license for it particular commodity, adequate records
of actual price verifications are lacking.
(5) AID end-use audits of commodities imported tinder the
CIP are still inadequate, alt=hough additional audit personnel in
Saigon has resulted in an increase of such audits from four in
19(6 to 19' in fiscal year 1971. The most recent year covered a
dollar value of ('1' imports of $130.6 million, or 58 percent of
the total imported. However, the representative sample techniques
used in the audits traced only $29.3 million of the commodities, or
only about. 11 percent of the total, on the basis of ultimate end-use.
As of July 1971, the Government of South Vietnam had registered
3.165 importers, end-users, and exporters. Docuiuents obtained by
U.S. Al 11) from the Viet marnese Director mate of Economic Control show
that there were. 1.689 active importers, of which 1.239 are merchant
importers. and 450 are manufacturers or end-users.
A decree, issued by the Ministry of Economy on Mardi 11. 1071,
helped to stirnrtiate competition and stabilize the import. market by
liberalizing capital requirements for joint-stock companies that can
be licensed to import, as "specialized companies" and do business in
any of the 18 major commodity groups.'?
I.S. AID/Saigon commodity analysts are now able to complete their
review of CIP license applications within 72 hours in approximately
85 percent. of the cases. Such review and decision depends largely
on an anailyst's judgment of the merits of Out documentation accoin-
panying the application. 'During fisitir'l 1971, a total of 13,798 license
applications were received; 4,999, or 36 percent, were rejected.- Major
See hearings, "inequitable Currency Exchange Rates In Vietnam," pp. 48- 49.
bearings, p. 59.
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reasons for rejection were failure to post. advance deposits, missing
documentation, or failure to meet competitive price or other CIP
criteria.
A listing of ineligible importers, suppliers and agents is mnaintained
monthly by U.S. AID/Saigon. In view of the committee's concern
over illicit practices in the CIP and other investigations currently
underway involving black-market currency manipulation, AID has
agreed to supply the ineligible list, which also contains known black-
market currency manipulators to the subcommittee.21
U.S. AID/Saigon has also applied criteria to make certain that when
an importer is suspended for illicit activities in connection with the
CIP, affiliated companies or subsidiaries are likewise suspended if the
beneficial interest exceeds 49 percent of such affiliate or subsidiary or
where there is an interlock of top officers or stockholders of such
companies.22
1. In the planned increase of the CIP during fiscal 1973, AID
should make certain that commodity imports do not dampen
incentive for the production of similar products by local South
Vietnamese industries. In the transition period, as U.S. military
action diminishes and our presence becomes less a factor in the
South Vietnamese economy, every possible incentive should be
provided to individual South Vietnamese producers to expand
both their domestic and foreign market potentials. Government of
South Vietnam economic planning, both short- and long-run,
should be geared to this effort to maximize the industrial base to
produce goods which now must be imported in significant
quantities.
2. While there has been a slight increase in the procurement of
Government of South Vietnam-financed imports from the United
States, our country is receiving far less than a fair share of orders
(8.7 percent) as compared with Japan and Singapore (42 percent).
Our Government should direct the U.S. Ambassador to South
Vietnam to make the strongest possible representations to the
Government of South Vietnam to vastly increase its importation
of U.S. manufactured goods, especially development items. In
view of the complete U.S. support of the Government of South
Vietnam import program, directly and indirectly, and in view of
the present U.S. foreign and domestic economic problems, some
significant reciprocal move on the part of the Government of
South Vietnam should certainly be forthcoming.
3. AID should tighten its preshipment inspection requirements
incorporated under current and future economic assistance agree-
ments to assure proper net weights, quality specifications, packag-
ing, suppliers' certification, et cetera, on a greater range of CIP
commodities from third-country sources.
21 Ibid., p. 44. Ineligible lists are in the subcommittee file.
22 Ibid., p. 43.
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4. AID should establish a more comprehensive price verification
system for offshore procurements of CIP commodities because
of the planned increases in the level of the CIP in South Vietnam
and because of unstable world economic conditions that could
result in abnormal price fluctuations. In addition to technical
services that are rendered through AID missions and U.S.
Embassy personnel in various countries, U.S. AID/Saigon com-
modity analysts should fully utilize existing commercial sources
for comparative price quotations.
5. U.S. AID/Saigon should maintain increased surveillance over
existing supplies of individual commodities, including those in
bank warehouses, before approving licenses for additional im-
ports of such commodities. Expanded numbers of ultimate end-use
audits are particularly recommended in view of the planned
increase in the level of the CIP in South Vietnam.
The committee, through the work of the Subcommittee on For-
eign Operations and Government Information, will continue its
close surveillance of the economy and efficiency of the CIP during
the coming year.
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V. AGRICULTURE AND LAND REFORM
Background
South Vietnam is predominantly rural and agriculturally oriented.
Some 70 percent of the population resides in rural areas. The decen-
tralized social, economic, and political characteristics of the South
Vietnamese society has historically meant relatively weak central gov-
ernments since control and authority has been diffused into village,
district, and province structures.
Like other Asian countries, South Vietnam relies heavily on its rice
crop each year. Before the intensification of the war, South Vietnam
exported as much`as 200,000 tons of its rice annually. Peak rice produc-
tion was 5,300,000 tons in 1963. But as the war accelerated, rice output
dropped steadily to 4,336,000 tons in 1967. Over 700,000 tons of rice had
to be imported that year.23 Until 1971, Vietnam was forced to import
rice to meet its consumer demands.
Shipments of title I, Public Law 480 commodities to South Vietnam
from the United States over the years have included rice, cotton, flour,
corn, wyheat, tobacco, sweetened condensed and nonfat dry milk, and
other commodities. When sold on the local market by importers, these
commodities have generated piasters to support the GVN war effort.
Title I sales in South Vietnam in fiscal 1970 were $104 million and in
fiscal 1971, $110 million. Estimated sales for fiscal year 1972 are $115
million?4
AID agricultural technical assistance has also been provided to the
Government of South Vietnam in efforts to increase the production of
rice, poultry, and livestock, in research, in irrigation, and in grain
handling and marketing systems.
Land Reform
The ownership of vast areas of rich land by it relative handful of
the wealthy elite, as contrasted with the mass of the land-poor peasants,
who had to rent land to survive, was a characteristic of South Vietnam
as in the Far East and colonial-dominated areas of the world. Histori-
cally, it is in such widely contrasting economic and siocial cleavages:
that the seeds of communism have been planted and taken root.25
Sporadic attempts at land reform in South Vietnam began soon
after the victory over French colonialism. in 1954. A detailed account of'
the actions taken by the Government of South Vietnam in acquiring
agricultural land to be used in land reform was contained in a March
1968 report of this committee (h. Rept. 90-1142). Such efforts were
zz Ibid., p. 3.
24 Ibid., p. 78. See also AID congressional presentation, fiscal year 1073, ibid., p. B-4.
s, For a detailed description of this thesis, see a study for the subcommittee by Dr. Paul
S. Taylor entitled "Communist Strategy and Tactics of Employing Peasant Dissatisfaction
Over Conditions of Land Tenure for Revolutionary Ends in Vietnam." Committee print,
August 1970.
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edged to be totally inadequate and largely ineffective. Of the 4.48 mil-
Ion acres of la.ndacquired, less than 15 percent was redistributed to
individuals and legs than 10 percent distributed for communal and
public use.
During the period 19:51-f>S, U .S. AID provided some 121 million
to support these inadequate Government of South Vietnam land re-
form programs, including approximately $4.8-million-funded techni-
cal equipment and technical services andFthe remainder in counterpart
funds to defray Government of South Vietnam administrative costs.
No U.S. financial assistance was provided for land reform during
fiscal 1961 through fiscal 1965, as the land redistribution program vir-
tual]v ground to a halt that extended to 1967.
III' 196S, this committee strongly argetI our Government to press
the Government of South Vietnalli fur "an aggressive new program of
land and rent reform goring beyond the implementation of present leg-
islation and projects." 20 On March 36. 1970, the Government of South
Vietnam National Assembly finally enacted the "hand-to-tlie- tiller"
law feeler which tenant farmers will receive title, to the rice lands they
are far?Ining, up to a limit of 3 hectares in the southern part of South
Vietnam to I hectare in Central South V-ietlIaln.27 The former owner of
the land will be reimbursed by a 20-percent cash payment, plus bonds
which may be redeemed in equal annual installments over an 8-year
period.28
Tho new law. intenclctl to vit-tnally eliminate tenancy on rice lands.
should help to provide rural South Victnaniese residents an increased
comrnitnrent, to the defense of the central government. It should also
help provide them with a, fairer share of the economic lxnefits of their
own labor. The Government of South Vietnam stated its intention to
implement the new land reform program over a 3,-rear' period.
Land Reform Progress
The Government of South Vietnam implementation of the new
"land-to-the-tiller" law, enacted in Nfaarch 1970, began in September
1970. fly the end of 1971. some 1.145,000 acres had b een transferred to
nearly 325,0(10 tenant farniers.211 The current estimate thus far after a
year's operation is the distribution of about 2.3 million acres to some
700,000 farm families.
A special land distribution nrogrant for MIonlagluards was initiated
by the Government. of South Vietnam in late 1970 but titles had been
issued to only 22.000 Montagnar?d families for some 125,000 acres by
the end of 1971. Another (loverillnent of South Vietnam program.
directed Ioward the col licluiI Ig of IIIdividalaI o\vltt?rsllil) r'izhts %vitIIiII
refugee and development settlements and to squatters on public donain
lards. resulted in the issuance of titles to some 05,001) acres.ao
V .S. MI) lends teclillical assistance to the Gover?tile [it of South
Vietnam land reform programs. including the training of personnel
and villa_, ollieials who aclnirtistc?1? the prograalus, tlu' use. of aerial
photography it,; a stthstitn(t? for ground surveys. the development cif
nutna;rrnu?III corntrols, and the application of voruputct tetltnolo~r~.
2" 11. Iarn1. 90 1142. p. 16.
2' A I,retare l++10.00(1 Fcqunre tneier$ of In not, or nttnttl 2.47 ntrrrK.
2" All) congres)Oonnl presentation, llscett year 10 3. p. It 2.
iu t.. pp, B 2. It Is19.
'" laeid.. pp. 11 Is--111.
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Total U.S. AID cost of supporting the Government of South Viet-
nam land program will be $47 million. Approximately $10 million was
obligated from fiscal 1969 funds and an additional $15 million from
fiscal 1971 funds. Another $15 million is proposed in the fiscal 1973
budget. U.S. funds are released only as the Government of South Viet-
nam payments to former landowners are actually made. These funds
are subsequently used by the Government of South Vietnam to finance
imports as part of the CIP, thus helping to offset the inflationary effects
of piaster payments to the former owners of the land.31
Increased Crop Production
For the first time in many years, the current production of rice in
Vietnam should be sufficient to meet its consumer needs. With
U.S. AID assistance and work done by the International Rice Research
Institute (IRRI) in the, Philippines, several new "miracle" strains
have been introduced and, together with increased use of imported
fertilizers and pesticides, have boosted the rice crop to some 5,700,000
tons.32 At the present rate of increase, it is possible that the GVN may
reach a level of production that will make it possible to again export
rice to earn badly needed foreign exchange if markets are available.
North Vietnam was also expected to harvest a record rice crop in
1971, using the same types of "miracle" strains such as "IR-8" pro-
duced by the IRRI and obtained by the North Vietnamese through
commercial seed channels in Hong Kong and elsewhere. However,
in the fall of 1971, floods upset that crop -orecast.Their rice crop this
year was estimated to be nearly 6 million tons, about 1 million higher
than in 1959, the previous best production year. It is still expected to
be slightly less than the amount of rice, needed to feed North Vietnam's
20 million people.33
In other U.S. AID-assisted crop production projects, efforts are
being directed toward increasing domestic production of animal feed
and research in other crops adaptable to South Vietnam, particularly
those with export potential. Planting of corn and sorghum has been
targeted at 72,500 acres in 1971 and 150,000 acres in 1972. Efforts are
also being directed to assist the GVN to increase poultry produc-
tion by 15 percent per year and swine production by 10 percent per
year. Additional emphasis is being placed on the training of personnel
and development of an agricultural credit system and farm cooper-
ative organizations. Technical assistance is directed mainly to the
Agricultural Development Bank (AI)B) to increase the availability
of loan funds, efficiency of operations, and broader coverage of the
farmer population. The level of funding for U.S. All) assistance to
the Government of South Vietnam in the field of agriculture for fiscal.
1972 was $4.9 million, as compared with $7.3 million in fiscal 1971, and
a proposed $5.2 million level for fiscal 1973.35
t Ibid., p. B-18.
3' Hearings, p. 3
33 For an informative description of the North Vietnamese rice situation see an article
by George McArthur of the Los Angeles Times entitled "North Vietnam Reaping Record
Rice Crop," Washington Post, Aug. 19, 1971, p. F2.
ah AID congressional presentation, fiscal year 1973, pp. B-Q, n-13-17.
3? Ibid., p. B-5.
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Needs and Objectives
Among the specifiicneeds and objectives of U.S. assistance in the
fields of agriculture and land reform in South Vietnam, the committee
believes that therv is a continuing requirement to diversify the pro-
duction of new types of crops that are adaptable to the soil and climate
conditions of South Vietnam and that represent a potential export
market.
Similarly. the committee concludes that. laudable objectives in the
expansion of a rural banking system and farm loan programs in Viet-
nam, together with necessary extension services will be of significant
value to those farm families who have recently received acreao'e under
the South Vietnamese "hind-to-the-tiller" law and who neecfcapital,
as well as technical aid, to realize the full economic benefits from
their newly acquired land.
Finally, the committee concludes that F.S. AID iaanan-ement and
technical assistance being provided to the Government of south Vict-
nai.na is a continuing requirement to help accelerate the distribution of
land under the "land-to-the-tiller" law and other programs such as
the special Montagnard land distribution so that the backlog of claims
for payments to former landowners can be further reduced.
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VI. PUBLIC SAFETY PROGRAM
Background
Public safety programs in South Vietnam have been supported by
AID and its predecessor agencies since 1955. Until 1961, the U.S. AID
program was largely limited to training. The present program as ad-
ministered over the past 10 years has consisted of (1) support for the
national police force; (2) establishment of a police telecommunications
system, and (3) support for GVN correction centers. Since the, forma-
tion of the civil operations and rural development support program
(CORDS) in 1967, the U.S. support effort has been included as a
directorate under that organization.36
U.S. AID's public safety division has provided over 200 police spe-
cialists to help train, organize, and equip the Government of South
Vietnam National Police forces at all levels, including the National
Police Field Forces (NPFF), a paramilitary police unit engaged pri-
marily'in combating the Vietcong infrastructure (VCI) in rural areas
of South Vietnam. The National Police Force has increased from
75,000 in 1967 to 114;000 in January 1972 with a proposed increase to
122,000 by June 30,1973.
A separate national police telecommunication system was established
in 1965 and involves a network of radio, telephone, telegraph, and
teletype equipment that connects villages and hamlets with province
capitals and with Saigon. AID technicians helped design the system
and AID funds paid for much of the equipment used.
The national identity registration program, begun in October 1968,
has now registered more than 6.5 million South Vietnamese aged 15
and over.
U.S. AID's role in the Vietnamese correction center program is
largely an advisory one designed to improve the conditions at the
42 centers established under the program.
Con Son Prison
Much public attention bad been focused on inhumane treatment
of inmates at these centers in 1970, particularly the repression of po-
litical prisoners at the infamous Con Son Island prison where Mem-
bers of the U.S. House of Representatives disclosed the use of "tiger
cages" to hold certain types of prisoners in close confinement. The tiny
cells were almost identical to those used on Devil's Island off the coast
of French Guiana.
Hearings on U.S. assistance to the public safety program in South
Vietnam were held by the subcommittee on July 13, August 12, and
so Background on the Public. Safety Program in Vietnam is taken from testimony by
AID Assistant Administrator (Vietnam) Nooter's testimony. See hearings, pp. 5-6 and
also the AID congressional presentation, fiscal year 1973, pp. B-67-70.
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1tit:nrt 17. 197O. '1'estilnony Was presented by Ilepresentatives Wil-
ha.ln I1~. Anderson. Augustus F. Ilapyl,ins, Philip M. Crane All). De-
fense, Depa-rtluent. and outside witnesses concerning their firsthand
observations of conditions at ('on Solt.2, Pictures and tape recordings
were also used to d1lelllnent the testimony.
Gr aphis descriptions of brutality. -improper diet. 1)OOL medical
facilities, and tlaas,tnitary prison conditions were presented by _llein-
bers and a staff uuenibcr of the Ilouse select conmmtee which touted
South VietMUtl, to inspect the conduct of U.S. operations, in the previ-
ous month.
It was also revealed that North Vietnamese prisoners of war were
incarcerated on Con Son, for alleged {'rimes committed while prisoners.
contrary to terms of tile Geneva Convent ion.,'
On Dere.mber 2s, I970, I'SMA1'V Ileadquarters in Saigon issued
a new policy directive (528-S) designed to upgrade public safety
correction and detention policy and operatious.*'a But shortly there-
after, il.1t'~' awarllcd a 400.0iH) contract to the ICNIK ' tIl.1 constrite-
tion combine to build new isolation cells at the ('on Son prison
facility."
AID Support of GVN Public Safety Program
I'SAID li is expended sonic S77.8 million in the public. safety pro-
?rranl from fiscal 1007 through fiscal 1972, while the Defense Depart-
nient. has contributed another $3S million, primarily to those par