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ative conclusion about prospects and to blame other people and to find it very difficult to unite in a positive program. This is my observation of sort of a national characteristic. This is particularly true of the French-educated intelligentsia of Vietnam. These are the people that these writers mostly talk to, although not exclusively.

They do get out in the country occasionally. The principal strength that Diem has is in the countryside among the peasants. He is good at that. He talks to them with understanding. He knows their problems, and he gets a response.

He scorns Saigon, and he doesn't make any attempt really to win over the intellectuals. I think a part of this negative report from Saigon is the fact that it is the intellectuals who influence the reporters to the greatest extent. I do not deny that a lot of the criticisms are based on part fact, but it just seems to me to be out of proportion and not in perspective, if one views the whole situation. I have done my best, both in Saigon and here, and shall continue to do so, to try to correct this, because as we move along and are trying to sustain the government with the one hand, it makes little sense for us publicly in our press to smack it with the other.

Senator FULBRIGHT. It sure doesn't. It seems very strange indeed. Senator SPARKMAN. May I suggest that is not peculiar to overseas reporting, though, with a number of these publications.

Senator FULBRIGHT. I would not say some of these people, though, are completely without a sense of perspective. I don't know Karnow, is it?

Mr. NOLTING. Karnow of the Times, yes.6

Senator FULBRIGHT. And then [Walter] Lippmann, I think, bases his articles on reports from [Joseph] Alsop. There are one or two others here that I don't know, who wrote the Time article, but they are very critical indeed with regard to corruption.

LAND REFORM IN VIETNAM

You yourself mentioned that a moment ago in the early part about social reforms. What did you have in mind when you used that term "social reforms" with regard to South Vietnam? Is there a land problem there?

Mr. NOLTING. I would say the principal one is land redistribution.

Senator FULBRIGHT. Is it held largely by a few families?

Mr. NOLTING. No; it is mostly the family estates which have been to a large extent redistributed to the peasants.

Senator FULBRIGHT. What kind of land reforms do you have in mind?

Mr. NOLTING. I have in mind the settlement of people in overcrowded areas on government lands, mostly in the lowland high plateaus which are mostly planted in rubber plantations now.

Senator FULBRIGHT. This is quite different from the situation we find in some Latin American countries. It isn't the case of the feudal system, with a few people owning all the land, is that true?

6
• Stanley Karnow, who covered Southeast Asia for Time and Life.

Mr. NOLTING. I think that is by and large true. It used to be that way, but this has changed.

Senator FULBRIGHT. This is rather an opening of new land, a resettlement problem you had in mind, is that right?

Mr. NOLTING. That is right, and the relief of overcongested people by that.

A NEW SYSTEM OF TAXATION

Senator FULBRIGHT. What about taxation? Do they have what you would call a reasonable system of taxation, internal taxation? Mr. NOLTING. They have recently decreed a new system of internal taxation which is going to improve it very much.

Senator FULBRIGHT. What, briefly, are some of the characteristics? What is new about them?

Mr. NOLTING. It involves a more equitable system of land taxes and a better collection. They have been lagging in certain places way behind the current year, and this had been corrected by penalties.

Senator FULBRIGHT. Are the taxes extremely burdensome, or would you say they are reasonable?

Mr. NOLTING. I think they are reasonable.

Senator FULBRIGHT. Do they have income taxes?

Mr. NOLTING. Yes.

Senator FULBRIGHT. Do they enforce them?

Mr. NOLTING. They are establishing measures to enforce them better. One of the problems about their income tax is that the Chinese communities in Saigon particularly, which are the principal business and banking communities, have been very adept at avoiding taxes. This problem is also being attacked.

Senator FULBRIGHT. They are attacking it?

Mr. NOLTING. Yes, sir.

Senator FULBRIGHT. We know of such things in this country too. They do everything in cash, I guess, and keep no records. Mr. NOLTING. That is about it.

Senator FULBRIGHT. Is that true?

Mr. NOLTING. This I understand to be the case.

HOUSING PROBLEM

Senator FULBRIGHT. Is there a housing problem there?

Mr. NOLTING. In Saigon there is, or there is a slum problem.
Senator FULBRIGHT. Is this critical?

Mr. NOLTING. One of the things that was recently agreed in our recent negotiations, although stricken from the record of those negotiations, was the commencement of a large-scale housing program on the outskirts of Saigon in the direction of the new road to Baria that was recently constructed.

AGRICULTURAL CREDIT

Senator FULBRIGHT. Is there a problem of credit there, particularly of agricultural credit?

Mr. NOLTING. The agricultural credit extension has done a great deal of good. This is a program that Diem put in quite a few years ago.

Senator FULBRIGHT. Is it working?

Mr. NOLTING. It is working well. It ought to be extended further, but it is working very well, and repayments coming back into a revolving fund are also working well.

Senator FULBRIGHT. Is it somewhat similar, say, to our agricultural credit system; production credit, for example? Are you familiar with our production credit association?

Mr. NOLTING. A little bit.

Senator FULBRIGHT. I just wondered if it was similar.

Mr. NOLTING. I don't know. I can't answer how similar it is. What this involves is simply the lending of funds at a reasonable rate for Vietnam.

Senator FULBRIGHT. What is a reasonable rate?

Mr. NOLTING. I think it is 2 percent a month on the unpaid balance, 12 percent a year.

Senator FULBRIGHT. That would be 24 percent a year, if it is 2 percent a month.

Mr. NOLTING. It is 12 percent a year, 1 percent a month on the unpaid balance.

Senator FULBRIGHT. One percent.

Mr. NOLTING. Yes, but let me say that this is my recollection of this: Mr. Cattreel, can you correct me on that?

Mr. CATTREEL. I can't confirm it accurately, no.

Mr. NOLTING. For the purpose of seed, fertilizers, and farm implements, a lot of people are using it, and they like it.

Senator FULBRIGHT. It is still better than it was, but that is a long way from ours.

Mr. NOLTING. If they borrowed from the private lenders, they would pay three times as much.

AGRICULTURAL COOPERATIVES

Senator FULBRIGHT. Do they use cooperatives at all there, or is there such a thing as cooperatives in the field of agriculture?

Mr. NOLTING. I think there are some. I am not too familiar with the way they work it.

Senator FULBRIGHT. Do we promote or seek to promote this type of activity, association, similar to our REA' or-well, you have already mentioned credit. Credit, I take it is financed by the government.

Mr. NOLTING. Credit is financed by the government, yes. On the cooperatives, I am not sure. What would be the substance of that? How do they work?

Senator FULBRIGHT. As just one example, a big part of the rice crop in my State is grown under the rice grower's cooperative. It is a very large organization, with hundreds or several thousand members. They grow rice, market it, and store it through this huge cooperative used in our part of the country.

'Rural Electrification Administration.

48-688 0-86--3

You will remember one of the earliest ones was the orange cooperative called Sunkist, I believe, in California years ago, for supervising the marketing of their crops. All through this country there are farm bureau cooperatives of all kinds.

In Minnesota there is the huge Land-O-Lakes cooperative for butter. All over the country you find different forms of it, but that is what I mean by cooperatives. We have a very extensive system of cooperatives covering nearly all of these things.

Mr. NOLTING. Yes.

Senator FULBRIGHT. They have been very useful in my State, at least in farming, which is essentially agricultural. I just wondered whether you were taking any interest in this.

Mr. NOLTING. I don't think there is any system of collective cooperative harvesting and selling of the rice crop, for example. I think it is done on an individual basis.

BROADENING THE BASE OF DIEM'S GOVERNMENT

Senator FULBRIGHT. I am very glad to have your report that these reports of our own people are exaggerated, at least, if not untrue. But assuming there was some truth in their observations as carried in our own publications, written by our own representatives, it would seem to me that if this is a long term program, and if President Diem wishes to establish a broad base for his government, that some of these things might be very useful. And they don't require any enormous amount of money to get them started. It is a matter that has been very successful in this country, and they later become self-generating. Many of our programs repay all of the original funds, the capital that is advanced by the government. This is a device-if this is a long struggle, and you anticipate our being in there a long time, and you say it is absolutely essential to our security, it seems to me we ought to be thinking about some of these things that would give a broader base to the government.

Mr. NOLTING. The farm credit thing was, I believe, promoted by us long before I got there, and I know that is going well and is increasing. I think they made an additional appropriation in calendar 1962 in a budget which we had a look at to extend this, but I don't know that we have pushed-I may be wrong in this, Senator, but I don't know that we have pushed-the cooperative in the sense that you just described, the harvesting or planting of the rice crop.

Senator FULBRIGHT. In my State these organizations-the REA Farm Bureau, the rice growers' co-op, and so on-are among, I think, the most popular and most strongly supported organizations of nearly anything down there that the government has ever done. There are also credit associations. I recently met with the White House Credit Production Association which has about 3,000 members, and these people swear by it. They have paid back their original government financing, and it is their own money now. They manage it themselves and they are devoted to it. It has been a tremendous thing for that area.

THE ALLEGIANCE OF THE VIETNAMESE PEOPLE

I was just wondering if our government is committed, if this is not a temporary military operation, if they are thinking about some things that will help this government or its successor government to have the support of the people. We have been deluged with information that Diem does not command the allegiance of many of the people there. I don't know whether that is true or not. You tell me it is not true, but we certainly have had that kind of information.

Mr. NOLTING. Senator, let me qualify that, if I may. What I mean is that he commands more allegiance, in my opinion, in South Vietnam than anybody else does, but the situation is not that of a popular political leader. In my opinion, the majority of people in the country in Vietnam, and this is some 80 percent of the people, are not interested in a popular political leader in our sense. They are more interested in a person who will give them protection, in whom they have respect for his, we will say, clean government, and who will mete out justice to them.

They are apathetic about popular government, so it is a somewhat different concept from ours when we say we want a democracy with a popular leader at the head of it, and it is built into the situation there. I don't want to confuse this nor to indicate that I do not agree with you.

I do agree with you that things need to be done in great numbers to make the people willing to sacrifice more for their freedom. But I don't think it is a question of a popular government so much as an efficient government and a just government.

Senator FULBRIGHT. I am not arguing with you. I know very little about it. I am one of the members who have never been in Vietnam, and I am not speaking or arguing with you. I am just trying to explore it.

But if we are committed to, as you say, our man and we have to back him, as long as we are giving out large sums in the military fields, if this is a long term thing, I should think we should not neglect these rather homely undramatic things.

Mr. NOLTING. I agree.

RECONCILING THE PEOPLE AND THE GOVERNMENT

Senator FULBRIGHT. We should not neglect them at all. I think the thing that has reconciled the people in my State, at least to many of our Government activities which they don't like, is some of these they do like, and which they do profit by. There are a lot of things that our farmers and people in Arkansas don't like at all about the Federal Government, but there are enough of these other things in which they do participate that they are willing to go along, so to speak.

They are reconciled to being a part of the Union, in spite of the fact that we tried to secede once, but we are now reconciled to being associated with our Yankee friends. One of the main reasons is just these things that I have mentioned.

They have made a greater impression on the people than anything else, a succession of various kinds of activities that have given them an opportunity to help themselves. They believe the

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