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Rh on its advantages and to overcome the obstacles to its success, I have directed the principal efforts of the United States in Vietnam, in cooperation with the French, toward aiding the Vietnamese to develop and execute a series of emergency programs covering the military establishment, agrarian reform, refugee resettlement, fiscal management, and the establishment of a national assembly. Some progress, of increasing momentum is being made in all these fields, with corresponding increase in the stability of the Government. The least successful aspect of my mission has been my failure thus far to induce Diem to broaden his Government by including other able, experienced leaders, such as Dr. Phan Huy Quat, former Defense Minister.

3. Considering all factors, although the situation in Vietnam is not bright, I believe that is Diem has firm U.S. support and guidance and active French cooperation, or at least acquiescence, his Government has a reasonable prospect of success. While the atmosphere in Saigon has improved demonstrably since November, owing to the departure of General Hinh and the backing which the United States Government has given to Diem, I have been unable to determine the extent of improvement in the countryside and villages of free Vietnam. There the Viet Minh will maintain a significant degree of control until the National Security Action program is well advanced. Moreover, the sects, although displaying some uneasiness that their days of political and financial independence may be numbered, re,ain devoid of any sense of national conscience and still have the capacity to do great harm. Likewise the prospect of national elections in 1956 hangs es a threat over free Vietnam. This threat may reach the stage of crisis by July 1955, the period when under the Geneva Accord the two sides ere to begin discussions leading to elections. Nevertheless, in my judgment, there is at least an even chance that Vietnam can be saved from Communism if the present programs of its Government are fully implemented.

4. . Best available estimate of the for CY 55 of financing programs of military and non-military aid that I recommend are:

. In practice, because of delays in making new Rh