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Certain additional costs not reflected in the above cost estimate will probably require larger Vietnamese Governmental expenditures than presently estimated. These additional costs will be:

(1) The financial support given by the Vietnamese Government to the sects, which will increase when the French cease their financial support of the sects on 31 January 1955. Diem will probably have to continue the subsidies he now gives the sects and assume at least part of the support now provided by the French for the time being, and until he is in a position politically and militarily to cut off their subsidies. It is difficult to estimate the amount of support the Vietnamese Government will feel required to furnish. However, based on present Vietnamese and French payment figures a total of approximately $5,000,000 may be required in FY 1956. Expenditure of this sum would reduce the Vietnamese contribution to its own military and economic aid programs and increase the requirement for U.S. funds accordingly for FY 1956.

(2) Another incalculable cost will arise if the refugee evacuation toward tho end of the 300-day period (May, 1955) exceeds expectations. There may be a requirement for an additional $15,000,000 in this field. I therefore recommend that the cost estimates cited as requirements for U.S. funds be considered as minimum fixtures, and that sufficient additional funds on the order of $20,000,000 be made available for FY 1956 to pormit flexibility in coping with the above contingencies, is necessary. Rh