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III.

18. In the long run, the security of Indochina against communism will depend upon the development of native governments able to command the support of the masses of the people and national armed forces capable of relieving the French of the major burden of maintaining internal security. Some progress is being made in tho formation and development of national armies. However, the Vietnamese Government has been slow to assume its responsibilities and has continued to suffer from a lack of strong leadership. It has had to contend with: (a) lingering Vietnamese suspicion of any French-supported regime, combined with the apathetic and "fence sitting" attitude of the bulk of the people; (b) the difficulty, common to all new and inexperienced governments, of training the necessary personnel and building an efficient administration; and (c) the failure of factional and sectional groups to unite in a concerted national effort.

19. The U.S. economic aid program for Indochina has as its objectives to increase production and thereby offset the military drain on the economy of the Associated States; to increase popular support for the Government by improving the effectiveness of Government services; to make the Government and the people aware of America's interest in their independence and welfare; and to use economic aid as a means of supporting the military effort. Because of their strained budgetary situation, the Associated States cannot meet the local currency costs of the projects; about 60 percent of the program funds is, therefore, devoted to importing needed commodities which are sold to generate counterpart.

20. The military situation in Indochina continues to be one of stalemate. Increased U.S. aid to the Franco-Vietnamese forces has been an essential factor in enabling them to withstand recent communist attacks. However, Chinese aid to the Viet Minh in the form of logistic support, training, and technical advisors is increasing at least at a comparable rate. The prospect is for a continuation of the present stalemate in the absence of intervention by important forces other than those presently engaged.

21. While it is unlikely under the present circumstances that the French will suffer a military defeat in Indochina, there is a distinct possibility that the French Government will soon conclude that France cannot continue indefinitely to carry the burden of her total military commitments. From the French point of view, the possible means of lessening the ANNEX TO NSC 124 Rh