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should be able to increase military expenditures in view of additional financial contributions from outside Indochina (measured in piasters), which should result in increased incomes and permit increased tax receipts. The amount of taxes collected is also capable of expansion through improved tax collection. Doctor Sumberg, an American financial expert, is currently in Indochina conducting a 3 month study of the tax systems of the Associated States prior to making appropriate recommendations.

22. Currently, little or no industrial support of the war exists in Indochina. The adaptability of the indigenous population to specialist requirements and the existent support, with very little means, of a large and complex civilian transportation system in the larger cities of the Associated States, emphasize the existence of a technical knowhow, a fundamental requirement for any industrial base. Capital is either non-existent or carries prohibitive interest rates. The advisability of U.S. support of a small arms industry, tire factories, battery factories, garment factories, etc. becomes one of weighing comparative costs of local production against outside procurement. On a short term basis importation appears most economical for the majority of items, but detailed studies must and should be made by qualified experts to assure that this is correct. With respect to certain items of military support, such as battery production or tire recapping, local production appears most economical. Currently, a large proportion of batteries received

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