Declassified per Executive Order 13526, Section 3.3
NND Project Number: NND 63316. By: NWD Date: 2011
TOP SECRET – Sensitive
"Viet-Nam. While continuing reorganization and training along U.S. lines the Vietnamese Armed Forces ... are still conducting operations against fragments of dissident sects and Viet Cong guerrillas. These military operations have succeeded in practically eliminating the Binh Xuyen and Cao Dai forces. The Hoa Hao, operating along the Vietnamese-Cambodian border, even though small, still give the Vietnamese some embarrassment and required the employment of a small portion of the Vietnamese Army against their operations. The over-all success against these anti-government forces has facilitated the release of the majority of the Vietnamese units from pacification missions, thus increasing emphasis on unit training and the concomitant increased effectiveness of the armed forces. In addition, the activation of two corps headquarters within the army was completed last month and has resulted in a more satisfactory command structure which will materially increase the combat efficiency of the army.
In 1959 U.S. policy papers began to emphasize that GVN preoccupation with internal security interfered with its ability to prosecute other desired programs, and particularly that economic development lagged what was "politically necessary" to "compete" with the DRV. The following is from the OCB Progress Report of January 7, 1959:
"A. SUMMARY EVALUATION
"32. Developments related particularly to a U.S. course of action to assist Free Viet-Nam to develop a strong, stable and constitutional government which would work toward the weakening of the communists in both North and South Viet-Nam. President Diem remained firmly in control despite some political dissatisfaction with his government … The communists and dissidents continued their campaign of assassinations, especially of officials in rural areas and carried out attacks aimed at disrupting Viet-Nam's economic progress. Although the government gave increasing attention to development of the economy, such development continued to be inhibited by almost pre-emptive military requirements which utilized a substantial portion of Viet-Nam's total resources, including U.S. aid …
"B. MAJOR OPERATING PROBLEMS FACING THE UNITED STATES
"33. Diem's Internal Political Position. Diem increased his travels throughout the country for the purpose of popularizing his regime. Increasing accomplishments of the government in the economic and social field s should also have beneficial political results. Nevertheless, the failure of the government to fully rally certain elements of the middle class, the intellectuals and former officials to its support, the frustration and restlessness of some of the present officials, and some
