The CHAIRMAN. Well, the staff says they take this from, I believe, an official statement that there were 11,243 killed which works out as a very high cost per kill, if you want to use that distasteful word.

Senator LAUSCHE. Mr. Chairman, we ought to get the correct figure. The CHAIRMAN. This is the staff's figure.

Senator LAUSCHE. What is the answer of the witness?

Mr. BELL. I am not the authority on these matters, Senator, the figure that has been supplied to me is 31,360. It differs from the figure that was supplied to the staff. We will get the correct figure for the record.

Senator LAUSCHE. I would suggest that that be corrected so we get an accurate figure.

Mr. BELL. Of course the Senator recognizes that these are estimated figures.

As you know, the Vietcong do not always leave their dead on the battlefield in many cases.

The CHAIRMAN. Please look up that figure for the record. In any case, I only ask this to give the impression to both the committee and to the public that this is a rather substantial operation as of now, is it not?

Mr. BELL. It certainly is.

The CHAIRMAN. And it is growing.

Mr. BELL. Yes, sir.

The CHAIRMAN. You estimate it is going to be less next year?

Mr. BELL. No; more.

The CHAIRMAN. It is going to be more.

Have your estimates as to the rate of escalation in the past proved to have been accurate?

Mr. BELL. Are you asking me personally, sir?

The CHAIRMAN. Yes.

Mr. BELL. Or the executive branch?

The CHAIRMAN. Yes. The executive branch.

Mr. BELL. They certainly have not been-it is a wartime situation. There were optimistic expectations a couple of years ago.

The CHAIRMAN. Would you say they were a little more optimistic than facts proved them?

Mr. BELL. They certainly were.

The CHAIRMAN. For several years running. It is escalated far greater than you had expected.

Mr. BELL. Yes, sir; that is correct.

EVIDENCE OF SUPPORT FOR SAIGON GOVERNMENT

The CHAIRMAN. Recently General Greene, the commanding general of the Marine Corps, on returning from Vietnam said this: "You could kill every Vietcong and North Vietnamese in South Vietnam and still lose the war." Do you think there is any evidence of growing popular support for the Saigon Government?

Mr. BELL. Yes, sir; there is a great deal.

The CHAIRMAN. Would you elaborate on that?

Mr. BELL. Yes, sir.

The CHAIRMAN. Briefly.

Mr. BELL. Perhaps the most dramatic evidence is that last spring there were elections in the towns and district communities in Viet

nam-in the countryside. These elections to the surprise of many outside observers were not only held but some 70 percent of the eligible voters did, in fact, vote. They elected provincial representatives, they elected senior citizens of the community, men who had stood, who had offered themselves for election. There were contested elections in nearly every case. It was, by the testimony of those who were there and saw it, a vivid demonstration of participation in normal government function under very abnormal circumstances.

EXTENT OF GOVERNMENT CONTROL OVER COUNTRYSIDE

The CHAIRMAN. How much of South Vietnam is under the firm control of the Saigon Government?

Mr. BELL. There is no simple answer to that, Mr. Chairman.

Senator LAUSCHE. Would the chairman identify whether he is talking about area or about people?

Mr. BELL. I was going to make that distinction, Senator Lausche. If you consider the inhabited area of the countryside, the estimates which seemed to me, when I was there, to be most persuasive were that about 25 percent of the people who live in the countrysideoutside of the cities and towns-live in areas in which there is a good security day and night, and in which there are normal government operations functioning. About 50 percent of the people live in socalled contested areas in which there is a degree, sometimes a considerable degree, of security risk.

Normally, in the daytime people move around reasonably safely, including our civilian advisers that we have living out in the countryside-in the small towns. But at night, there may well be and often are Vietcong or North Vietnamese military actions. These areas are not secure, not wholly secure at night, and are areas in which there may be units of the Vietcong or North Vietnamese military forces that can stage attacks.

The remaining 25 percent of the people who live in the countryside are in areas where the Vietcong are pretty substantially in control, and where people from the Government or American AID advisers, for example, can go normally only with a military escort.

CONTRAST WITH SITUATION A YEAR AGO

The CHAIRMAN. Mr. Bell, would you say the situation is better now than it was a year ago?

Mr. BELL. It is about the same, Mr. Chairman.

The CHAIRMAN. Do you recall the estimates?

Mr. BELL. Excuse me, sir, there was a period during the spring and summer when the security conditions clearly deteriorated, but over the last few months the situation has been somewhat restored and most people feel it is about the same now as it was a year ago.

The CHAIRMAN. Do you recall that for the last 4 or 5 years the testimony from administration witnesses each year has been that things were getting better or that the situation was going to be better before very long. Is that about accurate?

Mr. BELL. I don't recall-let me put it this way, Senator. My own testimony has not been of that character, and I am not here speaking for others.

It has been evident to us, to the AID people, who have been living and working in the countryside these past several years, that the problem of establishing security and economic progress in areas which are either contested or under Vietcong control is the heart of the effort to bring about a successful solution in South Vietnam, and that that effort has not made significant progress for the last 3 or 4 years. Senator GORE. Mr. Chairman, will you yield temporarily? The CHAIRMAN. Yes, I yield.

VULNERABILITY OF SAIGON

Senator GORE. I have here a letter from Secretary McNamara to the committee, which the committee received last week, in which he says, "Saigon remains quite vulnerable."

Is Saigon included in the area which Mr. Bell describes as secure? Mr. BELL. I was referring, Senator, to the countryside and not to the cities at all. The cities, Saigon, Nha Trang, Danang, and the other cities are in the term I was talking, about secure areas. People move about and work freely. There are terrorist attacks, which you well know, in these cities from time to time. They are occasional and not continuous.

I think what Secretary McNamara was probably referring to is that major military actions against Saigon or against these other cities is certainly conceivable.

Senator GORE. He didn't say conceivable. He said Saigon is quite vulnerable.

Mr. BELL. In the sense that there are units of regimental size, perhaps larger, in Vietnam which could make land attacks on Saigon, if they so choose. It is also obviously a vulnerable city from the standpoint of any air attacks.

Senator GORE. Thank you, Mr. Chairman.

(NOTE.-Mr. Bell subsequently stated that he had not seen Secretary McNamara's letter before responding to Senator Gore's question and that he unintentionally misinterpreted the letter. The full text of the letter follows:)

Hon. J. W. FULBRIGHT,

Chairman, Committee on Foreign Relations,

U.S. Senate, Washington, D.C.

THE SECRETARY OF DEFENSE,
Washington, January 28, 1966.

DEAR MR. CHAIRMAN: Thank you for your letter of January 14 expressing the committee's interest in the vulnerability of the Saigon economy to attack by the Vietcong.

Mr. David Bell is better qualified than I to comment on economic warfare which might be conducted by the Vietcong. Therefore, I am taking the liberty of forwarding a copy of your letter and this reply to him.

I would like to discuss with you, however, the problem of Saigon's physical security, which has a direct bearing on the economy of the Republic of Vietnam in general and on the economic life of the capital city in particular.

We do not feel that a direct attack on Saigon by any sizable Vietcong or PAVN force is likely, but we do face the continuing threat of isolated terror attacks within the city limits, and are constantly aware of the possibility of mortar attacks from outside the city's perimeter. The bombing of the U.S. Embassy last year is an example of a type of terror attack most difficult to guard against. The great number of vehicles and people in Saigon make absolute security an impossibility, although curfews and increased U.S./GVN military and national police patrols have reduced the numbers of such attacks. As you may have seen

in recent news reports, the quick reaction of the national police force has prevented several Vietcong bombing incidents in the past several weeks.

In addition to possible terror attacks on physical installations within the city, there is also the ever-present threat of similar attacks on roads and highways leading into the city and on port facilities and river approaches servicing Saigon and the rest of the Republic of Vietnam. Attacks on any of these communication facilities do serious but temporary harm to not only the economy of Vietnam but also the military effort and the morale of the people. The Vietcong has at various times successfully interdicted roads approaching the Saigon perimeter and has been able to reduce shipment of rice and other foodstuffs to such low levels that heavy imports have been required. We have been able to prevent serious economic setbacks and food shortages in numerous areas only by use of airlift and armored convoy. In cooperation with the Government of Vietnam, we are making the most energetic efforts to reduce these problems.

The consequences of damage to Saigon port facilities is being considerably lessened by construction of protected alternate facilities such as Cam Ranh Bay, and increased river patrol activity by United States and Government of Vietnam forces has reduced the changes of Vietcong incursions along vital waterways. Current Vietcong terrorist activity continues to be directed at phychological targets rather than against more lucrative economic and operational targets, probably in view of United States/Government of Vietnam overall capabilities. Saigon remains quite vulnerable. Terror activity could probably be intensified at any time by the Vietcong agents present in the area, since terror is the principal tool of the type of war the Communists are waging. I hope this information is useful to you. Sincerely,

ROBERT S. MCNAMARA.

Mr. BELL. Those are questions, sir, which are obviously beyond my immediate responsibility. The kind of security that I am describing in response to the question about the countryside is, assuming that the Vietnamese Government and American, Korean, and Australian and New Zealand troops succeed in breaking up or pushing back the major military units of the Vietcong and the North Vietnamese, there still would remain the problem of establishing local security and local progress.

If I understood the chairman's question correctly he was quoting General Greene as saying that we could win the major military battles but we would still have the kind of problem I have been describing in the countryside. I thoroughly agree with General Greene that that is correct.

Senator GORE. Thank

you very much.

Mr. BELL. It is that kind of local security and progress that I was referring to.

QUOTATION OF CHURCHILL

The CHAIRMAN. My time is up. I only want you to comment on one last statement.

In this week's Newsweek, Mr. Hughes has a column in which he quotes Churchill as having made this statement:

Going into swampy jungles to fight the Japanese is like going into the water to fight a shark.

Do you think that is appropriate to our situation in the jungles of Vietnam?

Mr. BELL. Well, Senator, I was in the Marine Corps in World War II, and we did go into the jungle to fight the Japanese and we did quite well.

The CHAIRMAN. Thank you very much.
Senator Sparkman?

PROBLEM OF INFLATION

Senator SPARKMAN. Mr. Bell, one thing I wanted to ask you about was this question of inflation. You discuss it quite fully in your statement, which I have read. But isn't that a real problem already?

Mr. BELL. Yes, sir; it is. There was a price rise in 1965 on the order of 40 percent. It is a very serious problem, and one which has been growing in dimensions as the Vietnamese Government expenditure budget has risen, as the American troops have come into Vietnam in larger numbers, spending increasing amounts of money on the local market, and as the military construction program has become larger. These have soaked up all available skilled labor, and is bidding for labor that doesn't exist, and for materials as well. So that the local economy in Vietnam is a typical war boom economy at the present time, and the inflationary problem is a very serious one.

One measure, but only one, which is necessary to contain that inflation is to increase the volume of imports, and this is a major reason for the supplemental that is before you now.

Senator SPARKMAN. I notice you state that the Vietnamese Government has reduced its budget which should have some helpful effect, and you also bring out this point of the need of greater imports. Mr. BELL. Yes, sir.

PROCESS FOR IMPORTING GOODS AND MATERIALS

Senator SPARKMAN. Now, this may be a simple matter, but I am not sure that I understand. How do you get imported goods into circulation in Vietnam? Do they go to the Government or do they go to individual merchants?

Mr. BELL. For the most part they are handled through normal commercial channels-Vietnamese and some American firms which are import establishments-businesses in Saigon, and to a lesser extent in the smaller cities.

For that part of the total imports that the United States finances, we work out with the Government of Vietnam an approved list of items and amounts. So much for fertilizer, so much for iron and steel, so much for small electric motors, so much for drugs and medicines of various kinds, and so on. Then the Vietnamese Government issues import licenses to these importers-there are a substantial numbers of importers, resultng in great competition in this marketand they place orders. Items are bought mostly in the United States but for a few things we will permit orders to be placed in other lessdeveloped countries. We do not ordinarily finance with AID funds imports from Europe or from Japan.

Orders are placed-the goods are shipped-they are delivered, and on presentation of an invoice and a bill of lading to a designated American bank the supplies are paid from our supporting assistance funds.

The goods, therefore, move through normal commercial channels. The Vietnamese and American importers pay in piasters to the central bank of Vietnam the piaster value of the goods; the exporter, the seller, receives his dollars from the U.S. Government.

The piasters that are received for these goods by the Government of Vietnam are applied to the Government's budget in ways that are agreed between them and ourselves.