ABSTRACT

The Americans and the French together understood the necessity for Bao Dai to expand his army and relieve the costs to France of financing its Expeditionary Corps and the costs to America of its Indochinese expenses. Ambassador Bruce in Paris argued that creating this army was ‘the next step in helping to secure our objectives in the area’.1 Raising finances to fund an army for each of the Associated States had become difficult with the adoption of the March Agreement and the conference in Pau, which had placed the functions of revenue-raising in the hands of the Indochinese states. Customs revenue, the most easily obtained income, would not be collected by the French and would become the responsibility of the states. Leon Pignon, the French expert on Indochina, told ambassador Heath in Saigon that the French budget for Indochina was nearly $570 million, which included the expenses for the pay and maintenance of the Expeditionary Corps.2 Enlarging the National Army would place a financial strain on the French and on the Associated States, who were unable to meet the costs of funding the twelve native battalions already in existence. The French urged Vietnam’s Prime Minister Huu to draw up a sound budget and a financial system to help adapt Vietnam to this new economic situation.