In 1961 the ‘Agroville’ scheme was transformed into ‘strategic hamlets’ (ap chien luoc). This was an initiative suggested to Diem by American advisors and developed largely by the CIA. The ‘strategic hamlets’ were to be a network of self-sustaining communities, able to withstand communist infiltration and attack. Peasants would be moved into these large rural settlements, compensated for this relocation and given plots of land. Each ‘strategic hamlet’ would be provided with a defendable perimeter, small arms and militia training; it would be outfitted with a radio or telephone connection, so it could make contact with the government, ARVN and nearby hamlets. But like the ‘Agrovilles’, the ‘strategic hamlets’ program failed, mainly because it was poorly implemented. Despite a barrage of CIA-produced propaganda, most peasants did not wish to relocate. Much of the money set aside for compensation ended up in the pockets of corrupt government officials – including Diem’s own family – rather than with the peasants. By late 1963 the South Vietnamese government claimed to have completed 8,600 ‘strategic hamlets’ – but a subsequent American investigation found that four-fifths of these were incomplete. American funding dried up and the program soon faded away. Many ‘strategic hamlets’ were abandoned, stripped of whatever was useful and left to rot.
Despite its corruption and failures elsewhere, the Diem government did make some progress in industrialising the economy. South Vietnam’s status as a developing nation, in recovery from war and colonialism, received extensive media coverage in the West. Because of this, there were several Western companies willing to assist Saigon with trade and investment. In 1957 Diem announced a five-year economic plan and called for foreign loans and domestic investment. Those who invested in the economy, particularly export industries, were promised government guarantees and concessions, such as lower tax rates and land rents. Local companies were subsidised and locally produced goods were protected with tariffs. Meanwhile, the government and its agencies imported much-needed equipment: factory and farm machinery, motor vehicles and raw materials such as steel and ore. South Vietnam’s agricultural sector also recovered: rice production exploded from 70,000 tons per annum (1955) to 340,000 tons (1960). Predictably, Diem’s main trading partner during this period was the United States. Between 1954 and 1960 the US government pumped around $US1.2 billion into South Vietnam, about three-quarters of which was used to expand and bolster the military. Washington also offered incentives to American companies who traded with South Vietnam.
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