pliers now cannot compete in that market since GVN financing favors non-U.S. suppliers.

An agreement between our Mission in Vietnam and the GVN provides that similar types of commodities will not be financed by both GVN and AID except under exceptional circumstances. Contrary to Mr. Roby's information, so far as can be determined, no directive has been issued by the GVN permitting the use of its own foreign exchange to import gasoline engines, nor has our Mission received a request from the GVN proposing such a change.

Since the GVN uses a different coding system than AID to identify the imports it finances, our Mission took the further precaution of checking all recently opened letters of credit. No evidence that the GVN was funding the import of gasoline engines that are reserved for AID financing was found. Small Japanese or other non-U.S. diesel engines may for certain applications take the place of gasoline engines imported from the United States. However, the Vietnamese government finances the import of such engines with its own foreign exchange. Although we do urge that they import more U.S. goods, Vietnamese importers, like private businessmen in any country, want to take advantage of competition to get the best price they can. Mr. Roby states that prior to a change in U.S. policy, GVN foreign exchange generated through expenditures by American nationals in the local economy was subject to restrictions by the United States. In fact, regulations of the International Monetary Fund prohibit the imposition of such restrictions, including any provisions requiring the purchase of commodities from a specific country or countries with such funds. There has been no change of policy in this respect.

The overall statistics for imports into Vietnam of parts and engines in 1967 and 1968 demonstrated that even when GVN-financed imports were included, American suppliers still dominated the engine field, accounting for about 55 percent of all such imports. Italy, Germany, France, the United Kingdom and Japan provided about 35 percent, all of which were GVN-financed. Taiwan, Korea, India, Finland, Portugal and other countries shared the remaining 10 percent of total engine and parts imports in these two years.

To provide perspective with regard to the expenditure of AID funds in this field, we are attaching a tabular summary table that shows the volume of AID financing by source countries from July 1, 1967 to May 24, 1969, of the kind of commodities the John W. Roby Company offers for sale to Vietnamese importers. It is readily apparent from this summary that U.S. suppliers account for the major part of AID-financed imports in these categories. Please let me know if you wish further information. Sincerely yours,

MATTHEW J. HARVEY, Director, Congressional Liaison.

JOHN W. ROBY CO., INC., Seattle, Wash., June 25, 1969.

Re Letter dated June 11, 1969-course of hearings conducted by Select Committee on Small Business regarding the Agency for International Development. Mr. JAMES C. CORMAN, M.C.,

Chairman, Procurement Subcommittee, Select Committee on Small Business, House of Representatives, Washington, D.C.

GENTLEMEN: My firm in Seattle has been in the Foreign Trade business for over 20 years and over-all I think the AID program is very good and a necessity in the Far East, Middle East, Africa and South America, where our main business is developed. Of course, in any business you have good personnel and bad. You have people who are interested in promoting American products and you have people that seem to have other interests. A lot of the people in the AID program seem to be very dedicated to the work they are doing and others just don't seem to have good judgment. Of course, this happens in my own company or any private business as well as government business, but I think that the AID program should continue on with some changes.

PROMOTE AMERICAN PRODUCTS

In East Pakistan, manufacturers have been working for years to sell American made gasoline engines and American-made gasoline engine powered products to that market. This is in the under 16 HP range. We have spent thousands of dollars in propaganda knocking the small diesel engine which is not being made

in the U.S. It is mainly made in Europe and Japan. This educational program from diesel over to gasoline is a long, drawn-out, expensive undertaking.

A German organization and a Japanese organization have made a joint venture arrangement with a local firm to manufacture pumps in Pakistan using the German and Japanese diesel. They were having a very difficult time on the service problem in the field and they requested assistance through USAID to educate the people on how to service and maintain their diesel-powered pumps. Experts were sent from the United States to Hawaii for a preliminary training course and then sent on to Pakistan where our own American Government people are assisting our competition in promoting and servicing our American competitors' equipment which of course, knocks out all of the American-made product.

In Vietnam, Thailand and Cambodia, we have spent hundreds of thousands of dollars in promoting the American air-cooled gasoline engines as the ideal power unit to power the fishing boats, water taxis, etc. USAID published a book in Saigon knocking the American gasoline engine and promoting the Japanese diesel. I think that our AID officials and employees should have an educational program on American products and I think their job should be to sell America rather than to promote other nations' finished products.

AID BULLETINS SMALL BUSINESS CIRCULAR

Another problem we have is the Small Business Circular publication, as the minute that this is published showing a customer's name and the items he is purchasing from supposedly American firms, firms from Taiwan, Korea and other places that are allowed to supply under the AID program, bid against us at prices that we are unable to compete with in the U.S. Taiwan and Korea especially are copying American products down to the nuts, bolts and screws without regards to patents or anything and there is no chance for us to compete and actually this is giving away American industry to allow such places as Korea and Taiwan to supply under the AID program.

On the Commercial Import Program, it takes about 30 days after they receive our Proforma Invoice to get the red tape down and 60 days waiting period while the commodities are published in the Small Business Circular publication. Actually, the sale is made before all of this publication business is put together on the Commercial Import Program, as it is the general rule that the person buying can specify what he is buying and who he is buying from without regard to price as it is his money in local currency that he is paying for the product and AID is only supplying the foreign exchange.

We represent Tecumseh products and Clinton Engines as an example. The minute that a requirement is published in the AID bulletins, every little individual in the United States, every exporter and everybody else that is trying to make a dollar, calls either the factory or us at Seattle or writes us asking for a quotation so that they can bid on the requirements appearing in the circulars. Actually, they are just wasting money and causing a lot of paper work because the sale has already been made before it ever appears in the Small Business Circular and the firms selling overseas have excellent agents. I would state that the Small Business Circular on the Commercial Import Program is a complete waste of time and all it does is to show what is being sold to a firm's competitor, both in the United States and Foreign Countries. Also, firms such as ours who have gone to the expense of traveling overseas to develop business and have a higher cost in our product because of this added travel expense, are at the mercy of the competitor who sits at home and bids the AID circulars against us without the cost of the overseas travel to develop the business. Also, the long delay in time that is required for publication and the waiting period involved causes us to lose a great amount of business to other countries as they can ship immediately where we have to wait, and wait, and wait.

In the case of Indonesia, interest on local currency through the National Bank is charged at the rate of 12% per month. From the time that the order is placed in the U.S. to the time it arrives in Indonesia or what we call in the trade. "the circuit" it is approximately 5 months: multiplying this out our product costs approximately 60% more than the invoiced amount by the time they get through paying the interest charges and costs involved. Whereas a Chinese firm in Singapore pays approximately 1% per month for money which would be a total of 5% to cover the circuit and it takes about 10 days for delivery from Singapore to Djakarta. This is another 5% so the same business through other channels costs 10% against our AID program's 60%.

SUBSTITUTE PARTS FOR AMERICAN PRODUCTS

Substitute parts for American products, better known in the trade as “bootleg parts". These bootleg parts or substitute parts come from Taiwan, Japan, Korea and the United States. They are not genuine parts but in most cases are very similar to the actual parts. When they get these parts overseas, they print up genuine looking Kohler boxes, Briggs and Stratton boxes, Clinton boxes and Tecumseh boxes and package these parts. Sometimes these parts cause us no end of problems on warranty as they just don't work and tear our air-cooled engines apart. I think that only genuine parts for the engines involved should be allowed to be imported on the AID program. All other American manufacturers in the automotive, machinery and engine field are having the same problem.

SPECIFICATIONS

When AID is buying for a specific project, many times the specifications outlined are very poor and they buy for price and not quality or what will do the job. This causes many problems in the market on the service of the product once it gets into the field. A good example is in late 1967 a purchase of 1130 self prime pumps were purchased for the rural pacification program in Vietnam to be put out to the small farmer for irrigation purposes. Specifications in the bid actually were wrong but were written around a 3" pump that would require an 8 HP heavy duty cast iron kerosene engine. The bid that was accepted by the AID people, as they were actually doing the purchasing for this program, was a 3" pump powered by a light weight, aluminum, short life, kerosene conversion engine. Technically, you lose approximately 20% HP when you burn kerosene. The requirement called for 3000 RPM which drops the HP again about 1 HP as the engines are rated at 3600 RPM and no consideration was taken for the extreme heat. These engines are tested at 60°F, and you lose 1% of power for every 10° of increased heat over that point. Actually, the so-called 5 HP which was accepted, under the operating conditions that it had to work in, would only produce about 2.9 HP and that certainly isn't sufficient power to run a 3" pump. The boxing on this shipment specified that it was to be the standard government packing and when this shipment arrived in Vietnam, all the boxes had deteriorated and there was considerable damage. As they didn't have sufficient power, the people did not accept them and in the past 4 months I was in Vietnam and these pumps are still sitting in the Cooperative Yard all rusted out and you might say 70-80% deteriorated. The ultimate consumer does not place the blame on the pump or importer, but on the engine and then the engine manufacturer suffers the consequences. This kills another American product in the export market.

In the pump field again in Laos, AID purchased 500 pumps for pumping water out of the Mekong River up a 40 foot bank. They took the lowest bid and they had to place a barrel half-way up the bank and use one pump to pump to the barrel and another pump to pump to the top. One properly engineered pump that exports at $92.00 was put beside these pumps and it delivered to the top, which is 40 feet, as much as 4 of these so called "price pumps" (export $73.00) that are being dumped into the market.

A good question by me is, should I dump poor quality, unworkable equipment into the AID program as other people seem to be doing or should our firm continue to supply our engineered, sufficiently powered equipment that will work? We are not getting the business because our price is high, yet if we drop and supply on a price basis disregarding quality we would take every bid by 15-20% and sometimes up to 50% if we supply the same thing as is being accepted now. Attached is a photocopy of a letter on the last bid opening on 355 pumps. The specifications were improper on these pumps but I visited the purchaser and found what he wanted. I bid according to what he personally told me yet I am $7,000 over the lowest competitive bidder. If I was to supply the same product as the low bid, I could be under $30,000 on this bid. My $38,000 bid is of approximately the same quality as being bid at $64,000 by other quality producers. The low bidder is going to supply a throw-away type engine that is designed in America to be used one time and not repaired. This is an aluminum type engine whereas I was going to supply a long life, heavy duty cast iron engine that can be repaired many times and will give them many years of satisfactory service.

COMMISSIONS

In most countries where AID funds are involved, the local currency is usually very unstable and not of much value outside of the country. In the trade we call this "Mickey Mouse" money. Several years ago we paid commissions in U.S. Dollars to our exclusive agents, employees or representatives who lived in the local markets and in many cases these people were Europeans or other nationalities. AID has changed this rule so that we must now pay commissions in the local currency of the country involved and we cannot pay a dollar commission to them here in the U.S. Because of this ruling, we have lost our top, key foreign personnel. Basically, these people are interested in hard currency and must have it to survive. There is only one thing that they can do now: That is to quit promoting American products and concentrate on European, Japanese, Taiwanese and Korean products as these people pay commissions in hard currency in a European bank account or Oriental bank account where it can be kept for their later use. In the case of Taiwan and Korea where AID funds are involved, say that they decide to copy my pump, without my permission or without regards to patents, when it appears in the AID bulletin. The bare pump I must sell from the U.S. for about $35.75 on a 2" unit. This pump can be duplicated with the cheap labor of Taiwan for approximately $10.00-$12.00. They will sell this at say, $30.00 which is underneath the American price and set aside a $15.00 commission for the persons involved in hard currency in a convertible account. We cannot do this here in America. The high labor cost and taxes to support our foreign programs makes our costs uncompetitive to start with. The AID rules do not allow us to pay dollar commissions. I think that AID should allow us to pay a reasonable commission in dollars to our agents overseas that are promoting our American business. We must have this in order to remain in business.

AID AND THE VIETNAMESE GVN FUNDS (GOVERNMENT OF VIETNAM FUNDS) A number of years ago, before the war got going heavy, the money generated from our government expenditures in Vietnam and the money generated from the G.I.'s local purchases was transferred back through various local channels into the central bank of Vietnam in the form of script and this was credited against the AID procurements which assured America that the dollars spent in Vietnam would come back to America. A couple of years ago, our State Department saw fit to change this method and to give the Government of Vietnam, U.S. dollars instead of credits. These dollars now become GVN funds which they can spend anywhere in the world they see fit for any commodity they so desire. The Vietnamese basically are interested in one thing and one thing only and that is the quick dollar in hard currency and of course this has completely cut out American business. They prefer purchasing from Europe and Japan rather than the U.S. and use these GVN funds for this purpose. It is like cutting the bottom out of the bucket. As long as this continues, it is the greatest robbery of America that has ever happened. They can even use this money to buy through Singapore or Hongkong from Communist China. As long as this is allowed to continue, the Vietnam war will never stop because millions upon millions of dollars per day are generated by our over 500.000 G.I.'s and the support they require, and I also understand now that the U.S. Government is paying for defoliaging rubber trees up to $300.00 apiece and they are paying damages to buildings destroyed which is going into the GVN funds in the shape of hard currency in U.S. Dollars. There are, no doubt, many other ways money is accumulating for the Government of Vietnam and the politicians involved. It is my opinion that instead of paying the Government of Vietnam in Dollars, that we should pay them in the form of foreign exchange credits which would be administered by the AID organization for purchases in the U.S. over a long period of time and in this way the exorbitant drain-off, kick-backs could be controlled and this would also insure us that the minute we left Vietnam, a communist or other type of government would be cooperative with the U.S. otherwise these credit build-ups would not be available to them.

Of all problems we have now, I think the GVN funds not being spent in America and out of our control is our single biggest problem and one place where the AID organization is needed extremely bad.

Yours very truly,

JOHN W. ROBY, President.

MANFRED HAUSMANN,

Saigon, June 20, 1969.

JOHN W. ROBY AND CO., INC.

Seattle, Wash.

DEAR JOHN: Ref.: CPA Invitation No. 3427-20039 355 Pumps.

I am giving you hereafter the result of last Monday's Bid opening:

New York Research Corp. (HOMELITE)

American Trading (SCOTT)

Biedermann & Cie. (BARNES)

Getz Bros.

Fairbanks Morse

Far East Enterprises (BARNES)

Cogema (JAEGER)

Pacific Corp.

Roby

Paco

Jaeger

US$64, 574. 00

44, 352. 00

31, 484.00

52, 735.00

37, 949. 00

30, 068. 00

49, 700.00

39, 050. 00

38, 162. 50

72, 164.00

46, 150.00

Pacific Company (ORLY)

31, 950.00

and there is not much I can say. The cheaper quotations all include either the B&S model 80.232 or 81.232 and Fairbanks Morse has quoted with the Tecumseh H 30 model.

The difference in price is right there and it boils down to one single question. You either supply junk or you don't. Since the ROBYCO tradename enjoys an excellent reputation in Vietnam we can't afford to do that.

We have approached Mr. LE, who works at the place where you took the Fairbanks Morse Pump pictures and hopefully he will listen. If they go by price again and some smart "expert" at USAID makes the decision then we don't have a chance.

I'll keep you informed about further developments.
Yours very truly,

DEAR MR. ROBY: We are in receipt of your letter of June 6, regarding procurement of engines from Japan financed by the Government of Vietnam.

The understanding between USAID and the Government of Vietnam (GVN) is that similar types of engines will not be financed by both the GVN and USAID; at the present time USAID has an agreement with the GVN that GVN would finance water-cooled marine diesel engines. (We recognized that such engines can be adapted to land-based power sources.) When it finances engine imports of the types agreed upon, the GVN determines eligible sources of supply. Based on GVN import records, it appears that the primary sources of supply for engines and parts eligible for GVN financing are Italy, France, Germany and the United Kingdom. During 1967 and 1968 these countries supplied by C & F value almost 28 percent of the engines and parts brought into Vietnam. In the same period, Japan, Taiwan and Korea supplied 9 percent and the United States supplied, primarily with CIP financing, 55 percent of all imported engines and parts. The remaining percentage was supplied from many countries: India. Finland, Portugal, etc.

Before we received your letter, my staff heard rumors about the possible procurement of gasoline engines from Japan. These rumors were discussed on June 12, 1969, during a meeting between my staff and Mr. Huynh Trung Nghia, the head of the Directorate of Foreign Trade (DCE). The following is the excerpt from the minutes of this meeting which deals with this subject:

"USAID also asked Mr. Nghia about the rumors that DCE is going to finance Japanese Honda Gasoline Engines G-40RT and G-65RT. Mr. Nghia said he received instructions from the Minister to submit to him all license applications for these engines. As of today, Mr. Nghia has not seen any. USAID expressed their objections to GVN financing of gasoline engines and informed Mr. Nghia that if he sees any such license applications, he is invited to contact USAID/CIP who would give him detailed information on imports of gasoline engines before he informs the Minister."