VIETNAM veterans have been told they can continue to fly the old South Vietnamese flag over their memorial at the Dandenong RSL club and that the Government will still pay the $40,000 owing on the memorial.

The veterans were told by the Government recently that they could have the money on the condition they agreed to stop flying the flag.

Liberal senator Mitch Fifield had told Prime Minister John Howard that the condition was contained in a letter from Veterans Affairs Minister Bruce Billson. The condition was based on advice from the Department of Foreign Affairs and Trade, concerned about offending the Vietnamese danGovernment, which provides access to areas such as the Long Tan battle site.

Senator Fifield said the men were conscripted to fight for that flag and they had earned the right to fly it on their memorial. Mr Howard said he would examine the flag condition and was sure something could be done.

Yesterday club president Alec Kowarzik said he had received a new letter saying the club would get the money. He said the veterans had agreed not to fly the flag on official occasions when Government ministers or the Governor-General were present.

Mr Billson said yesterday the Government had no desire to prevent groups from flying the flag of their former South Vietnamese allies, provided courtesies and protocols were observed.

Only officially recognised national flags are meant to fly at memorials in locations controlled by the Federal Government or at national memorials. "The same should apply for any commemorative event at which an official representative of the Australian Government is present," Mr Billson said.

Senator Fifield said last night this was a great outcome.

"There was a blockage in the form of a bureaucratic clause in the letter of offer," he said.

"As soon as I brought the matter to the Prime Minister's attention, he acted swiftly to resolve the issue."