Colombo, 11 January 1950
Economic Policy in South and South-East Asia Memorandum by the Australian Delegation
Introduction
1. The consolidation of communism in China, and the evident threat of its emergence as a growing force throughout South-East Asia, underline the urgency of international efforts to stabilise government and to create conditions of economic life and living standards under which the ideological attraction which communism exerts will lose their force.
2. It is perhaps doubtful whether Communist China will, at least in the near future, be in a position to make any tangible contribution towards raising the living standards of the under-developed and highly populated countries in this area. In this respect there may be no exact analogy with Europe where the Soviet Union has been able to use its export capacity as an instrument of bargaining and propaganda. By so much will the democracies be at an advantage as compared with the situation in Europe.
3. However, the problem in Asia lies in the poverty of the region itself, no less than in the pressure from an external force. Surveys made by the United Nations and others emphasise the comparatively low consumption standard of the area as compared with others, the pressure of population on consumption standards, and the insufficiency of capital formation to make possible any rapid improvement in production and thus in the standard of living.
4. The initiative for economic development comes from the Asian countries themselves. Its form is for Asian countries themselves to determine. Assistance from countries outside the region must be approached on that assumption.
5. Possibilities of international action
Already some machinery exists for promoting rehabilitation and development. So far this machinery has achieved relatively little in South and South-East Asia. The Australian Government is concerned that there is lacking as yet any concerted attempt to check and reverse through international economic measures the deterioration in the political and economic situation.
6. Because international economic assistance will, in many cases, produce only slowly its effects on production and living standards, further delay in comprehensive international economic action may well have the result that action will fail to achieve its political purpose of maintaining stable government, even though such action does eventually raise living standards from which the countries themselves and those that trade with them would undoubtedly benefit.
7. The economic benefits to the rest of the world, and particularly the United Kingdom and Continental Europe, from the restoration and development of the output of food and raw materials of the region are self-evident. South and South-East Asia is one of the few regions from which it is possible to foresee a substantial contribution towards solution of the dollar problem by way either of direct dollar earnings or replacement of supplies on which the sterling area and Western Europe are dependent. The economic significance of this factor has been recognised in O.E.E.C. and was brought to the attention of the Meeting of Commonwealth Finance Ministers in July last, by the Finance Minister of Pakistan, Mr. Ghulam Mohammed.
8. Because the economic situation in South and South-East Asia lies so close to the international political problems that arise in particular parts of the area, the Australian Government is pleased that opportunity has been provided in the Colombo Conference to have the question discussed by the Foreign Ministers. It is the Australian Government’s hope that the Foreign Ministers will, in a recommendation to their Governments, provide an impetus and sense of urgency which may otherwise be lacking if the question is left for determination in its economic and financial context alone. It is clear that in a large measure the economic advancement of the area can be treated only as one aspect in a number of different contexts – the policies of O.E.E.C. and the United States E.C.A. in Europe, the dollar policies of the sterling area, and the functioning of instrumentalities such as the International Bank for Reconstruction and Development and the United Nations Technical Assistance Programme which are world-wide in their scope and responsibilities. It should be a function of the Meeting of Foreign Ministers, after discussion, and assuming they are agreed on the general lines of Australia’s assessment of the situation, to provide a general South and South-East Asian economic policy for their Governments to follow through in the respective instrumentalities in which they have a voice.
9. Australian attitude
For her own part Australia has already inaugurated a scheme under which relief goods have been sent to Asian countries direct, and as a result of contributions to international bodies such as UNICEF; trainees are coming to Australia under free fellowships; and there is a policy of facilitating the sending of technical experts into the area.
10. The Government will shortly make a review of its policy in South and South-East Asia, especially in the light of the discussions of the Colombo meeting. In the course of that review it will give full consideration to the possibility of making further assistance available to one or more countries in the area, as part of a co-operative effort in which other members of the Commonwealth and the United States are participants. This paper leads to the suggestion that there should be continuing consultation to see how far it is practicable to organise such a co-operative effort.
11. Basis for agreed conclusions by Foreign Ministers’ Meeting
The propositions set out in paragraphs 14 to 25 below are advanced as the basis for a set of agreed conclusions by the Meeting of Foreign Ministers, for subsequent reference to and acceptance by their Governments.
12. Asia’s priority requirements can be very generally stated to be:—
(a) consumption goods to maintain minimum subsistence standards and production incentives,
(b) technical advice and assistance to provide the administrative framework and technological knowledge which is necessary in some underdeveloped countries to enable governments to draw up and implement plans for productive development; and
(c) capital equipment itself, including agricultural requirements such as fertilisers.
13. Appraisal of the trend in the economic and political situation suggests that results are needed more quickly than they have been achieved in the past. If it were practicable to supply incentive and basic relief supplies to certain countries (of which Indonesia is an example) it is probable that a fairly quick increase in production would follow. The recovery of production would create conditions in which it would be easier to justify longterm governmental or private commercial assistance under categories (b) and (c), and particularly the extension of credit.
I. CONSULTATION WITH THE UNITED STATES
14. It is evident that, given the size of the problem, the economic progress of South and South-East Asia depends very much on the willingness of the United States so to conduct its own domestic and foreign economic policies as to provide stable markets for the area’s exports, and to supply the predominating share of the capital equipment and consumption goods which the area needs to increase its production. In other fields, such as the furnishing of technical personnel, Commonwealth countries should be able to make a significant contribution.
15. Growing United States awareness of the drift in South-East Asia, and the fact that United States representatives will confer soon in Bangkok, make timely a high level approach to the United States Government to represent the views of Commonwealth Ministers on the political and economic situation and the need for economic support.
16. It would be essential, when such an approach is made, that Commonwealth countries should at the same time indicate the extent to which they are prepared themselves to make a tangible contribution. The additional propositions listed below appear to cover the main fields of activity in which Commonwealth countries could play an important part.
II. FINANCIAL AND OTHER MEASURES TO MAKE SUPPLIES AVAILABLE
17. No attempt will be made in this paper to estimate what level of financial assistance would be necessary to get results reasonably quickly. Commonwealth Governments could assist in two ways: by a readiness to facilitate procurement by the South and South-East Asian Governments, and by extending credit.
18. The Governments have already accepted the recommendation of the Finance Ministers of July last that they should adopt policies of developing the agricultural and industrial resources of underdeveloped countries in order to increase their levels of production and consumption. It now seems appropriate that Foreign Ministers might recommend their Governments:—
(i) to examine the possibility of making credit available for essential productive purposes in South and South-East Asia, and to agree to consult with each other on the subject;
(ii) to take appropriate action in the International Bank for Reconstruction and Development to give a high priority to any requests from South-East Asia that are in accordance with the Bank’s purposes;
(iii) to encourage Governments outside the Commonwealth which have an interest in the welfare of the region to adopt similar policies.
Technical assistance and advice
19. The feasibility of introducing capital investment on any large scale will be limited by lack of preparation for it. This suggests that a high priority should be given to technical assistance, in the form of advisory field missions to countries that want them, and the provision of training facilities in the more economically advanced countries. The sooner technical standards are advanced the sooner it will be possible for capital investment to begin to raise local production. South and South-East Asian countries have shown themselves anxious to accept assistance in the form of technical advisers in both administration and scientific and industrial fields. Similarly, they are anxious to send trainees to other countries.
20. The United Nations technical assistance programme will be dependent upon the voluntary contributions of governments.
21. It is suggested that the Foreign Ministers should recommend for the consideration of their Governments:
(i) contribution to the Technical Assistance Programme of the United Nations;
(ii) a policy, within the various international organisations administering this programme, of giving a high priority to the claims of South and South-East Asia;
(iii) supplementary bilateral arrangements in appropriate cases for the provision of direct aid of this kind;
(iv) consultation among Commonwealth Governments, on the implementation of these arrangements.
Machinery for further consultation
22. Since the response which any government may be expected to make to recommendations of this nature will be influenced by the extent to which participation can be shared, it is desirable that Commonwealth consultative machinery should be established.
23. It would be the aim of such consultative machinery to bring in countries outside the Commonwealth as and when it was felt that this would promote the basic purposes of this proposal. If it were found that responsibilities could be shared with existing international organisations, such as the United Nations Economic Commission for Asia and the Far East, the Australian view would be that machinery should be adapted accordingly. It is suggested, however, that in the first place there should be established by the Meeting of Foreign Ministers, a Consultative Committee for South and South-East Asia with terms of reference along the following lines:—
(a) to receive from Governments an indication of the broad lines of action which they consider it feasible to take in response to the recommendations of this meeting;
(b) to examine the methods of co-ordinating development activities in South and South-East Asia, in association with other interested countries and with regional and international organizations concerned with the object of raising the level of production and the standard of living in these areas;
(c) to make recommendations to governments on these subjects.
24. Participation in the Committee would be open to all Commonwealth countries which felt they had a direct interest in the area.
25. If the proposal were acceptable to the Meeting of Foreign Ministers, the Australian Government would be pleased to accept the responsibility of convening the first meeting in Australia.
[NAA: A1838, 381/3/1/3 part la]