BRIEF FOR MINISTER FOR EXTERNAL AFFAIRS

Canberra, 4 April 1951

SECRET

Colombo Plan—Australian Contribution

1. The Australian Government have agreed to contribute A£31¼% million over the six year period Ist July, 1951, to 30th June, 1957, towards the economic development programme under the Colombo Plan. The Government also decided that they would contribute A£8¾% million during the first year of the Plan, i.e. 1st July 1951 to 30th June 1952.

2. The immediate question to be considered is—how shall we distribute our first year’s contribution of A£8¾ million?

3. The following South and South-East Asian countries are now participating in the Plan:—

• India
• Pakistan
• Ceylon
• Thailand
• Viet-Nam
• Cambodia
• Laos
• Burma, Indonesia and the Philippines have not yet decided to join.

1. If all above countries were participating and we distributed our contribution on a population basis the following would be the result:—

* On this basis the total share of countries not yet participating (Burma, the Philippines and Indonesia) is A£1,653,000.

1. It is suggested that A£2m. be kept in reserve for countries not yet participating, i.e. Indonesia, Burma and the Philippines. The greater part of this could possibly be kept for Indonesia, since the Philippines Government has already received and will probably continue to receive substantial aid from the U.S.A. We might, in the future, consider making a token grant to the Philippines of A£¼ m. We have already made a loan of A£625,000 to Burma (June 1950) and it is somewhat doubtful, in view of disturbed conditions there, whether a relatively small contribution from Australia would have much benefit or significance, economically or politically. This could however be considered if and when Burma decides to join the Colombo Plan.

2. The remainder of the Australian contribution—A£6¾% m.—could be distributed among India, Pakistan, Ceylon, Thailand and the Associate States of Indo-China.

Thailand, according to their representative at the last meeting of the Consultative Committee and to the representative of the International Bank, is unlikely to require external financial aid immediately. The Indo-Chinese States have not yet completed development plans, and are, in any case, likely to remain the concern of France, with economic aid from the U.S.A. We might, however, allow a total amount of A£500,000 for Thailand and the Associate States of Indo-China, again as token contributions for the sake of good will and to counter any suggestions of discrimination or of lack of interest.

This would, therefore leave A£6,250,000 to be divided among India, Pakistan and Ceylon.

1. If this amount (A£6,250,000) 1s divided on the basis of requirements as stated in the Colombo Plan report, the result is (approximately):

This, however, despite India’s estimate of external finance requirements, seems too heavily weighted in favour of India. The following points are relevant:—

(i) The U.S.A. is considering a substantial gift or loan of 2m. tons of grains to India, valued at about $190m. Though this is in connection with an emergency situation, it cannot be overlooked, as a portion of it would presumably assist in general development.

(ii) India is very much more developed industrially and technically, and her economic and sterling balance position is generally very much weaker than that of India¹ and of Ceylon. It should be noted, however, that Pakistan has recently been granted a loan of $60m. by the International Bank.

(iii) Ceylon has been receiving high prices for her exports, particularly rubber; there were some doubts at the London meeting and at the recent conference of the Consultative Committee about Ceylon’s need for external assistance.

1. It is therefore suggested that a distribution on approximately the following basis be considered:—

1. Summary

As a reasonable working basis the following is suggested:—

1. Some early decision should be made regarding the form of the Australian contribution, and terms and conditions. It is suggested that the greatest advantages, political and economic, would be derived from the contribution if it is made in the form of a gift. If this is agreed, further consideration could then be given to the most appropriate type of gift—whether in the form of wheat, flour or other foodstuffs, etc., or in sterling. The grant could be the subject of a relatively simple bilateral agreement which ensured that the use of the contribution was in furtherance of the objectives of the Colombo Plan.

2. Conclusion

The above is submitted to provide a working basis for the allocation of the Australian contribution. It is suggested that the next steps are:—

(i) to discuss the above with the other Departments concerned.

(ii) to discuss the proposed allocation, and related problems, with other contributing countries, actual or prospective, who are members of the Consultative Committee, i.e. the United Kingdom, Canada, New Zealand, and the United States of America; to clarify with them possible effects of the International Bank loan to Pakistan; the proposed U.S. wheat gift (or loan) to India, and to see whether any countries (e.g. the U.S.A.) have views on the relative needs of the countries of the region. This discussion would assist in regard to the problem of co-ordination of aid programmes, and might lead us to revise our allocations.

1. It is recommended that:

(i) Discussions on these matters be held at an early date with the other Departments concerned.

(ii) You approve the general line of the attached draft telegram,² which will be discussed at the meeting of Departments.

(iii) A meeting be held, say, early in May if representatives of the United Kingdom, Canada, New Zealand, the United States of America and Australia, to consider these matters with the objective of keeping up the momentum of the Colombo Plan.

[NAA: A9879, 2202/E1 part 3]