CABLEGRAM FROM DEPARTMENT OF EXTERNAL AFFAIRS TO EMBASSY IN WASHINGTON

Canberra, 18 May 1951

1. SECRET PRIORITY

Our 319,¹ 422² and 472³

Colombo Plan

1. The Australian Government proposes in the near future to make a decision concerning the allocation of their first year’s contribution of £A.8¾ million to the Economic Development Programme under the Colombo Plan, and then to commence discussions with the recipient Governments. Simultaneously, we are examining further plans for the expenditure of our contribution (approximately £A.3 million) to Technical Assistance in the three years 1950-53.

2. Discussions at the departmental level have led to the following tentative proposal for the allocation and form of contribution to the Economic Development Programme in 194]—5S2:

i. India: £A.3.75 million (probably in the form of wheat and some coarse grains).

ii. Ceylon: £A.500,000 (probably in the form of flour).

iii. Pakistan: £A.2 million, part of which will possibly be used to supply Australian equipment etc. for the Thal Development Project⁴ and other selected development projects; and part possibly in Australian currency convertible within the sterling area and other easy currency areas.

iv. The remainder, namely £A.2.5 million, would be reserved for other countries of the region which may join the Plan, with the intention that the situation will be reviewed at the end of the first six months of the Plan, i.e. in January 1952, and the funds completely allocated among those then participating.

1. It is tentatively considered that aid should be given by way of grant rather than loan.

2. It is contemplated that agreements with recipients will take a relatively simple form. As a general principle, we would ask for provision of information demonstrating the use to which aid has been put. Where aid is in the form of consumption goods (or finance) we would possibly ask for an undertaking by the Government to use the aid in ways which contributed to the carrying out of the investment objectives of the Colombo Plan, but not otherwise attempt to specify the use to which the Government should put the local currency proceeds. Where aid in kind is given for particular projects, it might be desirable to go further and to ask for a general undertaking by the Government to accept its share of internal finance and organisation.

3. We should like you to inform the State Department of these tentative suggestions and to invite their comments in an informal way, pointing out that we would hope to have the benefit of their experience in this and other regions. You should make it clear that we would not wish to commit the United States in any way and will naturally take full responsibility for our own decisions. We do not intend to refer to this consultation in discussion with potential recipients, although if State Department had no objection, we would keep United Kingdom, New Zealand and Canada generally informed.

4. In addition to the above, it would be helpful to us for general background on United States policy to have any information which you may be able to obtain about the form and content of the bilateral agreements which the United States customarily makes with Asian countries to which aid 1s granted, with particular reference to the extent of supervision of the use of counterpart fund arrangements, control of their expenditure of such funds and similar relevant information.

5. You will, of course, emphasise the confidential nature of this information and the embarrassment to the Government if there were any leakage of information, particularly to the prospective recipient governments. This is particularly so, since the Government has yet to make important decisions of principle, e.g., as to whether aid will be by way of gift or loan.⁵

[NAA: A9879, 2202/E1 part 3]