SUBMISSION FROM CASEY TO CABINET

Canberra, 25 May 1951

CONFIDENTIAL

Australian Government’s Contribution to the Colombo Plan

INTRODUCTION

1. Cabinet decided on 13th December, 1950 that the Commonwealth Government would contribute towards the economic development programmes under the Colombo Plan, over the period July 1951 to June 1957, an amount of at least £25 million sterling (£A31 %m.), with an initial contribution for the first year of £7 million sterling (£EA8 % m.). It was also agreed that details of financial arrangements, of the manner in which the aid should be provided and of terms and conditions, were to be jointly examined by the Departments of the Treasury, Commerce and Agriculture, Trade and Customs, National Development and External Affairs, and a further submission made on these details by the Minister for External Affairs. (Copy of Cabinet decision is attached—Annexure 1).¹

The abovementioned Departments have examined these subjects and I have considered their recommendations.

1. Seven months have passed since the Commonwealth Consultative Committee completed the Colombo Plan Report, which contains details of development plans and of related financial requirements, and I think that, in order to keep up the momentum of the Plan, and to forestall any criticism from Asian countries, it 1s most desirable that Cabinet make an early decision on the form and the distribution of our contribution for the first year. Such a decision becomes even more urgent in view of the disastrous famine in India.²

The U.S.A. Government has under consideration a proposal to supply to India a substantial quantity of wheat. Apart from this, the President is expected to submit plans soon to Congress for further aid, part of which will make a contribution towards financing projects which are included in the Colombo Plan. I believe that an early indication of the Australian Government’s intentions concerning our contribution will have beneficial effects in the U.S.A. in relation to their own aid programme, and may assist the U.S.A. Administration in answering certain objections and questions by Congress some of which have been raised already in regard to the conditions attached to their proposed aid and about the part being played by Commonwealth countries in the Colombo Plan.

DISTRIBUTION OF AUSTRALIAN CONTRIBUTION

1. Careful consideration has been given to the most useful and equitable distribution of our contribution. An examination was made of each country’s estimate of its need for external assistance. Adjustments were then made to raise Ceylon’s share to a round figure of £4500,000. For political reasons, and because of her relatively under-developed state, the amount for Pakistan was also increased. Provision has been made to reserve an amount for South-East Asian countries should they decide to participate in the Plan. The following distribution is proposed:—

(British South-East Asian Territories are excluded because the United Kingdom Government have advised that they prefer to retain complete responsibility for financing their development programmes. We are however providing assistance under the Technical Co-operation Scheme).

FORM OF CONTRIBUTIONS

1. I have fully considered the question of whether the contributions we make should be In the form of loans or of gifts. For a number of reasons, I have reached the conclusion that we should provide our assistance in 1951/52 by way of gifts. Our contributions will be a small part of the individual country’s requirements, and of the assistance which will probably be given to them by the U.S.A. Government. The latter will probably provide assistance on the usual E.C.A. conditions which are briefly described as ‘part grant and part credit’ but in fact in most cases become grants. Furthermore, although some of the Asian countries may be in a position to service loans, it should be noted that their Financial situation as measured by present balance of payments, or by internal budgetary positions, is not a true reflection of the state of countries where hundreds of millions ol persons live in conditions of great poverty. To make our relatively small contributions by way of loan would, I am sure, greatly reduce both the short and long-term benefits to be derived from them and also the political and other advantages to ourselves. I understand that from a financial and economic point of view it is within Australia’s capacity to make gifts rather than loans. Having in mind the great disparity between our own standards of living and those of neighbouring peoples I think by making gifts we shall give proof of our sincerity, and of our desire to assist these countries.

CONDITIONS OF AID

For similar reasons the conditions associated with the provision of aid to the Commonwealth countries involved should be as simple and as straight forward as possible, and not such as might imply interference with domestic policy or a wish to bring pressures to bear on the recipient Government. The main condition should be that the aid contributes to the purposes for which it is given, namely to assist in carrying out the development programmes of the Colombo Plan. It would perhaps seem unnecessary in some cases to insist on any specific conditions at all, especially where it is clear that the immediate purposes of the aid, and of the type of aid given, for example, free wheat for India, are to help relieve a famine.

In relation to some kinds of aid it might be desirable that certain conditions be provided in order to prevent waste, to ensure the proper use of the grants made; or for other reasons. To some extent we can use the safeguard, at the procurement stage, of shipping supplies only when we are satisfied that they can be properly used.

Our main objective, I suggest, should be to ensure reasonably that our contribution is used effectively, and I propose that a simple exchange of letters be made to cover this as best we can. Our experience in 1951/52 will guide us in relation to this and other matters when we come to decide our policy for 1952/53 and later years.

RECOMMENDATIONS

1. lt is recommended that:—

(i) The distribution of the Australian Government’s contribution for the first year of the Colombo Plan be approved as follows, and in the form of gifts: India £A4 million: Pakistan £A2 million; Ceylon £A500,000; and that the balance, £A2¼ million, be reserved and its distribution considered in December 1951.

(ii) The contribution be offered to India primarily in the form of wheat and other commodities and supplies needed by India, generally in the manner described in Annexure II of this submission.³

(iii) The contribution be offered to Pakistan generally in the form of supplies for developmental projects such as the Thal Agricultural programme, the details being subsequently negotiated between the Governments of Pakistan and the Australian Government.

(iv) The contribution be offered to Ceylon in the form of a gift of flour.

(v) Aid be offered and given where possible in the form of commodities and supplies from Australia and shipping and other services, and to the extent that this is impracticable aid will be offered in the form of Australian currency convertible in the easy currency area.

(vi) The grants and the conditions attached to them be the subject of an exchange of letters, to be approved by the Minister for External Affairs.

(vii) The Minister for External Affairs be authorised, after consultation with the Minister for Commerce and Agriculture, to negotiate or to complete any necessary contracts or other arrangements in accordance with this submission, and with Annexure II thereof, for the purchase of wheat, flour, barley, maize or other commodities for the purposes of making the gifts described above, and if necessary to take options of purchase from Australian marketing authorities or other sellers before final confirmation is received of the actual requirements of the recipient country.

(viii) The inter-departmental committee comprising the Departments of the Treasury Commerce and Agriculture, Trade and Customs, National Development and External Affairs continue to examine the problems associated with the details of the Australian Government’s contribution to the Colombo Plan, and to advise the Minister for External Affairs.

(ix) An immediate offer be made on the lines described in this submission to the Governments of India, Pakistan and Ceylon respectively, inviting their acceptance in principle, and subject to an exchange of letters providing that aid be used for the purposes of the Colombo Plan.

(x) No publicity be given to these proposals or offers until they have been accepted by the recipient Governments in principle.

(xi) Subsequently there should be arranged an intensive programme of publicity particularly in Asia and the U.S.A. on Australia’s contribution.

(xii) If it should be necessary to send a negotiating mission to any of the recipient countries, the Minister for External Affairs be authorised to appoint the mission in consultation with the Treasurer and the Minister for Commerce and Agriculture.

[NAA: A4940, C353]