Ottawa, 26 May 1951
- CONFIDENTIAL PRIORITY
Your 881 and 91.2 Following are Canada Departmental views:—
(a) Allocation. As you know, tentative Canadian allocation for 25 million dollars first year contribution is three-fifths to India and two-fifths to Pakistan. They have not received any request for assistance from Ceylon, but if such request is received, they would like to help. In any event, they anticipate some difficulty in actual spending of Indian and Pakistan allocations. They have left no reserve for other areas on the grounds that since these are likely to receive American aid, it might be preferable for Canadians to specialize on India and Pakistan. Here again, if requests are received, they could probably be met.
(b) Form of contribution. This is at present under discussion. Canadians would hope that contributions in each case would cover a number of projects to which Canada would contribute in the form of consumer goods, industrial materials or possibly financial loan. In the case of India, there has been considerable discussion of wheat, but as yet, there is no indication of how much India wants. They definitely do not want low grade wheat which is all that is at present available. Possibly in two or three month’s time they may negotiate for wheat from this year’s crop, but even so, there is no certainty how much will come for Colombo Plan allocation. Canadian impression is that Indians will want other things as well. A senior Indian Official is coming to Ottawa in June for general talks on possible projects. In the case of Pakistan, discussions have not advanced to detailed projects.
(c) Question of grants or loans. Canadian feeling is that assistance should be made available on either a grant or loan basis depending on nature of each item of assistance and end use to which it Is to be put. They feel grants would be suitable for consuming goods supplied for direct distribution. Establishment of counterpart funds would be required. In the case of projects of a commercial nature which would produce revenue or improve foreign exchange position, Canadians feel loans would be suitable method of finance. They would hope loans would be spent in Canada but would have no objection their being spent in other areas short of dollars for example Europe.
(d) Form of agreement. In general, Canadians have in mind more detailed agreements than is apparent from your paragraph 4. They envisaged at the outset master agreements which would set forth general objectives and principles governing provision and use of assistance provided by Canadian Government and which would incorporate general financial arrangements and procedures (for example setting up and operation for counterpart accounts). They would give publicity to signature of such agreements and feel they would have certain value as an opening gesture before detailed agreements could be drawn up. Master agreements would be supplemented by agreement covering individual transactions. This would probably vary widely but Canadians emphasize that they would not extend beyond specifying use of contribution. They would not for instance ask for supervision of actual handling of any project. Regarding last sentence in your paragraph 4, such an undertaking might, in their view, be suitable for inclusion in master agreement.
[NAA: A9879, 2202/E1 part 3]