Canberra, 21 June 1955
CONFIDENTIAL
Australian Participation in the Colombo Plan
The Colombo Plan, which began as a purely British Commonwealth undertaking in 1951, is now accepted as the major international instrument for carrying out programmes for the economic and social development of South and South East Asia. Seventeen countries are now members of the Colombo Plan—the donor countries being Australia, Canada, Japan, New Zealand, United Kingdom, United States of America—and the recipient countries Burma, British Borneo colonies, Cambodia, Ceylon, India, Indonesia, Laos, Malaya, Nepal, Pakistan, Philippines, Singapore, Thailand and Viet Nam.
2. Development investment in the free countries of South and South East Asia both from internal and external sources and stimulated by, or given under, the Colombo Plan is estimated to have been £2,000,000,000 since the formulation of the Plan in 1951. About 18 per cent, or £360,000,000, represents aid from outside sources, including the Colombo Plan and assistance given by the United States under a number of programmes.
Basic purposes
3. When the question of Australian participation in the Colombo Plan was submitted to Cabinet in 1950 it was argued that ‘economic stagnation in South and South East Asia exposes it to grave instability and communist penetration, of which there is already ample evidence in some of the countries. Short of armed force, economic assistance and technical advice directed towards improving the efficiency of administrations are the only methods open to us maintaining stable democratic governments in the area’.
4. The then Minister for External Affairs1 went on to say that ‘clearly the assistance which Commonwealth countries may afford will not be enough to bring about the rapid improvement in South and South East Asia… The prime objective is to induce the participation of the United States… Implementation of the Colombo Plan for economic development and technical assistance will satisfy a requirement repeatedly stated by the United States, that initiative must come from the area and from governments with political interests in it ….’.2
5. It is clear that the basic reasons for initiating the Plan still exist and that the British Commonwealth initiative has succeeded in enlisting the support of the United States which now regards its very substantial aid to the area as coming under the Colombo Plan.
6. For the countries of South and South East Asia the Colombo Plan is the favoured instrument through which to receive aid because of the absence of political conditions attaching to aid and because the scheme functions with a minimum of formalities.
Original Australian pledges
7. Australia’s initial participation in the Colombo Plan was approved by Cabinet—
(a) on 1st August, 1950, when it was agreed that Australia should contribute approximately £3,500,000 to the technical assistance scheme for a period of three years (later extended to six years);3 and
(b) on 15th December, 1950, when it was decided that Australia should contribute to the economic development plan for the period July 1951 to June 1957 a total amount of at least £31,250,000.4
Australian expenditure
8. The rate of expenditure under the Colombo Plan has been slower than originally contemplated, as shown in the following tables:—
ECONOMIC DEVELOPMENT PROGRAMME
Year| Expenditure including
Wheat & Flour| Expenditure excluding
Wheat & Flour
—|—|—
1951/52| £3,466,000| -
1952/53| £3,380,000| £842,000
1953/54| £2,340,000| £2,090,000
1954/5 5(Est.)| £2,900,000| £2,400,000
TECHNICAL CO-OPERATION SCHEME
| Year | Total |
|---|---|
| 1950/51 | £18,250 |
| 1951/52 | £124,275 |
| 1952/53 | £238.018 |
| 1953/54 | £321,325 |
| 1954/55(Est.) | £555,000 |
9. The slow rate at which impetus was gathered in both of the above programmes has been due to a number of factors such as the gradual build-up in membership, early hesitation on the part of some recipient countries to accept the bona Odes of the Plan, the time required for the formulation of requests, lengthy procurement procedures in Australia, and manufacturing and delivery delays. It is only now that programmes, particularly those relating to the supply of Australian manufactured equipment, are really under way.
10. There is an inevitable time lag between the date when funds are committed for expenditure on any item of consequence and the time the financial obligations involved have actually to be met. For example, payments for the diesel electric locomotives requested by Pakistan in May 1952 and approved in August 1952 will not be finally met before August, 1955. Similarly awards of scholarships for university courses are not completely paid for until the end of the three or four year courses involved.
11. Of the £31,250,000 originally pledged for economic development, £26,000,000 have already been committed in terms of orders placed or firm requests now being processed. It is expected that requests which will entail committal of the remainder of the total initial pledge (£31,250,000) will be received within the coming year.
12. So far, however, only about £12,000,000 from this original pledge has been actually spent, which means that about £20,000,000 worth of commitments at present entered upon or foreseeable remain to be paid for. According to our present estimates of the rate at which commitments will become due, namely £5,000,000 per annum, this will take about four years.
13. Of the £3,500,000 originally pledged to the Technical Co-operation Scheme only £1,250,000 has so far been actually spent but commitments entered upon or foreseeable would entail the expenditure of approximately £700,000 in each of the coming three years.
14. There must be forward planning of programmes if continuity is to be preserved. The problem of forward planning and the delays between the acceptance of a commitment and its liquidation exists in all Colombo Plan donor countries. It is overcome in the case of Canada by the use of a Colombo Plan Trust Account into which are paid the sums made available annually for Colombo Plan purchases, so far totalling $128,400,000 (£A58,600,000). In this way there is no lapsing of unspent annual contributions. In the case of New Zealand the problem is partly solved by the prompt payment into the accounts of recipient countries of lump sums in respect of approved projects which those recipient countries spend as and when they wish. In the United States, while there is normally a need to re-appropriate funds unspent, in the case of the $200,000,000 recently sought by President Eisenhower as a ‘President’s Fund for Asian Economic Development’ he asked that ‘to help assure the most effective use of these funds this appropriation should be available for use over a period of years’.
Continuation of the Colombo Plan
15. In his statement to the House of Representatives on 20th April, 1955, the Prime Minister gave as the fourth of the broad principles governing Australian foreign policy ‘the need to seek to raise living standards not only for ourselves but for all those other nations who are struggling towards a life which we have been privileged to enjoy for a long time’. He said that our good neighbour policies expressed themselves in a number of directions including economic and technical assistance under the Colombo Plan. He went on to say that ‘ever since the Colombo Plan, in which Australia played a most honourable and foundational part, we have in common with certain other nations made substantial contributions to the store of capital and other goods and to goodwill in several Asian countries. This policy we are determined to pursue. We believe that personal contacts between Asian students and the Australian people in Australia and between Australian experts and the countries they have visited and the physical examples of goodwill to be found in Colombo Plan programmes have all helped to make our attitude and the integrity of our motives better understood and reciprocated in Asia’.
16. In his Presidential address to Congress on 20th April, 1955, President Eisenhower said—’It is clear that most of the nations of free Asia prefer to quicken their co-operative march towards these objectives through the Colombo Plan Consultative Group which was established in 1950 to promote mutual economic development. We welcome this initiative. As a member of the Group, we shall continue to work in strengthening its co-operative efforts’.
17. The Prime Minister of Canada, Mr. St. Laurent, on 4th October, 1954, in opening the Colombo Plan Conference in Ottawa, said: ‘What I saw in Asia convinced me that what is being done there is well worth continuing…The enthusiasm and determination and realistic approach of these people was such as to justify the hope that these ancient nations will succeed against the crippling material handicaps which now beset them…We in the West should do all that we can within the limits of our available resources to assist them’.
Further Australian pledge
18. The Cabinet approval of 14th December, 1950, was to the effect that ‘the possibility of making a contribution additional to that agreed upon should be kept under review and the matter be resubmitted to Cabinet at an appropriate time by the Minister for External Affairs’.
19. At the meeting of the Colombo Plan Conference of Ministers to be held in Singapore in October, 1955, an item on the Agenda is ‘The Future of the Colombo Plan’.
20. In view of the lead given by Australia in the initiation of the Colombo Plan it would be most desirable for Australia to be able to announce at that meeting its agreement in principle to an extension of the Plan, and to make some further monetary pledge.
21. I recommend that Cabinet should authorise a further pledge to the Colombo Plan of £A 15,000,000 to cover commitments under the economic development scheme which will be entered into up to the end of a further three-year period ending mid-1960 and which will involve expenditure spread over those three years and possibly two further years.
22. Similarly, I recommend that Cabinet should authorise an additional pledge for the technical co-operation scheme of £2,800,000 commitments for which would be planned within the same three-year period ending 1960, and spent within those three years and possibly two further years.
23. This proposal would mean that we would be contemplating expenditure under the Colombo Plan at the .rate of about £5,000,000 a year on economic development and £700,000 a year on technical co-operation to the period mid-1962.
24. This proposal would mean also that at the Colombo Plan Ministerial Conference in October Australia would be able to give a further over-all pledge to the Colombo Plan of £17,800,000 for a further three-year period.This will compare with the total pledge of £34,750,000 which we gave for the first six-year period. We would thus be maintaining approximately our present rate of pledging in monetary terms, although on the basis of the depreciation of the purchasing power of money continuation at the present rate may be represented as a reduction in our rate of pledging.
Trade implications
25. Colombo Plan aid is not given for trade promotion purposes although there is no doubt that, in fact, Colombo Plan equipment has a trade promotion effect. Without attempting an exact appreciation of this aspect, which is the province of the Minister for Commerce and Agriculture, it is clear that, if Australian Colombo Plan commodities and equipment are satisfactory in use, they are likely to promote repeat orders by way of commercial transactions. Also, on a broader view, it can be said that in the long run success of the Plan in raising the living standards in Asia will have a considerable promotional effect on our marketing possibilities. In the short run, the supply of Australian goods and equipment to the area creates a knowledge of our capacities and sometimes a direct and immediate trade follow up.
Procurement policy
26. In approving expenditure for funds approved by Cabinet and voted in Parliament for the Colombo Plan, I pursue normally accepted Government export policy.
27. We endeavour to , provide under the Colombo Plan equipment of Australian manufacture and of types which are normally produced in Australia. It is, however, seldom possible to provide any major item of equipment which is entirely made in Australia and some items supplied under the Colombo Plan contain components imported from the United Kingdom and other sources. Exports under the Colombo Plan are confined to those which are substantially of Australian manufacture and more particularly do not contain an appreciable dollar content.
28. The supply of equipment containing components financed by dollars obtained from International Bank loans is precluded because of the Government’s obligation not to export such equipment. My department has no quarrel with this criterion.
29. In determining what constitutes an appreciable dollar content—i.e. in respect of dollars not obtained from International Bank loans—and what constitutes substantially Australian manufacture, I have taken the view that a convenient working rule is that exports of commodities under the Colombo Plan should be subject to no less favourable export controls than apply to normal commercial exports. In other words, I am guided by the policy of the Department of Trade and Customs in issuing export permits.
30. In determining procurement policy 1 shall continue to take into account the views of responsible departmental authorities about serious shortages of particular items or components. There will be periodic consultations and such arrangements for ad hoc consultation on details as are consistent with the practical task of administering this complicated and time-consuming intergovernmental programme. The Australian effort will be negligible if we refrain from procuring any item in respect of some small part of which there is some deficiency in Australia.
Supply of trucks
31. The situation has arisen whereunder the export of any trucks under the Colombo Plan has been queried by Treasury. They contend that, although certain trucks do not contain any components financed under International Bank loans, since some types of trucks are assembled in Australia With components financed under International Bank loans this precludes the export of any types of trucks, irrespective of size or make, without prior consultation with the Bank. Treasury, however, are unwilling to consult with the International Bank concerning the export of such Australian trucks on the ground primarily that such exports do not add to our net earnings of foreign exchange.
32. On the other hand, certain Australian truck manufacturers have an export programme of trucks which will probably result in the sale of several hundred trucks of various kinds during the coming year, some of which are identical with trucks manufactured from International Bank loan financed components. I understand that the Interdepartmental Dollar Committee made a special allocation for the importation of the necessary components for these trucks so that loan components would not be incorporated. Whether or not there is an obligation to consult with the International Bank on these, export permits for this programme are being given by the Department of Trade and Customs. The Department of Commerce and Agriculture has not envisaged any restrictions on commercial or Colombo Plan exports of trucks.
33. The number of trucks which I have so far authorised under Colombo Plan programmes is 40, 34 of which (Dodge) contain no dollar components and 6 of which (I.H.C.) contain dollar components to the extent of £233 per truck. In other words, there is a dollar content to the extent of £1,400 in a total value of £66,500. In addition, I am considering other requests from the area which, together with the 40 trucks mentioned, might involve a programme for 1955/56 and later of approximately 300 trucks. Taking our present commitments as a yardstick the total value of the dollars involved in such a programme would be less than £12,000. (I may say that the dollar component for the whole Colombo Plan programme for 1954/55 was about £20,000.)
34. The total number of trucks now approved and being considered is comparatively small but these trucks form integral parts of a number of economic development schemes formulated by the recipient countries—Indonesia, Burma, Ceylon, etc.—and accepted by us as worth-while projects. We do not have readily at hand alternative programmes, which do not contain trucks and which we could meet.
35. The total maximum provision for the despatch of Australian-made trucks under the Colombo Plan for 1955/56 and later is 300 out of a total annual Australian production of similar trucks of 14,000.
36. In this matter I ask that the same export controls as apply to normal commercial exports should be applied to exports under the Colombo Plan, that is to say, if the Department of Trade and Customs is issuing export permits for trucks or other equipment, then similarly export permits should be issued for Colombo Plan trucks and other equipment.
Recommendations
It is recommended that Cabinet approve—
(a) the announcement at the Singapore Colombo Plan Ministerial Conference in October, 1955, of a further Australian pledge to the Colombo Plan of £A17,800,000 to be committed during the period ending mid-1960;
(b) that in applying normal commercial export policy to Colombo Plan exports I should be guided by the existing export controls as administered by the Department of Trade and Customs;
(c) where there is considered to be an obligation to consult with or inform the International Bank in relation to any export programme, such consultation should cover in the same terms exports under the Colombo Plan as under normal commercial transactions.
[NAA: A4940, C353]
1 Percy Spender.
2 Ellipses in text in the original.
3 Document 80.
4 Cabinet met on 13 December 1950 and approved a total figure of £25,000,000 sterling, which translated to £A31,250,000. See Document 125.