Canberra, 27 March 1950
Economic Assistance to South and South-East Asia
In preparation for the forthcoming meeting of the Consultative Committee, we have initiated discussions in Canberra with other interested Departments.
2. We are enclosing for your information two documents.
Enclosure A. is a report of the first meeting which was circulated to Ministers.
Enclosure B. supplements this report in some respects.1
3. You will note that attention has so far been mainly focused upon a review of Australia’s capacity to supply certain urgently needed items. The list used was one which happened to be available concerning the urgently needed imports of Indonesia. This may possibly not be altogether appropriate in the case of your area. It is therefore requested that you bring to our attention any significant items of this nature which are in short supply and which Australia might possibly be able to supply.
4. In view of the approaching meeting of the Consultative Committee, it is requested that this question be treated as a matter of urgency.
[NAA: A1838, 381/3/1/3 part lb]
Attachment
REPORT ON FIRST EXPLORATORY DISCUSSIONS AMONG DEPARTMENTS ON QUESTIONS ARISING FROM AN ECONOMIC PROGRAMME IN SOUTH AND SOUTH-EAST ASIA
At the invitation of the Department of External Affairs an exploratory discussion between departments was held on 20th March, 1950. Representatives of the Departments of External Affairs, Treasury, Commerce and Agriculture, Trade and Customs and of the Division of Industrial Development attended.
At the suggestion of the Department of External Affairs, discussion was directed towards seven subjects, and the following are the tentative views of departments on these subjects.
REVIEW OF AUSTRALIA’S CAPACITY TO SUPPLY, ON A COMMERCIAL BASIS, INCENTIVE FOODSTUFFS, URGENTLY REQUIRED EQUIPMENT FOR AGRICULTURE, TRANSPORT, COMMUNICATIONS, ETC.
The following is a comment furnished by the Department of Commerce on the availability for South-East Asia of certain products from Australia. The list should be accepted with the reservation that it relates only to known requirements of Indonesia in respect of which information on urgently needed imports happened to be available. When lists from other countries in the area of their main requirements are available, further Departmental examination will be desirable. However, for present purposes, it is assumed that this list is fairly representative of the urgent needs of the area as a whole.
Capital goods and materials for construction of capital goods
Urgency I.
| Iron and Steel: Corrugated Iron: | The supply of significant quantities to South-East Asia could onlybe possible at the expense of Australian requirements. Steel is being imported. |
|---|---|
| Spades, etc.: | Should be available in reasonable quantities subject to steel supplies. |
| Agricultural Machinery: | A number of smaller implements may be available, e.g., hand ploughs, scarifiers, disc ploughs, rotary hoes. Steel supplies and foundry labour present difficulties. |
| Rice Milling Equipment: | This item is being further investigated. |
| Machine Belting: | Anticipated that some sizes and types of leather belting would be available. |
| Electric Cables: | Some types could be supplied without difficulty but copper has to be imported. |
| Internal Combustion Engines: | Small motors are in fair supply. |
Urgency II.
| Cement: | In short supply, although, now being imported, a few hundred tons could be made available. | |
|---|---|---|
| Screws: | Shortage of screw wire. | |
| Locomotive Rails: | See ‘Steel’. | |
| Accumulators: | Certain types can be supplied in reasonable quantities. | |
| Cars: | ) | |
| Chassis for Cars: | ) | Not available. |
| Textile Machinery: | Certain types of textile machinery are manufactured in Australia but are in short supply. | |
| Printing Machinery: | Sampled forms could be supplied on order/but local supplies are short. | |
| Charcoal and Coke: | Charcoal is being examined. |
Urgency III.
| Sewing Machines: | Unlikely to be available |
|---|---|
| Window Glass: | Largely imported |
| Wire Rope: | As for steel |
| Office Machines: | Not available |
| Motor Cycles: | Motor cycles as such not made in Australia but a bicycle fitted with a light motor is known to be made by one manufacturer. |
Consumption goods and raw materials
Urgency I.
| Rice: | Provided rice is kept off the local market we expect about 7,000 tons will be sold to Malaya. More may be available from this year’s crop. Price is about £45 - £50 a ton. If rice is again allowed on the Australian market there will be very little for export. | |
|---|---|---|
| Wheaten Flour (limited quantities): | Australia could supply substantial quantities at say £40 a ton. I f the export flour trade does not improve, and given the necessary notice, as much as 200,000 tons might be supplied, if required. Mills are now on a two shift basis; full production would give say an extra 200,000 tons a year. | |
| Yeast: | Should be available. | |
| Cloves: | Not produced. | |
| Weaving Threads | ) | Unlikely to be available |
| (especially cotton): | ) | |
| Sewing Threads: | ) | |
| Textiles (especially simple and cheap cotton materials): | Some woollen piecegoods may be available. Cotton piecegoods are unlikely to be available. | |
| Newsprint: | ) | Australian supplies imported. |
| Cigarette Paper | ) |
Urgency II.
| Dried and Salted Fish: | There are possibilities which are being examined. |
|---|---|
| Bicycles: | Possibilities of producing for the market are worth examination. |
| Chemicals and Fertilisers: | Industrial chemicals are unlikely to be available. Principal fertilisers are being imported. |
| Printing Ink: | Some supplies probably available. |
| Pharmaceuticals: | Reasonably good prospects in certain pharmaceuticals. |
| Office and Writing Equipment: | Stationery supplies are a possibility. |
Urgency III.
| Earthenware and glass eating and drinking utensils: | Cheaper types of glassware may be available in reasonable quantities. |
|---|---|
| Bottles: | Supply position difficult. |
| Galvanised and enamel household articles (cheap quality): | At present supplies are good on the domestic market but price may be relatively high. |
| Polish: | Certain polishes (e.g. wax floor polishes, metal polishes) available. |
Any special measures available to the Government to assist the countries to procure supplies in Australia
The success of any programme of economic assistance is largely dependent on efficient procurement machinery, particularly in regard to items which are in very short supply in Australia. While ordinary commercial channels should be used as far as possible since trade links are thereby established which are important to long-term trade, consideration might also need to be given to the recipient countries maintaining their own purchasing missions in Australia. If this should prove to be the case, the Department of Commerce would be prepared to render all necessary guidance and assistance in order that their access to supplies might be facilitated.
Measures necessary to interest Australian businessmen to establish trade or investment relations with the countries in the area
There was little discussion of this item. It needs considerable further inter-departmental exploration.
Determination of Australian attitude towards commodity arrangement for the main exports of the area
Special International Commodity Groups exist in relation to most of the major primary products of the area. Australia is a member of the Rubber and Tin Stud[y] groups, the Sugar Council and the Cotton Advisory Committee, and has sent observers to meetings of the International Rice Commission.
Australia’s policy towards Inter-Governmental Commodity Agreements has developed mainly through interest in the major primary products exported by Australia. On general grounds, however, the establishment of Commodity Agreements, wherever warranted has been supported, e.g., the proposals for a tin agreement. It is expected that support by Australia for Commodity Agreements covering rubber, tea, etc. whenever justified by the circumstances of the particular commodity, would be consistent with Australia’s import interests and would promote her wider interests in international trade through the greater stability that such agreements might be expected to contribute.
Prospects of increasing Australia s imports from the area
The Department of Trade and Customs pointed out that, under the present circumstances, Australia, generally speaking, obtains all she needs from South and South-East Asia.
Special measures to increase imports from any one country in the area would, except in the case of a few products, be at the expense of other countries in the region.
Australia’s import trade is conducted on a merchant to merchant basis and Australia’s imports are determined by ordinary commercial considerations such as price factors, relative quality and delivery dates. Any expansion in imports from South and South-East Asia would, in present circumstances, have to be determined by these considerations. Any governmental action to increase Australian imports from the area, at the expense of countries outside the area producing similar products would probably be contrary to Australia’s international obligations under G.A.T.T. inasmuch as controls imposed would not be on balance of payment grounds.
Exchange control, trade discrimination, double taxation, etc.
The importance of the exchange control policy adopted by the Indonesians was emphasised. At present Indonesia is part of the Netherlands Monetary Area and trade and payments between that area and the sterling area are governed by the agreement which does not include provision for gold payments. The Netherlands Monetary Area is therefore classified as a soft currency area.
Advice from both the United Kingdom and Indonesian sources indicates however that Indonesia is likely to earn a surplus of sterling in the long run. This aspect requires further examination.
Indonesia is a member of G.A.T.T. and it was considered that questions of trade discrimination against Australia (if any) could best be dealt with through the G.A.T.T. machinery.
Questions of double taxation, etc. require further examination before any useful comment can be made.
Credits from Australia
It was agreed that the question of credits from Australia arose only in connection with Indonesia and perhaps Indo-China and Siam. The discussion centred round the position of Indonesia.
Information from Indonesia indicates that Indonesia is at present short of sterling but that, by next year, this sterling deficiency is expected to turn into a sterling surplus.
In these circumstances there may be a short-term problem of financing the movement of whatever supplies can be made available from Australia in the immediate future. A short term ‘pump priming’ credit on a business basis from the Commonwealth Bank may therefore be appropriate. The Commonwealth Bank would of course require a guarantee from the Government against any political risks involved.
It was agreed that the Treasury and the Commonwealth Bank should examine this question in detail and submit a report.
In view of the nature of the Indonesian financial problem as at present known, the question of whether any inter-Govemmental loan of a larger size and for a longer period should be considered on broad political grounds was left over pending a direction from Ministers.
[NAA: A5460, 301/5]
1 Not published.