Washington, 31 March 1950
Economic Assistance to South and South-East Asia
1. It is very difficult at the moment to give you any definite information on U.S. views or preparations in regard to economic development of South-East Asia. The State Department is in considerable turmoil just now – partly because its Bureau of Far Easter Affairs was reorganized last week and Butterworth replaced as its head; partly because Congress has not yet voted funds for Point Four, and it is impossible to do much planning until the amount of money available is known; and partly because Senator McCarthy’s1 charges of disloyalty in the State Department are disrupting work and have compelled one of the key men in the planning of technical assistance (Haldore Hansen)2 to drop all his work on this item and concentrate on preparing his defence before the Congressional Committee.
2. We have had some preliminary discussions, and it is hoped that at the end of next week the U.S. will be in a position to give us some views on the following four points:
(a) The nature of the assistance which the British Commonwealth might give to South-East Asia—in the extent and proportion to which it should be made available in technical assistance, in supplies, and in capital goods;
(b) The manner in which the programme should be integrated with other schemes of assistance to this region, such as U.S. bilateral aid, the United Nations expanded programme of technical assistance, and investment by the International Bank;
(c) The assistance which the U.S. contemplates giving this region, and the criteria and principles which it intends to adopt for its own bilateral aid; and
(d) The total programme of assistance which might be achieved in South-East Asia, with some indication of the respective roles which might be played by the British Commonwealth, the United States, and the United Nations and specialised agencies.
(e) Direct capital investment or provision of materials and supplies.
3. As far as possible competition and duplication should be avoided between the programmes of the United Nations and the bilateral assistance given by the United States and by the British Commonwealth. There is a lot to be said for encouraging the United Nations and its agencies to do as much as they can in this region, and for using bilateral programmes to supplement and make more effective these international programmes. The Economic Commission for Asia and the Far East could also be assigned specific tasks in collecting information and perhaps given some functions of coordination. The agencies, particularly F.A.O. and W.H.O., could conduct large-scale programmes, particularly in technical assitance.
4. If this approach were taken, the British Commonwealth scheme (with the United States preferably working along similar lines) might be devoted to the following:
(a) Technical assistance of a sort which it was not desired to give through international channels, chiefly for reasons of defence or security;
(b) Technical assistance which is in addition to the share to which South and South-East Asia is entitled under the United Nations programme;
(c) Planning and collection of information, where it is not thought desirable to have Russian participation or access to material (the Soviet Union is a member of ECAFE);
(d) Supplies and equipment needed to supplement the programmes of the international organisations. The technical assistance programme could be made much more effective if, in addition, some equipment could be made available simultaneously, for example in agriculture.
(e) Direct capital investment or provision of materials and supplies.3
5. The Senate Foreign Relations Committee yesterday began hearings on Point Four legislation.4 The Secretary of State (Mr. Dean Acheson) made a statement, a copy of which is attached to this memorandum. The legislation is finding less support in Congress than was expected, and it is not impossible that the amount of funds sought ($45,000,000) may be cut. Some of those members who would like to vote against the funds for ECA or Palestine relief, but find it politically difficult to do so, may relieve their feelings by voting against funds for Point Four.
6. As we noted in an earlier memorandum, a press campaign in the last few days, inspired by the State Department, has emphasised the need for American aid to South-East Asia to counter the spread of communism. This is to assist the passage of current legislation through Congress. But at the same time, the State Department stresses that the amount of aid which could be used is comparatively small—nothing on the scale of the Marshall Plan for Europe is contemplated. The sources of United States assistance to South-East Asia appear to be:
(a) Point Four (bilaterally through the U.N.);
(b) Unexpended ECA funds for China, totalling about $100,000,000;
(c) $75,000,000 available under the Mutual Defence Assistance Act, of which $15,000,000 has already been allotted to China, $10,000,000 to Thailand, and $5,000,000 to Indonesia;
(d) Import-Export Bank loans; and
(e) International Bank loans (though this is an international institution, its loan policy in this region would depend on the attitude of the American representatives).
7. The State Department tends to the view that the other countries of the region themselves should be asked to submit their plans and requirements, and that it would be dangerous for Commonwealth countries to attempt to indicate too strongly to them what should be done.
8. The Food and Agriculture Organization intends to ask the Australian Government to invite the F.A.O. to have a representative at the British Commonwealth Conference. They do not feel that the representative should necessarily have the formal status of an observer, but they would like him to have access during the conference to representatives and officials and possibly to be present at some of the detailed committee discussions. The representative would be in a position not only to inform the Conference of what the plans of the F.A.O. are, but would be able to discuss with you and other Commonwealth representatives possible modifications in F.A.O.’s programme.
9. At present an inter-American conference in Washington is discussing technical assistance to Latin America within the framework of the Organization of American States. We have no details so far, but this may have an influence on the pattern for regional administration and use of technical assistance.
[NAA: A1838, 708/9/2 part 2]
1 Republican Senator from Wisconsin, Joseph R. McCarthy. McCarthy became prominent after February 1950 when he alleged that the State Department had been penetrated by communists. A congressional investigation followed.
2 Haldore Hanson, Executive Director, Secretariat Interdepartmental Committee on Scientific and Cultural Cooperation, US Department of State.
3 Text in parenthesis was a handwritten addition in the original.
4 See footnote 9, Document 27.