Canberra, 30 August 1963
1/63. Secret
An Examination of the Nature and Extent of Current British Economic Interests and Political and Military Commitments in South and South East Asia, their likely course over the next Ten Years, and the Implications for Australia
Introduction
This study of British involvement and policies in South and South East Asia must be seen against the background of an inexorable shrinkage in Britain’s relative power position. The following tables give some comparative figures for estimated population growth and for two of the most important indicators of economic development:
POPULATION A*
| 1960
(million)| 1975
(million)| 1960–1975 increase
(million)
—|—|—|—
U.K.| 51.6| 55.5| +3.9
U.S.| 179.2| 217.3| + 37.1
U.S.S.R.| 215| 275| +60
E. E. C.| 170.1| 189.8| + 19.8
India| 417| 563| + 146
China| 654| 894| +240
Japan| 95.1| 116| +20.9
Canada| 17.6| 22.3| + 4.7
Australia| 10.3| 13| + 2.7
STEEL AND ELECTRICITY PRODUCTION B*
| (Steel: Millions of Metric Tons)
1961| (Electricity: billion Kwh)
1961
—|—|—
U.K.| 22| 146
U.S.| 88| 879
U.S.S.R.| 71| 328
E.E.C.| 73| 298
India| 4| 23
China| 15| 58(1960)
Japan| 28| 132
Canada| 6| 114
Australia| 4| 25
A* Figures from ‘The Future of Growth of World Population’ U.N. 1958
B* Figures from U.N. Statistical Handbook 1962
2. Britain’s capacity to contribute to the defence of her interests and those of the free world depends on her rate of economic growth and the proportion of her resources she is prepared to devote to such defence. Since 1957 Britain has aimed to stabilise defence expenditure at 7% of her gross national product. The last decade has been a period of relatively slow growth for Britain (see table at Annex). 1 She has now for the first time defined a quantitative growth objective—of 4% per annum. After the vicissitudes of 1961 and 1962, when economic activity declined through the second half of each year, there was so much slack in the economy that a growth rate of 4% should be fairly easy to achieve this year and perhaps next. In the longer run, however, genuine growth based on increased productive efficiency is a more uncertain prospect even if Britain succeeds in entering the E. E. C. Further, to attain it and simultaneously maintain a strong foreign balance will require, inter alia, a major expansion of British exports. The National Economic Development Council has set the requirement at 5% per annum for the period 1961–1966, but Britain’s export performance was nowhere near this in 1961 and 1962, when it failed to keep pace with the expansion of world trade, and immediate future prospects are bedevilled by the possibility of E.E.C. discrimination and the likelihood that world trade will not expand significantly faster in the next few years.
3. Material factors are not the only ones which hitherto have given Britain her place in the world. Mr. Macmillan has observed that some of the best periods in British history have been those when England ‘on its own, had not been strong’ but had been able to establish its influence ‘by resourcefulness and perseverance’. 2 However, there is today in England a lack of sense of direction and determination. This failing has been damaging to Britain’s international stature. Some revival is likely, but one direction it could take would be a ruthless determination to adjust to Britain’s loss of power and to prune over-extended overseas commitments.
Britain’s Economic Stake In South And South East Asia
Trade
4. In 1961 a Board of Trade/F.B.I. delegation which visited South East Asia reported that the main features of British trade with South East Asia were a continuing decline in the overall favourable balance, a sharp absolute decline in exports to certain countries, notably Indonesia and Burma, and a decline in competitive position very nearly everywhere.
5. In the following year, 1962, British exports and re-exports to Asia (including Japan, Korea, China and Taiwan) showed a marked drop. After having accounted, in each of the previous years of the last decade, for between 12.3% and 13.4% of her world exports, they fell to 10.9% in 1962. In absolute terms British exports to Asia of approximately £E432 million were lower than in five of the six preceding years. Imports from Asia on the other hand rose to their highest absolute level in a decade—£E430 million, and 9.6% of total imports—and for the first time in the decade Britain’s favourable balance of trade with Asia was negligible. The fall in British exports was to a large extent due to a decline in British exports to India of £E45 million. India is likely to increase still further its defence and development expenditure and to reduce all but essential imports to the minimum. Britain may be able to recover the lost ground only by greater effort and better salesmanship in other markets. Malaysia and Japan, and in the longer run China, probably offer the best opportunities; British exports to Malaya, which fell quite substantially between 1956 and 1958, have increased in the last three years by 38% and Britain’s favourable trade balance has improved from £E23 million to £240 millions.
6. Of the five biggest Asian buyers of British products (India, Hong Kong, Malaya, Japan, Pakistan) Britain has given way to the U.S. as the largest exporter in all but Malaya.
7. British exports of manufactures over the last fifty years have been affected far more than other countries’ by the industrialisation of the developing countries, and the effect on British exports of import substitution in the primary producing countries will probably continue to be disproportionately high.
Investment
8. Some picture of British investment in South and South East Asia is given by the following Board of Trade figures for earnings of private direct investment (excluding oil and insurance). These figures include unremitted profits:
Country| 1958
£m| 1959
£m| 1960
£m| 1961
£m
—|—|—|—|—
Indonesia| 1.7| 1.8| 1.9| 1.9
Thailand| 0.3| 0.5| 0.3| 0.7
India| 15.9| 17.1| 19.3| 20.2
Pakistan| 2.2| 2.8| 2.4| 2.6
Singapore| 0.8| 1.2| 1.4| 1.5
Malaya| 10.5| 15.2| 19.3| 19.5
Hong Kong| 2.1| 3.1| 3.9| 3.7
9. The earning rate on capital probably averages around 10%. Refurns in India and Pakistan seem to have been roughly in the vicinity of this figure. In Malaya and Hong Kong it is likely that the rate was substantially higher but on the other hand it was markedly lower in Indonesia, where we believe British investment to be of the order of about £E100 million (20% in oil).
10. Private direct investment per annum (excluding oil and insurance) is shown in the following Board of Trade figures which include profits (which in 1960/1961 amounted to about 34% of total investment):
Country| 1958
£m| 1959
£m| 1960
£m| 1961
£m
—|—|—|—|—
Indonesia| 2.1| 1.3| 2.2| 0.8
Thailand| 0.5| 0.1| 0.3| 0.4
India| 5.9| 12.4| 13.5| 13.1
Pakistan| 0.4| 2.4| 1.8| 2.0
Singapore| 1.5| 1.2| 0.6| -0.1
Malaya| 5.5| 5.7| 8.6| 6.9
Hong Kong| 1.8| 0.8| 0.4| 1.3
11. British private investment in the above countries represented approximately 11.6% of total British overseas direct investment in 1958, 12.6% in 1959, 11.4% in 1960 and 10.4% in 1961. Investment in Western Europe, however, rose each year from 9.4% in 1958 to 18.2% in 1961, and has been substantially higher again in 1962.
12. In future it seems likely that there will be less capital in Britain available for overseas investment. She has recently been seeking to protect her balance of payments by curbing net capital exports and by, in 1961, requesting British companies overseas to remit a proportion of their profits. For the first time, in the last two years, Britain has been a net importer of private long-term capital.
[ matter omitted ]
Britain’s Military Role In South And South East Asia
Existing British Force Levels
16. The British Five Year Defence Programme published in March 1957 looked forward to a substantial reduction (from about 800,000 to about 400,000)* in overall force levels, reliance on all regular forces which would be compact, mobile and equipped with nuclear weapons, maintenance of the independent deterrent, increasing emphasis on collective security arrangements in areas such as South East Asia and the stabilising at about 7% of the gross national product of British defence expenditure, which had risen to over 10% during the Korean War. In the Far East since there has been a continuing reduction of the U.K. Army strength—from 21,000 to 13,000 so far—and slighter reductions in the Navy and Air Force offset by an improved operational capability, particularly for nuclear retaliation.
17. Present British forces in the Far East are as follows:
Naval Forces
Far East Fleet (Royal Navy)
2 Aircraft Carriers (one added in 1963)
1 Commando Ship
1 Cruiser
5 Destroyers
9 Frigates
11 Minesweepers
4 Submarines
10 RFA’s3
1 Escort Maintenance Ship
1 M/S4 Support Ship
Military Forces
12 infantry battalions with supporting troops, including the 1 infantry battalion forming part of the Commonwealth Brigade 6 of the battalions are Gurkhas.
Air Forces
R.A.F (FEAF)
Aircraft
| Establishment | Strength |
|---|---|
| 146 | 152 (including 16 Canberra bombers, 17 Javelin fighters arid 20 Hunter fighters) |
18. These figures include forces in Hong Kong. Naval and air forces appear likely to remain at roughly their present levels, but the British Government hopes to reduce its military by up to 60% before the end of the decade, in the expectation that independent countries will take over responsibility for internal security. The timetable will be affected by the course of Malaysian–Indonesian relations; the original plan to withdraw the three Gurkha battalions at that time responsible for internal security in Borneo by not later than the end of 1964 has already been set back twelve months, and additional battalions have since been sent to the area.
19. In addition, there is the Reserve capacity based in the U.K., though the military force available from this for deployment in the Far East is substantially less than we expected when it was established.
- Current British force levels are well below this figure: Army 151,226, Royal Navy and Royal Marines 81,865 and R.A.F. 108,200. Comparative figures for the Australian forces are 22,100, 11,392 and 15,860. [Footnote in original.]
[matter omitted]
Factors Affecting the Future of the British Military Commitment
25. Within the limits of her existing commitment Britain is likely to take her treaty obligations in South and South East Asia seriously throughout the period. She will also have for probably the whole of the period continuing, although diminishing and comparatively insignificant, territorial responsibilities, in Hong Kong and possibly the South West Pacific. The decision to build a new conventional aircraft carrier by 19715 indicates an intention to continue to pursue a global strategy, based on three carrier task forces including one east of Suez.
26. However, in addition to the planned substantial reduction in Army force levels, there are qualifying factors to be taken into account when assessing the future scale and effectiveness of the British military commitment to the Far East.
27. There is no guarantee and little likelihood that forces from the Strategic Reserve in the U.K. will be available for Asia if a situation arises in which there are conflicting priorities with Europe.
28. The doctrine of the Strategic Reserve produces an obvious problem of communications.
29. The terms of the Nassau Agreement 6 seem likely to have a bearing on British global strategy, including strategy in the Far East, and the cost of acquisition of Polaris may require retrenchment elsewhere in the defence programme.
[matter omitted]
31. The future of military bases in Asia is uncertain.
This has two aspects for us: how well-based is a strategy which is dependent on overseas bases and what contribution would the U.K. make to the close defence of Australia if they were denied to her. Singapore’s facilities remain essential to British strategy in the Far East. Up to November 1961, there had been a growing tendency to look for alternatives because of the doubts about whether the base facilities would be workable under war conditions and because of a more general feeling that British strategy had to accommodate itself to the growth of neutralism in newly independent countries. However, the terms negotiated between the British and the Malayan Governments in November 1961 for the continued use of the Singapore base allowed the British Chiefs of Staff to re-introduce it into their planning. On various occasions since, British representatives have expressed confidence that its facilities would be available for a very long time. These estimates have seemed too optimistic or complacent when compared with the British Government’s pre-November 1961 attitude, and appear more so now in the light of the Manila Agreements 7 and the subsequent Indonesian propaganda offensive against Malaysian bases. The latter’s future may depend on Britain securing wider Asian recognition that Commonwealth forward bases fulfil an essential role in making possible an effective conventional response to Chinese aggression. We have a major interest in this, as forward bases are vital to Australian strategy, and a British line of approach which stressed the continuing role of conventional forces would be as congenial to us as it might be in Asia. At the same time it is also important for us to know whether the emphasis placed in the 1962 Defence White Paper and subsequently on the assured future of Singapore carries any implication that Britain will now be more reluctant than previously to consider the necessity and financial implications of renewing her military apparatus in Australia if Singapore were lost.
32. There is a strong possibility of a change of Government in Britain in the near future.
(i) The Conservatives have been in power in Britain for 12 years. It is highly possible that there will be a change of Government in 1964.
(ii) In its defence policy, the Labour Party criticises the British independent nuclear deterrent as neither independent nor credible and it supports the principle of centralised control of the Western deterrent. As a Government it may be prepared to opt out of the strategic nuclear business altogether and to reject the Nassau Agreement on Polaris (its present attitude is that it is precluded from taking a firm position because it is denied the full facts about the agreement). It has taken the line that Britain could make a more valuable contribution to the Western alliance by maintaining really strong conventional forces. How it can increase the size of its conventional forces without returning to some form of conscription is not made clear; it was said that Mr. Gaitskell8 was coming round before his death to the view that the Labour Party would have to commit itself to selective military service, but this is less likely to commend itself to Mr. Wilson. Thus, so far as can be seen, the Labour Party supports the U.S. administration’s major military concepts but may not be willing to face up to the obligations.
(iii) As far as the Far East is concerned, such indications as one has about Labour attitudes are not altogether encouraging. As Labour’s spokesman on defence, Mr. George Brown, advocated that Britain should put her obligations to N.A.T.O. first and fulfil her force commitments in Europe even if this had to be at the expense of withdrawing troops from the Far East. There is a general feeling in the Labour Party that overseas bases are, in his phrase ‘a hangover from the old so-called imperial times’. While a Labour Government would no doubt be receptive to requests from India in particular, and other Asian Commonwealth countries, for military assistance, it would not find it difficult to accommodate itself to a swing to neutralism. A Labour Government is likely to see less obligation on Britain to provide for the defence of Australia and New Zealand and to be more brutal in indicating that it expects us to do more for our own defence.
33. To sum up, priority for the homeland and Europe, increasing dependence on the U.S. and the N.A.T.O. alliance, anti-nuclear sentiment in Africa and Asia, the likely contraction of bases, the decline in her relative economic and trading position, the need to reduce foreign expenditure, and continuing manpower shortages in the forces, are all factors limiting Britain’s ability to maintain an effective military presence east of Suez. She has sought to make the best of limited resources and adverse circumstances by a strategy of long-range mobile forces operating from a central reserve in the U.K. and, to date, a major theatre base in Singapore. The conventional role of those forces outside Europe is essentially that of fire brigades for small brush-fire wars; where, in fulfilment of her regional alliance commitments, it may become necessary to oppose Chinese Communist aggression, Britain would expect nuclear weapons to be used. British strategy in the Far East, therefore, is essentially one with a limited application which is likely to contract. The responsibility for the military containment of Communism in Asia is basically and increasingly one for the U.S. and the countries of the region.
BRITAIN’s POLITICAL PoLICIEs IN SouTH AND SouTH EAST ASIA
34. This Department concluded in January 1961 from an examination of a definitive British Government assessment of prospects for the next decade that the cost of Britain’s activities would continue to be the main factor in her own calculation of what she could do in the future, that areas east of Assam would have a low priority, that there was little likelihood of any major U.K. effort in local war in South East Asia, and little will in London to expand the U.K./U.S. partnership there, that Britain under-estimated the problem of China, and that British thinking on the whole Asia area demonstrated a lack of urgency and was essentially short-term. The Department expressed the opinion that the British paper underlined the need for Australia to review certain fundamental assessments and assumptions as a basis for the conduct of her relations with Asian countries during the next decade and beyond. 9
35. Shortly afterwards, the British Government’s decision to open negotiations for entry into the European Economic Community vividly demonstrated its scale of priorities and its assessment of Britain’s diminished stature on the world scene. No suggestion that it would embark on such a step had been evident in the British Government’s 1960 ten-year look, though it was perhaps implicitly foreshadowed in its conclusions that henceforth Britain would have to defend her interests through alliances rather than the use of her own resources and that increasingly over the decade she would have to beware of spreading her resources too thinly.
36. The British Government has made it plain that it has no intention of turning its back on Europe, but it is apparent that its opportunities for keeping up the momentum in relations with Europe are going to be severely circumscribed for the next few years. There will be a resultant pressure on Britain to compensate by greater activity elsewhere, in order to preserve both the special Anglo-American relationship and her bargaining position vis-a&-vis the Six. This coincides with a measure of disillusionment in Whitehall about Africa and crises affecting two Commonwealth countries in Asia which have demanded a British response of some depth.
37. British commitments to Malaysia have been reinforced and enlarged by the understanding arrived at the quadripartite talks in Washington in January that Britain should accept the primary responsibility for its support and the subsequent Indonesian campaign against the new Federation. The danger of a speedy contraction of Britain’s responsibilities in the Borneo territories and Singapore has been averted and Britain has accepted greater continuing economic and defence support commitments to Malaysia than she would have been prepared to do if Malaysia had come into existence without objections from its neighbours.
38. At the same time, the Chinese attack on India, the deterioration in Indo-Pakistan relations and the threat to Pakistan’s pro-Western alignment have offered scope for new British initiatives on the Indian sub-continent. Ever since her expulsion from the East Indies by the Dutch in the seventeenth century Britain has put India before South East Asia. While few would contest that the fate of India is the key to the future of democracy as an alternative to Communism in Asia, concentration on India has always carried the risk that Britain would fail to give sufficient weight to South East Asia, the ‘Indo-China’ area. But for the difficulties which have attended the birth of Malaysia, British involvement in South Asia and South East Asia might have got further out of balance quite quickly.
[matter omitted]
Australian Policy
42. Australian policies already rest on an assumption that British military resources in the Far East are unlikely to be maintained at their present levels and that Britain’s primary political interests lie elsewhere: they consequently seek to keep all our other options open, to give due weight to our essential dependence on the U.S., to try to improve the peacekeeping capacity of the United Nations and to seek new forms of cooperation between Asian countries which will be politically rewarding to us and politically and economically rewarding to them. We assume that before 1973 Britain will probably have reached a full economic and political accommodation with Europe. Nevertheless, the continued operation for a time of the combination of circumstances which has drawn Britain more deeply into South and South East Asian affairs recently, and a prudent anticipation of eventual reversion to the pattern of gradual decline, more limited in the economic and cultural than the political and military spheres, in British influence and interest in Asia, suggest some possible courses of action:
(i) There would be advantages in an early effort to strengthen regional Commonwealth political ties in Asia, taking into account–
- that the unwieldy structure of the expanding Commonwealth, the failure to solve the problem, e.g., by a two–tier system,10 and the development of regional integration in other continents provide reason and stimulus for closer and more organised cooperation between Commonwealth countries in the Asian/Pacific area;
- that, while in the long run the strength of any regional Commonwealth association will depend on the strength of the area rather than the common relationship to Britain, the most favourable conditions from Australia’s point of view for any such initiative will exist while Britain is excluded from Europe and able to play a key role on the traditional pattern;
- that a British Labour Government is likely to be actively pro-Commonwealth (the ‘shadow’ Foreign Secretary is a keen Commonwealth man with a special interest in Asia);11
- the usefulness to Australia as a white country with colonial responsibilities of the ‘bridge’ the Commonwealth provides (particularly with the prospect of China putting increasing stress on the racial factor in its appeal to Afro-Asian states);
- the physical facts about Commonwealth countries in our area of primary interest; namely that they comprise 72% of the population and 54% of the land mass of South and South East Asia;
- the fund of popular goodwill towards the Commonwealth which exists in Australia, New Zealand and Britain, and which has come to the surface in India;
- the U.S. belief as expressed to the Australian Prime Minister by Mr. Rusk last month that the Commonwealth is ‘an element of strength not quite being tapped’.
(ii) We should aim to persuade Britain to postpone for as long as possible any further rundown in conventional forces (including those engaged on internal security duties) in the Far East, having in mind her immediate responsibilities to Malaysia and the wider considerations of the importance of others contributing along with the Americans to a conventional Western military capability in Asia capable of deterring smaller-scale Chinese aggression and the useful purpose the presence of these additional battalions can serve in helping to carry us through the period it will take to expand Australia’s forces (four years to raise our Army strength by 6,000).
(iii) Forward bases will continue to be important if we are to have the option of meeting Chinese Communist aggression with conventional forces, and the future of the Commonwealth bases in Malaysia is likely to depend on whether we can secure wider Asian backing for them. Since the Sino-Indian conflict, some Indian leaders are prepared to admit privately that the Malaysian bases perform a vital function, but they do not envisage India changing its public opposition to all foreign bases. A joint U.K. Australian ultimate aim (without rushing our fences and bearing in mind that Nehru’s successors will probably be more amenable to reason on this issue) should be to persuade non-Communist Asian countries, and in particular India, that the defence of South and South East Asia is indivisible and the common responsibility of the countries of the area and that Commonwealth bases in Malaysia and perhaps elsewhere are an integral part of the pattern.
(iv) Success in this would represent a substantial concession by India which might have the incidental advantage of offering Pakistan a sense of security and making possible a reversal of the present grave deterioration in Indo-Pakistan relations. This is the pre-requisite for consolidating an Asian regional Commonwealth association and most desirably should be effected by a settlement of Kashmir and other outstanding issues. It appears, however, that some lateral tacks to alleviate the consequences of the differences between the two countries are all that is immediately possible.
(v) There would seem to be something to be gained from taking up a long-standing British invitation to discuss the implications of her strategy in the Far East and the future requirements for bases for the close defence of Australia and New Zealand.
(vi) We must accept that Britain will not as a general rule send her best political people to Asia, but should judiciously do what we can to encourage her to improve the general standard of her representation in the area. The appointment of Lord Head 12 to Kuala Lumpur is encouraging.
(vii) It seems necessary to accept that increasingly we shall have to be more active in London in putting forward regularly at Cabinet level and to public opinion the special problems and claims of South and South East Asia as we see them.
(viii) It will be important for us to do likewise in Western European capitals, in anticipation of the continuation of Europe’s economic and military growth, its increasing influence within the Atlantic Alliance and the prospect that Britain will become a member of a European political community.
(ix) Our diplomacy should be adapted to take account of the developing role of the institution in Western Europe and as the basis for Atlantic consultation and cooperation. We cannot leave it to Britain to act as our point of contact. We should be clear how our own interests enter into what the Chairman of the State Department Policy Planning Council has described as ‘the most basic creative task for the 1960s’—to ‘bind up in new unity an increasingly united Western Europe and Japan in a global partnership’, which would then ‘build a new and constructive relationship with the developing countries’.
(x) In all matters raised in this paper Australian and New Zealand interests are basically identical. We should work for closer military cooperation and a political relationship of instinctive intimacy between our two countries. 13
1 Not published.
2 See Document I.
3 Royal Fleet Auxiliary ships.
4 Minesweeper.
5 This decision was abandoned in the UK 1966 Defence White Paper.
6 The Nassau Agreement was negotiated in December 1962 between President Kennedy and Macmillan, after discussions in the Bahamas. The US provided the UK with nuclear-armed Polaris missiles for Royal Navy submarines which were built under licence, the steel for the hulls and important elements of the communications, navigation and guidance systems coming from the US. In return the UK leased the Americans a nuclear submarine base at Holy Loch, near Glasgow. The agreement made clear that the UK’s Polaris missiles were part of a multilateral force within NATO; they could only be used independently when ‘supreme national interests’ intervened.
7 Presidents Macapagal (Philippines) and Sukano, and Tunku Abdul Rahman of Malaya, met in summit in Manila between 30 July and 5 August 1963. Their stated aim was to improve relations through closer association (to be known as Maphilindo), and the resolution of problems arising from the Malaysia project and the international status of North Borneo (Sabah). The UK saw in the agreements reached at the summit a threat to the establishment of Malaysia. The summit also threatened to drive a wedge between the UK and the US (the Kennedy administration wanted to delay the inauguration of Malaysia, fearing it would prevent the summit reaching a successful conclusion), and it was because of this that Macmillan was persuaded to accept a UN mission to North Borneo and Sarawak to ascertain the wishes of the local population in respect of the Malaysia project.
8 Hugh Gaitskell, Leader of the UK Labour Party, 1955–63.
9 See Document I, note 4.
10 Concern that the close and informal relationship enjoyed by the original members of the Commonwealth would be diluted by the admission of so many new members from Africa, Asia and the Caribbean led to the suggestion in the 1950s that there might be a two-tier Commonwealth consisting of an inner sanctum, based on the original members, and a second tier, consisting of the new members. Countries like Australia and Canada favoured a two-tier system but it was rejected by the UK Government on the grounds that newly independent countries would opt out of the Commonwealth rather than accept second-tier status.
11 A reference to Patrick Gordon Walker, who lost his parliamentary seat when the Labour Government was elected in October 1964. He was still appointed Foreign Secretary but resigned in January 1965 when he was defeated at a parliamentary by-election. He had served as Secretary of State for Commonwealth Relations, 1950–51, towards the end of the post-war Attlee Labour Government.
12 A minister in the post-1951 Conservative Governments in the UK, holding the portfolios for War(1951–56) and Defence (1956–57), Anthony Head (Viscount Head, created 1960) was British High Commissioner to Nigeria, 1960-63, and British High Commissioner to Malaysia, 1963–66.
13 In November 1964, the Foreign Office in London prepared its own assessment of British policy objectives in Southeast Asia. Here it was suggested that the region was of relatively little economic importance to the UK and that Britain’s interests were on the wane. In 1953 what had then been Malaya had brought a net balance of foreign exchange to the Sterling Area of £62 million. The figure stood at £43 million in 1955, but by 1964 it was in deficit and likely to remain so. By this time barely three per cent of Britain£s world trade was with Southeast Asia. Economically, Britain£s interests were said to be ‘more negative than positive’ Politically, however, the position was different. Britain still had a substantial interest in keeping communism at bay, ‘and we need to maintain our effort in the area if we are to keep our position as a world power and the United States’ principal partner’. Ultimately, the future lay in neutralisation and non-alignment. Any ‘excessive’ desire to retain direct military and political influence would be counterproductive because it would encourage an unnatural alliance between local nationalism and communism. And yet a balance had to be struck between the danger of staying too long and that of withdrawing too fast. A Western defeat in Southeast Asia would render the long-term objective unobtainable. Military measures would therefore remain essential until there was a prospect of a modus vivendi with the communist powers. The US would have to ‘make the running’, but Britain’s power to influence American policy would depend on Britain ‘making a respectable contribution’ by maintaining the Singapore base and continuing to defend Malaysia against Indonesia. British policy distinguished between the continental region in the north, where the proximity of China was the dominant factor, and the archipelago to the south, where the West was at less of a geographical disadvantage. In the north the aim was to work towards the emergence of regimes sufficiently subservient to be acceptable to China on the one hand, while sufficiently non-communist to be acceptable to the US on the other. Burma provided a ‘possible illustration’. There was little prospect of applying this formula in Vietnam. In the archipelago, Maphilindo (see note 7 above) seemed to offer the best prospect of future stability, but not while confrontation continued. Ultimately, a non-aligned Southeast Asia would be able to stand on its feet only if it had substantial economic and technical aid. For this purpose aid should be coordinated with other donor countries in the West. The text of the document (UKNA: CAB 148/17, OPD(64), 10, ‘British Policy Towards South-East Asia’, memorandum, Gordon Walker for Cabinet Defence and Oversea Policy Committee, 19 November 1964) is published in S.R. Ashton and Wm Roger Louis, eds, East of Suez and the Commonwealth. 1964–1971 (hereafter cited as ESAC), Part I (British Documents on the End of Empire series. The Stationery Office, London, 2004), Document 89.
[NAA: Al838, TS691/1 PART 3]