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895B.00R/2–1050: Telegram

The Chargé in Korea (Drumright) to the Secretary of State

confidential

188. Joint State-KMAGECA message Redeptel 113, February 3.

I. After prolonged discussions between KMAG and officials Ministry National Defense, chief of staff Korean Army agreed to limit allocations for fourth quarter Korean fiscal year ending 31 March to 4.37 billion won for national defense by eliminating all expenditures for Youth Corps, Reserve Corps, and other irregular forces, except 116 million for training leaders National Defense Corps (National Guard), by deferring maintenance and repair of buildings and by reducing food ration allowance for units from won 270 for troops in combat and won 220 for noncombat troops to won 200 per day. This recommendation has not yet been approved by President and State Council. Joint Economic Stabilization Committee is striving to effect other reductions in order present coordinated recommendation for total expenditures fourth quarter. Present indications are that, despite strongest representations all components American mission, Republic of Korea does not recognize grave consequences continued deficit spending. At recent meeting with Joint Committee President stated he hoped Committee would correct impression that there was financial crisis in Korea. Attitude that there is very little Government can do to correct situation also held by Minister Finance, Governor Bank Korea, and virtually all members State Council. Adherence this attitude in glaring contrast known facts indicates it will be extremely difficult to obtain enforcement by ROK of measures essential to economic stability without extreme pressure from mission. Lieutenant Colonel Ralph R. White, fiscal officer, KMAG, has been designated to serve on Joint Committee. Have suggested ROK designate representative National Defense.

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II. Answers to specific questions URAD follow:

1.
Total allotments by Minister National Defense to its units first three quarters ending 31 December 19,048 million won. Divided as follows, by quarters: Ministry National Defense, 121 million; Army 16,523 million; Navy 2,154 million; Air Force, 250 million. Allotments to Army included 720 million for all civil components. KMAG is exerting every pressure to reduce expenditures for Youth Movement, National Guard and other civil components to minimum. KMAG strongly feels and has advised Koreans only expense for civil components should be for Leaders’ School of National Defense Corps (National Guard), which is made up of National Youth members only. However, many members National Youth are not members of National Defense Corps and receive no support from defense appropriations. Cost of school for FY 50–51 is estimated at 42 million won.
2.
Original budget current fiscal year calculated on basis average Army strength 75,000 men. Additional 25,000 men referred to inclosure 1 Embdesp 96 are part of present “basic troop strength” of 100,000 men but are in excess strength provided for in appropriations passed to date by National Assembly.
3.
Preliminary calculations indicate total authorized strength Army 100,000, Navy 7,500, and Air Force 2,000 can be supported coming fiscal year on total appropriation for Ministry National Defense of 27 billion won in contrast to 36 billion won included in budget for fiscal year 1950–51 submitted to National Assembly without mission concurrence. This assumes minimum present value of won and military situation as it now exists and flow of military aid continuing in future years as at present. In view limitations Korean heavy industry deemed most essential this flow continue. Home Affairs has requested 10.4 billion for police for fiscal year 1950–51. Believe minimum cost police force of 50,000 would be 6.7 billion won.
4.
Budgetary effects Embassy’s recommendation December 19 of raising military assistance funds up to 20 million dollars estimated a 4 billion won annually for Air Force (POL, construction new hangars and shops and maintenance) 150 million won annually for Army (POL, gun sheds, maintenance) and 15 million won annually for coast guard (fuel, lubricants, paint, etc.) Won cost POL included since National Defense must reimburse office of supply and use by National Defense will reduce availability POL for sale in general economy. Since date of arrival of equipment unknown above figures are annual and not necessarily cost in fiscal year 1950–51.
5.
Appropriations for police current fiscal year to date are as follows by major categories:

Police communication system, won 31,340,500.

National Police College, won 77,702,200.

District police, won 3,958,151,700.

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Clothing, won 767,100,000.

Temporary expenses for public security, won 3,601,452,300.

Total, won 8,435,762,700.

About 20,000 men regarded as “combat police” and ⅖ above total might be considered direct supplement to military expenditures. In addition to police, Ministry Education has expended 56 million won for “youth and student training” and 10 million won for “student patriotism movement”, both activities regarded by Koreans as quasi-military, but regarded by KMAG as of no military value. Minister Education has requested additional supplemental appropriation 98 million won for this purpose, of which mission informed 50 million already obligated.

III. Information on developments affecting stabilization program being forwarded promptly as received by mission.

Drumright