The Secretary of State to the Embassy in Korea
113. From State and ECA. Gratified and encouraged by reports of vigorous action taken by ECA Mission and Emb to bring inflationary forces under control (Embdes 57, Jan. 18).
In connection Congressional consideration FY 1951 program, we anticipate criticism may be directed against ECA program for failure ROK bring about financial stabilization as provided aid agreement, and especially against recovery projects 1951 program in view inability ROK finance won requirements even with counterpart funds. Since expenditures Ministry Natl Defense one of big de-stabilizing factors, we shld be prepared here indicate how such expenditures can be controlled and reconciled with stabilization objectives. In this connection Embdes 75 Jan 21 and especially Embdes 96 Jan 25 have been extremely helpful.1
Dept and ECA wlcl like AMIK prepare fuller statement than has been recd of possibilities controlling and reducing such expenditures, enlisting full cooperation chiefs KMAG and ECA Mission as well as ECA budget consultant. Perhaps it wld be useful for KMAG appoint a senior finance officer to work in cooperation with ECA and Heer2 to assist in analysis. In this connection wld it not be useful include Rep KMAG and Rep Ministry Natl Defense on joint stabilization comite. Meanwhile wld appreciate such info as you can provide on fol questions:
- How are expenditures of Defense Ministry divided between (a) regular forces (b) naval and coastal patrol forces, and (c) reserves, Natl Guard, Youth Movement, etc.?
- Are the additional 25,000 men referred to Encl. One Embdes 96 in addition to 100,000 present basic troop strength?
- Can an estimate be made by Subcommittee NR 4 of minimum fixed expenditures for a basic security force of 100 thousand men, a police force of 50 thousand, and existing naval forces given the present mil situation. What we have in mind is a benchmark from which to [Page 26]evaluate desirability of additional expenditures for combat aircraft, heavy weapons, patrol craft, etc., in terms of their internal budgetary costs.
- What are anticipated budgetary effects of Emb’s recommendation Dec 19 that mil assistance funds for Korea be increased from $10.2 million to $20 million.
- What mil expenditures are included in accts of Home Ministry and other govt agencies.
Any other pertinent info will be welcomed as well as further reports on other aspects of inflation and stabilization program. [State and ECA.]