ISAC Files, Lot 53 D 443

Memorandum Approved by the International Security Affairs Committee 1

top secret

ISAC D–22/3b

Guide Lines for Fiscal Year 1953 Foreign Aid Programs

non-european areas

A. General

1. Scope and Purpose of Paper.

(a) This paper is intended to provide the guide lines within which programs can be drawn up for both military and economic aid in the non-European areas, including the Near East and Africa, the Middle East, South Asia, the Far East and Latin America. Greece and Turkey are not included because (a) it is assumed that by FY 1953 Greece and Turkey will be members of NATO, (b) the problems of programming for Greece and Turkey are much more nearly like those of the NATO countries than they are like those of the non-European areas.

(b) The process of developing an integrated mutual security program comprises the following steps:

(i)
Determination of objectives, by area and by country, in as clear and as specific terms as possible.
(ii)
Agreement upon working assumptions.
(iii)
Determination of programs required to achieve objectives.
(iv)
Calculation of minimum funds needed to finance the tentative programs.
(v)
Reassessment of entire program in terms of the total it is reasonable to request and in terms of relative priorities of various programs.
(vi)
The development for presentation of an integrated foreign aid program.

[Page 391]

The purpose of this paper is to make a start, for the non-European areas, on the first two steps. The assumptions stated here will have to be revised from time to time. The objectives stated here, either explicitly or by reference to FY 1952, are in many cases too general to be very meaningful in terms of the type and extent of aid required to achieve these objectives. Every effort must be made to refine the objectives and make them more specific. This effort will be made in Washington, but it must also be made by the missions themselves as an essential part of the programming process. To the extent that it is done successfully, to that extent the whole program will be tightened and its presentation made more convincing.

Conclusions with respect to aid expressed in this paper are subject to revision and are limited to those cases where no aid is believed to be necessary or where aid is limited to a certain type. No effort is made to suggest specific amounts for particular countries since amounts are considered to be the end product of the programming task, justified by the programs themselves.

(c) Programming for FY 1953 is in various stages. To the extent that it has already gone forward, the basic premise has apparently been that the assumptions and objectives for the FY 1953 program would be the same as for FY 1952. To a large extent, this paper will confirm that premise. To the extent that it calls for changes, persons engaged in programming both in Washington and in the field should be immediately so instructed. In those areas where programming for FY 1953 has not yet begun (principally in those cases where a program was to be inaugurated in FY 1952 and is not yet under way because of a lack of Congressional authorization and appropriation), instructions should be issued immediately to proceed with programming for FY 1953 on the basis of this paper. Section A of this paper and such other parts as may be appropriate should be sent to all interested missions.

2. Generally Applicable Assumptions. For purposes of uniformity in programming, it is essential that certain general assumptions be accepted, as follows:

(a)
There will be no general war.
(b)
Unless otherwise specifically stated, the political complexion and orientation of the various countries, the state of relations between them, and their economic condition will be assumed to be about the same as today.
(c)
FY 1950 and FY 1951 programs will have been successfully completed.
(d)
The proposed FY 1952 programs will have been completed in varying degrees.
(e)
The United States will be successful in its efforts to persuade aid recipients to comply with whatever standards are required by the U.S. Congress with respect to East-West trade so that extension of aid will not be prohibited.
(f)
For the proposed FY 1952 aid programs, funds will have been available for all of the military programs and for 75% of the economic programs, taking into account the possibility of transfers between titles. (Note: This assumption will be subject to revision, country by country, as more precise information becomes available.)

3. General Principles. It must be recognized that in almost no case in the non-European areas (except with respect to the military aid program in Latin America) is there any specific objective comparable to the MTDP in Europe which provides a measuring rod for the determination of the dollar amount of programs. Moreover, the factors affecting aid programs in the non-European areas vary widely from region to region and in many cases from country to country. The following comments, however, are of general application:

(a)
Because of general and increasing pressure on United States resources, an even more severe standard must be applied in testing the necessity for proposed FY 1953 programs than was applied for programming for FY 1952.
(b)
The purposes of military aid programs include the following:
  • Mainly military:
    (i)
    To strengthen the ability of friendly governments to discourage, resist or repel aggression and to participate in the collective defense efforts of the free world.
  • Military and political:
    (ii)
    To assist friendly governments to maintain internal security.
  • Mainly political:
    (iii)
    To improve the attitudes of certain states toward the free world and the U.S. by indicating our willingness to help them maintain their own security against external and internal aggression.
(c)
The purposes of economic aid programs include the following:
  • Mainly military:
    (i)
    To enable governments to strengthen their ability to withstand aggression, both from within and from external sources, and to participate in the common defense effort.
    (ii)
    To increase the output and facilitate the distribution of strategic materials needed for common defense.
    (iii)
    To increase the capacity of the area to produce essential civilian goods, especially foods, so as to reduce the drain on U.S. output and shipping in the event of an emergency.
  • Mainly political:
    (iv)
    To strengthen support for friendly governments by assisting them to provide more effectively for the needs of their people.
    (v)
    To arrest economic deterioration threatening political stability.
    (vi)
    To improve popular attitudes toward the free world and the U.S.
(d)
The final statement of objectives for each country should indicate the specific purposes for which aid is needed. Aid programs should, [Page 393]so far as possible, be multi-purpose programs. In some cases, however, it may well be that the dominant objective of a program may be jeopardized if a different type of objective is also pursued. For example, care must be exercised that encouragement of strategic materials development and procurement (as a part of an aid program) does not interfere with the program’s basic political objectives.
(e)
The possible purposes of economic aid above stated may in many cases be achieved by loans. That possibility should always be considered by programmers. To the extent possible, programmers should determine the minimum amount of aid, grant or loan, which would be needed to accomplish United States objectives in a given area or country, initially without regard to the relative roles of loan and grant aid. Programmers should then make recommendations as to those parts of the program which might be effected on a loan basis. This procedure calls for the maximum possible contact and cooperation between the lending agencies and the grant aid agencies, both in Washington and in the field.
(Notes: 1. Aid in the form of loans can sometimes appropriately go above the minimum level of aid which is to be determined by this procedure. For present purposes, programmers will not explore the possibilities for such loan aid.
2. The procedure outlined in this paragraph will probably not be practicable in Latin America or in the independent countries of Africa where programmers will presumably be concerned only with technical assistance programs for which loans are not appropriate.)
(f)
For the purpose of making recommendations as to those parts of a minimum economic aid program which might be effected on a loan basis, the following considerations are suggested. They do not represent a firm U.S. government position on the question of grants vs. loans:
(i)
The basic factors to be considered are the country’s anticipated balance of payments position, the degree of internal influence desired, the country’s needs for other investment which will also require debt-servicing capacity, and the degree to which the country itself is interested in and anxious for the assistance.
(ii)
In general, it is desirable that economic development projects and substantial equipment programs associated with technical assistance projects be financed on a loan basis. However, there is one basic criterion that should be met before assistance can be rendered in the form of loans: the recipient should have capacity to service further debt. This does not mean that the loan project itself need be self-liquidating, but the prospective debt servicing capacity of the borrower should be adequate to justify expectation of payment. The country’s prospective capacity to service debt should be calculated in terms of a level of exports and imports reasonably related to its own needs for increased production and not in terms of the largest possible export surplus.
(iii)
Many proposed recipients of U.S. aid are not in a position to carry further debt because their balance of payments prospects are highly unfavorable, e.g., Jordan, or because the country is in a state of civil disorder and until some greater measure of order is restored, its future prospects cannot be assessed, e.g., Indochina. Our aid programs in these areas are necessarily on a grant basis.
(iv)
Certain proposed recipients of grant aid have capacity to carry some additional indebtedness but the heavy initial capital [Page 394]investment that must be made to arrest deterioration or to give these economies the required forward momentum exceeds their limited servicing capacity. It is necessary in the interest of U.S. security to foster economic development in these areas at a rate faster than these countries can undertake exclusively on a loan basis. In such areas our program will involve grant and loan aid. This combination is flexible and can be tailored to meet our objectives, without resort to fuzzy loans, in countries which are obviously neither in the full grant nor full loan category.
(v)
Under certain circumstances it may be desirable to provide relatively small amounts of financial aid on a grant basis notwithstanding the country’s favorable balance of payments prospects so as to encourage the country to undertake, under joint supervision, projects essential to the common strength which the recipient government might otherwise be reluctant or incompetent to undertake. The activities we hope to encourage by grant aid are those which are not locally initiated because of lack of skills or other local obstacles, but which, having been begun under the stimulus of U.S. aid, are more likely to be carried on in the future with local resources.
(g)
A reasonably precise standard for determining the amount of grant economic aid is available when the objective is either (i) to enable the country to produce a given quantity of military production or (ii) to arrest deterioration in the country’s economic situation. In other cases, no precise standard is available, and the level of aid must be determined as a matter of judgment by the application of a number of factors, including (i) the importance of preventing the particular country from entering the Communist orbit, in terms of strategic materials, military implications, effect upon other nations, etc.; (ii) the degree of danger that the local government will be subverted and taken over by the Communists; (iii) the degree to which the local government is cooperating with the United States, e.g., in the United Nations and elsewhere (in general, this factor is significant only where neighboring countries are receiving substantial aid); (iv) a great variety of economic factors. As stated above, the degree to which objectives can be stated in specific terms will narrow the limits in which such a judgment will have to be exercised.
(h)
Where the objective of military aid in a given case is either (i) to maintain internal security or (ii) to repel aggression by a foe of known capabilities or (iii) to perform specific defense missions, a reasonably precise standard is available for determining the level of military aid to be provided, whether in the form of end-item aid or of financial aid. Where one of the principal objectives is to deter or discourage external aggression, however, there is no comparable precise standard for determining the level of military aid. In such a case, the level of aid must be determined as a matter of judgment by the application of a number of factors, including (i) the acuteness of the threat of external aggression, (ii) the degree to which increased military strength will discourage aggression, (iii) the degree to which a projected increase in military strength may invite aggression, (iv) the degree to which the military aid may accomplish political objectives; (v) the danger of additional equipment falling into the hands [Page 395]of Communist forces. Programs must always be tailored to the country’s ability effectively to utilize the aid.
(i)
In the process of programming for both military and economic aid, a determination should be made as to (i) the total magnitude of the task to be accomplished if the stated objectives are to be achieved, (ii) the cost of accomplishing the task, (iii) the length of time required to accomplish it, and (iv) the progress expected to be made by the programs proposed for FY 1953. On the economic aid side, the relative role to be played by loan and grant aid at various stages should be determined in so far as possible. These factors will be important not only in the development of the programs, but in their presentation.
(j)
Programmers will have to determine the anticipated degree of completion of the respective programs during FY 1952 and take account of such progress or lack of progress in formulating the 1953 programs. These estimates will, of course, be subject to constant revision.
(k)
In programming for both military and economic aid, the determination of extent and types of aid must be made in the light of (i) the degree to which U.S. controls will have to be exercised to make the aid effective and prevent its misuse and waste, and (ii) the degree to which the exercise of such controls will be politically feasible.
(l)
Every effort must be made to avoid aid programs which amount to direct support of government activities normally carried in their own budgets. Any such program should be considered only as a last resort to accomplish an absolutely essential objective.
(m)
Determination of United States contributions to United Nations technical assistance programs will be made as in FY 1952. Congressional reactions will have to be taken into account in negotiating proportion of U.S. contributions.

B. Far East

1. Area Covered. This section covers Japan, Korea, Formosa, Indochina, Thailand, Burma, the Philippines, Indonesia, Malaya, Australia and New Zealand.

2. Regional Assumptions.

(a)
A peace treaty will have become effective between Japan and most of the non-Communist nations formerly at war with Japan.
(b)
There will be no general Pacific Pact, but security commitments will have been concluded with Australia, New Zealand, the Philippines and Japan.
(c)
In Korea hostilities will either have ceased or will be at a low level of intensity, but Korea will remain divided and at least some UN forces will still be in Korea by the end of FY 1953.
(d)
Communist China will not have attacked Formosa, Indochina, Burma or Thailand, but the threat of attack will be intensified.
(e)
Japan will be playing an increasingly large role in the economies of the area, both as a supplier of industrial and consumer goods and as a market for raw materials.
(f)
It will be politically and economically feasible to build up and make use of Japan’s military production potential, except for such types of items as heavy artillery, tanks and aircraft.

3. Regional Objectives.

(a)
General objectives will remain the same as in FY 1952, with intense emphasis on keeping Japan oriented toward the free world.

4. Other Regional Guide Lines.

(a)
In programming for military aid, every effort should be made to provide for production in the area. Country military missions should indicate items in the end-item programs which could be produced locally, on the assumption that some method of financing such production would be available. In addition, country missions should be instructed to make recommendations as to items which could be produced efficiently and economically for use elsewhere in the area, if United States assistance for that purpose were made available.
(b)
Upon receipt in Washington of recommended country end-item programs, consideration should be given to the possibility of producing some of the items in Japan.
(c)
In any country where it develops that local military or paramilitary production would be desirable, a method of financing such production will have to be worked out which does not interfere with the political objectives to be supported by the economic program. Exchange of information and close cooperation between the military and ECA missions will be essential.

5. Japan—Special Assumptions.

(a)
Either through amendment of their constitution or otherwise, the Japanese will be in a position to develop essential military forces.
(b)
As of the beginning of FY 1953, the Japanese Government will have taken the initial steps to begin the development of Japanese forces. However, the major burden of the defense of Japan will fall upon the United States, acting under the bilateral security commitment.
(c)
Procurement in Japan of military equipment and consumer and capital goods for the Far Eastern area and for the reconstruction of Korea will have begun and will increase through FY 1953, so as at least to offset the anticipated decrease in the volume of procurement in Japan for the support of UN troops in Korea.
(d)
Japanese commercial export trade in both sterling and dollar areas will continue at least at present levels.
(e)
Japan will have earnings of approximately $150,000,000 to $200,000,000 from the U.S. share of the expense of maintaining U.S. troops in Japan during FY 1953.
(f)
Based on the foregoing assumptions, the further assumption is made that no economic assistance on a grant basis will be necessary for Japan in FY 1953.

[Page 397]

6. Japan—Military Aid.

(a)
The question of a possible military aid program for Japan is one which requires urgent attention at the highest levels. Among the subsidiary questions which will have to be considered are (i) the Japanese Government’s intentions with respect to the development of forces and particularly with respect to the use of the National Police Reserve; (ii) the desirability of encouraging Japan in the development of naval and air forces; (iii) the composition, size and organization of a MAAG-type mission for the post-treaty period; (iv) the phased equipment requirements for proposed Japanese forces; (v) the extent to which such equipment can be produced in Japan and the extent to which such local production can be financed by the Japanese Government without United States assistance. No conclusions with respect to these questions can be formulated now, but it is believed that a military aid program for Japan for FY 1953 will be necessary and that accordingly some method of providing for such a program in FY 1953 will have to be devised.

Attention is directed to the extraordinary security considerations attaching to any discussion of this subject.

7. Korea—Special Assumptions.

In addition to the assumption noted in 2 (c) above, it is assumed for FY 1953 that (a) there will be no political settlement of the Korean problem, (b) the Unified Command will have turned over full responsibility for relief and rehabilitation in Korea to the United Nations Reconstruction Agency, but this will of necessity apply only in South Korea and such portions of North Korea as may be under United Nations control; (c) substantial quantities of military materiel will have been turned over to the ROK forces.

8. Korea—Economic Aid.

(a)
All economic assistance programs for South Korea will be under the aegis of the United Nations either through UNKRA or other specialized agencies. This may have to include a military support program.
(b)
The total program for FY 1953 should probably not exceed $250,000,000. Computed at the presently projected percentage of 65% the US share of that amount would be $162,500,000.
(c)
The amount which will have to be requested in the FY 1953 program, over and above the amount provided for in the FY 1952 MSP, depends upon the date when the UNKRA operation is initiated.

9. Korea—Military Aid.

(a)
A military aid program will be necessary in FY 1953 to enable the ROK forces to assume the maximum responsibility for the defense of South Korea.
(b)
It is understood that the ultimate objective is an armed force of 250,000 (10 divisions plus 100,000 supporting troops), an adequate [Page 398]Coast Guard, and a small tactical air force, all adequately officered, and the development of a national police academy.
(c)
Questions which must be determined as a matter of urgency are (1) the degree of UN participation in such a military aid program, (2) net deficiencies of equipment after deducting existing equipment and equipment which may be turned over by United Nations units now in Korea.
(d)
It is believed some provision will have to be made in the FY 1953 Mutual Security Program for an end-item program for Korea.
(e)
A training program is already under way and will be of great importance in FY 1953.

10.Formosa—Special Assumptions.

(a)
The Chinese Communists will remain firmly aligned with Moscow and will not have developed clearly defined Titoist tendencies.
(b)
The Nationalist Government has no alternative but to rely upon the U.S. for aid.
(c)
The U.S. Seventh Fleet will still be assigned its present task with respect to Formosa.
(d)
A system of supervision and control will have been established in an effort to assure the effective utilization of U.S. aid.
(e)
There will be continuing budgetary problems beyond the capabilities of the Nationalist Government of China to solve, but under U.S. guidance the situation will be improving.

11. Formosa—Military Aid.

(a)
The objective of the military aid program for Formosa will continue the same as in FY 1952, namely to assist the Nationalist Government to develop adequate military strength to discourage and if necessary repel an attack by the Chinese Communist forces, in conjunction with the Seventh Fleet.

12. Formosa—Economic Aid.

(a)
The objectives of economic aid for Formosa will be to assist the Chinese Nationalist Government (1) to offset the inflationary impact of its military expenditures, including the assistance program (2) to develop a self-supporting economy on Formosa, and (3) to provide essential support for the military program. There is a difference of opinion within the U.S. Government as to whether or not objective (2) can be achieved so long as the island must support armed forces of the present magnitude, but there is no difference of opinion that efforts should be made to achieve that objective through the extension of aid and through the resolute insistence upon adequate budgetary and fiscal controls.
(b)
The technical assistance program will be carried forward indefinitely along present lines.

13. Indochina—Special Assumptions.

[Page 399]

(a)
Hostilities will continue in Indochina on approximately the present scale.
(b)
The French will be increasingly aware of the severe drain in men and money of their Indochina campaign and will carefully examine every possibility of arriving at some sort of a political settlement with the Viet Minh.
(c)
The De Lattre2 mobilization policy will be generally successful, so as to increase available manpower for the Associated States forces.
(d)
The political strength of the Associated States will be gradually increasing. Defections from, will be more numerous than defections to, the Viet Minh.
(e)
The French will have advised the U.S. that the planned levels of Associated States forces cannot be achieved without U.S. financial assistance for pay and maintenance.

14. Indochina—Military Aid.

(a)
The general objectives of the military aid program will continue the same in FY 1952.
(b)
Budgetary assistance should be considered only as a last resort if U.S. representatives are convinced that the French cannot carry forward their plans for the development of native forces without such assistance. In that event, the assistance should be considered only on the condition that a satisfactory plan be worked out jointly for the eventual relief of the U.S. from this burden.

15. Indochina—Economic Aid.

(a)
The general objectives of economic aid will be the same in FY 1953 as in FY 1952.
(b)
Basic program objectives should be consistent with U.S. policy to continue to encourage internal autonomy and progressive social and economic reforms, to prevent economic deterioration, and to assist the Associated States within the French Union to achieve greater stability by achieving more widespread popular support.

16. Thailand—Special Assumptions.

(a)
The effectiveness of the Thai Navy has been reduced by the transfer of its air and marine complements to the other services. It is therefore assumed that the end-item requirements of the Navy will be reduced accordingly.

17. Thailand—Military Aid.

(a)
The general objectives of the military aid program in Thailand will be the same as in FY 1952, namely, to assist Thailand to maintain internal security, to discourage external aggression, and to meet political objectives.

18. Thailand—Economic Aid.

(a)
In view of its relatively strong economic position and of the fact that the risk of Communist subversion is not as acute as elsewhere [Page 400]in the area, grant economic aid should be kept to a minimum consistent with political objectives and should be limited to technical assistance, including supplies and equipment needed to make such assistance effective.

19. Burma—Special Assumptions.

(a)
Burma is an extremely soft spot and a logical target for Communist subversion and aggression.
(b)
The situation in Burma will continue in FY 1953 approximately as at present, with the British Government continuing to exercise primary responsibility in the military field.

20. Burma—Military Aid.

Although under present conditions no military grant aid program is proposed for FY 1953, the U.S. should be prepared at any time to consider such a program at the request of the Burmese Government, always recognizing the primary responsibility of the U.K. and the British Commonwealth. No immediate effort should be made to stimulate such a request or to press for approval of a survey of military requirements.

21. Burma—Economic Aid.

(a)
The general objectives of economic aid for FY 1953 will remain the same as in FY 1952.
(b)
The critical nature of the situation calls for a sympathetic approach to Burmese requests for assistance.

22. Indonesia—Special Assumptions.

Conditions will continue about the same in FY 1953 as in FY 1952, with the Government showing an increasing tendency to align itself with the Western world. Economic conditions may, however, deteriorate depending on world price trends.

23. Indonesia—Military Aid.

(a)
At the present time no military aid has been requested by the Indonesian Government for FY 1952 or FY 1953 and none is proposed for FY 1953.
(b)
Even if a request were received, Indonesia would under present conditions be an area of low priority for large-scale military assistance. A request for military assistance should be received sympathetically on political grounds, but no extensive program should be undertaken.

24. Indonesia—Economic Program.

(a)
General objectives will remain the same in FY 1953 as in FY 1952.
(b)
Grant aid should be limited to technical asistance, including supplies and equipment needed to make such assistance effective, subject to possible future revision in the event economic conditions deteriorate sharply.

25. Philippines—Special Assumption.

[Page 401]

(a)
Continued progress will have been recorded in the control of the Huk movement, and in the economic situation.

26. Philippines—Military Aid Program.

(a)
General objectives of the military aid program will remain the same in FY 1953 as in FY 1952.

27. Philippines—Economic Aid.

(a)
No military support program comparable to the current $10,000,000 program should be contemplated.
(b)
The general objectives of other economic aid programs will remain the same in FY 1953 as in FY 1952.
(c)
Attention in programming should be given to increasing the proportion of loan assistance.

29. Australia, New Zealand, and Malaya.

(a)
No grant aid programs are contemplated for FY 1953.

C. South Asia

1. Special Assumptions.

(a)
Extreme tension between India and Pakistan will continue, but without actual hostilities.
(b)
India will still be pursuing an attempted neutral course between the Soviet bloc and the free world.
(c)
Pakistan and Ceylon will be firmly oriented toward the West.
(d)
Iran will remain independent.

2. Military Aid.

(a)
On the basis of the foregoing assumptions, no military aid is envisaged for FY 1953.
(b)
In view of the importance of Pakistan in the event of a Soviet attack upon Iran, a study should be made of Pakistan’s military requirements.

3. Economic Aid.

(a)
The general objectives of economic aid in South Asia will remain the same in FY 1953 as in FY 1952.
(b)
In view of the lack of going programs for India and Pakistan, every effort must be made to state objectives in specific terms so that proposed programs may be measured against them.
(c)
In view of the impossibility of having missions in the field in a position to do the programming in time for the Budget presentation, the programming will have to be done in the same way as for FY 1952, subject to modification as experience in the field requires.

D. Iran

1. Special Assumptions.

(a)
There will have been no Soviet attack and the Tudeh Party will not have taken control.
(b)
The oil dispute will remain unresolved as of the beginning of FY 1953.

[Page 402]

Note: While a more optimistic assumption with respect to the oil dispute might be justified, it seems wise to proceed upon a pessimistic assumption in this case. This assumption is not of course to be understood as a forecast.

2. Military Aid.

(a)
The general objectives of the end-item and training program should be the same as in FY 1952, with every effort being made to accelerate target dates consistent with the country’s ability to absorb equipment and its need therefor to restore and maintain internal security.

3. Economic Aid.

(a)
The objective of economic aid in FY 1953 will be to assist the government to maintain relative political stability and prevent complete economic deterioration and chaos and at the same time to bring about the maximum utilization of Iran’s oil resources for its own benefit and that of the free world. This will probably involve abandonment of most of the objectives of the FY 1952 program. The difficulty of translating dollar aid into the Government’s real requirements will require particularly intense study. Work on these problems should start at once, on a highly secret basis.
(b)
Budgetary support for the maintenance of the military establishment will probably be essential, as part of the economic aid program.

E. The Arab States and Israel

1. Special Assumptions.

(a)
Relations between Israel and the Arab States will be about the same as in FY 1952.
(b)
The middle east defense board will have been established arid will be making progress in securing local participation.
(c)
A modus vivendi will have have been worked out between the U.K. and Egypt. (Note: If this result cannot be achieved, our present policy in the area, including the proposed programs, will have to be drastically revised.)
(d)
A tripartite committee to coordinate military aid to the Arab States and Israel will have been successfully established and will be operating on a secret basis.
(e)
Iraq will have accepted the I.P.C. offer.

2. Military Aid.

(a)
The general objectives of the military aid program in the Arab States and Israel will remain the same in FY 1953 as in FY 1952.
(b)
If at all possible, such a program should be presented to the Bureau of the Budget and to the Congress on a basis comparable to that of other military aid programs and not in the vague terms of the FY 1952 program. Operations in the area must therefore be begun as soon as politically feasible.
(c)
The programming of military aid for the Arab States and Israel will be to a large degree unlike that for any other area because (i) proposals will have to be considered by a tripartite committee, (ii) political considerations will be of equal importance to military considerations in determining the composition and size of the country programs, (iii) programming must proceed on the premise that equipment will be furnished on a reimbursable basis wherever possible, (iv) the principle of impartiality must be followed.

3. Economic Aid.

(a)
The general objectives of economic aid in the area will be the same as in the FY 1952 program, including provision for the Palestine refugees.
(b)
The programs should be administered on a regional basis and the principle of impartiality must be followed.
(c)
Political factors will be of critical importance in determining the level of economic aid in the area and its distribution.

F. Independent African States

1. Special Assumptions.

(a)
Ethiopia and Liberia will be pressing for military aid.
(b)
Libya will be independent.

2. Military Aid.

(a)
In general, military aid should be extended to the independent African States only on a reimbursable basis.

3. Economic Aid.

(a)
The general objectives of economic aid will remain the same in FY 1953 as in FY 1952.
(b)
Since at least in Ethiopia and Liberia the possibilities of loans are considerable, grant aid will be limited to technical assistance, increased by a modest supply component to make such assistance effective.

G. Latin America

1. Special Assumptions.

(a)
Negotiations will have been successfully concluded with a few governments looking toward the assumption by them of hemispheric defense tasks for which needed equipment will be furnished by the United States on a grant basis.
(b)
No grant aid will be used to furnish items which could be produced locally.
(c)
Relative contributions for technical assistance programs from Latin American countries will continue to increase.

2. Military Aid.

(a)
General objectives of the military aid program will remain the same in FY 1953 as in FY 1952.
(b)
If possible, a military aid program for Latin America for FY 1953 should be developed for presentation to the Bureau of the Budget [Page 404]and to the Congress on a more concrete basis than the program for FY 1952. Accordingly, negotiations should proceed as soon as possible on an urgent basis in accordance with agreed procedures to implement the FY 1952 program and to make possible concrete programming for FY 1953.

3. Economic Aid.

(a)
The general objectives of economic aid in FY 1953 will be the same as in FY 1952.
(b)
Grant aid will be limited to technical assistance, including such supplies as are required to make such assistance effective.

[Annex]

Summary of Objectives of FY 1952 Aid Programs in Non-European Areas As Proposed to U.S. Congress

a. far east

Japan:

No aid programs proposed.

Korea:

To support the United Nations in providing for relief and rehabilitation in Korea.

Formosa:

Military aid objectives—To assist the Chinese Nationalists to equip and train forces which, in conjunction with the Seventh Fleet, will be capable of defending the island against external military aggression by the Chinese communists.

Economic aid objectives

(1)
To support the military effort.
(2)
To assist the island to absorb the impact of the military effort.
(3)
To develop a self-supporting economy.

Indochina:

Military aid objectives—To assist the French to equip and train French and indigenous forces capable of restoring and maintaining internal security and to the extent practicable, of discouraging Chinese Communist invasion.

Economic aid objectives

(1)
To assist the governments of the three Associated States in their economic development so that they may attain the popular support which is the strongest political guarantee against the internal development of communism.
(2)
To support the military effort of the French and indigenous troops.

[Page 405]

Thailand:

Military aid objectives—To assist the Thai to equip and train forces capable of maintaining internal security and discouraging aggression.

Economic aid objectives

(1)
To bolster political stability and check the development of internal communism by aiding and inducing the Thai Government to extend economic services and reforms.
(2)
To help build up rice exports for use in countries such as Japan and India.
(3)
Consistently with the foregoing, to assist in the development and supply of strategic materials required by the U.S. and allies.

Burma:

Military aid objectives—No military aid program for FY 1952.

Economic aid objectives

(1)
To strengthen the will and ability of Burma to resist the development of internal communism by helping the Government to establish its authority and attract popular support by assisting in (a) the rehabilitation of the Burmese economy, (b) the inauguration or extension of public services in the fields of health, agriculture, transport, communications, education, technical training, etc.
(2)
To increase the production and export of rice, minerals and other strategic products both to benefit Burma and for the use of the U.S. and its allies.

Indonesia:

Military aid objectives—No military aid program for FY 1952.

Economic aid objectives

(1)
To win the friendship of the Government and people of Indonesia for the U.S. by working with them in efforts to solve their pressing problems.
(2)
To help the newly independent government establish its authority and attract strong popular support by assisting it to inaugurate or extend public services greatly needed in the fields of health, agriculture and forestry, transport, communication, education and technical training, home industry.
(3)
To help restore the economy of the country from effects of the war and strengthen it so that (i) internal security may be firmly established; (ii) the social order may be stabilized and living conditions improved; and (iii) increased exports may benefit not only Indonesia but the U.S. and other countries needing Indonesia’s produce.
(4)
Consistently with the foregoing, to help plan, and help execute plans, for the development of the country’s resources, and the development and supply of strategic materials required by the U.S. and its allies.

[Page 406]

Philippines:

Military aid objectives—To assist the Philippine Government to equip and train military forces capable of restoring and maintaining internal security and to discourage external aggression.

Economic aid objectives

(1)
To assist the Philippine Government in establishing a stable economy capable of self-support.
(2)
To encourage the development of Philippine trade with Japan and the countries of Southeast Asia in order that Philippine economic dependence upon the U.S. may be lessened.
(3)
Consistently with the foregoing, to assist in the development and supply of strategic materials needed by the U.S. and its allies.

b. south asia

Aid Objectives

To take such steps as are possible to permit:

(1)
Maintenance of internal security.
(2)
The encouragement of orientation toward the free world of these countries and conversely, the prevention of a drift toward neutralism or toward the Soviet orbit.
(3)
The creation of social and economic conditions that will permit the growth and survival of non-Communist political institutions.

c. iran

Military Aid Objectives

To assist the Iranians in the development and maintenance of a military establishment capable of:

1.
Maintaining internal security.
2.
Carrying out a delaying action against an aggressive force.

Economic Aid Objectives

The general objective is to reverse the declining trend in production which is carrying the country in the direction of disintegration. The specific economic objectives are:

1.
To get immediate action with minimum of further planning.
2.
To benefit as many people as quickly as possible.
3.
To supplement the military aid program.
4.
To concentrate on the basic economic requirements of the country and to help develop those enterprises which are unlikely to attract private capital.
5.
To stimulate the development of such enterprises as are likely to improve the Iranian balance of payments.

d. arab states and israel

Military Aid Objectives

The general objective for the region as a whole is to assist in building up the defenses of the area on a basis of impartiality as between the Arab States and Israel in order to: [Page 407]

1.
Assist these nations in the maintenance of internal security.
2.
Increase the capabilities of these nations to harass and sabotage the invader and to assist in liberation in the event of Soviet conquest of the area.
3.
Prepare the area for allied military use in the event of war.
4.
Encourage orientation toward the free world of these nations and conversely, prevent their drift toward neutralism or toward the Soviet orbit.

Economic Aid Objectives

Our general objective is to make this weak and divided region a stable area, willing and able to resist internal subversion, prepared to keep the peace, and disposed to pursue objectives consistent with our own.

The specific economic objectives are:

1.
To counteract popular hostility and suspicion of the U.S. by providing concrete evidence at the grass roots of U.S. constructive interest in the local welfare.
2.
To strengthen support for the present governments or similar moderate governments by assisting them to provide more effectively for the needs of their people, especially in the fields of health, sanitation, education and agriculture.
3.
To give some impetus to economic development in the essentially stagnant economies of the area:
a.
So as to provide opportunities for productive employment to the disaffected unemployed.
b.
So as to make possible the resettlement of the hundred’s of thousands of Arab refugees.
4.
To support the UN program for the relief and resettlement of the Arab refugees from Palestine.

e. libya, ethiopia, liberia

Aid Objectives:

To take such steps as are possible to insure:

1.
Maintenance of internal security.
2.
Acquisition by the U.S. of strategic bases.
3.
A continued flow of strategic raw materials.
4.
Continued orientation toward the free world.

f. latin america

Military Aid Objectives. The basic objective of the MSP military grant aid program for Latin America is to help certain Latin American Governments to prepare their military forces to perform military missions which are essential to hemisphere defense, but which are generally beyond and above the requirements of their own local defense. These are missions which the U.S., in its own security interests, will have to perform in time of danger on its own if the Latin American Governments continue to be unable to carry them out. The political [Page 408]objective is to further strengthen the will of the Latin American Governments and peoples to cooperate in all aspects of hemisphere defense.

Economic Aid Objectives

1.
To stimulate the volume and types of production of basic materials required for defense production and stockpiling by helping the Latin American Governments to solve problems that would otherwise inhibit the expansion of raw materials production.
2.
To assist in overcoming present weaknesses in the Latin American economic structure which contribute to political and economic instability to the end that the orientation of the governments and people of the Latin American countries toward the U.S. may continue to be at least as favorable as at present.

g. multilateral technical assistance

To support the technical assistance programs of the United Nations and the Organization of American States.

  1. At the 38th Meeting of ISAC, August 14, Thomas D. Cabot, Director of International Security Affairs, instructed Jonathan Bingham, Assistant Director for Non-European Security Affairs, to prepare a memorandum setting forth guiding principles to assist in planning the fiscal year 1953 foreign aid program for non-European areas. ISAC reviewed in detail the resulting drafts at its 41st Meeting, August 31, and 42d Meeting, September 5. The version approved at the latter session was issued as document ISAC D–22/3b, September 6, 1951. The accompanying annex was approved at the 43d Meeting of ISAC, September 11. (ISAC Files, Lot 53 D 443)
  2. General of the Army Jean de Lattre de Tassigny, French High Commissioner and Commander of French Union Forces in Indochina.