SEAC Files: Lot 53D2551
Report Prepared by the Economic Cooperation Administration for the Southeast Asia Aid Policy Committee2
SEAC D–39
Economic Cooperation Administration Stem Status Report as of January 8, 1951
general
Mr. Griffin, Director of the Far East Program Division, since his return to Washington from Southeast Asia,4 has been engaged in [Page 3] conferences with ECA and State Department officials discussing reorientation of the program in the light of the existing “front line” situation where the Missions are operating. One result of these discussions has been the departure for Southeast Asia of a “task force” of ECA and State Department administrative officers to make on-the-spot decisions on administrative support problems. Counterpart and other problems are being reexamined in the light of Mr. Griffin’s discussions in the field.
On January 6 the President signed a bill authorizing transfer, whenever “he determines that such action is essential”, of ECA Act funds (Public Law 472, 80th Congress, as amended) for the purpose of carrying out the China Area Aid Act (Title 2, Public Law 535, 81st Congress), up to a total of 3 percent of the ECA Act funds available for FY 1951. This authority makes it possible for ECA to request transfer of not more than $75 million for expansion of its Far East program. The most immediate Far East Program needs are $15 million for initiating the Philippine program,5 $15 million for expanding the Formosa program6 and $4.5 million to replace Far East program funds previously used to finance grain for India.7
As of January 8, over $57 million of ECA funds previously allotted for Far East programs had been obligated for procurement authorizations and approximately $1 million for administrative expenses, leaving an unobligated balance (of allotted funds) of $4 million. The remainder of the $92 million of funds appropriated for Far East aid has not yet been allotted to the Far East Program Division.
The China Mission is now carrying out a special commodity program for Formosa to offset deterioration in the island’s foreign exchange position as well as the seasonal peak of commodity demand. As a result of official abandonment by the Chinese Government of policies which pegged the value of Formosan currency, the price level in Formosa has risen, but ECA’s special commodity program has been an important factor in preventing inflationary pressures from getting out of hand to date. As of January 8, over $35 million had been obligated for ECA’s Formosa program, and firm requests had been received by ECA/W for an additional $16 million of food, raw materials and textiles. Further allocation of funds to the Formosa program will be required if the full $16 million is to be approved, and if a continuous supply pipe-line to Formosa is to be maintained. [Page 4] ECA/W and the China Mission have made a decision to change past policy on sales-proceeds funds in Formosa. In the future these funds will constitute counterpart, the use of which will be subject to ECA review and concurrence. ECA/W has requested the China Mission to study the economic impact of proposed US military aid to Formosa. Because adequate information on the military program cannot be made available to ECA in Formosa, it may be necessary to send an ECA representative from Formosa to Japan (SCAP) to obtain the necessary data.
The Indochina STEM has proceeded with implementation of health, relief, and other projects in Vietnam, has made preparations for a fertilizer distribution scheme to be initiated immediately upon arrival of fertilizer supplies now on their way, and has drawn up plans to train and equip first-aid personnel in 5,000 villages. Specific program plans for Laos and Cambodia are being prepared; these plans follow the same general lines as those for Vietnam, with minor variations to fit each local situation. Definite procedures for a commercial import program have been finalized by STEM. Commercial imports under this program will consist of machinery, cotton, tobacco, POL, and other commodities, and will help to generate the local counterpart funds needed for carrying out the ECA program. The difficulty of generating sufficient counterpart funds still constitutes one of the major problems in the Indochina program, but ECA/W has made a firm decision that other means will be worked out to provide the total estimated need for counterpart funds (approximately 220 million piasters—$11,000,000) if the commercial import program does not generate this amount.
The Thailand STEM has submitted to ECA/W the first comprehensive outline of its program for the remainder of FY 1951. The largest projects in this program include development of a national agricultural center ($977,500) and of the Makkasan Railway repair shop ($1,160,000). Difficulties of recruiting personnel and procuring authorized matériel have slowed the progress of program implementation, but a specialist in railway engineering is leaving shortly for Thailand to supervise the Makkasan Railway repair shop project and to advise the Government of Thailand on general railway matters.
The Burma8 STEM has forwarded to ECA/W a full outline of its program, drawn up by STEM and the Burma Economic Aid Committee, [Page 5] for the remainder of FY 1951. This program includes projects for rural health work, agricultural extension, rehabilitation of educational institutions, and repair of the port of Rangoon. Implementation of the program is going forward in the field of health, but recruitment of medical personnel has encountered many obstacles. A commodity import program to generate counterpart funds is now underway, and some medical supplies have arrived in Burma; cotton yarn has been shipped, and raw cotton will be sent shortly. Excellent relations have been established between STEM and BEAC and Burmese suspicion of U.S. motives has been significantly reduced.
The Indonesia STEM has been severely handicapped by the lack of essential personnel. The program has moved ahead slowly, however, and additional funds have been obligated for medical projects. After lengthy negotiations, the Indonesians and the J. G. White Company have agreed upon a draft contract for engineering services by the White Company. Although ECA/W has made several comments on the fees and other costs provided for in the contract, it is expected to be signed shortly, and the first White Company engineers have left for Indonesia.
The Philippine program is still in a preliminary, organizational stage. During the past month a Special Session of the Philippine Congress, convened following the Foster–Quirino Agreement, has discussed legislation which the U.S. indicated was a necessary prerequisite to large-scale economic assistance. The Special ECA Representative in the Philippines believes the Congress will pass the bulk of the basic legislation recommended. An interagency agreement between the State Department and ECA has been substantially completed, and State–ECA discussions on a draft bilateral agreement between the United States and the Philippines have progressed satisfactorily. Recruitment of personnel for the Philippine operation has encountered many obstacles which are only beginning to be overcome, but ten key persons are now in the Philippines or on their way.
In addition to programs administered by ECA’s Far East Program Division, three small ECA projects in the Far East area are being administered by the Dependent Areas Branch of the European Program Division. All three are roadbuilding projects (in Sarawak, North Borneo and Malay) designed to increase food, rubber and tin production by opening up new areas. Approximately one-half million dollars of ECA aid is being used for these projects, principally for the purchase of road building equipment.
- Files of the Southeast Asia Aid Policy Committee, 1950–1951.↩
- The Southeast Asia Aid Policy Committee, an interdepartmental body established in 1950, was charged with responsibility for policy coordination respecting economic and military aid to Southeast Asia. Committee members were Dean Rusk, Assistant Secretary of State for Far Eastern Affairs (Deputy Assistant Secretary Livingston T. Merchant generally represented Rusk at SEAC meetings); Maj. Gen. Harry J. Malony, Special Assistant for Southeast Asian Problems, Office of the Secretary of Defense; and R. Allen Griffin, Director of the Far East Program Division, Economic Cooperation Administration.↩
- This paper was undated. It was circulated as document SEAC D–39, January 10.↩
- Griffin headed a survey team which visited Southeast Asia in March and April 1950 to develop recommendations regarding initial economic and technical aid to the area. In December, Griffin made a second regional circuit tour. For documentation on the Griffin Mission and related activities, see Foreign Relations, 1950, vol. vi, pp. 1 ff.↩
- For documentation on U.S. relations with the Philippines, including information on economic assistance, see pp. 1491 ff.↩
- Documentation on U.S. aid to the Republic of China is scheduled for publication in volume vii.↩
- For documentation on U.S. relations with India, see pp. 2085 ff.↩
- For documentation on U.S. relations with Burma, including information on economic assistance, see pp. 267 ff.↩