FRC Lot 53A441: ECA Deputy Administrator’s Files

The ECA Assistant Administrator for Program (Cleveland) to the ECA Acting Administrator (Bissell)

confidential

Subject: Meeting yesterday with John Allison

At a meeting yesterday with John Allison, Bill Lacey and Livey Merchant, which Ed Arnold, Bob Blum1 and I attended for ECA, I think we managed to take most of the curse off of John Allison’s letter to me of November 27.2

[Page 122]

I will just mention that we made the following points:

(a)
We are not making or planning to make a “frontal attack” on living standards in Asia.
(b)
We are not proposing any larger degree of “control over foreign governments’ economies by American advisers and technicians” than we have already undertaken in current programs, which is pretty small.
(c)
We have no intention of “treating all the various countries alike” and our operations and programming are the best evidence of this.
(d)
On reflection, and after discussion in ECA/Washington, I was inclined to agree that the giving of support to newly independent countries should not be highlighted as a new extension of U.S. foreign policy, but should be presented as one of the reasons for the weakness of governments in the area and therefore a reason for U.S. interest in strengthening governments so they can survive in a Kremlin-infested world.
(e)
We rejected the implication in the letter that we never give aid without any strings attached.
(f)
We do not contemplate a “virtual partnership” with countries to raise their standards of living, though joint administrative arrangements are useful in making sure that assistance is used in the most effective manner.

In addition to these negative points, we tried to bring out the reasons for the program, the importance of limiting the duration of each country operation, and the great importance, in the initial period, of “catalytic grants” for getting the activities going that governments can and will continue after grants have ceased. We also reemphasized our belief in loans as the main instruments for financing outside costs (and to some extent internal costs) of economic development.

Although the Far East people were not enthusiastic about having any policy statement at all on this subject, Merchant supported our suggestion that there should be a statement of general policy which can be used both in the U.S. and in Southeast Asia to indicate the methods and modifications of U.S. economic and technical aid programs in that part of the world. It was therefore agreed that we would revise the “Action Program in Asia”3 paper with a view to agreeing [on] a revised draft with the State Department during the next week or two.

We then went on to discuss the specific programs. No real objection has been raised so far except to the size of the Philippine program and to the existence of most of the Indonesia program. Although the discussions on this subject are not yet completed, I think the best we will do on Indonesia is a compromise proposal which Livey Merchant suggested. Under this compromise, we would continue the program [Page 123]next year at a level somewhat lower than this year’s program, and would achieve the reduction from the proposed $11.5 million program mostly by cutting out supplies and equipment of various kinds. As you know, it is Ambassador Cochran’s view that there should be no program at all and John Allison expressed the personal opinion that the program should be limited to the J. G. White operation4 and some technical assistance in the fields of education and public administration. With Merchant’s support, we brought out the point that to turn off the program now would have very adverse effects in Indonesia and possible repercussions in other parts of Southeast Asia.

In discussing the programs, I made the following suggestions about how we would handle, before the Budget Bureau and Congress, the question “how long are these grant programs going to last?”

a)
No general answer can be given for the region except the statement of philosophy that grant programs should taper off in favor of increased internal revenues and increased foreign lending.
b)
In Formosa and Indochina we are on a year to year basis, unable to predict the duration of the program because of the unpredictability of the military situation with which the program is associated.
c)
In the Philippines, we are operating on the basis of the five-year period set forth in the Bell Report, with a predilection in favor of somewhat larger input of aid in the early part of the five-year period.
d)
In Thailand, Burma and Indonesia, we are thinking in terms of a short period (3 to 4 years at the most) of grants, during which the grants would be used to help these countries get in a position where increased internal revenues and foreign investment loans can be used progressively more effectively.

There was no opportunity to discuss this proposed line at length, but it appeared to be well received.

On the whole, it was a most useful meeting and I think has cleared the air a lot.

  1. Robert Blum, Special Assistant to the Assistant Administrator for Program.
  2. Supra.
  3. See telegram dated November 9, p. 103.
  4. The J. G. White Engineering Co. had entered into a 2-year contract with the Indonesian Government to survey harbors, railroad facilities, telecommunications, and various industries such as mining, hydroelectric power, and civil aviation to ascertain their potential for future expansion. ECA had financed the contract. For further information regarding the ECA program in Indonesia, see pp. 583 ff.