Foreign Relations of the United States, 1951, Asia and the Pacific, Volume VI, Part 2

796.5 MAP/1–1551

Draft Paper by the Deputy Director of the Office of Philippine and Southeast Asian Affairs (Melby)

top secret

[Washington,] January 15, 1951.

The Philippines

problem

To implement N.S.C. 84/2¹

assumptions

1. It is assumed that the United States is determined, regardless of the cost and despite any eventualities, as part of its Pacific policy to retain the Philippines within the orbit of the democratic powers and to deny it to the Soviet orbit. This is the irreducible minimum of American security and interests in the Pacific and the Far East.

2. To assure success of this policy the developments most unfavorable to the United States in East Asia must be anticipated and taken into account in the following terms: with the inevitable debacle in Korea, with continuance of the Communist regime in power in China, with the certain Communist victory in Indochina if there is a Chinese Communist invasion (assuming American lack of available resources at present to intervene with armed force), and with the probably consequent envelopment of the rest of the mainland of Southeast Asia within the Communist embrace, non-Soviet influence will and for the predictable future have been eliminated from the East Asiatic mainland. Burma might be denied to Soviet communism in the event that developments in Asia should persuade India to abandon its neutrality, align itself with the democratic powers, and assist Burma to retain its independence.

3. American influence will then have been pushed back to the island chain off the mainland. The factors bearing on the problems of Japan and Formosa are beyond the scope of this memorandum, but it is assumed they will be retained by the United States. Assuming the development in paragraph 2, the limitations of American resources as reflected in commitments elsewhere, and the basic instability of the present Indonesian political situation, the prospects of retaining that archipelago can be given no more than a fifty–fifty chance. If the Philippines falls under unfriendly control, the American position in the island chain becomes untenable. The exploitable, strategic and psychological advantages of the Philippines to the United States are too obvious to require exposition.

arguments bearing on the problem

1. At the outset it must be admitted that the Philippines is in a parlous, though by no means hopeless, condition because of the catastrophic destruction caused by the war against Japan, of the altruistic and short-sighted failure of the United States to exercise the needed constructive and guiding influence on the affairs of the Republic since its independence, and of the relatively new societal development and experience of the Philippine people as compared with other Asiatic peoples.

2. The half-century of American rule in the Philippines created a deep-rooted and lasting orientation of the Filipino people toward the United States which will permit us to take any course of action which takes into account legitimate Philippine aspirations and tactfully approaches the natural sensitivities, insecurities and frustrations of a new state in the present world-wide struggle between antipathetic ideologies.

3. Whoever controls the Philippine armed forces controls the country in accordance with the traditional cacique pattern.

4. The post-war economic dilemma of the Philippines does not arise from a lack of basic wealth. It arises, rather, from the failure to restore prewar production (prior to 1941 the Philippines was not only self-supporting, it also paid all internal administrative and internal peace and order expenses incurred by the United States), mismanagement of available wealth, and inefficiency and corruption. In its immediate aspects the crisis arises from the dissipation of dollar reserves, and the failure to increase production sufficiently to make added dollar reserves and peso savings available for the necessary additional capital investment—through this spiral raising the standard of living to a point which will preclude internal unrest. The obvious intention of the Bell Report is that a combination of American financial and technical aid and American control will create this spiral and thereby deprive the Communists of any argument likely to seduce the broad mass of Philippine people to their way of thinking, while at the same time strengthening Philippine-American ties. The Bell Report² envisages an American expenditure of some 250 million dollars in grants and loans at an average rate of 50 million dollars a year to achieve this purpose.

5. The present Philippine military establishment, so far unable to control the Huk³ problem from a military standpoint, absorbs roughly 150 million pesos, 30 percent of the Philippine budget, a proportion which seriously endangers efforts to reestablish economic stability.

6. With the step-up in the tempo of Communist aggression in Asia and the increasing use of armed force to implement Communist purposes, it becomes increasingly apparent that the luxury of retaining the Philippines within the American orbit for the most part by relatively long-term economic methods can no longer be afforded. Emphasis on enlarged military program is now indicated. In view of the peculiar circumstances of the Philippine economic problem, the military solution offers economic as well as military prospects.

7. A formal request has already been made by the Philippine Government for additional military assistance in the form of material and budgetary aid. The first financial request is for 25 million dollars, but there is much evidence this, at a later date, will be increased. The Philippine Government obviously considers this request to be in addition to the 250 million dollars it expects to get under the ECA program and would make roughly 100 million dollars a year available. Given the present tempo in Congress, the inclination of the Department of Defense to agree to the priority of military aid, and the lobbying skill of the Filipinos, it is probable that the Philippines can get additional military aid, regardless of any other program. It is altogether possible that an additional military program would seriously jeopardize the chances in Congress of any economic program not correlative with the military. An uncorrelative military program by itself would be no more than a stop-gap with outgrowing economic consequences which would not be controlled. Parallel military and economic programs would give the Philippines greater resources than it could absorb and result in a wastage of dollars. Furthermore, the Philippines, once it had adequate dollar resources at its disposal, would lose much of its already lukewarm interest in a controlled economic program and enable the Philippine Government to play off one program against the other for its own purposes. ECA would also be enabled to reduce its dollar outlays to a nominal sum for technical assistance, and possibly for an occasional project as circumstances might indicate.

8. The Joint State–Defense Mutual Defense Assistance Program Survey Mission to Southeast Asia recommended the following with respect to the Philippines:

(a) The establishment of a regional Southeast Asian organization with headquarters in Manila.

(b) Stock-piling of American materiel for Asia in the Philippines.

(c) Stationing of one or two American divisions in the Philippines for purposes of internal order as well as availability for service elsewhere in the Far East.

(d) American training, payment for, and organization of two Philippine divisions. This would, in effect represent American control of the Philippine Army.

On the basis of the best available estimates, this would involve an expenditure in the Philippines of a sum not exceeding 50 million dollars a year, or 250 million dollars over a five-year period, said dollar exchange to be available to the Philippine Government for purchases of capital equipment and economic development by the Philippine Government, in accord with the Bell recommendations.

9. The foregoing program would provide the double advantage of affording necessary military security in the Philippines and would, furthermore, make available the necessary dollar exchange and peso savings needed for economic development.

10. American subsidy of the Philippine army to the extent of 50 million dollars a year would result in a saving of that amount in the Philippine budget. This saving should not, however, be applied to balancing the budget, which should be accomplished by a continuance of the present increased tax and improved tax collection program, but should be applied to financing the economic development program contemplated in the Bell Report. The program should be developed under the same terms and conditions envisaged in that report and with the same amount of American technical assistance and supervision. The Army military program grants would make available needed dollar exchange for capital goods imports. In any event, the amount of capital goods which the Philippines can expect to import from the United States will decrease as American military requirements increase. The basic Philippine economic need is dollar exchange, plus technical assistance, to develop resources, rather than outright financial assistance. The Philippines has the resources to finance this program itself if it will administer its internal affairs with reasonable honesty and efficiency. If the United States can increase its forced savings in the common interest, the Philippines should be expected to do likewise.

11. Any military agreement should be accompanied by another agreement providing for control of expenditure of economic resources derived from the military program as well as for requisite technical and specialized assistance.

12. The success of such a program can, in the eyes of Asia, dramatically vindicate the already unduly tarnished post-war American record in the Philippines.

13. Present Philippine leadership, by virtue of its past malfeasance and demonstrated incompetence, should be strengthened.

recommendations

1. That the recommendations of the Joint State–Defense MDAP Survey Mission to Southeast Asia be adopted as the basis of the American politico-economic-military program for the Philippines and the United States undertake to train, organize, direct and pay for Philippine armed services to the extent of 50 million dollars a year, as well as direct actual combat activities against dissident elements.

2. That the Congress be requested to make the necessary appropriations.

3. That the necessary accommodations be made with the Philippine Government and the required adjustment in the proposed ECA program be made.

1. For text of NSC 84/2, approved by President Truman November 10, 1950, see Foreign Relations, 1950, vol. vi, p. 1514.
2. Daniel W. Bell, Economic Survey Mission to the Philippines: Report to the President of the United States (Washington, Government Printing Office, 1950). For extensive documentation regarding the formulation of this report, see Foreign Relations, 1950, vol. vi, pp. 1474–1502, passim.
3. Hukbong Mapagpalaya ng Bayan (People’s Liberation Army), a military force affiliated with the Communist Party of the Philippines.