892.00–TA/3–1751: Telegram

The Secretary of State to the Embassy in Thailand

secret

1300. Dept after consideration FY52 Thai program prepared by ECA for submission Budget Bureau, totalling approx $12 million, has reached conclusion that only approx half program constituting stepped up technical assistance shld be grant aid and that other projects, particularly generators and irrigation for northeast, highway construction, and mining equip shld be subject of loan assistance. Contemplated that loans wld be handled by IBRD or Eximbank, but this is of course, no guarantee affirmative bank action.

Depts conclusion is not based on special Thai or SEA factors, but on position applicable to all countries that grant commodity aid shld not be extended to bankable projects when country is and likely to continue in sufficiently strong external economic position to warrant loans. Exceptions cld of course be made for compelling non-economic considerations, and particularly where these considerations most likely be sympathetically understood by appropriations authorities.

In Thai case we have concluded that necessities military and strategic problems warrant offer aid for projects such as those named, but [Page 1604] not as gift. Conclude also that although obviously loans less attractive to Thais than grants, they can be made understand their sound economic position both does not warrant gifts and does warrant loans, and that they will in general although not necessarily to last particular undertake borrow and carry out important projects this type without significant hurt our political relations and particularly without real ground to feel they have been let down or we are withdrawing our support.

Your comments are, however, urgently required by Dept, particularly if you find on other or stronger evidence than considered in Wash that position shld be reconsidered. You may if necessary consult with STEM, but not with Thai Govt.

Acheson