892.10/3–2351: Telegram

The Ambassador in Thailand ( Stanton ) to the Secretary of State

secret
niact

1474. Deptel 1300 March 17.

1. ECA/W originally recommended 1952 program on grant bases of 12½ million for forward planning. This view taken as basic cooperative program planning with Thai, now constitutes their expectation aid. Thai Govt has to considerable degree staked its future on US cooperation, its present stability derives in no small part from its success in obtaining US mil/econ aid. Any sharp reversal US commitments of Thai expectations aid built on US statements wld be major political blow to most stable pro-US Govt in SEA. We feel this is a political concept of the utmost importance and one which has heretofore governed our policies and political relations with Thailand. We, therefore, strongly advise against any departure from this concept at a time when the overall political situation in SEA continues to deteriorate and Thailand’s position as an independent nation is rendered increasingly precarious. Thus while economic factors may justify use loans, Emb believes primary political purpose ECA program must be kept strongly in mind. In this connection last year has seen so many sharp changes in US policy re Thai program as to have made sound planning most difficult and to have raised serious questions Thai Govt leaders whether US knows what it wants in aid program. Present 1952 program is a cooperatively planned project, in part including projects originally planned 1951 but postponed due slow start ECA, late delivery materials. Emb most strongly urges 1952 programs be permitted to go forward without further disruptive changes in quantity or policy.

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2. Nevertheless Emb has studied problem with great care and agrees with view reftel that sound economic approach to Thai 1952 ECA program as set forth Ecato 17 Jan 91 would indicate shift of some projects to loan basis may be feasible. As Emb has indicated in previous communications, Thai do not suffer from overall shortage foreign exchange; slow economic development results primarily from basic lack sufficient domestic capital. Some projects included in ECA 1952 program can be expected to earn substantial income and, with favorable foreign exchange position, repayment of foreign currency loan of moderate size is feasible despite recently completed World Bank loan. However, further careful analysis of Thai foreign exchange requirements resulting from MAAG, ECA and other programs is necessary before final judgment of adequacy. In view of Emb some individual projects in fol categories ECA 1952 program may be considered for transfer to loan basis, if further detailed analysis supports initial conclusion as to earning capacity: Telephone and telegraph; mining; industry and commerce. Total loans involved amount to far less than 50 percent 1952 program stated reftel. Further, Emb believes loan fund available to start sound private projects would be real stimulus immed economic development.

3. Emb does not agree highway program 1952 falls clearly within loan category. While long-term economic value highway program unquestioned, contemplated construction will not bring quick direct income to govt in banner projects listed foregoing para. Economic return new roads’ spreads gradually among many elements population and affects only indirectly and later revenues of expending govt. Further highway program 1952 in considerable part justified as to timing by mil strategic factors and by deep concern Pri Min. Emb, therefore, does not believe highways shld be transferred loan basis. Similar reasoning applies Thai requirements irrig, electric power under 1952 program in which projects meet basic national requirement, and will result in favorable impact on Thai people.

4. Any case, believe any shift to loan aid is not desirable if it involves sizable cut aid program, long delay or uncertainty in projects, which whatever bankable nature are urgently needed by Thai to raise production, living standards. If as indicated reftel, shift to loan basis means transfer such projects to tentative, uncertain and delaying procedures Export–Import Bank, Emb wld oppose for overriding political reasons. If, however, shift cld be accomplished within present program without delay planning, receipt goods, Emb believes idea sound as applied para 2. Without detailed knowledge US loan procedures, [Page 1606] Emb nevertheless believes cannot be effectively applied before 1953 program and shld certainly not be contemplated in magnitude indicated in reftel for 1952. Advisable under 1952 program to give ECA flexible loan authority to be applied specific categories mentioned para 2 as they develop within total 12 million program.

Stanton
  1. Not printed.