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

892.10/7–1751

Memorandum of Conversation, by Mr. Wilfred Malenbaum, Chief, Investment and Economic Development Staff

secret

[Washington,] July 17, 1951.

Subject: Supplementary Loans to Thailand

Participants:	Eugene R. Black, President, International Bank for Reconstruction and Development
	Willard L. Thorp—State Department1
	Wilfred Malenbaum—State Department

The meeting was arranged by Mr. Thorp to discuss with the IBRD, the U.S. Government’s problem of increasing, through the use of new loans, the proposed $7 million U.S. grant aid program to the originally contemplated $12 million figure. Mr. Thorp outlined the background of the problem and the strong reasons for the U.S. desire to maintain a $12 million figure in discussions with the Thais. Such loan action could perhaps most readily be obtained through the Eximbank. However, in view of the IBRD loans recently made to Thailand, the Department thought the IBRD might be interested in further loan action.

Mr. Black made the following points:

(1) The Bank management has had difficulties in the loans already negotiated with Thailand because the strong Thai financial position did not seem to justify public loan assistance. Mr. Black called particular attention to the fact that the Thai Government and nationals have been investing heavily in IBRD bonds here and in London. Moreover, there were no Thai requests before the Bank nor was there much evidence of the need for additional funds.

(2) Independently of (1), he foresaw a difficulty in the U.S. offering the Thais an IBRD loan. After some discussion, he did agree that a formula might be worked out so that the Thais, if they were prepared to take on $5 million in additional loan obligations, could be directed by the U.S. to the IBRD.

(3) He made it clear that he would consider it most unfortunate to inject the Eximbank into Thailand. He indicated that such an injection would make more difficult the entire IBRD program in Southeast Asia.

In the light of the above, Mr. Black said that he would discuss within the Bank the possibilities of further loans to Thailand and report to Mr. Thorp early next week on whether the Bank would be prepared to go ahead.² If it were, some procedure for transmitting this information at the appropriate time and through U.S. representatives would be discussed. Mr. Thorp told Mr. Black that no commitment had been made to the Thais for specific projects. The program originally worked out with the Thais had assumed a grant basis. In fact, we did not know for sure that the Thais would desire a credit. However, any program which was worked out would have to be done in close relation to the STEM Mission in Thailand.

1. Assistant Secretary of State for Economic Affairs.

2. On July 23, Mr. Black informed Mr. Thorp about the status of the proposed loan to Thailand. The initial paragraph of Mr. Thorp’s memorandum of telephone conversation read as follows:

   “Mr. Black telephoned Mr. Thorp from New York re the proposed Thai loan. He said it was all right and that he presumed there was a good chance to get the grant of $7,000,000. The Thais were supposed to get around $5,000,000 as a credit, and if they talked with the Bank, the Bank would look at the request very sympathetically. The big problem is what the money is to be used for. The Bank does not object to talking with ECA about the program, but the Bank wants to know what the money is to be used for before it will grant the loan. In the last analysis, the Bank wants to be free to pick what the program will be. The last time the Bank looked at the Thai picture, there was some railroad extension that it thought should be done.” (398.14/7–2351)