890.00/4–2053
Memorandum by the Officer in Charge of Economic Affairs, Office of Northeast Asian Affairs (Hemmendinger) to the Deputy Director of That Office (McClurkin)
Subject:
- The Colombo Plan and Its Possible Use as a Focal Point for Regional Development in Asia.
The Colombo Plan grew out of a series of meetings in 1950 beginning with a Commonwealth Ministers’ meeting in Colombo in January of that year. At Sydney, Australia in May a Commonwealth Consultative Committee was formed and the decision taken to attempt to expand membership to areas outside the Commonwealth. In addition, plans were drawn for a technical assistance program for the area. In September, 1950 at London the Committee issued a report entitled “The Colombo Plan for Cooperative Economic Development in South and Southeast Asia” containing the six-year development plans of each of the individual Asian member countries. It is from this report that the organization took its familiar title. The formal name of the organization was subsequently changed to the “Consultative Committee on Economic Development in South and Southeast Asia” after its membership had been broadened.
Membership
The original membership of the Consultative Committee consisted of the U.K., Canada, Australia and New Zealand, together with India, Pakistan, Ceylon, Malaya, and Borneo. The Associated States of Indochina, Burma, and Nepal have since become members and the Indonesian Cabinet recently announced its intention to join at the next annual meeting. The Philippines and Thailand, while not members, have sent observers to past meetings of the organization, as have ECAFE and the IBRD. The U.S. became a member of the Consultative Committee in 1951.
U.S. Attitude Toward Colombo
Initially the U.S. was rather reserved in its attitude toward membership in the Colombo Plan for fear it would appear that an exclusive U.S.-Commonwealth club was being formed in Southeast Asia. We took the position that U.S. membership would be contingent on broadening the participation of countries within the area, that the organization should continue to be entirely consultative, that it should function without a central secretariat or formal organization, and that membership would not imply endorsement of the plans drawn up by the countries within the area. It was also made clear that the U.S. would not undertake to underwrite whatever deficit might be determined to exist after all local resources and contributions of other donor countries had been taken into account. On the other hand, the U.S. recognized the need to increase the consciousness of the countries in Southeast Asia of the need for careful programming of their development and that the organization could perform a useful function in educating both member countries and the world in general regarding the nature and scope of the development problem.
[Page 308]One of the principal points made by the U.S. in consenting to membership in the Colombo Plan was that any aid to be rendered should be entirely on a bilateral basis. The U.S. stipulated that the organization should not attempt to indicate the priority of need for development assistance as between aid recipient countries nor the amount of assistance any given country should receive. This was done primarily in order that the U.S. might maintain “control” of the assistance rendered and retain freedom of action in determining the necessity for given projects. We feared being drawn into a position of underwriting local currency costs (which is a bottomless pit) rather than rendering assistance in a manner designed to give an incentive for the underdeveloped countries to maximize their own contribution to financing economic development.
Functions
There is a popular misconception that the Colombo Plan is a central plan which is regional in scope and that the organization is designed to administer aid for economic development. Development programs are entirely those of the individual participating countries. They are not screened by the Consultative Committee and no effort is made to develop a multilateral approach to the programming of economic development. This is consistent with U.S. views concerning the function of such an organization and particularly with the stipulation that U.S. aid, as with all “donor countries”, should be rendered bilaterally. The Consultative Committee has four principal functions:
- 1.
- to provide a rallying point for eliciting bilateral aid;
- 2.
- to provide a vehicle for publication of an annual report describing in some detail the development programs, progress in carrying them out, and estimates of external funds required for future development financing;
- 3.
- to provide an inducement to the Asian countries to systematize their approach to economic development in order to elicit outside aid; and
- 4.
- to provide a forum for informal discussion on economic development problems.
The Colombo Plan as a Regional Coordinator
It is clear from the above that to date the Colombo Plan has not provided the basis for a regional approach to economic development problems. There has undoubtedly been accomplished, in the process of developing individual country plans and in drafting the reports, as well as in discussion, a consciousness that the problems faced by all the underdeveloped countries of the Far East are substantially the same. They have come to appreciate the importance of careful programming and of the limitations on their own ability to modernize their economies rapidly.
[Page 309]Some of the considerations which caused the U.S. to take a cautious attitude toward the Colombo Plan initially have since been considerably alleviated. Merrill Gay is now of the opinion that we can and should take a less neutral position in the Colombo Plan organization, that its Commonwealth character has largely disappeared because of the inclusion of the non-Commonwealth countries and more active participation by the Asian members.
Japanese membership in the Consultative Committee is now a distinct possibility. At the ECAFE meeting in Bandung1 the Japanese delegate2 approached the Indian delegate concerning Japanese membership in the Colombo Plan. The Indian delegate, who is the Indian Minister of Industry and Commerce,3 indicated that he was personally favorably disposed toward Japanese membership. India, as the host country at the next annual meeting of the Consultative Committee, is in a position to extend an invitation for the Japanese to be present and it is probable that discussions are now going on between the Indians and Japanese as well as Asian Colombo Plan member countries concerning Japanese participation.
If we should decide to seek to establish a Far Eastern regional operating agency in the economic field, we should seriously consider recommending to member governments the strengthening of the Colombo Plan organization for that purpose. It is not entirely clear, however, whether ECAFE or Colombo is the more desirable base on which to build. Merrill Gay is not convinced that the presence of the USSR as a member of ECAFE should necessarily rule out its being used. It appears to me, however, that it would be difficult to obtain agreement within ECAFE regarding the geographical limits not only of development planning but also of the trade patterns which would be assumed to exist, and specifically whether Communist China should be included or excluded.
One of the most difficult problems with respect to channeling aid through or attempting to develop aid programs within a regional organization would be that of control of the U.S. funds to be used. The U.S. has appropriated funds ($20 million) for the United Nations Technical Assistance Administration over which the U.S. does not exercise direct control. It is doubtful that the U.S. Congress would be willing to appropriate the considerably larger sums involved in the aid programs on the scale currently being carried out in the Colombo Plan countries unless we had full and direct control of their distribution and end use.
[Page 310]Consideration might be given to using a Far Eastern organization in the manner in which the OEEC operates where the aid requirements are drawn up and screened by OEEC before presentation to the U.S. There is, of course, a rather significant difference between the experience of the Europeans and that of the underdeveloped countries of the Far East in programming economic development and understanding the limitations on their capacity to utilize new techniques and equipment. The classic example is the request by Pakistan for a large number of diesel locomotives far beyond their capacity to service and far too heavy for the quality of the existing roadbeds of the country’s railways.
The basic reason for seeking a different means of administering U.S. aid is to find a vehicle through which, in view of the sensitivities of the countries of Southeast Asia particularly, aid will be politically more acceptable and less fraught with the danger of appearing to seek the domination of the recipient countries. It is also desirable to increase consciousness of the total regional requirements of the countries of the Far East, a willingness to undertake projects which are within their means but beyond the immediate needs of the individual countries.
I think that the Colombo Plan, all things considered, offers the best means available of attaining these objectives and that we should therefore undertake to explore the situation fully. It would first be necessary to approach the officers directly concerned with the aid recipient countries and then talk with the agency (agencies) administering our programs in those countries to determine the most appropriate technique for expanding regional consciousness and increasing the acceptability of foreign aid, including U.S. aid.