796.5 MSP/9–852

No. 318
The Acting Assistant Secretary of State for Far Eastern Affairs (Johnson) to the Ambassador in the Philippines (Spruance)


My Dear Mr. Ambassador: Reference is made to your letter of August 291 to Mr. Allison and to your letter of September 8, 19522 to Mr. Acheson concerning industrial development in the Philippines. A reply to these letters, including your letter to the Secretary which he has requested the Bureau to consider in connection with your letter to Mr. Allison of August 29, has been delayed due to the very active consideration which has been given your views within the Department and in inter-agency discussions.

You will note from the attached memorandum1 that this Bureau was much impressed by your arguments; furthermore, that your views resulted in the Office of Philippine and Southeast Asian Affairs’ initiating conversations with the Export-Import Bank which were to culminate in a decision by the Bank to make loans for industrial development of the Philippines to the full extent of the Philippine willingness and ability to borrow (Musto 437, October 15, 1952).1

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A specific request from the Governor of the Central Bank has resulted in the Bank’s proposal to establish credits in favor of private commercial banks in the Philippines and the Philippine Reconstruction Finance Corporation to the extent of $5 million. A copy of a letter dated October 9, 19523 in which the Export-Import Bank sets forth this proposal and seeks the approval of the National Advisory Council of its consideration of this credit is enclosed for your information. Currently, the NAC is studying the proposed credit. We are all hopeful that this arrangement under which the Export-Import Bank will extend small industrial loans through commercial banks will result in the preponderance of loans being handled through commercial banks rather than the Philippine Reconstruction Finance Corporation. This should offer the greatest possible assurance that loans will be extended on a commercially desirable basis.

As you were advised by the MSA telegram of October 15 (Musto 437), MSA is not now planning to use any of its proposed FY 54 $5 million industrialization program for loans. Instead MSA is proposing to use most of this amount for industrial and engineering services to enable the Filipinos to evaluate and to develop commercially sound projects. In this connection you may be interested in a memorandum from Mr. Renne to Mr. Hayes dated October 17,3 which was made available to the Department on an informal basis. Although this document is understood not to represent the fully approved views of MSA, the document will give you some idea of the projects which MSA has in mind for possible use of this fund in finding new resources and in developing new uses for those presently known. We were pleased to learn that on the basis of the information in Musto 437 you were able to approve the use of funds for these objectives (Embtel 1153).3

I can assure you that the Secretary, Mr. Allison, and their staffs very much appreciate receiving your considered views on Philippine industrialization, as well as your thinking with regard to the agricultural problems of the Philippines. The impact of the current and proposed MSA programs will be followed closely. Your appraisal from time to time of the effectiveness of these programs is very much desired.

Sincerely yours,

U. Alexis Johnson
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  2. Document 312.
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