Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

792.5/12–154

No. 437
Memorandum by the Regional Director for Far East, Foreign Operations Administration (Moyer) to the Director of the Foreign Operations Administration (Stassen)

secret

Washington, December 1, 1954.

Subject:

• Additional Assistance to Thailand

1. Problem. The Department of State, for political reasons, considers it essential that prior to his departure, General Phao Sirynonda, Deputy Minister of Interior of Thailand, be given assurance of increased U.S. assistance to Thailand in response to the request for additional aid which he recently submitted on behalf of his government.¹ General Phao plans to leave Washington about December 4.

2. Discussion. The Thai Government requested additional assistance in the following amounts: $153,590,000, over six years, for development projects; and $36,841,000 in CY 1955 for budgetary support, primarily for the armed forces.

The Country Team was asked to review the Thai request in the light of financial resources available to Thailand for meeting the cost of military, economic and psychological programs necessary to combat communist penetration. (Incl. A: Usfoto 438, Nov. 19.)²

A cabled summary of the Country Team’s recommendations which are being forwarded by airgram has been received (Incl. B: Tousfo 489, Nov. 30).² It recommends additional grant aid totalling $25,225,000 in FY 1955, (including $600,000 for additional military end-item assistance); and $39,115,000 in FY 1956 (including $9,375,000 MDA), over and above presently planned MDA and Technical Cooperation programs.

The Country Team also recommends a loan program totalling $147.7 million, of which $16.2 million would be required in FY 1955 and $35.6 million in FY 1956. This is an overall requirement for external loan financing; the U.S. contribution would be reduced by the amount of any financing available through IBRD.

Since there is no prospect for a substantial improvement in Thailand’s revenues and foreign exchange earnings, the country will require additional external financing to maintain its present military forces, and to cover the cost of development projects necessary for (a) mounting communist threats at subversion and (b) defense support. While Thailand can undoubtedly arrange for some additional loans from established banking institutions, the Country Team believes that loans through banking channels will not cover the cost of projects required primarily for the purpose of meeting defense and cold war objectives.

O/FE included in its budget submission for Thailand a request for $19 million for defense support, and a contingency reserve of $25,000,000 to cover additional requirements which might be identified by the Country Team’s examination and appraisal of the Thai request for increased aid. As a result of the agency review of budget submissions, the defense support figure was reduced to $15 million, and the contingency item was eliminated, except as a possible claim on a world-wide reserve.

In the light of the Country Team’s recommendation that increased defense support is required in Thailand, even if there is no substantial increase in Thai force goals, it will be necessary to reconsider the level of aid to Thailand in FY 1955 and FY 1956.

The Department of State considers that it would be seriously damaging to U.S. interests in Thailand for General Phao to receive no more than a general assurance of sympathetic consideration by the United States of Thailand’s aid request. He has been a strong supporter of U.S. objectives in Thailand, has cooperated closely with U.S. agencies, and is a leading political figure—a likely successor to Field Marshal Phibun as Prime Minister. For these political reasons, a firm commitment to General Phao of some increased assistance to Thailand is considered necessary, prior to final review of the total grant and loan program proposed by the field. Any such commitment would have to be in very general terms since the detailed comments of the Country Team on specific project proposals have not yet been received.

3. Conclusion. Thailand will require defense support assistance in excess of that currently programmed for FY 1955 and presently provided for in the FY 1956 budget submission. At this preliminary stage of planning for FY 1956 it would be premature to give any assurances to the Thai Government on general levels of aid. Additional allocations to Thailand during the current fiscal year might be provided from Section 121 funds to meet immediate defense support requirements pending inter-agency review of total requirements for grant and loan assistance to Thailand in FY 1956.

4. Recommendations:

(a) The attached letter³ be given to General Phao, advising him of U.S. agreement to furnish an additional $36.5 million to Thailand for defense support in FY 1953.

(b) The proposed level of aid for Thailand for FY 1956 be increased to cover the additional requirements, as determined after inter-agency review of the Country Team’s recommendations.

1. The Thai request, in the form of a booklet entitled “The Request of the Government of Thailand for Additional U.S. Assistance,” prepared by the Ministry of Finance, Oct. 31, is not printed. (792.5/10–3154)
2. Not printed.
2. Not printed.
3. The draft letter is not attached to the source text; another draft, dated Dec. 2, is not printed. (792.5/12–254) An OCB Status Report of Dec. 7 includes the following paragraph: “Governor Stassen signed a letter on December 3 committing an additional $28.2 million in aid for Thailand for FY ’55. It is to be used for justified projects of a defense support nature. The letter is in reply to the one delivered to the President by General Phao.” (OCB files, lot 62 D 430, “Status Reports III”) No copy of the final letter from Stassen to Phao has been found in Department of State files.