Foreign Relations of the United States, 1955–1957, East Asian Security; Cambodia; Laos, Volume XXI

300. Memorandum From the Director of the Office of Philippine and Southeast Asian Affairs (Young) to the Deputy Regional Director for Far Eastern Operations, Foreign Operations Administration (Morrison)¹

Washington, June 10, 1955.

SUBJECT

• FY 1955 DFS Obligation of Funds for Laos and Cambodia

I should like to make clear the position of FE:PSA with respect to the obligation of FY 1955 military assistance funds for Laos and Cambodia.

1) I fully understand that in its management of United States aid funds the Foreign Operations Administration is bound by Congressional standards for valid obligational documents. Such documents may take the form of procurement authorizations and project agreements, or, in exceptional cases where detailed expenditure plans are lacking, of blanket intergovernmental agreements involving a lump sum up to a stated maximum granted in a specified period. The latter method has already been used in Viet-Nam.

2) Believing that there was insufficient information on costs and requirements in Laos and Cambodia to justify obligating before June 30 the entire amounts tentatively allocated in FY 1955 ($40 million for Laos, $29 million for Cambodia), FOA informed the OCB Working Group on Indochina on May 23 of its proposal to obligate funds sufficient only to carry the Lao and Cambodian armed forces through August, relying upon an uncertain Congressional reappropriation of FY 1955 funds to cover requirements of the last four months of the calendar year. Department of State representatives present at the meeting were opposed to the proposal. You replied that receipt of the State letter requesting support of the Lao armed forces and high-level representation on the obligation question would be required to change FOA thinking. The meeting was left at that.

3) At a meeting on May 27 attended by the Under Secretary, Mr. Murphy, Mr. Robertson, and myself, the stated requirements were met. As you know, the letter to Governor Stassen was signed and dispatched. Mr. Nolting was also requested to inform FOA of the Department’s view that the total allocation for FY 1955 for both Laos and Cambodia should be obligated before June 30 in order to insure our ability to provide necessary military support throughout Calendar 1955. It is my understanding that Mr. Nolting did this.

4) However, FOA apparently prefers to proceed with its proposal, defining the portion of the programs which will depend upon a Congressional reappropriation as the common-use element. This segment, set at approximately 25 percent of the total military assistance programs, is $10 million for Laos and $8 million for Cambodia.

5) I also understand that FOA representatives in an informal mark-up session apprised members of the Senate Foreign Relations Committee of the proposal for a reappropriation for the Lao and Cambodian common-use programs and that in consequence Senator George and others suggested that the total carry-over of FY 1955 funds be raised from $150 million to $200 million.

6) Aware of the above facts and what I believe to be the FOA position, I still consider that there is no reason not to obligate the entire FY 1955 allocations through intergovernmental agreements with Laos and Cambodia phrased in such manner as to make $40 million and $29 million respectively the maximum amounts which will be granted the two countries upon proper justification.

7) I do not agree the Lao program is a “horse-back” estimate of the Country Team. It seems to me now to be based on information and procedures comparable to what I have witnessed in recent years in the Korean, Japanese, Philippine, Thai, and Vietnamese programs. We had the Korean budget last year. We have the Lao budget now. Both were carefully screened. I submit that information received from Laos in recent weeks is at least as detailed as that previously received from Viet-Nam, where more than five times $40 million was obligated through an intergovernmental agreement. The Lao seven-months military budget presented the Country Team on May 24 indicated that $43.3 million would be required to support the Lao armed forces in Calendar 1955.

Commenting in Vientiane telegram 740 of June 3,² the American Missions judged this an honest piece of work based on 1954 known prices, but deemed savings of slightly more than $4 million could be made through improved procurement procedures, reductions in contemplated construction and security stockpiling, and elimination of a 10-percent troop pay increase in line with the policy adopted for the Vietnamese Army. On the basis of this budget, the Mission reiterated its recommendation that a total of $40 million be allocated for Laos for FY 1955. This would require the obligation of nearly $26 million, in addition to the $14.3 million actual disbursements, before June 30.

8) You have often stated that the common-use segment could not be obligated for Laos and Cambodia, since there were no detailed programs screened by competent authorities, specifically by a MAAG. I wonder whether this can still be said of Laos. I have on my desk a copy, received by pouch, of the Lao military budget, which contains common-use items and which was screened by MAAG/Saigon. I shall send this budget to FOA for study.

9) Although no itemized budget has been submitted for Cambodia, it seems certain that the amount tentatively allocated will be insufficient to cover requirements of the Cambodian National Army in this calendar year. Information from the field indicates that approximately $45 million, as opposed to the $29 million planned by the United States, will be needed above the Cambodian contribution. Refined cost studies have been deferred only because of the imminent establishment of a United States MAAG. I should like also to point out that the Secretary told the Cambodian Government during his visit to Phnom Penh in February that American aid in FY 1955 would be roughly $40 million. Any reduction or seeming reduction in this figure would greatly harm our political position.

10) I will admit that, before receipt yesterday of Vientiane telegram 760,³ I was prepared to agree to the FOA proposal provided that assurance could be given the field and the Department that, assuming a Congressional reappropriation, $10 million and $8 million would be obligated for Laos and Cambodia respectively in FY 1956 from the FY 1955 carry-over. I stressed the necessity of such an assurance because past experience indicates that there will be demands for reobligation from other world-wide programs for sums appreciably greater than the $200 million carry-over now contemplated.

11) Vientiane telegram 760, the arguments of which also apply to Cambodia, has confirmed my belief in our original position that intergovernmental agreements to obligate the entire amounts for Laos and Cambodia are mandatory. I believe the field has a thorough understanding of what is contemplated in Washington and rightly protests on the basis of its knowledge of the “disastrous” political and economic consequences in Laos if the hand-to-mouth procedure is followed. I urge FOA’s careful study of this telegram, particularly the statement that the U.S. “policy of short tether …⁴ may vitiate Lao cooperation,” and that ending the hand-to-mouth policy is the only position “consistent with practical objectives here.”⁵

1. Source: Department of State, Central Files, 751J.5–MSP/6–1055. Secret. Drafted by Young and Byrne.
2. Not printed.(Ibid., 751J.5/6–355)
3. In this joint telegram, June 8, the Legation, USOM, and USARMA protested “in strongest terms” against consideration in Washington of a “continuation of hand-to-mouth military budget financing in Laos” and argued that securing Congressional reobligation of the balance of calendar year 1955 funds implied “uncertainties which will be disastrous to our policy in Laos.” (Ibid., 751J.5–MSP/6–855)
4. Ellipsis in the source text.
5. On June 15 Morrison returned this memorandum to Young and noted their meeting on the afternoon of June 10 (of which no further record has been found) had cleared up “misunderstandings on this problem.” (Memorandum from Morrison to Young, June 15; Department of State, Central Files, 751J.5–MSP/6–1555) See the editorial note, infra.