Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

31. Telegram From the Department of State to the Embassy in Burma¹

Washington, March 29, 1956—8:23 p.m.

989. Joint State–ICA message.

1. You authorized inform GUB at appropriate level US prepared discuss development loans and Battle Act assurances prerequisite to such loans.

2. You may advise GUB that Battle Act would not present problem if GUB were to limit rubber shipments to Communist China as suggested Embtel 1042,² refrain from shipment of Title I items³ to Communist bloc and discuss in advance with the US quantities of any items on Title II list proposed to be shipped to any Communist destination. Such assurances could be oral and would suffice to have GUB simply state it prepared proceed with negotiations on basis knowledge foregoing.

3. You may inform GUB that, on assumption Battle Act problem obviated, US prepared:

a) Discuss loan for development purposes of up to 80 percent of local currency proceeds of sales under PL 480 agreement. Loan terms shown by standard agreement form pouched Embassy under transmittal slip March 9, copy of which may be made available to GUB. In view fact Burmese PL 480 agreement does not specify use portion of local currency proceeds for development purposes, will be necessary amend basic PL 480 agreement for that purpose. (FYI: Though above information can be transmitted GUB, do not initiate negotiations this subject until Department Circular 175 authorization obtained. End FYI.)

b) Offer GUB up to $25 million in dollar development loan subject to negotiation mutually agreeable projects. This will supplement further assistance which IBRD has indicated it prepared furnish GUB (Deptel 962⁴). FYI: Believe that combination of this development loan plus further IBRD loans should produce desired political impact necessary prevent GUB from becoming seriously entangled with Communist bloc in execution its development program. End FYI.

4. Guidelines for discussion of Para 3 (b): Loan these Mutual Security funds entail conformance certain minimum legislative and procedural requirements applied worldwide and inherent in aid under Mutual Security Act. Feel essential make most important points clear to GUB in making offer, in order avoid difficulties later if GUB objects these requirements.

Following points seem adequately covered by ECA bilateral of September 5, 1950,⁵ still in effect, so presumably no new agreement necessary and matter may be handled by exchange of notes:

(a) ICA review and approval of projects proposed for financing.

(b) Limited number program, technical and administrative staff in Burma attached to Embassy. Do not anticipate establishment formal mission at this time.

(c) ICA procedures would apply but with provisions for special expedited handling. Hope avoid types of problems and irritants of earlier U.S. aid program.

(d) Right of audit and end-use check.

Prefer projects for provision basic facilities, e.g., transportation, communications and power; or for provision basic government services to people, e.g., public health and education rather than those contributing directly to increased production crops in world surplus or undue emphasis Socialistic approach. Prefer projects of demonstrated engineering and economic soundness.

Assume loan to cover foreign exchange costs only and GUB will meet local currency costs from own budget or PL 480 source.

Visualize 40 year loan, repayable partially in local currency, partially in dollars, ratio subject to negotiations. If necessary could arrange dollar repayments fall due after IBRD loans liquidated. Interest rates for dollar repayment 3%, for local currency 4%.

In view Embtel 1042⁶ and views expressed by Congressman Judd,⁷ we are postponing indefinitely further consideration assistance to Burmese medical center. Village sanitation project could be aided out of PL 480 local currency and development assistance loans, depending on its relative priority vis-à-vis economic development projects which might be financed from those two sources.

For Bangkok: FYI Only. Further instructions re handling with TG follow soon as GUB reaction known. Embassy suggestions would be appreciated.

For Ambassador Satterthwaite from Robertson:

Dislike even suggest delay in your leave plans but in view importance Burma situation and these programs for which you have worked so hard, would it not be desirable for you delay departure long enough personally initiate these negotiations?

Dulles

1. Source: Department of State, Central Files, 411.90B41/3–1456. Secret; Niact. Repeated to Bangkok.
2. Telegram 1042 from Rangoon, March 14, reported Satterthwaite’s view that, although the Burmese Government would not agree to a publicly announced embargo on the shipment of strategic goods to the Communist bloc, it might be possible to obtain some form of commitment that the government would, in practice, find ways of preventing such exports. (Ibid.)
3. Title I of the Mutual Defense Assistance Control Act of 1951 forbade export of strategic items from the United States; Title II restricted the export of less strategic items.
4. See footnote 2, Supra.
5. Reference is to an agreement on economic cooperation signed at Rangoon, September 13, 1950; for text, see 1 UST 668.
6. Telegram 1042 from Rangoon (see also footnote 2 above), reported that in view of U Nu’s interest in the new environmental sanitation project and the probability that this project was more feasible than the medical center, Satterthwaite considered it preferable to give priority to it and to defer the medical center project until it could be more carefully studied.
7. Representative Walter H. Judd (R–Minnesota).