469. Despatch From the Embassy in Thailand to the Department of State 1

No. 458


  • Embassy Telegram No. 2327, March 23, 19552


  • Transmittal of Copy of Ambassador’s Letter to Prime Minister re Thai Economic Policy
[Page 812]

The referenced telegram recorded the conversation which I had on March 18 with Prime Minister Pibulsonggram in which I outlined some of the measures in the economic field which the Government of Thailand might appropriately take for this purpose. The Embassy and USOM had given considerable thought to this subject and the recommendations contained in the enclosed letter written to the Prime Minister at the latter’s request consequently constitute our combined best judgment. They were favorably received by the Prime Minister when orally outlined to him although the extent to which they may be translated into government policy and action remain to be seen.

I may remark, however, that recent measures of the Thai Government provide a basis for greater optimism in this respect. The most notable of these, reported in Embassy despatch No. 423, March 2,3 have been Cabinet approval of the proposals of the Minister of Finance sharply to reduce government expenditures under the 1955 budget and of the Minister of Finance’s request for earmarking of part of the U.S. defense support funds to finance a study by U.S. fiscal experts of means by which Thailand’s system of public finance and fiscal management may be improved.

John E. Peurifoy


Letter From the Ambassador in Thailand (Peurifoy) to Prime Minister Pibulsonggram

Your Excellency: I refer to our conversation of March 18 during which I reviewed with you the assumptions on which my government had expressed its willingness to make available additional assistance during the current U.S. fiscal year. Among these, as set forth by Mr. Harold Stassen, Director of the Foreign Operations Administration at Washington, in his letter of December 4, 1954 addressed to General Phao Sriyanonda,4 was the understanding “that the Thai [Page 813] Government will make every effort to assure the best use of its own resources”.

During our conversation I also noted with satisfaction the steps recently taken by your government to strengthen the economy of Thailand, such as the elimination of preferential rates of exchange, measures designed to tighten exchange control against capital flight, and the adoption of certain fiscal policies designed to reduce annual budget deficits. These are illustrative of measures which may contribute to the development of conditions under which Thailand’s resources may be most effectively mobilized for economic progress and under which United States aid can be most effectively utilized.

In addition, I suggested, for your consideration, certain other measures which appear to me likely to enhance Thailand’s ability to achieve maximum utilization of its own resources and thereby accelerate significantly the growth of its economy. At your request, I am pleased to outline the more fundamental of these proposals:

Development of a fiscal system which will insure that all sums spent for governmental purposes are appropriated by the National Assembly, pass through the national budget, and are subject to record and account when received or paid out of the public treasury.
Creation of a Budget Bureau under the direction of the Minister of Finance for the purpose of examining budget requests prior to the presentation to the National Assembly and of supervising expenditure of funds already appropriated.
Reliance by the government to a steadily increasing extent on the forces of competition in the fields of industry and trade.
Adherence to the principle of impartial specifications and the award to the lowest responsible bidder in purchases by the government.
Modification and continuous review of controls over exports of non-strategic commodities to insure that increasing latitude is afforded to private initiative to participate in the promotion and expansion of Thailand’s exports.
Removal of import restrictions not specifically dictated by balance of payments considerations.
Acceleration of current steps to improve tax collections and reassessment of the impact of the present tax structure.
Adoption of measures to encourage the flow of savings into banking channels in order to augment available capital for industrial investment.
Liberalization, clarification and codification of laws and regulations relating to private foreign investment in Thailand.

Substantial progress in the areas suggested above, would, in my opinion, contribute significantly to:

Maintenance of political and economic stability,
Creation of a favorable atmosphere for the maximum utilization of grants-in-aid and technical assistance from the United States and other international sources,
Making Thailand more attractive to foreign capital for both public and private projects.

The cordial cooperation and mutual trust which exist between the Governments of Thailand and the United States afford a unique opportunity to initiate at this time measures which would promote economic development, raise the standard of living and strengthen the independence of Thailand.

My government stands ready sympathetically to consider requests by your government for technical advice and assistance to move forward in the areas outlined above or in other allied fields which your government may suggest. For this reason, I welcome the proposal put forward on March 3 by your Minister of Finance to use part of the funds provided under the terms of Mr. Stassen’s letter of December 4 for a study of means to improve Thailand’s system of public finance and fiscal management.

Please accept [etc.]

John E. Peurifoy 5
  1. Source: Department of State, Central Files, 792.5–MSP/3–2455. Confidential.
  2. Supra .
  3. Despatch 423 was a 25-page appraisal of budget and financial data relating to Thailand for the period 1953–1955. Additional supporting detail was provided in nine enclosures attached to the despatch. (Department of State, Central Files, 892.10/3–255)
  4. Not found in Department of State files. An earlier draft of the letter, dated December 2, is Ibid., 792.5/12–254. The letter was based on a December 1, 1954, memorandum from Raymond T. Moyer, Regional Director for Far East, FOA, to Stassen, printed in Foreign Relations, 1952–1954, vol. XII, Part 2, p. 738.
  5. Printed from a copy that bears this typed signature.