Foreign Relations of the United States, 1955–1957, Korea, Volume XXIII, Part 2

155. Memorandum From the Officer in Charge of Economic Affairs in the Office of Northeast Asian Affairs (Ockey) to the Deputy Assistant Secretary of State for Far Eastern Economic Affairs (Jones)¹

Washington, June 8, 1956.

SUBJECT

• Report on Korea to the Prochnow Committee²

Attached is a summary report on the findings and recommendations on aid programs in Korea for the Prochnow Committee.³ You will recall that the Prochnow Committee was established to conduct a thorough review and analysis of the aid programs in certain countries where unusually heavy military and economic aid programs are involved. The Prochnow Committee will consider the attached report and submit it to the NSC.⁴

You will note that the report does not make a specific recommendation on the course of action to be followed in Korea. Rather, the basic alternative courses of action are outlined. The findings and recommendations are outlined below:

Findings:

1. A continuation of the present military establishment and economic development program in Korea will cost the U.S. from $650 million to $900 million annually for the next five years, at which time Korea will not be appreciably less dependent upon external aid than is now the case.

2. The morale, training, and capability of the ROK military forces to conduct a short, successful defense are good. However, the military forces are suffering from growing obsolescence of military equipment. The cost of maintaining the present military force in Korea will be roughly $650 million a year indefinitely, consisting of $500 million in dollar aid and $150 million local currency which must be met indirectly with U.S. aid.

3. Although the economy has for the most part been reconstructed and prewar consumption and production levels have been reached, there appears to be no prospect for Korean economic viability.

Recommendations:

The recommendations are stated in the form of 4 alternative courses of action:

1. Continue the existing policy with its implication of an annual cost to the U.S. of from $650 million to $850 million indefinitely. Even with this aid military equipment will become obsolescent and the economic situation will be unsatisfactory.

2. Increase the economic aid. The possibility of increasing the rate of economic development, however, seems limited.

3. Reduce military costs. While this seems to be the most possible alternative to the present course of action it is fraught with serious political and military risks.

4. Reduce the economic aid program. This would result in a reduction of consumption or investment and would create political problems with the ROK.

1. Source: Department of State, Central Files, 795.5–MSP/6–856. Secret. Drafted by Smith of NA.
2. The Prochnow Committee, formally An Interdepartmental Committee on Certain U.S. Aid Programs, was established by the NSC on December 8, 1955, to prepare reports on the coordination of military and economic aid programs in Turkey, Iran, Pakistan, Vietnam, the Republic of China, and Korea. The committee was headed by Deputy Under Secretary of State for Economic Affairs Herbert V. Prochnow and consisted of representatives of the Departments of State, Defense, and the Treasury, the Bureau of the Budget, ICA, and CIA.
3. Not printed.
4. After receiving and approving the assigned country reports, including the report on Korea, which were prepared by interdepartmental drafting groups, the Prochnow Committee submitted a final composite report to the NSC on August 3, 1956. (Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5610 Series) This report was discussed by the NSC at its 301st meeting on October 26, 1956, and the question of economic and military aid was referred to the Planning Board for further study.