406. Airgram From the Embassy in Jordan to the Department of State1
Ref: CG 409, December 31, 1959.2
- A.
Country team has given earnest consideration to possible ways and means adapting US program of assistance to Jordan to requirements of Section 503(c) 1959 Mutual Security Act,3 i.e., specific plan for each country receiving bilateral grant assistance whereby, wherever practicable, such grant assistance shall be progressively reduced and terminated.
Political and economic situation in Jordan such that we can foresee no specific timetable either for reduction or termination of US grant program in Jordan within period 1960–1965. We can, however, see several means by which US grant aid could possibly be reduced to a presently unpredictable extent and at a time we cannot now specify. Before reviewing these possibilities, might be useful restate basic Mutual Security Plan Objectives in Jordan, as country team sees them:
- 1.
- Encourage and assist Government of Jordan to increase its economic development activity so as (a) to reduce ultimately magnitude of its dependence on external aid, and (b) to bring about discernible rise in present low standard of living, a requisite to political stability.
- 2.
- Encourage the maintenance of armed forces capable of maintaining internal security, aiding in continuance of governmental stability, and successfully resisting encroachments until United Nations or Free World countries can take effective action to protect Jordan.
- B.
Our grant assistance to Jordan is designed to meet the above-stated objectives. Jordan is not a viable country and depends for its very existence as well as political stability on external assistance. With a population growth estimated at 3 percent per annum; a large military establishment presently essential to internal stability; the unsettled conditions in the area, and particularly the lack of settlement of the Palestine question; it is impossible to foresee any possibility of terminating our program of grant assistance in the period 1960–1965. Furthermore, the people of Jordan share the aspirations for improving their standard of living common to all the peoples of the underdeveloped countries. The disparity between their own standard (per capita GNP of $84) and that of Israel ($722) may be particularly painful to them.
If there should be a relaxation of tension in the area and a solution of the Palestine refugee problem resulting in a reduction in military expenditures, releasing funds which could then be diverted to economic development, we should have a brighter picture indeed. However desirable that situation is, it is not one on which we can prudently predicate a reduction or termination of US grant assistance.
- C. We believe Jordan should be encouraged to increase its economic
development expenditures and to restrict future military
expenditures to the present level. While our major objective in
Jordan has been the maintenance of political stability, and it must
remain our major objective, an essential corollary here as in other
less-developed countries is the realization of a perceptible rise in
standards of living through economic development. However, within
this policy, there are several possibilities for reducing US grant
assistance:
- 1.
- Induce Western European countries, e.g., Federal Republic of Germany and Italy, to extend capital assistance to Jordan, and induce the UK to increase its assistance. To the extent that such assistance is increased, our present annual grant of $40.5 million for budgetary support could be reduced.
- 2.
- If a multi-year program of sales of US agricultural surpluses to Jordan under Title I of Public Law 480 could be initiated, the maximum proportion of the dinar sales proceeds to be granted to the Jordan Government, we might be able to: a) increase the total expenditures for economic development in Jordan and b) simultaneously reduce the amount of our grant aid. Our intention would be to recommend reduction of US grant assistance, but only to the extent of part of the amount generated by the PL 480 program. The feasibility, extent, and timing of such a Program cannot be determined now.
- 3.
- If Development Loan Fund should be willing to undertake to finance a substantial volume of economic development projects in Jordan, consistent with Assumption 1 as stated by Department and ICA/W, our grant aid could be reduced. Country Team would welcome [Page 733] this development and appreciates activities already financed by DLF. However, uncertain as to how extensive DLF activities here will be.
- 4.
- If, as we strongly hope, GOJ increases its tax revenues and collections, US grant aid might be diminished. Here the Ford Foundation fiscal study team coming in June–August 1960 may be extremely helpful. But the magnitude of this source of governmental revenue is not large, because of the extremely low GNP in Jordan.
- 5.
- The new International Development Association, if it has a liberal lending policy applicable to Jordan’s economic and financial circumstances, could make a significant contribution to Jordan’s economic development, as well as permitting a reduction in US grant aid.
- 6.
- Utilization of Jordan’s considerable internal credit potential for purposes such as working capital in the agricultural sector and for financing of capital investments, not excluding a small fiduciary issue to be used for the latter purpose. Aiming at achievement of the above objective by helping to put into effect the law establishing the Central Bank in order to enable Jordan gradually to build up its own monetary and credit policies and facilities to best serve the national interest.
Summary
While Country Team cannot now predict timing or specific extent of measures or developments which could safely permit reduction US grant aid, the above six possibilities give us hope that ways and means may be found to permit a reduction. We cannot predict time when elimination of US grant aid may be possible consistent with US interest in Jordan’s stability as contribution to peace in area.