182. National Intelligence Estimate1

NIE 54-58


The Problem

To estimate probable political and economic developments in Ceylon and Ceylon’s foreign policy during the next few years.

Summary and Conclusions

The present nationalist-neutralist government of Prime Minister Bandaranaike came to power in 1956, when the electorate decisively repudiated the former pro-Western, upper-middle-class government. [Page 377] The Bandaranaike government has been seeking to establish an independent position in foreign affairs and to remove vestiges of Ceylon’s colonial past. While remaining in the Commonwealth, it has induced the UK to give up previously granted base rights on this strategically located island and has rapidly developed diplomatic, cultural, and economic relations with the Sino-Soviet Bloc. (Paras. 11, 42, 46)
Prime Minister Bandaranaike and a majority of his cabinet are moderate socialists, but his government includes radical leftist elements, including a group led by Philip Gunawardena that aims at establishing a communist state in Ceylon. Despite growing opposition to Gunawardena’s more radical proposals, we believe the chances are somewhat better than even that the coalition will hold together until the elections required by April 1961. However, labor unrest, strikes, and Tamil-Sinhalese tensions will probably continue to plague the present government within this period. (Paras. 12–17, 31, 34)
Ceylon’s economic situation has deteriorated during the past two years as a result of crop losses and declining export earnings. Moreover, over the long run, the country’s food production and export earnings probably cannot keep pace with the rapid rate of population growth which has developed since the war. In this situation, the government will almost certainly continue to seek foreign assistance on the best terms available from any source. (Paras. 33, 37–39, 40)
Sino-Soviet Bloc interest in Ceylon has markedly increased in the past year and a half. The Bloc has taken advantage of the Bandaranaike government’s willingness to expand economic, political, and cultural relations. This is evidenced by the establishment in Ceylon of Soviet, Chinese Communist, and Czech embassies during 1957–58 and by Ceylon’s initial acceptance of $60 million in foreign assistance from the Bloc during the past year. (Paras. 40, 46)
The three indigenous communist groups in Ceylon have considerable influence but are hampered by mutual antagonism—one is in the government coalition, another is the leading opposition party, and both are distinct from the orthodox Ceylon Communist Party. Although the communists currently lack substantial support among the rural Sinhalese mass, they control almost all of the urban trade union movement and are endeavoring to extend their influence in rural areas. (Paras. 19-21)
Radical leftist and communist influence is likely to expand within the government and in the country at large because of Bandaranaike’s tendency to compromise, the declining standard of living, and increasing Sino-Soviet Bloc activities. However, it is unlikely that the communists could win an election or form an effective government within the next few years. Over the longer run there is a [Page 378] danger that the general leftward tendency in Ceylon may lead it beyond its present neutralist policy to a position unfriendly to the West. (Paras. 8, 17, 23)


[Here follow Sections I, II, and III.]

IV. External Affairs

Relations with the West

Before the coming to power of Bandaranaike’s government, Ceylon’s economic and political relations were mainly with the West, principally through the island’s membership in the British Commonwealth. Shortly after independence Ceylon negotiated a mutual defense agreement with the UK whereby the UK assumed major responsibility for the island’s defense, using Ceylonese naval and air bases and communications facilities. The UNP governments, especially under Sir John Kotelawala, were generally pro-Western and anti-Communist.
The change which has taken place in Ceylon’s foreign policy under Bandaranaike, in response to the upsurge of nationalist-neutralist sentiments revealed in the 1956 election, has been much sharper than that in domestic policy. In November 1957 Ceylon got the British to agree to withdraw from the naval and air bases, although it did not repudiate the other aspects of the defense agreement, such as British provision of military advisors and the sale of equipment to the Ceylonese forces.2 Although Bandaranaike has not broken the Commonwealth tie, he has begun the process of transforming Ceylon from a dominion into a republic. The Bandaranaike government has openly embraced neutralism, associated itself with Afro-Asian nationalist aspirations, and developed much closer relations with the Sino-Soviet Bloc. Despite the role of its representative in drafting the UN report condemning Soviet aggression in Hungary, the Bandaranaike government refused to vote for approval of the report in the General Assembly.
Believing that it has established an independent position in foreign affairs, the Bandaranaike government is unlikely to seek further to dissociate itself from the West. With respect to participation in [Page 379] Commonwealth affairs, Ceylon will probably be inclined to follow Nehru’s lead. Relations with the UK will probably continue to be strongly influenced by important economic ties. However, being committed to a policy of neutralism, the Bandaranaike government is unlikely to make the air and naval bases available again to the West.
The US has had relatively little contact with Ceylon, but the dramatic assistance extended in connection with the disastrous floods in late 1957 has made a favorable impression on the people. The relatively small economic assistance program which has been in effect since 1956 has been received gratefully, and the government will probably continue eager to obtain more US aid, both because of its realization that future development of the island will depend to a high degree on external assistance and because of a desire to protect its neutrality by balancing Western aid against that expected from the Sino-Soviet Bloc.
Some criticism of the Voice of America installation in Ceylon has occurred during the past year and a half, and some attempts at censorship have occurred, on the ground that its use of anti-Communist material compromises Ceylon’s neutralism. Further attempts to restrict US freedom of operation may develop, especially if leftist influence increases in the government. However, Bandaranaike will probably remain unwilling to jeopardize future US economic assistance by forcing abandonment of the installation.3

Relations with the Sino-Soviet Bloc

The Bandaranaike government has removed almost all of the restrictions on Ceylonese contact with the Bloc which were imposed by the previous regime, and diplomatic, cultural, and economic relations between Ceylon and the Bloc have expanded rapidly in the past year and a half. Soviet and Chinese Communist embassies were established in 1957 and a Czech embassy in 1958. Their staffs take an active part in Colombo’s social and cultural life and frequently visit outlying parts of the country. Through trade union groups, representative members of the Colombo working class have been invited to lavish parties at the Communist missions. Some 600 Ceylonese have visited Communist countries and a number of Soviet and Chinese Communist cultural delegations have toured Ceylon. Communist literature and propaganda, formerly restricted, is flowing into Ceylonese bookshops and the press in increasing quantity.
Ceylonese-Bloc relations will probably continue to expand for the next few years. The leftist elements within the government may be expected to continue to work for closer ties. There is general recognition among all parties that the country’s future depends heavily on external assistance for development, and it is generally felt that such assistance should be sought from the Bloc as well as from the West.
If, as appears likely, Ceylon becomes more hard-pressed to find adequate financing for its food imports and a market for its exports, the country could become seriously vulnerable to Bloc economic penetration over the longer run. This will be particularly true if the Soviet Union implements its offer to take a large part of Ceylon’s rubber output over a 10 to 15 year period, and if Ceylon continues to be dependent upon Communist China for a substantial part of its rice supply.
In offering assistance, the Bloc will probably continue to seek to identify its international interests with those of Ceylon and to reduce Western influence on the island. Bloc officials are likely to avoid becoming involved in any Communist attempt to take over the government illegally, since such activity in Ceylon, as in India, would probably be counterproductive to present Bloc interests.

Regional Relations

Ceylon’s most significant regional relations are with India. These relations are subject to two conflicting influences: (a) traditional Ceylonese fear of India, focused over the past decade on the problem of the Indian Tamil minority, and (b) each government’s approval of the other’s socialist and neutralist policies. Most Sinhalese fear the potential political strength of the Tamil community and resent the Indian Government’s continuing manifestations of interest in the status and future of the Indian Tamils. On the other hand, Bandaranaike’s personal relations with Nehru are apparently close and Bandaranaike frequently seeks Nehru’s advice on international issues.
Ceylonese-Indian relations will almost certainly remain cordial for the next few years. Each side will probably seek to avoid provoking the other on the Indian Tamil question for the time being. India would probably try to bolster Bandaranaike in the event of a major challenge to him by either communist or old-style conservative forces. In the longer run, however, if Ceylon is unable to provide for its rapidly increasing population, Sinhalese pressures against the Indian Tamils will almost certainly be intensified and the issue between the two governments will probably become much more acute.
Bandaranaike is determined to establish Ceylon’s position as a member of the community of independent Asian nations. Relations with the other countries of South and Southeast Asia are likely to become somewhat closer in the next few years, mainly through expanding [Page 381] diplomatic missions and an increasing exchange of official visits. This will probably be especially true of countries, such as Burma, with which Ceylon is connected through trade and the common tie of Buddhism. Ceylon prizes its UN membership, achieved only in 1955, and may be expected to take an increasingly active part in UN affairs, especially through the joint efforts of the Afro-Asian Bloc, with whose aspirations Bandaranaike has frequently expressed sympathy. In the foreseeable future, however, Ceylon is unlikely to become a major factor in determining the pattern of relations among countries of the area.
  1. Source: Department of State, INRNIE Files. Secret. National Intelligence Estimates were high-level interdepartmental reports appraising foreign policy problems. NIEs were drafted by officers from those agencies represented on the Intelligence Advisory Committee, discussed and revised by interdepartmental working groups coordinated by the Office of National Estimates of the CIA, approved by the IAC, and circulated under the aegis of the President to appropriate officers of cabinet level, and the members of the NSC. The Department of State provided all political and some economic sections of NIEs.

    According to a note on the cover sheet, the following intelligence organizations participated in the preparation of this estimate: the CIA and the intelligence organizations of the Department of State, Army, Navy, Air Force, and The Joint Staff. All members of the IAC concurred with the estimate on March 18 with the exception of the representatives of the Atomic Energy Commission and the Federal Bureau of Investigation. Those representatives abstained since the subject being considered was outside their jurisdiction.

  2. The UK retains limited access rights to the bases for the next five years but cannot use them for military purposes without Ceylon’s consent. All Royal Navy facilities and stores are expected to be withdrawn by September 1958—probably to Mombasa or Singapore. The British are attempting to compensate for loss of the bases by developing communications and airfield staging facilities on Gan, one of the Maldive Islands about 600 air miles southwest of Colombo. A World War II airfield has already been reestablished and programmed construction is expected to be completed by January 1959. [Footnote in the source text.]
  3. The VOA installation at Colombo consists of three 35 kw transmitters, one of which is used by Radio Ceylon. Ceylon realizes a profit of close to $200,000 per year from rental fees and may purchase the entire installation in 1961 at an agreed price. The VOA transmitters provide a particularly clear signal for broadcasts beamed to India, Pakistan, East Africa, and the Middle East. [Footnote in the source text.]