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

3056. Reference: Deptel 26462 and Embtel 3032.3 Sarit’s desire discuss aid raises not only question of merits of increasing aid Thailand but wisdom of identifying increased or existing aid with Sarit.

I perceive no compelling economic reasons for increasing general level of aid. We are not in Thailand faced with situation such as that in Korea or Taiwan where withdrawal or drastic reduction of aid would result in practical economic collapse. On other hand, there are, of course, very large number of additional things that could very usefully be done within criteria present aid Tolme work. I am particularly impressed with importance of communications, not only for Thailand’s domestic development, but also because of their regional implications. For example, it seems to me that two or three good roads through Thailand reaching into Laos would do much to assist in orientating that strategic country away from north and towards free world countries of south as well as contribute to objective of increasing Thailand’s leadership role this area. There is also much that could usefully be done by increasing pace of construction of irrigation reservoirs in northeast as well as increasing education and health programs. However, limiting factor is not only availability of US funds but Thai capacity absorb additional aid. In some fields, particularly construction, Thai capacities to absorb now appear to be near practical limits. Thus additional large-scale construction activities could only effectively be carried out by American engineers and contractors thus involving considerable increase number of Americans in Thailand.

From a military point of view there is also no compelling reason to increase level of military aid. Assuming approval of FY 59 and 60 programs we will have given them in equipment and construction just about all they can effectively use or absorb and future requirements could be limited to a maintenance and participant training program.

[Page 991]

On other hand, from political point of view I recognize there are dangers in appearing too entirely unresponsive to requests for additional aid. One of our most important objectives here is to reduce left-wing influence on government and encourage greater governmental stability. There are Thai elements working in this same direction who argue US aid now inhibited by government instability and more stable government would receive greater US support. We should not appear to be unresponsive to this nor to encourage belief in Thailand that road to US economic assistance for legitimate needs lies in government instability and flirting with other side.

Also, Thais are very alert to what we are doing in other countries in area. If, for example, Thailand’s SEATO partner, the Philippines succeeds in obtaining any increased US assistance as result of Garcia’s visit,4 in spite of general public view of gross Philippine corruption in use of aid and other external resources (in which respect Thailand’s record is relatively very good), there would be strong repercussions here.

With specific reference to Sarit’s conversations in Washington, I do not believe that we are under any compulsion to give him a “present” to take home. He went to US for medical treatment which has apparently been as successful as could be expected. Also, I believe US should avoid appearance of linking its policies in Thailand to individuals to extent that it has been interpreted here we have done in past. At same time we should avoid giving any grounds for offense to Sarit who is authorized representative Thai Government and will in all probability remain key political leader so long as health permits. There is also consideration that depressed economic situation in northeast Thailand has become important political issue and Sarit himself is from northeast. Thanom and Sarit have committed themselves to “doing something” about northeast and if they appear to have failed in enlisting US support, left-wing elements will become more strident in demanding government accept Communist bloc aid.

As stated in Embtel 30485 I have attempted correct apparent impression of Thanom and others that USOM is now doing little or nothing in that area. I have also been careful to avoid raising any hopes that additional aid might be forthcoming. Thus far in conversations with Prime Minister and Acting Foreign Minister I have taken line that additional aid to northeast is matter of priorities to be determined by Thais within existing aid level.

In light of foregoing I recommend that in conversations with Sarit, Washington discuss increased economic aid with sympathy while pointing out that USG like that of Thailand faces problem of limited [Page 992] resources. Suggest it may be useful show parallel between present Thai Government budgetary and tax difficulties and enormous domestic and international demands made on US budget. Also suggest Washington carefully explain DLF criteria and procedures.

If Sarit appears to be reasonably responsive to matters we raise with him as suggested below, and if any additional funds can be made available I suggest we not make any specific public or private commitments to him on amounts or projects. Rather, he should be given grounds for optimism that some additional funds could be made available for sound projects developed by Thai Government and worked out in Bangkok with USOM and Embassy. This would also serve to diminish counter productive aspects of inevitably long time lag between such announcements and their execution which in past has seriously prejudiced political effects of such projects. That is, I believe past experience has demonstrated that there should as general rule be minimum of publicity on projects until they are complete; or at least, until actual work is underway.

This does not preclude a few relatively minor items such as cobalt bomb (Deptel 2696)6 or a DLF loan, which could as matter of expediency be announced in connection with Sarit visit. Usefulness such gesture can best be determined by Washington during course conversations.

Detailed comments on projects which could usefully be considered for additional aid or DLF financing will be submitted when Thai Government requests received.

If there is no possibility at this time of increased aid or additional DLF financing beyond that already contemplated suggest matter be sympathetically explained to Sarit and, where appropriate, EXIM Bank or other such financing be explored for equipment purchases. In any event suggest Department and ICA carefully outline to Sarit what USOM already doing in northeast giving him copy USOM presentation on this (Embtel 3048) which being pouched.7

Following are suggested topics for Washington initiate discussions with Sarit:

1)
Dependent on assessment results Erskine conversations, left-wing elements in government and responsiveness of government to left-wing pressures, etc., as outlined Embtel 2902.8 This connection am pouching on April 30 despatch giving additional details and recommending [Page 993] we support as appropriate and opportune rapprochement between military group and Democratic Party. However, also recommend we carefully avoid giving this “kiss of death” by any appearance we have originated or are promoting.
2)
Reduction non-MDAP military forces as one means reducing strain on budget of military expenditures and possibly making available some Thai Government funds for northeast development.
3)

Importance foreign investment to economic development (Embtel 2741).9 In this connection suggest discussing with Sarit compelling need for Thai Government make forthright and unambiguous statement on oil marketing policy and to act in accordance with that policy (Embtel 3032). I have discussed oil companies’ approach with UK Ambassador and we concur that no one in present government appears to have any effective control over General Narong, Chief of OFO, who manages to survive all government changes and who is apparently able dazzle government leaders with supposedly fabulous profits to be made from oil business. Although Thailand enjoys one of cheapest oil prices in world (17 cents a gallon ex tax for regular gasoline in Bangkok, 32 cents with tax) and oil companies have acted very properly, “Farang”10 oil companies are subjected to irrational and unreasoning attacks by members government and press which tend to whip up anti-foreign sentiment in general. This trend disturbing and could have implications extending far beyond oil company interests. Oil companies’ reasonable position is simply that they would like to know what rules are. As sovereign government, Thai Government has policy continue increasing competition with private companies that is obviously its right. Companies are just as obviously in no position compete against this and have no interest in increasing their investment in Thailand to meet increasing demand.

Also, in connection with private investment suggest discussion very adverse effects on potential investors of failure Thai Government implement even present investment law citing Foremost Dairy case as example. Also could cite inability General Tire get anyone in Thai Government even negotiate on definite proposal it made more than 18 months ago to establish tire factory here.

In connection foreign investment Department may desire give Sarit copy my April 21 speech to American Chamber Commerce11 as example efforts Embassy is making encourage investment.

4)
Need quickly establish metropolitan electric authority if Thai Government desires DLF loan for distribution system which is essential for utilization Yarn Hee power. While US procedures admittedly [Page 994] responsible for long lead time on many projects this excellent example delays for which Thai Government responsible. Might also mention that though US at Manila Council meeting in March quickly and generously promised support to Thai proposal for SEATO graduate engineering school thus far no definite project yet forthcoming from Thai Government.12

Foregoing has been discussed with Country Team which concurs.

Johnson
  1. Source: Department of State, Central Files, 792.551/4–2758. Secret; Limit Distribution. Repeated to CINCPAC exclusive for Admiral Stump and to CINCPAC POLAD exclusive for Steeves.
  2. In telegram 2646, April 19, the Department requested suggestions for handling Sarit’s anticipated request for more U.S. aid. (Ibid., 792.551/4–1958)
  3. In telegram 3032, April 24, the Embassy reported the concern expressed by oil companies operating in Thailand at what they regarded as an unfriendly attitude of the Thai Government toward all foreign oil companies. In particular, they felt that the Thai Government was trying to encourage a Thai oil monopoly in the marketing of oil products in the country. (Ibid., 892.2553/4–2458)
  4. President Garcia visited the United States, June 17–20, 1958.
  5. Dated April 25. (Department of State, Central Files, 792.551 /4–2558)
  6. Telegram 2696, April 25, informed the Embassy in Bangkok of approval in principle for shipment of cobalt–60 therapy equipment as part of a project involving peaceful uses of atomic energy. The United States was anxious to avoid the appearance that approval of this longstanding Thai request had come in response to a recent Soviet offer. (Ibid., 861.05192/4–1558)
  7. A copy of the USOM presentation on assistance to northeast Thailand, 1951–1958, is Ibid., 792.5–MSP/5–1358.
  8. Supra .
  9. Not printed. (Department of State, Central Files, 811.05192/2–2258)
  10. I.e., foreign.
  11. Not printed.
  12. The SEATO Council meeting was held in Manila, March 11–13, 1958; see volume xvi.