Foreign Relations of the United States, 1964–1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines

272. Information Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Bundy) to Secretary of State Dean Rusk¹

Washington, March 14, 1966.

SUBJECT

• From Lee Kuan Yew to Chiang Kai-shek: Far East—March 1966

Around our Chiefs of Mission Conference, I paid visits to Japan (briefly), Viet-Nam, Thailand, Singapore, Malaysia, the Philippines, and the Republic of China. This memorandum gives the highlights of my observations, drawing briefly on some of the broader policy points already covered in the “highlights” summary of our Baguio meeting, but primarily on my own observations.

1. General Observations.

a. The atmosphere in the whole area is markedly healthier than last year. This derives primarily from Viet-Nam, with Indonesia a close second in importance. There is an almost universal belief that the US is standing firm for now, and this has been a great strengthener and comfort even to such figures as Lee Kuan Yew. Nonetheless, our Ambassadors stressed that there was still a recurrent fear that we might make some deal and, more basically, that we may not really stay the course. For the time being, this fear is at rest, and the bombing suspension and the Honolulu conference were in the main correctly interpreted. Nonetheless, it persists as a major factor to take into account on any actions we may consider that carry the implication of compromise or retreat. In Japan, where the problem is somewhat different and where Reischauer sees marked favorable trends both on Viet-Nam and on the issue of greater economic responsibility, the bombing suspension and the Honolulu conference had a strongly favorable effect.

b. Regional efforts in the area have gained immensely during the past year and need to be pushed further wherever possible. The Asian Development Bank and plans for Southeast Asia have had great impact, and the reopened possibility of ASA (initially Thailand, Malaysia, and the Philippines), plus such efforts as the Korean Foreign Ministers Conference, are all moving in the right direction of, a phrase of Marshall Green’s, “putting a rim on the wheel” whose spokes ran only to Washington in the past.

c. The heightened tension over Viet-Nam, plus the specific contributions of individual countries, have imposed strains that must be met usually by US contributions. We need added effort, for different reasons, in several countries, and we simply must not let Viet-Nam beggar its neighbors.

d. Our overwhelming focus on Viet-Nam has diverted our own policy emphasis slightly from many specific problems now assuming major proportions:

• —Bringing Japan to a greater role of responsibility, in what Reischauer describes as a race between such a role and the emergence of a new selfish nationalism;
• —Meeting the serious strains in Korea, arising from their force contributions and continuing fears and internal problems;
• —Tension and a tendency to jitters in the Republic of China, especially with the dark cloud of Chinese representation;
• —Our relationship to the Philippines in a new situation of movement there;
• —The needs of Thailand, especially as it becomes a major base area for us;
• —Whether we should assume a significantly increased role in the Malaysian economic picture and whether we may become involved to some degree, willy-nilly, in the Malaysia/Singapore problem.

[Here follow sections 2 on Vietnam and 3 on Thailand.]

4. Singapore.

a. Lee. My talk certainly found him more mellow, and may have opened the way to a more serious and deep relationship than we have ever had. He committed himself to accept an Ambassador, but was evasive on timing. He wants a sophisticated and low-key man, and I think our choice meets this specification.

b. Trade. The need for more outlets is real. I tried to hammer home how little we could do in textiles, and to urge a diversified survey both by the USG and private consultants. The latter idea seemed to find some response, and we should be prepared to follow up. They are terribly naive on how to deal with the US market.

c. Relations with Malaysia. This remains obsessive, and is more than ever the focus of Lee’s thoughts since his initial pushes to get the British to stay and to establish an Afro-Asian “position” have now been largely satisfied. The Tunku and Razak are anathema to Lee (and vice versa), so that I still find it hard to visualize a reconciliation for some time. Nonetheless, the economics alone clearly indicate that the two can neither live with each other nor without.

5. Malaysia.

a. British Role. British influence has markedly declined, and I do not think this was Anthony Head’s personality. Rather, it reflects a very deep-seated Malaysian feeling that they want a diversity of friends. We should avoid like the plague getting into any larger defense role, and I did not encounter any urging in Malaysia that we should, although Lee has the obsessive fear that the Malaysians now believe we will do this. But while the Malaysians may accept Commonwealth responsibility for their defense, they badly want other evident friends.

b. Economic Needs. We must abandon the stereotype of a rich and self-sufficient Malaysia. The Malaysian accounts have changed drastically in the last five years as a result of tin and rubber price changes. Hence, their coming five-year plan calls for more than $300 million of outside credit over this period. This will go in detail to the World Bank Consortium meeting in May, and we already have detailed materials for study. Although I warned them categorically that we would not be ready to announce decisions in May, it is absolutely clear that we face a major decision that will become acute in May. They want us badly, and if their plan makes as much sense as it appeared to me to make, I would favor a significant contribution. The question of Indonesian reaction has drastically changed from the past, and our participation would give a tremendous boost to the younger and more modern leaders who are evolving a new Malaysia. Needless to say, US stockpile policies that might depress the price of rubber could both cause a present outcry and drastically increased appeals for offsetting US assistance.

c. Relations with Indonesia. I found no easy optimism in Malaysia (or anywhere else) that Nasution and Suharto would for a long time call off confrontation or do more than ease the military pressure.

d. Relations with Singapore. This is as obsessive a subject as on the Singapore side, but with a clear and growing Malaysian sense that they hold bigger cards in any trade. (I sensed Lee knew this too.) In the difficult personal equations involved, I get the feeling that two Malaysians, Ismail (the number three) and Ghazali in the Foreign Office could do it. Unfortunately, neither has the political power to be given the chance. The Tunku and Razak do not trust Lee and talk a very different Malay language of personal trust and broad issues, as compared with Lee’s personal, and perhaps Chinese, more aggressive and precise viewpoint. I see little we or anyone else can do about this, but if our role increases we could at least try to cushion the more outrageous misunderstandings and to bring some appreciation of the overriding common interest.

6. Philippines.

a. Marcos. Much more hopeful and potentially decisive than his predecessor, but still only finding his feet. His political debts surround him, and he is far from having an administration “team”. His diffident handling of the recognition of Malaysia reflects these factors, as does his failure to take hold of the economic problem as yet.

b. Forces for Viet-Nam. Marcos should get a decisive Senate majority, but at substantial political cost. His Senate problem is enormous. This, plus the over-all uncertain political situation, is the underlying reason for his request for additional MAP. To my mind, $4–6 million a year to make his army a real engineer and civic action outfit, with significant political bonuses, is a highly worthwhile investment in every respect.

c. Economic Issues. The investment climate is not good, and on the Philippine side there is growing uncertainty as to American agricultural markets. Both problems go together, and we should be working in the next few months to lay out the broad lines on which the Laurel-Langley Agreement will eventually be revised. I doubt if we need to think of any significant additional economic aid. Trade and investment are the keys, and the time has come to start moving.

[Here follows section 7 on the Republic of China.]

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, ORG 3–2. Secret; Exdis. Drafted by Bundy. A note on the memorandum indicates that Rusk saw it.