278. Memorandum From the President’s Special Assistant (Rostow) to Acting Secretary of State Katzenbach 1

SUBJECT

  • Helicopters for Malaysia

The President has considered carefully your memorandum of December 6 (copy attached)2 on the above subject. He has weighed and is sympathetic to the arguments therein regarding an offer of support for the purchase at 5–1/2 per cent interest and 7 years repayment.

However, he recalls that this matter was the one item of serious business raised with him by the Tunku on his recent visit to Malaysia. He attaches importance to the friendship of the Tunku and to the good relations that have developed between our two countries.

Given the importance of Malaysia’s role in Southeast Asia, its internal situation, and its sympathetic understanding of our policy in Viet-Nam, the President believes that a somewhat more concessional offer is in order on a “one shot” basis. The sale will, of course, benefit our balance of payments. He has approved our support for an offer of 4 per cent for 7 years.

He believes that it is possible to make such an offer and at the same time make clear to the Malaysians that it is not a precedent, that it is made at considerable sacrifice on our part, and that it will not provide the basis for any future sales. The Malaysians should be reminded of our severe and burdensome obligations elsewhere in Asia.

As to financing, possibilities within the present MAP program should be explored first. Defense might want to consider hardening somewhat the concessional terms for other sales. Drawing on the contingency reserve for credit sales is another possibility.

The special circumstances of the President’s trip to Malaysia and the Tunku’s personal appeal could be considered as putting this matter in the “contingency” category.

If there are major considerations not heretofore brought to the President’s attention, he has expressed his willingness to take them under advisement. In the absence of such overriding considerations, [Page 618]he has approved moving ahead along the lines noted in the third paragraph of this memorandum.3

W W Rostow
  1. Source: Johnson Library, National Security File, Country File, Malaysia, Vol. IV, Memos, 1965–1968. Secret. A copy was sent to McNamara.
  2. See footnote 3, Document 277.
  3. On December 27 Rostow cabled the President the following: “Your offer to Malaysians worked. We got the order for Sikorsky plus some goodwill.” (Telegram CAP 661338 to the President, December 27; Johnson Library, National Security File, Country File, Malaysia, Vol. IV, Memos, 1965–1968)