282. Memorandum From Secretary of State Rusk to President Johnson 1

SUBJECT

  • Possible Appointment with Malaysian Minister of Finance, Tun Tan Siew Sin

The Malaysian Minister of Finance has been in Washington for ten days as a Special Emissary of the Malaysian Prime Minister, to explore with us ways of alleviating the situation in rubber whose price has fallen to an eighteen year low. He has asked us in the strongest terms for at least a courtesy appointment with you. Our recommendation is that you agree to such an appointment on Tuesday, October 10, or Wednesday, October 11, with the understanding, already obtained from the Minister, that he would make no requests of you with respect to rubber, would make Southeast Asian regional cooperation, and the role of the Asian Development Bank in particular, the major focus of the exchange of views he desires, and would agree to issuance to the press of the release attached.2

Recommendation

That you agree to a short courtesy call with the Minister of Finance on October 10 or 11 with the understanding that a public statement would be made along the lines of the enclosed.3

Background

The Malaysian Minister of Finance left Kuala Lumpur with the Malaysian press stating that his purpose was to request you to suspend sales from the GSA stockpile. For a considerable period of time, Malaysia has attributed an entirely disproportionate importance to stockpile disposals as a factor in the downward trend of rubber prices which currently are at their lowest level in 18 years. They have taken hitherto no account of the difficulties you would face in reducing disposals below the present level of 70,000 tons being sold exclusively for U.S. [Page 625]Government purposes. We have said in the strongest terms that reduction below 70,000 would be impossible. The Finance Minister brought with him to Washington a proposal to purchase the whole of the 360,000 tons of stockpile rubber. Under what precise arrangements such a transaction may be possibly completed without adverse effect upon either the U.S. or Malaysian budget and balance of payments situations has been under urgent study for the past week. After very careful calculations, it was the opinion of both sides that the gap between the price Malaysia was prepared to offer and that which GSA could accept was too wide to offer any promise that a transaction could be closed without some other, perhaps radically different, approach to the possibility of a sale. Discussion of possibilities can be resumed if the Malaysians desire.

We have been impressed by the way Minister Tan and his colleagues have begun to search for realistic solutions to the problems of natural rubber and are gratified that they seem ready to try to deflect Malaysian public opinion from a long-standing preoccupation with our stockpile sales. He has accepted, with disappointment but in seeming good spirit, our judgment that an international rubber agreement, dealing with synthetic and natural rubber, is impractical and that the United States could give no encouragement to holding conferences or commencing discussions for the purpose of establishing such an agreement.

Minister Tan faces real problems in returning to Malaysia if he can offer no credible explanation for why he remained ten days in Washington as Special Emissary of the Tunku and failed to see you. Minister Tan is prepared to make firm commitments that in a call on you he would ask nothing of you nor raise any points brought up in our recent discussions on rubber. Instead he would be prepared to express appreciation for reductions you have made in rubber stockpile disposals, and would wish otherwise to use the occasion of his call to discuss Southeast Asian regional cooperation and, in particular, the important role of the Asian Development Bank.

Dean Rusk
  1. Source: National Archives and Records Administration, RG 59, Central Files 1967–69, POL 7 MALAYSIA. Confidential. Drafted by Barnett and Robert W. Duemling (EA/MS) and cleared by Eugene Rostow and Solomon.
  2. The press release was attached to an October 9 memorandum from Bundy to Rusk, in which Bundy recommended that the Secretary send this memorandum to the President. Bundy outlined in more detail the issues and described in Tan’s seven meetings with State, Treasury, and GSA officials. (Ibid.) The text as released by the White House Press Office is in telegram 52462 to Singapore and other relevant posts, October 11. (Ibid.)
  3. For the memorandum of Johnson’s discussion with Tan, see Document 283.