346. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

SUBJECT

  • U.S. Aid to the Philippines

Whenever the United States agrees to help a country in need, it is easy—and all too common—to ascribe a cynical motive to that action. It is easy, too, too put a price tag on the action and to believe that thereby you have described a policy. It is all too simple—and generally superficial—to take an action by Government A and an action by Government B and make one the “pay off” for the other.

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This has been the approach in some of the reporting of your decision to lend new assistance to the Government of President Marcos.

Much of the reporting ignores several fundamental points involved in this decision. Among these fundamental points, I would note the following:

1. The assistance program just announced in outline is a determined effort to help a friendly country that is in trouble.

The Philippine economy has become almost a model of unstructured, unbalanced, and stunted growth. The late 1950’s were boom years. Gross National Product was growing at more than 5% a year. Industrialization was proceeding at a fast pace. But the rapid growth was unstable. The peso was over-valued. Import prices were artificially low. There were virtually guaranteed markets for the main exports.

In 1962, exchange controls were eliminated. The peso suffered almost 100% devaluation. Many marginal industries were in trouble. World prices for Philippine exports fell. Growth rates declined. The economy began to stagnate. The agricultural sector (employing between 70 and 80 per cent of the population) failed to expand. The Philippines, a rich farming country, finds itself importing 90% of its milk and dairy products and 10% of its total food needs. The population continues to rise dramatically (about 3.3% a year) as GNP stagnates at about 4%.

Our Filipino friends frankly admit that their operations are plagued by bureaucratic ineptness and nonperformance. Tax collections are inefficient and graft-ridden. Smuggling robs the federal treasury of $100 million or more a year.

In the last half of 1965, credit restraints were largely ignored with the result that there was a 5% increase in the money supply since June 1955. A 10% rise in living costs occurred in the same period.

In part as a reflection of deepening economic trouble, Communist insurgents have increased their activity; propaganda efforts, recruitment and terrorism are all on the rise.

So here is a country in deep trouble, and we are trying to help.

The cynical can assert that we are merely “repaying” Filipinos for their decision to send troops to Viet-Nam. The fact is that we would have helped them in any case—indeed, most of the programs now going forward were being considered long before the Philippines’ courageous decision to help their Vietnamese neighbors.

Needless to say, we are not providing economic aid to our Australian and New Zealand friends—who also have sent troops to Viet-Nam.

2. In working with President Marcos, we are cooperating with a new and active administration, one that has clearly recognized its country’s fundamental problems and a chief executive who is fiercely determined to move his country forward.

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President Marcos is not a man to ask for handouts or gifts without strings. He is a proud man. He is a man who wants progress for his people. He believes—and we share the belief—that the development and prosperity of his country is good, not only for the Philippines, but for Asia and for us.

He has taken steps to improve the efficient operation of his government. He has searched for men of capability and devotion and put them in positions of responsibility. He continues that search. He has moved actively against smuggling. He is trying to improve his country’s tax collection system. He has worked out a Four-Year Development Program which underlines his goals, and we are working with his specialists to refine that program and to outline workable and feasible projects.

And his principal goal is to improve the agriculture of his country. He wants to expand productivity. He wants to build new roads that will bring the countryside into contact with the towns—and therefore with the markets. He wants to provide electric power for his people in the countryside, and to give them the water they need for irrigation.

An important element in President Marcos’ plan is his concentration on 10 of his country’s provinces. These are areas where the need for improvement is greatest.

Beyond meeting the present urgent problems in his economy, President Marcos wants his country to move proudly forward over the frontiers of science and technology. He wants to share in the exploration of space and of the ocean depths, to improve the technical and scientific training of his young people, and to provide for both training and research in the area of economic development.

We are cooperating with him in these ambitious enterprises—not to help a man but to help a man who wants to help his people.

3. A careful look at the proposed forms of our assistance shows that each one is designed to help President Marcos and the Philippines to meet some of the specific problems they face—particularly in the agricultural sector.

To be specific:

(1)

A $4.5 million loan

This is for irrigation. It will make possible the reconstruction and extension of existing irrigation works, providing much-needed water for the farmers.

(2)

Feasibility study loan—$2 million

This will permit the Filipinos to conduct engineering and economic studies, with our help, which will tell them whether proposed new projects, including additional irrigation works, make sense. These studies will follow up surveys already conducted in the Water Resources survey.

(3)

PL–480 (Title II)

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A grant of food grains and other agricultural products.

This will provide:

(a)
Partial payment (in the amount of $3.5 million) to some 30,000 workers who will be digging and renovating irrigation ditches and building or repairing local roads.
(b)
$.5 million in grains, returns from which will help to capitalize livestock cooperatives.

(4)

PL–480 (Title IV)

Sale of between $20 and $25 million worth of needed cotton, feed grains and tobacco.

(Note: This is repayable in dollars at 3.5% interest.)

The peso proceeds from sale of these products will provide increased capital for the Agriculture Credit Administration.

They will also be used:

  • —for local costs of irrigation rehabilitation projects;
  • —for feeder road construction;
  • —possibly for some capital for the Land Bank.

There may also be some small grants to government agencies for such things as: agricultural research, technical training in agriculture; pest and crop disease control; land classification studies in connection with land reform.

(5)

Engineering equipment ($1.8 million)

This is equipment from surplus military stocks. It will be renovated by use of AID funds. Value of the repaired equipment is estimated at $10 million and it will be given to provincial governments (in 8 of the 10 critical provinces). The equipment is to be used in the road-building program and for irrigation and other agricultural development projects.

We will also be supplying some spare parts and technical training on operations and maintenance.

(6)

Other technical assistance (about $1 million)

To be used for such things as providing for a team from the U.S. Farmers Union to advise on agricultural credit, and for a team from the Rural Electric Cooperative Association to help work up projects for establishing new rural electrification cooperatives.

(7)

PL–480 (Title III)

This is a continuing program. It provides food products to U.S. voluntary agencies, such as the Catholic Relief Service, for their programs of aid to needy Filipinos.

(8)
In view of the need for better performance in the tax collection field, we have sent several specialists from the Internal Revenue Service to the Philippines. This is a small project which represents about 2 1/2 man-years of labor on our part annually.

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Even our assistance in the military field is related closely to President Marcos desire to help his farmers. The five engineer battalions we have agreed to support this year with equipment will be used by him in civic action projects—primarily road-building in rural areas.

This, we see when we look beneath the titles and the amounts, that the assistance program that we are working out with the Philippines is designed to meet specific needs, and primarily those needs in the field of agriculture which the Philippine Government and we recognize as most urgent.

4. Finally, it should be clear that the kind of program outlined in this memo and which we hope to carry out with the Philippines Government is a reflection of your consistent—and often repeated—concern with the problem of food production in a world where the population is rising steadily.

For example, on March 19, 1964, in your foreign aid message, you noted:

“Funds for educational and technical cooperation—to help start schools, health centers, agricultural experimental stations, credit services, and dozens of other institutions … But they will be used by selected projects to raise the ability of less fortunate peoples to meet their own needs.”

A year later, on January 14, 1965, you said:

“In the years ahead, if the developing countries are to continue to grow, they must rapidly enlarge their capacity to provide food for their people. Up to a point, they can and should improve their ability to buy some of their food from abroad. For the most part, however, they must expand and diversify their own production of food.”

On February 10, 1966—in your Food for Freedom—you said:

“We will launch a major, new attack on worldwide hunger. We will present this year a new food aid program designed around the principle of intense cooperation with those in all hungry countries who are ready to help themselves. We will direct our assistance program toward a cooperative effort to increase agricultural production.”

And again this year—on June 30, 1966 in your Food for Peace Report— you said:

“In simplest terms the task of bringing food and population into balance—while maintaining progress in health, education and economic growth—is the most critical challenge many countries are facing today. It will probably remain their most urgent challenge in the immediate years ahead. The world’s capacity to respond will dramatically affect the course which individuals and nations choose in confronting their problems and neighbors in coming generations.”

W. W. Rostow 2
  1. Source: Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 13, 9/15/66–9/30/66. Confidential.
  2. Printed from a copy that bears this typed signature.