61. Memorandum From the Administrator of the Agency for International Development (Bell) and the Under Secretary of State for Economic Affairs (Mann) to President Johnson)1


  • Southeast Asia Development Scheme

The attached talking notes for your meeting with Eugene Black2 represent the tentative views of the Department of State and AID on the purpose, sponsorship, scope, organizational arrangements, aid requirements and prospects of a Southeast Asia Development Association. These notes include answers to your questions of this morning. Further discussion among interested specialists and with Mr. Black will be required to firm up these preliminary views.

  • Thomas C. Mann 3
  • David E. Bell
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To bring together the peoples and governments of Southeast Asia in a constructive association for economic development action, in cooperation with each other and with the advanced nations; to build regional political unit and reduce tensions; to commit the advanced countries and the United Nations to a deeper interest in the development and, indirectly, the security of this vulnerable region; to bring the Soviet Union and North Korea, as well as the neutral counties of the area, into this relation of positive coexistence, offering North Vietnam a chance to change its policies.


To achieve these political aims even moderately, the Association must be all-inclusive, limited only by the willingness of countries to subscribe to the Associationʼs principles.

Suspicion that this scheme is a new try at western imperialism will kill it.

Soviet and North Vietnamese participation, or at least initial tolerance of the plan, appears to be essential. Consequently, Asian initiative from here out is crucial. The United States should try to work in the background in the formative stages, giving U Thant the lead.

A tie with the United Nations and with the U.N. Economic Commission for Asia and the Far East would provide the best auspices.


The broader the participation of Southeast Asian countries the better will be its chances of achieving both the developmental, trade and political purposes. Our interests would be served by the participation of effective democracies—the Philippines and Malaysia—and the strongest countries of Southeast Asia, Thailand.

We cannot dictate the exclusion of any country of the area. We should not, however, commit ourselves to providing direct U.S. aid to any participant, nor indicate that we expect to force our aid on those who have rejected it, i.e., Cambodia and Indonesia.

We should agree to contribute to consortia managed by the Associationʼs executive agent which would undertake projects in or benefiting any member country, regardless of whether that country is recognized by or directly assisted by the United States.

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Possible Organization:

The Association would have regional (recipient) and non-regional (donor) members.

It would have a permanent headquarters in the area, with a staff composed largely of Asians for secretariat-type functions, including data collection.

It would have an executive agent, preferably provided by the World Bank, to organize and manage the financing, construction and in some cases operation of regional projects serving more than one country, such as Mekong River projects, international transportation and communications projects, regional educational institutions (medical, dental, engineering, fisheries, agriculture, public administration and other types of colleges serving all countries of the region), etc.

The Association would be loosely associated with, and report to, ECAFE.

It would assist countries of the region to prepare their national development plans and might conduct regular examination of the membersʼ economic policies and problems, in the manner of the CIAP system in the Alliance for Progress.

It also might conduct trade and tariff consultations and discuss complementary industrial investment. Its role in coordinating bilateral aid terms has not been thought out.

Aid Requirements:

Under the best of circumstances, the region (including Indonesia) could use effectively at least $1 billion per year in all forms of foreign economic assistance for development, plus at least $200 million annually in foreign private investment.

We cannot expect these favorable circumstances in all countries of the area soon. Human resources are poorly developed, and training or experiences takes time. The public and private institutions and the basic infrastructure of development are inadequate. Domestic savings essential to economic growth will probably rise slowly. Furthermore, communist threats and aggression are forcing a tragic diversion of resources to military budgets. It is unlikely that there can be an immediate massive reduction of these expenditures.

Consequently, we believe that in the next few years, even with an early cessation of hostilities, the region can absorb no more than $700 to $800 million annually in long-term developmental aid (other than private investment) from all sources.

The United States ideally should not provide more than about half of this total. A dominant U.S. role would run counter to our political purposes and erode Congressional support for the effort over the years. [Page 155] Japan, Western Europe and the IBRD should be pressed to increase greatly their aid commitments to the region.

In addition to our contributions to long-term development, we will continue to have some bilateral aid obligation for economic assistance of a non-developmental character in South Vietnam and Laos, related to their distorted wartime economies or in support of temporarily inflated military forces.

Present and Future U.S. Aid Requirements:

U.S. economic aid to the potential membership of the Southeast Asia Development Association currently runs at about $385 million per year. This includes about $275 million from AID (largely grants), $95 million from PL 480 sales and grants, and nearly $15 million from the Export-Import Bank.

About half of this total, or $200 million, might be called long-term development aid.

A doubling of this U.S. developmental effort to about $400 million annually appears to be a reasonable goal.

This would not require a $200 million increase in the annual AID and PL 480 requirements. Some transfers from emergency-type supporting assistance and military assistance should be possible. Some increase in Ex-Im Bank loans can be expected. To the extent we can stimulate private U.S. investment, with guaranties and loans, we can reduce the need for U.S. Government aid. It may be possible to do our share with a net increase of only $100 million annually in the AID budget request to Congress.

The current U.S. Military Assistance Programs in these countries total $330 million.

An approximate monthly average MAP expenditure for Vietnam is $20 million, of which ammunition represents some $6 or $7 million. Direct U.S. military costs in Vietnam (outside the MAP budget) are roughly estimated as about $20 million per month.

In Laos, the monthly MAP cost is about $3.5 million, of which ammunition accounts for $1.5 million. Direct U.S. air operations have not been accurately estimated on a monthly average basis.

(See attached tables.)5

Private Investment:

Over the past two years, private foreign investment in Southeast Asia, including the Philippines, averaged some $70 million. Thailand got $73 million, Indonesia $12 million, Malaysia $40 million in 1963. There was a net withdrawal of private investment totaling $30 million from the [Page 156] Philippines, $14 million from Burma and $4 million from Cambodia during 1963.

With improvements in security and political climate, financial stability, assurance of profit-repatriation and a generally improved atmos-phere of foreign confidence in the region, this flow of resources and know-how into the region might be doubled.

The climate in the Philippines presently is worsening seriously.

The countries of the area can stimulate greater foreign (and domestic) investment by providing tax exemptions, liberal repatriation rights, permission to own land and bring in foreign technicians, establishing industrial parks, publicizing investment opportunities, etc.

The capital-exporting countries can stimulate private investment in the area by extending their guaranty programs to cover political risks (as we do), offering tax incentives to foreign investors, undertaking studies of investment opportunities, sector surveys and other technical assistance.

Urgent Needs:

Rural development, across the board—agricultural production and marketing expansion, potable water and irrigation, rural health and sanitation, village level schools, local roads and other transportation, community leadership training and motivation, etc.
Middle and higher education. Example: In Laos, there are only 80 high school graduates a year.
Industrial expansion, keyed to stimulation of agriculture, reduction of dependence on imports, and exploitation of labor cost differentials. Examples: Grain processing and packaging, fish canning and freezing, cotton and synthetic textile mills, paper, cement, light iron and steel shapes, cooking utensils.
Basic infrastructure: Electric power generation and distribution, especially to small towns for potential new local industries; highways and feeder road construction and improvement; railway expansion, particularly international links; telecommunications.
Health services, for cities as well as rural areas, including.
In preventive and curative medicines—
Malaria eradication.
Communicable disease control, including particularly:
  • Enteric disease, e.g., dysentery, typhoid fever.
  • Respiratory disease, e.g., tuberculosis and pneumonia.
  • Diseases of childhood, e.g., measles, whooping cough.
  • Leprosy.
  • Diseases which reach seasonal epidemic proportions, e.g., cholera, small pox.
Control and treatment of diseases of the eye such as trachoma and glaucoma.
Control and treatment of nutritional diseases and malnutrition.
In public health, expand village health and sanitation by water and sewage disposal and well drilling.
In direct health services, develop local and provincial medical facilities and provide surgical and medical teams.
Medical education.

Multilateral Projects:

The purpose of achieving greater regional unity can be advanced by giving great weight in project-selection to activities which knit these countries together. Such multi-national projects could be turned over to an Association consortium under World Bank management. These include:

The Mekong Riverʼs exploitation offers this opportunity, but this is a very long-term undertaking of enormous cost. Major, main-stream dams do not appear economically justifiable (in relation to costs in excess of $500 million for a single dam project) for some years. However, tributary dams which may produce electricity for neighboring countries may be feasible in the nearer future.

International highways and railways may be feasible in the near term. The French-built roads linking Cambodia, Vietnam and Laos are in bad disrepair.

A regional airline would make more sense than the present, deficit-ridden national lines. All the cities of the area need airport improvements and airways communications.

Expansion of the regional telecommunications system, which we have developed in Thailand and partially in Vietnam and Laos, is an attractive possibility.

Regional educational institutions, with different specialty schools established in different countries of the region, would serve twin purposes of development and regional political unification.

Some types of disease-eradication campaigns are most effective if they cut across national boundaries.

The regional experts will undoubtedly propose other schemes. A disadvantage of such multilateral projects is the difficulty of tying U.S. contributions to U.S. procurement, i.e., the gold drain issue.

  1. Source: Department of State, Ball Files: Lot 74 D 272, Southeast Asia. Confidential.
  2. President Johnson, accompanied by Ball, Mann, Cleveland, Bell, Poats, Secretary of Agriculture Orville H. Freeman, Secretary of Commerce John T. Conner, Director of the Budget Kermit Gordon, McGeorge Bundy, Bator, Komer, and Cooper, met with Black from 5:50 to 7:20 p.m. on April 8 in the Cabinet room of the White House. (Johnson Library, Presidentʼs Daily Diary) No other record of this meeting has been found.
  3. Printed from a copy that bears these typed signatures.
  4. Drafted by Poats on April 8.
  5. Attached, but not printed.