111. Telegram From the Embassy in Thailand to the Department of State 1

3136. The following telegram sent action Singapore March 12, 1971 is h/w being repeated for Dept’s action and Djakarta’s info.

“Subject: Ambassador Kennedy’s Call on PM Thanom.

1.
Summary: Ambassador Kennedy’s call on Prime Minister, who had with him four cabinet members and DG of National Economic Development Board, was used by Thai officials for emphatic presentation their views on PL–480 rice sales. They returned to this subject almost to exclusion all other topics raised by Ambassador Kennedy. In Thanat’s absence atmosphere was more friendly than when same subject raised previously, but seriousness of Thai concern and unanimity of all top officials was presented even more effectively. Thai presentation focused on RTG’s efforts to help itself, essential role of exports in Thailand’s economic viability, central position of rice in this regard, and impossibility shift from rice to more diversified exports in short [Page 230]run, say next two years. New element was repeated request that United States lend Indonesia funds for rice purchases in Thailand. Request was presented in fashion reflecting, for first time, full recognition and appreciation of great value of IGGI program and US contribution not only to Indonesia, but to Southeast Asia as a whole and to Thailand in particular. Ambassador Kennedy expressed appreciation for informative presentation and assured Prime Minister of US intention give full consideration to Thai concerns. End summary.
2.
Ambassador Unger yesterday took Ambassador Kennedy to call on Prime Minister Thanom who had with him Minister of National Development Pote, Minister of Finance Serm, Minister in Prime Minister’s office Sawaeng, Deputy Minister of Foreign Affairs Sanga (representing FonMin in Thanat’s absence), and Secretary General of Nedb Renoo. Pote acted as Thanom’s interpreter and principal spokesman.
3.
Ambassador Kennedy opened discussion with brief explanation of his Presidential mandate. In his response Thanom immediately turned to Thailand’s balance of payments problem. Thailand was still a low income country depending for economic viability heavily on a few export commodities. Rice was by far the most important export. Current trends toward self-sufficiency in neighboring countries, which constituted Thailand’s markets, were seriously reducing export opportunities and depressing price. This problem was intensified by PL–480 sales. Besides rice, the important rubber market was weak, and the surplus disposal issue is a depressing effect. Tin, although of somewhat less importance to Thailand, was another export commodity whose price was declining. Ambassador Kennedy briefly commented on the importance of agricultural diversification in coping with excessive dependence on one or a few export commodities, but Thanom, speaking through Pote, returned to his theme. Diversification required both time and markets. For Thailand rice was now and would inevitably remain for some time the principal export commodity. For the US, rice was a marginal product. Thailand was able and prepared to compete even in the present depressed market on normal commercial terms, but was unable to compete against concessional terms offered to its traditional customers. Thailand’s problem was intensified by the increasing financial burden of essential security measures and need to expand development activities just to keep even with population increase. Security was a precondition for economic development, and economic development without security would be meaningless.
4.
Ambassador Kennedy said the United States was anxious to be helpful in assisting Thailand in working its way out of its present predicament. Among the major tasks with which we might be able to be helpful were the development of expertise and education, and particularly with diversification and market development. DepFonMin [Page 231]Sanga immediately returned to the theme of rice, saying that the biggest single problem in finding a market for the rice available for export was Indonesia.
5.
Ambassador Kennedy expressed understanding of the importance of this problem, and asked whether tourism was expanding. Pote replied that the number of tourists was increasing, but money was getting scarce and the hotels were suffering. Returning to rice, he said that Thailand had considered subsidizing the Thai farmer, but there was really no way to do this which the country could afford. Sanga added that current prices were far below last year’s. Ambassador Unger said that, recognizing Thailand’s concern about this matter, we wanted to be extremely careful regarding next year’s PL–480 program. We would consider what the ministers had told us, continue our consultations, which had already begun, both here and in Washington and avoid, in particular, timing of sales which would fall within Thailand’s principal marketing period.
6.
Pote, for the first time raising a subject other than rice, said tourism was very important to Thailand. Thailand was providing all possible incentives for its expansion. He was, therefore, concerned about reports that PanAm was taking its 747’s to Singapore and hoped that they would not bypass Bangkok. He and Ambassador Kennedy then briefly discussed character of tourist industry here.
7.
Returning to rice Pote said the RTG hoped that the United States might be able to lend money to Indonesia on favorable terms to buy rice from Thailand. Ambassador Unger explained that American rice to Indonesia was in effect not supplied on a loan basis but as outright aid. In a sense it did double duty: the rice itself met an urgent immediate requirement in foreign exchange field, and the rupiahs paid for it were channeled into development. Pote said he understood well that the American program was very helpful to Indonesia, and Thailand ‘could not make too much noise about it.’ Indonesia needed rice and had no foreign exchange to buy it. But even if the US lent money to Indonesia for only two years to purchase this rice from Thailand, this would help Thailand get over the worst of its readjustment to the new situation. The Minister of Finance commented that for the same reason Thailand warmly welcomed other US assistance to Indonesia, including American investment in Indonesia. The inflow of American resources in turn enabled Indonesia to purchase other requirements from Thailand. Ambassador Kennedy said part of the problem was that Indonesia’s problems were long-term. It took the IBRD and other international lenders to work out an approach that seemed appropriate to the Indonesian situation, and this type of solution was not addressed to Thailand’s short-term problem. He was most anxious to understand Thailand’s problem and to have this opportunity to discuss it with Thai leaders.
8.
Thanom, speaking through Pote, said Thailand was happy to know that the US helped Indonesia which has turned toward the free world. This assistance helped in strengthening the whole region. Thanom wanted this help to continue, and was only concerned that it should not create problems for Thailand’s own endeavors to help itself.
9.
Ambassador Kennedy said he was here to learn and appreciated the friendship extended to US over many years. It was the President’s personal determination to build strength throughout the region and to work together with Thailand. It was his conviction that a good potential for a stronger economy existed throughout the whole area. He was also well aware of the fact that sometimes we ourselves were slowing down deliberately and tightening our budget in a manner that made itself felt in many contexts, in particular in our aid programs and in American tourism.
10.
Thanom raised the question of special funds. The Asian Development Bank had substantial resources by now but its terms were such that Thailand did not appear able to receive much help from it. Ambassador Kennedy said that the administration had been unable to obtain Congressional approval for special funds for the ADB. It had been his own endeavor to have the United States make a contribution to ADB’s special funds equal to that which the Japanese were making. This position which envisaged a US contribution of approximately $100 million had the firm support of the executive, and had been included in a bill providing for appropriations for other international lending institutions. Even though special funds for the ADB had been deleted by the Congress, the request will be resubmitted. The ADB, which had been slow in getting started, was nevertheless now in a better position to contribute to the development of the region.
11.
Pote asked whether the US could help Indonesia with commodities other than rice. Was the US discouraging farmers from growing rice? Ambassador Kennedy said technological progress such as use of fertilizers sometimes permitted increases in yields even though acreage was restricted. Ambassador Unger referred to the recent discussion of our Indonesian aid program in Bangkok and Washington and pointed out that we had in fact offered to substitute other commodities this year for some rice scheduled for Indonesia. Indonesia needed a great deal of rice at certain times, and he repeated the hope that by beginning consultations on this complex problem early our efforts to reduce or eliminate an unfavorable impact on Thailand would be as effective as possible. Pote repeated that the Prime Minister wanted to stress the key importance of rice to Thailand. Indonesia constitutes a traditional market for about 300,000 tons of rice. With a disposable surplus of about 1 million tons, and with few other large markets (such [Page 233]as Hong Kong), sales to Indonesia were critical. He wished to repeat the suggestion that the US assist Indonesia by lending to it, perhaps through banking channels, an amount corresponding to the present level of American assistance. This would help solve Thailand’s problem and satisfy everyone. Thailand itself would need PL–480 assistance and was looking forward to further talks about this matter.
12.
Ambassador Kennedy expressed his deep appreciation for the opportunity to meet with his hosts and to explore these important problems with them.
13.
Comment: In addition to underlining once more the central position of rice in this country’s economy and therefore the sharply adverse impact of US PL–480 rice transactions on our relations, the discussion between Ambassador Kennedy and the Prime Minister and his group (heavily weighted on economic side) also strongly suggested that we will be adding another serious problem to US-Thai relations if surplus rubber disposal is not handled exceptionally carefully.
14.
Ambassador Kennedy has approved.

Unger

Unger
  1. Source: National Archives, RG 59, Central Files 1970–73, POL 7 US/KENNEDY. Confidential; Priority. Repeated to Djakarta.