Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

545. Telegram From the Embassy in Thailand to the Department of State¹

Bangkok, March 1, 1960—11 p.m.

2466. Reference: (A) Department telegram 2108,² (B) Embassy telegram 2335.³ Informal reaction Finance Minister Sunthorn and Director Bisudhi, Office of Governor, Bank Thailand, has been secured (reference B). Both officials expressed personal understanding and appreciation Department/DLF accommodation on Thailand’s special needs and circumstances. With reference reference telegram A numbered item 3 believe following proposed procedure offers conformance with DLF procurement policy and implementation obtainable without detracting from general impact of this loan to enhance US/Thai relations.

(1) Secure TG agreement that Thailand would procure US capital equipment equal in value to and as consequence proposed DLF loan.

(2) As baht needed fund highway construction costs DLF loan drawings will be made by borrowing agency and credited Bank of Thailand general reserve account in US banks accredited by Bank of Thailand for deposit. US dollar equal to these drawings will be sold to Bank of Thailand’s equalization fund, baht proceeds credited appropriate government account to meet highway construction baht costs.

(3) Secure TG agreement establish in Bank of Thailand at time DLF loan agreement signed a special account equal full amount DLF loan. Bank to establish procedure identifying those capital equipment purchases considered attributable to DLF loan and credit those purchases against special account. Bank of Thailand would assist government in attempting influence this procurement from US. Believe best encourage Thai procurement soonest and that interest US and DLF procurement policy best served by not attempting maintain balance between dollar drawing on loan and Thai procurement capital equipment.

Request Department comments re procedures 1 through 3 above, and authorize Embassy formally discuss substance with Foreign Minister as preliminary to DLF loan negotiations.

Comment: (A) Foreign Minister requests US consider as capital equipment purchases Thailand’s procurement of heavy mobile machinery and heavy duty trucks widely used by Thai Government ministries and private industries. While he appears convinced private industries will buy much capital equipment in US, government direction such procurement might adversely affect government efforts attract private investors from all free world countries.

(B) Finance Minister and Bisudhi desire establish dangerous precedent of blocking Bank of Thailand’s reserves in US. Bisudhi urges that the “special account“, refer to 3 above, not be considered as blocked reserve (see Embtel 2088).⁴

(C) Because relatively free foreign exchange available Thailand, Bisudhi’s fears directed sale blocked dollars will be at discount. This he believes could cause IMF criticism that Thailand not maintaining single [garble] rate. Also sale of blocked dollars at discount will generate objections other countries which likely be voiced through IMF.

(D) Neither Finance Minister nor Bisudhi voiced opposition to loan condition that Government of Thailand use DLF or like amount for purchase capital equipment in US.

(E) Both agreed that Thai Government expenditure local currency amount approximately 4 million baht over period of road construction would not be strain on government budget.

(F) Bisudhi stated if special account procurement acceptable Bank will be prepared supply US officials report on purchases charged this account.

Johnson

1. Source: Department of State, Central Files, 792.5–MSP/3–160. Confidential.
2. Document 543.
3. Supra.
4. In telegram 2088, January 30, the Embassy reported on various offers to the Thai Government of loans by private U.S. citizens and banks, and referred to a loan several years previously which had been secured by a Bank of Thailand note in a blocked account in an American bank. (Department of State, Central Files, 892.10/1–3060)