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

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

Bangkok, September 2, 1960—7 p.m.

421. Following my return I have reviewed situation Thailand with Country Team, and particularly with USOM have reviewed situation with respect economic aid for FY 62. I am persuaded political considerations demand expanded program and economic situation invites such expansion. Therefore I strongly endorse program for 31 million dollars submitted by USOM August 29 for FY 62.

Today Thailand relatively favored country in Asia in its ratio population to resources and this contributes strongly to stability. Rapid population growth (now estimated 2.75 percent per annum) could, however, present country in relatively short span of years with economic and social pressures well-known elsewhere Asia. Obviously desirable Thailand take steps now which will prepare accommodate such population growth so as to turn it into asset rather than liability, assuring expanding economy and rising per capita income. This matter of central concern U.S. because Thailand basically most stable country this region, in best position cooperate effectively in promoting common interests, and has come to represent in Asia dignified, self-respecting nation, outspoken friend of U.S. and our policies but in no sense a satellite.

Since Thailand crucially important to U.S. we must also face immediate problem in Thai-U.S. relations posed by contrasts in political outlook this region. For sound reasons USG assists, sometimes substantially, neutralist countries which also accepting assistance from Communist bloc. However, Thais increasingly impressed by fact countries like Cambodia, while bearing none of responsibilities for free world defense (from which they clearly benefit), nonetheless receive substantial U.S. aid and also considerable aid from Communist side and thus seem successful in pursuing policy of having best both worlds. Thais particularly disturbed at current reports U.S. aid to Cambodia may be substantially increased. Most recently Thais have been especially distressed possibility development another Sihanouk-type regime in Laos and at possibility U.S. would deal in same generous manner with such regime.

These considerations have persuaded me and Country Team that our economic aid program, as important arm our foreign policy, must be used to assure Thais our continuing recognition their role and to redress imbalance vis-à-vis neutrals (who receiving aid from two directions) by U.S. offering join them major cooperative effort for accelerated economic development over coming years. Believe continued stability and friendly orientation Thailand depends on several factors but of major importance is that Thais feel steady modernization and economic improvement taking place and that U.S. contributing thereto. Accelerated development can be accomplished with grant funds not greatly larger than previous years. Believe it should come now, however, before Thais tempted further toward conclusion that turn in neutralist direction desirable for them also. This sentiment strengthened by recent Laos developments.

Fortunately, political situation coincides with stage in development Thai economy which invites application expanded technical assistance, preparation for loans through surveys and support of economic infrastructure construction, leading into program accelerated development and, eventually, self-sustaining growth status. FY 62 submission emphasizes timely assistance Thailand to set stage for what frequently called “economic takeoff”.

Thailand’s existing infrastructure, its fiscal conservatism, its control of inflation, all augur well for Thailand’s ability to sustain and even augment its growth above current 4 to 5 percent annual level. FY 62 program conceived as basis for moving into quid pro quo relationship under which TG would further modify tax structure and collection techniques, take steps improve agricultural productivity, formulate rational economic plan for allocation public sector resources, enact final legislation to promote private investment, reduce raw material import duty rates to encourage infant industries, etc. FY 62 program also places major emphasis on engineering and economic feasibility surveys which are necessary precondition if Thailand is to make optimum use DS funds succeeding years and enable TG take advantage loan possibilities such institutions as IBRD, IDA and DLF. Without augmentation DS to level approximately that proposed Country Team submission, surveys of type contemplated could not be achieved and prediction sustained economic growth Thailand could not safely be made.

Fact that Thailand seeking economic development in free economy and if successful will provide demonstration to other SEA countries of value this system also speaks for intensifying our cooperation with Thais for such development. Furthermore, Thailand over recent years has not been seduced by lure of large-scale prestige projects but has approached economic development on more modest, pragmatic basis, recognizing wisdom gradual industrialization and giving thought how this can proceed without dangerous disruption social structure.

Strong military argument can also be made for expansion U.S. aid to Thailand. In recent years total budgetary appropriations to Thai defense ministry have declined in both absolute amount and to even greater extent in terms percent total budget. They now constitute less than 17 percent total Thai budget as compared with 20 percent several years ago. These reductions military appropriations reflect emphasis Sarit government on economic development. We believe this emphasis conforms with popular sentiment Thailand, and this conformity presumably reason military administration of Thailand giving more emphasis to economic development than to military power. Were U.S. to reduce its overall economic aid level we believe TG itself would attempt to compensate for shortfall by increasing own economic development expenditures. This could be accomplished by inflationary measures, or by further reduction in military appropriations. As emphasized Embtel 243, either consequence would result in setback U.S. objectives.² In view conservatism Thailand’s financial leaders, success recent years measures control inflation, and necessity continue minimize inflation in view requirements for larger aid from such external sources as IBRD, we believe that were Thailand forced take either of two steps (i.e., inflationary financing, reduction of military appropriations), likely alternative would be reduce expenditures to military with consequent deterioration military capabilities.

If Washington concurs in recommended FY 62 program it would be my intention approach Prime Minister Sarit at early date with concept of expanded Thai-American effort in economic development field. Concept would rest on premise stated by King of Thailand in Washington (and also often stated by Sarit) that Thailand does not wish continue receive aid indefinitely; effort would be aimed at putting Thailand in position several years hence to sustain her own growth with help through loan and private investment. Such a presentation would not enter into specific figures but would rather examine directions in which Thai economy can expand and how U.S. can help. Would have to make clear what kinds of actions would have to be taken by Thai Government if such a program were to have chance of success, and commitment that requisite TG actions and U.S. assistance would be closely geared. Would of course have to be noted that U.S. assistance must depend on availability funds from Congress and supply of necessary technicians and others to carry on on U.S. side. Such factors would obviously affect rate of accomplishment as would progress of TG in carrying out actions depending on it. Only after such preliminary exploration at top level made and depending on degree of enthusiasm and resolve on part of Thai Government would we turn to more concrete discussion of types and levels U.S. assistance and specific measures which we would expect the Thai Government to take on its side.

I recognize program of magnitude recommended for FY 62 not in keeping target figure mentioned guidelines, nor does it represent gradual reduction sought by Mansfield Amendment.³ However, in view political, economic and military considerations reviewed above I am persuaded that we must now make at least relatively modest reevaluation of our economic cooperation with Thailand embodied in FY 62 USOM submission.

Johnson

1. Source: Department of State, Central Files, 792.5–MSP/9–260. Confidential. Repeated to Saigon, Vientiane, CINCPAC for POLAD, Phnom Penh, and Rangoon.
2. In telegram 243, August 13, Unger urged strongly that the defense support figure of $16 million for Thailand proposed in the fiscal year 1961 program submission be raised to $20.6 million. (Ibid., 792.5–MSP/8–1360)
3. The Mansfield Amendment, proposed by Senator Mike Mansfield (D.–Mont), was incorporated into the Mutual Security Act of 1959, P.L. 86–108, approved July 24, 1959, in Section 401 (a). (73 Stat. 252)