245. Memorandum From the Deputy Assistant Secretary of State for Far
Eastern Economic Affairs (Peterson) to the Assistant Secretary of State for Far
Eastern Affairs (Harriman)0
Washington,
December 19,
1961.
SUBJECT
- Economic Aid to Souvanna
Government
The attached memorandum and proposed telegram1 is a first step
toward bringing into perspective the nature and direction of aid in Laos
designed to substitute economic and social development for past support
via the military.
It does not give the size of the program, but in the remaining half of
the current fiscal year I think it can be taken as assured that the rate
of cash grant for budget support will certainly use up the $29 million
now projected. My hunch is that if budget costs of demobilization arise
concurrently with an upswing in road building, enlarged agricultural and
health programs, etc., the needs for the fiscal year will approximate
$40 million.
Previous briefings given me on the issue of cash grant versus a commodity
import program and its attendant import and foreign exchange controls
have been rather persuasive that the cash grant system is the best in
Laos.
I recommend you approve the telegram to Vientiane to obtain country team
comments and have at least a conditional proposition for Ambassador
Brown to put forward to
Souvanna.
[Page 542]
Attachment2
Washington,
December 18,
1961.
Memorandum From the Director of the
Office of Southeast Asian Affairs (Anderson) to the Assistant Secretary of State
for Far Eastern Affairs (Harriman)
SUBJECT
- Economic Aid to Souvanna Government
I am enclosing a draft telegram outlining our economic aid program to
Souvanna that we propose
to send to Ambassador Brown,
first for his comments and then to be presented to Souvanna. It is
the first of a series outlining our future relations with
Souvanna.
In the telegram we have not specified how or when this program should
be presented to Souvanna as
these questions will be determined by events in Laos; it may be, for
example, that we may wish to offer this program to Souvanna when he comes to Vientiane
for the three Princes’ meeting or it may be that we will want to
postpone it for a while. In the same way we have made the program
itself as flexible as possible and have focused on the immediate
future rather than the unpredictable longer run.
In essence we are prepared to provide Souvanna with an enlarged project program—roads,
rural development, etc.—and a continuation of the present rate of
budget support. Our only conditions are: 1) that he join with us to
establish procedures that will insure the effective use of the aid;
and 2) that we undertake a joint review of the means of providing
the aid. Details of our aid program, the type and number of
projects, the personnel that will be required, and the amount of
money needed are now being worked out by AID and State and will soon be sent to Vientiane.
We have had lengthy discussions with AID about this telegram, occasioned largely by their
desire to change from a cash grant program to a commodity import
program which would be put on a competing basis with that of the
U.S.S.R., i.e., we would tell
Souvanna that we will
match the Soviets’ commodity gifts. While we agree that the cash
grant system should be reviewed to see if there is not a more
efficient and productive method of providing our aid and that other
nations should make aid available to Souvanna, we certainly do not
believe that we should take an active role in inviting the Soviets
into Laos. These subjects will be discussed in later telegrams.
