227. Memorandum From the Under Secretary of the Treasury (Barr), the Under Secretary of State (Katzenbach), and the Administrator of the Agency for International Development (Gaud) to President Johnson1
SUBJECT
- African Development Bank
In your Foreign Aid Message, you stated that we would “seek an appropriate means of responding” to the request made last year for U.S. participation in a soft loan fund to be administered by the African Development Bank. In your Economic Message you also stated our policy of supporting such regional development efforts. Thus far, however, we have not given any answer to the African Bank request.
The absence of any U.S. response has in effect stalemated the Bank’s effort to put together a package of contributions to this proposed loan fund. Normally, we would want to obtain thorough Congressional soundings before making a response. However, State, Treasury, and AID have reviewed this matter carefully in light of all of our other plans in the foreign assistance area, and we are agreed on the following points:
- 1.
- Our bilateral aid programs for Africa have been designed on the assumption that we will be moving into participation in an African Bank fund; it therefore is important to our own plans for the Bank to get serious international discussions underway.
- 2.
- We cannot obtain legislation for an African Bank contribution this session, if only because there is not sufficient time to put together a package involving other contributors. Action in the next Congressional session is entirely feasible.
- 3
- In view of the fights expected this year on the AID bill, the Inter American Bank, and the Asian Development Bank, it would be counter-productive to attempt full Congressional soundings on an African Bank proposal at this time. (In addition, since the African Bank includes the U.A.R., and other Arab North African countries, this is a particularly inopportune moment to discuss the Bank with the Congress.)
- 4.
- The Congressional group headed by Rep. Multer that accompanied Under Secretary Barr to Africa this Spring (the group that later met with you on this subject) was strongly in favor of U. S. participation in an African Bank fund, and can be expected to assist in mobilizing Congressional [Page 377] support for a suitable proposal next year. Earlier, very limited soundings on the Senate side also indicated a generally favorable reaction.
- 5.
- With essentially every other regional development effort coming up for U.S. action either this year or next, there would be some political advantage to having—and some disadvantage to not having—an African Bank proposal to submit to the Congress next year.
- 6.
- The appropriate U.S. participation would be relatively small—about $20 million a year for three years, conditioned upon (a) limitation of our share to about 40 per cent of the total fund, (b) complete “tying” provisions to protect our balance of payments, and (c) a strong U.S. voting position, including a right to prevent the use of our own contribution for a particular project. No authorizing legislation would be sought until 1968, and appropriations next year would be small.
We therefore believe it would be desirable to inform the Bank that we would be prepared to approach the Congress next year for authority covering a U.S. contribution along the lines indicated briefly in paragraph 6 above, and in more detail in the attached memorandum (Tab A).2 If you approve, the first step would be for Secretary Fowler to send the President of the Bank the letter attached in draft form (Tab B). (This would be transmitted in confidence, but we would have to expect that the U.S. response would leak out eventually in the course of international discussions.)
Secretary Fowler and representatives of other potential donor countries have been invited to attend the meeting of the Bank’s Governors on August 21–26. Our response will get the most mileage if it is conveyed to the Bank by that time.
Concur:
Nicholas deB Katzenbach
William P. Gaud
Recommendation: That you approve our advising the African Bank that we would be prepared to approach Congress next year for authority covering a tied Special Fund contribution of up to $20 million a year for three years, subject to appropriate contributions from other contributors and to other terms and conditions.3