Attachment4
TALKING NOTES: SOUTHEAST ASIA DEVELOPMENT SCHEME
Purpose:
To bring together the peoples and governments of Southeast Asia in a
constructive association for economic development action, in
cooperation with each other and with the advanced nations; to build
regional political unit and reduce tensions; to commit the advanced
countries and the United Nations to a deeper interest in the
development and, indirectly, the security of this vulnerable region;
to bring the Soviet Union and North Korea, as well as the neutral
counties of the area, into this relation of positive coexistence,
offering North Vietnam a chance to change its policies.
Sponsorship:
To achieve these political aims even moderately, the Association must
be all-inclusive, limited only by the willingness of countries to
subscribe to the Associationʼs principles.
Suspicion that this scheme is a new try at western imperialism will
kill it.
Soviet and North Vietnamese participation, or at least initial
tolerance of the plan, appears to be essential. Consequently, Asian initiative from here out is crucial.
The United States should try to work in the background in the
formative stages, giving U
Thant the lead.
A tie with the United Nations and with the U.N. Economic Commission
for Asia and the Far East would provide the best auspices.
Scope:
The broader the participation of Southeast Asian countries the better
will be its chances of achieving both the developmental, trade and
political purposes. Our interests would be served by the
participation of effective democracies—the Philippines and
Malaysia—and the strongest countries of Southeast Asia,
Thailand.
We cannot dictate the exclusion of any country of the area. We should
not, however, commit ourselves to providing direct U.S. aid to any
participant, nor indicate that we expect to force our aid on those
who have rejected it, i.e., Cambodia and Indonesia.
We should agree to contribute to consortia managed by the
Associationʼs executive agent which would undertake projects in or
benefiting any member country, regardless of whether that country is
recognized by or directly assisted by the United States.
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Possible Organization:
The Association would have regional (recipient) and non-regional
(donor) members.
It would have a permanent headquarters in the area, with a staff
composed largely of Asians for secretariat-type functions, including
data collection.
It would have an executive agent, preferably provided by the World
Bank, to organize and manage the financing, construction and in some
cases operation of regional projects serving more than one country,
such as Mekong River projects, international transportation and
communications projects, regional educational institutions (medical,
dental, engineering, fisheries, agriculture, public administration
and other types of colleges serving all countries of the region),
etc.
The Association would be loosely associated with, and report to,
ECAFE.
It would assist countries of the region to prepare their national
development plans and might conduct regular examination of the
membersʼ economic policies and problems, in the manner of the CIAP system in the Alliance for
Progress.
It also might conduct trade and tariff consultations and discuss
complementary industrial investment. Its role in coordinating
bilateral aid terms has not been thought out.
Aid Requirements:
Under the best of circumstances, the region (including Indonesia)
could use effectively at least $1 billion per year in all forms of
foreign economic assistance for development, plus at least $200
million annually in foreign private investment.
We cannot expect these favorable circumstances in all countries of
the area soon. Human resources are poorly developed, and training or
experiences takes time. The public and private institutions and the
basic infrastructure of development are inadequate. Domestic savings
essential to economic growth will probably rise slowly. Furthermore,
communist threats and aggression are forcing a tragic diversion of
resources to military budgets. It is unlikely that there can be an
immediate massive reduction of these expenditures.
Consequently, we believe that in the next few years, even with an
early cessation of hostilities, the region can absorb no more than
$700 to $800 million annually in long-term developmental aid (other
than private investment) from all sources.
The United States ideally should not provide more than about half of
this total. A dominant U.S. role would run counter to our political
purposes and erode Congressional support for the effort over the
years.
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Japan, Western
Europe and the IBRD should be
pressed to increase greatly their aid commitments to the region.
In addition to our contributions to long-term development, we will
continue to have some bilateral aid obligation for economic
assistance of a non-developmental character in South Vietnam and
Laos, related to their distorted wartime economies or in support of
temporarily inflated military forces.
Present and Future U.S. Aid Requirements:
U.S. economic aid to the potential membership of the Southeast Asia
Development Association currently runs at about $385 million per
year. This includes about $275 million from AID (largely grants), $95 million from PL 480 sales and
grants, and nearly $15 million from the Export-Import Bank.
About half of this total, or $200 million, might be called long-term
development aid.
A doubling of this U.S. developmental effort to about $400 million
annually appears to be a reasonable goal.
This would not require a $200 million increase in the annual AID and PL 480 requirements. Some
transfers from emergency-type supporting assistance and military
assistance should be possible. Some increase in Ex-Im Bank loans can
be expected. To the extent we can stimulate private U.S. investment,
with guaranties and loans, we can reduce the need for U.S.
Government aid. It may be possible to do our share with a net
increase of only $100 million annually in the AID budget request to Congress.
The current U.S. Military Assistance Programs in these countries
total $330 million.
An approximate monthly average MAP expenditure for Vietnam is $20
million, of which ammunition represents some $6 or $7 million.
Direct U.S. military costs in Vietnam (outside the MAP budget) are roughly estimated as
about $20 million per month.
In Laos, the monthly MAP cost is
about $3.5 million, of which ammunition accounts for $1.5 million.
Direct U.S. air operations have not been accurately estimated on a
monthly average basis.
(See attached tables.)5
Private Investment:
Over the past two years, private foreign investment in Southeast
Asia, including the Philippines, averaged some $70 million. Thailand
got $73 million, Indonesia $12 million, Malaysia $40 million in
1963. There was a net withdrawal of private investment totaling $30
million from the
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Philippines, $14 million from Burma and $4 million from Cambodia
during 1963.
With improvements in security and political climate, financial
stability, assurance of profit-repatriation and a generally improved
atmos-phere of foreign confidence in the region, this flow of
resources and know-how into the region might be doubled.
The climate in the Philippines presently is worsening seriously.
The countries of the area can stimulate greater foreign (and
domestic) investment by providing tax exemptions, liberal
repatriation rights, permission to own land and bring in foreign
technicians, establishing industrial parks, publicizing investment
opportunities, etc.
The capital-exporting countries can stimulate private investment in
the area by extending their guaranty programs to cover political
risks (as we do), offering tax incentives to foreign investors,
undertaking studies of investment opportunities, sector surveys and
other technical assistance.
Urgent Needs:
- A.
- Rural development, across the board—agricultural production
and marketing expansion, potable water and irrigation, rural
health and sanitation, village level schools, local roads and
other transportation, community leadership training and
motivation, etc.
- B.
- Middle and higher education. Example: In Laos, there are only
80 high school graduates a year.
- C.
- Industrial expansion, keyed to stimulation of agriculture,
reduction of dependence on imports, and exploitation of labor
cost differentials. Examples: Grain processing and packaging,
fish canning and freezing, cotton and synthetic textile mills,
paper, cement, light iron and steel shapes, cooking
utensils.
- D.
- Basic infrastructure: Electric power generation and
distribution, especially to small towns for potential new local
industries; highways and feeder road construction and
improvement; railway expansion, particularly international
links; telecommunications.
- E.
- Health services, for cities as well as rural areas, including.
- 1.
- In preventive and curative medicines—
- a)
- Malaria eradication.
- b)
- Communicable disease control, including
particularly:
- Enteric disease, e.g., dysentery, typhoid
fever.
- Respiratory disease, e.g., tuberculosis and
pneumonia.
- Diseases of childhood, e.g., measles,
whooping cough.
- Leprosy.
- Diseases which reach seasonal epidemic
proportions, e.g., cholera, small pox.
- (c)
- Control and treatment of diseases of the eye
such as trachoma and glaucoma.
- d)
- Control and treatment of nutritional diseases
and malnutrition.
- 2.
- In public health, expand village health and sanitation
by water and sewage disposal and well drilling.
- 3.
- In direct health services, develop local and
provincial medical facilities and provide surgical and
medical teams.
- 4.
- Medical education.
Multilateral Projects:
The purpose of achieving greater regional unity can be advanced by
giving great weight in project-selection to activities which knit
these countries together. Such multi-national projects could be
turned over to an Association consortium under World Bank
management. These include:
The Mekong Riverʼs exploitation offers this opportunity, but this is
a very long-term undertaking of enormous cost. Major, main-stream
dams do not appear economically justifiable (in relation to costs in
excess of $500 million for a single dam project) for some years.
However, tributary dams which may produce electricity for
neighboring countries may be feasible in the nearer future.
International highways and railways may be feasible in the near term.
The French-built roads linking Cambodia, Vietnam and Laos are in bad
disrepair.
A regional airline would make more sense than the present,
deficit-ridden national lines. All the cities of the area need
airport improvements and airways communications.
Expansion of the regional telecommunications system, which we have
developed in Thailand and partially in Vietnam and Laos, is an
attractive possibility.
Regional educational institutions, with different specialty schools
established in different countries of the region, would serve twin
purposes of development and regional political unification.
Some types of disease-eradication campaigns are most effective if
they cut across national boundaries.
The regional experts will undoubtedly propose other schemes. A
disadvantage of such multilateral projects is the difficulty of
tying U.S. contributions to U.S. procurement, i.e., the gold drain
issue.
