Foreign Relations of the United States, 1964–1968, Volume XXVII, Mainland Southeast Asia; Regional Affairs

67. Memorandum From Francis M. Bator of the National Security Council Staff to President Johnson¹

Washington, June 21, 1965.

SUBJECT

• Instructions to Gene Black for Meeting on Asian Development Bank

At Tab A are the draft instructions for Gene Blackʼs use at the Bangkok meeting on the Asian Development Bank.² These are agreed between Gene, Dave Bell, Tom Mann, Charlie Schultze and, with one proviso, Joe Fowler.

If you agree, Gene would propose:

(1) That the Bank be capitalized at $1 billion, with a maximum US share of $200 million. Of this, we would pay in a total of $100–150 million, over a 4–5 year period. The exact ratio of paid-in versus callable capital would be subject to negotiation: we would try for 75% but settle for 50%. The cash cost to us would run $25–30 million per year over 4–5 years. (If it works out, we would presumably ask the Congress for authorization next spring and for the first appropriation for FY ʼ67.)

(2) The creation within the Bank of a separately financed Southeast Asia Development Fund, with a maximum US contribution of $100 million (par. 7 in Bellʼs memo.). Gene feels that such a fund within the Bank would (i) make it much easier to get others to put money into Southeast Asia; and (ii) be a good way to funnel some of our own development money, as part of the Baltimore program. (As Daveʼs memo points out, Charlie Schultze has some doubts about the tactical wisdom of Black mentioning the $100 million or any other figure. In the face of Geneʼs strong preference for naming a figure, and the othersʼ concurrence, Charlie is not inclined to press the point. He did want it brought to your attention; his memo is at Tab B.³)

There is one outstanding issue—whether to tie our contribution to the Bankʼs capital to spending in the US:

All concerned agree that the money for the Southeast Asia Fund should be tied. It is also agreed that, if at all possible, the Bankʼs capital should not be tied. However, Joe Fowler would prefer to avoid a public US commitment, this summer, to give away money which is not tied. He is worried about appearing too relaxed about the balance of payments, and would prefer to leave the question of tying open for later decision. (Joe agrees that the real effect on our payments of tying or not tying will be negligibly small. He is concerned about appearances on the Hill.)

Gene Black, on the other hand, feels strongly that we should make it clear now that the US is against any tying of capital contributions to the Bank. He believes that if we hedge on this, it will be impossible to keep others from tying their contributions and that this would impose a serious handicap on the Bank. He is also afraid that a hedged position on tying would take a lot of the political punch out of the US offer. (He telephoned me just now from New York to make certain that you would be told he feels strongly about this.)

Timing: Black will be leaving for Bangkok at dawn on Thursday. He hopes to have a word with you about this tomorrow evening at dinner.

Francis ⁴

Approved, with Black free to take the lead against tying of Bank capital (—this is what Gene would like, and all except Joe Fowler agree)⁵

Approved, with instructions to Gene that “if possible, the question of tying Bank capital should be left open for later decision” (—this is the language Joe prefers)

Bundy speak to me

1. Source: Johnson, Library, National Security File, Country File, Vietnam, SEA Development Program, Vol. I, 1965. Confidential.
2. A June 21 memorandum from Bell to the President, not attached. (Ibid.)
3. A memorandum from Schultze to Bell, June 21, not attached. (Ibid.)
4. “Mac [McGeorge Bundy] had to leave before Dave Bellʼs memo came over. He told me to send it in. He has been over the substance and concurs.” [Footnote in the source text.]
5. McGeorge Bundy wrote the following note on the source text: “Approved, just before Gene [Black] left.”