Office of the Historian

115. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

Washington, May 1, 1967.

SUBJECT

  • Loans to Korea for Power Development

AID (Administrator Gaud) asks your approval to make two development loans to South Korea.2 They would finance the foreign exchange costs in improvements of the country’s electric power system. The total of the two loans is $34.7 million:

  • —$22 million to finance a new thermal power plant in southeast Korea, the nation’s fastest-growing industrial area;
  • —$12.7 million for improvements in Korea’s electric transmission and distribution system.

You will recall that in May 1965, a commitment was made to President Park that we would provide Korea with $150 million in assistance this year. With the two proposed loans, we will have fulfilled that commitment up to $142 million. AID is considering additional loans of $8 million and expects to fulfill the commitment to Park completely by this summer.

Under our urging, the Koreans have boosted electricity rates by 24 per cent. The new loans will carry the requirement for another 10 per cent raise. Other requirements are aimed at enabling the Korean power company to meet its own future needs for capital investment.

Korea’s need for additional power resources is urgent if the country is to maintain its encouraging high rate of growth. Demand has increased 19 per cent a year since 1964.

The loans would be used solely to finance purchase of United States equipment and services. Secretary Fowler agrees they will have a minimum adverse impact on our balance of payments. The Budget Bureau (Director Schultze) supports AID’s proposal.3

I recommend that you approve these loans.

Embassy Seoul has strongly urged that announcement of the loans be held until after the presidential election (May 3). Their judgment is that announcement just in advance would do President Park more harm than good. Announcement after will strengthen his party in the up-coming legislative elections.

Walt

Loans approved4

Disapproved

See me

  1. Source: Johnson Library, National Security File, Country File, Korea, Vol. IV. Confidential. The memorandum indicates that the President saw it.↩
  2. Reference is to an April 15 memorandum from Gaud to President Johnson. (Ibid.)↩
  3. Reference is to an April 21 memorandum from Schultze to President Johnson. (Ibid.)↩
  4. The President checked this option.↩