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125 Submission from Spender to Cabinet

Canberra, December 1950

37A. CONFIDENTIAL

The Colombo Plan for Co-operative Economic Development in South and South-East Asia

A. INTRODUCTION

1. On November 28th last I presented to the House the report of the Commonwealth Consultative Committee on South and South-East Asia, and indicated that an announcement would shortly be made regarding a financial contribution by the Australian Government to assist in implementing the development programmes described in the report.

2. Advance copies have been in the hands of all Members of Cabinet for several weeks so I do not intend to deal with the details of the report, but only with the points relevant to the necessity for a contribution by Australia.

3. The chief purpose of this Submission is therefore to ask Cabinet to approve the amount of financial aid that should be granted by the Australian Government.

4. As the United Kingdom Government has already announced its contribution, which they estimate may amount to well over �300 million (sterling) during the period 1951–7— it is imperative that, in order to gain U.S.A. support for the Plan and a substantial financial contribution, an early announcement on this subject be made.

B. THE IMPORTANCE AND SIGNIFICANCE OF THE COLOMBO PLAN

5. In sponsoring, at Colombo in January last, the proposal for a joint Commonwealth approach to the plan for economic development of South and South-East Asia the Australian Delegation fully recognised its responsibilities towards, and interest in, the countries of this region. In attempting to put into motion a process which would mobilize international economic assistance for South and South-East Asia, I was influenced by four main considerations. The first is the vital importance for Australia's long-term security of a United States commitment to sustain the economic, and indirectly, the political, stability of this area. The second is the fact that Asian countries will not accept United States aid with the same readiness to identify themselves with the West in the global political dispute as was the case in Europe. In consequence we have attempted, and should continue, to use, the great potential Asian influence of the Commonwealth as a cohesive force progressively to bind Asia to the West in a way which so far has been impossible by direct political pressure in a region whose nationalism is founded on reaction against the West. This is a major reason for the initiative that Australia took at the Colombo Conference. Thirdly, while I do not underrate the value of the accumulated experience of the United Kingdom in this region I am of the opinion that her chief interests in this area are mainly economic. Fourthly, we must regard this Plan as part of a foreign policy designed to deny this important part of the world to Soviet Russian influence.

6. It is a Plan which is intended to contribute to peace within the area, and to our own security, and so needs to be paid for.

C. NECESSITY FOR AN AUSTRALIAN CONTRIBUTION

7. The total of the development programmes, over the six year period July 1951-June 1957, is estimated at �1,868 million sterling, of which �1,085 million will be required from external sources. The United Kingdom will permit the drawing on sterling reserves by India, Pakistan and Ceylon to the extent of about �246 million and will apply �61 million for development in Malaya and British Borneo. A gap of about �778 million will be left. Obviously the combined resources of the Commonwealth alone are insufficient to meet the requirements of the Plan, and the critical question will be the extent to which the U.S.A. will participate, and contribute substantial financial assistance. Only the U.S.A. can fill the political and economic gap. It is not of course possible to predict that she will. I count it a good chance however that the U.S.A. and the Commonwealth together could ultimately carry South and South-East Asia with them, if we act quickly. On the other hand deliberate Australian isolation from this region while we are achieving our small population increase seems to me to lose us the opportunity of using foreign policy effectively in our long term defence.

8. We must therefore show our sincerity to the peoples and Governments of the area, and we must demonstrate to the U.S.A. our willingness to make some considerable contribution to assist in solving a problem which is of such special significance and importance to Australia, by undertaking to make available financial and economic aid for the Colombo Plan.

D. PROPOSED CONTRIBUTION

9. It will be recalled that prior to the Sydney meeting of the Commonwealth Consultative Committee I received the authority of Cabinet to negotiate within the limits of �13 million Australian for assistance (including credits) to South and South-East Asia during the year 1950-51. Only �1,345,000 of this amount has so far in fact been committed during the current financial year. The discussions of the Consultative Committee have in effect deferred the inauguration of the economic aid programme until 1951–2.

10. During the London meeting of the Commonwealth Consultative Committee in September last, at a critical stage of the discussions I communicated with the Prime Minister, on the subject of a financial contribution.1 The Prime Minister, without having the opportunity of consulting with Cabinet, was of the opinion that the Australian Government's contribution should be of the order of �7 million sterling during the first year i.e. 1951-52, with an over-all contribution of �25 million sterling during the six-year period from 1951-52 to 1956-57.2

11. It is my submission that, having regard to the magnitude of the plan, to Australia's initiative and interest in it, to the world interest which the plan has created and the overriding necessity of committing the U.S.A. to this area of the world the Australian Government, particularly in view of the authority given me by Cabinet prior to the Sydney meeting, might well offer �10 million sterling during the first year. The total contribution for the six-year period should, I believe, be of the order of at least twice that indicated above i.e. about �50-60 million sterling. However, in view of the difficulties which now confront us, I think we could make the offer as suggested by the Prime Minister, and also indicate that we shall keep the matter under review having in mind the possibility of increasing our aid, should this become practicable.

12. The contribution proposed would be available for assisting the development plans not only of India, Pakistan, Ceylon or the British territories of South-East Asia, but of the other countries of South-East Asia which it is hoped will participate.

13. A decision to give the amount of financial assistance which I recommend, would be in our own interest, and would be a highly practical one. The economic development and higher living standards resulting from the Plan (and we expect the great proportion of assistance to be provided by countries other than Australia) will undoubtedly increase our own commercial and export opportunities; this in itself is important. The potential effects on our security, for such small cost, are incalculable.

E. RECOMMENDATION

It is submitted for decision:

(a) That the Australian Government convey a message to the South and South-East Asian countries participating in the Colombo Plan expressing its sincere wishes for success in this important enterprise, and indicating that it will support the programme to the fullest possible extent.

(b) That the Australian Government agree to contribute towards the Plan (for participating countries and non-Commonwealth countries yet to come in) over the period July 1951 to June 1957, a total amount of at least �25 million sterling with an initial contribution, for the first year (1951-52), of �7 million sterling. Details of financial arrangements, of the manner in which the aid is to be provided, whether by loans or grants, or both, or otherwise, and the terms and conditions, are to be jointly examined by the Departments of the Treasury, Commerce and Agriculture, Trade and Customs, National Development and External Affairs, and a further submission made on these details by the Minister for External Affairs.

(c) That the possibility of making a contribution additional to that indicated in (b) above be kept under review and the matter be resubmitted to Cabinet at an appropriate time by the Minister for External Affairs.

(d) That an immediate announcement be made in terms of the above proposals on the contributions which the Australian Government proposes to make to the Colombo Plan.3

[NAA: A4940, C353]

1 See Document 108.

2 See Document 109.

3 On 13 December, Cabinet approved Spender's recommendations, adding that the terms in which the announcement would be expressed would first need approval from the Prime Minister, and that 'care must be taken to avoid raising expectations on the part of the proposed recipients'.

Last Updated: 10 January 2017

Category: International relations

Topic: History