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130 Paper by Department of External Affairs

Canberra, December 1950

The Economic Objectives of Policy towards South and South East Asia


1. Agriculture is the basic need for all countries in the region, both as a source of food and of export earnings.

2. International assistance will therefore be concerned mainly with—

(a) supplying food;

(b) supplying equipment, fertilisers, and other essential requirements for increasing the agricultural production of food or other export crops. One stage removed are forms of assistance to improved public administration, public health, transport and the basic services without which increased agricultural production could neither be effected nor used.

3. For our purposes it is necessary to have—

(a) a broad view of the economic disabilities of the area as a whole;

(b) a picture in general outline of the intensity of the problem as it arises in each country. Only on this basis can Australia foresee the kind of supplies and technical assistance which are required; and judge which among the ten countries involved should receive prior attention by Australia.


4. Details and up-to-date studies by ECAFE, FAO, the Monetary Fund and others are available. The statistics relate to China and Indonesia as well as to the territories covered by the Consultative Committee and it has not yet been possible to isolate out the information for South and South East Asia proper. With this reservation the salient facts are:

(a) The index of all agricultural production in 1948/49 was still only 94% of the figure 12 years earlier (1934-38).

(b) The main energy foods are about back to prewar levels of production.

(c) All comparisons with the prewar period should bear in mind that the consuming population now is between 10 and 12% higher than before the war.

(d) The area under cultivation is already higher than before the war but the fact that production is lower demonstrates the fall in yields due to lack of fertiliser, abandonment of lands during the war, and other causes of serious deterioration.

(e) In 1948/49 consumption of food per head was only 88% of the already low prewar level.

(f) Rice production in 1948/49 was still slightly less than prewar. The increase in population, already referred to, was enough to wipe out the region's export surplus, which before the war was its second most important export, and require the net importation of rice into the region as a whole. If, however, production plans of Burma and Thailand for 1950/51 are realised, the region could again become a net exporter, assuming present low standards of consumption remain stationary.

(g) Many countries within the region depend on rice exports from Burma, Indonesia and Thailand, and these exports fell from 5.7 million tons in 1934-38 to less than 3 million tons in 1949.

Of special interest to Australia is the fact that net imports of bread grains rose from 1.0 million tons prewar to 4.3 million tons in 1948/49. If rice production plans are maintained, wheat needs may fall slightly in 1950/51 to a figure of about 3.5 million tons.

(h) The balance of trade of the area as a whole with the outside world deteriorated from a surplus of $519 million in 1937 to a deficit of $827 million in 1948. This is primarily due to a fall of 20% in the volume of exports between 1937 and 1948, occurring mainly in exports of rice, petroleum, and vegetable oils. Rubber exports have increased. The loss of dollar earnings was particularly severe.


5. Various studies that have been made indicate the possibilities of mutual aid through an increased volume of intra-regional trade, mutual exchange of technical training facilities, co-operation of new central banking institutions, and so forth.

6. The present obstacles to trade between Pakistan and India are a conspicuous example of the damage that can be done by interrupting trade.

7. Trade within the region is relatively high and covers the sale of surpluses of rice, sugar, copra and coconut oil, timber, jute, etc. Exchange of raw materials for manufacturers from Japan was a major element in prewar trade, and this trade will no doubt increase progressively.

8. Prior to devaluation,1 FAO and others were commenting that greater development of intra-regional trade was necessary because the area was experiencing increasing difficulties in competing with overseas markets and in financing imports from outside the region (illustrated by the overall deficit in the region's trade balance to which must be added net indivisible payments). Devaluation may now have changed this situation. In any case, however, it is not feasible to oppose that system of expanded mutual trade on the members of the region; it can only develop out of commercial advantages aided, where appropriate, by trade agreements and negotiation of payment schemes (for example as negotiated by SCAP).

9. One way in which the development of mutual trade may take place, however, is as a consequence of the direction of international assistance to the establishment of manufacturing processes which will use the products of the region and turn out the crude or finished product (petroleum, textiles etc.).


10. The FAO-ECAFE report (E/CN.11/135)2 estimated that the following were the region's main agricultural requisites in 1948:

(a) Fertilisers—nitrogenous and phosphates
Supplies are now improving but are said to be insufficient.

(b) Irrigation and drainage equipment
Pumps (2� to 12�)

Power units: electric, diesel and petrol
Well casings
Earth moving machinery
The report in September 1949 suggests that availabilities are improving.

(c) Agricultural machinery and implements
Tractors, parts and repair shops
Hand implements
Ploughs, etc.
The report in September 1949 refers to increased availabilities of light tractors.

(d) Pesticides

(e) Livestock and veterinary equipment

(f) Primary processing equipment

Miscellaneous plant, on large and small scale, for processing rice, flour, cotton, oil seeds, sugar, tea, and rubber.

11. A good deal of information is already available as to the fields in which technical training has been commenced by various international organisations. The United States has given us lists of the types of training which are considered essential tinder the American 'Point Four'3 programme in Thailand and the Philippines. By way of example the list for Thailand totals 67 experts (21 for agriculture and forestry, 21 for public health, 8 for transportation, 4 for industry, 3 for mineral resources, 3 for statistics, and the balance spread over fisheries, education, public administration and communications). The scheme also provides for the technical training abroad of 87 Siamese drawn from similar fields with, however, greater emphasis on industry and transport.

12. The Americans are considering a list from the Philippines suggesting the training of 65 persons and the provision of 26 experts to the Philippines. In addition to the fields covered in the Thai list, reference is made to social welfare, finance and applied sciences.

13. Australia can act on the assumption that technical training will be required by these countries over an almost unlimited field. In the administration of any enlarged programme by Australia it will be desirable, however, to try to relate the awards more specifically to the really essential purposes and to take into consideration, in organising the courses, the necessity to get quick results and to avoid asking the Governments to send away their key personnel for long periods. Some attention should also be paid to the desirability of ensuring that persons being trained in a particular field of knowledge receive their training in the same country; there will be obvious complications if, in a field such as educational technique or engineering technique where there is no international standardisation, some trainees may go to some countries and some to others.


14. The following purports to be no more than a thumbnail sketch of the economic situation in each of the countries covered by the Consultative Committee. The information is sufficient to draw certain broad conclusions as to the general state of health of each economy. A final decision as to the country or countries in which Australia should interest itself most would, however, depend on a more exact study of economic needs and upon the political aspects with which this paper does not attempt to deal.


15. Balance of payments figures being inadequate, the trend of the trade balance is the best overall indicator of the situation of the economy. The volume of trade is substantially lower than before the war and exports to the United States are now only half what they were before. The volume of the most important exports, rice, tin and coal, has fallen. The country is substantially dependent on imports from France (60%) and the United States (15%). Large amounts of textiles are imported.

16. In 1947/48 average imports were the equivalent of $165 million and the average exports the equivalent of $80 million, leaving a very large trade deficit to which must presumably be added not invisible payments.

17. The country is an important rice producer. Prewar production was 6.5 million tons and in 1948/49 was still only 5 million tons. As a result exports fell from 1.3 million tons to 0.2 million tons. Rubber production in 1948/49 was only 44,000 tons compared with 56,000 tons before the war.

18. There are serious transport problems arising largely out of the internal strife in the country.

[remainder of document missing]

[NAA: A 1838, 381/3/1/3 part lb]

1 On 18 December 1949 the UK Government had announced the devaluation of sterling by 30 per cent.

2 Not published.

3 See footnote 9, Document 27.

Last Updated: 10 January 2017

Category: International relations

Topic: History