The question is what to do with �2� million Economic Development Funds as yet unallocated in the present year. Possible alternatives are: to allocate it all to Indo-China, thus giving Burma nothing, having nothing to offer Indonesia should it join the Plan, and indirectly depriving India, Pakistan and Ceylon of funds extra to their present allocations; or to split it up between various countries; or to hold it all for Indonesia should it join the Plan; or carry it over to the next financial year and add it to the �22.5 million as yet unallocated.
(a) In the case of Indo-China, we should be under not illusions as to the real benefits likely to accrue. Anything we can offer would be negligible in comparison with the $U.S. 21,828,000 worth of economic and technical aid supplied by the United States during the year ending June 30th, 1951, and the $U.S. 30-40 million worth of aid which the Associated States are expected to receive by the end of June, 1952. It is not d case then, of Indo-China being in desperate straits for aid and we being in a position to make a significant contribution. With the unsettled conditions in Indo-China and the overburdened administration there, they are probably receiving as much aid as they can cope with for the present.
We might hope for certain political advantages. To date we have had practically no contacts with Indo-China and Australia can mean little either to the administrations there or to the community at large. The negotiation and early commencement of an aid programme following closely on the exchange of diplomatic representatives could perhaps, 'put us on the map', nourish goodwill, develop closer relations and give us something rather more than mere formal standing with the local authorities. These advantages, were they to be realised, need no elaboration. At the same time, however, we should be prepared to run into difficulties with the French who, we might expect, would prove jealous of their prerogatives and influence and who could create obstacles to the adoption and implementation of a satisfactory programme. The Americans, we understand, have not found everything plain sailing in this respect although the French have been anxious to obtain American aid. Certain other practical difficulties suggest themselves which could impede the speedy launching of an aid programme.
(b) Of the two mainland countries in South East Asia to which it is contemplated aid might be sent, Burma appears to offer more favourable prospects than Indo-China. The political situation and internal security conditions in Burma are rather more favourable to the effective operation of an aid programme: W.H.O. for instance, does not operate in Indo-China, but does in Burma; they have been able to hold national elections of a kind in Burma, but cannot even contemplate these in Indo-China. Both countries are unsettled, but on our present information the Burmese administration appears rather more stable and effective than the Indo-Chinese. The task therefore, would not only be less complicated than in Indo-China but in addition, there have already been contacts between Burma and Australia which would provide some foundation on which to build goodwill through an aid programme: both countries were members of the British Empire, Australia participated in the loan to Burma by Commonwealth countries and is favourably regarded for its support for Indonesian independence, there have been Burmese missions to Australia and Burmese students are already in Australia, etc.
(c) If the arguments in (a) and (b) are accepted, it would appear preferable to allocate the funds to Burma rather than to Indo-China or to India, Pakistan or Ceylon. The latter three countries have already received allocations from us and unless there are strong grounds of practical advantage for our increasing them, the political advantage offering in Burma should determine the decision. Burma has only now joined the Plan after considerable hesitation and it would seem desirable to move in promptly to consolidate this position and thus succour the forces which favoured the Burmese decision.
(d) However, this consideration should not necessarily outweigh the case for Indonesia. It is, I believe, settled policy that Australia should concentrate its efforts under the Colombo Plan on Indonesia. We have been doing our best in Djakarta to warm the authorities to the Plan and it would surely be unfortunate if they should join this year and find us already fully committed elsewhere. It is doubtful if the Indonesian could be made to understand our blowing so hot and cold. On these grounds I feel that we should reserve at least a portion of the free funds against an Indonesian decision to join the Plan. Apart from these considerations, Indonesia offers a safer investment for our limited resources, being comparatively secure from the forces which threaten the stability of Indo-China and Burma.
2. My recommendations would be:
(i) that we do not allocate funds to Indo-China (apart perhaps from a token gesture) or to Pakistan, India or Ceylon;
(ii) that we find out what other countries are doing for Burma and if this country is reasonably well provided for already, we reserve the funds for Indonesia or carry them over to the next financial year;
(iii) if we can make a significant contribution to Burma, then we divide the funds between Indonesia and Burma but we do not leave ourselves empty handed in the event of Indonesia joining the Plan.
[NAA: A 1838, 3004/11 part 1]