Canberra, 19 March 1952

SECRET

Political objectives of the Colombo Plan

1. In any public discussion of the Colombo Plan, it is desirable to avoid any reference to the political and strategic objectives of the Plan, or at least to make such references only in the most cautious terms. At the same time, in discussions among departments and among Ministers here it is clearly necessary to try to establish the importance of these objectives.

The Asian problem

2. In the Colombo Plan area dwell almost 600,000,000 people. For Australia, four features of this area are significant: it is afflicted by appalling poverty; its attitudes are conditioned by recent memories of the struggle against European 'imperialism'; parts at least of the area are relatively close to Australia; four of the territories (India, Pakistan, Ceylon, and the British Malayan territories) are members of the Commonwealth.

3. The Colombo Plan was conceived to deal with the threat of a serious deterioration in living standards. It is false to assume that the status quo is practicable. The Colombo Plan shows that a large amount of capital investment in Asia is required to maintain even present low standards of consumption. The f 1000m. stg. which it was thought in 1950 would be needed by way of external aid during six years for the four Commonwealth territories alone was intended to do little more than hold the present position. The area as a whole dwells on the edge of famine. Food supplies in Asia are precarious.

Attitudes of Asia towards the West

4. There are abundant reasons why Asian people should want drastic reforms in their economic system. Given this, and the comparative weakness of the thread of liberalism in political affairs which traditionally characterise European cultures, the Communist idea must necessarily appeal to some Asian peoples. We may perhaps regard it as good fortune that the U.S.S.R. has been unable to provide much tangible aid to Asian countries and has confined its activity to political propaganda and penetration. One of the great tests of the wealthier European and North American countries is to work out a partnership of mutual confidence between themselves and the new Asian countries. This has to be done in a way which buries the bogey of Western imperialism–economic or political. Incidents like that leading to the fall recently of the Indonesian Government¹ are a reminder of the need for tact on the part of donor countries in providing their aid to Asian countries. They are used to poverty. One of the arguments against aid programmes, such as that in which Australia is engaged, is that Asian countries can afford to wait before raising their living standards. To some extent, their Governments can afford to wait, and it is probably true that their political future will be determined by many factors additional to the standard of living which they provide for their people. But it is clear beyond doubt that the level and distribution of national income are important determinants on the stability of governments, and that moderate governments have a better chance of survival if they can point to achievements in the economic sphere, provided that they can, at the same time, demonstrate that foreign assistance presents no threat to national independence.

5. It is because of the exposure of Asian Govts, to internal criticism that Australia has always advocated the creation of a Consultative Committee containing all the countries concerned as donors or recipients. United States arrangements for the provision of aid do not permit any collective discussion of the economic problems of the recipients of aid. Certain concessions to national prestige are made by the Americans in the form of joint committees in the respective capitals. But it is reasonable to suppose that Asian Govts, will find it beneficial to have available a system of regular conferences and to be able to demonstrate to their people that they meet with the more powerful contributing countries on a basis of full equality and with full liberty to discuss the terms on which they receive aid. On the other hand, a conference pledged to co-operative effort provides a better environment for internal reforms–possibly in private discussion–than bilateral diplomatic negotiations where resistances to pressure are easily aroused. United States participation in the Consultative Committee, now established, is likely to lead to an important improvement in confidence among contributors and recipients.

Significance for the Commonwealth

6. A conference of Commonwealth Foreign Ministers was held in Ceylon in January, 1950. That conference discussed the usual subjects of interest to the Commonwealth–the future of Germany, the political situation in Europe, and the Far East. Australia found at the conference a good deal of interest in the economic problems of the area. Paradoxically, this interest was least on the part of India, but perhaps this may be attributed to Pandit Nehru who is notoriously less interested in economic policy in India than in the political development of a free Asia, insulated as far as practicable from the ideological rivalries of Communism and the rest of the free world.

7. It is no doubt unwise to generalise about the attitude of these countries towards the Commonwealth. But the Commonwealth link is by no means strong. There are differences of culture, some deep-seated resentments, and sharp differences in policies on Asian affairs, on 'colour' questions, and the like. Economically, the traditional strength of the United Kingdom as a secure market for Asian supplies and a reliable source of capital equipment has diminished as a result of post-war events. The sterling area has been passing from crisis to crisis, and in this field the sense of confidence among participating governments has been subject to recurring strains. Net dollar earners like Ceylon and Malaya have had to be satisfied that they should share the sacrifices of dollar imports.

8. The Commonwealth has the unique feature of seldom providing formal machinery of co-operation, for which there are ample historical reasons founded partly in attitudes of governments like Canada and South Africa. The Ceylon Foreign Ministers' meeting proved an opportunity for creating a piece of Commonwealth machinery devoted specifically to a purpose which, in the minds of the public in the Commonwealth, was straight-forward and uncomplicated by any doubtful political motives. For the first time, most members of the Commonwealth joined together in a co-operative programme for the economic benefit of some of them. We understand that this ' Commonwealth ' aspect of the Colombo Plan appealed to the Canadians. It is an aspect of the Plan which we in Australia should not overlook. Even though the scope of the Plan has been deliberately developed to include other countries in the area, not members of the Commonwealth, and even though a necessary price for United States participation was the elimination of the specific reference to the Commonwealth, the facts will continue to speak for themselves. Commonwealth countries are the major beneficiaries and are receiving a major part of their total foreign aid from Commonwealth sources.

9. The Com.² countries are not in a position economically to make any substantially enlarged contribution towards the economic welfare of Asian countries. The United Kingdom's contribution to the Colombo Plan has been largely confined to releases of sterling balances (which they might have been forced to make in any case) and some aid by way of technical assistance. Some of this latter aid might well have been forthcoming without the Colombo Plan. Nevertheless, it serves the purpose of the Plan if it can be demonstrated to the Asian people that, under its umbrella, a reasonable amount of assistance of one kind or another is coming from the United Kingdom. The Plan has been greatly helped by the Canadian contribution. In Colombo and Sydney we had no great hoped that the Canadians would participate at all, and Australia and the U.K. offered to carry 66[%]³–2/3 of the cost of technical assistance on the assumption that not much could be obtained from Canada. In fact, Canada has contributed $25 million for each of the first two years of the economic development programme�a rate substantially higher than that which Australia has accepted by her own offer of �Stg25m. over 6 years.

Assistance from the United States

10. The Colombo Plan must be regarded as a bid to interest the United States in providing an enlarged volume of economic aid to South and South-East Asia. Without it, the prospects of reaching the modest targets of the Colombo Plan are remote. During the early post-war years, the United States concentrated very largely on Europe and, to a small extent, on Latin America. The Philippines can be left out of the count as a continuing commitment of the United States. In 1949, the United States began to provide substantial aid to Indonesia and Thailand, and, in 1950, to Burma. There was little prospect of substantial U.S. aid going to Pakistan, India, Ceylon or Malaya. During 1950, there was, quite apart from the political objective of getting a United States commitment for the economic development and political security of South-East Asia, a real threat that the impending withdrawal of United States aid from Europe would leave the world with a constant dollar problem. In the context of economic strategy, there was everything to gain from economic development in South-East Asia generated with American dollars. Such a programme would enlarge the world supply of raw materials (and lower their price) to the benefit of countries like the United Kingdom. Secondly, the United Kingdom Treasury clung to the hope that U.S. aid might take the form of 'free' dollars–that is dollar grants which would be given to countries like India which would spend them in the United Kingdom and so enlarge the dollar earnings of the sterling area. It can be assumed that this objective was one of the main considerations which led the U.K. Treasury to press on with the econ. devpt.⁴ part of the Colombo Plan after strenuously resisting Australia's proposal to establish a tech. asstce⁵ fund from which no benefits to contributors could be gained.

11. For her part, the United States had, for some time, shown caution about extending its commitments in Asia. Mr. Acheson several times spoke publicly on two prior conditions which the United States sought to see satisfied: first, that countries in the area should show their capacity for self-help; and, secondly, that there should be a sharing of the burdens. In fact, the Colombo Plan has led to the presentation of the national plans of each of the countries in the area in a way which shows what proportion is being contributed from their own resources–necessarily the major proportion. The Colombo Plan also demonstrates that the U.K., Australia, Canada, and New Zealand are prepared to share part of the cost of giving assistance to this area.

12. It is difficult to make an appreciation of the effects, if any, that the Colombo Plan has had upon U.S. willingness to maintain or extend its aid in the area. It is a fact that, before June, 1950 (when the Sydney Conference decided to start a Commonwealth Aid Programme) the U.S. had not provided aid to India, Pakistan, or Ceylon. Since then, aid has been offered to all three. In 1950–51, the U.S. gave $5.2 million economic aid to India; $449,000 to Pakistan; and $39,000 to Ceylon. Economic aid to these countries, together with Afghanistan, Indo-China, Burma, Indonesia, Nepal, the Philippines, and Thailand, totalled $70.6 million in 1950–51. In addition, loans amounting to approximately $60 million were made to these countries, and, in June 1951, a loan of $190 million was extended to India for purchase of wheat.

13. On many occasions, the U.S. Administration has shown a growing desire to discuss with us the planning of our own aid to these countries, and is interested in having a secretariat for the Consultative Committee. While one cannot be dogmatic about it, all the signs suggest that the Commonwealth Aid Programme is welcomed by the Americans and has encouraged them to extend their aid. In fact, the size of the U.S. aid likely to be offered to countries in the area in 1952 is still rather small, and it far from realises U.K. hopes that a substantial amount of 'free' dollars will find its way into the sterling area through this channel. A large part of the current appropriation of $408 million for economic aid to Asia and the Pacific is likely to go to Formosa, Indo-China, the Philippines, and Thailand, which are the four countries in Asia and the Pacific to which United States military aid of $611 million will be directed in 1952.

Australia's interests

14. Australia must pay her share of the cost of attaining the objectives of Commonwealth solidarity and Asian-Western friendship referred to above. But, in addition, Australia has her own particular interests to achieve and obstacles to overcome in our relations with our neighbours. In the last resort, the power of the United States, and to a less extent of the United Kingdom, may protect their interests in Asia. We do not have a comparable economic or military power. What we do have is a wealth of misunderstanding as between Australia and Asian countries which grows partly out of the history of isolation between us, and partly out of our immigration policy, which many Asians undoubtedly regard as an offence to their national pride and, to some extent, an obstacle to the achievement by Asians of a decent standard of living. We unavoidably differ from them on many international questions because we have defined our attitude in the cold war and they still hesitate to identify themselves with anti-Communist policies. To them we are a colonial power and we must expect them to be needling us, along with other administering powers, over the administration of New Guinea. They will instinctively be more sympathetic towards the Indonesians than with us in any showdown over Western New Guinea. While we have committed ourselves fully to back Bao Dai in Indo-China, the Asians are reluctant to support any regime which they consider nourishes the continued interference of Europe in the destiny of Asian people. They are notoriously more readily disposed than we to cooperate with Japan, whose aggression is less repugnant in their eyes than in ours. Our own protestations of our desire to work closely with Asian countries cannot disguise basic differences between us in our attitude towards a number of major international questions. In some of these fields it seems improbable that differences in outlook can be reconciled in the foreseeable future. If this is so, the case is all the stronger for building bridges between us where we can find useful places to put them.

15. Within the Colombo Plan it has been possible to mix together Asians and Australians in a way which has not been otherwise practicable. While there are large numbers of private Asian students in Australia, it should not be overlooked that the vast majority come from Malaya and Hong Kong. A very substantial proportion of the Asians who come from India, Pakistan, Ceylon, Indonesia, and the Philippines come under the Colombo Plan, and without this Plan the numbers who would have come to see and appreciate the Australian outlook and the Australian people would have been negligible. All these advantages to Australia have to be weighed against the cost. The cost of technical assistance is very small in relation to the number of key people in the administration of the respective countries who can be impressed with the generosity of Australia and our co-operative and neighbourly attitude towards Asians collectively and individually. The econ. devpt.⁶ programme, costing us an average of $5� million a year is expensive. Measured beside our annual earnings from exports, it is not a large sum in the economic sense. It is equally not large in the eyes of the recipient governments. Its best effects would be achieved if it could be represented to be an indispensable part of a larger collective contribution by a number of countries such as Canada, United Kingdom, and the United States. That is why it is disappointing that the United Kingdom has not pledged a contribution which incontrovertibly was additional to that she would have been obliged to make through the processes of negotiation over sterling balances. It would be worth while testing out the U.K. representative at Karachi to see what the possibilities are of getting even a small contribution allocated by the U.K. to one or other of the non-Commonwealth countries in the area.

16. We should not expect too much direct evidence of gratitude too quickly. Governments receiving aid may not want to make too much of it locally because of internal political resistance to foreign entanglements. We should therefore not expect too much public expressions of gratitude. Reports from our posts indicate that the attitudes of particular people who have come to Australia for training are almost uniformly favourable. We can further widen the favourable response in recipient countries by getting Australia associated with some major projects in the country, such as irrigation schemes, financed with the local currency proceeds of our wheat, and the equipment of technical schools.

17. In planning the form of our aid programme, we should choose those kinds of assistance which identify Australia as the source. Generous treatment of Asian individuals is a valuable counter to resentment of our immigration policy. We can show that Australian policy is consistent with absence of any colour or race discrimination in the treatment of Asians which are invited to this country.

18. Australia's more direct interest is in the mobilisation of international effort–and primarily United States effort–to raise living standards and remove the incentives for extremist governments or governments which will choose extreme nationalism as a means of diverting their people from discontent at their social conditions. Australia's efforts alone will not fill many rice bowls. We have a diplomatic objective, but the United States is not likely to be impressed by our efforts unless we continue ourselves to pay some price for getting the result we want.

[NAA: A1838, 3004/11 part 1]

1 The Government of Dr Sukiman Wirjosandjojo had resigned in February 1952, partly as a result of a scandal involving the provision of US aid to Indonesia. The Indonesian Foreign Minister had signed an agreement with the US Ambassador–which committed Indonesia to closer alignment to the West–without consulting his Cabinet colleagues and (as became clear when the agreement was publicised) against the wishes of many Indonesian parties.

2 That is, 'Commonwealth'.

3 Editorial insert

4 That is, 'economic development'.

5 That is, 'technical assistance'.

6 That is, 'economic development'