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231 Paper by Department of External Affairs

Canberra, June 1952

SECRET

Previous discussions

1. The Department has already discussed with the Department of the Treasury working papers designed to establish the estimates required for 1952/3.

2. In these papers, the Department reduced the estimate for Colombo Plan Economic Development substantially below the estimate for 1951/2 (to �5.75m. as compared with �8.75m.), having in mind the balance of payments situation. The estimate for Colombo Plan Technical Assistance was put tentatively at �495, 000 (as compared with �200,000). Assistance to United Nations programmes to which Australia is more or less committed was estimated at �938, 000 (compared with �956, 000 in 1951/2).

3. The total submitted for discussion with the Treasury was thus �7,183,000, compared with a total vote for 1951/2 of �9,906,000 and total expenditure estimated at �4,650,000.

4. The Treasury suggested—

(a) that we endeavour to keep to a ceiling of �3.5m.;

(b) that we divert expenditure as far as practicable from saleable commodity exports;

(c) that we adopt a procedure, tentatively advanced by ourselves, of opening a line of economic development supplies for Colombo Plan recipients without committing ourselves to any Government as to how much we will, spend in 1952/3;

(d) that commitments to Australian suppliers may be incurred in excess of approved expenditure;

(e) that the vote be a single sum, the proportions to be received by beneficiary countries or organisations being fixed in subsequent consultations between the two Departments.

Each of these proposals is dealt with in the following submission of estimates for Division 196 in 1952/3.

Pooling of international development and relief

5. The nature of the Government's commitments varies as between one programme and another. While expenditure on economic development can be reduced in 1952/3, it is the External Affairs view that specific and implied international commitments make it unnecessary to budget for an increase in expenditure on certain United Nations programmes. The Government should have the opportunity of examining each item of proposed expenditure separately in the light of the particular justification.

6. At the same time, there is an advantage to our international negotiations in avoiding announcing publicly at this stage the proposed maximum expenditure on particular items.

7. It is therefore requested that—

(a) the individual items be submitted for governmental approval;

(b) the estimates as approved be submitted to Parliament in two sub-items:

(i) Colombo Plan—economic development and technical assistance;

(ii) United Nations—relief and rehabilitation and technical assistance programmes.

Colombo Plan—Technical Assistance (196(1))

8. Australia's current commitment is to spend a sum of approximately �2.7m. in the period 1951/7.

9. The programme is a developing one with a lag between commitments and expenditure.

10. The 1952/3 estimates reflect commitments made in 1951/2 for training in Australia of personnel and for provision of expert personnel and supplies for training institutions; and some development of group training in Australia. Special political importance is attached to the training in Australia of Asian personnel. A small allowance is made for responses to new requests which may be made by Asian recipients during the year.

11. The estimates for 1952/3 have been kept at less than the average rate of expenditure (�500,000) necessary to acquit our liability, and a higher rate of expenditure is contemplated in later years.

12. In decision of August 14, 1950, on Submission 149,1 Cabinet authorised payment to trust account of the Australian contribution as required, authority for expenditure being exercised by the Minister for External Affairs.

13. After detailed consultation with officers of the Treasury and elimination of two large projects, the Department submits an estimate of �424,000 for 1952/3. The basis for this estimate is attached as Annex A.2

Colombo Plan—Economic Development Programme (196(2))

14. In 1951/2 the appropriation was �8.75m. Of this amount, �6.5m. was allocated among India (�4.2m.), Pakistan (�2m.), and Ceylon (�300,000). �2.25m. was held in reserve against possible allocation to new participants, but it was decided not to make allocations

15. Of the �6.5m. allocated, �4m. will have been spent by 30th June 1952; �3.7m. for India, �300,000 for Ceylon, and nil for Pakistan.

16. In the original working papers it was suggested tentatively that an amount of �5.75m. might be provided in 1952/3, made up as follows:—

�m.
1951/2 pledges not spent:Pakistan2.00(approx)
India.50(approx)
2.50
New allocations (at less than a 5 year average of �4.95)3.25
5.75

17. Having in mind present balance of payments and budgetary problems, the Department has further considered ways and means of reducing commitments in 1952/3. It is the Department's view that this objective can be reached without damage to our political relations and to the Australian policy of encouraging other governments to mobilise aid for this area provided—

(i) there is a basic flow of deliveries (and expenditure) during the year, especially for Pakistan upon which no funds were expended in 1951/2;

(ii) we signify our willingness to continue making advance commitments for supply in excess of this minimum sum and up to a total which, in the three years 1951/4 will raise average expenditure to �4.7m., i.e. something approaching the annual average of �5.2m. necessary to discharge our liabilities in the period 1951/7.

The Department submits an estimate of �3.25m. under this heading. We also propose—

(i) that additional commitments to Australian suppliers up to a total of �4.55m. be permitted;

(ii) that bulk commodities which normally make a contribution to our foreign exchange earnings, e.g. wheat and flour, will not be provided in 1952/3 under the Plan (save as necessary to replace the damaged Mildura cargo).

(iii) That, so far as possible, goods which have a 'trade promotion value' will be provided.

19. Detailed examinations of requests and of goods available (or available prospectively) show that these are practical and useful conditions.

20. In view of the facts that our average yearly obligation exceeds �5m., and that, during the first year of the Plan (when it was only beginning to get under way), we actually spent over �4m., it is clear that an appropriation of �3.25m. for the second year of the Plan represents a substantial reduction, and one which we are willing to recommend only in the light of present circumstances. The provision of only �3.25m. would require that this sum be regarded and used as an 'operating fund' from which to make cash purchases of goods immediately available or to make progress payments for goods ordered for later delivery (i.e. in 1953/4 or later).

21. We have now received a large number of requests from Pakistan for manufactured goods and equipment (amounting to some �6–7 million) and these have been examined in relation to availability and capacity to manufacture—present and prospective. In some cases, tenders have been invited (e.g. for the manufacture of pumping equipment to the value of about �1,200,000). We are still without much information on India's needs, but we are of the opinion that we can enter into commitments (i.e., place firm orders) in 1952/3 with Australian manufacturers or merchants for goods required by Colombo Plan countries to the total value (including freight, insurance, etc.) of �7.75m., and we would propose to divide this sum as follows:—

�m.
India...3.5
Pakistan...3.25
Ceylon....25
Other countries7.75

This amount of �3.5m. for India includes �0.5. allocated but not spent in 1951/2; and the �3.25 for Pakistan includes approximately �2m. allocated to that country but not spent in 1951/2. This would mean a new allocation (not in cash but by way of firm orders) for India of �3m. compared with �4.2m. for 1951/2, and for Pakistan �1.25m. as against �2m. for 1951/2.

22. The Officer in Charge of Colombo Supplies, supported by the Department of Commerce and Agriculture, has advised us that equipment which is under discussion with the Government of Pakistan is almost wholly of a type which would not otherwise be exported. It is mostly capital equipment which, when it becomes known for its performance in the area, may be expected to stimulate enquiries for further supplies of this and similar equipment from Australia and supplies for maintenance. For various reasons, Australian manufacturers have not yet been able to 'break in' to the markets of South and South-East Asia to the extent considered possible, and the Department of Commerce and Agriculture attaches importance to the trade promotion benefits of gifts under the Colombo Plan.

23. A tabular presentation of these proposals is given in Annex B. and Annex C.3

[NAA: A9879, 2202/El part 4]

1 See Document 80.

2 Not published.

3 Not published.

Last Updated: 10 January 2017

Category: International relations

Topic: History