Further to our 1634.2 Assistance to South East Asia.
2. The main emphasis of the United Kingdom delegation to the Sydney Conference will be on the formulation of long term economic development plans for South and South East Asian countries. With this in mind, they intend cabling suggesting3 for revised agenda which they hope will be received before the agenda is communicated to other Commonwealth countries.4
3. The United Kingdom Treasury are taking increasing interest in preliminary discussions on the Sydney conference in London because of the close connection between economic development and dollar saving. The Treasury are hoping the Sydney Conference will draft a questionnaire to be sent together with the offer of Commonwealth assistance to South East Asian countries. The questionnaire will ask these countries to set out the nature of economic development proposals for which some outside assistance will be required, the extent to which these can be achieved from own resources, the extent to which outside aid would be welcomed and the nature of this aid. Only when this stage is reached and assessment made of the need for non-Commonwealth (i.e. largely American) economic help would the British seek such aid.
4. Obviously the British aim is that South East Asian countries and the British Commonwealth would combine in presenting the United States with a cut and dried plan for self-help and outside assistance for the area. The British believe there is little likelihood of United States Congress approving piecemeal economic assistance on worthwhile and continuing scale. The experience of E.R.P. has revealed that comprehensive planning towards foreseeable objectives is necessary to enlist American aid.
5. The time required for planning a comprehensive economic assistance programme does not rule out urgent need for United States military assistance which at least in the United Kingdom Treasury view must be kept distinct from United States economic aid.
6. Further Treasury reasons apart from general administrative difficulties for delayed approach to the United States are—
(a) The close connection between economic development and dollar saving, especially in India and Pakistan.
(b) The fear that American intervention in domestic economic policies and trade patterns (which the British assume inevitably follows the granting of United States economic assistance) may
(1) antagonise countries which have newly won their independence.
(2) result in the diversion of some of Malaya's net dollar earnings from the sterling area reserves.
7. This approach probably explains why the British have not supplied lists of proprietary import requirements of South East Asian countries. While it is not intended to rule out discussion in Sydney of 'first aid' measures these will be of minor significance to the United Kingdom.
8. Although the United Kingdom Treasury believes Indonesia will earn sufficient sterling this year to meet her essential requirements from the sterling area (her surplus with the United Kingdom should more than balance any debits with the rest of the sterling area) her overall sterling position is in doubt, pending the conclusion of a deferred payments agreement with Holland (who at the moment is extremely short of sterling). Indonesia has not asked for further sterling credits but the British believe the possibility of this has been under discussion among the Indonesians themselves. The British Treasury is not at present disposed to grant Indonesia sterling credit but are prepared to discuss financial assistance in Sydney.
9. A hint was given that the United Kingdom may seek sterling contribution from Australia towards the cost of the defence of Malaya.
10. Was informed that the United Kingdom considers it most unlikely they will be able to supply the conference with reports on the economic position of South East Asian countries
[NAA: 9879, 2202/El part 1]