TABLE 6.-Thailand-Estimated dollar cost of program by major project

1 Does not include any portion of funds that may be approved for basic materials development (in title I of proposed Mutual Security Act).

Experts sent to country. Cost computed on uniform basis of $12,000 per person, allowing for average lapse of 3 months.

Persons brought from country for training. Cost computed on uniform basis of $5,000 per person. 4 Provides for an estimated 85 persons.

Provides for an estimated 77 persons.

I would like to divert from that statement in the remarks that I wish to make at this time, if that is agreeable to the chairman.

The CHAIRMAN. Very well. Do you mean you have filed your statement?

Mr. GRIFFIN. Yes, sir. A statement has been filed which, if the chairman wishes, can go into the record.

The CHAIRMAN. Is it your statement?

Mr. GRIFFIN. It was a statement by me; yes, sir.

The CHAIRMAN. Very well.

(The statement is as follows:)

STATEMENT OF R. ALLEN GRIFFIN, DIRECTOR, FAR EAST PROGRAM DIVISION, ECONOMIC COOPERATION ADMINISTRATION

This statement pertains solely to the six Far East countries where ECA is now conducting grant-aid programs.

The most active threat to the security of the free world today is in the Far East. Not only did the Communists attack in Korea but they are carrying on large-scale attacks in Indochina, and smaller-scale, more dispersed attacks in Burma and the Philippines, and are fomenting lawlessness in Indonesia. Formosa is under continual threat of Communist invasion from the mainland. In all of these countries either direct Communist aggression or internal Communist subversion-designed to rob these countries of their independence and force them into the service of the Communist world-is an active threat.

The United States is now carrying on aid programs in six countries of southeast Asia. In Formosa, an ECA program has been continuously in operation since the spring of 1949, under the authority of the Foreign Assistance Act of 1948. Programs in Burma, Indochina, Thailand, and Indonesia were initiated in 1950, and in the Philippines in April 1951, under the authority of the Foreign Economic Assistance Act of 1950.

These programs in southeast Asia are essential tools of United States foreign policy which seeks to so strengthen the countries as to enable them to resist internal and external pressures. The freedom and independence of the countries of southeast Asia are vital to the United States. Southeast Asia dominates a corner of the world and controls the passages and communications between the Pacific and Indian Oceans. The building up of armed defenses against communism the world over requires ever-increasing quantities of raw materials, and

southeast Asia is one of the greatest producing areas in the whole world, supply. ing needed tin, rubber, petroleum, fibers, essential oils and fats, and other strategic materials. There could hardly exist a multilateral world economy without southeast Asia. It is a potentially rich area. Its people are capable, with our understanding and with our moral and physical assistance, of develop. ing it and reaping the rewards of that development.

United States military assistance is being extended to four of the countries of southeast Asia. But the defense of southeast Asian countries cannot be assured by military means alone, or even primarily by military means. Except in Formosa, the chief danger is one of internal subversion whose breeding ground is hopelessness, despair, and poor living conditions due in part in some cases to administrative deficiencies of inexperienced, overworked, and undermanned governments.

Most of the countries of southeast Asia are too weak internally to stand without outside support. Four of them are newly independent, with little experience in self-government. No modern, self-governing state-and especially no state with a democratic form of government-can maintain itself and develop its resources unless it performs a minimum of public services in the fields of health, agriculture, education and technical training, transport and communications, industry, and over-all economic planning and prospecting. The countries of southeast Asia are acutely deficient in these public services and in the technicians, equipment, procedures, and institutions for carrying them on. The very first step in any program of economic development designed to increase production and standards of living must, therefore, be the organization and maintenance of self-sustaining public services.

Accordingly, during these first several months of operations in southeast Asia, ECA has tried first and foremost to help the governments establish or improve essential services and institutions, create planning agencies, initiate surveys and pilot projects, and thus to lay a foundation for economic development.

It was no accident that this was also the appropriate way to go about earning the confidence of governments, for these were and are the problems with which the governments of the area are overwhelmingly concerned.

COSTS

The ECA is not undertaking any large-scale public works in any southeast Asia country, and only small amounts of capital goods are involved. The total dollar cost of the fiscal year 1951 program in the six countries of southeast Asia was $157,000,000. Of this, $100,000,000 consisted of essential industrial raw materials, fertilizer, and consumers' commodities for local sale to combat scarcities and inflation (in Formosa) and to provide local currencies needed to institute agricultural, health, transportation, and other services acutely needed, and to provide direct economic support for local military defense activities. (Of the total commodity program in fiscal year 1951, more than three-quarters went to Formosa alone, for whose defense the United States has assumed special responsibilities, including the defense mission of the Seventh Fleet.) This left $57,000,000 for the dollar costs of technical assistance and supporting equipment and supplies and minor capital improvement in the six countries.

Considering the vital importance of these countries to the military security and economic well-being of the United States and the whole free world, these costs may be regarded as small in relation to our objectives.

HOW THE ECA CARRIES ON PROGRAMS

The first step in initiating aid programs was the negotiating of bilateral agreements; the second was the establishment of a Special Technical and Economic Mission (STEM) in each country, for the aid program in each country is built brick by brick out of the recommendations of the mission. The mission's recommendations in turn are arrived at as a result of joint study and consideration between it and the government.

The countries of southeast Asia established governmental machinery to work with the STEM's in the development of aid programs. For example, in Burma there was established what is known as the Burma Economic Aid Committee, which consists of principal officers of the Burmese Government departments concerned. The Committee meets twice monthly with the principal officers of the STEM. All aid proposals prepared by the Ministers are jointly considered, screened and transmitted to ECA-Washington for consideration and final action. Similar machinery was established in the other southeast Asian countries.

The spirit in which the ECA missions offer their services to the various governments and peoples of southeast Asia is this: "How can we help you solve your most pressing problems?"

There is no shortage of problems confronting these southeast Asian countries. Burma's economic plant and the public services essential to its efficient operation suffered enormous damage and deterioration during the war, the subsequent insurrections, and the transition from foreign rule to independence. And the Burmese Government does not have technicians of administrators, or training and research institutions, or equipment and supplies, or adequate revenues, for remedying these basic deficiencies.

Formosa is obliged to support a large military establishment for the defense of the island, as well as sustain a million refugees and the superstructure of the Chinese Nationalist Government. Without strong help it cannot maintain the economic and political stability necessary for military defense. That is why the program there is relatively so large.

The Associated States of Indochina, under constant Communist attack and competing with the Communists for the support of the people, must develop. the governmental strength and services needed to allow them to respond to the people's needs, and they do not have enough revenues or equipment or supplies or technicians for the task.

Indonesia, newly independent, finds itself with a large and complex economy but without sufficient administrators, technicians, and institutions needed for operating it effectively.

The Government of the Philippines is unable, without outside aid, to conduct efficient and effective Government services and undertake economic development that can solve some of the urgent problems of the people and prevent them from turning in despair to lawlessness and the Communist-dominated Huks.

Thailand is in need of outside aid to help it strengthen the economic and social foundations of political stability against rising social and poltical pres

sures.

The aid we bring these countries is directed to the particular needs of each government. In Formosa, the central problem being the battle against inflation, the program includes large amounts of producers' and consumers' goods for local sale, supplies in direct support of military assistance, and equipment and supplies and technical assistance for increasing industrial and agricultural production. In Indochina, the biggest problem being the shortage of local revenues needed to pay for public services, about half the ECA program is devoted to the supply of commodities for local sale, proceeds of which are then used for needed services and projects. In other countries there is greater relative need for technical assistance, both for general economic planning and development and for specific technical projects, and in those countries technical assistance with supporting equipment and supplies bulks large. In three countries ECA finances the services of American engineering firms which are aiding the government's plan and carry out programs of economic development. In most southeast Asian countries our programs are supplying health technicians, public-health experts, sanitation engineers, experts in a great number of agricultural problems, transportation specialists, minerologists, and the like to help get specific projects under way, and to establish institutions for training experts and developing technical knowhow. In Thailand, an American road engineer is helping draw up a road-building program and United States road-building equipment is being supplied to help make it a reality. United States technicians are helping improve port facilities in Rangoon and Bangkok; they are helping eradicate farm animal diseases in Burma they are helping develop efficient methods of public administration in nearly every department of the Philippine Government.

The benefits of these activities are not temporary. The object is to build institutions and procedures that will provide a continuing supply of trained men and technical know-how and that will help unlock the great resources of these countries for their own and the whole world's good.

THE COUNTRY PROGRAM

The need of any country for public services and economic development must be met primarily through the most efficient use of its own resources. In addition, various kinds of outside aid may be available-ECA aid, Export-Import Bank loans, International Bank loans, and Un technical assistance. In our view, it is highly important that all of the resources, domestic or foreign, available to each country, be used in the most efficient and effective way. It is for this reason that we aim, to the fullest extent possible, to fit our aid into a country

program for the use of a country's total resources. It is only through the drawing up of such a country program that the total needs of a country in all fields can be comprehensively surveyed and balanced against all resources available, and the most effective plans possible laid for their use.

If these various instruments of foreign aid in any country were employed separately, there would inevitably be waste, and the pace at which any country might develop strength under such circumstances would be retarded. The ECA is firmly convinced that in any single country all United States-aid operations, whether technical assistance, grants, or loans, should be centered for programing purposes in a single United States mission, and that that mission should work as closely as possible with the host government through a total country program. The working out. of country programs with the governments concerned is one of the most important functions performed by our missions.

The ideal of a country program has not been reached in any of the countries in which we operate. Nevertheless, the machinery established in each country for working with ECA is to a degree serving as a general planning and coordinating agency, and we hope that in time genuine country programs will emerge.

THE EARLY IMPACT

The going aid programs in southeast Asia are based on the well-founded premise that, unless concrete results can be achieved promptly, there will be no future for long-range technical-assistance and economic-development programs. We believe, therefore, that in countries where the threat of subversion exists technical assistance must be on such a scale, and accompanied by equipment and supplies in such volume, as to allow an early impact on the economic and social and political situation. Our programs, therefore, in a very real sense are intended to safeguard the future of the countries of southeast Asia by employing all the various instruments of aid--technical assistance, grants, loans, and general economic planning aid-now, and in sufficient volume.

THE VILLAGE-LEVEL APPROACH

It is in the rural villages of southeast Asia that one finds the core of ultimate political power. The Communists conquered Red China by capitalizing upon rural poverty and unrest. Careful observers of the Asian scene are unanimous in their opinion that programs of economic development must be deeply and practically concerned with the people of the villages. In southeast Asia we have tried to find out what are the most rudimentary needs and desires of the rural populations, to derive our ideas of what should be done from a study of their feelings and of their needs. We have used, and are using, our influence and our programs as much as possible to see to it that aid programs genuinely try to solve the problems of the rural masses and promote a broad base of popular support for democratic government. Thus, our health programs emphasize mobile health units that circulate in the rural villages, mobile clinics, and rural health centers; our extensive agricultural aid programs stress a wide range of extension services; and our industrial projects include the development of small rural industries.

COORDINATION WITH MILITARY ASSISTANCE

In four countries-Formosa, Indochina, Thailand, and the Philippines-not only are economic assistance programs under way but also military assistance programs, the latter being administered by United States military-assistance advisory groups. In Formosa one of the principal objects of ECA-aid programs is to help relieve the inflationary impact of the defense effort which the Nationalist Government of China, with extensive United States assistance in the form of military equipment and supplies, in maintaining. Both in the planning and conduct of programs, in Washington and in Formosa, there is close coordination between the ECA program and military assistance. In Indochina, Thailand, and the Philippines, the inflationary impact of military programs is far less and the same degree of meshing of programs is not necessary. Nevertheless, in Indochina, Thailand, and the Philippines, close relations are maintained between the STEM's and MAAG's, and there is frequent opportunity for inclusion in a STEM program of projects that are likewise useful for over-all military strength, as, for example, aid to highway building in Indochina and Thailand, and attention to refugees in the war zone in Indochina.

COUNTERPART FUNDS-SALES PROCEEDS

In order to attract and maintain popular non-Communist support, the governments need immediately to inaugurate projects and build essential public services for which they may or may not be able to raise local currency revenues to pay local costs. All southeast Asian countries are not therefore required to put up counterpart funds on a commensurate value basis. In some countries the aid programs include the importation of substantial amounts of essential civilian supplies that are then sold for local currency. The sales proceeds so generated are then put in a counterpart fund which the local governments and the ECA jointly use to pay the local costs of projects. This is the case in Indochina, where half the dollar cost of the program consists of commodity supply. The Burma Government pays most of the local costs of the program from tax and other revenues, having only a small commodity import program to generate the remainder of the local currency for needed projects. The Philippines program has a substantial commodity program, and Formosa has by necessity the largest commodity import program of all. Programs in Thailand and Indonesia are on a full commensurate value basis, with each United States dollar of aid matched by local counterpart put up by the recipient government. Our programs there do not generate sales proceeds.

This variable counterpart practice differs from that in the European recovery program of regularly requiring full deposit of counterpart for dollar aid granted. This variation was necessary because of the differing character of the problems in some southeast Asian countries. However, in southeast Asia there is no question whether the countries are making a maximum effort at self-help as a condition of our aid. By the very nature of the programs, which are built up of specific agreed projects, we are helping the southeast Asian countries with their own national efforts. Commodities supplied are either directly for the use of governments, or for sale, with proceeds used by governments for specific agreed projects.

RESULTS OF FIRST YEAR OF OPERATIONS

It is perhaps too soon to assess with full confidence the first year of our operations in southeast Asia. The fact that we have had authority to operate there for a year does not mean that we have had substantial programs going for a year, for it has taken some time to get the missions established, the programs drawn up, and the pipelines flowing.

Nevertheless, it is possible to indicate some real accomplishments. In the first place, we are beginning to win the confidence of the governments and people of southeast Asia. In Burma, in Indonesia, in Indochina, where suspicion of the motives of the westerner is an understandable legacy of colonialism, we have rolled up our sleeves and asked of governments how we could help them solve their most urgent problems. This approach has been, on the whole, rewarded by an increasing cordiality, trustfulness, and cooperation which cannot fail to lead to better understanding between our countries. We are, of course, no strangers in the Philippines and Formosa; during the past year our increasing understanding of their problems and aid in their solution have cemented even more closely our relations. In Thailand cordial relations have grown even more cordial.

These questions of confidence, of course, are extremely difficult to gage but we think that by this measure alone the programs we have been carrying on in southeast Asia have been forth a great deal to the United States Government. We are not yet prepared to state that we have strengthened the governments of southeast Asia during the first year of operations, but we have started a wide range of strength-building projects. The fact that a United States special technical and economic mission is in each country, equipped with the instruments of aid, and ready to help, recruiting and making available technical experts and beginning to deliver equipment and supplies, has been of psychological value in strengthening governments and in stabilizing political situations. There have been certain tangible accomplishments.

In Formosa, where we have been operating a program since the spring of 1949, the benefits of a well-thought-out and implemented aid program are evidenced by the order that prevails there and the fact that the economy still functions reasonably well in spite of the burdens placed upon it. Formosa is a directly threatened country sheltering a large army and a million refugees, with a huge defense burden. And yet, not a single guerrilla band operates in the island. Law and order prevail. The farmers, aided by recent land reforms