Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

15. Memorandum From the Deputy Assistant Secretary of State for Far Eastern Affairs (Sebald) to the Secretary of State¹

Washington, August 31, 1955.

SUBJECT

• Possible United States Loan to Burma

Problem:

The Burmese Government has asked the United States for a $50 million loan. What should be the position of the United States toward this request?

Discussion:

1. The Burmese Government has informally requested the United States for a U.S. Government loan of $50 million to meet a temporary financial crisis. (Tab A, telegram No. 123 from Rangoon.²)

2. Burma’s request for a United States loan is the first major change in its previously rigid neutralist attitude. This is especially noteworthy since Burma earlier terminated a U.S. aid program in the belief that acceptance of U.S. aid was inconsistent with a truly neutral attitude. It now believes it would be unable to carry out even a modest economic development program and at the same time maintain minimum levels of consumer goods imports without external assistance. The Prime Minister has indicated that failure to achieve these objectives could have disastrous results for his party in the April–May 1956 general elections. Any presently conceivable alternative government would certainly be far less friendly to the United States and may well be avowedly pro-Communist.

3. The Burmese request for U.S. loan assistance at this juncture may prove to be the last opportunity for positive U.S. action to arrest Burma’s drift toward the Communist bloc. U Nu is scheduled to visit Moscow in October and it is likely that in the absence of U.S. assistance, the Burmese may feel obliged to seek a Russian loan. In such an event, a substantial portion of the backing for the Burmese currency might be in rubles.

4. Ambassador Satterthwaite expresses the hope that we will be able to grant the Burmese request. He furthermore believes that the Burmese have informed the Communist Chinese of the request and that Communist China is endeavoring to frustrate the granting of the loan or at least dictate the terms under which it is granted. (Tab B, telegram No. 173 from Rangoon.³)

5. To boost rice exports, the Burmese Government has entered into rice barter deals with a number of Communist countries. U Kyaw Nyein, Acting Foreign Minister, told Senator Dirksen in June the resulting closer economic ties with the Communist bloc would “suck Burma into the Communist orbit within five years.” This prognostication takes on added weight with the recent news that Burma has issued an export license authorizing the sale of three thousand tons of rubber to Communist China. There is at present no assurance that even with a U.S. loan Burma would cease any further small shipments of rubber to Communist China, with its possible Battle Act⁴ implications, or of shipping rice to Ceylon in payment of Ceylonese rubber shipped to Communist China.

6. The Burmese request is for a dollar loan to provide temporary backing for its currency. The problem, however, could be solved by a combination of PL 480, MSA funds and possibly other sources. The Department of Agriculture has given approval to the discussion with the Burmese of a possible PL 480 agreement. While no funds for Burma were specifically included in the FY 1956 MSP presentation to Congress, it was specifically indicated in the confidential memorandum to Congress accompanying the presentation that we plan to use the Asian Aid Fund should the Burmese request aid. (Tab C.⁵)

7. Preliminary exploration of the possible loan sources indicates that Burma can obtain perhaps $20,000,000 from India and the I.M.F. This would reduce the requirements to not more than $30,000,000. To the maximum extent possible, we would endeavor to utilize surplus agriculture commodities under PL 480 to meet this need but some drawings of MSA funds are likely to be necessary. (Either the Asian Development Fund or the President’s Emergency Fund.⁶)

Recommendation:

It is recommended:

(1) That you agree in principle on the political desirability of the United States extending assistance to Burma in its current financial crisis;

(2) That you authorize, in accordance with Department Circular May 15, 1953,⁷ discussions with the Burmese and other government agencies with a view to determining the minimum amount of U.S. aid necessary to meet Burma’s needs and the sources from which such funds might be derived.⁸

1. Source: Department of State, Central Files, 890B.10/8–2155. Secret.
2. Supra.
3. Telegram 173 from Rangoon, August 22, reported that the Burmese Government had issued a license early in August for the export of 3,000 tons of rubber to the People’s Republic of China. Satterthwaite commented that Nu had probably informed the Chinese Ambassador of his intended approach to the United States for a loan and that the Chinese were evidently trying to prevent it. (Department of State, Central Files, 890B.10/8–2255)
4. The Mutual Defense Assistance Control Act of 1951, approved October 26, 1951, forbade U.S. assistance to countries shipping strategic goods to Soviet-dominated areas; 65 Stat. 644.
5. Tab C, an excerpt from a memorandum, entitled “Additional Uses for the President’s Fund for Asian Economic Development” is not printed. The fund was established by Section 418 of the Mutual Security Act of 1955, approved July 8, 1955; 69 Stat. 283.
6. Reference is to funds provided by Section 401 of the Mutual Security Act of 1954, approved August 26, 1954, for use when the President determined it was important to the security of the United States; 68 Stat. (pt. 1) 832.
7. Circular telegram 25 set forth principles to be observed in the negotiation of treaties and executive agreements; it stated that treaty negotiations should not be entered into without the written authorization of the Secretary or Under Secretary. Department of State circulars were internal procedural directives; a file was maintained by the Bureau of Personnel.
8. Dulles initialed this memorandum indicating his approval.