Foreign Relations of the United States, 1964–1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines

303. Memorandum of Conversation¹

I–881/65

Washington, January 21, 1965, 10:50–11:40 a.m.

SUBJECT

• Philippine Participation—Free World Assistance to South Vietnam

PARTICIPANTS

• Philippine Side
• Secretary of Finance—Rufino G. Hechanova
• Philippine Ambassador to the United States—Oscar Ledesma
• United States Side
• Assistant Secretary of Defense (ISA)—John T. McNaughton
• Deputy Assistant Secretary of Defense (ISA)—Peter Solbert
• Director, Far East Region (ISA)—Rear Admiral F. J. Blouin (USN)
• Assistant to Director, FER (ISA)—Captain D. T. Neill (USN)

Financial Support for Philippine Free World Assistance to South Vietnam

Mr. Hechanova stated that the Philippine contingent would be trained and ready to go to South Vietnam in March or early April. He further indicated that his news media contained some disturbing reports to the effect that the Korean contingent proposed for Vietnam would be U.S. sponsored mercenaries. In an effort to avoid similar charges levied against the U.S. and the Philippine Governments, the Minister of Defense, Peralta, had instructed Mr. Hechanova to request a lump sum grant in advance to the Government of the Philippines, and that the GOP would request an appropriation of an equivalent amount of pesos from their own sources to support the 2500-man contingent to South Vietnam. (The implication is that the Philippine appropriation would not be acted upon, but serve as a cover.)

Mr. Hechanova stated that financial assistance for the Philippine internal propaganda campaign to sell to the Philippine public the concept of armed forces assistance to South Vietnam would also come out of the advance grant.

Mr. Hechanova relayed Mr. Peralta’s opposition to any moves to reduce the present and proposed Philippine level of per diem ($15 per day for field grade officers, $12 for company grade, and $8 for enlisted men). Mr. McNaughton reminded Mr. Hechanova that U.S. representatives in Manila are in the process of negotiating with the Philippine Defense Secretary, Mr. Peralta, on the method of U.S. financial support, and that the per diem question was also under consideration, but that a decision could not be made until we received a report from our representatives on these negotiations. Mr. McNaughton also indicated that we wished to be fair in the question of per diem pay. Mr. Hechanova rationalized that the per diem level was based on the precedent set with the medical and psy-operations teams of 34 Philippine personnel presently in Vietnam.

Admiral Blouin stated that we were hoping to obtain a reduction on what we consider to be an excessive per diem payment and commented with respect to effect on Koreans and Vietnamese. Mr. Hechanova responded that any reduction would have an adverse effect on the morale of the Philippine military and recruitment of volunteers for Vietnam, stating further that the Philippines has a higher living standard than those other countries of Asia, and that he did not feel it was proper to send the Philippine military to Vietnam with less money than they received at home. Admiral Blouin questioned this statement. Hechanova modified it—Philippine Government could not reduce per diem from that already approved.

Philippine Shopping List

Mr. Hechanova proposed that partial proceeds from PL 480, Title I funds be allocated to the purchase for the Army of additional earth moving and road construction equipment. Along with road construction equipment, they would like to have additional helicopters. The reason for these requests is to expand the road and communication network in Mindanao in an attempt to bring remote areas in better contact with markets, and provide an excuse for Army presence in remote areas through road construction and easier access to those areas for purposes of security. In effect, they would be creating a pre-emptory counter-insurgency effort. He stated that the areas concerned were made up mostly of Moslem communities having an affinity for Indonesia and the GOP would like to get in first in view of the potential Indonesian infiltration and insurgency threat and the possibility of Indonesia going Communist. In this same regard, Mr. Hechanova mentioned that proposals were being developed to obtain finances through the New York money marts for a north to south national railway through the Island of Mindanao. The foregoing efforts are designed to tie together the outlying areas and pave the way for closer government control and influence through economic means.

Reinstatement under MAP of Military POL Support and General Consumable Supplies

In this regard, Mr. Hechanova issued a plea for a return to MAP support of AFP POL and consumables, and to explore the use of some PL 480 proceeds to support armed forces Philippines fuel requirements. Mr. Solbert explained to him that GAO had been pushing the Department of Defense to have the indigenous governments provide the POL support and shoulder the costs of armed forces consumable supplies, for the reason that these functions were considered to be a stimulus to the local economy.

Philippine Defense Budget

Mr. Solbert posed the question of whether funds actually released to the Philippine Department of Defense were measuring up to those authorized and if they were adequate to meet defense expenditures. Mr. Hechanova stated that they were approaching equalization but that a new scheme of submitting budgets to the Philippine Congress would be placed in effect for the first time this year. This formula would involve setting up four major categories of special funds derived from special specific tax revenue bill to be treated as separate budget items placed before the Congress: (1) education; (2) defense; (3) various categorized roadbuilding projects; and (4) medical health. If this improved formula is successful, the special fund for defense would add an additional $40–50 million to the defense budget and he had high hopes that the new formula would be successful and prove palatable to his Congress.

Mr. Solbert stated that he was glad to have the chance to hear the Philippine position first hand. Mr. McNaughton thanked the visitors for a very clear presentation of their problems and stated that the information provided would be very helpful in arriving at a decision on the Country Team assessment of these issues which is expected shortly.

1. Source: Department of Defense, Joint Chiefs of Staff Files, Official File, 9155.3 (22 Jan 1965). Confidential. Drafted by Captain Neill on January 22 and approved by Solbert on January 27. The meeting was held in McNaughton’s office.