TNAG-0005-FCO40-41-Departmental-briefs-about-Hong-Kong-1968 — Page 35

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31. The outcome of the Vietname war is the undoubted key to what happens in South East Asia, particularly in the northern tier. If the result was a South Vietnam that that looked as though it could maintain its independence, with possible U.S. economic and technical aid alone, the boost to morale in South East Asia would be considerable. If, however, the settlement looked like resulting in due course in a Communist-dominated South Vietnam, the urge to reinsure with China would probably be paramount. A further factor influencing regional thinking, quite apart from the threat from China and the possible increase in Soviet influence, may be the degree to which tough, expansionist Vietnam, divided or reunited, will be flexing its muscles towards other countries or preoccupied with its own post-war rehabilitation.

32. At the moment, Thailand is the most prosperous of the northern tier countries but she (along with countries such as Korea, the Philippines, Taiwan and Japan) would suffer economically if American forces were withdrawn from Vietnam and Thailand itself. On the other hand, she might feel that the departure of those forces made her less exposed as a target for Chinese subversion. The Thai tradition of being on the winning side would probably put her in the van of any reinsurance movement.

33. To what extent would a South East Asia, intent on good relations with Peking, be detrimental to Western interests? Would the northern tier become a number of apprehensive ostrich-like Burmas closed to any significant Western penetration? Or would there still be scope for Western economic aid and commercial effort, so that after an initial compromise with Peking the countries might settle back into a balanced posture (or even a grouping) in which Western interests could still develop?

34. Regional co-operation in South East Asia as a whole or in either the northern or southern tiers seems to offer the best hope of orderly economic development and maximum freedom from Chinese domination. There have been, and still are, efforts to co-operate on a regional basis ('Maphilindo', ASA (now ASEAN), ASPAC, Asian Development Bank). But such efforts are severely hampered by particular rivalries - Malaysia/Philippines (erupting vigorously again at the moment); Thailand/Cambodia; Malaysia/Singapore. The prospects are probably brighter in the southern tier where Indonesia, with a population of over 100 million and great natural wealth, is a natural focus for co-operation. If with outside aid, she is able to surmount her economic and internal problems and avoid a resurgence of Communism, she could be second only to Japan in any efforts towards regionalism in South East Asia. But, alternatively, a chaotic Indonesia could revert to an expansionist policy, 'confronting' her Malaysian, Philippine and Australian neighbours. Western countries are already assisting economic development in South East Asia; would increased regional co-operation offer greater scope for concerted Western assistance or would bilateral aid remain the most rewarding?

35. SEATO is a mixture of regional and extra-regional defence co-operation. It has been welcomed by some countries in the area as the most effective way of ensuring U.S. protection; by others it has been shunned as a Western bloc, association with which would do them more harm than good. A reappraisal of its role will presumably be necessary when the Vietnam war has ended. If the U.S. decided on an off-shore protective role, would SEATO be the best vehicle for this? Is there any prospect of an enlarged defence grouping of the regional members of SEATO (effectively Thailand and the Philippines)? Could it emerge from a prior economic association? Would it need U.S. guarantees to be credible?

36. To move south from South East Asia proper, Australia and New Zealand share the general Western interests of promoting stability in Asia and resistance to Chinese pressure by strong indigenous regimes; their geographical, and increasingly their economic, involvement with the 'Near North' underline this interest in a special way. Australia in particular is likely to feel a growing self-interest in using her wealth to assist in the economic development of the area. Her Europeans-only immigration policy may pose problems for her in her dealings with the countries of the area if the issue of race moves to the fore of world politics.

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