CAB148-30-Defence and Oversea Policy Committee Meetings Relating to 1967 Disturbances-1967 — Page 326

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CONFIDENTIAL

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CONFIDENTIAL

3.

NEGOTIATIONS ON ECONOMIC AID FOR SINGAPORE AND MALAYSIA:

THE SECOND STAGE

(Previous Reference: OPD(67) 27th Meeting, Item 1)

The Committee had before them a memorandum by the Minister of Overseas Development (OPD(67) 88) on the second stage of negotiations on economic aid for Singapore and Malaysia.

THE MINISTER OF OVERSEAS DEVELOPMENT said that it was now necessary

for us to decide on the level of economic aid to be made available to

Singapore and Malaysia beyond the current financial year to mitigate

the effects of our defence rundown there. The two Governments were

expecting us to commit ourselves to levels of aid over the whole period

of our rundown; we should not do this, but it was essential for us to

undertake aid commitments over the period up to 1971 so as to match the

medium-term rundown of our forces in the area, which was being announced

to the two Governments and would become public knowledge, and to enable

them to revise their development plans so as to create new employment.

Negotiations with Singapore and Malaysia had shown that they had in

mind projects which would be concentrated on productive investment of

the kind that we would wish them to adopt; we must be prepared to

provide aid for such projects on a realistic scale. He proposed that aid up to £25 million for Singapore and £18 million for Malaysia

should be provided up to 1971 although our negotiators should

be given authority to offer £5 million more than this in each case if

necessary. The rate of disbursement of aid would depend on the two

Governments putting forward projects which were aid-worthy and in

practice we could expect that something like the proposed amounts

would actually be spent in the period; it would however be in our interests that worthwhile projects should proceed as quickly as possible since this should reduce the amount of aid that we would need to provide

later in the rundown. As regards aid terms, some flexibility should be

allowed to our negotiators; but in general he had it in mind that half

of the aid should be in the form of grants and half on soft loans; for

political reasons it would not be possible to differentiate in the terms

of aid between Singapore and Malaysia, even though the latter would

suffer much less damage from our defence rundown and had much the

stronger economy. In addition, authority should be given for other forms of assistance (including the provision of inducements to British firms);

the two Governments need not be told of the amounts in mind

for these purposes; but £12 million for Singapore and £5 million for

CONFIDENTIAL

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