CAB148-30-Defence and Oversea Policy Committee Meetings Relating to 1967 Disturbances-1967 — Page 327

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Malaysia should be sanctioned, the specific purposes, terms and amounts to be agreed from time to time with the Treasury. So far as practicable, arrangements should be made to ensure that imports required for

development projects are bought from this country.

These proposals would not be welcomed by the Governments of Singapore

or Malaysia who had assessed the damage that they would suffer from our withdrawal at twice our figures; the amounts proposed wore however very

close to those which we had been willing to envisage during the Defence

Expenditure Studies earlier in the year as a reasonable price for

securing an orderly rundown of our forces and they had been put forward

by the negotiating team which had visited the two countries recently.

They had not been adjusted as a result of devaluation, although this

might reduce their real value to the two countries. We could not

reasonably offer anything less.

In discussion it was argued that it would be inadvisable for us to

take decisions on the level of mitigatory aid appropriate for Singapore

and Malaysia so soon after the devaluation of sterling, and particularly

in view of Malaysia's unhelpful attitude towards the sterling problem

which was unlikely to le affected by the suggested offer of aid. It would be preferable to wait until the post-devaluation situation had

become clearer before reaching dacisions. In any event we should not undertake aid commitments to these two countries which were as large

or long-term as had been suggested; amounts of £15 million for

Singapore and £7 million for Malaysia might be more appropriate initially until we had been able to examine properly any plans that the two Governments might put forward. Decisions taken earlier in the year

did not commit us to any particular level of aid: we should not

allow ourselves to become committed to make good the loss which Singapore

and Malaysia might suffer from our military withdrawal and this would be

unquantifiable anyway given the private enterprise basis of their

economies. We should relate our aid to the two countries strictly to

our own interests, which did not necessarily include the continuance in

power of any particular government in Singapore. Aid calculations

should be based on the principle that amounts granted would be larger if we could withdraw quickly than if the process had to be spread over a long period. As regards the terms of aid, Malaysia would be much less

seriously affected by our military rundown than Singapore; she had a

strong economy and was well able to service loans. There was there-

fore a very strong case for treating aid to Malaysia on a different basis from that of Singapore.

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