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ASIAN ECONOMIC HISTORY
Series Two: Economic Development in Brunei, Hong Kong, Malaysia, Singapore, South Korea and Taiwan, 1950-1980

Part 1: Files for 1950-1954

Part 2: Files for 1955-1958

Part 3: Files for 1959-1962
Part 4: Files for 1963-1966

Extracts from Documents - Part 4

FO 371/187685 covers the exploitation of natural gas fields in Brunei. The file includes discussions with Mr Filstead and Mr Jungell of Conch and Mr Dampier of Shell.

…During the construction phase (pipeline and liquefaction plant), which would last about 2½ years, some $2 million would be spent in Brunei and, once the operation was in full swing, expenditure on wages etc. would be about $½ million a year.  The liquefaction plant would provide a nucleus for a deep water harbour, which the Brunei authorities have been considering for sometime, and encourage other industry.  The natural gas line would feed Brunei town and could be tapped for other use elsewhere as the need arose.  Total capital investment in Brunei itself would amount to about $55 million.  Two methane tankers would be needed to move the liquefied gas.  It is conceivable that these would be constructed in Japan on the basis of patents held by Conch.

The file includes maps of the proposed developments and extracts from ‘Petrol Intelligence Weekly’ along with full details of discussions with the US.

OD/20/307 is a consultant’s report on ‘Higher Education in Relation to Development in S E Asia’ focussing on manpower requirements, skill sets, training and improvements in education in Malaysia and Singapore. It runs to some 145 pages including the following sections:

Commerce – Commercial life is centred on the import/export trade, and therefore largely concentrated in the main parts – Rangoon, Bangkok, Singapore, Djakarta, Manila, Saigon, Phnom-Penh.  Combined with the fact that these cities, save for now Singapore, are also capital cities and the seats of Government, this has produced two important consequences.  First, it has re-emphasized the excessive centralisation of trained manpower and the contrast between the modernised city and the still traditional rural area.  Secondly, because commerce of this type is international, it tends to leave commercial life largely in the hands of immigrants and expatriates; the network of retail distribution, gradually spreading from ports into the interior, has also mainly been created by these immigrants.  In a period of strong nationalist feeling, this has caused resentments. This accounts for the negative attitude towards commerce (which is potentially a great national asset) in so many countries of the region and the failure to devote resources, facilities and trained manpower to its development.

Infrastructure and Industry – Industrialisation and the development of infrastructure has, on the contrary, attracted great attention and large financial resources, including much foreign aid.  Every country has a small nucleus of modern industry mainly based on government or expatriate investment.  In Singapore and Manila (to a lesser degree in Bangkok), where commerce and industry are in uninhibited partnership, industrial growth is gathering speed.

What is noticeable, however, is the contrast between a few modern, high-technology undertakings and the generally backward and sparse distribution of small, native owned and managed industries using local materials to meet local needs.  A development and thickening of the industrial sector will depend partly on cheap power supply, partly on better road communication, partly on greater attention to the development of smaller local industries.  But above all it will depend on a rise in purchasing power of that huge section – 70/80% - of population which depends on Agriculture and which one day will supply both the market and the labour force for industry.  There is no evading the priority of Agricultural development, as there was not in Britain, in America, in France, in Japan and in China.

Human Resources – The manpower problems of these economies fall under three headings:  quality, distribution and training.  Save in Malaysia and possibly Cambodia, the actual numbers entering the higher level of Secondary education would already be sufficient for immediate manpower requirements but for three major difficulties –

a).  Far too many fall by the wayside; additionally (or alternatively) too many of those who reach University courses are quite inadequately prepared for them.

b).  Those who succeed are magnetically held in the main towns and in white collar occupations.  In consequence, the all-important rural economy is starved of energetic and capable young men with modern training.

c).  The purely academic education of schools and colleges is not followed by practical training in realistic conditions, save for a tiny minority.  In consequence, agricultural graduates do not know farming, engineers are too often ineffective in industry, and above all there is a dearth of practical technicians between the level of artisan and University Graduate.

Manpower and Education - A crucial distinction must be made at the outset of this Report.  Throughout, I am using “manpower requirements” to mean the minimum requirements of manpower trained in modern skills to make possible sustained economic growth and modernisation and to provide a gradually improving health service.

On Malaysia, (page 66) his conclusions are as follows:

There are three strategic areas in which Malayan manpower policy requires adjustment.

First, a greater concentration on food production and diversification of economic crops, involving a large increase in field and research staff.

Second, primary and secondary education have been expanded to ratios which have outrun University provision.  It is suggested that one new University college is needed by 1967 and a second by 1971/2.

Third, and of a highest priority, existing and planned production of graduate Secondary teachers is far below requirements; a clear and determined decision is needed to guide students into teaching and to reward them adequately even at the expense of output in certain subjects which have a value in themselves and will come into their own when – and only when – the foundations of manpower production have been well laid in the Secondary schools.

On Singapore (page 73) he concludes:

A very great deal hangs on the success of Singapore’s industrialisation programme.  Omens, in terms of enquiries and actual investment in new factories in 1963/4, were good.  But Malaya (as well as every other SE Asian country except Burma) is competing with Singapore to attract investment, and has achieved a good deal of success in attracting mainly light industry to the industrial township of Petaling Jaya (Kuala Lumpar) and to some smaller estates, such as the growing centre at Ipoh.  On the whole it is probably in the interest of Malaysia that Singapore should prove itself capable of demonstrating to SE Asia and to investors from further afield that its well-known commercial skills can be matched by a growing reputation for industrial skill and enterprise.  To achieve this will involve an intensive concentration on raising the standards, and the volume, of technical education and, perhaps above all, the standards of native industrial supervision and management.

OD 20/104 includes a news-cutting concerning the Bipartisan Senate group headed by the Democratic Senator Mansfield – His 1963 report urges that the US should reconsider its S E Asia aid programme recommending “no extensions of US aid to any S E Asian country not now receiving it:  this would affect Burma, Malaya, North Borneo, Sarawak and Brunei.

Many other documents look at US policy in the region, the impact of the Vietnam conflict and the disruption caused by racial tensions in Indonesia and Malaysia. The Malayan Fortnightly Summary of 15 January – 29 January 1963 comments as follows: “Interest in Brunei and its future remains considerable and the extent of Malayan involvement in the suppression of the revolt is still an important political issue in Malaya…

OD 35/39 on Hong Kong includes a full record of the meeting with IBRD representatives, , 21 November 1966, to get their preliminary impressions and conclusions following their recent two and half week mission to Hong Kong. Mr Jansen (IBRD) who led the mission said: “He would try to give his impressions of the economic position of Hong Kong and her future development. The main difficulty was the lack of reliable statistics which made economic forecasting extremely difficult.  For this reason the export position is the best indicator of the strength of Hong Kong’s economy.  The annual rate of increase in exports has now sunk from 13 to 15 per cent to a current rate of 1 to 8 per cent; this may, however, be no more than a temporary reduction.  Textiles have remained the principal export commodity although there had been a switch to higher quality fabrics.  Other points of importance in assessing the health of Hong Kong’s economy are:-

a)  The main industries are still light consumer industries – textiles, plastics, electronics etc.

b)  Outside investment is still at a reasonable level.  A labour shortage is, however, becoming evident and wages are rising.

c)  The banking position is now stabilised and the crisis of confidence appears to be over.

d)  Increases in tourism are satisfactory and there is a current rate of 600,000 tourists so per year.

e)  Government revenue and expenditure have both increased rapidly in recent years and until last year there was an annual revenue surplus.  Mr Jansen expected a small deficit in the current year.

For the future he expected the current rate of growth of exports to continue in spite of limitations such as textile quotas and possible increased labour costs, but he thought that more automation of industry and a higher level of labour skills would be necessary in future.  In order to sustain the economic growth at its present rate he considered a number of particular weaknesses would require attention:

a)  The existing arrangements for long term finance are poor and Hong Kong is already being overtaken by her neighbours (South Korea and Taiwan) in the more capital intensive industries notably petro-chemicals and artificial fibres.

b)  There is need for a considerable expansion of facilities for basic technical and industrial training and also for the expansion of higher education.

c)  The improvement of urban transport and communications including those between the island and the mainland is essential.

d)  The consumption of water is rising rapidly and further development of water supplies will become necessary.

e)  There is a need for continued heavy expenditure by the Government on low cost housing and resettlement for a number of years to come…

OD 20/314 focuses on Capital Aid to Singapore. A note of 1 January 1965 on the subject of the £5m loan to Singapore states that it is for disbursements before the end of 1967 on the current Singapore development plan.  “Of specific projects we only know, from item 1 on this file that an iron and steel plant, which would itself use up most or all of the money, is a possibility.  Since Singapore was annoyed at the location of the Yawata Steel Mill at Prai in Malaya, they may well decide on having a steel plant of their own, and this would be a useful British export.  We know of other Singapore schemes such as the plan to establish an offshore fishing fleet and shore-based installations, that will call for capital outlay, and would be of much interest to UK manufacturers…

OD 35/43 includes a ‘Brief on Economic Development in Asia’ for the UK Prime Minister’s visit to Washington DC in July 1966. The ‘Talking Points’ section refers to President Johnson’s speech on July 12 at White Sulphur Springs which was “a much needed reminder of the progress made in Asia despite the Vietnam war.

It asserted: “We believe strongly that western interests in Asia are best served by the building up of indigenous economic strength. This was the precise purpose of the Colombo Plan.  We are keeping up our aid programmes in the area so far as our own economic difficulties allow, and wish we could do more.  We should have wished for this reason to increase our economic assistance as savings in overseas defence expenditure are made but in our present circumstances this is not likely to be possible for us.

We are glad to have been able to make larger contributions to the Asian Development Bank.

The final paragraph of President Johnson’s speech was as follows:

Earlier this year the Foreign Minister of Singapore said that if the nations of the world could learn to build a truly world civilization in the Pacific through cooperation and peaceful competition, then – as Theodore Roosevelt remarked before him – this may be the greatest of all human eras – the Pacific era.

As a Pacific power we must help achieve that outcome.  It is a goal worthy of our dreams and of the deeds of brave men.  I pledge to all those counting on us:  We will do our part…

FO 371/169793 covers the Nineteenth Session of ECAFE in Manila, 5-18 March 1963. The Steering Brief prepared by the Foreign Office sets out the following objectives:

The main point of sending a delegation to ECAFE meetings is to demonstrate the interest we take in promoting economic development and social progress in the region and the importance we attach to ECAFE as a means to this end.  We are also concerned to exert our influence on Asian economic thinking and, so far as possible, to encourage them to pursue policies compatible with our own.

FO 371/170822 includes a translation of an article form the Nikon Keizai on Japanese business opinion and interests in South Korea, especially the export of chemical fertilizers and regulations for the assembly of motor vehicles there.  It reports on the cement industry, iron and steel industry, machinery industry, automobile industry and fertilizer industry.

FO 371/170820 contains abstracts from report of the Central Board of the State Planning Commission on the fulfilment of the 1962 State Plan in Korea, data on the economic situation in Korea in 1963, and the text of Mr Killen’s speech as Director of USOM to the Korean Chamber of Commerce on 15 May 1963.

There is an emphasis on the need to restore agriculture production in South Korea, the need to get North and South Korea to cooperate, and the problem of South Korea’s dependence on foreign markets for 90% of its machinery and equipment. On the other hand, the North Koreans are arguing that the two halves of Korea are economically complementary and are continually trying to parade the ideal of economic self-sufficiency.

FO 371/170824 includes a booklet on “Hints for Businessmen visiting the Republic of Korea” and sub-files on British trade with North and South Korea.

FO 371/187058 is the Annual Review for Taiwan for 1965. It states:

American military aid continues on a large scale…  The island’s economy is booming.  Japan granted a loan of US $150 million.  United States economic aid programme which came to an end in June was an outstanding success….

During 1965 the island’s economy again made impressive progress.  Exports increased by 6 per cent to US $488 million while industrial and agricultural production rose by 14 per cent and 6 per cent respectively.  Due to heavy imports of capital goods and raw materials, there was at the end of the year a small unfavourable balance of trade.  However, the foreign exchange reserves stood at US $200 million.  The influx of foreign investment capital showed a marked increase over the previous year.  Japan remained Formosa’s most important trading partner and the granting of a Japanese Yen loan, equivalent to US $150 million, in April, did much to relieve anxieties about the termination of United States economic aid at the end of June.  During the past 15 years, the total of United States economic aid in grants and loans mounted to US $1500 million.  Although some US $130 million, still in the pipeline, will continue to flow into the economy during the next two years, the fact that Formosa now has a viable economy and is able to stand on its own economic feet is a great achievement and an outstanding success for the American aid programme.  The outlook for the Formosan economy was one of buoyant optimism at the end of 1965.

FO 371/187058 covers UK Trade with Formosa providing the following statistics:

 

Imports from Formosa

Exports to Formosa

1962

£981,473

£655,186

1963

£975,709

£909,755

1964

£1,956,337

£1,049,281

1965

£1,329,000

£1,730,000

 

It is noted that: “During the last year the majority of our exports came under the heading of machinery and transport equipment (£970,000), chemicals were next on the list.

FO 371/187143 provides the Annual Review for Korea for 1965:

On the economic side there was some progress and it could be said that the Korean economy finished the year in better shape than it started it.  The year brought another good harvest, and although the Government deliberately accepted a moderate degree of inflation they were able to keep prices more in check than in previous years. Thanks partly to the introduction of the floating rate of exchange in March and to Government encouragement, the export target for the year was attained, whilst the Won settled down at a reasonable stable rate.  A drastic re-arrangement of the bank interest rates, however, did not achieve its primary purpose of stimulating supplies of local capital for private investment, whilst corruption in government and business seems to be no less.  A second 5 year plan has been drawn up but not announced, but it is still the case that many capital projects are extravagant in conception and not consonant with the true economic needs of the country.  The situation does not augur well for the effective utilisation of the forthcoming Japanese grants and loans and it will require very considerable tact and restraint on the part of Japanese industrialists who will find it tempting to acquire a dominating position in the Korean economy…

Compared to American and Japanese influence in Korea, British endeavours were of meagre proportions:

After many stops and starts, the contract for railway signalling equipment which is being paid out of a loan of £500,000 negotiated nearly two years ago, was signed toward the end of the year and work will begin shortly.  On the other hand, the Koreans were unhappy about our treatment of their cotton textiles; although we treated them generously they did not think so.  Another unhappy feature, despite the major effort which we put into it, was the failure to persuade Korean Airlines to buy two BAE 111’s which demonstrated if it were needed, how difficult it is to counter American – and Japanese – domination of the Korean market …

The British analysis gives useful data on US and Japanese policy in the region.


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