SOVIET BLOC AND WESTERN SUPPORT FOR ECONOMIC DEVELOPMENT IN SYRIA, ARGENTINA, A

Created: 4/30/1957

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Officenited states government

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from

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m^Jflct "Sorlot Bloc'and'iostern

Support for Economic Development in Syria- -

horoviththo aubject

report togethereoorandnm byrogoasible.ppropriaU cW^on or the SJ^'SSwd

oncede counterwasurea program.

3. -

naoor " 3 Morororonaa

indacatlng how^theae tie. axe being underminedoned"J k? CODflU:aer considerable detail on apacUU

Teaanta an excellent research Job In that it adequately conaidara pertinent materials and analraslhS laWnrwr oonairtent with the purpoae indicttH^e!

In aa each aB tho requesterindicatedreceive multiple copies of the paperrie^has been reproduced in ditto form. For the preeert onJ*- ^tor re'vieTand^onsid-

;Ctt HlStOWCAi REVIEW PROGRAM

AS SANITIZED

-

CIA HISTORICAL REVIEW PROGRAM RELEASE AS9

SOVIET BLOC AKD WESTERN SUPPORT FOR ECONOMIC DEVELOPMENT IN SYRIA

7

WASHING

THISDlFORMATJjOJ. ;p

arrEi) STATES

SC. MISSION

y^TiIE TRAHS--LATION OF KRICH IN AM

WITHIN THEf>aPJQHAQE LAWS

TO AN UNAUTHORIZED PERSON IS PROHIBITED BY

CENTRAL INmLIGErffiE AGffiJCY Office of Rcso&reh ana Reports

TABLEONTENTS

_

^HDBQflr7c

General Ecoooalo Irobloaa

V J

and Storage Pecilitlee 6

. > a.e fl

pf .Indigenous Fund-Providing . c Credit

. 3. International Financial

n. Syrian Plena Tor Economic Development

InvooWt* .

Eooooalo

ontrolffect of tho Middle East

III. The Report of the International Bank for Rooonstroctlon and

Dorelopooata .

Sappart for Economic Dovnloprant,24

Foreign

., 6

and Technical

DB tfestarn Conatruction Contracts*

with the West ee"

T. Yugoslav Eoonoale Activities In

Bloc Support for Econoslc Development Introduction, - P

u. Expansion of Eoononic

1* Tho Dooaocuo International Fair

of Coccwrelal Delogotlona.

PenetrationPrice Manipulation

. 4. Trade Agroeo-enteD

5. Comoorcial Offlcoa and Dooaotlc

6- Trade with the Sino-Sovlot

7. Trade Dlfficultlea. .

TABLE OT COhTEHTS {Continued)

C, Analfltonco for Eeonoalc DevolonoGct by Soviet Bloc

l'a v

1 ,. USSR. . a a a a 48

Gerwny, ri

a e.

Iaeuo of the retroleun Refinery

"Area Deals"

VI, CorKiluaionB

9

81

1 .

Table 7

a

a

9

- a

a

a

a

a a

Appendix Ai Appendix B:

Appendix Cr Appendix Di Appandfx Ei Appendix Yt

a

65

Tables

Sino-Soviet Bloc Participation in, 71

Syrian Trade Agrootwote ulth tho Sino-Soviet Bloc,

Syrian Agents Offering Sice-Soviet Bloc Cossoditles,

Sino-SoYiet Bloc Econoaie Asaiatonsr to Syria,,

Souroc References.

yrianrelations with the Slnc-Sovi*tboen extremely limited. Tho Bloo aocounted for leoo than 3total trade, and only OsechonlovaMo had any officialtho Syrian Covernaent* Toward the do nohe Blooa aoro active economic policy in bo ntteopt to expandwith Syria* With the aid of elaborate pavilions anddesigned propaganda the Bloc countries dominated theinternational fairs bald In Demascue during4 andBloc countries participated in too Third Damascusnd oonducted aggressive advertising campaigns in In tho naantiiw, numorouo Bloc coarieroialp scientificpdelegations toured Syria, signing trade agreementso riminato offers of economic, oeointanceo usbor ofcanpalgno wore

undertaken by the Bloc. The Coamunlst Chinese Government vaa recognised by Syria and East Germany wis granted peraleaica toonsulate In Damascus*

By tho endyria had elgnod nine, trado flgrepmeota with the Bloo-cnra than any other undordnvclopad free-world country. During tho narkotlng aoajwn inntensive activity by tho Bloc Inyrian cotton market raised the price of cottonevel suffioiect to prlcitmajor importer of Syrianof the aarktft- By tho

and ofhe Bloc bad contracted for approximatelyer-cent of Syria'a exportable cotton. Touel shortage resultingIts sabotage of the Iraq Potroleun Company- pipelines, Syriaargo proportion of its potroleun requlroaento from tho

To date several Bloc countries have been awarded constructionin Syria valuedainlnnaillion and have plaood bldnillionther projects. Czechoslovakia hae beenontract toajor petroloum refinery in Syria. The moat significant agreement between Syria and the Bloc baa been tho pure hay Syria of Bloc arms valued atillion, thus forcing Syria to commit an important part of future barley and cotton crops*

The of foothe Bloc's appearancehampion of Syrian political and economic Interests has been to farther exacerbate Syrian relations

Sjrtw*

'no'alcYrelations wltS^ranee'and the United Kingdom areow ebb.

Thefla countries havo boon Ux> cf Syrians cost important trading partners*

In the past Franco, alone, took core than half of Syria's cotton exports.

The coot of military expenditures and the loss of important sourcee

of foreign exchange have severely curtailed Syria's six-year development

program- The program, designed to expand agricultural production end

productivity, calls for an expenditure3 million for

irrigation projecta, roada, airoortn, drainage projector port development,.

and an oil refinery. Two major undertakings, estimated to cost_aboutmillion, wero ochoduled for initialajor aoorco of funds for this program was to have been oil transit revenues from the Iraq Petroleum Company. The International Bank for Reconstruction and Development hadix-year prograa whicht0 million, but moot of theecommended were much smaller than thoae contemplated by the Syrian Government.

Although tho major share of the coat of Syrian eeonobio development muat bo flnanoed from internall.eablo amount of foreignwill be needed if the program is to assume significant As .nationalist fervor haa pushed Syria increasingly toward tho left, however, foreign private canitel haa become unwilling to expand Investments in Syria. Tho Bloc, despite nusarcua general offers towhatever econoedo assistance Syria requiroa, does not appear willing to become an alternative source of investment fundsarge scale, although It may be willing to undertake smaller, individual projects.

Tho combination of rampant nationalism, the losamount of oil transit revonues, the arms egroefflsnt with the Bloc and the estrangement with major Western trading partners has served to push Syria into closer politico-economic relatione with the Use -nd has crested serious economic problems for SyriainUaat, will require postponement of Syria's prograu fcrvelorasnt.

3

Vgblem3_

a. Introduction

The majority of tho projects nocesaary for improving economic wo If arc in most of the underdeveloped countrioa are of euch magnitude as to require eixoable investments from external eourcea. Consequently tho political climate In which economic development takes place haurimary consideration affecting the economic development of these countries* In many areas of tho world nationalism and antagonism based on anti-colonial feelinga have created conditions wAlch aerlously affect the availability of direct, large scale, private lnveetmaot. As foreign privato investors have boconie reluctant bo supply tho capital requirements of underdeveloped countries, and as weatarn governments have been alow to fill tho investment gap, the Soviet bloc has been presented with an oxcellont opportunity to play an Increasing role In the economic progress of many free world areas.

In Syria, tho problem haa been magnified to an extent that in many instanceo political considerations have become the almost exclusive detcminanta of economic decisions, nationalism, antagonism toward tho Koet (arising particularly out of theconflict)eneral foar of tho resurgence ofcolonial domination have considerably incroanad Syria's political and econoeilc vulnerability to the blandlsheenta of the Soviet Bloc.

B.

Syria io primarily an agriculturalotton, wheat and barley are Syria's major crops and the major conmodlty oourcoa of foreign exchange. Approximatelyercent of the people derive their living directly from agricultureonsiderable portion Of the rest earn their Incomes by handling or processing agricultural coasoditles. j/rogram aimed at improving the living standards in Syria bust emphasise investment which would increase agricultural productivity* There isorge quantity of untiUed land available in Syria but tho lade of water seriously limits its utilisation. 'Die total arable land is estimatedillionf whichillion is under cultivation. Irrigated land accounts for only aboutercent of the land under cultivation and periodic droughtsgrtcultural production extremely/ Dueevere* oroughthe harvest of wheat and barley was approximately halfrop and almost all exports of wheat wero prohibited.yria is also faced with the problem of raising the relatively low productivity of ito agriculture. Tho maximum yield of whoat on -Syrian land ia reported to beer hectare whereas wheats-producing countries in Europe obtain yields ofetric

* ectare"crco.

ilogramoetric ton-

tona per hectare, uj Hottfithctajiding differencea In Syrian and European coats of production, tho coaparativoly low yield la an important factor In tho competitive pooltloo of Syria'o agricultural cocsodltiee on the world market.

C. Transportation end Storage Facilities

The development of transportation facilities ia one of Syria's most urgent needs. Transportation has not kept pace with tho expansion of production and particularly with ah If to in the geographic pet to to of agricultural output. Tho Jotlrah area, located in the northeastern part of Syria, produces moat of Syria's wheat export arj-pluaajor portion of the country's barley and cotton crops. In spite of thlo, the area is poorly equipped with highways and railroads. Tho coat of transportation In this area haa become extremely burdensome and .rates are subject to eherp soasonal fluctuations due. mainly to hoavy traffic during the harveet eeaeon and virtual ceo nation of traffic during tho winter months. During the harvest eeaeon tho coat of transporting grain from the Jotlrah region to Aleppo la about twice ae much as during the" 5/ Transport chargea represent aboutof. export price of barley andifth of that of wheat. 6/ The roada, moat of which aro unsurfaced, are inadequately maintained. Tho railway* were constructed priornd arc no longer adequate for the needs of tho expanding economy.

In tha commercial center of Aleppo and the port of Letakla la another

obstacle which must be overcome before any eixeable expansion of agriculture can be undertaken. Inadequate storage facilities keep

storage charges high and frequently force farmers to dump their products on the doeestlc market. D. Electric Power

A major limitation to Industrial erpanclon In Syria is tha

shortage of electric power. Outopulationillion, not

coreillion lire in towns end villagea supplied with electricity and only about half actually havo faoilltles for its uoo. Many Industrial eetabliahaants prarido their own power facilities.

makeigh cost of power generation and eerloualy inhibit expansion of facilities. E. Industry

Modern factory production in Syriaelatively recent development. The bulk of Syrian Industry has been developed since the ond of World War II, but tha earlier rapid rate of growth itas Wgun to level off. Many industrial concerns iihich wire devolopsd

esult of war time and postwar coaaodlty shortages have boon maintained by an exaggerated aye torn of protection from foreign" competition. This protection-has dulled the incentive to increase efficiency, and haa therefore retarded the expansion of domoatlc markets. P. Finance

1. Lack of Indij;enoun Fund-rrovidin^ Institutions

Primary financial deterrenta to economic dovolopmant In Syria are the lack of Indigenous sources of Investment capital. For the mast part, there are do savings banks, insurance companies, mortgage-financing Institutions, of any of the othor institutions which normally mobilise savings and invest in government or other high-grade bonde. The agricultural Bank provides only an insignificant amount of capital and the Central Bank, establlehodas not begun to 'functlon^aava source.of domestic-capital.'

* Francoordanraq, Britain 3ndach.

The Syrian economy la nerved primarily by foreign banks. Of theommercial banks accredited at tho beginning, ton. Including all tho larger Institutions, wore/ Too French Banana do Syria et du Libans till largest commercial bank and,he bank of ioeue, dcolnatoo the banking oyotom. Theae foreign commercial banks are engaged principally In ehort-tenn

financing of foreign and domeotic trodo andtlo In tormo of long-term Investment fanda. Tha BSL haa. In Oa paet, oxtondod soae investment loans to Indus try, but only after securing the guarantee of the Syrian Government.

The development of domestic capital faces tho handicapow annual per capita incomend the traditional hoarding of savings practiced by the wealthy class. these difficulties are likely to be overcome In any short-run program. Savings among the bulk of the population are practically nonexistent. The wealthy class converts its savings into gold. 4 the siia of this accumulation mas estimated at0 million.ho niddle classart of ita Income for extraordinary

2. Domestic Cr^J^

Jfatll tho recont creationontrol tanking authority tocommercial creditpcommorclal banks generally had been free to determine their own credit policies. The volume of credit extended was usually based upon the oxpoctationa of the next harvoet season* By the endbank credit totallediln.ank

9

credit expanded rapidly, risingovel of about till million. Thla rise was due mainly to the expectation of bumper crops. Credit expanded only slightlyotal of9/ Thle relatively saall increase over the previous year was the resultontraction of credit in5 becauseavero winter drought and poor barveat prospects. By tho laat quarter5 credit began to expand again and by the first quarter6 banking circles had regained their optimlsa and woreecord agricultural season. Jj/

In addition to bank credit, fermora obtain creditumber of other waya, of which the following aro the moot important"

Loans by tha Agricultural Bank of Syria secured by land mortgages;

Credit purchaeea from marchanto;

Future aaloa of growing crops atprice lower than that which might be obtained during the

Until the establishment of the Central Bank, the Agricultural Bank wae the only government banklng^inatitution. the bulk of tho loana extended by the Agricultural Bank are short-term loans to farmers owning small or mediuo-elxed farms. Long-term loane, whichmall part of total loans, aro extended for land purchase and improvements

10

and for tho purchaso of farm machinery. The borc oxtondederiod generally rangingndears. No one borrower raaj receive more/ The inability to obtain large loana from the Bank often compels large landowners to turn elsewhere to aatiafy their capital requirements.

he Dank granted short-tern loana valued3 Pillion and long-tern loana valued1 Ion. In an attempt to increase the Bank's lending capacity, the government authorisedn incraaae la the Bank's capital6 olllionillion. JjJ

Since moat Syrians use currency for the settlement of obligations, increased credit resulting free an expansion of economic aetivivy has been aoccejpaniadimilar increase In the quantity of currencyuring the first quarterhe total volume of money in circulation was4 million. Byeriod of general credit expansion, tho total had increased to0yrian officials claim this Increase was much less than neoeaaary to meet the needs of the economy. 3- Intentional rjpsncifj ftmmmWp1

The increasing economic activity, with the concomitant expansion of credit and demand for importo, has resulted in a

deterioration In Syria's balance of payments end foreign exchange holdings. Syria's trade deficit la usually offset, on the current account of tho balance of internationaly local expendlturoo by foreign cone*osiouaires and oil transit payesntb mads by foreign oil companies, by United Nations Relief and Works Agency expenditures in Syria, and by emigrant remittances (see ovovor, the annual trade daflclts have become larger without aIncrease In the offsetting factors.

ttfiBJi

Syria's Balance of Trade (millions 3US)

Exports

1

During tho firstonthsoreign exchange roaervee fall

no rapidly that Syriaoreign oxchango crisis. risis was

averted when tha Syrian Governmentillion loan from

bla endow agreoment with the Iraq Petroleum

Company, (IPC) whichharp lncreaoe in sterling recelpta. }jf

" The IPC agreed to pay Syriail lion pounda sterling annually

illion) for trenait righta of the oil pipallnca. In addition, the ire agreed to payillion poundo sterlingillion at the official rate of oxchange) for retroactive payments and to deliver upone of crude oil annuallyrice considerably below the market price.

12

Syria's Foreign Exchange Reserves

)

234555

8

13

II. ggjiB Plans for Econwie Daveloiggnt

Onha Syrian Parliamentcar extraordlnary sod apodal budget for economic development providing for nxpondlturen1 of3 Billion. ho budgetillion for now Irrigationillion for roads,illion forillion for the Mlnlatry ofillion for completion of the Gheb drainage project In Western Sjrla,illion for en'oil refinery. Also included wereo for surveya for tho Euphrates Valley irrigation scheme and the Latakia-Jetlrah Railroad (See

Onermanent Economic Council and anfor Economic Development were established to control the execution The'Council*.will norve on an advisory body and the Institute will plan and supervise capitalprojects.

14

Syria haa In progreaa. In additionumber of smaller projects, two major undertakings. The first, started lates the transformation of Latakiaodern seaport to aorve as aoutlet for Syrian ecencdltiea. The coat of renovating the port area is estimatedil lion and is to be completed by The eecond major project, started Ina the roolanation of the Gbab ewenpa.. This project lo to bo completednd

wlU cont about Sill million- 7jj o.ran suitable for growing rice, cotton, sugar beeto, wheat and barley will be in addition to drainage faoilltlea end irrigatiooower atationa are to ben the Orontes River to Increase electric power generating capacity for tho nona-nana area. 2Jj

Tho Euphrates valley hydroelectric and irrigation complex is by far the moot ambitious of Syria's planned development projects. Tho construction of the complex will extendonsiderable length of time and will cost0 million. The cost of the Tusef lasha Dam alone is estimatedillion and that of tho Irrigation system at5 Billion* Upon completion, tho system will irrigate about ono pillion aerco suitable for cotton, wheat, barley and other products suitable for cultivation in Syria. In addition, the Dam will provide Aleppolseablc Increase in oloctrlc power.

'Related to theEuphratoD Valley complex is the expansion of transportation facilities to the area. In addition to funds allocated for road maintenance and Improvement, the Syrian Government plana to investillion in the conetructionailroad from the area to the Ibrt of Letexia.

p. immrw-ng toaacto nrmtenrr

rtoro than half of public Investment In tho program of economic development la to be financedvcraarrnt bond inauen endreceipts of petroleum revoauen frou the Iraq Petroleum Coni--pany.

f Rove raw

eor000

Withdrawals from ordinary budget 0

Sbare of .petroleum

ReTre^fl.^frott USD

Government donestio

bori.:

ror If other oburcos of funds aro anticipated. The ability of Syria toargo-erWilo economic develops/art program cannot easily bo determined by tho uae of publiohod information. Syria haa many different typon of budge to. 'Include the ordinary and developmental buigetn, and various special, related, autonomouo, and annexed budgets. Some aro entirely independent of the ordinary budget; some are Interrelated in that they either contribute to or drawthe ordinary budget. These ancillary

16

budgets total appa-ojdMtolrercont of tho ordinary budget. Tho special budget, vhlohelated budget and an autonocous budget, totalledillion Syria traditionally underestimates revenues In lts^budget and the additional lnooae la placedreservehe else of the fund isilitary secret inasmuch as supplemontary arms purchases are made from It. It would appear, however;ercent of the country's national innoan" la absorbed in goTernmental operations.

the Bonk will "dircot the granting of loans in the country as is comannsurate with the roOuiromonta of nationaland will direct tJui financial policyiew to promoting production,tho national revenue; . he Central Bank Is now tho bank of Issue and Is responsible for determining credit and discount polioioe. In addition, tho Bank will make loans for industrial and agricultural cuttosob. Potentially, the Banrource of

Syria hns an ootimntcd populationillioner cnpdta income.

17

Tho RanqutiSjrio et du Llbanhe former bank of inouc, ldoiltod. ito note laeuc to tho extant of its gold and foreign exchange roservee. The charter of tho Central Bank ponaito an oxpanolon of coney incovered to the extant of onlyercent by gold and foro^gg exchange. The balance of tho backing la to bo in official and .private Syrian rocelvnbl Tho Syrian economy la not yet experiencing any significant degree ofbut Inflationary forces are pro tent end an injudicious Central Bank Policy could reenforce them. Present bank reserves do not appear adequate to oupport moreoderate increase in note issue. If Utoee reserves should increase appreciablyuture date, the Inflationary potential would accordingly increase too.

Tho Syrian Government is in the process of establishing an Industrial Bank to finance in duo trial development. The capital, of tho Bank will be8 Billion, of which the Syrian Government will Bubsarlba toercont of the stock and offer tho remainder to the banks of other Arab countries.

D. Effectsorced

Syria to curtail its economic development programime whenscarcely got underway. 6 tho Syrian Primeall Syrian ministries to stop apendlngract tonto cook bandore, and to suspend any work requiring largetho exception of matters related to national

Ifl

fluted that tha rapid increase In mblliaatlon needo hagvlth tha problem of raising an2 million forarmo purchasca." 3j/ (tha length offor which thisr^wnrfred.has not boonhla is more thanori total gcwument Whereas thobudget

beercent higherith more thanoref the budget allocated 'for militaryditurea.

^WliXar saarogf;the Ordl - V.

s

would bo raiaed by impoaingetail galea tax, an excise

tax on manufacturedapital levy,ombination of

-measures. Ont uaa announced that the Cabinet whoill which would providohroe-year national loan ofillionax upon Industrial production, ealarlea and wagoo, and commodity purchaaea for raining the remainder of thefunds. 3jJ/

In addition to draining Syrian financial ronouroeflexp^ltoree, tho Middlecriaia baa had othereererlng of the Iraq Petrolein Coaqaur/ plpellnea haa reenltedforeign exchange and haa created

ite accompanying advonie affeota onooar/ will dedond-on.how soon andapacity.au=ed. Its^^Bonthato.roatoro full capacity.

20

Ill- Tho Report of the International Bank for Reconstruction and Upvff loppgnt

Int the request of the Syrian Government,commission from tho International Bank for Reconstruction(IBRD) arrlvod In Syria toeneral revieweconomic potentialities and subnlt recommendations fora long-term econoBio development pro gran. The HisaIonsurroy during the latter part of4 and submitted itstho President of

Tho Missionrogram of government action for the50 androgram for economic development amounting to0 million. *

Table 5

Summary.of IBRD

Irrlgatlon^and

Other

Electric

Transport and

Public sorvlooB and

Tha Kl onion suggested that airy long-rangeo gran placo primary emphasis upon agriculture with special consideration

Galons otherwise indicated, information presented in thla auction Is based upon the publlehed report of the Mission, The Economic Dgval-

23

Riventimulating cotton end grain exports. Although the totalrecommended Is somewhat larger than that ourrontly planned by Syria, the'Mlasion recommendedarger portion to public services and bousing. The Mission suggested concentratingumber of smaller projects .which could be completedhort period of time end without toourden on the economy- The Mission furtherthat the entire Euphrates Valley complex be put off untiln view of thu high cost of the project and the construction tine re quired* Tho Mission was apprchonslva that the simultaneous exooution of thoand other major projects would Impose an excessive burden on the avnliable financial reoourcos. Expendituresong period of time with no significant incrosso in production during tho extendedperiod would bo extremely inflationary.

that Bvro^jnetwork from the Jeairah areav.,lntnictod rathorthan on expansion of railroad faoilitlea-Now and expanded road facilities would costillion, compared to theillion for the expansion of the railroad. -In addition to modernisation of the port of Tatakia, it was recommended that approximatelyillion be invested in an expansion of grain storagefacilities, eliminating the need for many farmers to dump their grain on tho market during tho harvest season*

In addition to tho eourcee of revenue Indicated In the Syrian budges, the Mlaaiou buggoeted that additional revenuetllllon) could be obtained through aoleotlvo tax lncroaaea and ah laprovement In tex collecting proccduroa. The growth In the economy would itself provide an Increaseo i, percent per year In taxes and other revenuea.

Tin* extent to which Syrian econotaie development vlil require external assistance vtll depend upon tbe rate ef progress'detflTed. Until tbe announcement of tbe Six-Yesr Development Program, Syria bad been able tolow rata of economic expanaion without algnlf-loaot external assistance. apid rate of expanaion planned for the next few years, however, Syria will have to aeek capital fromsources.

** 'gllm'te" for Foreign Investment

The Syrian political and economic climate foraradoxical picture. The country etill hasresources and some degree of economic stability. notroblem and the free cerkot rate of tbe Syrian poundrelatively stable for some time. Private ownership of The entrepreneurial group Is Influential andrelations with foreign business circles.- There areno foreign exchange restrictions. Fxohange Control2 permits free tranofer of capital and profits outendoalgbed to, footer both short and long-term foreignn exchange market isfor the mlotlve stability of the dollar-poundrerequisite for the encouragement of domes tie savings

g^aff

i" Other hand, there aru factors which Lend to dampen Any -nthusiass for liiveatawftt of fur our private capital. Ihere is tho raUler small Ooraot-tic market which presently confines the expansion amiof industrial output in Syria. ountry ofillion people with low purchasing power It is possible to manufacture economicallyimited range of articles for the home market. This cuuicethas been aoraewtist offset by excessive protection of Industry resulting from the priority given toesigned for national self-sufficiency.

Of even greater significance has boon Syria's politicalrampant nationalism. Government changes have been frequent, withgovernment becoming more anti-Western. Nationalisation ofhaa become mora frequent. Inhe governmentdoc roe requiringbe

represented in Syria only -by 'Myrlaninationn or -by-.comaf rcaal companies owned by Syrians. In addition, the decree requiresajority of the managers and mombera of the board of directors of these cooeiorcial companies be Syrian.

9 isoued in2 etat.au that onlymay own agriculturalinterpretation of this

decree could affect oil-prospecting conceosions and leasee inasmuch as prospecting io often carried out on land suitable for cultivation.

he Syrian Parllaauntaw arbitrarily

ordering "concesuionarj coEpaniaa" to increase wages byercent.ii further legislation pending which would require foreignto deposit cash in Syria instead of using bank guarantees. Foreiirn

There sro0 ageacloe and branchoa of foreign enterprisesoint atock companion registered inhese firsts have invested aboutillion in commercial activities and about t3 million in banking operations. Except for investments in petroleum pipelinea, total British and French investment is probably not large. United States invaatment is estimated at million, of whichercent is in petroleum facUltiea. Some important investment In oilhaa recently been undertaken by an American firmest German Due to the current political Instability in Syria, however, it is unlikely that further foreign investawnt will be. undertaken there in the near future. Several major Western oil cospanlea recently decided not to expand their present facilities In Syria.C. Loans and Technical Assistance

Nationalistic and anti-Western sentiment is nowhere morethan ineluctance to accept loana or economic aaaiatance from Western countries or Western-sponsored organ! tat ions. Kxcept for

SHU

.'6

united Rations relief aid to Uie Arab refugees, Syria bee accepted only0 annually in technical assistance from the Doited Rations olnoe This has been confined to health end educational devel-opaent and to technical advice provided by sail gronpe'of Industrial and agricultural experts.

Inhe Syrian Government refused tollllon loan offered by the International Bank for Reconstruction and Development,, The Syrians olalned that their neu agreement with the Iraq Petroleum Coopeny would provide tho required funds forank loan was sought. It is probable that the Syrian Government nay have objected to tho Bupervieory require Dents of the Bank and toercent interest rate. In addition, the rising anti-Western sentlnent and probable desire to benefit froa anticipated East-West competition also may, have Influenced the-de^Latoi.

As far as Is known, the only governacnt-to*goverumont loens accepted by Syria from the West havexport-Import Bank loan for drilling waternd two loansillionby Saudi Arabia, 0 Syriamillion loen from Saudi Arabia. Inaudi Arabletllion Interest-free loan to Syria and postponed repay&enfc of the previoushe loons are to No repaid through normal coEsodity trade-

D- Western Construction Contract*

Few significantprivate orbeen awarded to Western flram during the paat aeveral yaara- Tho following tabloumaery of such major oontraota as have been awarded to Western companies*

Table 6

Contracts Awarded to Western

West Germany

BolgiCB

fatherlands

united States Densiark

of Pro feet

latekw thermal electrlo

plant near Aleppo, jjg/ Construction ofau canal near the Ghab. /

of Jesirab-Utakia

Railroad.. $tj

of buildings at

Aleppo end HesEO (Damascus) airports.

of Hejas Railway.

Latakia port survey.

Switzerland

Swedes Yugoalavia

m, road from

to Qaaiehli, wo dralnago conalo in the

Surveyam on the Orontea River-

Drilling of ten water welle. Several projects.*

Since the outbreak of hostilities In the Kiddle test,agmomentritish company for drawing up plena for the construction of the International Airport In Daaascus haa been cancelled, as hare various sgreetsents with French and British firms foruaber of snail public works projects. . Trade with the West

Trade with the West5 oonprised aboutercent of Syria's total trade. Trance, Lebanon, and the united Kingdom accounted forono-third of this trado (aee) Although complete trade statistics are not yet available, it Is likely that there will bo an lnorean* In the proportion of trade with the Bloc and aoco change In the pattern Of Syria's trade with tho West. It appears, however, that tha bulk ofend agricultural commodities required for Syrian consumer require

loeotB and economic development will continue to be imported from the West. Tho most Important commodltioa imported from the Wost are fuels, machinery, precious metals. Iron and ateol products, automobiles and other vehicles, and silk products (see. Iraq and Saudi Arabia provide almost all of Syrla'a petroleum requirementa. Tho United Kingdom, the united States, Vrance, and West Cermany provide tha bolk of the other lacoBioodltieo imported by Syria,

Syrla'a major exports to the "est are raw cotton, wheat, berloy, and wool (son Table ll). France generally lakeo about half of Syrla'a cottonmajor source of foreign onehsngn earnings.

Lebanon lBporta nearly all of Syrian oaf livestock aod aiteabl* quantities of vheat, barley and wool.

* record crop6 provided Syria with3 no trie tone ofetric tonsatrlo tona of barley, Bloo ootlvity in theraiaed pricesend aui:iciont to price French

larporters oat of the market after Franco had contracted forercent of Syria's cotton surpluB bad been

purchased by the Bloc by tho end of

Activity in the vheat market6 was characterised chiefly by political rather than economic decisions. France hadfor ehlpxentfl0 aotric tons, but public reaction to the Algerian crisis forced tho Syrian Government to embargo all shipments Thevban denied exporters aocesaajor importer and forced tbe prloe of wheat on the domestic market to drop. France was offeringoercent higher prices than other countries Several months after tho imposition of tho ban the Government concluded an agreoment toetrle tona of vheat to Egypt,ate0onth* Tha Syrian Government reportedly agreed to sell tho wheat to Egyptow price and lo meeting difficulty in fulfilling its commitment because domeatlc producers are balking at this government -eatabllabed price level- In addition, Syria in having

...

difficulty in chartering shine to transport tbe wheat.

Syria'a surplus of barley baaeady market, Belgium haa been replaced by Meet Germany as the major market and Yugoslavia has appearedajor Importer, Chechoslovakia la reportedly active in the market and other shipments are scheduled for Western Europe. The following table presents prollalnary data of Syrian exports of 'heat and barley during6 export season.

Table 7

Syrian Exports of Wheat and Barley,6 (metric tons)

Italy Yugoslavia Belgium Rumania Denmark West Germany Franceulgaria Egypt Others

TOTAL

Syria is presently faood with the problem of disposing of its major industrialGrowing competition In neigbboring Arab states from Japanese and Eaetero European textiles la pushing the higher-priced Syrian goods out of traditional laarketn* ospaelolly in

. 3SL

Iraq. Soon sales are being made in Saudi Arabia, Sweden end Swltcer-land but Syria Is still finding it difficult to develop saw markets for its textiles.

r, TjKafllqTtoBWiS AgtlTttlMYtl5

Syria's oocaaerco with Jugoslavia has expanded5 trade between the two countriesevel of aboutillion. rade was at en annual rate of3 million over the first three months and is expected to register an Increase in the balance of the year. Duringugoalavla importedetric tons of barley, whereas In the period, Imports0 metric tons of barley were registered.

The TugoslBTO have been successful inumber of important construction contracts In Syria- In the Fallugoslavia was awarded contractsajor part of the project to develop Latakiaodern seaport.. Tho parolon contracted for was to have boon completed by the end JO/ The Syrian authorities were so pleased -with the work the Yugoslavs had done that It appears probable that the remainder of the projeot will be awarded to them. 7j/ Inhe Tugoslaval mtllloo contract to begin the initial work, on the Gbob reclamation project. Tha project was to be completed within two ynare eftor work commenced. Jg/

33

Inugoslav company wasontract to drill sixty desert vaterwells Innd Immediately dispatchedease of drilling technicians to execute the'J.

The Tugoalave are actively biddingide variety of projecta. They wore one of the first toid on the petroleum refineryelgian firm wasontraot for the survey of the Jnalrali-Ietakla Railway, the Tugoslave attempted, unsuccessfully, to revorso tho docialonut-rate offer, In replyyrian request for bids for the coostructloaumber of silos, the Tugoslave underbid the lowest Western offer byercent, Tho Tugoslave are one of three leading contenders for tbe award to survey the Euphrates Valley complex - 7J/

R-wently Tugoslavio has become Involved in arms negotiations with Syria,, Two Syrian military representatives oreittuaal arms and may have already purchased0 worth of rifles. The Syrians plan toilitary attache to Belgrade,

Jugoslavia haa plans for further expansion of trade with Syria and other Arab countries, Tho Yugoeler Foreign Trade Committee has eatabpecial group to concern Itself solely with tbe Middle East area

3t

It oootpaplatofl soiling goods on short tero orcdlt and promoting coo pa ration between Individual flnu and osnufacturlng ontarprlaee of Yugoslavia and tho Arab countries. In addition, each of the Jugoslav embaooles in tho Arab oountclos are being staffed with sevornl rfaslems to faollitato working with tho Arab States.

V,

A. lotroquetIon

Until4 Syrian economic relations with tha Bloc wore confinedimited commerce, almoat all of it with Cxochoalovakln. Inhe Slno-Soriet Bloc gave tho firat indicationore active economic policy toward Syria. At tho Firat Damoacua International Fair the participating Bloc countrloe constructed elaborate pavilion a, diaplayed extensive llnea of coomodltiea, and otherwise dominated the exhibition. With the Initial propaganda benefita, thus obtained, the now faclliar pattern of Bloc economic penetration began to onfold. Numerous delegations with authority to sign commercial agreasanta appeared in Damascus with increasing frequency. Bloc commercial ropreeentatlvao offered to sell commodities at below-market prices and to buy Syrian commodities at premium pricee. Commercial officoa were opened In Damaecus and Bloc commodities were advertised oxtensively In local nowspapore. Local representatives for Bloc trade organlxationa began to appear throughout the major cltiea of Syria. Commercial, scientific, technical and cultural dslogntlone were oxchonged and numerous, though vague, of fore of asslatance for Syria's economic development program ware extended. By the time of tho Third Damascus International Fair inyria had signed trado egraomentc wiUiChina nnd all the European

Bloc countries. The foundation for en expanaion of trade relatione appeared to be firmly established.

B. Expansion of Economic Relations,

1. Tho Damascus International Fair

The Damaacua International Fair, tho moat Important of the trade fairs held In the Arab countries, aerves as on Important racchanie* for the expanaion of Bloc economic relations not only with Syria but with other Arab countries as well. Since tho firet fair was activated Inhe Bloc haa dominated the fairgroundo with elaborate pavilions end well devised propaganda. At the first fair, tho Soviet Onion, Cccnunlst China, CtochoSlovakia, Hungary and Bulgaria presented the most spectacular pavilions and attracted tho moathose coon trice displayed everything from heavy industrial equipment to foodstuffs and clothing, with major emphasis upon those commodities necessaryuitable expansion ofand industrial production In the region. (See.

The USSR did not participate in tho secondbut the Bloc was represented by Cocraimlot China, Ctechoslovakla, East Germany, Hungary and Poland. The Bloc again dominated the event, with the pavilion of Communist China the most popular.

Bloc participation at the third fair was particularly Important as ovory European Bloc country and Communist Chine had

36

displays. Several of tho Bloc countries advertised baavily in local newspapers and the Bloc pavilions again were among the cost lapresslvs of the Pair.

With the exception of theman and Czechoslovakian exhibits, it appears that the main purpose of the Bloc pavilions was to Impress the Syrian public with the range and capabilities of industry in communist countries. Kany of tho Bloc repreeontativoo at the displays refused to discuss prices, credit terms, or del ivory torms. Observer reports indicate that the various displays of heavy industrial equipment made little Impressionountry with no proepect of developing heavy Industry. Many of the consumer goodo displayed could not have been designed for saleonsumer market with limited purchasing power. Much of the advertising undertaken by tha Bloo during the fair waseneral nature, without reference to specific commodltiee.

The displays of the East Germans and Czechs, although tinged with propaganda, appear to have been successful In selling the conswditioslayed. he Czech* reportedly closedor about tl million worth of coonoditlcs of tho typco dioplayed at the Fair. fQ/ The East Germans -claimed to have arranged forillion worth of business by the end of6 Fair. 8j/ Representatives of both these countrlee offered commoditieo at lov prices and wore willing

to extend favorable credit

Available Information lndicaUo that the commodities

displayed by tho Bloc wore generally Inferior or obsolete when compared

to Western products. It must not be overlooked, novotor, that to

countries in the early stage of Industrial development the low cost

of euch oouipmont may far outweigh the alight disadvantages of

obsolescence. Furthermore, where funds are short buyers will be

attraotod by payment plana which extendong period of time.

The following information ic re pro sen to tiro of comments

made by American officials or Syrian businessmen about the quality

of the products displayed by the Bloc during the throe

equipment, agricultural and textile

generally considered good; coneumer

goods are generally very poor; prices of Soviet television aboutimes that of. aete; road-buildinggenerally good but not suitable for large-scale operations; Soviet tractors equally as good. tractors.

General appearance of machinery andoocmed quits good; textiledisplay needed frequent repairs;tools possibly Bade in thegoods generally poor;generally acceptable; medical

equipment appeared to bo copies of obsolete American products.

CsacbogloTftJcig Quality of products consistently good; indue-_.

trial and egrioultui-al equipa3nt regarded highly; nadical oqulratmt goodj aatoniotlve equipacat generally inforior; sporting equipaent excellent.

c .ffffT"tfyf. Inonafcrial end agricultural equipcsnt end conGuoar goo do ganorelly good; rubber products excellent; tractor trailare acceptable; binoculara and othor optical aquipssnt excellent; aateaotivo equipxent Inferior.

Bachinerj not up to Syrian standards;

radical eqaipnant good bat priced high;machinery bslou Western etandardn; ixachine tools ocriparable to any inawrbpoi antos end trucks inferior.

below otondord; rcdioc good and

low priced; industrial and agricultural machinery inferior.

unfavorable vhon compared to

Italian or Prench; ooze goods probably made in DSSR; agricultural oojdpreatlectrlcal eouipcont obsolete; flour Billing equipwnt obsolete'.

tools below standard; agricultural

Machinery poorly dcolgnad; ouch equipoant copies obsolete Westernaodels.

generally poor; cloth drab and

rough; sany products ah&bby.

2. Influx of CoBwercial oaiocationo

The activities of tho Bloc dalogations at the Scocaa DaBaaeiin Intcrnatioaal Fair soon nmda it clear th&fc an oooroqIc

offensive wae being launched against the Syrian Government.fne Chlnese, Pollen, and East German delegations to the Pair5 all came to Damascusced by their respective governments to conclude trade agreements, and wars Joined late in Septemberlmilarly authorised Soviet trade Newspapers contained ref ben que te given by theae delegations at which Syrian officials were entertained and Impreased with the adventagee of clceer economic relations. The drift to the left which bad characterised the domestic political scene assured Syrian receptivity to those blandishments. The four Bloc delegations were succeeaful in concluding trade agreements with Syria. Since the end5 there hasteady flow of Bloc trade, scientific and technical delegations into Syria.

3. KerketH-tnJpnj.fifrjpn

Techniques employed by Bloc representatives to gain access to some commodity markets include offers to pure bo ee at premium prices, to sell their own products below prices generally prevailing, and to grant favorable credit and payment ule it has not been possible to establish that the re mil ting prices are below costs of production in the Bloc. One Syrian businessmen reported that Eaet German commercial officials were endeavoring to enter the machinery market by offering their producta at "ridiculously low prices" and by allowing libere) credit terms of overs an rxanple, Eaut Germany wen

avBTO ontract for lathee urton It underbid tho next lowoet offer

byercont. gj/ Tho CoamuuiiBtffered to sell

Metric tone of iron bars ater an trie. Latakla,

ine when the vaioleealo price of iron bars in Damaocuo Man

3 par metric ton. They further offered to accept as

Payment Syrian currency or cotton at the prevailing market

A Syrian businessman stated that ha has been purchasing

elovaklan cceiaodltleB at low price a, payingercent in cash and

the remainder Within one year. 2i/ At6 Damascus Pair, the

Czechs offered to sell various cceoodltles at lowerhan

those for comparable Western goods. They offered to accoptercent

in cash with the order or receipt of de-cunents with the balance

payable inonths on machine tools, and up toonths on trucks

and true tore. gg/ The following are additional examples of tho

methods employed to penetrate the Syrian market:

USSR Offered trucks at less0 compared0 for American trucks of similarold ball-bearings, manufactured to. manafactured automobiles and trucks, at competitiveffered to sell copies. autonotlvo spare parts atercent.

Czechoslovakia Offered to sell locomotives that Syrian business circles considered good In Quality0

u

percent lees than comparable Was Urn locomotives; payment terms wereercent down and the balance in equal installments without/ reportedly sold tanks to Syria;. tanks were being sold to Saudi Arabiaffered toarge quantity of barley atercent above the market

aay equipment contract by

underbidding the lowest Western offer by

agricultural and induatrlal machinery

at pricesoercent lower than coopexablo European goods, and AO percent lower. ' /

the wool season inhe price

of wool was approximatelyents perarge influx of wool caused pricea to fall considerably. The 0SSH and CEechoalovekia entered the market and paid eons merchantsoercent above the market/ During6 cotton-buyingumber of Bloc countries succeeded In raising the prioe of cotton byercent through coai-potitive bidding. ip2/

4* Trade Atyeeaar.ts

until5 Csechoalovakia was the only Bomber

of the Bloc whichrade agreement with Syria. In

Polish trade representativesrade agreement and within a

year Syria had trade agreements with Comauniet China and every Europe;

Bloc country, (see The agreements generally require the

ahlpewnt of Syrian agricultural producto and textiles in exchange

for industrial products, industrial raw materials, and machinery.

These trade agreeaoat* hare eorvod primarilynstruments

of propaganda as actual trada with tho Bloc has not assumed major

proportions. All agreements, however, do contain proriaiooe for an

expansion of trade. If desired.

5. Coagaarcial Offlcee and Domeetlc Aarncles

One clause of the trade agreements which most of the

Bloc countrieo appoar to be implementing is that providing for the

eatablltthment of permanent trade officea in Syria. he Soviet Unionommercial office in Damascus and began to advertise Soviet merchandise in local/ Permanent commercial attaches or suasions were subsequently established by

Poland, Hungary, Bulgaria, CtochoSlovaklo, Ccaauniat China and East Germany. In addition to ita commercial attache, the East German Gotontends toranch of its foreign trade bank In Damascusoans of simplifying payments arrangementa between tho two countries. lOU/ Expanding economic relations eventually resulted In official recognition of Comninlst China and an agreamont with East Germany for the estabUshment of an East German consulate in/ As yet, tho consulate has not been activated.

Tee policy of granting exclusive egenclee for tha ealo of npociflc ccainoditioe la being used by tho Bloc with increasing

frequency. Numerous agento dloplaying Bloc ccoasodltleo havethe more Important cltiea of Syria (aea riot Union granted Georgeigh ranking comber ofCoauatnlet Party, an exclusive agency for theSoviet outoraobiloe in Syria andfirat agency inEast to aoll Soviet goods privately. The agency grant vaathe Soviet Legation on the recommendation of Fhalideabor of the Syrian Parlianent and the leader of/

he Syrian Government authorised the establishment of the Syrian Lao torn Economic Developmenthe corporation waeo handle general merchandise trade with Bloc couhtrieaommission and representation baeia, and also to undertake the construction of Industrial plants, the establishment of chipping and transportation agencies, the oale of petroleua producta and derlvatlvoB, and to extend brokerage and advertising/ The corporation roportodly was organized at the instigation of tho chiefoviet technical delegation which had visited Syria Inhe group which subsequently formed the organisation was assured that all business transactiooa concluded In the future between the USSR and Syria would be handled through this/ The manager of tho corporation is the above mentioned George uvayahiq. Of particular

significance is tho appolntount of Abd-el-Hadl Rabbet ao chairman of tho board of directors. onservative businessman, is one of the most influential industrialists in Srrla. His stature could add tnpetue to tho campaign aimed at increasing Soviet-Syrian trade. 6. Trade with the Slno-Sovtst Bloc

yria's trade with the Sino-Soviet Bloc totalled aboutmillion and accounted forercent of Syria's total trade (see. During the first nine months6 trade between Syria and the Bloc rose to almost Jfl million, orercent of Syrla'a total world trade.

The commodities Syria has exported to the Bloc have been traditional Syrianwheat and barley. Major laports from tho Bloc have been such commodities as wood products, cotton manufactures, and glassware. Tha exchanges of particular commodities have been small and have not reflected the development of any dependence upon Bloc markets or suppliers.

The pattern of tradeowever, will probablylaeable increase in Syria's trade with the Bloc. Por the next few years, the Bloc should bo an important market for Syrian cotton; especially if cotton la to be used as payment for arms recently obtained from the Bloc. During the cotton marketing season In the Fallhe Bloc entered the cotton oarxot in force. By the end

45

ofurchases of cotton by tho Bloc emountsd to0 metric tona compared withetric tone.during thoarketing/ Theide from the cotton accepted in partial payment for arae purcbuaes, reportedly paid cash, did not quibble over price a, and made generous promises of future/ loc cotton purchases may have been as highillion. Communist China'a cotton purchases alone probably totalled more thanrm Inn during this period, compared with total trade0JeV

Tho eavering of the IK pipeline transiting Syria hasuel crisis and forced Syria to turn to the Bloc for lsporta of petroleum. Whenern oil companies in the Middle Eaat Indicated thoir inability and unwillingness to supply Syria with lto petroleum needs, the USSH offered Immediate0 tone. Syria eubeequently contractedons of petroleum valued at6 million from the USSR. During60 tone wore delivered to. Trade Difficulties

There have been few Syrian complaints reported about tho quality of coanoditiee or services of the Bloc. Caecii products have generally been well received. One major complaint on tho part of the Syrian Govornmint has been tho lack of fulfillment of commercial

A6

algrwd with the Bloc, especially Chechoslovakia. Inha Syrian Governmento to to tho Czech Legation pointing out the fact that tho Caecha had bought almost nothing in Syria since the olgnlng of tha agreement, although the Ctecba were obliged, according to the terns of the agree Kent, to purchaee Syrian goodsalue ofercent of her exports to Syria.saohoalovakla exported7 million worth of gooda and purchaaed0 worth of Syrian commodities. zech exports to Syria were double thondrom the Blochole were almost four times her exporte to the Bloc. The Syrians have occasionally complalnod about Bloc trado delegations being more interested in purveying propaganda than In concluding commeroial agroementa. 2Jj5/

The sale of Cast German "IFA" automobilea in Syria waa farommercial success bo cause of the poor quality of the product. Purchasers complained of the Inability of the automobiles to climb hills and of serious engine trouble afterew months of It has been reported that the purchasers have bad their money refunded and tbe agency has been discontinued, /

Tho distributor of Soviet automobiles has couplalnod that salee are impeded because of the insufficiency of spare pert a, service facilities and the general high prices of the autaranbllou. JJfl/ The

insufficiency of eparo parto hasactor in the inability of Rumanian-etanufactured machinery to enter tha Syrian narkot to any extant. il9/ In some instances, Syrian Importers have rocolvod prepaid shipments of various types of goods from Czechoslovakia which wore not the styles and numbers/

C* Assistance for Economic Devslonmcnt by Soviet Bloc Countrloa Sinceyria haa been aubjsctedarrage of offersumber of Bloc countries to assist in her economic Many of the offers have quoted low prices and generous repayaent terms. The Syrian Minister of Public Works stated that many Soviet Bloc bids for surveys and construction projects ran aboutents to each dollar of American/ One Syrian businessman indicated that the bleb cost of American equipment and technical aervlcs was prompting many Syrian businessman to look with favor upon Bloc

Offers of assistance have ranged from the construction of email Industrial installations to general offers of assistance for the complete requirements of Syria's economic development program, Long-term credit arrangements with Bloc countries providing for economic development ventures came toillion by At the same time, offers are outstanding for moreillion additional. The contracts which have- been signed hovo, for tha moat part, been with Syrian buslnesomon end not directly related to Syria's plannedprojects (see,

1- PSSR

The USSR has offered the most and probably has accomplished

48

tho least in aeslatlng Syria Inher oconoey- Inho USSR offered toetroleum refineryominal/ This offer, assisted by domestic left-wing pressure for acceptance, was largely responsible for tho inclusion in tho development programmtllion refinery. The USSR, subsequently, dropped out of contention fcr the refinery contract. echnical delegation hoaded by Nikolai Kolnlkov, director of Technoexport, arrived in Syria in6 purportedly to study Syrian/ Tho delegation toured the major Syrian cities, publicising their visit with indiscriminate offers of economic assistance. In Damascus, Melnlkov offered to assist in the construction of textile, cement, and glass etroleum refinery, an electric power plant, and the Latakia-Aleppo railway. The businessman of Horns and Kama wore offered assistance in the construction of cement plants which would requireown payment until tha facilities were In operation. In Aleppo, businessman ware offered assistance in the constructionumber of plants, including silk and textile/ One firm in Aleppo wasomsnt plantexcluding excavating machines, electi leal equipment andirm in. had previouslyid ofdlllon for the entire project. leeV

Inoviet Foreign XlnieUr Shepilov visited ^yria and extended offers of political, ricononlc aud military anblst&nco, 12

This Is an unrealistic fitvre androtably presented for Itsi. Ybr.f "hr serai, iron in on ow-ag- cvasct plant inl'-.wi St-iton han

^r?

Shepilov reportedly declared the readiness or the Soviet Onion to oxtend unconditional financial end technical aid to Syria and urged the Syrian Government to draw npdetailed development/ Shepllov added that the USSR was prepared to offer whatever aid was necessary for the construction of the lusef Pasha Bam,.tho Latakia-Aleppo Railway and wheat storage facilities in tho Jealrab, all on long-term payments endow rato of/ Re further proailaed that the Soviet Bloc would absorb all surplus quantities of Syrian grain and cotton which could not be sold on Woo tern markets. lJO/

Recently, Soviet petroleum technicians "affirmed" the presence of extensive deposits of petroleum In the northern regions of Syria and have offered to develop these resources on "normal commercialjl/

2. CsochoSlovak la

C re oho Slovakia has boon one of tho more successful Bloc countries in obtaining construction contracts in Syria. The Czechs havo reportedly been awarded contracts valued at moreillion, including the constructionajor oilugarhina factory and two cement plants, (see In addition, they have beenontract for the surveyajor cement plant in Haa*.

i. East (jorrcaiiT

The East Germans have been awarded contracts for theof two cement plante, several textile factorieshoe factory.have placed bidsumber of other projects, including the Utaki*-Aleppo Railroad (see. The cement plante to be constructed by the Eastof throe major plants to be constructed by private Syrianeventually supply the bulk of Syria's cement needs. The ceaent plant in Aleppo waa awarded to the East Coraano for aboutillion aa compared to an American bid of approximatelyillion. tJg/

Hungary

Hungary baa been awarded contracts to construct three flour mills in Syria and haaid for the contract toighway from Aleppo to Jeairah. In addition, tha Hungarians have offered to send mobile technical teams into the agricultural areas of Syria. These teams would be composed of one or two "technicians and/or agricultural experts"rew of approximatelyaintenance man. These unite would repair and service agricultural equipment and give advice on agricultural/ The effect of Hungary's current oconomlc crisis on these foreign economic activities has not become clear at this writing.

jjjfcflffSf

51

The Dulgarlana have bean awarded contracta totalling nearlyillion. Included are contracta to construct military-

ilitary airfieldumber of grain elevators (ace

13V

. The contract for grain elevators wQa obtained after the

Bulgariansest German firm by/ Bulgaria

alsoontract toour-year geological survey

to determine the prospects for the development of mineral re source

A group of technicians is studying plana for further development of the

Port of Latokia. JJj/ Ten agricultural experts are training Syrians

in the use of agricultural machinery in en agricultural school which

ia reportedly furnished exclusively with equipment donated byl/

Ten Bulgarian technicians skilled in tha operation of dieaol engine c

wore scheduled to arrive In Syria during6 and six

other technicians arrived in late6 to aealst in tho con-

atructlon of military/ There are Indications that two

groups of technicians are being selected to travel to Syria for a

survey of possible Bulgarian eitea for the coo struct ionakery,

a cotton gin and seed plant, two railroad stations and a> locomotive

repair shop.

Inhe Folleh firm CEEOPontract

free Saudi Arabic, Syria and Jordan to survey the reconstruction of the He.}at Railroad. Thein cxaspetition against Western bidders, wao far below Wo stern bide end reportedly would not havo covered the contractor's costs* Ifrl/ Tho contract wae subsequently cancelled when Saudi Arabia refused to parotlt the Polish technic lane to enter that country. Ten of the Polish techniciansn Syria and are preparing an offor for the survey of tho Latakla-Aloppo-Joclrah Railroad.

7.

Shortly before tha opening of tho Damascus Pair inheorge Andrescu, Director of the Rumanian pavilion, expressed an interest in assisting Syria in construction of cement plants at Rama and Horns and In the expansion of tho railroad facilities in the Aleppo-La talc La/

53

Tho prospect of Bloc erooion of Western Influence In the Middle Eest petroleum Industry, which could result from Bloc constructionajor potroleun refinery In Syria, hse ceusod conoldsrsble concern among Westorn officials. The Doited States Government considered the situation serious enough to warrantssistance to certain Western governments if they would agree to subsldlae any bid extended by thoir domestic firms. The refineryajor East-West economic issue.

Dndor an agreement concluded latehe IPC agreed to provide Syriaons of crude oil annually at reduced prices. The DSSR lined lately offered toefineryominal price to process tho orade oil. Pressure from left-wing elements in Syria then forced the government to include tho constructionefinery vlth on annual capacity of one allllon tons in its Six-Tear Developmental Budget. Tho Syrian Petroleum Instltuto Has created to draw upand call for bids on the project.

In addition to the rather nebulous Soviet bid, CanohoSlovakiairm bid and on6 it was rumored that tho Cseoh Md was accepted In principle, Inroup of Cseeh Petroleum experte arrived In Dosaocus and stated that Czechoslovakia could oomplete the refinery in two yeare- Tha Cuschs indicated that thoyechnicians available anddy to accept cotton and wheat In pays-en t

In addition to tho Soviet and Caecb bids, the Syrianreceivedron firms in the united Kingdom, France, Went Germany, Italy, Yugoslavia and the Doited States, he Syrian Minister of Public Works established an advisory group consisting"of one represent tntlve oecb from Czechoslovakia, Egypt and tbe United Kingdom to study the hide and provide technical advice. ljO/

he bids under consideration were narrowedfrom Czechoslovakiaa DS-UK fins* Both placed bids of

approximatelymillion butwore considered to be

technically/ Cfiechoslovokia, however, subsequentlyMd. / to eogagoDctch auction" with the

Ccooks and was unwilling toower bidrovision for on escalation clause to compensate for any future increase in labor and material costs. / Holding. governmental pressure, however,

irm bid, offering to acceptercent one year after the contract,ercent upon completion of work andercentearsow rate of Interest,. The Czechs had offered to acceptercent upon completion and the balanceears.) /

With the outbreak of hostilities In the raddle East and Battle Western sentimenteak, public nroaaur* mounted for on award to Czechoslovakia. Seeking to find some grounde for compromine becauco oftechnical inferiority of the Czech opeoificsiion, the Minister of

Public Works attempted to have tho Csechs construct tho bealoand either the Wosl Germans or Itellaua ccmstntat tho highly complex erecting Tho Ueet Germaneall ana refuaad to agree to cooperate with the Csechs on any co notproject. / The Dhlted States orfiered to lnoreane7 fiscal-year aid to Italy If the Italian Government would lend upillion to an Italian consortium which consideredew bid for the entire project. /

In the meantime there were reports In the Syrian proas that the Czechs hadew offer to build the complete refinery with the USSR providing technical aidatalytic cracking unit, In latosan Caech delegation arrived in Damascus and pressured left-wing elements into calling for an award to CaechohIovoile It was rumored that tho Csech bid had again been lowered.

By the end oft becaas apparent that the award of the contract would be bo nodel It upon political considerations. The Syrian Cabinet was splitajority in favor of awarding the oontract to CBoobosiovaklaissentingthe Minister of Public Works, who Is responsible for signing the cootract. / By the endowever, the Cabinet was reorganisedinister of lubllc Workc favorably dlnposad to an award of the coctroot to the Cseche wan appointed.. The now Hlnlater stated thatcba had lowered their

56

bidercent and were willing to accept Syrian pounds is pa;rment,Quwatllthe refinary waaolitical

ioaue and would probably determine Syria's futureower bidinfluenco the decision- /

claimed It had lowered ita bid as much as was economically feasible and that further consideration was useless since it was likely thatvokla would again lover ita bid.nhe Minister of Public Works announced that tbe contract bad been awarded to The construction la expected to takeonths andoreign exchange cost of Syria will be required to payercent upon signature of tbe agreement,ercent within three months after signature,ercent when the refinery coaaencos operations, and the balance in seven equal Installments ending The loan carries an'lrrtereet rateercent on the unpaid balance. 1 though the price was not substantially lower than the Procon bid. President Quwatll claimed that tho Czech offer had several advantages* In additionower price, the Czechsower interest rate, wore willing to accept payment In Syrian goods, guaranteed quality equal to Western processes, and wars willing to postpone payment of Syria'a arms indebted^ nesn to Czechoslovakia. / Primeli stated thatercent of the pries was payable in Syrian merchandise- / The Czocha also were reported to be willing tc revise tbe Syrc-Cseeh trade agreement as desired by Syria, to provide notdac spere parte for military equipment.

and to furnish additional oroa whenever requested.

Although the contract haa been awarded to Czechoslovakia, the issue at ill appears to be unsettled. The award of the contract oocurrod at tho same tinetruggle for power developed between right >wH left-wing factions In the government. It may well be that tho award precipitated this arlsls In the Syrian government. E. Scholarships

Within the framework of trade end oultural agreements with thelause is generally included which provides for economic and technical asaistanoe. One device used by the Bloc to provideaaslstance la the extension of scholarships to students andfor study in the Bloc. Syria haa an agreement with the OSSR for general assistance within the field of oduoatlon and haa offered echolarships to professors who desire to specialise in the studies of tho use of atomio energy. / In addition, scholarships have been offered for the study of language and literature In the DSSH. /

C ceo ho Slovakia has extended thirty-five scholar chips and Poland five scholarshlpo for the study of engineering, mathcaatioe, physics and chemistry, XQ/ East Germany offered fifteen scbolarahfpa and Bulgaria three for technical, scientific and liberal arte studies in those countries. XlU

58

Slcc& tbe autumnho Sovlot Bloc haa agreed to eoll

to tho Syrian government inu valued atillion.

Prior to6 three eeparateo tailing/

wore negotiatedi the firetillion; the aocond forhe thirdillion.

Among the major iteaa Syria uaa to recelvo from tho Bloc uere

tanks, armored troop

gone, and quantities of artillery, anti-

aircraft guns, rockets, mines, ammunition, radar equipment and medical supplies. /

' Payment arrangements for thefrommay haveovn payment in sterling and the balonco in Syrian commodities. One source indicated that the Csschs had agreed to acceptercent of the value of the eras in Syrian currency, and the balance in dollara or sterling. / In earlyseeh representotlveo reportedly arrived to arrangeupply of Syrian barley to be sent to CxaehoDlovakiaj the ooot of the barley to bo aet against part of tbe cost of the arms being supplied to Syria by the Czechs- / As the statistics of barley shipments ino not indicate any ehlpmeote to Czechoslovakia, it is probable that the negotiations nay have been for shlpmenta

.

In earlyyria began direct negotiationaUSSR for iru. Thio was quiteirect reoultvisit to rfaaoow in late Analgned in lato Rovvaber

/ "

IS/ The Syrians reportedly requested air-oraft. naval vessels and other equlpaont, tho operation of whichigh degree of technical skill. / There were lndlcatlona that Syria was negotiating directly with, and being advised by, Soviot Marshall Zbukov. lgy Tho Soviet authorities agreed to train Syrian pilots in the USSR. oviet advisors are expected in Syria to assist in the operation and aalntenance and to train Syrians in tho use of the sere coaplex technical equlpneot./

It is apparent that the pure ha no of Bloc arms baa placedburden upon tho Syrian economy.. The Syrian fQoieterinancial crlais was imminentesult of thoBloc eras. There, are indications that Syria was unable tofirstand was facedud got

deficit ofdllion-he willingness of the Caecbi- to postpone the arms paymont was undoubtedly an inportant factor In the award of the oil rorinery contractchonlovakie

aJrWtf"

60

IV. Copolualoos

Syria 'a oconoalc roletloaa with tho Weatorn world have beandisturbed by the Soviet Bloc's arrival on the scene as"an active political and cconoaic foroe. In Syria, the USSR baa oueceeded in synthesltlng Arab natlonallsn with Soviet inporlalisa Into an anti-Western force not eeusJJed elsewhere in the noa-coEsainist world. esult, Syria has moved slowly but steadily to the loft. The growth of left-wing parties in itself has rtot been particularly spectacular and communist ideology apparently has notignificant faotor in doaestio eooDoaio policy. However, tho leadora in Syria, and other Arab countries have bannered so hard on the ant1-W0 stern colonlalisa end anti-Israeli themes that ooonoaio relations between Syria and thocountries have been seriously affected.

61

y^Utical-instability in Syria has adversely affected not only Syrian plans for oconocaic development but the dally operation of the economy itself. Government policy la now characterised by extreme economic natlonallsn, end the Israeli problem has influenced manynoalc decisions. The basically conservative Syrian businessas been outshoutod by domestic political elemento, eo that manyhave been forced to turn to the Bloc in order to remain In business. Political considerations have profoundly affected Syria's pattern of foreign trade, and economic relations with France and the united

heretofore two of Syria's moat Important tradingalmosttandstill.

62

Syria's economic development oust be baaed upon large-scalein agriculture, publio utilities and varloua social undertakings that will not be productive in the immediate future. In addition, much effort will necessarily be channeled Into enterprises whichtbe indispensable beaio ofhighways, electric power. Tho indirect charaoter of the benefits accruing from them, the sheer magnitude of tho nocoasary investment, or tho extent of the risks involved, requires government sponsorship of these undortakingo The very nature of these public undortekingB, moreover. Ilea In their long-run charaoter; and private investmentituation fraught with uncertainties would rather wait (rpou than aaaiat in the completion of moat of these large-scale undertakings. The violence done to foreign investments through destruction of property and nationalination has caused Western capital to shy away fror further InvoiTOmant lm Syria. Tet, Syria aoiat attract foreign capital. One of the Ironies of theltuatlon la that Syria dopon Western snrkuts for tbe aale of Ito products end for capital to Invest in developmental echenes, and yet Syria has become openly bootllo to the West, and fnara ite political and economic penetration -

Sloo-Soviot Rioo does not appear willing to become ansource of capital to which Syria can turn. There is notAlhg to Indicate that the USSR la prepared to Halt extending large-acale loane or grants to Syria, or to seriously negotiate the general offers of eealatanoe made by delegatlona and miaalons which have visited Syria. Domestic economic difficulties In Ccamamist China and the Europeanko thon questionable sources of slreablo quantities of futurc Investment capital, although eorao, ospoclally Ccecho Slovakia and East Gercany, nay bo expected to oontluuo to obtain -obstruction contracts In Syria. Indoed, It would appear that the DSSR has been sotting the propaganda stage for economic assistance and then sending the Satellites to do tha actual negotiating. The petroleum refinery ia on oxaapio of this

Rather than asalat in Syrian economic development, tho eoonomle and political activities of the Bloo have served to bring Syria close to financial collapse through tha disruption of trade with the West and increased military expenditures.

Should Syria survive the preeont politioal and economic ferment It will still faco sorlous long-rango economic probloms- Tho expansion of agrloultural production eo envisaged in development plans mayall to provide an adequate solution. Syria isurplus cottoo and carrels producer and as other underdeveloped-agricultural

TheBloo does not appear idlllog to become ansource of capital to which Syria can turn. There la nothing to Indicate that tho USSR la prepared to riok extending large-scale loans or granta to Syria, or to soriously negotiate the general offers of aeaistacoe tasde by delegations and adsslons which have Visited Syria. Doze at lc eoonoalo difficulties In Ccacaxnist China and the European Satellites moke then Questionable sources of sizeable quant it lea of future investment capital, although soma, ospooially Czechoslovakia and East Germany, may bo expected to continue to obtain construction contracts in Syria. Indeed, It would appear that the DSSR has boon setting tho propaganda stage for economic assistance and then sending the Satellites to do the actual negotiating. Tho petroleum refinery is an example of this technique.

Rather than assist in Syrian econoadc development, the economic and political aotivitles of tho Bloo have ssrvod to bring Syria close to finanoial col la pee through the disruption of trade with the West and Increased military expenditures.

Should Syria survive the preeent political and economic fenaent it will still face serious long-range econooie problema. Tbe expanaion of agricultural production as envisaged in developaont plans may veil fall to provide an adequate solution* Syria Isurplus cotton and careels produoor and as other undordovolopod-egriculturel

63

oountrles expend production, Syrian commodities will meet Laoreasing competition on world smrketa. The USSR itself plana to expand cotton production byons annually Igg/ Thisalone Is more than Syrians total production of cotton.

Although trade between Syria and the Bloc nay be expected toan eoononic foundationarge-scale expansion of trade with the Bloc does not preeontly exist- The Syrians might be willing to expand their purchases of industrial ccoaoditioa from the Bloc, but the eoononic difficulties In Eastern Europe will compel these countries to fleet an expansion of trade with countries wklch can solve their immediate eoonocle problems.

The Bloc will probably continue to exert economic pros sure uponh offers to expand trade end assistance for Syria's economic development pro gran. It la probable that the Bloo will continue to undertake construction projects and, no long ao tension exists In the area, continue to provide Syria with arms.

able fl

Syrianof, [USn)

S3

1

Credit

and Servicea

Imports and Export* 2* Transit Trade 3- Tourlea

Oil Klacellaneous

1.7

2

(A)

J

Granta and Remittancee

remittancee

grants to UNRV

2.B

Id

and Gold Movementa

Sector

payments

U. Monetary Reserves

(C)

and 'Omissions

)

ivitAl)

Administrativein Semi-Autooosoun

Government

IrrigationPro gran

Air

Land Surveys

Mlsaollaneous

Ministry of mi PROJECTS

Appropriations to Existingto Existing Coeacltmente

for Loons and Advances to Public

Investment in Senl-Auto-

no nous Government

IncludeiTTao millionetroleum refinery

Balancea tot lot Osed by Existing Projects GRAND TOTAL

66

[Ufal 7RAD3

Tradino. Partnore

franco Lebanon

United Kingdom

United States

West Germany

Italy

Iraq

Belgium

Saudi Arabia

Netherlands

Others

7

47

s-st

Peroant cf. Total

100

13

96

1

Porcont pf_Tptcl

ICC

of Nationalirootorato of Ministry of National aoorocy^irootorata of

Statistios, Statistical Abstract of Syria. Statistics, Summary of Foreign Trade. Damai

Dili am,6

Syrian Ctpna^ltr-Trado'vithWest ^rhjor6

fmilou CS $

100

13

Ministry of National Economy, Directorate qf Statistics.

mroarr of Foreim Trade. Plratthn-

Qf

S Inp ^'fovle t,ro tha Damn, scuo

OSSB

C zochoslovaxla

H^lor Comwdlti

DiBUlayci*

exhibit

equipment

tools

equipment

machinery

equipment

equipment

refinerlee

elevators

fabrics

ing plants

products

enginea

products

equipment

and

products

tools

tools

equip-

tools

equip-

machinery

equip-

machinery

equipment

and Steel products

machinery

a

equip-

engines

equip-

products

products

equipment

tools

products

uachinee

engines

engines

equip-

equip-

machinery

SJSPrS?f

71

Country

Caecho Slovakia (Continued)

Hungary

Bulgaria

Jewelry Furniture HuntingHachine too la

Wood-working

oquipaont Text ilea Freight-lotding

equipment Buses

Electrical

TreetornailroadHachlne tools

knober producta Agricultural

machinery Industrial

machinery

Traetora Trucks Motorcycles Kachine tools Electrical equip-

cent SportingAutomobilea PumpingJewelry Glassware

Electrical

machinery Kachine tools Communications

equipneat Textiles Sporting goods Pharmaceuticale Motorcycles Trucka Construction

Eachinory

No exhibit

otors

Trucks and buses Diesel pumps

recision instruments Printing machinery Shoe machinery Musical instruments

Motorcycleo Machine tools Precision instrumenta Textile machinery Electrical equipment Motion picture equipment Textile products Diesel engines Various consumer goods

Agricultural machinery Lonber producta Ores

Agricultural products Machine tools Textile products

72

APPEND II

East Cornany

Poland

Rumania

22&

No pavilion but exhibited IPa autoraobiloo end delivery wagons

Wo exhibit

No exhibit

Agricultural

machinery Antonobiles Electrical

machinery Machine tools Chemicals Various consumer

goods

Machine tools Automobiles Agricultural machinery Motorcycles Irrigation end jumpingsent MiningTextile fabrics PrecisionSteel producte MedicalHousehold utensils Sporting goods

No exhibit

ng machinery Pumping equipment Glassware Jewelry

ui pent Coment-edxlng machines

Trucks Canned foods

sswart

Agricultural products Wining equipment Machine tools Wood products Building materials

ruTu

ousewares

73

ifi

Albania.

B Continued Halor Cosaodltlea Dlaplajed

hoexhibit

Textile products Mineral producta Building Kafcerialaobacco leather producta Oil producta

7t>

Syrian Trade Agreements with the Sino-Soviet Bloo

Albania

lulgirU

7

6

7

Communist China

Scot Germany 6

Ha A. Syrian agriculturalfor Albanian coal and asphalt

H. A, Syrian agricultural

products for Bulgarianindustrial rev materials and Industrial produots

K, A* Syria

tobacco, wool, cereal, oil seeds, silk and rayon textiles. China exportB-oechiaory,antimony, liquors, wines, chemicals

ottcn,

grain, oil seeds, oils, dried fruit, tobacco, wool. East Germanymohlnery and transport equipment, medical equipment, metal and ohomioal products, photographic equipment

Other

First agreement

Ko

nation treatment syiiniut Establishment of permanent delegations

Kost-favorad-nation First treataont, Estab- agreement, llehment ofagencies Automatic rensval

Kost-favored-oa- First tlon treatment agreementpecial Establishment of account* permanent agencies million swing Automatio renewal

Shukri Aovad (Aleppo)

Attar,o,o. Abdallah Chahine Is sat DlarbakJrll

Al-Fallah agricultural Machinery Co, SbalUodsabbal (Aloppo, Hesa, Letakia)eorge Chennage

Ahmed Rarestanio.

(Aleppo) Kaccscho Broa.

Elio KafaahCo. ZeJd. rfahfout Rashld

Ixnbroa Ibpaaroodea Rafleho, Yassln TabbaaabeWdi Joseph m Lahham Fro rest Ka talari Huggaoh Frerea Sauusf Freres Maison Ara et Cie (Aleppo) Adel Ifendia Co,

Leather oqui patent Bicycles rfachlne tools Auto eculpmeeit Telephone oquinaont Kotorcyolos and bicycles Musical instruments Furniture Water pomps Furniture, textiles Skoda and Tetra vehicles

Machine tools

Agricultural machinery

rumping equipment

Medical equipment

leather goods

Sporting oquipmont

Glassware, porcelain fixtures

Chinavare

Artificial flowers

Jewelry, glassware

Radio receiving sets

Electric motors, flour mills

Canned foods, boer

Buttons

Bicycles, mo tore roles

Tire pumps and accessories

Sewing machl.no s

Bathroom fixtures

Chine ware, betbrooa fixtures

Textiles

rbotographic equipment Sewing mchlnos

73

Zaccecho Bros, Bayfaum, Ajeml, ElUbi et Cie (Aleppo)

Tavfig Sanadikil

Eastern Economic Development Corp,

AJ.QP.B2

Are and Co,

Zahid K, Elian Nurlo. Kategraph Co,

materials Mschinory, motors

Skode automobiles Textile machinery

Rio to graphic equipment Precision lnntrunonta Electrical equipment Katoroyoles, bicycles Printing equipment

Hashwoh fc Dirghom

lhrawi (Bona)

Abd el-Baqlros. Awuud Kadad

Antoun Rain luuollon

Refrigerators, heavy roadui potent, vonbing machines. Motorcycles and bicycles

Refrigerators, heavy road construction equipment, uaabing teiohlnos Motorcycles, bicycles

Motorcycles, bicycles Refrigeratora, washing machines, heavy road con-etruotion equipnent

& Shaliln

washing machines, heavy rood building equipment.

79

aid Shrelqi

Busteal Bros,

Agents for East Gnrpin CaBmodltftaa

Touf Ik Senadlkieran Khali1 Fettal at File Marcel Koran Hisham Hasan Jaffan Kajld Kuabarl Mil loon Karawi Oaar Fawal al-Wafal (Aleppo) Finan Maeall Kaslh Tarebsyn Photo Dcrri' Arta et Muelque Shaflg Eahas

Abd-el-Sarin Kajl el-He oaranl Nicola and Mase Dobal

Ale pro

Ulnkieh Fro roe Elian ot Babboth

Motorcycles, bicycles

Trootora, refrigeratora

Road construction equipment Agrloulturcl equipment

Photographic equipment Rugs, kitchenuare Optical equlpsjsnt

Watches, calculating machinea Typewriters Addingental equipment

Rubber products Printing equipment Motion picture equipment Musical Instruments Toxtlle machinery rbtoreyeles Drugs

Foodstuffs Writing equljussnt

(Continued)

Aepj&aJ'or^jrecdlUgfl

ons

Suwayd Sakkatex

Fbarmaeutioale Furniture Textile products Rubbor producta Hardware

Medical lnetnnwnts Dueoa

Tabbakh Sawvah Sc Co.

ntoun Ahannage Hasan Keher Hasuioh Kbouri,o.

Precision instruments Motorcycle a

Bicycles, notion picture

equipment

Machine toolo

Radios

Sewing machines, kltchenvaro. electricol oquipsent

Xastern Trading and Agency Co.

ooad

ellaa

Jallad Muhammad Hani

Bltar

rtaboki Co.

Succar Co*

Rgp^gfinrn^Teg forX

Eastorn Trading and Agencyustafa Kar Ellon Rabbet

81

Representatives forndustrial equipment Avedie Kllletbachien

i

(Continued)

eneproduoto

Maayea, Khatar &Agents forasnocus

Various industrial andaoohinsrT

Agents for DSSR Coanodltlflf.

Goorgo Dwayshlg General

Syrian OU Refining and Distributing Coapsay

' Kaalh al-Bakla (El-SeXeer Agency)

Automobiles

Potroleun produots Coordinating Bloo advertising

I

g

8

P

Sourcea

International Rank for Reconstruction and Development, The-tccoomlcf Srrja, John. Hopkins UniversityVyVu.

State, Damascus,,.

State, Cairo. Dap2tate, Damascus,, Op, Clt.

IBRD, The Scertomie Development of Syria..

Ibid.

7-

8*Snimu'F^onoury, Local

9- Jbid.

tate, Damaacua,,. U. State, Damascus,,

B3D, The Economic Development of Syria, Op..

tate, Dsaascoa,,

tate, Damascus,, Op. git.

IB. SttvU, Daaaocue,0.

19- Conaorco, Bureau of Foreign Coaaerco, World TmdaSccnonlcn

20. U.Syria Tonr Shova Few SovietDaaaecua,, Qp. '

- -

- f.

Tho Scoocaitc Davaloannot of Syria. Op. Cit.

State, rJaaaacua,, Op. Cit.

Air, Daaaaciis,

xb,uj'tconomcp. Cit.

Stato, Daaaacoa,p. Cit.

Ibid.

State, Beirut,.

Ibid.

State, DaBaocuo,,iaited/Official Ueo Only.

PBIS, WE and, OUO.

IX, ft,

WE end7.

35.

36.

37-

m

b7

HE and1OO.

39.

40* IBBD, roe Econooic Development of Syria, Op-V

IBRD, Jh^^onoaic Development ofrit-l -

State, ^rcne,UO-

State, riasasons,, Oo.

IMF, International FljvuiclaJ Hews Snrvev. Vol..

. 3, '

State, Darcecna,,.

Hewiejs. "Syria Clvee Roan Oil Field4.

47.

Technical Anal stanceReporta of thoBoard,4.

49.

Export-Import Bank of Washington, Press3.

State, Jidda,0.

State, Damascus,, State, Damascus,.

54. ,

55- Coamorco, Sccnoalc Reports,.

57. State, Gaav-.soue,. Op. Cit.

PBIS, WK and,.

Cairo,9Cairo,9Dacoacus,;-

State, Doaancns,, Op. Cit.

Agriculture, Cairo, Reportsnd

Ibid.

Cconerca, Economic RaporU. Op.. 3.

Agriculture, Cairo,, Op,

Daaaecue,, Op. Clt.

Damascus,, Qp. Cit,.

74.

75.

76.

77.

99

1UO.

PBIS, OSSR0U0.

83. " "

84.

65.

86.

Damascus,, Op.

'

Damascus,2

90

State, Damascus,, Op. Cit.

State, Damascus,,

State, Damascus,3VO.

98. Agriculture, Cairo, Report ft, J4.

99.

tate, Damaecue,, Op..

Agriculture,p. Clt.

State, Decascua,, Qp..

tate, Damascus,,.

tate, Daaaacus,UO.

ice. roid.

.

uaoascua,,

State, Damascus,.

SiaU, Daasscus,. CU, FSIfUO.

91

--

Air, AA Damascus,.

SUte, Damascus,.

Damascus,.

p. Clt.

Air, AA Daaascuo, IR Damascus,p. Clt.

6.

p. Cit.

9.

' .

-

.

CIA,, Op,-

'3?. Air, AA Centonj,IA,and HE

ipjjjit,

iU-

Oacascus,, Op, Clt.

Daaaecua,,.

U7. pais,

U8.

IbJ.d.

.

csvnrtwu*,

. .

"

.

>

SUte, Damaacua,9UO.

SUU,,.

-

Tork Tlaee,..

Hew Tork Tims a,..

PBLS, WE andUO.

WE and1UO.

Jbic;.

.

" " -

ISO. OSR '

.

.

. Tiaee,..

atajJAgepce.p. Cit.

Danaacus,UO.

WE and,UO.

Stata, Da^ccua,p.S, WS and-tato, DaEaecufi,pa-_Cjt;.

Office Memorandum

ShJJJtri

UNITED STATES GOVERNMENT

6

mom

suanjCT: -Transmittal of ERA ProjectSoviet Bloc and Western Support for Economic Development in Indonesia"

Transmitted herewith arc three copioa of the subject report togetheremorandum by the responsible analyst certifying as to the appropriate classification of the materials contained therein.

The purpose of the paper is to present thec and Western assistance to Indonesia in terms of the economic envelopment plans drawn up by the Government of Indonesia.

developed in the study shows that, up toBloc has not been an important trading partner ofan important source of capital funds. However, ita substantially increased tempo of Bloc interest in

the Indonesian economyeciprocal Indonesian interest in diversifying its sources of capital imports. The time is,ripe for serious evaluation of alternative policies and actiona which. may-initiate with respect to orientation of Indonesian economic development toward the Vest.

the whole, the paper is quite well written.

analyzing the pertinent material. Aside from two brief earlier papors on Bloc "tradinghis represents her first major research effort in which aho has had the opportunity to take an assigned topic through the complete research process from project planning to final draft. She did thisery minimum of detailed supervision.

TABLE OP CO.VTgKTS

Susmary and Conoluelons

I* Foreign Trade.

Agreements with Eloc

Trade Office b

In Djakarta International Trade Fairs Intensified

Development in

Role of the

TheSeonoolo Devslopaent Plan

The National Planningndonesian Industrial Development Corporation Development ,and Training Institutes

World Assistance to and InveaU-ent in Indonesia

1. US

a. Other Free World Assistance

Investment

Bloc

East Oermasr

CssohoSlovakia

3*

4* Other Sine-Soviet Bloo

Tables

Foreign

Textile Iaports

ocal Indonesian Representatives Handling Bloo

Appendixouroes and Evaluation of Sources

mm

Indonesian trade5 with the Slnc-Sovlet Bloc, althougha

i

email char* of total trado, haa artble inoreeee over previous rears. During the past several /ears the Bloo countries have made considerable efforts to increase trade and economic relatione with Indonesia. These efforts have included the conclusion of trade agreements, the eetabllshment of permanent trade mlaiione, participation in the Djakarta InterruOlonol Trade Pairs and,recently, offere of technical assletanoe for Indonesia'a eooncalo b the Bloc has Intensified its efforts to develop oloeer relations with IndonesU. In April the Soviet union made its first concrete proposal to give IndonesUassistance for development in"all fields. Tworoviding foral stance were announced the earns month. President Sukarno received and accepted invitations to visit the Soviet Union and Ccexsuniet Chine. Indonesia also accepted invitations toarliamentary mission to the USSR, Poland, CseehoSlovakia and Ccaaaunist China.

To date the 3ino-Soviet Bloo has provided Indonesia with known credits totallingillion and asn grants. The largest Bloc credit has been0 million credit extended by East Oeroany5 for the constructionugar factory. ul million credit wee extended by Cwohoolovnkia Priorloc technical assistance had beenmall-scale. It now appears that the Bloo desires to participate In Indonesia's ecofwxale developmentarge-eoala. Current

offers by tJia Bloo hara closely paralleled the general objectives of Indonesia's

Five-Tear Soonoetio Development Flan.

i

The amount of Bloo aid haa baasoompared with tha aiaiatanoa Indonesia haa received free Total CIS aiaiatanoa to Ina0 haa amounted to approximately $U8 million whloh0 million axyort-Iaport Bank aradit extended An agreement under Public, alaned inn additional suaillion to be ueed for eoeooada development purposes.

With Indonesia's economic development severely handicappedack of capital and aof axillad personnel, it la apparent that Indaneala will require appreoiabla out aide aeaistanoe if an extensive deTalo patent proarea ia to be undertaken. The In done elan Ooverrmnt, in line with ita neutrallat policy, haa Indicated ita willlngnesa to receive aaalstance free any aouroe provided it oonUina no polltloal or sdlltary ceaaaitawntt. Indonaaia will probably continue torge share of its capital and technical aaaletance requirements from the Free World, but there ia an increasing receptivity to Bloc offers of assistance. If the Bloo countries continue to make offers whloh ooofore to Indonesia's needs, an Increasing amount of Bloo aid will probably be aeeepted.

i. tmaXm tak

aino-Soviet Bloc tradehowa In Tablee pron

1

inaignlfloont percentage of Indonesia's total trade. Indooaalan trade with

the bloo countries,lthougha relatively aeell share of

trade,isaablt inoreaae Inoonatlan exporU to the bloo

5aroeot of total axpcrts) ocen*Jed to export*41 percent of total oxportt). Similarly, Indoneilan iaqports from the bloo5 inoreaaed6 peroent of total lanporte)4 perotnt of/ The gradual lnoroaae in the volume of trad* with the bloa evidenced in the fir at half5 was oonewnat offaeteoreaae In tha second half, partially attributable to the policy of the harahap Cabinet whlohtech, Poliah and Hungarian imports from July to ald^eeaber because of unfavorable trade

Cseonoolovakla, Conxauniit China end Hungary ere Indonesia's most iaqaortant bloo trading partners'. Rubber, copra, popper, coffee, cone sugar, and coconut oil are exported to the bloa countries in exchange for light manufactures notably teat ilea, cement, motorcycles, and machinery.

Of Indonesia's three principal exportubber, tin andnly rubber la exported to the bloo, although oncer the o'-meut bleo ogre amenta tin Is Included onxport lists. Even though rubber accounted for approximatelyercent of total Indonesian exports to

the Blooxports toBloo accounted forercent of total

Indoneilan rubberxporta. 6 low rubberegan to treks reactions

i

in toe Indonesian rubber producing areas, further alarai was evoked by rreiloent Klaahbowr'a statement to Congress that theould ba lelf-eufflolantynthetic rubber production within two6 an Indonesian Cabinet decision to lift the scherzo on rubber shipment! to Ccavaunlst China was announced. Although tha Bloc provideselatively minor market for Indonesian rubber, it Is apparent thatecline in rubber exports Indonesia will be under pressure not only to expand rubber

ahlpmenbe to the Bloc countries but also, with the recent Indonesian cabinet

to

decision,/take stops to open possibilities for the export of rubber to Ceaaaunlit China. 5 the Bloc took significant proportions of certain agriculturals follows) arcentff. percentj8ercent and coconutk percent, y

Ceavaodity statistics for the first half5 anew that textiles accounted for about half of tha Bloo exports to Indonesia, while cement and lead-finished Iron and steel accounted for aboutercent each, withUght manufaetureo making up moat of the balance. */

Bloc supplies of textlloi to Indonesia increased coniiderebly in the fir it half Although they had sold only aboutil lion worth of textiles to Ina3 percent of total text liethey sold over

tl2 million worth in tho firat six monthsncreasing tho Bloo*iof this Import market5 poroont (soo/ Inooneaia it highly dependent upon external sources for textiles sinos onlyoroont of her recjuirmmente arm ast by aomestia proonotlon.

Tha Bloo ia not limiting its aalat in tha textile fiald to Uxtilss alone. CasohoaloTaxla2 parcant of Indonesia's ianwts of

tortile Raobinory Infirst half Whereas Csech ocxlng machines ccerprleedercont of too total importedheirIncreased

5 percent in tho first halffi/ Bloo overtures in this field have not com solely free* Chechoslovakia. Ckesnonist Chins5 offered to provide equipment for textile sillsone-term credit basis. J/ East Ooraany also has made offers of tqoipntnti and following4 Djakarta Trade Pair it donated en automatic weaving machine and two knitting machines to the Textile Seecarch Institute in Ban tang. if/

In vieV of Zrtdonesia's intended expansion of its textile industry, the Bloo nay continue to be an important supplier of eculpoent. 4 Indonesia hadextile grills in operation and the industry was equipped with aboutspindles and en0 naohanleal looma0 hand Inhe head ofextile Research Institute, Dr. Ssfuan, sooeptod an invitetion torech textile nachinery exhibit* Before hie departure bs declared that Indonesia at thathad only 20 percent of itsirenents of textile machinery, The potential impact of bios equipment upon Indonesia's textile industry is therefore significant.

He 8nnp-flyT*Ti ftftfr ftr^afflflA ArtaTavaM

c-3oviet Bloo eountries have Bade considerable efforts in the past several resra to pronote end increase trade and economic relations with Indonesia* Those efforts have included the conclusion of tradethe establishment of permanent trads offices in Djakarta, active

participation in the DJakarU International Trade Fairs, and lnteneifUdnoon after thef the All *rrern-

ment, invitations to visitE wort Issued to President Sukarno and an Indonesian Par liana ntoth of which have boonhortly after tho Scriet inrltttient were leaned, wroral other Bloo coentriet, including- Ccaaaunislxtended invitations to an Indoneelan parUanentarj

delegation.

Indonesia aurrentlras trade aareossmts with Ceecno Slovakia, Hungary, Poland, KananU and Ceaaeaniet China. An agreement between the Baat Oerman Chamber of foreign Trade and the Indonesian National Trade Organ-ltatioo expired

Under the All Ckrrsracent wMah hold offioe from3 to5

government poll or ladtrengthening of trade relatione with the Bloo.

Closer trade ties rare negotiated at trade agreseamtt were oonoloded for

the first vine with Cosssanlst China, foaeanU, and Eaet Cermeny. In5

the All Government began to snow dleUloslonparat with Bloo trade i

nndar the agreeawinta bad net measured cp to expeo%ationo| Indonesian products

told to the bloo oountriet wore being retold on the Inropean sarkete at

lower prices) and the Bloo, in seeking outlets in IndonesU, appeared to

favor local Consauniet buelnesaaon. W After.-the Harahap Cabinet took office

in5 SpeoUl tradehe parallel transactions* formerly

Under parallel transactions (ho ocesaoditleo of one country are exchanged for ooeiwditles of the other without transfer of funds.

used extensively with HlUnloto abolished. Covemmtnt doolaratiooa leaned la5 indicated that trade arrangemente with the Bloc countries had boon unsatisfactory and had resulted,eneral deterioration of the foreign exabange peel tie*. The Priae Hinleter,arllamentsry debate, pointed out that raw prodnote exported to the Bloo had been retraded In otherla direct ccnpotltioe with nornal Zadofwaian exporte and that, under parallel transactions, Indonesian exports war* usually aold below world market prises with the deficit evade ap by charging Indonealan consumers snre for

The AH gorerumnt, which again took office laaa indicated Its dissatisfaction, first acranasod laith the existing Bloo trade Zt has notified the Eastern European countries of its desire to terminate tho existing agreements| heverer, this measure haa boon taken with the view that new arrangements will be formulated la which the quotas (volume) would be rsrised and the systems of paysarnt be madecerpletely nowhether or ant the voluae of trade would be laereaeed vnder new agreements, tho Hoc would probably continue toarge exeunt of ita trade because of established oenneotions with Indonealan bualmsomnm and Increased Indonesian familiarity with Bloc products. The enrreat status of the bloo agreeownte are given belowi

After protracted ae foliations, resulting frca Indonesian reluctance to include ita "strong*obber, tin anda the agreeoamt to aroid the loss of local ourroucy earned from the normal sale of these ooemoditlsa, the agreement

was finally renewed In late5 for the period ending The agreement anrlaaged trade In each directionillion pounds sterling,X percent increase over the previous agreement. In done elan export quotas.. of copra. of tint Csscn. export quotas for machinery and textiles were aignifloantly Increased.

Hungary

The In done alan-Himgarian agreement was automatically extended to Under the previous agreement the largest Hungarian export quota consisted of textiles, followed by industrial machinery motorcycles and household articles. Tha previous agreement provided for total trade amountingillion rupiahs.(approximatelyillion)

Tha Polish agreonant5 for the06 provided for total tradeillion pounds sterling, the same as under the previous agreement. It was reported that Indonesia hadolish request to raise the anticipated level of trade toillion poundsn apparentof thaattitude toward bilateralin general and espaoially those with the Bloo. Polish offers of credits and technical assistance and the poisibility of direct shipping services between the two countries were discussed during the negotiations, but no agreement has subsequently been coaoludsd on either of these points. Principal Polish export quotas include textiles sad autohinery (Including textile mandonesian export Quotasons ofons of rubberons of copra.

i 2py

The agreement with Coamunlst China was automatically renewedear ending6 under theof tho previous agreement. The previous agreement provided for total tradell! ion pounds sterling, in Indonesian trade delegation was sohedulsd to depart for China in5 for tha purpose of negotiating an enlarged pact providing notably for increased textile in ports, but the trip was postponed indefinitely, the Indonesian Economic Ministry announced that trade with Chins was running wall and would continueew trade agreement.

The Rumanian agreement was extended for one year The Rumanian delegation to the 3rd International Trade Pair at Djakarta announced Rumania's intention of expanding trade relations with Indonesia within tho framework of the agreeaont.

Unless otherwise specified, the official exchange ratehas bean used throughout the paper.

o

A preliminary agreement between Bulgaria and Indonesia was announced in The head of the Bulgarian delegation to Indonesia in3 announced that the firat trade transactions between the two countries would take place lets5 or early Bulgaria willoeaent, porcelain, textiles and cicatrical produots In exchange for Indoneilan agricultural produots*

Indonesia does notrade agreement withA. In6 tha Soviet Ambassador proposed the conclusionrade agreement between the two countries. The Indonesian Government indicated the entire Question of trade aare amente was still under consideration and that interested governaants were being informed that Indonesia was not iaaediately prepared to negotiate an agreement with anyone. Nevertheless, at the tine the Indonesian Oovsrnaent undertakes the planned revisions of the existing bloorade sgreeawmt probably will be signed with the USSK.

Tho Indonesian Foreign Office announced In6 that an

Indonesian trade delegation Is expaoted toach "and Ruaenia and trade

delegations froa tho USSR, Hungary, Bulgaria and East Qeraany are expaoted

in Djakarta to conduct negotiations for trade agreements. For these agree -

aents whloh expire by aid-July, validity will be tearxrarlly extended pending

completion of new agreements.

B. ParpanenV Tra> Officei,

Csechoalovakla, Poland, Bulgaria, and Hungary have established full-

fledged permanent trade idealone in Indonesia, while Seat Oeraany and

Rumania have had loss formal representations there. One of the functions

of the trade misalone apparently haa been to find suitable agents or outlets.

preferably Indonesians, for tho commodities being offered by the Bloc countries.

floeist of local representatives handling Bloo producte.

fWrWllafl. Trpdan un latter5 tho ltoaattjlaa to tha Jrd InUnutlonal Trade FairarAooneod plans topermanent trada offioe la Indonesia. aV In5 thisof teohnologioalermanent elepley ofpeepe, Ulsooassanloatlocui eo^psent, and other avohlaerrWierere arranged dally.Wl .IV

Caeoh Tradee. Folaoek habeen reported as tho'-principal offloer In the Caeoh Trade Xleeion which la attached to the onoaeralakarta. Other information haaaeoh eoasaaralal repreoentatlYe attached to the Consulatev"

ttmaarlan Tradeiber fesua. faraairty withungarian State Iron and Machine Factory, wee reported en route to Djakarta In5 to be Deputy Trade , Kungarian Export Manager, Hungarian Trade CosaUialcn, was listed la Djakarta in

February:,,

i

flnpen Tra.denformation in5 reported that the unbare of the trade representation of the test Osiman Chancer of Foreign Trade included Willi SohUd end Klndler (fnu). The address wae liated ae Hotel dee Ir.de s, DJakarU, cable designation "HAVDDIDO".

nformation In5 atated that the pernanent Pollen Cceaaeroial Klaalon maintained an offioe at DJalan

-mm

Indrasaju Ro.jakarta. Hi6 Wo^tiaieriexfcer of tho

Polish Tradeppointed Charge of tho mwlr-oitabllahftdi

r

Pollen Ecfcaaay In DjtxarU.

Tr*,oorad* xdaaion, headed by aGonoraroff, hasrade office in Djakarta*

Be ftqaPqU<m PJrtnrTrff,Ttrlt fPAT? 3a/

Corxemlftlovakia, lest Gvnaany, Hungary, Poland and- partiolpttad la tho 3rd International trad* fair hold ia Djakarta froB6 Poland and Rmanl* had only iafornatlon too tha aad Zaat Oomany exhibitedocal agent. While tha Bloo ssajutllai did not dondnate tha ralr ai tot/ had aenehey neverthelessary iapretaive showing. Tho Otftfltas war* tha seat aggro*aire in rxjbll citing their exhibit,ritB of ad* in local rnravpaper* about the product* on diaplay. A* in tho pa*t| th* Bloo oountrlaa usedfair for aajorpurposef, exhibiting their producta in an effort to convince Tndoneaia they vara eapabl* of supplyingulr*wnt* for capital and eensuaar rood*. Renarks aad* by sooa Indonesian officials and businessmen indioated that China, Cae oho Slovakia, and Hungary had to aces* extent saooeeded In establishingonviotion.

Th* Bloo countries ban advertised axtensively to jrcootef their product*. Poll oh advertlaatxfnts appearing in the Indonesian pre**

urn. |

hav* Hioll ah trade organ^sationi vMch claim to ba abla to deliver

a wide range of good* Including hoary capital aqulpnrnt, ehipo, and notor

i i

Tho Csoeh Cecraercial tuprtaantatlTa attached to tho Caooh Conaulato General, in an offort to interest local importere in Modan in Oeech pro ductdlttriVitoi to importer* ft eataloguoide variety of available product*. It inolndod. laaOnlheTf* Tahlolaa and light engineering producta, textiles, and leather goods, oeTatio aad glass products.cataalaa delegation vaa alao la Xedaa dasaxutrating agriculturalrawlerriple-gang plov, dit6-aarrovv and other farato the aaplonea of tho Office of Agriculture In Sorth Sonatra, 2h/ The Soviet Eabaeey la planning toarge-scale publishing and inforsation pro gran inj/

IH. oyVooVmY fa strrTPOfiA

Keen cede oerelopBsat haa bean given high priority by the govarrnent, but llxdtad financial resources have pre vented Zndoneaia froa significantly incroaaing ita rate'of capital investment. Private oapltal haa failed to oocpensate for the lov level of gcvernaent invsstmeiit. Govanruontal policy, conditioned by intense natlonalisa and directed at the "Tadcneaiaaiaation" of all oonpanias, has sought to liait tho eoonondo influence of foreign investors. laaaaihi failure toealiatic foreign lnveatoent lav haa eiaoouraged relnraatoaut as veil aa nev Inrestaatnt by foreign oapltal. Foreign aid pro grass have been restricted by Indonesianear

-u-

<

of hiving restrictions imposed on their sovereignty and freedom of action

>

ensitivity to foreign Influence. At tho um time Indonesia haa

' <

i

not had tha domestic re sourcee and economic institutions to undertake an extanalve eccnomio cevalopment program without outaido aaaiatanoa.

Inowever, tho Harahap Cabinet, raoognlaing that arallabla capital in Indonesia waa insufficient for ita cocnomie development, act up tha Foreign Invoatment Costalttee, boadad by tha Planning Bureau Chairman,

to etudy poaaibilitiao of foreign capital lnveetmente la Indonesia. Pending

the enactment ofkiTsniuent policy atataasmt on foreign

investment waa iaaned in Deoenberprinciple the etatetaent

welcomed the antranoe of foreign capital, both in the form of government

loana as well as private investments. In Indonesia. Fields cloeed to

foreign investment-would be limited to public utilities, some email indue tries

traditionally operated by Indonesians andnvolving tho security

of the country. But in other basic industries foreign investors would be

permitted to hold up-ercent of the capital steak. The statement

implied that tha draft foreign iaveetawnt lev would give guarantees against

nationalisation end double taxation and assurances that profits and celeries

could be transferred abroad. Although those changes in foreign investment

regulations wouldonsiderable improvement. It is wall estahllehed

that foreign investors have not been strongly attracted to areas where their

oapltal etock ownership haa boon limited to anything lata thanercent.

In6 th* mv governasmt headed by Prime Klnlster All 3astro-

addjojo took office. olicy atateaent to Parliament

In6 oontalnod tha following point* of thoprogram

forolopsie nt J TjJ

a* InitiationiTe-yearaaTalornaret plan with asphatia on tha oaTaloraaMrt of industry and alBLQf,

b. Kla-rttien of tha Stato Planning Coaadsaion to tha Wniatry of state Planning, Confcine sad atrangthan tha organiaaticoal ret-up of th* Kowwjadond tha State Planning Crtaalaaion which ara rt*pca*lbl* for thaof abort-term and long-rang* conproject*.

e, Dirialon of lnraetaarat administration into three oategorlaai

- OoTarnaant investment

- Private lnveataeut (tha government plana

to gir* advice in detraining prloritie* for Investment and to pro-ride protection against foreign competition)

Tillage inraataant

to reo*ire technical and/orfrom abroadaxrely nn*jt*l'iiU1 basl*any political or military oxaedtmerrte"

of foreign capital lnreeUaaiit by lav

alanced budget which la sonrrfan opportunity for eoTrVinaad ea^lormant

A, TJte >tole of the Oorernatmt in AVxmcado Pevelorawmt

Government fond* here bean tha eource of almost half of Indonesia'*

nvaatmant and ara likaly to continue to be an important elegant in

futor* development. Ooremmant inv**tmemt In the past haaf

diverse project* frequently undartakan en pcUtlcal ground* and often

abandoned because of unforeseen development*. Prime Mjniater All, in hie

tatement, pointed cut that tho five-year eeonocdc development plen (which was ecoaiated by the Rational Planning Baroan at the end5 and which la Indonesia'a firat ooa^hemeive plan for economic derolopBant) would prevent the Ttiioca atlnlstrict from working inde-partdantly of each otheresultant watte of ertargr and money, would insure ocopletionot once boron, and would prerent leaa inportant projects frees being undertaken firat.

The draft budget6 includeerUllon for capital It latinted that about half of thia it nplaaeaant and renewal rather than newcrsrnrasnt development expenditure under45 budgets include flillionillion

XSAJta^mJamtOkXn*n

The five-rear eooncodo development plan covers such fields of reconstruction as agriculture, Mining and ssanufaoturing, power,Ications and social affaire. It la hoped that the budget, ourrently runningefioit rate ofillioneer, can be balanced in tha first /ear of the plan, financing of the plan la to be effeoted withA billion rupiaha from the4 billion rupiaha from private investmentilton rupiaha from village investment.DJoanda, Director of the Rational Planning Bureau, has stated that the plan is based

entirelyealiatioof -hit' lcdooeela can do withith foreign aid or additional aourcaa of foreign exchange penal ttof projaot* of lover priority, There haw boon recentthat outside asalstance will be required to finanoa th*in tine tedonraraatlon8 official In *djJ-Aprilintantion of raqua*ting aid fron th* US In inplaaantationIndonesian rinano* KiniaUr ataUday that

only half of6 portion ofr plan would be oovered in th* budget owingaollna in anticipated taxJ/

Th*o begin6 anda total gOTarnmant oxpondituro4 billion rvipiahailllon)illion rupiah* annually5 ailllon). Of tha total

s

illion rupiah* of govorneant financing,ercent would be appropriated for power,ercent for transportation and coaaamioationa,eroent for industry andercent for agriculture. Migration and Tillage development andercent for social welfare. Acoordlng to6 peroent of th* national revenue* will be Inveatad in the first five-year plan. Forond, third, and fourth five-year plans, aaount* have been eatixatederoent,ercent anderoent respectively, and for th* period0 percent, yj

The plan doe* not set apearget* but include* three Hate of projects in order of decreasing priority withint. Th*

-

SEGREf

lists include I special proJsots, large-scale and aultl-purpoee, which

are to ba undertaken by the Centralentral projeota, large-

scale and aingle-purpoee, which are to be undertaken by the -er.tral Qoverraent|

eo<*atandodt of projeote to be urged upon provincial govern-

ments and private enterprise e. ai/

Special ProUct;

The National Manning Bureau glvea priority to the development

of eleetrlohe Asahan River project and the DJetilubur Power Station-

Irrigation project.

Plana include the con atructionydroelaotric pew plant at Aaahan, Berth Sumatraapeoltyutllowatte will bo put Into uae within the next fire years, andi be eapeoially to aupply energy to fartiliaerhe generation of thev will ultimately supply cheap eleetrlo power to several Industrie, snob aa the eluminum, paper and cement industries.

, Plana include the oonotruotlon of two dams, the DJatUuhur Dam and the Tarum Dam on the TJltarum River, permitting Irrigationdditional hectares in Java and ultimately providing for the feneration of rrydroeloctrio energyw for several industries in West Java. It la hoped that the DJatUuhur Cam will be oomplated in five years.

Other projsota included in thia list are the iron and steel integrated projsot,

the chemical and fertiliser industry and plana for the development of a

rayon industry. Although all of the special projeota are at acme stage of

active study, eoonomlo Justification has not been established for all of them

and work may not be startedumber of years on those projeota for which

eoonomlo Juetlfication has already been established.

projects include ooapletlon of projsots already

under way, euoh as the oement plant at Oraalk and various Oorenvasnt projects

In the textile industry.

The primary result of the agricultural projects will be to

make Indonaaia aalf-Bufflclent in food and to Increase tha exportation of

agricultural produce In order to acquire foreign exchange. Projoote for tha

laoprovement of socialinclude transmigration, adulation, health.

and housing.

An outline of the plan ia ready for subed salon to the Cabinet

for atudy and the Minister of State lOanning has expreaaed tha hope that

the bill on the first fire-year plan would be eettled in the second aesaion

of Parliament.

Recent discussiens have taken place on two project! included

in the five-year eoonoaio development plan. Both of these projeete have

beanigh priority by Mr. 0Juanda.

The Indonesian press haa reported that work on the conatruotlon of an iron and steel aill In Laapong (South Sinatra) will be started on 1with tha dispatch ofxpedition who willurvey foronths of tha reglc-n'e iron era and limaatono deposits. It haa alao been reported that the State Planning Bureauart steel and iron mill projeete la DJampang Rolen in Heat Java sad la Southeast Kalimantan (Borneo). Another expedition la to survey the Bukitaaa coal nines for tbe possibility of increasing the mines' output.

Total ooot of theon annual capeoity jfertiliser plant at Palamfeeng (Southeast Suaatro) istoillion, half of which will boured frosi foreign eouroes. Tha advantages of tho planteduction in foreign osnhangs required for imported fertllieerj (a) local availability of raw material (natural gas will probably be supplied byest of planned domestic prodaot will be about half of imported fartillaer. The American fismasay haa lUtsd it believes this project merits tho ecsuld-aration of the Export-Import Ben*oan to finaaoe tha dollar ooat of the plant, particularly in view of recent Soviet bloo industrial credit offero (tho visa listed fartlliaer planta among the projeota It oonsldered suitable for tho extension of technical assistance).

2. The National Planning Bureau

eoononic planning la the responsibility of the National

Planning Board which ie composed of the nine cabinet mashers most direct!/

concerned with eoonomlo planning and presided over by the Prime Klniator.

The National Planning Bureau la an executive unit of the Board and la

responsible for drafting economic plana, programs and propoeed policies.

The Director of the National Planning Bureau la Mr. X. DJuanda

and tha Deputy Director la Kr. All Budlerdjo. The part of the Bureau in

ohorg* of planning la divided into eight amotions, each amotion being

responsible for drawingnsertain branch of government

activities and forming an Intermediary between that branch and the Ministries

In3 the Bureau for the Coordination of foreign

Aesietanoe and the Committoo for the Coordination of foreign Assistance,

both previously under the Ministry of Eoonomlo Affaire, ware aboilahed and

became the Secretariat of the Interdepartmental Ckjordlnation of the Katlonal

- IB -

-Srontt

Planning Bureau. The Interoapartaental Coordination Committee,ver by tha Direotor of tha National Planning Bureau and composed ofen*ral of tha Hinletriaa repreaented on the lottional Planning Board, coordinate* tha proJ*et* of tha differentor the utilisation of th* variona forma of foreign technical assistance.

A number of foreign experta, under aaalatanoe project* of the UN, the Colombo Plan, otc, ar* attached to th* Bureau aa adviaor* and aaalatanta under th* supervision of th* director. Th* services of thea* foreign expert* ware utilised in tho formulation of the five-year plan, . White Engineering Corporation, which worked under th* Katlonal Planning Bureau from4 untilta oontract was cancelled, aeeiated in aurvoya of Indoneaia'a eeonomio needs and in'the preparation of apeoifio inveetnent project*. Three French engineer* have been working on th* Aaahan project aad an Italian power expert wa* attached to th* Bureau in In4 th* Indonesianh* *ervice* ofitting experts from Canada. On6 th* government renewed for another tare* years the UW rochnlcel Assistance Agreement under which adviaor* are aeelgned to as si at the Planning Bureau in drawing up davalopnaat plana.r'afrdorrtllM Industrial frYttoFrtnta iV

In4 th* Indoneeian Induatrial Development Corporation Ltd, wa* founded under th* auspice* of the Indonesian Chamber of Coonmro*.

-

' -SECRET

Ir. Albert Harnix Lceaben Toblng was dasiipiatod General Manager under

an Executive Council composed of aevaralf tha Indonaalan

1

Chamber of Commerce. The Board of Director* oonalata of Ir. DJuacd* (Chief of tha national Planningr. Leoneading bualncaaman and former Klniater of Public torks) R. Iakandar Tadjaaukmana (former Miniiter of labor) and the management of the Bank Induetri Megar* (tha state industrial development bank). Tha aim of this corporation ia to aaelat in and to stimulate the eiUhUahment of industrial project* in Indonesia. It offers the following cervicesl the preparation of plana concerning oparatloni, organisation, and blueprlnte and theof coat data for the establiahment of new factories! plana for improvamante in operations and organisation of old factories! indueement of domeitio and foreign oapltal to invest in Indonesian industrieej mediation between bualneeamen and the Goverrsment or between eeraral Industries concerning th* eatabllahmant of new industrial project* and th* facilitation of solution* to the problem* encountered! mediation between Indonesian bualneeamen and international aganoie* and between In doc**ianen and foreign businessmen who are Interested in investing capital in Indoneelaj and finally the *stabli*hmant of factories whan no iniativ* la shown by other*. Itertain thatBloc trade mission* and trad* representative* will make

-

strong efforts to win the confidence of the members of the Industrial

Development Corporation.

1

Im Development and Tralnlne

Tho Depertmeot of Industry of tho Ministry of Eooncaio Affairs maintains development and training institutes throughout Xndooosla. Tha Institutes aroi Induatrial Development Inatitutai Owmlcal Institute| Materials Testing Institutej Laathor Institutej Textile Institutej CaroAlea Inatltutof and Batik Institute. The Inetitutea' farmery functlor, is to provide the baalo engineering faoilitloe, services, and trained personnel for implementing the governments program of industrial development. Their eeeondary function la to provide reeeeroh and analytical eervieea to thoindustries. . throughid program has been furnlehlng commodity aid to the Inatltutea for use in both training and development programs. The eervicee of teohnioal experts, under the OH Teehnical Assistance Program, hare been supplied to aselat in tha execution of the projeota. In addition to the Indonealan staff, there are twenty-two European technic lane ea*ployed by tho go?ies it on direct eontraote and sesigned to thee* institutes. In view of Indonsaia's lack of qualified end experienced technical pereonoel these lnatltuUa, with their primary emphasis on training, play an important part In Indonesia's economio development.

In6 It vu reported Uut tha Indonesian Minleter of Edwatlon had baen invited toelegation to the USSR to atudy tha It ia antlolpatedoviet offer of eaalatanoe in the fields of teohnloalxi culturalwill fallow; an earlier proposal wee mads by Soviet Aabaaeador Ihukovaamut for tha exshanj* of profeeeor* and atudent* under which Indoneelan atudanta could study in Rueeian univareitiee. SJw7 In view of the treat need for the training of lhdoneeiana in Uohnical field* and tha laok of adequate training faollitieo in Indonesia, thiaide area for exploitation by tha USSR. It seem likely that Soviet offer* of training will be accepted by Indonesia, particularly In view of tha Inlcneslan practice of recruiting expert*umber of different countries to avoid tha danger of any one nationality dominating th* program. In view of the importance the guieiiaaaiito the continuing placement of foreign techniolana in theset aeema probable that Soviet personnel might be attached to several of these institutes.

B. freeiatanca to end Inwrtawant in. US ilslBtancc

0 total US asaUtanoa to Indoneaia has amounted to0 million. Inn0 millionImport Bank credit madef whichmillion remains unallocated. 5j/

an Kxlabenk credits her* been authorise! for tho transportation devalop-

wentevelopment, harbor oocatruction, reil-

i

road rehabilitation program, electrification program, fort it development

of

program,ement plant, purchase of aircraft and equipment and marina angina a. %J Primary aairhaaia of tha OS Uahnioal cooperation program In Indonaala haa been plaeed on laoreaalag agricultural and flabarlaa production and on tha expansion of publia health aarrlaaa and facilities for technical training. Moderate aaalatanoe haa bean glTan to Indonesia in providing engineering aerrioee and Improving public adainistration.

The Introduction and distribution of higher-yielding riee and com seed and assistance In tha aodernlaatlon of the Indonaaiaa

fiahlng fleet have been of partioular aignifloanoe. Special amlaria-oontroi pro>cti hare been undertaken with notable aucecee. Tha

'University of California and Tuaanrgea Inetltut* are providing technical

a set stance la the field* of nedleel education aad vocational training.

Faellltiee for teohnioal traiaiag Include foraiahiag laariean expert!

to help ia tha developnant of Indonesian lnaUtatlons and providing

training opportunities in. forJ2/

Theelgned inor tbe aale

to Indonesia of OS surplus agricultural ooamsdible* valued

ailllon will provide needed local currency funds to aaaiet la Indonaala'a

conoKlo Tha agricultural commodities covered by the

agreement are! 0 millioniillion;

1

million) and wheat0 million. Ooean transportation oovering

approximatelyercent of the coat la estimated9 million.

i

Blghty percent of the ruplahillion) will

be loaned to the Indonesian Government for eoonomlo development purposes.

The remainder of the ruplah prooeeda (equivalentill loo) will

be epent by the US for market development activities, the purchase of

strategic nateriale, defrayment of US expenses and the financing of

international educational exchange aotlTltiee.

2. Other Free World Assistance to Indonesia

Apart from the Netherlands loan0illion,

asalstance frost other Free World, countries haa been small. 4

the Minister of Finance, Mr. Ong Sng Die, reportedly stated that the

gorsrnmant had obtained loans abroad totallingillion (approximately

illionullion) from France,

illionillion) from West Germany and

illionillion) from the Netherlands. A

subsequent Embassy cheok with members of other Missions and officials

in the Ministry of Finanoo revealed the status of the credita from

these countries to be ae followsj

rance and Indonesia reaohed an agreement in4 at the ocnolusleo of their trade agreement negotiations which provided for credits totallingillion franosillion) to be used

amafar

within on* roar and repayablearlodears, tho credits war* to be weed for theIn France of capital goodsInstallations, power and eleetrlo equipment, buildingships, mining equlpaent. At of the end4 ao agrsmaoat had been reached on the ten* for the laylaisenUtloa of tha credit and the French Goruxument waa becoming Impatient and had asked the Indonesian Qorernoent to ocme to some early conclusions or roleaa* the credit for nee by France la other parte of the world.

0 agreeatent with the Bank Vereln Westdoetachland, Dvsssldorf, almply pro-Tided that the Bank would consider requests for credit from Indonesia, and If tho project was considered sound and terms of credit could be agreed upon, the Beak would grant tho credit. The amount and credit terms were not stated. There had been no speoifio requests submitted to the Bank for credit as of

Theho Bank of Indonesia was authorised by the Monetary Council4 toredit agreement with the Export Financiering HiJ, tha Hague, for approximatelyillion). According to the Commercial Counselor of the Office of the High Commissioner for the Netherlands none of the credit bad been used aa of He added that the credit la to bo used for projeot* which coat hare the prior approval of the) Netherlanda OoTsrrmksnt and can, in aoe dispensed freely by the Indonesians as claimed by the Fillister of Finance.

3. Forelm InTes^ament

Failure of the Indonesian Qorenuasnt to provide the neceeeary guarantees for foreignagainst nationalisation and doable taxation, settlement of land coo sees ion rights and assurances that profits can be transferreddiscouraged reinvestment ao well as now investment by foreign capital. The withdrawal of Dutch capital, primarily invested in rubber plantations, haa boon moat extensive, but4 British and DS interests also

announced their Intentions ofparM Tular etroleuatandard 7aeuua tadxpect, however, to limit0 ndUlon la Indonesia over tha next feur or five yeare. Monthly transfer of profit, la tied to ooaodtawaate of new lnvestaent) ailllon by Stanrao and of WO ailllon by CalUx. &J

On* the Indonesian press snnouoced Indonasian and Japaneee governacntal approval for tho establlahxantoint Japanese-Indonesian national fU construction Bank. Tho bank willapltal of49 peroent of whloh will be providedapaneee ooasxtay aadercent by Prieate tadesaselaa inveetore. The Japeaeae lareator, Iichlwara Sanayo Ccaxany, haa reportedly .pi idirst iaatallaaot. The bank will not annexe, ia forelxn exchange trcncaotlenc, bat it will lead axocy far the daralopaant of Xmdcnecle'e petroleua industry, interialandeervloee, and other/

Inontract to finance aa oh leeryioe straw paper mill in Central Javaour-year credit vaa ocnoludad between tha State Industrial Bank and an Italian first "Celluleso rccdlio-. The mill, achedalad to opaa bya to hare an annual capacityona. econd State Industrial Bank project for an aabeetoe oeaamt factory near Oreeik (Zaat Jara) la to have

-

Ma

Italian technical aid and financial aid froa fitv Zealand under the Coloobo plan* Hew Eealand aealetanoe haa also been reported for

planned tannery end glaee factories. The Indonesian foreign credite ooaealttee has annoanoed the continued opportunity for capital anode imports under loaf-tern credits frcei the Hotharlsnds, Vest Qersuory, France, Sweden, Italy, CseohoSlovakia, the UK and

To date the Slno-Soviet Bloo haa provided ladoneala with

knowntotalling approxUaateuyullion and anInin eo^ipswmtnand travel expenses, the largest credit has been ancredit granted by East Oorasur/5 for thea sugarother6 adllioa credit

payableearsercentae granted by Cseohaelo-vakUj Soviet Bloo grant aeaistance has included an Bast German donation of an autcekatio weaving machine and two knittingwhich had been exhibited-at* Djakarta Trad* Pair, installations by Cseeh Ueanlolaas of five loons ordered by Indonesia at the sen* fair, and tours of the USSR by Indonesian delegations of railwayman. Industry, and agricultural officials

The Bloc technical aid progrssi in Indonesia has been carried out in the past by the European Satellites, primarily East Oereauay

-

CwcheBlevfcV.it.. There areowrw, that the CSflS intend* to beooae lnoreaaingly aetiv* la Xaexeaasla* Ia6 the Soviet Onion Bade lte flret concrete prepoeal to five XadoaeaUaid for cevalepnent la all fields, including agrieultur* and Industry,lthough tha aaount and type of aid, another grant or loan, la not yet deer, It appear* that Indonesia la receptive aad In principle la prepared to accept the Soviet offer.

Frier6 Bloo eeeieteaoe had beenaall-ecele. la view of the recent announcement* of the Soviet aid offer aad tha oonclualon of several agreaaante for Caeeh aid, it appears that the Sloe intends to participate In Lndoaeala'e aconoado devslopaantarge-scale, Tha poeelbilitr of an lacraaaed bloo aid prograa laby rrlee Sinister All's poller atateBent amde before Parliament la6 shortly after be took offiee. The rrlae Mlaiatar, la

eapreealng the dee ire to asintain good relation* with the US "which

i

le oapable and willing to give aid to otherdded that Indonesia waa alaoto oax* aa* of tha ability aad wtlllngaeae of Ccaaaunleto give* Oaraanr

the largsst Bloo projsot la Indonesia to data has been that r* salting froa th* Bast German can tract, signed la

- U

for the oonatruotionugar factory is Jogjakarta.(Southha sugar faotory winapaoltyone of sugar perours with an additional distillery capacityona of aplrlt, dally, ijij It haa been reported thateotarea of landcree) win be planted with auger oane to supply the adll. The factory la to0 workers, fi/ The total oane grinding eapaelty parour, ofugar fectcries la7 tons. The Jogjakarta factory will lnerease total oane grinding oapaolty paroursercent.

Die lnveet-Kxport was eatabllahed la4 to facilitate the export of complete Industrial installation, and is responsible for contacting foreign firms and negotiating contracts. teb usx was estabUshed to carry out the more technical work of contracting for all eoulpmentiven plant and to supervise the execution Of cor.tracts.

Beat Germanyn actlre lnteroat in obtaining the oontraet for thia project. In4 Rudoff, Deputy Chief4 (Pood Installstions of 0IAas aaaigned to Djakarta,anner of the East Qermsa trade svlseion because he had eome teohnioal knowledge about augarktrlng tho aaaei period Pech, head of the Indonesian. Turkish, and North Korean1 eectioo of 7xb IsEZ* was aaat to Indonesia to plan the eatshllahsawt of augar faateries. 7j/ although the Indonesian Kinister of finance announoed in suiembei1 or4 that no decision had been reached for tho ocastmction of the sagar faatory

een received Iron West Germany, the rietherlands,end Beettutore^tiefi received at this tine indicated that VEB IHKX had recelred the eon tract tn rough DZl

InfotvaU. contract for the cor.ttruction

of the sugar factory was signed with oaat (See etUchmentopy of the contract) The terae of tha contract specified that Seat Germany must dalivar the eonlpaant laay to enable the rawfactory (inelnding rower station, aolaeeec-taak, eager laaeratery and tranaport Installation) to be pat Into operation onoj the white sugar stage ono| the spirit plantnd the workshop and foundry

Under the terms of tha eontraet the total ooata of the ee^lpcant for the factory ware listedound* sterling0 alllion). Installationand the traraland aalariea of the Bast German technician* ware included in tha purehasa price of the equlpomnt. Istlmatoa aad* of the total ooata of eonetruetlngaotery bar* placed the vela* as hint0 million.

indicated at the nnlnaming of the first aMpaezt of aaohinery for the factory thatillion rupiah*8 alllion oalng th* oonraraloa ratead already been

earmarked for machinery for the footer/ oad that am addlUcnal 60

rupiaha0 million) weald bo needed. 2a/

i i

tVMnt la to bolx aanoal laateJlasmte within

thend la tho following

upmof too firat

anaaal Initillaanti

on.aroant of tho firat

anaaal laatsllassrt

(b) ug and yt Sop

and... JO paroant of tho annuel

installment payaolo at tha fixed datea

Thara la no thin* In tha tenaa of tha ooatraot to iadloate pajaoat will be aavd* by Indonealan dallTarioa of eugar aa haa boon Indicated by eons eeureee. Tha term* opacify that* te thoount of tha Oautaohan So ten Beakaw been aataaltehad with tha Dank of Indooeeia can bo uaod by East Germany for tha purchase of laaanoaiaalisted la an attachment te tho aontraot, Thia Hat includes product, normally exported by Indonesia to tha Bloc--thaimportant of which are rubber and tin.

In June or5 Mr* Susan to and Mr* Supergents of "Jejaeen Credit Teal" (Peasants Creditere sent te Beet Germany to eattie matters pertaining to the purohaee of the eugar faotory eojulpmeat. njj In5 the first ehipmant of machinery for the faotory waa unloaded at Sursbaja. JjJ la early

--

Sovwber reportreighter was lot dingf

auger faotory at the rort of Vriaoer for export froa East Oereauv to

1

Sultan Boeoo indicated that four Boat Oorsaacting a* technical aoMoora were expected to arrive In the add die of October andotal ofachnloiane would bo aent to asalat in plantther reporte hare placed the nueoer of East Qereain tachnloiane aa high

Reporte have been reoelved which hare lndioatadn* -on the augar factory hai bogged down. It waa reported la5 that production at the new plant, originally ecfaeduled to begin In August, had been postponed until excsa tiasHowever, in the oeooad general debates in rarliaaeat laria* loadstar All, la answer, to cue at0 the conrtraotlon of the augar alU, replied that work had not stopped. Re stated that, in view of the faot that Indooeeia and Seat Ceranny haveirect oosml cations and becaase of tha large aaouat of capital aeodsd for the projeet. progress has been alow.

Sugar production in Indonesia has steadily iaoreeaed sinoe the war5 production eetlnated. oosrpared.4.nV IXeseotio oonsuDtptlon requirements have aUaoat eCjualed annual production, however.

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-SEefiEf

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Tha following table oh ova In do nodooeatic consumption of whits eugar

i

Tona

Tha ooaatruatlon of this plant falls within tha government's plans for agriculturalot a, thaurposes of which aro to naka Indonesia self-sufficient in food and to increase tha exportation of agricultural produce in order to acquire foreign exchange.

East Caraway, Runeni* aad Csechoalovaiela have expressed an Interest In providing technical aaeletaace for the development of tha (forth Sumatra oilfielda. Thaae eowatriea have offered to send experte to exploit tha oilfielda, to aupply petroleuai eocdpawtat and to train Indonesian pareonnal. Devalopaant of tha North Sumatra

oilfieldsaoeptive field for Bloc assistance,

i

The""oilfields have been exploited only-nited scale by local groupseoleioa on whether they are to be nationaliasd or privately operated. Disposition of the oilfielda ia currently under etudy by the government, north Suaatra contains rich oil depoalte, but any expanaion by the Indonaaian Covsrnaont would require foreign oapltal as wall aa foreign Uohnicians. The local groups have no

-

capital, only United credit, and ara oonstantly faoad with financial

diffloultiea In the operation of tha installation, flj/

i

ailure totabla patrolam policylaabla drawback fad* foreign inTtatora. Under presenteach foreign firm oust ask* separate arrangementa for cco-eeaaions, taxaa and the uae of foreignll of which are auajeot to The failure of the gerernaent toew adning law haaorloua obstacle to foreign petroleua interests in obtaining and renewing oonceaaiono for devalopaant of the petroleum reaourcea. If Bloc offers meet Indonesia'a roojiireaents, it would not seen unlikely for Indonesia to accept scon assistance frost tola ojuerter. Bloc willlngneaa to train Indonesian peraonnel would oertalnly appeal to the gorernaamt in Tiow of ita insistence that Indonaaian personnel be aaployed In technical and aoadnlatratlre poaltions in the industry.

i

Caeoh efforts to proTide technical asaletanco for Indoneeia's economic development wet with Tory little sue at asnly one email-scale project, the constructionairra*-producing factory, was undertaken with Coach assistance. 5 article la VrtH' in reporting on this project, indicated swat of the textile

aachlacry had arrived and Csach techniciana war* SBsistlng in tha mounting and operation of tha machinery, fll/ An Babe say chaokvup revealed tho prata rtlNK woo exaggerated) tho textile machinery, ordered from Csaeb-oalDTa*ia at4 Djakarta fair, had not arrived nor had construction work began. Date of arrival of either tho textile emoblnmry or tha Caeoh technicians was not known, fig/ Baporto that Cm oho Slovakia warn building an electric poweraotory far radioharmaceutical plant,aotory for small andave mot boon confirmed.

In earlyhortly after tho aov Indonesian Gmvernmect headed by Prime Mini star Alltookwo agriaasnta providing for Caeoh seal stance wars anaovaoed.

An Indonesian preaa agency announced that the Caeoh Ooverament had agreed toredit for approximatelyillion to Indonesia, payable in fire year*ercent interest. The credit will be used by the Indonealan Tire and Rubber Cemspaay toire faotory in Djakarta. on tract for this purpose was signed between the Bank of Industry and the Caeohbrx>export. Si/ Prague announced the ooncluatonecond agrismsnt by Teohnoexnort for the oonstruotion of aa *naa*lamr* faotory which will tornens of enamelear, the Casoha are to

-

-mm

deliver tea ccDxuat*eading an electric power station. Caeca technicians will install tho enjilreewt and train Indonesian worker* in tho eervioing of tho machinery and la production aothoda. JO/ According tq preae reporte tho firat part of the onsmslware faotory eojdjaaent haa already arrived in Indonesia. 2a/

Tnnonealan Zccoomio Kiaiatry sources revealed onpril that tho Oaaoh Coveroaent hadraft credit aarteaait to the InrtVinoalan OoMriawjut under which orodita wc*old be granted to Indonesia for tho establishment of euoh laduatriao as steel, oarseat, textllee, flasa, paper and pulp andhe foreign Office haa atated thiseviaion of tho draft on which the countries had failed to agree la Tha asfeesey has been informed that tho total lino of credit la not specified bat that subsidiary agreement* are to be roachodroject-tn-pro5eot basis. The teams* call far

payment in eterling withercent down.ercent on the first

i

shipment and tha balanceemi-ensual installments. Tho draft envisages the us* of Caeoh technicians whose expenses will b* paid in local ovrrency. 9j/ The sgri meant was signed onay sad tho press reported the first credit under tho agreement was theillion credit to the Indonesian Tire and Rubber Company. It is not olear if theaotory la Included undar this credit sgri meant or if itoparate deal.

uaAvU

AagTlliint of4 included

a jroriBloo for RuMooltJi aeeletenoe In too construction ofoeraantin drilling oilwlli uut working ulnerel dope aits. 2i/

In5 too hood of th. SounUr. Trade Offloo inadeoffer for the eocurtruetloaeaamt edU onIon*-tor* eredit basis. The esaent plant would have on annual eapeeltrone. fcxaaalaa Unhnloiane were one to arrive la6wo-aonth eurvey touitable site for the Indonesia already hoe eae oeeant plant la operation and ooaetraotlon work la proireaaiBd on the oenaat plant at Orealk, near 3urab*ya (Boat Java) whloh ia being flikaneed by aa Xaport-laaort Beak loan, oa/ Antioipated production of the Orealk plant, added to eurreat prediction, la oxpeotad to bring local oeaaat output oloso to preeoat daaaada of tho dcawaUo aarket. Dr. DJuaada has atated that the plant at Orealk will save Indonesia approximatelyilllon per rear la foreign eauhange. Construction of this third plant weald aake ladonaaia aalf-euffioient ia oeaaut aad alght areaurploa for export. It also would hato the ooaeoadteat reault ofnlacing Bloa exports of oeaaat to Zadoneaia. Craer half of Indonesia's total oaaant Isaxn-ts la tha first half5 war* supplied

by th* Bloo* Of total Bloo export* of oeaaat to Indonesia la5 ejjproxinatelyercent wa* supplied by3 percent by Kuaanla, endro Inner by reload endlthough Via Indonesian Oovernwoot hoe not announced that Ruaanla baa bear, tvarcaJ the oontraot for construction of tale oeaseat plant, It eecma likely that fhaaanian aaalataaoe vlll be accepted.

The Rowanlaaa haveaeworel offer of aaalataaoe for the OBvelopaent of the Berth loaatra ailflalda. urvey of the oilfielda and the rafinary at raaejoelaaaaaaiea delegat ion offered to furnish eaeere drilling eokilpawant for use ia tha oilfialda and to train Tidomaiin/ To date there baas bean no subsequent efforta by the Buaaniana to push this project, but with diapoaition of tha Berth Buaatre oilfialda vadar study by the All Covcrrawmt th* Ibaaaaiaas will probably aake

eon* eoaorete aid offer.

1

ffttW aiiTO^wwTitt 6aM wwWafllA

Polish, Hungarian and Ooacnmlateonoado aeale-teaoaa Indonaala have beaa liaited priaarily to general offer* of long-tera credit* to finance Indonaaianf Capital erode. Incanwniat China offered long-ten credits la the forat of capital goods for th* oonstruotloa of textlia nulla, hydro* electric Installation* and oeoent/ To data no igi

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for the om of euch orodita haTe been signed withof these oouatrl**.

Tho USSR, innd* its firat ccnorot* proposal

i

ofaid to Indonesia. Borlstarutovha praaa onpril that ha hada concrete economic aid pnpoaal to tho Indonesian uavaraaaat. Shaker ecaannted that tho offar waa effective for ear field, Anclodlng agriculture and ladnetrr. Dr. Djuanda, Director of the Rational Planning Bureau, stated h* waa unable to dleoase tho Soviet offer at thaw tine bat described itarallel to tho Soviet offer* eaute to India. OovoraMarUl decision oa aaoeptauoe of the Soviet offer haa art yet been reached, but It eeesj srtreassly unlikely that the Indonesian Oovwrnaamt, facedufficiently attractive Soviet eoononic aid program, would refuse It.

Xhokov,ay proas interview,tated that ha had laferaad tha Indonesian frla* Malabar and tha foreign Kiaister that If the Indonesian Government waaldoncrete proposal tho USSR was prepared to studj it carefully and etart* listed ocnstructicn of power aUtlona, fertiliser factories, oil refineries or alundnun sad oaaant plants as suitable project* for ooeperatioo. He added that the USSR waa piopaied te oeeperate with Indonesia la the use of atonic energy for peaceful purposes and to train Indonealan personnel la this field in the USSR. Zhukov farther revealed that the USSR wee atodrlng the possibility of granting

-

SCCREf

to Indonesian students to take up specialised studies lo

laaadaa. universities.

i

Thess project! which havey thukov bore boon wett-ehosen by the Soviets, Developeent of power hee boonby the national Planning Bureeu Inyaer development plea. Conetruatlon of ehealoal fcrtUlecr faetoricsigh priority beeouso of lto importance for Increasing food produotien, erpealelly thet of rice. Giepoeitiori of the Worth Sumatra ellflald* is currently under study by the governaent end it eeecui apparent that efferte to develop theae oUfialda will require aaaa type ef fereian assistance.

2 'is*

1 (Onentlty In aetrio tons,ndloatedi value In tho asanas of US dollars)

4

i

stem

repreeentatiTee for bloo producta IncludeI

i

CMehoiloveklo

i.T. Ottilia tradingunung Sahardirm SJan andJ1 Kajaa Wuruk 31

I.T. Pd. reriatle, Djalan Itrnlegxan. MAM, Djalan Djendrel SucUroon

i.T.atjeekmgan

I.T. Hardjaoarl,jalan Aaec* Baru

I.T. Alpine, Krenat Raja 16

I.T* Inooproa,jalan Cadjeh Xada

aavaolao loola

Cbaoapoland industrial -hflwlt

Ska davia engine*

fikoda aad >totokdv Motor Tahlolaa

Jam blayole* and svteroyalei Shoo uehlnerr, Brno.

|

loro printing oachinert

aoteor tractor*

Chaaatpal ffearauvceutlcal Cbaaaloala

O^reaar

Zohaani, Ltd, Djalan Orja 70

Aaron.

jaajaa

Sol* agent for aala of aachlaerr exhibited at 3rd international Trada Pair

Bala repre sen ta tire for tha XPA ante factory In Baat Oeraany

Autotoohnioua Uidaawyar, Djalan Raja Iraaat 74

i.T. rbpulalr, Paaar Baraahaar

P.D. Hera a, Djalan DJokJa 13

Hotoreyol**

Tungsram light bulb* aad radio tubee

Sola agaat for textile*

Sola agant for ooaaat

Bourc.ti State, Djakarta,tate, Djakarta,

apfrhdix ii

lj CrtaMTce, Bureau ofi Ceeanree, Country by Ccnovxtttr 8crie*.

^ Stata,,/ 8uu,: Hay

V 9p' tttr* Country by

y CeaavMree, 3ur0.ua of Forolea Oxaaram, Country by CooaaoeUiy Serlce, Jan-JunV

j/ State, tedsoO.

OP*ountry by Cuooodity

oy itjdioyj^^lra Proa* Bpjvwy,OO.

jaaarta, .

u/ suu, oxa,tUBSULSt,

ibis, PS rlflo,^ State,3. iVDjakartatata,7.

am,,.

tate, rajekarta,.

Air, Djakartatate, Djakarta, Dap.

StaU,DaptaU,,

State, DjakartaUU, ajeiart*%.

A&-

5tV SUte,3tate,,jakarta Dap. IJO,j/ SUU,c09, .

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SECRET

Qg- eit" Djakarta step.

i

24/ CS- nfo, ten State, Biatortn Drp. jk,.

State,karta, State,.

OP' cU'. Djakartafadaaso.

fcatJ

Btete,a- -

^6/ State, Djakarta, SO-

xu ma, n. ftx,uo.

Djakartaeb j.

tncacadc anrvey afayoco.

Djakarta JwajAi, lfl.

.

IX

Djakarta.

fcrelca CcxEaeroo vweJrly,

%.

0.

Djakarta,.

Djakarta,- (QUO flection)

touspo vtoa,.

.

EE, 0CO.

roliry ftapurt, Curraot. looanla Dor,,

56/ import-Eaport Desk cat UaaMngt-w, Twentieth Bectf-ennnal Seport to Ocajreaa fcx the Periodj,

eparU to cao&ejsa oa tike Mutual security rrotfrea Xor

aaaWraUoy

Djakarta.

laoooalc Survey of tale aad the Par laot..

State,.

l$B,Weajgy Kooa. Dev..

5.

cob,fl.

PS,

&/pais re rTi.

68/ State, Cjakart*, S.

wio;

32/ -

Hjy

XA/ r roo.

Djakarta.

74/ OBI,.

12/

76/ State, Djakarta.

tPtqMtlQMl aamJatt

Djekart,, C7.

are,, C3oo.

88/ state,,bajelsB Agriculture ocarvieo Ppt.

PP-tate.

mrond earlier, C/

67/ TSO, ktanthly InnaeyaalafJ preaa.

urabaya,8.

P'el.

ais,.

2/ Britlah Eabaeay, Prcao,6.

23/ State, v*7 8tata,7.

SaV Om> Current fdgoat of tho Soviet Preaa. Vol. VI ,an 55

96/ State,,.

27/ State, Djakarta0

98/ Cocoerce, Voekly Scon. Devi.

52/ Cobwtco, Country by Ccanoodity Sariaa.

caaaarca, Wkly foon Dev,.

& KBtathly lo^donaaiaa Preaa Survey..

tate,3, C.

p.ED3 PI fS7-

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0p* Memorandumunited states government

to

oatsi6

THRU

fXOM

Support for. Economic Development In Argentina"

1. Transmitted herewith are three copies of the subject report, togetheraaoranduni by tha responsible analyst certifying as to the appropriate classification of the materials contained therein.

2j The purpose of the study is to present the Soviet"ostern assistance to Argentina in the light of thoplans under active consideration by theof 1

3-

Soviet Bloc economic

activities in Argsntina, whUe not significant compared with those of tha Free World countries, have increased In tempo These overtures have taken the familiar forms ofers to provide capita^ development credits on easy terms in exchange for agricultural products.

k. The feature of the Argentine situation which commands attention at this Juncture is governmental consideration of the recently completed economic development blueprint prepared by Dr. Paul Prebiah, one of Latin America's most competenteconomists. The recomaondations of Dr. Probisch contain some foatures of interest to private Western Investors and their governments and other features which furnish an opportunity for coorpetition between Bloc and Western governments in the furtherance of long-range Argentine economic development.

i

5. The instant study is considered to represent an excellent research Job in that it quite adequately considers pertinent

LF*"ta *the purpose

st^ 8hou"to the requestor

CIA HISTORICAL REVIEW PROGRAM trT oU. RELEASE AS SANITIZED

10

Im gad

i

". trn iportevioa aad llestrie

U.noodo Aaaietance end

A* Proa tbe free acrid

1. XareatMntea

redits

3. Proa tbe Sdtiet Bloo

Teooaidel ieaiatanee

Ana*

HI. Trade with the Slnc-Sarie*

A* Telne aad coxroait lor. of Trade

rgentina*a

s. Argentiae'e

B. Bloo Trade Deliaopeattiee

rv. Slno-Soriet Bloo Trade Offeneire

A* Trade Agreooenta aad

B. Trade Pair*

0.

ouroea end Bralaationa of

Appendixooationa of Principal Koonomio Drrelojxwnt 53

SEfifftf

ta3ls Of cttottj (float *tf)

x. onmuaa* oau^tlaas

n. exporwfeport bank Croatia to

xn.rorvlfaof arraattna

it.norlsi bloo

v. trad*

^eeRTr

Slno-Soviet Bloo oocmoBtlon Argentina, vhilo sot slgnlfioant oooporod withf tho Pro* Vorld coonar* increased sharply4 tho value ofloo trod* wasalii ion orercent of Arrentina'a total trad*. Thl*eroont increaseredits, ocerplete installations of In duet rial plants, Bachinery, and technicians ha to boon provided by Bloo countries. Bevever, thus far. tola type of ooonoaio assistance haarail scale.5 Bloo emmtries (the USSR and Crechoslovakia) hareotalillion in credit to Argentina aa ccoxared withillion extended by theort Sank alone daring thia period.

The recently intensified Bloc eeoricmlc actiTitios In Argentina are reflected la offers i to provld* capital good* urgently needed forocfloaioiregraa In exchange for agricultural prcdactej to provideal stance] bo grant long-tern, low Interest credit for capital goods purchases. It ia quit* possible, in view of its larga-ooale foreign capital requireneots and it* eaollnlng foreign exchange position, that Argentina will look with favor on greater Bloo participation in its ocoaonio covslornent. Thl* prospoot is enhanced by Bloo wUlingmsa to purohas* largo quantities of axri cultural and livesroduct* for which Argentina haa experienced marketing difficulties.

erioussituation, ft problem of retarded ewneaio

growth during the lastre, may be attributed to the policy of th*

Ptron regie* of pushingat tho expense of agricultural production, rxcrpBix. state InUrrwitlcnnd the buraaseratlo system of goTOruaeutal controls. Eartriction* aad ceotrola oa agrlaaltxira r* ratingurtailed production and aa lacreaae la prices, together with aa absence of technical adraacee hare seriously retarded derelcpaent of tola important aector of the economy. ]/ At the seaa tin* theor agricultural producta for the growing population in Argentinao lacreaae. This oDceetio supply aad danmnd aitaatloa has seriously liaited Argtr.liaVa capacity to export agricultural aad lit* stock products Which oompriaC orerercent ofotal exports* ATailabla exportable product* are not sufficientensat* for the rising deund for irport* of industrial goods. gSbua imports of trrgently needed capital eouipaent hare been curtailed and tha Ceralopntnt of the ladnatrial aector haa been

Far capita production ia Arrentine haa lncroaeedercent

error the last decade while tin* demand, both for dcaoatic consumption aad for exports, has increasedore rapid rate.this haa re raitedarious lafUUoaary situationack of iareatsmnt capital, ExUrnelly, la aptta of goTernmentol *ffoTt* to

irrest th* tr*nd, lnjorttxports and Increased foreign in4obt*da*os dai resulted, kJ

A. fafoQf Pj fnTTrTnrl

5a.no* of payioonts deficit was an6 nllllon and tho foreign trade0 aillion. The difference in the two la accountable in tersgirorable balance in lnrislbl* aeoooat*. Ret only haa Argentina^ indebtedness under bilateral agroe-aanta (with free World countries) increased but payswnts on relatiTely Bhort-tara inrtallaantf fliyital gooda oootinue to aount. The daolinlng foreign trad* position during the last decade haaonocoltant drain on Argentina'a raid and foreign exchange reeervas.tood0 aillion at the and5 at coopered2 ailliono.(So* Table I)

thia critical external position any bo attributed not only to tha failure to provide adequate priM inoeatlTos and to adopt policies to proooto aa adequate growth of axriroltaral and livestock production and therebyreater supply of sxportabl* products, but also to the failuT* to direct Industrialisation into channel* that would itrsngthaa th*xternal petition by reducing the reliance on such baaio import* aa iron, steel, pstrolaua and ooal. 'J

SECRtT

USMJ, V

Qttimi Amti and Oblixation* At m,

9fReported PT the Central BanV of

Amu ,

Dollar

fitarling

Othar Trade

Total

01

Balance* agalnit Argentina under trade egreenenta with I

Others

Total

InaaVtadaaia

raynent Obligation! (principal plua intereet)

Dollar

Sterling

Oaraan Trada Agreement

Other

Total lnatallaant

payment

Total

B. frabftaen Mgusto

To rehabilitate itiArgentina cuat talc* inaadiat*to curb th* inflationaryaproT* tha deterioratingpoaition, androgram for inoreaaed production in the agricultural and lndaatrial aaotora of tha economy. Inf thia, tha rroTi*ienal Government, inppointed Dr. Raulr*tary for th* United Watlon* Cooslialon

for Utin tserica, to tho port of ooorjoelc iMior to tho President forthroo cento period tc^rtod/ tho oooooen- andoarad*tlon* foroerelopaent prograa. In3 and6 Dr. Prebiachsrio* of reporte la whlfeh ho outlined tpoolflo propo*ale for guieiuAmitalon for tho rehabilitation andepe*mt of tho national oconeec/.

Sr. rrobioch rUtod that it Is essential that prodoxrtion inb* increasedaroont within tho oaxt roarorthar SO paroant within two or thro*/ however, in order to achieve thia goal the halano* of parasnte situation wast be lnproved by giving iensdlate attention to inoreaalng agrlonltural production, re-channeling industrial production, and eTIainattng tha bottlenecks to devvlonaemt cauaed br inadeonato power and transportation faoilitl**. the following areof th* principal rcoeejessadatlons a* do in tha Prebiech

tho peso should bo deralnedllatio rate be establishedeene of increasing iaoeatlves to faraere and exporters of aanaXaotured good* And facilitating the laportatlon of urrantlr needed capital goods. U/

il* for*ign flmrwrial assistance ahould be *oaght in the forat of loans, inrestawnts, sore favorable credit tern* on capital goods purchases, and credit* to both the public and private

-4-

h

ilateral trade agreenente with Buropaaa countriee ahould

air* way to track*nltllateril basic. XJ/ The ajurariaaaut ahould gradually reduce its control of the ecocony oerpi la tbe petreleua and railroad lnduetriea, which ahould raaaln mtioaalited. lV Zb Xlaai vlth tba aboTe rirwaanlatlona tha Argentine cjorarneent onalued tha para and eatabllabed an offlolal rat* of exchange ofoaos8 dollar for all trade transections except laporta of oapltal goods, lnxnry laporta, and Inrialbla and oapltal tranaaotlcna which will acre through tha free aarkat. lj/ accent aotlona, regarding foreign ecoooaio aaalaUnce ladloate that tha gOTeruaant la attaonjtlng tom farDraole ellaate for foreign inraeinajnt. In addition, an Argentine riation haa been aent to Europe to arrange forf balances Cat abroad under exUtlng bilateral egroacante, to aacure additional credite, aad to put trade on abade. The adaaioa will probably also atteapt to refinance obligations. lVieslon to the Dnited 2tat to will atteapt to arrange large seals loans for economic, cerelopaent. XlJ Although tha Provisional Oom jueut haa announoed that It is in faror of aore priTate enterprise, do overallhis regard baa been enunciated. One exception bearing on this point is ths aanoTOCoaamt that petroleum

production ana derslesnaiit will nmin. in th* hands of th* OoTaruiauit. lfl/ Barring any drastic change* in gomuiacAIt

reasonable tothat Argent in* Will continue toolicy

which vill took froaUr and acre efficient development of agrloultor* and industry,rnrarrjaanUl control of thond core forodxnla tho font oX erodlta cat lavs,ho following aao^lona on agrioultcr* and lit*toes) Industry and Bdnlnrj and olootrio powar and trsnaportation lraUnda n* rifle, proposals *or develop=ent oootalnad la tho rrstdsoh reports and tha lspleaernUtloos of tha proposal* by tha Arfaatlna Ocrsynaovrt*

0, AaTlflaltaro and Livestock,

Th* rarcQ Oureiiaaut, la aa *ffort to pronotalon In Argentina,n *ocas*la poUoy anion discouraged developaaurt of tho agricultural and Uv* stock production. Rxpsnsicn of industrial productionncreased iaporta of capital tOjdf*aaTs which had to bo aat with increased Argentinef whioh overoroont ar* agriealtaro and live stock prwhwta* paring th*h* inorsssing psyaoata far Iaporta wora nor* than offset by tho growth of receipt*srge export surplus of foodatoffa aold at cooperatively high prices. Bat the mat fire, with tho exceptionar* one* ofts la trade, intensified by droughtnd declining world price* for agricultural product*. Aa

excellent oro? rialdesultedarge export rorplua3light .surplus laeeerer, the effaata ol* reetricted ifi-eulcural pcc-racUoe, rising dona ft it rtimal, lav prltea aad tha abeeuee of teohaleal idraaoai la agriculture vara fillhea la eplte af rigid rararuaautal eeatrole ta curtailrade deficit of eaaaalllloa re raited*

ft Increase the promts tlrity la agrlcnitare aadoaadrr the guieiiutiit east tare steps to Insure arester prise inceutlTae to the faraer and to preoote avdarnlaatlon aad aMhanlaatlon of farming cathode. In accordance withaado by Dr. fraMath, tha Provisional Oovenaetat on a?nnounced: tha csTaleatioo of tho peso and the eataMl absentiagle rate of la pesosB dollar for exporta of agricultural Ia addltioa, tha Ooraiuaautatloaal aaaocado UatoTailen rand far atianlatiaf lasaaola^Ual aad aoonoads adTaaoea la agricultureoiWcX. gtf the new fevariaeaatal policy to give greater attention ta aarlealtare and Urostoek predaetten along with faTorabla waathar ocm&tlese daring the latter pert5 hare considerably brightened tha preopaote far aa increase la agriculturalV

Althoaxh farored over agriculture daring the rerun ara, Argentina'a lndu*trial aector has alao suffered inaCeuuate <kr*lopmnt. Orosa dcewctic

s

softer

formation In ir rent in* haa fallen both la aacaal andercentage of national, prodoeVica and there haa been an abeenoe of ctv capital lzrreiV aaat In irarjportatleri, power, and aoot manufacturing

Tha rrebiitfi reporte atrea* tha need for oonoolldatlon of indue triee already la exlateace and their gradual expenalon by the eatahUabawmt of new branches.ertleolar, theyhe aeed te derelap theeaaaavjeeaai and aacttaalaalhe paper end oellaloae industrial, aad tha eheedoel ladastry* ther eazhaaiaa the aeed farto canals? its tan bear/ne of the obisf ooetaalai to Jrraatlnst* industrial growth, bowerar, haa been the lack of Deosaaarrel ecrJnojaat isport*. Raw mteriala reeourse* sooh aa petroleejOf Iron and coal hare not Veen exploited raff latently end Urge onsnUtiei of these neterials km to) be iaporodd thereby askingameaaixiitae, oartailaent of needed capital eQxipaent laporti. ort rv^xlreaecti of aapltal goods for theoan are ertiaated at2 Villioa. gV

1. Petroleum

Probably the east laaortast iaeaadlaU proyeot la the deTolop-aent of deanatlo petrolena reeo-creee, the daaaad for petrolaaa hae grown with tha laaastriallaatlon aad the rapidly increasing popoUtlon of the eoantry,with th* re salt that there is anillion

I

ton annual pevrclewa deflslt Uindicated that

petroleum production ehe-sld B* raited from the preaent prc-aaotion raUHUM tona annually to ftdllion too annual rate bytU Taeports of petroleea, presently ooaprie* abortoroont ofotal importZfJ Tha principal source* ofaportath* Dutch VrrtVeaeiosU, Kuwait, and the

Th* rrerisicn Oorernaant elosed the door on exoluelre foreign eenoesslona in th* petrelraa ianustry torn it awarded exolnsiTe derelopatato*he state ownedowever, In accordance with Dr. fnUooh'neoenemdation that ret role a* derelopewnt beut idth the aid of foreign fiaaneial assistance, the govsnnsent hai eaneuaoed that foreign companies any *ontribute to the development through th* eewtruotloo of pipelines, the sale of eqalinsat and materials under deferred paymenthe drilling of oil veil*ontrast basis, and tha partielpation is expansion aotlTltiee coraricg any phase of the industryixes fbrslgn-Argentine state owned company formula. H/ The sreae inrslTSd in currant and future petrolena dovelopBent plana will probably include the territory of Veuonen, the

Patagonia region in southern Argentina, and the Salts,nd

22/

Buenoe Aires Provinces. The goTernaeat is particularly anxloua to

begin construction ofn the Suite, an* asndoaa and Buenos Aires.

Provinces* Onhef Indostry announoad that

m was ready to receive bid* for too financing1 no worth

1

of pipeline, goa lino, and nlr^llgoseus eejclpctaTrt. fl/ Ha also iuinounoed that tha call for bide would ba antda in th* Soviet Bloc aa welln tha free oorld. JV The foUcwia* prsjecte and their eatlaated ooit* werea* lino from OampO Duran to Boenoeillion| an oil pipeline from Caapo Scran to sacipeline fromo Banillion] an ntddentifiec project at Oampa Duron, HI millionj increases in the refinery at lajaa d* Cuyo and ia the Bueooe Airestitllon aad .'laubricating oil plant, f4 aimistribution plant and *ojiipat*at,dllloaj drilling rigs and crilliafdllion. Ztesired that peroenthesehich would be guaranteed by the Central Bank begla9 aad rua foreare. Bids were reojoaeWd bpj/ The Kiaister *ai* it clear that control ofevelopment projaet* would be la th* hands of TP? and that no pnym*st in patrolaom or in coaoeaaioa rights would be considered. I'J

The mining lndu*try has been of minor elgnlflceno* in Argentina* Rerarthslssa, sou atrldet hare been mad* in recent yearsBlep existing domesticarticularly iron. h* government announced that economic plane for expansion of th*

tools Iron plant la th* Provinoe of /ujaya coaplated. Plan* to expand, th* prejduotlcn tt thia plantear7

will reoulre anillion in foreign exchange to cover

iarport* of eoxdpaeat for bloatower plaatharcoal plant. Th* iroa will b* oonrerted into steelolling alii at tho tax* location.t Qsraan flra, Deoag,eported to both* charcoal plant andew blasteveral* boon plained vlth tha portlolpatloa of US firs* for th* extension andof tha Iron elsea anddlla at Rosarlo and can Biools* la tho Prorinoea oflrai and Santaith th* aidillion loan by th* Exports Tjrcort Bank, Argentina plana to construct an Integrated rteel rill at San ttoolas. Tha OTerall cost of th* plaat, which la designed toetrio tens of *teel Ingot* annually, willInn. The plant la to lnslade docx sad other raw aaterlal handling

i

y-productoe blast furnaoo, open-hearth steel askinglooadng and billetail and atrestural foras aill, and finlablng adlli for the production of Plato, strip, sheet andOj

J. xasi

for *oos tiaa th*has boon worfciag on the deTelopaont of ooal depoalta in Argentina, partioularly at Rio Turblo

-

la the rc-rthsm TaXn^paU irn. coal rtwrTti at these

toit highons. Bnm, afterear* th* adao* ara

1

eupplyiag0 tona ofear. This lav productionbean attributed to bud planning, poor tTanaportationUehaicalla expeeted that with lerge-*cal*

lureatawut,oal-w* thing riant vhleh Cieeboalurakla haa oeartrtfltad to nratract, the ninei eouldone per year

Traniucrtatlon and Electrical fewer

another Obsteela toIndustrial aad agricultural duwlopwint, and probably tha one irOjdrlaa: tha aoat laaediate action, Is the lftex of satransportation ayateaorer* shortage of electrical .pew. Ij^uroutant la these soetors which now eerlauslyeoaoadc progress haa been alow, further adranoea in both of these fields williuire large-scale foreign aaalstaaoe. i

lahe feTerncsnttyiar hlgbwiy dorelopaeot plan which prc-rldeo for eawtruetlon of expreoe higbwaya to ocunect Busaae Una with nor Ml Plata and Roeerto,f the Pan Anerlcan highway to connect Boeno* Alrea with neighboring ccuntriee (Paraguay, Chile aad rolitia). Although th* gorernsent lntanda to carry out construction onroject* without tho aid of foreign

-

t I* estlaated that away, tij trillion worthrom abroad, sV In railroad tran.pertaticcCduotloa ofioeaArgeotlnAU eccaeaioKercho* Minister

ofle4 for boosttssel elsetrla0 of then0 freightUsa-looosxrtirtt partsteel bridge part* and usorttd Bedsroisatlon eemirswiat for ship* end rood lino, thowould be purchasedeferred pern-rat basis with tern* op toear*. oal III Of OK firm* ha* putaid for th* entir* program.la th* long-run, plan* for oupon start of th* steal allla at Haemrio *ed aaa tteola* whiohurtraatiaaoundries te product railroad rolling atosk abauld addtoailroad oaruloieaeot. &/

fhere has beea Terr little progree* la the last teaterlous shortage of eleotrle

power, eetlaated te beper annum, i* ens of the Bore urgent problem* feeingar. rreblech ha*rogram for the development of eleetrlo power in which he has outlined the following astlone to be taken for lmaedlaW aad long-term expenslso.

a. to haatea th* eonstraatloaran*Biaalon linca from the new sea Kleola* paver plant

b. To import smallrit* for rapid icatallation

o hasten ooratraottaa of new projeete in tbe interior

I

d. To change the orgeniratlca of tho Boearlo power plant and oeaaeet it to Stn Rloola*.

oWIt tf

To expand tho powerr Paorto Faero by the end

vt tf*

b. To max*hengaa la tha corporate etrootwr* of

power enterprise*o aak* aiWtloTtal large icraatntonte d. Toe* JOO,CCO kilowatt tharao-alaotrio plastcock Bod (Beano* Airaa ProTinse)eaerrea to ba otfsotlYo0

of tha Belto Or*ade irojoot

of poeelble oarolopawat of power in tho Parana Btody of poeelble me* of atomio powmr in the prodaoUon

of eleotrloal *Mrgy. }Q/ OerotBaeat poller regirding the entire plan haa not been announced. Rowerer, iad, fee gorarnamjit took orar th* Roaario plant whloh had been th* property of the firm, Sofina,Belgium and ftvlaa inter*ate. ThafranchlBe expired

-IV-

SEBRtf

In XWa end linen that date haa been operatingrovisional irUnpion of th*l/ This action Yii probably takesttp toward th* leeeanc* of new atoeh tor th* Gcrrernaawt. and tha eventual reorean-lRation of tha plant in accordance with tha Proetsoh recMavinditlon. SJ

1* rnT*iaa*ert

Tho laak of lndir^oons Capital for inTeitaant awfcc* it imperative that Argentina receive financial assiatanoe from abroad for itaaralanaamt profraou Priororeign inroitcmt acccunUl for tha balk of capital formation, However, the ebaeaoe of profit remittance* daring most of the period7 and th* rtgprou*

tea of gOTeraaeatel control of basin*as enterprise bar* effootlYulr dUoouraged priTaU foreigacaaoe^anoa, Arfactlna has turned eaienaively to abort term credit far financing naceaaary oapltal goods importi. JV Th* opening of the free market la foreignfor profit rexdttanoe* and the ifitry of new capital iaaseatrable step toward the creationor* favorable lntaatiaaat ollaau. Koverthelees* there are atill ccaertalatie* which oonfront foralfn investors. Cfclif among those undarteiatlea are th* governmentavard labor aad Inflation. Although tbe ereatioaree market through which foreign fund* aa/ fraelr enter

:

or looTO Arrmttna baa reaarfed practically all rrrartaaaoUl control, remit* far tho Inportation of luohinsr/ aa vail aa other good*il reoulred* droolar laaaad to* tha Control Bank intated that It will psradt Oapltalha for- of laporUd now saehdnery (oonplato on plant, ap additions to existing planta) If tho luiaateauits produce *uod* that BOV aatat b* Imported or that ooald bo exported.These steps, tokenh* Provisional Oovoraaent, indicate that Argentinaaking earieu* attoapt* to attraot foreign lures tuoiit oapltal*

Tho United State* and Great Britain have by far tbe .arrest chare of total foreignn Argentina. entral Bank rurrey oad* In3 ahoaaol that out of the total foreign InTOBtaont In Argentina, On! ted States lnTaators acooonted foreroent and British investors forercent. The raaaindar Included lnvoetnanta froa Swiss, Belgian, Italian and Trench aoorcea. SUelatively eaall aaoont of foreign lutcatocut has taken place4QBufflolent to aignificantly chant* the forepoing atlaarted that only aboat one-half of total foreign inraataant repre-eeata original ineaataent while th* other half represent* reinresUd

3* Credit*

Argentina'a ererseae obligation* on relatively ahort-Wra orediU for purchases of capital goods are ateadily Increasing. Xn the

peat* art Boat Of the foreign OBpittl Obtained by Arr-nt loa has beenather thannraj-torabasis, At ihs beginning3 Arruntina's total tajtellaaat obUgatirwis (principal plus interest to be paid until serturity) enountedullion, K6 percent of which was to be paidr CanadianJ By the endotal installaant eTaidailon had grown toillion,oroant of which ia to be paid inr Canadian dollars.argo part of these credits will bare to be repaid within the next fire years, fafboutillion will hare to bo repaid anion sfjos of the loanstnsn*ed, fcj Prlaalpal item purchased on these ore Site inoladesaant. laocextlTe, isTlculeural eo^ipaaat. caaent aamtfaoturinj; nachlnery, adjdns; ecriipnrmt, oil field ec/jipcwnt, stool sill ec^ljawnt and

to the Onited States, best Osraaaa- is Argentina's largest creditor. There were aa credits fro. Blna-4oulst Bloo oountrles listed as of Che beginning

In order to carry oatooooetio dereloptseot plena Arewatina sill find it neeoeeery to secure edeUtteaal large-scale orodito froa abroad. These Argentina will try to obtain on extra fsrerable tarns. An Argentina mission haa been sent to Rruoperellsinsry Tiait to discuss the consolidation of debts with rarious European oountrles, the arraagwneot of deferred peyaent terns, and the extension of credits

for ArrsnWnaf capitala aiaaior. boo aleo boon tcni bo tho Batted State* to arrange forloan* to Argentina, flatted State* Oorenrarat credit* to Argentina haro been reitrlctid to ta^art^raiort Pan* orvotto aad to credit* aader. There hrr* boon no isa grant* or ermttt* to Argentina. A* of JOtfjxrrt-Jcport to* loans aad Calhorlaad credit* too wornUlloa (flaa TAle II).

(la thoaaaada of

ObUaar Purroao loan. Aaowi Metniraed tffPfoM

Agencl* da rrxarport** "harbor

. Barge* 4

Conecrtlua

of

5i

prod.

Arg,ft

4

of

0

National

Lead

. 5

kn aeTeeatrnt forUUen loan was signed Tha credit will bo used to tttlct In financing United Statoi exporta ofsateriele,echnical torrlooa to Argentina for tho construction of an Integrated steel sill at San Uoolaa which win hare tn erwrell ooat8 an^llon. Tho ixport-lmport Bank credit will finance up toercent of purchases of marly flOO adon to bo Bade la tho Ihdtod States. &/

In addition to the abort the Dnl tad States Oorcrneeat3 million te Argentina fa* oooneala aeralnpawnt under OS enilehichgrloulteral aurploses may be eold to friendly natdona for foreign fjurrencles which then may be aeedoTolepnent loan to the country, o

It La quite possible, in view of its foreign capital roqulre-awnte and Its declining dollar position* that Argentina will look with fator apaa offsra of credit aad technical asalttanoe from Soviet Bloo eovntriaa. This prospeet le enhsaood ay Bloo iateraat in eecnrlng large onaatitieo of Argentina'o agricultural and llTestock prodnote. loo eoantrlesfor about one-third of total Argentine ezporte

oor year for saaaar crops la Argentina and the worst year la recent times for edible oil production. Cccse^anUy, Argentina purohased0 ton* of ediblefroo the US andor.

of ration sad leah asmei-oportioos of Us rye, liaetudbrsuh* extract, and canned Boat2?/

Ona far, bovarer, actual ftrrlat Elao credlte end technical eeslstenee to (rjcntlnA hare been Wfligibl*. Chechoslovakia has bean,or, thoiv* Bloo country ta offering eeoneala assistance, althoughS baas istng Interest, foot intar*rt alao haa boon lecently elselayed or Poland, Hungary aad tha (ECU Tha concern of than Satcllitot, bevmr, oceae to ba focused priaaxlla cm expandlaf trace rather thanooaoado aesirVance la tha fora ofor technical

Baataaaaaa iaaataaaatat

Oeaaral off art of technical aid la the fera of eoaploto iaatallationa of Industrial plaata and aachlwry aa mil as technicians hare been aad* by eereral Bloc countries to latin Arerica. ignificant being the Januarytatement aada by Goviel freoder Bulganln, la reply to cusatlona awbalttod to hU bysagasino, that the DSdS la ready to eell to Latin, auerloaa ecuntrias various typee of oapltal foods and to provide taehnioal aaslatenoo in th* field* of electric cover, ocsaatruotien, transport, ando date specific Bloo offers of technical eld to Argentina

hare bean relatively insignificant. Indication* are, bowrer, that

p

* panish language lev* fcegaslac published la Sow Zork for Latin Aeerio*

-

Sfetfitl

tTfiU

tear will Increase la Iff* hailsast Oercany, Rcntaxy, roland, acd tha USSR bare ill show interest In prorldlna tochcieal assistance to Argentina, to date only CnoehcoloTakia end Buagary hare actually sent couplets industrial Installations and technician*.

In Karontwo Ccoun technicians were In Argentina to assist la settingcall tractor factory near San Klcolae. Cco-atruntion of tho factory, whichoint project of the Csech Skoda wdrxo and tho Argentine state tradingIAFZ, was to take one Also la tho San Vloola* area, Cteoh technialana haT* constructed theargsat distillery." Additional Csech technioians were in Artentina lan connection with import* of Ctech trucks. Zs/ Probably tho aelt Important example of Csech technical assistance to Argentina Is the contract awarded to the Caeca firm, Teduuwxport, in5 for tho Installationoal-^ahinj. plant at tha Argentln* Oorarnrent-caned coal mines at ftio rurbio in ewrthern Patagonia. The ceet of Ctech oc^aipamnt for the plant, xfcich la toaily capacity of a, COO tone, ia estimated at nearlyirayaaot terms were stated to be ae fellows t ercent thirty days after elgnlng the contrastJercent open receipt of snipping ooouoeato for each partial dslivoryj SO percent when theis pat into operationjore ant on5 percent on

-

Jl| andorceajt J>l. CtUnr/ of thois to bo eoBplatedCredits osiendad for thie project trill bo financed under tho.flrtilt prevision in tho Osech-Argentlm trade asretwnt. it tho fljoahs did notid, it is bolisTsd that thsr probably got tho contract by bribing Argentina officials, 2Z/ It is interesting to note that Csoch proas atateaauta regarding th*plant refer ton getting the contract ever enopaUticti frea united States, french andaen

One of the noet recent caTalopcant*ch eooooalo activities in Argentina la the taleoall Cscch trnnoport aircraft to Argentina, Inotal cost of theetiaated to be5 nilUon, la to be financedO-yaar credit, four of theCttatpanied by Cscch tochnical personnel, haw already been shipped. The Coach* hare also offered Jet aircraft under the easeaoch ceeadseion rlsited Tueuowi Province la harchfor the object of stodying nacainery racuirecwate for bugar production aad railroad aotivitiea but there hero dean no taown offera to dote, so/

Although no contracts hats been oonolnded, tha USSR ha* *boan an thtareet in participating in Argentina's pctroleua dorelcpeent program. oviet oonawoial alesloh it reported to hare offered to supply TP7 with Grilling *ouipa*nt and otheripwnt and

stool atWfltv for pip*lin* construction, en faYnrabl* orodit tera*.Thisbowerer, did not does lafornorieal written bid.

Bid* hare bean rscelTBd for financing]illion pipeline prograa

frcra British, rrortoh, Sotted states, tad host Qorosnad* by th* hlnlgtor of Industry it tho tiao of tho invitation for bids on tho jdpolln* ocoitrootlca plan, indioato that Argsntin* voald bo billing to aoflopt finwabla bid* froa euttid* tho dollar area, otaa fronloo* fl/ Othaf Ofrora of tooanical eaoiatanooo, include an offer in5 to soil road construction ec^ilpoent, flj/ entire railwayation sysic&s, oloetrie looctaotiToa. These offers also included the aarrieea of tocfmioiana to aid in sotting op the installations, fij/thtro hare boon increasing indleatioaarowing ftrtiot Interest la npjlying Argentinac^pmat

and eoppliea onder gensrooa tanas, th* Seriate hare also *uggested

that they send mjineors to wort with Argentina personnel on Soviet 1

aaui^axrnti specifically road-gradarg, now in Argentina* gg/

Tho ATgentine-^ansarlaa trade agreement of4 previdan for *onding Hungarian technicians to aid in the installation andof Enngartsa eo^cdrawnt. SjJ Bungarian aotlTitiea in56 bar* included leading toehniaiano to Argentina in oooneoticn with the aarTiaing of Qana die eel railroadupplylng

-

plans and eeuipaaat to Argentina for an oxygen factory,and of faring eleeel-electrio poweror nurino and land tranaportatlen and stationary porar plant ueo,

ttedor too CSS-Argentine trade agreement ofeattta ocatritted to expertor two Urge nodornvidently these oceodtaemto bare not baon set aa tharoimported ODH exports to Argirrtini4 or tb* first half eat Cereany offered to supply the Argentine aegar industry (dth all essentialt recelredear credit basis and at the sax* tlx* indicated that the OCT nu prepered to offer coal adnlng, rood construction, power station, ohaodcal, andhlnery on lcrg-ters epodlto at low Intoroat rates.

Tho roUeh>Ax%atn%iae trade egrcceamt of5 provides that Poland facilitate tbe export of capital goodo to Argentina on short-tern credit but there haa teen no erldenoe of iapleaontation of the

2. ,'tti Aid

To data there hare been BO Bloc ara* ahlpnenta to Argentina*

Recant Ctech and Sovietof adlltery aircraft to Argentina hove a

not resulted In any contracta.* Credlta

Three Soviet Blocoechoalorahla, Poland and -

sre provided for extension, of lens-tcrra creditto Argentina under their rospootlTomtkti for the met pert, these creditfciro not boon utilised.

The exteaelon byt inill loo oredlt to Argentina for1 wining eonipaerat, oil drilling eculpacot, transportation ec^pnont, eaTicultural ecndrnaat, and power plant* repreeeute the first significant Soviet Sloe offer of eooncolc assistanceree World country. Jj/ Thie credit does not na to hare been utilised, (ft pert this rsry be due to the faot that an Argentine elation to the OMR in4 found the Soviet ec^xlfDent offered te bo of lev Quality endn$ the credit provision was reducedUllcn Soriet off ere of railway electrification aysteoui sad rood oeastraetion oonipaoot in August and5 ny hat* been an attoopt to get Argentina to utilise *oao of thia oredlt. 2 has beenoncerted effort to expand it* eeonoaie relation* with Argentina. Inoviet trade reprosontstlve* called on arreutlne effieial* in Bueno*t which tie* they loft new catalogs of Soviet rnohinery anda aire to supply Argentina with needed ecuipaent under terns ofercent down aad the balance in five yearsercent interest.Alee in April, the florist, visited the administrator of IPf, Argentine State Oilfield* Monopoly, to offer Soviet oil drilling

aad other petrelroa ooalpaoat, lndladlni stool abeoti adeouaU to coTcr AOfseterial Beaded for the oanatruotion of IF7"planned pipeline arstea. Too tern offered include credit ofo SO pear*ercent anneal iaterest. tho XT? adBdnistratcr boa aakedrit ton of for froa tha Seriate.

ech-Argent ins trade agreement of5 proTided for th* extension bp Oaoohoaloraxl*dllion credit to Argentina for piuiOieso* of capital goods. Ooo*dllion of thio erodlt will b* oaad for parohaaoo of Catch eoalpaantoal^ahinj plant at Ho Tarsia ia Southern Patexuaia.ot known whether otherho*loT*jcUn projects la Argentina aro being financed under this credit, although it le entirely poteibl*ecent pcrchaeo af Ctech transport aircraft on lO-roar credit teraa oar relate todllion proriaioo.

The Fellrh-Arger.tLn* trad* agreoaent ofhilethat Poland facilitat* the export of capital goods to Argentina on credit, did notpaclfic axaurrt. Aa yet there haa boon no evidence of ear Poliah erodlt to Argentina.

East Oeraaay ha*redite for pvnxhaae* of eouipaeat forufar iadastrp and haa indioated ita williaxneia to great leap-tare credits for ether oonlpaont pnrehaoo*. Aa ret no

/

ccctmct* km resulted fro* these offers,

m. /rreutlna'a Trade Ith the fiina-farlet bim

i

Argantloa la tha largest latin tearlcan tradar with tha Sloo-SoTiet Bloo. 4 IrraokWe traoa with tha Sloohola increased ahorplr both In amount andercentage sharo of total trada. Only with Bulgaria has trada decreased. (SOO Tahla 2) Although- total trada with tho Bloadllitii lajaaoautad laaaereent of Argentine's total trade, itrai tho Talao of Argentine-aioc trade3 and orer twice tho Tala* of tradeoetwar pee* rear. Preliminary lnforaatlon oa ArBtotlao-flino-Scrlet Bloc trads In tho first half of tha rear indicate! that the lerel of trade5 via aa high, or higher, than4 lerel.

Argentine export* to tha Bloo4 wore la excess of lmporte. Exports amounted tolllien while laporta were Talced at approximately jPJJ ailllon. Daring tho first six acothetowrer, tho reverse waa tree* lmporte wvro reported tolllion,ercent higher than iaports in the eases periodhile exporti were reportedlllion, only aboutercent of exporte in the earn period Indications aro that this tread probably leveled off ecnevbat In tha last half of the Tear.

Too large lnorcBM inount with the Bloe45 laesultonsiderable incfwaee la trade with the VSSa and Poland, trad* with those two oeuatric* lahighest erer reeorded amounted forhird* ofotal trade with the Bloo. Trade with CotehcslovaXla, Bangary, ftaaaala. and China alto lasraassd33 lorels hat did not reach the leral of prtrira peak years. Trada with Albania, Bulgaria andaa nejllgitZt.

fallowing the conclusionarge trade agreewnt laotal trade bstwesh Argentina and th* OSSX Inoreaaed free

asouat13 to oca* ill aolllnondaillion tcporta4 totalledillion and export* were,tllllen. Preltalnar/ statistic, indicate that in the firat halfrade aaounted torillion ae eoecared toillion la the first aixaaonthi Thia decline la total trade we* th* re saltharp decline in Argentine export* during the. period, laport* in th* first half5 were raisedonsiderasle increase oror theiiiien reeorded in the first half

rade with Poland, second large at Dloo trading partner,srsl ofdllion4 as coopered with

figure represents Argentine export*A exports under the trade agreeasnt did not begin until

-

1

eliehtly Bore1 onnrnrtft4

tUlllon and export* wedllicn. Dcrlnj the first half

1

bllih-Arreatine trade ooctinwd lte upward tread, anoontinjillion a* oospore*illion in the first half Ae no the eaoe inradeaporta fromillion. Increased oror import* in the eaae period

inwall*4 aillien,ecliainj trend.

Trade withrr, Ruuiria and China alsocjiaidarahl* increase4

-a? -

Argentina^ exporta to tho Biao-Goriet Bloo45 wen* eor-pcaed eatlrely of agricultural and lirtrtcox producta. Rldee, grains, and oasts,af, tcgsthsr errorercent of Argentina's exports to tho Bloo, eaoufitedn aadsnUlloa ivepectlTely. Other experts, la eaantiutira order, were <ra*bracho extract, llntuft oil aad other Testableool and cutter.

rjeatiaa exported to thelllion worth2 adllloa worth of hides, U5 ail Hon worth of linseed oil, aad aboutdllion worth of batter aad euebraeho extract. All exporte except batter wore specified la the3 trade egreecavst. Statistics for th* first half5 re-real that, la aeeUtlon to exportingeata aad linseed oil, Argentinadllloa worth of wool to tho DBS* bo butter or ojartaraoho extract esparto were reported during th* period.

Poland iaported adllion worth of grainslllion worth ofillloa worth of wool, and email aaounta of neat and ouabraoho extract froa ArgentinachoslOTakia, the third largest Blsc trader with Argentina, imported grain* (wheat andool, hides, aa-at and one bra oho extract raloed

-

regret*

347 Billion,adlllon end rlillftp mapeetlrely. Hangaryta-la iapcrted chiefly hides, grains and quebracho extract cad Chita iaported chiefly quebracho extract. .

rren^in* frpim

Argentina,'* najor iaporta froa the Biuo-do*riet alec aer* Crude Baterlalf, dnerai* and fannfartured goods, each a* coBoat end iron and iteel prodnete. Irpcrta of thete coDaodltlea4 accounted for orer To percent of total iaporta froa the Bloo xhile lapoTtc Of racainrry and tiunsporUttoa equipnant aoooanted for onlyoroont of the total. Cbeerioal* and aiaeslltneoua prodnota Bade apatr.irr. portsy talne, were iron and cteelilllcc|illioui eexrat,aillion,7 aillion, petroleta9 nilllooi5 aillion and railroad ec^paent,illion.

Xaporte from5 tenslsted chiefly of iron and etoel prodnotadllioo, petreleuta prodnota9 all lion, and railroad eo^dpaont (exploding rolling st> ok)illioa. Snail ascents of aaaMnery,orth of traetoreorth of oinlng aachlncry, were aleo Inportod. Orerercent ofiaporta froa Poland4 con listed of coal

'

spssr

caaent. Coal lraxn-ta ware valnedlUlco aad oastut lapcrta ataaUllon. Cueutoalcraxla and ffonrtry trera tho Urgaat exporteraachlnerr aado irjantlaaaaoho-elOTakie exported aooa ttJ, alllloa vcrtt of tractors, aaddllloa worth of railroad ooachoa aad aachlnery. Xaporta froa haaaala constated entirely ofhich aaoonted5 adllion, There war* ao luportahina reported.

Available data roTOal* thatho CTOR Increased exports Of railroad eajilaaona, laoloa^ta* looaovtlvse, aad ilao exported0 worth of adalnj aaxbiaarr. CscehoalevsJda lacreaaed Iron and ttaal export*ogliiihla anovata to alnoatadllion in th* first aU aonthJ

- W-

iff. inff I

| , IS I IBi. |

Jj| . i

ostwar tr*d* tot been based almostca

i i

bilateral tgreoatente aad la recent rears the trend haa an toward increasingndereeaaate with rany ooaatries or the free Vorld. Tale tread haa not been la evidence inilateral arrsareaanto vitbo-5rriat Bloo ooontrlee. for th* aoot part, Bloo export* to Argentia* Bar* failed to keep pace with irgaatin* expert* to the Bloc, fan Cantral Beak of Argentina reports that/ at the and ofotal Bloo indebtedness to Argentine onder Bilateral agreenenteillion, fhio le well aboreillion awing credit pendtted in tho tgr**Nctc. The breakdown of thia debt aa* ao follow*irilllcnjlln,6 million)oo BSSx debt wae reduced toll Hon

by the end of IMS. A* tho4 trade between Argentina and the Bloo sxrated to only9ajor pert of this indebtedness wae accumulated prior

Q3SB deliTeriee fell far Short of neeting cecal fcoeaVa under the trade agreement at the end of the first agreement yearcrte to Argentina daring the period,3 tomounted toillion ofillion target ahils Argentina

by4 asounted toUllou.During theflTn Mothshe BW2 stepped ay its exports end, by1sod of thootaldlllon worth of Soviet roods bad boon dollrarod to Arrentina^atlll wall belowdlllon target* florist deliTerle* of erode peireleua4 wer* far abort of ooaadtoanta, aa were reliviriee of eoal, sheet iron, pipe, transportation aovJnaent and retrolowa and adning eewlraaat. At tha aaae tlsa, Soviet doUrerieo of refined petroleoa prodnota were ereatly la exeese of oocj^tssate, and dellTeriee of ralla approxliaabod the establlihadnplaaanWtlon of the protocol for trade5 le not known, hcvtrsr, statist!si for tho firat half of the roar ladloate that the Boriets again fell short of their ooondtaaatf to export erode petroleum, eaulp-

aant and iron and steel*

*

Preliminary statistics for the first half of tha year indieate that OtaehoeloTakla and Argentine prdbcbly did not aaet their export eosndtatente toder the5 agreementobeldiary barter agreement the Qaeobs were te export to Argentinaillion worth of iron and steel products, aaohinery and wood. 1CV Although far exceeding Argeutlne experts during the period, Ceeeh exports throughaoonted to9 adlllon ofillion proriaioo. One of the najor dellnouernoles was in dell varies of iron and steel

prodoote. Only t5 sdllion of the ooaoattted H4 aillion worth of these

USSR deliveries under the agreement did not begin untilexportedillion worth of products in theof

product* wti exported bycaring the fir it half of the

rear* Xxzorto froa Argentine vera also legging behind tho eetebliehed

1

otalillion OUTth of producta which Argentina waa to ahlp to Cueohculoraale dsriag tho/ onlylllion worth of grains, ooata and hidoa had boon doUToradho aad ofn addition to assorts under tha trada arrengenente, CiochcilcvaWo is eaaudtted te proTiao vpillion ia credit for capital goods purchaeea. There hare boon reportof definite utilisation ofl adllion of thia credit for eo^paentoal, waahfnj plaat la Argentina.

Arfentiaa-rbliah export eoetae aetrobably full/ iaplaaented bp the cad of the rear, Tradetwo countries4 waa alavat la belance. AlthoughBaah roperted that Poland waa Indebted to Argentina byalllion at the endeat of the debt waa incurredye are. rovlalon in tho5 agreement thatthe export of capital goods to Argentina oa anbaala haa apparently

At the endtaaawrrarge debt to Argentina enouniiag todllion. Soa* effort waa Bade to reduce the debtarter agreeaent signed lahich edpulated that Hongarydllion worth of good* la return for Argentine exporta Talued0 bIIIIcq. The5 adllion)

to b* csod to refect th* debt. Hot only her*garlan* railed to fulfill their trade eonaltaeaU to Argentina, hatof their oolAverieibeen found to bo defective. It hateported thathlbyiHtn railway car* delivered to Argentina by thofira woro defective and of poor/

Buxmnla it th* only Bloo country, which, at th* and,light export rnrploa In it* trade with Argentina. aanlea export* eootitted entirely of wceandication* are that3 Bananla again had an export turpla*.

At ther* eat ao foraal trade *rrangea*nt between th* OCR and Argentine until* figure* did not *hcv the etata* of lastrade with Argentina. Bywo month* before 'the expiration of the trade agreeaont, no trade bad been reported between thee* two countries.

iv. tekl Jam TCTde Qfxtnrtre jo- ir^ina

o overture* to Argentina have been foeuaed primarily on expending trade. Not only are the Bloo oountrlce willing to take agricultural and livestock oesacdltlee, ouebraonoool isey, linseed ell, cheese, better end aide* ISQJ for which Argentina ha* had minor nark*ting diffleolbtct, hat they are willing to export to Argentina capital goods to aid inconomic development.

J

SincecVlet^tieas sad odtsiona froa Cocnonlet China,ODa, Bulgaria, Crocho Slovakia, Poland aad3 qktb visited Argentina to alBouea tha exnaneioa of trada. In5 the USSR inaugurated an elaborate industrial exhibit in Baanoa Airee in an atteapt to interest tho Argentinee in Sorlat eauapaaat. Recent Bloo trade off era to Argentina hare been directed to provincial goTsrnaaPts aad private erAorpriaen aa veil aa to ecrtral gwieriaaaiit/ this is iaadth the Provisional (hmrnaaate aanouaooaente regarding the d, centralisation of foreiga trade andaiion of the etate trading orgaidaatloo,/

rgentinarada agreeaeate with Soviet Bloc 6cantriflraf Baasarp, Poland, Buasai* andotal trade turnoTsr of oreradllion, (Set Table T)

Th* largest and nest eiffdtlWi of thsee agroeoents wxa otgaod

3 hyS and Argentina. Th* agreement, th* flrrt *

aver negotiated between tho OMRatin American country, provided for en annual trade turnoverlllion eachillion orodit to be extended; to ixgentlna for purchaaeo of Sovlot capital aouipnont, and Soviet technician* to inatall and wrvio* tnporte of Soviet aouluaoat. oaeV Tho trsda target* act by tM* agreement sore than doubled the snounl of the entire latin American area'* trad* with the Bloo* Th* ograemant vis extended In4 end5 vaa revised downwardrotocol to the egroaaont. Th* protocolore realistic trade target0 adllion for tho calendar5 and reduced theillion credit provision in3 agresaent toillion. Significant change* in Soviet export quotas as sstebUshcd by the Kay protocoloasiderBbl* lncreaoe in exports of iron and steeleduction in the ouot* for earn patroleuu etpdpaxml, delation of ooal froa th* list, end the addition of special atoela, alnwlrew, cellulose and pine wood.

ear Oaauh-Argantiae trade agreement aigned ins the second largest trade aATucBent between Argentinaoviet Bloo country. Cseehcsloralcia and Argentine, hare traditionally traded under bilateral trading *rrongoaant*. However,

agroeaeut Dagatlatad after the expiration2 agreemento total trade target rwro than double in^rloue trade. agreeststprovided for oere titillier, to Argentina for purohaaea of Capital goods. At the ismabaidiaryegrfleaent we ei fined under Which OeechoelovsJcU agreed to axport cn additionaladllion worth of foodo to Argentina, in return foril lion worth of Argentina prcdusVf* The difference aata to he to reduce Caeca ladebtedneee to Argentina whieh waa reported to beillion at the end

A protocol to thetrada agroeuent ofigned ianviaadvd total tradeadllionhislight laoreaae otwrmillion target act Thia agreement, lixm thoae aegotlated with* aad Ctocheelowahla, made provision for tt-gea-tlas imports of eepltel goeda oa aa Installment payment basie.

Hungary aad Argentinaew three year trade agreMent ia3 to replace the previous agreeaoat of9 wbiob oxjlred in Thlaill Urn trada turnover target apparently for the first year. Self of Buugary'e axporta uader this agreement ware to reduee the Irongarian debt to Argentina which stood atillion at the end Onpril

-hi -

ew trade target rotocol tou*

greatly reduced leTel5 fcillioo and Ittmgsrianillion. In* insolence wae to bo naod to reduce tb* maigaxian debt. Cadsr tola agreement Argentina agreed to admit Rangxrian teehnlolana to *erviae end installacainerr. Thea laettirigned which established the ieeel for Argentina export*5 Billion and Hungarian expertsillion.

After two years, during vhlea tlaa there va* no larsal trad, agreement, Rumania and Argentina, incv trad* sgreeosnt. so trad* target la available far thl* agreeRwnt.

Aa Past Qerou^ArgsntiBe eoapensatlon *grct>aont, signedor theth* ODft i* the first agreeueat orer aegotlated between these two countries. Pro vision was aad*otaletohang*dIIion.

There baa been no trad* agr assent between Argentina and Balgaria0ulgarian eXasaeroial ads si on now in Argestlna nay be attewpting toee* agresaent. |JJ/ Argentina has never had foraal trade agreawoata with either Albania or Coesanlst Chins* Trade with these countries haa been conducted on an ad, hoc. basis. esult of exchange visits by Argentine end Coeouaist Chinese delegation*

if*po^rto.nform *

of thl. iBftMoX OoTOOOoat.

B, trace felre

Toe BorUi exhibit at to* Industrial Fair held la Buenos iirai

I

la5 was tha Arse of its kind in latin Aaorlee and attracted capacity ertrade. lW the Talus of the exhibit, which featuredoad Machinery aad aiaing cTslpseat,S At the cIoh of the exhibit. eoao ftrt Woo dollars earth of So riot aachlnarr, trnaka, and cU-drilling ac^paoat were sold froa the dlaplay to the Argentina era/ and ITT. The rooDUndar of the roods exhibited were reported to hare been seat bach to the/

BP

Taa Argentina Ooaalasloa for the Prcewtion of Trade, organised bp delegates to the Jtetoov feoooada Oonfsreooc laaa boon actiTe in offorto to la-crease Argentine-Bloc trade, parti oalarly Coataanist China. This organisation Is reported to hare been working eith the Soriet rrbasty in Buenos Aires to preaote trade betwecQ

i

Argentina and Cceaanlat/ Through theae efforta an Argentira delegation waa sent to Ofalna lahine aa delegation netted Argentina la/

sotoi fjpjof Bjaa/oaaa

UtXBKOUl tog

'*gJT"u

tV Stato, Boaao* Alrea., p. 2

Op. Jit. Iirtornattoool Konatary rood. International Financial Km ^rrrr>

Op. cit. Stato, Bttaaoa Airoc. Dtp See, p. 14

Bank for International SotUcwcnte, Prow Rcrltnt,, 0

A&laV

;mj>

ttarr ftsao, International Pljianolal Rm

17. lrea.pr Jo,oot II, Row, p. I* OtfO

id, i

tate, Bosnct, p, 3Hrta, Bptaos ium/.ftp 5oo, p, 3

23, Stato, Dosnos-ross ItaVlond

aa* foretUcaeate,V. * for International 2atUener.ta, Press Reriow,on 36

2i* QPi ffatii Ber* for International SeUlecata, Press Barlow,mank for Xntemtioftsi SatUceanto,lev,an 36

281

SUte, Buenoe Aires,,atrols Inaorio-Thlrdo *nel. A, OIA

Stoto, Buenos Aires,

SUte, Corrent Aocnoado

teroe of hane.tet<m. -rircloi

QsTaun&aAJwtissgito Info oia

33. State, Baenoa Alrea.,oekaeon,, 0

Son**top y&

i

tpAg^vlBv ffrM Pmtamirl,

I*

he, tjaflmM'

BtflkKsAlngiojl, ttm helssso,

f3>

5

aM

ttlt, Bttzaos Alrst.> p. 7

SuslMtt TnUnis^teal,.

9

CHx.fiJAa,wroi Alrte. DtpBmtip

50. Sttts, toraot Urw.. 1* sctrlQ,

51.

. LA -

. 7

55* Op.ill, 17

56. Vi Buonoe Alree.rrantlne Central gank

ftflflU

SlUJ&biUtp yfly, p# a

uu. fcaayrt Alrtt.

,f enol. 3Baate, Baenet, p. 6

tate, Boom Alroo.. 1

tate, Bwrot Alroo.,f eool. 1

ute, Boenoa Alroo.,

lft,fill, BUte, Boaaoeftato, Baoaoa Alrai,, p. 1

jests gag.* *

68Jti&UBank,abth.stlaNa Bttte, Bvonoo Alrote Bopp. 3

lejf igfr Ttot,

wno*

Ota, :Va*Mnj>on,prizti.

lp (ortsMng toOA. rSO, 10

Arnr, Ap^ntina.U TJUnfa

63,

CIA. POD

CU. TOO euxoaxr5'

Latta.AanTloa.8

83. mta, BuoaoB.Air, Born,3

u m

U. PUD.stad

teufiiV.m in-7iiB, p. 7

94. <

U ftl,^ TTltfft,3,

lute,S,. CoTOroe,foreignd.

,a 9

State, Bueneo Alroi.

OXa, Tm,latcted

,

i

tete, Samoa Air*a.,- ltete, Booncs Aires. Sapp. I

tate,. 11

Stato, fhpanos Urea.,a, OUO

- A-

STi, 15

icfo0.

s--a

ta, rro

lit* flUU,U

or**>

^irtiiirt, p.oftfni

ffffjort riiFtt,Apr a

OIAt TO tomarr p. JO

1M. Oa, TO tatr/PH ft.

7

t*Xi

1,

OIA. FDO femrr p. 57

Original document.

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