The Colombo Plan For Co-operative Economic Development in South and South-East Asia REPORT BY THE COMMONWEALTH CONSULTATIVE COMMITTEE, LONDON, SEPTEMBER AND OCTOBER, 1950

Appendix to the Journals of the House of Representatives, 1950 Session I, A-17

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1950 NEW ZEALAND

The Colombo Plan For Co-operative Economic Development in South and South-East Asia REPORT BY THE COMMONWEALTH CONSULTATIVE COMMITTEE, LONDON, SEPTEMBER AND OCTOBER, 1950

Presented to Both Houses of the General Assembly by Leave

By Authority: E. E. Owen, Government Printer, Wellington.—l9so.

CONTENTS Pagt Foreword v Chapter I. The Importance of South and South-East Asia ... ... ... 1 11. The War and its Aftermath ... ... 4 in. The Need for Development 8 IV. The Development Programme of India 12 V. The Development Programme of Pakistan 20 VI. The Development Programme of Ceylon 28 VII. The Development Programmes of the Federation of Malaya, Singapore, North Borneo and Sarawak 33 VIII. The Sum of the Programmes of the Commonwealth Countries ... 40 IX. The Need for Trained Men 46 X. The Need for Capital 54 Appendix 1. Production and Exports of Some of the Principal Products of Main Countries of South and South-East Asia 65 2. Balance of Payments on Current Account of Commonwealth Countries in South and South-East Asia 68 3. India: Statistical Appendix 69 4. Pakistan: Statistical Appendix 78 5. Ceylon: Statistical Appendix 84 6. Malaya and British Borneo: Statistical Appendix 90 7. The Council for Technical Co-operation—Constitution ... 99

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INDEX TO TABLES Table Page 1. Production and Exports of Selected Commodities from South and South-East Asia ... 6 2. Rates of Population Increase in South and South-East Asia ... 9 3. Levels of Economic Development in 1949: Comparative Indicators 10 4. India: Analysis of Programme 13 5. India: Current and Future Rates of Investment 16 6. India: Internal Finance available for Development in the Public Sector, 1951-57 17 7„ India: Internal and External Finance for Investment, 1951-57... 19 8. Pakistan: Agricultural Production, 1948-49 20 9. Pakistan: Some Projects of Provincial Governments in Progress 21 10. Pakistan: Analysis of Programme 22 11. Pakistan: Distribution of Cost of Agricultural Section of Programme 22 12. Pakistan: Production under Agricultural Section of Programme 23 13. Pakistan: Internal and External Finance for Investment, 1951-57 26 14. Ceylon: Analysis of Programme 29 15. British Territories: Analysis of Programmes 34 16. British Territories: Internal and External Finance for Programmes, 1951-57 37 17. British Territories: Domestic and Foreign Exchange Expenditure for Programmes, 1951-57 39 18. Public Authorities' Expenditure on Development Programmes... 41 19. Analysis of Development Programmes 42 20. Range of Identifiable Projects in Development Programmes ... 43 21. Domestic and Foreign Exchange Expenditure for Programmes, 1951-57 44 22. London Prices of South and South-East Asia Export Commodities 46 23. Higher Educational and Technological Training Centres ... 49 24. Preliminary Requirements of Overseas Experts for Programmes 51 25. Balance of Payments, 1950-51 56 26. Revenue and Expenditure of Governments 57 27. Summary of External Finance Required, 1951-57 58

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FOREWORD 1. This Report was prepared at a meeting of the Commonwealth Consultative Committee on South and South-East Asia, which took place in London in September 1950. The Governments represented at the meeting were Australia, Canada, Ceylon, India, New Zealand, Pakistan and the United Kingdom. 2. At the first meeting of the Consultative Committee at Sydney in May 1950 the decision was taken to draw up a six-year programme of economic development for countries in South and South-East Asia, and it was also decided to invite other countries in the area to join in this co-operative enterprise to make a comprehensive attack upon the problem of poverty and under-development in the area as a whole. The Governments of Cambodia, Laos and Viet-Nam, and the Government of Thailand, accordingly sent delegations to a joint meeting with the members of the Consultative Committee early in October 1950; the Ambassadors in London of Burma and Indonesia attended this meeting as observers on behalf of their Governments. 3. These Governments have all been invited to participate in the further work necessary for the success of the plan, and to prepare development programmes on the same lines as those which have been prepared by the Commonwealth Governments in the area. They have also been invited to join the Council for Technical Co-operation which the London meeting agreed to set up. These Governments are now considering their attitude to the plan in the light of the reports received from their delegates (Cambodia, Laos, Thailand, Viet-Nam) or observers (Burma, Indonesia) who attended the joint meeting. 4. Thus, whilst this Report has been prepared by Governments represented on the Commonwealth Consultative Committee, and consequently deals in detail primarily with the problems and programmes of the Commonwealth Governments in the area, the needs of the other countries in the area are very similar to those of the Commonwealth countries, and it is hoped that at a later stage they will prepare similar programmes which will enable a complete conspectus to be made of the problem of development of the whole area.

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ABBREVIATIONS, UNITS AND SYMBOLS USED IN THE REPORT Malaya Federation of Malaya and Singapore. British Borneo North Borneo, Brunei and Sarawak. Tons = Long tons of 2,240 lbs. ...•■= Not available. — Nil or negligible. EXCHANGE RATES USED IN THE REPORT Rupees (Rs.) (India and Ceylon): 13-33=") 4-77="| Rupees (Rs.) (Pakistan): 9-27= >£l Sterling 3-32=>$U.S. 1 Malayan dollars (M $): 8 • 57=J 3 • 06=J

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CHAPTER I THE IMPORTANCE OF SOUTH AND SOUTH-EAST ASIA 1. The peoples of Asia have long felt the pressure of poverty and hunger. While the realisation of self-government could not of itself relieve this situation, it has made possible a new approach to the problem of raising living standards through the vigorous development of national resources. Among the peoples of Asia hopes and aspirations have been raised by the plans of their Governments to secure a fuller life for them. 2. The region with which this Report is concerned comprises the countries of India, Pakistan, Ceylon, the Federation of Malaya, Singapore, North Borneo, Sarawak, Brunei, Burma, Thailand, the Associate States of Cambodia, Laos and Viet-Nam, and Indonesia. Its 570 million people make up onequarter of the population of the world. Despite the abundance of human resources, the considerable natural wealth of the area has not in the past been developed rapidly enough to ease the increasing pressure of population upon the land. There is, therefore, great poverty among millions and an unceasing struggle for existence. In India at present the people's diet consists almost entirely of cereals, and in the rationed urban areas they consume only about 12 ounces of food grains a day. In Pakistan, with its wide range of temperature, 9 yards of cotton cloth have to suffice for one man during the year. The low level of consumption illustrated by these meagre quantities is clearly inadequate by any standard ; moreover the level of food consumption in the whole sub-continent of India is appreciably below what it was ten years ago. The same general picture, with local variations, is presented by every country in South and South-East Asia. In these circumstances the urgent need of these countries is to develop their economies in order to increase food production and consumption and raise the real income of their peoples. 3. During the past five years political events have moved fast in South and South-East Asia. Changes have taken place on a scale hardly precedented in world history. Independent Governments have come into being, supported by democratic institutions and imbued with enthusiasm for the future welfare of their countries. The horizon of thought and action in the economic as well as the political field has been greatly extended, and Governments are grappling with the problem of promoting the economic improvement which is indispensable to social stability, and necessary to strengthen their free institutions. It is of the greatest importance that the countries of South and South-East Asia should succeed in this undertaking. The political stability of the area, and indeed of the world, depends upon it, and nothing could do more to strengthen the cause of freedom. 4. The countries of the region play an important part in the world economy. The area is a major source of the food and raw materials consumed throughout the industrialised world. Before the war it provided almost all the world's exports of jute and rubber, more than three-quarters of the tea, almost twothirds of the tin and one-third of the oils and fats. These key products have for generations flowed into the great trade routes of the world. Rubber, tin and jute products earn dollars in the Western Hemisphere. Tea and oils are shipped to Europe. In return, the industrial products of the West —textiles, machinery, iron and steel —flow back into the area. 5. Two features of this world-wide trade are especially significant in relation to present-day difficulties. The first is that the area has traditionally had a large trading surplus with North America, and a deficit with the United

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Kingdom and Western Europe. The earning of this dollar surplus in trade with South and South-East Asia was an important factor in enabling the United Kingdom and Western Europe to finance their own dollar deficits before the war. Thus the dollar earnings of South and South-East Asia were a significant element in the world's multilateral system of trade. 6. Secondly, the main impetus to the development of South and SouthEast Asia, which helped to make possible a world-wide pattern of trade, came from a steady flow of capital from the countries of Western Europe and more especially from the United Kingdom. While this flow of investment may not have been adequate to permit as rapid social and economic progress as might have been desirable, it nevertheless provided the basis for the development which has taken place in the area over the past hundred years. There can be no question that external finance must continue to be made available if the constant pressure of population is not to depress living standards still further. 7. Since the end of the war both these features in the economy of South and South-East Asia have been transformed. Dollar surpluses have in many countries been replaced by dollar deficits ; and the flow of new capital into the area has itself dwindled away as a result of the disturbance caused by the war and the reluctance of private investors to risk their savings in the face of new uncertainties. 8. In these circumstances it is clear that the vital interests of the countries of South and South-East Asia, as of the rest of the world, require the restoration of the area to its key position in world trade. The strengthening of their economies through the resumption of a large-scale flow of capital is essential to any permanent increase in productivity and living standards, and at the same time it is a condition of the higher level of trade on which a stable world system could be based. 9. At their meeting in Colombo in January, 1950, the Foreign Ministers of the Commonwealth' countries agreed upon the vital importance of the economic development of South and South-East Asia in the maintenance of the political stability of the countries in that area, and in the growth of an expanding world economy based upon multilateral trade. 10. The Commonwealth Governments took the initiative in considering international action to deal with the problem because three-quarters of the people of South and South-East Asia live in countries which are members of the Commonwealth, and the whole area is one with which the Commonwealth Governments have close political and economic ties. But the initiative has been taken mno exclusive spirit. It was contemplated from the beginning that all countries in the area which were not members of the Commonwealth should be invited to participate on equal terms in whatever plan could be devised to lead to international action. It was moreover recognised that the resources required for the effective development of South and South-East Asia were considerably more than the Commonwealth itself could provide, and that it would therefore be necessary to seek the co-operation of other countries. The scale of the problem is indeed such that a new and more comprehensive approach was from the first regarded as essential. 11. Accordingly, after the Colombo Conference, a process of Commonwealth consultation was begun with the purpose of making the most effective possible attack upon the problem, and of focussing world attention on the needs and difficulties of the area, The Commonwealth Consultative Committee, which

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was brought into being at Colombo, met at Sydney in May and took the process a long step further. The Governments of the Commonwealth countries in the area agreed to draw up a practical and realistic plan of development for a sixyear period to run from the middle of 1951, and they put the preparatory work in hand at once. They also decided to provide funds for a technical assistance scheme for the area. This scheme, the detailed organisation of which was worked out at a meeting at Colombo in July, is outlined in Chapter IX of this Report. .12. In the meantime, in accordance with the decisions taken at Sydney, invitations were issued to the non-Commonwealth Governments in the area to join in the work of the Consultative Committee and to draw up six-year plans of economic development. In the event, however, it has not proved possible to secure the full participation of the non-Commonwealth Governments within the time originally envisaged, nor have they been able to prepare programmes of the kind presented to the Committee by the Commonwealth Governments. This Report has therefore confined itself in the main to the development programmes of the Commonwealth countries. It is, however, hoped that it will be possible for the non-Commonwealth countries to co-operate fully in the plan in the very near future and to prepare development programmes of their own which, when brought together with those of the Commonwealth countries, would provide the comprehensive survey of the needs of the area as a whole that was originally considered desirable. .13. The preparation of this Report is thus a further step in the process set on foot in Colombo. The idea conceived there has been given shape and content in the last eight months. The scale of the problem has been assessed, knowledge has been gained of the difficulties to be overcome, and the way has been prepared for further advance. 14. The purpose of the Commonwealth Governments in initiating the programme described in this Report is fully in accord with the principles of the United Nations. They intend that it should develop in harmony with the valuable work done in the area by the United Nations and its Specialised Agencies which have recognised the need for outside assistance for the development of under-developed territories. .15. These considerations form the background of this Report. The improvement in the welfare of the South and South-East Asian peoples is a vast human endeavour, and the community of free nations stands to gain immensely by it. The political stability of the countries of the area is possible only in conditions of economic progress, and a steady flow of capital from more highly developed countries is essential for this purpose. The conception of the Commonwealth countries' approach to the problem is that a fresh impetus should be given to economic development in South and South-East Asia in order to increase production, raise standards of living, and thus enlarge the volume of trade around the world from which all countries may benefit. It is because this is a world problem of the first magnitude and not a purely national or regional one, that the Commonwealth Governments have framed this Report for the world's consideration.

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CHAPTER II THE WAR AND ITS AFTERMATH 1. The second world war inflicted heavy losses on South and South-East Asia. In the fields of battle physical damage caused by the fighting itself was aggravated by ' scorched earth' and ' denial' policies which followed the outbreak of war. Under the Japanese occupation many territories were despoiled and neglected, and economic assets built up over generations were allowed to waste away. Railway tracks and locomotives were removed; rubber plantations and tea estates reverted to the jungle ; power stations were driven without care or maintenance. After the war these disasters, combined with a world shortage of shipping, radically disorganised the production and transport of foodstuffs and raw materials within South and South-East Asia, with calamitous results for the economies of the area. 2. Economic dislocation and inflation in many parts of the area were added to the physical ravages of war. The Indian sub-continent, as the great Eastern base of the Allied armies, supplied the forces East of Suez with clothing from mills worked to capacity without normal renewals ; at the end of the war machinery was overstrained and in need of replacement. The railways, too, had carried an unusually heavy volume of war traffic and by 1945 were in urgent need of repair. Every effort was made to increase food production at the expense of crops such as cotton, jute and oil-seeds. Home consumption of such goods as cotton textiles had to be restricted in order to maintain exports in the interests of the war effort. These measures, together with the great increase in the money supply arising from war finance, created an inflationary situation which remained a source of serious weakness when the war came to an end. 3. If the state of insecurity had ended with the war, much more might have been done in South and South-East Asia during the ensuing five years to restore a healthy pattern of production and exchange. Unhappily political and social disturbances occurred in large areas with varying intensity at different times. Some Governments have been largely preoccupied with these disturbances and others, although well established, have been compelled to devote a large part -of their resources to defence and the maintenance of law and order. In the Indian sub-continent the transfer of political power to the new Governments of India and Pakistan was carried out smoothly, but the partition of the country itself caused considerable economic dislocation. Attempts are still being made to resolve certain matters which are costly to both India and Pakistan and a serious obstacle to economic advance. In Malaya economic rehabilitation has proceeded a long way, but the measures required to maintain law and order are a heavy drain upon the resources of the Government of the Federation of Malaya and upon the United Kingdom. In Thailand the economic situation has steadily improved. In Burma, IndoChina, and Indonesia grave dislocation has retarded the process of post-war recovery. 4. The central problem has been, and still is, the supply of food. It is here that the impact of the war and of post-war unrest has been most serious, for the effects of the disruption of major sources of supply have been accentuated by large population increases. Rice is the staple food of the hundreds of millions living in the area, and in 1938 over 5,500,000 tons were exported from Burma, Thailand and Indo-China, while imports into India, Ceylon, Malaya and Indonesia were 3,300,000 tons. Immediately after the war there were 15 million acres of abandoned rice fields in South-East Asia and exports

THE WAR AND ITS AFTERMATH

from the sources mentioned above were reduced to under 1,000,000 tons in 1946; these were wholly absorbed by the importing countries of the area. In 1950 exports are not expected to exceed 2,500,000 tons. So radical an interruption in the supply of rice naturally held grave dangers for the inhabitants of all rice importing countries of the area. It undoubtedly aggravated the catastrophic famine in Bengal in 1943, although this was also in part a result of the internal strains occasioned by the war. 5. To meet this situation, and to prevent the recurrence of famine, was one of the first and most urgent tasks of the post-war years. The International Emergency Food Council was created in 1946 to allocate scarce foodstuffs on the basis of need and to prevent ruinous competition in world markets. It continued in operation until 1949. This was an act of international cooperation of major significance to South and South-East Asia. The meagre rice allocations were also supplemented by large shipments of wheat from the United States, Australia and Canada. In addition, the importing countries themselves took measures to increase still further their own output of food by speeding up irrigation projects and by providing special assistance to farmers. 6. Thanks to these measures and to the gradual recovery of rice production within the area, a sufficient flow of essential foodstuffs was maintained to avert widespread starvation. It must be acknowledged, however, that over the greater part of the area little progress has been made towards raising food consumption. Calculations made by the United Nations Economic Commission for Asia and the Far East, in its recent Economic Survey of the area, show that the output of food in South and South-East Asia is still below its pre-war level, while the population has increased by some 10 per cent. Consumption per head is, therefore, lower than it was ten years ago. 7. Related to the problem of food is that of transport. Reference has already been made to the serious deterioration which took place in the railway system during the war as the result of a great increase in the volume of through traffic, some of which would normally have been routed by sea. There was also loss of rolling stock and locomotives exported directly to war areas. In South-East Asia it was found at the end of the war that more than a third of the pre-war track had been torn up or rendered useless. Road and water transport had also suffered heavily. Large numbers of water craft and working animals —perhaps as many as one-half —were destroyed by Japanese troops retreating before the Allies or through the looting of farms and plantations by starving refugees during the ensuing chaos. All this had the most serious effects upon the production and movement of crops. Since the war some of the deficiencies in transport equipment have been made good, but not all the railways of South-East Asia have yet been rebuilt. 8. The effects of the war on industry are to be seen mainly in India. Although there is little industry in other parts of South and South-East Asia, the whole area was affected by what happened in that country. The production of war material in India led to a large temporary expansion in the output of steel, electric power, cement and cotton textiles, all devoted to war purposes. The industrial machine, however, especially in the jute processing and textile trades, did not receive adequate maintenance. As a result of this prolonged wear and tear, the accumulated deficiencies in the supply of many essential consumer goods could be overtaken only gradually during the postwar years, and at the cost of a heavy charge on external resources which might otherwise have been applied to new development.

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9. In view of these difficulties, it is hardly surprising that there is still a major task of reconstruction in South and South-East Asia. The outstanding fact is the amount of work which has already been done and the levels of production which are being achieved. The course of the various economies is described in a wealth of detail in the United Nations Annual Economic Surveys of Asia and the Far East, and it is necessary here to relate only the essential facts. In the following table the more significant figures of pre-war and post-war production and exports are presented: Table 1. —Production and Exports of Selected Commodities from South and South-East Asia thousand tons Production — Pre-war 1946 1949 Rice (paddy) 70,990 64,987 70,117 Wheat 10,160 9,180 9,517 Oils and fats 3,596 2,844* 3,174 Sugar 6,223 5,789 6,200 Jute 1,831 1,427 1,340 Cotton 1,132 759 606 Tin 116 15 94 Petroleum (crude) 7,960 444 9,034 Exports— Rice (paddy) 5,676 956 2,460 Oils and fats 1,319 174 630 Sugar 1,029 2* 36 Tea 315 268 362 Jute 757 391 271 Jute manufactures 894 711 846 Cotton 573 171 177 Rubber 830 891 1,393 * 1947. Note: For the definition and sources of these figures, and for details by countries and years throughout the period, reference should be made to Appendix 1. 10. It will be seen that, although production has in general been restored, exports have revived unevenly and exports of foodstuffs are still much lower than pre-war. Rice. —The drastic effects of the war have already been described. Since 1946 the work of rehabilitation has partially restored the flow of supplies. There has been a full recovery in Thailand, but not in Burma or Indo-China. Rubber. —The level of exports recovered rapidly after the war and is now far higher than at any previous time. Orders were placed for the necessary equipment long before Malaya was liberated. But the real effects of the years of neglect under Japanese occupation have yet to show themselves. The long period in which there was no replanting will react upon the productivity of the industry in future years, unless a large programme can be got rapidly under way. Oils and fats. —The main producers of oils and fats in the area are India, Indonesia and Malaya. Immediately after the war the attempts made in India to increase the production of other foods reduced the output of oils and fats. Since that time competing demands for cultivable land have limited production. The level of India's exports of oils has also been affected by the cessation of its imports of copra and by a general increase in home consumption. In spite of internal difficulties, the production of oils and fats in Malaya, which suffered considerably as a result of the war, is now almost back to its pre-war level.

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Sugar.—Production in the Indian sub-continent has been increased, but in Indonesia, where wartime disruption brought exports to a complete standstill, it still remains far below the pre-war level and is barely sufficient to meet domestic consumption. Over the whole area the output of sugar had just about recovered in 1949 to its pre-war level. Tea.—Although Ceylon and India have substantially increased their production, this has been partially offset by the slowness of recovery in Indonesia. As late as 1949 Indonesian production was only one-third of pre-war. Jute and cotton.—India and Pakistan, the main producers of these commodities in the area, have found it impossible to restore pre-war levels of output because of continuing demands on cultivable land for other purposes. Present plans provide for increased production of both materials. Tin.—The tin mines of Malaya and Indonesia suffered heavily from the ' scorched earth' policy during hostilities and from neglect during enemy occupation ;in Thailand the mines were kept short of fuel. Since the war new dredges and pumps have been put into operation and the supply of engineering materials, coal and electric power improved. By 1949 the production of tin had been almost restored to the pre-war level, from the very low level of 1946. This was mainly due to rapid improvements in Malaya and Indonesia. Production of tin in Burma and Thailand remains low. Crude petroleum.—Production in Indonesia, which ceased almost entirely after the war, was restored by 1949 to 80 per cent, of the 1938 level. In Brunei, however, production has greatly expanded since the war and is now nearly five times as great as in 1938. Electric power.—Industrial expansion during the war led to an increase in the output of electric power in the sub-continent of India and this has been continued in post-war years. It is now almost twice the pre-war level, although still insufficient to meet demand. 11. Against this background of dislocation and uneven recovery in South and South-East Asia it is possible to distinguish certain broad financial effects. First among these was the inflation of prices and costs caused by the shortage of supplies and unbalanced Budgets. In the Indian sub-continent the increase in the supply of money to finance war production and the accumulation of sterling credits against wartime exports led to an increase of 150 per cent, in wholesale prices between 1939 and 1946. In the occupied territories of South-East Asia the enemy financed himself by unrestricted creation of paper money. Over the whole of the area the increase of wholesale prices between 1939 and 1947 was nowhere less than 150 per cent, and was as great as 1,000 per cent, in Indo-China. During the five years since the war the inflationary pressure has slackened, but the upward movement of prices did not show signs of halting until 1949. At the present time, however, account must be taken of the probable long-term effects of the devaluation of sterling and of the rearmament policies recently decided upon. 12. The effects of inflation in South and South-East Asia have been mitigated by the provision of external finance and by using up external assets. The process of rehabilitation has been assisted by import surpluses financed by these means. The attempts by some countries to increase production in various sectors of the economy have, during the past five years, involved increased imports of machinery, vehicles and constructional materials, which domestic industry was unable to provide. Moreover, emergency imports of grain and textiles in the period immediately after the war were made possible only by incurring substantial trading deficits which were financed by drawings upon accumulated reserves of sterling. In addition, import

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licensing controls have been relaxed for certain periods since the war, and this has had the same effect of giving an outlet to inflationary pressures dammed up within the economy. 13. For some or all of the above reasons, India, Pakistan and Ceylon drew upon their sterling balances in the years 1946-49 to the extent of about £340 million to finance their deficits on current account. This external finance could scarcely be regarded as adequate considering the extent of the losses incurred during the war and the post-war needs of the countries. It was nevertheless equal to more than one-fifth of their combined imports from the rest of the world during the period. To this extent the United Kingdom bore the immediate burden of rehabilitation in India, Pakistan and Ceylon, and it was in fact enabled to do this by generous support from the United States, Canada, Australia and New Zealand in the form of gifts and loans (including Marshall Aid) and by the accumulation of sterling balances by various countries. In the Colonial territories in the area the United Kingdom Government have also sanctioned assistance to a total of £95 million in the form of grants in aid of administration, loans and grants for war damage and development purposes, and security expenditure. Of this amount about £47 million will have been spent by 31st March, 1951. The direct burden of rehabilitating the Commonwealth countries in South and South-East Asia has thus been borne to a large extent within the Commonwealth, apart from drawings by India on the International Monetary Fund and on loans from the International Bank. 14. Less progress has been made with rehabilitation in most of the nonCommonwealth countries of South-East Asia. The United Kingdom, Canada and Australia provided some financial support to these countries during the period of rehabilitation. A joint Commonwealth loan to Burma of £6 million was shared between the United Kingdom, Australia, India, Pakistan and Ceylon. India made a loan to Thailand. Nevertheless, the assistance given by the Commonwealth to the non-Commonwealth countries, as also the substantial aid provided by the United States and other countries, has done no more than meet a part of their needs. 15. A realistic view of the last five years shows that much has been done to restore the disrupted economies of South and South-East Asia. Those countries which have succeeded in maintaining political stability through the turmoil of the period have made headway with rehabilitation, although this has in some cases involved large balance of payments deficits. A stage has now been reached at which it is possible to plan ahead and to move from policies based upon the need to deal with immediate emergencies to the execution of sound and realistic long-term plans for economic development. CHAPTER 111 THE NEED FOR DEVELOPMENT 1. Throughout South and South-East Asia the standard of living is lamentably low, and the economies are gravely underdeveloped. Poverty and hardship are the rule rather than the exception. The meagre diet of most of the peoples of these countries lacks variety ; it is composed mainly of cereals, pulses and starchy foods, which do not supply the amount of proteins and fats necessary to proper nutrition. The average daily consumption of food per head is below 2,000 calories, which contrasts with about 3,000 in the United Kingdom. The absence of adequate medical facilities results in a high mortality rate. Illiteracy is very high. There

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are many ways in which the lot of the peoples in the area might be compared with that of those in more advanced countries, and all would emphasise the need for urgent measures to improve their position. This can be done most economically and effectively by the development of the natural resources of the area. The longer the initiation of the necessary action is postponed, the greater will the problem become. It brooks no delay. 2. Everywhere in the area populations are growing quickly, as is indicated by the following table: Table 2. —Rates of Population Increase in South and South-East Asia Annual rate of increase per cent. India \ . , . Pakistan J Ceylon 2-2 Malaya 2-4 Burma (1931-41) 1-3 Thailand (1937-47) 1-8 Indo-China (1931-36) 1-4 Indonesia (Java, 1920-30) 1-8 If these rates of increase are maintained, the present population of some 570 million will, before 1970, have grown to 720 million, an increase in less than twenty years roughly equivalent to the total population of the United States. To some extent this increase will reflect the lower death rate resulting from improvements in public health —for example, the eradication of malaria from Ceylon. The inevitable short-term trend towards larger populations only emphasises the need for rapid development. The additional problem which this increase in population involves may, however, be counterbalanced to some extent by the increased vigour and productivity of the people which might be expected to flow from any advance in their standard of living. In the longer run experience suggests that a general improvement in standards of living eventually exercises a steadying influence on the growth of population. In some countries in the area this influence is already apparent from the declining birth rate of the middle classes. In East Bengal, for instance, it has been found that the average size of families tends to be smaller on holdings of ten acres than on those of five. 3. It is clear that agricultural and industrial production will have to rise to provide for the additional population —even at the existing standard of living. A very substantial programme of development is needed to secure any improvement. The necessary statistical data do not exist for a reliable estimate of the extent to which production is keeping pace with population growth in South and South-East Asia, but it is highly probable that the events of the last ten years have caused production per head to deteriorate. As far as the land is concerned, this is not a new process, for in undivided India agricultural yields per acre had been falling before 1939. While the area under rice rose slightly from an average of 66 million acres in 1914-19 to an average of 69 million acres in 1934-35, the average yearly production of rice actually fell from 27 to 25 million tons. This decrease in agricultural yields must be checked and some improvement must be achieved. In essence, however, the problem is one of original development of potential resources rather than mere rehabilitation and the restoration of economic activity to a previous level. The problem may be described as one of increasing the capital equipment of the countries in order not only to keep pace with the growth of populations, but also through increased production per head to permit some rise in the level of consumption. This is a formidable task.

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4. The present state of development in South and South-East Asia is probably as low as anywhere in the world. International comparisons are difficult and preclude precise conclusions, but it is possible to give a broad picture of the disparity between the national incomes of countries in the area and those of more advanced countries. From such information as is available, it appears that average national income per head in most of South and South-East Asia ranges around £2O, whereas in the United Kingdom it is over ten times as large, and in the United States it approaches £4OO. 5. By far the largest element of national income in South and South-East Asia is derived from agriculture, which in all the countries provides the livelihood for more than half, and in some for as much as 80 per cent., of the population. The heart of the problem is the under-employment which results from the pressure of population on the land. In Ceylon, for example, there are nearly 1,200 people who depend upon agriculture for every 1,000 acres of cultivated land. This contrasts with about 60 in Great Britain. 6. What this difference means in terms of output can be illustrated by a comparison between India, with 306 million acres under cultivation, and the United States with 360 million. In India there are 73 million agricultural workers of all kinds, while in the United States only 8 million are actively occupied on the land. In spite of the much more intense application of manpower, agricultural yields per acre are far below those in the United States ; for instance, the yield of wheat is less than 600 lb. compared with over 1,000 lb., and the yield of cotton is only 66 lb. compared with 313 lb. This disparity cannot be explained simply by natural differences of soil fertility ; it is the application of capital which enables the farm worker in the United States to produce so much more than the peasant of South and South-East Asia. For example, in the United States there are over 2,400,000 tractors, whereas in India there are only 10,000. Again, the United States uses, on an area only one-sixth greater, over 13 million tons of fertiliser a year against some 200,000 tons used by India. 7. In communications, fuel and power, and industry the scope for development is illustrated by the comparative examples given in the following table: Table 3. —Levels of Economic Development in 1949: Comparative Indicators Unit United United per 'OOO India Pakistan Ceylon Malaya Kingdom States population (a) Electricity production ...'OOO kWh 13 1-9 9-6 117 1,033 2,296 Coal consumption tons 80 18 28 85 3,884 3,473 Petroleum consumption ... tons 7-8 11 23 99(b) 327 1,638 Steel consumption tons 3-8 1-3 6 16 194 364 Cement consumption ... tons 7-2 3-6 19 25 148 229 Locomotives nos.(c) 22 16 32 31 410 309 Carrying capacity of railway tons 10(d) 8-8 4-5 13 276 556 wagons Rail freight 'OOO 65 .. .. 32 446 4,568 ton miles Load-carrying road vehicles nos. 0-18 0-17 1-41 3 16 43 All-weather roads miles 0-32 0-1 0-87 0-93 3-7 2-2 Telephones nos. 0-37 0-21 2-2 7-7 98 261 (a) In most cases, figures refer to 1948. (b) Excluding Service supplies and bunkers. (c) Per million population. (d) Excludes 16,516 wagons for which no carrying capacity is recorded. 8. The scope and the need for development are great, but so also are the potentialities of the region's underdeveloped natural resources. In India it is estimated that improvements in agricultural practices and technique alone, through the use of better seeds and fertilisers and through irrigation works, could by 1956-57 secure increases over the current estimated levels of production of 8 per cent. (3,000,000 tons) in foodgrains, 30 per cent. (195,000

10

THE NEED FOR DEVELOPMENT

tons) in cotton, 50 per cent. (375,000 tons) in jute and 30 per cent (1,500,000 tons) in oil-seeds. In Ceylon it would be possible in the long run to bring another 3 million acres of land under the plough, thus doubling the cultivated area. In Pakistan two irrigation projects at present in hand, at Thai and K„otri, will make an additional 4,800,000 acres available for cultivation, and a further 2,300,000 acres at present lying waterlogged in West Pakistan could be recovered by the construction of tube-wells to lower the water-table in the area. Similarly, in nearly all the other countries of the area the application of capital would enable large tracts to be brought under cultivation. This work, much of which will be accompanied by the development of hydroelectric power, is the first step towards that growth in productivity without which many of the ills which afflict South and South-East Asia —poverty, under-feeding, disease, illiteracy—cannot be relieved. The hydro-electric power resources of the area have hardly yet been tapped. Pakistan's potential, for instance, is estimated at over 5,000,000 kilowatts ; the actual installed hydro-electric capacity is now 9,600 kilowatts, and in the next six years it is to be increased by 200,000 kilowatts. What is true of hydro-electric power is true also of the mineral resources of the area; in many of the countries the extent of these resources has not yet even been ascertained. 9. The human and material resources of the area are large enough to solve its problems. But if they are not brought into effective use, the position will become worse. Even the present inadequate standards of nutrition will not be maintained, for the pressure of increasing populations will bring them still lower, and this will make it all the more difficult to create the social services which are required to combat disease and to educate the millions who are still unable to read. The growth of productive power is a gradual process which must be spread over generations. The levels now reached in the advanced countries, which are themselves insufficient to satisfy their peoples' aspirations, are the result of 150 years of economic development. It is the early stages which are the most costly and difficult. Basic services—railways, roads, ports and harbours, electricity and irrigation—require a vast capital investment and must be undertaken before production can be increased significantly. In democratic countries a certain minimum of social services must be provided concurrently with programmes for economic development if these are to command the popular support without which they would be frustrated. 10. The countries in South and South-East Asia are at very different stages of development, but none has passed the period at which heavy expenditure on basic services is required. Once the process of development gets under way its effects are cumulative and the difficulties become less. This is illustrated by the experience of these countries so far. In India the production of iron and steel increased from an almost negligible amount in 1914 to 400,000 tons in 1925, and to 800,000 tons in 1939 ; in the next ten years there was a further increase to 1,100,000 tons. In the same way it was possible to expand the production of cement, already doubled in the five years before the war, by another 47 per cent, between 1939 and 1949. 11. The most effective and efficient pattern of development is different for each country. There is no standard formula which can be universally applied. There are, however, no grounds in experience for the view that development implies uneconomic national self-sufficiency. In fact, the countries in South and South-East Asia with specialised economies heavily dependent upon international trade have the largest national incomes per head. In the ordinary way the growth of national income brings with it automatically an increase in trade. The United States, which has the widest and most complete natural resources of any advanced country, and which could be virtually selfsufficient if it wished, has a foreign trade per head some twenty times as great as that of India.

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THE COLOMBO PLAN

12. Ever since the end of the war, and indeed during the war itself, considerable thought has been given in South and South-East Asia to the need for development. Much useful experience has been gained without which it would have been impossible to proceed with the formulation and execution of realistic programmes. The problems of the whole area have been in the forefront of discussions in the United Nations and its Specialised Agencies, and valuable expert investigations have been made, particularly by the Economic and Social Council and the Economic Commission for Asia and the Far East. Now, for the first time, it is possible, as is shown by such detailed programmes as have been submitted, to proceed with the comprehensive attack on the problem which the situation demands. The different countries have of course approached their problems differently, but there is a common strand which runs through the whole. In Chapters IV-VII there is a brief description of each of the Commonwealth countries' Development Programmes, as prepared for discussion and analysis in this Report; additional statistical material will be found in the Appendices. CHAPTER IV THE DEVELOPMENT PROGRAMME OF INDIA 1. India has a population of some 350 million and an immense variety of natural resources. It is predominantly an agricultural country, and about 70 per cent, of its working population depend on the land for their livelihood. Agricultural yields are, however, low in comparison with most other countries, and there is evidence of a further decline over the last two decades. A number of industries became established between the wars, among them iron and steel, cotton textiles, sugar, cement and matches, but organised largescale industry of this kind provides employment only for about 10 per cent, of the working population ; medium and small-scale industry engages another 10 per cent., and the remaining 10 per cent, are employed in services and the distributive trades. According to rough estimates the annual income per head in real terms has declined in recent years, and in terms of 1945-46 prices ij is estimated at R5.237 in 1945-46, R5.233 in 1946-47, and R5.200 in 1948-49. 2. An extraordinarily severe strain was imposed on the Indian economy by the war and the partition of the country. Under the stimulus of war demand, some increase in agricultural and industrial production did take place. This was, however, more than counterbalanced by the diversion to war purposes of a large proportion of total supplies available, as India became the supply- base for the Allied armies East of Suez. The value of goods and services provided by the economy of undivided India for war purposes was roughly equivalent to R5.22,000 million (£1,650 million). Inevitably severe shortages of goods for civilian use developed; this, combined with a six-fold increase in money supply arising from the needs of war finance, produced a serious inflation. In spite of controls, the wholesale price index rose from 100 in 1939 to 400 in 1950, and the cost of living index reached 320. The effects of the war on the external balance of payments became apparent in the emergence after the war of a large deficit such as the economy seldom experienced in pre-war years. This deficit arose from heavily increased imports—of foodgrains to meet the domestic shortage, of consumer goods to meet the backlog of pent-up demand, and of capital goods to meet accumulated industrial maintenance and replacement needs. Although the use made of sterling balances to satisfy these import demands has helped to hold inflation in check, at the end of five years it still remains a major obstacle to economic progress.

12

DEVELOPMENT PROGRAMME OF INDIA

3. To these problems were added those arising from the partition of the sub-continent. A part of what had previously been internal trade in cotton, jute and foodgrains now became a feature of external trade, involving a net outward payment and a consequent aggravation of the balance of payments problem. In addition, abnormal expenditure of about R5.300 million a year on the rehabilitation of refugees and approximately R5.300 million on essential food subsidies intensified the budgetary problem. Moreover, the political and economic changes that followed the war adversely affected the flow of savings into the capital market. This is still the position, though not to the same degree. Basis and Objectives of the Programme 4. The scheme of development proposed for India is designed to improve the standard of living, to provide a minimum of social services and to supply sufficient capital and consumer goods to restrain inflation. To achieve these objectives it is proposed: (a) To undertake certain basic public development, such as irrigation and rural electrification, in order to increase agricultural production. (b) To increase the supply of fertilisers, agricultural implements and building materials, at a reasonable cost, in order to raise the yield of land under cultivation. (c) To develop and improve transport facilities. (d) To promote the full use of existing industrial equipment and capacity, and to extend the production of iron and steel. (e) To encourage industry in the villages in order to provide work for the under-employed and unemployed rural population. Description of the Programme 5. A great deal of work has already been started to meet development needs. The programme now contemplated embraces schemes already begun, and, in addition, others of high priority which could be undertaken as soon as adequate finance is available. In framing the programme, a list of projects in progress or ready for execution, with a total cost of R5.32,190 million, was investigated. From these a careful selection was made of the most urgent projects, estimated to cost Rs. 18,400 million. The Government of India consider that these represent the minimum of development necessary to achieve the objectives of the programme, and that after the six-year period they can be supported out of the country's own resources. The cost of the. programme is estimated as follows: Table 4. —India: Analysis of Programme Number Rs. £ Percentage of schemes (a) million million of total In hand New Agriculture 6,080 456 33 104 27 Transport and communications— Railways 4,8001 Roads ... ... 1,099 (_ 527 38 27 35 Ports and harbours... 110 f 7 ' 027 52 ' Others 1,018 J Fuel and power 576 43 3 27 2 Industry and mining (ft) ... 1,800 135 10 21 23 Social capital— Education 1,1441 Healtli 5 7 2 > 913 218 16 105 50 Others 1,071 J Total 18,396 1,379 100 284 137 (a) Costing more than Rs. 2• 5 million (£190,000). (b) Excluding coal.

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THE COLOMBO PLAN

6. In agriculture there are three multi-purpose projects which are accorded a very high priority and on which work is already in progress: the Damodar Valley (R5.500 million, £37.5 million); the Hirakud (R5.300 million, £22.5 million); and the Bhakra Nangal (R5.757 million, £56.8 million). The Damodar Valley scheme in Bihar is designed to harness the wayward Damodar River, whose periodic floods cause untold destruction and misery. New dams Will contain the flood water for irrigation, power generation and even navigation. The scheme will, at the same time, open up to full development the richest mineral basin in India. Further South, the Hirakud Dam is intended to control the floods of the Mahanadi which cause considerable damage and soil erosion. It will also cover the barren earth with a vast lake to supply life-giving irrigation to the surrounding area and provide power for the cottage industries. To the North, at Bhakra and at Nangal, dams will be erected across the River Sutlej, one of which will be not much smaller than the Boulder Dam in the United States. The harnessing of the Sutlej will open up areas now arid for the resettlement of refugees. Power will be provided for the cities of the North, including New Delhi. These three projects are expected to bring about 6,000,000 acres of new land under irrigation by 1956-57 and to increase electricity generating capacity by 708,000 kilowatts. 7. Another major development is the Government's Integrated Crop Production Plan. This provides for the extension of cultivation on reclaimed lands, the introduction of improved agricultural techniques, the use of better seeds and fertilisers, and the execution of a large number of local irrigation Works. As a result of this campaign and of the multi-purpose projects, it is expected that by the end of 1956-57 there will be an addition to agricultural production of 3,000,000 tons of foodgrains, about 195,000 tons of cotton, 375,000 tons of jute and 1,500,000 tons of oil-seeds. All these commodities are in short supply in the area. 8. Under transport and communications an expenditure of R5.4,800 million (£360 million) is planned on railways. This will provide for the construction and restoration of tracks, bridges, structural works and rolling stock. The establishment of a plant for the manufacture of locomotives is also contemplated. These projects, coupled with the extension and improvement of roads, are designed to open up the hinterland, to enlarge the size of the domestic market, and to facilitate the flow of goods to the ports. In the industrial sector the emphasis is on raising production of steel, particularly through the modernisation and expansion of existing steel plants and the construction of additional capacity for an annual output of 500,000 tons. 9. It is hoped that the carrying through of the programme will provide a basic standard of living which would include, amongst other things, an annual cloth consumption of 15 yards per person, and, in the rationed urban areas, cereal consumption of 16 ounces a day. This represents a modest, but important improvement over present consumption levels, which on a per head basis are only about 10 yards of cloth per year, and, in the rationed areas, 12 ounces of cereals a day. Ten yards of material provides less than two garments a year, without taking into account other uses of cloth. The average daily supply of food, consisting mostly of cereals, at present provides only about 1,600 calories, which is nothing like enough for adequate nutrition. 10. The programme should reduce the country's foreign exchange expenditure on food supplies, which is an important cause of the current balance of payments deficit. It should also result in substantial increases in exports of raw materials such as oil-seeds and short-staple cotton (exports of which have fallen to one-third of the pre-war level), and of manufactures like jute products, cotton textiles and other consumer goods. At the end of the six-year period, it is expected that equilibrium will be achieved at a higher level of international trade.

14

15

DEVELOPMENT PROGRAMME OF INDIA

Administration of the Programme ,11. In India the administration responsible for the execution of the programme has had considerable experience with problems of development. The plans of individual Ministries and States are examined by the Planning Commission which is drawn from Government, industry and labour. This Commission advises the Government, and maintains liaison with all sections of the public. Financial control over expenditure is secured through scrutiny by the Ministry of Finance of minor schemes of development and by the Economic Committee of the Cabinet, or the Cabinet itself in the case of more important schemes. Parliamentary control over expenditure is exercised by the Standing Finance Committee Whose approval is necessary for all schemes involving a non-recurrent expenditure of more than R5.500,000 or a recurrent expenditure of more than Rs. 100,000 per annum. There is also an Estimates Committee which scrutinises in detail all government expenditure included in the Budget. There is close collaboration between the Central Government and the States not only on the broad objectives of economic policy, but also on the particular schemes of development which the States may undertake from time to time. Examples of financial co-operation between the Central Government and the States are afforded by land reclamation schemes and the Damodar Valley Corporation. Co-operation between the Government and private enterprise is shown in enterprises like the Shipping Corporation and Air-India International in which there is substantial participation by private investors. Government and Private Investment 12. Private investment, both foreign and domestic, is earnestly welcomed in India as a means of development., The size of foreign investment in relation to total investment is large. According to the census recently conducted by the Reserve Bank of India, the market value of total long-term private foreign investment is R5.5,190 million (£389 million). British investment is valued at R5.3,760 million (£282 million)—about 70 per cent, of the total—and United States investment at R5.300 million (£22 million). The predominant element in this foreign investment is ' direct' investment in Which control of operation is associated with ownership of capital; this is put at R5.4,310 million (£323 million). 13. The scope for making conditions of investment more attractive to foreign investors is under continuous examination by the Government. Their power with respect to the admission of new foreign enterprises is for the most part exercised only for the purpose of preventing over-investment in certain crowded sectors of the economy. The control of capital issues applies only to joint-stock companies with a capital of over R5.500,000 (£37,500)— a substantial figure in the scale of investments in India. Only a few specified industries like the manufacture of munitions are reserved to the Government. In certain special fields of national importance, such as civil aviation and shipping, private enterprise is encouraged to participate with the Government in semi-public corporations. The full current earnings of all foreign enterprises may be freely remitted abroad under the existing exchange control regulations. The Government have decided that investment from hard currency areas shall be treated in much the same way as investment from the sterling area, and investors from these areas are allowed to repatriate in full not only the original capital invested in approved projects after January, 1950, but also any profits which may be ploughed back into the business. To stimulate domestic and foreign private investment a number of concessions have been made by way of tax reliefs and more liberal depreciation allowances. 14. Most of the investment contemplated in the programme is in the public sector, since the plan concentrates on basic development in irrigation, transport and rural electrification. As the projects make progress and new lands

THE COLOMBO PLAN

are brought under cultivation and larger quantities of power are generated, the scope for private investment in agriculture and small industry will vastly increase. Even in the period of the present plan the scope for private enterprise will be considerable. The execution of the plan is expected to make possible net private investment of the order of Rs. 1,600 million per year in the early stages, rising progressively to an annual rate of R5.2,600 million by the end of the six-year period. The sources of savings for this investment will be the reserves of companies and private savings, both of which are expected to increase as the programme proceeds. In addition to this investment, private savings are expected to contribute an average of R5.400 million net a year towards financing the programme, through subscriptions to Government securities. Limitations on the Programme 15. The prime limitation on the execution of the programme is the availability of internal and external finance. This problem is dealt with at length in subsequent paragraphs. Another limitation is the availability of technical skill. At present India can provide most of the lower and medium grade technicians it needs as well as a considerable number of highly skilled personnel, such as engineers, doctors and agricultural experts. More trained men of the latter category will, however, be required for the execution of the programme. In addition more experts from abroad will be needed in certain very specialised fields of industry, agriculture, medicine and education. Facilities will continue to be required for Indian students to undertake postgraduate studies and research abroad in certain specific subjects. The country's requirements under these heads are discussed in greater detail in Chapter IX and are listed in Appendix 3. Financing the Programme 16. The development outlined in the plan involves public investment of R5.3,070 million (£230 million) per year, as compared with the recent rate of R5.2,250 million (£169 million). Taking into account net private investment, it is estimated that the current rate of total investment is about 4 per cent, of the national income. At the end of the period the contemplated increase in public and private investment should raise this rate to around 5% —6 per cent, of an increased national income. These rough estimates are illustrated as follows: Table 5. —India: Current and Future Rates of Investment Rs. millions 1950-51 1951-52 1956-57 Government investment 2,250 3,070 3,070 Estimated private investment 1,600 1,600 2,600 Total investment 3,850 4,670 5,670 Balance of payments deficit on current account 1,400 2,180 1,310 (£lO5 m.) (£163 m.) (£9B m.) Investment financed from domestic resources 2,450 2,490 4,360 Investment as a percentage of national income* 4% 4£%t05% 5i%t06% Domestically financed investment as a percentage of national income 2\% 2\% 4% to 4\% * National income of the Union Provinces for 1948-49 is about Rs. 80,000 million; on the basis of this figure the national income for the whole of the Indian Union is assumed to be about Rs. 96,000 million; the latter is expected to rise to about Rs. 103,000 million by 1956-57

16

DEVELOPMENT PROGRAMME OF INDIA

17. Assuming a capital inflow of the order envisaged in the programme, and the resultant increase of incomes as it is executed, it is estimated that internal finance to meet the cost of development over the six-year period could be made available as shown below: Table 6. —India: Internal Finance available for Development in the Public Sector, 1951-57 Rs. millions Annual average Total Current Revenues of Central and State Governments 816 4,900 Surplus of state-owned enterprises (mainly railways)... 300 1,800 Net borrowings from the public 400 2,400 Proceeds of Railway Depreciation Fund 200 1,200 1,716 10,300 (£l2B m.) (£772 m.) 18. The estimate given above of the sums likely to be available for development out of the revenues of the Central and State Governments includes the revenue which is already being spent on development; it also takes account of economies in public expenditure, which is now running at an annual rate of R5.7,130 million. These economies are expected to release something like an extra Rs. 1,100 million for development over the period. Allowance has been made for certain new forms of taxation which will be introduced. There is not, however, much scope for an increase in the yield of income tax, which is expected in the budget year 1950-51 to provide about a quarter of the total revenues of the Central and State Governments, estimated at R5.7,115 million. The existing rate of income tax is only slightly less than in the United Kingdom and it is already acting as a disincentive to saving and investment. Some increased finance is also expected to become available from the earnings of State-owned enterprises. 19. The most careful plans have been made to stimulate domestic savings. The stagnation prevailing in the capital market has prevented any large-scale borrowing by the Government during the last two years. As inflation is brought under control, however, and real incomes rise, the capital market is expected to yield net subscriptions to public loans of the order of Rs.4OQ million per year. There are already some indications of a revival of the capital market. The Government have taken a series of measures for dealing with the problem of inflation. There is a comprehensive system of controls on prices, foreign exchange, imports and exports, and some essential commodities are subject to allocation. In recent years the Government have also taken steps to regulate credit facilities in order to discourage speculative holding of stocks. Trading in futures has been prohibited in certain commodities, and some commodity prices have been statutorily reduced. A vigorous drive for National Savings is in operation, and this offers various alternative schemes at the attractive rate of nearly 4.13 per cent, (simple interest) as compared with the current yield on long-term securities of 3.15 per cent. This is not likely, however, to produce spectacular results in view of the country's low level of income per head ; there is only a small margin left for saving ; this is largely in the hands of a section of the urban population, which has also to bear a relatively heavy burden of taxation. Acting on the advice of an Expert Committee which reported, recently, however, the Government have taken steps to extend banking to rural areas for the purpose of mobilising such savings as are available among the agricultural classes.

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THE COLOMBO PLAN

20. Taking the plan as a whole, the gap between its estimated cost, Rs. 18,400 million, and the estimated finance that can be mobilised internally, Rs. 10,300 million, represents the amount of external finance necessary for the execution of the programme, R5.8,100 million (£607 million). The injection into the economic system of this amount of foreign capital would provide a further stimulus to the capital market. During the six-year period the availability of outside finance would allow the importation of additional goods. This should serve not only to reduce the price level somewhat, but also to provide incentives to industrial and agricultural workers. 21. In spite of import restrictions India incurred balance of payments deficits (excluding transactions with Pakistan) of the order of £75 million in 1948 and £ll9 in 1949. These deficits were financed mainly by drawings on the sterling balances in London, and in part by drawings on the International Monetary Fund, and by loans from the International Bank for Reconstruction and Development. Since devaluation the balance of payments position has improved. This has been due partly to an increase in exports, and partly to a previous tightening of import restrictions. The level of imports is still being kept down by rigorous restrictions, in the absence of which the demand for imports would be substantially larger. The estimated deficit for the year 1950-51 is £lO4 million, which can be met from available external resources. 22. The balance of payments estimates for 1951-52 and 1952-53, excluding transactions with Pakistan, have been worked out on the assumption that external finance will be available in addition to drawings on sterling balances. They take into account the imports of consumer goods and industrial raw materials related to the projects contained in the programme ; they also allow for an expected increase in exports. On this basis, the estimates show deficits of £163 million for 1951-52 and £154 million for 1952-53. It is assumed that up to £35 million per annum of the deficit will be met by drawings on sterling balances. The amount of £607 million represents the difference over the six-year period between the estimated balance of payments deficit and what would be covered by drawings on sterling balances. 23. At the end of the six-year period, there will be a sharp decline in public investment. This will lead to a considerable curtailment in the level of governmental imports, although the increased demand for imports on private account may in part offset this reduction. However, 1957 and after should see an increase in domestic production of consumer goods and industrial raw materials. The need for imports will thus be reduced, while simultaneously earnings of foreign exchange will be increased as a result of higher exports. Though precise calculations are difficult to make over such a long period, it is expected that there will be a considerable improvement in the overall position in the longer term, though a small deficit may persist for a short time after 1957. 24. The external finance envisaged in the programme is necessary both to cover the balance of payments deficit and to enable the Government to raise the rest of the internal finance required. This will be done either by the sale of foreign exchange to private importers, or by the direct sale of imported consumer goods, such as food, which are mainly imported by the Government. The provision of some external finance for this purpose is important in existing conditions because, even if the developmental imports required were forthcoming, the carrying out of the plan would be stultified if this supplement to internal finance were not available to the Government. It is expected that the measure of external finance necessary during the six-year period will decline from year to year as the programme generates additional

18

DEVELOPMENT PROGRAMME OF INDIA

incomes. The programme is not expected to produce inflationary effects. If necessary, however, existing physical and financial controls will be maintained during the period. A positive anti-inflationary influence will be the continuance of drawings on sterling balances to finance part of the balance of payments deficit. 25. The following table illustrates the estimated finance for the plan from internal and external sources in the six-year period to provide the equivalent of an annual investment of R5.3,070 million (£230 million): Table 7. —India : Internal and External Finance for Investment, 1951-57 Rs. millions 1951-52 1952-53 1953-54 1954-55 1955-56 1956-57 Total 1. Investment in the public sector ... 3,070 3,070 3,070 3,070 3,070 3,070 18,400 (£1,379 m.) 2. Internal financial resources ... 1,360 1,490 1.590 1,780 2,000 2,090 10,300 (£772 m.) 3. External finance necessary for the programme ... 1,710 1,580 1,480 1,290 1,070 980 8,100 (£607 m.) 4. Estimated use of sterling balances 470 470 .. .. .. .. 2,800* (£35 m.) (£35 m.) (£2l lm.) 5. Total deficit in balance of payments (3+4) ... 2,180 2,050 .. .. .. .. 10,900* (£163 m.) (£154 m.) (£818 m.) * Provisional figures. Toward the end of the six-year-period the need for public investment on the large scale projected for earlier years will decline ; moreover, domestic resources will be augmented by the operation of the programme. After the programme comes to an end, therefore, investment should be supported by increased government revenues and domestic saving. 26. As already shown, it is proposed that the external finance should be absorbed In the economy through a planned deficit in the balance of payments which will cover the import of: (a) capital goods needed for the development plan ; (b) raw materials such as cotton, non-ferrous metals, timber and oil; and (c) food and consumer goods. 27. The implications of failure to secure external finance are worth examination. It is the view of the Government of India that, if external finance on the scale envisaged in the programme is not forthcoming, the rate of increase in production would clearly be smaller than is desirable in the prevailing circumstances. This would mean that the present unbalance between money supply and goods would take longer to correct. Inflation would continue to keep down the level of production and the flow of goods to the market, would impede the flow of savings into productive enterprises, would reduce the capacity to save of the investing classes and would thus maintain the upward pressure on the level of prices and wages. In that event, India would have to face at the same time the problem of counteracting inflation and the necessity of carrying out a modicum of "development within the resources at its command. This would inevitably entail a drastic curtailment of imports, and possibly the abandonment of some development projects

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THE COLOMBO PLAN

already under way. It might also require, apart from any possible economies in expenditure, the raising of taxes to levels which are bound to cause further hardship. If it became necessary to resort to a certain amount of deficit financing to carry out a minimum programme of development, the existing physical and financial controls would have to be intensified and expanded. In present conditions in India this would present formidable difficulties. Such a rigorous management of the country's economy would be likely to lead to unemployment, to reduced trade with the rest of the world, and to lowered business activity. No noticeable improvement in living conditions would be possible, and there might even be some deterioration. This is bound to react unfavourably on the economic and political conditions of the country, especially in the prevailing social and political atmosphere in South and South-East Asia. CHAPTER V THE DEVELOPMENT PROGRAMME OF PAKISTAN 1. Pakistan is predominantly an agricultural country with a population of 82 million occupying an area of 364,000 square miles. Its two zones are separated by 1,000 miles of Indian territory. Western Pakistan has common frontiers with the Soviet Union in the North, with Iran and Afghanistan in the West and North-West, and with India in the East and South-East. Eastern Pakistan has Burma on the South-East and India on its Northern and Western borders. Eighty per cent, of the population are dependent upon agriculture. The principal products are shown in the following table: Table 8. —Pakistan: Agricultural Production, 1948-49. thousand tons Rice (milled) 8,429 Wheat 4,103 Sugar-cane 1,019 Jute 978 Oil-seeds 360 Cotton 192 Tobacco 140 Hides and skins 65 Tea 21 Wool 12 2. In 1947, at the outset of its existence as a separate country, Pakistan was confronted with problems of great gravity, principal among them being the rehabilitation of nearly 7,000,000 refugees. At the same time large numbers of professional men, lawyers, doctors and traders left the country. Everywhere businesses were shut down, banking operations suspended and commodity markets closed. It was necessary not merely to establish a new administration, but to rearrange the entire economic and social fabric of the nation. 3. At this critical time, those parts of British India and the Indian States which now constitute Pakistan were still suffering from the after-effects of the war. In East Bengal dislocation and distress followed the Allied armies' ' scorched earth' and ' denial' policies which aggravated the effects of the great famine of 1943. The railways were overstrained and dilapidated and their equipment depleted by the transfer of locomotives and rolling stock to Iraq. Chittagong port, after years of neglect, had been subject to intense strain during the war and was greatly in need of repair. Western Pakistan

20

DEVELOPMENT PROGRAMME OF PAKISTAN

is the main wheat-producing area of South Asia and it had to meet the extraordinary food requirements of the armies based on the sub-continent during the war. In addition, this zone of Pakistan has always been a major source of recruits for the armed forces. The railway system consequently suffered the immense burden of carrying both supplies and personnel for the Allied armies. The indirect effects of the war were also serious for the country's economy. The strict control of food prices which was maintained in the interests of the war effort kept down agricultural incomes. On the other hand, there was a general increase in the price of manufactured goods, and the consequent diminution in the value of savings was especially damaging to the agricultural communities which later came to form part of the new state of Pakistan. 4. When Pakistan came into being, the country found itself with over 80 per cent, of the world's production of jute, but with no jute manufacturing capacity. Pakistan was producing annually 200,000 tons of cotton, mainly of fine quality, but its textile industry was negligible. There were no tanneries, no woollen mills and very little other industry. It was thus inevitable that the economy of Pakistan should depend mainly on the export of its agricultural products. In the brief three years since Pakistan achieved independence, the country has been largely preoccupied with problems of an emergency character. The Government have been obliged to spend large sums on the relief and rehabilitation of refugees. This burden, in addition to the problems of national administration and defence, retarded economic development. Nevertheless, the need to develop the country was immediately recognised, and despite their other preoccupations, the Government, early in 1948, established a Development Board, which has since approved 112 schemes estimated to cost Rs. 1,125 million. In order to finance development the Pakistan Government have raised Development Loans amounting to R5.820 million. Loans have been granted to Provincial Governments to enable them to put in hand a number of projects of which the following table gives examples: Table 9.—Pakistan: Some Projects of Provincial Governments in Progress Expenditure already incurred Nature of work Rs. million Irrigation works of Thai Project 100 Bhambanwala Ravi Bodian Canal 40 Rasul Hydro-Electric project 40 Lower Sind Barrage 30 Chittagong Port development 11 Malakand Hydro-Electric Extension project ... 3 Private enterprise has established four cotton textile mills with 100,000 spindles, and it is expected that a further 12 textile mills with 300,000 spindles will shortly be in operation. Several jute presses have been imported into East Pakistan. A cigarette factory has been set up in Karachi; a large sugar factory with an output of 50,000 tons has been erected ; and some tanneries are being built. There has been some investment in medium and small-scale industries such as steel fabrication and the manufacture of soap, glass, sulphuric acid, enamelware, sports equipment, leather goods and surgical appliances. Basis and Objectives of the Programme 5. Economic development has not so far proceeded in accordance with any national plan. In order to avoid dissipation of the limited resources of the country on less important projects, and to concentrate on urgent objectives

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the Government of Pakistan have now drawn up a six-year plan of development which embodies the projects of highest priority. The programme is essentially one of basic development intended to prepare the country for future advancement. It does not, therefore, aim at spectacular results in terms of the present living standards of the people, although a beginning will have been made in this direction if the plan is carried out. The plan is inspired not only by the desire to improve the standard of living, but also by the conviction that the country is endowed with an industrious and virile people inhabiting a land whose natural resources call for a vigorous programme of development. It is based on the assumption that Pakistan must continue to be essentially an agricultural country, but that agriculture must be carried on in the most efficient way. The present low yield per acre is due to the continuance of antiquated and obsolete methods and the shortage of modern equipment. Description of the Programme 6. Pakistan's programme is estimated to cost R5.2,600 million, divided in the following way: Table 10. —Pakistan : Analysis of Programme Rs. million £ million Percentage Agriculture 820 88 32 Transport and communications — Railways 200 5- oa / s r 530 57 20 Ports 140 I Telecommunications 90 J Fuel and power 470 51 18 Industry and mining* 490 53 19 Social capital— Housing 40" Health and medical 40 Education 100 f 290 31 11 Technical training and polytechnics 90 Water supply 20 _ Total 2,600 280 100 * Excluding coal. The main features of this programme are briefly described in the following paragraphs. 7. Agriculture.—Agriculture constitutes the largest section of the development programme. The introduction of modern methods and mechanical equipment and the increased use of fertilisers are urgent necessities. The agricultural programme will involve an expenditure of about R5.820 million, distributed as follows: Table 11. —Pakistan : Distribution of Cost of Agricultural Section of Programme Rs. million Irrigation 234 Land settlement 159 Anti-waterlogging measures 123 Improved varieties of seeds ... ... ... 99 Subsidisation of fertilisers and manures 92 Mechanisation ... 80 Development of animal husbandry 20 Development of fisheries 10 Miscellaneous agricultural schemes 3

22

DEVELOPMENT PROGRAMME OF PAKISTAN

8. New irrigation works and anti-waterlogging measures, involving the lowering of the water table in swampy ground, are of central importance to the plan. It is expected that 6,000,000 acres will benefit from the measures. Depending on the system of water distribution, 4,000,000 acres will come under double cropping. The distribution and use of improved varieties of seeds and fertilisers and the partial mechanisation of agriculture, for which an expenditure of Rs. 272 million has been provided in the plan, are expected to be responsible for an appreciable proportion of the increase in production to be achieved by 1957. Table 12. —Pakistan : Production under Agricultural Section of Programme thousand tons Estimated Increasedue Increase Percentage Present output to larger due to Total increase output 1957 acreage higher yield increase in output Cereals and pulses ... 15,046 17,596 1,848 702 2,550 17 Food cash crops (oilseeds, vegetables, sugarcane, fruits, tea) ... 5,004 9,309 3,055 1,250 4,305 86 Total food crops ... 20,050 26,905 4,903 1,952 6,855 34 Non-food cash crops (jute, tobacco, cotton) ... 1,359 1,547 122 66 188 14 Total 21,409 28,453 5,025 2,018 7,043 33 Note.—The increase in production of other agricultural commodities, e.g., wool, hides and skins, forest products, milk products and fodder is estimated at about 55 million tons. Of this total, 48 million tons represent fodder, 5 million tons forest products and 1,300,000 tons milk products. Notable features of the agricultural plan are the expected increases in the production of oil-seeds by 220 per cent., sugar-cane by 70 per cent., vegetables by 68 per cent., fruits by 90 per cent., cotton by 27 per cent., and jute by 10 per cent. The expected increase in the output of rice of more than 500,000 tons will be sufficient to meet the needs of Eastern Pakistan. More generally, the programme will help to bring down the price of essential foodstuffs and should permit some increase in the standard of living. 9. Fuel and Power. —In a country with such limited resources of oil and coal, hydro-electric power is of crucial importance. Without adequate power there can be little progress in other sections of the plan. Power is essential to future development in both agriculture and industry. The hydro-electric power potential in Pakistan is 5-6,000,000 kilowatts against which present installed capacity is only 9,600 kilowatts. Thermal stations provide another 59,500 kilowatts. In a population of 82 million, the rate of consumption of electricity per head is one of the lowest in the world. In view of the existing unsatisfied demand and of the extra demand which will be created by the development programme, it is proposed to build new stations capable of generating an additional 200,000 kilowatts of hydro-electric power and about 56,000 kilowatts of thermal power at a cost of R5.450 million. This: will supply the power needed for the extensive new pumping and irrigation projects contemplated in the plan, for the jute and cotton factories which are to be set up and for the machinery which will be used in modernising the mines. The additional power will also enable Pakistan to dispense with the supply of electricity which at present is imported from India and which may not always be available. Following a survey by professional consultants, the Pakistan Government is taking steps to increase the output of coal.

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THE COLOMBO PLAN

Workable deposits are estimated at about 165 million tons and the programme provides for an expenditure of nearly Rs.2o million to increase the present low output of 324,000 tons to 3,000,000 tons a year. 10. Transport and Communications. —The restoration of the railway system in Pakistan is an urgent need, particularly for the transport of the agricultural produce of the country. The intense pressure on the railways during and after the war, the inadequacy of repairs, and the almost entire absence of replacement reduced the transport system to an extremely low level of efficiency. There are also several urgent projects for new railway construction, but the plan does not provide for their execution except in one or two vital cases. The plan concentrates particularly upon the repair and replacement of worn-out locomotives and rolling-stock. The expenditure provided for these purposes is estimated at R5.200 million. There is provision for the development of roads and telecommunications at a cost of Rs.loo million and Rs.9o million respectively. The inadequate handling capacity of the port of Chittagong is a serious impediment to the flow of jute exports from East Pakistan. Before the war the capacity of the port was small. The excessive use to which it was subjected during the war created the need for extensive repairs. At the time of partition its handling capacity was no more than 600,000 tons. Capacity has since been increased to 1,800,000 tons by an expenditure of Rs.lo million on the most urgent needs. The development plan now provides for the further expenditure of R5.130 million designed to extend the facilities of the port to enable it to handle some 4,000,000 tons a year. 11. Industry and Mining.—The Government of Pakistan regard the development of certain industries as of fundamental importance to the economy. These are jute and cotton processing and the manufacture of paper. There are no jute mills in the country in spite of Pakistan's huge production of jute. As the national economy depends to a large extent upon the continuance of the demand for this commodity, the Government consider it necessary that measures be taken to manufacture jute products under the most favourable conditions so that they may compete successfully with substitutes. The plan contemplates the establishment of six jute mills which will produce 130,000 tons of jute goods a year. This production will be sufficient to supply Pakistan's own requirements and a margin for export. The cotton textile industry is regarded as equally important. At the present time, when the annual consumption of cotton goods is at the exceedingly low rate of 9 yards per head, Pakistan can supply only 100 million yards out of the 700 million yards consumed. Production will increase to 450 million yards with the establishment of new mills in the near future. The development plan now provides for 24 additional mills. At the end of the six-year period it is expected that domestic production, together with annual imports of 150 million yards, will be sufficient to meet the demand created by an average consumption level of 17 yards per head. To the extent that the community can afford to raise its consumption above this low level, additional imports will be required, with an increasing proportion of finer cloths. The plan provides for the establishment of a paper mill using local raw materials and capable of an annual output of 30,000 tons. The total cost of establishing the jute, cotton and paper factories is estimated at R5.390 million. There are also certain miscellaneous industries such as sugar, ceramics, glass, chemicals and fertilisers, which the Government consider should be developed. Rs.9o million have been provided for these industries in that part of the programme which is to be financed by private enterprise. The plan also covers the cost of a general geological survey of the country to find out its mineral wealth.

24

DEVELOPMENT PROGRAMME OF PAKISTAN

12. Social Capital.—ln the matter of social services it has been the policy of the Government of Pakistan to finance both capital and recurrent expenditure from the revenues of the Provincial Governments and municipalities. The large capital expenditure on this account under the development plans of the Provincial Governments cannot be wholly met out of their revenues, and provision has therefore been made in the programme for a sum of Rs.lBo million to meet part of the expenditure involved. This amount will cover the capital cost of housing (Rs.4o million), the expansion of health and medical services (Rs.4o million), and the expansion of educational facilities (Rs.loo million). Included in the housing programme is the provision of prefabricated houses for refugees and for the development of new residential areas and townships. The expenditure under health and medical services will provide 600 new rural and 600 mobile dispensaries, 120 new hospitals, and increased training facilities for technical personnel. The provision for education is designed to set up 4,460 new primary schools, 1,456 middle schools, 400 high schools, 15 teachers' training schools and 2 teachers' training colleges. Provision of Rs.9o million has been made in the programme for the establishment of technical institutes and research laboratories (Rs.4o million) and for scholarships for training abroad in scientific and technical subjects (Rs.so million). Administration of the Programme 13. The Government of Pakistan have decided that the best method of implementing the six-year plan would be to establish autonomous administrative machinery charged specifically with the execution of the programme. It has, therefore, been decided to set up an Economic Council responsible directly to the Cabinet. Subject to the general control of the Government, this Council will be entirely autonomous, with power to appoint consultants, experts and officials, and to determine the method or agency by which plans are to be carried out. Financial control over the programme will be exercised in the ordinary way. No expenditure can be incurred without provision in the Budget approved by the Legislature. Before expenditure actually takes place, each project is scrutinised by the Ministry of Finance and, if it exceeds Rs. 100,000, by the Standing Finance Committee of Parliament as well. The expenditure is scrutinised by the Auditor-General who reports annually to Parliament. Government and Private Investment 14. The nature of the Pakistan programme is such that by far the greater part of the total expenditure will be incurred by the Government, who, as hitherto, will be responsible for hydro-electric power, transport, ports and irrigation. Of the total expenditure of R5.2,600 million contemplated in the programme it is estimated that about R5.400 million will be accounted for by private investment in the cotton, jute, paper and other enterprises. The Government reserve to themselves the munitions industries and the manufacture of railway wagons, telephone, telegraph and wireless apparatus. They also reserve the right to take over or to participate in any other industry vital to the security or the economic well-being of the State. If private capital is not forthcoming in branches of industry of national importance, it may be necessary for the Government to initiate development in these fields as a means of stimulating private enterprise. In order to encourage private enterprise, measures of taxation relief have been introduced. For example, new industrial undertakings are, during the first five years, exempt from certain charges under income-tax and business profits tax; depreciation allowances have been extended. An Industrial Finance Corporation has

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THE COLOMBO PLAN

been set up to assist industry by making advances and loans. As regards the investment of foreign capital, the Government have stated that they welcome capital seeking investment with a purely industrial and economic object. They regard it in the national interest, however, that nationals of Pakistan should normally be given the option to subscribe a certain proportion of the capital of industries established by foreign enterprise. In thirteen basic industries this proportion is 51 per cent. In other industries it is 30 per cent. In practice, however, this provision is flexibly applied and is not enforced when local capital is not forthcoming. Limitations on the Programme 15. A total development programme of R5.2,600 million over six years far from exhausts the possibilities of initiating new projects during that period. The Government have, however, considered carefully the limitations upon the rate of internal development. The shortages of trained men will be a handicap in certain fields. On the other hand, Pakistan should benefit from the fact that a relatively high proportion of the skilled artisans and craftsmen of undivided India now live in Pakistan. The prime limitation upon the rate of development lies, however, in the volume of internal finance which is available to the Government for expenditure in the public sector of the programme without either inflation or a further depression of the already low standard of living. Financing the Programme 16. During the period 1951-57 the development programme calls for public investment totalling R5.2,200 million (£237 million) and private investment totalling R5.400 million. In addition, some private investment outside the programme will take place ; it is, of course, impossible to make any accurate forecast, but for illustrative purposes it is assumed that private investment outside the programme will rise gradually and, together with the very heavy expenditure incurred on resettling refugees, amount to a total of some R5.45.0 million during the period. The following table gives a very rough breakdown of the total public and private investment of R5.3,050 million over the period of the programme. Table 13. —Pakistan : Internal and External Finance for Investment, 1951-57 Rs. millions 1951-52 1952-53 1953-54 1954-55 1955-56 1956-57 Total Development programme 335 480 480 435 435 435 2,600 of which — Public investment ... 275 400 400 375 375 375 2,200 Private investment... 60 80 80 60 60 60 400 Private investment outside the programme, and resettlement expenditure .. .. .. .. .. .. 450 Total investment .. .. .. .. .. .. .. 3,050 Internal financial resources 220 250 270 290 320 350 1,700 of which — Private saving ... . . .. .. .. .. .. 1,200 Public funds .. .. .. .. .. 500 Balance of payments deficit 215 305 .. .. .. .. 1.350 Financed by sterling balances .. .. .. .. .. 150 Other external finance required .. .. .. .. ..

26

DEVELOPMENT PROGRAMME OF PAKISTAN

17. As can be seen, the internal resources for financing investment consist of the total savings that can be made available by individuals and private enterprises on the one hand, and by public authorities and public enterprises on the other. A recent investigation was made by a Committee of officials, industrialists and bankers into the rate of saving in Pakistan, and they estimated that the rate would be about R5.200 million annually, or Rs. 1,200 million over the six-year period, taking into account the expectation that the annual rate of savings will slowly increase as incomes rise. In a relatively undeveloped country such as Pakistan, with a low national income per head, savings are inevitably far below those in more advanced countries. Thus the internal resources which can be tapped through borrowing are very limited. There is also very little scope in Pakistan for increases in taxation. The scale of taxation prevailing before partition has been maintained and in addition, estate duties have been instituted. Rates of income tax and customs duties are already high. It is considered that to raise taxes further would discourage investment and hinder trade. An extension of export duties would tend to raise the price of Pakistan exports and prejudice its foreign trade. However, as incomes rise, it is considered that there should be some increase in public revenue from existing taxes and some economies in public expenditure ; taking these factors into account, it is estimated that R5.500 million will become available from public sources for financing investment over the period. Thus, to finance total investment of R5.3,050 million, it is estimated that some Rs. 1,700 million will be available from internal sources both private and public. The rate at which these internal resources will become available is assumed to increase progressively over the period and emergency expenditure on the maintenance of refugees is expected to be on a declining scale. To carry out the total investment programme, the Government of Pakistan expect that it will therefore be necessary to run a balance of payments deficit of Rs. 1,350 million over the six-year period, of which a small part will be required to finance Pakistan's imports of emergency supplies for the resettlement of refugees. 18. The balance of payments of Pakistan is at present in deficit In 1949-50 the deficit was R5.312 million (£36 million). For 1950-51 it is estimated to be R5.230 million (£25 million). This is mainly due to special factors which are not likely to recur, more especially a loss of export earnings and heavy expenditure on the rehabilitation of refugees. Apart from the financing of the development programme, the Government of Pakistan intended to bring the present deficit within more manageable limits and to wipe it out entirely during the course of the next year or two. As a result of the development programme, however, a balance of payments deficit totalling Rs. 1,350 million over the six-year period is expected. It is considered that this will rise to a peak in 1952-53 and will fall gradually towards the end of the period. To finance the total deficit, the Government of Pakistan intend to rely to the extent of R5.150 million on the use of their existing sterling balances. The remainder of the deficit will require external finance of R5.1,200 million from other sources. 19. During the six years the structure of trade is expected to change. There will be, on the one hand, an increase in exports, made possible by the rising production in various sections of the economy ; on the other hand, the developmental imports under the plan will increase and then fall again towards the end of the period. An increase in general imports will be made possible by the expansion of exports. The composition of imports will change as a result of the implementation of the development plan

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THE COLOMBO PLAN

itself and of the improvement in the general purchasing power of the country. It should be possible to relax controls on trade and to admit more freely imports which are at present excluded or restricted owing to shortage of foreign exchange. It is hoped that the balance of payments will return to equilibrium after the period at a higher level of imports and exports, and that these will be permanently maintained. 20. If external finance is not available to the extent indicated in the plan, the economic development of the country will have to be curtailed severely and the rate of economic and social advance correspondingly retarded. The Government of Pakistan are convinced that time is the major consideration in the situation which confronts not only Pakistan, but also the other countries in South and South-East Asia. The events which followed the attainment of independence and the economic distress which still prevails have caused much disillusionment amongst the people. It is of prime importance that they should be given grounds for hope that the harshness of their existence will soon find relief. It is realised that the present plan will not achieve spectacular results. But its execution will provide tangible evidence to the people that the immense task of improving their standard of living is being taken in hand, and that within the limit of what is immediately practicable real improvements are being effected. CHAPTER VI THE DEVELOPMENT PROGRAMME OF CEYLON 1. The population of Ceylon is at present 7,300,000 and is increasing at the rate of some 200,000 every year. The economic position of the Island is dominated by the fact that two-thirds of the cultivated land is taken up with the production of three main crops—tea, rubber and coconut. Twothirds of the population depend on this production or on allied manufacturing and distributive activities. This specialisation is at the expense of food production. Two-thirds of even the present restricted consumption of rice, which is the staple diet, has to be satisfied by imports—4oo,ooo tons out of a total of 587,000 tons consumed in 1949-50. Over half Ceylon's annual expenditure on imports goes on food. Tea, rubber and coconut account for 90 per cent, by value of the total exports of the Island, which is therefore dangerously dependent on the fluctuations of world prices over a very limited range of commodities. In the past these fluctuations have been great, as will be seen from Table 22 on page 46. This has had grave consequences for Ceylon. The high prices which have prevailed since the end of the war have made possible a general advance in the standard of living and the Government have been able to improve social services. Basis and Objectives of the Programme 2. The main objective of the Government's programme is to bring about increased economic stability by reducing Ceylon's precarious dependence upon factors outside its control. To achieve this aim, it is proposed to diversify the economy by some increase in food production and by the creation of other forms of employment. This will better enable the Government, over the long run, to maintain revenues and thus sustain the improved social services. Failure to do this would, in their view, involve grave social and political consequences.

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DEVELOPMENT PROGRAMME OF CEYLON

Description of the Programme 3. The main features and cost of the programme are indicated in the following table: Table 14. —Ceylon: Analysis of Programme Rs. million £ million Percentage Agriculture 503 38 37 Transport and communications — Railways 30 Roads 100 y 297 22 22 Ports and harbours 167 J Power 109 8 8 Industry 75 6 6 Social capital— Housing 471 Health 132 >- 375 28 27 Education 196 J Total 1,359 102 100 4. Agriculture.—Two-thirds of the population at present live in the zone of heavy rain in the West of the Island, crowded into a little less than one-third of its area. Pressure on land in this wet zone can best be relieved by migration to the more sparsely inhabited dry zone in the Eastern and North Central parts from which, as from the rest of the Island, malaria has been almost eliminated since the war. It is in this area that all the major projects for land development are being undertaken by the Government. The total acreage at present cultivated is 3,250,000; it is estimated that another 3,250,000 acres are potentially available for cultivation. For the present purpose it is particularly significant to note that of the area now cultivated over 2,000,000 acres are devoted to the production of the three primary products, tea, rubber and coconut, leaving only about 1,000,000 acres for food production. By 1957 it is planned to have under food crops another 200,000 to 250,000 acres —an increase of about 20 per cent, on the present food-producing areas, from which it is expected to get 75,000 tons of rice annually. This figure includes 131,000 acres covered by the Government's existing development plan, which is due to be completed in 1953. In all these land development projects serious difficulties are involved in clearing the virgin jungle which at present dominates these areas. Work on the new land has already started, and the target of about a 20 per cent, increase in the food-producing area by 1957 is considered to be realistic. 5. The largest of the projects, which is being carried out under the direction of United States engineering firms, involves the damming of the Gal Oya in the Eastern Province, from which it is hoped to irrigate 100,000 acres now under jungle, and to improve the irrigation of 30,000 acres already cultivated so that two crops a year may be harvested instead of one as at present. It is planned in this new area to provide 21,000 peasant holdings. A similar project at Huruluwewa is to provide water for 10,000 acres of paddy land and 6,000 acres for garden crops. The Gal Oya project will not be fully completed until 1962, and an even longer-term project—not to be begun until 1952 —is the damming of the Walawe Ganga, to irrigate 40,000 acres of new land, to ensure supplies of water to 13,000 acres of existing paddy land and to produce 10,000 kilowatts of electric power. A further 24,000 acres of garden land will also be developed.

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THE COLOMBO PLAN

6. Transport and Communications. —The main project under this head is the development of the Port of Colombo, which is now heavily congested. It is not only the main port of the Island, but by reason of its geographical position it also commands important lines of sea communications to all parts of the world. Plans are now complete and work is about to begin on the first stage of its development. The port will have alongside berths and equipment, with all modern facilities for the rapid handling of cargo. As a result of the proposed development the number of ships and the volume of tonnage to be handled through the port will be considerably increased. This will mean a quicker turn-round of ships which should result in lower working costs and be reflected in cheaper freight rates. 7. Power. —The first stage of the only hydro-electric scheme in the country is now almost completed. This will provide an installed generating capacity of 25,000 kilowatts. It is now proposed to commence the two further stages of the scheme, each of which will have a capacity of 25,000 kilowatts. A complementary project is the erection of 941 miles of transmission lines with 60 sub-stations. With the completion of the multi-purpose agricultural projects additional power will become available. 8. Industry.—Ceylon has little manufacturing industry, but projects are now being developed for the processing of local agricultural products and raw materials. Under the coconut oil project, which Is one of the more important of those proposed, about 3,800 tons of low-grade oil will be available from the extraction of oil cake by the continuous solvent process. It is expected to produce annually about 800 tons of glycerine, 4,800 tons of fatty acid, 50,000 tons of cattle food and 1,000 tons of lauryl alcohol. Agricultural improvements will call for greatly increased quantities of fertilisers, and there is a fertiliser project designed to produce 80,000 tons of ammonium sulphate and 35,000 to 45,000 tons of superphosphate. Other projects include the manufacture of caustic soda from locally produced salt, the exploitation of the large deposits of ilmenite and the refining of locally produced sugar-cane. In addition, certain of the factories set up under wartime conditions for the manufacture of plywood, glass, ceramics and coir, and for steel rolling are to be reorganised on sound economic lines. 9. Social Capital.—The part of the programme allotted to social investment is devoted largely to schools and hospitals, and in a lesser degree to housing. In Ceylon there is free education up to and including the University, and nearly 70 per cent, of the population is literate. A high standard has been set, which it is most important to maintain. Much of the improvement in educational facilities has been achieved during the last five years by a considerable expansion, often on an improvised basis. One of the main problems now is the rebuilding and replacement of unsuitable buildings. As part of the general improvement of medical services it is proposed, under the plan, to double the present hospital capacity of 2*7 beds per 1,000 ; even then capacity will be far behind the standard generally accepted in Western countries of 15 per 1,000. It is expected that the Government's own housing plans will be supplemented considerably by private enterprise, which will be assisted by a Government Housing Loans Board set up to provide finance for private housing schemes. Administration of the Programme 10. The fact that the Government is to take a predominant part in all the projects included in the programme will simplify the problem of its administration. The Ministry responsible for the particular service will carry out the individual plans. The co-ordination of development and the determination

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DEVELOPMENT PROGRAMME OF CEYLON

of priorities will be done, as in the past, at Ministerial level in the Cabinet. The Ministry of Finance is consulted at an early stage in the preparation of plans, and the actual work is executed under the normal financial control of the Government. Government and Private Investment 11. In formulating their programme the Government have concentrated in the agricultural field on the production of food. It has not been considered necessary to make specific financial provision in the programme for improvements in the cultivation of tea, rubber and coconut. The production of these three commodities is carried on by private enterprise ; the tea plantations are mainly owned by United Kingdom companies, but 60 per cent, of the rubber and nearly all the coconut lands are owned by Ceylonese. It is the Government's policy to encourage and assist improved production of these three commodities. There are two State-sponsored credit institutions which give long-term loans for agricultural development, and private enterprise makes full use of these facilities. While, as indicated earlier, the Government are taking the initiative in establishing certain new industries, this does not exclude private enterprise in this field. It is part of the Government's policy to welcome foreign capital. Limitations on the Programme 12. The successful implementation of the programme will depend primarily on adequate external finance, but also on the availability of technical experts. In many of the projects the initial period of ' running-in' will be left to foreign contractors, whose expertise and managerial skill will be available on mutually agreed terms until the projects are well established and local personnel have been trained. Most of the demands for ordinary technicians and skilled labour can be met locally. Financing the Programme 13. The programme is estimated to cost R5.1,359 million (£lO2 million). Of this, government loans and planned budgetary surpluses are expected to provide about Rs.Blo million (£6l million) over the period. The balance, R5.550 million (£4l million), is the external finance needed to carry out the programme. Of this, some R5.520 million (£39 million) represents the cost of actual developmental imports ; the remainder would allow a slight increase in the volume and range of imports and ease the task of the Government in raising internal finance. Part of the internal finance for the programme will be raised from loans which are expected to total R5.450 million, an annual average of R5.75 million. This would compare with domestic borrowings of R5.46 million in 1948-49 and of Rs.3o million in 1949-50. It is the view of the Ceylon Government that, having regard to the dependence of the economy on world market prices, it would be unrealistic to count on any higher level of borrowing during the development period. The balance of about R5.360 million will be provided by budget surpluses which, at the current rates of taxation, would provide funds at an average annual rate of Rs.6o million, if the present level of prices for export commodities were maintained. 14. The annual revenue of Ceylon is now running at the rate of about R5.650 million. Direct taxation accounts for over 20 per cent, of this, and indirect taxation for about 60 per cent. Of the latter by far the greatest part is export duty, the yield from which depends upon prevailing prices. The revenue from income tax also varies with the incomes derived from

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exports of the three main products. The rate of income tax has been raised since the war and the incidence of export duties is heavy. It has been estimated that taxation already amounts to over 20 per cent, of the national income, and the Government consider that they cannot base their programme on any assumption of an increased yield, beyond that already taken into account in the expected contribution from budgetary surpluses. The internal expenditure of Rs. 840 million involved in the programme should have no serious inflationary effect, and the external finance needed to implement the programme will largely be required to meet the balance of payments deficit arising from the increased level of developmental imports. The development expenditure to be financed from internal sources will average about R5.135 million annually. This compares with an average expenditure over the years 1947-48 to 1950-51 of R5.116 million, which is being incurred on the Government's current programme due to be completed in 1953. The difference between the average expenditures of R5.116 million and R5.135 million is the measure of the additional effort which Ceylon is itself ready to expend on the 1951-57 programme. 15. At the present time Ceylon's balance of payments has changed from a deficit of Rs.2B million in 1949 to an estimated surplus for 1950 of Rs.loo million ; but, apart from the uncertainty of how long this will continue, it is inadequate to cover the increased imports which will be necessary to carry out the programme. Indeed it is the view of the Government that, even excluding new development, Ceylon is likely to go into deficit during the next few years if there is some reduction in the prevailing high export prices. The vulnerability of the position is illustrated by the fact that a reduction of only 10 per cent, in export income would amount to approximately R5.135 million annually. In these circumstances, while it is clearly difficult to forecast the balance of payments over the next few years with any accuracy, the Government estimate that to implement the six-year development programme would bring the balance of payments deficit over the period up to a total as high as Rs.Boo million. They have in this estimate assumed that the prices of the three export commodities will fall below the high prices now prevailing, and used an approximate average price for rubber of Is. Bd. per lb., for tea of 3s. 6d. per lb., and for copra of £67 per ton. (Additional information on Ceylon's balance of payments will be found in Appendix 2.) They propose to find R5.250 million of the total deficit of Rs.Boo million by drawing on Ceylon's sterling balances. On the assumptions made above, this will still leave a deficit of R5.550 million. In a situation where the total of the budgetary surpluses and the full amount of loans which can be raised from the public are being devoted to development, the Government deem it imprudent to draw down their sterling balances by more than R5.250 million, since the amount not needed as a currency reserve is required to cushion the economy against the uncertainties of international trade. 16. On account of the rising population the current rate of investment is doing no more than maintain the present standard of living and the social services which now form an essential part of that standard. The Government of Ceylon consider that further progress, on which political and social stability in the Island may well depend, cannot be achieved without a higher level of capital investment. Moreover, failure to implement the six-year programme would mean that diversification and the expansion of food production so necessary to the stability of the economy would have to be indefinitely postponed.

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CHAPTER VII THE DEVELOPMENT PROGRAMMES OF THE FEDERATION OF MALAYA, SINGAPORE, NORTH BORNEO AND SARAWAK 1. These territories have a combined population of nearly 7,000,000, of whom over 5,000,000 live in the Federation and 1,000,000 in Singapore. Although they share a common currency —the Malayan dollar, equal to 2s. 4d.—and co-operate closely on questions of social and economic policy, they are four separate territories. The two colonies on the island of Borneo, North Borneo and Sarawak, became the United Kingdom Government's direct responsibility for the first time in 1946 ; large parts of them are completely undeveloped. Apart from Singapore, the territories are predominantly agricultural in so far as they are developed at all, much of the area being thick jungle. Of the total area of 81 million acres, only about 6,000,000 acres are regularly cultivated, the chief crops being rubber (3,700,000 acres), rice (over 1,000,000 acres) and coconut (700,000 acres). There are, in addition, large areas of forest in North Borneo and other land in Sarawak which is only intermittently cultivated by primitive methods. The other major resources are the tin of Malaya and the oil of British Borneo. 2. All four territories suffered considerable damage during the war, which included three and a half years of Japanese occupation. The physical destruction was greatest in North Borneo, where the two chief towns were practically razed to the ground. Out of a total of 900 government buildings 600 were completely destroyed and all but twenty of the remainder were damaged. In other territories also buildings, railways and rolling stock, plant and machinery, roads and bridges, and port and harbour installations were destroyed or damaged. Some of this destruction was to prevent valuable assets falling into Japanese hands. The Japanese neglected the maintenance of anything which did not contribute directly to their war effort. Plantations were abandoned to weeds, machinery was left to rust, buildings were allowed to fall into disrepair. Education was neglected. Public health and other social services were not maintained (in 1944 the death rate in Singapore was double the pre-war rate). 3. Immediately after the liberation, local Governments and private enterprise began the immense task of rehabilitation, and by now this has been largely completed except in North Borneo. A striking illustration of this recovery is the rubber industry, where the great efforts made by estates and smallholders resulted in a record output for the Federation of 698,000 tons in 1948. The cost of restoring the public services and rehabilitating public assets has been borne by the local Governments, largely out of their revenues, but partly from their reserves or from loans. Since the liberation, gross investment of all kinds, both public and private, has exceeded £l5O million. The cost of some of this investment will be recovered from the United Kingdom Government who have offered about £4O million, in grants and interestfree loans, towards war damage compensation. Further to assist these territories the United Kingdom Government have allocated over £8,000,000 under the Colonial Development and Welfare Act, made direct grants of £8,000,000 to the Federation towards the cost of internal security measures, and grants-in-aid of nearly £2,000,000 to North Borneo; they have also arranged for the Federation to raise a loan of £8,000,000 on the London market. Basis and Objectives of the Programmes 4. The four territories differ widely in their state of development and the extent to which the tasks of rehabilitation and restoration have been completed. In consequence the starting points and the objectives of their

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programmes for economic development differ. But the purpose common to them all is to put in hand the most urgent projects which will help to secure the prosperity and social well-being of the peoples of the territories, and to prepare the ground for further development. Close attention has been paid to the various limitations which determine the rate at which progress can be made. The programmes have been drawn up on the basis of schemes already started, and of a realistic assessment of what more can be done over a period of six years within the limits of the financial and other resources which the Governments of the territories hope will be at their disposal. 5. Every effort is being made under the development plans to broaden and diversify the economies of these territories by increasing the production of foodstuffs, especially rice, and of other agricultural products such as palm oil and cocoa, and by stimulating manufacturing industries. Nevertheless, it is clear that their economies will remain primarily dependent on rubber and tin, the export of which will largely determine their balance of payments position and their ability to earn dollars. While the main investment in rubber and tin will be by private enterprise, the Governments consider it necessary and urgent to help the improvement of rubber production by the smallholders who cannot command the finance available to the large estates. Description of the Programmes 6. The development programmes of the public authorities in the four territories are estimated to cost in total about £lO7 million. This excludes private investment; no reliable estimate can be made of this, but it is likely to be of considerable importance. The distribution of the public authorities' programmes and their costs are shown in the following table: Table 15. —British Territories: Analysis of Programmes £ million Federation Singapore N. Borneo Sarawak Total Percentage Agriculture ... ... 10-9 0-4 1-0 0-7 13-0 12-1 Transport and commu- _ _ nications 10-8 7-1 1-7 1-5 21-1 19-5 Fuel and power ... 10-0 9-9 0-2 20-1 18-7 Industry 0-2 o*2 0-2 Social capital 12-8 35-6 2-5 2-1 53-0 49-5 Total 44-7 53-0 5-2 4-5 107-4 100-0 7. The Federation Plan.—The Federation plan aims primarily at expanding the national income by improving agricultural efficiency, by diversifying the economy and by providing more electricity and better communications. There are in the Federation some 350,000 rubber smallholdings, averaging about three acres each, on which the trees are old and yields are falling. Although it would result in a threefold increase in yield of rubber per acre, the smallholders cannot replace the old trees with high-yielding types. Quite apart from the technical difficulties of replanting part of a smallholding, they cannot afford to lose part of their present income by destroying some of their existing trees, as the new ones would take seven years before beginning to yield. It is proposed to assist the smallholders in various ways. For example, the Government can clear new land for them, plant it with highyielding rubber and possibly other crops, and eventually settle them there. Alternatively, a number of smallholdings can be grouped together and part of the area replanted. The appropriate methods will vary from one area to another, and will depend partly on the crops for which the cleared land is suitable. Larger producers of rubber and other crops who wish to develop their estates will be assisted by loans.

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development programmes OF MALAVA AND BORNEO

8. At present the Federation produces only about 40 per cent, of the 1,000,000 tons of rice a year consumed in the Federation and Singapore. The plan proposes to increase the present low yields from the existing rice acreage, by providing irrigation, drainage, better strains and protection against pests. It proposes also to open up new rice land, and some of this may be suitable for mechanical cultivation ; pilot schemes are already being undertaken. The increase in rice production planned will, however, do little more than keep pace with the rapidly increasing population, and a high level of imports from neighbouring countries will continue to be necessary. 9. The demand for electricity is now far greater than the supply. Many industries, notably tin mines, have during the past four years had to restrict their output, while future industrial development of the country is being impeded by shortage of electric power. The Connaught Bridge Power Station, designed for an ultimate capacity of 80,000 kilowatts, will be a first step towards remedying this shortage. During the six years of the plan it is intended to put in hand a number of hydro-electric schemes and to complete a grid. The plan also provides for the improvement and extension of existing roads, railways and telecommunications services. This last item is a large one, necessary on security as well as economic grounds. 10. In addition to other schemes for expanding output, the plan covers an expenditure of £12.8 million on social capital, including £7,000,000 for education, labour, medical and social welfare services. The Government consider that the need for these improvements is urgent and must be met. At present only one-third of all children of school age receive any kind of schooling. Nearly 50 per cent, of the Federation's population is Malay, over 38 per cent. Chinese, and nearly 11 per cent. Indians, Ceylonese and Pakistanis. Education to promote a sense of common citizenship is therefore particularly desirable. It is especially important to provide more education for Malays, in order to fit them to play a larger part in the government, commerce and industry of the country. 11. The Singapore Plan.—Singapore is one of the great ports of the world. It lives mainly by trade ; there is also some manufacturing, but relatively little agriculture (the whole island covers little more than 200 square miles). The plan reflects these facts. It provides for further expansion of harbour facilities and for an international airport, which will form a valuable link in world air communications. A large item is for the expansion of electric power, which will assist the development of local industries. The substantial expenditure on social investment is considered by the Government as the more urgently necessary since it represents a constructive measure against terrorist influence. Large amounts are to be spent on education—with the aim of achieving education for all children by 1960—health services, water supplies and the other needs of a rapidly expanding urban community. The improvement in water supplies is important to meet the needs of shipping. The most serious social need is for more houses. A large proportion of the people live in slums, and the population is increasing rapidly. Overcrowding is very serious, and it is estimated that it will be necessary to rehouse about half a million people. The Government are fully conscious of their responsibility in helping to alleviate the situation. The Singapore Improvement Trust, a public authority, is responsible for carrying out the Government's housing programme. While aiming to cover all its costs, the Trust is able to let houses at much lower rents than private enterprise, which in any case caters primarily for the middle classes. But the progress of rehousing will depend on the extent to which internal finance can be raised additional to that required for the other items in the development programme.

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12. The North Borneo Plan. —North Borneo has by no means fully made good the heavy damage suffered during the war. Hence a large part of the plan covers the reconstruction of buildings, ports and harbours, and railway equipment. The plan also provides for the improvement of agriculture, for better communications, and for some expansion of social services. 13. The Sarawak Plan.—Sarawak, like North Borneo, has a small and unevenly distributed population. Communications, including telecommunications, are to be improved. Agriculture is to be assisted, for example, by substituting wet paddy cultivation for hill paddy cultivation, which is wasteful and is causing soil erosion. Geological, timber and fishery surveys are to be undertaken as an indispensable preliminary to further development of natural resources. There is to be some expansion of social services. 14. Brunei. —Brunei is a small protected State situated between North Borneo and Sarawak. Largely due to oil royalties, its financial resources are sufficient to enable it to carry through its development programme, but it is being hampered by shortage of technical staff. Administration of the Programmes 15. The projects included in these programmes are to be undertaken by government departments or by other public authorities or agencies. In Malaya and Singapore the degree of control and co-ordination found necessary is exercised by the Government Secretariats. In both Sarawak and North Borneo, a Development Secretary has been appointed to co-ordinate the development projects. There is no planning control over the scale and incidence of private investment. Government and Private Investment 16. The projects making up the development programmes are the responsibility of the Governments and public authorities in the territories. They consist mainly of investment in the basic services which, although they expand the national income, result in no direct monetary return, or produce only a modest and, in some cases, a delayed one. But a large part of the productive side of the economy—the estates and small holdings, the mines, manufacturing industry and commerce —is dependent for its development on private enterprise which was primarily responsible for the rapid commercial recovery of Malaya after the war. In North Borneo and Sarawak, which are in a much earlier stage of development, the role of private investment is as yet small, but opportunities are likely to increase as the basic services are improved and extended into the undeveloped hinterland. The overseas investor, who has done so much for Malaya and Singapore in the past, will continue to be welcome. There is no discrimination against overseas capital invested in the country which is treated in exactly the same way as local capital. Profits can be remitted freely, whether to dollar countries or elsewhere. Limitations on the Programmes 17. In the view of the Governments of the territories the size of the development programmes reflects a realistic appraisal of what can be accomplished in the time. Of the limiting factors which have been taken into account, mention should be made here of the comparatively small populations, outside of Singapore, and the difficulties in obtaining sufficient numbers of engineers, agronomists, doctors and other scientific and technical staff; these difficulties have been aggravated by the marked shortage of housing in all the territories. In the Borneo territories there is the additional fact that, when the administration was taken over after the war, the basic administrative services and data

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DEVELOPMENT PROGRAMMES OF MALAYA AND BORNEO

necessary for economic development were almost totally absent. This latter deficiency must be made good before development can gain real impetus. But the most important limitation on the size of the development which can be undertaken by the four territories is availability of the necessary finance to carry through the projects and to meet the consequent recurrent expenditure. Financing the Programmes 18. In estimating the extent to which the development programmes could be financed from internal funds, the authorities have had regard to their experience, particularly since the liberation, and to present political and social circumstances in the territories. On this basis they have estimated that the appropriate distribution of the costs of the total programme, as between internal and external finance, would be: Table 16.—British Territories: internal and External Finance for Programmes, 1951-57 £ million North Federation Singapore Borneo Sarawak Total Internal finance 8-7 35-3 0-9 0-9 45-8 External finance 36-1 17-5 4-3 3-5 61-4 Total 44-8 52-8 5-2 4-4 107-2 19. There are a number of factors relevant to the consideration of the amount of internal finance which can be provided from the territories themselves. Even in times of prosperity the administrations in the territories experience difficulty in raising, by means of taxes or loans, funds which might seem commensurate with the level of national income. Since the liberation, rates of taxation have been progressively increased, especially on tobacco and liquor. In the Federation, for example, where they form one of the main sources, revenue from these latter taxes has increased by 300 per cent, as a result of four separate increases. The Federation also has a wide range of import duties on other commodities. The Federation and Singapore introduced income tax in 1948 on a graduated scale rising to 30 per cent, and a company tax at a standard rate of 20 per cent. The Borneo territories have introduced a tax on companies. The total revenue of the four territories has increased from about £43 million in 1947 to about £6l million in 1949, an increase of 42 per cent, in two years. Steps are being taken to increase the yield from income tax, but one of the most urgent requirements in this connection is more officers of high quality and with sufficient experience of the very specialised local conditions, notably Chinese accounting practices. It would be inviting failure to increase the rates too rapidly, particularly in territories where direct taxation has only recently been introduced. Other measures will be taken to expand the revenue from taxation as rapidly as circumstances permit, but there are limits to this and the process must necessarily be a gradual one. There are many difficulties in the way of increasing further the levels of indirect taxation in all the territories. In Singapore especially, which is a free port depending on its entrepot trade, the scope is very limited if serious damage to the economy as a whole is not to result. Nevertheless, a substantial increase in tax yields has been taken into account in estimating the amount of internal finance available for the programme. It is considered unrealistic to assume that any further large increase in revenue over and'above that presently envisaged could be expected during the six-year period.

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20. It is difficult to raise government loans locally. A large part of the profits resulting from the sale of the main Malayan products do not remain in Malaya for local investment. Many rubber and tin companies are British and foreign owned, and their profits are transferred as dividends and export of capital elsewhere. This is a severe limitation on the capacity to raise local loans in the Federation, Singapore and the Borneo territories. Local investment capital is traditionally directed towards the more remunerative commercial and industrial investments. This tradition is strongly established and the opportunities for speculative investment are considerable. When the Federation Government tried in 1946-48 to raise locally a loan of £12,000,000, it obtained less than £8,000,000, of which £6,000,000 came from the banks. There are Savings Banks in the Federation and Singapore, but their total deposits are only about £8,000,000. Continued efforts will, however, be made to induce local people to lend to their Governments, and account of this possibility has been taken in drawing up the programmes. 21. A significant limiting factor in the case of the Federation is that the local authorities are currently having to devote roughly a third of their annual revenues to defence and security expenditure. Even when the emergency ends, and the United Kingdom assistance in meeting defence expenditure stops, the greater part of this expenditure will have to continue as a preventive security measure. 22. In Sarawak and North Borneo a very large part of the population of about 850,000 enjoy a primitive subsistence way of life. There are comparatively few individuals with incomes susceptible to heavy taxation. The administrations which took over in 1946 have already increased taxation by 50 per cent., and further rapid increases would be resented. They would not be conducive to the co-operation which the Governments desire to encourage. There is thus little scope for raising substantially tax revenue or savings, and until the economy is further expanded development must necessarily depend almost entirely on external finance. 23. There is a further consideration which must weigh heavily with the Governments of the territories in assessing the extent to which they can provide from internal resources the funds needed to carry out their development programmes. This is the high degree of dependence of the territories' economies on rubber and tin, forming as they do some 50 per cent, of the total exports, including re-exports. Export duties on tin and rubber and other primary products, which are assessed on an ad valorem basis, provide a substantial part of the Government's revenue ; this increases as export prices rise, but is highly vulnerable in times of falling prices. The present demand and prices for these products are high, and the territories' balance of payments position is consequently satisfactory. In 1951-52, for example, it is estimated that Malaya's imports at £295 million may exceed her exports and net invisible earnings by only £4 million, even on the assumption of an average price for rubber of 12 pence per pound, which was about the average price during 1949 (compared with an average price of 19 pence during the first six months of 1950, and an average of 40 pence per pound during JulySeptember 1950). The income from rubber and tin is subject to wide fluctuations, and any sharp fall would result in a serious deterioration in the economic stability of the territories and in their ability to command the financial resources required to execute their programmes. The prosperity of Singapore as an entrepot is heavily dependent on its flow of trade with neighbouring countries, which is liable to great fluctuation.

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DEVELOPMENT PROGRAMMES OF MALAYA AND BORNEO

24. In the circumstances referred to in the preceding paragraphs, the Governments have thought it prudent to take a cautious view of the export prospects for rubber and tin over the period covered by the programmes. This, is reflected in their assessment of the funds which they can expect to raise locally from revenues, borrowing and other funds, namely £46 million. 25. If, in the event, the present high level of prices and demand were to persist through the greater part or the whole of six years, it would be possible to broaden the scope of the programme ; there are a number of additional projects, prepared to meet real and pressing needs, which could be brought forward into the programme. Alternatively, to the extent to which the continuance of the present favourable circumstances made possible an increased flow of internal funds, the external finance required by the present programmes could be reduced. In face of the limitations on the scope for raising internal finance, and having regard to the liability of their economies to sharp fluctuations, the Governments of the territories concluded that the execution of the development projects, on the scale and at the rate put forward in the programmes, will depend on a steady inflow of external finance, amounting in all over the six years to about £6l million. 26. A large part of this external finance is required to meet that portion of the domestic expenditure which cannot be met from the finance raised locally. The increase in the volume of developmental imports attributable to the programme is small in relation to the total programme. Table 17.—British Territories : Domestic and Foreign Exchange Expenditure for Programmes, 1951-57 £ million North Federation Singapore Borneo Sarawak Total Domestic expenditure 36 44 4 3 87 Foreign exchange expenditure* 9 9 1 1 20 Total 45 53 5 4 107 * Includes sterling. The estimates relate to expenditure on developmental goods for the programmes. As far as the balance of payments is concerned the uncertainties of forecasting have already been set out. In 1949 there was a surplus of just over £1,000,000. If the rate of development were to be maintained at about present levels, and assuming that the average price of rubber throughout the period is about the same as in 1949, then over the six-year period the payments might be expected to be roughly in balance, although with substantial swings either way. The effect of the accelerated rate of development proposed in the programmes would be to bring the balance of payments into deficit as a result of increased imports of both developmental goods and consumer goods. 27. It is the view of the Governments of the territories that, without the essential component of external finance, many projects would have to be deferred, with consequential damage to the territories' economies, and with all the social and political consequences of a failure to meet the urgent economic and social needs of their peoples. It would be impossible to achieve the fundamental objective of the programmes: this is to put the territories in a position in which, with a rising national income, increased taxable capacity, and expanding and more broadly based overseas trade, they could stand more firmly on their own feet. Having achieved the necessary economic basis for greater social and political stability, they could look forward, with confidence and a larger measure of self-reliance, to further progress in economic development and well-being.

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CHAPTER VIE THE SUM OF THE PROGRAMMES OF THE COMMONWEALTH COUNTRIES 1. The programmes described in the previous four chapters demonstrate the opportunities which exist in the area for raising the standard of living of the peoples through development. They also show that the countries' resources of capital and trained men are insufficient to make full use of these opportunities. All the Commonwealth countries in the area —and indeed the non-Commonwealth countries too —face the same problem, but their needs and circumstances differ widely. For this reason the course of development charted in the programmes, and the problems which will be encountered, are necessarily different. 2. In India, the problem is one of food and raw material shortage, and the need to overcome inflation; so the programme is directed to the expansion of food and raw material production, and the scale of development which can be undertaken is governed by the need to prevent inflation. Pakistan's problem is one of low productivity and of the need to provide some diversification in an almost completely agricultural economy; so its programme provides for more industry and a general advance in power, transport and agricultural efficiency. In Ceylon, and also in Malaya, the economies are at present highly specialised in the production of export crops ; it is therefore necessary, without abandoning specialisation in traditional lines of production, to concentrate on opening up new areas for food production in order to give more stability to the economies. 3. All the countries need to undertake basic economic development on a large scale —irrigation, power, communications, railways, roads, ports and harbour installations. Most of this work is normally the responsibility of Governments, and the programmes presented are those of public authorities and are to be financed almost entirely by public authorities, directly or indirectly. Private investment does not normally undertake work in the field of basic economic development. For however much this development contributes to the prosperity of the countries themselves and to the world as a whole, it is not of a character likely to appeal to the private investor. Moreover, the scale of investment required is far beyond the scope of the domestic capital market in an under-developed country. 4. This is why the programmes mainly relate to public investment. But the fact that the work of basic development is for the most part undertaken by public authorities in no way lessens the importance which is attached to private investment. In general, public investment in these countries is confined to basic services and to industries of strategic importance, such as the production of munitions ; the establishment of new basic industries also tends to require Government finance. Both in India and in Pakistan there are a number of undertakings in which Government and private enterprise work in partnership. In the case of Pakistan, the Government found itself compelled to take the initiative in this way, in order to inspire public confidence in the undertakings and to attract private capital to them. It is the intention of the Government to withdraw its participation in these enterprises as soon as private capital is able to provide all the necessary funds. In the general field of industry and commerce, however, the dominant role in all the countries is played by private enterprise. 5. As the development programmes proceed and the national incomes and savings of the countries grow, the scope for private investment will

SUM OF THE PROGRAMMES

increase. It is expected, for example, that in India private investment will rise by about 60 per cent, in the course of the six-year period. In the Federation of Malaya, where the major export industries are entirely privately owned, private investment in agriculture, mining and industry will be substantially greater than the public investment in these fields. Throughout these countries, public development paves the way for private investment. 6. All the Governments welcome the inflow of foreign private capital, and whilst some regulation is necessary to ensure that the investment is not inconsistent with the wider economic interests of the countries, these regulations are in practice administered in a manner which takes fully into account the countries' need for foreign capital. In the long run, when the emphasis of the investment programmes changes from basic development to investment in industry and commerce, the need will best be satisfied by private capital. Indeed the progress of these countries in later years will depend largely upon the existence of a favourable atmosphere for private foreign investment. Whilst at present the scale of private foreign investment is small in relation to capital needs, all the countries are conducting their policies towards foreign investment in a manner which seeks to build up this favourable atmosphere. Nature of the Programmes 7. The rate of expenditure under the development programmes is as follows: —■ Table 18. —Public Authorities' Expenditure on Development Programmes Average annual rate 1951-57 Total 1950-51 Per cent, of 1951-57 £m. £m. national income £m. India 169 230 3 1,379 Pakistani) 32 47 2f 280 Ceylon 10 17 10(6) 102 Malaya and British Borneo ... 6 18 4 107 (a) The Pakistan programme includes £43 million of private investment in 1951-57. (b) Based on a probable under-estimate of Ceylon's national income. 8. In framing these programmes, the Governments have been guided by their experience of development work so far. They have included only as much as they could be reasonably confident of completing within the period, given a supply of capital and trained men from overseas on the scale indicated. Previous plans have been ruthlessly curtailed in order to arrive at programmes which are both feasible and balanced within themselves. India, for example, has projects worked out which would cost R5.32,000 million; but the programme is limited to Rs. 18,000 million. Pakistan's programme is about 60 per cent, of what it was previously hoped could be accomplished. Post-war experience in most countries, not only in South and South-East Asia, has shown the danger of starting on an over-ambitious investment programme, and consequently of failing to carry it out. 9. The size of the programmes is limited by the shortage of both capital and trained men of all kinds. Even programmes of the size now contemplated could not be accomplished without capital and trained men from overseas. It will be noted that the programmes for Ceylon and Malaya are larger, in relation both to national income and to population, than those of India and Pakistan. This is possible primarily because of their higher national income per head.

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10. In all the countries the programmes represent a considerable acceleration in the present rate of development. With the assistance of substantial economic support from overseas and by drawing down their sterling balances, the countries have been able to do a great deal, although in some cases much of the work has been more in the nature of reconstruction than new development. Organisations are therefore in being to carry out development, and a large number of projects are already under way. A total of 94 identifiable projects of £1,000,000 or more, costing in all £569 million, are included in the programmes, and significant expenditure will have taken place on 71 of these by June, 1951. These development programmes are not a leap in the dark ; in great part they involve a speeding up and broadening of work which is already in progress. 11. As far as future development is concerned, the experience already gained is of particular importance. Procedures which have been evolved over the years exist in all the countries for the stringent control of public expenditure. More recently, the problem has been to establish machinery for the co-ordination of large-scale development planning. There are many difficulties in the way of building a sufficiently strong organisation of this nature, but the Governments are fully seized of its importance. Moreover they recognise that the administration of development programmes cannot follow a rigid pattern ; rather it must be kept under constant review as the development work gathers momentum. 12. The distribution and the cost of the programmes is described in the following table: Table 19. —Analysis of Development Programmes Malaya and India Pakistan Ceylon British Borneo Total £m. £m. £m. £m. £m. Percentage 456 88 38 13 595 32 Transport and communications 527 57 22 21 627 34 Fuel and power 43 51 8 20 122 6 Industry and mining(6) ... 135 53 6 194 10 Social capital 218 31 28 53 330 18 1,379 280 102 107 1,868 100 (a) Including multi-purpose projects. (b) Excluding coal. 13. In all the countries (except Singapore, where the problems are entirely different) the programmes concentrate upon agriculture, transport and communications, and electric power. These are the basic development requirements, related to the overriding need to increase production of food and agricultural raw materials. They account for over 70 per cent, of the total of the programmes. They include bringing new land into cultivation in all countries. For example, the Ceylon programme envisages an increase of some 20 per cent, in the land under food production, without interfering with the production of export crops. In India, Pakistan and Ceylon, the basic development will be achieved by big multi-purpose projects which combine irrigation, flood control and the production of hydro-electric power. In India and Pakistan much of the newly irrigated land will be cultivated by modern techniques. This work will demonstrate throughout the area the possibilities and advantages of new systems of agriculture. The productivity of the land already under cultivation is also to be increased by greater use of fertiliser, double cropping, seed-farms, improved transport and provision of electric power.

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SUM OF THE PROGRAMMES

14. Industry accounts for about 10 per cent, of the expenditure envisaged in the programmes. In Pakistan the proportion is nearly 20 per cent., but Pakistan is a country with hardly any industry at all, since the parts of undivided India which subsequently formed Pakistan were the agricultural areas serving the towns ; the scale of industrialisation envisaged in the next six years is the minimum necessary to introduce a better balance into the economy. In India relatively little industrialisation is contemplated ; the main effort is directed to food and raw material production, and to the provision of power and transport for the countryside, so that rural industries can develop naturally and along economic lines. The general tendency of policy in all the countries is away from the concept of intensive urban development and towards a more balanced economy in the villages. 15. The rest of the programmes is devoted to the provision of social capital —housing, health and education. The need for these services is, of course, very pressing, and it is necessary for them to march in step with the development of productive power. They can moreover have a considerable effect on productivity by enhancing the mobility, physical fitness and efficiency of labour. The expenditure of capital on social services involves a running cost when the services are established, and this becomes a fixed charge on budget revenue. The Governments have therefore had to weigh the relative advantages of the development of production against the extension of social services. In so doing they have had to take into account the fact that the former directly increases the future national income and taxable capacity, whereas the latter represents a call upon future revenue. The countries have struck this balance differently in their programmes. India and Pakistan have allocated only modest funds to social capital; Ceylon and the Federation of Malaya have allocated rather more ; while over half of the Singapore programme consists of expenditure on social capital. This is inevitable in a city with the special characteristics of Singapore, with its rapidly rising population. 16. The programmes consist of a large number of specified schemes, which are listed in Appendices 3 to 6. Apart from the large multi-purpose projects, a relatively small part of the total consists of big projects, and most of the remainder is made up of a series of expenditures which could perhaps be grouped together under broad headings, as in Table 19. They cannot, however, be said to represent self-contained operations which can be treated individually without regard to the programme as a whole. Indeed, even the major projects depend to some extent for their full effect on the carrying through of these other expenditures. In fact, of the total cost of the programmes, only about one-third can be attributed to readily identifiable individual projects. This is shown by the following table: Table 20. —Range of Identifiable Projects in Development Programmes Projects begun Projects begun before June 1951 after June 1951 Total No. Value No. Value No. Value £m. £m. fim. Over £10,000,000 ... 12 223 6 116 18 339 Between £1,000,000 and £10,000,000 59 165 17 65 76 230 71 388 23 181 94 569 17. All the programmes involve the expenditure of foreign exchange. But the proportion of this expenditure varies widely from programme to programme. This is illustrated by the following table, which shows the division

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THE COLOMBO PLAN

between expenditure on domestic goods and services and expenditure of foreign exchange on imported developmental commodities: Table 21. —Domestic and Foreign Exchange Expenditure for Programmes, 1951-57 Expenditure on Expenditure of Percentage of domestic goods foreign foreign exchange Total and services* exchange expenditure _ £/"- £m. £m. India 1,379 1,142 237 17 Pakistan 280 165 115 41 Ceylon 102 63 39 38 Malaya and British Borneo... 107 87 20 19 * Part of the domestic expenditure will call for external finance. See Table 27. As will be seen, the proportion of the foreign exchange expenditure to the total cost of development is much smaller for India and Malaya than for the other two countries. In the case of India this is because a high proportion of the materials and equipment required is available within the country, and the need for imports is therefore relatively small. This is also true to some extent of Malaya, with the additional factor that the v programmes have a large local labour content. Results of the Programmes 18. When the programmes are completed, results like the following can be anticipated: More land under cultivation: 13 million acres (increase of per cent.). More foodgrains produced: 6 million tons (increase of 10 per cent.). More land under irrigation: 13 million acres (increase of 17 per cent.). More electric generating capacity: 1.1 million kilowatts (increase of 67 per cent.). 19. In terms of the standard of living of the people, the growth of productive power is not likely to show spectacular results by 1957. But the danger at present throughout the area, and in particular in the Indian sub-continent, is that the standard of living will fall, as a result of population growth and the inadequacy of savings and capital investment. The programmes will do little more than hold the present position, but it will be apparent to everyone in South and South-East Asia that progress is being made. The strength of these programmes is that they are designed to lay sound foundations for further development: they aim to provide, in a six-year period, the indispensable preliminary basic development which will pave the way for improvement in the future. 20. The execution of the programmes is expected to strengthen the financial position of the countries, both internally and externally. The growth of productive power will increase national income and therefore the yield from taxation and the amount of savings. The Indian programme, for example, envisages that the net home-financed investment programme, both private and public, would increase from its current annual rate of R5.2,450 million (£lB4 million) to an annual rate of R5.4,360 million (£327 million) by 1957. The increased production, particularly of food, will curb the inflationary forces, and the result will be a healthier internal economy, better able to sustain its own investment programme.

44

SUM OF THE PROGRAMMES

21. On the external side, it is impossible to forecast balances of payments several years ahead, especially for countries whose export earnings are subject to wide fluctuations. It is clear, however, that the export potential of the various countries is likely to rise as the programmes take effect, and this will enable them to increase their total imports. At the same time the tendency will certainly be for the composition of these imports to change. In particular, the increased food production envisaged in all the programmes is likely to reduce the proportion of food imports in favour of imports of capital and consumer goods, even though there is ample room for an increase in food consumption. This somewhat lowered dependence on imported food will in turn strengthen the economies of the countries and enable them the better to meet any crises which might endanger food supplies from abroad. In the result, therefore, there is a reasonable expectation that the development will strengthen the external financial position of the countries. While this is true of all the countries, it applies with special force in the case of Pakistan. • Effect on World Trade 22. The increase in incomes is likely, other things being equal, to contribute to the expansion of world trade. The opposite would be true only if the development were consciously planned to lead towards self-sufficiency. While the programmes provide for some diversification of the economies, this is not with autarky in mind. There is such a dangerous dependence on two or three export crops in Ceylon and Malaya that diversification is no more than ordinary prudence, while in Pakistan the economy is concentrated unduly upon agriculture. 23. All the countries are expanding rice production, and the total increase may be of the order of 2,500,000 tons. India expects to increase production by 7 per cent., Pakistan by 6 per cent., Ceylon by 32 per cent, and Malaya by 77 per cent. This expansion will not, however, lead to uneconomic duplication. The total population of the area at the end of the six years is likely to be some 10 per cent, higher, and the increase in production envisaged in the programmes will to a large extent be taken up by the restoration of pre-war levels of consumption. On balance, it is estimated that the aggregate dependence of all the countries in the area on rice imports will be lessened by not more than 10 per cent., and that they will still have to import a total of 1,700,000 tons. 24. Both the Indian and the Pakistan programmes provide for an increase in cotton production ; here too there is such a large potential demand for cloth in the sub-continent that the extra cotton, and the extra cloth, will be easily absorbed. The increased production of jute is likewise directed towards a sound economic purpose. Exports from the Indian sub-continent have fallen since the end of the war. The commodity has been so scarce and expensive that other countries have been stimulated to search for substitutes to an extent which may threaten the future market for the natural product. This danger will clearly be lessened if production is expanded to a level which will enable it to be sold more cheaply. It should, moreover, be noted that even these plans for expansion both in India and Pakistan will not restore production to pre-war levels. In these circumstances the attention to be paid to jute and jute goods is clearly necessary for both countries. 25. The programmes are of a constructive character in relation to world trade and the world economy. The corollary is that a healthy world economy i§ vital for the fulfilment of the programmes, The demand for the main

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THE COLOMBO PLAN

exports of the area is subject to extreme fluctuations, as is illustrated by the following table: Table 22. —London Prices of South and South-East Asia Export Commodities Basis 1920-29 1930-39 1940-49(a) Commodity of prices High Low High Low High Low Tea ... pence/lb. 201(b) 15|(b) 18* 11* 36i(c) 14i(c) Rubber ... pence/lb. (d) 35 9* 9$ 2\ 18 llf Tin £ per ton 419(6) 139(6) 311 100 757 209 Copra ... £ per ton 30 21 23 9 47(c) 19(c) Jute ... £ per ton 78 15 56 14 115 21 (a) The period 1940-49 was marked by a general upward trend in prices. (b) 1922-29 only. (c) Average f.o.b. contract prices; the free market price for copra was substantially higher. id) Average annual London prices. The national incomes of these countries, their balance of payments and, in particular, their dollar earnings are thus at all times vulnerable even to relatively minor fluctuations in world business activity In working out their programmes Commonwealth countries have assumed a relatively high level of world demand for their basic exports. If this assumption were not fulfilled, their ability to carry out these development programmes would be gravely impaired. Conclusion 26. The conclusion is reached that the development programmes have been framed on a realistic basis. They are designed to provide the foundations for future progress rather than early dramatic results. They are consistent with the concept of an expanding world economy, but are very vulnerable to changes in the level of business activity throughout the world. There are two limitations upon the size of the programmes—the shortage of trained men, and the shortage of capital, both internal and external. The latter shortage is the more serious. Even these programmes, though limited in the results which they will achieve immediately, are more than the countries can sustain from their own resources. Their economies need support to carry the programmes through. The next two chapters describe the size and nature of the support which they require. CHAPTER IX THE NEED FOR TRAINED MEN 1. The development programmes described in the preceding chapters involve the application of modern technology and skills to the under-developed and traditional economies of the countries of South and South-East Asia. This process is not new, but has been proceeding at varying rates in the different countries throughout the past hundred years. With the help of administrators, scientists and technicians from overseas, and increasingly from their own peoples, the countries have been equipping themselves to use the recent advances in science and technology which, applied to the tasks of peace, can bring incalculable material benefits to all in South and South-East Asia. 2. The ability of these countries to raise the living standards of their peoples depends on the success they have in raising the productivity of the individual worker. The increased use of capital equipment, whether in the form of irrigation works, power stations or farm tractors, will only be possible and can only bring its full benefits if the knowledge and skills of the peoples

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NEED FOR TRAINED MEN

in the countries enable them to use this equipment effectively. Thus an essential part of the economic development of South and South-East Asia is the provision of trained men, whether experts or craftsmen, to carry out the projects already in hand, to initiate other schemes in the programmes, and to raise the level of technical skill among agricultural and industrial workers. It is for this reason that, in addition to directly productive projects, provision has been made in the programmes for training institutes, technical schools, research laboratories, field stations, experimental farms and other agencies through which knowledge can be increased and disseminated. These schemes, although many of them are small in terms of capital cost, are indispensable to the success of the programmes as a whole. 3. The extent and nature of the need for technical experts vary from country to country. They depend on the size of a country's own technical resources, on the success it has had in the post-war years in recruiting and retaining personnel from overseas, and on the new demands arising from its development programme. The Commonwealth countries in the area have in their plans for development laid particular stress on the expansion of agriculture through large multi-purpose projects. It is not surprising therefore that the keenest demand is for civil, electrical, mechanical and hydraulic engineers, experienced in the construction of large dams, the erection of hydro-electric stations, and the laying out and operation of irrigation and drainage works. Experts in soil science and management, agronomists and ecologists are equally necessary. Then there are those who have to direct the clearance of jungle and the planning of settlements in new lands. Others have to organise the instruction of settlers in improved methods of cultivation, the planting of new crops, the use and maintenance of modern equipment, and the introduction of power-driven equipment to cottage industry. To bring the multipurpose projects to speedy fruition, this wide range of experts must be on hand at the right time and in sufficient numbers. 4. India needs particularly experts in certain specialised fields of industry, agriculture, medicine and education, and, reflecting the nature of her development projects, a substantial number and a wide range of engineering specialists. But, having regard to the size of her programme, India's requirement of outside assistance is modest as her own resources of technical experts are considerable. Ceylon's requirements follow a rather different pattern ;in addition to the experts required for the major agricultural projects, there is a substantial demand for mechanical engineers, factory managers and production experts, who are needed for the development of its industries. Pakistan has since 1947 recruited a substantial number of experts from overseas, but there are many demands outstanding. The development now in view calls for further recruitment, particularly in the agricultural field, and the development of training facilities in the country. The needs of Malaya and British Borneo are comparatively few and the range is smaller. Here the particular need is to recruit experts for permanent service for whom there will continue to be work long after the six-year period. The problem which faces all these countries is how to recruit experts in sufficient numbers and with sufficient speed. They seek to ensure that projects for which the necessary financial and physical resources can be provided go forward with the minimum delay and that the necessary progress is made with the training of their own people' 5. In the post-war years there has been a world-wide shortage of experts of all kinds, including instructors and teachers. This is probably temporary but it is nevertheless serious in relation to the urgency of the needs of the countries of South and South-East Asia. There are already a large number of unfilled posts in these countries. The inadequacy of the training facilities

47

THE COLOMBO PLA&

has limited their ability to meet the situation by increasing the number of their own technicians. The problem of overseas recruitment has been aggravated by changes in the conditions of recruitment and service. Until recent times Europe provided a substantial proportion of the trained manpower in many Asian countries, whether of administrators, doctors, teachers or scientists. These people were normally employed by Governments or semigovernment organisations ; regular recruitment of Europeans to these government services has now ceased. At the same time there has been some repatriation of private enterprise capital, and Europeans have shown a certain reluctance to accept overseas appointments in the changed circumstances. This reluctance has been reinforced by full employment in highly developed countries, by the temporary nature of the employment offered abroad and by the disinclination of many men, who have been separated from their families during the war, to extend that separation by further service overseas. Before the last war trained men were engaged to serve private employers in Asia in large numbers —government participation in industry or trade being restricted to certain well-defined channels employing full-time career officers of the government technical services. With the considerable expansion of their activities, Governments are now having to augment their own permanent technical services by employing outside experts on development projects. Recent experience shews that men with the required qualifications are scarce and difficult to secure for the periods of service desired, which may be two or three years. But the needs have never been more urgent or of greater importance to the countries of the area. 6. There are three main ways of overcoming the problem, each requiring help from countries outside the area: (i) Expanding training facilities in the area. (ii) Ensuring that adequate training facilities for students from the area are available overseas in universities, technical institutions, public utilities and private manufacturing establishments of all kinds. (iii) Obtaining trained men from abroad. 7. Local Training.—A high proportion of the workers in developed countries are trained in some profession, trade or skill. The resources of trained men thus built up make it comparatively easy for developed countries to expand an industry or to embark on some notable public undertaking or an enterprise overseas in which technical knowledge and skill and industrial experience are required. In the predominantly agricultural countries of South and South-East Asia, the skill of the workers is mainly that of village craftsmen and artisans working as individuals with simple tools and using traditional methods. Only a very small proportion of the population has any training in large-scale-industrial production and the application of scientific and modern engineering processes in the varied fields of economic activity. The shortages in higher grades of knowledge and expertise are serious, but perhaps even more acute, because less generally appreciated, is the need to train middle and lowergrade workers and technicians of all types. These must be trained throughout the whole area, not just in hundreds as in the case of top-grade men, but in thousands. In the years ahead when overseas experts and skilled men have given their advice, completed their work on projects, and departed, the success of the development programmes will depend on the extent to which a sufficient number of people have been trained to take over and to carry forward the work which has been set in train. This is a matter to which increasing attention will have to be paid, and much outside assistance will be needed, especially in the days immediately ahead, in providing teachers and instructors from overseas to train instructors in the South and South-East

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NEED FOR TRAINED MEN

Asian countries. The instructors thus trained would then pass on the knowledge they have acquired to others in a " snow-balling " process closely parallel to systems of training and upgrading unskilled labour during the war. Thus the largest single lack in Asian manpower resources would be supplied. 8. Training of foremen and the skilled and semi-skilled worker can be arranged most economically and effectively locally. Even in the higher category of skills, this is more economical and, over a great part of the field, more satisfactory. The expansion of training facilities in the countries themselves is thus a vital element in their plans for economic advancement. The programmes of the individual countries reveal how much Governments are doing to help themselves by expanding existing establishments and setting up new institutions. The Pakistan Government, the United Nations Food and Agricultural Organisation, the Economic Commission for Asia and the Far East, and the International Bank have collaborated to establish in Pakistan, for the benefit of all Asian countries, a centre for training in the formulation and appraisal of development projects. Pakistan has plans for the expansion of its existing institutions of higher education, and is paying particular attention to establishments to increase the skill of the ordinary worker and to train farmers in the use and maintenance of tractors and their implements, the use of improved seeds, and the application of fertilisers. "In Ceylon, the facilities for university education and for medical and technical training are being expanded. In India, the Scientific Manpower Committee and the University Education Commission have assessed the additional requirements of technical personnel in the next ten years and have made recommendations for the further expansion of existing technical resources to meet these needs. Other important steps taken by the Government in recent years are the creation of a Department of Scientific and Industrial Research ; the opening of a series of National Laboratories for research in physics, chemistry, ceramics and other fields; the expansion of research and training facilities in existing institutions devoted to agriculture, medical and technological education, such as the Dehra Dun Forest Institute, the Indian Institute of Science at Bangalore, the School of Tropical Medicine, the Indian Agricultural and Research Institute ; and the development of postwar vocational training schemes under which a large number of polytechnic and other training institutions have been set up. The Government are also examining schemes for two higher technical institutes which, when set up, will provide facilities,, on a considerable scale, for training and research in engineering and technology for graduate and post-graduate students and research workers. In Malaya, Raffles College and King Edward VII Medical College, Singapore, have been raised to the status of a University to serve the whole of Malaya. There are governmental trade schools and junior technical schools in the Federation, Singapore and North Borneo to train artisans. 9. The facilities for training in the countries themselves are illustrated by the following table: Table 23. —Higher Educational and Technological Training Centres Number of institutions Output of trained and training centres * men 1949 1957 1949 1957 India 2,777 3,330 125,790 167,720 Pakistan 216 293 22,000 25,300 Ceylon 22 28 1,454 3,050 Malaya and British Borneo ... 10 18 260 500

* Includes only universities, technical training colleges and trade schools.

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THE COLOMBO PLAN

The present output of trained men is insufficient to meet growing needs, and if adequate expansion is to take place in these countries, substantial assistance will be needed from overseas to provide fully competent staff and the necessary equipment. (10. Training Overseas. —The need to maintain and where possible to expand the facilities in countries overseas for giving the highest type of training to students is well understood by the members of the Commonwealth. India, Pakistan, Ceylon and Malaya send as many students abroad as they can afford, while the other members of the Commonwealth have made provision for receiving overseas students into their universities and technical colleges. In the British Isles, for example, the universities and university colleges at the beginning of the academic year 1948-49 had a total student population, mainly full-time, of about 100,000, of whom nearly 8,000 came from overseas; there were 860 from India, 110 from Pakistan, 170 from Ceylon and 113 from Malaya. These figures take no account of the large number of students from these countries studying in other technical and training colleges. Under India's scholarship scheme for students from other Commonwealth and foreign countries, scholarships were awarded to sixtyfive students during 1949-50, of whom fifty have already joined and started their work. Australia, New Zealand and Canada also provide facilities in their institutions of higher learning for Asian students. The United Kingdom and other Commonwealth countries account for a very high proportion of the overseas training being given to students and research workers from Commonwealth countries in South and South-East Asia. But although a great deal is already being done, Commonwealth countries, both within and outside the area, are reviewing the provision they make for receiving and assisting students from the area, with the intention of seeing what more they can do to help. Australia, for example, is working out detailed plans for 150 additional special fellowship awards and for several group visits of technical students in 1951. It is hoped that it will be possible to increase the number in subsequent years. Certainly the need for increased facilities abroad for study and research in agriculture, medicine, engineering and education will continue for many years ahead. India alone wishes to send abroad over the next six years some 3,000 such students. An important facility for overseas training is that provided by private firms which make arrangements for apprentices and students to spend a period in their factories acquiring knowledge of the methods of production and the problems of management. This type of training is particularly valuable in terms of the quick practical benefits it can give to the country from whom the trainees are drawn. ill. Overseas Recruitment. —The provision of training, whether in the country itself or overseas, cannot meet the most urgent needs which must be satisfied if the programmes for economic development are to go forward. These must be met by recruitment from overseas of a sufficient number of scientific, technical and educational specialists. The following table and the fuller statements given at the end of each of Appendices 3-6 do no more than illustrate the nature of the need. The figures in the table relate only to the needs arising out of the development programmes and even in this restricted sense, which takes no account of the needs at present outstanding, they are not complete. Moreover, the summary statement necessarily cannot indicate the complexity of the needs and the varying degree of specialisation called for by particular projects.

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NEED FOR TRAINED MEN

Table 24. —Preliminary Requirements of Overseas Experts for Programmes Malaya and Type of expert India Pakistan Ceylon British Borneo Agriculture 37 38 9 11 Fisheries 6 12 1 1 Miscellaneous industrial experts ... 8 12 8 4 Engineers— Civil 25 69 22 10 Mechanical 339 58 2 3 Electrical 36 51 .. 1 Chemical 11 39 3 Other* 41 .. 20 U Industrial chemists 1 27 3 Statisticians, &c 2 8 .. 1 Research chemists 18 42 Medical 49 25 2 5 Education 13 30 1 8 Civil engineering superintendents and foremen .. 12 22 Miscellaneous 52 37 82 4 Total ... 638 460 154 59 * Includes civil, mechanical, electrical and chemical engineers, where these form part of a group which cannot be sub-divided. Where the exact number wanted is unknown, the requirement has been shown as 1. The length of time for which a particular man is needed varies from a few months to three or more years, and one man may be able to satisfy a number of needs in one or more countries. It might not, however, be unreasonable to estimate that at any one time during the period of the execution of the programmes, these countries together will be calling for the assistance of between 500 and 750 highly qualified experts from abroad. Trained men of all types are also likely to be required in substantial numbers by the nonCommonwealth countries of the area, as is clear from the surveys undertaken by the Economic Commission for Asia and the Far East. 12. The most direct and effective way of meeting such needs is for the countries themselves to seek out the technical assistance they need. In this way they are already meeting an important part of their requirements by employing consulting engineers, overseas contractors, and companies expert in the particular type of enterprise which it is desired to develop. Private enterprise has in the past played, and will continue to play, an important part in meeting the technical assistance needs of under-developed countries, both by supplying their own experts and by creating training facilities. The difficulties referred to earlier in recruiting experts for service in South and South-East Asia probably apply with less force to recruitment by private enterprise. It is not possible to state in numerical terms what this contribution of private enterprise amounts to at present, since the arrangements are usually made privately, between a company in, for example, the United Kingdom and one in India. Alternatively, the arrangement may be between an overseas company and the Government of a country in the area. In this way the countries receive a flow of technical knowledge and facilities for training their own people, whether at home or overseas, which could not otherwise be readily made available to them. In the past much of this assistance has been undertaken wholly by private enterprise, but in a number of instances in recent years private enterprise has been associated with Governments in the establishment of new industries and the recruitment and training of the necessary personnel An association of this kind is responsible

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THE COLOMBO PLAN

for locomotive production and the manufacture of fertilisers in India, for establishing a security printing works in Pakistan, and for developing cement production in Ceylon. Nothing fundamentally new is required in the way of organisation to stimulate the flow of technical assistance through private enterprise, and the hoped-for expansion in private investment should be followed by an increased flow of technical assistance. Much depends on the terms and conditions which Governments and local companies can offer so as to take advantage of this means of drawing on supplies of technical personnel. 13. Many of the present urgent needs must necessarily be satisfied from recruitment by the Government or a public authority, and it is here that the greatest difficulties would seem to arise, particularly when an expert is needed for a longer period than a few months. The Commonwealth Governments have been giving special attention to this problem in considering the development needs of South and South-East Asia. A review of the position has shown that a great deal has been done and is being done by individual Governments and by the United Nations and its Agencies. But the need in the area for trained men is so urgent that greater sacrifices and a greater co-operative effort will be required if the development plans are to be executed economically and speedily. Fortunately there is an increasing awareness of the nature and seriousness of the problem of skilled manpower. Under the " Point Four " programme the United States will, through bilateral arrangements, be in a position to make further assistance available. The United Nations and its Agencies have performed a valuable service in focusing attention on the problems, analysing their nature and suggesting possible solutions. Within the limits of the resources at their disposal; these Agencies have sought to help in applying such solutions, supplementing the efforts of individual Governments to help themselves and the assistance they have been receiving from other Governments on a bilateral basis. The decision to expand the United Nations Technical Assistance Programme and the provision of funds totalling $2O million, of which Commonwealth countries have agreed to contribute approximately one-fifth, should enable the United Nations and its Agencies to increase the range and intensity of their technical assistance work. It is hoped that they will be able to devote special attention to the vital needs of South and South-East Asia and to direct a generous proportion of the increased funds to meet those needs, thus augmenting the valuable work already being done in the area. A Scheme for Technical Co-operation 14. Since the assistance available or at present planned through national and international sources cannot meet all the known needs, the Commonwealth Consultative Committee at its meeting at Sydney in May, 1950, decided to set up a technical assistance scheme to which Commonwealth Governments have agreed to contribute an amount up to a maximum of £8,000,000 over three years. A copy of the Constitution of the Council for Technical Co-operation, the organisation responsible for the scheme, is to be found as Appendix 7to this Report. The scheme is based on the maximum mutual help among the countries in the area and the other participating countries. Assistance is to be provided on a bilateral basis ; this will not, however, exclude joint schemes in which more than two co-operating countries or agencies are participating. 15. The Council will not compete with existing organisations. On the contrary, it is intended that there shall be the fullest co-operation with the United Nations and other agencies providing technical assistance in the area,

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Close liaison and co-operation among the various agencies now operating in the field of technical assistance is essential if the available manpower is to be used to best advantage. This is all the more important in view of the expansion of the technical aid programme of the United Nations and its Specialised Agencies and of United States activities in this field through the " Point Four " programme. The organisation initiated by Commonwealth Governments may usefully act as a channel for making information available to Governments about sources from which trained men and training facilities may be sought and, where necessary, as a clearing house for requests for technical assistance. This should ensure that all agencies which may be concerned are informed, so that duplication and overlapping are avoided and the provision of men and training facilities speeded up. Discussions have already taken place with representatives of the United Nations and of its Specialised Agencies with a view to establishing the closest liaison between those operating the Commonwealth scheme and those responsible for existing schemes. 16. The Council for Technical Co-operation is to be composed of representatives from each of the participating Governments, assisted by a Bureau with headquarters in Colombo. The constitution of the Council is a flexible one, calculated to promote to the maximum practicable extent the provision of trained men and training facilities to meet the varying needs for technical assistance. It is hoped that all countries in the area will come into the scheme on equal terms with the Commonwealth countries to avail themselves of the facilities offered and to make their contribution in the spirit of cooperation in which it is devised. The main functions of the Council will include provision of such assistance as: (ia) Training of personnel from countries in the area in countries where suitable instruction is available, and the despatch of missions abroad to study the latest techniques or practices. (b) Experts, instructors and advisory missions to assist in planning, development, or reconstruction, or for use in public administration, in health services, scientific research, in agricultural, industrial, or other productive activities and in the training of personnel. (c) Equipment required for training or use by technical experts in the region. Every effort will be made to expand the training facilities in the countries themselves, if necessary, by the use of new methods and techniques. Help in this field includes university facilities for undergraduate and post-graduate study and research; training in government establishments, in technical schools, research institutions and experimental stations ; and places in factories and workshops for the training of skilled foremen and skilled workmen. It would appear that there is likely to be a lack of equipment required for training or use by technical experts and instructors since existing agencies are strictly limited in the extent to which they may make such equipment available from the resources at their disposal. The Commonwealth countries participating in the scheme are examining how they might help to remedy these deficiencies by making available suitable types of equipment such as visual aids and specialised equipment for technical training establishments. 17. Even during the period in which the details of the scheme and its organisation were still under consideration, work went forward of compiling information on the nature of the needs and the ways in which they might be satisfied. India, Pakistan and Ceylon notified other Commonwealth Govern-

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THE COLOMBO PLAN

ments of outstanding requirements of trained men, whom they needed to carry on the work of development already in hand. Ceylon, for example, asked if it could be assisted to fill outstanding vacancies for trained men of various types including draftsmen, mechanical engineers, experts for medical and social schemes, irrigation engineers and expert industrial advisers. Some assistance to meet these demands has been given. Certain Commonwealth Governments have decided that it would be desirable to set up special units to receive requests for technical assistance and find ways and means of meeting them within their own countries. In the short period while this work has gone forward on an ad hoc basis, it has been found that the close touch which can be maintained by a body working in the area has much to commend it and is appreciated by the Governments who are seeking assistance. The benefits of these arrangements should increase as the permanent organisation grows in experience. 18. The present acute shortage of trained men in the countries of South and South-East Asia is an inevitable result of the endeavours being made to break with traditional methods and to introduce new techniques for using the resources of nature. The shortage has been aggravated both by general changes in conditions of recruitment and service since 1950, and by the resolute efforts now being made to increase the rate of economic development. The Governments of the countries in the area are making every effort to train their own people, by developing their own training facilities, and, with the co-operation of other Governments, by sending students overseas, and by recruiting experts from abroad. The problem can only be solved if countries in the area and overseas, acting individually and collectively, determine to match the size and urgency of the needs by their efforts to meet them. The Council for Technical Co-operation and the United Nations and its Agencies, acting in close consultation, can fulfil their respective and complementary functions of seeing that the available resources of technical man-power are used to greatest effect in carrying forward with increasing momentum the plans which the countries of South and South-East Asia have prepared for their economic and social betterment. CHAPTER X THE NEED FOR CAPITAL 1. The shortage of capital is the main limitation on the execution of the development programmes described in this Report. This arises simply from the poverty of the area. Its productivity and national income per head are so low that the tax structure is inevitably narrow and the taxable capacity inadequate ; the flow of savings is insufficient, for the great mass of the people have no margin above subsistence level. Consequently there are very limited resources with which to finance the capital expenditure required for development. In India, for example, total home-financed investment is now about 2\ per cent, of the national income ; in some advanced countries this figure runs above 20 per cent., and in most advanced countries it is as much as five times the Indian figure. 2. The present situation is in the nature of a vicious circle. Economic development cannot proceed because the rate of saving is inadequate ; saving does not take place because there is insufficient development. The problem in South and South-East Asia is to find means of remedying this shortage

54

NEED FOR CAPITAL

of capital. Development will by its own momentum ultimately bring about a solution, for as productive power and national income rise, so the proportion of the national income which can be saved will grow ; the amount of savings available therefore rises cumulatively until at a high stage of development the country can finance a high level of development expenditure. As this process proceeds, it may be expected that the financial institutions through which saving is stimulated will establish themselves. It would, indeed, be the duty of Governments to foster their growth. In the early stages, however, they exist only in a limited form, and it is no solution to the problem of the lack of savings merely to create new institutions faster than the cumulative process will allow. 3. The traditional means by which the vicious circle of lack of savings and lack of development has been broken is by injections of foreign investment. Without the use of external resources, the Government must either restrict its development programme or divert internal resources to development work by cutting down the standard of living. The latter process could be achieved by a ruthless mobilisation of the economy including direct action to cut consumption. Alternatively, it could be accomplished by inflation. This would be a slower and less obvious process, but it would just as inevitably involve a reduction in living standards ; indeed, it might also have other serious consequences, for it would tend to discourage savings still further, and might adversely affect production. 4. For Governments in South and South-East Asia none of these courses is practicable. Curtailment of the development programmes, while populations are increasing, would condemn the people of the area to continuing poverty ; direct reduction of living standards could not be achieved without authoritarian government; the political, social and economic consequences of inflation are unpredictable, but the social fabric could hardly be expected to withstand the strain which it would impose. 5. In the absence of any effective means of making further progress with their economic development by their own unaided effort, these countries need a large initial stimulus in the form of foreign investment They need more goods to enable them to carry out their development programme —not only capital goods, but also consumer goods for the workers engaged on the projects. The foreign investment provides these goods. In other words, it enables the country to have a larger balance of payments deficit than would otherwise be possible (or a deficit instead of a surplus). This is the primary function of the foreign investment. Without it, the country would not be able to afford to buy from abroad sufficient capital or consumer goods, and the development programme could not be carried out. 6. At the same time foreign investment can incidentally help to provide the internal finance which the Government need to pay the workers and the contractors for the development programme. The precise technique by which the flow of capital from abroad is transmuted into finance for the Government will vary from time to time and from country to country. But in one way or another, the foreign investment can serve a double purpose, providing both external finance to meet the balance of payments deficit and internal finance for the Government. Balance of Payments 7. The balance of payments of the four territories whose development programmes have been described in the previous chapters, is summarised in the following table. This gives estimates of their receipts and payments on

55

THE COLOMBO PLAN

current account in the year 1950-51, that is the period immediately preceding the expansion of development: Table 25. —Balance of Payments, 1950-51 £ million India (a) Pakistan (a) Ceylon (b) Malaya Imports— Food 76 2 46 81 Developmental commodities (c) 142 43 10 26 Other 283 121 29 185 501 166 85 292 Invisible payments 86 10 26 20 Total payments 587 176 111 312 Exports 371 150 102 269 Invisible receipts 112 1 17 40 Total receipts 483 151 119 309 Surplus (+)/Deficit (—) —lO4 —25 +8 —3 (a) Excluding transactions between India and Pakistan. {b) 1950. (c) Iron and steel, non-ferrous metals, timber, cement, fertiliser, vehicles, machinery and equipment. 8. India and Pakistan expect to be in considerable deficit in 1950-51, Malaya to be virtually in balance, and Ceylon to have a small surplus. The actual outcome for the last two countries depends to a very large extent upon the world prices of their export crops, and over a period their trade balances can fluctuate so widely and quickly that it is difficult from one year's figures to draw definite conclusions about their external financial prospects. In all countries there is some import control, particularly on imports from hard currency sources, but the restrictions are much the most severe in India, where their removal would increase imports substantially. 9. An important point which emerges, from the point of view of consideration of capital shortage, is that the economies of India and Pakistan are already receiving support from overseas on a substantial scale. This is effected primarily by reduction in their sterling balances by agreement with the United Kingdom Government. Their ability to undertake the present level of development and other government expenditure already depends upon the availability of substantial external finance. This relationship is illustrated by the fact that the Indian balance of payments deficit in 1950-51 is estimated at £lO4 million, while current public expenditure on development is estimated at £169 million. Internal Finance 10. The measures of taxation and the development of savings have varied from country to country. In general, current rates of taxation are high for countries with low national incomes per head. In India and Pakistan the rates of income tax are nearly as high as those of the United Kingdom, although the number of people with taxable incomes is low. In Ceylon government revenue is equivalent to 25 per cent, of the gross national product, although estimates available of the latter may be somewhat conservative. In Malaya it has increased by more than a third in the two years since 1947. Income tax was introduced in Malaya in 1948 on a graduated scale rising to 30 per cent., but in a country with mixed populations and languages the difficulty of training officials quickly in methods of tax collection limits the

56

NEED FOR CAPITAL

speed with which this source of revenue can be developed. There has been a steady drive to increase government revenue in all countries, and whilst it can never be asserted with certainty that the yield of taxation has reached the practicable maximum—and in some countries the maximum is nearer than in others —it is certainly true that in general the incidence of taxation is very high in relation to income levels, and may indeed act as a deterrent to desirable investment. 11. During the period there will be scope for some economy in government expenditure in all countries ; the very high levels of expenditure are largely due to specific costs of the post-war dislocation —defence, settlement of refugees and rehabilitation work of various kinds. It is noteworthy, however, that defence expenditure in India and Pakistan, although it appears large in relation to their central Budgets, is less so in relation to the total of central and provincial expenditures and is in fact no more than 2-3 per cent, of their national incomes. Defence there, as in all countries in the world, is a severe - obligation, but nevertheless it is not a decisive element in the general consideration of the shortage of capital, although it must be a matter of continuing concern and should be reduced as soon as international conditions permit. 12. The organisation and stimulation of savings have been carried further in some countries than in others. There are great practical problems in countries with a relatively small urban population. It is relatively easy in the towns to organise the apparatus of savings banks and similar agencies which are necessary to encourage thrift among the people; in the villages and rural areas the task of organisation is much more arduous. Great efforts have been made, particularly in India. Over a period, especially with incomes rising in the process of development, it will be possible to increase the flow of savings, but the process is not one which can be carried out rapidly. 13. The budgetary position of the Governments is shown in the following table: Table 26. —Revenue and Expenditure of Governments £ million India (a) Pakistan (b) Ceylon Malaya (1950-51) (1949-50) (1950-51) (1949) Revenue— Direct taxation 129 10 11 8 Other 405 120 38 50 Total 534 130 49 58 Expenditure (excluding expenditure on development)— Defence 126 55 1 Other 400 111 48 49 Total ... 526 166(c) 49 58 Expenditure on development— During year to which this table relates 169 23 10 Aid) Average rate during 1951-57 ... 230 47 17 18 Revenue as per cent, of gross national product 7 7 25 14 (a) Central, Provincial and most State Governments. (b) Central and Provincial Governments, excluding States. (c) Includes expenditure on capital account financed from loans, as follows: defence £lsm.; refugees £5 m.; state trading £6 m.; other £llm. (d) Includes some rehabilitation.

57

THE COLOMBO PLAN

14. Broadly speaking, the Budgets are now approaching balance apart from development expenditure, which is normally financed by borrowing. The extent to which this borrowing is of an* inflationary character depends upon how far the real resources of the country are supplemented by drawing on external assets and upon how far real savings in the private sector of the economy are available for financing public investment. In the case of both India and Pakistan, substantial drawing upon external assets is taking place in 1950-51 and this is reducing the inflationary pressure resulting from their present development expenditure. In all the countries there is still inflationary pressure. While prices are still tending to rise in India, they have remained more stable over the last few months in Pakistan and Ceylon. It is still too early to say how the recent increase in world commodity prices will affect the economies of these countries ; but it will clearly in the course of time add to the forces which are making for inflation. 15. It is, therefore, with their taxation and government expenditure already high, their balance of payments in some cases in deficit, and inflationary pressure already existing in varying degree, that the countries of South and South-East Asia are contemplating the expansion of their development expenditure which is indispensable for any solution of their problems. In India and Pakistan all these difficulties already exist, while in Ceylon and Malaya the favourable position resulting from the high demand and prices for their exports may only be temporary. The Need for Externa! Finance 16. The economies of countries in the area are already receiving external finance, primarily through sterling balance releases. The acceleration of development work will require additional external finance. The total requirements of external finance in the six-year period are set out in the table below. These calculations by the countries are based upon a number of assumptions, any or all of which may be falsified by the course of events ; and the total should be regarded as representing the broad dimensions of the requirements of external finance, rather than as a forecast purporting to describe the position six years ahead. Table 27. —Summary of External Finance Required, 1951-57 £ million Malaya India Pakistan Ceylon and British Total Borneo For period, July, 1951—June, 1957 Total cost of the development programme* 1,379 280 102 107 1,868 Cost of capital goods imported for the programme 237 115 39 20 411 External finance needed— From sterling balances 211 16 19 - 246 From other sources 607 129 41 61 839 Total 818 145 60 61 1,084 For first year, 1951-52 External finance needed— From sterling balances 35 10 5 - 50 From other sources ... 128 13 7 9 156 * The internal finance available for the programmes, on the assumption that external finance is forthcoming would be: India, £772 million, Pakistan, £l5l million, Ceylon, £6l million, Malaya and British Borneo, £46 million. 17. The figures of external finance in the table above represent the total amount of external finance which the countries would require in the period, on the assumptions upon which the estimates have been based. In particular,

58

NEED FOR CAPITAL

they include the whole of the prospective balance of payments deficits of the countries concerned, both in respect of the public development works described in their programmes and in respect of the private sector of their economies. 18. India, which has been subject to serious inflationary pressure, has taken various measures to reduce it. Apart from strengthening their physical and fianancial controls, the Indian Government, in framing their Budget for 1950-51, have been able to bring about a very substantial reduction in the deficit, although this involved the curtailment of some desirable expenditure on development. India is sufficiently industrialised to produce internally much of the equipment and materials required for development; it has therefore estimated its needs for external finance by reference to the probable availability of internal finance from private and public savings. It is expected that increases in the yield of taxation, economies in government expenditure and greater savings will raise the amount of internal finance available for development in the public sector from £lOO million in 1951-52 to £l6O million in 1956-57. After allowing for this, the Indian Government estimate that £l2B million of external development finance will be necessary in the first year (corresponding to a total balance of payments deficit of £163 million). This requirement will fall progressively to £73 million in the last year. External finance is needed not only for the materials and equipment imported in connection with development projects, but also for other imports, to enable the Government to counteract inflationary pressure and to raise a part of the funds needed for internal expenditure. The estimated deficits referred to above are not based on a ' screened' import programme and an export forecast ; they show the deficits which would have to be incurred to carry out the development programme without inflation if external finance were provided on the scale assumed. If India found it necessary, through lack of external purchasing power, to balance its external accounts during this period, it would be obliged to curtail the programme. 19. Pakistan's position is different. Nearly the whole of the materials and capital goods which are needed to carry out the development programme have to be imported, and consequently a large part of the expenditure on the programme directly requires external finance. The internal financial expenditure involved in the programme is believed to be within the financial capacity of the country. Thus Pakistan does not expect to have to combat serious inflationary pressures by devoting a large part of the external finance to the import of goods not required under the programme. Pakistan accordingly expects its belance of payments deficit to grow during the earlier years on account of the import of capital goods, reaching a peak of £33 million in the second year of the programme, when the flow of capital goods will be greatest. After that, the balance of payments will improve for the development programme should greatly strengthen the position. 20. Ceylon's requirements of external finance for the development programme are virtually limited to the actual capital goods imports involved. The balance of payments is at present favourable ; it would deteriorate considerably if there were any weakening of the prices of tea, rubber and coconut products. If these prices fall, however, the Ceylon Government would expect a balance of payments deficit to arise which would be larger than the external cost of its development programme and more external finance would thus be needed. The difficulty which confronts Ceylon is that commitments have to be made ahead, and its economy is so vulnerable that it is impossible to predict with any certainty whether its internal or external financial resources will be strong enough in the future to meet the commitments entered into in this programme.

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THE COLOMBO PLAN

21. In Malaya and British Borneo the need for external finance arises primarily from the lack of internal finance available to the Governments. The external finance is a larger part of the total development programme than in the other countries' programmes. The balance of payments position of Malaya is rather similar to that of Ceylon ; it is now reasonably favourable, but can rapidly deteriorate and destroy both the internal and the external financial basis of the development programme. 22. It appears from the programmes that the need for external finance cannot be measured by the cost of imports of capital goods for the projects in the development programmes ; consumer goods as well as capital goods are needed to carry them out. The need for external finance arises from the size of the balance payments deficit which is required in order to permit the development programmes to be carried through; the criteria to be adopted are therefore to be found firstly in the soundness of the development programmes themselves, and secondly in the extent to which a balance of payments deficit is necessary in order to provide the external resources to support the economies of the developing countries. The Provision of Finance 23. The dimensions of the external finance needed by the Commonwealth countries in the area have been stated above at almost £l,lOO million in the six-year period beginning in July, 1951. This figure represents a general order of magnitude ; the countries' needs for external finance will change in the course of the period as the general economic position changes, and the programmes themselves will change in the light of experience and further progress. The programmes will be kept under continuous review. It is impossible now to make a similar assessment of the needs for external finance of the non-Commonwealth countries in the area, but the application to them of the same technique as has been applied in this Report would almost certainly point to a considerable need, although it would not be as large as that of the Commonwealth countries, which have three times the population. 24. The problem which confronts the countries of South and South-East Asia is to secure a flow of capital from overseas of these general dimensions, in order to provide them with the resources required to supplement their own maximum savings and enable them to carry out their programmes. The possible channels of external finance are—(i) use of the countries' own external assets {e.g., sterling balances) ; (ii) from private investors overseas to private enterprise in the area ; (iii) from private investors overseas to Governments in the area; (iv) from international institutions to Governments in the area; (v) from Governments overseas to Governments in the area. 25. In the last five years, as explained in Chapter 11, external finance has been provided by Commonwealth countries to non-Commonwealth countries in the area. The main sources of external finance for Commonwealth countries in the area has been the use of their external assets. In addition to the use of sterling balances of £270 million by India and Pakistan for the purchase of pension annuities, the transfer of military assets and capital repatriation, the sterling balances of India, Pakistan and Ceylon have been drawn down by £340 million for current account purposes from 1946 to 1949. By agreement with the United Kingdom these countries restricted their drawings below what would have been desirable for their economies, in order to limit the burden on the United Kingdom economy.

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NEED FOR CAPITAL

26. The sterling balances of India, Pakistan and Ceylon will continue to be drawn down gradually during the six years, and by the end of the period it is expected that they will have been reduced to the level of reserves which these countries would wish to hold for the protection of their external financial position and for the backing of their currencies. To the extent of this reduction, they will themselves be providing external finance from their own resources. On the other hand, the economic burden of supplying the corresponding imports will directly or indirectly fall upon the United Kingdom, just as it would if the United Kingdom were giving these countries loans of equal size. It is not certain, of course, that the whole burden would immediately fall upon the United Kingdom. Other sterling area countries, such as Australia and New Zealand, may be in surplus on current account and accumulate sterling. In that event they would be easing the immediate burden on the United Kingdom to whom they would in effect be making short-term loans. Similarly, other countries outside the sterling area might accumulate sterling as a result of expenditure by the countries of South and South-East Asia. 27. Thus the net effect of the six-year operation will be that a part of the sterling balances of India, Pakistan and Ceylon will have been repaid, at immediate economic cost to the United Kingdom, while another part may have become the sterling balances of other countries who would then have to bear the immediate economic burden. In either case, and wherever the immediate economic burden may ultimately fall, the effect of the programme should be to eliminate the problem created by the accumulated sterling balances of Commonwealth countries in the area. 28. The contribution which can come through the second channel of external finance —private investors overseas to private enterprise in the area —will largely depend upon the contributions made in other ways. As was explained in previous chapters, there is a growing field for private investment in South and South-East Asia, for which the public development programmes are providing a sound economic framework, but the immediate problem is to finance public development of basic services. Private investment can carry forward the work begun by public development. 29. The third channel —private investors overseas to Governments in the area —can produce constructive results. There is a substantial volume of lending by the London market to Governments and public authorities throughout the world ; indeed, there is at present great pressure upon the London market, for there are more demands for loans for some years ahead than there are likely to be resources available. Borrowing by Governments from private investors abroad has been the principal source of finance for development in the past, and there is scope for an expansion of government borrowing in private capital markets in other capital exporting countries. 30. The fourth channel —the International Bank for Reconstruction and Development—is of great importance, and Commonwealth Governments are considering how best they would be able to facilitate its use. The Bank has already made loans to India totalling $62.5 million for development projects, and loans to Thailand of the order of $l5 to $2O million are being negotiated. All countries in the area, except Burma, are (or have applied to become) members of the Bank, and it is greatly hoped that it will be possible to enlist its full support and co-operation. The Bank must continue to make sound loans if it is to retain the support of the money markets from which it must borrow the money it lends, and recent developments warrant the belief that it will find ways and means of effective help. Much will depend upon the presentation of carefully prepared plans of general development from which

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THE COLOMBO PLAN

elements may be selected as offering particularly suitable openings for substantial assistance from the Bank. 31. The fifth channel of external finance is from Government to Government. It is very unlikely, in view of the magnitudes involved, that the external finance available through the previous four channels will be enough to enable the development programmes to be carried out. It seems certain, therefore, that a substantial element of Government-to-Government finance will be required, particularly in the early stages of the development programmes. It is not, however, the present intention of the United Kingdom Government, in view of their special responsibility for these territories, to seek finance from other Governments in respect of the Federation of Malaya, Singapore, North Borneo and Sarawak, apart from assistance which is available under present arrangements. 32. The Commonwealth Governments are considering to what extent the external finance requirements can be provided by their countries through the five channels. But the task of providing this financial support for the development of South and South-East Asia is manifestly not one which can be tackled by the Commonwealth alone. The need to raise the standard of living in South and South-East Asia is a problem of concern to every country in the world, not only as an end in itself, but also because the political stability of the area and its economic progress are of vital concern to the world. 33. The way in which financial support could most effectively be given if other countries proved able to help, is a matter which cannot be determined at this stage. It would be clearly desirable, however, for the flow of capital to be organised and managed in a manner which made the greatest possible contribution to the objective of creating a pattern of world trade capable of sustaining a multilateral system of international payments. For this reason, and especially in view of the fact that the trade of South and South-East Asia is an essential element in a multilateral system, it is desirable that whatever means may be -adopted for providing a flow of capital should not involve the tying of purchases to particular sources of supply, but should permit the available funds to be used in the most advantageous manner. It is likewise desirable that the flow of capital should not be arranged in a manner which involved such burdens of future repayment as would frustrate the purpose of stimulating an expansion of trade. 34. The duration of the period for which special means of creating an international flow of capital to South and South-East Asia will be needed will depend primarily upon the speed with which the public development programmes for the provision of basic essential services can be carried out. As the national income and productive power of these countries grow, they will be better able to finance their own development. As the development of basic services proceeds, the emphasis in new development will tend to pass from the public to the private sector. If in this period it is possible to build up an international flow of private capital, at the end of six years the need for special measures will come to an end. Conclusion 35. This Report has described in detail the economic problems and programmes only of the Commonwealth countries within the area. Much that it contains, however, would apply with substantial accuracy to those other countries of South and South-East Asia which are not members of the Commonwealth. They all are afflicted by deep and widespread poverty. They all suffer from an acute shortage of capital. It has not yet proved possible for these countries to discuss their economic programmes alongside

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NEED FOR CAPITAL

those of Commonwealth countries, but it is hoped that this may be done at a later stage. When their data and programmes become available, it will almost certainly prove that they require external finance for comparable purposes and on a comparable scale. 36. At such time as these additional countries in the area become fully associated with the work of the Consultative Committee and are in a position to make their programmes available, it will be necessary to make some adjustment in the name and structure of the Committee in order to permit it to operate effectively on a wider basis. If other countries find themselves able to help in the work of economic development in South and South-East Asia, further and probably more radical alterations in the organisation will be required. It may be the wish both of countries providing external finance and of those receiving it that it should be made available on a bilateral basis. It may be, however, that there would also be need for an organisation of participating Governments which could review progress, which could draw up periodic reports, and which could serve as a forum for the discussion of development problems in South and South-East Asia. The form of such an organisation cannot be determined until it is clear what the sources of external finance will be. But it would seem preferable if the organisation could include both countries supplying capital and countries receiving it, who would all meet to consider the problem of development as a matter of common interest. 37. Stress has been laid throughout this Report on the poverty of the peoples in the area. In economic terms that is the cardinal fact which must be held in mind. In another sense, however, these countries are rich. They are rich in the dignity of peasants tilling the soil, and in the wisdom of teachers and scholars. They also possess incalculable capital in the form of the traditions of civilisations which are older than history itself —traditions which have produced treasures of art and learning and which still mould the minds and spirits of their peoples. The worst effect of poverty has been to cloud and circumscribe these human aspects. They must be liberated so that they can contribute towards the self-realisation of individuals, towards the fulfilment of national aspirations, and towards the enhancement of the lives of other peoples throughout the word. The progress of science and technology has suggested ways in which this may be done ; and in an age when other countries are increasingly reaping the advantages of scientific and industrial advance, the hastening of a similar process in Asia cannot safely be delayed. 38. Commonwealth countries in the area have shown their determination to do their full share in furthering the economic development of their own countries. It is realised that this burden must be borne chiefly by the countries themselves. The careful preparation of these programmes by the Governments of the under-developed countries and the scrutiny which they have given to aH the projects which they have under contemplation in order to reduce them to a consistent and practical programme, is an index of their self-disciplined resolve to move forward energetically. Without external financial assistance something will be done. But it will be done at a much slower rate than would be possible if external finance were provided. 39. And speed is necessary. In a world racked by schism and confusion it is doubtful whether free men can long afford to leave undeveloped and imprisoned in poverty the human resources of the countries of South and South-East Asia which could help so greatly, not only to restore the world's prosperity, but also to redress its confusion and enrich the lives of all men everywhere.

63

APPENDIX 1

APPENDIX 1 Production and Exports of some of the Principal Products of Main Countries in South and South-East Asia

65

(thousand tons) Pre-war 1946 1947 1948 1949 Prod'n. Exports Prod'n. Exports Prod'n. Exports Prod'n. Exports Prod'n. Exports 1. Rice (paddy basis) — India Pakistan Burma Thailand Indonesia Indo-China Others j- 42,790 6,861 4,288 9,689 6,395 967 3,021 1,366 19 1,270 44,065 3,775 4,569 7,530 4,218 830 417 443 96 43,534 5,343 5,092 8,475 4,724 908 792 378 41 / 30,754 \ 12,643 5,203 5,419 9,155 5 019 854 143 1,207 793 156 32,479 12,106 4,134 5,541 9,829 5,019 1,009 1,171 1,196 "93 Sources and Notes (1) U.N. Economic Survey of Asia and the Far East. 1946 Production: F.A.O. Rice Bulletin. Indonesian Exports: F.A.O. Rice Bulletin. Pre-war = 1934-38. Others = Ceylon, Borneo and Malaya. Total 70,990 5,676 64,987 956 68,076 1,211 69,047 2,299 70,117 2,460 2. Wheat — India Pakistan }ll0,160 9,180 7,893 jawf 5,389 \ 3,265 5,414 4,103 (2) F.A.O. Grain Bulletin. 1946 Production: F.A.O. Yearbook. Pre-war = 1934-38. Total 10,160 9,180 7,893 8,654 9,517 3. Oils and fats — India Pakistan Indonesia Others | 2,278 1,028 290 | 507 580 232 63 33 78 2,116 492 236 89 132 121 f 1,963 \ 172 640 280 128 246 190 1,885 172 827 290 128 335 167 (3) Production: U.N. Economic Survey for Asia and the Far East. Exports: F.A.O. Fats and Oils Bulletin. Pre-war = 1934-38. Others = Ceylon and Malaya. Total 3,596 1,319 174 2,844 342 3,055 564 3,174 630

THE COLOMBO PLAN

Production and Exports of some of the Principal Products of Main Countries in South and South-East Asia (continued)

66

(thousand tons) Pre-\ var 1946 1947 1948 1949 Prod'n. Exports Prod'n. Exports Prod'n. Exports Prod'n. Exports Prod'n. Exports Sources and Notes 4. Tea — India Pakistan Ceylon Indonesia Indo-China } 190 102 74 11 149 98 67 1 242 133 134 130 3 1 283 132 1 8 190 128 4 / 246 1 19 133 12 10 156 12 132 9 259 21 134 25 190 14 137 21 (4) U.N. Economic Survey for Asia and the Far East. 1946 Production: F.A.O. Yearbook. 1949 Exports: U.N. Economic Bulletin for Asia and the Far East. Pre-war - 1934-38. (5) Production: F.A.O. Yearbook. 1949 from F.A.O. Sugar Bulletin. Exports: F.A.O. Sugar Bulletin. Prewar = 1934-38. * Up to November only. (6) F.A.O. World Fibre Survey, and Fibre Bulletin. Prewar = 1934-38. Indian production includes imports from Nepal. Exports are from whole sub-continent and exclude trade between India and Pakistan. Pakistan, having no jute mills, exports almost its entire output, of which it is estimated that in 1948 and 1949 four-fifths went to India and the rest overseas. Figures refer to crop year ending 30th June of year mentioned. Total 377 315 375 268 424 322 420 309 439 362 5. Sugar — India Pakistan Indonesia } 5,088 1,135 1,029 5,764 25 - 6,691 49 2 r 4,984 \ 1,019 220 62 4,921 984 295 36* Total 6,223 1,029 5,789 6,740 2 5,223 62 6,200 36 6. Jute — India Pakistan | 1,831 757 1,427 391 991 269 f 303 \ 1,222 }(416){ 362 978 \ / (271) Total 1,831 757 1,427 391 991 269 1,525 (416) 1,340 (271) 7. Jute manufactures — India Pakistan | 1,266 894 1,089 711 1,051 751 | 1,086 896 823 846 1 8. Raw Cotton — India Pakistan y 1,132 573 632 171 759 171 f 560 \ 190 181 185 414 192 42 135 Total 1,132 ! , . 573 632 171 759 171 750 366 606 177

APPENDIX

67

9. Natural rubber — Federation of Malaya 359 344 404 367 646 640 698 679 1 672 679 (7) Production: U.N. EconIndonesia 319 301 177 230 278 287 432 432 1 431 422 omic Bulletin for Asia and Ceylon... 51 49 94 101 89 82 94 92 ! 90 90 the Far East. Pre-war = Thailand 43 42 25 24 52 53 96 96 94 94 1938. Exports: F.A.O. Indo-China 59 59 20 135 38 51 44 41 43 41 Fibre Bulletin. Pre-war = Others 35 35 34 34 61 61 72 71 67 67 1935-39. Figures refer to cpflcnn pnnina Qntn Tntip at oCdoUIl CIIUHI5 JvUl JUilv v/1 Total 864 830 754 891 1,164 1,174 1,436 1,391 1,397 1,393 year mentioned. (8) Production: F.A.O. Year10. Tin— book. Exports: F.A.O. Federation of Fibre Bulletin. Pre-war = Malaya 62 79 8 8 27 32 45 47 55 55 1935-39. Figures refer to Indonesia 33 19 6 5 16 16 31 33 29 30 season ending 31st July of Thailand 14 14 1 1 1 5 4 6 8 8 year mentioned. Burma 5 2 - 1 2 2 1 2 2 2 Indo-China ... 2 2 - - - - - - - (9) U.N. Economic Bulletin for Asia and the Far East. 1946 Total 116 15 46 81 94 Exports: Rubber Statistical jDiuieuu. jr.ic-wcir lyjo, 11. Petroleum crude — Others — Burma and British Indonesia 7,275 260 1,098 4,264 5,834 Borneo. Brunei 685 184t 1,690 2,641 3,200 ( 1fft \cf\ 1 Tlnllftin of* tlif \l\J) OlClUijUvul DUIlvlIlI U1 lllv Total 7,960 444 2,788 6,905 9,034 International Tin Study rjrnnn Prp-war — j vJJLUUp. x iC"Wai — LyJO-JO. Exports include re-exports. (11) U.N. Economic Bulletin for Asia and the Far East and Brunei Annual Reports. Pre-war = 1938. 1 f Six months' production only.

APPENDIX 2 Balance of Payments on Current Account of Commonwealth Countries in South and South-East Asia, 1949-53 £ million 1949-50 1950-51 1951-52 1952-53 (or 1949) Forecasts India (a) — Imports ... ... ... ... 451 501 578 583 Invisible payments 92 86 87 87 Exports 314 371 390 404 Invisible receipts 110 112 112 112 Surplus (+)/Deficit(-) - 119 - 104 - 163 - 154 Pakistan (a) — Imports 120 166 165 176 Invisible payments 20 10 10 10 Exports 106 150 151 152 Invisible receipts 9 1 1 1 Surplus (+)/Deficit (—) 35 25 23 33 Ceylon— Imports 77 85 (b) 99 99 Invisible payments 17 26(b) 24 24 Exports 80 102 (b) 95 94 Invisible receipts 12 17 (b) 16 15 Surplus (+)/Deficit(-> - 2 + 8(b) - 12 - 14 Malaya— Imports 215 292 295 297 Invisible payments 20 20 20 20 Exports ... 196 269 271 272 Invisible receipts 40 40 40 40 Surplus (+)/Deficit (—) + 1 3 4 5 North Borneo— Imports 3-9 4-2 4-9 5-3 Invisible payments 0-2 0-2 0-2 0-2 Exports 4-4 6-0 4-9 5-2 Invisible receipts - 0-1 Surplus (+)/Deficit (-) +O-3 +l-7 -0-2 -0-3 Sarawak — Imports 12-8 16-5 16-8 16-5 Invisible payments (c) ... ... 8-6 10*4 10-5 10-5 Exports 21-9 28-0 24-6 25-7 Invisible receipts ... 01 0-1 0-3 0-3 Surplus (+)/Deficit (-) +O-6 +l-2 -2-4 -0-1 (a) Indian and Pakistan statistics exclude transactions with each other. Pakistan statistics for 1949-50 are converted throughout at Rs. 9-27 == £l. (b) 1950. (c) Mainly profits of oil companies.

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APPENDIX 3 INDIA: Basic Statistics 1 Rupee = l.s. 6d. Sterling. == 21 United States cents. All figures relate to the year 1948-49 unless otherwise stated. Population Total Population (millions) 347 • 34 Urban Population 14 per cent. Economically Active Population* (millions) 108-9 Per cent. Of which— (approx.) Agriculture • 67 Manufacturing 21 Other 12 National Income* Rs. million Gross National Product at factor cost 78,105 Per head of population, R5.301 (£23). Area* Million acres Total Area 781 Under cultivation (1949-50) 306 (39 %) Of which— Rice 72 Wheat 22 Jowar 22 Bajra 19 Electricity Kilowatts Capacity installed 1,400,000 Transport (March 1949) Miles Motor Roads 182,000 Railways 33,861 Inland Waterways 6,300 Balance of Payments in 1949 (Excluding Transactions with Pakistan) Rs. million Imports, c.i.f. 6,012 Other payments 1,226 Exports, f.o.b. 4,189 Other receipts 1,460 Deficit 1,589 * Relates to the Union Provinces only in which about 75 per cent, of the total population live.

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India (continued) External Trade during 1949 (Excluding trade with Pakistan) Principal imports— Rs. million Wheat 615 Rice 306 Machinery and Equipment ... ... ... ... 908 Vehicles, Communication Equipment and Railway Stores 535 Principal exports— Jute manufactures 1,228 Tea 792 Cotton manufactures 457 Public Finance(«) (1950-51) Expenditure— General Administration (including Police, &c.) 1,427 Defence 1,680 Social Services 1,493 Other... 2,530(b) Total 7,130 Revenue— Income Tax ... 1,719 Taxes on Commodities 2,515 Other 2,881 Total 7,115 (a) Central, Provincial and most State Governments. Revenue and Expenditure of Railways is excluded. (b) Includes a part of expenditure on development; the greater part of development expenditure, being financed by loans, is excluded from the above figures. Public Debt (excluding unfunded debt and deposits)— Rs. million Internal 18,476 External 592 Development Programme (1951-1957) Rs. million Total capital expenditure by Government 18,396 Expenditure on domestic goods and services 15,230 Expenditure of foreign exchange 3,166 Of which:— Rs. million Per cent. Agriculture 6,080 99 Transport— Railways ... 4,800") Roads 1,099 V 7,027 38 Ports and Harbours ... ... I,OIBJ Fuel and Power... 576 3 Industry and mining (excluding coal) 1,800 10 Social Capital— Education ... 1,144"! Housing 183 t 7QII Health ... 515 f 2 ' 913 16 Others 1,071 j

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APPENDIX 3

India (continued) List of Projects involving expenditure of more than 55.2.5 million covered by the development programme 1951-57 Total cost during 1951-57 (Rs. million) Number of Schemes New Projects Description in Hand Schemes AGRICULTURE (including irrigation) 1 Integrated Crop Production Plan. The object of the plan is not merely to increase the total area under cultivation of major crops by 4£ million acres, but also to improve agricultural practices and techniques through the use of better seeds and manures and the provision of water through minor irrigation works. It covers the whole country ... ... ... ... 1,322-6 1 Damodar Valley Project (multipurpose). It contemplates the construction across the Damodar River of 8 storage dams with hydro-electric stations and 2 auxiliary plants with a total installed capacity of 240,000 kW., an additional 200,000 kW. steam power, a power transmission grid and an irrigation barrage with associated canals and distributaries 500-0 1 Hirakud Project (multipurpose). It envisages the construction of a dam across the Mahanad 15,000 ft. in length, with the maximum height above deepest bed of 150 ft. It also contemplates the construction of two hydro-electric power houses of 32,100 kW. capacity 300-0 i Bhakra Nangal (multipurpose) 757-2 1 Kakarapara (multipurpose) 94-0 2 Tungabhadra (multipurpose). One end will be developed from Hyderabad and the other from Madras 319-8 1 Chambal (multipurpose) 153-5 ! Kosi Barrage (multipurpose). Stage 1 69-9 23 Major irrigation projects in the various states to bring more land under irrigation 798-1 260-0 26 Minor irrigation schemes in the various states 280-3 34-2 10 Schemes for construction of tube wells including purchase and distribution of necessary equipment ... 130 • 4 15-1 14 Establishment in the various states, of institutions of research in agriculture, fisheries, animal husbandry, &c„ and for training men 77-6 7-2 7 Distribution of fertilisers, manures, better seeds, implements, &c. 38-5 2-8 3 Minor schemes for the introduction of mechanical cultivation 43-0 or. Schemes for the reclamation of waste lands 17-2 13-3 9 Plans for establishment of rural credit institutions and facilities * 29-8 61-1 5 Preliminary investigation of certain major products ... 44-1 5 Minor schemes for development of forests 11-3 14-3 14 Miscellaneous schemes relating to rural development, establishment of dairy units, special cattle camps, &c. 206 -6 71-9 TRANSPORT AND COMMUNICATIONS Railways (Innumerable The plan aims at the restoration of 15 dismantled lines projects) and the construction of about 36 new lines, 5 special projects including the establishment of two locomotive manufacturing and servicing factories al Tatanagar and Chittaranjan, and 6 structural and engineering works; it further involves the addition and replacement to the rolling stock and equipment of a large number of locomotives, wagons, carriages and sleepers 4,800-0

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India (continued) Total cost during 1951-57 (Rs. million) Number of Schemes New Projects Description in Hand Schemes Roads 47 Schemes for the construction of new trunk and feeder roads in the several states as well as the improvement of existing ones. It also includes schemes for construction of new bridges 162-1 597-3 5 Establishment and organisation of public corporations for running road transport services 226-9 10-2 Ports and Harbours 1 Construction of the Port at Kandla 66-0 3 Modernisation of the ports of Madras, Bombay, Cochin and the development of Sika and Bhavanagar ... 64-0 Other 3 Provision of aeronautical communication and navigation, and an intensified net-work of internal and foreign air services 200-0 27-5 1 Lump sum provision for a number of capital schemes in Posts and Telegraphs 540-0 1 Lump sum provision for a number of capital schemes in Broadcasting 50-0 FUEL AND POWER 29 Hydro-electric and thermal projects for the generation and distribution of electrical energy such as Machkund, Pykara, Sharada, Pathri, &c. 533-0 14-5 INDUSTRY 1 Establishment of one integrated steel plant 600-0 1 Heavy electrical plant factory 284-0 3 Loans for the extension and modernisation of Tata's plant, the Steel Corporation of Bengal and the Bhadravathi iron and steel factory 178-2 1 Aircraft manufacturing project 140-7 1 Sindri fertiliser factory 10-0 1 Machine tool factory 70-6 1 Penicillin factory 26-8 1 Radio equipment and radar factory 81-2 34 Schemes for the various industrial projects comprising chemical factories, one paper mill, one cement factory, an aluminium factory, and a wire and wire products factory; development of rural cottage industries; and establishment of Industrial Schools and Polytechnics for training, &c 131-8 250-8 SOCIAL CAPITAL Education 14 Schemes relating to engineering technological, higher scientific and research education 170-1 72-1 3 Grant of stipends and scholarships 117-1 28 Development of {a) universities and institutions of importance to all India, (b) basic, (c) social and adult education 629-9 27-1 2 Construction of building, &c 21-9 10 Miscellaneous schemes relating to education 100-5 Medical 10 Development of medical educational institutions ... 59-3 49-3 25 Setting up of new and expansion of old hospitals and dispensaries 216-4 62-9 2 Building schemes 7-3 2-5 3 Miscellaneous schemes for medical development ... 7-2 4-3

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APPENDIX 3

India (continued) Total cost during 1951-57 (Rs. million) Number of Schemes New Projects Description in Hand Schemes Others 7 Labour and Labour Welfare schemes including industrial housing 185-8 19-3 1 Provision for the rehabilitation of displaced persons ... 750-0 31 Public Health schemes for anti-malaria, sewage and drainage, rural public health, rural water supply, urban water supply and miscellaneous construction works 118-3 75-1 7 Miscellaneous construction programme 189-3 12 Miscellaneous schemes for the welfare of scheduled and backward classes, fire service and slum clearance ... 65-1 31-6 Technical Assistance Required From Abroad Serial No.* Number of Type of Experts Time for of project Experts or Subject which required I (a).—Six-Year Development Plan: Central Government Agriculture ... 1 1 Vaccine and sera 3 years 1 1 Animal husbandry Fisheries ... 22 Master fishermen 2 years Communications 6 11 Telecommunications 5 years 9 ? Aircraft experts 10 1 Technical adviser 11 2 Astronomers Industry ... 13 2 Mechanical engineers 14 5 Mechanical engineers and chemists 15 2 Chemical engineers ... 1 Designers 2 months 16 240 Mechanical engineers 4 years 17 1 Electrical engineer 2 years 1 Works Manager 2 years 18 ? Plant erection 4 years 19 18 Electrical engineers 2 years 24 1 Technical adviser 3 years 26 50 Mechanical engineers Electrical engineers Production engineers Development engineers Designers 28 1 Roads 4 years Shipping ... 29 2 Captain superintendents 3 years 2 Marine engineers Education ... 31 7 Technical professors 5 years 32 6 Technical professors 5 years Multi-purpose 34 13 Civil engineers projects. 35 2 Geophysicists 2 Geologists 3 Drilling engineers 36 1 Hydraulic engineer 4 Research 37 28 Electrical, mechanical, civil, water planning and irrigation engineers ... 2 years

* Refers to schedule of projects in Indian Development Programme.

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India (continued) Serial No* Number of Type of Experts Time for of project Experts or Subject which required Health 38 1 Paediatician 1 Social medicine 1 Paediatric nurse 3 Public health 2 years 1 Health director 1 Administration officer 40 8 Laboratory ... ... ... ... I year 42 1 Physiologist ! year 1 Psychiatrist I year 43 1 Bacteriologist \ 7 vear „ 1 Pathologist j 2 years 44 1 Physiologist 1 1 Pharmacologist }►! year 1 Pathologist j 45 4 Civil engineers i year 1 (b).—Six-Year Development Plan: States Governments Agriculture ... 1 14 Agriculture Co-operation ... 1 2 Banking and Insurance 3 1 Workshop engineer Fisheries ... I ? Fishery 3 months Milk supply ... I 2 Dairy Irrigation, &c. ... 1 1 Electrical engineer 1 Civil engineer... 5 3 Civil engineers ... ... ... 1 year 6 2 Electrical engineers ... ... ... 2\ years Power project ... 1 1 Electrical engineer 1 Civil engineer 3 years 22 Electrical engineers years 3 1 Electrical engineer ... 6 1 Electrical engineer Permanent 9 2 Electrical engineers Miscellaneous ... \ ? Sericulture 3 6 Mechanical engineers 4 4 Mechanical engineers ... ... 2 years 5 ? Mechanical engineers 2 years 6 4 Mechanical engineers 6 months 7 1 Mechanical engineer 8 1 Mechanical engineer 3 months 9 2 Mechanical engineers 6 months 10 4 Mechanical engineers ... ... 1 year 11 2 Mechanical engineers ... ... I year 12 3 Mechanical engineers ... ... 6 months 13 3 Mechanical engineers 1 year 14 6 Mechanical engineers 15 4 Chemical engineers ... 1 year 16 5 Chemical engineers 2 years 18 3 Electrical engineers 2 years Medical ... 3 1 Professor of Pathology 2 years 1 Pharmaceutical chemist II.—Additional Requirements from Technical Assistance Scheme Communications 1 1 Electrical engineer Health 8 3 Teachers of nursing 9 1 Thoracic surgeon \ year 10 1 Anaesthetist 1 year 11 1 Cardiologist I year 12 1 Chest specialist 1 year 13 1 Orthopaedic surgeon 1 year 14 1 Physiotherapist 1 year 15 1 Prosthetic technician 3 year 16 1 Physiologist 1 year 17 1 Biochemist 1 year 18 1 Pharmocologist 1 year 19 1 Pharmaceutical chemist 1 year 20 1 Psychiatrist 1 year 21 1 Bacteriologist 1 year

* Refers to schedule of projects in Indian Development Programme.

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APPENDIX 3

India (continued) Serial No* Number of Type of Experts Time for of project Experts or Subject which required lll.—Additional Requirements from United Nations Agencies Health 1 2 teams Malaria control 2 1 team Child welfare 3 1 team Venereal diseases 4 4 Cholera Agriculture ... 5 4 Diseases of paddy 6 1 Mechanical engineer 7 1 Agriculture 8 1 Agriculture 9 2 Agricultural research 11 1 Administrator economist 12 1 Mechanical engineer 13 1 Paper and cellulose 14 1 Plywood 15 1 Sawmill engineer 16 1 Food packing 17 1 Tobacco auction 18 1 Hides and skins 19 1 Artificial insemination 20 3 Fisheries 20 Crew 1 2 years 21 1 Soil conservation 22 2 Statisticians 23 2 Plant diseases 24 1 Preservation of food 26 1 Road transport 28 1 Mechanical engineer 3 Electrical engineer 29 6 Research 2 years 30 1 Electrical engineer ... ... ... 3 years 31 1 Mechanical engineer 3 years 32 1 Mechanical engineer 2 years 33 1 Concrete 2 years 34 2 Civil engineers 2 years 35 1 Electrical engineer 2 years 36 1 Civil engineer 6 months 37 1 Hydraulic engineer ... 2 years 38 1 Hydraulic engineer 2 years 39 1 Hydraulic engineer 2 years 40 3 Hydraulic engineers 2 years Education ... 50 5 Bibliographers 51 1 Research chemist 52 3 Research chemists 53 4 Research 56 1 Botanist 57 1 Chemist 1 Physicist 58 1 In ultra centrifugo Trainees to be sent Abroad Serial No* Number of Type of Period of Trainees Training Training 1(a). —Six-Year Development Plan: Central Government Communications 6 18 Telecommunications 1 year 8 6 Civil works 6 months 11 2 Astronomical research 12 2 Geophysics Industry ... 13 25 Aircraft manufacture 15 1 Chemist 5 Technologists 16 400 Machine tool factory 1 year 17 6 Telephone factory 18 77 Steel plant 23 10 Scientific instruments 1 year 26 Radio equipment 27 20 Industrial explosives 1 year Transport ... 28 120 Road engineering 1 year

* Refers to schedule of projects in Indian Development Programme.

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India (continued) Number of Type of Period of Serial No.* Trainees Training Training Education ... 31 27 Specialised training 2 to 3 years 32 27 Specialised training 2 to 3 years 33 800 Note A 2 years Multi-purpose 35 2 Geophysics 2 years projects 1 Economic geology 1 Engineering Geology 1 Water hydrology 1 Drilling 37 43 Note B 1 year Medical 38 60 Maternity and child care 9 months 39 845 B.C.G. vaccination 4 months 40 126 T.B. mobile and epidermicological work 3 years 42 30 Post-graduate medical study ... 1 year 44 50 Medical training I (b).—Six-Year Development Plan: States Governments Agriculture ... 1 14 Agricultural and allied subjects ... 2 years 22 Land eradication 4 1 Research Co-operation ... 2 1 Silk industry Multi-purpose 1 4 Electrical engineering projects 5 6 Electrical engineering 1 year 6 4 Electrical engineering 18 months 1 10 Electrical and mechanical engineering 2 years 8 1 Hydro-electricity ... 2 years 9 2 Electrical engineering 10 1 Electrical engineering 1 year Industry ... 1 3 Sericulture 2 years 3 3 Paper making 9 3 Steel plant 6 months 10 4 Steel plant 6 months 11 2 Steel plant 6 months 12 3 Wire and wire products 1 year 13 4 Tube mill 18 months 14 3 Stainless steel 18 months 15 1 Chemical engineering 2 years 1 Mechanical engineering 2 years 16 1 Mechanical engineering 2 years 3 Chemical engineering 2 years 18 4 Chemical engineering 1 year 19 1 Foundry and workshop 1 year 20 1 Soap manufacture 1 year Medical 2 20 Nursing 10 Midwifery 3 140 Medical training and nursing 4 20 Bacteriology and pathology ... 1 year I].—Additional Training Facilities Abroad under Technical Assistance Scheme Communications 1 4 Teleprinting 2 6 Telecommunications Multi-purpose 3 6 Dams and hydro-electric projects ... 1-2 years projects 4 8 Thermal power station 1 year 5 12 Thermal power station 1 year 6 18 Electric transmission 1 year Mining 7 2 Mining 1-2 years

* Refers to schedule of projects in Indian Development Programme.

76

APPENDIX 3

India (continued) 111. —Additional Training Facilities Abroad under United Nations Agency Schemes Number of Type of Period of Serial No.* Trainees Training Training Agriculture ... 6 6 Tractor 9 2 Agriculture 10 2 Topographical survey Transport ... 27 21 Road engineering 2 years Labour 41 4 Technical and vocational 42 2 Employment exchange 43 6 Mining 5 years 44 8 Social security 45 6 Labour relations 6 months 46 4 Trade unions 6 months 47 4 Wages and productivity 6 months 48 2 Minimum wages 6 months 49 4 Labour inspection 8 months * Refers to schedule of projects in Indian development programme. Note A (see I (a) above) Low temperature physics; laboratory testing and wind tunnel research; ultra-short wave and micro-engineering, &c.; electron microscope; applied science and chemical engineering and technology; highway engineering; advanced hydraulics; advanced structures; municipal and sanitary engineering; production engineering; machine tools; town and regional planning; chemical plant design and manufacturing engineering; economics; geophysics; mechanical engineering; electrical engineering; chemical technology; soil mechanics; head engines (gas turbines and jet engines); radiology; design of towers for extra high tension transmission lines and their manufacture; hydro-electric generator; civil engineering—bridge design and construction; geological engineering; manufacturing and machine parts; paleobotany; research electrical engineering; radio physics and electronics; X-ray/spectroscopy; naval engineering; road equipments, maintenance, operation and administration; dams; theoretical and practical training in multi-purpose projects and working; leather chemistry, hide proteins, vegetable tannings, hide synthetic tanstuffs, hide tanning salts; physio-therapy; anti-tuberculcsis; psychiatry; pharmacology; ophthalmology; cytology and genetics; maternity and child welfare; dentistry; industrial and business administration; educational films; training in modern trends and patents, study of marks; commercial art; research of theory of machine; business administration; blind; social sciences, penal; children—educational psychology; museology and museography. Note B (see I (a) above) The training will be in erection and maintenance of modern high pressure thermal plants; power transmission system; project planning; designs; hydro-long; engineering geology; soil mechanics; malarial engineering; construction engineering; agricultural engineering; soil conservation; water planning engineering; dam design engineering; civil construction engineering; erection engineering, &c.

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APPENDIX 4 PAKISTAN Basic Statistics 1 Rupee —2s. 2d. Sterling. =3O United States cents. All figures relate to the financial year 1949-50 unless otherwise stated. Population Total Population (millions) 82 -23 Urban Population 12 per cent. Economically Active Population (millions) 22 Per cent. Of which— (approx.) Agriculture 82 Manufacturing ... ... ... ... ... ... 4 Other 14 National Income Rs. million Gross National Product at factor cost 16,711 Per head of population Rs. 222 (£24). Area Million Acres Total Area 233 Under cultivation 54 (24%) Of which— Rice 21-5 Wheat 10-8 Cotton 2-7 Jute 1-9 Electricity Kilowatts Capacity installed 69,074 Transport Miles Motor Roads 57,984 Railways 6,982 Inland Waterways 5,000 Balance of Payments (excluding transactions with India) Rs. million Imports, c.i.f. 1,118 Other payments 190 Exports, f.o.b 911 Other receipts 85 Deficit 312 External Trade Principal imports— Rs. million Cotton textiles and yarn 416 Metals, machinery and millwork ... ... ... 135 Chemicals, drugs and medicines ... ... ... ... 39 Provisions and oilman's stores 34 The above figures relate only to seaborne trade and therefore exclude most of the trade with India.

APPENDIX 4 Pakistan (continued) External Trade—(continued) Principal exports— Rs. million Raw cotton 355 Raw jute 300 Tea (black) 49 Hides and skins ... ... ... ... ... ... 31 The above figures relate only to seaborne trade and therefore exclude most of the trade with India. Public Finance* Expenditure— Rs. million Defence 509 Development 211 Social Service 148 Others 886 Total 1,754 Revenue — Income Tax 90 Tax on commodities 490 Others 627 Total 1,207 * Including Provinces but excluding States. Public Debt— Internal: Rs. 820 million. External: In accordance with the terms of the financial settlement between India and Pakistan, the Government of India accepted initial liability for all the financial obligations outstanding on the day of partition. Pakistan's share of this liability is to be repaid to India in fifty annual equated instalments. The allocation of these liabilities between India and Pakistan is yet to be determined by a Committee set up for the purpose. Development Programme (1951-57) Rs. million Total Capital Expenditure by Government 2,600* Expenditure on domestic goods and services 1,500 Expenditure of foreign exchange 1,100 Rs. million Per cent. Of which— Agriculture (including Irrigation) ... 820 41 Transport— Railways 2001 Roads ... 100 (~on ->1 Ports 140 f DiU Z1 Telecommunications 90 J Fuel and power 470 18 Industry and mining (excluding coal) 490 19 Social Capital— Education 100^ Technical Training 90 Housing 40 11 Health 40 Water Supply ... 20^

* Includes Rs. 400 million private investment in the programme.

THE COLOMBO PLAN

Pakistan (continued) List of projects covered by the development programme, 1951-57 Total cost during 1951-57 Number of (Rs. million) Projects Description Schemes New in Hand Schemes AGRICULTURE (including Irrigation) 20 Lower Sind Barrage. It will consist of 44 spans of" 60 feet each, and will have three feeders, two on the left bank and one on tbe right bank. Area covered by this project is estimated at 2 - 8 million acres Rasul Tube-well Project. It is proposed to construct I 235 1,800 tube-wells, worked by electricity to be generated f by Rasul Hydro-electric Project. This project will irrigate 712,000 acres and help in lowering the water table of a considerable portion of the area now lying water-logged in the Punjab _ 2 Land Settlement. To make full use of the facilities provided by the construction of Thai and Abbasia Canal Systems at a cost of over Rs. 100 million, it is proposed to provide amenities such as roads, schools, dispensaries, temporary houses, &c., and to organise facilities for colonists to break up new land, for the supply of seeds, agricultural implements, credit facilities, &c 142 18 3 Subsidies for fertilisers and manures, to popularise the use of manures and fertilisers in the country ... 92 Seed and Model Farms. It is proposed to set up in the country a net-work of Government-owned farms to demonstrate to backward farmers the advantages of modern methods of agriculture, and to supply improved varieties of seeds - 100 4 Mechanisation of Agriculture. Tractor farms and repair workshops are to be set up to popularise the use of modern machinery 25 55 1 Anti-Waterlogging Measures. About 2-3 million acres of good land are lying water-logged and about 40,000 acres are getting water-logged every year. To lower the water table of these lands it is proposed to construct a chain of tube-wells in the area - 124 1 Development of Animal Husbandry. Objectives are:— (i) Organisation cf dairies throughout the country"! (ii) Development of better breeds of cattle by )* 20 research, demonstrations, &c. j 1 Development of Fisheries. It is proposed to organise co-operative societies for fishermen to encourage tbem, through subsidies if necessary, to mechanise their boats, and to provide cold storage facilities for the catch, &c - 10 Miscellaneous Schemes relating to minor irrigation, re-excavation of channels, control of pests and diseases, &c 3 - TRANSPORT AND COMMUNICATIONS 1 Rehabilitation of Railways. To replace worn out locomotives and rolling-stock it is proposed to purchase urgently at least 170 diesel electric locomotives, 1,950 wagons, 310 light-weight steel carriages and 3 million sleepers. In addition it is proposed to rehabilitate the workshops of the East Bengal Railway 165 Construction of new railway lines - 35

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APPENDIX 4

Pakistan (continued) Total cost during 1951-57 (Rs. million) Number of Schemes New Projects Description in Hand Schemes (Innumerable Construction of Roads. A number of new roads, projects) metalled and unmetalled, are to be constructed ... 100 2 Ports. The objective of the first scheme is to raise the handling capacity of Chittagong Port to 3 -96 million tons per annum. The second scheme provides for the construction of a dry dock at Karachi 130 10 1 Telecommunications. Provision of new telephone exchanges, expansion of existing telephone exchanges, expansion of trunk circuits, extension of telegraph services and main telegraph circuits, introduction of telephoto services, expansion of wireless circuits, &c. 90 FUEL AND POWER 12 Mechanisation of coal mines to raise output; the generation and distribution of 256,000 kW. of thermal and hydro-electric power. The important projects are the Warsak Multi-purpose Project (installed capacity 90,000 kW.), the Karnafulli Multi-purpose Project (installed capacity 40,000 kW.), the Mianwali Hydro-electric Project (installed capacity 30,000 kW.), the Dargai Hydro-electric Scheme (installed capacity 20,000 kW.), &c. ... 95 375 INDUSTRY AND MINING 7 Provision has been made, mostly on private account, for the development of textile (Rs. 240 million), jute (Rs. 110 million), paper (Rs. 40 million), heavy chemical (Rs. 65 million), miscellaneous and small scale industries (Rs. 25 million), and mechanisation of mines and a complete geological survey of the country 95 395 SOCIAL CAPITAL Social Services — 3 Housing - 40 Health services - 40 Education - 100 Other Services — Karachi Water Supply Scheme (Rs. 20 million) Establishment of Technical Institutes, Polytechnics, I Research Laboratories, &c. (Rs. 40 million) ... f 20 90 Grant of Scholarships for training abroad in scientific j and technical subjects (Rs. 50 million) J Technical Assistance Required From Abroad Experts Number Agriculture 38 Fisheries 12 Miscellaneous industrial experts 12 Civil engineers 69 Mechanical engineers 58 Electrical engineers 51 Chemical engineers 39 Industrial chemists 27 Statisticians 8 Research Chemists 42 Medical 25 Education 30 Civil engineering superintendents and foremen ... 12 Miscellaneous ... 37

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Pakistan (continued) Trainees To Be Sent Abroad Serial Number of Type of Training Period of Training No* Trainees 30 25 Training facilities in—(a) Problems of river control ~ (b) Hydraulic problems and structures (c) Design of low and large drop falls 39 25 Training facilities in—(a) Experimental stress analysis methods for ~ s t^ie design of dam 1 6 mon ths to 1 year (b) Lining of channels (c) Tube wells (d) Problem of soil mechanics (e) Physical analysis of soil with regard to open channel and dam (/) Use of electronic apparatus in dam design,, 40 25 Textile technology, wool and cotton ~ 25 Textile engineering 41 10 Paper industry 42 20 Jute mills 43 20 Factories and workshops—sulphuric acid, alkalis, fertilisers ... 44 20 Training facilities in manufacture of—(a) Light castings (b) Hand machine tools (c) Light and heavy machine tools ... L mnnth „ t t v „„_ {d) Hosiery machines, needles and fittings... | y (e) Small dynamos, motors and accessories 25 Training facilities in—(a) Engineering technology (b) Leather technology (c) Glass (d) Cottage industries 20 Pharmaceutical industries 20 Metallurgy 45 25 Practical training in electrical engineering 46, 47, 25 Hydro electricity 1 to 2 years 48, 49, and 50 51 5 Power generating 1 year 56 10 Locomotive workshops and sheds (mechanical"] department railway) >1 year to i\ years 10 Carriage and wagon workshop (railway) ...J 10 Mechanical engineering, motive power, traffic 1 (transportation) and traffic (commerical) ... I , 10 Railway bridge engineering and railway signal j y engineering J 10 Railway engineering in modern design of railway bridges, signalling equipment, maintenance and repairs 1 year to \\ years 10 Modern methods of completion and use by operating department of monthly statistics 6 months to 1 year

* Refers to schedule of projects in Pakistan Development Programme

82

APPENDIX 4

Pakistan (continued) Serial Number of Type of Training Period of Training No. Trainees 59 10 Engineering in road construction including" soil stabilised roads 10 Maintenance of automatic telephone exchange 10 Maintenance of radio transmitting, receiving and technical equipment, both telegraphs and telephones ... ... ... ... >1 year 10 Improvement in telegraph traffic handling with special reference to mechanisation of telegraph office 62 and 10 Mining including milling ... .... ... 63 Social 10 Maintenance of radio transmitting and Services receiving equipment ... 6 months 50 ::: ::: ::: ::: ::;>«<> 3^ 20 Teachers 2 years 10 Organisation of National Insurance ... ... 1 year 20 Teachers (nursing) 2 years

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APPENDIX 5 CEYLON: Basic Statistics 1 Rupee=l s. 6d. Sterling. =2l United States cents. All figures relate to the calendar year 1949 unless otherwise stated. Population Total Population (millions) 7-3 Urban Population 15-5 per cent Economically Active Population (millions) ... 2-6 Per cent. Of which— (approx.) Agriculture 53 Manufacturing 10 Other 37 National Income Rs. million Gross National Product at factor cost 2,245 Per head of population R5.308 (£23). Area Million Acres Total Area 16-25 Under cultivation 3-25 (20%) Of which — 'OOO Acres Tea 534 Rubber 573 Coconut 920 Electricity Kilowats Capacity installed 16,300 Transport Miles Motor Roads 6,362 Railways 894 Inland Waterways 120 Balance of Payments Rs. million Imports 1,029 Other payments :. 218 Exports 1,064 Other receipts 155 Deficit ~, 28

APPENDIX 5

Ceylon (continued) External Trade Rs. million Principal Imports— Grain and Flour 329 Textiles 152 Iron, Steel, Machinery 84 Fats, Seeds, Nuts, Oils 49 Principal Exports— Tea 650 Rubber ... ... 125 Coconut and Coconut products 186 Plumbago 6 Public Finance (1949-50) Rs. million Expenditure— General Administration (including Police, &c.) ... 65 Defence and External Affairs 9 Social Services 270 Other 259 Developmental Expenditure 136 Total 739 Revenue— Income Tax 118 Taxes on Commodities 369 Other 83 Total 570 Public Debt— Internal 315 External 125 Development Programme (1951-57) Rs. million Total Capital Expenditure by Government 1,359 Expenditure on domestic goods and services 833 Expenditure of foreign exchange 526 Rs. million Per cent. Of which— Agriculture (including Irrigation) ... 503 37 Transport— Railways 301 Roads 100 22 Ports and Harbours 167 J Power 109 8 Industry 75 5-5 Social Capital— Health 471 Education 132 >375 27-5 Housing 196 J

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Ceylon (continued) List of Major Projects Covered by the Development Programme, 1951-57 Description Total Cost During 1951-57 Rs. million AGRICULTURE Schemes New Gal Oya Scheme (multi-purpose) in hand Schemes The Gal Oya scheme comprises the damming of the Gal Oya river in the Eastern Province of Ceylon to provide yearly about 700,000 acre feet of water for irrigation, with which it is hoped to irrigate 100,000 acres now under jungle, and to improve the irrigation of 30,000 acres already cultivated. The new land will be leased to peasant cultivators, who will each get in the area on which paddy is to be grown 4 acres of irrigated land and 3 acres of unirrigated land, with a small house and garden. In the area which is to be devoted to sugar-cane cultivation the proportion of irrigated land will be higher. It is hoped to provide 21,000 peasant holdings in the new area. In the area already cultivated, two crops a year instead of one may be possible on 30,000 acres 327 Walawe (multi-purpose) Construction of an earth dam across the Walawe Ganga River together with related structures to store 250,000 acre feet of water to irrigate 40,000 acres of new land and to ensure supplies to 13,000 acres of existing paddy land and to produce 10,000 kWh. HydroElectric Power. The reservoir will also serve as a flood-reducing agent. Two channels on the left and right banks of the river together with the distributary and field channel system will serve the whole area. In addition to the paddy land, approximately 24,000 acres of garden land will be developed 75 Kantalai Construction of a 16-mile long channel tapping the Alut Oya and Gal Oya streams to feed the existing Kantalai Tank which seldom fills now. Raising the spills of this Tank and the restoration of Yendarasam Kulam to form a single reservoir of capacity 90,000 acre feet. The reservoir together with the channel system will be made use of to irrigate 9,000 acres of new paddy land and 4,900 acres of existing paddy land and to develop 4,800 acres of high land for garden crop, in addition to existing acreage of 4,900 acres of paddy land below Kantalai Tank 22 Huruluwewa Restoration of an earth dam, 1 • 6 miles long, together with the related works to form a reservoir of 55,000 acre feet capacity and the construction of the main, distributary and field channel systems and roads for the development of 10,000 acres of paddy land and 6,000 acres for garden crops 16-4 Parakrama Samudra Scheme Construction of a diversionary weir across the Amban Ganga, an inlet channel 2f miles long, and the restoration of 3 tanks to form a single reservoir of 83,000 acre feet capacity and the construction of the main, distributary and field channels together with a road system serving 21,000 acres of paddy land and 8,000 acres of high land for garden crops 10-8 TRANSPORT AND COMMUNICATIONS Development of the Port of Colombo The development of the Port of Colombo is a matter of the highest importance in order to meet the requirements of the increased trade of the Port. It is planned to develop the Port in four stages. Stages I and II comprise the construction of alongside berths for cargo ships, as well as an oil dock for the discharge of tankers. This will give an additional 8-9 berths to the number existing at present, dependent on the monsoon. Stage 111 will increase the number of alongside berths by 6. They will be used by passenger ships and ships bunkering. Stage JV is the extension of the existing breakwaters, so as to give an Outer Harbour of some 450 acres in extent. This will give 6-8 additional anchorage berths, as well as 16 alongside berths in the Inner or existing Harbour 230

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APPENDIX 5

Ceylon (continued) Description Total Cost During 1951-57 Rs. million Schemes New in hand Schemes Electrification of Railway Suburban Services To run an efficient and economical service. Electrification is expected to increase the existing traffic by at least 30 per cent, owing to the better service. There is a demand for a much improved service. With the improved service the surburbs should be quickly developed. This will ease the present housing problem 31 POWER Development of Hydro-Electric Scheme Under the proposed scheme an additional generating capacity of 50,000 kilowatts will be installed 71 Erection of Transmission Lines and Sub-Stations This is a complementary project to the hydro-electric power scheme. It is proposed to erect 941 miles of transmission lines with 60 sub-stations 31-7 INDUSTRIES Vegetable Oil Project This chiefly concerns copra and its products and secondarily certain oil seeds. It is a comprehensive project comprising the following:— (a) Continuous solvent extraction. (b) Batch solvent extraction. (c) Splitting of the fat to produce glycerine, which has to be refined and concentrated, and fatty acid which will be refined by distillation. {d) Cattle food compounding, utilising the ponnac from the extraction plants and blending it with other suitable food materials. (e) Refining of the oils. (/) Production of fatty alcohol 12 Paper The factory is designed to manufacture the ordinary types of paper for writing and printing. The Monosulphite process will be adopted. The manufacture of kraft paper, used to make bags for cement, is also included 12 Caustic Soda The manufacture of caustic soda utilising salt produced in the local salterns by solar evaporation has been investigated, and the project has advanced to the stage of calling for tenders. Schemes for the utilisation of the by-product chlorine are also to be included. The by-product hydrogen will be used for hydrogenation in the manufacture of lauryl alcohol 7 Fertiliser The proposal is to manufacture ammonium sulphate and superphosphate. The raw material used for the production of synthesis gases will be wood. Sulphur and phosphatic rock will have to be imported 35 Sugar A factory to produce sugar utilising the sugar-cane that is grown locally 11 Social Capital Housing 47 Health 132 Education 196

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THE COLOMBO PLAN

Ceylon (continued) Technical Assistance Required From Abroad Project Experts Required Overall industrial development ... 1 Chief industrial planner and co-ordinator (indefinite period) Fertiliser project (ammonium sulphate) 1 Expert conversant with manufacture (1 year) 4 Technicians Separation of ilmenite from sea sand ... 1 Expert acquainted with methods Textile manufacture (cotton and silk) 1 Consultant on manufacture and cultivation of raw material (1 year) 7 Technicians Manufacture of pig-iron and steel ... 1 Consultant (1 year) 7 Technicians Ceramic factory 1 Expert conversant with manufacture and establishment of factory Glass factory 1 Consulting expert (5 years) Development of inland fisheries ... 1 Adviser Match manufacture 1 Expert consultant Sugar manufacture 1 Technologist 1 Manager Hydrogenation of coconut oil 1 Manager 1 Technologist Paper manufacture 1 Manager 1 Engineer Caustic soda manufacture 3 Chemical engineers Irrigation 10 Construction engineers Sugar-cane cultivation 1 Expert (3 years) Cattle breeding 1 Expert in animal husbandry (3 years) Gal Oya Development (Multi-purpose) 2 Experts in animal husbandly Project 1 Saw-mill manager 1 Civil engineer 1 Building technician National T.B. centre Demonstration team of:— 1 Expert clinician 1 Thoracic surgeon 1 Anaesthetist for thoracic work Nursing staff Malaria eradication 1 Entomologist 1 Technician State Insurance scheme 1 Social insurance expert 1 Actuary 1 Organisation and methods officer Rural development 1 Sociologist Water works 4 Water supply engineers 24 Draughtsmen (water works) 20 ~ (structural) 32 „ (architectural) Port development 1 Mechanical engineer 1 „ (boilers) 4 Tug engineers 1 Dredger engineer 1 Diver 1 Assistant docking and slipping master Colonisation schemes Team of adult educationists Scientific and industrial research ... Visiting experts Mineralogical survey Team of experts Utilisation of timber Team of experts to make survey and advise Juvenile delinquency 1 Psychiatrist

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APPENDIX 5

Ceylon (continued) Trainees to be sent Abroad Subject Facilities required for Hydrogenation of coconut oil 23 Technicians Paper manufacture 11 „ Caustic soda manufacture 5 „ Textile manufacture 8 „ Fertiliser project 13 ~ Iron and steel project 17 Sugar manufacture 4 „ Study of wood distillation plants ... 2 „ Soil moisture investigation 1 Officer Soil chemistry ... 1 „ Cattle breeding 1 „ Irrigation engineers 15 Officers Veterinary science 5 „ Forest research 2 „ Dairy development 2 „ Agricultural statistics 1 Officer Medical 30 Doctors per annum National Insurance 1 Officer to be trained in organisation and methods (3 months) Education Fellowships and scholarships in research and development in a variety of subjects

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APPENDIX 6 MALAYA AND BRITISH BORNEO Basic Statistics 1 Malayan dollar =2s. Ad. sterling. =32-66 United States cents. All figures relate to the calendar year 1949. FEDERATION OF MALAYA AND SINGAPORE Population Total Population (millions) 6-13 Urban Population 27 per cent, Economically Active Population (millions) 2-26 Per cent. (approx.) Of which— Agriculture 52 Manufacturing 10 Other 38 National Income Ml million Gross National Product at factor cost 3,345 Per head of population M $545 (£63) Area Million acres Total Area 32 Under cultivation 5 (16%) Of which— Rubber 3*3 Rice ... 0-9 Coconut o*s Electricity Kilowatts Capacity installed 141,900 Transport Miles Motor Roads 6,365 Railways 1,091 Inland Waterways 150 Balance of Payments M% million Imports c.i.f. 1,839 Other payments 171 Exports, f.o.b 1,678 Other receipts 343 Surplus 11 External Trade Ml million Principal imports— Rice 209-4 Textiles 239-5 Sugar 50-8 Machinery .- 49-3 Principal exports— Rubber 726-8 Tin 273-6 Coconut Products 108-0

APPENDIX 6 Malaya and British Borneo (continued) Public Finance Expenditure— General Administration (including regular police, &c.) 117-5 Defence 75-0 Social Services 81-7 Other 220-1 Total 494-3 Revenue— Income Tax 70-8 Taxes on Commodities 235-2 Other 188-1 Total 494-1 Public Debt— Internal 212-5 External 103-3 Development Programmes (1951-57) Federation Singapore M $ million Total Capital Expenditure by Government 384 454 Expenditure on domestic goods and services ... 308 377 Expenditure of foreign exchange 76 77 Federation Singapore M% M% Of which — million Per cent, million Per cent. Agriculture (including irrigation) ... 93 24 3 1 Transport 93 24 61 13 Fuel and Power 86 22 85 19 Industry and Mining (exc. coal) ... 2 1 Social Capital— Health 17] 60] IST ::: ::: ::: 110 si 305 67 Other 37 J 105 J SARAWAK AND NORTH BORNEO Population Sarawak N. Borneo Total ('000) 546 345 Economically active population ('000) 337 Of which— Per cent. Agriculture ... 44^ Manufacturing \ Other 55 National Income Not available Area Sarawak N. Borneo Million acres Total Area 30 19 Of which— Wet paddy (intermittent) 1-2 Forest 94 per cent. Dry paddy (intermittent) 5-7 Arable \\ per cent. Tree crops (rubber, sago, &c.) 0-4

THE COLOMBO PLAN

Malaya and British Borneo (continued) Electricity Kilowatts Capacity installed 2,082 1,332 Transport Miles Motor Roads 279 377 Railways 7 116 Inland Waterways 1,007 Several hundred Balance of Payments M% million Imports 109-7 34 0 Other payments 78-7 I*7 Exports 187-7 37-7 Other receipts 0-9 0-4 Surplus 5-1 2-4 Public Finance Expenditure— General administration (including Police) ... 2-3 1-2 Defence 0-1 Social Services 3-7 1-4 Other 12-4 7-1 Total 18-6 9-7 Assistance from Colonial Development and Welfare Fund 1-6 9-6* Revenue— Company Tax 0 -25 0-10 Taxes on Commodities 9 -00 5-63 Other 4-09 0-92 Total 13-34 9-65 Public Debt * Total development expenditure. Development Programmes (1951-57) Sarawak N. Borneo M$ million M% million Total Capital Expenditure by Government 38-6 44-6 Expenditure on domestic goods and services 27-8 35-3 Expenditure of foreign exchange 10-8 9*3 M% Per M% Per Of which— million cent. million cent. Agriculture 6-0 13 8-6 14 Transport and Communications... 12-9 34 14-6 32 Fuel and Power 1-7 2 Social Capital 18-0 51 21-4 54

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APPENDIX 6

Malaya and British Borneo (continued) Federation.—List of Projects involving Expenditure of more than Mss million covered by the Development Programme, 1951-57 Number Total cost during of Description 1951-57 Projects (M$ million) AGRICULTURE (including Irrigation-Forestry) 85 Irrigation drainage and river conservancy schemes ... 28-8 Resettlement of smallholders whose rubber trees are old with falling yields 25-0 1 Establishment of a rural and industrial development authority 150 Planters Loan Board to provide credit facilities to help development of medium-sized estates 7-0 Forestry Programme: Includes expenditure on training, reafforestation, construction of forest roads, research and on pilot commercial projects (a fibre board plant, a sawmill and timber depots) ... 6-6 TRANSPORT AND COMMUNICATIONS 29 Development of telecommunications 29-6 26 New roads or improvements to existing roads \ „ „ 96 New bridges; provision of workshops J Port development 14-0 1 Completion of East Coast Railway 7-0 FUEL AND POWER Electricity development; completion of Connaught Bridge Power Station; completion of grid, hydro-electric schemes 86-0 SOCIAL CAPITAL Education The programme includes six schemes for extension of teacher training facilities, the building of new "English" and Malay Vernacular Schools, extensions to the Malay Men's and Malay Girls' Colleges and a contribution to the cost of establishing the University of Malaya ... 40-0 Medical 40 Establishment of a new Medical Training School, 25 Rural Health Centres, 11 Tuberculosis Clinics and the improvement of existing hospitals in all States ... 16-9 Housing Capital of proposed housing trust and provision for Government quarters and offices 21-0 32 Improvement of water supplies 26-6 Singapore.—List of Projects involving Expenditure of more than Mss million covered by the Development Programme, 1951-57 Number Total cost during of Description 1951-57 Projects (Ml million) TRANSPORT AND COMMUNICATIONS 1 Establishment of an international civil airport 40-0 2 Schemes for the construction of a new graving dock and extension of wharves 14-3 2 Schemes for road development 5*5 FUEL AND POWER 1 Power station and ancillary works 81-0

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THE COLOMBO PLAN

Malaya and British Borneo (continued) Number Total cost during of Description 1951-57 Projects (Ml million) SOCIAL CAPITAL Education The education programme aims at providing free, universal and compulsory education for children of school age by 1960 51 -8 Medical Programme: aims inter alia at increasing hospital accommodation by approximately 3,000 beds 59-0 5 Housing designed to ease the acute shortage 89-0 Extensions to Municipal water supply 35-1 Land reclamation and development 28-2 Sewerage development 17-4 North Borneo. —List of Projects covered by the Development Programme, 1951-57 AGRICULTURE (including Irrigation and Forestry) 11 Schemes for hemp disease control, agricultural and paddy experimental stations, soil survey, tobacco investigation, mechanical rice cultivation, irrigation and other agricultural developments. The plan also provides for the establishment of a veterinary department with laboratory facilities and quarantine stations, a stock farm, and improvement of pig breeding. Provision is made for fisheries, forestry surveys, and silvicultural operations... 8-5 COMMUNICATIONS 6 Ports and harbours—reconstruction and development of wharves in permanent materials in the main ports and harbours of the Colony, e.g., Sandakan, Labuan, Jesselton, Kudat, Tawau, Lahad Datu and other smaller ports 3-4 1 Government vessels—a fleet of Government vessels will be purchased to facilitate travel either by sea-route or along rivers 0-6 5 Aviation—the plans for aviation include development of airfields at Labuan, Jesselton, Sandakan, Tawau, the construction of smaller airfields for use by " feeder " aircraft at isolated places and the provision of ground organisations, buildings, fire fighting equipment, &c. ... 1-4 1 Roads—the plan comprises construction of some 112 miles of new road as a first priority, a further 260 miles as a medium-term policy, and thereafter a further 350 miles. The plan also includes provision for introduction of up-to-date mechanical equipment, e.g., tractors, bulldozers, graders, &c 7-0 1 Railway—the plan comprises replacement of the main section of the line from Jesselton to Beaufort with 60 lb. rails, and strengthening of all bridges and embankments accordingly and procurement of further rolling-stock... I*9 1 Telecommunications—scheme for general improvements in the telecommunications system 0-3

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APPENDIX 6

Malaya and British Borneo (continued) Number Total cost during of Description 1951-57 Projects (M $ million) SOCIAL CAPITAL Medical 5 Schemes for provision of medical facilities, including construction of a hospital for mental patients, a tuberculosis sanatorium, travelling dispensaries and mosquito control 0 • 7 Education 5 Schemes for provision of teacher training colleges, a secondary school, a trade school and other minor , educational projects 2-5 Buildings, &c. 7 Schemes for provision of housitg, erection of public buildings such as dispensaries, schools, offices, &c., town planning and land acquisition, land reclamation and provision of water supplies, fire services, &c. ... 17-2 Miscellaneous A number of minor schemes covering geological survey, a census in 1951, a statistical bureau, construction of community centres, provision of a printing press and other miscellaneous items 0 9 Sarawak.—List of Projects covered by the Development Programme, 1951-57 AGRICULTURE (including Irrigation-Forestry) Schemes for a soil survey, the improvement of the rubber industry, cultivation of cash crops, mechanical cultivation and paddy production; an agricultural staff training school, animal husbandry, the provision of laboratory accommodation and equipment, &c.; agricultural stations, paddy demonstration plots, a cocoa nursery, the manufacture of artificial fertilisers, the establishment of centralised processing factories for rubber, the improvement of sago refining; forestry and fisheries development and the encouragement of cooperation 5*9 COMMUNICATIONS Schemes for construction of trunk and secondary roads 8 • 2 1 Sungei Kut Canal construction 0-3 2 Construction of airfields at Kuching and Sibu and airfield telecommunications ... 0-6 1 Construction of a port on the Rejang River 0-2 Internal telecommunications 3-9

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THE COLOMBO PLAN

Malaya and British Borneo (continued) Total cost during Number of 1951-57 Projects Description (Rs. million) SOCIAL CAPITAL Education Schemes for a teacher training and secondary school at Batu Lintang, a rural improvement school at Kanowit; the provision of scholarships for higher education; the establishment of a trade school, commercial courses, science laboratories in schools, and domestic science centres; the production of vernacular literature; and the rehabilitation of existing schools 4-1 Medical Provision of travelling and fixed dispensaries an interterritorial mental hospital, the extension of T.B. facilities; a malaria survey of the Borneo territories and an anti-T.B. campaign; the establishment of a health centre at Kuching; the rehousing of the leper settlement, rehabilitation work in hospitals, &c. ... 3-1 Social Welfare Provision of a Boys' Home and a Girls' Club at Kuching, and a Youth Hostel and Boys' Club 0-2 Buildings Government buildings, and housing schemes at Kuching 5• 4 Expansion of electricity supplies and water works; establishment of a statistical bureau for the Borneo territories; a geological survey; and a scheme for produce exports control 6*4 Singapore.—Technical Assistance Required From Abroad Number of Time for which Experts Type of Experts required 1 Airport adviser 1 Electrical engineer 1 Mechanical engineer 1 Civil engineer 5 Gas engineers Architects Structural engineers Draughtsmen Town planners Engineers f Varymg Draughtsmen Civil engineers Planners Draughtsmen 1 Master fisherman 5 Civil engineers 1 Mechanical engineer 2 Surveyors

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APPENDIX 6

Malaya and British Borneo (continued) Federation of Malaya and Singapore.—Technical Assistance Required From Abroad Number of Time for which Experts Type of Experts required { Through normal recruitment channels) 2 Soil chemists Permanent 7 Agricultural „ 6 Drainage and irrigation. 7 Teachers 3 Assistant Comptrollers of income tax „ 4 Assessment officers 1 Personnel officer 7 Inspectors of machinery „ 3 Radiographers „ 2 Medical officers ... ~ 2 Anesthetists 17 Medical ~ 7 Health officers 11 Lady medical officers „ 2 Radiologists „ 3 Dental officers 1 Blood transfusion ~ 1 Tuberculosis 25 Nursing sisters „ 2 Mechanical engineers 1 Electrical engineer „ 6 Civil engineers 2 Architects „ 2 Railway engineers „ 14 Surveyors ... ... ... ... ... ... „ 24 Telecommunications 9 Veterinary officers „ North Borneo, —Technical Assistance Required From Abroad 1 Stock man Permanent 1 Hydraulic engineer „ 1 Tobacco ... ... „ 1 Agronomist ... „ 1 T.B. specialist • 3 Road engineers 1 Domestic science ~ 10 Forest surveyors ~ 1 Statistician ~ 2 Surveyors ... ~ 5 School teachers „ 1 Education officer „ 1 Trade school teacher „ (! Through normal recruitment channels) 2 Drainage and irrigation engineers Permanent 11 Drainage and irrigation assistant engineers 2 Medical „ 1 Dentist „ 1 Surgeon „ 1 Telecommunications „ 1 Civil engineer „ 1 Teacher

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THE COLOMBO PLAN

Malaya and British Borneo (continued) Sarawak.—Technical Assistance Required From Abroad Number of Time for which Experts Type of Experts required 1 Civil engineer I Mechanical engineer 3 Civil engineers 1 Port engineer I Varying 1 Telegraph engineer f 1 Trade education 2 Medical officers 2 Laboratory technicians {Through normal recruitment channels) 1 Agriculture Permanent 4 Teachers „ 1 Land survey 2 Medical „ 1 Nursing sister 1 Mechanical engineer „ Note.—lt will be seen that the requirements of trained personnel for permanent appointments are considerable. It is to be hoped that the Council for Technical Co-operation will be able to assist in such recruitment on request.

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APPENDIX 7 The Council for Technical Co-operation—Constitution Preamble The Governments of Australia, Canada, Ceylon, India, New Zealand, Pakistan and the United Kingdom having considered:— (a) the urgent need for further technical assistance, additional to that available from other sources, to promote economic development in South and SouthEast Asia with a view to raising the living standards of the peoples of the area, (b) the desirability of developing further co-operation and enterprise in the provision of technical assistance, and (c) the need for fullest co-operation with the United Nations and other agencies providing technical assistance in the area, with a view to encouraging and speeding the provision of technical assistance from all sources, have resolved that a scheme should be organised to provide assistance up to a maximum value of £8 million sterling over the three years commencing Ist July, 1950, and that, for the purpose of this work, a Council for Technical Co-operation in South and South-East Asia should be set up with the following constitution. A.—Functions 1. The purpose of the Council for Technical Co-operation is to assist in the economic development of South and South-East Asia by the provision of technical assistance. 2. The Council will organise the provision of such assistance as the following:— (1) (a) Training of personnel from countries in the area in countries where suitable instruction is available, and the despatch of missions abroad to study the latest techniques or practices; 0b) Experts, instructors and advisory missions to assist in planning, development or reconstruction, or for use in public administration, in health services, scientific research, in agricultural, industrial, or other productive activities and in the training of personnel; (c) The provision of equipment required for training or use by technical experts in the region. (2) Where any co-operating Government considers that the provision of technical assistance requires the establishment, equipment, extension or endowment of training or other institutions in the countries of the region not available under any other scheme, such facilities may be contributed as technical assistance. It will be for the country requested to provide assistance to decide whether such assistance should be afforded. 3. The Council will investigate any obstacles or difficulties that reduce or prevent the availability or best use of technical assistance, and will use its best endeavours to remove or mitigate all such obstacles or difficulties. 4. For the guidance of co-operating Governments the Council will endeavour to agree on the general conditions such as remuneration and allowances which might best apply to experts and others who are employed in various countries of South and South-East Asia and to trainees, whenever sent out of their own country. B.—Organisation 5. The Council will consist of one representative of each co-operating Government. The Council may at any time admit to its membership a Government which applies to co-operate under the Scheme. 6. The Council will establish headquarters in Colombo where it will normally meet as often as business requires. It may, however, meet from time to time at any other convenient place in the area. 7. Each co-operating Government will meet the expenses of its representatives on the Council.

THE COLOMBO PLAN

8. To assist the Council in the performance of its duties a Bureau will be established consisting of a Director and such other Staff as the Council may appoint. 9. Under the control of the Council, the Director of the Bureau shall organise the development of the Technical Co-operation Scheme. 10. The Director shall submit for approval by the Council an estimate of expenditure for each year ending 30th June. 11. Contributions by each Government to meet the working expenses of the Council for any year will, unless otherwise determined by the Council, be in the same proportion as the contributions to the Technical Co-operation Scheme for that year. 12. The Council will make appropriate provision for the maintenance and audit of its accounts. 13. The Council will take into account the known views of co-operating Governments unable from time to time to be represented at a Council meeting. Any increase in the membership of the Council or changes in its constitution or office of Director will be made only after proposals have been discussed and agreed between all co-operating Governments. The estimated working expenses of the Council and the proportion in which these expenses will be borne by co-operating Governments will also be discussed and agreed between them. The Council will proceed in the co-operative spirit which is the keynote of the Scheme and endeavour at all times to reach agreement without formal rules of procedure. C. —Administration 14. The Director of the Bureau shall maintain and make available to all co-operating Governments an up-to-date record of all sources of technical assistance available to the area through any international or national agency. 15. The Director of the Bureau shall establish liaison immediately with the United Nations and the specialised agencies, and with all other organisations or countries not members of the Scheme, which are presently affording technical assistance within South and South-East Asia, or which may in future decide to do so. 16. Each co-operating Government will supply the Director of the Bureau with a statement of the types of technical assistance which it can make available, and will from time to time supplement and revise such information. 17. Co-operating Governments seeking technical assistance under the Scheme will state their requirements to the Director of the Bureau, and will provide such relevant information as may be required to deal with them, including particulars of any application made to any other agency. 18. On receipt of a request for technical assistance, the Director of the Bureau shall give every assistance in documenting the request and bringing it to a successful conclusion. 19. Co-operating Governments to whom requests for assistance are transmitted will advise the Director of the Bureau, as soon as possible, of any assistance that can be arranged, and he shall be responsible for putting the Governments in touch either direct or through the Council. 20. In the furtherance of the work of the Council, members of the Council, the Director of the Bureau or members of the Staff may visit any co-operating country with the agreement of the Government concerned. 21. The Director shall prepare for the Council periodical progress reports of the Scheme at such intervals as the Council may require. For this purpose each co-operating country will maintain contact with the Director on the progress of requests for technical assistance under the Scheme. D.—Operation of the Scheme 22. Technical assistance provided under the Scheme will be arranged on a bilateral basis by agreement between co-operating Governments, and the terms and conditions upon which assistance is provided will, in every case, be solely a matter for the Governments concerned. Bilateral arrangements do not exclude joint schemes where more than two co-operating countries are involved.

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APPENDIX 7

23. In order to ensure, in the interests of the area, the best use of resources available, a contributing Government will, in the normal course, be expected to bear, to the fullest extent possible, as a charge against its contribution to the Scheme, the costs of basic salaries of persons whom it makes available under the Scheme, and the Government to whom expeits are made available will, in the normal course, be expected to bear, to the fullest extent possible, the local costs of the experts, including subsistence and travelling. 24. In order to assist co-operating countries to secure training for personnel additional to that already available from existing sources, the co-operating countries will normally accept personnel for training on the following basis: So far as practicable the country from which the trainees are sent will defray the costs arising in respect of the trainees in their own country; and, so far as practicable, the Government of the country providing training will bear all costs of training arising within its own territories, including allowances for the maintenance of trainees. 25. The allocation of costs suggested in paragraphs 23 and 24 is intended only as a pattern for the guidance of co-operating Governments and these provisions do not in any way detract from the clear understanding that in every case such arrangements will be solely a matter for the Governments concerned as provided in paragraph 22. 26. Governments will make special efforts to encourage the training of personnel in the trainee's own country, and for this purpose other co-operating Governments will devote as large a proportion of their contribution as is practicable to provide teaching staff and material facilities. 27. Any co-operating Government may, as a contribution under the Scheme, offer to defray the costs of obtaining technical assistance or training facilities, including endowment of existing institutions, in any other country. In the event that the facilities needed to satisfy an application for technical assistance cannot be provided because they are only available either in a country whose Government's contribution to the Scheme is exhausted or in a non-participating country, the Council shall endeavour to arrange for the costs to be met from the uncommitted part of the contribution offered by other co-operating Governments, bearing in mind the desirability of maintaining reasonable equality in the extent to which contributions are fully utilised. 28. Costs met by a co-operating Government in respect of technical assistance received by it will not be regarded as a contribution under the Scheme. 29. To ensure an adequate record of the progress of the Scheme and also of the appropriate distribution of the expenses incurred, the Council will keep accounts of the expenditure incurred by each co-operating Government under the Scheme. For this purpose each co-operating country will forward a periodical statement to the Director showing, for the period in question, particulars of the expenditure incurred and chargeable under the Scheme.

(10270) Wt. 1083-683 KBO 11/50 D.L.

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