(SANITIZED)BLOC FOREIGN AID POLICIES(SANITIZED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00247A001100430001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 27, 2016
• Document Release Date: December 24, 2013
• Sequence Number: 1
• Publication Date: January 1, 1962
• Content Type: REPORT

50X1 -HUM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
S-E-C-R-E-T
NO FOREIGN DISSEM
-1-
Bloc Foreign Aid Policies
50X1-HUM
50X1-HUM
The Soviet Bloc has two general policies in these areas. One
is the official, or overt pOlicy, which is to encourage opposition
to imperialism and colonialism. The second, or covert policy is to
support pro-Communist elements in these countries. As long as there
seems to be no basis for expecting a really pro-Communist force to
come to power, Khrushchev must co-exist with the existing anti-Western
national bourgeois governments. Hence, the Bloc continues to provide
them with developmental aid. At the same time, Bloc leaders believe
that many of the current leaders arc out of touch with their peoples,
that they will not indefinitely remain in power. (The Hungarian
ambassador to Ghana made a bet with Source that Nkrumah will last less
than a year.) So, while token quantities of assistance continue to
go to such governments, the Bloc is giving more attention to its longer-
Tun aims and to the future ruling classes in these countries. It is
felt that more lasting results can be achieved by subVersive activities,
including bribes to middle-level government and other officials, and to
bringing people from the less-developed nations to the Soviet Bloc for
academic and military training. 50X1-HUM
50X1-HUM
disagreement between Khrushchev and Peking over policies 1
to be followed toward national bourgeois regimes
The d's ute is basic. In regard to the less-developed 50X1-HUM
countries the Chinese maintain that the USSR should leave the
Asian countr es alone, as a sort of Chinese preserve.
Chinese military officers and other Peking officials state this openly.
The Chinese appear to be less interested in Africa and other arctic
largely because of economic limitations. 50X1-HUM
50X1-HUM
conflicts within the CPSU over
policies toward the less-developed areas
There is opposition, but it is temporary a It
reflects temporary economic difficulties ... in Hungary, the government
is engaged in a costly program to switch the remaining private agri-
culture to socialized agriculture. There is much feeling in the Party
hierarchy that scarce skills and equipment should be used at home.
50X1-HUM
the foreign aid programs of the Bloc are quite small relative
to their total economic activity ... probably less than 1 percent of
gross national product and onl a ne -ble s
duction.
50X1-HUM
Soviet leaders feel it is a significant cost. In the Bloc, there
is not the unused productive capacity which you have in the West. In
the USA, for example, if you wanted to increase steel output, you have
the unused capacity already in existence; you could increase it almost
S-E-C-R-E-T
NO FOREIGN DISSEM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
S-E-C-R-E-T
NO FOREIGN OISSEM
-2-
50X1-HUM
1
overnight. In the Bloc, there are no such unused capacities ... it
is a strain to meet production goals. Bloc planners, therefore,
object to foreign aid, because it cuts into their plans for increasing
domestic investments. Bloc leaders also recognize that Bloc aid
capabilities are limited, that they can't begin to compete seriously
with Western aid programs. General opinion among Hungarian and otk)z) -HUM
Bloc leaders is to give technical aid as training personnel, etc.
rather than investment aid.
any such aid had to be well-founded, on both political and economic
grounds.
II. Current Bloc Trade and Aid in Underdevelo)ed Areas
A. Economic Assistance
50X1-HUM
50X1-HUM
extensions of developmental aid will be
lower in 1963 and 1964. This is due primarily to economic reorgani-
zations within the Bloc. Intra-Bloc cooperation is being reorganized;
agriculture in European Satellites is being reorganized; a large effort
is being made to build up the Bloc's chemical industry; the costs of
increased military production are now being felt within the Bloc. These
factors are reflected in the Bloc's aid to the underdeveloped countries.
Moreover, economic aid poses a special problem. The Bloc cannot compete
with the industrial West in the volume of aid extended. In two recent
CEMA meetings, March and June 1962 (in the latter it was at least planned
to be discussed) it was resolved that aid to the underdeveloped countries
be given through the UN and other international forums, with the USSR
providing a large technical staff but little capital equipment. 50X1-HUM
It serves both political and economic aims, although some-
times, of course, the economic are subordinated to the political. It
is hoped, both by Soviet and Satellite officials, that the less-developed
countries will sooner or later increase their exports of useful products,
such as exports of Goa's iron by India. Although there is some sentiment
in the Bloc that these countries will eventually be competitive with the
exports of the Bloc, others maintain that these areas provide an alter-
native market for Bloc exports (an alternative to the Common Market).
This more traditional view probably prevails; namely, that some of these
S-E-C-R-E-T
NO FOREIGN DISSEM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
NO FOREIGN DISSEM
-3
countries, like Ghana,
will
be
in
the socialist camp
years, and will then be
a part of the world socialist
50X1-HUM
within 10 or 15
market; then
its aluminum, lumber, etc., will go to the rest of the Bloc, rather
than to Europe, and the trade will increase accordingly.
50X1-HUM
Bloc developmental aid projects
50X1-HUM
are carefully selected. The Bloc declines to
participate in a project which it believes to be economically ridiculous.
Also, the Bloc looks for projects which will help consolidate lasting
economic ties with the recipient country. For example, Ghana asked for
assistance in several civil engineering projects, including a bridge and
a railroad, which Hungary declined, because they would lead to no greater
Ghanaian dependence on the Bloc. Hungary did, however, agree to deliver
an incandescent light factory and penicillin plant, because Ghana will
have to buy from Hungary spare parts and materials for these plants for
the next 10-15 years.
50X1-HUM
ifficulties in im-
50X1-HUM
occurred in Indonesia,
where the USSR, Poland, and Hungary were to cooperate in providing port
equipment and ships. The USSR would ship cranes, etc.; Poland, tankers
and medium cargo ships; Hungary, small cargo ships. About 70% of this
project, was never implemented. The reasons were50X1-HUM
several:
capacity
50X1-HUM
First, Hungary and Poland found they had insufficient free
in their shipyards; when the agreement was signed, in 1959
there was considerable idle capacity in Hungarian and Polish
shipyards;
50X1-HUM
50X1-HUM
Second, because of domestic economic needs Bloc planners
felt they could no longer afford to fulfill such an agreement --
it was for $30 million with deliveries to be made through 1964 --
particularly because world prices for ships had since risen, so tlint
some of the equipment could be sold at higher prices elsewhere. 50X1-HUM
It was therefore decided to substitute telecommunications
equipment for the port equipment, and the total would be of considerably
less value...something like $2-3 million.
Bloc Technical Assistance
50X1-HUM
50X1-HUM
1
They send the best they have; that is, those who are the
most capable in their fields and who are politically the most reliable.
S-E-C-R-E-T
NO FOREIGN DISSEM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
4
S-E-C-R-E-T
NO FOREIGN DISSEM
-4-
50X1-HUM
Technicians are viewed as Bloc ambassadors to these countries. Generally
there is no shortage of engineers in the Bloc 50X1-HUM
special organization in the foreign trade ministry of Hungary was just
organized several months ago with the function of assigning specialists
abroad and signing long-term contracts for their services. 4 This is in
accord with the preference of Bloc planners for technical assistanc.,
rather than capital equipment experts. 50X1-HUM
5UX-1 -HUM
salaries Bloc technicians receive 50X1-HUM
depend on whether they have their family accompany
them overseas or not. If the family stays home, they receive their
50i
regular salary, all forints, plus some $250-400 per month pp_y_ diem,
plus free medical care and free housing overseas. If the 1-iirjoes
along, they get only 10-20% of their home salary, but the pc_r diem is
20-40% greater than that received by a man unaccompanied b7?FirTWmily,
and free medical care and housing arc still provided.
III. The Bloc's Aid Program in Ghana
1. Ghana is a special case, in that Hungarian economic penetration
has been particularly successful there. The Hungarian economist, Jozsef
Bognar, is heading some 14 planning commissions which have been com-
missioned to work out a 20-year development plan for Ghana. These com-
missions involve around 18 Hungarian specialists; 4-5 economists, some
statisticians and accountants, and the rest industrial specialists. The
plan is to be submitted by the end of 1962. Although Bognar is under
instructions to draw up the plan which seems most feasible, economically
speaking, for Ghana, one of the assumptions underlying his work is close
Bloc-Ghanaian economic cooperation in the future.
2.
50X1-HUM
Hungary was to supply Ghana with industrial
equipment valued at some 5-6 million Pounds Sterling over the 1961-64
period, of which about 860,000 Pounds has so far been signed into con-
tracts, including:
a. an incandescent light and bulb factory - 300-400,000 Pounds;
b. an antibiotics plant - 100-150,000 Pounds;
c. a factory to manufacture structural cable, value unknown.
In addition, two other transactions have recently come under discussion:
a bauxite processing plant, and port cranes and equipment. Hungary re-
fused civil engineering works, railroad construction because such pro-
jects would not lead to closer future ties with Hungary ... spare parts,
trade, etc. 50X1-HUM
3. implementation of projects in
Ghana would be better assured now, because in some cases Ghana has given
its guarantee that it would sequester the funds needed to cover the local
currency costs -- amounting to 45 percent of the total costs -- of Hun-
garian projects. This measure was called for by previous experience of
Hungary in Ghana, where local funds were not forthcoming for Hungarian
aid projects.
4. Bloc countries are trying to get Ghana to agree to establish
joint Bloc-Ghanaian enterprises to export Ghana's products, like cocoa
Ghana's officials are so far unwilling to do this, as they fear it
would mean the loss of their chief sources of foreign exchange. Bloc
planners have also suggested that cooperatives (kolkhozy) be established
S-E-C-R-E-T
NO FOREIGN DISSEM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0
?
NO FOREIGN DISSEM
-5-
50X1 -HUM
in Ghana to produce cocoa on a large scale, but the tribal leaders
are opposed to this, as it would threaten their control over their
peoples.
S. In Ghana a central party school has been established f0150X1-HUM
young Ghanaians. It is a secondary school in which
economy, and economic planning are taught -- all by
Bloc. After a one or two-year course, the students
Ghanaian government.
Such training,
Bloc, is considered an
countries.
and in the
ting these
economics, political
teachers from the
are employed by the
Comment:
both in the underdeveloped countries
extremely effective means of penetra-
50X1 -HUM
50X1 -HUM'
2. The organization referred to here is probably the Hungarian foreign
trade company TESCO (Technical and Scientific Cooperation) which
was established in early 1962 to handle scientific-technical coopera-
tion and exchanges with Bloc countries and underdeveloped countries.
S-E-C-R-E-T
NO FOREIGN DISSEM
Declassified in Part - Sanitized Copy Approved for Release 2013/12/24: CIA-RDP80-00247A001100430001-0