(The information supplied follows:)

AGENCY FOR INTERNATIONAL DEVELOPMENT

Number of projects with unliquidated obligations as of Mar. 31, 1963, for which no funds are being requested in fiscal year 1964

INCREASE OF PROJECT FUNDING THROUGH PRESIDENTIAL DETERMINATION

Mr. PASSMAN. Presidential determinations are usually made, I suppose after the agency has justified to the President the need for Presidential determination so that funds may be made available for a project?

Mr. GAUD. That is right, sir.

ADDITIONAL FUNDS FOR LAOS

Mr. PASSMAN. It would appear that on June 29, there was a Presidential determination to make additional funds available to Laos. Could you tell us whether or not you funded this item, with which some of you are familiar, out of the regular Military Assistance Program, or out of some other account?

Mr. MILLER. There was a modification, was there not, an increase from $

to $

Mr. PASSMAN. Maybe you.could term that action a "modification." I would term it a "straight-out increase" at the end of the year, from -Out of what account were the funds obtained? Mr. MILLER. My recollection is, it was an increase of $1963 funds.

$

up to $

out of

Mr. PASSMAN. Out of military assistance, or some other account? Mr. MILLER. I do not have the determination with me. I would have to check it for the record. I would be glad to provide the information. (The information follows:)

The additional funds were made available from funds appropriated for military assistance..

Mr. PASSMAN. We were told many times in previous years that we would not be blackmailed into providing aid. But it would appear that we are getting a bit soft on this point.

I have another document here, and I quote:

We have been informed by the

government that while it would prefer not

to accept military assistance from Communist countries, it will do so if Western countries are not willing to provide adequate assistance.

That is either blackmail or Webster has changed the definition of the word since I looked it up last.

We have with us today Mr. William S. Gaud, Assistant Administrator, under Mr. Bell, testifying for the Near East and south Asian region, and also the Honorable Phillips Talbot, Assistant Secretary of State for Near Eastern and South Asian Affairs, the same region that is under Mr. Gaud's administration.

You gentlemen will have to tell me which one would like to testify first.

Mr. GAUD. Mr. Talbot, why do you not lead off?

Mr. PASSMAN. All right, we shall first hear from Mr. Talbot.

STATEMENT OF ASSISTANT SECRETARY OF STATE FOR NEAR EASTERN AND SOUTH ASIAN AFFAIRS

Mr. TALBOT. Thank you very much.

I am glad to appear before you in support of the requested appropriations for the foreign assistance program, and to discuss with you political and economic developments of the past year in the Near East and south Asia.

Since we met a year ago this important part of the world has been touched by far-reaching and sometimes dramatic developments. Perhaps most significant was Red China's assault on India last October and India's determined resistance, assisted by the free world. In Iran the Shah's sweeping reform program is being pressed ahead and should substantially strengthen that crucial Soviet border area. In the Arab world Communist prestige and influence are at their lowest point in years.

or

The political and social movements in the area are generally forward and in the direction of those objectives that we and the nations of the region share. This favorable situation can be ascribed in part to the encouragement and assistance given by the people of the Western World, notably the United States. Without that assistance many of the political developments would undoubtedly have been less favorable might have taken a different direction. We must frankly recognize that large problems remain, problems of political instability, inadequate development planning, and intraregional animosities, and so forth-but the peoples of the area, by and large, now have new hopes, plans, objectives, and a substantial part of the tools for constructive development. Our patient but firm cooperative and dependable assistance can be a continuingly significant factor in determining whether the gains already made are to be consolidated and assured or are to be allowed to wither away.

SOUTH ASIA

The Communist Chinese attack on India during the past year removes any doubt that south Asia is a prime target of Communist expansion and that what is now at stake is the entire balance of power Asia and the political system that will dominate half of mankind. It is essential that the countries comprising the indivisible whole of this strategic area remain free and independent, that they are enabled to continue and succeed in their heroic efforts to maintain political freedom and to resist the inroads and pressures of a powerful force dedicated to the destruction of their way of life.

In terms of military and political strategy the subcontinent is indivisible. India and Pakistan are the heartland, and neither country could long endure in freedom if communism or chaos should penetrate the area. Afghanistan and Nepal are sensitive northern extremities that for political, economic, and strategic reasons are highly important if the area as a whole is to have security and an opportunity for political and economic development.

In south Asia strongly held antagonisms between groups (that is, linguistic or religious rivalries) and between countries (India and Pakistan) enormously complicate the task of these young governments, drain their resources, and invite Communist exploitation. They and we have recognized the threat of these divisive currents, and we are using all the diplomatic tools available to us to help compose differences, notably in the Kashmir dispute, in order that our energies and theirs may be concentrated on the threat of communism and on building strong societies capable of meeting the vast human aspirations in the area.

The Communist Chinese attack on India came at a time when all efforts were being strained toward achieving the goal of self-sustaining growth. The attack and the larger threat which lies behind it create a new challenge and have had far-reaching effects. On the positive side, the dramatic response to the Chinese challenge clearly revealed that Indians, in a time of crisis, would put aside their dif ferences and work together to defend India's territorial integrity.

India, over the past decade, has been effectively using the large input of U.S. aid in achieving social and economic accomplishments that have been remarkable, in view of the great difficulties which she has had to overcome. The Chinese threat has now forced India to assume an added burden of building its defenses at the same time it continues its development efforts. While the ability of the countries of the area to meet the Communist threat will be very materially influenced by the willingness of the West to provide strength and steadfast support, the countries recognize that the battle is largely theirs. Their strong sense of nationalism fortifies them in their task, even though it sometimes makes it difficult for others to help them. Pakistan continues to be allied with us, both bilaterally and by virtue of her association in CENTO and SEATO. It is anti-Communist, it cooperates with us in military affairs, and against great odds it has significantly improved economic conditions and social and political institutions. Under a carefully worked out development plan, Pakistan is using our assistance effectively to increase agricultural production, strengthen industry, extend its transportation system, and improve the effectiveness of public administration.

The Government of Pakistan has taken advantage of Communist overtures following the October attack on India to conclude trade and boundary agreements and to consider a civil air agreement with Red China. We have made clear our concern and our belief that, even if marginal benefits may accrue to Pakistan from these measures, the political effect is to give advantage to an enemy against which we are formally allied. Here, as elsewhere, we must seek to accomplish our objective without infringing upon the sovereign rights of another government. We continue to believe that our national interests and those of Pakistan coincide and that this is recognized by Pakistan as

well. The recent agreement to reopen the Pak-Afghan border and to resume political and trade ties is a hopeful and constructive development that reflects credit on the governments immediately concerned, justifies our policy of patient assistance, and augurs well for the fu

ture.

GREECE, TURKEY, IRAN, AND CYPRUS

Greece, Turkey, and Iran constitute an important defense line for the free world. Stanchly independent, they hold a long, exposed border and thwart any Communist dream of easy expansion through the Mediterranean, the Persian Gulf, and the Arab world. The firm CENTO-NATO corridor provides a protective screen behind which the peoples of the Near East can, in times such as the present, work ut their own destiny with some assurance that there will not be direct interference from the U.S.S.R.

These nations were prompt and firmly in support of the United States at the time of the Cuban crisis. During the past year they have borally fulfilled their NATO and CENTO obligations, and, over and above that, have continued to provide us bases, facilities, and services designed for our mutual protection. In the U.N. and in other interrational forums they have, as in the past, stood up for measures designed to favor free world interests. They have not hesitated to resist repeated Soviet trade and aid blandishments, despite their real material need.

Countries that elect to pursue such a dangerous course in the face of great odds entail burdens that are often commensurate. Each of these countries has peculiar defense problems because of long common borders with Communist nations. Each must maintain a military posture that will discourage Soviet attempts to support either direct r indirect aggression against it. The large military cost burdens are imposed upon economies and social structures that are desperately trying to modernize in order to meet the rising expectations of the people and the survival requirements for modern nationhood. Achieveents in reaching satisfactory goals vary from country to country cording to the resources available and the complexities of the probems that have to be solved in order to modernize institutions. All three countries have taken encouraging steps forward during 1962-63 and have successfully withstood internal challenges that illustrated both their essential strength and the problems with which they must continue to cope. I refer to the recent religious riots in Iran, the attempted military coup in Turkey, and the fall of the Caramanlis cabinet in Greece.

Iran has been the scene of exciting and encouraging change during the past year. The Shah of Iran has accelerated the momentum of a reform program he calls the "White Revolution." Included in it are and distribution, better profit sharing for workers, women's suffrage, and a literacy drive by a domestic peace corps. He has taken the proram to the people and in a referendum in January received an overhelming vote of approval. The elections now being readied for early fell will be held under a new electoral law under which for the first time in history there will be a registration procedure, positive identifiration of voters, and other reforms enabling the illiterate voter to press his political preferences.

These changes truly constitute a peaceful revolution. The combina tion of the landed elite and various extremely conservative forces has lost its dominant position. No doubt such groups will remain forces to be reckoned with for some time, but they no longer constitute a high but weak dam back of which a mounting flood of demagogic discontent could rise. There is now real hope for dynamic new leadership and constructive national unity.

In the past there has been criticism of the military force level which was established by a United States-Iranian agreement of July 1958. Our goal has been an optimum balance between the economic development requirements of the economy and the need for adequate forces to provide internal security and defense against limited external aggression. In order to assure ourselves that this goal was being reached, our Joint Chiefs, working with the Iranian Government, made a thorough review of military programs. As a result, the projected force levels are being reduced by 331% percent and the army is being reformed and modernized under a carefully worked out schedule. Our commitments have been reduced, and our ally is strengthened both economically and militarily.

Throughout this subregion there are close relationships with Europe. Greece and Turkey are members of NATO; Greece is associated with the Common Market: Turkey is negotiating for association; and trade and cultural relations are close and important. All of the countries have received loans from various European countries and there is an increasing recognition of the desirability of multilateral devices. International consortia have been arranged for providing external financing to Turkey and Greece. Within the past few years the European states have provided an increasing proportion of the total external assistance. We are fully aware of the desirability of increased European participation and are working toward that end. In doing so, we are mindful, of course, of our own peculiar and essential security requirements in the area, and of the sensitive but highly valuable political and psychological relationship between ourselves and the countries of the area.

NEAR EAST

In the past year, there have been dramatic developments in the Near East that will undoubtedly affect the course of events there and the execution of our own policies and programs, including those relating to foreign assistance. The revolutions of September 26, 1962, in Yemen, of February 8 in Iraq, and of March 8, 1963, in Syria, and the emergence of a Ba'thist-nationalist coalition government in each of the latter two, have affected the political dynamics in the region as a whole. The manifest desire of the Arab peoples for closer relations has resulted in serious reconsideration of unity and an agreement in principle for closer political association among the United Arab Republic, Syria, and Iraq. In the area generally there are encourag ing indicators that economic and social progress, requisite for any real political stability, has accelerated in recent years.

Although no substantial progress has been made in resolving the Palestine problem, serious incidents along Israel's borders have been. few, relative to previous years, and have been settled through the