COPY ll-Z9-57 (dd)
From the Office of Senator Joseph C. 0 'Mahoney FOR RELEASE WEDNESDAY A.M. NOVEMBER Z7, 1957
U. S. FUNDS BUILDING POWER DAMS IN FOREIGN COUNTRIES WHILE COLORADO RIVER BASIN DEVELOPMENT FACES GRAVE
DANGER OF CUTBACK, SENATOR O'MAHONEY SAYS
Pointing out that on September 30th last the International Cooperation Ad-ministration had almost $3 billion of U. S. funds available for foreign economic aid and over $5 ·billion for military assistance, Senator O'Mahoney has written to Director Brundage of the Bureau of the Budget that savings in foreign aid can be made in sufficient amount to continue the development of the Upper
Colo-rado River Basin without interruption,
He has pointed out that eight electric power and irrigation projects are being supported by federal funds in Afghanistan, Formosa and Korea. At the same time, he has quoted from the report of Comptroller Joseph Caznpbell of the Gen-eral Accounting Office to show that, in the opinion of the latter official, more military equipment is being sent abroad than the countries to which it is sent are able to use.
O'Mahoney's letter to the Director of the Budget was prompted, be said, by reliable indications that the Bureau of the Budget has decided to make deep slashes in estimates for natural resource development and that the Upper Colo-rado River Basin may be one of the heaviest sufferers,
"In its Midyear Review of the 1958 Federal Budget, issued on October 1st," the Senator said, "the Bureau of the Budget estimated that expenditures for natural resources development would be cut from $1, 538, 000, 000, as recommended in the
(MORE)
-I
-
-2-President's budget of last January, to $1.4 billion and now, unless the officials of the four Upper Basin States make vigorous protest it is likely that everything will be dropped except Glen Canyon and possibly Flaming Gorge.
"At the present moment, as I understand it, none of the participating proj-ects is on the Budget Bureau program, and the Navajo Reservoir has been dropped.
"In support of Flaming Gorge, Lyman, Seedskadee, and Labarge, I have pointed out that these projects are supported by the same logic used by the Presi-dent in defense of foreign expenditures for miliary and economic aid. In his Okla-homa speech Mr. Eisenhower said it was necessaTy to maintain military aid and then added 'The same applies to economic aid•••and shows the free world's ability to develop its resources and increase its living standards.'
"If we intend to develop the natural resources of our allies and increase the living standards of their people, as the President puts it, I have urged the Bureau of the Budget that 'we cannot fail to develop our own natural resources and maintain our own living standards because these are the factors that make it possible for our people to aid the free world.'
"It is now under•tood that the Secretary of the Treasury will ask Congress to raise the debt limit. It is clear on all sides that no tax reduction will now be asked. Unemployment is increasing while steel production is declining and plant expansion has been stopped.
"It is imperative, therefore, that no cuts be made in existing plans for re-source development. The waters of the Upper Colorado River must be conserved so that the natural resources of this area shall be made available to support the United States economy which in turn is supporting the free world.
"What's good enough for Afghanistan, Formosa and Korea is good enough for the Upper Colorado River Basin."
The full text of Senator O'Mahoney's letter to the Director of the Budget is attached.
c
0 p
y
UNITED STATES SENATE
Washington, D. C.
The Honorable Percival F. Brundage
Director, Bureau of the Budget Executive Office Building
Waahington 25, D. C. Dear Mr. Brundage:
November 23, 1957
As you know, your able Assistant Director of the Budget, Mr. Robert E. Merri-am, was good enough, at my request, to hold a conference with the Governors of the four Upper Colorado River Basin States and their representatives in room 246 of the Executive Office Building on the morning of October 28th last. The conference was most satisfactory from the point of view of the opportunity that was afforded to the officials of the Upper Basin States to present the facts which, in their opinion, justify the inclusion in the President's Budget !or 1959 of an estimate !or the Upper Colorado Storage Project sufficient to enable the Bureau of Reclamation to proceed with the plans which Commissioner Dexheimer laid before the House Appropriations Committee when the Appropriation Bill for fiscal 1958 was under consideration.
Recognizing even at that time that increased appropriations would probably be
necessary for defense, I presented orally the suggestion that it will be easily possible to save from the outmoded military assistance program now being carried out, and from the economic aid program, more than sufficient money to prevent the abandon-ment of much of the Upper Colorado Project which I fear is now proposed. It is recog-nized by Secretary McElroy that "A strong and growing United States Economy is the very foundation of our military strength and that of the free world. " The conservation and development of our natural resources constitutP an essential element in the preser-vation of the United States economy. And since we are correctly pursuing a policy of stimulating the economic development of our allies by the appropriation of funds from the United States treasury, we must be certain that we shall make no cuts in the de-velopment of American resources which will tend to weaken the United States economy
upon which the free world depends.
1 now have before me the precise figures from the International Cooperation Ad-ministration which show that on September 30th this year the funds appropriated and
unexpended !or the Mutual Security Program amounted to a total of $7. 989 billion. Of
this sum, $5;053 billion was available for military assistance, and $2.935 billion was available for non-military expenditure.
I called the attention of Assistant Director Merriam to the Report of Comptroller General Joseph Campbell on the Military Assistance Program which was submitted to the V1ce President of the United States and the Speaker of the House on August 29th last, in which, after examination of the military assistance program in nine
countries--France, Germany, Italy, Spain, Turkey, Pakistan, Formosa, Japan and Korea--the Comptroller General reported that we are furnishing military supplies in some of the
Mr. Brundage
-2-
November 23, 1957allied countries beyond the capacity of those countries to use them. It appeared from
this report that while unused military supplies were not being recovered from the
countries where they are not used, we are sending similar supplies in the same
un-realistic manner to other countries. More than that, according to the Comptroller
General's report, "the military aid program to date, for which almost 24 billion dollars
has been appropriated, in many countries has not, in the opinion of our military
author-ities, resulted in the creation and maintenance of effective fighting forces by
present-day stal).dards." The GAO report goes so far as to say that we have been delivering
military equipment to some countries which they have not desired, and that the pricing
policies are inaccurate and confused. Let me make the following quotations:
"Programing of military assistance. In a number of countries the United
States has programed and is delivering equipment in excess of that which
can be effectively absorbed and utilized by the recipients at their existing
stage of development. The recipients either have not been able to use
the aid furnished because of their financial and economic incapacity and
their manpower limitations or they have not desired to use the assistance
for the purposes intended by the United States. ***Responsibilities for
controlling overseas agencies and for developing program requirements
within the Department of Defense have not been clearly defined."
"Pricing policy and practice. During our reviews we have noted much
con-fusion in the pricing of military assistance shipments. Different units used
different pricing data, thereby impairing the accuracy of consolidated
re-ports. Also, the latest cost data was not always used in pricing computa
-tions, due in part to cumbersome and untimely cataloging procedures."
One of the most significant criticisms of the military assistance program made
by Mr. Campbell's report is that in some countries the foreign governments and their
agencies are making a profit contrary to the memorandum of understanding with our
government. This criticism is directed at the offshore procurement program by
which we have entered into contracts for the procurement abroad of military equipment
and under which "contracts amounting to $2.7 billion had been awarded as of December
31, 19 56. " I quote from the report:
"The memoranda of understanding which govern the principles and
policies to be observed by the United States and foreign g.overnments
under the offshore procurement program ~rovide that no profit will
be made by the foreign countries on o!fshpre procurement contracts.
We have observed that allowances for profit were included in certain
contracts with foreign governments and their instrumentalities. As a result of our bringing this matter to the attention of the Departments
of State and Defense, these departments issueq a joint message to
Mr. Brundage -3- November 23, 1957
conducting negotiations as to the application and operation of the 'no profits' clauses. However, since it appeared unlikely that the current position of the Departments of State and Defense would result in sub-stantial recovery of profits, we transmitted a comprehensive report,
which was classified, to the Secretaries of State and Defense on the more significant problems and its recommendations. This report
has been transmitted recently to appropriate congressional committees. 11
It is clear from the GAO report that in the opinion of that agency the Military
Assistance Program should be reevaluated, responsibilities for carrying on the pro -gram "within the Department of Defense should be clarified, 11 and that "an internal audit program should be established."
There can be no doubt, therefore, that great savings can be made in the military assistance program for which funds amounting to $5. 053 billion were available and un-expended on September 30, 1957. It can scarcely be doubted that sufficient savings can be accomplished here alone to carry on uninterrupted the authorized program for the conservation of the water of the Colorado River System in the States of the Upper Basin.
I do not criticize economic aid given to our allies for the purpose of improving
their capacity to raise their living standards, the importance of which the President
emphasized in his Oklahoma speech of November 13th. Speaking of economic aid,
he said: "This kind of assistance helps others keep free of dependence upon Soviet help which too often is the prelude to Soviet domination. It shows the free world's
ability to develop its resources and increase its living standards. It helps allied
economies support needed military units and remain sturdy partners m this
world-wide struggle."
This objective of the President I applaud, but I venture to point out that, if we intend to develop the natural resources of our allies and increase the living standards
of their people, we cannot fail to develop our own natural resources and maintain our
own living standards because these are the factors that make it possible for our
people to aid the free world. We cannot sacrifice the conservation of wasting water,
or the development of power and the prevention of floods in this country, while we
use the funds appropriated by Congress for these same projects in foreign lands.
In 1956 the International Cooperation Administration financed a contract by which the Helmand Valley Project in Afghanistan was surveyed by the Tudor Engineering Company of San Francisco. This company, the head of which was a former Assistant Secretary of the Interior, recommended a program for the completion of the Afghanis-tan irrigation project which it reported could be completed in what was called "Phase I" by 1961, the total cost of which on a preluninary basis was estimated to be $10
million. This great program was started in 1946 by the government of Afghanistan in a contract with Morrison-Knudsen Company of Idaho, a well known and efficient
Mr. Brundage -4- November 23, 1957
construction corporation which has done much work on American projects. Most of the
cost of this project will be borne by funds supplied by the Afghan government and
bor-rowed from the Export-Import Bank.
Two major dams of the Helmand Valley Project have already been completed
and I feel that the continued cooperation of our government is needed. It should be pointed out, however, that in Taiwan, or Formosa, there was initiated >n fiscal year 1956 at a total cost of $40 million, including local currency, the Shihmen Multipurpose
Dam. This project is for the development of electric power, for the storage of water
for irrigahon and flood control, and for the storage of water for drinking purposes.
Three other projects are fostered by the International Cooperation Administration
in Taiwan--the Wusheh Dam Hydro Project, the Lungchien Hydro Power Project, and
the Ku Kwan Hydro Power Project. Dollar funds to be expended on these four projects
in Taiwan for fiscal year 1958 are estimated at $9,250,000. There will be included,
of course, counterpart funds and local currency generated by ICA.
There are three such projects in Korea- -the Hwachon Hydro-Electric Power
Project, the Unam Power Plant, and the Chongpyong Dam and Power Project. The
first of these projects was initiated in 1954 and is expected to be completed in
Decem-ber, 1957. The cost will be approximately $13.5 million. Of this amount, $9.7
mil-lion is classed as ICA dollars, and the remainder comes from counterpart funds and
from contributions by the South Korean government. Una= Power Plant is a repair
job costing about $200, 000, of which $115, 000 comes from JCA dollars. The Chongpy-ong Dam and Power Project involves the rehabilitation of 01hydro-electric plant and
dam on the North Han River. It was approved in 1956. United States engineers are
now drafting specifications for equipment and materials. Almost $3 million was
pro-vided for this project through fiscal year 1957, and additional United States
contribu-tions are expected to be required,
I do not urge the termination of any of these prOJeCts. They will develop
re-sources in these areas which doubtless will raise the living standards of the people
of these areas, and the completion of the projects will demonstrate to the people that
the free world does not have to surrender to the Soviets 1n order to make economic
progress, but certainly it follows that we must not neglect our own economic resources.
The waters of the Upper Colorado River Basin have been wasting for years into the
lower basin and eventually into the sea. The area through which these waters flow in
Wyoming, Utab, Colorado and New Mexico is rich in natural resources, the
develop-ment of which we need if we are to prove to the world that the free people of the United States can lead all mankind to a demonstration that free government is better than dictatorship.
I hope that the Bureau of the Budget will not make the mistake of submitting an adverse recommendation to the President on the authorized Upper Colorado River Stor-age Project.
Sincerely yours,
/s/ Joseph C. O'Mahoney Joseph C. O'Mahoney
