RESPONSE TO UNDER SECRETARY ROBINSON'S REQUEST FOR LDC MATERIAL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600060007-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 168
• Document Creation Date: December 19, 2016
• Document Release Date: May 24, 2005
• Sequence Number: 7
• Publication Date: August 11, 1975
• Content Type: MF

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rl
01
11 August 1975
MEMORANDUM FOR: Deputy Director for Intelligence
SUBJECT Response to Under Secretary
Robinson's Request for LDC
Material
1. Attached is the joint OER/OCT. response to
Under Secretary Robinson's 4 Augist request for
information on 21 LDCs. The material for each country
is organized as follows:
A. Regional Political Relationships
B. Role in LDC Movement
C. Oil Strategy
D. Views on Special Relationships
with the United States
E. Staying Power of Government
F. Economic Development Strategy
G. Interest in International
Marketing Arrangements
H. Balance of Payments Trends
I. US Investment Position
Foreign Trade Profiles
Balance of Payments
2. Also included is a table indicating basic
economic data for all countries.
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Acting Director
Economic Research
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ALGERIA
A. REGIONAL POLITICAL RELATIONSHIPS
By virtue of size, location, and military strength,
Algeria plays a leading role in North Africa. Algeria
maintains good relations with Tunisia. Relations with
Morocco have been more problematic because of differing
political systems and ideologies, and because Algiers
has publicly opposed Morocco's efforts to annex Spanish
Sahara.
Algeria is becoming more dependent on richer and
more conservative Arab oil producers because it needs
considerable assistance to finance its ambitious de-
velopment plan. It is interested in developing
political and commercial ties with African countries
to the south and is looking to sub-Saharan Africa as
well as the Maghreb as eventual markets for its
industrial products.
B. ROLE IN LnC MOVEMENT
Algeria has gained increasing prominence as the
self-proclaimed spokesman for the nonaligned movement,
Since the Fourth Nonaligned Summit Conference held in
Algiers in September 1973, the Algerians have continued
to assert their leadership as formal head of the non-
aligned movement and to chair its 17-member
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coordination bureau. Algiers has been a leading pro-
ponent of the radical viewpoint on creating a new
international economic order.
The Algerians have capitalized on the growing
conviction among LDCs that they must remain united to
achieve new economic power relationships with the ,
industrialized states. Moreover, they come to inter-'
national conferences with massive working drafts and
field first-class teams, while many other LDCs send
people who are either poorly prepared or not empowered
to make decisions on the spot. Although moderate non-
aligned states resent Algeria's militance and its use
of steamroller tactics, they have thus far been
reluctant to mount a systematic challenge to Algeria's
leadership.
C. OIL STRATEGY
Algeria is an active member of OPEC. Its oil
policies, however, are tempered by its limited capacity
to expand production and its inability to finance its economic
development program even with the large jump in oil
prices. Algiers thus opposes a significant cut in
oil prices and OPEC-allocated production cutbacks.
It would, however reluctantly, comply with an Arab oil
embargo in the event of another Arab-Israeli war.
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Algeria supports the forma-~.ion of producer cartels,
linking the price of oil and a'.;. raw materials to the
cost of industrial imports. I?? fears coordinated
action by oil consumers and cc,-.,idemns the International
Energy Agency as a US instrurr 'ant for confrontation with
the oil producers. Algeria has argued with little
success for massive OPEC aid to LDCs, knowing full well
that the financial burden for such aid would fall to
wealthier oil producers.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
There are major foreign policy differences between
the United States and Alger.i.i. And Algeria has a strong
desire to avoid identificat".on with the US government, as
distinct froin the private ?ector. Algeria will not likely
alter its basic position on the Middle East, on support in
principle for liberation movements, or on its call for a
radical transformation of the world economic system in
favor of the developing countries. Despite these differences,
economic cooperation has been increasing. Algeria sees the
United States as a market for its oil and gas and a major
source of capital and technology.
E. STAYING POWER OF GOVERNMENT
After more than a decade in power, President
Boumediene has achieved a good measure of stability.
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Domestic critics lack leadership, and political exiles
are disorganized and have no significant following.
Boumediene has outlasted or suppressed his major rivals
and has held together a coalition of military men and
technocrats. Boumediene,. in consultation with a small
inner circle of advisers, makes the key decisions.
F. ECONOMIC DEVELOPMENT STRATEGY
Algeria's highest priority economic goal is to
parlay its large but finite oil and gas resources into
a productive economic base that will enable the country
to prosper long after petroleum reserves begin to
dwindle. To accomplish this, the Algerians have chosen
to invest heavily in large scale, capital-intensive
industrialization -- to the almost complete neglect of
the agricultural sector. Consequently, Algeria is
importing enormous amounts of foreign expertise and
equipment while importing increasing amounts of food.
Obtaining adequate foreign financing is the most
immediate obstacle the Algerians must hurdle to realize
development objectives. The country's foreign payments
position has deteriorated sharply since 1974, and pre-
viously open handed foreign lenders are increasingly
cautious. Lower oil prices and production so far this
year are reducing export earnings: while ambitious
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development projects and an exceptionally poor harvest
are spurring imports. Consequently, Algeria is drawing
down foreign reserves and attempting to borrow $1 to $2
billion.
With only moderate OPEC price hikes in the offing,
oil production limited to about current levels, and
potentially large natural gas exports far in the future,
Algeria will no doubt be seeking similar amounts next
year. International lenders have already stiffened
their terms and are showing increasing reluctance to
sponsor a nation whose foreign debt is mounting at
unprecedented rates while its prospects for an expanded
income appear increasingly uncertain. Aware of its
predicament, Algeria is pressing harder than ever
for suppliers' credits and loans from wealthier
Arab states.
Even if Algeria should be able to finance projects
now on the books, it will have to cope with a growing
shortage of qualified workers and a long-range food
problem. All levels of skilled workers are in short
supply, with mid-level managerial personnel particularly
scarce. Despite record numbers of Algerians in all
types of training, the situation is expected to worsen
for several years. Algeria is almost certain to have
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to divert increasing amounts of foreign earnings to
finance food imports. No effort is being made to
check the country's rapid population expansion of 3.3%
annually, and land reform measures(aimed at providing
ownership to the masses)are expected to cause con-
tinuing declines in agricultural production.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Algeria has bartered oil as a means of marketing
more oil without appearing to lower prices. Typically,
suppliers are paid in oil valued at the "public"
Algerian price, which is higher than the price the
supplier receives from a refinery. Supplier contracts
reflect this overvaluation of oil.
H. BALANCE OF PAYMENTS TRENDS
Algeria's current account has moved substantially
into the red and is expected to stay there for many years.
Technical limitations will prevent any significant expan-
sion of oil production, and large-scale natural gas
exports will not materialize before the late 1970s.
Oil price increases are not expected to be large enough
to offset increases in imports resulting from ambitious
development projects. Since 1973, Algeria has borrowed
considerable funds, most in the form of suppliers'
credits and commercial loans. Minor amounts of con-
cessional aid have been received from international
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lending institutions. The prospect of debt default
and rescheduling request, while impossible to predict,
most certainly cannot be ruled out.
1. US INVESTMENT POCITION
US private investment in Algeria totaled $56 million
in 1973, of which $43 million was in the petroleum?
sector. All of the investment in the petroleum sector
is held as a partnership in joint ventures with Sonatrach,
the Algerian state oil company. Getty Petroleum is the
only US firm with an equity interest in a producing
field.
Outstanding investment disputes are confined to
ten private individual claims and one US qovernment claim
for properties nationalized -- but not compensated --
in the early 1960s. The properties are valued at $6
million.
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Approved F
1972
1973 1974
1975 a/
Exports
1,195 1
,832 4,578
5,000
Imports
-1,356 -2
,197 -4,039 ,
6,000
Trade Balance
-161
-365 +539
-1,000
Services and Private
Transfers
(Net)
-46
-187
-356
-900
CURRENT ACCOUNT BALANCE
-207
-552
+183
-1,900
Economic Assistance (Net)
14
19
(-)
(-)
Private Capital (Net)
271 1
,056
202
(-)
CAPITAL ACCOUNT FLOWS
285 1
,075
202
1
000
Net errors and omissions
and allocation of SDRs
-92
-35
161
,
CHANGE IN RESERVES
-14
650
546
-900
RESERVE LEVEL
(End of Year)
701 1,
374
1,924
1,024
a. Estimated,
ALGERIA: BALANCE OF PAYMENTS
(Millions US $)
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 FCREIGN TRADE PROFILE, 1974
Million US $
Total Exports 4,578
Of which:
Oil
4,250 est.
Non-oil raw materials 250 est.
Total Imports (cif)
4,039
Exports*
Oil
Gas
Wine
Fruits and.
Vegetables
Million US $
Percent
f
1,477
39
154
133
o
world exports
3
NA
NA
Percent of Exports to:
100
100
NA'
NA
NA
United States
8
5
NA
Western Europe
83
NA
Japan
Other
--
95
NA NA
NA
NA
s
US Imports as a percent
9
--
NA
NA
of US Consumption
Country's share of US
36
NA
NA
NA
imports
3
NA
NA
NA
Major Products Imported from US*
Total Machinery Manufactured Food and
Goods Live Animals
Percent from U.S. 8 NA NA
NA
* Data are for 1973.
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A. REGIONAL POLITICAL RELATIONSHIPS
By virtue of its size, political clout, military
strength, and position as the principal state in conflict
than as leader, and Sadat's sole concern within the
nonaligned is to gain support for the Arab cause against
Israel. Egypt's nonalignment is iaore nominal than
substantive; Sadat uses the label to justify his turn
away from the Saviets and to pull a light veil over
what is in fact his marked pro-Western and pro-US
orientation..
in recent years, however, has been as participant rather
heavily dependent on other Arabs, however, for financial
assistance, and its ability to guide the policies and
the politics of the Arab world is limited by this dependence
and by the wide divergence of views among the Arabs,
which enables many Arab states to maneuver successfully
against Egypt's now moderate policies.
B. ROLE I N LDC MOVEMENT
Egypt under Nasir was a founding member of the
nonaligned movement, and President Sadat still refers
to Cairo's leading role in the movement. Its involvement
with Israel, Egypt is a leading Arab state. It is
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C. OIL STRATEGY
Egypt has only recently become a small net exporter
of oil, is not a member of OPEC, and has played no role
in OPEC's political or economic strategy.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH NE UNITED STATES
There are few economic inhibitions on Egypt's
willingness to contemplate a special relationship with
the United 1tates, but there are some political inhibitions.
President Sadat's turn toward the United Stags is opposed by
local leftist elements and by intellectuals who doubt that
Sadat's sole reliance on Washington in peace negotiations
will pay off. Radical Arabs outside Egypt -- Libya,
the Palestinians, and Iraq, for example -- vociferously
oppose close US-Egyptian relations, and Cairo's friendship
with Washington has been the primary reason for the
Soviets' curtailment of arms shipments to Egypt. While
this opposition dictates some caution in Egypt's relations
with Washington, it has not affected Sadat's determination
to maintain and improve the ties.
E. STAYING POWER OF GOVERNMENT
There appears to be no imminent threat
to President Sadat's government. Opposition to Sadat's
policies does exist among leftist groups, students,
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and extreme conservative religious fundamentalists,
but none of these groups is largo enough, cohesive
enough, or in command of enough u%ipport to pose a real
threat. The military would be the only group strong
enough to carry off a successful move to oust Sadat,
but there is no evidence to indicate that such a move
is likely. Some discontent exists within the military --
over the no war/no peace situation, over economic grievances,
and over the armed forces' lack of military equipment
and spare parts -- but this discontent does not appear
to be extensive or directed particularly at Sadat.
Sadat's present :.erm extends until October 1976. He
was nominated in July by the Arab Socialist Union and
the People's Assembly for another six-year term beginning
in 1976, and his response, although not a clear acceptance,
indicates that he intends to run again.
F. ECONOMIC DEVELOPMENT STRATEGY
Egypt has the potential to achieve rapid economic
growth in the longer term -- the Egyptians themselves
mention a 7%-10% rate. The country has a large internal
market; plenty of skilled labor; an adequate supply
of managers, engineers, and other cadre; and a long
tradition of effective, if not efficient, administration.
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The economy han been held below its potential by a
severe shortage of foreign exchange, the priority demands
of the conflict with Inrael, and a system of bureaucratic
controls that neverely?inhibitn private activity.
The requirernentn for rapid growth .ire thus t (l) obtaining/
sufficient forrt.gn exchnnqc'; (2) allocating more resotirc.er
to non-military investments and (3) providing a much
more favorable environment for private business activity.
Progronn in all three directions will be much easier
if there in no war with Israel.
G. INTEREST IN INTERNATIONAL i'MARKETHIG A RANGEMENTS
Egypt may express interest in establishing marketing
arrangements for cotton, its nunbor one export earner.
Nevcrthelens, we have noticed thun far little hard
evidence of any nubntantial ;roves in thin direction.
H. BALANCE OF PAYMENTS TRENDS
At the outset of 1975, Egypt faced a nerioun liquidity
crisis brought on by lowered export earnings, large
foreign debt maturities, and a winding down of Postwar
Arab aid. Because Egypt was emerging from a decade
of economic stagnation, Sadat was unwilling to reduce
imports. He banked instead on further Arab aid to
cover the i.:-,ending payments gap.
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In .lutte, the ~andit~ ext"r,ciec3 a rash loan of 5000
Million' which will enable Cairo to weather the s .financial
storm. t:crypt can now cover its current account def ici t
Of $1.7 billion and its lo_ ttg- and r edi a;r tent -c r~ttot?i_c
debt repayments of ;00 ni.llion. In addition to the
new Saudi aid, Cairo has available S90O r+iliion in
cash pledges from Other OPEC r_otuntr_ ins, at least 304
Million in long-tern credits, Si50 -million in unused
project aid, and S200 million f rcm?t other t)otrrrr s --
making a grand total of x2.35 billion for the rear.
Cairo ray face additional foreign exchn;tge require-tents
if military debt oblicationz to the G5 =3t are not renegotiated.
Egypt nonetheless nhould be able to got through 1975
without reducing irporta from the high level of 1974.
Proaspecta for a continuation of the i"provd financial
por_itinn now appear prcnising, barring renewed hor.tilitien.
Annual foreign exchange earnings might even double
in the next three years. By 1978, exploitat-;.:. of new
oilfields and the repreasuring of the El Xorgan field
r;-ould raise output to roughly 650,000 b/d, about
one-third of present Libyan production. Allowing for
domestic consumption, oil exports would yield about
$800 million annually (at current prices).
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J.;arningn on the nervice account arri also expected
to increase. flot.el Construction should help tout int
earnings to top ; 000 million by 1970, conpar. eel with
the SriOO million anticipated for 1975. -Suez Canal
fees will increase from an estimated .175 million ins
1.975 to an much as S37S million next year.
t, US i UVESTwLUT f AS t T i ou
Ut private insvestront in i;grpt during 1973 totaled
about S200 million. txtracttve industries dominated
investment activity, accounting for roughly 90~ of the
total figure i`~troletz ~ dcvelopr,cnt and related infra-
structure act..ivity. .wr,re b~+ far the rot important of
r
the major invent: cnt categoricn.
 Total Exports
O: :rhich:
EGYP
FORE:IGN TRM PROFILE, 1974
:2iIlio:: US $
1,673
Exports
Non-Dill ra-ar serial:, 1,?Oc?
Total t"'po! t5 (fob) 3,023
Cotton
Million US S
Percent of world exports
Percent of Exports to:
United
Western
Japan
Others
Approved
612
6
100
States
n eg 1.
Europe
20
22
58
US Imports as a percent
of US Consumption
Country's share of US
imports
net exporter
Maio' Products Imno-ted 0 .,-C= us
Percent from U.S.
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EGYPT: J ALANCF OF I'AYME'N'T'S
Million:-, U" )
1.972
1973
1974
1L)
___
Exports
813
1,003
1,673
1,000
Imports,
1,206
1,574
3,020
3,028
Trade Balance
-473
-571
1,356
-2,028
Service; and Private
Transfcrn (Not)
7
6
41
350
CURRENT ACCOUNT BALANCE
-466
-565
-1,315
-1,678
Economic A:;:;i:;tarce (sot)
295
642
1,011
2,350
Private Capital (Net)
165
255
-500
CAPITAL ACCOU.N- FLO;;S
295
807
1,266
1,650
Net errors and or1i scions
and allocation of SDits
CHANGE IN TtL'5:.;~VS
-171
2-12
-49
172
RRESEIZVE LEVEL
(End of Year)
149
391
342
514
a. Estimated.
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I RAN
A. REGIONAL POLITICAL RELATIONSHIPS
Iran in the pacesetter in the Persian Gulf. It
is the region's most populous :state, has the most power-
ful military force, and the largest economy. Moreover,
the Shah of Iran in pursuing ambitious plans to create
and preserve a regional environment favorable to the
expansion of Iran's power and influence.
The Shah is seeking to parlay his economic strengths
into political gains. lie has improved relations with
Arab governments generally and forged especially close
ties with President Sadat of Egypt and with King liusayn
of Jordan. Good relations with the Sultan of Oman
resulted in the dispatch of some 2,500 Iranians troops
to help put down a leftist revolt in the sultanate.
Recent steps toward a more cooperative
relationship with his Arab neighbors include the, Iran-
Iraq accord, regular consultations with other Arab
leaders, and continental shelf agreements with several
neighboring states. The Shah hopes ultimately to forge
the Gulf states into a formal alliance system under
Tehran's sponsorship.
Iran is a member of CENTO and of the Regional Co-
operation for Development (RCD) organization, comprising
also Pakistan and Turkey. Tehran has supported recent
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moves to upgrade this gienerally moribund organization.
B. ROLE IN LDC MOVEMENT
The Iranian government hat; nought to identify itself
with the economic goals of the less developed countries
and has played a supportive, but somewhat moderating
influence, on the political initiatives of nonaligned
countries. The Shah clearly aspires to a position of
greater influence -- if not leadership -- in the no-called
"Third World."
Iran closely associates itself with talk of a "new
world economic order" in which LDCs would have more
influence and a greater share of wealth. The Shah regards
his oil-pricing policy and his proposal for tying the
price of raw material exports to that of industrial imports
as an important step toward achieving that "new order."
He has also promoted the theme that the superpowers
represent a danger, because of both their rivalry and
their monopoly of military and economic power. Iran has
proposed that the UN declare the Middle East a nuclear
free zone and the Indian Ocean a "zone of peace", and
has advocated the removal of foreign military presence
from the ::ersian Gulf.
The Shah has also sought to extend his influence
among LDCs through personal diplomacy and through
carefully tailored aid projects, which also abet Iran's
economic interests.
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C. 01 L STRATEGY
An oil in its major revenue nource, Iran in committed
to rnnximiri_ng crude oil export prices and to widening
exports of hicthevr valued oil uroduct:st. Tohhr.an r??a11z,,n
the collective barclaininq strength afforded by OPEC and
will continue to play a leadership role in the organization.
Iran's excess oil revenues are being lent to aid investments,
mainly to those countries in which it believes it can ob-
tain needed technology and expertise. Although increasingly
friendly with the Arab countries, Iran is unlikely to join
in a future Arab oil emL-argo based on Western support for
Israel.
Iran given high priority to it:s plan to construct
nuclear powerplantn capable of providing 23,000 mega-
watts by 1995. Almost totally dependent on foreign
assistance, Iran so far has made arrangements for nuclear
facilities with West German ond French firms. Although
Tehran in a signatory to the Non-Proliferation Treaty,
its interest in acquiring nuclear knowhow could, in
part, be motivated by the desire to preserve the option
of developing nuclear weapons.
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D. VIEWS ON SCPCiA L RELATIONSHIPS WITH THE UNITED STATES
Obviously a special r.e_l,7t onuhip already exists
between Iran and the United .states. Most economic and
political factors -- particularly tran'ts need for sophis-
ticaLed technical assistance -- favor its continuance
for the near term.
There are reasons why the Shah will not want to
identify his government to closely, or exclusively,
with the United States, however.
-- Iran's common border with the Soviet Union
requires the Shah to maintain cordial relations
with Moscow through regular consultation and
limits the extent to which he can cooperate
militarily with the United States.
-- The Shah's need for revenue to fund
industrialization places him at odds with
the United States and Western governments
over oil-pricing policy. Any hints that
the United States contemplates force against
oil producers will limit the degree to which
the Shah -- publicly at least -- will promote a
special relationship with the United States.
-- US arms policy toward Turkey, Pakistan,
and Jordan probably has strengthened the
Shah's doubts about US reliability as an
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ally. Moreover, he recognizes that in-
fluential grouus in the United States, both private
and in gover, nmen t, do not favor overly close
ties with Iran because of the autocratic
nature of its government. The Shah,
i:herefore, probably has doubts that the
US execu{ive will, in fact, be able to
o.eliver on all its long-range commit-
ments. For this, and other, reasons,
he has carefully developed ties with other
Western suppliers and will try to expand
those ties.
-- The Shah will also be careful to avoid
too close identification with US-Middle
East policy if that policy ignores Arab
demands for return of occupied lands.
Islamic Iran, virtually surrounded by
Arab states, cannot afford association
with such a policy.
E. STAYING POWER OF GOVERNMENT
We see little prospect during the next few years
for a serious challenge to the Shah's authoritarian
control over Iran's internal affairs and programs. The
creation of a one-party state, in March, should enhance_
his ability to control the political process.
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Nevertheless, the Shah's dcci!,ion-making monopoly
and the trend toward greater repression of opponents
(mainly resulting from the increased activity of terrorist
groups) will incur certain political costs:
-- growing alienation and dissent,
including terrorism, with some
anti-US overtones;
-- limited bureaucratic and govern-
mental effectiveness in implement-
ing the Shah's ambitious programs; and
-- the stifling of political institu-
tions, which could maintain stability
after the Shah's demise.
F. ECONOMIC DEVELOPMENT STRATEGY
Iran has embarked upon an ambitious restructuring
of its economy with a view to joining the ranks of
developed nations by 1983 -- the end of its Sixth Five-
Year Plan. It is also developing an increasingly more
effective and more self-sufficient military capability.
Specific economic goals include expansion of GNP from
about $43 billion ($1,300 per capita) in 1974 to about
$190 billion ($4,500) per capita in 1983. A tenfold-
increase in the output of manufactured goods, and a five-
fold expansion of exports of non-oil commodities are
planned during the period. The economic transformation
also ,obyrd FteIsaws? /( Q zQi1 g> TtQRg01 0ff90 07-4 25X1
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educational levels of Iran's populace whereby all urban
and 80% of the rural dwellers in the 7-45 age group are
to be literate by 1983.
The inability of the Iranian economic infrastructure
and resource base to accommodate the fast pace of the
economic expansion under way poses a serious obstacle to
the plans set forth by the Shah. Shortages of skilled
manpower and inadequate supply of materials, port capacity,
and transport facilities are already affecting the develop-
mental. program; a formal decision to slow down the program
is expected shortly.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
'Tehran seems to be consciously diversifying its
import suppliers to avoid over dependence and to obtain
the benefits of. competition among suppliers. A desire
to ensure adequate and secure supplies has motivated
Iran to invest in joint foreign operations and to assist
suppliers with prepayments. Preferences for US equipment
and technical assistance are heavily directed by military
needs and extend to a lesser degree to industrial and
consumer demands. Alternative, though probably less
desired, supplies from non-US sources are available..
H. BALANCE OF PAYMENTS TRENDS
Prior to the sharp rise in oil prices in 1973 and
1974, Iran almost consistently ran annual. current account
deficits. These deficits were fi t},
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Approved
loans, mainly from the United States. During the last
several years, it,.; large oil earnings have allowed Iran not
only to pay for its rapidly growing imports, but also to prepay
a large portion of its foreign debts, and to amass
increased foreign reserves. In April 1975, foreign
reserves stood at $9.2 billion,compared with $1.1 billion
in April 1973.
The current surpluses could give way to deficits
by the end of this decade, forcing Iran to return to
foreign capital markets. if Iran makes
reasonably good headway in development, and its economic
prospects are good, it should have little difficulty
in obtaining foreign financial support.
1. US INVESTMENT POSITION
At the outset of 1975, US private investment in
Iran amounted to $480 million -- considerably larger than
that by any other country and roughly 55 % - 60% of total
foreign investment in Iran. Roughly half of US invest-
ment is in the extractive industries (mostly oil),
about 44% in manufacturing, and 6% in banking. The extent
of US joint ventures with Iranian firms is not known, but
such arrangements are being used more frequently. There
are no major outstanding US-Iran investment disputes.
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 , "O;IA-RDP86T00608R000600060007-4
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FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports
19,340
Of which:
Oil
18,660
Non-oil raw materials 215
Exports
Total Imports (cif) 11,828
Million
US
$
P
18
660
ercent
P
of
world exports
,
18
ercent
of
Exports to:
100
United St
ates
12
Western E
Japan
urope
36
Others
20
32
US Imports as a percent
of US Consumption
Country's share of US
imports
Total Military
Percent from U.S. 40
_-.~~~-L k- r,anutacted rccd a. d
Equipment Machinery cruiD^ent - 90 Goccs .i~sls
Live
6 3 2
Major Products Iraa'-ted from. US
Year ending 31 March 1975.
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FOREIGN TRAIRAN
DE PROFILE, 1974 +-
Million US $
Total Exports 19,340
Of which:
Oi)
Non-oil raw materials
18,660
215
Total Imports (cif) 11,828
Exports
Oil
Million US $
18,660
Percent of world exports
18
Percent of Exports to:
100
United States
12
Western Europe
36
Japan
20
Others
32
US Imports as a percent
of US Consumption
36
Country's share of US
imports
12
Major Products Frc?rt d frc LS
Total Military
iranspon ~..53_t.. . -cs
Fuuip,:,ent Machinery Ecui=anent real,^d
Percent from U.S. 40 90 6 3
Year ending 31 March 1975.
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1,xporLr,
ltrpor.In
Trade 1)a lance
Servict7 n and Private
Trannferr; (Net.)
CURRENT ACCOtj;;T BALANCE
Economic AJniGt/11Ce (N(et)
Private Capital (Net)
CAPITAL ACCOUNT F'LO~WS
Net error, and omission:;
and allocation of SDRs
CHANGE IN RESET VES a/
RESERVE LEVEL
(End of Year)
1972 19`7:1 1'71{ 1'~ lSh
4300 6920 2200 22200
-2600 -3000 -7200 .-10000
1700 3120 14000 11400
-2100 -3230 -1400 -1400
-400 -110 13400 10000
-5 -1 -400 -560
721 1052 -2900 -3540
716 1051 -3300 -4100
-559 -1900
316 382 8200 5900
778 1160 9475 15375
a.inc u ing government foreign official
assets not counted in reserves.
b. E3timated.
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 Approved For Release 2005/06/09 : CIA-RDP86T00608R000600060007-4
MOROCCO
A. RLGIOUAL POLITICAL RELATIONSHIPS
Morocco has boon a voice of moderation in the Arab
world. Its involvement in the Arab 1j-~ague and the (7110
generally has been as a participant rather than 313 a leader.
Relations with its main neighbor, Algeria, have been
periodically strained by mutual distrust and by Algeria's
public opposition to Moroccan efforts to annex at least
part of Spanish Sahara. Since June 1974, Morocco has
invested considerable time and prestige in its campaign
to acquire Spanish Sahara and the final disposition of
this issue will significantly affect the stability of
the region.
B. ROLE IN LDC MOVEMENT
Rabat has played only a nominal role in nonaligned mov it,
and it does not appear to aspire to leadership. It is
uncomfortable with much of the militant rhetoric and
positions adopted by the nonaligned. Its primary concern
within the movement is to in support for its claim to
Spanish Sahara.
C. OIL STRATEGY
Morocco's domestic resources provide about 30% of
the country's energy requirements, mainly in the form of
coal and hydroelectric power. It had earlier hoped that
it could be a major oil producer, but exploration
never paid off in commercial finds. The search continuez--
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'Phi, domes;t.ic potential in not great. Coal in in
remote areas, poor in quality, and expensive to mine.
Heavy reliance on hydroelectric power has caused serious
concern because of recurrent droughts. As an Arab state,
Morocco has benefited from aid from its richer neighbors,
via the Arab Fund for Economic and Social Development, the
Kuwait Fund, and other bilateral channels. Rabat would
not publically attack oil actions taker, by other Moslim 25X1
states.
 Approved For Rel
F. ECONOMIC DEVELOPMENT STRAGEGY
The development plan calls for broader distribution
of growth benefits among the population, largely through
land redistribution, Moroccanization of industry and
services, job creation, housing and social services, and
rural uplift programs. The plan aims at an annual real
growth of 9% in 1975 through 1977, compared with 5.6% in
1973 and 1974. Government investment is to reach 20% of
GDP by 1977 0cmpared with 8% in 1974. To accomplish these
goals, the plan emphasizes export diversification and
more productive agricultural investments. At the same
time, a slowdown in infrastructural development is con-
templated. These structural changes will undoubtedly
require more time than optimistic planners project because
the government lacks the ability to mobilize the
necessary manpower and financial resources.
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G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Morocco has not been a particularly vocal proponent of
the UNCTAD integrated commoditien program or general Third
World commodity demands. It has, however., expressed
interest in having phosphates discussed in any forth-
coming energy conference. Morocco also participx-ated in the
last UN sugar conference.
In recent years, Morocco has not felt the pressure
of commodity problems, because it is in the unique position
of being able to exercise cartel-like pricing powers in
its major export -- phosphate rock -- without being in a
cartel. Morocco is the world's third leading producer
(behind the United States and the Soviet Union) but is
the world's leading exporter.
Largely because of world recession and high prices
for phosphate rock, world demand has begun to slacken.
Adding to Morocco's concern is a US Grand Jury investi-
gation of the phosphate (and other fertilizer) products,
which may cause further price softening. As a result,
Morocco has begun to look favorably on agreements that
would help maintain their export earnings. Toward this
end, Rzbat has established a Phosphate Institute and is
attempting to entice other Third World producers to join.
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II, BALANCE OF PAYMFNT5 TRLNDS
Morocco ran current account surplur.,cts from 1972
through 1.974, after a docade of defic:itu. The deficits are
likely to return, however. From 1961 to 1971, Morocco had
a negative trade balance despite a fourfold increase in
export proceeds. Receipts from tourism and worker_s''
remittances from Europe offset most of the trade deficit,
and foreign aid financed the remainder. In 1972-74, export
proceeds approached import levels because of higher
phosphate prices and sharp gains in tourism and remittances.
This year, higher imports w 1 falling phosphate exports
will lead to a large trade deficit. Private capital flows
are currently neg',:tive as a result of Rabat's Moroccanization
program. Since the current account deficit is being
financed .y aid funds (chiefly from OPEC), however, Morocco
will not have any major balance-of-payments problems.
1, US INVESTMENT POSITION
US private investment in Morocco is about $50 million
as follows:
Petroleum distribution
40%
Mobil
EXXON
Manufacturing
34%
American Tire
IBM
Colgate-Palmolive
American Chewing Gum
Commerce, Banking & Insurance 14%
Bank of America
Coca Cula
Others (agri-business, hotels, transport) 12%
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The Moroccanizntion ef`f'ort, initiated in c?ar.ly 1973,
hAn been relatively problem-free, with several companies
nuccenbfully making the transition to joint ownership.
Thrs major outstandincf issue involves the interest
rake fo be paid EXXON on the din-investment proceeds it
will :7cceive over the next 6 or 7 yearn. Other American
oil companies have accepted Moroccanization terms.
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MOROCCO
FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports 1,750
Of which:
Oil net importer
Non-oil raw materials 1,170
Total Imports (cif)
Exports Phosphates
2,000
Citrus Fruit
Million US $ 980
Percent of world exports 34
Percent of Exports to: 100
105
NA
100
United
W
States negi.
negl.
estern
Europe 60
85
Japan
3
0
Others
37
15
US Imports as a percent
of US Consumption net exporter NA
Country's share of US
imports
Major Products Imported from US
Food and Manufactured Transportation
Total Edible Oils Goods Machinery
Percent from U.S. 11 20 7
7 12
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MOROCCO: BALANCE OF PAYMENTS
(Millions us $)
1~
1-
1974
19751
Exports
632
911
1,750
2,080
Imports
-698
-1,035
-2,000
-2,700
Trade Balance
-66
-124
-250
-620
Services and Private
Transfers (Net)
114
227
452
460
CURRENT ACCOUNT BALANCE
47
104
202
-160
Economic Assistance (Net)
40
-19
67
220
Private Capital (Net)
-23
-60
-183
-40
CAPITAL ACCOUNT FLOWS
17
-79
-116
180
Net errors and omissions
and allocation of SDRs
4
5
5
CHANGE IN RESERVES
68
30
91
20
RESERVE LEVEL
(End of Year)
237
267
358
378
a. Estimated.
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NIGERIA
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A. REGIONAL POLITICAL RELATIONSHIPS
Nigeria, which has substantial oil revenues along
with the largest black African population and standing
military force, focuses its attention mainly on African
problems. Since the civil war, Nigeria's military
leaders have cautiously and pragmatically begun to use
these resources to promote Nigeria's image as the con-
tinent's most dynamic state and to carve out a larger
leadership role in Africa. Nigeria is an active participant
in regional economic groupings, particularly in west Africa,
and was the prime mover behind the formation last May of
the 14-nation Economic Community of West Africa States.
The new government in Lagos is not expected to push Nigeria's
claim to African leadership any more agressively than its
predecessor, in order to avoid provoking fears of
Nigerian domination. However, the new leadership prob-
ably will take a more strident stand on southern African
issues.
B. ROLE IN LDC MOVEMENT
Nigeria has not aspired to a leading role in the non-
aligned movement. Traditionally inward looking and basically
pro-Western, Nigeria over the past five years has developed
an increasingly assertive and genuinely nonaligned foreign
policy Approv cQF~of-R
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of trade for developing African countries with the EC and
at the GATT talks. Over the short term; Nigeria's new
military regime is likely to be preoccupied with internal
problems rather than foreign affairs.
C. OIL STRATEGY
In international oil policy, Nigeria has been satisfied
mainly to follow the lead of Middle East producers. It
has developed a reputation as one of the more moderate
OPEC members. Nigeria's new regime has given no indication
so far that radical departures may be in the offing in
either its oil policies or its generally good working
relations with American oil companies.
Nigeria did not join in the recent Arab oil embargo,
and we see no evidence that Nigeria would willingly join
a new Arab-sponsored embargo that had its roots in purely
Middle East issues. Nigeria's new head of state,Brigadier
Muhammed, though a Muslim, is not expected to advocate a
pro-Arab stance for Nigeria. Such a course of action
would only antagonize Nigeria's non-Muslim minority.
Nigeria has no clearly defined policy toward- aiding
LDC countries. In African forums, Nigeria has indicated
its willingness to consider selling crude oil at unspecified
concessionary prices to African countries with oil refineries,
if they use the oil for domestic purposes only. At the
same time, Nigeria has sought to assure fellow OPEC members
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by the public and the armed forces.
that it is prepared to join them in providing economic
aid to African LDC countries rather than provide bi-
lateral concessionary oil. Nigeria's equivocal stance
has come under public criticism from Algeria.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
The recent surge of 04.1 money has buttressed
Nigeria's strongly nationalistic outlook. As a corollary
of their increasingly independent political stance,
Nigerians do not feel compelled to seek anything from
anyone. Nigeria has turned to a wide variety of Western
and Communist countries for foreign investment, technical
training, and military purchases in order to avo;-: over
dependence on any one source. Nigeria welcomes US invest-
ment. Some 400 Nigerian officers are trained in the
United States each year. The new regime seems favorably
disposed toward the United States and the West in general.
E. STAYING POWER OF GOVERNMENT
Nigeria's new military government has been accepted
The
cohesion of
the
new leadership
to
the
test in
the months
ahead
should
the.
encounter 'setbacks and frustration in
coming
to grips with such pressing problems as inflation, com- 25X1
modity shortages, distribution short comings, and unemployment.
may be put
government
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F. ECONOMIC DEVELOPMENT STRAGEGY
Nigeria's primary economic objective as set forth
in the Third National Development Plan is to achieve a
rapid increase in the standard of living of the average
Nigerian. The Plan calls for investments of $48.6 billion
over five years,of which $32.4 billion is to come from the
public sector. More than half of public sector investment
is slated for transport ($12 billion) and industry ($6
billion). Other priority areas are mining and quarrying,
education, agriculture, housing, communications, power
and health care. Private sector investment is to be
concentrated on building and construction, industry,
distribution, and agriculture. A scarcity of managerial
and technical manpower and inadequate institutions to
administer development projects are the major constraints
on plan implementation.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Nigeria is a member of OPEC and follows OPEC policies.
It has traditionally been a follower rather than a leader
in OPEC. Its policy has been to maximize revenues and it
has steadily increased production and prices. Recently,
however, the sagging market for its high priced quality oil
has caused Nigerian output to drop dramatically. To
reverse the decline, Lagos recently reduced prices. Lagos
has also entered into commodity agreements for its exports
of coffee, cocoa, sugar, and tin.
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H. BALANCE OF PAYMENTS TRENDS
Nigeria began to run current account surpluses in
1973 and is expected to continue to run surpluses at
least until the late 1970s. Reserves totaled $6.5 billion
in May 1975.
1. US INVESTMENT POSITION
US private investment in Nigeria totals about $1 bil-
lion, mostly in the oil industry. The three largest
investors are: Mobil (gross investment $400 million, net
book value $160 million); Gulf ($320 million gross, $103
million net); Phillips ;$173 million gross, $44 million
net).
On 3 August 1974, the United States and Nigeria
signed an investment guarantee agreement providing for
political risk coverage for new American investment in
Nigeria. There are no outstanding investment disputes
in Nigerian although Lagos has been negotiating for some
time with American International Insurance Company for
49% government participation.
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NIGERIA
FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports
Of which:
9,317
Oil
Non-oil raw materials
8,615
565
Total Imports (cif)
2,779
Exports
Oil
Cocoa*
Vegetabl
Oi
*
e
ls
Million
US
$
Per
8,615
252
120
cent
of
world exports
7
16
Percent
of
Exports to:
100
100
1
100
United St
W
t
ates
37
20
3
es
ern E
Japan
urope
49
44
88
Others
4
3
2
10
33
7
US Imports as a percent
of US Consumption
36
100
Country's share of us
imports
14
7
Major Products Imported from US
Total Wheat Machinery
Percent from U.S. 12 NA NA
* Data are for 1973.
Transport
Equipment
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NIGERIA;
BALANCE' OF PAYMENTS
1972
1973
f Iiil.1 i.onn
1974
t):;
1975
Exports
2.3
3.6
9.6
9.0
Imports
-1.6
-2.0
-2.7
-5.3
Trade Balance
.7
1.6
7.1
3.7
Services and Private
Transfers (Net)
-1.3
-1.4
-1.1
-1.2
CURRENT ACCOUNT BALANCE
-.6
.2
6.0
2.6
Economic Assistance (Net)
.1
-.1
--
Private Capital (Net)
.4
.2
-.9
CAPITAL ACCOUNT FLOWS
.4
.1
-.9
Net errors and omissions
and allocation of SDRs
CHANGE IN RESERVES
.2
5.1
RESERVE LEVEL
(End of Year)
.4
.6
5.6
a. Estimated.
 Approved For Release 2005/06/09 : CIA-RDP86T00608R000600060007-4
SAUDI ARABIA
A. REGIONAL POLITICAL RELATIONSHIPS
Saudi Arabia plays a leading role in Arab councils,
both informally and in the Arab League, although no
far it has not sought to exploit its position fully.
Since the Middle East war in 1967 it has been paying
annual subsidies to Egypt and Jordan; since its oil
earnings mushroomed in 1974, it has supplemented these
payments and broadened the list of recipients to include
Syria, Iraq, and both Yemens. The Saudis continue to
allow Cairo to take the lead in determining matters
of Arab policy, though they will, for example, back
a Syrian position when they believe Damascus has been
slighted. The fact that Egypt and the other confrontation
states have to be careful not to alienate Riyadh gives
the Saudis a broad veto over Arab policy.
B. ROLE IN LDC MOVEMENT
Saudi Arabia usually avoids participation in non-
aligned conferences, partly because it does not wish
to be badgered for money and partly because the meetings
are usually dominated by leftists. On East-West and
Third World issues -- unrelated to the Middle East --
Saudi Arabia's foreign policy has been staunchly pro-
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American and anti-Communist. It is not attending the
coming conference in Lima, according to th' deputy
foreign minister, because it expects it to bo run by
the "extreme left." Saudi Arabia is, nevertheless,
influential within countries belongi.ig to the nonaligned
movement because it is a prime source of loans. The
government obligated itself to nearly $3 billion worth
of aid in the first half of 1975 alone. Saudi Arabia
is already the world's largest aid donor, except for
the United States.
Co OIL STRATEGY
Saudi Arabia clearly has control over the OPEC
oil prices because of its large excess production capacity
and its ability to lower production sharply and still
earn sufficient foreign exchange. Although Riyadh
can afford to be more moderate on prices than other
OPEC members, it will probably go along with the 15%
oil price increase we expect to be adopted at the September
OPEC meeting. Oil minister Yamani has several times
linked Saudi moderation on the price issue to progress
in organizing a joint producer-consumer conference
that will discuss not just oil, but energy and raw
materials in general.
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Saudi action triggered the oil embargo during
the 1973 Arab-Israeli war, and the Saudis have said
repeatedly that the West can expect something similar
if another war erupts. The Saudis could employ various
combinations of an embargo and/or production cuts.
Saudi Arabia has followed cautious investment policies.
As the Saudis become mor.: financially sophisticated,
however, they have begun to increase their long-term
portfolio holdings. They are nevertheless still concentrating
on government issues or government-guaranteed issues.
With respect to the US market, they have shown sensitivity
to US fears of Arab control of US industry. They are
particularly irritated at publicity given to the Arab
boycott and to their stated policy of refusing visas
to Jews. Such irritants may diminish Saudi enthusiasm
for American investments.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
Saudi Arabia considers that it has had a special
relationship with the United States ever since Aramco began to
explore for oil in the 1930s -- antedating the creation
of Israel, as Saudis like to point out. Aramco was
for a time so deeply involved in the life of the kingdom
that it all but ran the country with little friction.
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i w
Even recent negotiations to allow greater
government ownership of Aramco have been amicable.
From the Aramco experience, the Saudis emerged with
a marked respect for US technology and a strong preference
for US products. The relationship was strengthened in
mid-1974, when the two countries signed an agreement
creating a variety of commissions to further economic
and security cooperation.
US ties with Israel are, of course, the inhibiting
factors in the political area. The Saudis have long
urged the other Arab states to turn away from the Soviets
and towards the United States, in the belief that
Washington alone can pressure Israel to agree to
acceptable settlement terms.
In the economic sphere, the Saudis have a strong
preference for government-to-government relationships
with respect to contracts and development projects;
they are impatient with the US reliance on the initiative
of private companies. A related irritant is the delay
they perceive in the supply of US-made weapons. They
suspect that protracted delivery delays are a result
of a systematic anti-Arab, pro-Israeli bias in defense
matters; they claim the Israelis have been resupplied
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in short order in the past, even where US units had
to be stripped to accor.modate them. The upshot has
been increasing nervousness about dependence on
US arms -- fears recently intensified by congressional
action on sales to Jordan and Turkey.
E. STAYING POWER OF GOVERNMENT
We consider the Saudi government to be stable,
at least at present. There is no significant subversive
threat in the kingdom. There has been some minor religious
and labor unrest in the Eastern Province -- where the
oilfields are located -- but it was never very great
and has diminished in recent years. The army is considered
loyal. The country's manpower shortage guarantees more
than eough work-for everyone. There are long-term
threats; the population has been shielded from the
twentieth century to a degree possibly unmatched anywhere
else, and development will presumably stir new ideas.
There may be an increased demand for political freedom.
As foreigners are brought in to work on development
projects, there could be labor discontent and various
forms of religious-nationalist-ethnic friction. But-
continuing prosperity will ease even these strains.
Meanwhile, such dangers as exist at present are
within the royal family, where individuals step on
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in short order in the past, even where US units had
to be stripped to accommodate them. The upshot has
been increasing nervousness about dependence on
US arms -- fears recently intensified by congressional
action on sales to Jordan and Turkey.
E. STAYING POWER OF GOVERNMENT
We consider the Saudi government to be stable,
at least at present. There is no significa;it subversive
threat in the kingdom. There has been some minor religious
and labor unrest in the Eastern Province -- where the
oilfields are located -- but it was never very great
and has diminished in recent years. The army is considered
loyal. The country's manpower shortage guarantees more
than eough work for everyone. There are long-term
threats; the population has been shielded from the
twentieth century to a degree possibly unmatched anywhere
else, and development will presumably stir new ideas.
There may be an increased demand for political freedom.
As foreigners are brought in to work on development
projects, there could be labor discontent and various
forms of religious-nationalist-ethnic friction. But-
continuing prosperity will ease even these strains.
Meanwhile, such dangers as exist at present are
within the royal family, where individuals step on
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.-10. , 1.11111110
one another's toes as they maneuver for power. So
far, King Khalid and Crown Prince Fahd are operating
in harmony, though problems could develop out of the
division of power between them.
The family has always, despite
intense rivalry, managed to hang together in a crunch;
they can be expected to do so in the present situation.
F. ECONOMIC DEVELOPMENT STRATEGY
Saudi Arabia's development plan -- $142 billion
for 1975-80 -- is the world's most ambitious. Industrial
development, agriculture, housing, defense, and socially
orientated infrastructure programs have all been allocated
massive amounts of funds under the current plan. While
Saudi Arabia has no financial constraints on its development
programs, it is unlikely that even one-half of the scheduled
projects will be completed by 1980. Lack of manpower,
transportation facilities,and administrative controls
will all be factors disrupting the various programs.
As a result, costs of most projects are expected to
soar beyond original estimates as shortages of skilled
labor and critical materials lead to higher prices.
A constant reexamination of the development effort
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will be necessary if serious disruption of the domestic
economic and social order is to be averted in the years
ahead.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Saudi Arabia has no interest in marketing arrangements,
except where they ensure a steady supply of high technology
imports and technical assistance. The Saudis generally
prefer to deal in cash with such suppliers. Negotiations
are continuing, however, with potential suppliers of
high technology both on a government-to-government
and government-to-private basis. Negotiations with France
are aimed at a long-term oil deal in return for technical
assistance on industrial projects.
H.
BALANCE OF PAYMENTS TRENDS
Saudi Arabia's current account surplus has ballooned
from $1 billion in 1972 to over $25 billion in 1974
as a result of higher oil prices. Slowed demand for
oil in 1975 has cut exports slightly, but the current
account surplus is still expected to be over $22 billion.
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As demand picks up in 1976-79, Saudi Arabia
is expected to run surpluses in excess of $25 billion
per year. The resulting growth in reserves is expected
to continue on through 1980, albeit at a reduced level.
As a result, Saudi leaders will continue to face a major
challenge in investing their surplus revenues for the
next five years at least.
I. US INVESTMENT POSITION
US private direct investment in Saudi Arabia totaled
some $1.3 billion at the end of 1974, including some
$600 million in
concentrated in
industries such
particularly
grow rapidly
involving US
Aramco. Other investments are primarily
manufacturing and petroleum-related
as Tapline.
Investment in industry,
a joint-venture basis, is expected to
during the next several years.
partners
automotive production
Key projects
include petrochemical plants, refineries,
facilities, and other heavy industry.
The only outstanding major investment dispute
concerns the Saudi takeover of Aramco. Still under
negotiation are the service fees per barrel Aramco will
be granted, production entitlements, and final compensation.
While negotiations have been protracted, they appear
to be progressing in a fairly amicable atmosphere.
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The Saudis clearly desire a continuing role for Aramco
and have no desire to alienate fcreign investors --
current or potential.
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? SAUDI ARABIA
FOREIGN TRADE PROFILE, 1974
Million US $
Exports
Oil
Million
US
$
31,400
Percent
of
world exports
26
Percent
of
Ex-.)orts to:
100
United St
ates
9
Western E
urope
52
Japan
16
Others
23
US Imports as a percent
of US Consumption
Country's share of JS
imports
31,400
31,400
3,800
Major Products Imported from US
Machinery
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(Millions US $)
Exports
Imports
Trade Balance
Services and Private
Transfers (Net)
CURRENT ACCOUNT BALANCE
Economic Assistance (Net)
Private Capital (Net)
CAPITAL ACCOUNT FLOWS
Net errors and omissions
and allocation of SDRs
CHANGE IN RESERVES
Official Reserves
Other Foreign Assets (Net)
RESERVE LEVEL
(End of Year)
Of which:
Official Reserves
Other Foreign Assets
1972
1973
1974
1975*
5,110
8,793
31,400
28,900
-1,275
-1,817
-3,600
-5,000
3,035
6,976
27,800
23,900
-2,346
-3,908
-1,'.00
-200
1,489
3,068
26,700
23,700
-56
-377
-1,400
-1,100
111
-1,014
-8,600
-5,700
55
-1,391
-10,000
-6,800
-174
+105
--371
--
1,370
1,782
16,329
16,900
1,056
1,375
12,149
12,900
314
407
4,180
4,000
2,893
4,675
21,004
37,904
2,500
3,875
16,024
28,924
393
800
4,980
8,980
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ZAIRE
REGIONAL POLITICAL RELATIONSHIPS
Over the pant several yearn, President Mobutu has
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made rapid strides in bringing Zaire into the mainstream
of African affairs. Zaire has a major vc 'n African
forums and President Mobutou is cultivate image of
a leading African statesman.
B. ROLE IN LDC MOVEMENT
Despite Mobutu's aspirations, Zaire has not played
a major role in the nonaligned movement to date. He is
moving closer to China and the Arab World and at the same
time distancing himself somewhat from Belgium and the
United States.
C. OIL STRATEGY
Zaire currently relics on imports to meet its
15,000 b/d petroleum consumption. Later this year, how-
ever, production from offshore fields will be initiated
at the 25,000 b/d level. Zaire also has & vast hydro-
electric potential -- 13% of the world total -- of which
less than 1% has been exploited.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
Mobutu's relations with the United States are a source
of frustration to him. His aspirations to become a third
world leader are hampered by his close association with
the United States and our strong support for him in the
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early yearn of hire regime. At the name time, he is heavily
dependent on US financial interest to help him solve serious
economic problems he now faces. Ile has been unable to
obtain significant financial support from the Arab World
or from West European countries.
E. STAYING POWER OF GOVERNMENT
Although Zaire's economic problems have produced an
almost shady stream of popular grumbling and many of
Mobutu's policies are not popular with either the people
or government officials, there are no indications that
anyone in Zaire can translate that dissatisfaction into
a move to unseat Mobutu. Mobutu's security forces appear
completely loyal to him and maintain a careful watch of
disgruntled elements.
F. ECONOMIC DEVELOPMENT STRAGEGY
Zaire has no official development plan, but general
economic policies include:
(1) industrialization through
state participation in economic ventures and granting in-
centives to private investment; (2) improvement of manage-
ment of the economy through reorganization of enterprises
and markets and replacement of expatriates by nationals;
(3) prevention of urban food shortages by increasing
agricultural production and reducing food imports; and (4)
development of the poorest areas of the country.
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A major economic goal of
President Mobutu
is his "drive for economic independence." Steps to
achieve this included the expropriation of Union Miniere's
assets in 1967, the turning over to Zairians of certa.n
foreign-owned agricultural and commercial enterprises in
November 1973, and the "radicalization" measures of
December 1974 which included the extension of state
control over more than 100 firms of both foreign and
Zairian ownership.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Zaire participates in commodity agreements on sugar
and tin and belongs to producer organizations for both
copper and wood. Zaire's decisions on trading arrangements
will inevitably be conditioned by its increasing require-
ments for revenues and foreign exchange.
H. BALANCE OF PAYMENTS TRENDS
Low copper prices and improvident economic policies
have created a foreign exchange crunch in Zaire. In the
first quarter of 1975, expenditures exceeded receipts forcing
Kinshasa had to draw down its reserves to $90 million.
Zaire now finds itself unable to borrow sufficient funds
to maintain imports and meet its debt obligations. To
cope with the situation, Zaire introduced import controls
in early 1975. Only foods, drugs, and raw materials for
domestic processing may be imported freely. Even
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authorized imports are often canceled as suppliers
demand -- but are unable to obtain -- advance payment.
The reduction in imports is disrupting the industrial
sector, which is heavily dependent on foreign inputs.
Kinshasa must obtain large foreign loans if it is to
survive the current crunch without severe shortages,
inflation, and unemployment. Copper prices are unlikely
to rise enough over the next year or two to finance
imports at the 1974 level, and other exports show little
promise of expanding enough to make up the difference.
1. US INVESTMENT POSITION
US investment in Zaire rose from about $25 million
in 1970 to between $100 million and $200 million in 1974.
The principal US investments are in oil exploration and
production, copper mining, flour milling, auto assembly,
textiles, tire and battery production, and tourist
facilities.
While most large US investments are protected by the
Investment Code of 1969, assets of US petroleum marketing
companies -- Mobil and Texaco -- were nationalized in early
1974. Compensation negotiations are moving slowly.
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Oil net importer
Non-oil raw materials 1,280
Total Imports (cif)
Exports
Copper
Million US $
Percent of world exports
Percent of Exports to:
850
10
100
United
Western
States
Europe
negl.
90
Japan
2
Others
8
US Imports as a percent
of US Consumption
Country's share of US
imports
Major Products Imported from US
Percent from U.S.
ZAIRE
FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports 1,294
Of which:
Total
16
Construction, Transport, and
Mining Equipment
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ZAIRE: BALANCE' OF PAYMENTS
(Millions us $)
1972
1973
1974
1975
Exports 764
1,044
1,333
NA
Imports -826
-948
-1,193
NA
Trade Balance -62
96
140
NA
Services and Private
Transfers
(Net) -350
-360
-506
NA
CURRENT ACCOUNT BALANCE
-412
-264
-366
NA
Economic Assistance (Net)
--
--
--
Private Capital (Not)
--
--
--
CAPITAL ACCOUNT FLOWS
374
318
139
NA
Net errors and omissions
and allocation of SDRs
32
8
134
NA
CHANGE IN RESERVES
-6
62
-93
NA
RESERVE LEVEL
(End of Year)
178
235
140
NA
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ZAMBIA
A. REGIONAL POLITICAL RELATIONSHIPS
Zambia's active and influential role in the
Organization of African Unity (0AU) stems from its
proximity to the white-ruled southern AU'rica. Since
Zambia gained independence from Britain in 1964,
President Kenneth Kaunda has given a high priority
to attaining majority rule in Rhodesia, Mozambique,
Angola, and South Africa. Although Zambia has been a
staging area for southern African liberation movements,
Kaunda has always argued that peaceful change is pre-
ferable to violent revolt.
During the past year,Kaunda and the Presidents
of Tanzania, Mozambique, and Botswana had cooperated
with South African Prime Minister Vorster in an effort
to bring peace and majority rule to Rhodesia. Kaunda's
diplomacy, following the coup in Protugal, also helped
to end the years of guerrilla warfare in Mozambique.
He is now deeply involved in efforts to forge unity
among the rival nationalist groups in Angola.
B. ROLE IN LDC MOVEMENT
In 1970 Kaunda was chosen chairman of an OAU
summit conference in Addis Ababa, and he hosted a
conference of nonaligned nations in Lusaka. Both
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bodies designated him as chief spokesman it, '-he effort
to establish an arms embargo against Portugal and South
Africa. In this role he visited Germany, France,
Britain, and the United States and also addressed
the U.N. General Assembly. Kaunda subsequently toured
the Soviet Union and also traveled to South Asia and
Caribbean countries. Kaunda, however, is unlikely to
pursue an international leadership role much further than
his goals for southern Africa. He is a modest man, com-
pared with Nkrumah or Mobutu, and has drawn criticism
for neglecting domestic problems.
C. OIL STRATEGY
Zambia imports all of its petroleum -- about 17,500
b/d -- as well as small amounts of coal and electricity.
Development projects nearing completion will eliminate
requirements for coal and electricity imports by 1978.
Prospects for discovering oil are poor. Land-locked
Zambia's petroleum-related priorities are to expand
domestic refinery capacity, add alternative pipeline
systems to the one now leading from Dar-Es-Salaam, and
develop government-to-government purchasing channels
with Arab states, principally Saudi Arabia. Although
the cost of petroleum imports has nearly quadrupled
since 1973 to about $80 million, the impact on th'
balance of payments has been small compared with that
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D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
Although US-Zambia relations have never been
seriously strained, Kaunda is convinced that the United
States could do more to loosen white rule in Rhodesia.
Zambia's participation in. the U.N. sanctions against
Rhodesia has been costly, and Kaunda would like the
United States to apply the sanctions more tightly.
Since Kaunda has assumed a key role in the Rhodesian
negotiations, he also has urged the United States to
encourage Pretoria to withdraw South African support
from Smith unless he accedes to majority rule.
E. STAYING POWER OF GOVERNMENT
.Kaunda's stability is well above the African norm.
After 11 years as president, he has no apparent
challengers. -Zambia, however, has its share of the
ethnic tensions and econcs.ic discontents that have
brought sudden overthrows of seemingly entrenched
leaders elsewhere. Without an heir apparent, Kaunda's
sudden demise would result in a leadership struggle.
F. ECONOMIC DEVELOPMENT STRATEGY
Zambia's princ;i.pal. economic goals, expressed in
the 1972-76 National Development Plan, are to achieve
self-sufficiency in food production and develop import-
substitution industries. Production of corn, oilseeds,
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and sugar are assigned the highest priorities. Progress
so far has been irregular. The decade-long search for
alternatives to Rhodesian trade routes has been costly,
diverting financial and administrative resources from
development. Wide fluctuations in copper prices also
have upset financing. Recent moves to broaden govern-
mental control over the economy may undermine the
confidence of potential foreign investors, further
impeding development.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Zambia is a founding member of CIPEC (Inter-govern-
mental Council of Copper Producing Countries). President
Kaunda has recognized that copper producers do not
enjoy the strength of oil producers. He has stated that
CIPEC is not seeking extortionate prices for copper, only
what is "fair and equitable." As the majority stockholder
in its copper industry, Zambia is free to seek the best
possible conditions of sale. But it would probably
'resist proffered bilateral agreements on copper by the
United States if they encroached on Zambia's commitment
to CIPEC.
H. BALANCE OF PAYMENTS TRENDS
Low international copper prices can be expected to
produce a large current account deficit in 1975, the first
in three years. Zambia plans to rely mainly on increased
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foreign borrowing to offset the deficit. Loans total-
ing over $300 million are being negotiated with
US, European, and Saudi Arabian banks. In
addition, import restrictions have been tightened.
Nonetheless, Lusaka may have to reduce its foreign
exchange reserves to exceptionally low levels.
1. US INVESTMENT POSITION
US private investment in Zambia totals about $250
million to $300 million. Most is in copper mining
(American Metals Climax, Inc.) and in petroleum supply
and distribution (Mobil and Caltex). Other important
US investors include Coca Cola, Westinghouse Air Brake,
International Telephone and Telegraph, National Cash
Register, St. Regis Paper Co., and Ingersoll Rand.
There are no major investment disputes involving US
companies.
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ZAMBIA
FGREIGN TRADE PROFILE, 1974
Unit: States
Western Europe
Japan
Others
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BALANCE OF PAYMENTS
(Millions US $)
Exports
Imports
Trade Balance
Services and Private
1972 1973 1974.1t/ 19?S
760 1,153 1,324 900
-566 -541 -778 -800
194 612 546 100
Transfers (Net) -391 -485 -468 -500
CURRENT ACCOUNT BALANCE -197 127 78 -400
Economic Assistance (Net) NA NA NA NA
Private Capital (Net) 87 -285 NA NA
CAPITAL ACCOUNT FLOWS 110 -51 NA NA
Net errors and omissions
and allocation of SDRs
-61 -48 NA NA
CHANGE IN RESERVES 148 28 -21 -100
RESERVE LEVEL
(End of Year) 165 193 172 72
a. Preliminary.
b. Estimated.
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 Approved For Relea
INDIA
A. REGIONAL POLITICAL RELATIONSHIPS
India is the preeminent power in South Asia, but
it does not provide leadership for South Asia, or for
the larger Indian Ocean region. India's relations with
its immediate neighbors are such as to give New Delhi
no real opportunity of playing the role of leader.
Pakistan is the traditional enemy, Nepal and Sri Lanka
mistrust their giant neighbor, and Bangladesh, while
publicly proclaiming its close ties with India, is
presently trying to extricate itself from too close an
embrace in order to improve relations with antagonists
of India such as China. Indian relations with Afghanistan
are good, in very large part because of a common distrust
of Pakistan.
In the larger Indian Ocean area, New Delhi exercises
little influence anywhere, with the exception of Mauritius.
,The government of that island, influenced by the large
Hindu population, apparently feels a strong cultural and
politica:. attraction for the much larger Hindu nation to
the north. In international forums, the Muslim nations
of the Near East, Africa, and Southeast Asia are frequently
forced to choose between Pakistan and India. Often,
cultural and religious ties are determinants in their
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decision to support the former. In Southeast Asia,
Indians an individuals are generally unpopular, and
India, an a nation, is often ignored. Finally, there
are many governments in the region that have viewed
New Delhi as a stalking horse for the Soviet Union
ever since conclusion of the Indo-Soviet Treaty of
Peace, Friendship, and Cooperation in 1971.
B. ROLE IN LDC MOVEMENT
India, along with Egypt and Yugoslavia, was one of
the early leaders of the nonaligned movement. Following
war with China in 1962 and the death of Nehru two years
later, India began to lose its leadership role. It
still belongs to both the Nonaligned Conference and the
Group of 77. Domestic crises over the past decade, both
economic and political, have focused government attention
on internal matters. Detente has tended to limit
New Delhi's ability to maneuver between blocs. Pakistan
has played down its once close identification with
Western-sponsored defense pacts and has drawn the Muslim
nations closer to its side. Peking is now a permanent
member of the Security Council and claims to speak for
Asia. Finally, the leadership of the nonaligned group
of nations has fallen to Arab and African activists such
as Algeria. Indian influence today is limited, although
as a nation of 600 million people, having a 1-million-man
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army, and able to explode a nuclear device, its voice
cannot be ignored. India would like to play a leader-
ship role again, but the changing world situation,
combined with India's current concentration on internal
problems, will keep it from doing so.
C. OIL STRATEGY ?
India relics heavily on petroleum imports to
satisfy its energy needs. Domestic production of
148,000 b/d covers only one-third of consumption. The
cost of imported oil reached $1.5 billion in 1974 and
equalled 37% of export earnings. India has discovered
extensive offshore oil reserves, but any significant
reduction in oil imports is unlikely before 1980 and
self-sufficiency is at least a decade away if it can ever
be attained. Coal reserves are extensive but under-
developed, mainly because of low coal min productivity
and the high cost of transportation.
New Delhi has actively sought price concessions
and aid from OPEC members. Although dismayed at the
reluctance of OPEC to be more concessional to the
most seriously affected nations, New Delhi has
continued to give OPEC strong diplomatic support in'
international forums.
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D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
India's relations with the United States have
frequently been troubled by misunderstandings and con-
flicting goals over the past quarter century. Many
Indian leaders, particularly those of the left, still
-view US foreign policy as dominated by neo-colonialism,
militarism, imperialism, and racism. Despite this,
there is still a reservoir of good will for Americans,
caused in large part by traditional common interests
in democracy and by large scale US economic and technical
assistance over a period of many years. Two current
sticking points between India and the United States
involve the possible sale of US arms to Pakistan and the United
States' decision to expand the naval and air base on
the Indian Ocean island of Diego Garcia. In the past
year, however, leaders of the Indian government have
repeatedly emphasized their desire for improved relations
With Washington.
The constraints on ':he press and politicians in
India since the June emergency proclamation could result
in less moralizing over the alleged faults of the United'
States. In case of governmental reverses, however, the
United States will remain the most likely foreign
scapegoat.
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E. STAYING POWER OF GOVERNMENT
has dramatically consolidated her control over the
government since proclamation of a state of emergency on
26 June and is likely to remain in power for at least the
next year. Mrs. Gandhi has given no hint as to when she
will lift the emergency, but most observers believe it
will continue well into 1976 or beyond. The emergency
can be retained indefinitely,and there is no constitutional
requirement for new elections so long as a majority of
the legislature is willing to extend the life of the
present parliament. Prime Minister Gandhi has an over-
whelming majority in that parliament. The opposition
is in disarray, with many leaders in jail, others in hiding.
The press is muzzled and the security forces are alert
and apparently loyal to the government. Over a period
of time, particularly if a serious economic crisis were
to occur, an effective underground opposition could
develop in India, but'this seems to be at least several
months away.
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ECONOMIC DEVELOPMENT STRATEGY
India has persistently given industrialization
more priority than agricultural development. Industriali-
zation programs have been characterized by enlargement
of the public sector, rigid constraints on private
investment, and mushrooming bureaucratic requiremeni,s.
Shortages of public investment funds, raw materi.-I ,
capital goods, and energy have been the major constraints
on industrial growth, along with the bewildering plexus
of government regulations.
India is combating these constraints rather than
changing its priorities. During the past year, New Delhi has
liberalized some industrial and import controls in an effort to stimulate
industrial production. Businessmen are optimistic
concerning Mrs. Gandhi's more authoritarian measures,
such as prohibiting strikes. She also has not nationalized
any more private industries. Agriculture is largely
left to respond to the annual monsoon rains.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
India is very interested in international marketing
arrangements as a method to improve prices of its major
exports. India took a leading role in organizing the iron
ore exporters' association and has participated in recent
coffee, sugar, and tin conferences. With Bangladesh,
India has established a jute promotion organization.
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India is a member of the tea exporters group which meets
under FAO auspices. This group has discussed potential
joint policies to benefit tea exporters but has been
unable to agree on what actions are appropriate.
H. BALANCE OF PAYMENTS TRENDS
Since 1.972, the balance of trade has deteriorated
dramatically. During the past two years, 4 63%growth
in exports was dwarfed by a 104% rise in imports as world
market prices soared and poor grain harvests increased
import requirements. Outlays on petroleum, foodgrains,
and fertilizers accounted for most of the growth in
imports. Export growth has reflected the world commodity
boom. Sugar sales, the most dramatic example, rose to an estimated
$300 million in 1974 from $55 million in 1973.
India's net economic assistance climbed
from about $500 million in 1972 to nearly $2 billion
last year. With a larger trade deficit this year, India's
aid requirements will retrain high. Since an increase in new aid seems
unlikely, New Delhi will have to take some combination of the
following steps: dip into its foreign exchange reserves
which amounted to $1.4 billion at the end of March; '
further increase IMF borrowings; press for debt rescheduling;
or, as a last resort, further ct;rtail imports.
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1. US INVESTMENT POSITION
New Delhi has been forcing US oil companies with
refineries in India to sell it a majority of the equity.
The US companies are glad to do so because Indian price
regulations were used to make their refining operations
unprofitable. EXXON has already sold 75% of its Bombay
refinery to the government, and Caltex is currently
negotiating for a similar sale. New Delhi has allowed
oil companies to contribute technology in return for
minor equity in public sector refineries -- Phillips
Petroleum owns 25% of the Cochin refinery, and American
Oil owns 13% of the Madras refinery. There are no
major investment disputes with India.
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 Non-oil raw materials j
2,000
Total Imports
(c.i.f.)
5,400
Exports*
Million US $
Tea
Iron Ore
Cotton
Textiles
Leather
Manufactures
Jute
Manufactures
Perc
t
186
170
301
en
of world exports
25
235
292
Pe
5
NA
rcent of Exports to:
100
NA
NA
United States
100
100
100
100
W
t
4
_-
16
es
ern Europe
39
1
5
42
Japan
Others
negl.
56
78
28
7
52
8
4
5
US Imports as a percent
of US Consumption
21
48
35
50
FOREIGN TRADEIndiaPROFILE, 1974
Million US $
Total Exports 4,100
Of which:
Country's share of US
imports
Total
Percent from U.S. 20
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Major Products Imported from US*
Other Transport
Wheat Cereals Eaui nmanf- Organic
56 64
*For year ending 31 March 1974.
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India
BALANCE OF PAYMENTS
Exports
Imports
Trade Balance
Services and Private
Transfers (Net)
(Millions US $)
Fiscal Years*
1972 1973est 1974est. 1975pro;.
2,520 3,187 4,100 4,300
2,643 -3,952 -5,400 , -5,800
-122 -765 -1,300 -1,500
-287 -340 -370 -400
CURRENT ACCOUNT BALANCE -409 -1,105 -1,670 -1,900
Economic Assistance (Net)** 503 866 1,875 1,790
Private Capital (Net) - 18 - 20 - 20 - 20
CAPITAL ACCOUNT FLOWS 485 846 1,855 1,770
Net errors and omissions - 42 365 -223 - 20
and allocation of SDRs
34 106 - 38 -150
RESERVE LEVEL 1,311 1,417 1,379 1,229
(End of Year)
*FY 1975 = 1 April 1975 - 31 March 1976.
**Includes IMF transactions.
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INDONESIA
A. REGIONAL POLITICAL RELATIONSHIPS
Indonesian leaders believe that their country is
destined to play an important leadership role in South-
east Asia. Jakarta has been a major driving force within
the Association of Southeast Asian Nations (ASEAN) since
its founding in 1967. Indonesian diplomats have pushed
to expand the association's discussions beyond its
original limited goals of economic and educational co-
operation to include political and defense problems.
Since the fall of Saigon, Jakarta has emphasized the need
for greater intelligence and military cooperation among
the ASEAN states.
B. ROLE IN LDC MOVEMENT
Indonesia is a charter member of the nonaligned move-
ment, but in recent years the Suharto government has been
criticized by some radical third world states for its
avowedly anti-Communist attitudes. This has to some
extent blunted Indonesia's effectiveness as a leader of
the moderate group within the Nonaligned Conference.
President Suharto is now working to refurbish Indonesia's
third world credentials through meetings with other
nonaligned leaders.
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OIL STRATEGY
Indonesia is a member of OPEC and has supported
the Suharto government will probably maintain
price increases. Because the country is poor and has a
large population, its oil strategy has been to pump as
much oil f'-?r as much money as fast as possible. Jakarta
opposes using oil as a political weapon and did not
participate in the October 1973 embargo even though it
is mainly a Muslim country. Jakarta is not financially
able to aid other LDCs although it has tried to help its
ASEAN colleagues meet short-term energy shortages.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
Indonesian leaders will be careful about entering any
special relationships with the United States that might
prejudice their country's independent image.
E. STAYING POWER OF GOVERNMENT
power over the next five years, but that festering social
and economic problems combined with increased government
suppression will lead to political instability over the
longer term. Suharto's staying power depends on continued
military unity; some fissures within the military have
already appeared and may get worse over time. Many
important segments of the population are politically dis-
affected but thus far they have been unable to find unified
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F. ECONOMIC DEVELOPMENT STRATEGY
Indonesia has three major long-term economic goals:
controlling inflation, reducing income inequality, and
providing for development needs. Although Jakarta has
not yet decided how to allocate its newfound oil. wealth
to serve these objectives, some steps have been taken.
To control inflation -- a serious problem in 1973-7" for
the first time since 1968 -- restrictive monetary
policies have been undertaken. Major investment projects
are being drawn up that are labor-intensive and meet
developmental needs in airiculture, transportation, and
export-oriented industries, Government planners,
although they have developed labor intensive projects,
favor capital-intensive, heavy industrial projects
where the benefits eventually trickle down to the bulk of
the population. Thus, the majority of domestic investment
will likely continue to flow into the latter types of
projects rather than into ones that employ large
numbers of rur,:. peasants.
G. IN?EREST !N INTERNATIONAL MARKETING ARRANGEMENTS
Indonesia belongs to the following international
commodity organizations: International Tin Committee,
Association of Natural Rubber Producers, and OPEC.
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Suharto government has also agreed to join with
Malaysia and Thailand in establishing a buffer stock
and price rationalization scheme for natural rubber.
H. BALANCE OF PAYMENTS TRENDS
Indonesia has run current account deficits even
with the recent surge in export revenues. These
deficits have been financed by foreign aid from the
Inter-Governmental Group for Indonesia (IGGI) (the
US is a member) and by private capital. Because of the
increased oil prices, Indonesia is now able to finance
its current account deficits, mainly through private
capital inflows.
1. US INVESTMEMT POSITION
US private investment in Indonesia is about $2
billion of which over 90% is in extractive industries
(oil and mining). Of the other 10%, more than half
is in manufacturing.
There are no major outstanding disputes involving
US private investments in Indonesia. Last year, however,
President Suharto announced a new program to accelerate
indigenous control over the economy. It includes raising
Indonesian ownership in joint ventures to 51% from the
current 15%-25%, increasing indigenous participation in
all other business forms, and broadening local participation.
~.~~
 FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports
Of which: 7,425
Oil 5,210
Non-oil raw materials -1,780
Total Imports (c.i.f.) 3,840
Exports
Million US $
Percent
f
Timber Rubber
5,210 725
Ve_qetable oils
o
world exports
480
175
Percent
f
4 NA
155
o
Exports to:
26
13
100 100
4
U
i
100
100
100
n
ted States
W
25
estern Europe
25
NA
Japan
negl. 3
18
NA
NA
Others
64 80
3
NA
NA
11 17
NA
US I
'
54
NA
NA
mports
as a percent
of US Consumption
Country's share of US
imports
45
Major Products Im orted from US
Percent from U.S.
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INDONESIA
BALANCE OF PAYMENTS
(Millions US $)
1972
1973
1974
1975
Exports
1760
2950
7400
7700
Imports-
-1450
-2660
-3800
5000
Trade Balance
310
290
3600
2700
Services and Private
Transfers (Net)
-720
-1100
-3300
-3700
CURRENT ACCOUNT BALANCE
-410
-810
300
-1000
Economic Assistance (Net)
339
550
635
335
Private Capital (Net)
458
493
-252
1070
CAPITAL ACCOUNT FLOWS
797
1043
383
1405
Net errors and omissions
and allocation of SDRs
CHANGE IN RESERVES
387
233
683
405
RESERVE LEVEL
(End of Year)
574
807
1490
1895
a. Estimated.
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MALAYSIA
A. REGIONAL POLITICAL RELATIONSHIPS
Malaysia is probably the most committed member
of the Association of Southeast Asian Nations (ASEAN).
Although it believes ASEAN should avoid any stance that
the region's Communist nations might consider provocative,
it sees a strong regional organization as a bulwark
against further Communist advances in the wake of
Vietnam.
B. ROLE IN LDC MOVEMENT
Although Malaysia identifies itself with the non-
aligned movement, it is among the more moderate members.
It has on at least one occasion walked out of a non-
aligned conference to protest what it considered
extremist policies. Malaysia does not aspire to a
leadership role in the nonaligned world.
C. OIL STRATEGY
This year, Malaysia is expected to become a small
net exporter of petroleum. Crude production reached
80,000 b/d in 1974, while domestic consumption was 90,000
b/d. Malaysia's 1975 production will likely reach nearly
100,000 b/d, and we expect Malaysia to be exporting
300,000 b/d in 1980.
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D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
Although Malaysia is well disposed toward the United
States, its commitment to a nonaligned policy rules out any
close relationship.
E. STAYING POWER OF GOVERNMENT
There is no political threat to the Razak govern-
ment. It has effectively eliminated a political opposi-
tion by absorbing all meaningful opposition parties into
a nine-party National Front. The Communist insurgency
does not threaten Prime Minister Razak politically.
F. ECONOMIC DEVELOPMENT STRATEGY
Malaysia's long-term economic goals focus on con-
tinued growth through rapid expansion and diversifica-
tion of exports. The encouragement of foreign investment.
in a frameworks of unencumbered free enterprise has been
the linchpin of Malaysia's remarkable economic success
over the past decade. A growing sentiment within the
government to play a larger role in the control and
exploitation of natural resources, however, is under-
mining this favorable investment climate. This is most
evident in the case of oil, where the newly formed
National Oil Company is trying to exert tighter control
over the foreign oil companies.
G. INTEREST IN INTEF.AATIONAL MARKETING ARRANGEMENTS
With several major commodity exports -- natural
rubber, tin, and palm oil -- Malaysia is seriously
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concerned with making suitable marketing arrangements
that would stabilize raw material prices. Malaysia's
moderate role in the International Tin Council (ITC)
probably typifies official thinking about the type of
marketing arrangements that should be made, Recently,
Malaysia has been attempting to initiate an inter-
national buffer stock scheme for nat;-ral rubber. The
arrangement sought would be fashioned along the
lines of the ITC in which floor and ceiling prices would
be set and both consumers and producers would participate.
H. BALANCE OF PAYMENTS TRENDS
Malaysia has a very healthy international payments
position. Despite drastic fluctuations in prices for
raw materials, the country has rarely experienced a
trade deficit and has retained a remarkably strong and
stable currency. Altr :,ugh net services and transfer payments
have traditionally been in deficit, mainly as a result
of freight charges and profit repatriation, they are
usually outweighed by trade surpluses. Current account
deficits -- when they have occurred -- have easily been
more than offset by capital inflows that include private
foreign investment, and in recent years, official
borrowing. International reserves have continued to
increase in line with import growth. In 1975, falling
exports will probably cause a large current account
deficit, but it does not appear that reserve levels will
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have to be drawn down much, if at all, because of
capital inflows.
1. US INVESTMENT POSITION
Most recent estimates place US investment in
Malaysia at about $500 million. The United States ranks
third, following the United Kingdom and Singapore, among
foreign investors in Malaysia. The largest share of US
investment is in the oil industry, although in recent years
US investment has increased most rapidly in the electronics
industries. If major US oil companies continue their ex-
ploration and development programs, the extent of US in-
vestment, can be expected to double within a relatively short
period. There are no major investment disputes.
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Malaysia
FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports 4,530
Of which:
Non-oil raw materials 4,230
Total Imports (c.i.f.) 4,375
Exports
Rubber Tin Timber
Vegetable Oil
Oil
Million US $
P
1,280 670 650
480
300
ercent of world exports
Percent of Exports to:
48 43 NA
11
regl.
United States
11 30 2
12
7
Western Europe
Japan
25 30 21
30
-
Others
4 23 42
5
31
60 17 35
53
62
US Imports as a percent
of US Consumption
100 83 NA
8
36
Country's share of US
imports
NA
30
negl.
Major Products Imported from US
Machinery and
Total Transport Equipment
t_rcent from U.S. 9
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Malaysia
BALANCE OF PAYMENTS
(Millions us $)
E
1972
1973
1974est. 1975
xports
1,700
2,970
4,530
NA
Imports
-1,570
-2,285
- 3, 920
NA
Trade Balance
130
685
610
NA
Services and Private
Transfers (Net)
-337
-543
-668
NA
CURRENT ACCOUNT BALANCE
-207
142
- 58
NA
Economic Assistance (Net)
126
23
1
NA
Private Capital (Net)
137
131
292
NA
CAPITAL ACCOUNT FLOWS
263
154
293
NA
Net errors and omissions
and allocation of SDRs
CHANGE IN RESERVES
58
114
75
371
-120
115
NA
NA
RESERVE LEVEL
(End of Year)
1,034
1,405
1,520
NA
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PAK I STAN
A. REGIONAL POLITICAL RELATIONSHIPS
Regionally, Pakistan's closest economic, political,
and military ties are with China, Iran, and the Arab
states. Moreover, Pakistan is formally allied withlran,
Turkey, the United States, and the United Kingdcu in the Central Treaty
Organizatior (CENTO) and has become increasingly active
in that organization since the early 1970s. It is also
a member of Regional Cooperation for Deve'Lopment (RCD),
a pact under which Pakistan, Iran, and Turkey cooperate
on economic projects.
Pakistan seeks to achieve two basic objectives
through its alliances. First, it seeks commitments
from its allies to support its security and territorial
integrity against what it preceives as ongoing threats
from India and Afghanistan; Pakistan claims these two
neighbors are working together against it with some
support from the Soviet Union. Second, Pakistan seeks
material assistance for the development of its economy
and the equipping of its armed forces. Iranian and
Arab aid commitments to Pakistan have increased sharply
in recent years. Pakistan, fo its part, provides the
Arabs with military advisers and technicians. Pakistan
has long received military and economic assistance from
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China and, since 1965, mostly economic aid from the United States.
B. ROLE IN LDC MOVEMENT
In recent years, Pakistan has enjoyed considerable
success in gaining acceptance from the nonaligned nations
as one of them. To a great extent, this success
has been the result of Prime Minister Bhutto's cultiva-
tion of closer ties with Muslim Middle East nations.
Pakistan is a member of the Group of 77 but is not yet
a member of the Nonaligned Conference.
Pakistan generally tries to take relatively moderate
stances on issues that concern the nonaligned movement,
to avoid antagonizing the US and other Western countries.
Nevertheless, it has usually sided with the Chinese or
the Arabs when their positions conflicted with Washington's--
for instance, on Indochinese, Korean, or energy issues.
Prime Minister Bhutto may well aspire to a leading
role in the nonaligned movement. He probably believes
that Pakistan, as one of the most populous Islamic nations,
and he
as one of the Islamic world's more sophis-
ticated leaders. deserve to exert strong influence among
the nonaligned nations in general and the Islamic countries
in particular. Were he to assume such a leadership role,
Bhutto would probably be a force for relative moderation.
His actions would be influenced by his own interest in
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'enhancing his personal prestige and his country's
interest in maintaining strong ties with China, the
Islamic cc ntries, and the United States.
C. OIL STRATEGY
Pakistan's prospects for achieving energy self-
sufficiency during the 1970s are remote. The country's
major energy source is an abundant supply of natural
gas -- some 10 million cubic feet of proved reserves
with more being found. Coal reserves are also extensive
but of low quality. Development of both coal and gas
reserves have been hampered by limited development funds
and by government curbs on foreign investment. Oil pro-
duction is only 10,000 b/d, compared with imports of
60,000 b/d. The cost of petroleum imports, now running
at S35O million annually, has become a major burden on
the economy. Exploration has been speeded up in recent
years, with four US firms doing most of the researching.
Although no important new discoveries have been made,
government officials remain optimistic that domestic
production will ease the oil import burden by the 1980s.
Pakistan has not been critical of OPEC, because it has
been a major recipient of OPEC aid. Since January 19,74,
OPEC aid agreements with Pakistan have exceeded $1 billion.
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D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
At present there are no major inhibitions on
Pakistan's willingness to contemplate a special relation-
ship with the United States. Since the 1960s, when US-Pakistan
relations were poor, several factors have facilitated
their improvement:
-- The change in US relations with
China;
The sympathy extended to Pakistan by
the United States in 1971, when most coun-
tries sided with India and Bangladesh.
Generous US economic assistance.
Pakistan depends heavily on US
commodities, especially wheat); and
Pakistan's lack of satisfactory
alternatives to friendship with the
United states, given the Soviet Union's pre-
ference for -- and extensive military
assistance to -- India.
Pakistan would probably welcome even closer ties with
the Un-J.ted States. Its objectives in establishing special relations
would be to obtain military equipment, increased US
economic aid, and the strongest possible US commitment
to help Pakistan in the event of aggression by its
unfriendly neighbors. The main developments that could
inhibit US relations with Pakistan would be a US decision
to give preference to India over Pakistan, or a serious
deterioration in US relations with allies of Pakistan
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P
E. STAYING POWER OF GOVERNMENT
There are no signs that Prime Minister Bhutto',
government is likely to face any major threats to its
survival in the near future. Bhutto has been successful
in outmaneuvering and suppressing his political opponents,
in holding down autonomy-seeking elements in the outlying
provinces, in retaining the loyalty of the armed forces,
and in keeping Pakistan's perennial economic problems
from reaching proportions that would generate widespread
unrest.
F. ECONOMIC DEVELOPMENT STRATEGY
In this primarily agricultural country, the main thrust
of economic development has been toward increasing grain
production. Wheat is the country's staple food, and cotton,
cotton textiles, and rice are the major exports. Increased
production of these commodities has been a major
economic goal, with development of natural gas and oil
reserves a close second. Pakistan has a good chance to
become self-sufficient in foodgrains and fertilizer
(based on natural gas) by the end of the decade.
G. INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
Pakistan favors international negotiations on
individual commodities to ensure "fair and renumerative"
prices and reliable supplies for consumers. Islamabad
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seeks the adoption of a program phased over the next
five to ten years which would remove tariff and non-
tariff barriers that affect imports of developing
countries. Pa:. ;:5.nula,r emphasis would be paid to
eliminating tariffs and quotas which discriminate
against LDCs as well as those on the manufactured and semi-
manufactured exports of these countries.
H. BALANCE OF PAY,.ENTS TRENDS
The necessity to import, la..-..a quantities of wheat
and fertilizer has caused serious balance-of-~-payments
problems for Pakistan. While prices for these products
were increasing, the country's most important exports,
cotton and textiles, rose less rapidly under pressure of
reduced demand. Aid from middle East oil producers and the
consortium of developed countries as well as a 1974 debt re-
scheduling, helped Pakistan through its difficulties.
However, the balance-of-payments situation is likely to
remain tight for the next several years.
1. US INVESTMENT POSITION
About 40% of the $70 million US investment in
Pakistan is in fertilizer plants. Hercules and EXXON
own urea plants with a combined capacity of 600,000 tons,
75% of the country's capacity for nitrogenous fertilizer.
EXXON has a 75% interest EXXON-Pakistan Fertilizer Com-
pany: Hercules has 40% in partnership with Davwood
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Industries of Pakistan, Davwood owns 40%, and ciovern-
ment and private investors, the remaining 20%.
There are no major investment disputes, although Hercules
has had problems working with Davwood. Petroleum accounts
for 26% of US investment. EXXON also has a 17? share of
the 50,000 b/d Karachi petroleum refinery and owns 270
filling stations and a depot marketing operation.
Texas-Gulf Inc., Amoco, Marathom International, and Western
Offshore Drilling are actively exploring for oil both
on and offshore.
Government policy encourages foreign investment
through tax incentives. Low wages, also encourage
investment. However, foreign investors must secure govern-
ment'approval for virtually all aspects of their
operations -- pricing, export and import authorization,
marketing facilities, and sometimes profit margin.
All these involve frequent _nd lengthy negotiations
with the government.
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Pakistan
BALANCE OF PAYMENTS
(Millions US $)
1972
1973
1974
1975
Exports
626
939
1,014
1,230
Imports
-861
-1,044
-11951
-2,125
Trade Balance
-235
-105
-937
-895
Services and Private
Tr
- 55
- 13
ansfers (Net)
-102
-125
CURRENT ACCOUNT BALANCE
-290
-118
-1
E
,039
-1,020
conomic Assistance
P
(Net)*
302
309
955
900
rivate Capital (Not)
19
5
38
25
CAPITAL ACCOUNT FLOWS
247
Net errors and omissions
and
l
65
a
location of SDRs
1
CHANGE IN RESERVES
57
197
RESERVE LEVEL
(End of Yea-)
478
*Includes IMF Transactions
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Pakistan
FOREIGN TRADE PROFILE, 1974
lhiiliion US $
Total Exports 1,026
Of which:
Oil net importer
Non-oil raw materials 350
Total Imports (c.i.f.)
1,370
Exports
C tton
Cotton Yarn
Cotton Cloth
Rice
Million
Perc
t
US
f
$
38
188
143
212
en
o
world exports
4
NA
Percent
of
Exports to:
100
100
NA
100
United St
Wester
E
ates
1
negl
13
ne
l
n
urope
6
11
2 7-
g
Japan
20
4
1
O
4
--
thers
73
85
56
99
US Imports as a percent
of US Consumption
Country's share of US
jr mDrts
net exporter
8
NA
NA
NA
NA
NA
NA
Major Products Imported from US
%
Total Wheat Fertilizer
Percent from U.S. 25 75 37
* 1 July 1973 - 30 June 1974
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.r PHILIPPINES
A. REGIONAL POLITICAL RELATIONSHIPS
The Philippines is a member of the Association of
Southeast Asian Nations, but until recently has not '-)een
particularly active in association matters. President
Marcos' recent campaign to create an independent fore4.gn
policy and erase Manila's image as a US client has
resulted in his increased interest in regional affairs.
The Philippines is unlikely to be an influential member
in the association, because other members suspect Marcos
is more interested in using the forum for personal glory
than for seeking solutions to regional problems.
B. ROLE IN LDC MOVEMENT
The Philippines is not a member of the Nonaligned
Conference, but Marcos is currently seeking observer
status. Manila's participation in SEATO and its close
defense and base arrangements with the United States are
major obstacles to its acceptance in the nonaligned club.
C. OIL STRATEGY
The Philippines is poor in energy resources, and the
outlook for energy self-suff?cience in the next decade is dim.
Currently, most of the country's energy needs are met.from
imported petroleum.
In 1974, domestic oil consumption was about 200,000 b/d
at a foreign exchange cost of .nearly $700 million. This
year the oil bill will be on the order of $850 billion.
The government is belatedly pushing oil exploration, b,:it
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Manila has tried to gain assistance from Arab members
of the OPEC states, but with little success. Manila's
relations with the Arab oil producers are complicated
by Arab criticism of Philippine treatment of its Muslim
minority.
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Some talks, however, have been conducted for OPEC funding
of prospective development projects in Moslem areas of the
country. The Philippines' plans for eventual energy self-
sufficiency include nuclear pcwer as well as exploitation
of geothermal resources.
D. VIEWS ON SPECIAL RELATIONSHIPS WITH THE UNITED STATES
The Philippines has a long history of special rela-
tionships with the United States. President Marcos is
currently working to loosen many of these ties in order
to achieve a more balanced foreign policy.
E. STAYING POWER OF GOVERNMENT
President Marcos has a firm'hoid on political and
economic power in the Philippines. There are no opposition
groups of any significance; Communist dissidents currently
are weak. The most serious internal security problem is
-the Muslim rebellion in the south. Thus far,.the armed
forces have been able to contain the fighting to the Muslim
areas, which are relatively small and geographically isolated
from important economic or political centers.
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F. ECONOMIC DEVELOPMENT STRATEGY}
Under President Marcos, the Philippines' major long-
range economic goal is to sustain a high rate of economic
growth through increased agricultural. exports. Concomitant
goals are to increase rural living standards through land
reform and increased rural credit. Although a somewhat
expanded role of the public sector in economic develop-
ment is foreseen, the government continues to favor the
private sector and is encouraging foreign investment.
The political and social stability. attending martial law,
and the changes in commercial and investment law since
1972 have given the economy a significant boost and are
expected to support continued growth over the next few
years.
INTEREST IN INTERNATIONAL MARKETING ARRANGEMENTS
The Philippines has shown an ambivalent attitude
toward international marketing arrangements. As a victim
of OPEC oil prices, yet an exporter of raw materials, the
Philippines has proved to be a moderating influence at
international gatherings dealing with primary commodities.
Manila has categorically rejected membership-in the inter-
national copper organization (CIPEC) because the Philippines
has a favored position in the lucrative Japanese market.
However, the Philippines would'-probably look favorably on
bilateral long-term arrangements for other commodities,
particularly sugar. With the expiration of the US Sugar
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Act (under which the United States has been the sole
buyer) and with sugar prices soaring, the Philippines
held back exports earlier this year, hoping for higher
prices. As prices fell, the government was left holding
nearly 1 million tons with no large buyer and a new
crop soon to come in. Hence, Manila is eager to find a
suitable marketing arrangement for sugar, which in 1974
was the country's largest earner of foreign exchange.
H. BALANCE OF PAYMENT TRENDS
The Philippines' international payments position has
improved radically since the late 1960s and early 1970s,
when chronic trade deficits compounded problems of high
external debt and low foreign reserves. An extensive debt
rescheduling in 1972 was soon followed by the dramatic
increase in raw material prices. The export surge carried
through most of 1974, but a trippling of the oil import
bill led to a current account deficit once aga:.n --
$200 million. However, a significant increase in private
capital inflows, reflecting.a renewed interest by foreign
investors, more than offset the current account deficit
and resulted in a net increase of international reserves.
In 1975 the current account deficit will likely increase
as world prices for raw materials remain depressed. The
Philippines will probably have'to draw down reserves
somewhat, but not critically, and will still be in a
considerably better position than before 1972.
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1. US INVESTMENT POSITION
TUS investment in the Philippines is estimated to be
in excess of $1 billion and includes a wide range of manu-
facturing and extractive industries. The United States
accounts for about 7!% of the total foreign investment
in the Philippines.
Until July 1974, US investment in the Philippines
was accorded snecia.l consideration under the 1946 Laurel-
Langley Treaty. Among other things, the treaty guaranteed
that US investors would be be treated on a "parity"
with Filipinos in those types of investment involving
utilization of public lands and natural resources. The
lapse of Laurel-Langley last year, however, has had little
overall impact an US interests. Many US firms had been
engaged in non parity investment areas, and those that had
parity rights were able to negotiate equitable des-inves.t-
ment arrangements.
Curzent Philippines investmei,c laws are liberal and
are directed at attracting foreign capital.. Investment
in pioneer industries may be 100% foreign-owned, but must
be converted to local ownership within 30 years. Industries
deemed "overcrowded" can be denied foreign investment
approval. Foreign ownership in public utilities and
exploitation of natural resources is limited to 60%.
Retail'trade must be 100% Philippine-owned. There are no
major outstanding US-Philippines investment disputes.
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Philippines
FOREIGN TRADE PROFILE, 1974
Million US $
Total Exports -2 725
Of which:
Oil net importer
Non-oil raw materials 2,260
Total Imports (c.i.f.) 3,436
Exports
Sugar
Vegetable Oils
Copper .
Timber
Million us $
766
381
393
Percent of world exports
7
8
332
Pc =cent of Export' to:
100
100
5
100
oo
100
United States
85
65
8
10
Western Europe
1.7
4
- 9
Japan
10
6
86
59
Others
5
12
2
22
US Imports as a percent
of US Consumption
51
8
15
NA
Country's share of US
imports
25
56
4
NA
Percent from U.S.
Non-Electrical Electrical Motor Vehicles
Total Machinery Cereals Machinery and Parts
23 34 4~ 40 27
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Exports
Imports
Trade Balance
Services and Private
Transfers (Net)
CURRENT ACCOUNT BALANCE
Economic Assj,stance (Net)
Private Capital (Net)
CAPITAL ACCDUNT FLOWS
Net errors and omissions
D o f SDRs
and a l r"'?~'~
CHANGE IN RESERVES
(Millions US $)
1972
1973
1974
1975proj.
1,138
1,871
2,725
2,500
-1,260
1,597
-3,143
-3,200
-122
274
-418
-700
99
154
138
145
--..23
428
-280
-555
193
153
181
185
17
134
285
185
210
287
466
370
-159
-121
103
-165
28
594
289
-350
282
876
1,165
815
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SRI LANK/I
A. REGIONAL POLITICAL RELATIONSHIPS
Sri Lanka has sought to maintain balanced relations
with the other countries in South Asia and fancies itself
as a potential political broker betwcon India and Pakistan.
It thus has scrupuii)usly avoided criticizing both New
Delhi and Islamabad over contentious issues and renders
as much public support as possible for each in international
organizations.
Prime Minister Sirimavo Bandaranaike has worked hard
to reach agreements in recent years with New Delhi over
lingering problems,includinq repatriting Tamils--south
Indian immigrants in Sri Lanka, only some of whom are
Sri Lankan citizens; achieving Sri Lankan sovereignty over
An island lying equidistant betwebn the two :ountries; and
improving economic relations. Accords on these issues h.,ve
helped to allay Colombo's traditional fears of Indian
hegemonic intentions for South Asia that had been intensified
in 1971 by the Indo-Soviet Treaty, India's defeat of Pakistan
the sameyear, and the Indian nuclear explosion in mid-1974.
At :fte same time, Sri Lanka continues to enjoy cordial
relations with Islamabad. Colombo has pursued a low-key
approach designed to gain Pakistani support for Sri Lanka's
acpixatians to play an imports :t role in the nonaligned
ugvemezt. The Ceylonese also hope that good relations
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with Pakiritan will somehow yield benefits in the form of
economic aid and that Islamabad will' use its influence
with its oil-rich Muslim friends to secure economic
assistance and concessionary terms on petroleum.
as Algeria.
Sri Lanka in a member of the Colombo Plan.
B. ROLE IN LDC MOVEMENT
Sri Lanka has recently taken an increasingly active
role in the nonaligned movement in anticipation of the
Summit Conference scheduled. to meet in Colombo in August 1976.
As host country for the Conference, Sri Lanka becomes the
chairman of the 17-me;nber Coordination Bureau for the next
three years and thus, in a sense, assumes the role of
titular head of the nonaligned movement for that time period.
The actual le&dership of the nonaligned movememt, however,
is likely to remain in the hands of such activist states
Mrs. Bandaranaikc is a tough, pragmatic and skillful
negotiator who has been adept at balancing contending
forces both domestically and within South Asia. Shortly
after assuming power in 1970, she attempted to put Sri
Lanka in the forefront of the nonaligned movement by
proposing that the Indian Ocean become a "zone of peace."
While Sri Lanka has continued to press this issue before
tha United Nations in recent years, it has done so
increasingly in a pro forma manner; it is aware that all
major naval powers are opposed. Over the past two years,
Mrs. Bandaranaike has adoped the middle ground on most
international iss es anA _ 4et Q.,; *o .,, %...._._.,.,