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United States Department of State / Foreign relations of the United States, 1949. The Far East and Australasia (in two parts)

Korea,   pp. 940-1114 PDF (68.3 MB)

Page 1114

Radical measures must be taken to eliminate the system of "voluntary
,contributions" and to put a stop to unauthorized expenditures and
transfers of government funds. The elimination of subsidies in the
prices of goods and services supplied by government enterprises must
be undertaken immediately unless those subsidies can be financed, as
appears quite unlikely, from taxes or other revenues. This will in turn
permit the cessation of unsound bank credit expansion, and the early
introduction Of orthodox bank credit policies. Likewise, the Korean
Government must arrange for realistic adjustments in the prices of
ECA imports to the maximum levels at which the available supplies
can be sold with corresponding adjustments in the counterpart fund
deposit rate. Gradual adjustment of these prices, as the experience
;of the past six months has shown, will never catch up with the in-
flation. These measures will require persistent courage and firmness
of purpose, but they should nevertheless demand the immediate atten-
tion of the Government.
  4. The Government of the Republic of Korea is obligated, under
  the terms of the Aid Agreement,' to help itself by taking such measures
as were contained in the despatch under reference. So far there has
been little evidence of such self help. Unless President Rhee and his
Government show the willingness and the ability to inaugurate
measures designed to stabilize the internal economy of Korea, the
United States Government will be -forced to re-examine the character
and extent of economic assistance which can be made available. The
United States Government therefore desires that the President make
regular reports to the Embassy of progress being made by the Korean
Government in this regard.
  The Economic Cooperation Administration concurs in this instruc-
tion and the Secretary of State requests that the Officer in Charge
periodically report to the Department all particulars with regard to
the progress made in initiating and carrying out such measures.
  Reference is to the United States-Korean Agreement respecting economic
cooperation, signed at Seoul on December 10, 1948, and entered into force
December 14, 1948; TIAS No. 1908, printed in 62 Stat. (pt. 3), 3780.

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