Mr. Secretary,

The Government of the Federation of Malaya is submitting an urgent application for loans from the Government of the United States of America because of a financial crisis which threatens the continuation of its Development Plan. As you are aware my Government campaign against the Communists is fought on two fronts — the economic and the military. My Government's weapon against the Communists on the economic front is the Development Plan. It is because of this fact and the fact that Communist success in Malaya will have wide repercussions on the international plane that I have sought this interview, in the course of which I hope I shall be able to emphasise the political aspect of the request for the loan. Before doing so, I would like to thank you for granting me this interview, which I know takes a lot of your valuable time.

The Communists in Malaya had known for some time that their tactic of attempting to overthrow the Government by the force of arms had failed. They are now resorting to a new tactic; that of pinning down the Government to the present level of expenditure on the Emergency, which is running at the current rate of M$126 million annually, so that it cannot continue to implement its Development Plan. Thus far, my Government has succeeded in thwarting the Communists. Now, however, my Government is facing a financial crisis. Without the help of your Government, it looks as if the Communists are going to succeed after all with their new tactic. The Government of the United Kingdom has made it clear that it cannot contemplate giving any further help in addition to the valuable financial help it has already given, and that even where public loans are concerned, the Federation Government cannot expect to raise a loan in the London Market in the near future. With elections only a year ahead and if it becomes clear, as it certainly will, that the cost of fighting the Emergency is a major factor preventing the Government from carrying out its Development Plan, then there certainly will be pressure for recognition of the Communist Party, which is all what the Communists say they want, as a condition for giving up the fight.