Reference Our letter No. 105 of February 2, 1954.?

You have, no doubt, wondered what progress was being made in the preparation of a suitably revised memorandum embodying the Nepalese request for road maintenance equipment from Canada under the Colombo Plan. Such a memorandum was, in fact, submitted to us under cover of a letter of March 4. The reason it was not sent forward to you is that it did not appear to us to be the kind of document on which Canadian officials could usefully base a recommendation to Ministers. I am attaching four copies of the relevant memorandum now merely as a background for recent developments connected with the Nepalese request.

2. You will agree, I think, that although the revised submission by the Government of Nepal conforms broadly to the outline which we drew up for the convenience of the Nepalese authorities, the presentation of the request still leaves a good deal to be desired. It also contains a number of references to possible Canadian aid in fields other than road maintenance and these will, of course, eventually have to be deleted. All this is, however, merely a matter of presentation and does not affect the substance of the question which is whether Canadian assistance to Nepal of the nature and scope envisaged is a sound proposition at the present stage of Nepal's economic development.

3. It seems fairly evident from the Nepalese submission that Nepal has neither the technical personnel nor the technical facilities to undertake a road maintenance programme of its own. We have no evidence that there is a sufficient number of trained people in the country competent to operate whatever equipment we might decide to make available to Nepal. Nor do we have any guarantee that such equipment would be adequately maintained. In the circumstances, I think there would be little purpose in asking the Nepalese Government for formal guarantees which they might be all too willing to give but which we know they could not with the best will in the world implement.

4. We have now written again to the Nepalese Embassy for certain clarifications which should help us to make up our mind as to where we go from here. These clarifications relate to the arrangements which are now in force for the maintenance of the road linking India with Nepal and subsidiary roads in the valley of Kathmandu. It is our assumption that such maintenance, to the extent that it is being done at all, is in the hands of Indian engineers who, as you know, constructed the Thankot-Bainse section of the main Indo-Nepalese road link. If our assumption is correct, it is obviously in our interest to assign responsibility for the maintenance of the Canadian equipment to these engineers and to discuss with them in detail the list of equipment submitted to us by the Nepalese to determine whether this is, in fact, the equipment best calculated to meet the needs of the Nepalese road maintenance programme.

5. I feel that, depending on the nature of the clarifications we receive from the Nepalese in response to our latest enquiry, the alternatives open to us are:

(a) that we make equipment available to Nepal on the formal understanding that Indian road engineers are given responsibility for road maintenance in Nepal and that we confirm this understanding in a tripartite exchange between Canada, Nepal and India;

(b) that we make this equipment available as part of a broader programme which would comprise the assignment to Nepal of two or three Canadian engineers qualified to operate the Nepalese Government's road maintenance programme at the outset and to train Nepalese engineers to take over after the initial period.

6. Either alternative is, I suppose, open to objection on political grounds. If we decided to adopt the first alternative, the Nepalese might resent the fact that we required the guarantee of a third country as a condition for our assistance to them. If the experience of the Americans in Nepal is any guide, the second alternative might not commend itself to the Indian Government although I imagine that, in practice, they would perhaps welcome a situation where the Americans no longer had a monopoly of "foreign" aid to Nepal.

7. I understand that the Americans have in recent months been careful to consult informally with the Indians about any request for economic or technical aid which was being submitted to them by the Nepalese Government. They have done so in recognition of India's special position in Nepal. In our own case there are, of course, additional reasons why it is useful for us to co-ordinate the provision of road maintenance equipment with the programme of road survey and construction in Nepal with which the Indians are associated on a continuing basis. Accordingly, when I called on Sir Raghavan Pillai on April 23 in another context, I took the opportunity of acquainting him with the broad terms of the Nepalese request to us. Sir Raghavan was just on the point of leaving Delhi to attend the Colombo Conference but asked me to raise this matter again with him on his return from Ceylon. It was his view that both Canada and India stood to gain from a close integration of the efforts which the two countries were making to aid in the economic development of Nepal.

8. It occurs to me that, without prejudice to our final decision on the Nepalese request, it might be useful at this stage if you were to investigate which of the items listed in the Nepalese request are available from Canadian production. The answer to this question might presumably affect our subsequent discussions with the Nepalese. We, on our part, shall continue to explore a basis on which it might be possible for us to provide to the Nepalese Government the equipment which they have requested from us. I assume that we would not wish to turn down the Nepalese request for aid under the Colombo Plan unless the conditions for extending such aid could, in fact, be shown to be clearly unsuitable. ⁶³

ESCOTT REID