I was returned to inactive status in 1946 and called back in 1950 again to work with the Mutual Defense Assistance Program.

I might say that is one of the penalties you pay for getting a specialty in the service, particularly a specialty that is as new and complex as the mutual security concept.

I have just returned from a trip to the Far East.

Mr. Chairman, perhaps the most useful thing I could do would be to summarize country by country, the impressions, the facts, and perhaps 2 or 3 suggested conclusions.

What I am talking about, of course, is a program which you people have largely written. You look to the Mutual Security Agency and the Defense Department to administer it.

I think it is fair to state as a conclusion preliminary to my remarks that in the Far East you see the program beginning to pay off. We see the beginning there of the working out of the concept of the Mutual Security Program.

I went first to Japan. The Japanese situation in a nutshell is about like this: We are not supplying under MDAP appropriations equipment to the Japanese. Up to now the equipment that has been made available to the Japanese National Police has been funded in the appropriations to the Army. Our only MDAP interest in Japan at this time is in the training category where we are now finalizing the arrangements to bring Japanese military students here to take the courses in our various service schools.

For your information the Japanese have an American training group there. They call it the Security Advisory Group.

(Discussion off the record.)

General OLMSTED. The discussions and negotiations leading up to the bilateral agreement which is required for eligibility under the Mutual Defense Assistance Program are progressing. That, of course, is a State Department responsibility. As soon as that bilateral is executed, then our advisory group will become a MAAG and the implementation of the program from that time on will become a normal MDAP operation comparable to that which we have in the other countries around the world.

The Japanese have a rather substantial unused industrial capacity. We have been procuring there several hundred million dollars worth of military equipment for the use of our United States forces in Korea and the ROK's as well.

We have also, just this year, initiated negotiations for offshore procurement of military end items using MDAP funds. Our 1953 program is envisaged at something in the neighborhood of 40 to 50 million dollars. Our people there advise us that the Japanese have a capacity unused to make spare parts and ammunition in which we are particularly interested which might run as much as 200 or 300 million dollars. If we can get our offshore procurement up to about that level, we will establish a balance for the Japanese, a balance of payment, imports and exports, that would probably eliminate the necessity of thinking about economic aid in that area.

In other words, it would provide the necessary dollar balances to make their economy viable. Now this is an impression only.

The Japanese are very much interested in strengthening of their economy. By comparison they are more interested in that than get

ting on with their rearmament program. We are telling them, at least from the military side, that our resources, of course, are not unlimited, that our desire, all things being comparable, like price and quality and time of delivery, that our desire would be to place these offshore procurement contracts with the people who are doing the most for themselves, and we are hopeful that perhaps that type of persuasion will be influential in the thinking of the Japanese to get them on faster with their own rearmament.

There is no thinking on our part of a Japanese military force beyond the needs for their own internal security. There has been a little bit of interest and activity on the Air and Navy side, but by comparison it is quite modest to the interests and progress that has been made on the Army side.

Now that, in a relatively few words, is a summary of my observations about the situation as it now is in Japan. If you would like to stop for questions, fine. If not, I will go on and discuss the situation. Mr. JUDD. What would the committee prefer?

My suggestion is that we let him cover the waterfront. Otherwise we will get so bogged down in Japan that we will not get to the other

areas.

Why do you not go ahead, General, and we will make notes of things to come back to?

General OLMSTED. In Korea the MDAP interest there is limited to the training as it is in Japan.

The supply of the equipment to the United Nations forces and the Republic of Korea forces comes from the moneys appropriated directly to our military services and not the Mutual Security appropriation.

We are doing a perfectly remarkable job in the training of these South Koreans. Eighteen months ago there was no responsible viewpoint in the Pentagon that you could make good soldiers out of these people and today there are twice as many ROK divisions in the line as there are American divisions. In addition to that they have an excellent training establishment where their return students from the United States, with the help of our advisers, have established little counterparts of our Fort Sill, our Fort Benning, our Fort Knox, our Fort Monmouth, and the great bulk of the training now is carried on by their own people, our American personnel simply being there as advisers and to offer guidance.

In the ROK divisions and in the ROK units we still have, and at their request, an American adviser down to the battalion level. But our whole training job there is being carried on with something in the neighborhood of 2,300 American officers and men.

Now, General Van Fleet told me there, and I think he has said since, he does have in smaller units now and in his training center, sufficient personnel, progressing through their basic and advanced training so that if he is given instruction to do so, or if his successor, General Taylor is, that they can substantially increase the number of ROK units and in a very short period of time.

There is another thing being employed in Korea which I think is worthy of their consideration not only there, but everywhere American forces are deployed around the world and that is what they call the KATOUSA plan, the Korean augmentation to the United States Army.

(Discussion off the record.)

General OLMSTED. Koreans are integrated right in alongside of the American soldiers at the squad level, and they are doing very well. They get some benefits by serving in the American Army and, in addition to that, they are very proud to have the privilege of wearing an American Army patch.

Mr. JUDD. Is that above the number of Korean divisions?
General OLMSTED. Yes, sir; that is in addition.

I visited every one of our unit commanders who told me that they could absorb a greater percent of their unit strength in KATOUSA's without adversely affecting the fighting quality of their units.

Now this is the reason why I say that is important. In that concept lies the possibility of having the framework of American leadership augmented with the strength of personnel from our partner countries, but avoiding the charge that we were employing mercenary soldiers. They become a part of our own fighting units.

I think the concept is one susceptible of wider application. (Discussion off the record.)

General OLMSTED. We, of course, are continuing our program of bringing selected Korean students to the United States. Almost without exception they are standing very high in their classes in our various schools. They are a very earnest lot.

I think this: We must accept the fact that the economy of the Republic of Korea cannot continue to carry this military burden without having to have some support, dollarwise, from the United States. The figure now would seem to be somewhere in the neighborhood of $200 million.

On the other hand, a Korean soldier costs them about $190 per year for pay and subsistence, whereas a United States GI costs us a little over $3,000 a year. The Koreans are paying that $190. There is a wide spread in the difference of cost. There is also a wide spread in the cost of the initial equipment of a Korean unit.

(Discussion off the record.)

Mr. PROUTY. Do the KATOUSA's serve under the same conditions as American troops except for pay?

General OLMSTED. Yes, the pay, and in the event a KATOUSA becomes a casualty, he ultimately winds up in the Korean medical chain of command rather than ours, although the first aid and clearing station level is standard American service.

After he is passed back to the base hospital, if he has to be, he goes to the Korean base hospital rather than to our own.

In Formosa, I was very much heartened with the progress that the Nationalists are making. I had served with them during the last war. I have seen them come from a very ineffective military organization through the process of training five divisions in India and then having them spearhead the operation in Burma in 1944. They were under the command then of Gen. Sun Li-Rond, who is the overall commander now. A very good general.

From the standards of their equipment, the manner in which they maintain it, the physical condition of their troops, they are quite an inspiring lot.

General Chase says he can advance them in terms of combat readiness just about as fast as our program or our directive permits. (Discussion off the record.)

General OLMSTED. Their (the Korean) training is largely being conducted by their own people, people who have been through our training schools here, under the MDAP, and have now gone back and are conducting the training in turn for their fellow countrymen. One very pleasing thing is that the Chinese are making excellent progress in bringing the native Taiwanese into their military units, as you know. The population of Formosa was about 6 million before these people came from the mainland. There were about 2 million of them who came over. In the beginning there was some resistance on the part of the native Taiwanese to this influx and there was some question about whether the government would be a good government. These problems seem to be well resolved. The government is a good government. Formosa, which was a food deficiency area under the Japs, has now bcome a food surplus area in spite of its 2 million people. They are now raising sugar, rice, pineapples, and other things for export which exceed their own requirements.

Part of that has been furnished through our MSA Program, the fertilizer and development of farming techniques. Part of this has been accomplished simply by the industry and the spirit of the Chinese farmer. Anyway, if our program was expanded to permit it, the native Taiwanese that they are bringing in each year could be substantially augmented. Certainly I would recommend that we consider that.

The Taiwanese are on a 2-year compulsory service basis. Of course, the mainlanders are in for the duration. There is no terminal date as far as their service is concerned.

Another very hopeful thing in that area is the attitude of the overseas Chinese.

Throughout southeast Asia live about 10 million overseas Chinese. They constitute in many important spots a very large percentage of the total population. Almost a fourth of the entire population of Thailand is Chinese, half of the population of Singapore, and half the population of Saigon. Several hundred thousand are in Manila, over 2 million in Hong Kong. These people have been through a cycle where 3 or 4 years ago they were rather receptive to the Communist government on the mainland. Both from the information they get, from the relatives back on the mainland, and from the things that they observe, they have now come to the conclusion that the hope for solving our total problem in Asia is to take the mainland of China away from communism, and that that must be spearheaded by the Chinese themselves. Otherwise, the defection from communism on the mainland would not be at the maximum possible level. And so, following a convention that they had in Taipeh in October, they have now done some talking among themselves. I had the opportunity of talking with their leaders in Manila, Saigon, and Bangkok. They would like to find a way in which they could put up money and men to support the Nationalist cause.

Taking a quote from Ben Franklin, if you want a fellow to be for you, you do not offer to do something for him, you let him do something for you.

The sure way to tie these overseas Chinese to the cause of Nationalist China and the free world is to make it possible for them to do these things that they are now trying to do.

Take the case of the Philippines, for example-they are willing to put up quite a lot of money there. They are rich. They are paying half of the total taxes of the Philippine Government. They would like to help, but the exchange limitation makes it impossible for them to get the money out of the Philippines and into Formosa.

One of the things I have recommended in discussions since my return is that we try to make that mechanism available to them, which we can do without cost to ourselves, whereby for example they could give us the pesos and we could use the pesos in our Philippine program, thereby saving us that many dollars, and freeing those dollars to permit us to augment our program on Formosa.

It would be a simple device and one that would be within our capability and without cost to us.

I think if we stimulate and assist this overseas Chinese effort-I have quite a lot of information and documents on it-they agreed in their convention on Formosa to raise a total of $100 million (United States), to contribute to the support of this effort. In the opinion of their leaders, that is not an unduly optimistic figure, but it is going to take some doing. It is going to take perhaps some mechanical help from us to help them accomplish it. It may take a little organization stimulus, too.

It is one of the many problems out there--and I am going to keep coming back to this-that makes you conclude that you must deal with that area on an area basis rather than on a country-by-country basis.

I have the feeling that our economic program in Taipeh was making a lot of sense, and also that there is now in being there some industrial capability. I visited four arsenals in the vicinity of Taipeh. They are only working at about 50 percent capacity. We are now in the process of placing some offshore procurement ammunition orders in those arsenals for ammunition that we need. It will tend to further stabilize and improve the Nationalist economy, and at the same time will get us ammunition that we want closer to the place of end use.

There are further opportunities for developing the offshore procurement business on the island and we are in the process of developing it. Indochina is a much more complex problem because there the French and French colonial forces have the command responsibility. The Vietnamese have the desire to develop their strength and increase their contribution to the common effort, but it is not moving as fast as we would like to see it move.

(Discussion off the record.)

General OLMSTED. They have sent a team of French and Vietnamese officers to Korea to take a look at the training methods up there. Maybe that will tend to increase their conviction and their enthusiasm that this thing can be done.

I did have the opportunity to have quite a long visit with Bao-Dai. (Discussion off the record.)

General OLMSTED. He is a very intelligent fellow and is quite alert to this problem.

The situation in the north in the Tonkin Delta has made no real progress in the past year. The situation in south Vietnam seems to be improving. There is no real problem in the state of Laos, and the modest problem that exists with the rebels in Cambodia is pretty well contained, so we are told.