obligational authority of $1.170 billion, which was a baseline $1 billion program with $170 million additional earmarked to provide for the special combat needs in Laos and Vietnam.

If you recall at that time the Secretary of Defense cautioned that the [security deletion] "may represent a conservative estimate, since it is based upon analysis of possible developments over which we do not have full control."

I think the events of the past year underscore the significance of the Secretary's statement. Due to the increased costs for Vietnam we had to make full use of the $300 million drawdown authority provided in section 510 of the authorizing legislation.

Mrs. BOLTON. The drawdown, what do you mean?

Admiral HEINZ. This authorizes the drawdown of service stocks up to a total of $300 million in any one year.

Mrs. BOLTON. Does it have replenishing?

Admiral HEINZ. It says this will be replaced by subsequent appropriations.

Mrs. BOLTON. Nothing else?

Admiral HEINZ. No. This drawdown together with an increase of $33.3 million over our original estimate of recoupments and reappropriations resulted in the revised figure of $1.591.3 billion for obligational authority in fiscal year 1966, as of January 1966, when this book was made up.

As a result of the recent legislation, the funding of the support for Vietnam and other free world military assistance forces in being were transferred to and merged with the accounts of the military departments.

The last column on page 5 shows our proposed fiscal year 1967 program, in which we are requesting new obligational authority of $917 million. We estimate $10 million in reappropriations and $100 million in recoupments for a total funding availability of $1,027 million.

Turning to pages 6 and 7, you will see the details of the country programs that we propose for fiscal year 1967. On these pages the total amounts for each country is broken down into the three categories of operating costs, investment costs, and supply operations.

You will note at the right on the bottom of page 7 we take into account the estimated $110 million of reappropriations and recoupments, the recoupments being savings we anticipate from prior year programs, and in this manner reduce our new obligational authority to $917 million.

You will note that operating costs are less than investment costs. We are making a determined effort to have the countries pick up a greater part of the burden of their operating costs, and the result is reflected in this table.

Pages 8, 9 and 10 show historical data of military assistance since its inception in 1950.

Pages 11 to 13 are concerned with excess stocks which the military assistance program can deliver to the countries for repair and rehabilitation costs only. However, the values shown here are the acquisition costs of the various items concerned since it is the only way we can present this excess program.

Turning to pages 14 and 15, we have a schedule of deliveries by fiscal years to the various countries concerned.

60-929-66-pt. 2- -2

Starting at page 17, we have the report required to the Congress which informs you of the changes in the current fiscal year program from that presented to you in last year's congressional document. These changes occur not only because of price changes but changes in requirements on the program throughout the year. The best example is the changes shown in the major increases on page 21 for Vietnam and Laos.

The next section on page 25 and going through page 27 shows details of our proposed training program. In connection with this, I would mention that we have recently completed a worldwide training conference and have placed a great deal of increased emphasis on training during the coming year. We are going to make a determined effort to single out potential future leaders for our training.

I now move forward to the country programs. This starts with the European region, which is summarized on pages 30 and 31. Military assistance is reaching the end of its job in Western Europe. Since the inception of the program in 1950, the number of countries receiving grant materiel aid has dropped from a total of 14 to the 4 shown in this year's program. The programs now for these four countries account for only 3.5 percent of our worldwide total. In 1950, some 75 percent of the program went to Europe. We had the major purpose of building up allied strength against the Communist threat.

The programs for 10 countries have already been phased out. This trend will continue as we expect to phase out Norway and Denmark in the very near future, leaving only Portugal and Spain.

The remaining pages of this section, commencing on page 40, are historical data of our phaseout programs.

While Western Europe is approaching military self-sufficiency, many countries in the next section, the Near East and south Asia, still require substantial assistance.

The summary is shown on pages 54 and 55. In this summary [security deletion]. We are requesting a total of $240 million of grant aid during 1967 for the [security deletion] countries in the area. This represents 23.4 percent of the anticipated total obligational authority of the program.

A major emphasis of our total military assistance effort is placed on developing programs which will encourage and elicit maximum self-help from the countries concerned. In regard to this self-help, I would mention that Greece is taking on more of the burden of supporting her own forces and increasing her maintenance and repair facilities. We no longer provide her with any commercial consumables.

Turkey is another country where self-help is producing results. [Security deletion.]

Turkey is also producing increasing amounts of ammunition and more types of ammunition. Another large country in the area, [security deletion] as it becomes economically more viable, [security deletion is increasing its purchases of military equipment through military sales and relying less on grant aid assistance.

In past years we have supported major military assistance programs for both India and Pakistan in consonance without military assistance objectives [security deletion.]

The sharp but brief border clashes in Kashmir and the Punjab last September caused us to suspend all deliveries to both countries on September 8, 1965. In mid-February we announced in the light of the excellent progress made by both countries in withdrawing their troops to positions held in August of 1965 that we would resume on a selected case-by-case basis the sale of nonlethal military equipment to both countries.

This is the status of our policy at the present time. [Security deletion.]

The other programs in the Near East and south Asia are minor and consist mainly of training. I would turn now to Africa which is summarized on pages 84 and 85. Here through the allocation of military assistance amounting to about 3 percent of our anticipated total obligational authority, we seek to promote three major objectives: the independence of African countries from Communist influence and control, the maintenance of regimes which are capable of maintaining internal stability as a precondition to orderly social and economic development, and the continued United States use of bases in Ethiopia and Libya.

Each of the 11-country programs proposed for Africa is designed to promote one or more of these three basic objectives. All are in consonance with the congressional restrictions on military aid. The total African program is $31.8 million, of which $22.2 million is for equipment, an amount which is well below the legislative ceiling of $25 million for defense articles.

You will note the program for Ethiopia is the largest in the area. It reflects both our effort to improve the internal security of that country and [security deletion]. While our other African programs are relatively small, the stakes are large and there is, of course, political instability prevailing through most of the continent which provides a wider range of opportunities for Chinese, Soviet, and other local Communist activities. We therefore join other free world nations in assisting key African countries to improve their stability in order that they may move more rapidly toward political maturity and economic development.

The next regional area is that for the Far East, which is summarized on pages 116 and 117. At the outset of the discussion in this

I would mention that it should be noted that document reflects the transfer of Vietnam to the military department budgets. Military assistance proposed for remaining recipient countries in the area. amounts to [security deletion] million, or [security deletion] percent of our anticipated obligational authority. Since Admiral Sharp will cover this region in detail, I propose therefore to spend no more time on these important programs in the Far East, and to proceed to the Latin American section which runs from pages 140 to 181, and which is summarized on pages 140 and 141.

In Latin America the specific objectives of military assistance are the development of Latin American forces capable of maintaining internal security against threats of violence and subversion whether Communist inspired or "home grown." We also encourage the armed forces to support and strengthen democratic institutions and to undertake civic action projects.

Finally, we hope to develop selected units which may have possible use in carrying out peacekeeping assignments under the aegis of the Organization of American States and/or the United Nations. [Security deletion.]

I think there is progress in this direction. The program we propose for Latin America is specifically designed to support the internal security and civic action efforts. It provides assistance to 19 countries, as I mentioned. It is in full compliance with the legislative provisions which apply to our effort in Latin America. I would mention the functional breakdown. Internal security takes 53.5 percent, civic action. 13.8 percent, maritime defense, 8 percent, general training 15.5 percent, and supply operations 9.2 percent. This breakout reflects the increased emphasis we are placing on training throughout Latin America. In connection with this I would point out that we are in a transition in our training programs from concentrating on military skills to those of broader scope which provide training in management at levels appropriate to the capabilities of particular groups of trainees.

This completes my rundown of the country programs.

Finally, we have the worldwide and regional programs which are summarized on page 183 and which continue through page 200. As shown on page 183, this section includes the U.S. share of NATO infrastructure in the amount estimated as necessary to meet our obligations to this international endeavor. The U.S. support of international military headquarters, administrative expenses, regional costs, and, finally, funds for the credit assistance required in connection with military stales to countries economically capable of purchasing equipment for their defense needs.

The summary of our NATO programs runs from page 184 through page 187. The second category in the worldwide area, "Program administration," has its details on page 188 through page 195. Here our request for funds shows some slight reduction from 1966 expenditures. This is shown at the bottom of page 188.

Regional costs are explained on page 197. You will note we carry here the India-Pakistan program as I mentioned previously.

The last pages of the book, 201 to 204, contain the details of our proposed credit sales program to which we have allocated $56.7 million in new obligational authority for fiscal year 1967. Mr. Kuss is scheduled to appear before you on this part of the program.

This concludes my brief presentation of the document before you. I hope that this introduction has given you an insight into the material we have prepared for you and will prove helpful in your consideration of the program this year. As you know, Admiral Sharp and the other commanders of the unified commands who will follow me in testifying before this committee have direct responsibility for U.S. security interests in their respective areas, and therefore are intimately concerned with the military assistance programs in those areas.

I am sure you will have many questions which they are uniquely qualified to answer. I will be followed by Admiral Sharp, the Commander in Chief, Pacific. Upon completion of his presentation, we shall both be ready to answer your questions.

Chairman MORGAN. Thank you, Admiral Heinz.

Admiral Sharp, do you want to proceed and then we will ask either one of you questions.

Admiral SHARP. I will proceed with my statement, if I may, sir.

STATEMENT OF ADMIRAL U. S. G. SHARP, U.S. NAVY, COMMANDER IN CHIEF, PACIFIC

Mr. Chairman and members of the committee, I appreciate the opportunity to appear again before this distinguished committee. Last year in discussing the PACOM military assistance program, my comments encompassed the strategic situation in the Far East, particularly in southeast Asia. My comments this year will follow the same pattern, with emphasis on military assistance programs as they relate to the strategic situation.

I will address my comments to three main aspects which, taken together, form the backdrop of the military assistance program. First, there is the Communist threat, second the strength of friendly and allied forces assisted by the United States, and third, the war in southeast Asia. I shall take up each of these subjects separately.

First, the threat. The aggressive militant threat of Communist power in Asia continues and that is our basic problem. The primary military threat is, of course, Communist China and their number one asset is their manpower-approximately 2,500,000 in their armed forces.

During the past year, China's threat has focused increasingly on Vietnam. The Chinese Communists are obviously testing the effectiveness of so-called wars of national liberation as an instrument for the achievement of Communist control over other nations. The war in southeast Asia will provide a critical test of the future success or failure of that concept. They must already be having some second thoughts about the ultimate success of these tactics. Further, I believe that the Chinese Communists probably now realize that they cannot force the United States to abandon the free countries of the Far East.

Meanwhile, the heaviest concentration of Chinese scarce resources has been allocated to the development of nuclear weapons. This has been done even though living standards, while slowly recovering from the debacle of the great leap forward, remains extremely low. Within the next few years it is possible that they will have a very limited medium range ballistic missile capability which will expand during the next decade.

This threat could be used in the Far East as a form of regional blackmail and to enhance Peiping's prestige. [Security deletion.]

As you well know, our forces in Vietnam have been rapidly increased this last year. Korea and Australia have also made significant contributions to free world military strength there. [Security deletion.]

While most of these increased forces are positioned with respect to the war in Vietnam, we still must support our allies around the whole perimeter of the west Pacific and maintain adequate reserves capable of rapid deployment when and where needed. [Security deletion.] South Korea, although under an armistice, still faces the threat of [security deletion] North Korean line divisions [security deletion] in position for rapid movement south. It can be assumed the Chinese Communists can substantially reinforce the North Koreans in a relatively short time with [security deletion]. We must maintain effec