It is fair to say that our bombing is a crutch to the Cambodian Army but as such has not halted the enemy advance.

The cost of such bombing approaches exceeding $41⁄2 million a day on the average and has been going on since February. These costs included gasoline and ammunition, of course. That would bring total costs to over $250 million.

While all of this is difficult enough we have the basic problem that the bombing is being done under a constitutional cloud which has not been diminished by official statements.

In this case none of the usual constitutional props exist for Presidential military action. That is, American troops are not present in the theater of operations. American lives and property are not in any serious or special danger. The Tonkin Gulf resolution which purported to authorize Presidential military action in Southeast Asia was repealed in 1971.

The SEATO agreement authorized consultation between member states. The remaining active governments in SEATO, Thailand and the Philippines, have not asked for our assistance in Cambodia. Cambodia is a protocol state, not a member as such of SEATO and has proclaimed its neutrality.

The truce agreement itself makes provision for the enforcement of the terms of the truce. These provisions require unanimous action even to take up problems for investigation-in my opinion truly a dead end at work.

There is in fact no document that we can point to which authorizes military action by the President to enforce the Truce agreement. We must find out if there are secret agreements with the enemy, or if the true agreement is not our whole understanding. We must learn the President's authority to carry out this bombing action. If there are in fact no strings which inhibit a President from acting in this situation, there may be no barriers to such action in the future. Congress may then have to act and act as swiftly as possible to end what is considered by many as an intolerable situation.

Now, gentlemen, you are welcomed to this subcommittee. Will you say who wishes to speak first.

STATEMENT OF HON. ARTHUR W. HUMMEL, JR., ACTING ASSISTANT SECRETARY FOR EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

Mr. HUMMEL. Mr. Chairman, I would like to speak first.

You have introduced a very large number of topics and a number of criticisms of the Khmer Government, some of which we, I think, would like to deal with.

Mr. Nix. Do you have a statement?

Mr. HUMMEL. Mr. Chairman, it was my understanding that you wished to have our statements inserted in the record and not necessarily read because of press of time.

Mr. Nix. That is correct, and without objection it is so ordered. Mr. HUMMEL. There is a statement from myself and a statement also by Mr. Nooter of AID.

[The written statements follow:]

STATEMENT OF HON. ARTHUR W. HUMMEL, JR., DEPUTY ASSISTANT SECRETARY FOR ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

Mr. Chairman and Members of this Committee: I am privileged to appear before this Committee to discuss Cambodia and the U.S. position with respect to the situation presently existing therein.

As you will recall, hostilities in Cambodia erupted in the spring of 1970 when the North Vietnamese/Viet Cong moved out of their sanctuaries within Cambodia along the South Vietnamese border and attacked to the west. At that time, the Khmer Government launched a world-wide appeal to all UN members for assistance in defending itself against foreign aggression. A number of countries, including the U.S., responded. Our primary interest at that time, which continues today, was based not only on assisting a small country to resist aggression but even more in the solution of the Vietnam war which, in turn, overflowed into neighboring states of Laos and Cambodia.

Since that time, the military situation has ebbed and flowed with neither side achieving a clear-cut decision. Economically, the situation has been a serious one but has been kept under quite successful control through international, including U.S., and Khmer efforts which Mr. Nooter here will discuss later. Politically, the country has altered its type of government from that of a kingdom to a republic. It has managed, despite the war, to hold presidential and National Assembly elections and has carried out its international obligations as a member of the UN and its subsidiary organizations.

As has been the case militarily, so has the political situation varied from time to time. Most recently there has been increasing pressure on the government of the Khmer Republic because of alleged corruption, increasing inflation and the narrowing of governmental authority and leadership into a few hands. As a result, the Khmer government has in the past two weeks set up a "High Political Council" of four of the most prominent Khmer leaders, including President Lon Nol, and is in the process of forming a new cabinet. These moves are intended to broaden the base of the government, to rekindle popular support and eventually provide unity for negotiations aimed at achieving peace in Cambodia. Concomitant with the entry into effect of the Vietnam ceasefire agreement, President Lon Nol announced a unilateral ceasefire. He did this deliberately in the hopes that it would produce a favorable response from the Khmer insurgents and the North Vietnamese/Viet Cong. At Lon Nol's request, we also ceased all combat air operations. Regrettably, after about a week, the enemy gave its response in renewed attacks which have raised the level of military activity to its highest pitch ever. The Khmer government, therefore, requested renewed U.S. air support which we have given. As a result of the increased enemy attacks, the Khmer have suffered heavy casualties, including civilian ones caused by indiscriminate rocketing. A recent example was the attack against the Phnom Penh suburb of Pochentong, reportedly by a North Vietnamese rocket team, which caused 19 dead and 62 wounded. The Khmer government has also attempted to establish contacts with local insurgent leaders, has publicly offered amnesty and alluded to further concessions once negotiations were started. Here again, the enemy response has been negative and has included threats of death against the Khmer leadership.

Many questions have been asked in recent weeks concerning the US role in this country and the need for our interest in it. As the Secretary of State and other government leaders have clearly pointed out, we believe strongly that the problems of Indochina as a whole cannot be resolved, unless peace is achieved in all three of its components. It is evident that the ceasefire agreement so long sought and at last achieved in Vietnam will be in jeopardy, if similar situations cannot be achieved in Laos and Cambodia. In the former, a ceasefire was reached a month after that in Vietnam. However, Cambodia remains at war and our continued assistance to it is designed to assist it to find a peace which will not only allow the Khmer to resolve its own problems but will protect the Vietnam ceasefire which offers an alternative to continued death and destruction for the South Vietnamese.

Much has been made of US bombing in Cambodia and particularly that its alleged indiscriminate character produces massive civilian casualties. I believe that Mr. Doolin from the Department of Defense can better address himself to these questions. However, I would point out that targets specifically do not include populated areas and that the diligent questioning of refugees in Phnom Penh and other cities nearby by Embassy officers has failed to turn up any evi

dence that US bombing has been solely or even significantly responsible for civilian casualties or refugees. This is not to say that there have been none, but I believe they have been minimal under the circumstances.

Mr. Chairman, I have tried to trace a brief perspective of the situation in Cambodia and to reply to a few of the doubts held by some regarding US interests and activities in Cambodia. Our objective in Cambodia is to enhance the prospects that the Cambodians will negotiate a ceasefire and a return to peace as a solution to that war, as a vital part of the entire Indochina problem and as a contribution to regional stability and progress in Southeast Asia. Our economic and military assistance is designed to this end.

STATEMENT OF HON. ROBERT H. NOOTER, ASSISTANT ADMINISTRATOR, Bureau for SUPPORTING ASSISTANCE, AGENCY FOR INTERNATIONAL DEVELOPMENT

Mr. Chairman and Members of this Committee: It is a privilege to appear before you to discuss our program in Cambodia.

First of all, I think it might be useful to give you a brief summary of how the economic aid program in Cambodia began in 1971.

In March of 1970, following the deposition of Sihanouk, the North Vietnamese opened hostilities against the Cambodian Government. Their enemy's military actions seriously affected the country's commerce and, in the summer of 1970, Cambodia asked the United States to resume economic assistance.

Prior to the war Cambodia was in relatively good economic shape. Export earnings, together with tourism, loans, and aid, were enough to pay for the country's imports of $100 to $120 million a year. Foreign exchange reserves were about $65 million. By 1971, however, as a consequence of the war, there was a precipitous drop in Cambodia's export earnings. The Government drew down its foreign exchange reserves in order to finance imports and used up its prewar stockpile of commodities.

With almost no exports, the country was unable to continue financing imports needed to sustain the economy. Agricultural production, particularly rice, fell sharply because of territorial losses and labor shortages resulting from the military buildup. The major rubber plantations curtailed or ceased operations. Industrial production also fell because of raw material shortages, manpower diversions, and war damage. Tourism virtually disappeared.

At the same time rapid expansion of the Cambodian armed forces, which before 1970 was only a 35,000-man largely ceremonial force, and the burden of armed conflict resulted in a drastic increase in Cambodian budget expenditures.

In formulating our initial economic aid program, we analyzed available data, including prewar import patterns, military force levels, and the impact of hostilities on agricultural and industrial production and transportation. Based on this analysis, we developed an aid framework geared primarily to supplying commodity imports needed to meet real resource needs rather than to combat inflation. We decided that the number of AID employees administering the program would be kept small; that we would not, at least for the present, initiate technical or capital assistance projects; that we would not have a separate AID mission in Phnom Penh; and that we would try to develop and maintain a procurement system that minimized the need for U.S. and Cambodian Government administrative controls.

We asked Congress to approve a $70 million Commodity Import Program in FY 1971. This program was initiated in March 1971. Following the advice of the International Monetary Fund the Cambodian Government acted courageously to implement a number of important self-help measures including adoption of a flexible exchange rate system, simplification of the import licensing mechanisms, increased import taxes, and higher interest rates. Parallel with these reforms, and in an effort to reduce the continuing drain on Cambodian reserves, we made a $20 million cash grant to the Cambodian Government in October 1971. We have since replenished the Commodity Import Program from time to time with additional resources.

Cambodia has also received, under a PL 480 sales program, substantial amounts of agricultural commodities, including cotton, wheat, and rice. PL 480 sales will be about $30 million in FY 1973.

As part of the stabilization effort, a multilateral Exchange Support Fund of $35 million was established in 1972 on the advice and with the assistance of the IMF. This Fund was established in recognition of the fact that not all of the

country's foreign exchange needs could be met through the tied procurement procedures of the Commodity Import Program. Donor contributions are made available on an untied basis at a level worked out by the IMF. The Fund has been an effective mechanism for enabling Cambodia to secure outside assistance in helping to meet part of the country's foreign exchange needs. Contributors include Japan, Australia, the United Kingdom, Thailand, New Zealand, and Malaysia, besides the United States and Cambodia itself.

Now, having said that, what has our aid program accomplished? First, U.S. economic aid to Cambodia has been, and still is, essential for the survival of the Cambodian economy in time of war. We finance food and other imports required to keep the economy going, some of which replace domestic production lost as a consequence of the war. Equally important, these imports are essential to forestall a serious deterioration in the living standard of the Cambodian people. Cambodia has never been a rich country, with prewar per capita income estimated at $111, and without U.S. assistance the lot of the average Cambodian would have been a sad one indeed.

As U.S. and other economic aid programs have gotten underway, imports have resumed and are about $115 million annually, a level which should sustain the economy. Foreign aid has financed only the import needs, not the domestic budget deficit.

In order to finance the budget for the expansion of its military forces, the Government has had to borrow from its Central Bank. The amount of such deficit financing which the Government has used for the military buildup has been greater than the stabilization impact of foreign aid. The country, as a consequence, has seen substantial monetary expansion and inflation. In 1971, monetary expansion was 50 percent, and close to that in 1972. Inflation bas been somewhat erratic, prices rising early in the war during 1970, then lagging behind the rate of monetary increase, but again recently price increases have accelerated.

The Khmer Government's role in economic policy has always been of cardinal importance. Provision of economic assistance presupposed the Khmer Government would take the measures that were necessary to maximize the usefulness of that assistance and, in addition, use its own foreign resources as well as seeking international support. Monetary and fiscal policies were to be the primary tools for controlling the allocation of resources and the rate of inflation. Given the situation it faced, the Cambodian Government has done well, particularly for a country which moved so swiftly from tranquillity to war. The Khmer Government has generally followed a realistic exchange rate policy, even though that has required continuous devaluation as the rate of inflation continued.

Recently, we have also begun a program of direct assistance to refugees and war victims. Until 1972, Cambodia was able to meet the most pressing needs of its refugees, most of whom found housing with other members of their families or friends, and the Khmer Government did not seek additional outside aid. Last year, however, the continuation of hostilities led to an increasing number of persons who were not able to find employment or otherwise provide for themselves. This was particularly true of the 10,000 persons in Government refugee camps, most of whom were women, children, and old people.

On August 10, 1972, the Cambodian Government first requested U.S. assistance to refugees. We dispatched a team to review the situation and to determine what forms of U.S. assistance would be the most helpful in keeping with U.S. policy and legislative restraints regarding personnel limitations. The team confirmed that there were real needs to be met, with the most urgent requirement for relatively small amounts of assistance to those refugee families living in camps. The team recommended that assistance be provided through the United Nations or through private voluntary organizations in order to keep direct U.S. involvement to a minimum.

Since that time, AID has given several grants to private organizations interested in and able to assist Cambodia's refugees. The first of these grants, for $50,000, was made in December 1972 to the International Red Cross (ICRC) to provide food, clothing, medical care, and other assistance. In April, we gave an additional $100,000 to the ICRC. More recently, we made grants for $500,000 each to the Catholic Relief Services (CRS) and to Cooperative for American Relief Everywhere (CARE). These grants will provide medical care, food, assistance in resettlement, and, when security conditions permit, goods and credit facilities to finance resumption of farm activities.

Regarding future aid requirements, the longer-term objective of U.S. policy is to achieve a negotiated cease-fire and a return to peace. While prospects for

peace are uncertain, it is the U.S. Government's hope and intention that a cease-fire will be achieved and that soon our assistance will be directed to a post-war situation. First priority will be relief for war-displaced persons. We will seek, primarily through additional grants to private and international organizations, to provide medical care, assistance in resettlement, food, credit facilities to finance resumption of farm operations, seeds and tools, and housing materials.

In terms of longer-range reconstruction and development requirements, the economic outlook for Cambodia is fair. With a settlement or a subsiding of hostilities, commerce would resume its normal pattern and domestic production and exports should approach prewar levels. Manpower would be released from military service and return to domestic agricultural and industrial pursuits. Cambodian agricultural exports should be reasonably competitive and commercially attractive, and tourism to Angkor Wat should again become an important source of foreign exchange.

While the need for aid to finance essential consumption imports should gradually decline, there will be a requirement for extensive aid in the private sector to assist industry and in the public sector to restore transportation and infrastructure. Some of this aid should be forthcoming from international and regional aid organizations. Indeed, the international framework for increased assistance is already in place in the form of the Exchange Support Fund. There are also bilateral aid programs in Cambodia. Japan, for instance, has given substantial amounts of rice and humanitarian relief, principally through its Red Cross. Other countries, the UN Development Program, the Mekong Committee, and the Asian Development Bank are also helping Cambodia with technical assistance or loans.

It is our expectation that these existing multilateral aid arrangements can be expanded to assist in Cambodia's longer-range development. Other countries have indicated their desire to provide additional assistance, particularly in humanitarian and reconstruction aid. The U.S. should also stand prepared to provide assistance which will help Cambodia move toward economic self-sufficiency when peace is restored there.

Attachments.

1. AID and PL 480 obligations for Cambodia, by fiscal year. 2. Contributions to 1973 Exchange Support Fund.