Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

169. National Intelligence Estimate¹

NIE 65–56

Washington, August 7, 1956.

PROBABLE DEVELOPMENTS IN INDONESIA²

[Here follows a note concerning distribution of this paper.]

The Problem

To estimate probable developments in Indonesia over the next few years.

Conclusions

1. The prospects appear moderately favorable that Indonesia will continue to advance slowly in the direction of a modern democratic state over the next few years. Progress toward defining the permanent structure of the state, creating better educational opportunities, and eliminating illiteracy will probably be made. No dramatically adverse developments are likely, although such problems as reorganization of the armed forces, local armed resistance, and the West Irian issue will remain largely unresolved. The economic situation will continue unstable, but recurring difficulties will not affect the bulk of the population, which remains largely outside the sphere of the money economy. Although some progress may be made, the prospects for rapid economic development under a five year plan now being considered are not promising.

2. The Ali government will probably remain in office at least for the next year. The composition of a successor government will depend on the circumstances leading to the fall of the Ali government and on the position adopted by the Nahdatul Ulama (NU), a conservative Moslem party which has the third largest representation in parliament. A successor government would probably not have PKI (Communist Party) participation.

3. Indonesia will almost certainly continue to maintain what it regards as a balanced position between East and West, although it will probably expand its relations with the Bloc. It will accept economic assistance from both sides, while insisting that it be without strings. The removal of Dutch influence will continue to be the principal immediate objective of Indonesia’s foreign policy. Indonesia’s recent repudiation of its debt to the Netherlands³ will almost certainly be followed by continued agitation for Dutch withdrawal from West Irian.

4. The PKI remains potentially a threat to the continuation of a free, democratic Indonesia. The Communists can be expected to exploit the prestige they gained in the 1955 elections. Current Bloc policies, particularly as reflected by cultural and economic ties, will also gradually improve the position of the indigenous Communists. However, any attempt by the Communists to gain power quickly would cause an unfavorable reaction against them, a fact of which they seem to be aware.

[Here follow more detailed discussion of the existing political situation and anticipated developments and an appendix entitled “The Indonesian Economy.”

1. Source: Department of State, INR–NIE Files. Secret.

2. A note on the cover sheet reads:

   “Submitted by the Director of Central Intelligence. The following intelligence organizations participated in the preparation of this estimate: The Central Intelligence Agency and the intelligence organizations of the Departments of State, the Army, the Navy, the Air Force, and The Joint Staff.

   “Concurred in by the Intelligence Advisory Committee on 7 August 1956. Concurring were the Special Assistant, Intelligence, Department of State; the Assistant Chief of Staff, Intelligence, Department of the Army; the Director of Naval Intelligence; the Director of Intelligence, USAF; and the Deputy Director for Intelligence, The Joint Staff. The Atomic Energy Commission Representative to the IAC, and the Assistant Director, Federal Bureau of Investigation, abstained, the subject being outside of their jurisdiction.”

3. Announced on August 4.