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

177. Memorandum From the Under Secretary of State (Hoover) to the Director of the International Cooperation Administration (Hollister)¹

Washington, August 31, 1956.

SUBJECT

• Indonesian Request for U.S. Economic Assistance

I refer to my memorandum of August 2, 1956² and your reply of August 17, 1956³ on the subject of the Indonesian request for U.S. economic assistance.

I agree with you that it would be preferable that the Mission be authorized to discuss a “line of credit” of $25 million to be available over a period of more than one year with the understanding that no more than $15 million of this sum will be available for obligation in FY 1957. I would therefore appreciate it if you would establish $15 million as a potential requirement for Indonesia, Development Assistance, for FY 1957. I suggest that, when a decision is made to authorize our Ambassador to make the offer described above and the Ambassador communicates the offer, the $15 million should then be considered as a firm requirement, in addition to the $4 million Development Assistance already agreed upon.

As to the timing of negotiations, the factors listed in the last paragraph of your memorandum will of course be taken into consideration.⁴ As soon as we have determined that political circumstances warrant the initiation of substantive discussions with the Indonesians we shall so inform you.

Regarding the amount of Technical Cooperation which you are programming, I believe $7 million is acceptable. I am informed, however, that preliminary discussions with the Indonesian Government on this program have been based on an illustrative $8 million figure presented to the Congress. It may be desirable therefore that, if feasible, we inform the Indonesians of the $7 million total program level in the context of discussions of a larger development assistance program. This would in my opinion minimize the effect on the Indonesians of the cut below $8 million necessitated by Congressional action reducing the total Technical Assistance appropriation, and facilitate our Mission’s discussions on this matter.

Herbert Hoover, Jr.⁵

1. Source: Department of State, Central Files, 756D.5–MSP/8–1756. Secret.
2. See footnote 5, Document 166.
3. Hollister’s memorandum recommended that the U.S. Mission in Djakarta be authorized to discuss a “line of credit” of $25 million to be available over a period of more than 1 year, but that, because of other demands on U.S. aid funds, only $15 million should be made available in fiscal year 1957. It also stated that because of Congressional reductions in Technical Cooperation funds, the ICA was programming $7 million rather than $8 million in this category for Indonesia. (Department of State, Central Files, 756D.5–MSP/8–1756)

4. The last paragraph reads as follows:

   “As to the timing of further discussions with the Indonesians, we will be guided by your instructions. We note from recent cables that the Embassy is concerned by current Soviet activities. On the other hand, Indonesia seems to be supporting Egypt on the Suez Canal issue and, more recently, has officially abrogated its financial settlement with the Netherlands. Furthermore, I believe Sukarno is about to visit Moscow. I am not suggesting that any economic aid to Indonesia be conditioned on a reversal of Indonesian positions on these matters, but I do think that any such aid should not be timed to appear to be rewarding the Indonesians for their actions on them.”

5. Printed from a copy that bears this stamped signature.