501.BC Indonesia/10–849: Telegram

The Chargé in the Netherlands (Steere) to the Secretary of State 1

top secret

907. Hicus 52. Following text secret memo basis my Hicus 532: “Following suggestions based on calculation that foreign debt Indonesia [Page 504] is 3.3 billion Netherlands guilders, divided approximately as follows:

900,000,000 consolidated debt,

400,000,000 foreign credits guaranteed by Netherlands,

2,000,000,000 floating and other debts to Netherlands, (total) 3,300,000,000; and that internal debt is approximately 3 billion Indonesian guilders.

It is recommended that:

Netherlands cancel ‘floating and other debts due Netherlands’ to extent of 2 billion Netherlands guilders.
Netherlands, as creditor on consolidated debt, and as guarantor on foreign credits, assume full contractual obligations for servicing debt of 1.3 billion guilders compromising these two items for period of four years from date of transfer of sovereignty.
Netherlands suspend applicability of ‘tin pledge’ for same period of four years.
Netherlands maintain lines of credit to Indonesia for minimum of four years, in amount of blank million guilders.
Netherlands provide Indonesia with such technical experts and advice as may be helpful in securing efficient and sound management of finances and economic Indonesia.

It is further recommended that:

Indonesia continue responsible for internal debt of 3 billion guilders.
Indonesia take advantage of readiness of Netherlands to provide technical experts and advice and enter into consultations with Netherlands in sense on which there has already been ‘meeting of minds’.
Indonesia consult with Netherlands, and possibly with experts from international bank or fund, with view to determining what decision should be taken by Indonesia in handling internal debt and preparing for assumption of management of economy of Indonesia from date of sovereignty transfer.
No decision be taken at this time as to how internal debt may be dealt with—as, for example, by consolidated loan or by monetary operation. It is suggested that any further monetary operation affecting value of currency would, if taken during period of RTC, upset conditions Indonesia and possible RTC negotiations. It would even be dangerous take such step prior ratification RTC agreement. Any necessary operation might even be more successful if undertaken by new government, on its own initiative, after transfer of sovereignty.
Indonesia undertake follow economic and monetary practices approved by international standards and endeavor achieve and maintain sound economic and monetary system, including balanced budget.
Indonesia consult with Netherlands with view ascertaining whether there may be made available to Indonesia, for application on reduction of its internal debt, sum of approximately 100 million Indonesian guilders on deposit in Java Bank, to credit of Netherlands bank and under joint control of Netherlands Government and ECA.
Indonesia benefit from revival of ECA aid, which is to be recommended on successful consummation of an RTC agreement.
Indonesia be prepared as early as possible, with assistance of Netherlands, to submit pertinent data to international organizations or foreign governments which might normally be looked to for advice or credits.” Signed Cochran.

  1. Repeated in telegram Gadel 48, October 11, 2 p. m., to New York (USUN).
  2. Infra.