856D.00–TA/2–751: Telegram

The Secretary of State to the Embassy in Indonesia


821. For Armstrong and O’Sullivan, Ref Embtel 896 Jan 8, Toeca 24 Jan 17, Toeca 49 Feb 3, Embtel 1032 Feb 3.1 Difficulty expected justifying Indo ECA program2 before Budget Bureau, without ur full support and fully expressed desire Indo Govt for ECA program, in view fol:

Current Indo dol position. We appreciate obvious difficulties justifying contd grant aid $10–$15 mil Indo because great and continuing improvement Indo econ position, which you noted. Indos and Eximbank Jan 11 signed loan contracts for $52 mil specific major developmental projects.3 Indo dol exchange holdings now over $90 mil, increase over $60 mil last eight months. Substantial gold reserves $178 mil earlier in year recently increased by further purchase $30 mil gold. Strong commodity markets Indo exports, which Acct these spectacular improvements, apparently unlikely be radically changed near future. ECA aid approx $12 mil insignificant compared Indo total annual imports over $300 mil. Under these circumstances adverse Cong reactions grant aid may be anticipated. This may be complicated by Cong [Page 595] inability understand giving Indos grant aid for activities they capable fin themselves.
Apparent unacceptability ECA program Indo. Dept notes you have experienced difficulty getting Indo Govt prepare justification present and future programs. Re both Point 4 and STEM program, we note increasing Indo reluctance accept and house Amer technicians.
Possibility that now may be propitious time indicate to Indos availability US aid shld not be taken for granted no matter how close US–Indo friendship. Dept notes ur recommendation US interests Indo may best be served present time by refraining entirely offering Indos any future econ aid unless they specifically request it and indicate greater sense appreciation and ability absorb such aid than heretofore shown (urtel 1032 Feb 3, re conversation Fon Min Roem on Indo actions in UN and Indo reaction mention Pac Pact).4

Dept therefore seriously considering advisability recommending eliminating fiscal year 1952 Indo ECA program, and restricting fiscal year 1951 program to projects already formally approved or otherwise committed Indos. This wld probably reduce fiscal year 1951 total from about $12 mil to about $9 mil.

Dept wld appreciate ur comments.5

Rptd for info: AmEmbassy London 3697.

  1. Not here printed; the arguments presented in telegram 855, infra, represent a summary of Ambassador Cochran’s views as reported in these telegrams from Djakarta.
  2. On October 16, 1950, the United States and Indonesia signed an Economic Cooperation Agreement at Djakarta, which was recognized as binding by Indonesia pending parliamentary action. For the text of this agreement, see TIAS No. 2762; 4 UST 19.
  3. See telegram 728 to Djakarta, January 16, p. 586.
  4. Not here printed; excerpts from telegram 1032 from Djakarta, February 3, that deal with the Pacific Pact are printed on pp. 145147.
  5. Ambassador Cochran responded in telegram 1061 from Djakarta, February 11. In that message, he recommended that “FY ’52 Indonesian ECA program be eliminated and FY ’51 program be restricted to projects already formally approved or otherwise committed Indonesians. Exception would be to provide for continuance J. G. White Engineering Company under terms contract only recently concluded between it and Indonesian Government.” (856D.00–R/2–1051) The J. G. White Engineering Company had entered into a two-year contract with the Indonesian Government to survey harbors, railroad facilities, telecommunications, and various industries such as mining, hydroelectric power, and civil aviation to ascertain their potential for future expansion. ECA financed the contract.