856D.00–TA/2–2051

The Assistant Secretary of State for Far Eastern Affairs ( Rusk ) to the Director, Far East Program Division, Economic Cooperation Administration ( Griffin )1

secret

Dear Mr. Griffin: The Department of State has been giving careful consideration to the advisability of maintaining the existing ECA grant aid program in Indonesia. While the Department recognizes that financial need is by no means the sole criteria by which the institution or continuation of a grant aid program should be determined, it is clear that such aid cannot, in any event, be justified in the absence of a demonstrated desire and willingness on the part of the recipient government to furnish the cooperation necessary to achieve the success of the program. In the absence in Indonesia of this essential element, it is the view of the Department of State that:

(a)
The fiscal year 1951 ECA grant aid program should be restricted to projects already committed to the Government of Indonesia, including financing for the full two-year term of the J. G. White contract.
(b)
No fiscal year 1952 ECA grant aid program for Indonesia should be conducted, except for the J. G. White contract.

To recapitulate the facts on which this position is based, I find that Indonesia’s gold and dollar exchange position has improved so greatly during the past year that it no longer requires grant aid to buy commodities or services from the United States; that this favorable position is likely to continue; and that at best grant aid would constitute only a small complement to Indonesia’s import program. Given Indonesia’s strong nationalist feelings, the present state of its governmental services and organization, and its unsettled internal conditions, the acceptance of considerable numbers of American technicians under United States Government control and their effective utilization by the Indonesian Government would be precluded.

Accordingly, the Department of State believes that the presentation by the Economic Cooperation Administration of its budget for additional amounts for Indonesia for the fiscal year 1951 and for the entire fiscal year 1952 should be modified to conform to paragraphs (a) and (b), above. I am most anxious to discuss with you the views expressed above in order that we may arrive at an agreed position between the Department and ECA prior to any appearance before the Bureau of the Budget and prior to any communication to the Indonesian Government which would lead it to believe that a final decision had been reached. The manner of informing the Indonesian Government of any final decision will also require careful thought and handling. I shall be delighted to get together with you to discuss this matter further at any time convenient to you.

Sincerely yours,

Dean Rusk
  1. A notation at the bottom of the source text reads: “(Note: See attached blue for initials. The only change in the letter is the addition of the final three sentences of the last paragraph which in the revised letter suggest consultation between the Department and ECA. Messrs. Matthews and Stinebower were informed of this revision before the revised letter was handed to Mr. Griffin on February 20. It is believed that all carbons of the original letter of February 14 have been collected and destroyed, together with the signed original which Mr. Griffin returned to Mr. Rusk.)”