756D.5–MSP/12–1751

Mr. Robert Blum, Special Assistant to the Assistant Administrator for Programs, Economic Cooperation Administration (Cleveland) to the Acting Assistant Secretary of State for Far Eastern Affairs (Allison)

confidential

Dear Mr. Allison: A few days ago, at the conclusion of our brief conversation about ECA aid to Indonesia, you suggested that I write you an informal letter setting forth the points I had raised and the reasons for ECA’s recommendations regarding continued technical and economic aid for Indonesia. I agreed to do this, and I know you appreciate that this letter is quite informal, although naturally it reflects the discussions I have had in ECA. You and I agreed, however, that such a letter might help you in developing, as soon as possible, a firm position on this question within the Department of State.

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We have recognized from the beginning the special circumstances that prevail in Indonesia and that affect the nature and scope of our aid program there. It has certainly never been, nor is it now, our intention to force our program on a country which is capable of adequate technical and economic development without our aid or which does not want that aid. We do not, however, feel that because of Indonesia’s great natural wealth and presently favorable balance of payments, the country is not really in need of ECA aid. It is perfectly true that the Indonesians have sufficient foreign currency available to buy commodities abroad and to obtain the services of foreign technicians and specialists. It is equally true, however, that due to their lack of technical and administrative know-how the Indonesians are insufficiently equipped to solve, without outside assistance and encouragement, the administrative, economic and educational problems with which they are faced. It is possible that in the long run Indonesia would develop, even without ECA assistance, the skills and knowledge needed to overcome the present underdevelopment of the country. In view of the present critical world situation, however, and the Communist efforts to spread their influence in Southeast Asia, the time element is of great importance. The U.S. should, therefore, do everything in its power to speed the consolidation of this, the fifth largest nation in the world.

It is true that the Indonesians have been slow to accustom themselves to working with the U.S. in economic and technical matters. This is a type of difficulty we have had to face and overcome in other countries of Southeast Asia, for example, in Burma where an initial reluctance has given way to wholehearted cooperation. To overcome this difficulty requires tact and patience but does not mean that the program should be stopped or seriously weakened. Indonesian reluctance has been largely due to the fact that the administrative apparatus of the country is still too deficient to accomplish smoothly the various administrative tasks resulting from the aid program. Thus, this program, if tactfully managed, will help give the Indonesians the very experience they need instead of being a burden and an embarrassment. I think it can also be demonstrated that, while foreign aid in general is still a delicate question in Indonesia, there has been growing interest and even enthusiasm with regard to specific projects. While, for example, in the Public Health field, Indonesia at first was most reluctant to accept U.S. medical personnel, they are now eager to retain the ECA nurses who have proved useful. Indonesia is also continuously increasing the number of requests for ECA-financed training of its citizens in the U.S. I therefore feel that it would be defeatist to abolish or cripple the program just at a time when many of the initial difficulties are being overcome.

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It is possible that some Indonesians, especially communists and fellow-travelers, would be delighted to see the end of ECA aid for Indonesia. It is even possible that, in moments of irritation, some leaders who are neither communists nor fellow-travelers may express privately the opinion that the advantages accruing to Indonesia through ECA aid are hardly worth the trouble that we cause them. If, however, one were to put the clear-cut question, whether the Indonesians would actually welcome the ending or reduction of our aid program, I think the answer would be negative. The Government and people would undoubtedly be resentful if Indonesia alone of all the Southeast Asia countries were to be excluded from the ECA program or have its share of aid reduced. Indonesian misgivings about our aid would hardly be diminished by a mere reduction in the amount of dollars made available to them, as such a reduction would merely mean that the advantages of our aid would decrease while the irritations would still remain.

In receiving ECA aid, Indonesia has accepted another tie with the free West, a tie which in the long run will help pull the country away from the Red orbit. Although I hesitate to express an opinion on the broader political implications of the aid program, I cannot help but feel that the reduction of our aid, without compelling reason, would weaken rather than strengthen America’s position in Indonesia just at a time when such a sign of withdrawal would be most welcome to the Communists.

In spite of these considerations and in order to see how the views of the State Department might be met, we have re-examined the $11.5 million FY 53 program submitted to the Bureau of the Budget in order to see whether it could be reduced to an amount at least no greater than the present program of $8 million. The results are shown in the attached tabulations1 which correspond to those in our original submission. Instead of making an arbitrary across-the-board cut, we have tried to distribute the reduction among the various suggested projects in such a manner that what remains will still be an organic and balanced program.

Almost one-half of the total reduction has been taken out of the amount budgeted in the original program for agriculture. While an attempt was made to distribute the loss among the various projects in that category, the overall goal of a substantial saving of dollars could only be reached by paring down each of the three largest projects in Agriculture by 40 to 60 percent. The particularly promising and important project of aid for the irrigation and reclamation of potential rice-growing areas in Borneo was reduced from $800,000 to $400,000. The item of $900,000 budgeted to provide refrigeration equipment for [Page 762]the fishing industry was cut down to $400,000, although such equipment for the fishing industry was to have been one of the salient features of the FY 53 program. Instead of $750,000 only $300,000 would be available under the $8 million program to obtain processing equipment for rubber-growing smallholders, who today have to sell badly processed rubber to Chinese merchants making disproportionately large profits from processing. $400,000 were taken out of the Public Health category, which means, among other things, complete elimination of the important floating clinics project. The category of Transportation, Power and Other Public Works was reduced by more than 50 percent, leaving only small sums for the entire category. Education was deprived of $500,000, or one-third of the amount originally proposed, and even the Public Administration category, perhaps the most important one, considering the enormous shortcomings now prevalent in Indonesia in that field, was reduced from $1,695,000 to $1,350,000.

While it can hardly be said that these savings would be meaningful from the point of view of the American taxpayer, considering the magnitude of our foreign aid appropriations, the reduction is certainly a very serious one for the effectiveness of the program itself. The amounts budgeted in the $8 million program for the various categories and for the individual projects are very small compared with the goals to be attained. Any further reduction would not only cripple the program and cause certain projects to be thrown out entirely, but would have an adverse political effect that would be most undesirable. Our whole aid effort would risk appearing economically and politically meaningless. I am also afraid that such further reductions, instead of creating a better atmosphere between Indonesia and the U.S. would on the contrary embitter the Indonesians. For this reason I do not think reductions below $8 million, if they are to be considered at all, should be decided upon unilaterally by the United States, but only if consultation with the Indonesian Government should demonstrate that they are desirable.

I hope that this informal note will be helpful and that the State Department and ECA will be able to arrive at an early agreement on this controversial matter.

Sincerely yours,

Robert Blum
  1. Not printed.