Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

OCB files, lot 62 D 430, “Indonesia”

No. 294
Paper Prepared for the Operations Coordinating Board¹

top secret

[Washington,] September 21, 1954.

Status Report On NSC 171/1 Indonesia²

I. Political

1. On August 10, Indonesia and the Netherlands agreed on a protocol terminating their Union and retaining only those parts of the financial and economic agreements which have heretofor been implemented. At the conference, the Dutch refused to discuss New Guinea and as a result, despite our attempts at discussion, Indonesia has asked that the New Guinea question be placed on the UNGA agenda and intends to introduce a resolution asking the Dutch to negotiate further under the terms of the Agreement on the transfer of sovereignty. The Netherlands and Australia will oppose inscription and discussion in the UNGA. Both the Netherlands and Indonesia have requested our support. We have replied by stating our desire to avoid offending either party and our determination to abstain on all voting and to refrain from debate or lobbying in accordance with our policy of strict neutrality. The Indonesian Ambassador indicated that his Government understood the U.S. position and would appreciate U.S. neutrality.

2. Embassy Djakarta has started preliminary negotiations for a treaty of friendship, commerce, and navigation; the Indonesian Foreign Minister has recently told the Embassy of his intention to complete these negotiations in the near future.

3. Indonesia has “sounded out” Middle Eastern, African, and Asian countries on participation in a conference in Indonesia this fall. To date plans are indefinite and it is not expected that the conference will be held in the near future, although Prime Minister Ali is visiting India and Burma this month in a move believed to be related to it. In other developments related to Indonesia’s neutralist foreign policy, her officials made known that they would not attend the SEATO Conference at Manila but were not opposed to it. A Soviet Embassy is to be opened in Djakarta in October following the recent opening of an Indonesian Embassy in Moscow.

4. The U.S. has found no opportunity to encourage the settlement of the reparations question with Japan. Japan has suspended the export of textiles to Indonesia as a result of the latter’s failure to pay an installment of their adverse trade balance recently due. We have informally encouraged Indonesia’s support of Japan for full membership in GATT and indications are that such support will be forthcoming.

5. A visit by President Sukarno to the United States is not scheduled for 1955; the Department of State is urging that his visit be given a high priority in the list of prospective visitors for 1956.

II. Military

1. Defense will provide MATS transportation from Manila to the United States on a non-reimbursable basis for Indonesian military officers assigned to U.S. Service Schools. The Army Attaché, Djakarta, is now issuing necessary authorization. The first trainees under the new arrangement are expected to leave for the U.S. in October. Indonesia initially requested 154 spaces, and to date has declined 16. Spaces for the balance are available subject to final acceptance by Indonesia and to security suitability of the individual trainees.³

2. Defense informed State on 17 September of the Joint Chiefs of Staff view that before a decision is made to furnish U.S. officers to assist in the training of Indonesian armed forces, a survey to determine whether such assistance is desirable should be conducted. Defense recommended that in discussions with the Indonesian Government the furnishing of military training assistance by the United States should be made contingent on the outcome of a survey of Indonesian training needs.⁴

III. Economic

1. FOA has obligated $1 million in FY 1954 for the police training and equipment project. The chief technical adviser to this project, Mr. Fruit, has just completed a preliminary survey and his informal report to the Department on August 6 was optimistic about the success of this project. Procurement of 250 jeeps, 8 patrol boats and 1 aircraft is planned and has been started. Selection of 28 officers for training in the U.S. and 20 for training with the anti-guerrilla elements of the Philippine Constabulary has been completed. Selection of five additional technicians is proceeding.

2. The Department has consulted with Embassy Djakarta regarding the extent and effect of the financial deterioration in Indonesia and the need and justification for U.S. financial and economic assistance. The Embassy has recommended against special financial and economic assistance to Indonesia at this time. The general problem of extending assistance to Indonesia for its economic development is being subsumed under work in the Department on a regional approach to economic problems in Southeast Asia. The financial situation in Indonesia is being closely watched by the Embassy and the Department.⁵

3. Pursuant to NSC Action No. 1173, State and FOA have drafted a program for OCB consideration which, subject to availability of funds and a show of Indonesian initiative, will improve the efficiency of the independent small holder in production, processing, and marketing of rubber. Study continues on other aspects of the problem. (Cf. agenda item No. 1, OCB meeting of September 22, 1954.)⁶

4. A new FOA director arrived in Indonesia in July. He will review the program and coordinate its separate projects to achieve greater impact. The regular FY 1954 program of technical cooperation, amounting to $4 million, was obligated in late June and implementation has proceeded in a routine manner.

IV. Informational

1. Negotiation on an Information Media Guarantee Agreement has been completed and will probably be signed within the next two months. This will facilitate the import of American books and publications through dollar reimbursement to American publishers with the U.S. Government receiving the locally generated rupiahs.

1. The source text contains no indication of authorship.
2. Document 255.
3. See Document 296.

4. On Sept. 29, Ambassador Cumming, then in Washington, discussed with Admiral Radford, Chairman of the Joint Chiefs of Staff, the question of U.S. military training assistance to the Indonesian Army. Galbraith, who was present, recorded parts of their conversation:

   “Ambassador Cumming referred to the letter from the Secretary of Defense dated September 17, 1954 and the JCS memorandum enclosed therein dated August 31, 1954 on the subject of military training assistance to Indonesia. The Ambassador said he did not think the sending of an individual or a group to Indonesia to make a survey of Indonesia’s training needs would be advisable at the present time and probably not until after elections. He said the Embassy’s best estimate is that the elections will be held sometime in mid–1955 and that those non-Communist and anti-Communist political elements amenable to cooperation with the U.S. are expected to win the elections. The Ambassador said it was his opinion that elections would bring some greater degree of stability to the Indonesian Government and would perhaps permit the implementation of U.S. military training assistance to Indonesia in some form. The Ambassador said that meanwhile Indonesian Army and Naval officers are being trained in the U.S. in increased numbers which would permit a more efficient use of American training in Indonesia at a later date.…

   “Admiral Radford expressed interest in Ambassador Cumming’s brief survey of the situation. He said he did not believe Defense expected any immediate or dramatic results from Indonesia and he agreed with the Ambassador that the time of any survey of Indonesia’s military training needs would await the Embassy’s and the Department’s recommendations.” (756D.58/9–1754)

5. On Sept. 21, the Embassy informed the Department of State of General Motors’ decision to close down its operations in Indonesia, based partly on the deterioration of the economic situation there. (Telegram 471; 811.05156D/9–2054) On Oct. 7 the Embassy reported that Stanvac had decided to proceed with its planned investment program after the Indonesian Government agreed to exempt the company from payment of its 66 2/3 percent surcharge tax. (Telegram 566; 811.05156D/10–754)
6. See Document 299.