Office of the Historian

121. Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Acting Secretary of State1

Washington, November 7, 1955.

SUBJECT

  • PL–480 Negotiations with Indonesia

Problem:

On what, if any, basis should the United States open negotiations of a PL–480 agreement with Indonesia.

Discussion:

1.
The Ali Government on July 12, and the Harahap Government later, requested a PL—480 program of cotton, milk, tobacco, and wheat, computed at $48 million for two years. Interdepartmental approval has been given the request which by reason of some reduction in quantities and different price computations would amount to $29.5 million (Tab A).2 The draft instruction went to Ambassador Cumming on October 13.3
2.
Dr. Sjafruddin, Governor of the Bank of Indonesia, on October 25, called on the Department, and submitted informally a request involving larger quantities of these commodities plus rice amounting to a total of $199.4 million over two years.4 This would be far larger than any PL–480 (Title I) agreement yet negotiated by the United States. It poses many technical difficulties, raises serious questions regarding its impact on the Indonesian economy, and involves important political considerations in our relations with other producing countries. Furthermore, any decision must be governed by our own political considerations in relation to Indonesia.
3.
In view of the uncertainties regarding the post-election government in Indonesia, the Department queried the Ambassador regarding the desirability of opening any negotiations on a PL–480 agreement with the Indonesian Government at this time.5 The Ambassador [Page 207] just prior to Dr. Sjafruddin’s presentation of a new and much larger program, suggested that we proceed with negotiations on the basis of the $29.5 million program while “keeping some area of disagreement open pending further developments [i.e. a clearer picture of the political complexion of the new government]”.6 At the same time the Ambassador expressed the view that were we to “refuse to negotiate [at all at the present time] because of fear of what government might emerge [it] would tend to strengthen anti-western and weaken pro-western opinion in the non-Communist spectrum” (Tab B7).

Provisional election returns for most districts indicate an allocation of seats more favorable than we had anticipated (28% Masjumi, 27% PNI, 20% NU, 18% PKI). Recent parliamentary debates regarding the Harahap Government have shown moderation on the part of Masjumi, PNI, and NU, leaving room for political compromise among them. In short the prospects look reasonably good regarding the formation of a government which would not be pro-Communist. It is still too early to be certain that the ultimate coalition will not accept some degree of Communist cabinet or parliamentary support. Were negotiations to be initiated now, on the basis of the very large program presented by Dr. Sjafruddin, we could be faced with the prospect of discussing a very large aid program with a government which we would not wish to support wholeheartedly. Quite apart from the economic and administrative problems involved in Dr. Sjafruddin’s new program, it would probably be desirable to adopt a middle course of commencing negotiations on the basis of a smaller program, which, moreover, should help friendly elements in Indonesia.

Balancing Indonesia’s extraordinary request for rice (250,000 tons) and United States disposal interests with the problem in our relations with Southeast Asian rice producing countries, the Departments of Agriculture and State have reached agreement to offer up to 50,000 tons of rice on condition that Indonesia take steps to assure Burmese and Thai understanding of United States action in this field.

Recommendation:

1. That you sign the attached telegram (Tab C8) authorizing Ambassador Cumming to open negotiations for the program of $29.5 million in accordance with the Department’s A–78, plus the conditional arrangement for rice, leaving to future Departmental approval [Page 208] the devices and methods of protracting negotiations if we find that necessary.

  1. Source: Department of State, Central Files, 411.56D41/11–755. Confidential. This memorandum, drafted between October 28 and November 4 and apparently sent to Hoover, who initialed his approval, on November 4 or 5, is evidently misdated (see footnote 8 below).↩
  2. None of the attachments is printed here.↩
  3. Airgram 78 to Djakarta, October 13, not printed. (Department of State, Central Files, 411.56D41/10–1355)↩
  4. Sjafruddin’s conversations with Robertson and Young on October 25 were recorded in memoranda of conversation of that date by Leonard S. Tyson of the Office of Philippine and Southeast Asian Affairs, neither printed. (Both Ibid., 411.56D41/10–2555)↩
  5. Telegram 659 to Djakarta, October 18, not printed. (Ibid., 411.56D41/10–1855)↩
  6. These and subsequent brackets are in the source text.↩
  7. Telegram 992 from Djakarta, October 25. (Department of State, Central Files, 756D.00/10–2555)↩
  8. Apparently a draft of telegram 780 to Djakarta, November 5. (Ibid., 411.56D41/11–555)↩