Office of the Historian

139. Telegram From the Department of State to the Embassy in Indonesia1

Washington, February 25, 1956—2:22 p.m.

1452. Djakarta’s 1932, rpted The Hague as 120.2 Djakarta’s 1971, rpted The Hague as 126.3

[Page 235]
1.
Mukarto called on Murphy February 234 under instructions his government and stated following: (1) Abrogation finec agreements end privileged position Dutch in Indonesia and place all foreign investment equal basis; (2) American business and investment in Indonesia would not be adversely affected; (3) all existing commitments to Dutch business and investors which have standing “under international law” would be honored.5
2.
Difficult give specific guidance (urtel 1932) absence further Indonesian clarification implementation abrogation finec accords. Suggest you informally express view U.S. gratified learn Indonesian Government intention that abrogation will not adversely affect US investments and state we interpret Mukarto remarks indicate no steps will be taken which would give rise to feeling in minds businessmen U.S. or any other national origin that foreign investors unwelcome Indonesia.
3.
Our preliminary assessment possible effects abrogation as follows:
(a)
Possibility U.S. companies operating in Indonesia now incorporated in Netherlands may subsequently be required incorporate in Indonesia need not necessarily affect their individual financial arrangements with Indonesia. Unless any new investment policies fail provide adequate transitional provisions for current U.S. investment arrangements believe unlikely U.S. investments will encounter special problems. However must await further developments to obtain clearer picture.
(b)
Effect abrogation on Netherlands-Indonesian economic relations under study. Would appreciate Embassy comments especially after Indonesian position re abrogation clarified. Suggest you ascertain informally what Indonesians and Dutch view as main economic advantages under RTC for Netherlands, as opposed to other countries, which may now be modified.
Dulles
  1. Source: Department of State, Central Files, 656.56D13/2–2356. Confidential. Repeated to The Hague. Drafted in PSA; approved in FE; cleared by Murphy and with WE, ITR, and ED, and in substance with the Department of Commerce.↩
  2. Telegram 1932 from Djakarta, February 17, reported that the factions represented in the Indonesian Government had agreed in principle on the unilateral abrogation of the financial and economic agreements attached to the Union Statute and that the matter was under study by the ministries concerned. Cumming requested instructions regarding the views he should express on the matter if he should be queried privately. (Ibid., 656.56D13/2–1756)↩
  3. Telegram 1971 from Djakarta, February 23, reported that the Netherlands Economic Counselor in Djakarta had expressed uncertainty about the effects of Indonesian abrogation of the financial and economic agreements. (Ibid., 656.56D13/2–2356) Telegram 1307 from The Hague, February 22, reported that Indonesia had informed the Netherlands Government on February 21 that it no longer considered itself bound by the Union Statute and all annexed agreements and exchanges of correspondence. (Ibid., 656.56D13/2–2256)↩
  4. The meeting was recorded in a memorandum of conversation by Underhill of the same date. (Ibid., 811.05156D/2–2356)↩
  5. The Ambassador made a similar statement to Young on February 21. (Memorandum of conversation by Young, February 21; ibid., 886D.00/2–2156)↩