Office of the Historian

155. Telegram From the Embassy in Indonesia to the Department of State1

Djakarta, May 11, 1956—noon.

2836. Joint Embassy/USOM message. Deptel 1997.2 I believe present political situation provides possibility for major constructive developments, including long-needed fiscal reform which previous government planned but unable carry through owing interim status. With present coalition giving indications of stability and political climate as favorable as could be expected, I consider present propitious for considering aid to Indonesia beyond present level technical assistance and PL 480.

With current Soviet bloc aid offers apparently still in somewhat nebulous state and awaiting concrete proposals from Indonesia, prompt indication of forthcoming assistance from US in reasonable amount should help those forces in government seeking limit or neutralize Soviet bloc efforts. No doubt some Soviet bloc aid will be accepted, as it was before present Soviet economic offensive apparent (e.g. East German credits for Jogjakarta sugar mill), but I do not feel our hesitation likely reduce such aid or in long run lessen likelihood competition with Soviet offers.

As indicated my telegram 27473 Indonesia has already taken initiative in instructing bank information representative approach Exim Bank on medium term credits and requesting information report IBRD mission to Indonesia last June.

Difficult recommend amount of development assistance since until we in position to negotiate with Indonesians efforts to devise program remain somewhat theoretical exercise. Much also depends on willingness Exim Bank and IBRD extend assistance. Toica A–403 October 28, 1955,4 submitting narrative presentation USOMFY 1957 illustrative program, includes rationale for level of development assistance aid. Considering some dollar back-stopping of PL 480 counterpart required, Embassy and USOM have reached tentative conclusion that Indonesian requests of approximately $35 million for FY 1957 excluding Exim and IBRD requests would not be unreasonable and could be used as basis for discussions.

Cumming
  1. Source: Department of State, Central Files, 856D.00/5–1156. Secret.↩
  2. Telegram 1997 to Djakarta, April 27, stated that before detailed consideration could be given to an increase in economic aid to Indonesia, a policy determination that “conditions are favorable” was required and it requested the Embassy’s views on this matter. (Ibid., 856D.00/4–1856)↩
  3. See footnote 3, supra.↩
  4. Not further identified.↩