Office of the Historian

170. Telegram From the Embassy in Djakarta to the Department of State1

Djakarta, August 10, 1956—5 p.m.

437. Joint Embassy/USOM cable. In meeting with Foreign Minister today he told me that he had asked Djuanda if he in the coming discussions with Soviet trade delegation had blocked out the economic assistance areas that would not encroach upon aid activities that US could do and was interested in. Djuanda replied that he did not know what US was planning to do. He went on to tell Prime Minister that while there had been discussions with Baird he felt that in final analysis Department of State would make decision as to more aid and thus was worried that Ambassador Cumming was apparently shying away from such talks with him. I explained to Foreign Minister relationships and that I was relying on Baird to carry main responsibility of actual detailed economic discussions. Foreign Minister assured me he understood. Against this background Baird now reports that in meeting same hour today with Djuanda and Sponsler,2 Djuanda reiterated great desire for survey team for urea fertilizer plant and additional cement factory. Then he asked if any money was immediately available to begin road construction Sumatra under present bilateral agreements (presume concern re road construction related to Soviet trade mission). We pointed out DA classification this project requiring loan agreement. He indicated reference Mutual Security Act of 1954, paragraph 2, standard loan agreement would delay agreement to sign even if additional aid agreed to.

Djuanda then set meeting with Baird, Sponsler and Walker3 for 10:00 a.m. Wednesday, 15, to discuss developmental priorities in government, EX-IM and private sectors.

In view these two conversations, Baird, Sponsler and I:

1.
Doubt we can further delay in increasing economic aid to RI until Sukarno returns from iron curtain trip. We may well find ourselves by then in position of competition USSR we attempting to avoid. Recommend immediate favorable decision this matter and authorize me discuss RI.
2.
Suggest “appropriate United States legislation” as an acceptable substitute to “Mutual Security Act of 1954” of standard loan agreement.

Cumming
  1. Source: Department of State, Central Files, 756D.5–MSP/8–1056. Secret; Priority; Limited Distribution.↩
  2. William A. Sponsler III, Chief of the Indonesia Division of ICA.↩
  3. George T. Walker of the ICA Mission in Djakarta.↩