Office of the Historian

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

Washington, June 17, 1957—4:42 p.m.

2102. Joint State/ICA message. Embtel 2861.2

[Page 394]

FYI Following factors preclude additional loan aid Indonesia present time: (a) likelihood amount obligated FY 1957 $15 million loan will not exceed $700,000 (see Icato A–1468;3Icato 11374); (b) political situation; (c) degree to which Indonesians demonstrate ability support additional projects; (d) Congressional action re FY 1958 aid appropriations not concluded; and (e) necessity meet criteria set forth paragraph below.

In view (a) above and to insure uninterrupted implementation loan projects currently plan request carry-over authority Congress for unobligated balance FY 1957 $15 million MSP loan. Anticipate any new funds additional to $15 million would come from proposed new Development Loan Fund.5 Pending Congressional action aid legislation, impossible for us know precisely how Fund would operate. In general anticipate countries may apply to Fund for specific projects which meet following criteria: (a) projects could not obtain financing from other public lending institutions or from private sources, (2) projects economically and technically sound, and (3) projects afford reasonable promise increasing country’s productive capacity. End FYI.

Suggest you continue express U.S. sympathetic interest Indonesian aspirations and needs. Indicate to Foreign Minister that $15 million loan recently signed demonstrates this interest. You may point out RI that since present $15 million loan program just initiated and U.S. Congress has not yet acted on Development Loan Fund proposal, U.S. not in position consider additional loan aid at this time.

Dulles
  1. Source: Department of State, Central Files, 756D.5–MSP/6–1757. Confidential. Drafted in SPA and ICA, approved in FE, and cleared in draft with U/MSA and the Economic Development Division of the Office of International Financial and Development Affairs (ED).↩
  2. Telegram 2861 from Djakarta, May 23, reported that Allison had received a message from Subandrio that the Indonesian Government would like to begin negotiations for a second $15 million loan, similar to the one recently agreed upon in Washington (see footnotes 2 and 3, Document 225). (Department of State, Central Files, 856D.10/5–2357)↩
  3. Airgram Icato A–1468 to Djakarta, May 29, transmitted the text of a memorandum of May 17 from Raymond T. Mover, Director of the Office of Far Eastern Operations (ICA), to Hollister concerning the implementation of the $15 million development assistance loan. Hollister had approved implementing two projects under the agreement without delay but had approved obligating funds before June 30 only for such aspects of the projects as were ready to be initiated by that date. (Washington National Records Center,ICA Message Files: FRC 58 A 403, Box 174, Djakarta)↩
  4. Icato 1137 to Djakarta, May 31, concerned implementation of the projects. (Ibid.)↩
  5. The Development Loan Fund was subsequently established by the Mutual Security Act of 1957, approved August 14, 1957. (71 Stat. 355)↩