177. National Security Council Report0

NSC 5901


General Considerations

1. The chief danger confronting U.S. policy with respect to Indonesia is that a combination of domestic instability, Sino-Soviet Bloc economic and military aid, and growing local Communist strength may lead to a Communist takeover or to a policy increasingly friendly toward the Sino-Soviet Bloc on the part of whatever regime is in power. The size and importance of Indonesia, together with its strategic position [Page 335] in relation to Australia and Free Asia, and the probable serious consequences of its loss to Communist control, dictate a vigorous U.S. effort to prevent these contingencies.

2. Basically, any non-Communist Indonesian regime likely to come to power will desire to follow a “neutralist” policy, seeking aid on its own terms from both the West and the Bloc and balancing each off against the other. It is unlikely that any foreseeable non-Communist regime will depart from this basic policy, even though there is growing concern among Indonesians, including the Army, over growing Communist strength and the extent of aid accepted from the Bloc. Many Indonesian leaders remain suspicious of Western motives. These leaders, preoccupied with colonialism, have found in the Western European attitude towards Cyprus, Algeria, and Arab nationalism, as well as towards the West New Guinea issue, strong grounds for such suspicion of Western motives. Formal political commitments to the West would constitute in their minds unacceptable abridgement of their international freedom of action; and regional military security pacts are opposed on the grounds that they sharpen rather than reduce international tension.

3. Indonesia has certain advantages and points of strength. It shares no common boundary with a Communist state. Although the Indonesians have an extremely low per capita income, a salubrious climate and fertile soil make the crushing poverty and starvation characteristic of some Asian nations unknown in Indonesia. A predominantly subsistence economy cushions most Indonesians from adverse commercial and financial developments. While there is severe overpopulation on Java and much “shared poverty,” absentee landlordism and glaring inequalities in land distribution are almost unknown. The Dutch implanted in Indonesia a strong respect for legal processes and the rule of law. Western concepts of individual freedom and democratic government introduced by the Dutch found a parallel in the democratic structure of the Indonesian village and the Indonesian tradition of compromise and collective decision-making.

4. On the other hand, Indonesia was ill-prepared to face the problems and assume the responsibilities of independence. The educational policy of the colonial regime prevented the development of an indigenous civil service and a corps of trained professional men. Dutch economic policy militated against the growth of an Indonesian entrepreneurial class. Dutch policy of regarding all political activity as subversive prevented the acquisition of a healthy political experience and a knowledge and understanding of political techniques, and left in their stead a tradition of negativism and irresponsible obstructionism. Finally, Dutch administrative policies tended to preserve and accentuate regional and ethnic differences.

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5. The Indonesian Communist Party (PKI)1 is relatively well-organized, well-financed, and well-led. It is unique among Indonesian political parties in its discipline, unity of purpose, and command of the techniques of political action. It also dominates the Indonesian labor movement through its labor federation, SOBSI, and its electoral strength is particularly concentrated in central and east Java. The PKI, which has capitalized on internecine quarrels, venality, and incompetence in the non-Communist parties, demonstrated in 1957 and 1958 local elections its steadily increasing popular support. If the election scheduled originally for 1959 had been held, the PKI would probably have emerged as the largest party in Indonesia and would have been in a strong position to demand cabinet representation. However this election has now been postponed for at least one year. The party has established itself in a strong psychological position by refraining from overt extra-legal activities, strongly supporting the governments recently in power, and more recently backing vigorously President Sukarno and endorsing the government’s military action against the rebels. At the same time, it is free of any responsibility for government failures and inadequacies since it has not been formally represented in any cabinet. Open measures of repression against the PKI would be difficult to justify on internal political grounds, and would expose any government undertaking them to charges of truckling to Western pressure. At present the PKI probably lacks the resources to seize power by overt force, and postponement of the elections may delay a bid for power via the polls. However, there is a serious and continuing danger that Indonesia may fall to Communism through government inadequacy, Communist subversion, legal political means, or, as a last resort, by violence.

6. PKI efforts have been complemented in the external field by the Sino-Soviet Bloc, which since September 1956 offered Indonesia about $350,000,000 in military and economic credits, under which arms and military equipment were provided when Western sources were denied; vigorously espoused Indonesia’s claim to West New Guinea; and gave diplomatic support during the difficult days of the recent rebellion.

7. During recent months some non-Communist leaders and political parties have demonstrated a greater realization of the Communist danger facing their country, and appear more willing than before to cooperate among themselves and with the Army to give Indonesia a more effective government and check the growth of Communist strength and influence. The non-Communist political parties are at present overshadowed by the Army, the President, and the PKI as major power factors in [Page 337] Indonesia. While they won approximately 75 percent of the total vote in the 1957 election, they are faction-ridden and sharply divided among themselves. They represent nonetheless a significant element of Indonesian society seeking to steer a course between military dictatorship on the one hand and Communist dictatorship on the other. As such, they are presently exercising some stabilizing influence, and to the extent that they are able to reconcile and subordinate their inter-party differences, they could, with the backing of the Army, turn the tide against the Communist party in the political field.

8. The non-Communist posture of the Indonesian Government is now maintained in delicate balance between President Sukarno, General Nasution of the Army, and Prime Minister Djuanda. President Sukarno is Indonesia’s paramount political figure. He occupies this position not only because of his personal magnetism and hold on the masses, but because he represents to the Indonesian people the symbol of their revolution and the mystic incarnation of their state. Sukarno exercises a strong general influence on government policies but, unlike other prominent national leaders in Asia, does not direct the course of government operations. He has proclaimed Indonesia’s need for a “guided democracy,” as yet not clearly defined, but has no desire to assume responsibility for the difficult decisions which accompany the open exercise of power. At the same time no cabinet or public official can remain in office and function effectively in the face of Sukarno’s active dislike or disapproval. Unlike other national leaders in Asia, Sukarno is neither the titular nor actual head of a political party machine. The ruling elite appear increasingly aware that Sukarno, whatever his great service to Indonesian independence, cannot provide the constructive leadership required. He appears concerned by the growing power of the PKI but is reluctant to use force or to abandon his position of being above party struggles. He will probably seek to manipulate non-Communist elements to counter-balance PKI strength. Sukarno the symbol is still indispensable; he is a living national monument, a political fact of life which must be lived with.

9. The Indonesian Army is the largest element of the Indonesian armed forces. The Army and the predominantly non-Communist orientation of its officer corps, represent the principal obstacles to the continued growth of Communist strength in Indonesia. This situation derives to a considerable degree from the favorable impressions made on Indonesian officers trained in U.S. service schools, who now hold responsible positions. These officers have accepted U.S. organization, equipment, and training methods and, upon return to their homeland, have exerted a strong influence in orienting the Army toward the West and toward the United States in particular.

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10. Under the leadership of the anti-Communist General Nasution, the Army has assumed an increasingly powerful position in the political arena including a growing policy-making role. The Army is likely to continue to exercise considerable authority in civil affairs barring an open break between Sukarno and Nasution. The Army’s increased power has resulted from two factors: the considerable authority it is permitted under the present “state of war,” and the prestige accruing from its success in suppressing the regional revolt. The Army’s objective is to steer a middle-of-the-road course. Navy and Air Force leaders have had little apparent influence on the policies of the Government of Indonesia. However, their national positions are expected to improve as a result of large amounts of matériel received from the Soviet Bloc, and they may take an increasing interest in the political scene.

11. The Army, which is equipped with individual and light automatic weapons of varied origins and types, including Dutch, British, U.S. and Japanese, has reached the point where it must make major procurements of weapons and equipment. Late in 1957, because the U.S. and other Western countries were unwilling to sell arms to Indonesia, approaches were made to the Soviet Bloc, and an Indonesian military mission is believed to have purchased about $25,000,000 worth of Army hardware in Poland, Yugoslavia, and Czechoslovakia in 1958. In the next two years the Indonesian Navy is scheduled to obtain a significant number of ships from the Soviet Bloc, probably on credit. In early 1958 the Indonesian Air Force contracted to purchase from the Soviets about 115 aircraft, including MIG fighters, jet bombers, transports and trainers. Additional purchases from the Soviet Bloc can be expected.

12. In view of the key importance of the military as a stabilizing force in Indonesia, and in view of extensive Bloc military aid, the question of the quantity and form of U.S. military aid is a major policy issue. Although initially reluctant to accept U.S. terms for military aid, Indonesia is now actively seeking such aid. Because Indonesia previously rendered inoperative a bilateral agreement, it is now legally possible to provide grant assistance only under a Presidential Determination that waives the necessity for the U.S. to obtain certain assurances otherwise required by the Mutual Security Act of 1954, as amended, and usually included in military assistance agreements. In the summer of 1958 such a Presidential Determination was made and a token military aid program of about $7 million was approved. A request is now being processed to seek a further Presidential Determination for an augmentation program in the amount of $14.9 million which would bring the total FY 1959 program to about $22 million.

13. U.S. policy has for a number of years called for the provision of both technical assistance and economic aid to Indonesia, although for the past 18 months our policy has provided that these programs should [Page 339] be oriented toward the outer islands. The U.S. technical assistance program in Indonesia has concentrated on the important problem of developing technical, professional, and managerial skills, with major emphasis on education. However, prior to about 1955, the Indonesians were reluctant to conclude bilateral agreements which would have facilitated U.S. extension of economic aid. Since 1955 the Indonesian Government has become more receptive to U.S. economic assistance and, because of the serious economic situation, is now actively seeking such assistance.

14. The Indonesian Government fiscal and financial situation is now at about the lowest state since independence. During the past year, additional heavy burdens were imposed on the already unstable economy by a series of developments: the armed uprisings, the expansion of barter trade diverting resources from the central government, the anti-Dutch campaign, and the international business recession. The Indonesian masses living on a subsistence economy remain relatively unaffected by this situation, but the absence of economic development and the inability of the Indonesian Government to provide needed public services such as schools, hospitals, roads, and inter-island communications have contributed to regional dissatisfaction and political unrest, and have been exploited by the Communist Party, particularly on the over-crowded Island of Java, to win popular support. Direct government action to suppress the Communist Party would not bring lasting results unless non-Communist forces in Indonesia at the same time demonstrate to the masses some progress in solving Indonesia’s social and economic problems.

15. The shortage of trained professional men, administrators, and technicians is an underlying obstacle to progress in the solution of Indonesia’s manifold political, economic, and social problems. The Indonesian Government is making strenuous efforts to remedy this deficiency, and this is one field in which U.S. assistance can pay great long-range dividends.

16. In the recent rebellion, the regionalist leaders and their rebel forces in the outer islands were no match for the government forces in regular military operations. However, the rebels are proving to be effective guerrilla fighters and are seriously harassing the government forces and hampering the reestablishment of civil authority in North and Central Sumatra and North Celebes. Although the rebels lack the military capability and the political following to reestablish their control of major populated areas, they have some local support and can continue guerrilla warfare for a prolonged period, creating serious economic and political problems for the central government. Since Sumatra and Borneo produce a major portion of Indonesian export earnings, they are of great significance to the Indonesian economy. The central government is attempting [Page 340] to satisfy the desires of the outer islands for a larger measure of fiscal and administrative autonomy, and is giving priority to economic development projects off the Islands of Java. Regional distrust of the central government, however, is likely to continue.

17. The unresolved dispute between Indonesia and the Netherlands over West New Guinea has become in Indonesia a major vulnerability not only to the United States and its European allies, but also to moderate elements in Indonesia favoring a rapprochement with the Netherlands and closer ties with the West. It has poisoned Dutch-Indonesian relations, and undermined Indonesia’s otherwise excellent relations with Australia. The dispute does not appear at present susceptible of early solution. Both sides have taken irreconcilable positions on the basic question of sovereignty, emotions are high both in Indonesia and the Netherlands, and the Australians are, if anything, more determined than the Dutch that West New Guinea should not come under Indonesian control.

18. The U.S. cannot expect to reap the full benefits of aid to Indonesia while at the same time appearing to oppose Indonesian aspirations on the one international issue which has aroused great nationalist emotion in Indonesia and is a personal idée fixe with Sukarno. Not to support Indonesia on this issue is to leave this key gambit to the USSR. On the other hand, a shift in U.S. policy would create grave complications with the Netherlands and Australia, with unforeseeable results. Moreover, acquisition of West New Guinea might whet Indonesia’s appetite for other areas such as Timor, Papua, and British Borneo, whatever assurances Indonesia might give to the contrary. Even U.S. support of Indonesia on the West New Guinea issue probably would not deflect Indonesia from pursuing a basically neutralist course.

19. On balance there are compelling arguments for continuing, under present circumstances, a U.S. policy of neutrality in the West New Guinea dispute. This policy has been followed because of the seriously adverse consequences which would ensue if the United States supported either the Dutch or the Indonesian position. The former would drastically reduce if not eliminate United States influence in Indonesia, deal a serious blow to pro-United States elements and be exploited by the Soviet Bloc and the PKI as proof of United States hostility to the aspirations of the peoples of Asia and Africa. To support Indonesia on the other hand would have an equally serious damaging effect both on our bilateral relations with the Netherlands and Australia and in our working relationships with the former in NATO and the latter in ANZUS. The intensity of public feeling and the firmness of government positions in the three countries directly involved further counsel against any United States effort at this time to urge on the principals a compromise solution such as some form of UN trusteeship, though the latter might [Page 341] provide a basis for eventual compromise. Such a proposal would probably be acceptable to the Netherlands only if the Netherlands and/or Australia were named the administering power or powers. It would produce in Indonesia scarcely less condemnation than outright espousal of the Dutch cause.

20. U.S. ability to influence Indonesian policy and government actions is limited by Indonesian:

Resistance to guidance and direction from any foreign source.
Reluctance to undertake ties and associations which would appear to bind Indonesia politically and militarily to the West.
Continuing suspicion that the United States may be motivated more by a desire to combat Communism in Indonesia than to assist in the establishment of a strong Indonesian state.
Preoccupation with colonialism, both as it relates to its own New Guinea issue and to other current issues between Western European nations and dependent or newly independent states in Asia and Africa and the position which the United States has taken on these issues.
Resentment over alleged U.S. moral and material assistance to the rebels.
Irritation, frustration, and doubt of U.S. intentions occasioned by the length of time required by the United States in the provision of military and economic assistance.

21. U.S. ability to influence Indonesian policy and actions is strengthened by the following factors:

The predominantly Western cultural orientation of the Indonesian governing elite and the moral and intellectual commitment of this elite to the principles of democratic, representative government.
A strong desire for economic assistance, military supplies and equipment, and higher education and professional training from the United States and the West.
The fact that approximately 95 percent of Indonesia’s trade is with the Free World.
The teaching of English as the first foreign language in Indonesian schools.
Western orientation of the Army, which results in part from training accorded Indonesian officers in U.S. service schools.



22. Prevention of Communist control of Indonesia, or vital parts thereof, by overt armed attack, subversion, economic domination, or other means.


23. The establishment of a politically stable, economically viable nation, friendly to the West, with the will and ability to resist Communism [Page 342] from within and without, and the denial of its human and natural resources and strategic positions to the Sino-Soviet Bloc.

Major Policy Guidance

24. Employ all feasible means, including, in accordance with constitutional processes, the use of U.S. armed force if necessary and appropriate, to prevent Indonesia or vital parts thereof from falling under Communist control by overt armed attack, subversion, economic domination, or other means; concerting action with other nations as appropriate.

25. While seeking an ultimate pro-Western orientation, accept Indonesia’s neutralist policy, as necessary, even though the present regime maintains diplomatic, trade and cultural relations with the Sino-Soviet Bloc and is receiving Bloc military equipment and economic assistance, but endeavor to insure that these relations are reasonably balanced by relations with the Free World.

26. Seek by official and personal relations, as well as through the general character of U.S. relations with Indonesia, to encourage Sukarno to regard the United States as a friend of Indonesia, to direct his influence into constructive channels, and to restrict and contain the harmful aspects of his influence on Indonesian political and economic development.

27. Encourage reconciliation between the rebels and the central government, and cooperation among non-Communist political and military leaders, as well as between political parties, in order to stimulate the development of a more effective non-Communist political force.

28. Maintain and strengthen existing U.S. ties with the Indonesian police and military establishments; and increase their capability to maintain internal security and combat Communist activity in Indonesia by providing appropriate arms, equipment, and training, on a limited but continuing basis. To maximum extent practicable, U.S. training of personnel of the Indonesian armed forces should be expanded and efforts made to curtail Sino-Soviet Bloc training programs.

29. Demonstrate interest in and concern for economic development in Indonesia while avoiding actions which might be interpreted as an attempt to control or take responsibility for Indonesian economic development. To this end:

Encourage Indonesia to take steps such as the following to further its economic development:
  • (1) Improve its basic economic and fiscal policies, including the budgeting of government expenditures and a tax structure and administration which will increase government revenues.
  • (2) Control inflation and gradually eliminate inflationary pressures.
  • (3) Create a favorable climate for private investment.
  • (4) Reduce corruption.
  • (5) Expand technical, administrative, and entrepreneurial skills among Indonesian nationals.
  • (6) Foster diversification of the economy without neglecting staple exports.
  • (7) Maintain and increase close friendly commercial relations with the U.S. and other Free World nations.
Support loans to Indonesia by international organizations where consistent with relevant U.S. loan policies.
Encourage other Free World nations to continue measures designed to contribute to Indonesia’s economic development.
Be prepared to provide appropriate economic and technical assistance to Indonesia.
Be prepared to provide U.S. loans for economic development which are consistent with relevant U.S. loan policies.

30. Encourage Indonesia to improve administration by modernizing laws and administrative procedures.

31. Seek to broaden Indonesian understanding of the U.S. and the Free World and to convince Indonesia that closer cooperation with the Free World is desirable, by:

Assisting Indonesians to travel and study in the U.S. and other Free World countries.
Continuing programs for increased training of Indonesians.
Making full use of U.S. private organizations to assist educational, cultural, medical, and scientific activities in Indonesia.
Identifying the U.S. with willingness to assist peoples struggling with problems of independence, and emphasizing the U.S. tradition of anti-colonialism.

32. Encourage the development of closer relations between Indonesia and other nations of Free Asia, particularly Australia, Japan, the Philippines and the Federation of Malaya, and seek opportunities for improvement in relations between Indonesia and the Netherlands.

33. Give priority treatment to requests for assistance in programs and projects which offer opportunities to isolate the PKI, drive it into positions of open opposition to the Indonesian Government, thereby creating grounds for repressive measures politically justifiable in terms of Indonesian national self-interest.

34. Encourage government officials to oppose Communist activities, to understand the relations of these activities to international Communism, to realize the danger of Communist China, and to foster such understanding and opposition throughout the Indonesian populace.

35. Encourage the development of non-and anti-Communist labor, peasant, business and similar organizations.

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36. While for the present maintaining neutrality in the West New Guinea dispute in our relations with other governments, explore within the U.S. Government solutions to this problem compatible with over-all U.S. objectives, for possible discussion with other interested governments.2

  1. Source: Department of State, S/SNSC Files: Lot 63 D 351, NSC 5901 Series. Secret. Transmitted to the NSC on February 3, under cover of a memorandum by Lay which noted that the President had approved NSC 5901 that day and that it superseded NSC 5518 and the “recommendations” of the “Special Report on Indonesia.”
  2. There are no completely reliable figures on PKI membership, but it probably numbers at least 500,000 and may be substantially higher. PKI claims that it is Indonesia’s largest party are probably correct. [Footnote in the source text.]
  3. A 10-page financial appendix, January 9, was approved as part of NSC 5901. See Supplement.