212. Memorandum From Donald W. Ropa of the National Security Council Staff to the President’s Special Assistant (Rostow)1

SUBJECT

  • Where We Are in Indonesia

The outcome of the much-heralded MPRS (Consultative Congress) session was largely as predicted, although Sukarno once again eluded the net of those who wanted to put him permanently out of business. [Page 444]Our Embassy assesses the MPRS decisions as a substantial step forward in the long process of de-Sukarnoization, but it acknowledges that even the marginal room for political maneuver left Sukarno will keep the political pot simmering.

Marshal Green has promised us three stock-taking appraisals at this juncture: (a) an assessment of short-term prospects over the next three months; (b) implications for U.S. policy; and (c) Embassy recommendations on next moves in the assistance field. The first of these is in, and this is attached in case you have not seen it.2

On the economic front. Green believes Indonesia can rock along the next three months without a serious economic crisis on the basis of ad hoc measures and the $60 million in emergency foreign exchange credits received from Japan, Germany, Britain and the U.S. He considers it essential, however, that in this time frame the Indonesians finally clarify their own thinking, improve their economic planning apparatus and move into a position where they can effectively attack their deep-seated economic problems.

Both Malik and the Sultan have sent letters to Secretary Rusk via Widjatmika which ask that our AID programs be declared applicable again (in effect a request for a Presidential determination on Indonesian aid), present a shopping list of urgently needed goods valued at $495 million, and raise the question of Malik and possibly the Sultan meeting personally with the President, Vice President and Rusk in September following Malik’s trip to Moscow.

We have told Widjakmika that Malik would be welcome (without discussing dates or committing a session with the President), we want to be helpful on aid, particularly in multilateral debt rescheduling, but much still depends on the formation of a strong and effective government capable of using outside assistance.

Meanwhile, the IMF team has completed its preliminary survey, Indonesia has formally applied for re-admission to the IMF and IBRD, and substantive agenda discussions among Indonesia’s creditors are tentatively set in Tokyo on July 12.

For our part, at Green’s earlier urging, we are moving to resume the participant training program on a modest scale, separating this out from broader questions of aid resumption. Even this, however, will require a Presidential determination under 620 (j) of the Foreign Assistance Act of 1961 and Section 118 of the Appropriations Act of 1966. But it makes good political sense to prepare the Congressional atmosphere in this [Page 445]manner for the later resumption of larger aid. (A memo on this is in preparation.)

On the political front. The key is the complexion of the new cabinet now in formation. Green believes prospects are good that Suharto will prevail with a streamlined group dominated by capable technicians. We should know in two to three weeks. Green anticipates a more forceful Suharto now that the MPRS has confirmed his powers, but tension involving Sukarno and the political parties is probable. You have asked about political development in Indonesia. I have some preliminary observations in preparation and have asked both CIA and INR for their appraisals of the shape of political forces now at work.3

On the foreign front. Green sees de facto end of confrontation, return to the UN and the re-building of Indonesia’s ties to the non-Communist world as controlling objectives. However, the MPRS did not specifically endorse the Bangkok Agreement ending confrontation, Indonesia still is maneuvering around that agreement, and the next steps are unclear.

Recommendation

Once Green’s remaining two stock-taking messages are in and digested it may then be desirable to consider placing Indonesia on the agenda for NSC discussion. Earlier, this was premature. We are approaching that point now where NSC discussion might be optimally useful.

Don Ropa
  1. Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VII, 5/66–6/67, [2 of 2]. Confidential. The following handwritten note appears on the memorandum: “BKS [Bromley K. Smith]: Note NSC suggestion. DR [Donald Ropa].” There is a check mark through Rostow’s name.
  2. Telegram 107 from Djakarta, July 7. (National Archives and Records Administration, RG 59, Central Files 1964–66, POL 2–3 INDON)
  3. On June 29 the CIA’s Office of Current Intelligence prepared Intelligence Reference Aid No. 1586/66 on “Indonesian Youth Groups,” which provided brief background information on the role of students and youth groups in the Indonesian Nationalist movement. (Johnson Library, National Security File, Country File, Indonesia, Vol. VII, 5/66–6/67, [2 of 2]) On July 23 the Office, in coordination with the Office of National Estimates and the Deputy Directorate for Plans, prepared Intelligence Memorandum No. 1591/66, “Political Forces in Indonesia.” This memorandum stated that the army held the ultimate power in Indonesia and although military leaders were prepared to permit a voice to non-Communist civilian political elements, they hoped to limit their activities so they did not endanger the policy developed in response to the October 1965 coup. Indonesia’s Government was dominated by the triumvirate of Suharto, Malik, and the Sultan of Jogjakarta, who planned to name a cabinet before August and hold elections in 2 years. The most pressing problem in Indonesia was its poor economic situation. (Ibid.)