256. Memorandum of Conversation1

PARTICIPANTS

  • Professor Widjojo Nitisastro, Economic Adviser to Indonesian President Suharto
  • Dr. Salim, Economic Adviser, Indonesia
  • Ambassador Soejatmoko, Indonesian Ambassador to Washington
  • The Vice President
  • Mr. John Bullitt, Assistant Administrator for East Asian Affairs, Agency for International Development
  • Mr. John E. Rielly, Office of the Vice President

Professor Widjojo, after extending the greetings of President Suharto, stated that there had been setbacks in the Indonesian economy since the Vice President’s visit in November.2 Early this year there [Page 554]was an economic crisis. Confidence in the economic policies of the government has been shaken, both inside and outside the government. At the Rotterdam meeting a week ago, the results were very disappointing.

Professor Widjojo stated that he believes Indonesia cannot survive a second crisis. The basic need is food. Therefore, they have asked the U.S. Government for additional food assistance. They need rice, wheat, flour, and bulgar wheat.

Mr. Bullitt stated that the United States Government officials dealing with Indonesian affairs held off responsibility to the Indonesian request because we want to see what the Japanese do before we respond. The Vice President inquired whether we or they had put pressure on Mr. Miki. We should talk to him, as the Vice President had spoken to both Miki and Prime Minister Sato at great length about the Indonesian situation. Indonesia is very important to Japan, both as a market and as an ally in Asia. We must be very firm with the Japanese on this. Professor Widjojo replied that the Indonesians had already used their biggest gun—by having President Suharto visit Japan. The results were negative.

Professor Widjojo stated that he not only wanted to try to solve the food problem but to try to stop the ruinous inflation of the last several years. A major related problem is that of food production. They need fertilizer assistance as well as food.

The Vice President stated that with the oil industry in Indonesia you would think that the resulting petrochemical industry would produce fertilizer. Professor Widjojo stated that there are studies underway for the expansion of the petrochemical industry. Mr. Bullitt stated that one problem is that the government oil monopoly had refused to make commitments to guarantee a regular supply of oil. For this reason, foreign investors and the oil companies generally were reluctant to go ahead with expansion of the petrochemical industry.

The Vice President suggested that the time is late for continuing studying the situation. Progress must be made in getting the fertilizer. The time has arrived for a frank talk with our Indonesian friends. The Government of Indonesia must be willing to take decisions to get the petrochemical industry to develop. If the government is not willing to do this, they cannot expect help.

Professor Widjojo stated they also have natural gas as a source of energy supply. They hope to expand their food for work program this year with the help of the U.S. Governmental food assistance.

The Vice President inquired of Professor Widjojo whether he had seen Mr. Linen of Time-Life, the man who organized the Geneva meeting last November. He had sent a copy of the report on the conference to the President, to Secretary Rusk, and to Mr. Gaud. It is time, he said, [Page 555]that the Indonesian Government takes some strong measures. Also, we must be able to demonstrate here that the aid is not being misused. This is of continual concern here, both in the government and outside. The Vice President stated that if he had his way, we would be doing much more, but that the Indonesians must understand that their friends and supporters here do have a difficult time in dealing with the Congress. We know that there is a degree of public and private corruption. This is a continuing public relations problem. It would be a national/international disaster if the Suharto government would fail.

Ambassador Soejatmoko stated that they have an immediate need for fertilizer as well as for food. The Vice President stated that Indonesia must be able to demonstrate what Mr. Jim Linen talked about in his report: a spirit of confidence in the Indonesian economy. The Vice President knows that the United States business cannot do everything that needs to be done; the economy cannot be turned over to them. They can be permitted to chew up the economy and exploit it. But they must be convinced that the over-all environment in Indonesia is favorable for the economic development of the country. The Vice President apologized for speaking so frankly, but since “we are allies with- out any kind of a treaty,” we must be frank in assessing our mutual problems.

He knows that Professor Widjojo and the economic team understands these problems, but the military does not. The military must be made to understand what the situation here is in the Congress and with the public. The Vice President told Professor Widjojo that he and his colleagues are good men or they would not be here. He knows that the security of their country is essential to Asia. We and our allies cannot help Indonesia to the point that what we do in Vietnam will be of no avail.3

  1. Source: National Archives and Records Administration, RG 59, Central Files 1967–69, E–8 INDON. Confidential. Drafted by Rielly. Approved in S/S on May 7. The meeting was held in the Executive Office Building.
  2. See Document 247.
  3. Widjojo and Salim also meet with Barnett on May 3 and had lunch with Bullitt after the meeting with the Vice President. An account of their discussions is in telegram 158285 to Djakarta, May 3. (National Archives and Records Administration, RG 59, Central Files 1967–69, AID (US) 9 INDON)